



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------
                                    Form 10-K

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

                 For the Fiscal Year Ended December 31, 2000 or

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

              For the Transition Period from ________ to ________.
                         Commission file number: 0-26620

                                   ACCOM, INC.
             (Exact name of Registrant as specified in its charter)

                Delaware                                        94-3055907
  (State or other jurisdiction of incorporation or           (I.R.S. Employer
                organization)                               Identification No.)

                               1490 O'Brien Drive
                              Menlo Park, CA 94025
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (650) 328-3818
                       ----------------------------------

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

           Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, $0.001 par value per share
                       ----------------------------------

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  than 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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant was approximately $ 1,428,000 as of March 15, 2001, based upon
the closing sale price on the Over-the-Counter (OTC) Bulletin Board reported for
such date.  Shares of Common Stock held by each officer and director and by each
person who owns 5% of more of the outstanding Common Stock have been excluded in
that  such  persons  may be  deemed  to be  affiliates.  This  determination  of
affiliate  status  is not  necessarily  a  conclusive  determination  for  other
purposes.

         There were 10,198,277  shares of  Registrant's  Common Stock issued and
outstanding as of March 15, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Information  required  under  Part III will be filed not later than 120
days after the end of the fiscal  year  covered by this Form 10-K as part of the
Registrant's Proxy Statement for its annual meeting of stockholders.

         "Accom," "Abekas," "Axial,"  "DveousFX,"  "Stratasphere," and "WSD" are
some of the registered trademarks of the Company, and all of the Company's other
product  names  are  trademarks  of  the  Company.  This  Report  also  includes
trademarks  of companies  other than Accom,  Inc.  Unless the context  indicates
otherwise,  reference  in this Report to the  "Company"  and  "Accom"  refers to
Accom, Inc. and its consolidated subsidiaries.


<PAGE>



                                     PART I

Item 1.  Business

         The company  desires to take advantage of the "safe harbor"  provisions
of the  Private  Securities  Litigation  Reform Act of 1995.  Specifically,  the
Company  wishes to alert  readers  that the  factors  set forth in the  sections
entitled  "Manufacturing and Suppliers,"  "Competition"  "Proprietary Rights and
Licenses" and  "Additional  Factors That May Affect Future  Results,"  below, as
well as  other  factors,  could  in the  future  affect,  and in the  past  have
affected, the Company's actual results and could cause the Company's results for
future  years or  quarters  to differ  materially  from those  expressed  in any
forward  looking  statements  made by or on  behalf  of the  Company,  including
without  limitation  those  contained in this Form 10-K report.  Forward looking
statements can be identified by forward  looking  words,  such as "may," "will,"
"expect," "anticipate," "believe," "estimate" and "continue" or similar words.

General

         Accom, Inc. ("Accom" or the "Company")  designs,  manufactures,  sells,
and supports a complete line of digital video signal  processing,  editing,  and
disk  recording  tools,   primarily  for  the   professional,   worldwide  video
post-production  and  live  broadcasting,  and  computer  video  post-production
marketplaces.   The  Company's   systems  are  designed  to  be  used  by  video
professionals  to create,  edit and broadcast high quality video content such as
television shows, commercials, news, music videos and video games.

         The proliferation of distribution channels for video content, including
cable,  satellite and direct view systems such as videos and DVDs, is increasing
the demand  for  broadcast  content  while  diminishing  the  potential  viewing
audience and revenue per channel. To compete more effectively,  broadcasters and
other  professional  content  creators  require  systems that reduce the cost of
developing and delivering video content and more flexibly distribute the same or
repurposed  content over  multiple  channels.  These  systems must be capable of
performing  mission-critical  tasks reliably and in real time without detracting
from the final video quality. As video professionals transition from traditional
stand-alone  analog  systems to integrated  digital  systems,  they also require
systems that can be easily integrated with existing  equipment to leverage their
significant capital investments.

         The Company provides innovative products that cost-effectively meet the
needs of  professional  content  creators  and  broadcasters  in real time video
post-production  and  distribution.   The  Company's  current  products  include
integrated  nonlinear  editing  workstations,  on-line  video  editing  systems,
digital  video  effects  systems,  digital  switchers  and  digital  video  disk
recorders used during the content creation and  post-production  processes,  and
networked  still image and video clip storage  systems and digital video servers
used by broadcasters in the distribution process.


                                       2


<PAGE>


         The following table summarizes the Company's key products:

- --------------------------------------------------------------------------------
           Product                               Primary Applications
- --------------------------------------------------------------------------------
    Digital Signal Processors
- --------------------------------------------------------------------------------
    Dveous(TM)and Brutus            Digital Video Effects  systems for news and
                                    sports
- --------------------------------------------------------------------------------
    8150 Switcher                   Digital switcher for on-line post-production
                                    editing for commercials and long form
                                    television programs
- --------------------------------------------------------------------------------
    Digital Editors
- --------------------------------------------------------------------------------
    Axial(R)3000                    Edit controller for on-line  post-production
                                    editing  for   commercials   and  long  form
                                    television programs
- --------------------------------------------------------------------------------
    AFFINITY(TM)                    Integrated  nonlinear  editing  work station
                                    for  long  and  short  form   programs   and
                                    commercials   using   multiple   streams  of
                                    uncompressed video
- --------------------------------------------------------------------------------
    Video Digital Disk Recorders
- --------------------------------------------------------------------------------
    APR(TM)/Attache                 On-line  post-production editing and effects
                                    and  on-air   playback   of   graphics   for
                                    broadcast
- --------------------------------------------------------------------------------
    WSD(R)/2Xtreme                  Desktop  computer   graphics  and  animation
                                    production
- --------------------------------------------------------------------------------
    WSD(R)/HD                       High    definition     computer    graphics,
                                    animation, editing, and production. Supports
                                    both  standard  definition  and the industry
                                    standard high definition formats.
- --------------------------------------------------------------------------------
    Axess(TM)                       Creation and broadcast  distribution of news
                                    graphics and short video segments
- --------------------------------------------------------------------------------
    Abekas(R)6000                   Multi-user    digital   video   server   for
                                    broadcast applications
- --------------------------------------------------------------------------------

         The Company's  strategy is to leverage its established  position in the
broadcast  and  professional  segment  of the  video  post-production  market to
develop  innovative   products  and  market  them  to  the  post-production  and
distribution  segments.  Additionally,  the  Company  continues  to  pursue  its
strategy  of first  developing  and  marketing  full-featured  systems  to prove
technological  feasibility and market acceptance and then designing lower-priced
products with reduced feature sets to appeal to a broader base of customers.

         The Company  sells its  products  through a  combination  of its direct
sales force and  indirect  distribution  channels.  On December  10,  1998,  the
Company  acquired  substantially  all of the assets and certain  liabilities  of
Scitex  Digital  Video,  Inc.  and  certain  of its  affiliates,  as part of the
Company's  strategy  to broaden its product  line and to grow the  Company.  The
acquired  assets  included  Scitex  Digital  Video's   business  of  developing,
manufacturing,  marketing and selling digital video  manipulation  equipment and
nonlinear  editing  workstations for the video industry.  The products that were
acquired in such  transaction are described in the Section  entitled  "Products"
below.

          On  January  21,  2000,  Accom and  certain of its  subsidiaries  sold
substantially  all of their  respective  assets related to the ELSET virtual set
product line ("ELSET") to IMadGINE Video Systems Marketing, B.V. ("IMadGINE"), a
Dutch  company that is a wholly  owned  subsidiary  of Orad Hi-Tec  Systems Ltd.
("Orad"),  an Israeli corporation.  IMadGINE also purchased the stock of Accom's
subsidiary,  Accom Poland Sp. z o.o., a Polish corporation ("Accom Poland"). The
Company and its subsidiaries also sold to IMadGINE certain intellectual property
related to the ELSET  business.  ELSET  products  consist  of  virtual  sets for
high-end video content  creation in real time.  The Company's  first shipment of
ELSET virtual set tools occurred in March 1996 with the final shipment occurring
in  December  1999.  With  the  sale of ELSET to  IMadGINE,  Accom  reduced  its
headcount of full-time employees by 13. The positions  eliminated consisted of 9
software  engineers and 1 administrative  aide in the employment of Accom Poland
and 3 marketing and sales  employees  operating out of the Company's head office
in Menlo Park, California.


                                       3

<PAGE>


Industry Overview

          The  creation  and  distribution  of video  content  consists  of four
distinct stages: pre-production, production, post-production and distribution.

o  Pre-production involves creation of the script and storyboard.

o  Production  (content creation)  involves shooting video or film,  creation of
   computer-generated  graphics and sound  recording,  and live  presentation of
   newscasts, sporting events, and special events.

o  Post-production consists of editing and manipulating diverse images and audio
   elements into a final program, including off-line and on-line editing.

o  Distribution  is the  delivery of the  finished  video  content to the viewer
   through traditional channels such as broadcast,  satellite and cable channels
   or through direct distribution of video rentals, DVDs and video games.

         The market for systems used in the video content creation,  editing and
distribution process ranges from high-end  professional users such as television
networks,   cable   television   companies  and   independent   production   and
post-production  houses,  to  professionals  that create video  content for less
demanding applications such as corporate  communications.  High-end professional
users typically drive the performance standards for innovation,  quality,  speed
and features for the video production and broadcast markets.

         The  channels   available  for   distribution   of  video  content  are
proliferating as new cable,  satellite and direct view  alternatives  supplement
traditional  delivery systems.  This  proliferation is increasing the demand for
broadcast  content.   Concurrently,   the  viewing  audience  per  channel  and,
therefore,  the  potential  revenue  per  channel  is  being  reduced.  To  more
effectively   compete  in  this   environment,   broadcasters  and  other  video
professionals must reduce the cost of developing and delivering content and find
more flexible means to distribute  the same or repurposed  content over multiple
channels.  These requirements span the post-production and distribution segments
of marketplace.

         In 1997, the Federal Communications Commission mandated that the United
States would transition from its present analog-based,  terrestrial,  television
transmission  system toward a completely digital  transmission  system. This new
Digital  Television  system is  generically  referred to as "DTV," and,  for the
first  time,  opened the  possibility  of  offering  much  higher  quality  high
definition (HD) television  capability.  (Today's  broadcast video format is now
referred to as "standard definition" or "SD" television).

         The transition of the television  infrastructure from analog to digital
continues,  but high  costs for HD  production  and high costs for  consumer  HD
television  sets has  restrained  the  availability  of HD  programming  and the
acceptance of the HD TV set at the consumer level.

         Over the past  year,  however,  the  industry  has seen a growing  move
toward high definition video as a replacement for film, not only for traditional
episodic   television   programming,   but  also  for  theatrical  cinema.  This
"electronic film" is shot at exactly the same 24 frames-per-second  rate as film
and is often


                                       4

<PAGE>


called "24P HD." While costs of HD video production are higher than the costs of
SD video  production,  HD video is actually less expensive than film production,
yet offers most of the advantages of film for the program  producer.  It appears
that, due to these lower costs, much episodic  television  programming will move
from film to HD video production.

         With the sale of the ELSET  virtual set product line in January 2000 to
IMadGINE, Accom greatly reduced its presence in the production market place. The
production  market  place is  characterized  by  product  offerings  used in the
creation  of  video  content.   Accom  anticipates  that  its  emphasis  in  the
foreseeable  future  will  be on the  post-production  and  distribution  market
places.

Post-Production

         Video editing is critical to the  post-production  process and is often
completed  in two steps:  off-line,  to reduce raw  material to a smaller,  more
manageable group of elements;  and on-line, to assemble video, audio and graphic
elements  into a final  program.  The on-line video  editing  process  typically
occurs in a video "editing  suite"  comprised of  sophisticated,  interconnected
equipment such as video recorders and switchers,  digital video effects systems,
storage  devices for still images and  computer-based  graphics  systems.  Video
editing  suites  can cost more than half a million  dollars  due to the cost and
variety of equipment  required,  and professional  post-production  services can
cost in excess of $750 per hour.

         Over the past  several  years,  a number  of  personal  computer-based,
off-line  editing  systems have been  introduced  to enable more  efficient  and
cost-effective  editing.  However,  these off-line systems rely upon compression
algorithms to convert raw video content to signals capable of being  manipulated
on personal  computers.  This use of highly  compressed video  compromises video
fidelity.  Currently, video effects and compositing,  as well as two-dimensional
("2D") and  three-dimensional  ("3D")  graphic  elements,  must be created in an
uncompressed  format. An editor using a  compression-based  off-line system must
decompress  the video,  add effects and graphics and then  recompress the video.
This adds  complexity to the editing  process and often further  compromises the
video fidelity of the final content.  Moreover, these off-line systems typically
provide  the  user  with a  single  video  stream,  which  does  not  allow  the
simultaneous manipulation of multiple streams of video elements in real time.

         To   improve   productivity   and   creative   flexibility,    high-end
professionals  increasingly  require on-line  editing systems with  simultaneous
random access to multiple video streams and video of uncompressed D1 quality,  a
standard  digital video format that is the highest level of standard  definition
video quality  commercially  available  today.  Unlike  traditional  taped-based
analog systems,  an on-line editing system based on digital video disk recorders
enables the user to instantly and randomly  access any part of the stored video,
audio or other  material,  rearrange the material and play back edited  material
without repeatedly  winding and rewinding tape to locate desired  sequences.  In
contrast to off-line systems,  on-line digital-based systems do not require high
levels of compression  and,  therefore,  do not detract from the fidelity of the
final video content. As post-production  professionals  transition their on-line
edit rooms to digital  technologies,  they often create hybrid environments that
integrate  traditional  analog video processing  equipment with digital systems.
Therefore,   these  professionals  need  on-line  editing  systems  that  easily
interface with equipment made by different manufacturers.


                                       5


<PAGE>


Distribution

         In the past,  most  distributors  of video  content such as  television
networks and cable  broadcasters  relied on stand-alone still image disk storage
devices and analog tape-based systems when broadcasting commercials and programs
such as news,  sports and  entertainment  presentations.  These  were  typically
single-user  devices that cannot be easily  networked to serve  multiple  users.
With the proliferation of distribution  channels,  distributors of video content
increasingly  require  more  flexible  means of  accessing  shared  content  and
distributing  it over  multiple  channels.  Quick  access by  multiple  users to
content is critical to effective and economical news,  sports and  entertainment
broadcasting.   Networked  digital  video  disk  recorders  and  servers  enable
distributors  of video  content  to make  material  more  readily  available  to
multiple users and for broadcast  through  multiple  channels.  Distributors  of
video  content are  beginning to  transition  to  digitally-based  networks that
increase the speed at which information is shared,  reduce the time necessary to
complete production tasks and more efficiently utilize and repurpose the content
they create and distribute.

The Accom Approach

         The Company believes that  traditional  video systems do not adequately
meet the emerging  post-production  and  distribution  needs of high-end content
creators  and  broadcasters.   Professionals  in  this  market  segment  require
flexible,  cost-effective  systems that perform  mission-critical tasks reliably
and in real time  without  detracting  from the final video  quality.  These new
systems must also be capable of  accommodating  high-end video  professionals as
they  transition  from  traditional  stand-alone  analog  systems to  integrated
digital systems. In addition, high-end professionals require systems that can be
easily   integrated  with  existing  video  content  creation  and  distribution
equipment to leverage their significant equipment investments.

         Accom provides innovative products that cost effectively meet the needs
of high-end content creators and broadcasters in real time video post-production
and  distribution.  Relying on its core  technologies  and its  knowledge of the
high-end  video  market,  the Company  develops  sophisticated  digital  systems
comprised of both standard and proprietary hardware and software. Accom believes
that this approach results in flexible solutions, offering price and performance
advantages over competitive systems while facilitating the transition to digital
environments.

         Accom's systems offer the following benefits:

         Open Systems. The Company designs products for ease of integration with
other manufacturers'  products,  such as video switchers,  digital video effects
devices and video  recorders.  This  capability  allows users to leverage  their
existing  equipment  investments and customize their systems to meet current and
future requirements.

         Real Time  Performance.  Accom systems operate in real time and execute
processing and control functions 50 or 60 times per second. This enables content
producers to  instantly  view video  content in  full-quality  video  resolution
during production and post-production.

         High Video Fidelity. Accom systems operate in fully uncompressed,  high
definition and standard definition video formats. This capability provides video
content  creators  with D1 quality


                                       6

<PAGE>



video,  enabling  them to deliver  the same  content for  high-end  distribution
channels or distribution channels requiring lower resolution.

         Ease  Of Use.  The  Company's  systems  are  designed  to  improve  the
productivity of users and to reduce  training time. For example,  certain of the
Company's  products  utilize video images and  graphical  user  interfaces  that
eliminate the need for complicated menu structures and time codes.

         Leveraged Solutions.  Accom combines certain of its individual products
to create  integrated  solutions that offer  performance  benefits  beyond those
available  when such products are used  individually.  For example,  the Company
integrates its on-line editor  products with its digital video disk recorders to
provide on-line, random access editing capability.

         High Definition Capability.  Accom is pursuing product development that
will provide high  definition as well as standard  definition  functionality  in
some of its new products. While the acceptance of high definition has been slow,
the Company believes that most professional,  high-end users will require and be
willing  to  pay  some  premium  for  equipment   that   provides   multi-format
capabilities. This will allow such equipment to be used as required for existing
standard definition production, plus provide high definition when required, thus
providing a higher utilization rate and better value for the end user.

         The Company  offers a range of products to the high-end  segment of the
video  post-production  and  distribution  markets.  The  Company's  current key
products are:

                  o  Digital  disk  recorders to produce  computer  graphics and
                     animation;

                  o  On-line  video  editing  systems  used  by  post-production
                     professionals;

                  o  Nonlinear  editing  workstations  used  by  post-production
                     professionals;

                  o  Digital video effects and  switchers  used by  broadcasters
                     and post-production professionals;

                  o  Digital  video  disk  recorders  used  during  the  on-line
                     post-production editing process;

                  o  Networked  still image and video clip storage  systems used
                     by broadcast distributors of video content; and

                  o  Multi-channel   digital   video   servers   for   broadcast
                     applications.

Accom Strategy

         Accom's  goal  is to  be a  leading  supplier  of  post-production  and
distribution tools to the high-end video content creation, editing and broadcast
markets.  To achieve this goal,  Accom is following a strategy that includes the
following key elements:

         Leverage Market and Technical  Position.  The Company has established a
reputation for meeting the exacting  needs of the high-end  segment of the video
post-production  market.  The  Company's  strategy is to leverage its market and
technical position to continue to offer innovative new products to


                                       7

<PAGE>


the post-production  market segment and to expand its product offerings into the
distribution market segments.

         Broaden  Lower-Priced  Product  Line.  In the past,  the Company  first
developed and marketed full-featured systems to prove technological  feasibility
and market acceptance,  then designed lower-priced products with reduced feature
sets to  appeal to a broader  base of  customers.  The  Company  has  introduced
products,  such as the  Axial(R)  3000  on-line  editor,  the  Workstation  Disk
("WSD(R)")  digital  video disk  recorders,  and the APR(TM)  digital video disk
recorders that provide high-end users with reduced feature sets at lower prices.

         Invest  in   Innovative   Technologies.   The  Company  has   developed
significant  expertise  in core  technologies  relating  to  editing,  real time
control,  and digital video disk  recording.  The Company intends to continue to
internally  develop and acquire new technologies as necessary in order to design
products  that  satisfy  customer  requirements  for  quality,  speed,  cost and
functionality.  For example,  by acquiring  Scitex  Digital  Video,  the Company
obtained  access to digital  switchers,  digital  video  effects  and  nonlinear
editing technologies.

         Enhance  Distribution  Channels.  The  Company  intends to enhance  its
distribution  channels on an ongoing  basis to improve  market  penetration  and
increase sales.

Products

         The Company  currently offers nine product lines that address the needs
of the post-production and distribution market segments. The Company's nonlinear
editing  systems,  on-line editing control  systems,  digital disk recorders and
signal processing equipment are used primarily in post-production.  Digital news
graphics and clip  servers and  multi-channel  servers  address the needs of the
video distribution segment.

         The following  table  summarizes the Company's key market  segments and
products:

- --------------------------------------------------------------------------------
        MARKETS / Product                      Primary Applications
- --------------------------------------------------------------------------------
  POST-PRODUCTION:
- --------------------------------------------------------------------------------
    Digital Signal Processors
- --------------------------------------------------------------------------------
    8150 Digital Switcher           Digital switcher for on-line post-production
                                    editing  for   commercials   and  long  form
                                    television programs
- --------------------------------------------------------------------------------
    Digital Editors
- --------------------------------------------------------------------------------
    Axial(R)3000                    Edit controller for on-line  post-production
                                    editing  for   commercials   and  long  form
                                    television programs
- --------------------------------------------------------------------------------
    AFFINTY(TM)                     Integrated  nonlinear  workstation  for long
                                    and  short  form  programs  and  commercials
                                    using multiple streams of uncompressed video
                                    Video Digital Disk Recorders
- --------------------------------------------------------------------------------
    APR(TM)/Attache                 On-line  post-production editing and effects
                                    and  on-air   playback   of   graphics   for
                                    broadcast
- --------------------------------------------------------------------------------
    WSD(R)/2Xtreme                  Desktop  computer   graphics  and  animation
                                    production
- --------------------------------------------------------------------------------
    WSD(R)/HD                       High    definition     computer    graphics,
                                    animation, editing, and production. Supports
                                    both  standard  definition  and the industry
                                    standard high definition formats.
- --------------------------------------------------------------------------------
    DISTRIBUTION:
- --------------------------------------------------------------------------------
    Digital Signal Processors
- --------------------------------------------------------------------------------
    Dveous(TM)and Brutus            Digital Video  Effects  systems for news and
                                    sports
- --------------------------------------------------------------------------------
    Axess(TM)                       Creation and broadcast  distribution of news
                                    graphics and short video segments
- --------------------------------------------------------------------------------
    Abekas(R)6000                   Multi-user    digital   video   server   for
                                    broadcast applications
- --------------------------------------------------------------------------------


                                       8


<PAGE>


         The following  table  summarizes the Company's net sales, in thousands,
for the twelve months ended December 31, 2000, by market segment:

                                                 Twelve Months Ended
                                                 -------------------
                                                  December 31, 2000
                                                  -----------------
               Market                       Amount              Percent
               ------                       ------              -------

        Post-Production                    $ 16,159              48.2%
        Distribution                         13,187              39.3%
        Other                                 4,171              12.5%
                                       ----------------------------------------
                                           $ 33,517             100.0%


Digital Signal Processing Equipment

         On December 10, 1998, Accom acquired substantially all of the assets of
Scitex Digital Video.  The 8150 switcher,  the Dveous(TM) and the Brutus digital
video effects (DVE) product lines were a part of this acquisition.

         The 8150 Digital Switcher with Built-in 3D Effects

         The 8150  switcher  is  typically  used in an  on-line  post-production
editing suite. In addition to a switcher, this type of an editing suite requires
an on-line editor like the Axial(R) and a digital disk recorder like the APR(TM)
Attache or the  WSD(R)/2Xtreme,  products  manufactured by Accom. This 8150 is a
powerful  switcher which  combines the familiar  Mix/Effects  architecture  with
limitless effects layering capabilities. The 8150's graphically assisted control
panel and other  advanced  features make it easy to operate.  The 8150 offers an
optional  3D  Digital  Video  Effects  based  on  the  twin  channel  Dveous(TM)
architecture.   This   technology   provides   powerful   new  effects  such  as
SuperShadow(TM),  UltraWarp(TM), and the realistic textures and light sources of
SurfaceFX(TM).

         Dveous(TM) Digital Video Effects

         The Dveous is a powerful,  full quality and fully featured DVE product.
Dveous is used in  post-production  suites as well as for live  sports  and news
applications by television stations and production  companies.  DVEs are used to
manipulate  video images in real time to create  effects  like flying  pictures,
page turns and more  complex  effects  which were only  possible  in the optical
domain at one point in time.  The Dveous is  considered  by many as the  leading
high-end DVE product and is used by many well-known broadcasters through out the
world.  The Dveous  video  processing  system is based around  four-field  video
framestores. Video information is upsampled vertically to create a full frame of
data for every field.  The Dveous also  contains  23x12-point  video filters and
four-point  store  output  interpolators  to provide  superb  image  quality for
picture  expansion  and  compression.   All  picture  transform  information  is
calculated to 1.2nS spatial precision with full 10 bits per pixel precision.

         Brutus Digital Video Effects

         Brutus is a solution built on the established benchmark of Dveous(TM) .
Brutus offers  multi-channels of Dveous DVE combined through the Brutus combiner
to create  complex  effects and  manipulate  multiple  images in real time.  Any
Dveous can easily  upgrade to Brutus.  The primary


                                       9

<PAGE>


application  of Brutus is in live sports  production  where  effects  have to be
applied to multiple pictures simultaneously in a coordinated fashion.

Digital Editors

         The Company  currently  offers two product lines in the digital editing
area: the Axial(R) and  AFFINITY(TM).  During 1999 and 2000, the Company shipped
products from the  Sphere(R)  product line which was acquired in the purchase of
the assets of Scitex Digital Video in December 1998. The Sphere(R)  products are
no longer manufactured by Accom.

         On-Line  Editors

         The Company's  Axial(R) line of digital  on-line video editing  systems
consists of various  models of the Axial(R)  3000.  Key upgrade  options for the
Axial(R) 3000 are Live Video,  Random Access Visual Editing System  ("RAVE") and
the Axial(R) Cache Editor. A primary benefit of the Axial(R) line of products is
their ability to import edit decision  lists from off-line  editing  systems for
quick  assembly of  full-quality  video  content.  The Axial(R)  3000 is used to
perform editing and compositing for the high-end segment of the  post-production
market and works in either standard definition or high definition edit suites.

         The  Axial(R)  3000 with Live Video  Option  offers an enhanced  visual
interface  that  enables the video  editor to edit  information  by working with
pictures  and video clips  instead of only  timecode  numbers.  Axial(R)  models
utilize a text file  approach  for  interfacing  with  external  equipment  that
minimizes the need to write new software  device drivers,  thereby  facilitating
the integration of external equipment with the editing system. Axial(R) is based
on a multi-process  architecture that enables it to simultaneously control up to
47 independent devices.

         Nonlinear Editing

         In 1999,  the  Company  introduced  its next  generation  of  nonlinear
editing  products  called the  AFFINITY(TM).  The key features of the higher-end
AFFINITY(TM)  are: simple and easy to use human interface,  speed of editing and
high quality real time video effects.

         AFFINITY(TM)  is a real time editing  system  offering  five streams of
uncompressed and compressed,  standard  definition video. Key features include a
frame-based  3D DVE with  advanced  real time effects based on the Abekas Dveous
technology and full motion alpha keys. There is full support for three-point and
drag-and-drop  editing,  new  project  oriented  interface  with search and sort
capability and stackable  video clips,  instant cut away shots and quick version
comparisons.   AFFINITY(TM)   utilizes   third  party  disk  arrays  from  Medea
Corporation,  offering the best price  performance in terms of storage capacity,
access speed and price to end users.  Initial sales of AFFINITY(TM)  occurred in
February, 2000.

         In 1999, Accom introduced  AFFINITY(TM)/san,  a version of AFFINITY(TM)
using Fibre Channel drives instead of SCSI drives. Fibre Channel allows multiple
drives to be  interconnected  to form a storage area network (SAN), in which all
user can have access to all  material on the SAN.  This greatly  simplifies  the
flow of work in multi-system installations. Accom's AFFINITY(TM)/san solution is
based


                                       10


<PAGE>


on  off-the-shelf  hardware and software  used by the  computer  industry,  and,
therefore,  provides a more cost-effective  product than the nearest competitor,
who provides a proprietary networking solution.

Post-Production Digital Video Disk Recorder -- APR(TM)

         APR(TM)/Attache  was announced and first shown in September  1997,  and
full  production  shipments  began in the second  quarter of calendar  1998. The
APR(TM)  enables the digital  recording and playback of  uncompressed,  standard
definition  quality  video onto a real time,  random access  redundant  array of
individual  disks  ("RAID").  Applications  of the APR(TM) include random access
video editing and the editing of 2D and 3D graphics and animation for production
and  post-production.  Unlike a video tape  recorder,  the APR(TM) can instantly
access stored images and play back the images at speeds  ranging from 1/100th to
100 times normal play speed.  The APR(TM) is  configured  to offer storage of 40
minutes and 60 minutes of uncompressed video recording times. The APR(TM) offers
a  "half-bandwidth"  channel  option  called  KeyTrack(TM).  KeyTrack  allows  a
synchronous key/matte signal to be recorded in sync with the video. Two complete
videotape recorders or DDRs are normally required for this capability.

         APR(TM)/Attache  is the first digital disk recorder to offer  "PreRead"
and "PostRead"  functions.  "PreRead"  (write-after-read)  allows material to be
played off the disk, processed externally, and re-recorded back on the same disk
in real time.  This allows one Attache to function as both a playback device and
a record device, effectively replacing two devices in the post-production suite.
"PostRead" (read-after-write) allows material to be played out. Limited versions
of PreRead have been available on videotape recorders for several years and have
become standard features of videotape recorders.

Computer Graphics and Animation Digital Disk Recorder

         The Company's  WSD(R) digital disk recorders are used in the production
and  post-production  of computer  graphics and  animation,  in  post-production
editing, and in play out of stored elements in live production.

           The  WSD(R)/2Xtreme,  the fourth  generation  WSD(R)  product,  is an
uncompressed,   standard  definition  digital  video  disk  recorder  and  video
subsystem  that enables  users to record and play back  digital  video images in
real  time and  rapidly  transfer  digital  video  images  to and from  computer
workstations.  The  WSD(R)/2Xtreme  enables more efficient creation of 2D and 3D
graphics and  animation by providing a bridge  between the computer  workstation
and video tape recorders and other video devices. The  WSD(R)/2Xtreme's  digital
random  access  recording and playback  features  improve the quality of desktop
graphics production by eliminating the speed and maintenance problems associated
with analog video tape recorders. With the WSD(R)/2Xtreme,  frames can be played
back in real time so the user can see the end  result in full  motion on a video
monitor.  The Company has worked closely with a number of  third-party  software
developers  to  integrate  the  WSD(R)/2Xtreme  with  their  applications.   The
WSD(R)/2Xtreme  also  provides  both  Ethernet  and  SCSI  connections,  thereby
enabling  it  to  interface  with  applications  running  on  Silicon  Graphics,
Windows-NT(TM) and Apple Macintosh computer platforms.

         WSD(R)/HD is Accom's fifth generation WSD(R) product.  It is a standard
definition and high  definition  digital video disk recorder and video subsystem
that  enables  users  to  record  and  play  back  standard  definition  or high
definition digital video images in real time and rapidly transfer digital video


                                       11

<PAGE>


images to and from  computer  workstations.  While it provides  many of the same
features and is used in almost identical applications as the WSD(R)/2Xtreme, the
WSD(R)/HD is a complete  re-design at both the hardware and software level.  The
WSD(R)/HD  uses Windows 2000 as its  operating  system and Apple Quick Time as a
file format for stored video.  Accom has developed a new internet  browser-based
user interface that works on PC,  Macintosh,  Linux,  and Unix  platforms.  This
means that file transfer from  computer  graphics  programs is based on standard
computer networking and no longer requires third-party support.

Digital News Graphics and Clip Servers-Axess(TM)

         The Axess(TM) is designed to be used by broadcast professionals for the
preparation and on-air presentation of computer-generated graphics, still images
and  video  clips.  The  Axess(TM)  enables  broadcasters  to  digitally  store,
categorize,  search and obtain quick access to a library of previously  recorded
still images,  computer-generated graphics and video clips for use during on-air
presentations  of news,  sports or  entertainment  events.  The  Axess(TM)  is a
networked  system of  individual  nodes,  each having its own  storage  modules.
Storage  is  configured  to meet the needs of each  user,  but every node on the
network has access to the information  stored in other nodes. An option designed
with a RAID provides real time video storage.  The storage options enable a user
to record and play back a mixture of still and moving  images.  Depending on the
selected storage options, a single node can be configured to store from 1,000 to
70,000  still images or from 17 minutes to over 2 hours of  uncompressed  video.
Each  Axess(TM)  system  is a  user-designed  configuration  based on just a few
standard hardware components. The price of the Axess(TM) varies widely depending
on the number of nodes and the amount of storage per node.

Multi-Channel Digital Video Server-Abekas(R) 6000

         The  Abekas(R)  6000  is  a  disk-based,  broadcast  quality,  standard
definition,  digital  video  server in a compact,  single-chassis  design.  With
user-selectable  bit rates using DVCPRO or MPEG compression,  the Abekas(R) 6000
provides the user with the ability to select the compression  level  appropriate
to his needs.  The system is fully DTV ready,  accepting and  supplying  digital
video,  key, and digital audio signals.  It supports  either two, four,  six, or
eight  independently  controlled digital video channels,  with up to four tracks
(two stereo pairs) of digital  audio per video channel when  operating at either
the DVCPRO or DVCPRO-50  compression level. With enough disk capacity to provide
dozens of hours of local storage  capacity,  the Abekas(R) 6000 is ideal for use
in news editing and play out,  program  cache and play out,  spot cache and play
out, and program materials distribution.

Customers and Applications

         The primary end users of the  Company's  products are  post-production,
broadcast and cable companies and studios.  One customer,  Grass Valley Group, a
distributor,  accounted  for 11% of the  Company's  total  revenues for the year
ended  December  31,  2000.  No  customer  accounted  for more than 10% of total
revenues for the year ended  December 31, 1999.  One  customer,  AIM Co. Ltd., a
distributor,  accounted for 14% and 16% of the Company's  total revenues for the
three months ended December 31, 1998, and the twelve months ended  September 30,
1998, respectively.


                                       12

<PAGE>


Marketing, Sales and Service

         The Company  markets its products  through a combination  of its direct
sales  force and  indirect  distribution  channels.  The  Company  exhibits  its
products at major trade shows for the video and  computer  graphics  industries.
The Company also initiates  special direct mail and advertising  campaigns prior
to certain trade shows and advertises in industry trade journals.

         In the United States,  the Company  markets its products at trade shows
such as those held by the National  Association of Broadcasters  ("NAB") and ACM
SIGGRAPH.  The Company conducts domestic direct sales through employees based in
New  Jersey,  Illinois,  Georgia,  Texas and  California,  and uses  independent
representatives  to market its products in geographic  areas that are not served
by its direct  sales  organization.  The Company  utilizes an  additional  sales
channel of distributors for its WSD(R)/2Xtreme  product line to more effectively
reach the computer graphics and animation  content creators.  Outside the United
States,   the  Company   markets  its  products  at  trade  shows  such  as  the
International  Broadcasting  Convention  in Europe and  InterBEE  in Japan.  The
Company sells its products through a network of distributors that cover a myriad
of  countries.  During the twelve months ended  December 31, 2000 and 1999,  the
Company generated 35% and 34%, respectively,  of its net sales from customers in
markets  outside of the United  States and  Canada.  In the three  months  ended
December 31, 1998,  and the twelve months ended  September 30, 1998, the Company
generated 45% of its net sales from  customers in markets  outside of the United
States.  The Company has one employee  based in the United Kingdom to manage and
support the Company's  distributors  in Europe,  Africa and the Middle East. The
Company  has  one  employee  based  in Hong  Kong  to  manage  and  support  its
distributors  in Asia and Australia.  The Company  manages its  distributors  in
Central and South  America  through its  corporate  headquarters  in Menlo Park,
California.

         The Company  provides  technical  support and training to its customers
directly and through its distributors and maintains a technical support group in
both its Menlo Park and Grass Valley facilities.

         The  Company   generally  ships  its  products  within  30  days  after
acceptance of a customer  purchase order.  The Company does not believe that its
backlog at any  particular  point in time is  material or  indicative  of future
revenue levels.

Research and Development

         The Company's research and development efforts currently are focused on
the development of product  enhancements  and new products for its digital video
on-line editor and its video and computer  graphics digital disk recorders.  The
Company's  engineering  staff  consists of software and hardware  engineers  and
other support personnel. As of February 28, 2001, the Company employed 29 people
in  its  research  and  development  organization,  of  which  approximately  13
professionals  were focused on software  development.  During the twelve  months
ended  December 31, 2000 and 1999, the three months ended December 31, 1998, and
the  twelve  months  ended  September  30,  1998,  the  Company's  research  and
development  expenses  were  approximately  $6.5  million,  $7.3  million,  $1.2
million, and $3.3 million,  respectively.  The Company believes that its success
will depend,  in part, upon its ability to enhance its existing  products and to
develop and introduce new products and features to incorporate new  technologies
and meet changing  customer  requirements and emerging  industry  standards on a
timely and cost-effective basis.


                                       13


<PAGE>

Manufacturing and Suppliers

         The Company  manufactures  its  systems at its  facility in Menlo Park,
California.  The Company's  manufacturing  operation  consists  primarily of the
testing of  subassemblies  and  components  purchased  from third  parties,  the
duplication of software and the configuration,  assembly and testing of complete
systems.  The Company relies on independent  contractors to manufacture  certain
systems,   components  and   subassemblies  in  accordance  with  the  Company's
specifications.  Each of the Company's  products  undergoes  testing and quality
inspection during the final assembly stage.

         The  Company is  dependent  on sole  source  suppliers  for certain key
components  and parts used in its products.  The Company  purchases  sole source
components in some product lines pursuant to purchase orders placed from time to
time,  does not carry  significant  inventories  of these  components and has no
long-term supply arrangements. Financial, market or other developments adversely
affecting sole source  suppliers  could have an adverse effect on its ability to
supply  the  Company  with  components  and,  consequently,  upon the  Company's
business,  financial  condition  and results of  operations.  In  addition,  the
Company and certain of its  suppliers  subcontract  the  manufacture  of certain
systems, components and subassemblies to third parties. While the timeliness and
quality of deliveries to date from the Company's  suppliers and assemblers  have
been acceptable, there can be no assurance that supply or assembly problems will
not occur in the future. While the Company believes that alternative sources for
these  components or services  could be arranged,  the process of qualifying new
suppliers or assemblers could be lengthy, and there can be no assurance that any
additional  sources  would be available to the Company on a timely basis or at a
cost acceptable to the Company. Any disruption or reduction in the future supply
of any key components  currently  obtained from a single or limited source could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

Competition

         The video post-production and distribution equipment markets are highly
competitive and are characterized by rapid  technological  change,  frequent new
product  introductions,  short product lives,  evolving  industry  standards and
significant  price erosion over the life of a product.  The Company  anticipates
increased competition in these markets from both existing vendors and new market
entrants.  The  Company  believes  that the primary  competitive  factors in the
high-end  market  are  feature  availability,   quality,  price,  ease  of  use,
compatibility with other  manufacturers'  products,  ability to provide complete
systems,  continued  introduction  of new  products  and  product  enhancements,
customer  service and support and  distribution.  The Company  believes  that it
competes  favorably in the  high-end  segment of the video  post-production  and
distribution market with respect to most of these factors.

         In the digital on-line video editor, nonlinear video editor and digital
video disk recorder  market,  the Company has to date competed  primarily with a
limited number of  comparably-sized  companies as well as larger vendors such as
Sony Corporation,  Grass Valley Group, Media 100, Inc. and Avid Technology, Inc.
Each of these larger companies has substantially  greater financial,  technical,
marketing,  sales and customer support  resources,  greater name recognition and
larger installed  customer bases than the Company.  As the Company  continues to
broaden its  lower-priced  on-line  video editor and digital video disk recorder
product  lines,  the  Company  anticipates  that  it  will  encounter  increased
competition, including competition from these larger vendors.


                                       14

<PAGE>


         The  multi-channel  digital  video server and digital news graphics and
clip server market segment is an emerging market segment.  The Company currently
competes  with  established   video  companies  such  as  Quantel  Ltd.,  Leitch
Technology  Corporation,  Grass  Valley  Group and  Pinnacle  Systems,  Inc.  In
addition,  certain established computer and electronics  companies are currently
offering or have announced their  intentions to offer products or solutions that
compete with the Abekas(R) 6000 and Axess(TM).  In addition, the Company expects
that existing  vendors and new market  entrants will develop  products that will
compete directly with the Abekas(R) 6000 and Axess(TM) and that competition will
increase  significantly as the rate of conversion from analog tape-based systems
to digital  disk-based  systems  increases.  Many of the  Company's  current and
potential   competitors  have  substantially   greater   financial,   technical,
marketing,  sales and customer support  resources,  greater name recognition and
larger installed customer bases than the Company.

           Increased competition in any of the Company's markets could result in
price  reductions,  reduced margins and loss of market share, all of which would
materially and adversely affect the Company's business,  financial condition and
results of  operations.  There can be no assurance that the Company will be able
to compete successfully against current or future competitors.

Proprietary Rights and Licenses

Proprietary Rights

         The Company's  success and ability to compete is dependent in part upon
its proprietary technology. The Company relies on a combination of patent, trade
secret,   copyright  and  trademark  law,  nondisclosure  agreements  and  other
intellectual property methods to protect its technology.  The Company's products
are  generally  sold  pursuant to purchase and license  agreements  that contain
terms and conditions restricting unauthorized disclosure or reverse-compiling of
the proprietary  software  embodied in the products.  The Company owns 37 United
States patents and 8 foreign  patents.  The earliest of these patents was issued
in 1990,  and the most  recent  patent was issued in 1998.  These  patents  will
provide  protection to the Company ranging from  approximately  2007 until 2015.
The Company may pursue  further  patent  protection  for its  innovations in the
future.  However,  there can be no assurance  that any of the  Company's  future
patent  applications  will be granted in full or in part or that claims  allowed
will be sufficiently broad to protect the Company's technology. The Company also
owns 28  registered  trademarks  in the United  States,  33  registered  foreign
trademarks  and has two pending  foreign  trademark  applications.  Although the
Company  relies to a great  extent on trade  secret  protection  for much of its
technology,  and has obtained written confidentiality agreements from all of its
key  employees,  consultants  and vendors,  there can be no assurance that third
parties will not either  independently  develop the same or similar  technology,
obtain unauthorized access to the Company's proprietary technology or misuse the
technology to which the Company has granted access.

         There  has  been  substantial  industry  litigation  regarding  patent,
trademark and other intellectual property rights involving technology companies.
In the future,  litigation may be necessary to enforce any patents issued to the
Company,  to protect trade secrets,  trademarks and other intellectual  property
rights owned by the Company, to defend the Company against claimed  infringement
of the  rights  of  others  and to  determine  the  scope  and  validity  of the
proprietary  rights of others.  The  Company  is not aware of any stated  claims
against it regarding intellectual property rights. Any litigation arising out of
such claims  could result in  substantial  cost and  diversion of resources  and
could  have a  material  adverse


                                       15

<PAGE>


         The  Company  believes  that,  due to the  rapid  proliferation  of new
technology in the industry,  legal  protection  through means such as the patent
and copyright laws will be less influential on the Company's  ability to compete
than such factors as the creativity of its development  staff and its ability to
develop new products and markets and to service its customers.

         The  laws  of  certain  foreign   countries  treat  the  protection  of
proprietary  rights  differently  from those in the United  States,  and in many
cases the protection  afforded by such foreign laws is weaker than in the United
States.

Employees

         On  February  28,  2001,  the  Company  had  112  full-time  employees,
including 29 in research and development,  40 in marketing,  sales and technical
support, 30 in manufacturing and 13 in administration and finance. The Company's
success  will  depend,  in large  part,  on its  ability to  attract  and retain
qualified  personnel,  who are in great demand throughout the industry.  None of
the Company's  employees are represented by a labor union.  The Company believes
that its employee relations are good.

Organization

         Accom was founded in California in December 1987 and  reincorporated in
the State of Delaware on September 14, 1995.

Additional Factors That May Affect Future Results

         The company  desires to take advantage of the "safe harbor"  provisions
of the  Private  Securities  Litigation  Reform Act of 1995.  Specifically,  the
Company  wishes to alert  readers  that the  factors  set forth in the  sections
entitled  "Manufacturing and Suppliers,"  "Competition" and "Proprietary  Rights
and  Licenses,"  above,  the factors set forth below,  as well as other factors,
could in the future affect, and in the past have affected,  the Company's actual
results and could cause the  Company's  results for future  years or quarters to
differ materially from those expressed in any forward looking statements made by
or on behalf of the Company,  including  without  limitation  those contained in
this 10-K  report.  Forward  looking  statements  can be  identified  by forward
looking  words,  such  as  "may,"  "will,"  "expect,"  "anticipate,"  "believe,"
"estimate" and "continue" or similar words.

                                       16

<PAGE>


         Potential Fluctuations in Operating Results. The Company had net income
of $2.0 million for twelve  months ended  December 31, 2000,  and incurred a net
loss of $2.6  million for the twelve  months ended  December  31, 1999.  For the
three-month  Transition  Period ending December 31, 1998, the Company incurred a
net loss of $3.9  million.  The Company also incurred a net loss of $2.9 million
in the twelve months ended  September 30, 1998.  There can be no assurance  that
the Company will be profitable on a quarterly or annual basis in the future. The
Company's  quarterly  operating  results  in the past  have  fluctuated  and may
fluctuate  significantly  in the future  depending on such factors as the timing
and shipment of significant  orders,  new product  introductions  and changes in
pricing  policies  by the  Company  and its  competitors,  the timing and market
acceptance of the Company's new products and product enhancements, the Company's
product  mix,  the mix of  distribution  channels  through  which the  Company's
products are sold, the Company's inability to obtain sufficient supplies of sole
or limited source  components for its products and charges related to refocusing
and streamlining operations. In response to competitive pressures or new product
introductions,  the  Company  may make  certain  pricing  changes  or take other
actions,  such as  restructuring  the product lines,  that could  materially and
adversely  affect the  Company's  operating  results.  In addition,  new product
introductions  by the Company  could  contribute  to quarterly  fluctuations  in
operating  results as orders for new  products  commence and orders for existing
products  decline.  The  Company  believes  that its net  sales  generally  will
decrease  in the first  quarter of each  fiscal  year as  compared  to the prior
quarter due to decreased  expenditures in the post-production market during that
period and delayed customer purchasing  decisions in anticipation of new product
introductions by the Company and others at the annual NAB convention.

         The Company  currently  anticipates  that a number of factors may cause
its gross margins to decline in future periods from current levels.  The Company
believes  that the market for  on-line  video  editors,  digital  switchers  and
digital video disk  recorders will continue to mature and,  therefore,  that the
gross  margins the Company  derives from sales of these  products may decline in
future periods. Furthermore, if the Company expands its indirect sales channels,
its gross margins may be  negatively  impacted  because of discounts  associated
with sales  through  these  channels.  The costs to the Company of raw materials
used in the manufacturing of the Company's products may fluctuate at times. This
fluctuation may cause gross margins to similarly fluctuate.

         The Company's expense levels are based, in part, on its expectations of
future revenues.  Many of the Company's expenses are relatively fixed and cannot
be  changed  in short  periods  of time.  Because a  substantial  portion of the
Company's  revenue in each quarter  frequently  results  from orders  booked and
shipped  in the  final  month of that  quarter,  revenue  levels  are  extremely
difficult to predict. If revenue levels are below expectations,  net income will
be  disproportionately  affected  because only a small  portion of the Company's
expenses varies with its revenue during any particular quarter. In addition, the
Company typically does not have a significant backlog as of any particular date.


                                       17


<PAGE>


         As a result of the  foregoing  factors and  potential  fluctuations  in
operating  results,  the Company  believes that its results of operations in any
particular  quarter  should  not  be  relied  upon  as an  indicator  of  future
performance. In addition, in some future quarter the Company's operating results
may be below the  expectations of public market analysts and investors.  In such
event,  the price of the Company's  Common Stock would likely be materially  and
adversely affected.

         Dependence on Sales of New  Products.  The Company  anticipates  that a
significant  proportion  of its  sales in 2001  will  come  from  sales of three
products,  AFFINITY(TM),  Abekas(R)  6000,  and  WSD(R)/HD,  all of which  first
shipped in 2000.  As new  products  with no record or a limited  record of prior
sales,  there can be no assurance  that sales of these  products  will reach the
levels  anticipated  by the Company.  To the extent that sales of these products
are less  than  planned,  there  could be an  adverse  effect  on the  Company's
business, financial condition, and results of operations.

         Credit Line  Financing.  In February 2000, the Company  entered into an
agreement with The Provident Bank ("Provident") for a $2,000,000  revolving line
of credit ("line"). Provident and the Company modified the original agreement on
August 11, 2000,  February 13, 2001 and March 30, 2001. The Company  anticipates
that the line  will be  needed  to  provide  operating  cash for the  day-to-day
operations of the Company in 2001. The line  currently  allows for borrowings up
to  $2,000,000  with  availability  limited  to 60% of  the  Company's  eligible
accounts  receivable as determined  by Provident.  As of December 31, 2000,  the
Company  had  outstanding  borrowings  against  the line of $1.0  million and an
additional $469,000 was available for borrowing.  In addition,  the Company must
fulfill certain financial performance covenants set by Provident.  To the extent
that the level of eligible accounts  receivable is not sufficient or the Company
fails to meet the financial  performance  covenants,  the  Company's  ability to
borrow funds to finance operations will be negatively impacted. In the event the
Company is unable to borrow  funds,  the Company will  reevaluate  its operating
plans and believes it will have the ability to delay or reduce  expenditures  so
as to not breach its loan covenants or require additional  resources in order to
continue as a going concern at least through December 31, 2001.

         Rapid Technological  Change;  Product  Development.  The market for the
Company's  products is characterized by rapidly  changing  technology,  evolving
industry standards and frequent new product introductions. The Company's success
will  depend in part upon its ability to enhance its  existing  products  and to
develop and introduce new products and features to incorporate new  technologies
and meet changing  customer  requirements and emerging  industry  standards in a
timely and  cost-effective  manner.  The  Company is  currently  developing  new
products  and  product  enhancements  for its  product  lines.  There  can be no
assurance that the Company will be successful in developing,  manufacturing  and
marketing  new  products  and product  enhancements,  that the Company  will not
experience  difficulties  that delay or prevent the successful  development  and
introduction  of these  products  and  enhancements  or that the  Company's  new
products and product enhancements will achieve market acceptance.  The Company's
business,  financial condition and results of operations would be materially and
adversely  affected if the Company were to experience  delays in developing  new
products or product  enhancements or if these products or  enhancements  did not
gain market acceptance.  In addition, the introduction of products embodying new
technologies  or the  emergence of new industry  standards  can render  existing
products  unmarketable.  There can be no assurance that products or technologies
developed by others will not render the Company's  products  non-competitive  or
obsolete. In such case, the Company's business,  financial condition and results
of operations would be materially and adversely affected.

         Failure to Realize Benefits of Newly Acquired Business. On December 10,
1998,  the Company  acquired  substantially  all of the assets of Scitex Digital
Video,  Inc.("SDV")  and  certain of its  affiliates  (the  "Acquisition").  See
"Business--General."   The  Company  entered  into  the  Acquisition   with  the
expectation  that  product  development  under  way at SDV  at the  time  of the
Acquisition  would  result in  products  that would  produce a certain  level of
revenues.  To the extent that the  expected  levels of revenues are not realized
from these development efforts,  there may be an adverse effect on the effect on
the Company's business,  financial condition and results of operations.  Adverse
determinations  in such  litigation  could  result in the loss of the  Company's
proprietary rights, subject the Company to significant liabilities,  require the
Company  to seek  licenses  from  third  parties or  prevent  the  Company  from
manufacturing  or  selling  its  products,  any of which  could  have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.



                                       18


<PAGE>

         Dependence on Key  Personnel.  The Company's  success  depends in large
part  on the  continued  service  of its key  technical  and  senior  management
personnel and on its ability to attract,  motivate and retain  highly  qualified
employees.  None of the Company's key technical and senior management  personnel
is bound by an  employment  agreement  or an  agreement  not to compete with the
Company  following  termination of employment.  Competition for highly qualified
employees is intense, and the process of identifying and successfully recruiting
personnel with the combination of skills and attributes  required to execute the
Company's strategies is often lengthy.  Accordingly, the loss of the services of
key personnel could have a material  adverse effect upon the Company's  research
and development efforts and on its business,  financial condition and results of
operations.  There can be no assurance  that the Company will be  successful  in
retaining  its key  technical and  management  personnel  and in attracting  and
retaining the personnel it requires for  continued  growth.  The Company has key
person life insurance covering certain of its management personnel.

         Management of Growth.  Although the Company  streamlined its operations
during fiscal 1997 and sold the ELSET virtual set business in January 2000,  the
Company's long-term success will depend in part on its ability to manage growth,
both domestically and internationally. In addition, the Company will be required
to  enhance  its  operational,  management  information  and  financial  control
systems.  To manage the growth  resulting from the acquisition of Scitex Digital
Video in December, 1998, the Company brought on board the following three senior
level  managers:  Executive Vice President of Technology and  Engineering,  Vice
President of Sales,  and Senior Vice President and Chief Financial  Officer.  To
support  growth,  the Company will be required to increase the  personnel in its
sales,  marketing and customer support departments.  If the Company is unable to
hire a sufficient number of employees with the appropriate  levels of experience
to increase  the capacity of these  departments  in a timely  manner,  or if the
Company is unable to  effectively  manage its growth,  the  Company's  business,
financial  condition and results of operations could be materially and adversely
affected.

         International Operations. In the twelve months ended December 31, 2000,
sales to customers outside the United States and Canada accounted for 35% of the
Company's  total  sales.  In the twelve  months ended  December  31,  1999,  the
three-month  Transition  Period ended  December  31, 1998 and the twelve  months
ended  September 30, 1998,  international  sales accounted for 35%, 45% and 45%,
respectively,  of the  Company's  total net  sales.  The  Company  expects  that
international  sales will continue to represent a significant portion of its net
sales in the  future.  The  Company's  results of  operations  may be  adversely
affected by fluctuations in exchange rates,  difficulties in collecting accounts
receivable,  tariffs and difficulties in obtaining export licenses. Although the
Company's sales are currently denominated in U.S. dollars,  future international
sales may result in foreign currency  denominated sales. Gains and losses on the
conversion  to  U.S.   dollars  of   receivables   and  payables   arising  from
international operations may contribute to fluctuations in the Company's results
of  operations.  In addition,  international  sales are  primarily  made through
distributors and result in lower gross margins than direct sales.  Moreover, the
Company's  international  sales may be adversely  affected by lower sales levels
that  typically  occur during the summer months in Europe and other parts of the
world.  International sales and operations are also subject to risks such as the
imposition of governmental controls,  political instability,  trade restrictions
and changes in regulatory  requirements,  difficulties  in staffing and managing
international   operations,   generally  longer  payment  cycles  and  potential
insolvency  of  international  dealers.  There can be no  assurance  that  these
factors  will  not  have a  material  adverse  effect  on the  Company's  future
international  sales and,  consequently,  on the Company's  business,  financial
condition and results of operations.


                                       19

<PAGE>


         Dependence  on  Distributors.  The  Company  derives a majority  of its
revenues from sales through  distributors.  The Company  depends on distributors
for substantially  all of its international  sales. The loss of certain of these
distributors could have a material adverse effect on the Company. Certain of the
Company's  distributors  also act as distributors for competitors of the Company
and could devote greater effort and resources to marketing competitive products.
Because  the  Company's  products  are  sold to  high-end  video  professionals,
effective  distributors must possess sufficient  technical,  marketing and sales
resources  and  must  devote  these  resources  to a  lengthy  sales  cycle  and
subsequent  customer  support.  There  can be no  assurance  that the  Company's
current  distributors  will  be able to  continue  to  market  and  support  the
Company's existing products  effectively or that economic conditions or industry
demand will not adversely affect such distributors. The markets for new products
such as the digital  video  disk-based  servers  require a different  marketing,
sales,  distribution  and support  strategy than markets for the Company's other
products.  In addition,  the Company  currently may expand its existing indirect
sales  channels  to  implement  its  strategy  of  broadening  its  lower-priced
products.  There can be no assurance that the Company's distributors will choose
or be able to effectively  market and support these lower priced  products or to
continue to market the Company's existing products.

         Substantial  Control  by  Existing  Stockholders;   Effect  of  Certain
Anti-Takeover Provisions. As of March 15, 2001, the Company's executive officers
and directors,  and their affiliates,  beneficially owned approximately 53.0% of
the Company's  outstanding  Common Stock. As a result,  the Company's  executive
officers and directors and their affiliates will be able to exercise significant
influence  over the  Company  and its  business  and affairs as well as over the
election of directors,  regardless of how other  stockholders of the Company may
vote.  Furthermore,  acting together, such stockholders may be able to block any
change in control of the Company.

         In  addition,  a current  director  of the  Company  was  appointed  by
American Bankers Insurance Group, which owns 8% Senior Subordinated  Convertible
Notes of the Company which are  convertible  into up to 3,500,000  shares of the
Company's common stock.

         In addition,  the Board of Directors  has the  authority to issue up to
2,000,000  shares of  undesignated  Preferred Stock and to determine the rights,
preferences,  privileges and restrictions of such shares without further vote or
action by the Company's stockholders.  The rights of the holders of Common Stock
will be subject to, and may be adversely  affected by, the rights of the holders
of any  Preferred  Stock  that may be  issued in the  future.  The  issuance  of
Preferred  Stock  could  have the effect of making it more  difficult  for third
parties to acquire a majority of the outstanding voting stock of the Company. In
September,  1996, the Company's Board of Directors adopted a stockholder  rights
plan,  which  entitles  existing  stockholders  of the Company to certain rights
(including the right to purchase shares of Preferred  Stock) in the event of the
acquisition  of 15% or more of the Company's  outstanding  common  stock,  or an
unsolicited tender offer for such shares. The existence of the rights plan could
delay,  prevent, or make more difficult a merger,  tender offer or proxy contest
involving the Company.  Further, certain provisions of the Company's Amended and
Restated Certificate of Incorporation and Bylaws and of Delaware law could delay
or make difficult a merger, tender offer or proxy contest involving the Company.

         Possible Volatility of Stock Price; Decreased Liquidity.  The Company's
stock price has been and may continue to be subject to  significant  volatility,
particularly  on a quarterly  basis.  Any  shortfall in revenue or earnings from
levels  expected  by  securities  analysts,  investors  or others  could have an
immediate and  significant  adverse effect on the trading price of the Company's
common stock in any


                                       20


<PAGE>


given period. Additionally, the Company may not learn of, or be able to confirm,
revenue or earnings shortfalls until late in the fiscal quarter or following the
end of the  quarter,  which could result in an even more  immediate  and adverse
effect on the trading of the  Company's  common  stock.  On July 20,  1998,  the
Company's  Common Stock was delisted from the NASDAQ  National Market System and
it is now quoted on the  Over-the-Counter  (OTC) Bulletin Board under the symbol
ACMM. The OTC Bulletin Board may not provide as much liquidity for the Company's
Common Stock as the NASDAQ National Market.  Also, the aggregate market value of
the voting stock held by non-affiliates  ("public float") of the Company,  as of
March 15, 2001, was approximately  $1,428,000 which affects the liquidity of the
Common Stock.  Finally,  the Company  participates in a highly dynamic industry,
which may result in significant volatility of the Company's common stock price.

Item 2.  Properties

         The Company's  principal  office is located in Menlo Park,  California,
and consists of  approximately  30,000 square feet under a lease that expires in
June 2005. In addition,  the Company has an office in Grass Valley,  California,
consisting of  approximately  15,000 square feet,  under a lease that expires in
April 2004. The Company also leases work space in Hong Kong on a  month-to-month
basis.  The Company  believes that its existing  facilities are adequate to meet
its  requirements  for the near term and that additional space will be available
on commercially reasonable terms if needed.

Item 3.  Legal Proceedings

         There is no material  legal  proceeding to which the Company is a party
or to which any of its  properties are subject.  No material  legal  proceedings
were terminated in the twelve months ended December 31, 2000.

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

         None.

Executive Officers of the Company
<TABLE>
         The executive  officers of the Company,  and their ages as of March 31,
2001, are as follows:
<CAPTION>

Name                                     Age                            Position(s)
- ----                                     ---                            -----------
<S>                                       <C>    <C>
Junaid Sheikh....................         47     Chairman of the Board, President and Chief Executive
                                                 Officer
Phillip Bennett..................         47     Executive Vice President, Technology and Engineering
Donald K. McCauley...............         60     Senior Vice President, Finance, and Chief Financial
                                                 Officer
Ian Craven.......................         46     Senior Vice President, Engineering
William T. Ludwig................         53     Vice President, Sales
Wm. Harris Rogers................         53     Vice President, Marketing
Donald W. Petersen...............         56     Vice President, Manufacturing
</TABLE>

         Junaid  Sheikh has served as the  Chairman  of the  Company's  Board of
Directors  since March 1988, and as the Company's  President and Chief Executive
Officer since November 1991.


                                       21


<PAGE>


         Phillip Bennett has served as Executive Vice President,  Technology and
Engineering,  since  December  1998.  Since 1993, Mr. Bennett has been a private
investor and active in image processing and television systems development. From
1982 to 1993,  Mr.  Bennett was a founder and Vice  President of  Engineering of
Abekas Video Systems.

         Donald K. McCauley has served as Senior Vice  President,  Finance,  and
Chief Financial  Officer since December 1998. Prior to joining the Company,  Mr.
McCauley  served as the Senior Vice  President  of Finance  and Chief  Financial
Officer of Scitex  Digital Video from 1994.  Prior to that, he was a founder and
Chief Financial Officer of ImMIX, a manufacturer of nonlinear editors.

         Ian Craven  has served as Senior  Vice  President,  Engineering,  since
October 1991.  From October 1991, to April 1995, he also served as a director of
the Company.

         William T. Ludwig has served as Vice President,  Sales,  since December
1998.  From July 1996 to December  1998,  Mr. Ludwig served as Vice President of
Sales for Americas/Far  East (AMFE) for Pinnacle  Systems.  From January 1996 to
July 1996, he was the Director of Sales for FAST Electronics. From 1985 to 1995,
he served in various sales capacities for Abekas Video Systems.

         Wm.  Harris  Rogers  has  served as Vice  President,  Marketing,  since
December  1998.  From May 1998 to December  1998,  he served as Vice  President,
Sales and Marketing,  of the Company. From July 1995 to April 1998, he served as
Vice-President, Marketing, of the Company.

         Donald W. Petersen has served as Vice President,  Manufacturing, of the
Company since April 1990.

         Each executive  officer  serves at the sole  discretion of the Board of
Directors.


                                       22


<PAGE>


                                     PART II

Item 5.  Market  for the  Registrant's  Common  Stock  and  Related  Shareholder
         Matters

         Prior to July 20, 1998,  the  Company's  Common Stock was traded on the
NASDAQ  National  Market under the symbol ACMM since the  effective  date of the
Company's  initial public  offering on September 26, 1995.  Prior to the initial
public  offering,  no public market  existed for the Common  Stock.  On July 20,
1998, the Company's  Common Stock was delisted from the NASDAQ  National  Market
System.  The Common Stock is now quoted on the  Over-the-Counter  (OTC) Bulletin
Board under the symbol  ACMM.  The price per share  reflected in the table below
represents,  with respect to the period prior to July 20, 1998, the range of low
and high closing sale prices for the  Company's  Common Stock as reported in the
NASDAQ Stock Market for the quarters  indicated  and, with respect to the period
after July 20, 1998,  the range of low and high bid quotations for the Company's
Common Stock as reported on the OTC Bulletin  Board for the quarters  indicated.
The OTC Bulletin Board quotations reflect  inter-dealer  prices,  without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.

                                                           High         Low
                                                           ----         ---
    Fiscal Year ended September 30, 1998:
        First Quarter...................................  $2.63        $1.06
        Second Quarter..................................  $1.44        $0.81
        Third Quarter...................................  $1.16        $0.50
        Fourth Quarter..................................  $0.69        $0.22
    For the Three Months ended December 31, 1998........  $0.86        $0.19
    Year  ended December 31, 1999:
        First Quarter...................................  $1.25        $0.66
        Second Quarter..................................  $1.56        $0.81
        Third Quarter...................................  $0.97        $0.38
        Fourth Quarter..................................  $1.00        $0.44
     Year  ended December 31, 2000:
        First Quarter...................................  $5.00        $0.69
        Second Quarter..................................  $4.00        $0.81
        Third Quarter...................................  $0.97        $0.53
        Fourth Quarter..................................  $0.75        $0.15

         On March 15, 2001, the closing sale price of the Company's common stock
as reported on the OTC Bulletin Board was $ 0.375.

         The  Company  had 99  stockholders  of  record  as of March  15,  2001,
including  several  holders  who are  nominees  for an  undetermined  number  of
beneficial owners.

         The Company has never paid cash  dividends  on its capital  stock.  The
Company currently anticipates that it will retain all available funds for use in
the operation and expansion of its business,  and does not anticipate paying any
cash dividends in the foreseeable future. However, the Board of Directors of the
Company will review the dividend policy  periodically  to determine  whether the
declaration of dividends is appropriate.


                                       23

<PAGE>


Item 6.  Selected Consolidated Financial Data

<TABLE>
         The following table presents  selected  consolidated  financial data of
the  Company.  This  historical  data  should  be read in  conjunction  with the
attached  consolidated  Financial  Statements  and the related notes thereto and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" appearing in Item 7 of this Form 10-K.

                      Selected Consolidated Financial Data
                      (in thousands, except per share data)
<CAPTION>

                                               Fiscal Year Ended       Three Months Ended        Twelve Months Ended
Consolidated Statement of                      -----------------       ------------------        -------------------
Operations Data:                                  September 30,           December 31,               December 31,
                                                  -------------           ------------               ------------
                                           1996       1997     1998      1997     1998        1998       1999     2000
                                           ----       ----     ----      ----     ----        ----       ----     ----
                                                                     (Unaudited)           (Unaudited)
<S>                                      <C>        <C>      <C>        <C>      <C>        <C>        <C>      <C>
  Net sales...........................   $ 21,408   $17,627  $ 12,617   $4,133   $ 3,363    $ 11,847   $32,969  $ 33,517
  Gross profit........................     10,398     6,593     6,439    2,387     1,389       5,441    17,401    17,825
  Operating income (loss).............     (1,621)   (4,657)   (3,042)      90    (3,882)     (7,014)   (2,169)     (721)
  Net income (loss)...................       (916)   (4,490)   (2,881)     142    (3,896)     (6,919)   (2,595)    1,967
  Basic net income (loss) per
    share(1)..........................      (0.14)    (0.68)    (0.43)    0.02     (0.52)      (1.00)    (0.26)     0.19
  Diluted net income (loss) per
    share (1).........................      (0.14)    (0.68)    (0.43)    0.02     (0.52)      (1.00)    (0.26)     0.16
  Shares used in computing:
    Basic net income (loss) per
    share(1)..........................      6,439     6,587     6,662    6,638     7,552       6,891    10,124    10,180
    Diluted net income (loss) per
    share(1)..........................      6,439     6,587     6,662    7,034     7,552       6,891    10,124    14,089
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data:                         As of September 30,        As of December 31,       As of December 31,
                                            -------------------        ------------------       ------------------
                                           1996       1997     1998      1997       1998      1998      1999     2000
                                           ----       ----     ----      ----       ----      ----      ----     ----
                                                                      (Unaudited)
<S>                                      <C>        <C>       <C>      <C>         <C>       <C>       <C>      <C>
  Working capital (deficit)...........   $ 11,171   $ 7,550   $ 4,633  $ 7,492     $(2,661)  $(2,661)  $   200  $  3,770
  Total assets........................     17,279    11,545     8,093   12,447      17,213    17,213    12,035    14,739
  Long-term notes payable.............         24         -         -        -       1,165     1,165     3,261     3,318
  Total stockholders' equity..........   $ 12,952   $ 8,566   $ 5,720  $ 8,734     $ 3,929   $ 3,929   $ 1,338  $  3,479
</TABLE>


(1) Computed on the basis described in Note 1 of Notes to Consolidated Financial
    Statements.   All  share   amounts   have  been   adjusted  to  reflect  the
    implementation of Financial Accounting Standards Board Statement No. 128 and
    Staff Accounting Bulletin No. 98.


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

         The  following  Management's   Discussion  and  Analysis  of  Financial
Condition  and  Results of  Operations  should be read in  conjunction  with the
Company's Consolidated Financial Statements as of December 31, 2000 and 1999 and
for the twelve months ended  December 31, 2000,  1999 and 1998, the three months
ended  December  31, 1998 and 1997 and for the fiscal year ended  September  30,
1998,  included  elsewhere in this Report on Form 10-K. In the fourth quarter of
calendar  1998,  the Company  changed its fiscal year end from  September  30 to
December 31.

         In addition, in order to take advantage of the "safe harbor" provisions
of the Private  Securities  Litigation  Reform Act of 1995,  the Company  hereby
notifies  readers  that the factors set forth above in Item 1 under the sections
entitled "Manufacturing and Suppliers,"  "Competition,"  "Proprietary Rights and
Licenses" and  "Additional  Factors That May Affect Future  Results," as well as
other factors,  could in the future affect,  and in the past have affected,  the
Company's  actual  results  and could  cause the  Company's  results  for future
periods  to differ  materially  from  those  expressed  in any  forward  looking
statements  made by or on behalf of the Company,  including  without  limitation
those made in the discussion below. Forward looking statements can be identified
by  forward  looking

                                       24

<PAGE>


words, such as "may," "will," "expect," "anticipate,"  "believe," "estimate" and
"continue" or similar words.

Overview

         Accom  designs,  manufactures,  sells,  and supports a complete line of
digital video signal processing,  editing,  and disk recording tools,  primarily
for  the   professional   worldwide  video   post-production   and  distribution
marketplaces.  The Company had previously offered products,  including the ELSET
Virtual Set, in the video and computer graphics production marketplace.

         The following table  summarizes the Company's  products and the primary
markets they address.

- --------------------------------------------------------------------------------
                           Primary Markets / Products

      Post-Production:
           Digital Video Editors:
               Axial(R) 3000 on-line editor
               AFFINITY(TM) nonlinear editor

           Digital Disk Recorders:
               Work  Station  Disk  ("WSD(R)")/  2Xtreme(TM)  computer  graphics
               digital  disk  recorder
               Work  Station   Disk("WSD(R)")/HD   high definition  digital disk
               recorder
               Accom  Professional  Recorder ("APR(TM) ") Attache(TM)

           Digital Switcher:
               8150 switcher

      Distribution:
           Axess(TM)  digital news graphic and clip server
           Dveous(TM) and Brutus digital video effects systems
           Abekas(R) 6000 digital video server

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


         The Company's  revenues are currently  derived  primarily  from product
sales.  The Company  generally  recognizes  revenue upon product  shipment where
prices are fixed and collectibility is assured. If obligations exist at the time
of shipment,  revenue  recognition  is deferred until  obligations  are met. The
Company's gross margin has  historically  fluctuated from quarter to quarter and
declined on an annual basis.  In the future,  gross margins will be dependent on
the mix of higher and  lower-priced  products and the  percentage  of sales made
through direct and indirect distribution channels.

         Software development costs are recorded in accordance with Statement of
Financial  Accounting Standards No. 86. To date, the Company has expensed all of
its internal  software  development  costs, as costs incurred  subsequent to the
establishment   of  technical   feasibility  for  each  product  have  not  been
significant.

         On December 10, 1998,  the Company  acquired  substantially  all of the
assets and certain  liabilities of Scitex Digital Video, Inc. and certain of its
affiliates, as part of the Company's strategy to broaden its product line and to
grow the Company.  The acquired assets included Scitex Digital Video's  business
of developing,  manufacturing,  marketing and selling digital video manipulation
equipment  and


                                       25


<PAGE>


nonlinear  editing  workstations for the video industry.  The products that were
acquired in such transaction are described in the Section entitled "Products."

          On  January  21,  2000,  Accom and  certain of its  subsidiaries  sold
substantially  all of their  respective  assets related to the ELSET virtual set
product  line  to  IMadGINE.  IMadGINE  also  purchased  the  stock  of  Accom's
subsidiary, Accom Poland. The Company and its subsidiaries also sold to IMadGINE
certain  intellectual  property  related to the ELSET  business.  ELSET products
consist of virtual sets for high-end  video content  creation in real time.  The
Company's first shipment of ELSET virtual set tools occurred in March 1996, with
the  final  shipment  occurring  in  December  1999.  With  the sale of ELSET to
IMadGINE,  Accom  reduced  its  headcount  of  full-time  employees  by 13.  The
positions eliminated consisted of 9 software engineers and 1 administrative aide
in the employment of Accom Poland and 3 marketing and sales employees  operating
out of the Menlo Park office.

Results of Operations

Twelve Months Ended December 31, 2000 vs. Twelve Months Ended December 31, 1999

<TABLE>
         The following table presents the Company's  Consolidated  Statements of
Operations  (dollar  amounts in thousands)  for the twelve months ended December
31, 2000 and 1999:
<CAPTION>

                                               For the Twelve Months Ended
                                               ---------------------------
                                                       December 31,       Increase  (Decrease)
                                                       ------------       --------  ----------
                                                    2000        1999       Amount     Percent
                                                    ----        ----       ------     -------
<S>                                               <C>         <C>         <C>          <C>
Net sales                                         $ 33,517    $ 32,969    $    548     1.7%
Cost of sales                                       15,692      15,568         124     0.8%
                                                  --------    --------    --------   --------
Gross profit                                        17,825      17,401         424     2.4%
                                                  --------    --------    --------   --------
Operating expenses:
  Research and development                           6,518       7,340        (822)  (11.2)%
  Marketing and sales                                9,154       9,158          (4)    --
  General and administrative                         2,874       3,072        (198)   (6.4)%
                                                  --------    --------    --------   --------
  Total operating expenses                          18,546      19,570      (1,024)   (5.2)%
                                                  --------    --------    --------   --------
Operating loss                                        (721)     (2,169)      1,448    66.8%
Interest and other income (expense), net              (159)       (414)        255    61.6%
Gain from sale of ELSET product line                 2,888        --         2,888     N/A
                                                  --------    --------    --------   --------
Income (loss) before provision for income taxes      2,008      (2,583)      4,591   177.7%
Provision for income taxes                             (41)        (12)        (29)  241.7%
                                                  --------    --------    --------   --------
Net income (loss)                                 $  1,967    $ (2,595)   $  4,562   175.8%
                                                  ========    ========    ========   ========
</TABLE>



                                       26


<PAGE>


<TABLE>
         The following table presents the Company's  Consolidated  Statements of
Operations as a percentage of net sales for the twelve months ended December 31,
2000 and 1999:
<CAPTION>
                                                     For the Twelve Months
                                                     ---------------------
                                                      Ended December 31,      Increase
                                                      ------------------      --------
                                                       2000         1999     (Decrease)
                                                       ----         ----     ----------
<S>                                                   <C>          <C>          <C>
Net sales                                             100.0%       100.0%        -
Cost of sales                                          46.8%        47.2%      (0.4)%
                                                      -----        -----       ----
Gross margin                                           53.2%        52.8%       0.4%
                                                      -----        -----       ----
Operating expenses:
     Research and development                          19.4%        22.3%      (2.9)%
     Marketing and sales                               27.3%        27.8%      (0.5)%
     General and administrative                         8.6%         9.3%      (0.7)%
                                                      -----        -----       ----
     Total operating expenses                          55.3%        59.4%      (4.1)%
                                                      -----        -----       ----
Operating loss                                         (2.1)%       (6.6)%      4.5%
Interest and other income (loss), net                  (0.5)%       (1.3)%      0.8%
Gain from sale of ELSET product line                    8.6%         -          8.6%
                                                      -----        -----       ----
Income (loss) before provision for income taxes         6.0%        (7.9)%     13.9%
Provision for income taxes                             (0.1)%        -         (0.1)%
                                                      -----        -----       ----
Net income (loss)                                       5.9%        (7.9)%     13.8%
                                                      =====        =====       ====
</TABLE>

         The following is a discussion  comparing the results of operations  for
the twelve months ending December 31, 2000 and 1999:

         Net sales.  The  increase in net sales  during the twelve  months ended
December 31, 2000,  from levels for the twelve  months ended  December 31, 1999,
was primarily due to increased sales in the distribution marketplace.

         In the  twelve  months  ended  December  31,  2000 and  1999,  sales to
countries  outside the United States and Canada  represented  35% and 34% of net
sales,  respectively,  as export sales to Europe  increased,  as a percentage of
total sales, from 14% to 15% and export sales to the Pacific Rim decreased, as a
percentage of total sales, from 18% to 17%.

         The  following  table  presents net sales dollar  volumes by market and
related  percentages  of total net sales (dollar  amounts in thousands)  for the
twelve months ended December 31, 2000 and 1999:

                       For the Twelve Months Ended For the Twelve Months Ended
                       --------------------------- ---------------------------
                           December 31, 2000          December 31, 1999
                           -----------------          -----------------
Market                   Amount        Percent       Amount        Percent
- ------                   ------        -------       ------        -------

Production             $  --           --          $ 3,840           11.6%
Post-Production         16,158           48.2%      15,879           48.2%
Distribution            13,188           39.3%       8,813           26.7%
Other                    4,171           12.5%       4,437           13.5%
                       -------          -----      -------          -----
                       $33,517          100.0%     $32,969          100.0%
                       =======          =====      =======          =====

                                       27
<PAGE>

         Cost of sales.  Cost of sales, as a percentage of sales, for the twelve
months ended December 31, 2000,  remained fairly  consistent with levels for the
twelve months ended December 31, 1999.

         Research and  development.  Research and  development  expenses for the
twelve  months ended  December 31,  2000,  decreased  over levels for the twelve
months ended  December 31, 1999,  primarily due to the  elimination  of expenses
relating the to ELSET product line and reduced consultant expenses. The expenses
relating to ELSET were  eliminated  as a result of the January  2000 sale of the
ELSET product line to IMadGINE.

         Marketing and sales. Marketing and sales expenses for the twelve months
ended December 31, 2000,  were unchanged over levels for the twelve months ended
December 31, 1999. Expenses relating the ELSET product line were eliminated as a
result of the January 2000 sale of the ELSET  product  line to  IMadGINE.  These
reductions  in expenses  were  offset by  increased  trade show and  advertising
expenses.

         General and  administrative.  For the twelve months ended  December 31,
2000, general and administrative expenses decreased slightly from levels for the
twelve  months  ended  December 31, 1999.  The decrease was  primarily  due to a
reduced  provision for bad debts reflective of favorable  collection  trends and
reduced  expenses for  consultants  and temporary  workers  partially  offset by
increased legal and accounting expenses.

         Interest and other income, net. Interest and other income, net, for the
twelve  months ended  December 31,  2000,  increased  over levels for the twelve
months  ended  December  31,  1999,  due  to  an  increase  in   interest-paying
investments, reduced levels of debt, and an increase in other income.

         Provision  for income taxes.  For the twelve months ended  December 31,
2000 and 1999, the provision for income taxes  represents  primarily an estimate
of the current foreign tax liability. No benefit related to U.S. losses incurred
for the twelve  months  ended  December  31, 2000,  has been  recognized  by the
Company due to the  inability to carry back net  operating  losses and a lack of
earnings  history.  The deferred  tax asset on the balance  sheet has been fully
offset by a valuation allowance.

                                       28
<PAGE>

Twelve Months Ended December 31, 1999 vs. Twelve Months Ended December 31, 1998

<TABLE>
         The following table presents the Company's  Consolidated  Statements of
Operations  (dollar  amounts in thousands)  for the twelve months ended December
31, 1999 and 1998:
<CAPTION>

                                           For the Twelve Months Ended
                                           ---------------------------
                                                  December 31,         Increase  (Decrease)
                                                  ------------         --------  ----------
                                                1999       1998        Amount      Percent
                                                ----       ----        ------      -------
                                                        (Unaudited)
<S>                                           <C>         <C>         <C>           <C>
Net sales                                     $ 32,969    $ 11,847    $ 21,122      178.3%
Cost of sales                                   15,568       6,406       9,162      143.0%
                                              --------    --------    --------    -------
Gross profit                                    17,401       5,441      11,960      219.8%
                                              --------    --------    --------    -------
Operating expenses:
  Research and development                       7,340       3,721       3,619       97.3%
  Marketing and sales                            9,158       4,916       4,242       86.3%
  General and administrative                     3,072       1,623       1,449       89.3%
  Charge for acquired in-process technology       --         2,195      (2,195)    (100.0)%
                                              --------    --------    --------    -------
  Total operating expenses                      19,570      12,455       7,115       57.1%
                                              --------    --------    --------    -------
Operating loss                                  (2,169)     (7,014)      4,845       69.1%
Interest and other income (expense), net          (414)        114        (528)    (463.2)%
                                              --------    --------    --------    -------
Loss before provision for income taxes          (2,583)     (6,900)      4,317       62.6%
Provision for income taxes                         (12)        (19)          7      (36.8)%
                                              --------    --------    --------    -------
Net loss                                      $ (2,595)   $ (6,919)   $  4,324       62.5%
                                              ========    ========    ========    =======
</TABLE>

<TABLE>
         The following table presents the Company's  Consolidated  Statements of
Operations as a percentage of net sales for the twelve months ended December 31,
1999 and 1998:
<CAPTION>
                                                       For the Twelve Months
                                                       ---------------------
                                                         Ended December 31,
                                                         ------------------     Increase
                                                         1999         1998     (Decrease)
                                                         ----         ----     ----------
                                                                  (Unaudited)
<S>                                                     <C>          <C>         <C>
Net sales                                               100.0%       100.0%        -
Cost of sales                                            47.2%        54.1%      (6.9)%
                                                         ----         -----       ----
Gross margin                                             52.8%        45.9%       6.9%
                                                         ----         -----       ----
Operating expenses:
     Research and development                            22.3%        31.4%      (9.1)%
     Marketing and sales                                 27.8%        41.5%     (13.7)%
     General and administrative                           9.3%        13.7%      (4.4)%
     Charge for acquired in-process technology            -           18.5%     (18.5)%
                                                         ----         -----       ----
     Total operating expenses                            59.4%       105.1%     (45.7)%
                                                         ----         -----       ----
Operating loss                                           (6.6)%      (59.2)%     52.6%
Interest and other income (loss), net                    (1.3)%        1.0%       2.3%
                                                         ----         -----       ----
Loss before provision for income taxes                   (7.9)%      (58.2)%     50.3%
Provision for income taxes                                -           (0.2)%      0.2%
                                                         ----         -----       ----
Net loss                                                 (7.9)%      (58.4)%     50.5%
                                                         ====         =====      ====
</TABLE>

         The following is a discussion  comparing the results of operations  for
the twelve months ending December 31, 1999 and 1998:

                                       29
<PAGE>

         Net sales.  The  increase in net sales  during the twelve  months ended
December 31, 1999,  from levels for the twelve  months ended  December 31, 1998,
was primarily due to increased  sales in the  post-production  and  distribution
marketplaces as well as increased customer service revenues. The increased sales
resulted  largely from sales from product lines  acquired in the  acquisition of
the Scitex Digital Video assets and business in December 1998.

         International  sales in the twelve  months ended  December 31, 1999 and
1998,  represented  35% and 43% of net sales,  respectively,  as export sales to
Europe  decreased,  as a percentage  of total sales,  from 15% to 14% and export
sales to the Pacific Rim decreased,  as a percentage of total sales, from 23% to
18%.

         The  following  table  presents net sales dollar  volumes by market and
related  percentages  of total net sales (dollar  amounts in thousands)  for the
twelve months ended December 31, 1999 and 1998:

                    For the Twelve Months Ended      For the Twelve Months Ended
                    ---------------------------      ---------------------------
                         December 31, 1999                December 31, 1998
                         -----------------                -----------------
Market               Amount        Percent             Amount        Percent
- ------               ------        -------             ------        -------

Production           $ 3,840        11.7%             $ 5,275         44.5%
Post-Production       15,879        48.2%               4,046         34.2%
Distribution           8,813        26.7%               1,640         13.8%
Other                  4,437        13.4%                 886          7.5%
                     -------       -----              -------        -----
                     $32,969       100.0%             $11,847        100.0%
                     =======       =====              =======        =====

         Cost of sales.  Cost of sales, as a percentage of sales,  decreased for
the twelve  months ended  December 31, 1999,  from levels for the twelve  months
ended  December 31, 1998,  as a result of increased  overall  sales and a higher
proportion of higher margin, customer service sales.

         Research and  development.  Research and  development  expenses for the
twelve  months ended  December 31,  1999,  increased  over levels for the twelve
months  ended  December 31,  1998,  due to  increases  in headcount  and related
overhead expenses,  consultant  expenses,  and materials and services related to
specific project  development.  The increase in headcount was primarily a result
of the  acquisition  of the Scitex Digital Video assets and business in December
1998.

         Marketing and sales. Marketing and sales expenses for the twelve months
ended  December  31,  1999,  increased  over levels for the twelve  months ended
December 31, 1998,  primarily due to increases in headcount and related overhead
expenses,  expenses for consultants and temporary  employees,  sales  commission
expenses,  travel expenses,  trade show expenses,  and advertising expenses. The
increase in headcount  was primarily a result of the  acquisition  of the Scitex
Digital Video assets and business in December 1998.

         General and administrative.  The increase in general and administrative
expenses  for the twelve  months ended  December  31, 1999,  from levels for the
twelve  months  ended  December  31,  1998,  was  primarily  due to increases in
headcount and related overhead expenses,  expenses for consultants and temporary
employees,  fees for  professional  services,  bank charges and  amortization of
intangibles. The increase in headcount was primarily a result of the acquisition
of the Scitex Digital Video assets and business in December 1998.

                                       30
<PAGE>

         Interest and other income, net. Interest and other income, net, for the
twelve  months ended  December 31,  1999,  decreased  over levels for the twelve
months  ended   December  31,  1998,   due  to  a  decrease  in  the  levels  of
interest-paying investments as well as an increase in debt taken on, in part, to
fund the acquisition of the Scitex Digital Video assets and business in December
1998.

         Provision  for income taxes.  For the twelve months ended  December 31,
1999,  the  provision  for income  taxes  represents  an estimate of the current
foreign tax liability. No benefit related to U.S. losses incurred for the twelve
months ended  December 31, 1999,  has been  recognized by the Company due to the
inability to carry back net operating losses and a lack of earnings history. The
deferred  tax asset on the  balance  sheet has been fully  offset by a valuation
allowance.  For the year ended December 31, 1998, the provision for income taxes
represents an estimate of foreign tax liability.

                                       31
<PAGE>

Three Months Ended December 31, 1998 vs. Three Months Ended December 31, 1997

<TABLE>
         The following table presents the Company's  Consolidated  Statements of
Operations (dollar amounts in thousands) for the three months ended December 31,
1998 and 1997:
<CAPTION>
                                                 For the Three Months
                                                 --------------------
                                                        Ended
                                                        -----
                                                      December 31,      Increase    (Decrease)
                                                      ------------      --------    ----------
                                                   1998        1997      Amount      Percent
                                                   ----        ----      ------      -------
                                                            (Unaudited)
<S>                                               <C>        <C>        <C>            <C>
Net sales                                         $ 3,363    $ 4,133    $  (770)       (18.6)%
Cost of sales                                       1,974      1,746        228         13.1%
                                                  -------    -------    -------      -------
Gross profit                                        1,389      2,387       (998)       (41.8)%
                                                  -------    -------    -------      -------
Operating expenses:
  Research and development                          1,210        784        426         54.3%
  Marketing and sales                               1,163      1,214        (51)        (4.2)%
  General and administrative                          703        299        404        135.1%
  Charge for acquired in-process technology         2,195       --        2,195         N/A
                                                  -------    -------    -------      -------
  Total operating expenses                          5,271      2,297      2,974        129.5%
                                                  -------    -------    -------      -------
Operating income (loss)                            (3,882)        90     (3,972)    (4,413.3)%
Interest and other income (expense), net              (13)        53        (66)      (124.5)%
                                                  -------    -------    -------      -------
Income (loss) before provision for income taxes    (3,895)       143     (4,038)    (2,823.8)%
Provision for income taxes                             (1)        (1)      --         --
                                                  -------    -------    -------      -------
Net income (loss)                                 $(3,896)   $   142    $(4,038)    (2,823.8)%
                                                  =======    =======    =======      =======
</TABLE>

         The following table presents the Company's  Consolidated  Statements of
Operations as a percentage of net sales for the three months ended  December 31,
1998 and 1997:

                                                 For the Three Months
                                                 --------------------
                                                        Ended
                                                        -----
                                                      December 31,
                                                      ------------     Increase
                                                    1998      1997    (Decrease)
                                                    ----      ----    ----------
                                                            (Unaudited)

Net sales                                           100.0%    100.0%    --
Cost of sales                                        58.7%     42.2%    16.5%
                                                   ------       ---   ------
Gross margin                                         41.3%     57.8%   (16.5)%
                                                   ------       ---   ------
Operating expenses:
     Research and development                        36.0%     19.0%    17.0%
     Marketing and sales                             34.6%     29.4%     5.2%
     General and administrative                      20.9%      7.2%    13.7%
     Charge for acquired in-process technology       65.2%      --      65.2%
                                                   ------       ---   ------
     Total operating expenses                       156.7%     55.6%   101.1%
                                                   ------       ---   ------
Operating income (loss)                            (115.4)%     2.2%  (117.6)%
Interest and other income (loss), net                (0.4)%     1.3%    (1.7)%
                                                   ------       ---   ------
Income (loss) before provision for income taxes    (115.8)%     3.5%  (119.3)%
Provision for income taxes                            --        --       --
                                                   ------       ---   ------
Net income (loss)                                  (115.8)%     3.5%  (119.3)%
                                                   ======       ===   ======

         The following is a discussion  comparing the results of operations  for
the three months ending December 31, 1998 and 1997:

         Net sales.  The  decrease in net sales  during the three  months  ended
December 31, 1998, from levels for the three months ended December 31, 1997, was
primarily due to decreased sales in the

                                       32
<PAGE>

production and distribution  marketplaces partially offset by increased sales in
the post-production marketplace.

         International  sales in the three  months  ended  December 31, 1998 and
1997,  represented  45% and 49% of net sales,  respectively,  as export sales to
Europe  decreased,  as a percentage  of total sales,  to 17% from 31% and export
sales to the Pacific Rim increased,  as a percentage of total sales, from 16% to
21%.

         The  following  table  presents net sales dollar  volumes by market and
related  percentages  of total net sales (dollar  amounts in thousands)  for the
three months ended December 31, 1998 and 1997:

                  For the Three Months Ended  For the Three Months Ended
                  --------------------------  --------------------------
                      December 31, 1998          December 31, 1997
                      -----------------          -----------------
Market                Amount     Percent         Amount     Percent
- ------                ------     -------         ------     -------

Production            $1,113       33.1%         $2,389       57.8%

Post-Production        1,493       44.4%          1,040       25.2%

Distribution             424       12.6%            631       15.3%

Other                    333        9.9%             73        1.7%
                      ------      -----          ------      -----
                      $3,363      100.0%         $4,133      100.0%
                      ======      =====          ======      =====

         Cost of sales.  Cost of sales, as a percentage of sales,  for the three
months ended  December 31,  1998,  increased  from levels for the same period in
1997 due to lower  overall  sales,  the absence in 1998 of higher  margin  ELSET
software sales,  and added overhead created by the acquisition of Scitex Digital
Video in December 1998.

         Research and  development.  The  increase in research  and  development
expenses in the three months ended  December 31, 1998,  from levels for the same
period in 1997 was due to increases in headcount  resulting from the acquisition
of Scitex Digital Video,  increased material and consulting expenses relating to
specific   development   projects,   and  expenses   relating  to  consolidating
facilities.

         Marketing and sales.  The decrease in marketing  and sales  expenses in
the three  months ended  December  31, 1998,  from levels for the same period in
1997 was due primarily to decreases in sales commissions and trade show expenses
partially  offset by increases in headcount  resulting  from the  acquisition of
Scitex Digital Video and the consolidation of facilities.

         General and administrative.  The increase in general and administrative
expenses in the three months ended  December 31, 1998,  from levels for the same
period in 1997 was due primarily to increases in travel  expenses,  professional
fees, bad debt expense, amortization of goodwill, and facilities costs.

         Interest  and other  income,  net.  The  decrease in interest and other
income, net, during the three months ended December 31, 1998, as compared to the
three months ended  December 31, 1997,  was primarily  due to reduced  levels of
interest-paying  investments as well as an increase in debt taken on to fund the
acquisition of the SDV assets and business.

         Provision  for income  taxes.  In the three months  ended  December 31,
1998,  the  provision  for income  taxes  represents  an estimate of the current
foreign tax liability.  No benefit  related to U.S. losses incurred in the three
months ended  December 31, 1998,  has been  recognized by the Company due to the

                                       33
<PAGE>

inability to carry back net operating losses and a lack of earnings history. The
deferred  tax asset on the  balance  sheet has been fully  offset by a valuation
allowance. In the three months ended December 31, 1997, the provision for income
taxes represented an estimate of the foreign tax liability. No provision related
to U.S.  income in the three months ended December 31, 1997, had been recognized
by the Company due to the expected loss for the fiscal year ended  September 30,
1997.

Liquidity and Capital Resources

         Since   inception,   the  Company  has  financed  its   operations  and
expenditures  for property and  equipment  through the sale of capital stock and
convertible  debt,  borrowings  under a bank line of credit and term  loans.  On
September  29,  1995,  the Company  completed  its initial  public  offering and
received  approximately $17.8 million in net proceeds. On September 29, 1995, it
completed the acquisition of the shares of ELSET GmbH it did not already own for
approximately $7.6 million.

         The  Company's  financial  statements  are prepared and  presented on a
basis  assuming it continues  as a going  concern.  At December  31,  2000,  the
Company  had an  accumulated  deficit  of $20.3  million.  Management's  planned
expenditures  for 2001 exceed current cash and cash  equivalents.  However,  the
Company believes that its existing cash, cash equivalents and credit  facilities
will be  sufficient to meet its cash  requirements  for at least the next twelve
months.  The Company's recently developed products will need to attain favorable
market acceptance to meet its forecasted cash flow requirements.

         The Company believes that its operating plans are reasonable and can be
achieved. In the event that results from operations and cash flows generated are
less than planned,  the Company will reevaluate its operating plans and believes
it will have the ability to delay or reduce expenditures so as to not breach the
covenants of its credit  facilities  or require  additional  resources to ensure
that the Company  continues  as a going  concern at least  through  December 31,
2001.  If the Company is not  successful  in  delaying or reducing  expenditures
sufficiently  to continue as a going concern,  it wil consider  other  strategic
options. To assist it in evaluating strategic options now and in the future, the
Company has engaged  E.O.S.  Capital,  Inc. to provide  financial  advisory  and
consulting services (See Exhibit 10.16).

           As of December  31,  2000,  the Company had $216,000 of cash and cash
equivalents.  Operating  activities  used $2.0 million in net cash in the twelve
months ended December 31, 2000,  and provided  $87,000 in net cash in the twelve
months ended  December 31, 1999.  Net cash used by operating  activities  in the
twelve  months  ended  December 31,  2000,  was due  primarily to an increase in
accounts  receivable  which  resulted from higher sales at the end of the fourth
quarter.  Net cash  provided by operating  activities in the twelve months ended
December 31, 1999,  was due  primarily to decreases in accounts  receivable  and
inventories  partially  offset  by the  net  loss  and an  increase  in  accrued
liabilities and customer deposits.

         On  February  10,  2000,  the  Company  signed  an  agreement  with The
Provident Bank  ("Provident"),  an Ohio chartered  bank, for a revolving line of
credit ("line").  Provident and the Company  modified the original  agreement on
August 11, 2000, February 13, 2001 and March 30, 2001. The line currently allows
for  borrowings  up to  $2,000,000,  with  availablity  limited  to  60%  of the
Company's  eligible  accounts  receivable as  determined by Provident.  Interest
currently  accrues on  outstanding  borrowings at the bank's prime rate plus 250
basis  points.  The  credit  line  is  secured  by all  assets  of the  Company.
Borrowings  under the line are  subject to  compliance  with  certain  financial
covenants. As of each of December 31, 2000 and February 28, 2001 the Company was
not in  compliance  with a  financial  covenant.  Provident  issued  waivers  of
non-compliance  for these  violations in conjunction  with the February 13, 2001
and March 30, 2001 modifications to the agreement.  As of December 31, 2000, the
Company  had  outstanding  borrowings  against  the line of $1.0  million and an
additional $469,000 was available for borrowing.

         From December  1998 to January  2000,  the Company had a line of credit
with LaSalle  Business  Credit,  Inc.  ("LaSalle").  At the  termination  of the
agreement,  Accom paid  LaSalle the balance  outstanding  under the line of $1.5
million.  The final  payment to LaSalle was funded from the proceeds of the sale
of the ELSET product line to IMadGine.

         On March 12, 1999,  the Company  completed a private  placement of $3.5
million in senior  subordinated  convertible notes with a group of investors led
by the American Bankers  Insurance Group, Inc.  ("ABIG").  As a condition of the
agreement  between the Company and ABIG, the Company is required to meet certain
financial  covenants at the end of each fiscal quarter.  The financial covenants
consist of required  values of an interest  coverage ratio and a leverage ratio.
The Company was not in  compliance  with one or both of  covenants at the end of
each fiscal quarter in 2000.  The agreement

                                       34
<PAGE>

between the Company  and the  holders of the  convertible  notes was amended and
certain  waivers  (of the  covenant  violations)  granted on  November  3, 1999,
February 10, 2000,  October 25, 2000,  January 29, 2001,  and March 30, 2001. As
part of its  agreement  to grant  certain  waivers on February  10,  2000,  ABIG
stipulated  that the Company use the proceeds from sale of the ELSET virtual set
product line to IMadGINE to (a) pay or reserve funds to pay for all debt owed to
Scitex  Digital Video and (b) reserve  funds for the payment of all  transaction
fees relating to the sale of the ELSET product line. As part of ABIG's agreement
to grant certain waivers on January 29, 2001, the conversion  price of the notes
was reduced.  The notes  currently have a coupon rate of 8% per year,  mature in
2004 and are  convertible  into shares of Accom common stock at a price of $1.00
per share.  Proceeds from the private  placement were used to pay the balance on
the revolving line of credit with LaSalle  Business  Credit that was outstanding
at the time the proceeds were received.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         Interest Rate Risk.

         The  Company's  exposure  to interest  risk  relates  primarily  to the
Company's short-term debt.

         The  interest  rate of the  Company's  credit  line  is tied to  market
interest  rates which  fluctuate with market  changes.  The interest rate on the
revolving  loan with The  Provident  Bank  ("Provident")  is equal to the bank's
prime rate plus 250 basis points.  As  Provident's  prime rate  fluctuates,  the
interest expense  incurred by the Company on the credit line will fluctuate.  If
Provident's  prime rate increased by 100 basis points,  the  additional,  annual
interest  expense  incurred by the Company would be $10,300 (based on the credit
line balance at December 31, 2000).

         The Company does not currently hold interest bearing  investments which
would be affected by interest rate fluctuations.

         All of the Company's sales are transacted in U.S. dollars. In addition,
most of the Company's purchases are transacted in U.S. dollars. As a result, the
Company's  operations would not be affected by exchange rate fluctuations except
to the extent that sales in certain  countries might decrease if the U.S. dollar
became substantially stronger than the currency of the countries in question and
purchases denominated in U.S. dollars became prohibitively expensive.

                                       35
<PAGE>

Item 8.  Financial Statements and Supplementary Data

         See Item 14(a) for an index to the  consolidated  financial  statements
and supplementary financial information that are attached hereto.

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

         Not applicable.

                                    PART III

         Certain  information  required by Part III is omitted  from this report
because the Company will file a definitive proxy statement within 120 days after
the end of its fiscal year  pursuant to Regulation  14A (the "Proxy  Statement")
for its  annual  meeting  of  stockholders  to be held  June  14,  2001  and the
information included therein is incorporated herein by reference.

Item 10. Directors and Executive Officers of the Registrant

         Information with respect to directors of the Company is incorporated by
reference   from   the    information    under   the   caption    "Election   of
Directors-Nominees" in the Company's Proxy Statement.

         Information as to the Company's  executive  officers appears at the end
of Part I of this report.

         Information  with  respect  to  compliance  with  Section  16(a) of the
Securities   Exchange  Act  of  1934  is  incorporated  by  reference  from  the
information  under the caption  "Section 16(a)  Beneficial  Ownership  Reporting
Compliance" in the Company's Proxy Statement.

Item 11. Executive Compensation

         Information   with  respect  to  executive   compensation  and  related
information is incorporated by reference from the information  under the caption
"Executive   Compensation  and  Related  Information"  in  the  Company's  Proxy
Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         Information  with respect to security  ownership of certain  beneficial
owners and management is incorporated  by reference from the  information  under
the caption "Common Stock Ownership of Certain Beneficial Owners and Management"
in the Company's Proxy Statement.

Item 13. Certain Relationships and Related Transactions

         Information   with  respect  to  certain   relationships   and  related
transactions is incorporated by reference from the information under the caption
"Certain   Relationships  and  Related  Transactions"  in  the  Company's  Proxy
Statement.

                                       36
<PAGE>

                                     Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      The following documents are filed as part of this Report:

         (1)      Financial   Statements  and  Report  of  Ernst  &  Young  LLP,
                  Independent Auditors

                  Report of Ernst & Young LLP, Independent Auditors.

                  Consolidated Balance Sheets as of December 31, 2000 and 1999.

                  Consolidated  Statements of Operations - For the twelve months
                  ended December 31, 2000, 1999 and 1998, the three months ended
                  December  31,  1998  and 1997 and for the  Fiscal  Year  ended
                  September 30, 1998.

                  Consolidated  Statement  of  Shareholders'  Equity  - For  the
                  twelve months ended  December 31, 2000 and 1999, for the three
                  months  ended  December 31, 1998 and for the Fiscal Year ended
                  September 30, 1998.

                  Consolidated  Statements of Cash Flows - For the twelve months
                  ended December 31, 2000, 1999 and 1998, the three months ended
                  December  31,  1998  and 1997 and for the  Fiscal  Year  ended
                  September 30, 1998.

                  Notes to Consolidated Financial Statements.

         (2)      Financial Statement Schedules

                  The following financial statement schedule is included herein:

                  Schedule II - Valuation and Qualifying Accounts

                  Schedules  not listed  above  have been  omitted  because  the
                  information required to be set forth therein is not applicable
                  or is shown in the financial statements or notes thereto.

         (3)      Exhibits  (numbered in accordance  with Item 601 of Regulation
                  S-K)

                                       37
<PAGE>

  Number                               Description
 -------                               -----------

  3.1(1)           Bylaws of the Company.

  3.1.1(2)         Certificate of Amendment of Bylaws, dated as of May 26, 1999.

  3.1.2(2)         Certificate  of  Amendment  of  Bylaws,  dated as of July 20,
                   1999.

  3.2(3)           Amended and  Restated  Certificate  of  Incorporation  of the
                   Company  filed with the Delaware  Secretary of State upon the
                   closing of the Company's initial public offering.

  3.2.1(2)         Certificate of Amendment of Certificate of  Incorporation  of
                   the Company  filed with the  Delaware  Secretary  of State on
                   July 20, 1999.

  3.3              Certificate  of  Designation  of  Rights,   Preferences   and
                   Privileges  of  Series  A  Participating   Preferred   Stock.
                   Reference is made to Exhibits 4.3, 4.4 and 4.5.

  4.1              Reference is made to Exhibits  3.1,  3.2,  3.3,  4.3, 4.4 and
                   4.5.

  4.2(1)           Specimen Common Stock Certificate.

  4.3(4)           Preferred Shares Rights Agreement,  dated as of September 13,
                   1996,   between   the  Company   and  U.S.   Stock   Transfer
                   Corporation,  including the  Certificate  of  Designation  of
                   Rights,  Preferences and Privileges of Series A Participating
                   Preferred  Stock,  the  form of  Rights  Certificate  and the
                   Summary of Rights  attached  thereto as  Exhibits A, B and C,
                   respectively.

  4.4(5)           Amendment No. 1 to Preferred Shares Rights  Agreement,  dated
                   as of July 14,  1998,  between  the  Company  and U.S.  Stock
                   Transfer Corporation.

  4.5(6)           Amendment No. 2 to Preferred Shares Rights  Agreement,  dated
                   as of December 10, 1998,  between the Company and U.S.  Stock
                   Transfer Corporation.

  4.5(7)           Amendment No. 3 to Preferred Shares Right Agreement, dated as
                   of March 12, 1999 between the Company and U.S. Stock Transfer
                   Corporation.

 10.1(13)          Lease, dated November 19, 1999, by and between Menlo Business
                   Park LLC and the Company.

 10.1.1(13)        Addendum  to Lease,  dated  March 25,  1999,  by and  between
                   Whispering Pines Associates II and the Company.

 10.2(8)           1997  Non-Executive  Stock  Option  Plan and  Form of  Option
                   Agreement.

 10.3(1)*          1995  Stock  Option/Stock  Issuance  Plan and Form of  Option
                   Agreement.

 10.4(9)           Asset Purchase  Agreement,  dated as of December 10, 1998, by
                   and among the Company,  Scitex  Digital Video,  Inc.,  Scitex
                   Digital  Video  (Europe),  Inc.,  Scitex  Digital Video (Asia
                   Pacific),   Inc.,   Scitex   Development   Corp.  and  Scitex
                   Corporation Ltd.

 10.5(13)          Loan and Security Agreement, dated February 10, 2000, between
                   the Company and The Provident Bank,  including Revolving Loan
                   Promissory Note.

 10.5.1(14)        Modification  Agreement , dated August 11, 2000,  between the
                   Company and The Provident Bank

 10.5.2            Second  Modification  Agreement,  dated  February  13,  2001,
                   between the Company and The Provident Bank.

                                       38
<PAGE>

 10.5.3            Third Modification  Agreement,  dated March 30, 2001, between
                   the Company and The Provident Bank

 10.6(10)          Restricted   Stock   Purchase   Agreement  and   Non-Recourse
                   Promissory Note, each dated December 4, 1998, between Phillip
                   Bennett and the Company.

 10.6.2(2)         Amended and Restated  Secured  Promissory  Note,  dated as of
                   June 20,  1999,  issued to Phillip  Bennett in the  principal
                   amount of $500,000.

 10.7(10)          Restricted   Stock   Purchase   Agreement  and   Non-Recourse
                   Promissory Note, each dated December 7, 1998,  between Lionel
                   M. Allan and the Company.

 10.7.1(2)         Amendment to Restricted Stock Purchase Agreement, dated as of
                   June 20,  1999,  between  the Company and Lionel M. Allan and
                   Amended  and  Restated  Secured  Promissory  Note,  issued to
                   Lionel M.  Allan in the  principal  amount of  $65,000,  each
                   dated as of June 20, 1999.

 10.8(10)          Restricted  Stock  Purchase,  dated  December 7, 1998,  among
                   David A.  Lahar,  EOS  Capital  Profit  Sharing  Plan and the
                   Company;  Non-Recourse  Promissory  Note,  EOS Capital Profit
                   Sharing Plan of David A. Lahar in favor of the Company.

 10.9(10)          Stock Purchase  Agreement,  dated December 10, 1998,  between
                   Michael Luckwell and the Company.

 10.10(10)         Investor's Rights Agreement, dated December 10, 1998, between
                   Michael Luckwell and the Company.

 10.11(11)         Note Purchase  Agreement,  dated as of March 12, 1999,  among
                   the  Company,  American  Bankers  Insurance  Group,  Inc. and
                   certain other parties.

 10.12(11)         Form of 6% Senior Subordinated Convertible Notes due 2004.

 10.12.1           Second Agreement of Waiver and Amendment,  dated February 10,
                   2000,  between  the Company and  American  Bankers  Insurance
                   Group.

 10.12.2           Third Amendment Agreement and Waiver, dated January 29, 2001,
                   between the Company and American Bankers Insurance Group.

 10.12.3           Amended and Restated  Third  Amendment  Agreement and Waiver,
                   dated  March 30,  2001,  between  the  Company  and  American
                   Bankers Insurance Group, Inc.

 10.13(11)         Investor Rights Agreement,  dated as of March 12, 1999, among
                   the  Company,  American  Bankers  Insurance  Group,  Inc. and
                   certain other parties.

 10.14(12)         Asset  Purchase  Agreement,  dated as of January 21, 2000, by
                   and among the Company,  Accom  Virtual  Studio,  Inc.,  Accom
                   Virtual Studio  (Germany)  GmbH,  Elset  Electronic Set GmbH,
                   IMadGINE  Video  Systems  Marketing,  B.V.  and  Orad  Hi-Tec
                   Systems Ltd.

 10.15(12)         Conditional  Contract for Sale of Share,  dated as of January
                   21,  2000,  by and between  Accom  Virtual  Studio  Inc.  and
                   IMadGINE Video Systems Marketing, B.V.

 10.16             Letter of  Engagement,  dated  November 1, 2000,  between the
                   Company and EOS Capital, Inc.

 10.17             Fee  Agreement,  dated January 29, 2001,  between the Company
                   and American Bankers Insurance Group.

 21.1              Subsidiaries of the Company

 23.1              Consent of Ernst & Young LLP, Independent Auditors.

                                       39
<PAGE>

 24.1              Power  of  Attorney  (reference  is  made  to page 43 of this
                   Report).

 27.1              Financial Data Schedule. (EDGAR filed version only)



(1)      Incorporated  by reference to exhibits filed in response to Item 16(a),
         "Exhibits," of the Registrant's  Registration Statement on Form S-1 and
         Amendment No. 1,  Amendment No. 2 and Amendment No. 3 thereto (File No.
         33-95728), which became effective on September 26, 1995.

(2)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Quarterly  Report on 10-Q for the quarter ended June 30, 1999 (File No.
         0-26620).

(3)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Annual  Report on 10-K for the fiscal  year ended  September  30,  1995
         (File No. 0-26620).

(4)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Registration  Statement  on Form 8-A (File  No.  0-26620)  to  register
         Preferred Share Purchase Rights under the Company's  stockholder rights
         plan, adopted by the Company's board of directors on September 3, 1996.

(5)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Amendment  No. 1 to  Registration  Statement  on Form  8-A/A  (File No.
         0-26620), filed on September 21, 1998.

(6)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Amendment  No. 2 to  Registration  Statement  on Form  8-A/A  (File No.
         0-26620), filed on December 23, 1998.

(7)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Amendment  No. 2 to  Registration  Statement  on Form  8-A/A  (File No.
         0-26620), filed on March 26, 1999.

(8)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Registration Statement on Form S-8 (File No. 333-23635), filed on March
         20, 1997.

(9)      Incorporated  by  reference  from an exhibit  filed with the  Company's
         Current  Report on Form 8-K (File No.  0-26620),  filed on December 23,
         1998

(10)     Incorporated by reference from an exhibit filed with Amendment No. 1 to
         the  Company's  Annual  Report on Form 10-K/A for the fiscal year ended
         September, 1998, filed on January 28, 1999 (File No. 0-26620).

(11)     Incorporated  by  reference  from an exhibit  filed with the  Company's
         Current Report on Form 8-K (File No. 0-26620), filed on March 26, 1999.

(12)     Incorporated  by  reference  from an exhibit  filed with the  Company's
         Current  Report on Form 8-K (File No.  0-26620),  filed on  February 4,
         2000.

(13)     Incorporated  by  reference  from an exhibit  filed with the  Company's
         Annual  Report on 10-K (File No.  0-26620) for the year ended  December
         31, 1999.

(14)     Incorporated  by  reference  from an exhibit  filed with the  Company's
         Quarterly  Report on 10-Q (File No. 0-26620) for the quarter ended June
         30, 2000.

*        Management Compensatory Plan

(b)      Reports on Form 8-K

         None.


                                       40
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized in the City of Menlo
Park, California on this 30th day of March, 2001.

                 ACCOM, INC.

                By: /s/                JUNAID SHEIKH
                    ----------------------------------------------
                                       Junaid Sheikh
                            Chairman of the Board of Directors,
                           President and Chief Executive Officer

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature
appears below  constitutes  and appoints  Junaid Sheikh and Donald K.  McCauley,
jointly  and  severally,   his   attorneys-in-fact,   each  with  the  power  of
substitution,  for him in any and all capacities, to sign any amendments to this
Report on Form  10-K,  and to file the same,  with  exhibits  thereto  and other
documents in connection  therewith with the Securities and Exchange  Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact,  or his
substitute or substitutes may do or cause to be done by virtue hereof.

<TABLE>
         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities and
on the dates indicated.
<CAPTION>

                 Signature                                    Title                              Date
                 ---------                                    -----                              ----
<S>                                          <C>                                            <C>
             /s/ JUNAID SHEIKH               Chairman of the Board of Directors,            March 30, 2001
             -----------------               President and Chief Executive Officer
              (Junaid Sheikh)                (Principal Executive Officer)


          /s/ DONALD K. MCCAULEY             Senior Vice President and Chief                March 30, 2001
          ----------------------             Financial Officer (Principal Financial
           (Donald K. McCauley)              and Accounting Officer)


            /s/ LIONEL M. ALLAN              Director                                       March 30, 2001
            -------------------
             (Lionel M. Allan)

            /s/  THOMAS FANELLA              Director                                       March 30, 2001
            -------------------
            (Thomas E. Fanella)

            /s/ DAVID A. LAHAR               Director                                       March 30, 2001
            ------------------
             (David A. Lahar)

           /s/ MICHAEL LUCKWELL              Director                                       March 30, 2001
           --------------------
            (Michael Luckwell)

        /s/ EUGENE M. MATALENE, JR.          Director                                       March 30, 2001
        ---------------------------
         (Eugene M. Matalene, Jr.)
</TABLE>

                                       41

<PAGE>

<TABLE>

                                                        SCHEDULE II

                                                        ACCOM, INC.

                                             VALUATION AND QUALIFYING ACCOUNTS
                                              ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                                      (In thousands)
<CAPTION>

                                          Balance at         Charges to                                         Balance at
                                         Beginning of         Cost and                            Other           End of
                                            Period            Expenses       Deductions*       Adjustments        Period
                                         --------------     -------------    -------------     -------------    ------------
<S>                                          <C>                <C>                <C>             <C>             <C>
Year ended September 30, 1998 ......          401                --                164                --              237
Three Months ended December 31, 1998          237                29                --               2,630**         2,896
Year ended December 31, 1999 .......        2,896                --                733                --            2,163
Year ended December 31, 2000 .......        2,163              (240)***            270                --            1,653


<FN>

*    All deductions represent write-offs of bad debt.

**   This adjustment was made to increase reserves as part of the acquisition of
     Scitex Digital Video in December, 1998.

***  Adjustments to reduce the level of reserves required.
</FN>
</TABLE>
<PAGE>

                                   Accom, Inc.
                        Consolidated Financial Statements
                        As of December 31, 2000 and 1999
                                       And
          For the twelve months ended December 31, 2000, 1999 and 1998,
            For the three months ended December 31, 1998 and 1997 and
                  For the fiscal year ended September 30, 1998
                       with Report of Independent Auditors


<PAGE>

                                   Accom, Inc.
                        Consolidated Financial Statements
                        As of December 31, 2000 and 1999
                                       And
          For the twelve months ended December 31, 2000, 1999 and 1998,
            For the three months ended December 31, 1998 and 1997 and
                  For the fiscal year ended September 30, 1998
                       with Report of Independent Auditors

                                    Contents

Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . .   F-2

Consolidated Financial Statements:

         Consolidated Balance Sheets . . . . . . . . . . . . . . . . . .    F-3

         Consolidated Statements of Operations . . . . . . . . . . . . .    F-4

         Consolidated Statement of Stockholders' Equity . . . . . . . . .   F-5

         Consolidated Statements of Cash Flows . . . . . . . . . . . . .    F-6

         Notes to Consolidated Financial Statements . . . . . . . . . . .   F-8

                                      F-1
<PAGE>

                Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders
Accom, Inc.

     We have audited the accompanying consolidated balance sheets of Accom, Inc.
as of December 31, 2000 and 1999,  and the related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for the  twelve  months  ended
December 31, 2000 and 1999, the three months ended December 31, 1998 and for the
fiscal year ended September 30, 1998. Our audits also included the  consolidated
financial  statement  schedule  listed in the Index at Item  14(a) in Form 10-K.
These consolidated  financial  statements and schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

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

       In our  opinion,  the  financial  statements  referred  to above  present
fairly, in all material respects,  the consolidated financial position of Accom,
Inc. as of December  31, 2000 and 1999,  and the  consolidated  results of their
operations  and their cash flows for the twelve  months ended  December 31, 2000
and 1999,  the three  months  ended  December 31, 1998 and the fiscal year ended
September 30, 1998, in conformity with accounting  principles generally accepted
in the United States. Also, in our opinion,  the related consolidated  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.

                                        Ernst & Young LLP

Palo Alto, California
February 2, 2001, except for
paragraph 1 of
Note 7 and                            F-2
paragraphs 2 and 3
of Note 8,
as to which the
date is March 30, 2001

<PAGE>

<TABLE>
                                            Accom, Inc.
                                    Consolidated Balance Sheets
                               (in thousands, except per share data)

<CAPTION>
                                                                              As of December 31,
                                                                              ------------------
                                                                               2000       1999
                                                                             --------    --------
<S>                                                                          <C>         <C>
                                  Assets
Current assets:
   Cash and cash equivalents                                                 $    216    $    328
   Restricted cash                                                              1,620        --
   Accounts receivable, net of allowance for doubtful accounts of $1,653
     and $2,163 as of December 31, 2000 and 1999, respectively                  4,400       1,616
   Inventories                                                                  4,992       5,112
   Prepaid expenses and other current assets                                      484         580
                                                                             --------    --------
         Total current assets                                                  11,712       7,636
Property and equipment, net                                                     1,808       2,343
Intangible assets                                                               1,145       1,986
Other assets                                                                       74          70
                                                                             --------    --------
                                                                             $ 14,739    $ 12,035
                                                                             ========    ========

                   Liabilities and Stockholders' Equity
Current liabilities:
   Bank borrowings-line of credit                                            $  1,030    $    559
   Current portion of notes payable                                               224       1,315
   Accounts payable                                                             2,886       2,560
   Accrued liabilities                                                          2,208       1,574
   Accrued warranty                                                               463         463
   Customer deposits                                                            1,131         965
                                                                             --------    --------
         Total current liabilities                                              7,942       7,436
Long-term convertible notes                                                     3,318       3,261

Stockholders' equity:
   Preferred stock, $0.001 par value; 2,000 shares authorized; no shares
     issued and outstanding                                                      --          --
   Common stock, $0.001 par value, at amount paid in; 40,000 shares
     authorized as of December 31, 2000 and 1999;  10,198 and 10,133 shares
     issued and outstanding as of December 31, 2000 and 1999, respectively     24,252      24,201
   Notes receivable from stockholders                                            (500)       (630)
   Accumulated other comprehensive income                                          (7)       --
   Accumulated deficit                                                        (20,266)    (22,233)
                                                                             --------    --------
     Total stockholders' equity                                                 3,479       1,338
                                                                             --------    --------
                                                                             $ 14,739    $ 12,035
                                                                             ========    ========
<FN>
      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                               F-3
<PAGE>
<TABLE>
                                                        Accom, Inc.
                                           Consolidated Statements of Operations
                                           (in thousands, except per share data)
<CAPTION>
                                      Twelve Months Ended,          Three Months Ended,    Fiscal Year Ended,
                                      --------------------          -------------------    ------------------
                                          December 31,                 December 31,           September 30,
                                          ------------                 ------------           -------------
                                 2000        1999       1998         1998       1997              1998
                               --------    --------    --------    --------    --------         --------
                                                      (Unaudited)             (Unaudited)
<S>                            <C>         <C>         <C>         <C>         <C>              <C>
Sales
    Product                    $ 29,346    $ 28,532    $ 10,961    $  3,030    $  4,060         $ 11,991
    Service                       4,171       4,437         886         333          73              626
                               --------    --------    --------    --------    --------         --------
                                 33,517      32,969      11,847       3,363       4,133           12,617
Cost of sales
    Product                      14,744      14,417       6,286       1,924       1,721            6,083
    Service                         948       1,151         120          50          25               95
                               --------    --------    --------    --------    --------         --------
                                 15,692      15,568       6,406       1,974       1,746            6,178

Gross profit                     17,825      17,401       5,441       1,389       2,387            6,439
                               --------    --------    --------    --------    --------         --------
Operating expenses:
  Research and development        6,518       7,340       3,721       1,210         784            3,295
  Marketing and sales             9,154       9,158       4,916       1,163       1,214            4,967
  General and administrative      2,874       3,072       1,623         703         299            1,219
  Charge for acquired
     in-process technology         --          --         2,195       2,195        --               --
                               --------    --------    --------    --------    --------         --------

  Total operating expenses       18,546      19,570      12,455       5,271       2,297            9,481
                               --------    --------    --------    --------    --------         --------
Operating income (loss)            (721)     (2,169)     (7,014)     (3,882)         90           (3,042)

  Interest and other income         239          93         153          22          54              185
  Interest and other expense       (398)       (507)        (39)        (35)         (1)              (5)
  Gain from sale of ELSET
     product line                 2,888        --          --          --          --               --
                               --------    --------    --------    --------    --------         --------
Income (loss) before provision
     for income taxes             2,008      (2,583)     (6,900)     (3,895)        143           (2,862)
                               --------    --------    --------    --------    --------         --------

Provision for income taxes          (41)        (12)        (19)         (1)         (1)             (19)
                               --------    --------    --------    --------    --------         --------

Net income (loss)              $  1,967    $ (2,595)   $ (6,919)   $ (3,896)   $    142         $ (2,881)
                               ========    ========    ========    ========    ========         ========
Basic net income (loss) per
  share                        $   0.19    $  (0.26)   $  (1.00)   $  (0.52)   $   0.02         $  (0.43)
                               ========    ========    ========    ========    ========         ========
Diluted net income (loss)
  per share                    $   0.16    $  (0.26)   $  (1.00)   $  (0.52)   $   0.02         $  (0.43)
                               ========    ========    ========    ========    ========         ========
Shares used in computing
  basic net  income (loss)
  per share                      10,180      10,124       6,891       7,552       6,638            6,662
                               ========    ========    ========    ========    ========         ========
Shares used in computing
  diluted net  income
  (loss) per share               14,089      10,124       6,891       7,552       7,034            6,662
                               ========    ========    ========    ========    ========         ========

<FN>

      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                               F-4
<PAGE>

<TABLE>
                                                        Accom, Inc.
                                      Consolidated Statement of Stockholders' Equity
                                                      (in thousands)
<CAPTION>
                                                                  Notes       Accumulated                      Total
                                                                  -----       -----------                      -----
                                                               Receivable        Other                         Stock-
                                                               ----------        -----                         ------
                                        Common Stock,             From       Comprehensive   Accumulated      Holders'
                                        -------------             ----       -------------   -----------      --------
                                    Shares         Amount     Stockholders       Income        Deficit         Equity
                                    ------         ------     ------------       ------        -------         ------
<S>                                  <C>       <C>           <C>             <C>             <C>             <C>
Balances, September 30, 1997          6,627     $     21,427  $        -      $       -       $ (12,861)      $ 8,566
  Issuance of common stock
     upon exercise of stock
     options                             33             25             -              -               -            25
  Issuance of common stock
     through Employee Stock
     Purchase Plan                       15             14             -              -               -            14
  Purchase of common stock by
     Company                             (4)            (4)            -              -               -            (4)
  Net loss and comprehensive
     loss                                 -              -             -              -          (2,881)       (2,881)
                                 -------------- ------------- -------------- --------------- ------------- -----------
Balances, September 30, 1998          6,671         21,462                            -         (15,742)        5,720
  Issuance of common stock
     through private sales for
     cash and notes receivable        3,450          2,180          (630)             -               -         1,550
  Issuance of warrants for
     common stock                         -            555             -              -               -           555
  Net loss and comprehensive
     loss                                 -              -             -              -          (3,896)       (3,896)
                                 -------------- ------------- -------------- --------------- ------------- -----------
Balances, December 31, 1998          10,121         24,197          (630)             -         (19,638)        3,929
  Issuance of common stock
     upon exercise of stock
     options                             12              4                            -               -             4
  Net loss and comprehensive
     loss                                 -              -                            -          (2,595)       (2,595)
                                 -------------- ------------- -------------- --------------- ------------- -----------
Balances, December 31, 1999          10,133         24,201           (630)            -         (22,233)        1,338
  Issuance of common stock
     upon exercise of stock
     options                             65             51             -              -               -            51
  Payments by stockholders of
     notes receivable                     -              -           130              -               -           130
  Translation adjustment                  -              -             -             (7)              -            (7)
  Net income                              -              -             -              -           1,967         1,967
                                 -------------- ------------- -------------- --------------- ------------- -----------
Balances, December 31, 2000          10,198     $     24,252  $     (500)     $      (7)       $(20,266)     $  3,479
                                 ============== ============= ============== =============== ============= ===========
<FN>
      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                               F-5
<PAGE>
<TABLE>
                                                        Accom, Inc.
                                           Consolidated Statements of Cash Flows
                                                      (in thousands)
<CAPTION>
                                                    Twelve Months Ended,         Three Months Ended,   Fiscal Year Ended,
                                                    --------------------         -------------------   ------------------
                                                         December 31,                December 31,         September 30,
                                                         ------------                ------------         -------------
                                                 2000       1999        1998      1998       1997            1998
                                                -------    -------    -------    -------    -------         -------
                                                                    (Unaudited)           (Unaudited)
<S>                                             <C>        <C>        <C>        <C>        <C>            <C>
    Cash Flows From Operating Activities
Net income (loss)                               $ 1,967    $(2,595)   $(6,919)   $(3,896)   $   142        $(2,881)
Adjustments to  reconcile  net income
  (loss) to net cash  provided by (used in)
     operating activities:
   Charge for acquired in-process technology       --         --        2,195      2,195       --             --
   Depreciation and amortization of goodwill
     and other acquisition-related
     intangibles                                    939      1,408        707        275        118            550

   Gain on sale of ELSET product line            (2,888)      --         --         --         --             --
   Changes in operating assets and
       liabilities, net of effects of
       reserves to streamline operations and
       of sale of ELSET product line:
     Accounts receivable                         (2,784)     1,962      2,494        950       (325)         1,219
     Inventories                                    120        632        561        799       (309)          (547)
     Income tax refunds receivable                 --         --          243       --          378            621
     Prepaid expenses and other current
       assets                                        96        (45)       277         36        (97)           144
     Other assets                                    (4)         7       --         --         --             --
     Accounts payable                               326        464       (884)      (114)       570           (200)
     Accrued liabilities and customer
       deposits                                     260     (1,659)      (383)       131        187           (327)
     Deferred revenue                              --          (87)       (45)      --           (9)           (54)
Translation adjustment                               (7)      --         --         --         --             --
                                                -------    -------    -------    -------    -------        -------
   Net cash provided by (used in) operating
       activities                                (1,975)        87     (1,754)       376        655         (1,475)
                                                 -------    -------    -------    -------    -------        -------

    Cash Flows From Investing Activities
Expenditures for property and equipment            (391)      (400)      (326)       (48)      (344)          (622)
Proceeds from disposal of property and
   equipment, net of the effect of the sale
   of the ELSET product line                         11        351       --         --         --             --
Decrease in customer service inventories            326       --         --         --         --             --
Acquisition of Scitex Digital Video business       --         --       (7,893)    (7,893)      --             --
                                                -------    -------    -------    -------    -------        -------
       Net cash used in investing activities        (54)       (49)    (8,219)    (7,941)      (344)          (622)
                                                -------    -------    -------    -------    -------        -------
    Cash Flows from Financing Activities

Borrowings and payments on line of credit, net      471     (3,357)     3,916      3,916       --             --
Repayments on notes payable                        (643)      (750)       (10)      --          (14)           (24)
Proceeds from long-term notes                        57      3,261       --         --         --             --
Issuance of common stock                             51          4      1,563      1,550         26             39
Repurchase of common stock                         --         --           (4)      --         --               (4)
Restricted cash                                  (1,620)     1,132     (1,132)    (1,132)      --             --
Repayment of notes receivable from
   stockholders                                     130       --         --         --         --             --
Net proceeds from sale of ELSET product line      3,471       --         --         --         --             --
                                                -------    -------    -------    -------    -------        -------
       Net cash provided by financing
          activities                              1,917        290      4,333      4,334         12             11
                                                -------    -------    -------    -------    -------        -------

Net increase (decrease) in cash and cash
   equivalents                                     (112)       328     (5,640)    (3,231)       323         (2,086)

Cash and cash equivalents at beginning of
   the period                                      (328)      --        5,640     (3,231)     5,317          5,317
                                                -------    -------    -------    -------    -------        -------
Cash and cash equivalents at end of the
   period                                       $   216    $   328    $  --      $  --      $ 5,640        $ 3,231
                                                =======    =======    =======    =======    =======        =======
<FN>
                                                        -Continued-

      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
                                               F-6
<PAGE>


<TABLE>
                                                        Accom, Inc.
                                     Consolidated Statements of Cash Flows (Continued)
                                                      (in thousands)
<CAPTION>
                                                      Twelve Months Ended,          Three Months Ended,   Fiscal Year Ended,
                                                      --------------------          -------------------   ------------------
                                                          December 31,                 December 31,          September 30,
                                                          ------------                 ------------          -------------
                                                   2000       1999        1998        1998      1997            1998
                                                   ----       ----        ----        ----      ----            ----
                                                                       (Unaudited)          (Unaudited)
Supplemental Disclosure of Cash Flow
               Information
<S>                                                <C>         <C>        <C>         <C>       <C>              <C>
Interest paid                                      $ 379      $ 374      $   22      $   22      $  1            $  1
                                                   =====      =====      ======      ======      ====            ====

Income taxes paid
                                                   $  16      $   7      $   17      $    1      $  1            $ 17
                                                   =====      =====      ======      ======      ====            ====

Noncash investing and financing activities:

  Issuance of common stock in exchange
     for notes receivable                          $ --       $ --       $  630      $  630      $--             $--
                                                   =====      =====      ======      ======      ====            ====
  Issuance of warrants as partial
     consideration for acquisition of
     Scitex Digital Video business                 $ --       $ --       $  555      $  555      $--             $--
                                                   =====      =====      ======      ======      ====            ====
  Issuance of notes payable as partial
     consideration for Scitex Digital
     Video business                                $ --       $ --       $2,065      $2,065      $--             $--
                                                   =====      =====      ======      ======      ====            ====

<FN>
      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                               F-7
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


1. Nature of the Business and Basis of Presentation

Accom,  Inc.  (the  "Company")  designs,  manufactures,  sells,  and  supports a
complete line of digital video signal  processing,  editing,  and disk recording
tools,  primarily for the  professional,  worldwide  video  post-production  and
distribution marketplaces.

In conjunction  with the acquisition of Scitex Digital Video,  Inc. ("SDV") (see
Note 3), the Company  changed its fiscal year end from  September 30 to December
31. SDV had operated using a fiscal year ending December 31.

The financial  statements of the Company have been prepared on a basis  assuming
it continues as a going concern. The Company has an accumulated deficit of $20.3
million at December 31, 2000 and has used cash in operating  activities  of $2.0
million  during the twelve months ended  December 31, 2000.  The Company had net
income of $2.0 million in the twelve months ended December 31, 2000, including a
$2.9 million gain on the sale of the ELSET product line. The Company  incurred a
net loss of $2.6  million in the twelve  months  ended  December 31, 1999, a net
loss of $3.9 million in the three months ended December 31, 1998, and a net loss
of $2.9 million in the twelve months ended  September 30, 1998.  There can be no
assurance  that the Company will be profitable on a quarterly or annual basis in
the future.  The Company is  dependent  upon the  availablity  of funds from its
revolving  line  of  credit  with  The  Provident  Bank  and  has a  history  of
non-compliance  and  re-negotiation  of  covenants  with the Bank  (see Note 7).
Consequently,  although the Company believes its existing cash balances together
with operating revenues and funds anticipated to be available from its revolving
line of credit will provide  adequate  funding to meet the  Company's  liquidity
requirements for the next twelve months,  there can be no assurance the adequate
funding will be  available  on terms  favorable to the Company or at all. In the
event the Company in unable to generate  sufficient  cash flows from revenues or
secure additional sources of capital,  management will adjust the operating plan
and delay or reduce the Company's  expenditures  and the scope of its operations
to reduce  the need for  additional  cash  resources.  If such  efforts  are not
successful, the Company's ability to continue as a going concern may be severely
impaired.

One  customer,  Grass Valley  Group,  a  distributor,  accounted  for 11% of the
Company's net sales for the twelve  months ended  December 31, 2000. No customer
accounted for 10% or more of net sales for the twelve months ended  December 31,
1999. One customer,  AIM Co. Ltd., a  distributor,  accounted for 14% and 16% of
net sales for the three  months  ended  December  31,  1998,  and for the twelve
months ended September 30, 1998,  respectively.  Sales to countries  outside the
United States and Canada were 35% and 34% for the years ended  December 31, 2000
and 1999,  respectively.  For the three months ended  December 31, 1998, and for
the twelve months ended September 30, 1998, export sales were approximately 45%.
Export sales to Europe and the Pacific Rim were 15% and 17%,  respectively,  for
the twelve months ended  December 31, 2000, 14% and 18%,  respectively,  for the
twelve months ended December 31, 1999, 17% and 21%, respectively,  for the three
months ended  December 31, 1998, and 19% and 22%,  respectively,  for the twelve
months ended September 30, 1998.

                                      F-8
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


1. Nature of the Business and Basis of Presentation (continued)

On  January  21,  2000,  Accom,  Inc.,  and  certain of its  subsidiaries,  sold
substantially  all of their  respective  assets related to the ELSET virtual set
product line to IMadGINE Video Systems  Marketing,  B.V.  ("IMadGINE"),  a Dutch
company that is a wholly owned subsidiary of Orad Hi-Tec Systems Ltd.  ("Orad"),
an Israeli corporation. IMadGINE also purchased the stock of Accom's subsidiary,
Accom Poland z o.o., a Polish corporation ("Accom Poland").  The Company and its
subsidiaries  also  sold  certain  intellectual  property  related  to the ELSET
business. The net book value of the assets sold by the Company was approximately
$87,000.

The Company sold these assets in exchange for:  $4,000,000 in cash and a warrant
to purchase 70,423 shares of Orad. The warrant was valued at a nominal amount.

The  Company  recognized  a gain in 2000 from the sale of the ELSET  virtual set
product line of $2.9 million.  The pre-tax gain was  $2,888,000,  computed based
upon  ELSET's  net assets as of January  21,  2000,  and other  direct  expenses
related  to the sale.  The  reported  $2,888,000  gain  excludes  an  additional
$400,000  contingent  gain  which  was  deferred  under  the  terms of the asset
purchase  agreement  and was to be used to  settle  any  indemnification  claims
between the Company and Orad arising during the year following the  transaction.
In January 2001,  Orad  indicated  that it would not make any claims against the
escrow  account and the funds were  subsequently  released to the  Company.  The
Company recorded the resulting gain in its January 2001 financial statements.

The  Company  used the cash  proceeds  of the sale to: (a) pay the $1.5  million
balance  outstanding on the line of credit with LaSalle Business  Credit,  Inc.;
(b) pay the $565,000  balance  remaining  on one of the notes  payable to Scitex
Digital Video; (c) according to an agreement with the American Bankers Insurance
Group,  set aside sufficient funds to: (1) pay the second note payable to Scitex
Digital  Video in the amount of $750,000  when it came due in April 2000 and (2)
pay transaction expenses associated with the sale of ELSET.

2. Summary of Significant Accounting Policies

Reclassifications

Certain amounts in the prior years' financial  statements have been reclassified
to conform with the presentation for the twelve months ended December 31, 2000.

                                      F-9
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

Basis of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiaries  after  elimination of  significant  intercompany
transactions and balances.

Cash and Cash Equivalents

Cash equivalents  consist of financial  instruments having maturities of 90 days
or less at the time of acquisition  that are readily  convertible  into cash and
have insignificant interest rate risk.

Concentration of Credit and Other Risks

The Company sells its product primarily in North America, Europe and the Pacific
Rim. The Company  performs  ongoing  credit  evaluations  of its  customers  and
generally  does not require  collateral.  The Company  maintains  allowances for
potential  credit  losses  and  such  losses  have   historically   been  within
management's expectations.

Dependence on key suppliers:  The Company  purchases certain key components from
single source suppliers.  Any significant component supply delay or interruption
could require the Company to qualify new sources of supply,  if  available,  and
could have a material  adverse effect on the Company's  financial  condition and
results of operations.  In the ordinary  course of business,  the Company may be
liable to purchase from such suppliers  certain  inventories in excess of normal
operating requirements.

Dependence on  distributors:  Currently,  a significant  amount of the Company's
revenues  from  product  sales are  derived  from sales to  distributors.  Loss,
termination  or  ineffectiveness  of  distributors  to  effectively  promote the
Company's  products  could  have a  material  adverse  effect  on the  Company's
financial condition and results of operations.

Financial  instruments:  Financial  instruments,  which potentially  subject the
Company to  concentrations  of credit  risk,  consist of cash  investments,  and
accounts  receivable.  Other financial  instruments include short term borrowing
under a bank line of credit.  The carrying amount of such financial  instruments
represent their fair value. The Company's cash investments  generally consist of
money market  funds.  Under the terms of its agreement  with The Provident  Bank
("Provident")  (see Note 7),  cash  received  by the  Company  is  "swept"  into
accounts  controlled  by  Provident.  Cash  for  operations  is

                                      F-10
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

provided by  borrowing  from  Provident  under the terms of the  agreement  with
Provident establishing a line of credit.

Inventories

Inventories  are stated at the lower of cost  (which  approximates  actual  cost
using the first-in,  first-out method) or market.  Market value is based upon an
estimated average selling price reduced by normal gross margins.

Advertising Costs

The Company expenses advertising costs in the period in which they are incurred.
Advertising  costs for the twelve months ended December 31, 2000, 1999, and 1998
were approximately $333,000, $159,000, and $234,000,  respectively.  Advertising
costs for the three months ended December 31, 1998 and 1997 were approximately $
18,000 and $6,000,  respectively.  For the fiscal year ended September 30, 1998,
advertising costs were approximately $223,000.

Software Development Costs

Product  development  costs include costs related to software  products that are
expensed  as  incurred  until the  technological  feasibility  of the product is
established.  After  technological  feasibility is  established,  any additional
costs are  capitalized  in  accordance  with  Statement of Financial  Accounting
Standards  No. 86,  "Accounting  for the Cost of  Computer  Software to be Sold,
Leased  or  Otherwise  Marketed."  Based on the  Company's  product  development
process,  technological  feasibility  is  established  upon the  completion of a
working  model.  Costs  incurred by the Company  between the  completion  of the
working  model and the point at which the product is ready for  general  release
have been insignificant.  Therefore,  through December 31, 2000, the Company has
charged  all such  costs to  research  and  development  expense  in the  period
incurred.

Property and Equipment

Property  and  equipment  are  stated  at cost  and are  depreciated  using  the
straight-line  method over the assets'  estimated useful lives,  which generally
ranges from three to five years.

                                      F-11
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

The Company periodically evaluates the carrying value of long-lived assets to be
held and used when events and circumstances indicate that the carrying amount of
an asset may not be recovered.  Recoverability  of assets to be held and used is
measured by a comparison  of the carrying  amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.  Assets to be
disposed of are reported at the lower of the carrying  amount or fair value less
disposal costs.

Revenue Recognition

Revenues  are  recognized  when  persuasive  evidence  of an  agreement  exists,
delivery of the product has occurred, no significant  obligations with regard to
implementation  remain,  the fee is fixed or  determinable,  and  collection  is
probable.  Services revenues resulting from warranty and maintenance  agreements
are  deferred  and  recognized  on a  straight-line  basis  over the life of the
related agreement, which is typically from one to two years.

Effective  October 1, 1998, the Company  adopted  Statement of Position  ("SOP")
97-2,  "Software Revenue  Recognition" ("SOP 97-2"), and SOP 98-4,  "Deferral of
the Effective  Date of a Provision of SOP 97-2,  Software  Revenue  Recognition"
("SOP 98-4"). SOP 97-2 and SOP 98-4 provide guidance for recognizing  revenue on
software  transactions and superseded SOP 91-1. The adoption of SOP 97-2 and SOP
98-4 did not have a material impact on the Company's financial results.

In December, 1998, the American Institute of Certified Public Accountants issued
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition,  With Respect
to Certain  Transactions"  ("SOP 98-9").  SOP 98-9 amends SOP 98-4 to extend the
deferral of the application of certain passages of SOP 97-2 provided by SOP 98-4
through fiscal years beginning on or before March 15, 1999. All other provisions
of SOP  98-9  are  effective  for  transactions  entered  into in  fiscal  years
beginning after March 15, 1999.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 provides guidance on the recognition, presentation and disclosure
of  revenue  in  financial  statements.  In  October  2000,  the  SEC  issued  a
"Frequently Asked Questions"  document on SAB 101 to provide further  definitive
guidance on the

                                      F-12
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

implementation  of SAB 101.  SAB 101 is  effective  for  years  beginning  after
December  15,  1999.  The  Company  was  required to adopt SAB 101 in the fourth
quarter of fiscal 2000. The adoption of SAB 101 has not had a material impact on
the Company's financial statements.

Accounting for Stock-Based Compensation

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting   for  Stock   Issued  to   Employees"   ("APB   25")  and   related
interpretations  in  accounting  for its  employee  stock  options  because,  as
discussed in Note 10, the alternative fair value  accounting  provided for under
FASB Statement No. 123, "Accounting for Stock-Based  Compensation," ("SFAS 123")
requires  use of option  valuation  models  that were not  developed  for use in
valuing employee stock options.  Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant, no compensation  expense is recognized.  Option grants
to all others are  accounted  for under the fair value method  prescribed by FAS
123 and Emerging Issues Task Force  Consensus No. 96-18,  "Accounting for Equity
Instruments  That Are  Issued  to Other  Than  Employees  for  Acquiring,  or in
Conjunction with Selling,  Goods or Services." The fair value of such options is
determined using the Black-Scholes method.

In March 2000, the Financial  Accounting  Standards  Board ("FASB")  issued FASB
Interpretation  No. 44,  "Accounting  for Certain  Transactions  Involving Stock
Compensation  - an  Interpretation  of APB Opinion  No. 25" ("FIN  44").  FIN 44
clarifies certain elements of APB Opinion No. 25,  including:  the definition of
an  employee  for  purposes of applying  APB  Opinion No. 25, the  criteria  for
determining  whether  a  plan  qualifies  as  non-compensatory,  the  accounting
consequences of various  modifications  to the terms of a previously fixed stock
option  award,  and the  accounting  for an  exchange  of  options in a business
combination.  FIN 44 was effective July 1, 2000, but certain  conclusions in FIN
44 cover specific events that occurred after either December 15, 1998 or January
12,  2000.  The  adoption of this  interpretation  did not have an effect on the
Company's financial statements.

Intangible Assets

Intangible  assets were acquired in the acquisition of the Scitex Digital Video,
Inc.  business in December 1998.  Intangibles  are being amortized on a straight
line basis. The

                                      F-13
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

Company will regularly perform reviews to determine if the carrying value of the
assets  is  impaired.   The  reviews   look  for  the   existence  of  facts  or
circumstances, either internal or external, which indicate the carrying value of
the asset cannot be recovered. If there is impairment in the future, the Company
will measure the amount of the loss based on  undiscounted  expected future cash
flows from the impaired  assets.  The cash flow  calculations  would be based on
management's best estimates,  using  appropriate  assumptions and projections at
the time.

Based on a review of the accruals  recorded in December 1998 in connection  with
the SDV  acquisition,  accruals  and  related  intangibles  acquired  in the SDV
acquisition were reduced by $858,000 as of December 31, 1999. In addition, as of
December 31, 2000,  accruals and related  intangibles  were reduced by $448,000.
This reduction related to settlement in December 2000 of indemnification  claims
relating to the  purchase  of SDV which were  identified  during the  allocation
period following the acquisition.

<TABLE>
Intangible assets consist of the following:
<CAPTION>
           --------------------------------------------------------------------------------------------
                                           Estimated
                Intangible Category       Useful Life        2000           1999            1998
           --------------------------------------------------------------------------------------------
                                          (in years)                   (in thousands)
<S>                                          <C>         <C>              <C>            <C>
           Core technology                     8         $      525       $    642       $    869
           Developed technology                5              1,045          1,281          1,732
           Other intangibles                 3-15               418            512            692
                                                       ------------------------------------------------
                                                              1,988          2,435          3,293
           Less: Accumulated
                 amortization                                   843            449             46
                                                       ------------------------------------------------
                                                          $   1,145        $ 1,986        $ 3,247
</TABLE>

Acquired In-Process Technology

In-process  technology acquired in the acquisition of Scitex Digital Video, Inc.
in December 1998,  was accounted for under the purchase  method and was expensed
upon acquisition.

                                      F-14
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

Income Taxes

The liability method is used in accounting for income taxes.  Under this method,
deferred tax assets and liabilities are determined based on differences  between
financial  reporting  and tax bases of assets and  liabilities  and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

Net Income (Loss) Per Share

Basic and diluted  net income  (loss) per share have been  calculated  using the
weighted average common shares outstanding during the periods in accordance with
Statements of Financial Accounting Standard No. 128 ("SFAS 128"),  "Earnings Per
Share," issued by the Financial  Accounting  Standards  Board and the Securities
and Exchange Commission Staff Accounting Bulletin No. 98 ("SAB 98").

The dilutive effect of options,  warrants,  and convertible notes was considered
in the computation of diluted earnings per share for the year ended December 31,
2000.  The  dilutive  effect of options was  considered  in the  computation  of
diluted earnings per share for the three months ended December 31, 1997.

The  total  number  of shares  related  to  outstanding  options,  warrants  and
convertible  notes excluded from the  calculations of diluted net loss per share
were  2,875,307  and 29,000 for the twelve  months  ended  December 31, 1999 and
1998,  respectively,  12,000 for the three months ended  December 31, 1998,  and
77,000  for the  fiscal  year  ended  September  30,  1998.  These  shares  were
anti-dilutive for the respective periods.

                                      F-15
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

<TABLE>
The following  table sets forth the  computation of basic and diluted net income
(loss) (in thousands, except for per share amounts):
<CAPTION>
                                                                                                Fiscal Year
                                                                                                -----------
                                         Twelve Months Ended,           Three Months Ended,        Ended
                                         --------------------           -------------------        -----
                                              December 31                   December 31,        September 30
                                              -----------                   ------------        ------------
                                      2000       1999        1998        1998        1997           1998
                                    --------   --------    --------    --------    --------       --------
<S>                                  <C>        <C>         <C>         <C>         <C>            <C>
Numerator:
Numerator  for basic  net  income
(loss) per share-net income (loss)   $  1,967   $ (2,595)   $ (6,919)   $ (3,896)   $    142       $ (2,881)
Effect of dilutive securities:
        8% convertible notes
       (interest)                         331       --          --          --          --             --
                                     --------   --------    --------    --------    --------       --------
Numerator for diluted net income
(loss) per share-income
available to stockholders after
assumed conversions:                 $  2,298   $ (2,595)   $ (6,919)   $ (3,896)   $    142       $ (2,881)
Denominator:
Denominator for basic net income
(loss) per share-weighted
average shares                         10,180     10,124       6,891       7,552       6,638          6,662
Effect of dilutive securities:
        Employee stock options            390       --          --          --           396           --
        Warrants                           19       --          --          --          --             --
        8% convertible notes            3,500       --          --          --          --             --
                                     --------   --------    --------    --------    --------       --------
Denominator for diluted net
income per share-weighted
average shares and assumed
conversions                            14,089     10,124       6,891       7,552       7,034          6,662
Basic net income (loss) per share    $   0.19   $  (0.26)   $  (1.00)   $  (0.52)   $   0.02       $  (0.43)
                                     ========   ========    ========    ========    ========       ========
Diluted  net  income  (loss)  per
share                                $   0.16   $  (0.26)   $  (1.00)   $  (0.52)   $   0.02       $  (0.43)
                                     ========   ========    ========    ========    ========       ========
</TABLE>

Comprehensive Income

Effective  October  1,  1998,  the  Company  adopted  SFAS No.  130,  "Reporting
Comprehensive  Income." There are no material  components of other comprehensive
income (loss) and,  accordingly,  the comprehensive income (loss) is the same as
net income (loss) for all periods presented.

Segment Information

Effective  October  1,  1998,  the  Company  became  subject  to SFAS  No.  131,
"Disclosures  about  Segments of an Enterprise and Related  Information,"  which
establishes  standards  for the way  that  public  business  enterprises  report
information about operating segments in annual financial statements and requires
that those  enterprises  report selected  information  about operating  segments
interim financial reports. SFAS No. 131 also

                                      F-16
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

establishes  standards  for related  disclosures  about  products and  services,
geographic areas, and major customers.

Management has traditionally  organized the business in four market sub-segments
under one industry  segment which includes  activities  relating to development,
manufacturing  and marketing of digital video  equipment.  Starting in 2000, the
Company reduced the number of sub-segments  to three  reflecting  changes in the
Company's  product  offerings.  The Company's three reportable  sub-segments are
Post Production, Distribution, and Other. The Company's post product sub-segment
sells the  following  products  to  customers  and  distributors:  8150  Digital
Switcher,  Axial(R)3000 on-line editor,  Affinity(TM)  nonlinear editor, APR(TM)
disk recorder,  WSD(R)/2Xtreme disk recorder,  and WSD(R)/HD disk recorder.  The
Company's distribution sub-segment sells the following products to customers and
distributors:  Dveous(TM) and Brutus digital effects systems,  Axess(TM) server,
and Abekas(R)6000 server. The "Other" sub-segment consists primarily of customer
service revenues. The chief operating decision maker relies primarily on revenue
to assess market segment performance.

The following table  summarizes the Company's net sales,  in thousands,  for the
twelve months ended December 31, 2000, by market segment:

                                       Twelve Months Ended
                                       -------------------
                                        December 31, 2000
                                        -----------------
                   Market             Amount           Percent
                   ------             ------           -------

               Post-Production       $ 16,159            48.2%
               Distribution            13,187            39.3%
               Other                    4,171            12.5%
                                     --------           -----
                                     $ 33,517           100.0%

                                      F-17
<PAGE>


                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


2. Summary of Significant Accounting Policies (continued)

The following table summarizes the Company's net sales, in thousands, for twelve
months ended December 31, 2000, by geographic region:

                                             Twelve Months Ended
                                             -------------------
                                              December 31, 2000
                                              -----------------
               Geographic Region          Amount             Percent
               -----------------          ------             -------

               U. S. and Canada          $  21,696            64.7%
               Europe                        5,115            15.3%
               Asia (excluding Japan)        4,067            12.1%
               Japan                         1,649             4.9%
               Latin America                   990             3.0%
                                         ---------           -----
                                         $  33,517           100.0%


Substantially  all of the Company's  assets are in the United States.  All sales
are accepted and approved in the United States.

Use of Estimates

The  preparation of the  consolidated  financial  statements in conformity  with
accounting   principles   generally  accepted  in  the  United  States  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.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments  and  Hedging   Activities"   ("FAS  133").  FAS  133,  as  amended,
establishes  methods of accounting  for  derivative  financial  instruments  and
hedging  activities  related  to  those  instruments  as well as  other  hedging
activities.  The Company is required to adopt FAS 133 effective January 1, 2001.
However,  because the Company does not currently  utilize  derivative  financial
instruments,  the  impact  of FAS 133  will  not be  material  to the  Company's
financial position, results of operations, or cash flows.

                                      F-18
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


3. Business Combinations

On December 10, 1998, the Company  acquired  substantially  all of the assets of
Scitex Digital Video,  Inc., a Massachusetts  corporation,  Scitex Digital Video
(Europe)  Limited,  a private  company  incorporated  in England and Wales,  and
Scitex Digital Video (Asia Pacific),  Inc., a California  corporation  (together
"SDV"). In addition,  the Company acquired certain intangible  personal property
of Scitex Corporation Ltd., an Israeli  corporation,  related to SDV's business.
SDV  developed,  manufactured,  marketed  and sold  digital  video  manipulation
equipment  and  non-linear  video  workstations  that  are used  throughout  the
professional video and multimedia industry.

The  acquisition  was  accounted  for under the purchase  method of  accounting.
Accordingly, the assets and liabilities of the acquired business are included in
the  consolidated  balance  sheet  as of  December  31,  1998.  The  results  of
operations of SDV are included in the consolidated  statement of operations from
December 10,1998.

Under the terms of the agreement,  the total purchase consideration included the
following:

                                                             (in thousands)

                         Cash payment                                  $7,893
                         Fair value of warrants                           555
                         Subordinated promissory notes                  2,065
                         Liabilities assumed                            3,324
                         Other transaction costs                        1,589
                                                           -------------------
                                                                      $15,426
                                                           ===================

The warrants are for 250,000 shares and 750,000  shares of the Company's  common
stock, at $1 and $3 per share,  respectively,  and are  exercisable  through the
earlier of December 10, 2009, or a  consummation  of a corporate  transaction in
which  50% or more of the  Company's  voting  power  will  be  sold.  In lieu of
payment,  the holder has an option to  exchange  his  warrants  (or any  portion
thereof)  for  shares of common  stock  equal to the value of the  amount of the
warrant being exchanged on the date of exchange  (calculated based on the excess
of the fair  value of the share  over the  exercise  price,  divided by the fair
value - and then  multiplied by the  applicable  number of shares the warrant is
exercisable  into). If the Company's common stock were to trade for over 20 days
at a price of 140% of the exercise  price,  the Company  shall have the right to
call the warrant for redemption at a price of $0.01 per share then outstanding.

                                      F-19
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


3.  Business Combinations (continued)

The Company issued two subordinated  promissory notes in the amounts of $750,000
and $1,315,000.  The first note was due in April 2000.  Principal was to be paid
together with interest in arrears on the unpaid principal  balance at a variable
rate equal to the Merrill Lynch Money Market Rate.  The Company paid SDV $89,000
in April  2000 and  $224,000  in  January  2001 as full  settlement  of the note
(including  interest).  The remaining principal not paid, $484,000,  was kept by
the Company as settlement of indemnification  claims relating to the purchase of
SDV which were identified  during the purchase price allocation period following
the acquisition.  The second note consisted of $900,000 due in 1999 and $415,000
due in 2000. Payments were to be made on a quarterly basis starting on March 31,
1999.  Principal  was to be paid together with interest in arrears on the unpaid
principal balance at an annual rate of 10%, increasing by 1% at the beginning of
every fiscal quarter  starting with July 1, 1999.  $750,000 was paid on the note
in 1999. The remaining balance of $565,000 was paid in January 2000.

The purchase  price was  allocated  based upon the  estimated  fair value of the
assets acquired. The Purchase Price was allocated as follows (in thousands):

                   Acquired core technology                          $   869
                   Acquired developed technology                       1,732
                   Acquired in-process technology                      2,195
                   Acquired other identifiable intangible assets         692
                   Net tangible assets acquired                        9,938
                                                                  -----------
                                                                    $ 15,426
                                                                  ===========

The Company  allocated  SDV's purchase price based on the relative fair value of
the net tangible and intangible assets acquired.  In performing this allocation,
the Company  considered,  among  other  factors,  the  technology  research  and
development  projects in process at the date of  acquisition.  SDV's  in-process
research and development  program consisted of the development of future digital
editing and digital  video  effects  products.  At the date of the  acquisition,
SDV's research and  development  programs were  approximately  52% completed and
total continuing  research and development  commitments to complete the projects
were expected to be approximately $3.3 million, and be successfully completed by
early 2000.  The value  assigned to purchased  in-process  R&D was determined by
estimating  the  costs  to  develop  SDV's  purchased  in-process  research  and
development into commercially viable products, estimating the resulting net cash
flows from the  projects  and  discounting  the net cash flows to their  present
value.  The rates utilized to discount the net cash flows to their present value
were based on the Company's weighted average cost of capital. A discount rate of
35% was

                                      F-20
<PAGE>


                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


3. Business Combinations (continued)

used for valuing the in-process  research and  development and is intended to be
commensurate with the Company's  corporate  maturity,  the risks involved in R&D
projects of this type, and the uncertainties in the economic estimates described
above.

Financing

On December 10,  1998,  the Company  entered into a Loan and Security  Agreement
(the "Loan  Agreement") with LaSalle Business Credit,  Inc. The Company borrowed
approximately $3,340,000 under the Loan Agreement which constituted a portion of
the cash consideration for SDV.

Unaudited Pro Forma

The  following  summary  unaudited  pro  forma  information  shows the pro forma
combined  results of Accom and SDV for the three months ended  December 31, 1998
and for the twelve  months  ended  September  30,  1998 and 1997,  as if the SDV
acquisition had occurred on October 1, 1996 at the purchase price established in
December,   1998.  The  pro  forma   information  was  prepared  from  unaudited
information.  Accordingly,  the results are not necessarily  indicative of those
which would have occurred had the  acquisition  actually been made on October 1,
1996 or of future  operations of the combined  companies.  The pro forma results
for 1997 combine the Company's results for the twelve months ended September 30,
1997 with SDV's results for the twelve months ended  December 31, 1997.  The pro
forma  results  for the twelve  months  ended  September  30,  1998  combine the
Company's  results for the twelve  months  ended  September  30, 1998 with SDV's
results for the twelve  months from October 1, 1997 through  September 30, 1998.
As a consequence  of this  presentation,  SDV's results for the twelve months of
October 1, 1997  through  December 31, 1997 are included in the results for both
the twelve months ended September 30, 1998 and 1997.

The following unaudited pro forma results include the straight-line amortization
of intangible assets:

                                         Three Months Ended    Twelve Months
                                         ------------------    -------------
(In Thousands, Except Per Share Data)       December 31,     Ended September 30,
                                            -------------      ---------------
                                                1998                 1998
                                                ----                 ----

Revenue                                 $      9,768          $     44,679
Net loss                                      (8,571)              (18,529)
Basic and diluted loss per share               (0.85)                (1.83)

                                      F-21
<PAGE>


                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


4. Inventories

Inventories consist of the following:

                                                   As of December 31,
                                                   ------------------
                                                  2000            1999
                                                  ----            ----
                                                     (in thousands)

Purchased parts and materials                  $  1,490       $   1,656
Work-in-process                                   2,174           1,634
Finished goods                                      249             369
Demonstration inventory                           1,079           1,453
                                             --------------- ---------------
                                               $  4,992       $   5,112
                                             --------------- ---------------

5. Property and Equipment

Property and equipment consist of the following:

                                                   As of December 31,
                                                   ------------------
                                                  2000             1999
                                                  ----             ----
                                                     (in thousands)

Machinery and equipment                        $  3,623       $    3,399
Furniture and fixtures                              375              367
Computer equipment                                1,364            1,422
Service inventory                                   888            1,214
                                            ---------------- ---------------
                                                  6,250            6,402
Less:  accumulated depreciation                  (4,442)          (4,059)
                                            ---------------- ---------------
Net property and equipment                     $  1,808       $    2,343
                                            ---------------- ---------------

Depreciation expense for the twelve months ended December 31, 2000 and 1999, the
three months ended  December 31, 1998,  and the fiscal year ended  September 30,
1998 was $546,000, $1.0 million, $229,000, and $550,000.

6. Accrued Liabilities

Accrued liabilities consist of the following:

                                                   As of December 31,
                                                   ------------------
                                                  2000            1999
                                                  ----            ----
                                                     (in thousands)

Accrued compensation                           $   441        $    317
Accrued outside sales commissions                  368             534
Accrued acquisition liabilities                     -               45
Accrued ELSET sale liabilities                     496              -
Accrued supplier commitments                       555              -
Other                                              348             678
                                             --------------- ---------------
                                               $ 2,208        $  1,574
                                             =============== ===============

                                      F-22
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


7. Bank Borrowings

On February 10, 2000,  the Company  entered into an agreement with The Provident
Bank  ("Provident"),  an Ohio  chartered  bank,  for a revolving  line of credit
("line"). Provident issued modifications to the original agreement on August 11,
2000, and February 13, 2001 and March 30, 2001. In addition,  Provident issued a
waiver  for  non-compliance  of  a  financial  covenant  on  October  26,  2000.
Borrowings  against  the  line  are  subject  to  levels  of  eligible  accounts
receivable and compliance with certain financial  covenants,  including interest
coverage,  tangible net worth, EBITDA, and capital expenditures covenants. As of
December 31, 2000, the Company was not in compliance with a financial  covenant.
Coinciding with the February 13, 2001,  amendment,  Provident issued a waiver of
non-compliance for the December 31, 2000, violation.  Additionally, the February
13, 2001, modification resulted in changes in the covenants.  These changes were
to the values of interest  coverage  ratios,  tangible  net worth,  EBITDA,  and
capital expenditures which form the basis of the covenants.  The March 30, 2001,
modification  also  adjusted  the values  required  for the  interest  coverage,
tangible  net worth,  and EBITDA  covenants.  Additionally,  the March 30, 2001,
modification increased the interest rate charged on borrowing by 25 basis points
and reduced the percentage of eligible receivables  available for borrowing from
80% to 60%.

At inception,  the line allowed for borrowings up to $1,500,000  with provisions
for increasing the amount to $2,000,000 which were never instituted.  The amount
of the line remained at $1,500,000 until the February 13, 2001,  amendment which
increased  the amount to  $2,000,000.  As of December 31, 2000,  the Company had
outstanding  borrowings against the line of $1.0 million. An additional $469,000
was available for borrowing at the time.

Interest  accrues on  outstanding  borrowings  at the bank's prime rate plus 250
basis points.  The interest rate charged at December 31, 2000,  was 11.75%.  All
sums outstanding under the agreement are due on January 31, 2002. Borrowings are
secured by all assets of the Company.

As part of its agreement with  Provident,  the Company agreed to turn all of its
incoming  cash  deposits  over to  Provident.  As deposits  are  received by the
Company,  the funds are "swept" into an account  controlled  by  Provident.  The
deposits  are  used to  reduce  outstanding  balances  with  Provident.  To fund
operations, the Company requests cash advances by Provident, the availability of
which is determined by the factors discussed above.

To the  extent  that the  Company  does not fully  utilize  the line of  credit,
Provident  charges a  "commitment  fee,"  which is equal to 0.5% per year of the
portion of the credit line not utilized.

The  Company may  terminate  the line  before  March 1, 2003,  only if it has no
outstanding

                                      F-23
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


7. Bank Borrowings (continued)

balance  with  Provident  and has made no  borrowings  against  the line for six
consecutive months. In addition, there is a termination fee of $20,000.

From December 1998 to January 2000,  the Company  maintained a revolving line of
credit with LaSalle  Business  Credit,  Inc.  ("LBC"),  a subsidiary of ABN AMRO
Bank,  N.V. The line of credit  provided for borrowings  subject to the level of
eligible  accounts  receivable and required  compliance  with certain  financial
covenants. As of December 31, 1999, Accom had outstanding borrowings with LBC of
$559,000. On that date, the interest rate charged on outstanding  borrowings was
12.25%.  Accom used a portion of the proceeds from the sale of the ELSET product
line in January 2001 to pay the closing balance held with LBC which totaled $1.5
million.

Restricted Cash

As of December 31, 2000, the Company had $1.6 million in restricted  cash.  This
balance  consisted  of  the  following  components:  (1)  $375,000  in  deposits
collected by the Company but not yet "swept" to Provident under the terms of the
line of credit  agreement (2) $760,000 in funds  reserved for (i) payment of the
note owed to Scitex Digital Video,  Inc. ("SDV")  ($224,000) (ii) funds reserved
for the payment of SDV note which were released to the Company by the settlement
with SDV (see Note 3) but which had not yet been turned over to Provident  under
the  terms of the line of  credit  agreement  ($484,000)  (iii)  payment  of any
expenses  relating to the sale of the ELSET product line  ($52,000) (3) $420,000
in funds  reserved  in an  escrow  account  maintained  at  Provident  Bank as a
condition of the sale of the ELSET  product line in January 2000 (see Note 1) to
satisfy any indemnification  claims between the Company and purchaser that might
arise  between the date of the sale and the  one-year  anniversary  of the sale,
January 21, 2001.  In January 2001,  the $420,000  related to the ELSET sale was
released to the Company.

8. Long-Term Debt

On March 12, 1999, the Company  completed a private placement of $3.5 million in
senior  subordinated  convertible  notes  with a group of  investors  led by the
American  Bankers  Insurance  Group,  Inc.  ("ABIG").  The Company  recorded the
transaction  on its  books  net of  the  expenses  incurred  in  completing  the
transaction.  In each month since the  transaction,  the Company has amortized a
portion of the issuance costs as summarized below (in thousands):

                                      F-24
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


8. Long-Term Debt (continued)

        Proceeds of issuance of senior subordinated convertible notes    $3,500

        Less:  Issuance costs                                              (277)
                                                                        --------
        Book value of notes at issuance                                   3,223
        Plus:  Issuance costs expensed in 1999                               38
        Plus:  Issuance costs expensed in 2000                               57
                                                                        --------
        Book value of notes at December 31, 2000                         $3,318
                                                                        ========


The Company will  continue to amortize  the  issuance  costs until the notes are
paid in 2004 or ABIG exercises its conversion rights.

The agreement  between the Company and the holders of the convertible  notes was
amended and certain  waivers  granted on November 3, 1999,  February  10,  2000,
January 29, 2001, and March 30, 2001.  Additional  waivers were granted on April
18, 2000,  July 19, 2000 and October 25, 2000. As part of its agreement to grant
certain  waivers on February 10, 2000,  ABIG stipulated that the Company use the
proceeds  from sale of the ELSET  virtual  set product  line to  IMadGINE  Video
Systems  Marketing  B.V. (see Note 1) to (a) pay or reserve funds to pay for all
debt owed to Scitex  Digital  Video and (b) reserve funds for the payment of all
transaction  fees relating to the sale of the ELSET product line. As part of the
January 29, 2001, amendment,  the  parties agreed to reduce the conversion price
of the shares from $1.30 to $1.00 and to modify certain of the conditions  under
which Accom could prepay the notes.

The notes  currently have a coupon rate of 8% per year,  mature in 2004, and are
convertible  into shares of Accom common stock at a price of $1.00 per share. If
the Company fails to meet certain  covenants  specified in the agreement between
the Company and ABIG, ABIG has the right to declare the notes  immediately  due.
As of December 31, 2000,  the Company was not in compliance  with the covenants.
In the January 29, 2001,  Amendment and Waiver,  ABIG waived compliance with the
covenants  through  September  30, 2001.  In the March 30, 2001,  Amendment  and
Waiver, ABIG waived compliance with the covenants through December 31, 2001.

The proceeds from the private  placement  were used to partially pay the balance
on  the  revolving  line  of  credit  with  LaSalle  Business  Credit  that  was
outstanding at the time the proceeds were received.

                                      F-25
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


9. Commitments

Leasing Arrangements

The Company leases its primary office and manufacturing  facility in Menlo Park,
California,  under an operating  lease which  expires in June 2005.  The Company
leases  another  office in Grass Valley,  California,  under an operating  lease
which expires in April 2004.  The Company  leases storage space in Redwood City,
California, under a lease that expires in January 2002. In addition, the Company
leases  office space in Hong Kong under a lease which  expired in January  2001.
Following the  expiration of the lease for the Hong Kong office space in January
2001, the space will be rented on a month-to- month basis.  Rent expense for the
twelve months ended  December 31, 2000 and 1999, the three months ended December
31,  1998 and the  fiscal  year  1998 was  approximately  $1,049,000,  $628,000,
$131,000, and $465,000, respectively.

Future minimum rental payments under noncancelable  leases at December 31, 2000,
are as follows (in thousands):

           2001                                            $    1,184
           2002                                                 1,001
           2003                                                 1,009
           2004                                                   922
           2005                                                   443
                                                          -------------
           Total                                           $    4,559
                                                          =============

The  Company  was  a  sublessor  for  a  portion  of  its  primary   office  and
manufacturing  facility.  No sublease rental income was earned in 2000. Sublease
rental  income for the twelve months ended  December 31, 1999,  the three months
ended December 31, 1998 and for fiscal 1998 was approximately $86,000,  $27,000,
and $175,000, respectively.

10. Stockholders' Equity

Warrants

In December, 1998, the Company issued to Scitex Digital Video ("SDV") as part of
the  acquisition  of the assets and business of SDV warrants for 250,000  shares
and  750,000  shares of the  Company's  common  stock,  at $1 and $3 per  share,
respectively,  exercisable  through  the  earlier of  December  10,  2009,  or a
consummation  of a corporate  transaction  in which 50% or more of the Company's
voting  power will be sold.  In lieu of  payment,  SDV has an option to exchange
their warrants (or any portion thereof) for shares of

                                      F-26
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


10. Stockholders' Equity (continued)

Warrants (continued)

common stock equal to the value of the amount of the warrant being  exchanged on
the date of  exchange  (calculated  based on the excess of the fair value of the
share over the exercise  price,  divided by the fair value - and then multiplied
by the  applicable  number of shares the warrant is  exercisable  into).  If the
Company's  common stock were to trade for over 20 days at a price of 140% of the
exercise  price,  the  Company  shall  have the  right to call the  warrant  for
redemption at a price of $0.01 per share then outstanding.

Stock Options

The 1995 Stock Option/Stock Issuance Plan (the "1995 Plan") increased the number
of shares  available  for grant up to  2,000,000,  inclusive of options  granted
under the predecessor  plan, plus automatic  annual  increases in 1996, 1997 and
1998. Under the 1995 Plan,  options may be granted and shares may be issued at a
price not less than 85% of the fair value of the Company's  common stock on date
of grant.

During the 12 months  ended  September  30, 1997,  the Company  adopted the 1997
Non-Executive Stock Option Plan (the "1997 Plan"), under which options for up to
500,000  shares of common stock are available for grant to employees  other than
officers  and  directors  at a price not less than 100% of the fair value of the
Company's common stock on date of grant.

                                      F-27
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements

10.  Stockholders' Equity (continued)

Stock Options (continued)

<TABLE>
Stock option activity is summarized below:

<CAPTION>
                                            Shares           Outstanding Options             Weighted
                                           Available         -------------------              Average
                                           For Grant       Number of        Price Per        Exercise
                                          of Options         Shares           Share            Price
                                          ----------         ------           -----            -----
<S>                                         <C>              <C>           <C>   <C>           <C>
Balances at September 30, 1997                 948,772        1,530,421    $0.48-$5.88         $1.27
   Shares authorized                            66,597         -                -                -
   Options granted                          (1,456,920)       1,456,920    $0.81-$1.63         $1.01
   Options exercised                           -                (33,109)   $0.48-$1.31         $0.76
   Options cancelled                         1,702,899       (1,702,899)   $0.48-$1.69         $1.26
                                       --------------------------------------------------------------------
Balances at September 30, 1998               1,261,348        1,251,333    $0.48-$5.88         $1.00
   Shares authorized                           -               -                -
   Options granted                            (804,000)         804,000    $0.31-$0.65         $0.63
   Options exercised                           -               -                -                -
   Options cancelled                            40,615          (40,615)   $0.81-$1.03         $0.98
                                       --------------------------------------------------------------------
Balances at December 31, 1998                  497,963        2,014,718    $0.31-$5.88         $0.85
   Shares authorized                           -               -                -                -
   Options granted                            (121,400)         121,400    $0.41-$1.25         $0.71
   Options exercised                           -                (12,083)   $0.31-$0.48         $0.34
   Options cancelled                           195,583         (195,583)   $0.48-$1.03         $0.82
                                       --------------------------------------------------------------------
Balances at December 31, 1999                  572,146        1,928,452    $0.31-$5.88         $0.85
   Shares authorized                           -               -                -                -
   Options granted                            (244,900)         244,900    $0.25-$1.97         $0.87
   Options exercised                                            (65,030)   $0.31-$1.03         $0.78
   Options cancelled                           178,131         (178,131)   $0.31-$1.03         $0.71
                                       --------------------------------------------------------------------
Balances at December 31, 2000                  505,377        1,930,191    $0.25-$5.88         $0.87
                                       ====================================================================
</TABLE>

During the twelve months ended September 30, 1998, the Company repriced, through
cancellation and regrant,  options on 1,176,020 shares having original  exercise
prices  ranging from $1.06 to $1.88 with new options having an exercise price of
$1.03. The vesting terms of the repriced options were changed from five years to
four years. In addition,  repriced  options vest 25% after one year and then the
remaining 75% is vested  proportionately  on a monthly  basis.  Previously,  the
options vested 20% per year. The change in vesting terms also applied to 266,693
options  which were not repriced  because the original  exercise  price was less
than the new  exercise  price.  There  were  17,500  options  granted to Company
directors which were not subject to repricing or the change in vesting terms.

                                      F-28
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


10. Stockholders' Equity (continued)

Stock Options (continued)

During fiscal 1997,  the Company  repriced,  through  cancellation  and regrant,
options on 989,494 shares having original  exercise prices ranging from $1.63 to
$4.80 with new options with an exercise price of $1.31. The repriced options had
the same vesting terms as the original options.

<TABLE>
The options outstanding as of December 31, 2000 have been segmented into ranges:
<CAPTION>
                                            Weighted
                                             Average          Weighted                          Weighted
      Range of                             Remaining          Average           Options         Average
      Exercise             Options        Contractual         Exercise         Currently        Exercise
       Prices           Outstanding           Life             Price          Exercisable        Price
       ------           -----------           ----             -----          -----------        -----
<S>                        <C>                 <C>               <C>               <C>            <C>
    $0.25 - $0.53            107,195           6.01              $0.43              58,385        $0.47
        $0.65                595,821           7.94              $0.65             282,821        $0.65
    $0.72 - $1.00            357,400           8.24              $0.87             151,665        $0.88
        $1.03                812,275           5.49              $1.03             786,248        $1.03
    $1.06 - $5.88             57,500           8.17              $1.64              52,500        $1.60
                      -------------------------------------------------------------------------------------
    $0.25 - $5.88          1,930,191           6.87              $0.87          1,331,619         $0.93
                      =====================================================================================
</TABLE>

As of December 31, 2000,  the Company has  reserved  2,435,568  shares of common
stock for issuance upon the exercise of stock options under all of its plans.

Employee Stock Purchase Plan

The Company  instituted an Employee Stock Purchase Plan ("the Purchase Plan") in
1995. Under the provisions of the Purchase Plan,  250,000 shares were authorized
for the issuance of common stock.  Shares could be purchased  under the Purchase
Plan at 85% of the lesser of the fair  market  value of the common  stock on the
entry date into the offering  period or the purchase date. The Purchase Plan was
discontinued  in 1998.  As of December 31, 2000,  the Purchase Plan has not been
reinstated.

                                      F-29
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


10. Stockholders' Equity (continued)

Pro Forma Disclosure of Employee Stock-Based Compensation

<TABLE>
Pro forma information regarding net income and earnings per share is required by
FASB 123 for awards granted after March 31, 1995 as if the Company had accounted
for its stock-based awards to employees under the fair value method of FASB 123.
The fair value of the  Company's  stock-based  awards to employees was estimated
using the minimum value model for awards prior to the Company's  initial  public
offering in 1995 and the  Black-Scholes  model  subsequent to the initial public
offering.  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,  the Black-Scholes model requires the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.   Because  the  Company's   stock-based  awards  to  employees  have
characteristics  significantly  different  from  those of  traded  options,  and
because changes in the subjective  input  assumptions can materially  affect the
fair  value  estimate,  in  management's  opinion,  the  existing  models do not
necessarily  provide  a  reliable  single  measure  of  the  fair  value  of its
stock-based  awards to employees.  The fair value of the  Company's  stock-based
awards to  employees  was  estimated  assuming  the  following  weighted-average
assumptions:
<CAPTION>
                                           Twelve Months     For the Three    For the Fiscal
                                           -------------     -------------    --------------
                                               Ended          Months Ended      Year Ended
                                               -----          ------------      ----------
                                            December 31,      December 31,     September 30,
                                            ------------      ------------     -------------
                                           2000     1999          1998             1998
                                           ----     ----          ----             ----
<S>                                       <C>       <C>           <C>              <C>
      Risk-free interest rates            4.7%      6.5%          5.1%             4.7%
      Dividends paid                       -          -            -                 -
      Volatility factors-Company's
        common stock expected market
        price                             1.00      1.00          0.80             0.80
      Expected option life (in years)     2.00      3.00          4.00             4.00
</TABLE>

The weighted average "fair value" of stock options granted for the twelve months
ended  December 31, 2000 and 1999,  the three months ended December 31, 1998 and
for the fiscal year ended September 30, 1998 was $0.55, $0.54, $0.87, and $0.55,
respectively.

The fair value of employee  purchase  rights under the Employee  Stock  Purchase
Plan was estimated at the date of grant using the  Black-Scholes  option pricing
model. The following weighted-average assumptions were used:

                                      F-30
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


10. Stockholders' Equity (continued)

Pro Forma Disclosure of Employee Stock-Based Compensation (continued)

                                                        Fiscal year ended,
                                                        ------------------
                                                           September 30,
                                                           -------------
                                                               1998
                                                               ----

      Risk-free interest rates                                 4.7%
      Dividends paid                                             -
      Volatility factors - Company's common
         stock expected market price                           0.80
      Expected option life                                  0.50 years

The weighted  average "fair value" of employee  purchase rights issued under the
Employee Stock Purchase Plan during the fiscal year ended September 30, 1998 was
$1.47.  No purchase  rights were issued under the Employee  Stock  Purchase Plan
during the twelve  months ended  December 31, 2000 and 1999 and the three months
ended December 31, 1998.

<TABLE>
The pro forma  effect of  applying  the  estimated  "fair  value"  for  employee
stock-based  compensation  plans on net income  (loss) and net income (loss) per
share is as follows:
<CAPTION>
                                              Twelve Months        Three Months     Fiscal Year
                                              -------------        ------------     -----------
                                                  Ended                Ended           Ended
                                                  -----                -----           -----
                                               December 31,         December 31,   September 30,
                                               ------------         ------------   -------------
                                            2000         1999          1998            1998
                                            ----         ----          ----            ----
<S>                                     <C>           <C>           <C>             <C>
      Pro forma net income (loss)-
      basic (in thousands):             $  1,820      $ (2,865)     $ (3,979)       $  (3,477)
      Pro forma net income
      (loss)-diluted (in thousands):    $  2,151      $ (2,865)     $ (3,979)       $  (3,477)
      Pro forma net loss per share-
      basic:                            $   0.18      $  (0.28)     $  (0.53)       $   (0.14)
      Pro forma net loss per
      share-diluted:                    $   0.15      $  (0.28)     $  (0.53)       $   (0.14)

</TABLE>

The  effects  on pro  forma  disclosures  of  applying  FASB  123 for all  years
presented  are not  likely  to be  representative  of the  effects  on pro forma
disclosures  of future  years.  Because FASB 123 is  applicable  only to options
granted  subsequent  to March  31,  1995,  the pro  forma  effect  was not fully
reflected in fiscal years prior to 1999.

                                      F-31
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


10. Stockholders' Equity (continued)

Stockholder Rights Plan

Under the  Company's  stockholder  rights  plan,  existing  stockholders  of the
Company are entitled to certain rights  (including the right to purchase  shares
of  Preferred  Stock)  in the  event  of the  acquisition  of 15% or more of the
Company's  outstanding  common stock,  or an  unsolicited  tender offer for such
shares.

11.  Income Taxes

The Company's  provision for income taxes for the years ended  December 31, 2000
and 1999, consists entirely of foreign taxes.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are:

Significant components of the Company's deferred tax assets and liabilities are:

                                                           As of December 30,
                                                           ------------------
                                                          2000           1999
                                                          ----           ----
Deferred tax assets:
   Net operating loss carryforwards                      $ 2,904        $ 1,511
   Research credit carryforwards                             788            431
   Acquired intangibles                                    1,075            927
   Capitalized R&D                                           251          2,750
   Nondeductible reserves and accruals                     1,150          1,183
   Inventory valuation                                     2,665          2,128
   Other                                                       9             62
                                                         -------        -------
Total deferred tax assets                                  8,842          8,992
Valuation allowance                                       (8,842)        (8,992)
                                                         -------        -------
Net deferred tax assets                                  $  --          $  --
                                                         =======        =======


Realization  of deferred tax assets is dependent upon future  earnings,  if any,
the timing and amount of which are uncertain.  Accordingly, the net deferred tax
assets have been fully offset by a valuation allowance.  The valuation allowance
decreased by  approximately  $150,000  for the year ended  December 31, 2000 and
increased by $612,000 for the year ended December 31, 1999.

                                      F-32
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


11. Income Taxes (continued)

As  of  December  31,  2000,   the  Company  had  federal  net  operating   loss
carryforwards for federal income tax purposes of approximately $8,154,000, which
expire in the years 2012 through 2019 and federal  research and  development tax
credits of approximately $520,000, which expire in the years 2012 through 2020.

Utilization  of the  net  operating  losses  and  credits  may be  subject  to a
substantial annual limitation due to ownership change provisions of the Internal
Revenue Code of 1986 and similar state  provisions.  The annual  limitation  may
result in the expiration of net operating losses and credits before utilization.

12. Related Party Transactions

In  December  1998,  shares of common  stock of the  Company  were issued to two
members of the Company's Board of Directors,  Lionel Allan and David Lahar,  and
an officer of the  Company,  Phillip  Bennett,  in  exchange  for full  recourse
promissory  notes.  300,000  shares  were  issued at a price of $0.50 per share,
200,000  shares  were issued at a price of $0.65 per share,  and 350,000  shares
were  issued at a price of $1.00 per share.  The shares  were issued in exchange
for full recourse promissory notes totaling $630,000.

The notes of Mr. Allan and Mr. Lahar  accrued  interest at the prime rate.  Both
notes were paid in full in 2000.

Mr.  Bennett's  note  accrues  interest  at 5.5%  per  year.  The note is due on
December  7, 2001.  No payments of  principal  had been made as of December  31,
2000.

In March 1999, $300,000 was paid to a company,  E.O.S. Capital, Inc., associated
with a member of the  Company's  Board of Directors,  David Lahar,  for services
provided in the  acquisition of SDV. An additional  $87,500 was paid to the same
company in March 1999, for services  provided by Mr. Lahar in arranging the debt
placement by the American Bankers Insurance Group in the same month. In December
2000, $100,000 was paid to the same company for consulting,  financial advisory,
and investing  banking  services the company might provide to Accom from time to
time.

In February 2000,  $87,500 was paid to Eugene  Matalene,  Jr., a director of the
Company,  for services  provided in arranging the debt placement by the American
Bankers  Insurance Group ("ABIG") in March 1999. Such amount was included in the
accrued  liabilities  of the  Company as of December  31,  1999.  An  additional
$52,500 was paid to Mr.  Matalene in March 2001 for his  assistance in obtaining
the Third Amendment and Waiver from

                                      F-33
<PAGE>

                                   Accom, Inc.
                   Notes to Consolidated Financial Statements


12. Related Party Transactions (continued)

ABIG in January 2001. Such amount was included in the accrued liabilities of the
Company as of December 31, 2000.

13. Summarized Quarterly Data (Unaudited)

<TABLE>
The following table sets forth certain consolidated statement of operations data
for each of the eight  quarters  beginning with the quarter ended March 31, 1999
through the quarter  ended  December 31, 2000.  This  quarterly  information  is
unaudited,  but has been  prepared on the same basis as the annual  consolidated
financial   statements   and,  in  the  opinion  of  management,   reflects  all
adjustments,  consisting only of normal  recurring  adjustments  necessary for a
fair representation of the information for the periods presented.
<CAPTION>
                                                           Three Months Ended:
                                                           -------------------
                      March 31,  June 30,   September 30,  December 31,  March 31,   June 30,  September 30,   December 31,
                      ---------  --------   -------------  ------------  ---------   --------  -------------   ------------
                        1999       1999        1999           1999        2000         2000        2000           2000
                        ----       ----        -----          ----        ----         ----        ----           ----
                                                         (in thousands)
<S>                   <C>        <C>         <C>              <C>       <C>         <C>          <C>            <C>
Statement of
Operations Data:
Net revenue           $  9,538   $  8,348    $  8,768         $6,315    $  8,403    $  8,072     $  8,786       $  8,256
Gross profit             5,479      4,478       4,535          2,909       4,616       4,340        4,743          4,126
Operating income
  (loss)                   627       (537)       (672)        (1,587)        (69)        (98)          36           (590)
Net income (loss)          514       (599)       (813)        (1,697)      2,724         (98)         (17)          (642)
Net income (loss)
  per share-basic     $   0.05   $  (0.06)   $  (0.08)      $  (0.17)   $   0.27    $  (0.01)    $  (0.00)      $  (0.06)
Net income (loss)
  per share-diluted   $   0.05   $  (0.06)   $  (0.08)      $  (0.17)   $   0.25    $  (0.01)    $  (0.00)      $  (0.06)
Shares used in
  computing net
  income (loss)
  per share-basic       10,122     10,123      10,123         10,127      10,136      10,190       10,196         10,198

Shares used in
  computing net
  income (loss)
  per                   10,422     10,123      10,123         10,127      11,156      10,190       10,196         10,198

</TABLE>

14. Subsequent Event

In February 2001, the Company's Board of Directors authorized that an additional
2,000,000  shares  of the  Company's  common  stock  be made  available  for the
granting of stock options under the Company's  existing  stock option plans (see
Note 10).

                                      F-34
