MULTIMEDIA ACCESS CORP, SB-2, 1997-07-24

MULTIMEDIA ACCESS CORP
SB-2, 1997-07-24
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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As filed with the Securities and Exchange Commission on 07/24/97

Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MULTIMEDIA ACCESS CORPORATION

(Name of small business issuer in its charter)
------------------------------
<TABLE>
<S> <C> <C>
Delaware 3661 75-2528700
(State or Other Jurisdiction Primary Standard (IRS Employer
of Incorporation or Organization) Classification Code Number Identification Number)
</TABLE>

2665 VILLA CREEK DRIVE, SUITE 200, DALLAS, TEXAS 75234
972-488-7200
--------------------------
(Address of principal executive offices and
place of business and telephone number)
--------------------------

GLENN A. NOREM
CHIEF EXECUTIVE OFFICER
MULTIMEDIA ACCESS CORPORATION
2665 VILLA CREEK DRIVE, SUITE 200, DALLAS, TEXAS 75234
972-488-7200
-------------------------
(Name, address and telephone number
of agent for service)
-------------------------
Copies to:

John S. Stoppelman, Esq.
The Stoppelman Law Firm, P.C.
1749 Old Meadow Road, Suite 610
McLean, Virginia 22102-4310
Telephone: (703) 827-7450
Telecopier: (703) 827-7455
---------------------------------------
Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x]

<PAGE>

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
Title of each class
of securities to be Amount to be Maximum Maximum Amount of
registered registered price per Share aggregate price registration fee
- --------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock issuable upon
exercise of Private Warrants 2,274,073 $3.00 $6,822,219 $ 2,132
- --------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
Common Stock issuable upon
exercise of Private Warrants 707,500 $1.00 707,500 221
- --------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
TOTAL REGISTRATION FEE 2,981,573 $7,529,719 $ 2,353
- --------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<PAGE>
MULTIMEDIA ACCESS CORPORATION

CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------- ----------------------
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus...................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus ......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors .................. Prospectus Summary; Risk Factors
4. Use of Proceeds ....................................... Use of Proceeds
5. Determination of Offering Price ....................... Selling Securityholders and Plan of Distribution
6. Dilution .............................................. Dilution
7. Selling Security Holders............................... Selling Securityholders and Plan of
Distribution
8. Plan of Distribution .................................. Outside Front Cover Page of Prospectus;
Selling Securityholders and Plan of Distribution
9. Legal Proceedings ..................................... Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons ................................... Management; Principal Stockholders;
Certain Transactions
11. Security Ownership of Certain Beneficial
Owners and Management ................................. Management
12. Description of Securities ............................. Description of Securities
13. Interests of Named Experts and Counsel................. Interest of Named Experts and Counsel
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ........................................... Management
15. Organization Within Last Five Years ................... Prospectus Summary
16. Description of Business ............................... Prospectus Summary; Risk Factors; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions;
Principal Securityholders; Consolidated Financial
Statements
17. Management's Discussion and Analysis or
Plan of Operations .................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property ............................... Business
19. Certain Relationships and Related
Transactions .......................................... Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters ................................... Front Cover Page; Description of Securities
21. Executive Compensation ................................ Management
22. Financial Statements .................................. Consolidated Financial Statements
23. Change in and Disagreements with
Accountants on Accounting and
Financial Disclosure .................................. Experts
</TABLE>

<PAGE>

PRELIMINARY PROSPECTUS DATED July 24, SUBJECT TO COMPLETION

MULTIMEDIA ACCESS CORPORATION
2,981,573 SHARES OF COMMON STOCK

This Prospectus relates to the offer and sale by certain persons (the
"Selling Securityholders") of up to 2,981,573 shares (the "Shares") of Common
Stock, par value $.0001 per share (the "Common Stock"), of MultiMedia Access
Corporation (the "Company") underlying non-redeemable common stock purchase
warrants (the "Private Warrants"). The Private Warrants were issued by the
Company at various times between June 1995 and February 1997 in connection with
various financing transactions. Each Private Warrant entitles the holder to
purchase one (1) share of Common Stock at prices ranging from $1.00 to $3.00 per
share at any time commencing immediately upon issuance through and including
three years from the date of issuance. The Shares may be offered by Selling
Securityholders or by pledges, donees, transferees or other successors in
interest that receive such shares as a gift, partnership distribution or other
non-sale related transfer from time to time in transactions on the Nasdaq Small
Cap Market ("Nasdaq"), in privately negotiated transactions, or by a combination
of such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Company will not receive any of the proceeds
of the sale of such shares of Common Stock offered in this Prospectus, but will
receive proceeds of up to $7,529,719 from the exercise of the 2,981,573 Private
Warrants by the Selling Securityholders. Of the 2,981,573 shares of Common Stock
offered by this Prospectus, 2,850,550 are subject to "lock-up" agreements and
may not be sold prior to February 4, 1999 without the prior written consent of
the managing underwriter (the "Representative") of the Company's initial public
offering of Common Stock and Redeemable Common Stock Purchase Warrants (the
"Public Warrants"). The Company has agreed to pay all of the expenses in
connection with the registration and sale of the Common Stock being offered by
the Selling Securityholders (other than brokerage commissions and fees). See
"Description of Securities," "Shares Eligible For Future Sale" and "Selling
Securityholders and Plan of Distribution."

SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THESE
SECURITIES.

---------------------------------------
The shares of Common Stock and Public Warrants of the Company are quoted on the
Nasdaq Small-Cap Market ("Nasdaq") under the symbols "MMAC" and "MMACW",
respectively.

--------------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS".

---------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

--------------------------------------
<TABLE>
<CAPTION>

- ------------------------------ ---------------------------- --------------------------- ----------------------------
Price
to Underwriting Proceeds
Selling Securityholders Discounts and to
Commissions Company(1)
- ------------------------------ ---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
Per Share $1.00 $ - $1.00
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Per Share $3.00 $ - $3.00
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Total (2) $ - $ - $7,529,719
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(1) Before deducting expenses estimated at $ 110,000 (approximately $.037 per
share sold by the Company).
(2) Assumes exercise of all 2,981,573 Private Warrants the underlying shares of
Common Stock of which are being registered in the Registration Statement on
Form SB-2 of which this Prospectus forms a part.

----------------------------------------
The date of this Prospectus is _____________

<PAGE>

SUMMARY

The following summary is qualified in its entirety by the other information
and consolidated financial statements appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety.
Unless otherwise indicated all per share data and information in this Prospectus
relating to the number of shares of Common Stock outstanding assumes no exercise
of outstanding warrants and options. For an explanation of certain technical
terms used in this Prospectus, see "Glossary."

THE COMPANY

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

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

PRODUCT FAMILY

VIDEO SWITCHING HUB AND UTP VIDEO DISTRIBUTION. The Company's Viewpoint
VBX(TM) product provides high-quality workgroup video communications with shared
gateways to Wide Area Networks ("WANs") and existing video teleconferencing room
systems. The Viewpoint VBX(TM), a PC-based WindowsNT system, employs a switched
architecture to distribute uncompressed, full-motion video within a building or
campus using existing UTP wiring. The switching architecture can support
hundreds of users and allows point-to-point, multipoint and broadcast modes of
operation. The Viewpoint VBX(TM) is compatible with standard NTSC cameras, audio
components, speakerphones, PC video peripherals and other videoconferencing
products produced by third-party manufacturers.

INTERNET VIDEO. The Company currently markets several Internet video products
which capitalize on the growing popularity of the World Wide Web (the "Web").
Subscribers to the Web have sought improved Internet access capabilities, which
has resulted in increased usage of 28.8 and 56 Kbps modems, ISDN adapters and
cable modems. Improvements in video and audio compression technology, standards
and Internet access have made possible new forms of motion-video content for
Internet publishers and their target audiences. The Company's products are
designed to take

2
<PAGE>

advantage of these technological developments and target the rapidly- emerging
market for Internet video publishing, Internet video broadcasts and Internet
video call centers by enhancing Internet web pages with audio and motion-video.

VIDEO CODECS. The Company develops and markets standards-based video and
audio Codec products that enable multimedia applications for PCs and
workstations. The Company's Osprey Codecs capture, digitize, compress, transmit,
receive, decompress and display full-motion video. The Osprey(R) 1000 is
compatible with multiple video and audio compression formats for both PCs and
workstations that are equipped with the standard PCI-bus and supports the
Windows NT, Windows 3.1, Windows95, Solaris and UNIX operating systems. The
Company believes the Osprey(R)-1000 is the leading standards-based,
multi-algorithm video and audio Codec product for the Windows NT operating
system.

The Company also offers the Osprey(R)-1100 Codec for Sun workstations
equipped with the S-bus. The Company also markets SLIC-Video(TM) and
Osprey(R)-100 video capture products that enables Sun workstation and PC users
to view uncompressed, high-quality video and to capture full-motion video
frames.

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

VIDEO SURVEILLANCE. The Company believes that commercial and residential
video surveillance products represent another strong business opportunity. The
Company delivered its first video surveillance system to Alcatel in the first
quarter of 1996. This industrial surveillance system integrates standard alarm
and sensory devices and allows a central operator to monitor and inspect
hundreds of remote sites over the customer's existing frame relay computer
network. The Company intends to enter into relationships and collaborative
projects with communication system integrators, security system resellers,
distributors and suppliers to capitalize on this market.

The Company believes that the convergence of multimedia PCs, new
standards-based audio and video technologies and increased interest in the
Internet and corporate Intranets combined with PC price levels for such
capabilities will generate a rapid adoption of video communications products and
services. The Company's enabling technologies provide for economical solutions
for adapting existing and new PCs with video communication capabilities.

The Company was incorporated in Delaware in February 1994 and acquired all of
the issued and outstanding capital stock of its affiliate, Viewpoint Systems,
Inc. ("Viewpoint") in May 1994. Unless otherwise indicated, references in this
Prospectus to the Company include its wholly-owned subsidiaries, Viewpoint,
Videoware, Inc. ("VideoWare"), and Osprey Technologies, Inc. ("Osprey"), all
Delaware corporations. The Company's principal executive offices are located at
2665 Villa Creek Drive, Suite 200, Dallas, Texas 75234, its telephone number is
(972) 488-7200, its fax number is (972) 488-7299 and its Internet address is
www.mmac.com.

3
<PAGE>

THE OFFERING

SECURITIES OFFERED................... 2,981,573 shares of Common Stock.

COMMON STOCK TO BE OUTSTANDING AFTER
THE OFFERING(1)...................... 10,887,864

USE OF PROCEEDS...................... The Company will not receive any
proceeds from the sale of the shares
offered by this Prospectus. The Company
intends to use the proceeds, if any,
derived from the exercise of the
Private Warrants, the underlying shares
of Common Stock of which are being
registered in the Registration
Statement on Form SB-2 of which this
Prospectus forms a part, for working
capital and general corporate purposes.
See "Use of Proceeds."

RISK FACTORS......................... The securities offered hereby are
speculative and involve a high degree
of risk and should not be purchased by
investors who cannot afford the loss of
their entire investment. See "Risk
Factors."

NASDAQ SYMBOLS................... Common Stock -- MMAC
Public Warrants -- MMACW

- ----------
(1) Includes 2,981,573 shares of Common Stock registered herein issuable upon
the exercise of Private Warrants. Does not include (i) 140,000 shares of
Common Stock reserved for issuance upon exercise of warrants to purchase
Common Stock and/or Public Warrants (the "Representative's Warrants") sold
to the Representative, (ii) 140,000 shares of Common Stock reserved for
issuance upon exercise of Representative's Public Warrants issuable upon
exercise of Representative's Warrants, (iii) 394,975 shares of Common Stock
reserved for issuance upon exercise of options available for future grant
under the 1995 Option Plan, (iv) 1,605,025 shares of Common Stock reserved
for issuance upon exercise of options granted under the 1995 Option Plan,
(v) 803,832 shares of Common Stock reserved for issuance upon exercise of
options granted under the 1994 Option Plan, (vi) 84,770 shares of Common
Stock reserved for issuance upon exercise of options granted under the 1993
Option Plan, (vii) 45,000 shares of Common Stock reserved for issuance upon
exercise of options granted under the 1995 Directors Stock Option Plan,
(viii) 205,000 shares of Common Stock reserved for issuance upon exercise
of options available for future grant under the 1995 Directors Stock Option
Plan, (ix) 250,000 shares of Common Stock reserved for issuance under the
Employee Stock Purchase Plan, (x) 2,851,977 shares of Common Stock reserved
for issuance upon exercise of the Public Warrants. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Management -- Employee Stock Plans," and "Description of Securities."

<PAGE>

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary financial data as of December 31, 1995 and 1996 and
March 31, 1997 and for each of the periods ended December 31, 1995 and 1996 and
March 31, 1996 and 1997 is derived from the Company's consolidated financial
statements. The following data should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto
included elsewhere herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Consolidated Financial
Statements."

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------- ----------------------------
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ........................... $ 285,354 $ 1,095,012 $ 410,454 $ 259,533
Cost of goods sold .................. 136,381 393,918 175,585 116,556
Gross profit ........................ 148,973 701,094 234,869 142,977
Operating expenses .................. 4,720,559 4,581,840 1,175,949 1,353,176
Other expense (principally interest) (843,292) (513,219) (117,897) (196,334)
Net loss ............................ (5,414,878) (4.393,965) (1,058,977) (1,406,533)
Net loss per share .................. $ (1.06) $ (0.73) $ (0.18) $ (0.21)
Common and common equivalent
shares outstanding ................ 5,124,411 5,999,752 5,753,573 6,622,790

CONSOLIDATED BALANCE SHEET DATA:
<CAPTION>
DECEMBER 31, MARCH 31, 1997
------------- --------------
1995 1996 ACTUAL AS ADJUSTED(1)
---- ---- ------ --------------
<S> <C> <C> <C> <C>
Working capital (deficit) ... $ (3,891,602) $ (6,407,318) $ 3,269,871 $ 10,689,590
Total assets ................ 1,244,766 1,691,258 5,085,336 12,505,055
Total liabilities ........... 4,497,330 7,472,088 1,065,834 1,065,834
Stockholders' equity(deficit) (3,252,564) (5,780,830) 4,019,502 11,439,221
</TABLE>
- ----------

(1) Gives effect, on an as adjusted basis, to the assumed exercise of the
2,981,573 Private Warrants, the underlying shares of Common Stock of which
are being registered in the Registration Statement on Form SB-2 of which
this Prospectus forms a part. There can be no assurance that all, or any,
of the Private Warrants will be exercised in the foreseeable future, if at
all.

5
<PAGE>

RISK FACTORS

The securities offered hereby are speculative and involve a high degree of
risk. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this offering
before making an investment decision.

LIMITED OPERATING HISTORY; The Company has commenced limited marketing of
its products. Accordingly, the Company has a limited operating history upon
which an evaluation of its prospects can be made. Such prospects must be
considered in light of the risks, expense, delays, problems and difficulties
frequently encountered in the establishment of a new business in an industry
characterized by intense competition, as well as risks encountered in the shift
from development to commercialization of new products based on innovative
technologies. The Company's prospects are dependent upon the successful
commercialization of its products. There can be no assurance that the Company
will be able to implement its business plan or that unanticipated expenses,
problems or difficulties, technical or otherwise, will not result in material
delays in its implementation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business".

LIMITED REVENUE; SIGNIFICANT LOSSES; ACCUMULATED DEFICIT. The Company has
generated limited revenue, including revenues of $285,354, $1,095,012 and
$259,533 and incurred significant losses, including losses of $5,414,878,
$4,393,965 and $1,406,533 for the years ended December 31, 1995 and 1996, and
the three months ended March 31, 1997, respectively, and has continued to incur
significant additional losses to date. The Company anticipates that losses will
continue for the foreseeable future and until such time as the Company is able
to build an effective marketing and sales organization, develop a network of
independent resellers and achieve market acceptance of its products. In
addition, the Company's future performance will be subject to a number of
business factors beyond the Company's control, such as technological changes and
developments by others and unfavorable general economic conditions, including
downturns in the economy or a decline in the DVC or PC industries or in targeted
commercial markets, which would result in a reduction or deferral of capital
expenditures by prospective customers. There can be no assurance that the
Company will be able to successfully implement its marketing strategy, generate
significant revenues or achieve profitable operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Consolidated Financial Statements."

SIGNIFICANT CAPITAL REQUIREMENTS; POSSIBLE NEED FOR ADDITIONAL FINANCING. The
Company's capital requirements in connection with the design, development and
commercialization of its products have been and will continue to be significant.
Through the date of its initial public offering, the Company was substantially
dependent upon loans from its principal stockholders, as well as private
placements of its debt and equity securities, to finance its working capital
requirements. The proceeds of the initial public offering are being utilized to
commence full-scale marketing activities in connection with its products, to
complete the development of additional product and software applications, and to
fund the Company's working capital requirements. As a result of several
potential large contracts involving the Company's Viewpoint VBX product, the
Company, in anticipation of such orders, increased its level of spending on
inventory and development equipment during the second quarter of 1997 above that
contemplated at the time of the Company's initial public offering. The Company
anticipates, based on currently proposed plans and assumptions relating to its
operations, that currently available funds plus anticipated proceeds from the
exercise of Private Warrants will be sufficient to satisfy its contemplated cash
requirements through at least the first quarter of 1998. In the event that the
Company's plans change or prove to be inaccurate or if currently available funds
prove to be insufficient to fund operations, the Company could be required to
seek additional financing sooner than currently anticipated or could be required
to curtail its activities. As of the date of this Prospectus, the Company has
had preliminary discussions with several potential sources of additional
financing. The Company has no current arrangements with respect to, or sources
of, additional financing, and there can be no assurance that existing
stockholders will provide any portion of the Company's future financing
requirements. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. Additional equity
financing may involve substantial dilution to the interests of the Company's
then existing stockholders. See "Use of Proceeds", "Management's Discussion and
Analysis of Financial Condition and Results of Operation-Liquidity" and "Certain
Transactions."

6
<PAGE>

TECHNOLOGICAL FACTORS; UNCERTAINTY OF PRODUCT DEVELOPMENT AND
COMMERCIALIZATION. The Company has only recently commenced limited
commercialization of its products for a limited number of users. Accordingly,
there can be no assurance that, upon widespread commercial use, if any, these
products will satisfactorily perform all of the functions for which they have
been designed or that they will operate satisfactorily. Product development,
commercialization and continued system refinement and enhancement efforts remain
subject to all of the risks inherent in development of new products based on
innovative technologies, including unanticipated delays, expenses and technical
problems or difficulties, as well as the possible insufficiency of funds to
implement development efforts, any one of which could result in abandonment or
substantial change in product commercialization. The Company's success will be
largely dependent upon its products meeting targeted cost and performance
objectives of large-scale production, the Company's ability to adapt its
products to satisfy industry standards and the timely introduction of its
products into the marketplace, among other things. There can be no assurance
that, upon wide-scale commercial introduction, the Company's products and
software applications will satisfy current price or performance objectives, that
unanticipated technical or other problems which would result in increased costs
or material delays in introduction and commercialization will not occur, or that
the Company's products will prove to be sufficiently reliable or durable under
actual operating conditions or otherwise be commercially viable. Software and
other technologies as complex as those incorporated into the Company's systems
may contain errors which become apparent subsequent to widespread commercial
use. Remedying such errors could delay the Company's plans and cause it to incur
additional costs, having a material adverse impact on the Company. See "Business
- - Products" -- and "- Marketing and Sales."

CONCENTRATION OF REVENUE; DEPENDENCE ON KEY CUSTOMERS; Concentration of
Credit Risk. A substantial portion of the Company's sales are made to a small
number of customers, generally on an open account basis with no collateral
required. There can be no assurance that these customers will maintain their
volume of business with the Company. A loss of the Company's sales to these
customers could have a material adverse effect on the Company's results of
operations unless other customers were found to provide the Company with similar
revenues. The Company performs ongoing credit evaluation of its customers and
maintains reserves for potential credit losses. Although such losses in the
aggregate have not exceeded management's expectations, there can be no assurance
that potential credit losses will not exceed reserves in the future. In
addition, the Company invests its cash and cash equivalents with two financial
institutions, one a Texas commercial bank, and the other a major brokerage
house. Cash balances at the Texas commercial bank are insured by the Federal
Deposit Insurance Corporation up to $100,000 and the brokerage house maintains
accounts in several banks throughout the country and in government securities.
Should either the Texas commercial bank or the brokerage house cease business
operations, there can be no assurance that the Company will not suffer losses.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

UNCERTAINTY OF MARKET ACCEPTANCE. The DVC industry is characterized by
emerging and evolving markets and an increasing number of market entrants who
have introduced or are developing an array of new DVC systems. Each of these
entrants is seeking to establish its products as the preferred solution for
desktop video applications. As is typical in the case of emerging and evolving
markets, demand and market acceptance for newly introduced products and services
is subject to a high level of uncertainty. The Company currently has limited
marketing experience and limited financial, personnel and other resources to
undertake extensive marketing activities. The Company has not conducted and does
not intend to conduct formal market or concept feasibility studies for its
proposed products. The relatively high cost and less than television broadcast
quality video of DVC systems have, to date, limited the market acceptance of DVC
systems. Consequently, potential customers may elect to utilize other products
which they believe to be more efficient or have other advantages over the
Company's products, or may otherwise be reluctant to purchase the Company's
products. Achieving market acceptance for the Company's products will require
substantial marketing efforts and expenditure of significant funds to create
awareness and demand by potential consumers as to the perceived benefits and
distinctive characteristics of the Company's products. There can be no assurance
that the Company will have available funds or other resources necessary to
achieve such acceptance. See "Business -- Marketing and Sales."

7
<PAGE>
LIMITED MARKETING CAPABILITIES AND EXPERIENCE; DEPENDENCE UPON THIRD-PARTY
RESELLERS. The Company has limited marketing experience and has conducted only
limited marketing activities. Although the Company expects to continue to market
directly to certain accounts, the Company intends to establish a network of
resellers, consisting primarily of value-added resellers ("VARs"), systems
integrators and original equipment manufacturers ("OEMs") with established
distribution channels to market the Company's products and to educate potential
resellers to install and service its systems. The Company's prospects will be
significantly affected by its ability to successfully develop relationships with
VARs, systems integrators and OEMs and upon the marketing efforts of such
resellers. While the Company believes that independent resellers with which it
enters into such arrangements will have an economic motivation to market the
Company's products, the time and resources devoted to these activities generally
will be controlled by such entities and not by the Company. The Company will
also be dependent upon such resellers to provide installation and support
services. A decline in the financial prospects of particular resellers or any of
their customers, or inadequate installation and support services by resellers,
could have a material adverse effect on the Company. In addition, such resellers
will likely market various product lines, including, in some cases, products
directly competitive with the Company's products. The Company has entered into
agreements with a limited number of resellers to distribute its products. There
can be no assurance that the Company will be able, for financial or other
reasons, to finalize any additional third-party distribution or marketing
arrangements or that such arrangements, if finalized, will result in further
commercialization of any of the Company's products. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Marketing and Sales."

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

TECHNOLOGICAL OBSOLESCENCE; NEED TO CONFORM TO INDUSTRY STANDARDS. The
markets for the Company's products are characterized by rapidly changing
technology and evolving industry standards, often resulting in product
obsolescence or short product lifecycles. Accordingly, the Company's ability to
compete will depend in large part on its ability to introduce its products in a
timely manner, to continually enhance and improve its system and software
products and to maintain development capabilities to anticipate or adapt to
technological changes and advances in the DVC and PC industries, including
ensuring continuing compatibility with evolving industry standards and
technological advances. There can be no assurance that the Company will be able
to compete successfully, that competitors will not develop technologies or
products that render the Company's products obsolete or less marketable, or that
the Company will be able to keep pace with the technological demands of the
marketplace or successfully enhance and adapt its products to be compatible with
newly developed PC and networking products and technologies or software
products, or satisfy industry standards and the needs of its customers and
potential customers. Industry standards covering the Company's products have
been established by, among others, the International Telecommunications Union.
Such standards provide for acceptable product performance levels and
interoperability and compatibility standards. If such standards are changed
after adoption, customer confidence in, and the market for, the applicable
product could be adversely affected. There can be no assurance that such
standards will remain the same, and if changed, that the Company will be able to
comply with any changed standards. If any product does not

<PAGE>

comply with the applicable standards the Company may have to discontinue sales
of such product until such time, if ever, as it is able to modify or redesign
its technology. In addition, the establishment of standards adverse to the
Company's system could provide substantial competitive advantages to
manufacturers of other videoconferencing systems. See "Business -- Competition."

DEPENDENCE UPON THIRD-PARTY MANUFACTURERS AND SUPPLIERS. The Company has, to
date, engaged contract manufacturers to supply its products in limited
quantities pursuant to purchase orders. There can be no assurance that its
products can be manufactured reliably on a large-scale basis on commercially
reasonable terms, or at all. In addition, the Company has been and will continue
to be dependent on third parties for the supply and manufacture of all of its
component and electronic parts, including standard and custom-designed
components. The Company generally does not maintain supply agreements with such
third parties but instead purchases components and electronic parts pursuant to
purchase orders in the ordinary course of business. The Company is substantially
dependent on the ability of its third-party manufacturers and suppliers to,
among other things, meet the Company's design, performance and quality
specifications.

Failure by the Company's third-party manufacturers and suppliers to comply
with these and other requirements could have a material adverse effect on the
Company. There can be no assurance that the Company's third-party manufacturers
and suppliers will dedicate sufficient production capacity to meet the Company's
scheduled delivery requirements or that the Company's suppliers or manufacturers
will have sufficient production capacity to satisfy the Company's requirements
during any period of sustained demand. Moreover, the electronics industry from
time to time experiences short supplies of certain high demand components, which
may adversely affect the Company's ability to meet its production schedules.
Furthermore, although the Company owns the designs and dies for its custom
designed components and believes that alternative sources of supply are
available, the Company currently purchases all of its specially designed
components and certain high demand components from sole source suppliers.
Failure of manufacturers or suppliers to supply, or delays in supplying, the
Company with systems or components, or allocations in the supply of certain high
demand components could materially adversely affect the Company's operations and
ability to meet its own delivery schedules on a timely and competitive basis.
See "Business -- Production and Supply."

PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION. The Company holds a United
States patent covering certain fundamental aspects of the compressed packet
video Codec incorporated into the Viewpoint-PRO(TM) system. The Company may
apply for additional patents relating to other aspects of its products, has
registered trademarks for the WorkFone(R), FamilyFone(R) and Osprey(R) names and
has applied for trademark registration for the Viewpoint-PRO(TM), ViewCast(TM)
and SLIC-Video(TM) names, among others. There can be no assurance as to the
breadth or degree of protection which existing or future patents, if any, may
afford the Company, that any patent applications will result in issued patents,
that the Company's patents or trademarks will be upheld, if challenged, or that
competitors will not develop similar or superior methods or products outside the
protection of any patent issued to the Company. Although the Company believes
that its patent and trademarks and the Company's products do not and will not
infringe patents or trademarks or violate the proprietary rights of others, it
is possible that the Company's existing patent or trademark rights may not be
valid or that infringement of existing or future patents, trademarks or
proprietary rights may occur. In the event the Company's products infringe
patents or proprietary rights of others, the Company may be required to modify
the design of its products, change the name of its products or obtain a license
for certain technology. There can be no assurance that the Company will be able
to do so in a timely manner, upon acceptable terms and conditions, or at all.
Failure to do any of the foregoing could have a material adverse effect upon the
Company. In addition, there can be no assurance that the Company will have the
financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action which may be brought against
it. Moreover, if the Company's products infringe patents, trademarks or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which also could have a material adverse effect on
the Company.

9
<PAGE>
afford complete protection and there can be no assurance that others will not
independently develop similar know-how or obtain access to the Company's
know-how or software codes, concepts, ideas and documentation. Furthermore,
although the Company has and expects to continue to have confidentiality
agreements with its directors, employees, consultants, manufacturers and
appropriate vendors, there can be no assurance that such arrangements will
adequately protect the Company's trade secrets. See "Business -- Patents,
Trademarks and Proprietary Information."

RISKS RELATING TO PROPOSED EXPANSION; RISKS RELATING TO FOREIGN OPERATIONS.
The Company is using the proceeds of its initial public offering and intends to
use the proceeds received from the exercise of the Private and Public Warrants,
if any, to seek to expand its current level of operations. Successful expansion
of the Company's operations will be dependent, among other things, on the
Company's ability to achieve significant market acceptance for its products,
hire and retain skilled management, marketing, technical and other personnel,
establish an effective sales organization and enter into satisfactory marketing
arrangements, secure adequate sources of supply on a timely basis and on
commercially reasonable terms, and successfully manage growth (including
monitoring operations, controlling costs and maintaining effective quality
controls). The Company could also seek to expand its operations through
acquisitions. In such an event, investors in this offering would not have an
opportunity to evaluate the specific merits or risks of any potential
acquisition. In addition, to the extent the Company enters into foreign markets,
the Company will be subject to all of the risks inherent in foreign trade,
including trade restrictions, export duties and tariffs, fluctuations in foreign
currencies and international political, regulatory and economic developments
affecting foreign trade. There can be no assurance that the Company will be able
to successfully expand its operations or that the Company will not remain
largely dependent on non-recurring system sales to a limited customer base,
which sales will constitute all or a significant portion of the Company's
revenue. See "Use of Proceeds" and "Business -- Government Regulation."

POSSIBLE FLUCTUATIONS IN OPERATING RESULTS. The Company's operating results
could vary from period to period as a result of the length of the Company's
sales cycle, as well as from purchasing patterns of potential customers, the
timing of introduction of new products, software applications and product
enhancements by the Company and its competitors, technological factors,
variations in sales by distribution channels, competitive pricing, and generally
nonrecurring system sales. The Company's sales order cycle, which generally
commences at the time a prospective user demonstrates an interest in purchasing
one of the Company's products and ends upon execution of a purchase order with
that customer, could range from one to eighteen months. The period from the
execution of a purchase order until delivery of system components to the
Company, assembly and shipment, at which time the Company recognizes revenue,
may range from approximately one to four months. There can be no assurance that
such factors will not cause significant fluctuations in operating results in the
future. Additionally, the Company anticipates that upon entering into agreements
with resellers for distribution of the Company's products, of which there can be
no assurance, such distributors may place initial stocking orders for systems,
component parts and software programs, which could also result in material
fluctuations in the Company's operating results. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business --
Production and Supply."

LIMITATIONS ON USE OF NET OPERATING LOSS CARRY FORWARDS. At December 31,
1996, the Company had substantial net operating loss carry forwards for federal
tax purposes available to offset future taxable income. Under Section 382 of the
Internal Revenue Code of 1986, as amended, utilization of prior net operating
loss carry forwards is limited after an ownership change, as defined in Section
382. There can be no assurance that the Company will not in the future be
subject to further significant limitations on the use of its net operating loss
carry forwards. In the event the Company achieves profitable operations, any
significant limitation on the utilization of net operating loss carry forwards
would have the effect of increasing the Company's tax liability and reducing net
income and available cash resources. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity."

GOVERNMENT REGULATION. The Company is subject to regulations relating to
electromagnetic radiation from its products, which impose compliance burdens on
the Company. In the event the Company redesigns or otherwise modifies its
products or completes the development of new products, it will be

10
<PAGE>
required to comply with Federal Communications Commission regulations with
respect to such products prior to their commercialization. There can be no
assurance that the Company will be able to comply with such regulations. In
addition, new legislation and regulations, as well as revisions to existing laws
and regulations at the federal, state and local levels may be proposed in the
future affecting the video communications industries. Such proposals could
affect the Company's operations, result in material capital expenditures, affect
the marketability of its products and limit opportunities for the Company with
respect to modifications of its products or with respect to new or proposed
products or technologies. Expansion into foreign markets may also require the
Company to comply with additional regulatory requirements. The technology
contained in the Company's products may be subject to U.S. export controls.
There can be no assurance that such export controls, either in their current
form or as may be subsequently enacted, will not delay introduction of new
products or limit the Company's ability to distribute products outside of the
United States. Further, various countries may regulate the import of certain
technologies contained in the Company's products. Any such export or import
restrictions, new legislation or regulation or government enforcement of
existing regulations could have a material adverse effect on the Company's
business, operating results and/or financial condition. There can be no
assurance that the Company will be able to comply with additional applicable
laws and regulations without excessive cost or business interruption, if at all,
and failure to comply could have a material adverse effect on the Company. See
"Business -- Government Regulation."

DEPENDENCE ON KEY PERSONNEL. The success of the Company will be largely
dependent on the personal efforts of Glenn A. Norem, its Chief Executive
Officer, and other key personnel. The Company entered into a five-year
employment agreement with Mr. Norem in February 1994. All other key personnel,
including Philip M. Colquhoun, President of the Company, William S. Leftwich,
Chief Financial Officer of the Company, David T. Stoner, Vice President of
Operations of the Company, Neal S. Page, Vice President and General Manager of
Osprey and A. David Boomstein, Vice President of Business Development of the
Company are "at-will" employees by terms of their employment agreements. The
employment of each such key employee may therefore be terminated by the officer
or the Company at any time, for any reason or no reason. The loss of the
services of Mr. Norem or certain other key employees could have a material
adverse effect on the Company's business and prospects. The Company plans to
obtain "key-man" life insurance on the life of Mr. Norem in the amount of
$1,000,000. The success of the Company is also dependent upon its ability to
hire and retain qualified operational, financial, technical, marketing, sales
and other personnel. There can be no assurance that the Company will be able to
hire or retain such necessary personnel. See "Business -- Employees" and
"Management."

SIGNIFICANT OUTSTANDING OPTIONS AND WARRANTS. As of March 31, 1997 there were
outstanding stock options to purchase an aggregate of approximately 2,537,894
shares of Common Stock at exercise prices ranging from $.04 to $5.1875 per share
and Public Warrants to purchase on aggregate of 2,851,977 shares of Common Stock
at $4.50 per share. To the extent that outstanding options and Public Warrants
are exercised, the percentage ownership of Common Stock of the Company's
stockholders will be diluted. Moreover, the terms upon which the Company will be
able to obtain additional equity capital may be adversely affected because the
holders of outstanding options and warrants can be expected to exercise them at
a time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than the exercise terms provided
by such outstanding securities. See "Management -- Employee Stock Plans" and
"Certain Transactions."

NO DIVIDENDS. The Company has not paid any cash dividends on its Common Stock
and does not expect to declare or pay any cash dividends in the foreseeable
future. Certain of the Company's debt instruments include covenants precluding
the payment of cash dividends until after such debt instruments are repaid. See
"Dividends."

AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK. The Company's
Certificate of Incorporation authorizes the issuance of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights

11
<PAGE>

of the holders of the Company's Common Stock. In the event of issuance, the
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future. See "Description of Securities -- Preferred Stock."

LIMITATION ON MONETARY LIABILITY OF OFFICERS AND DIRECTORS TO STOCKHOLDERS.
Section 145 of the General Corporation Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith. Articles
Seven and Ten of the Company's Certificate of Incorporation contain provisions
indemnifying officers and directors of the Company to the fullest extent
permitted by Delaware law. These provisions provide, among other things, that a
director of the Company shall not be liable either to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Company has also entered into indemnification agreements with Messrs. Norem,
Leftwich, Colquhoun, Stoner, Boomstein, Page, Jobe, and Culp which provide for
indemnification to the fullest extent allowable under the laws of the State of
Delaware. These provisions may limit the ability of the Company's stockholders
to collect on any monetary liability owed to them by an officer or director of
the Company.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Assuming the exercise
of all Private Warrants, the Company will have 10,887,864 shares of Common Stock
(assuming no exercise of outstanding options and Public Warrants). Of these
shares, the 2,981,573 shares registered in the Registration Statement on Form
SB-2 of which this Prospectus forms a part and the 2,851,977 shares of Common
Stock registered in the Company's initial public offering will be freely
tradable, subject to "lock-up" agreements (see "Shares Eligible for Future
Sale"), under the Securities Act, except for any shares owned by an "affiliate"
of the Company (in general, a person who has a control relationship with the
Company), which shares will be subject to the resale limitations of Rule 144
adopted under the Securities Act. The remaining 5,054,314 shares are deemed to
be "restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were issued and sold by the
Company in private transactions not involving a public offering and are not
currently part of an effective registration. Except for "lock-up" agreements,
all such shares are currently eligible for sale under Rule 144. In addition, the
Company previously granted the Representative demand and piggyback registration
rights with respect to the securities issuable upon exercise of the
Representative's Warrants.

Under Rule 144, a stockholder who has beneficially owned Restricted Shares
for at least one year (including persons who may be deemed to be "affiliates" of
the Company under Rule 144) may sell within any three (3) month period a number
of shares that does not exceed the greater of: a) one percent (1%) of the then
outstanding shares of a particular class of the Company's Common Stock as
reported on its 10-Q filing, or b) the average weekly volume on Nasdaq during
the four (4) calendar weeks preceding such sale and may only sell such shares
through unsolicited brokers' transactions. A stockholder who is not deemed to
have been an "affiliate" of the Company for at least ninety (90) days and who
has beneficially owned his shares for at least two (2) years would be entitled
to sell such shares under Rule 144 without regard to the volume limitations
described above. See "Shares Eligible for Future Sale."

NASDAQ MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES FROM NASDAQ
SYSTEM; RISKS OF LOW-PRICED STOCKS. Nasdaq has implemented rule changes
increasing its quantitative listing standards which make it more difficult for
the Company to maintain compliance with Nasdaq's listing requirements. Although
the Company currently meets the new requirements for continued inclusion in
Nasdaq, if the Company is unable to satisfy Nasdaq's maintenance criteria in the
future, its securities will be subject to being delisted, and trading, if any,
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. ("NASD"). As a consequence of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities.

12
<PAGE>

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The SEC has adopted regulations
that generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. Such
exceptions include any equity security listed on Nasdaq and any equity security
issued by an issuer that has (i) net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for three years, (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous operation
for less than three years, or (iii) average annual revenue of at least
$6,000,000 if such issuer has been in continuous operation for less than three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith.

In addition, if the Company's securities are not quoted on Nasdaq, or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9 promulgated under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") for non-Nasdaq and non-exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.

As of the date of this Prospectus, the Company's Common Stock is exempt from
the definition of penny stock by operation of law because it is listed on
Nasdaq. However, in the event that the Common Stock were subsequently to become
characterized as a penny stock, the market liquidity for the Company's
securities could be severely affected. In such an event, the regulations on
penny stocks could effectively limit the ability of broker/dealers to sell the
Company's securities and thus the ability of purchasers of the Company's
securities to sell their securities in the secondary market.

RELATIONSHIP OF UNDERWRITERS TO TRADING; POTENTIAL ADVERSE IMPACT ON
LIQUIDITY AND MARKET PRICE OF SECURITIES. The Underwriters of the Company's
initial public offering may act as brokers or dealers with respect to the
purchase or sale of the Common Stock and the Public Warrants in the
over-the-counter market where each trades. The Representative also has the right
to act as the Company's exclusive agent in connection with any future
solicitation of Public Warrant holders to exercise their Public Warrants. Unless
granted an exemption by the Commission from Regulation M under the Exchange Act,
the Representative will be prohibited from engaging in any market-making
activities or solicited brokerage activities with regard to the Company's
securities during a period beginning five business days prior to the
commencement of any such solicitation and ending on the later of the termination
of such solicitation activity or the termination (by waiver or otherwise) of any
right the Representative may have to receive a fee for the exercise of the
Public Warrants following such solicitation. As a result, the Representative and
soliciting broker/dealers may be unable to continue make a market in the
Company's securities during certain periods while the exercise of the Public
Warrants is being solicited. Such a limitation could impair the liquidity and
market price of the Company's securities.

PUBLIC WARRANTS REDEEMABLE AT NOMINAL PRICE. The Public Warrants are
redeemable by the Company at any time commencing February 4, 1998, for $.10 per
Public Warrant upon thirty (30) days prior written notice, provided that the
average closing price or bid price of the Common Stock for any twenty (20)
trading days within the thirty (30) consecutive trading days ending on the fifth
day prior to notice of redemption equals or exceeds $6.75. Redemption of the
Public Warrants by the Company could force the holders to exercise the Public
Warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, to sell the Public Warrants at the then current market
price when they might otherwise wish to hold the Public Warrants, or to accept
the redemption price, which is likely to be substantially less than the market
value of the Public Warrants at the time of redemption. In the event of the
exercise of a substantial number of Public Warrants within a reasonably short
period of time after the right to exercise commences, the resulting increase in
the amount of Common Stock of the Company in the trading market could
substantially affect the market price of the Common Stock. See "Description of
Securities -- Warrants."

<PAGE>

USE OF PROCEEDS

Proceeds, if any, from the exercise of the Private Warrants, the underlying
shares of Common Stock of which are being registered in the Registration
Statement on Form SB-2 of which this Prospectus forms a part, will be used for
working capital and general corporate purposes, and possible future
acquisitions. The Company will not receive any proceeds from the sales of Common
Stock by the Selling Securityholders.

The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that currently available funds plus anticipated
proceeds from the exercise of Private Warrants will be sufficient to satisfy its
contemplated cash requirements through at least the first quarter of 1998. In
the event that the Company's plans change or prove to be inaccurate or if
currently available funds prove to be insufficient to fund operations, the
Company could be required to seek additional financing sooner than currently
anticipated or could be required to curtail its activities. As of the date of
this Prospectus, the Company has had preliminary discussions with several
potential sources of additional financing. The Company has no current
arrangements with respect to, or sources of, additional financing, and there can
be no assurance that existing stockholders will provide any portion of the
Company's future financing requirements. There can be no assurance that any
additional financing will be available to the Company on acceptable terms, or at
all. Additional equity financing may involve substantial dilution to the
interests of the Company's then existing stockholders.

MARKET FOR COMPANY'S COMMON STOCK

The Company's Common Stock is traded on the Automated Quotation System of the
National Association of Securities Dealers, Inc. ("Nasdaq") Small Cap Market
under the symbol "MMAC". The Public Warrants are traded on the Nasdaq Small Cap
Market under the symbol "MMACW". As of March 31, 1997, there were 7,906,291
shares of Common Stock and 2,851,977 Public Warrants outstanding. The Shares of
Common Stock are held of record by approximately 78 holders and the Public
Warrants are held of record by approximately 18 holders. The following table
sets forth, for the periods indicated, the high and low bid quotations for the
Common Stock and the Public Warrants on the Nasdaq Small Cap Market. These
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. The
trading market in the Company's securities may at times be relatively illiquid
due to low trading volume. The Company's initial public offering became
effective on February 4, 1997. Before this date, there was no public market for
the Company's securities.

COMMON STOCK PUBLIC WARRANTS
HIGH LOW HIGH LOW
---- --- ---- ---
FISCAL 1997
First Quarter $5.875 $4.00 $2.375 $1.00
Second Quarter $6.50 $5.00 $2.375 $1.375

On July 11, 1997, the last reported sales prices for the Common Stock and the
Public Warrants as reported on the Nasdaq Small Cap Market were $5.00 and $1.50,
respectively.

DIVIDENDS

The Company has never paid cash dividends on its Common Stock. The Board of
Directors does not anticipate paying cash dividends in the foreseeable future as
it intends to retain future earnings to finance the growth of the business. The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements, the operating and financial condition of the
Company and other factors deemed relevant by the Board of Directors.

<PAGE>

CAPITALIZATION

The following sets forth the capitalization of the Company as of March 31,
1997 on an actual basis, and as adjusted to reflect the exercise of all Private
Warrants, the underlying shares of Common Stock of which are being registered in
the Registration Statement on Form SB-2 of which this Prospectus forms a part..

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
ACTUAL AS ADJUSTED
------ -----------
(1)
<S> <C> <C>
Short-term debt, including current portion of long-term debt ... $ 317,489 $ 317,489
============== ==============

Stockholders' equity:
Preferred stock, $.0001 par value, 5,000,000
shares authorized, none issued or outstanding................ $ - $ -

Common stock, $.0001 par value, 20,000,000 shares authorized;
8,167,788 shares issued (actual) and 11,149,361 shares issued
(as adjusted)................................................ 817 1,115

Additional paid-in capital.................................... 17,809,152 25,228.573

Accumulated deficit........................................... (13,778,561) (13,778,561)

Treasury stock, 261,497 shares, at cost....................... (11,906) (11,906)
-------------- --------------
Total stockholders' equity...................................... 4,019,502 11,439,221
-------------- --------------
Total capitalization $ 4,019,502 $ $11,439,221
============== ==============
</TABLE>
- ----------

(1) Assumes the exercise of all Private Warrants. Does not include (i) 140,000
shares of Common Stock reserved for issuance upon exercise of the
Representative's Warrants, (ii) 140,000 shares of Common Stock reserved
for issuance upon exercise of Representative's Public Warrants issuable
upon exercise of Representative's Warrants, (iii) 394,975 shares of Common
Stock reserved for issuance upon exercise of options available for future
grant under the 1995 Option Plan, (iv) 1,605,025 shares of Common Stock
reserved for issuance upon exercise of options granted under the 1995
Option Plan, (v) 803,832 shares of Common Stock reserved for issuance upon
exercise of options granted under the 1994 Option Plan, (vi) 84,770 shares
of Common Stock reserved for issuance upon exercise of options granted
under the 1993 Option Plan, (vii) 45,000 shares of Common Stock reserved
for issuance upon exercise of options granted under the 1995 Directors
Stock Option Plan, (viii) 205,000 shares of Common Stock reserved for
issuance upon exercise of options available for future grant under the
1995 Directors Stock Option Plan, (ix) 250,000 shares of Common Stock
reserved for issuance under the Employee Stock Purchase Plan, and (x)
2,851,977 shares of Common Stock reserved for issuance upon exercise of
the Public Warrants. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management -- Employee
Stock Plans," and "Description of Securities."

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data have been derived from the
Company's consolidated financial statements. The audited consolidated balance
sheets as of December 31, 1995 and 1996 and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 1996 and the notes thereto appear
elsewhere in this Prospectus. The selected consolidated financial data set forth
below at March 31, 1997 and for the three months ended March 31, 1996 and 1997
are derived from unaudited consolidated financial statements which appear
elsewhere in this Prospectus and which, in management's opinion, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position and results of operations. The results
of operations for the three months ended March 31, 1997 are not necessarily
indicative of results of operations to be expected for the full year. The
following data should be read in conjunction with such consolidated financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------- ----------------------------
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ............................................. $ 285,354 $ 1,095,012 $ 410,454 $ 259,533
Cost of goods sold .................................... 136,381 393,918 175,585 116,556
----------- ----------- ----------- ------------
Gross profit .......................................... 148,973 701,094 234,869 142,977
Operating expenses:
Selling, general and administrative ................. 2,297,497 2,378,653 579,285 731,971
Research and development ............................ 1,983,310 1,997,146 546,399 562,125
Depreciation and amortization ....................... 439,752 206,041 50,265 59,080
----------- ----------- ----------- -----------
Total operating expenses .......................... 4,720,559 4,581,840 1,175,949 1,353,176
----------- ----------- ----------- ------------
Other expense (principally interest) ................. (843,292) (513,219) (117,897) (196,334)
----------- ----------- ----------- ------------
Net loss .............................................. $(5,414,878) $(4,393,965) $(1,058,977) $(1,406,533)
=========== =========== =========== ============
Net loss per share .................................... $ (1.06) $ (0.73) $ (0.18) $ (0.21)
=========== =========== =========== ============
Common and common equivalent
shares outstanding .................................. 5,124,411 5,999,752 5,753,573 6,622,790
=========== =========== =========== ============

CONSOLIDATED BALANCE SHEET DATA:
<CAPTION>

DECEMBER 31,
1995 1996 MARCH 31, 1997
---- ---- --------------
<S> <C> <C> <C>
Working capital (deficit) ............................ $ (3,891,602) $(6,407,318) $ 3,269,871
Total assets ......................................... 1,244,766 1,691,258 5,085,336
Total liabilities .................................... 4,497,330 7,472,088 1,065,834
Stockholders' equity(deficit) ........................ (3,252,564) (5,780,830) 4,019,502

</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

MultiMedia Access Corporation, develops and markets advanced video
communications systems. The Company delivers high-performance, low-cost products
that integrate video capabilities into existing desktop computers, applications
and networks, delivering standards-based video solutions to the PC and
workstation marketplace. See "Risk Factors -- Possible Fluctuations in Operating
Results."

RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996

Net Sales. Net sales for the quarter ended March 31, 1997 decreased to
$259,533 from $410,454 reported for the same period last year. In the first
quarter of 1996, the Company had product sales to three customers that did not
purchase any significant amount of product after the first quarter of 1996.
Absent these custom and non-recurring sales, which totaled approximately
$261,000, a comparison of period to period sales reflects an increase of
approximately $110,000.

Approximately 82% of sales in the first quarter of 1997 were sales of Osprey
products, principally of the Osprey-1000 and Osprey-1100 and their related
Developer Kits. While sales of Osprey products are expected to increase
dramatically for the balance of 1997 as new products are developed and marketed
and new contracts are finalized, the percentage of Osprey products to total
sales is expected to decline as the Company also expects to see a significant
increase in VBX product revenue over the final three quarters of the year.

COST OF GOODS SOLD. Cost of goods sold decreased $59,029 to $116,556 for the
quarter ended March 31, 1997 compared to the same period last year, primarily
due to the decline in net sales described above. Gross profit margin for the
quarter ended March 31, 1997 was 55.1%, representing a slight decline from the
57.2% margin reflected in the same period last year. The decrease can be
attributed primarily to consulting and custom programming revenue in the first
quarter of 1996 of $50,000 that was substantially greater than the same period
in 1997 and which has little or no associated cost of goods sold.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased from $579,285 in the first quarter of 1996 to
$731,971 in the first quarter of 1997 primarily due to a significant expansion
of the Company's sales and marketing efforts. By the end of the first quarter of
1997, the Company had filled six sales positions that did not exist during the
same period in 1996. This increase in the sales staff was anticipated in the Use
of Proceeds discussion in the Company's Form SB-2, effective February 4, 1997,
as filed with the SEC.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense of
$562,125 for the quarter ended March 31, 1997 was essentially unchanged from the
same period in 1996.

OTHER INCOME (EXPENSE). For the quarter ended March 31, 1997, other expense
increased $78,437 to $196,334 compared to the same period in 1996. This increase
is primarily caused by the write-off of debt issue costs related to debt
converted to equity at the Company's initial public offering in February 1997.
This write-off was recorded as additional interest expense.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

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

17
<PAGE>

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

The Company successfully completed an initial public offering of its Common
Stock and Redeemable Common Stock Purchase Warrants on February 7, 1997 and on
March 13, 1997 sold the over-allotment option, raising a total of $5,427,000 of
net proceeds. During 1997, with the proceeds of the offering, the Company is
endeavoring to build an effective marketing and sales organization, develop a
network of independent resellers and achieve market acceptance of its products
at prices and volumes which will, in the future, result in profitable
operations. However, the Company expects operating losses to continue until such
time as gross margins from the sales of its products exceeds its development,
selling, administrative and financing costs. As a result of several potential
large contracts involving the Company's Viewpoint VBX product, the Company,
in anticipation of such orders, increased its level of spending on inventory and
development equipment during the second quarter of 1997 above that contemplated
at the time of the Company's initial public offering. It is anticipated that the
proceeds from the initial public offering plus anticipated proceeds from the
exercise of Private Warrants will be sufficient to fund the operations of the
Company through at least the first quarter of 1998. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate or if
the proceeds of the initial public offering prove to be insufficient to fund
operations (due to unanticipated expenses or difficulties or otherwise), the
Company may be required to seek additional financing sooner than currently
anticipated or could be required to curtail its activities.

As of the date of this Prospectus, the Company has had preliminary
discussions with several potential sources of additional financing. The Company
currently has no commitments for additional loan financing. The Company may seek
additional financing to provide additional working capital in the future. Such
financing may include loans or lines of credit and could include factoring
agreements. The Company has no current arrangements with respect to, or sources
of, additional financing. There can be no assurance that existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. Additional equity financing may involve
substantial dilution to the Company's then existing stockholders.

At March 31, 1997, the Company had working capital of $3,269,871. Until the
completion of its initial public offering on February 7, 1997, the Company was
dependent upon loans from its principal stockholders, as well as private
placements of its debt and equity securities, to finance its working capital
requirements.

Net cash used in operating activities for the three months ended March 31,
1997 was $1,576,579. Increases in inventory were a result of an increase in
production levels to meet anticipated sales.

Cash used in investing activities for the three months ended March 31, 1997
consisted of $176,796 of capital expenditures. At March 31, 1997, the Company
did not have any material commitments for capital expenditures.

Cash provided by financing activities for the three months ended March 31,
1997 of $5,400,032 was primarily a result of proceeds from the Company's initial
public offering of its Common Stock in February 1997. At March 31, 1997, the
Company had cash and cash equivalents of $3,665,196.

18
<PAGE>

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

FORWARD LOOKING STATEMENTS

The above statements contain forward-looking statements that involve a number
of risks and uncertainties. In addition to the factors discussed herein, among
other factors that could cause results to differ materially are the following:
The Company's ability to achieve significant market acceptance for its products,
hire and retain skilled management, marketing, technical and other personnel,
establish an effective sales organization and enter into satisfactory marketing
arrangements, secure adequate sources of supply on a timely basis and on
commercially reasonable terms, and successfully manage growth (including
monitoring operations, controlling costs and maintaining effective quality
controls); risks inherent in foreign trade, including trade restrictions, export
duties and tariffs, fluctuations in foreign currencies and international
political, regulatory and economic developments affecting foreign trade; and
other risk factors listed from time to time in the Company's SEC filings and
reports, including but not limited to the final prospectus dated February 4,
1997, the Company's Annual Report on Form 10-KSB for the year ended December 31,
1996 and the Quarterly Report on Form 10-QSB for the quarter ended March 31,
1997. See "Risk Factors," "Use of Proceeds" and "Business - Government
Regulation."

<PAGE>

BUSINESS

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

INDUSTRY BACKGROUND

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

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

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

Classic videoconferencing room or group systems use expensive digital lines
and permit communication only between compatible facilities. These systems
currently cost between $10,000 and $100,000 and are typically used by large
corporations primarily for intra-Company communication between different
locations. The Company believes that the high cost of videoconferencing room
systems and the logistical problem of scheduling and availability have limited
their use.

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

The Company currently offers a variety of products with differing video
quality levels: NTSC TV quality with the Viewpoint VBX(TM) video switch,
business quality with the Osprey(R)-1000 using ISDN lines and consumer quality
video with FamilyFone(R)324 and WorkFone(R) 324 using modems over ordinary
telephone lines. The resolution and frame-rate of the video varies with the
bandwidth of the communications connection. The Company has designed its
products in response to the increasing demand for low-cost desktop
videoconferencing and for real-time collaborative computing applications using
telephone and computer networks. The Company also markets video products for the
Internet and corporate Intranets.

<PAGE>

PRODUCTS

VIDEO SWITCHING HUB AND UTP VIDEO DISTRIBUTION

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

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

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

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

INTERNET VIDEO

The Company first demonstrated its packet (TCP/IP-based) network video
technologies on the Internet's MBONE and on corporate Intranets in 1993. The
Company introduced its first commercial product, Viewpoint-PRO(TM), one of the
first TCP/IP-based videoconferencing systems designed specifically for LAN and
WAN applications in 1994.

The Company markets several video products that take advantage of the
growing popularity of the World Wide Web. The popularity of the Web has resulted
in subscribers seeking to improve their Internet access capabilities which in
turn has driven growth in higher bandwidth connections such as 28.8 and 56 Kbps
modems, ISDN adapters and cable modems. The availability of higher bandwidth,
along with advances in video and audio compression technology and standards,
makes motion-video possible for Internet publishers and their target audiences.

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

The Company is marketing its compression and video capture products to many
players in the web video- streaming marketplace. Following are three key
applications in the Internet video marketplace.

INTERNET VIDEO PUBLISHING

Video publishing refers to stored-video content, designed to be played
back to a user's system in real-time. The Company believes Internet video
publishing is becoming popular because it is far less technically demanding
than "live" video production and transmission.

21
<PAGE>

Internet video publishing entails compressing a video "clip" and
storing it on a server. The user is connected to the server by accessing a
Web page that holds the address for the target video server and then
establishes a direct connection to that server.

INTERNET VIDEO BROADCASTING

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

INTERNET VIDEO CALL CENTER

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

VIDEO CODECS AND DISPLAY CARD

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

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

The Osprey(R)-100 is a video capture product that enables standard PCs with
a PCI-bus architecture to view uncompressed, high-quality video and to capture
full-motion video frames. The Osprey(R)-100 provides affordable functionality to
the WindowsNT market.

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

VIDEO SURVEILLANCE

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

22
<PAGE>

In 1996 Company delivered its first video surveillance system to Alcatel, a
major communications systems integration Company in Richardson, Texas for use by
one of its international clients. This industrial surveillance system integrates
standard alarm and sensing devices (e.g. door magnets, motion detectors,
cameras, etc.), and allows a central operator to monitor and inspect hundreds of
remote sites over the customer's existing frame relay computer network.

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

The surveillance system delivered to Alcatel is based upon existing
Viewpoint-PRO(TM) technology. The Company is developing an Internet Video
Surveillance System designed to work with its Viewpoint VBX(TM) switching
system. An Internet version of the surveillance system is currently scheduled to
be available by the end of 1997.

MARKETING AND SALES

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

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

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

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

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

TARGET MARKETS

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

23
<PAGE>

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

PRODUCTION AND SUPPLY

The Company builds its current products using contract manufacturers in the
United States. The operations personnel in Dallas are responsible for parts
planning, procurement and final test and inspection to quality standards. The
Company plans for most high- volume production to be handled through large OEMs
or contract manufacturers.

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

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

INSTALLATION, SERVICE AND MAINTENANCE

Many of the Company's new products will be customer installable. The Company
has contracted with Data General Corporation to provide third party field
installation and support. The Company also plans to maintain a small technical
support group and will also depend on its resellers to install and service its
products.

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

RESEARCH AND DEVELOPMENT

The Company's development efforts during 1996 were devoted to the design and
development of the Viewpoint VBX(TM) video switching hub and codec server, the
WorkFone(R) 324, the Osprey(R)-1100 S-bus multi-algorithum video codec and the
Osprey(R)-100 video capture card.

Total research and development expense for 1996 was approximately $2.0
million. The 1997 research and development plan calls for approximately $2.2
million in development costs. For the three months ended March 31, 1997, the
Company incurred approximately $562,000 in research and development costs.

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

24
<PAGE>

marketable, or that the Company will be able to keep pace with the technological
demands of the marketplace or successfully enhance and adapt its products to be
compatible with newly developed products, technologies and software, or satisfy
industry standards and the needs of its consumers and potential consumers.

COMPETITION

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

PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION

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

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

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

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

GOVERNMENT REGULATION

The Company is subject to regulations relating to electromagnetic radiation
from its products, which impose compliance burdens on the Company. In the event
the Company redesigns or otherwise modifies its products or completes the
development of new products, it will be required to comply with

<PAGE>

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

EMPLOYEES

As of March 31, 1997, the Company had 47 employees, 4 of whom are in
executive positions, 23 of whom are engaged in engineering, research and
development, 11 of whom are engaged in marketing and sales activities, 3 of whom
are engaged in operations and 6 of whom are in administration. None of the
Company's employees are represented by a labor union. The Company considers its
employee relations to be satisfactory.

FACILITIES

The Company's executive offices and assembly operations and some of its
design and development activities are located in approximately 16,159 square
feet of leased space in Dallas, Texas. The lease expires in September of 1997
and provides for a base annual rent of $143,110. Osprey's design and development
activities are located in approximately 2,783 square feet of leased space in
Cary, North Carolina. The lease expires in December of 1997 and provides for a
base annual rent of $38,334. The Company leases office space for sales offices
in Milford, Michigan and Arlington, Virginia consisting of approximately 300 and
613 square feet of lease space, respectively. These leases expire in January
1998 and May 2000 and provide for base annual costs of $5,400 and $11,034,
respectively. The Company believes that its facilities are adequate for its
current and reasonably foreseeable future needs and its current facilities can
accommodate expansion, if required.

LEGAL PROCEEDINGS

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

26
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

NAME AGE POSITION
Glenn A. Norem ................. 44 Chief Executive Officer and Director
Philip M.Colquhoun ............. 57 President and Chief Operating Officer
David T. Stoner ................ 40 Vice-President of Operations
William S. Leftwich ............ 47 Chief Financial Officer and Assistant
Secretary
Neal S. Page ................... 38 Vice President & General Manager
A. David Boomstein ............. 41 Vice President of Business Development
William D. Jobe ................ 59 Chairman of the Board of Directors
Joe C. Culp .................... 64 Director

Glenn A. Norem has been Chief Executive Officer and a director of the Company
since its inception in February 1994. Mr. Norem has been Chief Executive Officer
of each of the Company's subsidiaries since their respective inceptions. Mr.
Norem has also been Chairman and Chief Executive Officer of Catalyst Financial
Corporation ("Catalyst"), an investment and business advisory firm to
development stage companies in the computer and communications industries, since
its inception in January 1990. From March 1984 to December 1989, Mr. Norem was a
general partner of Berry Cash Southwest Partnership, L.P., a venture capital
partnership. From May 1985 to December 1989, Mr. Norem was a general partner of
InterWest III, L.P., a venture capital partnership and, from 1983 to 1984, he
was Corporate Strategic Business Development Manager at Texas Instruments, Inc.
Mr. Norem began his career with IBM Corporation's System Communications Division
R & D Laboratory. Mr. Norem received a B.S. degree in Electrical
Engineering/Systems Engineering from Southern Illinois University and an M.B.A.
(Finance and Marketing) from the University of Chicago.

Philip M. Colquhoun was appointed President and Chief Operating Officer of
the Company in April 1996. He had been President of Viewpoint Systems, Inc. and
Osprey Technologies, Inc., both subsidiaries of the Company, since November
1995. From August 1994 to October 1995, Mr. Colquhoun was President of the
Connectworks Division of Connectware Inc., a wholly owned subsidiary of AMP Inc.
From September 1991 to August 1994, Mr. Colquhoun served as President and Chief
Executive Officer of Visual Information Technologies Inc., a manufacturer of PC
video, graphics and imaging products, which was sold to Connectware Inc. From
February 1990 to September 1991, he was Senior Vice President of Visual
Information Technologies Inc. From August 1984 to February 1990, Mr. Colquhoun
served Recognition Equipment Inc. in various capacities, including Vice
President Manufacturing, Vice President and General Manager, Special Products
Division and President, Postalogic Division. Mr. Colquhoun was the Vice
President of Finance and Administration for Nixdorf Computer Corporation from
1981 to 1984 and was employed by IBM Corporation from 1961 to 1981 in various
engineering, finance and manufacturing positions.

David T. Stoner joined the Company as Vice President of Operations in August
1996. From August 1994 to August 1996, Mr. Stoner was Vice President of
Engineering for the Connectworks Division of Connectware, Inc., a wholly owned
subsidiary of AMP Inc. From July 1986 to August 1994, Mr. Stoner was employed by
Visual Information Technologies, Inc. ("VITec"), a manufacturer of video,
imaging, and graphics products, which was purchased by Connectware, Inc. At
VITec, Mr. Stoner was responsible for the development of hardware and software
products, and served in various positions including Vice President of
Engineering. From January 1979 to July 1986, Mr. Stoner served in various
engineering positions at Texas Instruments, Inc. Mr. Stoner received his B.S.
degree in Electrical Engineering from the University of Kansas.

William S. Leftwich has been Chief Financial Officer of the Company since
March 1995. From January 1993 to March 1995, Mr. Leftwich served as Chief
Financial Officer, Treasurer and Secretary of Integrated Security Systems, Inc.,
a manufacturer, developer, and distributor of integrated security so-

27
<PAGE>

lutions. From August 1992 to December 1992, Mr. Leftwich served as Controller of
Thomas Group Holding Company, an affiliate of Integrated Security Systems, Inc.
Mr. Leftwich was self-employed as a financial consultant from January 1992 to
July 1992. From January 1989 to December 1991, Mr. Leftwich served as the Chief
Financial Officer of OKC Limited Partnership, an oil and gas exploration
Company. For approximately seven years prior to joining OKC Limited Partnership,
Mr. Leftwich served as Vice President -- Finance for Endevco, Inc., a natural
gas transportation and processing Company. Mr. Leftwich is a C.P.A. and received
a B.B.A. from Texas A&M University.

Neal S. Page has been Vice President and General Manager of the Osprey
division of the Company since January 1995. From October 1994 to December 1994,
Mr. Page served as Director of Product Development of the Company. From April
1988 to September 1994, Mr. Page was employed by Sun Microsystems where he held
management positions directing development and strategic relationships for
multimedia technology products. Mr. Page developed advanced graphics and imaging
products at General Electric from 1984 to 1988 and at Data General from 1983 to
1984. Mr. Page holds B.S. and M.S. degrees in Electrical and Computer
Engineering from North Carolina State University.

A. David Boomstein has been Vice President of Business Development since
February 1995. From January 1994 to January 1995, Mr. Boomstein was Vice
President for Desktop Programs at Applied Business Telecommunications, a
consulting and research firm focusing on teleconferencing and multimedia
applications. From January 1989 to December 1993, Mr. Boomstein worked with
Boeing Computer Support Services, Inc. on a mission services contract to the
National Aeronautics and Space Administration designing and installing
videoconferencing systems among NASA's world-wide partners. From December 1984
to December 1988, Mr. Boomstein was Product Marketing Manager for Compression
Labs, Inc.'s Rembrandt Video System. From June 1980 to November 1984, Mr.
Boomstein managed the development and deployment of Citicorp N.A.'s satellite
videoconferencing system. Mr. Boomstein received a B.F.A. in Communication Arts
from the New York Institute of Technology and an M.P.S. in Interactive
Telecommunications from New York University.

William D. Jobe has been Chairman of the Board of the Company since November
1994. Since July 1991, Mr. Jobe has been a private venture capitalist and
computer industry advisor. Since April 1995, Mr. Jobe has served as a director
of the Qualix Group, a Nasdaq NMS listed company. From June 1990 to July 1991,
Mr. Jobe was President of MIPS Technology Development, a subsidiary of MIPS
Computer Systems, Inc., a supplier of reduced instruction set computing products
and technology. From September 1987 to June 1990, Mr. Jobe was Executive Vice
President for Sales, Marketing and Service of MIPS Computer Systems, Inc. From
1993 through 1995, Mr. Jobe was Chairman and a director of Great Bear
Technology, Inc., a publicly-traded supplier of interactive multimedia software.
Mr. Jobe received a B.S.M.E. and a M.S.M.E. from Texas A & M University and a
P.M.D. from Harvard Business School.

Joe C. Culp has been a director of the Company since November 1995. Since
1990, Mr. Culp has served as President of Culp Communications Associates,
engaging in senior level consulting in the telecommunications industry. From
1989 to 1990, Mr. Culp was Executive Vice President of Communications
Transmission, Inc., a telecommunications provider. From 1988 to 1989, Mr. Culp
served as President and Chief Executive Officer of LIGHTNET, a fiber optic
telecommunications carrier jointly owned by CSX Corporation and Southern New
England Telecommunications. From 1982 to 1988, Mr. Culp was President,
Telecommunications for Rockwell International. Since 1994, Mr. Culp has served
on the Chairman's Advisory Board of Newbridge Networks a publicly-traded Company
and since 1996, has served as a director of IXC Communications, a public
Company. Mr. Culp received a B.S.E.E. from the University of Arkansas.

All directors hold office until the next annual meeting of the stockholders
and the election and qualification of their successors. Executive officers are
elected by the Board of Directors annually and serve at the discretion of the
Board.

Messrs. Norem, Jobe and Culp are members of the Audit and Compensation
Committees of the Board of Directors.

DIRECTOR COMPENSATION

Directors currently receive no cash compensation for serving on the Board of
Directors other than reimbursement of reasonable expenses incurred in attending
meetings. In June 1993, Mr. Jobe was granted an option to purchase 5,110 shares
of Common Stock under the 1993 Stock Option Plan at an

28
<PAGE>

exercise price of $0.20 per share. This option is fully vested. In November
1994, Mr. Jobe was granted an option to purchase 125,000 shares of Common Stock
under the 1994 Option Plan, at an exercise price of $3.00 per share. The option
vests as to one quarter of the shares subject to the option one year from the
date of grant and one quarter of the shares subject to the option each year
thereafter subject to acceleration based on the Company's performance. In
November 1995, Mr. Jobe and Mr. Culp were each granted options to purchase
40,000 shares of Common Stock exercisable $3.00 per share under the 1995 Option
Plan for consulting activity in addition to their director responsibilities.
These options vest over a three (3) year period.

In May 1995, the Company adopted a 1995 Director Option Plan (the "Director
Plan") under which only outside directors are eligible to receive stock options.
The Director Plan provides for the grant of nonstatutory stock options to
directors who are not employees of the Company. A total of 250,000 shares of
Common Stock have been authorized for issuance under the Director Plan. As of
March 31, 1997, options to purchase an aggregate of 45,000 shares at exercise
prices ranging from $3.00 to $4.00 per share had been granted under the Director
Plan. Each non-employee director who joins the Board after May 1, 1995 will
automatically be granted a nonstatutory option to purchase 15,000 shares of
Common Stock on the date upon which such person first becomes a director. In
addition, each such non-employee director will automatically be granted a
nonstatutory option to purchase 10,000 shares of Common Stock upon annual
re-election to the Board, provided the director has been a member of the Board
for at least six months upon the date of re-election. The exercise price of each
option granted under the Director Plan is equal to the fair market value of the
Common Stock on the date of grant. Each initial 15,000 share grant vests at the
rate of 25% of the option shares upon the first anniversary of the date of grant
and one forty-eighth of the option shares per month thereafter, and each annual
10,000 share grant vests at the rate of 25% of the option shares upon the first
anniversary of the date of grant and one forty-eighth of the options shares per
month thereafter, in each case unless terminated sooner upon termination of the
optionee's status as a director or otherwise pursuant to the Director Plan. In
the event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change in control transaction
involving the Company, each option becomes exercisable unless assumed or an
equivalent option substituted by the successor corporation. Unless terminated
sooner, the Director Plan will terminate in 2005. The Director Plan is currently
administered by the Board of Directors. The Board has authority to amend or
terminate the Director Plan, provided that no such action may impair the rights
of any optionee without the optionee's consent.

29
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation paid or accrued by the
Company to the Company's Chief Executive Officer and the Company's other
executive officers whose compensation exceeded $100,000 for the fiscal years
ended December 31, 1996, 1995 and 1994.

No other officer received cash compensation in excess of $100,000 in 1994,
1995 or 1996.

SUMMARY COMPENSATION TABLE

LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND OPTIONS
PRINCIPAL POSITION FISCAL SALARY BONUS (IN SHARES)
------------------ ------ ------ ----- -----------
YEAR
----
Glenn A. Norem 1996 $135,000 -- 160,000
Chief Executive Officer ...... 1995 90,000 $45,000(3) --(1)
1994 91,875(2) 45,000(3) 130,000

William S. Leftwich 1996 110,000 -- 30,000
Chief Financial Officer ...... 1995 90,000(4) 15,000(5) 60,000
1994 -- -- --

Philip M. Colquhoun ............ 1996 140,000 35,000 50,000
President and Chief Operating 1995 90,000(6) 3,500 200,000
Officer 1994 -- -- --

David T. Stoner ................ 1996 120,000(7) -- 100,000
Vice President of Operations 1995 -- -- --
1994 -- -- --

- ----------
(1) Does not include warrants to purchase 118,500 shares of Common Stock of the
Company granted to Mr. Norem and Norem I, L.P. in connection with financing
transactions. See "Certain Transactions".

(2) $22,500 of such amount was accrued as of December 31, 1994, of which
$11,250 was paid in 1995. The remaining $11,250 was accrued as of December
31, 1995.

(3) In October 1996, receipt of this amount was deferred by Mr. Norem until
February 1998.

(4) Represents Mr. Leftwich's annual salary. He assumed his duties with the
Company on March 29, 1995 and earned $67,268 in salary during 1995.

(5) Amount was accrued as of December 31, 1995 and 1996 and paid in 1997.

(6) Represents Mr. Colquhoun's annual salary. He assumed his duties as
President of the Viewpoint and Osprey subsidiaries on November 1, 1995 and
earned $14,880 in salary during 1995. Mr. Colquhoun assumed the duties of
President and Chief Operating Officer of the Company in April 1996.

(7) Represents Mr. Stoner's annual salary. He assumed his duties with the
Company on August 16, 1996 and earned $44,615 in salary in 1996.

<PAGE>

The following table provides information concerning options granted to the
executive officers of the Company in 1996.

OPTION GRANTS IN LAST FISCAL YEAR

% OF TOTAL
OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE/SHARE DATE
---- ------- ----------- ----------- --------
Glenn A. Norem 160,000 20.2 $3.30 1/01/01
William S. Leftwich 30,000 3.8 $3.00 1/01/06
Philip M. Colquhoun 50,000 6.3 $3.00 4/26/06
David T. Stoner 100,000 12.6 $4.00 8/19/06

YEAR-END OPTION VALUES

The following table sets forth certain information as of December 31, 1996
concerning the value of unexercised options held by the officers named in the
Summary Compensation Table above.

FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
---------------------------- -----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Glenn A. Norem.................. 144,267 196,833 $421,693 $268,612
William S. Leftwich............. 39,000 51,000 58,500 76,500
Philip M. Colquhoun............. 43,333 206,667 65,000 310,000
David T. Stoner................. -- 100,000 -- 50,000
</TABLE>

- ----------
(1) Represents the difference between the exercise price of the outstanding
options and the estimated market price of the Common Stock on December 31,
1996 of $4.50 per share.

EMPLOYMENT AGREEMENTS

The Company has entered into a five-year employment agreement with Glenn A.
Norem, effective February 7, 1994, which provides for his employment as Chief
Executive Officer. The employment agreement provides for an annual base
compensation of $90,000, subject to increases upon review by the Board of
Directors, and annual bonuses at the discretion of the Board of Directors. In
the event the employment agreement is terminated, (other than "for cause" by the
Company) including for "good reason" by Mr. Norem including in the event of a
"change of control" as defined in the agreement, then Mr. Norem will receive (i)
all accrued salary, bonuses and benefits through the date of such termination;
and (ii) a sum equal in the aggregate to the full amount, discounted by three
percent (3%), of (a) the salary and benefits which Mr. Norem would have
received, at the average rate or rates in effect during the six-month period
immediately prior to termination, and (b) the annual bonus or bonuses which Mr.
Norem would have received, at the rate of his annual bonus for the last full
fiscal year of the Company ending prior to termination, had, with respect to
both (a) and (b), Mr. Norem's employment under the agreement continued through
the full term of the agreement. The employment agreement also contains
provisions granting Mr. Norem certain piggyback and demand registration rights
that require the Company to register under the Securities Act any or all shares
of the Company's Common Stock held by Mr. Norem, or issuable upon exercise of
stock options held by Mr. Norem. The employment agreement is automatically
renewed for successive one year terms unless the Company or Mr. Norem elects not
to renew.

In January 1996, Mr. Norem's employment agreement was amended to increase his
annual base compensation to $135,000 and provide for a minimum bonus of $15,000
per year. Concurrent with the amendment, the Board of Directors granted Mr.
Norem a bonus of $45,000 per year for 1994 and 1995

31
<PAGE>

to be paid only upon the authorization of the Board of Directors. In September
1996, Mr. Norem's employment agreement was amended to include a non-compete,
non-solicitation, and non-circumvention agreement with the Company for the
duration of his employment and through the two years immediately following the
termination of his employment with the Company.

The Company has also entered into employment agreements with its five other
executive officers: Messrs. Colquhoun, Leftwich, Stoner, Boomstein and Page.
These employment agreements provide (i) for annual base compensation of $90,000,
$90,000, $120,000, $75,000 and $90,000 respectively; (ii) that the officer is
eligible to participate in the Company's Employee Stock Option Plans and
Executive Bonus Plans; and (iii) that the employment of each officer with the
Company is "at will" and may be terminated by the officer or the Company at any
time, for any reason or no reason.

EMPLOYEE STOCK PLANS

1995 Stock Plan

The 1995 Stock Plan (the "1995 Option Plan") provides for the grant to
employees of the Company of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
for the grant to employees and consultants of the Company of nonstatutory stock
options and stock purchase rights. A total of 2,000,000 shares of Common Stock
have been reserved for issuance under the 1995 Option Plan. As of March 31,
1997, options had been granted to purchase an aggregate of 826,025 shares at an
exercise price of $3.00 per share, 160,000 shares at an exercise price of $3.30
per share, 211,000 shares at an exercise price of $4.00 per share and 408,000
shares at exercise prices ranging from $4.50 to $5.1875 per share. The 1995
Option Plan may be administered by the Board or a committee approved by the
Board in a manner that complies with Rule 16b-3 promulgated under the Securities
Act. Currently, the 1995 Option Plan is administered by the Board of Directors,
which determines the terms of options and rights granted, exercise price, number
of shares subject to the option or right and the exercisability thereof. Options
and rights granted under the 1995 Option Plan are not transferable other than by
will or the laws of descent or distribution, and each option or right is
exercisable during the lifetime of the recipient only by such person. Options
that are outstanding under the 1995 Option Plan will remain outstanding until
they are exercised or they expire in accordance with the terms of each option.
The exercise price of all incentive stock options granted under the 1995 Option
Plan must be at least equal to the fair market value of the shares of Common
Stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of stock of the
Company, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date and the maximum term of
the option must not exceed five years. The term of all other options granted
under the 1995 Option Plan may not exceed ten years. In the event of certain
changes in control of the Company, the 1995 Option Plan permits each outstanding
option and right to become exercisable in full or assumed or an equivalent
option to be substituted by the successor corporation. Included are options to
purchase 160,000 shares at $3.30 per share and 50,000 shares at $5.0875 per
share granted to Mr. Norem in January 1996 and March 1997, respectively, options
to purchase 40,000 shares at $3.00 per share granted to each of Mr. Jobe and Mr.
Culp in November 1995, options to purchase 200,000 shares at $3.00 per share and
50,000 shares at $3.00 per share granted to Mr. Colquhoun in November 1995 and
April 1996, respectively, options to purchase 60,000 shares at $3.00 per share,
30,000 shares at $3.00 per share and 20,000 shares at $4.625 per share granted
to Mr. Leftwich in March 1995, January 1996 and March 1997, respectively, and
options to purchase 100,000 shares at $4.00 per share granted to Mr. Stoner in
August 1996. The options granted to Messrs. Norem, Colquhoun, Leftwich and
Stoner vest over a five year period. The options granted to Messrs. Jobe and
Culp vest over a three year period. See "Executive Compensation" and "Principal
Stockholders".

1994 Stock Option Plan

In February 1994, the Board of Directors and stockholders approved the
Company's 1994 Stock Option Plan (the "1994 Option Plan") pursuant to which an
aggregate of 2,000,000 shares of Common Stock were reserved for issuance in
connection with the stock options ("Options") available for grant.

<PAGE>

The Options may be granted in either or both of the following: (i) Incentive
Stock Options or (ii) Non-Qualified Stock Options. Non-Qualified Stock Options
may be granted to employees, directors and consultants of the Company.

The 1994 Option Plan was administered by the Board of Directors or, at their
discretion, by a committee which was appointed by the Board to perform such
function. The Board or such committee, as the case may be, within the
limitations of the 1994 Option Plan, determined, among other things, when to
grant Options, the persons to whom Options were to be granted, the number of
shares for each Option, whether Options granted were intended to be Incentive
Stock Options or Non-Qualified Stock Options, the duration and rate of exercise
of each Option, the share purchase price and the manner of exercise, and whether
restrictions such as repurchase rights by the Company were to be imposed on
shares subject to Options.

In connection with Incentive Stock Options, the exercise price of each
Incentive Stock Option may not be less than 100% of the fair market value of the
Common Stock on the date of grant (or 110% of fair market value in the case of
an employee holding 10% or more of the outstanding stock of the Company). The
aggregate fair market value of shares for which Incentive Stock Options granted
to any employee are exercisable for the first time by such employee during any
calendar year (pursuant to all stock option plans of the Company and any related
corporation) may not exceed $100,000. Non-qualified Stock Options may be granted
at a price determined by the Board or Committee, but not at less than the par
value of the Common Stock. Stock options granted pursuant to the 1994 Option
Plan will expire not more than ten years from the date of grant (five years in
the case of the Incentive Stock Options granted to persons holding 10% or more
of the voting stock of the Company).

As of March 31, 1997, options had been granted to purchase an aggregate of
803,832 shares as follows: 70,000 shares at an exercise price of $0.10; 191,800
shares at an exercise price of $2.20; 130,000 shares at an exercise price of
$2.42; and 412,032 shares at an exercise price of $3.00. Included are options to
purchase 130,000 and 125,000 shares at a price of $2.42 and $3.00 per share,
respectively, granted to Messrs. Norem and Jobe in May 1994 and November 1994,
respectively, all of which expire in May 1999 and November 1999 and vest at the
rate of 20% per year as to Mr. Norem and 25% per year as to Mr. Jobe commencing
in May 1995 and November 1995, respectively, subject to certain acceleration
provisions. In April 1995, the Board of Directors voted to grant no further
options under the 1994 Option Plan. See "Executive Compensation" and "Principal
Stockholders."

1993 Stock Option Plan

In May 1994, pursuant to the terms of the acquisition of Viewpoint, the
Company assumed the obligations of Viewpoint's 1993 Stock Option Plan (the "1993
Option Plan"). Stock options to purchase 287,564 shares of Common Stock were
assumed by the Company. Accordingly, the Company reserved 287,564 shares of
Common Stock for issuance pursuant to these outstanding stock options.

Since the assumption of the 1993 Option Plan, stock options to purchase an
aggregate of 178,427 shares have been exercised and stock options to purchase
24,367 shares have been canceled. Of the remaining options to purchase 84,770
shares of Common Stock as of March 31, 1997, options to purchase 51,100 shares
at a price of $.04 per share were granted to Mr. Norem. These options are fully
exercisable and expire in November 1998. In early 1995, the Board of Directors
voted to grant no further options under the 1993 Option Plan. See "Executive
Compensation" and "Principal Stockholders."

1995 Employee Stock Purchase Plan

In May 1995 the Company established an Employee Stock Purchase Plan (the
"ESPP") to provide employees of the Company with an opportunity to purchase
Common Stock through payroll deductions. Under the ESPP, up to 250,000 shares of
Common Stock have been reserved for issuance, subject to certain antidilution
adjustments. The ESPP, by its terms, became effective at the time of the
Company's initial public offering. The ESPP is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal
Revenue Code.

<PAGE>

Each offering period will be for a period of six months except the first
offering period under the ESPP is from the date of the Company's initial public
offering (February 4, 1997) through October 31, 1997. The ESPP terminates in
April, 2005. Eligible employees may participate in the ESPP by authorizing
payroll deductions during an offering period within a percentage range
determined by the Board of Directors. Initially, the amount of authorized
payroll deductions is not more than 10% of an employee's cash compensation
during an offering period, but not more than $25,000 per year. Amounts withheld
from payroll are applied at the end of each offering period to purchase shares
of Common Stock. Participants may withdraw their contributions at any time
before stock is purchased, and in the event of withdrawal such contributions
will be returned to the participants. The purchase price of the Common Stock is
equal to 85% of the lower of (i) the market price of Common Stock immediately
before the beginning of the applicable offering period or (ii) the market price
of Common Stock at the end of each offering period. All expenses incurred in
connection with the implementation and administration of the ESPP will be paid
by the Company.

Director Stock Option Plan

In May 1995, the Company adopted the Director Plan under which outside
directors only are eligible to receive stock options. The Director Plan provides
for the grant of nonstatutory stock options to directors who are not employees
of the Company. See "Management -- Director Compensation."

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the bylaws of the Company provide that the Company is required to
indemnify its officers and directors, employees and agents under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. The bylaws provide that the Company,
among other things, will indemnify such officers and directors, employees and
agents against certain liabilities that may arise by reason of their status or
service as directors, officers, or employees (other than liabilities arising
from willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.

34
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of June 30, 1997, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person or a group
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director, (iii) each executive officer named in the
Summary Compensation Table under the caption "Management", and (iv) all officers
and directors as a group.

AMOUNT AND
NATURE OF PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS BENEFICIAL SHARES OWNED (2)(3)
OF BENEFICIAL OWNER(1) OWNERSHIP(2) -------------------------
---------------------- ------------
<S> <C> <C>
Fred Kassner........................... 1,906,266(4) 12.8
69 Spring Street
Ramsey, NH 07446
H. T. Ardinger, Jr...................... 1,706,248(5) 11.5
9040 Governors Row
Dallas, TX 75247
Robert Moody, Jr....................... 1,152,842(6) 7.8
601 Moody National Bank Bldg.
Galveston, TX 77550
Glenn A. Norem...................... 964,391(7) 6.5
M. Douglas Adkins................... 874,921(8) 5.9
1601 Elm Street, #3000
Dallas, TX 75201
William D. Jobe....................... 96,567(9) 1.0
William S. Leftwich.................. 62,500(10) *
Joe C. Culp............................ 29,895(11) *
Philip M. Colquhoun................. 83,333(12) *
David T. Stoner....................... 20,000(13) *
All officers and directors as a
group (eight persons)............... 1,379,022(7)(9)(10)(11)(12)(13)(14) 9.3
</TABLE>
- ----------
* Less than 1%

(1) Unless otherwise indicated, the address of each individual is c/o the
Company, 2665 Villa Creek Drive, Dallas, Texas 75234.

(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date of this Prospectus have
been exercised. Unless otherwise indicated, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.

(3) Based on a total of (i) 7,906,791 shares issued and outstanding, (ii)
2,851,977 shares of Common Stock reserved for issuance upon exercise of
Public Warrants, (iii) 2,981,573 shares of Common Stock registered in the
Registration Statement of which this Prospectus forms a part and reserved
for issuance upon exercise of outstanding Private Warrants to purchase
common stock, and (iv) 1,130,127 shares of Common Stock reserved for
issuance upon exercise of vested stock options as of August 31, 1997. Does
not include (i) 140,000 shares of Common Stock reserved for issuance upon
exercise of the Representatives' Warrants, and (ii) 140,000 shares of
Common Stock reserved for issuance upon exercise of Representatives' Public
Warrants issuable upon exercise of Representatives' Warrants. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management -- Employee Stock Plans," and "Description of
Securities."

(4) Includes (i) 260,869 Public Warrants and (ii) 365,000 shares issuable at
$3.00 per share upon exercise of Private Warrants.

(5) Includes (i) 54,501 shares owned by Mr. Ardinger's wife, (ii) Private
Warrants to purchase 157,500 shares at $1.00 per share held by either Mr.
Ardinger or his wife, (iii) Private Warrants to purchase 487,500 shares at
$3.00 per share and (iv) 265,823 Public Warrants.

(6) Includes (i) 250,000 shares beneficially owned by Moody Insurance Group,
Inc., of which Mr. Moody is Chairman, President and the sole stockholder,
(ii) Private Warrants to purchase 200,000 shares at $1.00 per share, (iii)
40,000 Public Warrants and (iv) Private Warrants to purchase 275,000 shares
at $3.00 per share.

35
<PAGE>

(7) Includes (i) 51,100 shares issuable at $.04 per share upon the exercise of
options issued under the 1993 Option Plan, (ii) 110,501 shares issuable at
$2.42 per share upon exercise of options issued under the 1994 Option Plan,
(iii) 50,667 shares issuable at $3.30 per share upon exercise of options
issued under the 1995 Option Plan, (iv) 108,337 shares issuable at $1.00
per share upon exercise of Private Warrants, (v) 25,000 shares issuable at
$3.00 per share upon exercise of Private Warrants and (vi) 10,869 Public
Warrants.

(8) Includes (i) 220,500 shares issuable at $1.00 per share upon the exercise
of Private Warrants, (ii) 170,000 shares issuable at $3.00 per share upon
exercise of Private Warrants and (iii) 116,025 Public Warrants.

(9) Includes (i) 63,750 shares issuable at $3.00 per share upon the exercise of
options granted under the 1994 Option Plan, (ii) 23,333 shares issuable at
$3.00 per share upon exercise of options granted under the 1995 Option
Plan, (iii) 5,110 shares issuable at $.20 per share upon exercise of
options granted under the 1993 Plan and (iv) 4,374 shares issuable at $3.00
per share upon exercise of options granted under the 1995 Directors Plan.

(10) Includes 53,000 shares issuable at $3.00 per share upon the exercise of
options issued under the 1994 Option Plan and 9,500 shares issuable at
$3.00 per share upon the exercise of options issued under the 1995 Option
Plan.

(11) Includes 23,333 shares issuable at $3.00 per share upon exercise of options
granted under the 1995 Option Plan and 6,562 shares issuable at $3.00 per
share upon exercise of options granted under the 1995 Directors Plan.

(12) Includes 83,333 shares issuable at $3.00 per share upon exercise of options
granted under the 1995 Option Plan.

(13) Includes 20,000 shares issuable at $4.00 per share upon exercise of options
granted under the 1995 Option Plan.

(14) Includes 90,670 and 31,666 shares issuable at $3.00 per share to Mr. Page
and Mr. Boomstein, respectively, upon exercise of options granted under the
1994 and 1995 Option Plans.

36
<PAGE>

CERTAIN TRANSACTIONS

In January and February 1996, in connection with the issuance and sale of
short-term secured notes (the "Secured Notes II"), the Company issued to Mr.
Fred Kassner, a principal stockholder of the Company, $650,000 principal amount
of Secured Notes II. As an incentive to advance the Secured Notes II, Mr.
Kassner was granted Private Warrants to purchase 65,000 shares of Common Stock
at $3.00 per share for three (3) years. As of March 31, 1996, Mr. Kassner
converted his Secured Notes II to Common Stock of the Company at $3.00 per
share.

In January 1996, Messrs. Norem, Colquhoun and Leftwich received options to
purchase 160,000, 50,000 and 30,000 shares of Common Stock, respectively, under
the 1995 Employee Stock Option Plan, exercisable at $3.30, $3.00 and $3.00 per
share, respectively, vesting over a five-year period subject to acceleration.

In July 1996, the Company received gross proceeds of $1,000,000 in
connection with the issuance and sale of $1,000,000 aggregate principal amount
of a convertible note to Mr. Fred Kassner, a principal shareholder of the
Company (the "Convertible Bridge Debt"). Pursuant to the terms of the
Convertible Bridge Debt, Mr. Kassner received a Private Warrant to purchase
100,000 shares of Common Stock of the Company. The Private Warrant is
exercisable at a price of $3.00 per share for three years from the date of
issuance. In addition, upon Mr. Kassner's election to convert, he received an
additional Private Warrant to purchase 100,000 shares of Common Stock at $3.00
per share for three years from the date of conversion. Mr. Kassner converted
this debt into the securities offered in the Company's initial public offering
at a price of $4.50 per share for its Common Stock and $.10 per Public Warrant.

In September through November 1996, the Company received gross proceeds of
$615,000 in connection with the issuance and sale of $615,000 aggregate
principal amount of Convertible Bridge Debt to Mr. Robert Rubin, a shareholder
of the Company. Mr. Rubin received a Private Warrant to purchase 61,500 shares
of Common Stock of the Company exercisable at a price of $3.00 per share for
three years from the date of issuance pursuant to the terms of the Convertible
Bridge Debt. Mr. Rubin converted this debt into the securities offered in the
Company's initial public offering at a price of $4.50 per share of Common Stock
and $.10 per Public Warrant.

In October 1996, Glenn A. Norem, Chief Executive Officer of the Company,
agreed to defer the receipt of $170,308 principal amount of Secured and Demand
Notes, accrued interest of $13,154 and accrued salary and bonuses of $127,781
until February 1998. The Company has agreed to pay Mr. Norem interest at a rate
of 15% per annum on the deferred amount. In addition, Mr. Norem was repaid
$200,000 principal amount of Secured and Demand Notes plus accrued interest of
$8,921 on Convertible Debt from the proceeds of the Company's initial public
offering. Also, G.A. Norem I L.P., a partnership managed by Mr. Norem, was
repaid $35,000 principal amount of Secured and Demand Notes plus accrued
interest of $10,068 from the proceeds of the Company's initial public offering.

In November 1996 through February 1997, the Company received gross proceeds
of $1,300,000 in connection with the issuance and sale of an additional
$1,300,000 aggregate principal amount of Convertible Bridge Debt to Mr. M.
Douglas Adkins and Mr. H.T. Ardinger, each a shareholder of the Company. The
Convertible Bridge Debt bore interest at the rate of 8% per annum and was due
the earlier of ten days after the completion of an initial public offering by
the Company or 180 days from issuance. The holders of the Convertible Bridge
Debt received Private Warrants to purchase 130,000 shares of Common Stock of the
Company exercisable at a price of $3.00 share for three years from the date of
issuance pursuant to the terms of the Convertible Bridge Debt. Messrs. Adkins
and Ardinger have each converted this debt into the securities offered in the
Company's initial public offering at a price of $4.50 per share of Common Stock
and $.10 per Public Warrant.

In February 1997, the Company completed an underwritten initial public
offering of 1,400,000 shares of its Common Stock and 1,400,000 Public Warrants.
The shares of Common Stock and the Public Warrants were sold on the basis of one
Public Warrant for each share of Common Stock at a unit price to the public of
$4.60, and were separately transferable immediately upon issuance. In March
1997, the Company issued an additional 210,000 shares of Common Stock and Public
Warrants upon exercise of the underwriter's over-allotment option. The Company
received net proceeds of $5,427,000 during February and March 1997 related to
this sale.

<PAGE>

All future transactions between the Company and its officers, directors or 5%
stockholders will be on terms no less favorable than could be obtained from
unaffiliated third parties and will be approved by a majority of the independent
disinterested Directors of the Company.

DESCRIPTION OF SECURITIES

The Company is authorized to issue 20,000,000 shares of Common Stock, $.0001
par value per share and 5,000,000 shares of preferred stock, par value $.0001
per share. As of the date of this Prospectus, the 7,906,291 shares of Common
Stock outstanding are held by approximately 78 holders of record, and no shares
of preferred stock are outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The current shareholders of the Company (including
officers and directors) will continue to own more than 72.6% (or more if they
exercise Private Warrants, the underlying shares of Common Stock of which are
being registered in the Registration Statement on Form SB-2 of which this
Prospectus forms a part) of the shares of Common Stock after the exercise of the
Private Warrants and, accordingly, may be able to effectively elect all of the
Company's directors and control corporate policy. Holders of shares of Common
Stock are entitled to receive dividends when, as and if declared by the Board of
Directors in its discretion, out of funds legally available therefor. In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in the assets of the Company, if any,
legally available for distribution to them after payment of debts and
liabilities of the Company and after provision has been made for each class of
stock, if any, having liquidation preference over the Common Stock. Holders of
shares of Common Stock have no conversion, preemptive or other subscription
rights, and there are no redemption or sinking fund provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered will be, when issued upon payment of the consideration
set forth in this Prospectus, fully paid and non-assessable.

PREFERRED STOCK

The Company is authorized to issue preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Company's Common Stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in control of the Company. The
Company has no present intention to issue any shares of its preferred stock.

PUBLIC WARRANTS

The following is a brief summary of certain provisions of the Public
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the warrant agreement (the
"Warrant Agreement") among the Company, and Continental Stock Transfer & Trust
Co. (the "Warrant Agent"). As of the date hereof, there are 2,851,977 Public
Warrants outstanding. See "Additional Information."

Exercise Price and Terms. Each Public Warrant entitles the registered holder
thereof to purchase, at any time over a fifty-four month period commencing
August 4, 1997, one share of Common Stock at $4.50 per share, subject to
adjustment in accordance with the anti-dilution and other provisions referred to
below. The holder of any Public Warrant may exercise such Public Warrant by
surrendering the certificate representing the Public Warrant to the Warrant
Agent, with the subscription form thereon

<PAGE>

properly completed and executed, together with payment of the exercise price.
The Public Warrants may be exercised at any time in whole or in part at the
applicable exercise price until expiration of the Public Warrants. No fractional
shares will be issued upon the exercise of the Public Warrants.

The exercise price of the Public Warrants bears no relationship to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the securities offered hereby.

Adjustments. The holders of the Public Warrants are protected against
dilution of their interests by adjustments, as set forth in the Warrant
Agreement, of the exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Public Warrants upon the occurrence of
certain events, including stock dividends, stock splits, combinations or
reclassification of the Common Stock, or sale by the Company of shares of its
Common Stock or other securities convertible into Common Stock at a price below
the then-applicable exercise price of the Public Warrants. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
corporation) or sale of all or substantially all of the assets of the Company in
order to enable warrantholders to acquire the kind and number of shares of stock
or other securities or property receivable in such event by holder of the number
of shares of Common Stock that might otherwise have been purchased upon the
exercise of the Public Warrant.

Redemption Provisions. Commencing February 4, 1998, all, but not less than
all, of the Public Warrants are subject to redemption at $0.10 per Public
Warrant on not less than thirty (30) days' prior written notice to the holders
of the Public Warrants provided the per share closing price or bid quotation of
the Common Stock as reported on Nasdaq equals or exceeds $6.75 (subject to
adjustment) for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date on
which the Company gives notice of redemption. The Public Warrants will be
exercisable until the close of business on the day immediately preceding the
date fixed for redemption in such notice. If any Public Warrant called for
redemption is not exercised by such time, it will cease to be exercisable and
the holder will be entitled only to the redemption price.

Transfer, Exchange and Exercise. The Public Warrants are in registered form
and may be presented to the Warrant Agent for transfer, exchange or exercise at
any time on or prior to their expiration date on February 4, 2002, at which time
the Public Warrants become wholly void and of no value. If a market for the
Public Warrants develops, the holder may sell the Public Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Public Warrants will develop or continue.

The Public Warrants are not exercisable unless, at the time of the exercise,
the Company has a current prospectus covering the shares of Common Stock
issuable upon exercise of the Public Warrants, and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
state of residence of the exercising holder of the Public Warrants. Although the
Company will use its best efforts to have all the shares of Common Stock
issuable upon exercise of the Public Warrants registered or qualified on or
before the exercise date and to maintain a current prospectus relating thereto
until the expiration of the Public Warrants, there can be assurance that it will
be able to do so.

The Public Warrants are separately transferable immediately upon issuance.
Although the Public Warrants will not knowingly be sold to purchasers in
jurisdictions in which the Public Warrants are not registered or otherwise
qualified for sale or exemption, purchasers may buy Public Warrants in the
after-market in, or may move to, jurisdictions in which Public Warrants and the
Common Stock underlying the Public Warrants are not so registered or qualified
or exempt. In this event, the Company would be unable lawfully to issue Common
Stock to those persons desiring to exercise their Public Warrants (and the
Public Warrants would not be exercisable by those persons) unless and until the
Public Warrants and the underlying Common Stock are registered, or qualified for
sale in jurisdictions in which such purchasers reside, or any exemption from
registration or qualification exists in such jurisdiction.

Warrantholder Not a Stockholder. The Public Warrants do not confer upon
holders any voting, dividend or other rights as stockholders of the Company.

<PAGE>

Modification of Public Warrants. The Company and the Warrant Agent may make
such modifications to the Public Warrants as they deem necessary and desirable
that do not adversely affect the interests of the warrantholders. The Company
may, in its sole discretion, lower the exercise price of the Public Warrants for
a period of not less than thirty (30) days on not less than thirty (30) days'
prior written notice to the warrantholders and the Representative. Modification
of the number of securities purchasable upon the exercise of any Public Warrant,
the exercise price and the expiration date with respect to any Public Warrant
requires the consent of two-thirds of the warrantholders. No other modifications
may be made to the Public Warrants, without the consent of two-thirds of the
warrantholders.

DELAWARE LAW WITH RESPECT TO BUSINESS COMBINATIONS

As of the date of this Prospectus, the Company is subject to the State of
Delaware's "business combination" statute, Section 203 of the Delaware General
Corporation Law. In general, such statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with a person who is an
"interested stockholder" for a period of three years after the date of the
transaction in which that person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder" is
a person who, together with affiliates, owns (or, within three years prior to
the proposed business combination, did own) 15% or more of the Delaware
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer and Trust Company, 2 Broadway, New York, New York 10004.

REPORTS TO STOCKHOLDERS

The Company furnishes its stockholders with annual reports containing audited
financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.

The Company has registered its Common Stock and Public Warrants under the
provisions of Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the Company has agreed that it will use its best
efforts to continue to maintain such registration for a minimum of five years
from the date of this Prospectus. Such registration will require the Company to
comply with periodic reporting, proxy solicitation and certain other
requirements of the Exchange Act.

40
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the completion of this offering, the Company will have 10,887,804 shares
of Common Stock outstanding (assuming exercise of all Private Warrants and no
exercise of outstanding options and Public Warrants). Of these shares, the
2,981,573 shares offered hereby and the 2,851,977 shares of Common Stock
registered in the Company's initial public offering will be freely tradable
subject to "lock-up" agreements described below under the Securities Act, except
for any shares purchased by an "affiliate" of the Company (in general, a person
who has a control relationship with the Company), which shares will be subject
to the resale limitations of Rule 144 adopted under the Securities Act. The
remaining 5,054,314 shares are deemed to be "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act, in that
such shares were issued and sold by the Company in private transactions not
involving a public offering and are not currently part of an effective
registration. Except for the "lock-up" agreements described below, such shares
are eligible for sale under Rule 144. In addition, the Company has granted the
Representative demand and piggyback registration rights with respect to the
securities issuable upon exercise of the Representative's Warrants. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or even the availability of such shares for sale will have on the market
prices prevailing from time to time. If the holders of the shares eligible for
registration so choose they could require the Company to register all of said
shares at any time.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of 1% of the total number of outstanding shares of the same class
or, if the Common Stock is quoted on Nasdaq, the average weekly trading volume
during the four calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale and who has beneficially owned shares of Common Stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.

Except upon the consent of the Representative, all executive officers, all
directors and holders of substantially all of the outstanding stock of the
Company and substantially all holders of any options, warrants or other
securities convertible, exercisable or exchangeable for shares of Common Stock
have agreed not to, directly or indirectly, issue, offer, agree or offer to
sell, sell, transfer, assign, encumber, grant an option for the purchase or sale
of, pledge, hypothecate or otherwise dispose of any beneficial interest in such
securities until February 4, 1999. Holders of 400,647 of the "restricted
securities" have not agreed not to sell such shares, all of which are currently
eligible for sale under, and subject to, Rule 144. In addition, of the 2,981,573
shares of Common Stock offered by this Prospectus, 2,850,550 are subject to the
"lock-up" agreements discussed above.

No prediction can be made as to the effect, if any, that market sales of
shares of Common Stock or the availability of such shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.

<PAGE>

SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION

An aggregate of up to 2,981,573 shares of Common Stock (the "Shares")
issuable upon exercise of Private Warrants may be offered and sold pursuant to
this Prospectus by the Selling Securityholders. The Company has agreed to
register such Shares under the Securities Act and to pay all expenses of the
Selling Securityholders in connection therewith (other than brokerage
commissions and fees and expenses of counsel). Such Shares have been included in
the Registration Statement on Form SB-2 of which this Prospectus forms a part.
The Shares are being registered to permit public secondary sales of the Shares
by the Selling Securityholders from time to time subsequent to the date of this
Prospectus. Other than Glenn A. Norem, H.T. Ardinger, M. Douglas Adkins, Robert
Moody, Jr., and Fred Kassner, none of the Selling Securityholders beneficially
owns 5% or more of the Company's outstanding Common Stock. See "Principal
Stockholders."
<TABLE>
<CAPTION>
=========================== =================================================================== =================
BENEFICIAL OWNERSHIP OF SHARES
OF COMMON STOCK PRIOR TO SALE
--------------------------- ---------------- ---------------- --------------- ----------------- BENEFICIAL
OWNERSHIP
SELLING SECURITYHOLDER SHARES PRIVATE PUBLIC TOTAL OF SHARES OF
WARRANTS WARRANTS COMMON STOCK
AFTER SALE(1)
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
H.T. Ardinger 795,425 645,000 265,833 1,706,258 1,061,258
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Robert Gillings 81,217 597,650 81,217 760,084 162,434
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Robert Moody, Jr. 637,842 475,000 40,000 1,152,842 677,842
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Anthony Bellissimo - 5,000 - 5,000 -
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Glenn A. Norem 604,917 133,337 10,869 749,123(2) 615,786(2)
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Aileen Mandell 5,000 6,000 - 11,000 5,000
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
M. Douglas Adkins 368,396 390,500 77,982 836,878 446,378
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Fred Kassner 1,330,397 365,000 260,819 1,956,216 1,591,216
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Catalyst Financial Group - 5,005 - 5,005 -
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Robert M. Sterling, Jr. 467,928 100,000 10,869 578,797(3) 478,797(3)
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Christopher B. Clow 5,357 4,234 - 9,591 5,357
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Patrick J. Cozzone 3,643 2,879 - 6,522 3,643
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Lance & Sue Murray 214 170 - 384 214
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Mark A. Paine 429 339 - 768 429
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Larry R. Ross 429 339 - 768 429
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Thomas A. Witkin 2,786 2,202 - 4,988 2,786
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Robert Rubin 170,361 61,500 133,695 365,556 304,056
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
A. Starke Taylor, Jr. 96,120 25,000 12,787 133,907 108,907
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Joseph W. Geary - 25,000 10,869 35,869 10,869
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Henry Wendt 2,565 5,000 2,565 10,130 5,130
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
William Heim 225,271 50,000 25,271 300,542 250,542
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Greg Garcia 17,248 18,188 - 35,436 17,248
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Gary Motley 12,248 9,188 - 21,436 12,248
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
June Hanson 25,550 18,375 - 43,925 25,550
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Richard Pizitz - 6,667 - 6,667 -
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
Michael Pizitz - 10,000 - 10,000 -
--------------------------- ---------------- ---------------- --------------- ----------------- -----------------
John R. Whitman 20,000 20,000 - 40,000 20,000
=========================== ================ ================ =============== ================= =================
</TABLE>
- -------------
(1) Assumes (i) exercise of all Private Warrants held by each Selling
Securityholder; (ii) sale of all of the shares of Common Stock underlying
the Private Warrants held by each Selling Securityholder and offered
hereby; and (iii) no Selling Securityholder will acquire additional shares
of Common Stock, Common Stock Purchase Warrants, Options to purchase Common
Stock or other securities convertible into Common Stock of the Company.

(2) Does not include options to purchase 391,100 shares of Common Stock of the
Company.

(3) Does not include options to purchase 58,333 shares of Common Stock of the
Company.

The 2,981,573 shares of Common Stock being offered by the Selling
Securityholders pursuant to this Prospectus may be offered and sold from time to
time, subject to lock-up agreements, through the Nasdaq SmallCap Market or in
the over-the-counter market, in privately negotiated transactions, or in

42
<PAGE>

combinations of such transactions and may be sold as market conditions permit,
or otherwise, at prices and terms then prevailing or at prices related to the
then current market price. The Shares may be sold, but are not limited to sale,
by one or more of the following methods: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; and (c) face-to-face transactions
between sellers and purchasers without a broker/dealer. In effecting sales,
brokers or dealers engaged by the Selling Securityholders may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Securityholders in amounts to be
negotiated. Such brokers and dealers and any other participating brokers and
dealers may be deemed to be "Underwriters" within the meaning of the Securities
Act in connection with such sales, and any commissions received by them and
profit on any resale of the Shares might be deemed underwriting discounts and
commissions under the Securities Act. In effecting sales, broker-dealers engaged
by the Selling Securityholders may arrange for other broker-dealers to
participate. Any broker-dealer participating in any distribution of the Shares
may be required to deliver a copy of this Prospectus, including any Prospectus
supplement, to any person who purchases any of the Shares from or through such
broker or dealer.

INTEREST OF NAMED EXPERTS AND COUNSEL

The Stoppelman Law Firm, P.C., counsel to the Company owns 36,666 shares of
Common Stock of the Company, or less than one percent (1.0%) of the shares
outstanding.

LEGAL MATTERS

The legality of the securities offered hereby will be passed upon for the
Company by The Stoppelman Law Firm, P.C., McLean, Virginia.

EXPERTS

The consolidated financial statements of the Company and its subsidiaries at
December 31, 1996 and 1995 and for the years ended December 31, 1996 and 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
SB-2 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and this offering, reference is
made to the Registration Statement, including the exhibits filed therewith,
which may be inspected without charge at the Commission's principal office at
450 Fifth Street, N.W., Washington, D.C. 20549; at the New York Regional Office,
7 World Trade Center, New York, New York 10048 and at the Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the Registration Statement may be obtained from the Commission
at its principal office and regional office upon payment of prescribed fees and
over the Internet at www.sec.gov. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete and,
where the contract or other document has been filed as an exhibit to the
Registration Statement, each statement is qualified in all respects by reference
to the applicable document filed with the Commission.

43
<PAGE>

GLOSSARY

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

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

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

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

Intranet: A private Internet.

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

ISDN: (Integrated Services Digital Network) -- digital
network that provides seamless communication of
voice, video and text.

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

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

MBONE: A portion of the Internet with multimedia broadcast
capability.

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

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

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

PCI-Bus: A fast 32 bit peripheral interface for PC's and
workstations.

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

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

Standards-based A product which is designed to comply with standards
promulgated by a recognized industry organization.

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

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

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

WAN: (Wide Area Network) -- a voice, data and/or video
network covering a geographic area larger than a
campus, generally linking multiple smaller networks.

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

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

i
<PAGE>
MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors ......................................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996 and March 31, 1997
(Unaudited) F-3 Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996 and the
three months ended March 31, 1996 and 1997 (Unaudited) ................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December
31, 1995
and 1996 and the three months ended March 31, 1997 (Unaudited) ........................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1996 and
the
three months ended March 31, 1997 (Unaudited) .......................................... F-6
Notes to Consolidated Financial Statements ............................................. F-7
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS
MultiMedia Access Corporation

We have audited the accompanying consolidated balance sheets of MultiMedia
Access Corporation and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
MultiMedia Access Corporation and subsidiaries at December 31, 1995 and 1996,
and the consolidated results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.

Dallas, Texas ERNST & YOUNG LLP
March 10, 1997

F-2

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------- MARCH 31,
1995 1996 1997
--------------- ---------------- ----------------
ASSETS (UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ....................................... $ 16,605 $ 18,539 $ 3,665,196
Accounts receivable, less allowance for doubtful accounts of
$30,000, $43,000 and $42,000 at December 31, 1995 and 1996
and March 31, 1997 (unaudited), respectively .................. 4,564 185,564 153,568
Inventory ...................................................... 197,469 310,133 450,334
Prepaid expenses ................................................ 18,971 46,239 66,607
Due from debt holder .......................................... 315,300 - -
Deferred charges ................................................ 44,165 504,295 -
------------ ------------- -------------
Total current assets .......................................... 597,074 1,064,770 4,335,705
Property and equipment, net .................................... 485,700 460,895 549,529
Software development costs, net ................................. 143,795 147,321 176,403
Deposits ......................................................... 18,197 18,272 23,699
------------ ------------- -------------
Total assets ................................................ $ 1,244,766 $ 1,691,258 $ 5,085,336
============ ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ................................................ $ 580,160 $ 682,689 $ 351,134
Accrued compensation .......................................... 354,268 239,707 186,460
Deferred revenue ................................................ 75,513 15,591 15,591
Other accrued liabilities ....................................... 370,398 857,260 195,160
Short-term debt, officer ....................................... 364,154 533,089 311,243
Short-term debt, other .......................................... 66,633 1,966,202 6,246
Current portion of long-term debt .............................. 2,677,550 3,177,550 -
------------ ------------- -------------
Total current liabilities .................................... 4,488,676 7,472,088 1,065,834
Long-term debt ................................................... 8654 - -
Commitments
Stockholders' equity (deficit):
Preferred stock, $.0001 par value:
Authorized shares - 5,000,000
Issued shares - none .......................................... - - -
Common stock, $.0001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 4,721,268, 5,315,811 and
8,167,788 at December 31, 1995 and 1996 and March 31, 1997
(unaudited), respectively .................................... 472 532 817
Additional paid-in capital .................................... 4,736,933 6,602,572 17,809,152
Accumulated deficit ............................................. (7,978,063) (12,372,028) (13,778,561)
Treasury stock, 261,497 shares at December 31, 1995 and 1996 and
March 31, 1997 (unaudited) .................................... (11,906) (11,906) (11,906)
------------ ------------- -------------
Total stockholders' equity (deficit) ........................ (3,252,564) (5,780,830) 4,019,502
------------ ------------- -------------
Total liabilities and stockholders' equity (deficit) ......... $ 1,244,766 $ 1,691,258 $ 5,085,336
============ ============= =============
</TABLE>

See accompanying notes.

F-3

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE THREE MONTHS
--------------------------------- ENDED MARCH 31,
-----------------------------------
1995 1996 1996 1997
--------------- --------------- ----------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ................................. $ 285,354 $ 1,095,012 $ 410,454 $ 259,533
Cost of goods sold ........................ 136,381 393,918 175,585 116,556
-------------- -------------- -------------- --------------
Gross profit .............................. 148,973 701,094 234,869 142,977
Operating expenses:
Selling, general and administrative ...... 2,297,497 2,378,653 579,285 731,971
Research and development .................. 1,983,310 1,997,146 546,399 562,125
Depreciation and amortization ............ 439,752 206,041 50,265 59,080
-------------- -------------- -------------- --------------
Total operating expenses .................. 4,720,559 4,581,840 1,175,949 1,353,176
-------------- -------------- -------------- --------------
Operating loss .............................. (4,571,586) (3,880,746) (941,080) (1,210,199)
Other income (expense):
Dividend and interest income ............... 5,372 36 49 18,427
Interest expense ........................... (847,905) (513,979) (117,946) (216,047)
Other .................................... (759) 724 - 1,286
-------------- -------------- -------------- --------------
Total other income (expense) ............ (843,292) (513,219) (117,897) (196,334)
-------------- -------------- -------------- --------------
Net loss .................................... $ (5,414,878) $ (4,393,965) $ (1,058,977) $ (1,406,533)
============== ============== ============== ==============
Net loss per share ........................ $ (1.06) $ (0.73) $ (0.18) $ (0.21)
============== ============== ============== ==============
Weighted average number of common and
common equivalent shares outstanding ...... 5,124,411 5,999,752 5,753,573 6,622,790
============== ============== ============== ==============
</TABLE>

See accompanying notes.

F-4

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

COMMON STOCK ADDITIONAL
------------------------ PAID-IN
SHARES PAR VALUE CAPITAL
----------- ----------- --------------
<S> <C> <C> <C>
Balance, December 31, 1994 ...... 3,507,231 $ 350 $ 1,163,274
Payment of stock subscriptions - - -
Repurchase of 255,880 shares
of common stock at par ......... - - -
Sale of common stock, net of
expenses ........................ 833,333 83 21,66,811
Satisfaction of trade receivable
for 5,617 shares of common
stock ........................... - - -
Exchange of short-term debt
for common stock ............... 380,704 39 1,406,848
Net loss ........................ - - -
---------- ------ -------------
Balance, December 31, 1995 ...... 4,721,268 472 4,736,933
Exchange of short-term debt
for common stock ............... 221,195 22 571,167
Sale of common stock, net of
expenses ........................ 304,016 31 896,481
Exchange of trade payables for
common stock .................. 69,332 7 207,991
Fair market value of warrants
issued for consulting services
and inducement of debt ......... - - 190,000
Net loss ........................ - - -
---------- ------ -------------
Balance, December 31, 1996 ...... 5,315,811 532 6,602,572
Sale of Common Stock and
Public Warrants, net of ex-
penses (unaudited) 1,610,000 161 5,427,077
Exchange of short-term and
long-term debt for Common
Stock and Public Warrants
(unaudited) ..................... 1,241,977 124 5,713,003
Fair market value of warrants
issued for inducement of
debt (unaudited) ............... - - 66,500
Net loss (unaudited) ............ - - -
---------- ------ -------------
Balance, March 31, 1997 (un-
audited) 8,167,788 $ 817 $ 17,809,152
========== ====== =============

<PAGE>

<CAPTION>
STOCK TOTAL
SUBSCRIPTIONS ACCUMULATED TREASURY STOCKHOLDERS'
RECEIVABLE DEFICIT STOCK EQUITY (DEFICIT)
--------------- ----------------- -------------- ------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 ...... $ (191) $ (2,563,185) $ - $ (1,399,752)
Payment of stock subscriptions 191 - - 191
Repurchase of 255,880 shares
of common stock at par ......... - - (26) (26)
Sale of common stock, net of
expenses ........................ - - - 2,166,894
Satisfaction of trade receivable
for 5,617 shares of common
stock ........................... - - (11,880) (11,880)
Exchange of short-term debt
for common stock ............... - - - 1,406,887
Net loss ........................ - (5,414,878) - (5,414,878)
-------- -------------- ----------- --------------
Balance, December 31, 1995 ...... - (7,978,063) (11,906) (3,252,564)
Exchange of short-term debt
for common stock ............... - - - 571,189
Sale of common stock, net of
expenses ........................ - - - 896,512
Exchange of trade payables for
common stock .................. - - - 207,998
Fair market value of warrants
issued for consulting services
and inducement of debt ......... - - - 190,000
Net loss ........................ - (4,393,965) - (4,393,965)
-------- -------------- ----------- --------------
Balance, December 31, 1996 ...... - (12,372,028) (11,906) (5,780,830)
Sale of Common Stock and
Public Warrants, net of ex-
penses (unaudited) - - - 5,427,238
Exchange of short-term and
long-term debt for Common
Stock and Public Warrants
(unaudited) ..................... - - - 5,713,127
Fair market value of warrants
issued for inducement of
debt (unaudited) ............... - - - 66,500
Net loss (unaudited) ............ - (1,406,533) - (1,406,533)
-------- -------------- ----------- --------------
Balance, March 31, 1997 (un-
audited) $ - $ (13,778,561) $ (11,906) $ 4,019,502
======== ============== =========== ==============
</TABLE>

See accompanying notes.

F-5

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE THREE MONTHS
--------------------------------- ENDED MARCH 31,
--------------------------------
1995 1996 1996 1997
--------------- --------------- --------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss ....................................... $ (5,414,878) $ (4,393,965) $ (1,058,977) $ (1,406,533)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of fixed assets .................. 126,443 155,233 37,563 43,729
Amortization of software development ......... 222,632 50,809 12,702 15,351
Amortization of patent ........................ 90,677 - - -
(Gain) loss on asset dispositions ............ 1,955 (687) - -
Non-cash charges to interest expense ......... 264,777 165,001 - 155,667
Inventory reserve adjustment .................. 220,000 (5,000) - -
Write off of deferred charges .................. 376,633 - - -
Changes in operating assets and liabilities:
Accounts receivable ........................... 32,208 (181,000) (237,960) 31,996
Inventory .................................... (52,366) (107,664) (194,597) (140,201)
Prepaid expenses .............................. 17,360 (27,268) (6,793) (20,368)
Due from debt holder ........................ (315,300) 315,300 315,300 -
Deferred charges .............................. 38,089 (527,531) (55,499) 415,128
Deposits .................................... (368) (75) (75) (5,427)
Accounts payable .............................. 147,537 310,527 418,766 (331,555)
Accrued compensation ........................ 100,513 13,220 (82,038) (53,247)
Deferred revenue .............................. 58,042 (59,922) (16,003) -
Other accrued liabilities ..................... 219,696 541,605 203,083 (281,119)
-------------- -------------- -------------- --------------
Net cash used in operating activities . (3,866,350) (3,751,417) (664,528) (1,576,579)
-------------- -------------- -------------- --------------
Investing activities:
Purchase of property and equipment ............ (108,143) (132,910) (80,032) (132,363)
Software development costs ..................... (156,171) (54,335) - (44,433)
Other .......................................... 28,076 3,169 - -
-------------- -------------- -------------- --------------
Net cash used in investing activities ...... (236,238) (184,076) (80,032) (176,796)
-------------- -------------- -------------- --------------
Financing activities:
Net proceeds from issuance (repayment) of
short-term debt .............................. 1,096,000 2,550,000 735,000 210,202
Net proceeds from issuance (repayment) of
short-term debt-officer ........................ 345,000 - - (235,000)
Other .......................................... (8,270) (9,085) (2,192) (2,408)
Proceeds from issuance of long term-debt ...... 500,115 500,000 - -
Purchase of treasury stock ..................... (11,906) - - -
Net proceeds from sale of common stock and
warrants ....................................... 2,166,894 896,512 - 5,427,238
-------------- -------------- -------------- --------------
Net cash provided by financing activi-
ties 4,087,833 3,937,427 732,808 5,400,032
-------------- -------------- -------------- --------------
Net increase (decrease) in cash and cash equiv-
alents (14,755) 1,934 (11,752) 3,646,657
Cash and cash equivalents, beginning of period. 31,360 16,605 16,605 18,539
-------------- -------------- -------------- --------------
Cash and cash equivalents, end of period ......... $ 16,605 $ 18,539 $ 4,853 $ 3,665,196
============== ============== ============== ==============
</TABLE>

See accompanying notes.

F-6

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE THREE MONTH PERIODS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)

1. THE COMPANY AND DESCRIPTION OF BUSINESS

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

In February 1997, the Company completed an underwritten initial public
offering of 1,400,000 shares of its Common Stock and 1,400,000 Redeemable Common
Stock Purchase Warrants (Public Warrants). The shares of Common Stock and the
Public Warrants were sold on the basis of one Public Warrant for each share of
Common Stock at a unit price to the public of $4.60, and were separately
transferable immediately upon issuance. Each Public Warrant entitles the holder
to purchase one share of Common Stock at $4.50 per share, subject to adjustment
under certain circumstances, at any time commencing six months from the date of
the Prospectus through and including five years from the date of the Prospectus.
The Public Warrants are redeemable by the Company, at any time commencing twelve
months from the date of the Prospectus, upon notice of not less than thirty
days, at a price of $.10 per Public Warrant, provided that the closing price or
bid price of the Common Stock for any twenty trading days within a period of
thirty consecutive trading days ending on the fifth day prior to the day on
which the Company gives notice of redemption has been at least 150% (currently
$6.75, subject to adjustment) of the initial public offering price per share of
Common Stock. Additionally, in March 1997, the Company issued an additional
210,000 shares of Common Stock and Public Warrants upon exercise of the
underwriter's over-allotment option.

The Company received net proceeds of $5,427,000 during February and March
1997 related to this sale. The proceeds, net of expenses related to the
offering, are to be used primarily for marketing activities in connection with
the Company's products, to complete the development of additional product and
software applications, for repayment of certain loans and to fund its working
capital requirements.

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPALS OF CONSOLIDATION

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

F-7

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

2. Summary of Significant Accounting Policies - (Continued)

CASH AND CASH EQUIVALENTS

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

INVENTORY

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

PROPERTY AND EQUIPMENT

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

SOFTWARE DEVELOPMENT COSTS

Costs of developing new software products and substantial enhancements to
existing software products are expensed as incurred until technological
feasibility has been established, after which time additional costs incurred are
capitalized in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." Amortization of capitalized software development costs
begins when products are available for general release to customers, and is
computed using the straight-line method over a period not to exceed three years.
Amortization expense for the years ended December 31, 1995 and 1996 and the
three months ended March 31, 1997 (unaudited) was $222,632 (including $155,597
to fully amortize remaining costs of a Viewpoint product line), $50,809 and
$15,351, respectively.

PATENT

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

REVENUE RECOGNITION

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

NET LOSS PER SHARE

Net loss per share is computed based on the weighted average number of
common and common equivalent shares outstanding. The Company has computed common
and common equivalent shares in determining the number of shares used in
calculating earnings per share for years ended December 31,

F-8

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

2. Summary of Significant Accounting Policies - (Continued)

1995 and 1996 pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83. SAB No. 83 requires the Company to include all
common shares and all common share equivalents issued in the 12 month period
preceding the filing date of the initial public offering in its calculation of
the number of shares used to determine earnings per share as if the shares had
been outstanding for all periods presented. Options and warrants issued more
than 12 months prior to the initial public offering have been excluded since
their effect is antidilutive. Net loss per share for the three months ended
March 31, 1997 has been computed in accordance with AICPA Accounting Principles
Board Opinion No. 15 and does not include common share equivalents since their
effect is anti-dilutive.

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

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

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), Earnings per Share, which is effective
for financial statements issued after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts were
computed. Because the application of SAB No. 83 in calculation of per share
amounts under SFAS 128 is presently uncertain, the Company is unable to
determine the effect of this standard on its historical per share amounts.

DEFERRED CHARGES AND OTHER ASSETS

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

Deferred charges at December 31, 1996 consist of legal, accounting and
other expenses associated with the initial public offering which was consummated
in February 1997, as well as expenses incurred in connection with the issuance
of 8% debt in July through December of 1996. During February and March 1997,
$2,079,000 (unaudited) of legal, accounting, underwriting and printing costs
incurred connection with the initial public offering were charged against the
proceeds from the offering.

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

CONCENTRATION OF CREDIT RISK

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

F-9

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

2. Summary of Significant Accounting Policies - (Continued)

USE OF ESTIMATES

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

INCOME TAXES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

INTERIM FINANCIAL INFORMATION

The consolidated financial statements as of March 31, 1997 and for the
three months ended March 31, 1996 and 1997 are unaudited and include, in the
opinion of management, all adjustments, consisting of only normal recurring
adjustments, which the Company considers necessary to present fairly the
financial position, results of operations and cash flows of the Company for
those interim periods. The operating results for three months ended March 31,
1997 are not necessarily indicative of the results that may be expected for the
full fiscal year.

3. INVENTORY

Inventory consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------- ------------
1995 1996 1997
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Purchased materials ...... $144,986 $180,149 $254,341
Finished goods ............ 52,483 129,984 195,993
--------- --------- ---------
$197,469 $310,133 $450,334
========= ========= =========
</TABLE>

Results of operations for 1995 reflects a charge of $220,000 for
technological obsolescence of component parts and finished goods associated with
one of the Company's early-developed product lines. Inventory at December 31,
1995 and 1996 and March 31, 1997 is presented net of a reserve of $220,000,
$215,000 and $215,000 (unaudited), respectively.

F-10

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

4. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------- ------------
1995 1996 1997
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment .................. $ 455,055 $ 519,966 $ 614,001
Software ........................... 79,552 141,841 169,229
Leasehold improvements ............... 36,985 36,985 36,985
Office furniture and equipment ...... 85,090 87,630 98,570
---------- ---------- ----------
656,682 786,422 918,785
Less accumulated depreciation and
amortization ..................... (170,982) (325,527) (369,256)
---------- ---------- ----------
$ 485,700 $ 460,895 $ 549,529
========== ========== ==========
</TABLE>

5. SHORT-TERM DEBT

Short-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ------------
1995 1996 1997
---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
OFFICER:
Secured note payable to an officer and affiliate of
the Company, due on demand with interest at
15%. Collateralized by all assets of the Company...... $364,154 $ 533,089 $311,243
========= =========== =========
OTHER:
Secured note payable to an individual investor, due
on demand with interest at 15%. Collateralized by
all assets of the Company............................. $ 22,548 $ 22,548 -
Convertible secured debt payable to a principal
stockholder of the Company, due on demand 10 days
subsequent to an initial public offering or 180 days
after date of issue, with interest at 8%.
Collateralized by all assets of the Company........... - 500,000 -
Unsecured notes payable to principal stockholders
of the Company, due on demand 10 days subse-
quent to an initial public offering or 180 days after
date of issue, with interest at 8% .................. - 1,315,000 -
Unsecured , non-interest bearing note payable to the
Company's underwriter................................. 35,000 120,000 -
Other.................................................. 9,085 8,654 6,246
--------- ----------- ---------
Total short-term debt, other........................... $ 66,633 $1,966,202 $ 6,246
========= =========== =========
</TABLE>

F-11

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

5. Short-term Debt - (Continued)

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

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

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

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

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

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

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

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

In January and February 1997, the Company issued $600,000 (unaudited) of
unsecured debt to two principal stockholders of the Company. The unsecured debt
bears interest at 8% and is due on demand 10 days subsequent to an initial
public offering of the Company's equity securities or 180 days from the

F-12

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

5. Short-term Debt - (Continued)

date of issue. As an incentive to advance the debt, the stockholders were issued
60,000 three-year warrants to purchase Company stock at $3.00 per share. Based
on independent appraisal, the fair market value of these warrants of $1.00 per
share is being charged to interest expense over the term of the notes.

In February 1997, $2,915,000 (unaudited) principal amount of secured and
unsecured notes were exchanged for 633,694 (unaudited) shares of Common Stock
and Public Warrants in the offering. Additionally, in February 1997, the Company
repaid $377,548 (unaudited) principal amount of secured and demand notes
together with total accrued interest of $90,745 (unaudited).

Interest paid was $23,811, $1,287 and $209,656 for the years ended December
31, 1995 and 1996 and the three months ended March 31, 1997 (unaudited),
respectively.

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------- ------------
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Convertible notes ..................... $2,567,300 $2,567,300 $ -
Short-term notes converted to con-
vertible notes 110,250 110,250 -
Convertible secured debt payable to a
principal stockholder of the Com-
pany, due January 1998 with inter-
est at 8% collateralized by all assets
of the Company ..................... - 500,000 -
Other ................................. 8,654 - -
----------- ----------- ----
2,686,204 3,177,550 -
Less: current portion of convertible
notes .............................. 2,677,550 3,177,550 -
----------- ----------- ----
$ 8,654 $ - $ -
=========== =========== ====
</TABLE>

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

The Agreements allow convertible note holders, upon a public offering of
the Company's equity securities with proceeds exceeding $2,000,000, the right to
convert their notes to registered equity securities of the Company at the public
offering price and receive 5,000 three-year warrants to purchase the Company's
common stock at $3.00 per share for each $10,000 unit. Alternatively, the
convertible note holders may elect to request repayment of their notes from the
proceeds of the public offering and receive 3,334 three-year warrants to
purchase the Company's common stock at $3.00 for each $10,000

F-13

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

6. Long-term Debt - (Continued)

unit. In June of 1996, holders of $2,430,300 principal amount of the convertible
notes elected to convert into securities hereby and holders of $247,250
principal amount elected to be repaid from the proceeds of the offering. In
addition, by virtue of the aforementioned elections, the convertible notes,
which originally matured between March and July of 1996, were extended to the
closing date of the initial public offering.

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

In February 1997, $2,430,300 (unaudited) principal amount of 8% convertible
notes together with accrued interest of $367,827 (unaudited) were exchanged for
608,283 (unaudited) shares of Common Stock and Public Warrants in the offering.
Additionally, in February 1997, the Company repaid $247,250 (unaudited)
principal amount of 8% convertible debt together with accrued interest of
$118,726 (unaudited). Converting noteholders received 1,215,150 (unaudited)
three-year warrants to purchase Company stock at $3.00 per share while repayment
noteholders received 82,418 (unaudited) three-year warrants to purchase Company
stock at $3.00 per share in accordance with the terms of the Agreements
described above.

7. INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires a valuation allowance to be recorded when it is "more
likely than not that some portion or all of the deferred tax assets will not be
realized." In the opinion of management, realization of the Company's net
operating loss carryforward is not reasonably assured, and a valuation allowance
of $2,966,000, $4,625,000 and $5,003,000 has been provided against deferred tax
assets in excess of deferred tax liabilities in the accompanying consolidated
financial statements at December 31, 1995 and 1996 and March 31, 1997
(unaudited), respectively.

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

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------------- ---------------
1995 1996 1997
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward ...... $ 2,860,000 $ 4,349,000 $ 4,795,000
Excess of tax over financial state-
ment basis of patent 45,000 41,000 40,000
Accruals deductible for tax purposes
when paid ........................... 156,000 236,000 232,000
Excess of tax over financial state-
ment basis of software develop-
ment costs - 42,000 20,000
------------ ------------ ------------
Total deferred tax assets ............ 3,061,000 4,668,000 5,087,000
Less: valuation allowance ............ (2,966,000) (4,625,000) (5,003,000)
------------ ------------ ------------
95,000 43,000 84,000
------------ ------------ ------------
</TABLE>

F-14

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

7. Income Taxes - (Continued)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- ------------
1995 1996 1997
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax liabilities:
Excess of financial statement over
tax basis of property and equip-
ment 42,000 43,000 84,000
Excess of financial statement over
tax Basis of software develop-
ment costs 53,000 - -
------- ------- -------
Total deferred tax liabilities ...... 95,000 43,000 84,000
------- ------- -------
Net deferred taxes ..................... $ - $ - $ -
======= ======= =======
</TABLE>

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

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------------------- ------------
1995 1996 1997
--------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
U.S. federal statutory rate applied to
pretax loss ........................... $ (1,841,000) $ (1,494,000) $ (478,000)
Accrued compensation and other ac-
cruals 2,500 (19,000) 1,000
Amortization of patent ............... 27,500 (3,000) (1,000)
Depreciation of property and equip-
ment (27,000) (5,000) 1,000
Software development costs for finan-
cial reporting purposes (29,000) (11,000) (10,000)
Net operating loss carryforward not
recognized for financial reporting
purposes .............................. 1,714,000 1,476,000 433,000
Inventory and doubtful account re-
serves 50,500 3,000 (500)
Non-deductible interest expenses ...... 90,000 46,000 53,000
Other ................................. 12,500 7,000 1,500
-------------- -------------- ------------
$ - $ - $ -
============== ============== ============
</TABLE>

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

No income taxes were paid for the years ended December 31, 1995 and 1996
and the three months ended March 31, 1997 (unaudited).

F-15

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

8. STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK

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

STOCK OPTION PLAN

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

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

F-16

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

8. Stockholders' Equity (Deficit) - (Continued)

Following is a summary of stock option activity from December 31, 1994
through March 31, 1997:

<TABLE>
<CAPTION>
STOCK OPTIONS
---------------------------------------------
WEIGHTED
AVERAGE
NUMBER OF PRICE PER EXERCISE PRICE
SHARES SHARE PER SHARE
----------- ------------ ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1994 ...... 1,643,536 $ .04-3.00 $ 2.25
Granted .............................. 693,258 3.00 3.00
Exercised .............................. - - -
Forfeited .............................. 507,020 2.20-3.00 2.46
----------
Outstanding at December 31, 1995 ...... 1,811,774 .04-3.00 2.48
Granted .............................. 870,400 3.00-4.00 3.32
Exercised .............................. - - -
Forfeited .............................. 588,213 .20-3.00 2.55
----------
Outstanding at December 31, 1996 ...... 2,093,961 .04-4.00 2.81
Granted (unaudited) .................. 444,666 3.00-5.19 4.56
Exercised (unaudited) .................. - - -
Forfeited (unaudited) .................. 733 3.00 3.00
----------
Outstanding at March 31, 1997 (unaudited) 2,537,894 $ .04-5.19 $ 3.48
==========
</TABLE>

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

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

WARRANTS

The Company has issued warrants to purchase common stock of the Company in
connection with certain notes payable (as described in Note 5) and as
compensation for services rendered by various consultants and a financial
consulting firm controlled by an officer, director, and stockholder of the
Company. All warrants issued prior to 1995 have been exercised.

F-17

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

8. Stockholders' Equity (Deficit) - (Continued)

The following is a summary of warrant activity from December 31, 1994
through March 31, 1997:

<TABLE>
<CAPTION>
WARRANTS
------------------------------
WEIGHTED
AVERAGE
NUMBER OF PRICE PER EXERCISE PRICE
SHARES SHARE PER SHARE
----------- ------------- ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1994 ...... $ - $ - $ -
Granted .............................. 1,147,500 1.00-3.00 1.77
Exercised ........................... - - -
----------
Outstanding at December 31, 1995 ...... 1,147,500 1.00-3.00 1.77
Granted .............................. 376,505 3.00 3.00
Exercised ........................... - - -
----------
Outstanding at December 31, 1996 ...... 1,524,005 1.00-3.00 2.07
Granted - Non-Public Warrants (un-
audited) 1,457,568 3.00 3.00
Granted - Public Warrants (unaudit-
ed) 1,610,000 4.50 4.50
Exercised (unaudited) ............... - - -
----------
Outstanding at March 31, 1997 (unau-
dited) 4,591,573 $ 1.00-4.50 $ 3.22
==========
</TABLE>

In addition, at March 31, 1997 the Company's underwriter holds warrants to
purchase 140,000 units at $6.30 per unit, each unit consisting of one share of
common stock and one common stock purchase warrant exercisable at $4.50 per
share through February 2002.

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

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

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

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

F-18

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

8. Stockholders' Equity (Deficit) - (Continued)

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

9. COMMITMENTS AND CONTINGENCIES

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

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

Rent expense was $233,305, $247,765 and $63,125 for the years ended
December 31, 1995 and 1996 and the three months ended March 31, 1997
(unaudited), respectively.

The Company has entered into an employment contract with its Chief
Executive Officer through February 1999 that provides for a minimum annual
salary and incentives based generally on the Company's performance. Total
compensation, including incentives, which was accrued and included in accrued
compensation in the accompanying consolidated financial statements at December
31, 1995 was $112,929. No amounts were accrued at December 31, 1996 and March
31, 1997 (unaudited) (See Note 5).

10. RELATED PARTY TRANSACTIONS AND OTHER MATTERS

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

In May 1996, the Company issued 5,005 three-year warrants to purchase
Company stock at $3.00 per share to a company which is partially owned by the
Chief Executive Officer of the Company. The warrants were issued as
consideration for consulting services rendered during 1996. The fair market
value of the warrants of $.50 as determined by independent appraisal and fees of
$2,503 were charged to

F-19

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

10. Related Party Transactions and Other Matters - (Continued)

expense during 1996. Consulting fees of $11,692 and $8,130 remained accrued at
December 31, 1995 and 1996, respectively for consulting services rendered during
1994. Additionally, $12,500 and $3,562 of consulting fees were paid in 1995 and
1996, respectively for consulting services rendered in 1994.

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

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

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

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

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

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

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

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

During January and February of 1997, the Company issued $600,000
(unaudited) of 8% unsecured notes to two principal stockholders of the Company.
The notes were due on demand 10 days subsequent to an initial public offering of
the Company's equity securities or 180 days from date of issue. During February
of 1997 these notes were converted into Common Stock and Public Warrants in the
initial public offering as described in Note 6.

During February 1997, $1,915,000 (unaudited) principal amount of 8%
unsecured bridge notes and $1,000,000 (unaudited) principal amount of 8% secured
convertible notes owing to four principal stockholders of the Company were
converted into 633,694 (unaudited) shares of Common Stock and Public Warrants in
the offering at $4.60 per share. Additionally, during February 1997, the Company
paid accrued interest of $76,634 (unaudited) to the stockholders.

F-20

<PAGE>

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

10. Related Party Transactions and Other Matters - (Continued)

During February 1997, $1,905,000 (unaudited) principal amount of 8%
convertible debt and accrued interest of $282,992 (unaudited) owing to four
principal stockholders, its Chief Executive Officer and the spouse of another
principal stockholder and former director, were converted into 475,647
(unaudited) shares of Common Stock and Public Warrants in the offering at $4.60
per share.

During February 1997, the Company repaid $235,000 (unaudited) principal
amount of 15% secured debt to its Chief Executive Officer together with accrued
interest of $10,399 (unaudited).

F-21

<PAGE>

<TABLE>
<S> <C>
========================================================== ========================================================

No dealer, salesperson or any other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus, and, if given or made, such information or
representations must not be relied on as having been
authorized by the Company. This Prospectus does not MULTIMEDIA ACCESS
constitute an offer to sell or the solicitation of an CORPORATION
offer to buy any security other than the securities
offered by this Prospectus, or an offer to sell or a
solicitation of an offer to buy any security by any
person in any jurisdiction in which such offer or
solicitation would be unlawful. Neither the delivery of 2,981,573 SHARES
this Prospectus nor any sale made hereunder shall, under OF COMMON STOCK
any circumstances, imply that the information in this
Prospectus is correct as of any time subsequent to the
date of this Prospectus.

TABLE OF CONTENTS

Page

Prospectus Summary.................................. 2
Risk Factors........................................ 7
Use of Proceeds.....................................15
Capitalization......................................16
Selected Financial Data.............................17
Management's Discussion and
Analysis of Financial Condition and PROSPECTUS
Results of Operations.............................18
Business............................................21
Management..........................................28
Principal Stockholders..............................36
Certain Transactions................................38
Description of Securities...........................39
Share Eligible for Future Sale......................42
Interest of Named Experts and Counsel...............44
Legal Matters.......................................44
Experts.............................................44
Additional Information..............................44
Glossary............................................ i
Index to Consolidated Financial Statements.........F-1

Until ________________________, 1997 (25 days after
the date of this Prospectus), all dealers effecting
transactions in the registered securities, whether or not
participating in this distribution, may be required to , 1997
deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting
as underwriters and with respect to their unsold
allotments or subscriptions.

========================================================== ========================================================
</TABLE>
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Articles Seven and Ten of the Company's Certificate of Incorporation,
contain the following provisions with respect to indemnification of Directors
and Officers:

SEVENTH. The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters
referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights
to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who has ceased to be director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person.

TENTH. To the fullest extent permitted by Delaware General Corporation
Law, a director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. Neither any amendment nor repeal of this
Article, nor the adopting of any provision of this Certificate of
Incorporation inconsistent with this Article shall eliminate or reduce
the effect of this Article in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article would accrue
or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.

Section 145 of the General Corporation Law of the State of Delaware contains
provisions entitling directors and officers of the Company to indemnification
from judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, as the result of an action or proceeding in which
they may be involved by reason of being or having been a director or officer of
the Company provided said officers or directors acted in good faith.

The Company has also entered into indemnification agreements with Messrs.
Norem, Leftwich, Colquhoun, Stoner, Oakes, Jobe, Culp, Sterling and Bernardi
which provide for the indemnification of said officers and directors (former
directors in the case of Messrs. Sterling, Bernardi and Oakes) to the fullest
extent allowable under the laws of the State of Delaware.

II-1

<PAGE>

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

SEC Registration ...................................... $ 2,353
Nasdaq Listing Fee
7,500(1)(2)
Printing and Engraving Costs .......................... 20,000(2)
Legal Fees and Expenses ............................... 30,000(2)
Accounting Fees and Expenses .......................... 35,000(2)
Blue Sky Fees and Expenses ............................ 5,000(2)
Miscellaneous ......................................... 10,147(2)
--------------

TOTAL ........................................ $110,000
==============
- ----------
(1) Assumes exercise of all Private Warrants.

(2) Estimated

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following shares of Common Stock were issued by the Company during the
past three years without registering the securities under the Securities Act.
There were no underwriting discounts paid in connection with the issuance of any
of said securities, except as noted.

The sales of the securities described in the following table were made in
reliance upon Regulation D, Rule 506 of the Securities Act, which provides
exemptions for transactions not involving a public offering. With regard to the
Company's reliance upon the exemption from registration provided by Regulation
D, Rule 506 of the Securities Act of the sale of securities described below,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption. In particular, the Company confirmed that with
respect to the exemption claimed under Regulation D, Rule 506 of the Securities
Act (i) each investor made representations that he or she was sophisticated
and/or an "accredited investor" within the meaning of Regulation D of the
Securities Act in relation to such investments and (ii) each purchaser gave
written assurance of his or her investment intent, and the certificates for the
securities bear a legend accordingly.

Amount of Bridge
Purchaser Date Notes Purchased
--------- ---- ---------------
H.T. Ardinger 9/26/94 $500,000
Robert Moody, Jr. 9/27/94 300,000
M. Douglas Adkins 9/28/94 205,000
Fred Kassner 9/30/94 200,000
Henry Wendt 10/17/94 10,000
John R. Whitman 10/17/94 60,000
Robert Gillings 10/21/94 315,300
Elizabeth Sterling 10/24/94 50,000
Glenn A. Norem 10/24/94 50,000
Richard Pizitz 10/24/94 20,000
Michael Pizitz 10/24/94 30,000
Greg Garcia 10/26/94 27,000
A. Starke Taylor, Jr. 10/31/94 50,000
Robert Moody, Jr. 12/20/94 250,000
Joseph Geary 1/10/95 50,000
H.T. Ardinger 1/10/95 250,000
Adkins Family Partnership, Ltd. 1/16/95 100,000
Greg Garcia 1/17/95 27,562.50
June Pappas 1/17/95 55,125
Gary Motley 1/18/95 27,562.50
William Heim 1/19/95 100,000

II-2
<PAGE>

Number of Shares of Consideration
Purchaser Date Common Stock per Share
--------- ---- --------- ---------

Fred Kassner 8/4/95 833,333 $3.00
H. T. Ardinger 12/31/95 16,504 $3.00
M. L. Ardinger 12/31/95 16,504 $3.00
Doug Adkins 12/31/95 107,444 $3.00
Robert Moody 12/31/95 147,251 $3.00
Anthony Bellissimo 12/31/95 3,694 $3.00
H. T. Ardinger 12/31/95 26,747 $3.00
M. L. Ardinger 12/31/95 26,747 $3.00
Doug Adkins 4/18/96 35,813 $3.00
William Wells 4/18/96 16,750 $3.00
David Motley 4/18/96 3,333 $3.00
Shain McCaig 4/18/96 10,000 $3.00
Rhett Bently 4/18/96 30,000 $3.00
James Johnson 4/18/96 10,000 $3.00
Craig Noonan 4/18/96 3,333 $3.00
Jerry S. Harris 5/7/96 10,000 $3.00
Lanie R. Hughes 4/30/96 10,000 $3.00
Joseph W. Geary 5/24/96 42,333 $3.00
John S. Stoppelman 6/1/96 42,666 $3.00
Robert M. Sterling, Jr. 6/1/96 26,666 $3.00
Richard Epstein 6/28/96 20,000 $3.00
Paul Ehrlich 6/28/96 8,334 $3.00
Jared Shaw 6/28/96 4,167 $3.00
Daniel Kodsi 6/28/96 4,167 $3.00
A. Starke Taylor 6/28/96 53,333 $3.00
Richard Friedman 6/28/96 20,000 $3.00
Robert Rubin 6/28/96 36,666 $3.00
Stanley and Letty Epstein 6/19/96 5,000 $3.00
Juan Etayo 6/21/96 16,600 $3.00
Fred Kassner 3/31/96 221,195 $3.00
---------
TOTAL 1,711,880
=========

II-3
<PAGE>

In February 1997, the Company completed an underwritten initial public
offering of 1,400,000 shares of its Common Stock and 1,400,000 Redeemable Common
Stock Purchase Warrants (Public Warrants). The shares of Common Stock and the
Public Warrants were sold on the basis of one Public Warrant for each share of
Common Stock at a unit price to the public of $4.60, and were separately
transferable immediately upon issuance. In March 1997, the Company issued an
additional 210,000 shares of Common Stock and Public Warrants upon the exercise
of the underwriter's over-allotment option. Each Public Warrant entitles the
holder to purchase one share of Common Stock at $4.50 per share, subject to
adjustment under certain circumstances, at any time commencing August 4, 1997
through February 4, 2002. The Public Warrants are redeemable by the Company, at
any time commencing twelve months from the date of the Prospectus, upon notice
of not less than thirty days, at a price of $.10 per Public Warrant, provided
that the closing price or bid price of the Common Stock for any twenty trading
days within a period of thirty consecutive trading days ending on the fifth day
prior to the day on which the Company gives notice of redemption has been at
least 150% (currently $6.75, subject to adjustment) of the initial public
offering price per share of Common Stock.

II-4
<PAGE>

ITEM 27. LIST OF EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
PAGE NO. DESCRIPTION OF EXHIBIT NUMBER
- -------- ---------------------- ----------

<S> <C>
1 Form of Underwriting Agreement (1)
2 Agreement and Plan of Merger and Reorganization (1)
3(a) Certificate of Incorporation (1)
3(b) Amendment to Certificate of Incorporation (1)
3(c) Restated By-Laws (1)
4(a) Form of Common Stock Certificate (1)
4(b) Form of Warrant Certificate (1)
4(c) Form of Warrant Agreement between the Company and Continental Stock Transfer & Trust Company (1)
4(d) Form of Representative's Warrant Agreement (1)
5 Opinion of The Stoppelman Law Firm, P.C. on Legality of Securities Being Registered
9(a) Voting Trust Agreement between Robert M. Sterling, Jr. and Thomas E. Brown (1)
9(b) Voting Trust Agreement between Robert P. Bernardi and Richard Bernardi (1)
9(c) Form of Lock-Up Agreement (1)
9(d) Lock-Up Agreement with Robert Sterling Trust (1)
9(e) Lock-Up Agreement with Robert Bernardi Trust (1)
9(f) Lock-Up Agreement with Michael Nissenbaum (1)
10(a) Modified Employment Agreement between the Company and Glenn A. Norem (1)
10(b) Modified Consulting Agreement between the Company and Sterling Capital Group Inc. (1)
10(c) Form of Indemnification Agreement between the Company and Executive Officers and Directors (1)
10(d) 1995 Stock Option Plan (1)
10(e) 1994 Stock Option Plan (1)
10(f) 1993 Viewpoint Stock Plan (1)
l0(g) 1995 Director Option Plan (1)
10(h) Lease Agreement between the Company and Metro Squared, L P (1)
10(i) Employee Stock Purchase Plan (1)
l0(j) Licensing Agreement between the Company and Boca Research, Inc. (1)
10(k) Agreement between the Company and Unisys(TM)(1)
10(l) Employment Agreement between the Company and Philip M. Colquhoun (1)
10(m) Employment Agreement between the Company and William S. Leftwich (1)
10(n) Employment Agreement between the Company and David T. Stoner (1)
10(o) Employment Agreement between the Company and Neal Page (1)
10(p) Employment Agreement between the Company and A. David Boomstein (1)
10(q) Employment Agreement between the Company and Daniel W. Dodson (1)
10(r) Lease between the Company and Burlingame Home Office, Inc. (1)
10(s) Lease between the Company and Family Funds Partnership (1)
10(t) Agreement between the Company and Catalyst Financial Corporation (1)
10(u) Promissory Note by the Company payable to Robert Rubin dated September 5, 1996. (1)
10(v) Promissory Note by the Company payable to M. Douglas Adkins dated November 15, 1996. (1)
10(w) Promissory Note by the Company payable to H.T. Ardinger dated November 15, 1996. (1)
10(x) Promissory Note by the Company payable to H.T. Ardinger dated January 15, 1997. (1)
10(y) Promissory Note by the Company payable to Adkins Family Partnership, Ltd. dated January 15, 1997. (1)
11 Calculation of Net Loss Per Share
21 List of Subsidiaries of the Company (1)
23(a) Consent of Ernst & Young, LLP
23(b) Consent of The Stoppelman Law Firm, P.C.
24 Power of Attorney (2)
27 Financial Data Schedule
</TABLE>

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

(2) Included with signature page.

II-5
<PAGE>

ITEM 28. UNDERTAKINGS

A. Rule 415 Offering

The undersigned Company hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
to: (i) Include any prospectus required by Section 10(a)(3) of
the Securities Act; (ii) Reflect in the prospectus any facts or
events which, individually or together, represent a fundamental
change in the information in the registration statement and;
(iii) Include any additional or changed material information on
the plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the Offering of the securities at that
time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

B. Request for Acceleration of Effective Date

The Company may elect to request acceleration of the effective date of
the Registration Statement under Rule 461 of the Securities Act.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-6
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the County of Dallas
in the State of Texas on the 22nd day of July, 1997.

Multimedia Access Corporation

By: /s/ Glenn A. Norem
-----------------------------------
Glenn A. Norem
Chief Executive Officer

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Glenn A. Norem, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as full to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent or
either of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

SIGNATURE TITLE DATE

Chief Executive Officer
/s/ Glenn A. Norem and Director July 22, 1997
- --------------------------
Glenn A. Norem

/s/ William S. Leftwich Chief Financial Officer July 22, 1997
- ---------------------------
William S. Leftwich

/s/ William D. Jobe Director July 22, 1997
- ---------------------------
William D. Jobe

/s/ Joe C. Culp Director July 22, 1997
- ---------------------------
Joe C. Culp

II-7
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>

EXHIBIT
PAGE NO. DESCRIPTION OF EXHIBIT
- -------- ----------------------

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

(2) Included with signature page.

EXHIBIT 5

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549

Re: MultiMedia Access Corporation
Registration Statement

Dear Sir/Madam:

We are corporate and securities counsel to MultiMedia Access Corporation
(the "Company"), a Delaware corporation, in connection with the registration on
Form SB-2 of 2,981,573 shares of the Company's Common Stock (the "Common
Stock").

We hereby advise that, in our opinion, the shares of Common Stock have been
duly authorized by all necessary corporate acts of the Company, and when issued,
delivered and paid for, will be legally and validly issued, fully-paid and
non-assessable.

We consent to the use of our firm's name under the heading "Legal Matters"
in the Registration Statement, and any amendments thereto, filed with the
Securities and Exchange Commission in connection with the above-referenced
offering.

Very truly yours,

/s/ John S. Stoppelman
----------------------
John S. Stoppelman

MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
STATEMENT RE: CALCULATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------ ------------------------------------
LOSS PER SHARE DATA: 1995 1996 1996 1997
-------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)

<S> <C> <C> <C> <C>
NET LOSS AS REPORTED IN THE FINANCIAL STATEMENTS (5,414,878) (4,393,965) (1,058,977) (1,406,533)
-------------- ------------- ------------- -------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
3,528,536 4,844,706 4,459,771 6,622,790

COMMON AND COMMON EQUIVALENT SHARES ISSUED
IN THE TWELVE MONTH PERIOD PRECEDING THE FILING
DATE OF THE INITIAL PUBLIC OFFERING AS REQUIRED BY
SAB NO. 83:
COMMON STOCK
510,698 69,869 198,181 -
INCENTIVE STOCK OPTIONS
266,356 266,356 276,800 -
NON-QUALIFIED STOCK OPTIONS
40,208 40,208 40,208 -
WARRANTS
778,613 778,613 778,613 -

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING AS REPORTED IN THE
-------------- ------------- ------------- -------------
FINANCIAL STATEMENTS 5,124,411 5,999,752 5,753,573 6,622,790
-------------- ------------- ------------- -------------

LOSS PER SHARE AS REPORTED IN THE FINANCIAL
STATEMENTS (1.06) (0.73) (0.18) (0.21)
============== ============= ============= =============

SUPPLEMENTAL LOSS PER SHARE DATA:

NET LOSS AS REPORTED IN THE FINANCIAL STATEMENTS (5,414,878) 4,393,965)

INTEREST SAVED ON DEBT TO BE RETIRED:
$257,548 OF 15% SECURED DEBT 38,632 38,632
$247,250 OF 8% CONVERTIBLE DEBT 19,780 19,780
$35,000 OF NON-INTEREST DEBT AT 12/31/95 - -
$120,000 OF NON-INTEREST DEBT AT 12/31/96 - -
-------------- -------------
ADJUSTED NET LOSS (5,356,466) (4,335,553)
-------------- -------------

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING AS REPORTED IN THE
THE FINANCIAL STATEMENTS 5,124,411 5,999,752

SHARES NECESSARY TO PAY OFF DEBT:
TOTAL PROCEEDS TO RETIRE DEBT OF $539,798 AT DECEMBER
31, 1995 AND $624,798 AT DECEMBER 31, 1996 DIVIDED
BY
THE OFFERING PRICE OF $4.50 PER SHARE 119,955 138,844
-------------- -------------
ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,244,366 6,138,596
-------------- -------------

SUPPLEMENTAL LOSS PER SHARE (1.02) (0.71)
============== =============

SUPPLEMENTAL LOSS PER SHARE DATA INCLUDING
DEBT CONVERTED TO EQUITY IN THE OFFERING:

ADJUSTED NET LOSS (4,335,553)

INTEREST SAVED ON DEBT TO BE CONVERTED TO EQUITY:
$2,430,300 PRINCIPAL AMOUNT OF CONVERTIBLE DEBT
194,957
$2,915,000 PRINCIPAL AMOUNT OF BRIDGE DEBT
141,055
-------------

FURTHER ADJUSTED NET LOSS (3,999,541)
-------------

ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
6,138,596

SHARES ADDED FROM CONVERSION OF DEBT:
WEIGHTED AVERAGE SHARES - CONVERTIBLE DEBT
608,283
WEIGHTED AVERAGE SHARES - BRIDGE DEBT
150,119
-------------

FURTHER ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
6,896,998
-------------

FURTHER ADJUSTED SUPPLEMENTAL LOSS PER SHARE
(0.58)
=============
</TABLE>

EXHIBIT 23(A)
CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 10, 1997 in the Registration Statement
(Form SB-2) and related Prospectus of MultiMedia Access Corporation for the
registration of 2,981,573 shares of its common stock underlying non-redeemable
common stock purchase warrants.

Dallas, TX /s/ERNST & YOUNG LLP
July 17, 1997 --------------------
ERNST & YOUNG LLP

EXHITIB 23(B)

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549

Re: MultiMedia Access Corporation
Registration Statement

Dear Sir/Madam:

Very truly yours,

/s/ John S. Stoppelman
----------------------
John S. Stoppelman

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES AS
OF DECEMBER 31, 1996 AND MARCH 31, 1997 (UNAUDITED), AND THE RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 18,539 3,665,196
<SECURITIES> 0 0
<RECEIVABLES> 228,564 195,568
<ALLOWANCES> 43,000 42,000
<INVENTORY> 310,133 450,334
<CURRENT-ASSETS> 1,064,770 4,335,705
<PP&E> 786,422 918,785
<DEPRECIATION> 325,527 369,256
<TOTAL-ASSETS> 1,691,258 5,085,336
<CURRENT-LIABILITIES> 7,472,088 1,065,834
<BONDS> 0 0
0 0
0 0
<COMMON> 532 817
<OTHER-SE> (5,781,362) 4,018,685
<TOTAL-LIABILITY-AND-EQUITY> 1,691,258 5,085,336
<SALES> 901,262 244,802
<TOTAL-REVENUES> 1,095,012 259,533
<CGS> 393,918 142,977
<TOTAL-COSTS> 393,918 142,977
<OTHER-EXPENSES> 2,203,187 621,205
<LOSS-PROVISION> 42,777 5,498
<INTEREST-EXPENSE> 513,979 216,047
<INCOME-PRETAX> (4,393,965) (1,406,533)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,393,965) (1,406,533)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,393,965) (1,406,533)
<EPS-PRIMARY> (0.73) (0.21)
<EPS-DILUTED> (0.73) (0.21)

</TABLE>