<PAGE>


                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                  FORM 10-Q


     (Mark One)
     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934.
          For the quarterly period ended March 31, 1998
                                         --------------

                       OR


     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          FOR THE TRANSITION PERIOD FROM ____ TO _____




                       COMMISSION FILE NUMBER 000-21171

                       SPLASH TECHNOLOGY HOLDINGS, INC.
            (Exact name of registrant as specified in its charter)



                  DELAWARE                                    77-0418472
      (State or other jurisdiction of                        (IRS Employer
       incorporation or organization)                      Identification No.)
     555 DEL REY AVENUE, SUNNYVALE, CA                            94086
  (Address of principal executive offices)                     (Zip Code)

      Registrant's telephone number, including area code: (408) 328-6300



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 [ ]

The number of shares outstanding of the Registrant's Common Stock. $.001 par 
value, as of March 31, 1998 was 13,858,800 shares.


                                       1
<PAGE>

                       SPLASH TECHNOLOGY HOLDINGS, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                  December 31,      March 31,
                                                      1997            1998
                                                  ------------     ----------
                                                                   (Unaudited)
<S>                                               <C>              <C>
                     ASSETS

Current Assets:
  Cash and cash equivalents                         $43,637          $53,094
  Marketable securities                              10,073            4,500
  Accounts receivable, net of allowance 
    for doubtful accounts of $369 and $363 
    as of December 31, 1997 and March 31, 
    1998, respectively                                4,399            5,452
  Inventories                                         3,541            3,023
  Prepaid expenses and other current assets             527              409
  Deferred income taxes                               4,094            4,094
                                                    -------          -------
          Total current assets                       66,271           70,572
Property and equipment, net                           1,385            1,509
Deferred income taxes                                11,198           11,198
Other assets                                          3,639            3,370
                                                    -------          -------
          Total assets                              $82,493          $86,649
                                                    -------          -------
                                                    -------          -------

                     LIABILITIES

Current Liabilities:
  Trade accounts payable                            $ 2,283            3,478
  Accrued and other liabilities                      18,711           18,199
  Deferred revenue                                    1,700            2,998
                                                    -------          -------
          Total current liabilities                  22,694           24,675
Other long term liabilities                             932              958
                                                    -------          -------
          Total liabilities                          23,626           25,633
                                                    -------          -------

                 STOCKHOLDERS' EQUITY

Common stock, par value $.001 per share:
  Authorized: 50,000,000 shares.
  Issued and outstanding: 13,855,089 shares 
    and 13,858,800 shares as of December 31, 
    1997 and March 31, 1998, respectively                14               14
Additional paid-in capital                           85,458           85,468
Accumulated Deficit                                 (26,605)         (24,466)
                                                    -------          -------
          Total stockholders' equity                 58,867           61,016
                                                    -------          -------

          Total liabilities and 
            stockholders' equity                   $ 82,493          $86,649
                                                    -------          -------
                                                    -------          -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       2
<PAGE>

                       SPLASH TECHNOLOGY HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                 (UNAUDITED))

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED MARCH 31,
                                                     1997             1998
                                                  ----------       ---------
<S>                                               <C>              <C>
Net revenue                                        $16,053          $17,997
Cost of net revenue                                  7,683            8,264
                                                   -------          -------
        Gross profit                                 8,370            9,733
                                                   -------          -------

Operating expenses:
  Research and development                           1,145            3,163
  Sales, general and administrative                  2,129            3,671
                                                   -------          -------
        Total operating expenses                     3,274            6,834
                                                   -------          -------

          Income from operations                     5,096            2,899

Interest income, net                                   150              442
                                                   -------          -------
          Income before income taxes                 5,246            3,341

Provision for income taxes                           1,993            1,203
                                                   -------          -------

                 Net income                        $ 3,253          $ 2,138
                                                   -------          -------
                                                   -------          -------

Basic net income per share                         $  0.27          $  0.15
                                                   -------          -------
                                                   -------          -------

Diluted net income per share                       $  0.26          $  0.15
                                                   -------          -------
                                                   -------          -------

Shares used in basic net income per 
  share calculation                                 12,045           13,857
                                                   -------          -------
                                                   -------          -------

Shares used in diluted net income per 
  share calculation                                 12,395           14,057
                                                   -------          -------
                                                   -------          -------
</TABLE>

 The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       3
<PAGE>

                       SPLASH TECHNOLOGY HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED MARCH 31,
                                                     1997             1998
                                                  ----------       ---------
<S>                                               <C>              <C>

Cash flows from operating activities:
  Net income                                       $ 3,253          $ 2,138
  Adjustments to reconcile net income to net
    cash provided by operating activities:
  Depreciation and amortization                         75              455
  Provision for doubtful accounts                        -                -
  Changes in assets and liabilities:
    Accounts receivable                               (501)          (1,053)
    Inventories                                      2,035              518
    Prepaid expenses and other current assets           49              118
    Other assets                                        (1)              14
    Trade accounts payable                          (1,215)           1,195
    Accrued and other liabilities                       58             (485)
    Deferred revenue                                  (192)           1,298
                                                   -------          -------
      Net cash provided by operating activities      3,561            4,198
                                                   -------          -------

Cash flows from investing activities:
  Redemption of marketable securities                    -            5,573
  Purchase of property and equipment                  (177)            (324)
                                                   -------          -------
      Net cash provided by (used in) 
        investing activities                          (177)           5,249
                                                   -------          -------

Cash flows from financing activities:
  Proceeds (expenses) from public offerings           (464)               -
  Issuance and repurchase of common stock
    under stock plans                                    -               10
                                                   -------          -------
      Net cash provided by (used in) 
        financing activities                          (464)              10
                                                   -------          -------

Net increase in cash                                 2,920            9,457

Cash and cash equivalents, beginning of period      19,053           43,637
                                                   -------          -------

Cash and cash equivalents, end of period           $21,973          $53,094
                                                   -------          -------
                                                   -------          -------
</TABLE>

 The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                       4

<PAGE>

                       SPLASH TECHNOLOGY HOLDINGS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1.   REORGANIZATION AND BASIS OF PRESENTATION

     Splash Technology Holdings, Inc. (the "Company"), through its wholly-
     owned subsidiaries, develops, produces and markets color servers, which
     consist of computer hardware and software systems that provide an 
     integrated link between desktop computers and digital color copiers and 
     enable such copiers to provide high speed and quality networked color 
     printing and scanning. The Company sells its color servers through two 
     original equipment manufacturers ("OEMs") who integrate the Company's 
     color servers into connected digital color photocopier systems, which are 
     sold to end users in North and South America, Europe, Asia, Australia, 
     Japan, New Zealand, Africa and the Middle East. The Company operates in 
     one business segment.

     The accompanying unaudited consolidated financial information has been
     prepared by the Company in accordance with generally accepted accounting
     principles for interim financial statements and pursuant to the rules of 
     the Securities and Exchange Commission on Form 10-Q. Certain information 
     and footnote disclosures normally included in financial statements 
     prepared in accordance with generally accepted accounting principles have 
     been condensed or omitted pursuant to the rules and regulations of the 
     Securities and Exchange Commission. The December 31, 1997 balance sheet 
     was derived from audited financial statements but does not include all 
     disclosures required by generally accepted accounting principles. In the 
     opinion of management, the accompanying consolidated financial statements 
     contain all normal, recurring adjustments necessary to present fairly the 
     Company's consolidated financial position as of March 31, 1998 and the 
     results of operations and cash flows for the three months ended March 31, 
     1998, which results are not necessarily indicative of results on an 
     annual basis. Effective January 1, 1998, the Company changed its fiscal 
     year end from September 30 to December 31. The consolidated financial 
     statements should be read in conjunction with the consolidated financial 
     statements and related notes contained in the Company's Annual Report on 
     Form 10-K for the fiscal year ended September 30, 1997, and the form 10-Q 
     for the period ended December 31, 1997.

2.   BALANCE SHEET DETAIL (IN THOUSANDS):

     INVENTORIES:

<TABLE>
                                                    December 31,     March 31,
                                                        1997           1998
                                                    ------------     ---------
     <S>                                            <C>              <C>
     Raw materials                                    $ 2,403         $ 2,592
     Finished goods                                     1,138             431
                                                      -------         -------
                                                      $ 3,541         $ 3,023
                                                      -------         -------
                                                      -------         -------

     ACCRUED AND OTHER LIABILITIES:
       Royalties payable                              $ 5,391         $ 5,643
       Accrued payables                                 3,796           1,962
       Accrued product-related obligations              4,063           4,137
       Accrued compensation and related expenses          682           1,067
       Income taxes payable                             4,193           4,877
       Other liabilities                                  586             513
                                                      -------         -------
                                                      $18,711         $18,199
                                                      -------         -------
                                                      -------         -------
</TABLE>


3.   RECENT ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 1998, the Company adopted the provisions of 
     Statement of Position 97-2 "Software Revenue Recognition."  There was no 
     impact on the Company's financial condition and the Company's revenue 
     recognition policies remain substantially unchanged.

     Effective January 1, 1998, the Company has adopted the provisions of 
     Statement of Financial Accounting Standards No. 130, "Reporting 
     Comprehensive Income." The adoption of the Statement of Financial 
     Accounting Standard No. 130 had no impact on the Company. As such, no 
     separate Statement of Comprehensive Income has been presented.

     In 1997, the Financial Accounting Standards Board issued Statement of 
     Financial Accounting Standards No. 131 "Disclosures about Segments of an 
     Enterprise and Related Information." The pronouncement is effective for 
     the year ended December 31, 1998.  The Company is evaluating this recent 
     pronouncement and the effects, if any, on the Company's current policies.


                                       5
<PAGE>


4.   COMPUTATION OF NET INCOME (LOSS) PER SHARE

     The Company has adopted the provisions of Statement of Financial 
     Accounting Standards No. 128, "Earnings Per Share," ("SFAS 128") 
     effective December 31, 1997.  SFAS 128 requires the presentation of 
     basic and diluted earnings per share (EPS).  Basic EPS is computed by 
     dividing income available to common shareholders by the weighted average 
     number of common shares outstanding for the period.  Diluted EPS is 
     computed giving effect to all dilutive potential common shares that were 
     outstanding during the period.  Dilutive potential common shares consist 
     of incremental shares issuable upon exercise of stock options.

     In accordance with the disclosure requirements of SFAS 128, a 
     reconciliation of the numerator and denominator of basic and diluted EPS 
     is provided as follows (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):

<TABLE>
                                                  Three Months Ended March 31,
                                                         1997          1998
                                                      --------       --------
     <S>                                          <C>                <C>
     Numerator - Basic and Diluted EPS
       Income available to common stockholders        $ 3,253        $ 2,138
                                                      -------        -------
                                                      -------        -------

     Denominator - Basic EPS
       Weighted average shares outstanding             12,045         13,857
                                                      -------        -------
       Basic earnings per share                       $  0.27        $  0.15
                                                      -------        -------
                                                      -------        -------

     Denominator - Diluted EPS
       Denominator - Basic EPS                         12,045         13,857
       Effect of dilutive securities:
            Common stock options                          350            200
                                                      -------        -------
                                                       12,395         14,057
                                                      -------        -------
                                                      -------        -------
       Diluted earnings per share                     $  0.26        $  0.15
                                                      -------        -------
                                                      -------        -------
</TABLE>

     Options to purchase 6,642 and 1,434,536 shares of common stock were 
     outstanding at March 31, 1997 and 1998, respectively, but were not 
     included in the calculation of diluted net income per share because the 
     options' exercise price was greater than the average market price of the 
     common shares.

                                       6
<PAGE>

ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS AND OTHER PARTS OF THIS FORM 10Q CONTAIN 
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ALL 
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION 
AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE COMPANY ASSUMES NO 
OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S 
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE 
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE 
SET FORTH IN "FACTORS AFFECTING FUTURE RESULTS".

RESULTS OF OPERATIONS

     The Company has achieved significant growth in net revenue and operating 
income each year since fiscal 1994, before purchase accounting adjustments. 
The Company's growth is contingent on a number of factors, many of which are 
outside of its control.  These factors include the overall rate of growth in 
the color server market and the impact of economic conditions in Japan 
(including the dollar/yen currency exchange rate) on the demand for Splash's 
products and its customer's purchasing pattern.  Due to these and other 
factors (including an increasingly higher base from which to grow), the 
Company's historical growth rate will be difficult to sustain or exceed in 
the future.  In addition, the Company's overall expense level is expected to 
increase as the Company continues to build corporate infrastructure and 
expand its operations. Accordingly, the Company believes that 
period-to-period comparisons of its financial results should not be relied 
upon as an indication of future performance.

     The Company establishes its expenditure levels for operating expenses 
based on projected sales levels and margins, and expenses are relatively 
fixed in the short term. Moreover, the Company expects to continue to expand 
its sales and marketing, technical and customer support, research and product 
development and administrative activities. Accordingly, if sales are below 
expectations in any given quarter, the adverse impact of the shortfall in 
revenues on operating results may be increased by the Company's inability to 
adjust spending in the short term to compensate for the shortfall.

     The following table sets forth consolidated statement of operations data 
as a percentage of net revenue for the periods indicated:

<TABLE>
                                               Three Months Ended March 31,
                                                    1997          1998
                                               ------------   ------------
  <S>                                          <C>            <C>

  Net revenue                                       100%            100%
  Cost of net revenue                                48              46
                                                    ---             ---
    Gross profit                                     52              54
                                                    ---             ---
  Operating expenses:
    Research and development                          7              18
    Sales, general and administrative                13              20
                                                    ---             ---
        Total operating expenses                     20              38
  Income from operations                             32              16
                                                    ---             ---
  Interest income                                     1               3
                                                    ---             ---
        Income before income taxes                   33              19
  Provision for income taxes                         13               7
                                                    ---             ---
    Net income                                       20%             12%
                                                    ---             ---
                                                    ---             ---
</TABLE>


     NET REVENUE. The Company's net revenue increased 12% to $18 million in 
the three months ended March 31, 1998 from $16.1 million in the three months 
ended March 31, 1997. These increases were primarily attributable to higher 
unit sales of the Company's products due to increasing market acceptance of 
the Company's PCI and DC Series products and expanded product offerings. The 
Company sells a range of products and the revenue for any period will be 
determined by the product mix sold in that period. In addition, the Company 
sells a substantial portion of its products to two customers, Fuji Xerox 
Company Ltd. ("Fuji Xerox") and Xerox Corporation ("Xerox") on an OEM basis 
and, historically, fluctuations in net revenue are in part due to the 
purchasing patterns of these customers.  Because of a recent change in year 
end of one of these customers, and consequently, a change in purchasing 
patterns, the March 1998 quarter net revenue was lower than the December 1997 
quarter net revenue, and the remaining 1998 quarterly sales patterns are 
expected to change. There can be no assurance that the Company's two major 
customers, Fuji Xerox Company Ltd. or Xerox Corporation will not change its 
mix of product in a manner which would adversely impact net revenue.

     All sales to Fuji Xerox, and a portion of the Company's sales to Xerox, 
are international sales.  In addition, given Xerox's international customer 
base, the Company believes that a portion of Splash products purchased by 
Xerox in the U.S. are resold outside the United States. The Company expects 
that direct and indirect international sales will continue to represent a 
substantial portion of its net revenue for the foreseeable future. While the 
Company's international sales are generally denominated in U.S. dollars, 
fluctuations in currency exchange rates could cause, and, in the case of 
Japan, have caused, the Company's products to become relatively more 
expensive to end users in a particular country, leading to pressure to reduce 
the U.S. dollar denominated price to the Company's OEM customers. Such 
pressure could in turn result in a reduction in net revenue and profitability.


                                       7
<PAGE>

     GROSS MARGIN.  Gross margins were 52% and 54% in the three months ended 
March 31, 1997 and 1998, respectively. The increase in gross margin was 
primarily due to economies of scale derived from higher sales volumes, and 
reductions in component costs achieved through new product designs and 
favorable component pricing. The Company expects that gross margins will 
fluctuate from period to period and may decrease in future periods. Gross 
margin is affected by a number of factors, including product mix, product 
pricing and manufacturing and component costs. The average selling price of 
the Company's products has decreased in the past primarily as a result of 
competitive market pressures, the introduction of lower priced products and, 
in certain cases, in response to new product introductions by the Company's 
customers and competitors. The Company expects this trend to continue in the 
future.  Any decline in average selling prices of a particular product which 
is not offset by a reduction in production costs or by sales of other 
products with higher gross margins would decrease the Company's overall gross 
margin and adversely affect the Company's operating results.

     RESEARCH AND DEVELOPMENT.  Research and development expenses increased 
191% to $3.2 million in the three months ended March 31, 1998 from $1.1 
million in the three months ended March 31, 1997. As a percentage of net 
revenue, research and development increased to 18% in the three months ended 
March 31, 1998 from 7% in the three months ended March 31, 1997. The increase 
in research and development expenses reflects the addition of engineering 
resources through the acquisitions of Quintar Holdings Corporation 
("Quintar") and ColorAge Corporation ("ColorAge") in 1997. In addition, the 
increases in these expenses were also attributable to increased staffing and 
associated support required to enhance the Company's product line. Except for 
charges related to acquisitions, all research and development costs to date 
have been expensed as incurred. In view of the acquisitions and current 
projects under development and contemplated, research and development 
expenses are expected to increase in absolute dollars and as a percentage of 
net revenue in future periods.

     SALES, GENERAL AND ADMINISTRATIVE.  Sales, general and administrative 
expenses increased 76% to $3.7 million in the three months ended March 31, 
1998 from $2.1 million in the three months ended March 31, 1997. As a 
percentage of net revenue, sales, general and administrative expenses 
increased to 20% in the three months ended March 31, 1998 from 13% in the 
three months ended March 31, 1997. The increases in these expenditures were 
primarily related to expansion of the Company's sales support and marketing 
staff and associated costs (primarily to increase the Company's level of 
support for Xerox's sales organization), the implementation of promotional 
programs designed to improve name and product recognition in the end user 
community and the Company's increased participation in industry trade shows. 
In addition, the increases in these expenditures were due to increased salary 
and related costs from increased headcount related to the Company's efforts 
to enhance its corporate infrastructure and to support expansion of its 
operations. The Company believes that its sales, general and administrative 
expenses will increase in absolute dollars in the foreseeable future as it 
continues to implement additional management and operational systems, and 
expand its administrative staff. Sales, general, and administrative expenses 
are expected to increase in absolute dollars in future periods, although they 
may vary as a percentage of net revenue.

     PROVISION FOR INCOME TAXES. The Company accounts for income taxes in 
accordance with the Financial Accounting Standards Board's Statement of 
Financial Accounting Standard No.109 "Accounting for Income Taxes". The 
Company's effective tax rate was 38% and 36% for the three months ended March 
31, 1997 and 1998, respectively . The efective tax rate differs from the 
statutory rate primarily due to the benefits derived from the Splash Foreign 
Sales Corporation and research and development credits.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company has obtained sufficient cash from its public offerings and 
operations to satisfy its current liquidity requirements.

     As of March 31, 1998, the Company had $57.6 million of cash, cash 
equivalents and marketable securities and had no borrowings under its $5 
million bank line of credit. Borrowings under the line of credit bear 
interest at the prime rate and are available under the line of credit based 
on a percentage of eligible accounts receivable. The Company has 
re-negotiated its line of credit which has been increased to $10.0 million 
dollars.  This line expires April 18, 2000.

     For the three months ended March 31, 1997, the Company generated $3.6 
million in cash from operating activities, primarily due to a decrease in 
inventories partially offset by a decrease in trade accounts payable, and an 
increase in accounts receivable. The Company's operating activities provided 
$4.2 million in cash in the three months ended March 31, 1998, primarily from 
a increase in deferred revenue and trade accounts payable, and a decrease in 
inventories, partially offset by increased accounts receivable.

     Investing activities were not material in the three months ended March 
31, 1997. Investing activities provided $5.2 million primarily from the 
redemption of marketable securities in the three months ended March 31, 1998.

     Financing activities were not material for the three months ended March 
31, 1997, and 1998. The Company has no material financing commitments other 
than its obligations under operating leases.

       The Company believes that cash flows from operations and existing cash 
balances will be sufficient to satisfy the Company's cash requirements for at 
least the next twelve months.


                                       8
<PAGE>

FACTORS AFFECTING FUTURE RESULTS

     FLUCTUATIONS IN OPERATING RESULTS; SEASONAL PURCHASING PATTERNS. The 
Company's operating results have fluctuated and will likely continue to 
fluctuate in the future on a quarterly and annual basis as a result of a 
number of factors, many of which are outside the Company's control. These 
fluctuations are in part due to the purchasing patterns of the Company's two 
customers, Xerox and Fuji Xerox. These customers have historically made a 
significant portion of their purchases of the Company's products in the June 
quarter and September quarter. As a result, the Company's sales have 
historically been lower, in the December quarter than in the immediately 
preceding September quarter. However, the Company expects that these 
customers will change their purchasing patterns in the future (particularly 
in light of the recent change in year end by Fuji Xerox to December 31, from 
a fiscal year end of October 20).  Consequently,  this seasonality is 
expected to change in 1998 which would affect the Company's quarterly 
operating results, for example sales in the March quarter were lower than in 
the December quarter. In addition, any increases in inventories by the 
Company's customers could also result in variations in the timing of 
purchases by such customers. For example, in May 1996, as the Company 
transitioned from its Power Series line of products to its PCI Series line of 
products, Xerox informed Splash that it held in its inventory a substantial 
quantity of Power Series products accumulated since January 1996. As a result 
of the Company's product transition and Xerox's accumulation of inventory of 
these products, sales of Power Series products shipped to Xerox between 
January 1996 and April 1996 were generally recorded as net revenue when Xerox 
sold these products to end users. All other product sales are recorded as net 
revenue upon shipment to the OEM customer. There can be no assurance that the 
Company will receive sufficient inventory information from its OEM customers 
over time or that the Company will be able to prevent a recurrence of a 
similar problem in the future. In addition, announcements by the Company or 
its competitors of new products and technologies could cause customers to 
defer purchases of the Company's existing products. In the event that 
anticipated orders from end users fail to materialize, or delivery schedules 
are deferred or canceled as a result of the above factors or other 
unanticipated factors, it would materially and adversely affect the Company's 
business, operating results and financial condition.

     Results in any period could also be affected by changes in market 
demand, competitive market conditions and sales promotion activities by the 
Company, its OEM customers or its competitors, market acceptance of new or 
existing products, sales of color copiers with which the Company's products 
are compatible, the cost and availability of components, the mix of the 
Company's customer base and sales channels, the amount of any third party 
funding of development expenses, the mix of products sold, the Company's 
ability to effectively expand its sales and marketing organization, the 
Company's ability to attract and retain key technical and managerial 
employees, and general economic conditions. As a result, the Company believes 
that period-to-period comparisons of its results of operations are not 
necessarily meaningful and should not be relied upon as indicative of future 
performance. Due to all of the foregoing factors, the Company's operating 
results in one or more future periods may be subject to significant 
fluctuations. In the event this results in the Company's financial 
performance being below the expectations of public market analysts and 
investors, the price of the Company's common stock would be materially and 
adversely affected.

     The Company's gross margin is affected by a number of factors, including 
product mix, product pricing, and manufacturing and component costs. The 
average selling price of the Company's products has decreased in the past 
primarily as a result of competitive market pressures, the introduction of 
lower priced products and, in certain cases, in response to new product 
introductions by the Company's customers and competitors. The Company expects 
this trend to continue.  In the event of significant price competition in the 
market for color copier servers or competitive systems, the Company could be 
at a significant disadvantage compared to its competitors, many of which have 
substantially greater resources or lower product costs than the Company and 
therefore could more readily withstand an extended period of downward pricing 
pressure. Any decline in average selling prices of a particular product which 
is not offset by a reduction in production costs or by sales of other 
products with higher gross margins would decrease the Company's overall gross 
margin and adversely affect the Company's operating results. The Company 
establishes its expenditure levels for product development and other 
operating expenses based on projected sales levels and margins, and expenses 
are relatively fixed in the short term. Moreover, the Company's overall 
expense level has increased and is expected to continue to increase as the 
Company continues to build corporate infrastructure and to support expansion 
of operations. Accordingly, if sales are below expectations in any given 
period, the adverse impact of the shortfall on the Company's operating 
results may be increased by the Company's inability to adjust spending in the 
short term to compensate for the shortfall.

     EMERGING COLOR SERVER MARKET. The market for the Company's color server 
products has only recently begun to develop. Because the markets for digital 
color copiers and connected color servers are relatively new, and because 
current and future competitors are likely to continue to introduce competing 
solutions, it is difficult to predict the rate at which these markets will 
grow, if at all. If the color server market fails to grow, or grows more 
slowly than anticipated, the Company's business, operating results and 
financial condition will be adversely affected. The Company intends to 
continue to spend resources educating potential customers about color 
servers. However, there can be no assurance that such expenditures will 
enable the Company's products to achieve any additional degree of market 
acceptance. Moreover, the Company has historically focused on certain 
segments of the market (the prepress and graphic arts segments) and has had 
only limited penetration to date into the broader office segment or other 
market segments. There can be no assurance that the Company will be able to 
maintain or increase its presence in its existing market segments or to 
successfully penetrate such additional market segments.


                                       9

<PAGE>

     DEPENDENCE ON XEROX AND FUJI XEROX. The Company's products operate 
primarily with certain color laser copiers offered by Xerox and Fuji Xerox, 
and the Company currently sells its products primarily to Xerox and Fuji 
Xerox, which resell the Company's products on an OEM basis to their color 
copier end users. As a result, sales of the Company's products have been and 
will continue to be heavily influenced by the market acceptance of the Xerox 
and Fuji Xerox color copiers with which the Company's products operate and 
the sales efforts of Xerox and Fuji Xerox with respect to Splash products. 
Xerox and Fuji Xerox face substantial competition from other manufacturers of 
color copiers, including Canon Inc. ("Canon"), which the Company believes has 
the largest share of the worldwide market for color copiers. If sales of the 
color copiers of Xerox and Fuji Xerox with which Splash's products are 
compatible decrease, the Company's business, operating results and financial 
condition would be materially and adversely affected. Similarly, if Xerox or 
Fuji Xerox were to introduce color copiers that are not compatible with the 
Company's products, or if Xerox or Fuji Xerox were to introduce color copiers 
that already contain a significant portion of the functionality of the 
Company's products so as to render the Company's products unnecessary, the 
Company's business, operating results and financial condition would be 
materially and adversely affected. In addition, Fuji Xerox color copiers are 
produced in a single location in Japan, and any disruption of production at 
such facility could materially and adversely affect the Company's business, 
operating results and financial condition.

     As a result of its reliance on Xerox and Fuji Xerox, the Company 
currently has a relatively small sales and marketing organization and has 
limited experience with direct sales efforts. Any change in the sales and 
marketing efforts of Xerox or Fuji Xerox with respect to Splash's products, 
including any reduction in the size or effectiveness of the Xerox or Fuji 
Xerox sales and marketing forces, or changes in incentives for Xerox or Fuji 
Xerox salespersons to sell Splash products or color servers produced by 
competitors of Splash, could have a material adverse effect on the Company's 
business, operating results and financial condition.

     Xerox currently sells a substantial number of color servers made by 
companies other than Splash, including those of the Company's principal 
competitor, Electronics for Imaging Inc. ("EFI"). The Company is the 
principal supplier of color servers to Fuji Xerox. However, Fuji Xerox has 
increased the number of color servers sold to end users that were 
manufactured by companies other than Splash, including EFI. In addition, the 
Company is required to permit testing by Xerox and Fuji Xerox of the beta 
release of the Company's products (including components contained therein) 
and cannot begin shipping any version to Xerox or Fuji Xerox until such 
version and components meets their respective quality standards. Either Xerox 
or Fuji Xerox may choose to promote the use of color servers manufactured by 
competitors of the Company to the detriment of sales of the Company's 
products, may choose to manufacture color servers themselves, may choose to 
manufacture only color copiers that are not compatible with Splash products, 
or may otherwise reduce, delay or cease purchases and sales of Splash color 
servers.  Although the Company has a contract with Xerox, the Company does 
not have a contract with Fuji Xerox with respect to its products and is 
currently operating on a purchase order basis with Fuji Xerox. There can be 
no assurance as to the level of orders from Xerox under its contract or that 
the Company will continue to receive orders from Fuji Xerox. Any decrease in 
the level of sales to Xerox or Fuji Xerox would have a material adverse 
effect on the Company's business, operating results and financial condition.

     INTERNATIONAL SALES. All sales to Fuji Xerox, and a portion of the 
Company's sales to Xerox, are international sales. In addition, given Xerox's 
significant international customer base, the Company believes that a 
significant portion of Splash products purchased by Xerox in the U.S. are 
resold outside the United States. The Company expects that direct and 
indirect international sales will continue to represent a substantial portion 
of its net revenue for the foreseeable future. While the Company's 
international sales are generally denominated in U.S. dollars, fluctuations 
in currency exchange rates could cause and, in the case of Japan, have caused 
the Company's products to become relatively more expensive to end users in a 
particular country, leading to pressure to reduce the U.S. dollar denominated 
price to the Company's OEM customers, which could in turn result in a 
reduction in net revenue and profitability. In addition, to the extent that 
an increased portion of the Company's sales are denominated in foreign 
currencies, the Company could be exposed to currency exchange risks. Other 
risks inherent in international sales include unexpected changes in 
regulatory requirements, tariffs and other trade barriers and uncertainties 
relative to regional circumstances.  These risks, and in particular risks 
related to the economic circumstances in Asia, and in particular Japan, could 
have a material adverse affect on the Company's business, operating results 
and financial condition.  In addition, the Company's business, operating 
results and financial condition would be materially adversely affected if 
foreign markets do not continue to develop.

     INVENTORY RISKS. Xerox and Fuji Xerox may from time to time carry excess 
inventory of Splash color servers, inaccurately project future demand for 
Splash products or fail to optimally manage their ordering of Splash 
products, any of which could result in a significant decrease in orders from 
such customers in subsequent periods. For example, in May 1996, as the 
Company transitioned from its Power Series line of products to its PCI Series 
line of products, Xerox informed Splash that it held in its inventory a 
substantial quantity of Power Series products accumulated since January 1996. 
Xerox indicated to Splash that, to eliminate this inventory and to permit 
Xerox to introduce the PCI Series products, Xerox substantially reduced the 
selling prices of the Power Series products beginning in June 1996. Sales by 
Xerox of the Power Series products at a discount may have resulted in reduced 
sales of the Company's PCI Series products. Moreover, Xerox had difficulty 
selling color server kits for the Power Series products, which do not include 
a computer platform, because these units require the use of an Apple Power 
Macintosh based upon the NuBus architecture no longer used in Apple Power 
Macintosh computers. Thus, a purchaser of the earlier generation color server 
kit was required to purchase or already own a NuBus based Apple Power 
Macintosh. There can be no assurance that the Company will receive sufficient 
information from Xerox, Fuji Xerox or other customers over time or that the 
Company will in any event be able to prevent the recurrence of a similar 
problem in the future. As a result, Splash's customers, among other things, 
may be required to discount excess inventory, may experience difficulty in 
selling excess inventory, may experience reduced sales of new products or


                                       10
<PAGE>

may become dissatisfied with their relationship with Splash. Although 
customers have no commercial right of return with respect to the Company's 
products, there can be no assurance that the Company will not elect to make 
accommodations to significant customers. Reduced sales of Splash products by 
Xerox or Fuji Xerox or any financial or other accommodation made to Xerox or 
Fuji Xerox could have a material adverse effect on the business, operating 
results and financial condition of Splash.

     DEPENDENCE ON ADOBE SYSTEMS INCORPORATED. Substantially all of the 
Company's products depend on the PostScript page description language 
software developed by Adobe Systems Incorporated ("Adobe") and licensed by 
the Company from Adobe on a non-exclusive basis. Any delay in the release of 
future versions of PostScript by Adobe or in the upgrade of the Company's 
products to be compatible with current or future versions of PostScript, or 
any material defects in any versions of PostScript software (including 
defects identified in connection with upgrades of the Company's products), 
could have a material adverse effect on the Company's business, operating 
results and financial condition. The Company is required to pay a royalty for 
each copy of PostScript that is incorporated in Splash products, which 
royalty constitutes a substantial portion of the total manufactured cost of 
the Company's products. In addition, the Company is required to permit 
testing by Adobe of the beta release version of the Company's products, and 
the Company cannot begin shipping any version until such version meets 
Adobe's quality standards. The license agreement between the Company and 
Adobe expires in September 1998, subject to renewal upon mutual consent. 
There can be no assurance that Adobe will continue to enjoy its leadership 
position in the market, renew the current license at the end of its term or 
license future versions of PostScript to Splash on terms favorable to Splash 
or at all. If the license agreement between Adobe and the Company is 
terminated for any reason or the Company's relationship with Adobe is 
impaired, the Company could be required to change to an alternative page 
description language which would require the expenditure of significant 
resources and time and could significantly limit the marketability of the 
Company's products. Any increase in royalties payable to Adobe also could 
have a material adverse effect on the Company's operating results. In 
addition, the Adobe PostScript software is incorporated in the products of 
certain of the Company's competitors. The Company's business could be 
materially and adversely affected if Adobe were to make available to the 
Company's competitors future versions of Adobe PostScript software that 
include enhancements to the Adobe PostScript software that were originally 
developed or implemented by Splash.

     DEPENDENCE ON APPLE COMPUTER INC.  A majority of the Company's current 
products require the use of an Apple Power Macintosh computer as a computer 
platform. Apple has experienced, and continues to experience, significant 
financial difficulties and losses in market acceptance, and its products have 
particularly low levels of market acceptance in the office color printing 
market into which the Company is seeking to expand. In addition, Apple has 
experienced significant changes in management. If Apple were to discontinue 
production of the Power Macintosh models with which Splash products operate 
or were unable to provide or otherwise cease to provide an acceptable level 
of end user customer support, the Company's business, operating results and 
financial condition would be materially and adversely affected. For example, 
Apple phased out the manufacture of Power Macintosh products based on the 
NuBus architecture in the second half of calendar 1995 in favor of Power 
Macintosh products based on the PCI bus architecture. As a result, the 
Company had to expend significant resources and faced substantial risk of 
technological failure or lack of market acceptance in developing and 
introducing its PCI-based products. In addition, the Company has experienced 
sourcing difficulties related to Apple's delay in the release of new models. 
There can be no assurance that the Company will not experience similar 
difficulties in the future. Any extended delay between the discontinuation of 
an existing model and the release of an enhanced model by Apple could have a 
material adverse effect on the Company's business, financial condition and 
results of operations. Any efforts of the Company to migrate its products to 
a different computer platform would require a substantial expenditure of 
resources and time, and there can be no assurance that any such products can 
be successfully developed or introduced in a timely fashion and at 
competitive cost or otherwise achieve widespread market acceptance.

     DEPENDENCE ON SINGLE PRODUCT LINE. Substantially all of Splash's current 
shipments consist, and are expected to continue to consist, of the Company's 
color server products. Because of this product concentration, a significant 
decline in demand for or pricing of these products would have a material 
adverse effect on the Company's business, operating results and financial 
condition, whether as a result of a decline in sales of complementary Xerox 
and Fuji Xerox copiers; a further decline in the market for Apple Power 
Macintosh computers; increased sales by Xerox or Fuji Xerox of color servers 
offered by competitors of the Company or developed internally by Xerox or 
Fuji Xerox; new product introductions by competitors; price competition; or 
technological change. Any decline in the market for this product line or any 
failure to timely produce new and enhanced products would have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

     RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCT INTRODUCTIONS. The 
graphics and color reproduction, color processing and personal computing 
markets are characterized by rapid changes in customer requirements, frequent 
introductions of new and enhanced products, and continuing and rapid 
technological advancement. To compete successfully, the Company must continue 
to design, develop, manufacture and sell new products that provide 
increasingly higher levels of performance and reliability, take advantage of 
technological advancements and changes and respond to new customer 
requirements. The Company's success in designing, developing, manufacturing 
and selling new products will depend on a variety of factors, including the 
identification of market demand for new products, product selection, timely 
implementation of product design and development, product performance, 
cost-effectiveness of current products and products under development, 
effective manufacturing processes and the success of promotional efforts.


                                       11
<PAGE>

     There can be no assurance that any of the Company's future products will 
achieve widespread market acceptance. In addition, the Company has in the 
past experienced delays in the development of new products and the 
enhancement of existing products, and such delays may occur in the future. If 
the Company is unable, due to resource constraints or technological or other 
reasons, to develop and introduce new products or versions in a timely 
manner, or if such new products or releases do not achieve timely and 
widespread market acceptance, it would have a material adverse effect on the 
Company's business, operating results and financial condition.

     COMPETITION. The markets for the Company's products are characterized by 
intense competition and rapid change. The Company competes directly with 
other independent manufacturers of color servers and with copier 
manufacturers, and indirectly with printer manufacturers and others. The 
Company has a number of direct competitors for color server products, the 
most significant of which is EFI. Splash also faces competition from copier 
manufacturers that offer internally developed color server products, such as 
a non-PostScript color server offered by Fuji Xerox, or that incorporate 
color server features into their copiers. In addition, the Company faces 
competition from desktop color laser printers that offer increasing speed and 
color server capability. As component prices decrease and the processing 
power and other functionality of copiers, printers and computers increases, 
it becomes more likely that copier, printer and computer manufacturers will 
continue to add color server functionality to their systems, which could 
reduce the market for the Company's existing line of products.

     The Company also competes indirectly with manufacturers of electronic 
color prepress systems, which offer similar functionality for the short-run 
and commercial printing market as is provided by the Company's products. The 
Company also competes indirectly with providers of color separation, color 
editing and page layout software. While such software typically is 
complementary to the Company's systems, such software can also be competitive 
with the Company's systems and may become increasingly competitive to the 
extent that the providers of such software extend the functionality of their 
products in future releases.

     Many of the Company's current and potential direct and indirect 
competitors have longer operating histories, are substantially larger, and 
have substantially greater financial, technical, manufacturing, marketing and 
other resources than Splash. A number of these current and potential 
competitors also have substantially greater name recognition and a 
significantly larger installed base of products than the Company, which could 
provide leverage to such companies in their competition with Splash. The 
Company expects competition to increase to the extent the color server market 
grows, and such increased competition may result in price reductions, reduced 
gross margins and loss of market share, any of which could materially 
adversely affect the Company's business, operating results and financial 
condition. As a result of their greater resources, many of such competitors 
are in a better position than Splash to withstand significant price 
competition or downturns in the economy. There can be no assurance that 
Splash will be able to continue to compete effectively, and any failure to do 
so would have a material adverse effect upon the Company's business, 
operating results and financial condition.

     RISKS ASSOCIATED WITH ACQUISITIONS. The Company frequently evaluates 
potential acquisitions of complementary businesses, products and 
technologies. As part of the Company's expansion plans, the Company has 
acquired and may continue to acquire companies that have an installed base of 
products not yet offered by the Company, have strategic distribution channels 
or customer relationships, or otherwise present opportunities which 
management believes may enhance the Company's competitive position. The 
success of any acquisition could depend not only upon the ability of the 
Company to acquire such businesses, products and technologies on a 
cost-effective basis, but also upon the ability of the Company to integrate 
the acquired operations or technologies effectively into its organization, to 
retain and motivate key personnel of the acquired businesses, and to retain 
the significant customers of the acquired businesses. Any acquisition, 
depending upon its size, could result in the use of a significant portion of 
the Company's cash, or if such acquisition is made utilizing the Company's 
securities, could result in significant dilution to the Company's 
stockholders. Moreover, such transactions involve the diversion of 
substantial management resources and evaluation of such opportunities 
requires substantial diversion of engineering and technological resources. In 
addition, such transactions could result in large one time write-offs or the 
creation of goodwill or other intangible assets that would result in 
amortization expenses. For example, in connection with the ColorAge 
acquisition, Splash recorded an expense related to purchased in-process 
research and development of $26.9 million. To date, other than the Splash 
acquisition, the Company's only acquisition transactions were the Quintar and 
ColorAge acquisitions, which occurred on May 28, and October 30, 1997, 
respectively. Both acquired companies had technology under development. There 
can be no assurance that the acquired technology can be successfully 
developed on a timely basis or at all, or that products based on this 
technology will receive widespread market acceptance. Moreover, there can be 
no assurance that the Company can successfully integrate the acquired 
technology. The failure to successfully evaluate, negotiate and effect 
acquisition transactions could have a material adverse effect on the 
Company's business, operating results and financial condition.

     MANAGEMENT OF EXPANDING OPERATIONS. The growth in the Company's business 
has placed, and any further expansion would continue to place, a significant 
strain on the Company's limited personnel, management and other resources. 
The Company's ability to manage any future expansion effectively will require 
it to attract, train, motivate and manage new employees successfully, to 
integrate new management and employees into its overall operations and to 
continue to improve its operational, financial and management systems. In 
this regard, the Company currently does not have, but is seeking to identify 
and recruit, a Vice President, Sales and Marketing. Moreover, the Company 
expects to continue to increase the size of its domestic and international 
sales support staff and the scope of its sales and marketing activities, and 
to hire additional research and development personnel. The Company's


                                       12
<PAGE>

failure to manage any expansion effectively, including any failure to 
integrate new management and employees or failure to continue to implement 
and improve financial, operational and management controls, systems and 
procedures, could have a material adverse effect on the Company's business, 
operating results and financial condition.

     DEPENDENCE ON THIRD PARTY MANUFACTURERS. The Company generally 
outsources the manufacture of its products to third party subcontract 
manufacturers including MSL and Logistix. MSL purchases the components used 
in Splash boards from its component suppliers and performs double-sided 
active surface mount assembly, in-circuit test, functional test and system 
test of the printed circuit boards used in the Company's products, on a 
turnkey basis. MSL also performs in-warranty and out-of-warranty repair of 
failed boards for the Company's products. The Company directly purchases 
Apple Power Macintosh computers, monitors and memory, and furnishes these 
components, as well as the MSL-assembled boards, to Logistix for final 
assembly. Logistix directly purchases a small portion of the components used 
in Splash color servers and does all final assembly and system configuration.

     While the Company's subcontract manufacturers conduct quality control 
and testing procedures specified by the Company, the Company has from time to 
time experienced manufacturing quality problems. Although the Company does 
not believe any such problem had a material adverse effect on the Company's 
business, there can be no assurance that quality problems will not occur 
again in the future or that any such problem would not have a material 
adverse effect on the Company's business, operating results and financial 
condition.

     If the Logistix, MSL or other third party manufacturing facilities 
utilized by the Company become unavailable to the Company, or if the 
manufacturing operations at these facilities are slowed, interrupted or 
terminated, the Company's business, operating results and financial condition 
could be adversely affected. Although the Company believes that there are a 
variety of companies available with the capability to provide the Company 
with such services, there can be no assurance that the Company would be able 
to enter into alternative third party manufacturing arrangements on terms 
satisfactory to the Company, in a timely fashion, or at all.

     DEPENDENCE ON COMPONENT AVAILABILITY AND COST. The Company purchases 
components comprising a significant portion of the total cost of its color 
servers. The balance of the inventory required to manufacture the Company's 
products is purchased by Logistix. The Company currently sources most of its 
Power Macintosh computers that serve as the platforms for its color servers 
from Apple. The Company is currently operating on a purchase order basis with 
Apple.

     Certain components necessary for the manufacture of the Company's 
products are obtained from a sole supplier or a limited group of suppliers. 
These include Apple Power Macintosh computers, certain ASICs and other 
semiconductor components. The Company does not maintain any long-term 
agreements with any of its suppliers of components. Because the purchase of 
certain key components involves long lead times, in the event of 
unanticipated increases in demand for the Company's products, the Company 
could be unable to manufacture certain products in a quantity sufficient to 
meet end user demand. The Company has experienced difficulties related to 
Apple's delay in the release of new systems. There can be no assurance that 
the Company will not experience similar difficulties in the future. The 
Company also purchases memory modules from a single supplier. Although other 
sources are available, a change in memory supplier could require time to 
effect and could impact production. This risk would be exacerbated in times 
of memory supply shortages. Any inability to obtain adequate deliveries of 
any of the components or any other circumstance that would require the 
Company to seek alternative sources of supply could affect the Company's 
ability to ship its products on a timely basis, which could damage 
relationships with current and prospective customers and could therefore have 
a material adverse effect on the Company's business, financial condition and 
operating results. Moreover, there can be no assurance that alternative 
sources of supply would be available on reasonably acceptable terms, on a 
timely basis, or at all. The Company has from time to time experienced 
shortages in deliveries of ASICs from Toshiba Corporation, which shortages 
have impacted production volume capabilities. In order to attempt to mitigate 
the risk of such shortages in the future, the Company has increased its 
inventory of components for which the Company is dependent upon sole or 
limited source suppliers. As a result, the Company is subject to an 
increasing risk of inventory obsolescence, which could materially and 
adversely affect its operating results and financial condition.

     The market prices and availability of certain components, particularly 
memory, other semiconductor components and Apple Power Macintosh computers, 
which collectively represent a substantial portion of the total manufactured 
cost of the Company's products, have fluctuated significantly in the past. 
Significant fluctuations in the future could have a material adverse effect 
on the Company's operating results and financial condition.

     DEPENDENCE ON PROPRIETARY TECHNOLOGY; RELIANCE ON THIRD PARTY LICENSES. 
The Company relies in part on trademark, copyright and trade secret law to 
protect its intellectual property in the United States and abroad. The 
Company seeks to protect its software, documentation and other written 
materials under trade secret and copyright laws, which afford only limited 
protection and there can be no assurances that the steps taken by the Company 
will prevent misappropriation of its technology. The Splash software included 
as a part of the Company's products is sold pursuant to "shrink wrap" 
licenses that are not signed by the end user and, therefore, may be 
unenforceable under the laws of certain jurisdictions. The Company owns one 
patent. There can be no assurance that any patent, trademark or copyright 
owned by the Company, or any patent, trademark or copyright obtained by the 
Company in the future, will not be invalidated, circumvented or challenged, 
that the rights granted thereunder will provide competitive advantages to the 
Company or that any of the Company's pending or future patent applications 
will be issued with the scope of the claims sought by the Company, if at all. 
In addition, the laws of some foreign countries do not protect the Company's 
proprietary rights as fully as do


                                       13
<PAGE>

the laws of the United States. Thus, effective intellectual property 
protection may be unavailable or limited in certain foreign countries. There 
can be no assurance that the Company's means of protecting its proprietary 
rights in the United States or abroad will be adequate or that others will 
not independently develop technologies that are similar or superior to the 
Company's technology, duplicate the Company's technology or design around any 
patent of the Company. Moreover, litigation may be necessary in the future to 
enforce the Company's intellectual property rights, to determine the validity 
and scope of the proprietary rights of others or to defend against claims of 
infringement or invalidity. Such litigation could result in substantial costs 
and diversion of management time and resources and could have a material 
adverse effect on the Company's business, operating results and financial 
condition.

     There have been substantial amounts of litigation in the computer and 
related industries regarding intellectual property rights, and there can be 
no assurance that third parties will not claim infringement by the Company of 
their intellectual property rights. In particular, EFI filed suit against 
Radius in November 1995, alleging infringement of an EFI patent by Splash's 
predecessor, and requesting unspecified monetary damages and injunction 
relief. The technology which is the subject of the patent claim was acquired 
in the Splash acquisition, and EFI could add Splash as a defendant to this 
suit at any time. Although a portion of the purchase price in the Splash 
acquisition was placed in escrow pending resolution of the EFI litigation, 
there can be no assurance that any such litigation against Splash would not 
have a material adverse effect on the Company's business, operating results 
and financial condition. The addition of Splash as a defendant in the EFI 
suit or any other claims that the Company is infringing on proprietary rights 
of others, with or without merit, could be time-consuming to defend, result 
in costly litigation, divert management's attention and resources, and cause 
product shipment delays. If the Company were found to be infringing on the 
intellectual property rights of any third party, the Company could be subject 
to liabilities for such infringement, which liabilities could be material, 
and could be required to seek licenses from other companies or to refrain 
from using, manufacturing or selling certain products or using certain 
processes. Although holders of patents and other intellectual property rights 
often offer licenses to their patent or other intellectual property rights, 
no assurance can be given that licenses would be offered or that the terms of 
any offered license would be acceptable to the Company. Any need to redesign 
the products or enter into any royalty or licensing agreement could have a 
material adverse effect on the Company's business, operating results and 
financial condition.

     The Company relies upon certain software licensed from third parties. 
There can be no assurance that the software licensed by the Company will 
continue to provide competitive features and functionality or that licenses 
for software currently utilized by the Company or other software which the 
Company may seek to license in the future will be available to the Company on 
commercially reasonable terms. The loss of, or inability to maintain, 
existing licenses could result in shipment delays or reductions until 
equivalent software or suitable alternative products could be developed, 
identified, licensed and integrated, and the inability to license key new 
software that may be developed, on commercially reasonable terms, would have 
a material adverse effect on the Company's competitive position. Any such 
event would materially adversely affect the Company's business, operating 
results and financial condition.

     NEED FOR ADDITIONAL CAPITAL. The Company believes that in order to 
remain competitive it may require additional financial resources over the 
next several years for working capital, research and development, expansion 
of sales and marketing resources, capital expenditures and potential 
acquisitions. Although the Company believes that it will be able to fund 
planned expenditures for at least the next twelve months from a combination 
of the proceeds of its public offerings, cash flow from operations, existing 
cash balances and the Company's bank line of credit, there can be no 
assurance that the Company will be able to obtain any additional financing 
which may be required in the future on acceptable terms or at all.

     RISK OF PRODUCT DEFECTS. The Company's products consist of hardware and 
software developed by Splash and others. Products such as those of the 
Company may contain undetected errors when first introduced or when new 
versions are released, and the Company has in the past discovered software 
and hardware errors in certain of its new products after their introduction. 
Although the Company has not experienced material adverse effects resulting 
from any errors to date, there can be no assurance that errors would not be 
found in new versions of Splash products after commencement of commercial 
shipments, or that any such errors would not result in a loss of or delay in 
market acceptance and have a material adverse effect upon the Company's 
business, operating results and financial condition. In addition, errors in 
the Company's products (including errors in licensed third party software) 
detected prior to new product release could result in delay in the 
introduction of new products and incurring of additional expense, which also 
could have a material adverse effect upon the Company's business, operating 
results and financial condition.

     YEAR 2000 ISSUES. Many currently installed computer systems and software 
products are coded to accept only two digit entries in the date code field.  
These date code fields will need to accept four digit entries to distinguish 
twenty-first century dates from twentieth century dates.  As a result, many 
companies' software and computer systems may need to be upgraded or replaced 
in order to comply with such "Year 2000" requirements. Although the Company 
believes that its products and systems are Year 2000 compliant, the Company 
utilizes third party equipment and software that may not be Year 2000 
compliant.  Failure of such third-party equipment or software to operate 
properly with regard to the year 2000 and thereafter could require the 
Company to incur unanticipated expenses to remedy any problems, which could 
have a material adverse effect on the Company's business, operating results 
and financial condition.  Furthermore, the purchasing patterns of customers 
or potential customers may be affected by Year 2000 issues as companies 
expend significant resources to correct their current systems for Year 2000 
compliance.  These expenditures may result in reduced funds available to 
purchase products and services such as those offered by the Company, which 
could have a material adverse effect on the Company's business, operating 
results and financial condition.


                                       14

<PAGE>

                                    PART II

ITEM 1.   LEGAL PROCEEDINGS
          NONE

ITEM 2.   CHANGES IN SECURITIES
          NONE

ITEM 3.   DEFAULT UPON SENIOR SECURITIES
          NONE

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE HOLDERS
          At the Company's Annual Meeting of Stockholders held on February 
          26, 1998 Charles W. Berger and Lawrence G. Finch were elected to 
          serve as Class II Directors of the Company with 11,258,968 and 
          11,411,787 votes for and 203,350 and 50,031 votes withheld, 
          respectively. Messrs. Berger and Finch will serve for three year 
          terms expiring upon the Annual Meeting of Stockholders in 2001.  
          Also at the Company's Annual Meeting of Stockholders the proposal 
          to ratify and approve an amendment to the Company's 1996 Stock 
          Option Plan was approved with 6,760,297 votes for, 4,116,485 votes 
          against, and 7,123 votes abstaining. This amendment provided for an 
          increase in the number of shares reserved for issuance under the 
          plan from 3,150,000 to 3,900,000.

ITEM 5.   OTHER INFORMATION
          NONE

ITEM 6.   EXHIBITS

          EXHIBITS
          10.10   SPLASH-XEROX OEM PURCHASE AGREEMENT DATED APRIL 6, 1998.
          10.11   1996 STOCK OPTION PLAN, AS AMENDED FEBRUARY 26, 1998.
          27.1    FINANCIAL DATA SCHEDULE


                                       15
<PAGE>

                                   SIGNATURE

     Pursuant to the requirements of the Securities Act of 1934, this report 
has been signed and thereunto duly authorized, in the City of Sunnyvale, 
State of California, on May 15, 1998.


                                     SPLASH TECHNOLOGY HOLDINGS, INC


                                     By:  /s/     Kevin K. Macgillivray
                                          ------------------------------------
                                                  Kevin K. Macgillivray
                                            Chairman & Chief Executive Officer



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                                  EXHBIT INDEX


Exhibit Number                       Description of Document

10.10                                Splash-Xerox OEM Agreement
10.11                                Stock Option Plan
27.1                                 Financial Data Schedule


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