SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended AUGUST 31, 1997
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OR

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

For the transition period from to
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Commission file number 1-8654
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UNITEL VIDEO, INC.
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(Exact name of registrant as specified in its charter)

DELAWARE 23-1713238
- ----------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

555 WEST 57TH STREET, NEW YORK, NEW YORK 10019
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (212) 265-3600
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Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value American Stock Exchange

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K (X).

(Cover Page: 1 of 2 Pages)

The aggregate market value of the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at November 21, 1997 was approximately $16,090,000.

There were 2,674,665 shares of Common Stock outstanding at November 21, 1997.

DOCUMENTS INCORPORATED BY REFERENCE

PART III Certain portions of the Registrant's Proxy Statement for the
Registrant's 1997 Annual Meeting of Stockholders.

PART I

ITEM 1. BUSINESS

GENERAL

Unitel Video, Inc. (the "COMPANY") provides a full range of services to the
video and film communications industry for the recording, editing, creation of
digital effects and duplication of television programs, commercials and
corporate and other communications on videotape. The Company's services are
provided primarily in the following areas: studio videotape recording, mobile
videotape recording and live telecasting, film to videotape transfer, editing,
digital effects and videotape duplication. The Company also designs and
produces custom internet, CD-ROM, DVD, videodisc and networked multimedia
presentations.

The Company's services are provided at facilities located in New York City
and Los Angeles and through the Company's Mobile division based in Pittsburgh,
Pennsylvania, Burbank, California, and Montreal, Canada. The Mobile division
provides "on-location" services (the "Mobile Business"), including technical
personnel, for videotape recording and live telecasting of sports,
entertainment, cultural and other events throughout North America. In fiscal
1997, the Company established Unitel Video Canada Inc., a wholly owned
subsidiary of the Company, to engage in the Mobile Business in Canada.

As the Company is in a service industry it does not use raw materials. It
does, however, use videotape. Videotape is readily available from numerous
sources and the Company has not experienced, nor does it anticipate
experiencing, difficulty in obtaining videotape for its operations. In
addition, the Company has service contracts with its customers, generally for
facilities and personnel at specific times or on a project or job-by-job basis
(as more fully described below under the caption "Marketing") and, accordingly,
does not have backlog as such.

The Company's cost structure is such that depreciation, selling expenses
and general and administrative expenses do not generally fluctuate from quarter
to quarter during a fiscal year based on sales volume. Furthermore, a majority
of production costs are fixed. Accordingly, relatively small variations in
quarterly sales historically have resulted in disproportionately greater
variations in net earnings. In part due to the foregoing, during fiscal years
1997, 1996 and 1995, the Company recognized a significantly greater proportion
of net earnings in the first quarter, when sales are traditionally higher, as
compared to the other quarters of the fiscal year. See Note L to Notes to
Consolidated Financial Statements.

SERVICES

The Company provides services in two broad categories, production services
and post production services. In 1995, the Company made a decision to refocus
its resources toward the entertainment and corporate communications areas, its
traditional strengths. As part of this strategy the Company has reduced its
post production assets that service the highly competitive commercial
advertising segment of the industry. As a result of this change, revenues
generated from post production services have declined from 63% of sales in 1995
to 50% of sales in 1997, while revenues from the production area have increased
from 37% of sales in 1995 to 50% of sales in 1997. The Company anticipates that
this trend will continue in fiscal 1998.

PRODUCTION SERVICES

STUDIO VIDEOTAPE RECORDING. The Company provides the studios, equipment
and skilled technical personnel needed to record television programs,
commercials and corporate and other videotape communications. The equipment
provided by the Company includes color television cameras, videotape recorders,
sound monitoring and mixing equipment and lighting equipment. The Company does
not generally provide program direction or other artistic or non-technical
production services, such as the preparation of scripts, the hiring of
performers or the supplying of special props or scenery. The Company operates
eight studios in New York City.

Among the programs produced at the Company's studio facilities are "The Sally
Jessy Raphael Show", "Inside Edition", "The Montel Williams Show", "The Chris
Rock Show" and "American Journal". Studio recording accounted for approximately
18%, 18% and 16% of the Company's revenues during the fiscal years ended August
31, 1997, 1996 and 1995, respectively.

MOBILE VIDEOTAPE RECORDING AND LIVE TELECASTING. The Company's Mobile
division provides videotape recording and live telecasting services "on-
location" by transporting videotape and other related equipment in its mobile
vehicles. These vehicles have been designed to serve as the production control
center for events in sports arenas, concert halls, theaters and other locations.
The Company also arranges for the skilled technical personnel required to
perform these services. The Company's ten mobile vehicles are equipped to
travel on a continuous basis throughout North America and can be maintained in
the field. The Company's Mobile division accounted for approximately 32%, 27%
and 21% of the Company's revenues during the fiscal years ended August 31, 1997,
1996 and 1995, respectively. Some of the events handled by the Company's mobile
production units include "Live from the Met", "Live from Lincoln Center", "The
Grammy Awards", "The Emmy Awards", "The Academy Awards", major golf and tennis
tournaments, broadcast of Pittsburgh Pirates, Montreal Expos and Toronto Blue
Jays major league baseball games and the international broadcast of the "Super
Bowl".

POST PRODUCTION SERVICES.

FILM TO VIDEOTAPE TRANSFER. The Company provides the facilities and
technical personnel for transferring 16mm and 35mm motion picture positive and
negative film and slides to videotape. Through the use of computers, the color
of the picture may be corrected, altered or enhanced frame by frame to meet
client needs. Film to videotape transfer accounted for approximately 8%, 10%
and 9% of the Company's revenues during the fiscal years ended August 31, 1997,
1996 and 1995, respectively. The Company has performed this service for major
theatrical motion pictures such as "Amistad" and "The Jackal", and television
programs such as "Star Trek:Voyager", "Star Trek: Deep Space Nine" and "The
Simpsons".

EDITING. The Company provides editing equipment and skilled personnel
required to perform the editing, special optical and audio effects, titling and
other technical work necessary to produce a master videotape suitable for
broadcast, cablecast, duplication or other distribution. Using
computer-controlled electronic editing equipment, video and audio tape recorders
and special effects and titling equipment, videotape recorded by the Company or
others is processed into a finished product. Editing accounted for
approximately 26%, 30% and 35% of the Company's revenues during the fiscal years
ended August 31, 1997, 1996 and 1995, respectively. Among the programs edited
at the Company's facilities are "Star Trek:Voyager", "Star Trek: Deep Space
Nine" and "The Sally Jessy Raphael Show".

DIGITAL EFFECTS. The Company offers creative consultation, technical
assistance and full-service facilities for the creation of computer-generated
graphics, special effects and animation in the digital format in both 2-D and
3-D. These services accounted for approximately 7%, 8% and 9% of the Company's
revenues during the fiscal years ended August 31, 1997, 1996 and 1995,
respectively. The Company's projects in this area include various commercials
for Toyota, Sears and Nike and major theatrical motion pictures such as "Air
Force One", "Star Ship Troopers" and "Devils Advocate".

VIDEOTAPE DUPLICATION. The Company furnishes videotape duplication
services in all formats, including formats available for broadcast and cablecast
in the United States as well as the multiple formats used abroad. Duplication
services accounted for approximately 5%, 4% and 4% of the Company's revenues
during the fiscal years ended August 31, 1997, 1996 and 1995, respectively.

NEW MEDIA SERVICES. The Company designs and produces custom internet
websites and DVD, CD-ROM, videodisc and networked multimedia presentations for
clients in the publishing, financial services, pharmaceutical, entertainment,
advertising, retail, telecommunications and utility industries. Extensive use
of other Company resources are integrated into these productions, including
video compression, digital to video transfers, digital effects and studio and
location recording. The Company also provides MPEG compression services for
Softkey, Sony Interactive and Grey Advertising. New Media Services accounted
for approximately 1% of the Company's revenues during each of the fiscal years
ended August 31, 1997, 1996 and 1995.

MARKETING

The Company markets its services principally to cable television program
suppliers, independent producers, national television networks, local television
stations, motion picture studios, advertising agencies, and program syndicators
and distributors through the direct efforts of its internal sales personnel and
through advertising in certain trade publications. The Company has no material
patents. The Company markets its services through the use of the Unitel and
Editel names.

Customers for editing services, film-to-tape transfer, digital effects and
videotape recording of television commercials generally make arrangements for
the Company's services without significant advance notice, on a project or
job-by-job basis. Customers for studio and "on-location" videotape recording or
live telecasting of programs generally make arrangements longer in advance of
the time when the facilities and services are required. The Company has entered
into arrangements with several customers for periods ranging up to three years
to provide editing, mobile videotape recording and/or studio videotape recording
services. No customer accounted for more than 10% of the Company's total sales
for the fiscal years ended August 31, 1997, 1996 and 1995.

COMPETITION

The video services industry is highly competitive. Certain videotape
service businesses (both independent companies and divisions of diversified
companies) provide most of the same services provided by the Company, while
others specialize in one or several of these services. Editing and videotape
recording services are also subject to competition from the film industry.
While the Company does not perform any services directly on film it does provide
services for the motion picture industry, including film to videotape transfer,
film in film out and special high resolution digital effects work on feature
films.

Many competitors of the Company, some with greater financial resources, are
located in the New York City and the Los Angeles areas, the principal markets
for the Company's services other than "on-location" video services. The Company
provides "on-location" video services throughout North America and competes with
companies providing similar services throughout that area.

The Company competes on the basis of the overall quality of the services it
provides, state-of-the-art equipment, breadth of services, reputation in the
industry and location. The Company also competes on the basis of its ability to
attract and retain qualified, highly skilled personnel. The Company believes
that prices for its services are competitive within its industry, although some
competitors may offer certain of their services at lower rates than the Company.
The video services industry has been and is likely to continue to be subject to
technological change to which the Company must respond in order to remain
competitive.

EMPLOYEES

On August 31, 1997 the Company had 292 full-time employees. A portion of
the Company's New York post-production personnel (25 employees) are represented
by the National Association of Broadcast Employees and Technicians, AFL-CIO
("NABET"). The contract between NABET and the Company expired on April 17,
1997. The Company and NABET are continuing to negotiate a new contract. The
technical personnel of the Company's Editel Los Angeles division (55 employees)
are represented by the International Alliance of Theatrical Stage Employees
("IATSE"). The contract between IATSE and the Company expired on November 30,
1997. Negotiations for a new contract are underway. The technical personnel of
the Company's Mobile division (39 employees) are represented by the
International Brotherhood of Electrical Workers, under a contract which expires
in August 2000.

The Company believes that its employee relations are generally
satisfactory.

DEVELOPMENTS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FASB Statement
No. 121") which provides guidance on when to assess and how to measure
impairment of long-lived assets, certain intangibles and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company adopted FASB Statement
No. 121 as of August 31, 1995.

Based on the Company's decision to sell the Editel divisions, the Company
recorded an impairment charge of approximately $2,000,000 in fiscal 1996
relating to the assets at all three Editel divisions. The impairment charge
recorded represents management's estimate of the decrease in value of these
assets during the period such assets were held for sale based upon the
depreciation method which the Company has used in the past and which management
has found to be reasonable and appropriate.

In February 1996, the Company announced the closure of its Editel Chicago
division and subsequently distributed the majority of that division's assets
throughout the Company. The balance of the Editel Chicago division equipment
was sold in an auction which was held in May 1996. In March 1996, the Company
terminated the lease for its Editel Chicago division by making a lump sum
payment to the landlord of $1,600,000. The restructuring charge of $1,246,000
recorded in the quarter ended May 31, 1996 reflects this payment less the
reversal of $354,000 of accrued rent which would have been due under the terms
of the lease. Previously, in May of 1995, the Company adopted a plan to
downsize the operations of its Editel Chicago division and reorganize and reduce
its corporate management which resulted in recording a restructuring charge of
$400,000 for severance and early retirement expense.

During the months of March through May 1996, the editorial and computer
graphics departments of the Editel New York division were closed. In May 1996,
the Company reached an agreement in principle to sell the film-to-tape transfer
business of Editel New York, which was the remaining operating department, to a
group of employees backed by a private investor. The Company operated the
film-to-tape transfer business through August 1996, at which time discussions
with the employee led group were terminated and the business was closed. During
the negotiations, the majority of the editorial and computer graphics assets
were distributed throughout the Company. At August 31, 1996, the Company
estimated the revised value of the remaining assets held for sale to be
approximately $1,587,000 and classified them on the balance sheet as short-term.
In November 1996, the Company sold the majority of those assets to an unrelated
third party for $1,400,000. The balance of the assets were redeployed
throughout the Company or disposed of through an auction. Proceeds from the
sale of assets from both the Editel Chicago and Editel New York divisions were
used by the Company to repay outstanding debt.

In May 1996, after reevaluating the potential of the Editel Los Angeles
division, the Company decided to retain and expand this division and,
accordingly, discontinued seeking a buyer for this business.

In April 1997, the Company renamed its Windsor Video division "Unitel Post
38" and reorganized its New York operations into three divisions: the Unitel
New York Post Production division, the Unitel New York Studios division and the
Unitel Interactive division.

In June 1997, the Company merged its Unitel Hollywood and Editel Los
Angeles divisions, moving a significant portion of the Unitel Hollywood assets
into the Company owned Editel Los Angeles building. Additional equipment was
moved to the Company's New York based post production facilities for future use.
The balance of the equipment was sold, with approximately $1,700,000 in proceeds
used to repay long term debt. As a result of the merger, the Company recorded a
$1,055,000 restructuring charge in the third quarter of 1997. Additionally,
after a reassessment of the Company's New York post production assets, the
Company recorded an impairment charge of $300,000 in the fourth quarter of 1997.

In fiscal 1997 the Company announced the construction of two new digital
mobile production units. One of the mobile units has been completed. It is
anticipated that the second mobile unit will be completed in fiscal 1998.
Completion of the second mobile unit is expected to be financed from the
proceeds of a second series of industrial revenue bonds to be issued by the
Allegheny County (Pennsylvania) Industrial Development Authority. (See Note B
to Notes to Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations).

On August 12, 1997 and on September 8, 1997 the Company issued press
releases concerning, among other things, certain unsolicited, non-binding
expressions of interest in acquiring the Company and announcing that the Company
had retained the investment banking firm of Legg Mason Wood Walker,
Incorporated, as its financial advisor in connection with these expressions of
interest and any possible transactions that may result. While the Company
continues discussions concerning these expressions of interest, there can be no
assurance that these discussions will result in a definitive agreement or that a
transaction with any party will ultimately be consummated.

ITEM 2. PROPERTIES.

The following table sets forth, as of August 31, 1997, certain information
concerning the Company's facilities. The lease expiration dates exclude option
extension periods which exist in certain leases.

APPROXIMATE LEASE EXPIRATION
LOCATION SQUARE FEET PRIMARY USE DATE
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555 West 57th Street 3,000 Office space. Dec 2000
New York, New York

515 West 57 Street 40,000 Television studios and post-production Owned
New York, New York facilities.

508-510 West 57 Street 15,000 Television studio and support space. Jun 2001
New York, New York

841 Ninth Avenue 21,000 Television studio and support space. Aug 2003
New York, New York

503 West 33 Street 8,000 Television studio and support space. Apr 2001
New York, New York

402 East 76 Street 30,000 Television studio and support space. Jun 1998
New York, New York

5 West 37 Street 13,000 Post-production facilities and
New York, New York administrative offices. Mar 2001

8 West 38 Street 10,000 Post-production facilities and
New York, New York administrative offices. Mar 2001

222 East 44 Street 43,000 Former Editel New York facility
New York, New York subleased to third parties. Dec 1999

433-435 West 53 Street 14,000 Television studio and support space. Owned
New York, New York

423 West 55 Street 21,000 Studio support space. Aug 1999
New York, New York

4100 Steubenville Pike 18,000 Mobile production headquarters Sep 1997
Pittsburgh, Pennsylvania and garage.

729 North Highland 26,000 Post-production, film-to-tape transfer Owned
Los Angeles, California and computer graphics facilities
and administrative offices.

1101 Isabel Street 15,000 Mobile field shop and garage. Month to Month
Burbank, California

3540 Griffith Street 8,000 Mobile offices and garage. Jun 2002
Saint-Laurent, Quebec
Canada

All of the Company's facilities are well maintained structures, in good
physical condition and are adequate to meet the Company's current and reasonably
foreseeable needs.

ITEM 3. LEGAL PROCEEDINGS.

(a) There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their property is the
subject.

(b) No material pending legal proceeding was terminated during the fourth
quarter of the Company's fiscal year ended August 31, 1997.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT
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OFFICER
NAME AGE SINCE POSITIONS WITH THE COMPANY
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Barry Knepper 47 1982 President, Chief Executive
Officer and Director

Richard L. Clouser 57 1982 Senior Vice President - Corporate,
President of the Mobile Division and
Director

Karen Ceil Lapidus 40 1994 Vice President, General Counsel
and Secretary

Jill Debin Cohen 45 1995 President of the Unitel New York
Post Production Division

Albert Walton 52 1995 President of the Editel Los Angeles
Division

Tom Eyring 45 1995 Chief Technology Officer

Edwin Levine 58 1996 President of the Unitel New York
Studios Division

George C. Horowitz 45 1996 Chief Financial Officer

CERTAIN INFORMATION CONCERNING THE EXECUTIVE OFFICERS OF THE COMPANY

Mr. Knepper has been President and Chief Executive Officer of the Company since
April 1996 and a Director since May 1995. He has served as Senior Vice
President-Finance and Administration from April 1995 to May 1996 and as Chief
Financial Officer from January 1982 to April 1995.

Mr. Clouser has been President of the Mobile division of the Company since 1982,
Senior Vice President-Corporate since April 1996 and a Director since October
1996.

Ms. Lapidus has been General Counsel and Secretary of the Company since January
1994 and a Vice President since April 1996. From 1984 until joining the
Company, Ms. Lapidus was an associate attorney at Mudge Rose Guthrie Alexander &
Ferdon, a New York law firm.

Ms. Debin Cohen has been President of the Unitel New York Post Production
division since August 1996. From June 1995 to August 1996 she was President of
the Windsor Video division which became a part of the Unitel New York Post
Production division in August 1996. From November 1993 to June 1995 she was the
Vice President/General Manager of the Windsor Video division. Ms. Debin Cohen
was the Vice President of Operations for the Editel New York division from 1988
through November 1993.

Mr. Walton has been President of the Editel Los Angeles division since July
1995. From May 1994 through July 1995 he was the Director of New Business
Development for the Editel Los Angeles division. He served as Vice President of
CIS from 1988 through 1994, a Hollywood based specialized visual effects
company.

Mr. Eyring has been Chief Technology Officer since June 1995. From 1991 to June
1995 he was Vice President of Engineering of the Editel New York division and
from 1982 through 1991 he was Director of Engineering Services for the Editel
New York division.

Mr. Levine has been President of the Unitel New York Studios division since
August 1996. From June 1975 to August 1996 he was Vice President of Technical
Operations for the Unitel New York division of the Company.

Mr. Horowitz has been Chief Financial Officer of the Company since April 1996.
From May of 1993 through June of 1996 he was Director of Finance for the
Company.

The term of office of each executive director of the Company expires as
specified by the Board of Directors of the Company and when his or her
respective successor is elected and has qualified.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's Common Stock is traded on the American Stock Exchange under
the symbol UNV. The following table sets forth, for fiscal years 1997 and 1996,
the high and low sales prices of the Common Stock as furnished by the American
Stock Exchange:

Fiscal Year 1997: LOW HIGH
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First Quarter.......................... 5 3/4 8 1/2
Second Quarter......................... 6 8 3/8
Third Quarter.......................... 5 7/8 6 3/4
Fourth Quarter......................... 5 1/8 8

Fiscal Year 1996: LOW HIGH
--- ----
First Quarter.......................... 4 7/8 6 13/16
Second Quarter......................... 5 1/8 8
Third Quarter.......................... 4 7/8 7 3/8
Fourth Quarter......................... 5 1/4 6 1/4

As of November 21, 1997 there were approximately 358 holders of the
Company's Common Stock.

Since its inception in 1969, the Company has not declared or paid cash
dividends on its Common Stock, and it does not anticipate declaring or paying
cash dividends in the foreseeable future. The declaration, payment and amount
of future dividends will be determined by the Board of Directors in light of
conditions then existing, including the Company's earnings, financial condition,
capital requirements and other factors. In connection with its financing
arrangements, the Company is subject to certain restrictions which prohibit the
payment of cash dividends. (See Note B to Notes to Consolidated Financial
Statements, and Management's Discussion and Analysis of Financial Condition and
Results of Operations).

ITEM 6. Selected Financial Data
1997 1996 1995 1994 1993
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OPERATIONS:

Sales $58,767,000 $79,287,000 $83,285,000 $80,498,000 $79,390,000
Cost of sales $49,708,000 $65,501,000 $69,219,000 $64,391,000 $62,418,000(b)
Interest expense $ 3,430,000 $ 3,686,000 $ 3,649,000 $ 2,388,000 $ 2,815,000
Earnings(loss)before
income taxes $(4,398,000) $(5,084,000) $(9,341,000) $ 1,519,000 $ 924,000
Net earnings(loss)(a) $(4,436,000) $(5,124,000) $(6,547,000) $ 859,000 $ 711,000

FINANCIAL POSITION:
Total assets $63,083,000 $67,618,000 $74,186,000 $73,245,000 $69,052,000
Working capital
(deficiency) $(9,655,000)(f) $(8,356,000)(d) $(3,467,000)(d) $(8,055,000)(c) $ (705,000)
Current ratio .41 to 1 .60 to 1 (d) .82 to 1(d) .64 to 1 (c) .95 to 1
Property & equipment-net $51,907,000 $50,466,000(e) $34,491,000(e) $55,425,000 $51,166,000
Long-term debt, less
current maturities $26,525,000 $19,706,000 $19,936,000 $14,142,000(c) $21,835,000
Stockholders' equity $13,392,000 $17,810,000 $22,526,000 $28,828,000 $27,673,000

DATA PER COMMON SHARE:
Net earnings(loss)per
common share $ (1.66) $ (1.96) $ (2.53) $ .33 $ .30

Weighted average number of
common and common equivalent
shares outstanding 2,665,000 2,613,000 2,582,000 2,617,000 2,066,000

(a) Federal and state tax credits of approximately $14,000 in 1997,
$15,000 in 1996, $28,000 in 1995, $58,000 in 1994 and $30,000 in 1993
have been applied as a reduction of the provision for income taxes.

(b) Gain on sale or disposal of equipment and amortization of goodwill
have been reclassified to depreciation expense to conform with fiscal
1994, 1995, 1996 and 1997 presentation. (See Note H to Notes to
Consolidated Financial Statements)

(c) The revolving credit portion of the long-term debt, which expired in
May 1995, was included in current liabilities. In December 1995, the
Company refinanced its revolving credit and term loans outstanding
with its bank lenders.

(d) The working capital deficiency is primarily due to the inclusion of
$3,750,000 in 1995 and $6,588,000 in 1996 of Term Loan B in current
liabilities. (See Note B to Notes to Consolidated Financial
Statements).

(e) The decrease in fiscal 1996 in property and equipment is due to the
reclassification of the Editel divisions' net assets to assets held
for sale, a separate line in the long-term asset section of the
balance sheet. In 1996 the Company decided to retain its Editel Los
Angeles division and also redeployed the majority of the assets of the
Editel New York and Editel Chicago divisions throughout the Company.
These assets were no longer considered assets held for sale and were
reclassified to property and equipment.

(f) The increase in the working capital deficiency in fiscal 1997 is due
primarily to (1) the decrease in accounts receivable resulting from
(i) the closure of the Editel New York facility in August 1996, (ii)
the merger of the Los Angeles divisions in June 1997 and (iii) the
reduction in sales of the Company's Studio and Mobile divisions in
fiscal 1997 (See Management's Discussion and Analysis of Financial
Condition and Results of Operations), (2) the reduction in net assets
held for sale in fiscal 1997 due to the completion of the sale of such
assets prior to August 31, 1997 and (3) an increase in other current
items, all of which was offset by a reduction in the current portion
of long-term debt.
14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES.

The Company is committed to keeping pace with technological developments as
well as taking advantage of new business opportunities in the video
communications industry. Capital expenditures were $12,936,000 during fiscal
1997 as compared to $9,134,000 during fiscal 1996 and $9,738,000 (exclusive of
the acquisition of GC & Co.) during fiscal 1995. Expenditures made during
fiscal 1997 were primarily for two new mobile units of approximately $7,252,000
(one completed and one under construction) and equipment used in the production,
post production and computer graphics service areas throughout the Company. It
is anticipated that the second mobile unit will be completed in fiscal 1998.
Completion of the second mobile unit is expected to be financed from the
proceeds of a second series of industrial revenue bonds to be issued by the
Allegheny County (Pennsylvania) Industrial Development Authority. (See Note B
to Notes to Consolidated Financial Statements).

The net change in cash in the fiscal years ended August 31, 1997, 1996 and
1995 was ($55,000), $31,000 and $(1,132,000), respectively. The net cash
decrease in 1997 resulted from cash provided by operating activities of
$9,271,000 offset by cash used in investing activities of $9,132,000, (primarily
capital expenditures net of equipment sales) and $194,000 used in financing
activities. For the fiscal year ended August 31, 1997, the decrease in accounts
receivable resulted from the closure of the Editel New York facility in August
1996, the merger Editel Los Angeles and Unitel Hollywood divisions in June 1997
and the reduction in sales of the Company's Studio and Mobile divisions in
fiscal 1997 due to the cancellation of two television shows in 1996 and the
non-recurring nature of the Atlanta Summer Olympics and the Republican and
Democratic National Conventions in 1996 for which the Mobile division provided
production services. The net cash increase in fiscal 1996 was the result of net
cash provided by operating activities of $7,130,000 and financing activities of
$884,000 which was offset by $7,983,000 related to investing activities. For
the year ended August 31, 1996, the large reduction in accounts receivables and
payables was primarily due to the closing of the Company's Editel Chicago and
Editel New York divisions. The increase in deferred financing costs and the
majority of the net cash provided by financing activities were due to the
refinancing of the Company's debt in December of 1995. The majority of the
proceeds generated from the disposal of equipment was related to the closure of
the Editel Chicago and Editel New York divisions. The net cash decrease in
fiscal 1995 was the result of cash provided by operating activities of
$8,134,000 and financing activities of $1,420,000 less cash used in investing
activities of $10,686,000. The net cash decrease in fiscal 1995 was primarily
due to the Company's fixed asset expenditures for the year exceeding the cash
generated by operations.

In December 1995, the Company entered into a $26 million revolving credit
and term loan agreement with a financial institution, consisting of an $11
million revolving credit facility and two $7.5 million term loans (Term Loans A
and B). In May 1997, Term Loan A was revised by the inclusion of $2,500,000 of
the original Term Loan B and the advance of $518,000 of new funds, resulting in
a revised Term Loan A balance of $9,000,000. Term Loan A is payable in fifty
five (55) equal monthly principal installments of $100,000 plus interest, with
the balance of $3,500,000 due December 2001. In November 1997 Term Loan B was
repaid, in part from the proceeds of a new Term Loan D in the amount of
$2,500,000 which is due on January 31, 1998. $3,742,000 of the original Term
Loan B was repaid from sales of equipment from Editel Chicago, Editel New York
and Unitel Hollywood. The Company is currently in negotiations to refinance or
sell certain of its owned real estate and anticipates

using a portion of the proceeds of the refinancing or sale to repay Term Loan D
and other indebtedness and the balance of the proceeds for working capital
purposes.

In July 1997 the credit facility was further amended by the issuance of a
$5,080,000 letter of credit to secure payment of principal and interest on
$5,000,000 in principal amount of Allegheny County (Pennsylvania) Industrial
Development Authority Variable Rate Demand Revenue Bonds. The proceeds from the
sale of the Bonds were loaned to the Company and were used by the Company to
build a new digital mobile production unit. The letter of credit requires
quarterly principal payments of $179,000 commencing August 1998 to be applied to
the redemption in equal principal amount of the Bonds. The Bonds mature on July
1, 2009 and, to the extent not redeemed in full as described in the prior
sentence, are required to be repaid by the Company on that date. The terms of
the overall credit agreement with the financial institution provide that the
lender receive a first lien on all property and equipment and accounts
receivable that are not encumbered by another lender. The Company anticipates
that funds generated from operations together with funds available under its
existing credit facility, proceeds from the refinancing of its owned real estate
currently being negotiated and noted above in this item and proceeds from a
second series of industrial revenue bonds expected to be issued by the Allegheny
County (Pennsylvania) Industrial Development Authority will be sufficient to
meet the Company's anticipated working capital and investing needs in fiscal
1998.

Additionally, in December 1995 the Company obtained from a bank a
$4,000,000 mortgage on its property located on West 57th Street in New York
City. The mortgage is payable in equal monthly installments of $22,000 through
November 2002, with a final payment of $2,152,000 due in December 2002.

In February 1995 the Company purchased the business and assets of GC & Co.
(formerly known as Greene, Crowe & Company), a Burbank, California based
supplier of "on-location" services for the videotaping and live telecasting of
concerts, cultural and other events, including " The Academy Awards", "The
Grammy Awards" and "The American Music Awards". The purchase price was
$6,750,000, consisting of $6,000,000 in cash and $750,000 of convertible
subordinated promissory notes. The cash portion of the purchase price was
financed by a $4,700,000, five-year capital lease and a $1,800,000 loan with a
fixed interest rate of 9.3% payable in sixty equal monthly payments of principal
and interest of $33,000 and a balloon payment at the end of the five-year period
of $360,000. The promissory notes bear interest at 1% over prime, were due in
full in August 1997 and are convertible into the Company's common stock at
$10.00 per share. In August, 1997, noteholders of $640,000 principal
outstanding extended the maturity date of their notes to August, 1998 on the
same terms and conditions. The balance of the notes have been paid in full.

In connection with certain of its financings, the Company must adhere to
particular financial ratios and restrictions including restrictions on the
future payment of dividends. The Company anticipates that the restrictions will
not impair its ability to keep pace with technological developments.
See Note B to Notes to Consolidated Financial Statements with respect to
compliance with certain financial covenants.

The enactment of the Tax Reform Act of 1986 has limited the Company's
ability to defer the payment of taxes due to the imposition of an alternative
minimum tax which effectively results in the treatment of certain timing
differences as tax preference items.

RESULTS OF OPERATIONS

Sales were $58,767,000, $79,287,000 and $83,285,000 for the fiscal years
ended August 31, 1997, 1996 and 1995, respectively. The sales decrease of
$20,520,000 was primarily due to the closing of the Editel New York and Editel
Chicago divisions in 1996 and the merging of the Unitel Hollywood and Editel Los
Angeles Divisions in June 1997. Sales from continuing operations were lower by
approximately $5,000,000 in the aggregate in fiscal 1997 primarily due to lower
studio sales as a result of the cancellation of the "Mark Walberg" and "Rush
Limbaugh" television shows in 1996 and from lower Mobile sales due in part to
the non-recurring nature of the Atlanta Summer Olympics and the Republican and
Democratic National Conventions in 1996.

The Company recorded net losses of $4,436,000, $5,124,000 and $6,547,000 in
the fiscal years ended August 31, 1997, 1996 and 1995, respectively. The net
loss of $4,436,000 in 1997 is attributable to a loss in the Company's post
production operations and the merger related costs in Los Angeles. The net loss
of $5,124,000 incurred in fiscal 1996 was attributable to costs relating to the
closure of the Company's Editel New York and Editel Chicago divisions and the
operating costs of running these divisions until they were closed. The net loss
of $6,547,000 incurred in fiscal 1995 was due primarily to the pretax charge of
$7,681,000 taken for the impairment of assets of the Editel New York, Editel
Chicago, Editel Los Angeles and Unitel Post 38 divisions and the pretax charge
of $400,000 for the restructuring of the Editel Chicago division.

Throughout fiscal 1997, 1996 and 1995 the Company's New York Studio and
Mobile divisions operated profitably.

Production costs, the main component of cost of sales, consist primarily of
direct labor, equipment maintenance expenses and occupancy costs. The Company's
production costs, as a percentage of sales, were 70.4%, 72.7% and 71.1%, for the
fiscal years ended August 31, 1997, 1996 and 1995, respectively. The decrease
in production costs in fiscal 1997 is primarily due to the closure of the
Company's Editel New York and Editel Chicago divisions in fiscal 1996.
Production costs as a percentage of sales increased in fiscal 1996 due to the
incremental severance costs associated with the closure of the Company's Editel
New York and Editel Chicago divisions. During 1996, the Company implemented a
program to reduce production costs by closing unprofitable divisions and
streamlining operations wherever possible. The increase in production costs for
fiscal 1995, as compared with the prior years, is due primarily to an increase
in studio and mobile production revenues which incur variable expenses at a
higher rate than the Company's other services. Since most of the Company's
costs are fixed and a large portion of the costs are subject to price increases,
flat sales from year to year result in production costs which are an increased
percentage of sales. This same dynamic applies for both selling expenses and
general and administrative expenses.

Depreciation, as a percentage of sales, was 14.2%, 9.9% and 12.1% in fiscal
1997, 1996 and 1995, respectively. Depreciation expense increased in fiscal
1997 by approximately $500,000 compared to 1996. In fiscal 1997, depreciation
decreased approximately $1,500,000 due to the closure in 1996 of the Editel New
York and Editel Chicago divisions. In fiscal 1996, $2,000,000 of depreciation
was reclassified to impairment charge in connection with the closure of the
Editel New York and Editel Chicago divisions. Depreciation in the Company's
other divisions in 1997 was approximately the same as in 1996. Depreciation
expense decreased in fiscal 1996 due to the reclassification of the net property
and equipment of the Editel divisions to net assets held for sale at August 31,
1995. The impairment charge recorded represents management's estimate of the
decrease in value of these

assets during the period such assets were held for sale in fiscal 1996 based
upon the method of depreciation which the Company has used in the past and which
management has found to be reasonable and appropriate. The Editel Chicago
division was closed in February 1996 and the Editel New York division was closed
in August 1996. Depreciation expense increased in 1995 as a result of the
$4,750,000 equipment portion of the GC & Co. acquisition and capital
expenditures made during the year totaling $9,738,000. Depreciation includes a
gain (loss) on disposal of equipment of $220,000, ($58,000) and $352,000 in
fiscal 1997, 1996 and 1995, respectively. Had the gain (loss) on disposal of
equipment been excluded from depreciation expense, depreciation as a percentage
of sales would have been 14.5%, 12.3% and 12.4% in fiscal 1997, 1996 and 1995,
respectively.

Selling expenses, as a percentage of sales, during fiscal years 1997, 1996
and 1995 were 3.0%, 2.9% and 3.4%, respectively. Selling expense decreased
$541,000 in 1997 compared to 1996 as a result of the closure of the Editel New
York and Editel Chicago divisions in 1996 and the merger of the Unitel Hollywood
and Editel Los Angeles divisions in 1997. Since there was a comparable percent
decrease in sales in 1997, selling expense as a percent of sales was essentially
the same. The decrease in selling expenses during fiscal 1996 is primarily due
to a decrease in the sales staff at the Editel Chicago and Editel New York
divisions. In 1995, selling expense as a percentage of sales decreased due to
significant cost reductions.

General and administrative expenses as a percentage of sales during fiscal
years 1997, 1996 and 1995 were 12.4%, 12.2% and 10.6%, respectively. General
and Administrative expenses decreased $2,426,000 in 1997 principally from
reduced administrative payroll in 1997 due to the closure of the Editel New York
and Editel Chicago divisions and the recognition in 1996 of severance pay and
other costs in connection with the closure. In addition, there were decreases
in allowance for doubtful accounts and corporate expenses. The increase in
general and administrative costs in fiscal 1996 is due primarily to severance
payments at the Editel Chicago and Editel New York divisions. Cost reductions
put into effect in 1994 were reflected in fiscal 1995 by a decrease of
approximately 1% from the prior year.

Interest expense, as a percentage of sales, during fiscal years 1997, 1996,
and 1995 was 5.8%, 4.6% and 4.4%, respectively. Although interest expense
decreased 6.9% from 1996, the percent to sales increased due to the decrease in
sales resulting from the closing of the Editel Chicago and Editel New York
divisions in 1996 and the merger of the Hollywood and Los Angeles divisions in
June 1997. Although interest expense increased slightly in 1996, the percent to
sales increase to 4.6% in 1996 versus 4.4% in 1995 is due to lower sales in the
1996 fiscal year. The increase in interest expense in fiscal 1995 was due to
additional interest incurred relating to the mortgage financings for the Editel
Los Angeles building purchased by the Company in June 1994 and financing
obtained for the acquisition of GC & Co. in February 1995. During fiscal 1995
the Company wrote off $214,000 of deferred financing costs related to its bank
debt which was refinanced in December 1995. Additionally, interest rates were
significantly higher in 1995 as compared with the prior year resulting in higher
interest payments on the floating rate portion of the Company's debt.

The Company's effective tax rates were 1%, 1% and (30%) in fiscal years
1997, 1996 and 1995, respectively. The 1997 and 1996 effective tax rates
reflect current year net operating losses for which no tax benefit was provided.
The effective tax rate in 1995 differs from prior years primarily due to the
impact of the nondeductible goodwill write off and the impairment of assets
charge. (See Note F to Notes to Consolidated Financial Statements.)

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which are based
upon current expectations and involve certain risks and uncertainties. Under
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, readers are hereby cautioned that these statements may be impacted by
several factors, and, consequently, actual results may differ materially from
those expressed herein.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

UNITEL VIDEO, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PAGE

REPORT OF GRANT THORNTON LLP INDEPENDENT ACCOUNTANTS.........20

CONSOLIDATED FINANCIAL STATEMENTS:
BALANCE SHEETS - AUGUST 31, 1997 AND 1996................21-22
STATEMENTS OF OPERATIONS - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................23
STATEMENT OF STOCKHOLDERS' EQUITY - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................24
STATEMENTS OF CASH FLOWS - YEARS ENDED
AUGUST 31, 1997, 1996 AND 1995......................25-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............28-42

SUPPLEMENTARY FINANCIAL SCHEDULE.............................50

Selected Quarterly Financial Data is set forth in Note L to Notes to the
Consolidated Financial Statements.

REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Unitel Video, Inc.

We have audited the accompanying consolidated balance sheets of Unitel Video,
Inc. (a Delaware corporation) at August 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended August 31, 1997. 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 Unitel
Video, Inc. as of August 31, 1997 and 1996, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended August 31, 1997, in conformity with generally accepted accounting
principles.

We have also audited Schedule II of Unitel Video, Inc. for each of the three
years in the period ended August 31, 1997. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.

/S/GRANT THORNTON LLP
- --------------------------------

New York, New York
November 4, 1997

UNITEL VIDEO, INC.

CONSOLIDATED BALANCE SHEETS

August 31,

ASSETS 1997 1996
- ------ ---- ----
Current assets:
Cash $ 137,000 $ 192,000
Accounts receivable, less
allowance for doubtful accounts
of $412,000 in 1997 and
$712,000 in 1996 5,139,000 8,701,000
Other receivables 19,000 333,000
Prepaid income taxes 75,000 142,000
Prepaid expenses 564,000 735,000
Net assets held for sale -- 1,587,000
Deferred tax asset 844,000 844,000
------------ -----------
Total current assets 6,778,000 12,534,000

Property and equipment - at cost
Land, buildings and
improvements 20,799,000 19,915,000
Video equipment 87,745,000 97,023,000
Furniture and fixtures 2,591,000 3,502,000
----------- -----------
111,135,000 120,440,000

Less accumulated depreciation
and amortization 59,228,000 69,974,000
----------- -----------
51,907,000 50,466,000

Deferred tax asset 1,625,000 1,625,000
Goodwill 1,721,000 1,859,000
Other assets 1,052,000 1,134,000
----------- ----------
$63,083,000 $67,618,000
----------- -----------
----------- -----------

See accompanying notes.

UNITEL VIDEO, INC.

CONSOLIDATED BALANCE SHEETS
(Continued)

August 31,

LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------ ---- ----

Current liabilities:
Accounts payable $ 6,754,000 $ 4,967,000
Accrued expenses 998,000 1,450,000
Payroll and related taxes 2,038,000 2,947,000
Current maturities of long-term
debt 3,530,000 8,362,000
Current maturities of subordinated debt 1,167,000 1,166,000
Current maturities of ESOP loan -- 166,000
Current maturities of capital lease
obligations 1,946,000 1,832,000
------------- ------------
Total current liabilities 16,433,000 20,890,000

Deferred rent 121,000 325,000
Long-term debt, less current maturities 26,525,000 19,706,000
Subordinated debt, less current
maturities 1,770,000 1,979,000
Long-term leases, less current
maturities 3,666,000 5,604,000
Accrued retirement 1,176,000 1,304,000

Stockholders' equity:
Common stock, par value $.01 per
share:
Authorized-5,000,000 shares
Issued 3,540,954 shares in 1997
and 3,532,554 shares in 1996,
and outstanding 2,674,665 shares
in 1997 and 2,666,265 shares in
1996 27,000 26,000
Additional paid-in capital 27,367,000 27,545,000
Accumulated deficit (6,028,000) (1,592,000)
Common stock held in treasury, at cost
(866,289 shares in 1997 and 1996) (7,974,000) (7,974,000)
-------------- -------------
13,392,000 18,005,000
Unearned employee benefit expense -- (195,000)
--------------- -------------

Total stockholders' equity 13,392,000 17,810,000
------------- -------------
$ 63,083,000 $ 67,618,000
------------- -------------
------------- -------------

See accompanying notes.

UNITEL VIDEO, INC.
------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Year ended August 31,

1997 1996 1995
---- ---- ----

Sales $58,767,000 $79,287,000 $83,285,000
----------- ------------ -----------

Cost of sales:
Production costs 41,380,000 57,661,000 59,174,000
Depreciation and
amortization 8,328,000 7,840,000 10,045,000
----------- ------------ ----------
49,708,000 65,501,000 69,219,000
----------- ------------ ----------
Gross profit 9,059,000 13,786,000 14,066,000

Operating expenses:
Selling 1,734,000 2,275,000 2,843,000
General and
administrative 7,264,000 9,690,000 8,832,000
Interest 3,430,000 3,686,000 3,649,000
Restructuring charge 1,055,000 1,246,000 400,000
Impairment charge 300,000 2,000,000 7,681,000
----------- ------------ ----------
13,783,000 18,897,000 23,405,000
----------- ------------ ----------

Earnings(loss)from
operations (4,724,000) (5,111,000) (9,339,000)

Other income (loss) 326,000 27,000 (2,000)
----------- ------------ -----------
Earnings(loss)before
income taxes (4,398,000) (5,084,000) (9,341,000)
Income taxes (benefit) 38,000 40,000 (2,794,000)
----------- ------------ -----------
Net earnings (loss)
applicable to common
stock $(4,436,000) $(5,124,000) $(6,547,000)
----------- ------------ ------------

Net earnings (loss)
per common share $ (1.66) $ (1.96) $ (2.53)
----------- ------------ ------------
----------- ------------ ------------

Weighted average number
of common and common
equivalent shares
outstanding 2,665,000 2,613,000 2,582,000
----------- ----------- -----------
----------- ----------- -----------

See accompanying notes.

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
YEARS ENDED AUGUST 31, 1997, 1996 AND 1995
------------------------------------------

COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED COMMON STOCK UNEARNED EMPLOYEE
SHARES AMOUNT CAPITAL EARNINGS HELD IN TREASURY BENEFIT EXPENSE
-------------------------------------------------------------------------------------------------

BALANCE, August 31, 1994 2,616,465 $26,000 $27,386,000 $10,079,000 $ (7,974,000) $ (689,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net loss (6,547,000)
Exercise of stock options 5,000 32,000
Employee stock purchase plan 3,700 20,000
Allocation of ESOP shares (87,000) 280,000
----------------------------------------------------------------------------------------------

BALANCE, August 31, 1995 2,625,165 26,000 27,351,000 3,532,000 (7,974,000) (409,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------

Net loss (5,124,000)
Exercise of stock options 30,000 174,000
Employee stock purchase plan 11,100 49,000
Allocation of ESOP shares (29,000) 214,000
----------------------------------------------------------------------------------------------

BALANCE, August 31, 1996 2,666,265 26,000 27,545,000 (1,592,000) (7,974,000) (195,000)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------

Net loss (4,436,000)
Employee stock purchase plan 8,400 1,000 38,000
Allocation of ESOP shares (216,000) 195,000

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

BALANCE, August 31, 1997 2,674,665 $ 27,000 $27,367,000 $(6,028,000) $(7,974,000) $ -0-
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------

See accompanying notes.

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Year Ended August 31,
1997 1996 1995
---- ---- ----
Cash Flows From Operating
Activities:

Net (loss) $(4,436,000) $(5,124,000) $(6,547,000)
------------ ------------ ------------
Adjustments to reconcile
net (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 8,548,000 7,782,000 10,397,000
Net loss (gain) on disposal
of equipment ( 220,000) 58,000 (352,000)
Impairment and restructuring
charge 1,080,000 2,000,000 7,681,000
Amortization of deferred
financing costs 153,000 252,000 603,000
Recognition of
deferred gain -- -- (117,000)
Deferred rent (204,000) (539,000) (123,000)
Accrued retirement
expense (128,000) 163,000 172,000
Accrued restructuring -- -- 273,000
Deferred income taxes -- 36,000 (2,520,000)
Decrease (increase), net
of acquired assets and
liabilities, in:
Accounts receivable, net 3,562,000 3,999,000 (1,928,000)
Other receivables 314,000 29,000 20,000
Prepaid expenses 171,000 605,000 213,000
Prepaid taxes 67,000 425,000 (486,000)
Other assets (63,000) (30,000) (222,000)
Increase (decrease), net
of acquired assets and
liabilities, in:
Accounts payable 1,788,000 (2,372,000) 835,000
Accrued expenses (452,000) (170,000) 559,000
Payroll and related
taxes (909,000) 16,000 (324,000)
------------ ------------ ------------
13,707,000 12,254,000 14,681,000
------------ ------------ ------------
Net cash provided by operating
activities 9,271,000 7,130,000 8,134,000
------------ ------------ ------------

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
-------------------------------------

Year Ended August 31,

1997 1996 1995
---- ---- ----

Cash Flows From Investing
Activities:
Capital expenditures $ (12,936,000) $ (9,134,000) $(9,738,000)
Acquisition of GC & Co.
assets -- -- (1,300,000)
Proceeds from disposal
of equipment 3,804,000 1,151,000 352,000
------------- ------------- -----------

Net cash used in investing
activities (9,132,000) (7,983,000) (10,686,000)
-------------- ------------- ------------

Cash Flows From Financing
Activities:
Proceeds from long-term
financing 15,976,000 25,717,000 6,120,000
Principal repayments (16,022,000) (24,495,000) (4,187,000)
Deferred Financing Costs -- (574,000) (90,000)
Repayment of note to Banta -- -- (500,000)
Proceeds from issuance of
common stock 39,000 223,000 52,000
Repayment of loan to ESOP (166,000) (172,000) (168,000)
Release of ESOP quarterly
shares (21,000) 185,000 193,000
-------------- ------------- -----------
Net cash (used) provided by
financing activities (194,000) 884,000 1,420,000
-------------- ------------- -----------

Net Increase(Decrease) In Cash (55,000) 31,000 (1,132,000)

Cash, Beginning of Year 192,000 161,000 1,293,000
------------- ------------ -----------

Cash, End of Year $ 137,000 $ 192,000 $ 161,000
------------- ------------ -----------
------------- ------------ -----------
Schedule of income taxes and
interest paid:

Income Taxes Paid $ 38,000 $ 85,000 $ 162,000
Interest Paid 3,685,000 3,374,000 3,256,000
------------- ------------ -----------

$ 3,723,000 $ 3,459,000 $ 3,418,000
------------- ------------ -----------
------------- ------------ -----------

UNITEL VIDEO, INC.
------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(continued)

Year Ended August 31,

1997 1996 1995
---- ---- ----
Supplemental schedule of non-
cash investing and financing
activities:

Capital lease obligations: $2,622,000
----------
----------

Detail of acquisition of GC & Co.:
Fair value of assets acquired $6,750,000
Subordinated note to seller (750,000)
Capital lease obligation (4,700,000)
-----------
Net cash paid for acquisition $1,300,000
-----------
-----------

See accompanying notes.

UNITEL VIDEO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Business -- The Company provides facilities for studio production,
videotape editing, mobile production, digital effects, film-to-tape transfer and
duplication of videotape in all formats to the entire video communications
industry. The Company's facilities are used to produce television programs,
corporate communications and commercials on videotape. The Company's mobile
division provides "on-location" services for the videotape recording and live
telecasting of sports, cultural and other events throughout North America. The
Company also designs and produces custom internet, CD-ROM, DVD, videodisc and
networked multimedia presentations. Customers for the Company's services
include cable television program suppliers, independent producers, national
television networks, local television stations, motion picture studios, program
syndicators and distributors and advertising agencies.

(2) Consolidation -- The consolidated financial statements include the accounts
of the Company and its two wholly-owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.

(3) Depreciation -- Depreciation is provided on a straight-line basis over the
estimated useful lives of assets which are: 30-40 years for buildings; 15-30
years for building improvements; length of lease for leasehold improvements; 5-7
years for video equipment; 5-7 years for furniture and fixtures; and 3 years for
automobiles. Gain on disposal of equipment is included in depreciation and
amortization expense for all years reported. (See Note H to Notes to
Consolidated Financial Statements).

(4) Goodwill -- Goodwill relating to acquisitions represents the excess of cost
over the fair value of net assets acquired and is amortized over 15 years.
Accumulated amortization at August 31, 1997, 1996 and 1995 totaled $345,000,
$207,000 and $69,000, respectively. (See Note J to Notes to Consolidated
Financial Statements).

(5) Deferred Financing Costs -- Costs incurred in obtaining long-term debt
financing are included in other assets. These costs are being amortized using
the interest method over the term of the related obligations.

(6) Interest Cost -- The Company had capitalized construction period interest
costs of $211,000 in 1997.

(7) Income Taxes -- Deferred income taxes arise primarily from the use of
different depreciation methods and lives for tax and financial statement
purposes, differences in the timing of the deduction for the impairment charge
and net operating loss and alternative minimum tax credit carryforwards.

(8) Receivables -- The Company grants credit to customers, substantially all of
whom are in the entertainment, advertising or corporate communications
industries.

(9) Earnings per common share were determined by dividing net earnings by the
weighted average of common and common equivalent shares outstanding. In
February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share, which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and, if applicable,
diluted earnings per share. Basic earnings per share is computed by dividing
income available to common shareholders by the weighted average common shares
outstanding and dilutive potential common shares such as stock options. The
adoption of this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.

(10) Revenue Recognition -- Revenue is recorded when services are provided.

(11) Financial Instruments -- The Company's principal financial instruments
consist of accounts receivable, accounts payable and long-term debt. The
Company believes that the carrying amount of such instruments approximates fair
value.

(12) Use of Estimates -- In preparing financial statements in conformity
with generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

(13) Stock-Based Compensation -- Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), "Accounting for Stock Based Compensation,"
provided companies a choice in the method of accounting used to determine
stock-based compensation. Companies may account for such compensation either
by using the intrinsic value-based method provided by APB Opinion No. 25
("APB No. 25"), "Accounting for Stock Issued to Employees," or the fair
market value-based method provided in SFAS No. 123. This statement is
required to be adopted by the Company during its fiscal year ending August
31, 1997. The Company has determined to use the intrinsic value-based method
provided in APB No. 25 to determine stock-based compensation. The sole
effect of the adoption of SFAS No. 123 is the obligation imposed on the
Company to comply with the new disclosure requirements provided thereunder.

(14) New Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). The Company will implement SFAS 130 and SFAS
131 as required in fiscal 1999, which require the Company to report and display
certain information related to comprehensive income and operating segments,
respectively. Adoption of SFAS 130 and SFAS 131 will not impact the Company's
financial position or results of operations.

(15) Reclassifications - Certain amounts in 1996 have been reclassified to
conform to 1997 presentation.

B. LONG-TERM DEBT
AUGUST 31,
----------

1997 1996
---- ----

Notes payable to financial institution:

Term portion A payable in monthly installments of
$100,000 through November 2001 plus interest on
the declining balance at Prime plus 1.00% or LIBOR
plus 2.75% and final payment of $3,500,000 due
December 2001. $ 8,701,000 $ 6,787,000

Term portion B payable from the sale of assets with
interest payable monthly at Prime plus 1.25% or
LIBOR plus 3.00%. Repaid November 1997. 1,259,000 6,588,000

Revolving portion payable in full in December 2001
with interest payable monthly at Prime plus .75% or
LIBOR plus 2.50%. 5,871,000 5,706,000

Mortgage payable to a bank, due in monthly installments
of principal of $22,000 through November 2002, plus
interest on the declining balance at Prime Plus .75%
or LIBOR plus 2.50% with a final payment of $2,152,000
due December 2002. 3,555,000 3,822,000

Mortgage payable to a bank, at a fixed interest rate of
8.6%, due in monthly installments of principal of $6,250,
plus interest on the declining balance, through June 2019. 1,644,000 1,719,000

Mortgage payable to an insurance company, at a fixed
interest rate of 8.9%, due in monthly installments of
$22,000 through July 2009. 1,930,000 2,010,000

Note payable to an insurance company, at a fixed rate
of 9.3%, due in monthly installments of $33,000
through February 2000. 1,164,000 1,436,000

Note payable to a financial institution at a fixed rate of
10.6%, due in monthly installments of $25,000 through
April, 2001. 923,000 --

Subordinated debt consisting of convertible subordinated
promissory notes payable to prior owners of GC & Co.
at an interest rate of Prime plus 1% due in full August
1998 and a subordinated promissory note payable to
Scanline Communications at an interest rate of Prime
plus 2% due in monthly installments of principal of
$35,000 with a final payment of $1,458,000 due
May 1999. 2,937,000 3,145,000

Allegheny County Industrial Development Authority
Variable Rate Demand Revenue Bonds. Interest
payable monthly based on a weekly remarketing rate,
estimated currently at 3.8%. Quarterly principal
payments of $179,000, commencing August 1998, to
be applied to the redemption of bonds which mature
July, 2009. 5,008,000 --
----------- ------------
32,992,000 31,213,000

Less current maturities 4,697,000 9,528,000
----------- ------------
$28,295,000 $ 21,685,000
----------- ------------
----------- ------------

In December 1995, the Company entered into a $26 million revolving credit
and term loan agreement with a financial institution, consisting of an $11
million revolving credit facility and two $7.5 million term loans (Term Loans A
and B). In May 1997, Term Loan A was revised by the inclusion of $2,500,000 of
the original Term Loan B and the advance of $518,000 of new funds, resulting in
a revised Term Loan A balance of $9,000,000. Term Loan A is payable in fifty
five (55) equal monthly principal installments of $100,000 plus interest, with
the balance of $3,500,000 due December 2001. In November 1997 Term Loan B was
repaid, in part from the proceeds of a new Term Loan D in the amount of
$2,500,000 which is due January 31, 1998. $3,742,000 of the original Term Loan
B was repaid from sales of equipment from the Company's Editel Chicago, Editel
New York and Unitel Hollywood divisions. The Company is currently in
negotiations to refinance or sell certain of its owned real estate and
anticipates using a portion of the proceeds of the refinancing or sale to repay
Term Loan D and other indebtedness and the balance of the proceeds for working
capital purposes.

In July 1997 the credit facility was further amended by the issuance of a
$5,080,000 letter of credit to secure payment of principal and interest on
$5,000,000 principal amount of Allegheny County (Pennsylvania) Industrial
Development Authority Variable Rate Demand Revenue Bonds. The proceeds from the
sale of the Bonds were loaned to the Company and were used by the Company to
build a new digital mobile production unit. The letter of credit requires
quarterly principal payments of $179,000 commencing August 1998 to be applied to
the redemption in equal principal amount of the Bonds. The Bonds mature on July
1, 2009 and, to the extent not previously redeemed in full as provided in the
prior sentence, are required to be repaid by the Company on that date. The
terms of the overall credit agreement with the financial institution provide
that the lender receive a first lien on all property and equipment and accounts
receivable that are not encumbered by another lender.

Additionally, in December 1995 the Company obtained a $4,000,000 mortgage
on its property located on West 57th Street in New York City from a bank. The
mortgage is payable in equal monthly installments of $22,000 through November
2002, with a final payment of $2,152,000 due in December 2002.

In February 1995 the Company purchased the business and assets of GC & Co.
The purchase price was $6,750,00, consisting of $6,000,000 in cash and $750,000
of convertible subordinated promissory notes. The cash portion of the purchase
price was financed by a $4,700,000, five-year capital lease and a $1,800,000
loan with a fixed interest rate of 9.3% payable in sixty equal monthly payments
of principal and interest of $33,000 and a balloon payment at the end of the
five-year period of $360,000. The promissory notes bear interest at 1% over
prime, were due in full in August 1997 and are convertible into the Company's
common stock at $10.00 per share. In August 1997, noteholders of $640,000
principal outstanding extended the maturity date of their notes to August 1998
on the same terms and conditions. The balance of the notes have been paid in
full.

The costs associated with the merger of the Unitel Hollywood and Editel Los
Angeles divisions necessitated the waiver at August 31, 1997 of compliance with
certain financial covenants, and amendment of those covenants, by the Company's
lenders of its revolving credit and term loan facility and its mortgage on the
Company's property on West 57th Street, New York City.

Property, equipment and accounts receivable with a carrying value of
$57,046,000 at August 31, 1997 are pledged as collateral for all long-term debt
outstanding.

The agreements relating to certain of these long-term obligations include
covenants which, among other terms, place restrictions on the Company's capital
expenditures, the maintenance of certain financial ratios (including minimum
levels of net worth and debt-to-equity restrictions, all as defined in the
agreements) and the payment of dividends.

At August 31, 1997, maturities of long-term debt for the next five years
are as follows:

YEAR ENDED AUGUST 31,
----------------------

1998 $ 4,697,000
1999 4,762,000
2000 3,174,000
2001 2,576,000
2002 10,965,000
2003 and thereafter 6,818,000
------------
$ 32,992,000
------------
------------

C. OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS

The Company has entered into various capital lease agreements for video
equipment. The leases expire at various times through 2000.

Property recorded under capital leases includes the following:

August 31,
1997 1996
---- ----

Video equipment $10,312,000 $10,447,000
Accumulated depreciation (4,539,000) (2,496,000)
------------ ------------
$ 5,773,000 $ 7,951,000
----------- ------------
----------- ------------

Future minimum lease payments, as of August 31, 1997 are as follows:

YEAR ENDED CAPITAL
AUGUST 31, LEASES
- ---------- ------

1998 $ 2,345,000
1999 1,815,000
2000 2,158,000
2001 28,000
2002 -0-
------------

Net minimum lease payments 6,346,000
Amount representing interest ( 734,000)
------------

Obligation under capital
lease agreements $ 5,612,000
------------
------------

Current portion $ 1,946,000

Long-term portion 3,666,000
------------

$ 5,612,000
------------
------------

D. STOCK OPTION PLANS

In January 1986 the Company's Board of Directors approved a Non-Statutory
Stock Option Plan (the "Non-Statutory Plan") to grant options to purchase up to
50,000 shares of the Company's Common Stock to the Company's non-employee
directors. Under the Non-Statutory Plan options to purchase 10,000 shares were
outstanding at August 31, 1997.

In July 1988 the Company's Board of Directors approved a Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") to grant options to purchase up to
125,000 shares of the Company's Common Stock primarily to key employees.
Options to purchase 10,000 shares granted to several officers under the
Non-Qualified Plan were outstanding at August 31, 1997.

In July 1992 the Company's shareholders approved the adoption of the 1992
Stock Option Plan (the "1992 Plan") to grant options to purchase up to 350,000
shares of the Company's Common Stock primarily to key employees and non-employee
directors. Prior to July 1992, the Company granted options under the plans
described above. All future stock option grants will be made under the 1992
Plan. Options to purchase 215,500 shares were outstanding to key employees and
non-employee directors under the 1992 Plan at August 31, 1997.

Under all plans, options have generally been granted to purchase stock at
the fair market value of the shares at the date of grant as determined by the
Board of Directors. Options expire ten years after the date of grant.

The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, no compensation cost
has been recognized for the stock options granted to employees and directors.
Had compensation cost been determined based on the fair value at the grant date
for stock option awards in fiscal 1996 and 1997, consistent with the provisions
of SFAS No. 123 the Company's net loss and loss per share for the years ended
August 31, 1996 and 1997 would have been increased by approximately $427,570 and
$69,230 or ($.16) and $(.03) per share, respectively. During the initial
phase-in period of SFAS No. 123, such compensation may not be representative of
the future effects of applying this statement. The weighted average fair value
at date of grant for options granted during 1996 and 1997 was $3.73 and $4.07
per option. The fair value of each option at date of grant was estimated using
the Black - Scholes option pricing model with the following weighted average
assumptions for grants in:

1996 1997

Expected stock price volatility 50% 45%
Expected lives of options 10 10
Risk-free interest rate 6.9% 6.9%
Expected dividend yield 0% 0%

The following table summarizes option activity for the years ended August
31, 1995, 1996 and 1997:

Weighted
Average
Number of Option Price Exercise
Shares Per Share Price
- ---------------------------------------------------------------------------------------------
Options Outstanding, August 31, 1994 239,700 $ 5.75 - $13.18 $8.20

Granted 34,000 $ 6.63 - $ 7.25 $7.13
Exercised (5,000) $ 6.50 $6.50
Expired and canceled (43,000) $ 5.88 - $13.18 $8.35
-------

Options Outstanding, August 31, 1995 225,700 $ 5.75 - $13.18 $8.05

Granted 111,500 $ 5.13 - $ 5.28 $5.25
Exercised (30,000) $ 5.75 - $ 5.87 $5.81
Expired and canceled (91,700) $ 5.75 - $10.81 $9.15
-------
Options Outstanding, August 31, 1996 215,500 $ 5.13 - $13.18 $6.27

Granted 25,000 $ 5.28 - $ 6.13 $5.79
Expired and canceled (5,000) $ 5.25 - $ 5.25 $5.25
-------

Options Outstanding, August 31, 1997 235,500 $ 5.13 - $13.18 $5.80
-------
-------

At August 31, 1997, a total of 284,500 shares were reserved for future
option grants for all plans and options to purchase 235,500 shares were
outstanding.

The following table summarizes information about stock options outstanding as of
August 31, 1997:

WEIGHTED AVERAGE
RANGE OF EXERCISE NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE

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

$ 5.13-$7.25 179,500 8 years $ 5.66
$ 8.25-$8.63 54,000 5 years $ 8.62
$ 13.18 2,000 5 years $13.18

E. EMPLOYEE STOCK OWNERSHIP PLAN

In June 1987, the Employee Stock Ownership Plan (the "ESOP") obtained
financing from a bank amounting to $1,250,000, which was used in acquiring
115,849 shares of newly issued Company stock. The bank loan was repaid in full
in June 1997. The loan obligation of the ESOP was considered unearned employee
benefit expense and is recorded as a separate reduction of the Company's
shareholders' equity.

In fiscal 1991, the ESOP purchased 25,810 shares of the Company's Common
Stock. These purchases have been financed by a ten-year loan from the Company
for $229,193. The loan from the Company was repaid in full in 1997.

401(K) EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

Effective July 1, 1992, the ESOP merged into the Unitel Video, Inc.
Retirement Investment Plan (a 401(k) Plan), which became the Unitel Video, Inc.
401(k) Employee Savings and Stock Ownership Plan (the "Plan"). The Plan
requires the Company to match employee contributions to the 401(k) portion of
the Plan in shares of the Company's Common Stock up to the maximum amount set
forth in the Plan. The minimum contribution required to be made each year by
the Company is the amount necessary to meet its debt service requirements. The
Plan combines a 401(k) plan with certain features of an employee stock ownership
plan.

Total contributions to the ESOP and the Plan for each of the years ended
August 31 are as follows:

1997 ............................. $223,000
1996 ............................. $248,000
1995 ............................. $336,000

The Company adopted Statement of Position 93-6 (SOP 93-6), "Employers'
Accounting for Employee Stock Ownership Plans" during fiscal 1995. In accordance
with SOP 93-6, compensation cost and liabilities associated with providing the
employer's 401(k) match are recognized the way they would be if an ESOP had not
been used to fund the benefit.

The Plan's compensation expense was $167,000 and $158,000 for the years ended
August 31, 1997 and 1996, respectively. A summary of the Plan's shares is as
follows:

Year ended August 31,

1997 1996
---- ----
---- ----
----
Allocated shares 116,881 96,666
Shares released for allocation 6,807 8,608
Unreleased shares -0- 27,575
------- -------
123,688 132,849
------- -------
Fair value of unreleased shares
at August 31 -0- $155,000
------- --------
------- --------

Prior to adoption of SOP 93-6, the unreleased shares were considered outstanding
for the earnings per share computation. Accordingly, for the years ended August
31, 1997 and 1996, shares were no longer considered outstanding. The effect of
adopting SOP 93-6 was not material on the net loss.

F. INCOME TAXES

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

Year ended August 31,

1997 1996

Current portion of deferred
tax assets

Employee medical benefits $ 231,000 $ 449,000
Bad debt reserve 264,000 395,000
----------- ----------
495,000 844,000
----------- ----------

Long-term portion of deferred
tax assets (liabilities)

Accrued retirement 504,000 560,000
Net assets held for sale -- 1,646,000
Net operating loss
carryforwards 3,242,000 3,062,000
ITC carryforwards-Federal
and State (net of ITC valuation
allowance) 467,000 467,000
AMT credit carryforwards 2,540,000 2,540,000
Other - net 228,000 501,000
Fixed assets basis difference between
book and tax (1,166,000) (5,086,000)
----------- ----------
5,815,000 3,690,000
Valuation Allowance (3,841,000) (2,065,000)
----------- ----------
1,974,000 1,625,000
----------- ----------
Net deferred tax asset $ 2,469,000 $2,469,000
----------- ----------
----------- ----------

The provision for income taxes is comprised of the following:

Year Ended August 31,

1997 1996 1995
---- ---- ----
Current:
Federal $ -0- $ -0- $ (270,000)
State 38,000 40,000 36,000
---------- --------- ----------
38,000 40,000 (234,000)
Deferred:
Federal -0- -0- 1,610,000)
State -0- -0- (950,000)
---------- --------- ----------
-0- -0- (2,560,000)
---------- --------- ----------
$ 38,000 $ 40,000 $(2,794,000)
---------- --------- ----------
---------- --------- ----------

The Company's effective tax rate was (1%) in 1997, (1%) in 1996 and (30%) in
1995. The components of the reconciliation of the Company's effective tax rate
to the U.S. statutory rate of 34% are as follows:

Year Ended August 31,

1997 1996 1995
---- ---- ----
Tax expense computed
at statutory rate $(1,495,000) $(1,729,000) $(3,176,000)

State income tax, net of
Federal income tax
benefit 25,000 26,000 (607,000)

Loss without benefit 1,410,000 1,634,000 -0-
Goodwill 47,000 47,000 649,000
Other 51,000 62,000 340,000
----------- ----------- -----------

Actual tax expense $ 38,000 $ 40,000 $(2,794,000)
----------- ----------- -----------
----------- ----------- -----------

The Company's total alternative minimum tax credit carryforward is
approximately $2,400,000, which can be used against the Company's future regular
tax liability.

At August 31, 1997, the Company had available for tax purposes in excess of
$2,000,000 of State of New York tax credits that will expire through August 31,
2002. The State of New York limits the use of these credits on an annual basis.
For financial reporting purposes, a valuation allowance of $1,900,000 has been
recognized to offset the deferred tax assets related to those carryforwards for
the fiscal year ended August 31, 1997.

The deferred tax asset relating to the net operating loss carryforward is
attributable to the unused portions of Federal net operating losses generated in
fiscal 1997, 1996 and 1993 of $74,000, $665,000 and $515,000, respectively,
which are scheduled to expire in 2012, 2011 and 2008, respectively, as well as
state net operating losses generated in fiscal 1995 of various amounts scheduled
to expire at various times through 2008.

Internal Revenue Code Section 382 places a limitation on the utilization of
Federal net operating loss and other credit carryforwards when an ownership
change, as defined by the tax law, occurs. Generally, this occurs when a
greater than 50 percentage point change in ownership occurs. Accordingly, the
actual utilization of the alternative minimum tax credit carryforwards and other
deferred tax assets for tax purposes may be limited annually to the percentage
(about 6%) of the fair market value of the Company at the time of any such
ownership changes.

G. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The following is a schedule by years of future minimum
rental payments under operating leases that have an initial non-cancelable lease
term in excess of one year:

1998 $ 3,644,000
1999 2,787,000
2000 1,992,000
2001 1,282,000
2002 613,000
2003 and thereafter 500,000
-------------
$ 10,818,000
-------------
-------------

The aggregate rental expense for the years ended August 31, 1997, 1996, and
1995 was $3,385,000, $3,874,000 and $3,867,000, respectively.

The Company maintains cash balances at financial institutions located in
New York, New York, Pittsburgh, Pennsylvania, Los Angeles, California and
Montreal, Canada. These balances are insured by the Federal Deposit Insurance
Corporation up to $100,000 in the United States and by the Canada Deposit
Insurance Corporation up to $60,000 (Canadian) in Canada. At August 31, 1997,
uninsured amounts held at these financial institutions were approximately
$221,000 (USD).

The Company had a contract with a union that expired on April 17, 1997 and
another that expired on November 30, 1997. The Company and the unions are
continuing to negotiate new contracts.

There are various lawsuits claiming amounts against the Company. It is the
opinion of the Company's management that the ultimate liabilities, if any, in
these cases will not have a material effect on the Company's financial
statements.

H. NET GAIN ON DISPOSITION OF EQUIPMENT

In June 1990, the Company sold to CBS Inc. a building it owned at 508-510
West 57th Street, New York, New York. The sale price of the property was
$4,650,000 payable in cash at the closing. As part of the transaction, the
Company entered into an Indenture of Lease with CBS, pursuant to which the
Company, as tenant, leased back the premises. The Company recognized a net gain
on the disposition of $2,277,000. In addition, under the provisions of
Statement of Financial Accounting Standards No. 98, the Company deferred
$922,000 of additional gain from the sale, representing the present value of the
future minimum rental payment under the portion of the lease which was not
subject to early termination. The remaining balance of the deferred gain of
$117,000 was recognized in the year ended August 31, 1995 as a reduction of rent
expense.

The Company has accelerated its efforts to sell equipment which is not
fully utilized. In order to properly reflect the sale of equipment as part of
the Company's operations, in 1997, 1996 and 1995, $220,000, $(58,000) and
$352,000, respectively, of (loss) gain on disposal of assets was included in
depreciation expense.

I. ACCRUED RETIREMENT

Under the terms of employment agreements with two former officers of the
Company, retirement payments commenced September 1, 1996. At August 31, 1997, a
liability of approximately $1,176,000 has been recorded, based upon the present
value of these payments. Approximately $55,000, $163,000 and $172,000 has been
charged to operations for the years ended August 31, 1997, 1996 and 1995,
respectively.

J. IMPAIRMENT AND RESTRUCTURING CHARGES

The Company has determined to focus its resources toward providing services
to the entertainment and corporate communications areas, which represent the
Company's strength. As part of this strategy, the Company decided to sell its
Editel New York, Editel Chicago and Editel Los Angeles divisions, which
specialize in the highly competitive commercial advertising portion of the video
facilities industry. During the 1995 fiscal year, the three Editel divisions
incurred a pretax loss of $3,682,000. As a result, the Company identified
property, plant and equipment associated with these divisions, which after an
impairment charge of $4,700,000 recorded as of August 31, 1995 had a carrying
value of approximately $19,300,000, that it no longer needed for its current and
future operations. During the fourth quarter of fiscal 1995, the Company
committed to a plan to dispose of the Editel divisions and in the first quarter
of fiscal 1996 began marketing these divisions to potential buyers.
Additionally, the Company reevaluated its investment in the Unitel Post 38
division in the fourth quarter of fiscal 1995 and determined that, based upon
this division's operating results, the goodwill associated with the purchase of
this division, and certain property, plant and equipment that will not provide
any future benefits to the Company, were impaired. The Company recognized an
impairment charge of approximately $3,000,000 included in impairment charges
during the fourth quarter of fiscal 1995 which represents the remaining balances
of these assets.

On February 22, 1996, the Company announced the closure of its Editel
Chicago division and subsequently distributed the majority of that division's
assets throughout the Company. The balance of the Editel Chicago division
equipment was sold in an auction which was held in May 1996. In March 1996, the
Company terminated the lease for its Editel Chicago division by making a
lump-sum payment to the landlord of $1,600,000. The restructuring charge of
$1,246,000 recorded in the quarter ended May 31, 1996, reflects this payment
less the reversal of $354,000 of accrued rent which would have been due under
the terms of the lease. Previously, in May of 1995, the Company adopted a plan
to downsize the operations of the Editel Chicago division and reorganize and
reduce its corporate management which resulted in recording a restructuring
charge of $400,000 for severance and early retirement expense.

During the months of March through May 1996, the editorial and computer
graphics departments of the Company's Editel New York division were closed. In
May 1996, the Company reached an agreement in principle to sell the film-to-tape
transfer business of Editel New York, which was the remaining operating
department, to a group of employees backed by a private investor. The Company
operated the film-to-tape transfer business through August 31, 1996, at which
time discussions with the employee-led group were terminated and the business
was closed. During the negotiations, the majority of the editorial and computer
graphics assets were distributed throughout the Company. At August 31, 1996,
the Company estimated the revised value of the remaining assets held for sale to
be approximately $1,587,000 and classified them on the balance sheet as
short-term. In November 1996, the Company sold the majority of those assets to
an unrelated third party for $1,400,000. The balance of the assets were
redeployed throughout the Company or disposed of through an auction. Proceeds
from the sale of assets were used by the Company to repay outstanding debt.

In June 1997 the Company merged its Unitel Hollywood and Editel Los Angeles
divisions. A significant portion of the equipment from Unitel Hollywood was
moved to the Editel Los Angeles location. Additionally, a portion of the
equipment was transferred to the Company's New York Post Production division for
future use. The balance of the equipment was sold and the proceeds in the
amount of $1,700,000 were used to repay long term debt. As a result of the
merger and sale, the company recorded a restructuring charge of $1,055,000 in
the fourth quarter of 1997. Additionally, after a reassessment of its New York
post production assets, the Company recorded an impairment charge of $300,000 in
the fourth quarter of 1997 with respect to those assets.

K. FOURTH QUARTER ADJUSTMENTS

During the fourth quarter of fiscal 1997, the Company recorded certain
adjustments which resulted in restructuring ($1,055,000) and impairment
($300,000) charges being recorded in the amount of $1,355,000. $1,055,000 of
these adjustments or $.39 per share, related to previously issued quarterly data
for the third quarter of 1997, which the Company is restating on Form 10-Q/A.
See Note L to Notes to Consolidated Financial Statements.

L. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------

YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS LOSS
1997 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------

1st quarter $ 16,370,000 $3,603,000 $ 935,000 $ .35
2nd quarter 15,000,000 2,514,000 (572,000) (.21)
3rd quarter 15,840,000 2,746,000 (1,579,000) (.59)
4th quarter 11,557,000 196,000 (3,220,000) (1.21)

YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS LOSS
1996 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------

1st quarter $22,940,000 $5,805,000 $ 522,000 $ .20
2nd quarter 20,529,000 3,171,000 (1,379,000) (.53)
3rd quarter 19,281,000 3,166,000 (2,290,000) (.88)
4th quarter 16,537,000 1,644,000 (1,977,000) (.75)

YEAR ENDED PRIMARY NET
AUGUST 31, GROSS NET EARNINGS(LOSS)
1995 SALES PROFIT EARNINGS(LOSS) PER SHARE
----------------------------------------------------------------------------------

1st quarter $21,233,000 $4,548,000 $ 439,000 $ .17
2nd quarter 20,581,000 3,560,000 50,000 .02
3rd quarter 20,831,000 3,345,000 (798,000) (.31)
4th quarter 20,640,000 2,613,000 (6,238,000) (2.41)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.

The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS.

The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders to by filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

(a) 1. The following financial statements of the Company are
included in Part II, Item 8:

PAGE

Report of Grant Thornton LLP Independent Accountants.................20
Consolidated Balance Sheets - August 31, 1997 and 1996...............21-22
Consolidated Statements of Operations - Years Ended
August 31, 1997, 1996, and 1995....................................23
Consolidated Statement of Stockholders' Equity - Years
Ended August 31, 1997, 1996 and 1995...............................24
Consolidated Statements of Cash Flows -
Years Ended August 31, 1997, 1996 and 1995.........................25-27
Notes to Consolidated Financial Statements...........................28-42

2. The following schedule is included
in Part IV:

Consolidated Financial Statement
Schedule

Schedule II - Valuation and Qualifying Accounts and Reserves...50

All other schedules are omitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.

(b) Reports on Form 8-K. No reports on Form 8-K were filed by
the Company during the three months ended August 31, 1997.

1. Exhibit 3(A). Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(A) of the Registrant's Annual Report on
Form 10-K filed November 24, 1992 (File No. 1-8654)).

2. Exhibit 3(B). Amended and Restated By-laws (incorporated by
reference to Exhibit 3(ii) of the Registrant's Quarterly Report on form 10-Q
filed April 15, 1996 (file No. 1-8654)).

3. Exhibit 4(A). Specimen of Stock Certificate (incorporated
by reference to Exhibit 4 of the Registrant's Annual Report on form 10-K filed
November 29, 1984 (File No. 1-8654)).

4. Exhibit 4(B). Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 among Unitel Video, Inc., R Squared,
Inc., and Heller Financial, Inc. as agent and lender (incorporated by reference
to Exhibit 4(B) of the Registrant's Annual Report on form 10-K filed December
14, 1995 (File No. 1-8654)).

5. Exhibit 4(C). First Amendment and Limited Waiver to Loan
and Security Agreement dated November 26, 1996.

6. Exhibit 4(D). Second Amendment to Loan and Security
Agreement and Limited Waiver dated as of February 24, 1997 (incorporated by
reference to Exhibit 4(A) of the Registrant's Quarterly Report on Form 10-Q
filed July 9, 1997 (File No. 1-8654)).

7. Exhibit 4(E). Third Amendment and Limited Waiver to Amended
and Restated Loan and Security Agreement dated as of March 21, 1997
(incorporated by reference to Exhibit 4(B) of the Registrant's Quarterly Report
on Form 10-Q filed July 9, 1997 (File No. 1-8654)).

8. Exhibit 4(F). Fourth Amendment to Amended and Restated Loan
and Security Agreement dated as of May 7, 1997 (incorporated by reference to
Exhibit 4(C) of the Registrant's Quarterly Report on Form 10-Q filed July 9,
1997 (File No. 1-8654)).

9. Exhibit 4(G). Fifth Amendment to Amended and Restated Loan
and Security Agreement dated as of July 24, 1997.

10. Exhibit 4(H). Reimbursement Agreement dated as of July 1,
1997 between Unitel Video, Inc. and Heller Financial, Inc., as agent.

11. Exhibit 4(I). Second Amended and Restated Credit Agreement
dated as of December 12, 1995 between Unitel Video, Inc. and The Chase Manhattan
Bank, N.A. (incorporated by reference to Exhibit 4(C) of the Registrant's Annual
Report on Form 10-K filed December 14, 1995 (File No. 1-8654)).

12. Exhibit 4(J). Waiver to Loan and Security Agreement dated
April 12, 1996 (incorporated by reference to Exhibit 4(D) of the Registrant's
Annual Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).

13. Exhibit 4(K). Waiver and Agreement to Amend Financial
Covenants dated November 27, 1996 (incorporated by reference to Exhibit 4(E) of
the Registrant's Annual Report on Form 10-K filed November 27, 1996 (File No.
1-8654)).

14. Exhibit 4(L). First Amendment to Second Amended and Restated
Credit Agreement dated as of May 31, 1997.

15. Exhibit 4(M). Loan Agreement dated as of July 1, 1997
between Unitel Video, Inc. and the Allegheny County Industrial Development
Authority.

16. Exhibit 4(N). Pledge Agreement dated as of July 1, 1997
among Unitel Video, Inc., PNC Bank, National Association and Heller Financial,
Inc., as agent.

17. Exhibit 10. Material Contracts:

10(A). Amended Non-Qualified Stock Option Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(A) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*

10(B). Lease Agreement between Unitel Video, Inc. and
Educational Broadcasting Corporation dated July 16, 1993 (incorporated by
reference to Exhibit 10(B) of the Registrant's Annual Report on Form 10-K filed
November 26, 1993 (File No. 1-8654)).

10(C). Amended Non-Statutory Stock Option Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(C) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*

10(D). Amended Employee Stock Purchase Plan of Unitel Video,
Inc. (incorporated by reference to Exhibit 10(D) of the Registrant's Annual
Report on Form 10-K filed November 27, 1996 (File No. 1-8654)).*

10(E). Employment & Consulting Agreement between Unitel Video,
Inc. and Herbert Bass dated as of May 26, 1988 (incorporated by reference to
Exhibit 10(R) of the Registrant's Annual Report on Form 10-K filed December 13,
1989 (File No. 1-8654)).*

10(F). Employment & Consulting Agreement between Unitel Video,
Inc. and Alex Geisler dated as of May 26, 1988 (incorporated by reference to
Item 14(C)4(S) of the Registrant's Annual Report on form 10K filed December 13,
1989 (File No. 1-8654)).*

10(G). Amendment to Employment and Consulting Agreement dated as
of February 14, 1996 between Unitel Video, Inc. and Alex Geisler. (incorporated
by reference to Exhibit 10(G) of the Registrant's Annual Report on Form 10-K
filed November 27, 1996 (File No. 1-8654)).*

10(H). Lease Agreement between UNV, Inc. and HBWC Limited
Partnership dated as of August 12, 1988 (incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed December 13, 1989
(File No. 1-8654)).

10(I). Lease Agreements between Windsor Video, Inc. and Time
Equities Inc. dated as of September 4, 1986 (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on form 10-K filed December 13,
1989 (File No. 1-8654)).

10(J). Amendment to each Lease Agreement between Windsor Video,
Inc. and Time Equities Inc. dated as of July 13, 1994 and July 18, 1994
(incorporated by reference to Exhibit 10(K) of the Registrant's Annual Report on
form 10-K filed November 28, 1994 (File No. 1-8654)).

10(K). Lease Agreement between Unitel Video, Inc. and CBS, Inc.
dated as of June 15, 1990 (incorporated by reference to Exhibit 10(Y) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No.
1-8654)).

10(L). Amendment to Lease Agreement dated July 11, 1996 between
Unitel Video, Inc. and CBS, Inc. (incorporated by reference to Exhibit 10(L) of
the Registrant's Annual Report on Form 10-K filed November 27, 1996 (File No.
1-8654)).

10(M). Assumption and Assignment of Lease between Unitel Video,
Inc. and VCA/Teletronics Inc. dated May 19, 1990 (incorporated by reference to
Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed November 26,
1990 (File No. 1-8654)).

10(N). Amendment to Lease between Unitel Video, Inc. and Stage
57 Co. dated May 14, 1990 (incorporated by reference to Exhibit 10(BB) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No.
1-8654)).

10(O). Second Amendment to Lease between Unitel Video, Inc. and
Stage 57 Co. dated as of May 1, 1994 (incorporated by reference to Exhibit 10(O)
of the Registrant's Annual Report on Form 10-K filed November 28, 1994 (File No.
1-8654)).

10(P). Amended 1992 Stock Option Plan. (incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q filed
April 7, 1997 (File No. 1-8654)).*

10(Q). Lease Termination and Release Agreement dated as of March
13, 1996 between Unitel Video, Inc. and Putman Publishing Company (Incorporated
by reference to Exhibit 10(Q) of the Registrant's Annual Report on Form 10-K
filed November 27, 1996 (File No. 1-8654)).

10(R). Assignment, Assumption and Acceptance of Lease between
Scanline Communications and Unitel Video, Inc. (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on Form 10-K filed November 24,
1992 (File No. 1-8654)).

10(S). Asset Purchase Agreement dated as of May 5, 1992 between
Unitel Video, Inc. and Scanline Communications (incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated May 15, 1992
(File No. 1-8654)).

10(T). Amendment dated as of October 29, 1992 to Asset Purchase
Agreement dated as of May 5, 1992 between Unitel Video, Inc. and Scanline
Communications (incorporated by reference to Exhibit 10(X) of the Registrant's
Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(U). Lease Agreement between First East Associates and Unitel
Video, Inc. dated May 26, 1993 and Sublease dated May 26, 1993 between Unitel
Video, Inc. and KingWorld Productions, Inc.(incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed November 26, 1993
(File No. 1-8654)).

10(V). Sublease Agreement dated April 1, 1987 between R.E.
Graphics, Inc. (f/k/a Micor, Inc.) and Scanline Communications, together with
Modification dated February 1989 of Sublease Agreement (incorporated by
reference to Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed
November 24, 1992 (File No. 1-8654)).

10(W). Sublease Agreement dated January 1, 1982 between Columbia
Pictures Industries, Inc. and Bell & Howell/Columbia Pictures Video Services,
together with letter dated April 3, 1989 from Columbia Pictures to Scanline
Communications and undated Letter from Columbia Pictures to 43rd Street Estates
Corp. (incorporated by reference to Exhibit 10(BB) of the Registrant's Annual
Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(X). Third Tier Sublease, dated May 14, 1996, between Unitel
Video, Inc. and Photo-Magnetic Sound Studios Inc. (incorporated by reference to
Exhibit 10(X) of the Registrant's Annual Report on Form 10-K filed November 27,
1996 (File No. 1-8654)).

10(Y). Sublease Agreement dated as of July 3, 1996 between
Unitel Video, Inc. and Henry Dreyfuss Associates and Second Tier Sublease dated
as of July 3, 1996 between Unitel Video, Inc. and Paramount Pictures Corporation
(incorporated by reference to Exhibit 10(Y) of the Registrant's Annual Report on
Form 10-K filed November 27, 1996 (File No. 1-8654)).

10(Z). 401K Employee Savings and Stock Ownership Plan of Unitel
Video, Inc. effective July 1, 1992 (incorporated by reference to Exhibit 10(X)
of the Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No.
1-8654)).*

10(AA). Asset Purchase Agreement dated as of February 24, 1995
between Jee See & Co., Inc. and Unitel Video, Inc. (incorporated by reference to
Exhibit 2-1 of the Registrant's Current Report on Form 8-K dated February 24,
1995 (File No. 1-8654)).

10(BB). Two Third Tier Sublease agreements dated November 22,
1996 between Unitel Video, Inc. and Digital Universe II, Inc. (incorporated by
reference to Exhibit 10(BB) of the Registrant's Annual Report on Form 10-K filed
November 27, 1996 (File No. 1-8654)).

10(CC). Employment Agreement between Editel Los Angeles and
Albert Walton dated as of March 20, 1997 (incorporated by reference to Exhibit
10(A) to the Registrant's Quarterly Report on Form 10-Q filed July 9, 1997 (File
No. 1-8654)).

10(DD). Deed of Lease dated June 16, 1997 between Olymbec
Construction Inc. and Unitel Video Canada Inc.

10(EE). Remarketing Agreement, dated as of July 1, 1997, among
Allegheny County Industrial Development Authority, PNC Bank, National
Association, Unitel Video, Inc. and RRZ Public Markets, Inc.

18. Exhibit 23. Accountant's consent.

19. Exhibit 24. Power of Attorney from officers and directors to
Barry Knepper (included on signature page).

20. Exhibit 27. Financial Data Schedule.

* Management contract or compensatory plan or arrangement required to be noted
as provided in Item 14(a)(3).

UNDERTAKING

The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities and Exchange Act of 1934
and the total amount of securities authorized under any of such instruments does
not exceed 10% of the total assets of the Company and its subsidiary on a
consolidated basis.

UNITEL VIDEO, INC.
------------------

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
------------------------------------------------------------

COLUMN A COLUMN B COLUMN C1 COLUMN D COLUMN E
-------- -------- --------- -------- --------

BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
----------- --------- ---------- ---------- ---------

YEAR ENDED AUGUST 31, 1997
Allowance for doubtful accounts $712,000 $(10,000) $290,000 $412,000
-------- -------- -------- --------
-------- -------- -------- --------

YEAR ENDED AUGUST 31, 1996
Allowance for doubtful accounts $686,000 $407,000 $381,000 $712,000
-------- -------- -------- --------
-------- -------- -------- --------

YEAR ENDED AUGUST 31, 1995
Allowance for doubtful accounts $690,000 $125,000 $129,000 $686,000
-------- -------- -------- --------
-------- -------- -------- --------

COLUMN D
- --------

Uncollectible accounts written off.

COLUMN E
- --------
Deducted in balance sheet from accounts receivable.

For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statement on form S-8 Nos. 33-7306
(filed July 15, 1986), 33-13660 (filed April 20, 1987), 33-14654 (filed May 28,
1987) and 33-00613 (filed February 8, 1996).

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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
of 1933 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 directors, officers 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 of 1993 and will be governed by the final adjudication of such issue.

SIGNATURE AND POWER OF ATTORNEY

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

UNITEL VIDEO, INC.

December 12, 1997 By: /s/ Barry Knepper
-------------------------
Barry Knepper
Chief Executive Officer

December 12, 1997 By: /s/ George Horowitz
-------------------------
George Horowitz
Chief Financial Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Barry Knepper and George Horowitz, and each of
them, 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 to this report, and to
file the same, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

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

SIGNATURE TITLE DATE

/s/ Barry Knepper Chief Executive Officer; December 12, 1997
- -------------------------
Barry Knepper President and Director

/s/ Richard L. Clouser Senior Vice President - December 12, 1997
- -------------------------
Richard L. Clouser Corporate, President
of the Mobile Division
and Director

/s/ Herbert Bass Director December 12, 1997
- -------------------------
Herbert Bass

/s/ Alex Geisler Director December 12, 1997
- -------------------------
Alex Geisler

/s/ Walter G. Arader Director December 12, 1997
- -------------------------
Walter G. Arader

/s/ Philip Birsh Director December 12, 1997
- -------------------------
Philip Birsh