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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                                  FORM 10-KSB

(MARK ONE)

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    /X/      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
             FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

    / /      TRANSITION REPORT UNDER 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: 000-21415
                            ------------------------

                           WHITE PINE SOFTWARE, INC.

                 (Name of Small Business Issuer in Its Charter)

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                  DELAWARE                                      04-3151064
       (State or Other Jurisdiction of                       (I.R.S. Employer
       Incorporation or Organization)                       Identification No.)

  542 AMHERST STREET, NASHUA, NEW HAMPSHIRE                        03063
  (Address of Principal Executive Offices)                      (Zip Code)
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                                 (603) 886-9050
                (Issuer's Telephone Number, Including Area Code)

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

    Securities registered under Section 12(b) of the Exchange Act: None

    Securities registered under Section 12(g) of the Exchange Act: Common Stock,
par value $.01 per share

    Check whether the issuer: (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 / /

    Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to be the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/

    State issuer's revenues for its most recent fiscal year. $11,051,777

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 18, 1998, was $26,561,601, based on a total of 8,853,867
shares held by non-affiliates and on the last published sale price on the Nasdaq
National Market of $3.00.

    The number of shares outstanding of the Registrant's common stock as of
March 18, 1998 was 9,309,020.

    Transitional Small Business Disclosure Format (check one):

                               Yes / /    No /X/

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                               TABLE OF CONTENTS

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PART I

Item 1.      Description of Business......................................................................          3

Item 1A.     Risk Factors.................................................................................         15

Item 2.      Description of Property......................................................................         25

Item 3.      Legal Proceedings............................................................................         25

Item 4.      Submission of Matters to a Vote of Security Holders..........................................         26

PART II

Item 5.      Market for Common Equity and Related Stockholder Matters.....................................         27

Item 6.      Management's Discussion and Analysis or Plan of Operation....................................         27

Item 7.      Financial Statements.........................................................................         33

Item 8.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.........         33

PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
               of the Exchange Act........................................................................         34

Item 10.     Executive Compensation.......................................................................         36

Item 11.     Security Ownership of Certain Beneficial Owners and Management...............................         42

Item 12.     Certain Relationships and Related Transactions...............................................         43

Item 13.     Exhibits, List and Reports on Form 8-K.......................................................         43
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                            ------------------------

    THIS FORM 10-KSB CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS", "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS, INCLUDING THE FACTORS SET FORTH BELOW IN "ITEM 1A. RISK FACTORS,"
THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS OF WHITE PINE
SOFTWARE, INC. TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING
STATEMENTS.

                                       2
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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

    White Pine Software, Inc. ("White Pine" or the "Company") develops, markets
and supports multi-platform desktop multimedia software that facilitates
worldwide video and audio communication and data collaboration across the
Internet, intranets and other networks using the Internet Protocol ("IP"). The
Company's desktop videoconferencing software products, CU-SeeMe and
MeetingPoint, create a client-server solution that allows users to participate
in real-time, multi-point videoconferences over the Internet and intranets. In
November 1997, the Company began commercial shipments of MeetingPoint, the first
multimedia conferencing server software to implement the H.323 standard of the
International Telecommunications Union (the "ITU") for conferencing over packet
networks. MeetingPoint enables any standards-based client to participate in full
multi-point group conferences. Further building upon the core CU-SeeMe and
MeetingPoint technologies, the Company has developed ClassPoint, an integrated
vertical solution for distance learning and distance training, which is expected
to be shipped commercially beginning in April 1998.

    The Company also offers desktop X Window Systems ("X Windows") and terminal
emulation software. The Company's WebTerm product allows users to access host
applications from within a World Wide Web ("Web") browser. Its eXodus line of
desktop X Windows software enables seamless interoperability between local and
remote environments. The Company's 5PM line of terminal emulation software
provides desktop access to data and applications residing on enterprise legacy
systems.

    The Company's customers include businesses, educational institutions,
government organizations and individual consumers. The Company markets and sells
its products in the United States, Europe and the Pacific Rim through
distributors, a combination of strategic partners and original equipment
manufacturers ("OEMs"), its direct sales organization, and directly over the
Internet.

    The Company was incorporated under the laws of Delaware in April 1992 under
the name Visual International, Inc. Visual International, Inc. served as a
holding company and held substantially all of the stock of Visual T.I., Inc.,
which developed, manufactured and marketed video terminals, including early X
Windows terminals, and related hardware and software. In August 1993, Visual
T.I., Inc. was merged into Visual International, Inc. and, immediately
thereafter, Visual International, Inc. acquired all of the outstanding stock of
White Pine Software, Inc., a New Hampshire corporation. At the time of the
acquisition, White Pine Software, Inc. developed, manufactured and marketed X
Windows and terminal emulation software products for the Macintosh platform. In
December 1993, White Pine Software, Inc. was merged into Visual International,
Inc. Visual International, Inc., as the surviving corporation, changed its name
to White Pine Software, Inc. The Company extended its product lines by acquiring
Grafpoint, a California corporation, in April 1994 and About Software
Corporation, a French corporation, as of November 1995. References in this Form
10-KSB to the "Company" and "White Pine" refer to White Pine Software, Inc. and
its subsidiaries. The Company's principal executive offices are located at 542
Amherst Street, Nashua, New Hampshire 03063, its telephone number is (603)
886-9050 and its e-mail address is info@wpine.com.

    CLASSPOINT, EXODUS, MEETINGPOINT, WEBTERM, WHITE PINE and 5PM TERM are
trademarks of the Company. CU-SEEME is a registered trademark of Cornell
Research Foundation, Inc. All other trademarks or trade names referred to in
this Annual Report are the property of their respective owners.

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INDUSTRY BACKGROUND

COMMUNICATION ON THE INTERNET AND INTRANETS

    The rapid growth of the Internet has been largely attributable to its use as
a communications medium. Initially, the Internet facilitated text-based
communication applications. As multimedia PCs become commonplace, Internet usage
is expanding to take advantage of new multimedia capabilities for real-time
communications using Internet telephony and, ultimately, videoconferencing.

    Videoconferencing consists of real-time, one-way or two-way audio and video
communication. It enables users at remote locations to enjoy many of the
benefits of face-to-face meetings without the time and expense of travel. Today,
a substantial portion of videoconferencing systems remain hardware-based with
proprietary communication protocols and fit into three general classes:
room-based systems priced at or above $40,000, "roll-about" systems priced at
less than $20,000, and hardware-based desktop systems priced as low as $1,000.
In the early 1990s, the ITU began to establish standards for interactive audio,
video and data communication over digital networks. By 1992, a number of vendors
had introduced, and demonstrated interoperability among, hardware-based
videoconferencing systems that complied with early ITU standards. While the
implementation of emerging industry standards and other technological
improvements have helped to increase sales of hardware-based videoconferencing
systems in recent years, the relatively high price and limited interoperability
of these systems have impeded the widespread adoption of videoconferencing as a
mass communication medium.

    In an effort to expand the availability of videoconferencing as a
communications tool, a number of developers commenced efforts to develop
software-based videoconferencing technology that did not require expensive
proprietary hardware. In 1992, Cornell Information Technologies, a research
institute at Cornell University, introduced freeware known as CU-SeeMe
("Freeware CU-SeeMe"). This real-time, black-and-white desktop videoconferencing
software enables users to communicate over the Internet, independent of computer
hardware and operating system, using low-cost, easily available hardware, such
as 28.8 kbps modems and standard video-capture boards and video cameras.

    Although Freeware CU-SeeMe lacks the reliability, functionality and features
that are necessary to succeed in today's commercial marketplace, its popularity
has demonstrated the potential market for a software-based videoconferencing
solution that is able to connect users through the Internet. As industry
standards for Internet-based videoconferencing emerge, more developed IP-based
solutions are transforming the multimedia PCs already installed in homes and
offices into videoconferencing terminals at a fraction of the price of today's
hardware-based systems. Software solutions for videoconferencing over the
Internet and other IP-based networks not only provide videoconferencing
capabilities at a lower price but also permit the addition of new features and
the implementation of emerging standards.

LEGACY SYSTEM CONNECTIVITY

    Terminal emulators were developed in the early 1980s to mimic "dumb"
terminals that linked users to mainframe computers through a variety of
proprietary communication protocols. Subsequently, vendors developed
cost-effective, software-only products that both enabled PCs to emulate text
terminals for a variety of mainframe platforms and capitalized on the expanded
graphical capabilities of PCs by developing high-end, graphical software
emulators. Software terminal emulation, which can now be performed over the
Internet through IP, continues to provide easier and wider access to
mission-critical data and applications residing on enterprise legacy systems.

    In 1984, software engineers at the Massachusetts Institute of Technology
broadly expanded enterprise connectivity by developing X Windows as a standard,
independent of platforms, networks and operating systems, for workstations and
PCs. X Windows, which is based on a client-server computing model, permits a
user to run multiple graphical applications simultaneously on a variety of
platforms from a single X Windows terminal. Since 1990, virtually all X Windows
applications have used IP networks to establish

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connectivity for desktop PCs, enabling large numbers of PCs to access data and
applications across the enterprise, regardless of the platform, network or
operating system.

THE WHITE PINE SOLUTION

    The Company's multimedia conferencing products, CU-SeeMe, MeetingPoint and
ClassPoint, provide real-time, multi-point video and audio communication and
data solution over the Internet, intranets and other networks. By developing
videoconferencing products that require no proprietary hardware, White Pine is
able to offer videoconferencing at a substantially lower price than vendors of
traditional hardware-based systems and thereby encourage businesses and others
to adopt it as a mass communication medium. The Company's exclusive license
agreement with Cornell Research Foundation, Inc. (the "Cornell Foundation"), the
technology licensing organization associated with Cornell University, provided
the Company with the underlying technology for CU-SeeMe and MeetingPoint and
afforded the Company brand name recognition, an installed base, and a
time-to-market advantage over other vendors seeking to develop software
videoconferencing solutions.

    CU-SeeMe is available on multiple platforms and can be installed on most
multimedia PCs without any proprietary hardware. By operating over the Internet,
CU-SeeMe substantially broadens the base of businesses, organizations and
individuals able to engage in videoconferencing. MeetingPoint, the software-only
server component of the Company's videoconferencing solution, allows users of
CU-SeeMe to participate in multi-point videoconferences with a nearly unlimited
number of users. MeetingPoint solves the complex problem of enabling real-time
multi-point communication over the Internet between users operating at different
connection speeds without degrading the quality of the entire conference to that
of the slowest connection speed. MeetingPoint is the only solution available
today, hardware or software, that allows Microsoft NetMeeting, Intel ProShare,
PictureTel LiveLAN, and other H.323 compatible products to interact with each
other. The Company believes MeetingPoint's H.323 compatability demonstrates the
Company's continuing technological leadership in videoconferencing. Together
CU-SeeMe and MeetingPoint, with their low prices, cross-platform capabilities
and ease of use, enable businesses, educational institutions, government
organizations and individual consumers worldwide to interact in real time
without the time and expense of travel.

    ClassPoint, the Company's newest product offering, builds upon White Pine's
CU-SeeMe and MeetingPoint group conferencing technology to create a distance
learning and distance training solution. ClassPoint creates an instructor-led
"virtual classroom" that facilitates distance learning in any environment where
an instructor and students are in different locations. Because it enables the
fundamental interaction between the instructor and students, ClassPoint can be
used in kindergarten through high school ("K-12") classes and college and
university courses, as well as for home schooling. ClassPoint also offers
opportunities for distance training by businesses, government organizations and
others. ClassPoint enables simultaneous, real-time audio and video
communications, text chat, white board sharing, and Web touring. It also
provides a Web-based framework for materials to be shared before and after
classes and training sessions.

    White Pine's legacy emulation products, WebTerm, eXodus and 5PM, allow
businesses and other organizations to access data and applications residing on
host workstations, mini-computers and mainframe computers from most widely used
desktop operating systems. WebTerm, which allows users to access host
applications from within a Web browser, is a suite of products geared to
providing Advanced Intranet Solutions to corporations, educational organizations
and government agencies. White Pine's eXodus and 5PM products allow users
throughout an enterprise to access mission-critical data and applications
residing on legacy systems. These software products are competitively priced and
designed to be easy to use, and they include a comprehensive set of features
allowing for seamless integration with existing enterprise systems and newer
intranet applications.

                                       5
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STRATEGY

    White Pine's principal business objective is to be a leading supplier of
multimedia conferencing solutions. The Company plans to build upon its position
as a technological leader in Internet-based videoconferencing and to offer
customers complete multimedia conferencing solutions by continuing to expand its
connectivity product offerings. The key components of White Pine's strategy are
as follows:

MAINTAIN TECHNOLOGICAL LEADERSHIP

    The Company's CU-SeeMe, introduced in March 1996, was the first commercially
available Internet-based videoconferencing product. The Company believes that
CU-SeeMe's Internet-based videoconferencing technology, cross-platform
capabilities, software-only and hardware-independent architecture, and
scalability over a broad range of bandwidths provide significant competitive
advantages. CU-SeeMe has been featured in a number of on-line and industry
publications and won C/net's Best Buy designation in January 1997, PC
Computing's five-star rating in February 1997, PC Computing Magazine's "A-List"
designation in September 1997 and its "1997 Most Valuable Product Award" in the
Web Communications category, New Media Magazine's "1996 Hyper Award," and Byte
Magazine's "Best of PC Expo '96 Winner." MeetingPoint, introduced in November
1997, is the industry's first H.323 compliant multimedia conferencing server.
MeetingPoint's software-only architecture makes it scalable and deployable over
a variety of hardware platforms and operating systems, including Microsoft NT
and Sun Solaris. MeetingPoint received two leading industry awards within the
first few months of release: "1997 Product of the Year" by CTI magazine in the
"Video Conferencing" category and the "1997 Editors' Choice Award" from Internet
Telephony magazine. ClassPoint, which is expected to be shipped commercially
beginning in April 1998, builds upon the CU-SeeMe and MeetingPoint group
conferencing technology to create an innovative distance learning and distance
training solution for educational, corporate and governmental organizations.

FOCUS ON MARKET FOR MEETINGPOINT

    The Company believes its future success in the Internet-based multimedia
conferencing market derives in part from the capabilities of MeetingPoint, the
Company's software-only server technology for group conferencing. The
introduction of the MeetingPoint product line in 1997 has placed White Pine in a
clear technological leadership position within the H.323 server market.
MeetingPoint 3.0 incorporates advanced billing and tracking functionality,
standards-based whiteboard sharing, and interoperability supporting other
vendors' client software through the recently ratified H.323 standard for audio
and video communications. The Company believes that opportunities exist to
market MeetingPoint to Internet service providers, corporations and other
entities seeking to enable and promote multimedia group conferencing.

LEVERAGE CORE CONFERENCING TECHNOLOGY TO DEVELOP APPLICATIONS FOR VERTICAL
  MARKETS

    The Company intends to build on its core CU-SeeMe and MeetingPoint
technology in order to develop and market integrated and application-oriented
solutions for key vertical markets. The Company believes these value-added
solutions will help to differentiate the Company's conferencing products from
those of its competitors. For example, the newly introduced ClassPoint uses the
CU-SeeMe and MeetingPoint group conferencing technology to create a robust
distance learning and distance training application for education, corporate and
other environments.

LEVERAGE NAME RECOGNITION OF CU-SEEME

    The Company seeks to leverage the brand name recognition of CU-SeeMe and its
predecessor, Freeware CU-SeeMe, in the business, education, government and
consumer markets.

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PRODUCTS

VIDEOCONFERENCING

    CU-SeeMe

    CU-SeeMe is White Pine's desktop videoconferencing software for real time
person-to-person or group conferencing. Cu-SeeMe can be used over the Internet
or any IP network, providing the user with the power to communicate globally
without expensive hardware. This software-only solution runs on both Windows and
Macintosh computers and offers full-color video, audio, chat window, and white
board communications. The user can participate in "Live over the Internet"
conferences, broadcasts or chats. Cu-SeeMe can be launched directly from Web
pages with the user's favorite Web browser, using 28.8kbps modem, ISDN link or
better. For audio-only telephony use, CU-SeeMe works effectively over a 14.4kbps
modem.

    CU-SeeMe 3.1, the current version of CU-SeeMe, was initially shipped in
November 1997 and has a suggested retail price of $99. Release 3.1 enables
CU-SeeMe users to interoperate with H.323 standards-based clients via the
Company's MeetingPoint conference server. CU-SeeMe 3.1 is currently the only
cross-platform product capable of H.323 interoperability on both Windows 95/NT
and MacOS. The Company also licenses CU-SeeMe as a bundled package with
MeetingPoint and third-party cameras, and offers site licenses and volume
discounts for larger purchasers.

    MeetingPoint

    MeetingPoint is the server component of White Pine's client/server
videoconferencing solution and the industry's first fully H.323 and T.120
compliant server. It provides a "virtual meeting point" where groups of users
interact in real time. Administrators create and host conferences using
MeetingPoint. End-users then connect to the conference, using either CU-SeeMe or
any third-party H.323 compliant videoconferencing client product. MeetingPoint's
core "multimedia router" technology enables the group interaction to take place
by "routing" it to the other conference participants.

    White Pine's client/server approach to network-based conferencing offers
flexibility for organizations looking to take advantage of new IP-based
communications possibilities; nearly any type of real-time group communication
can be created with MeetingPoint. Regardless of the type of group connected
together, from a traditional four-person videoconferencing to an interactive
cybercast involving a thousand participants, MeetingPoint will host it in a
manner that is as friendly as possible to the underlying IP network.

    MeetingPoint is able to manage the amount of network resources that are
consumed as it hosts any type of group conference. The use of IP networks for
real-time communication is beginning a phase of significant growth, with
thousands of new users every day and creative new applications being discovered
weekly. However, multimedia requires significant bandwidth. While new
technologies like Fast Ethernet, ADLS, and cable modems promise expanded
bandwidth in the near future, today most users face network constraints. Home
users, for example, are usually limited to 28.8 kbps modem connections.
Business, governmental, and educational enterprises may have 10 mbps modem local
area networks ("LANs"), but these are used for a variety of traditional,
mission-critical applications such as file sharing, e-mail and printing. Even
network service providers are challenged to stretch their network resources to
cover rapidly growing customer traffic. In those rare instances where bandwidth
is plentiful, it comes at a relatively high cost, especially for wide area
network ("WAN") links. Because of these network constraints, MeetingPoint's
bandwidth management capability allows users to make the most of the new
collaboration, entertainment and learning possibilities that network-based
multimedia communications create, without having to make expensive upgrades to
the user's existing network infrastructure.

    MeetingPoint's ability to manage the use of network resources while hosting
group conferencing arises from its core multimedia router technology. This
technology is focused on a single, very specific task:

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routing real-time multimedia information among clients participating in group
communications. Considerable intelligence regarding the specific nature of
multimedia data and real-time group communications has been built into
MeetingPoint. MeetingPoint uses this intelligence to manage and limit bandwidth
use. Increased economies are achieved when wide-area communications are routed
through servers spread out across an organization's network, either to network
service provider "points of presence" or to remote offices on an intranet.

    MeetingPoint 3.0, the current version of MeetingPoint, was initially shipped
in November 1997 and has a suggested retail price of $3,995 for a server with 10
user connections. The Company also offers MeetingPoint 3.0 at higher prices for
up to 100 users; capacity beyond 100 users may be obtained by linking two or
more MeetingPoint servers. The Company also licenses CU-SeeMe and MeetingPoint
as a bundled package and offers site licenses and volume discounts for larger
purchases.

    ClassPoint

    ClassPoint, which is based on White Pine's CU-SeeMe and MeetingPoint group
conferencing technology, creates an instructor-led "virtual classroom" that
facilitates learning for any environment where the instructor and students are
in different locations. Because it enables the fundamental interaction between
the instructor and students, ClassPoint can be used for distance learning in
K-12, college and university classrooms, as well as home schooling. ClassPoint
also offers opportunities for distance training by businesses, government
organizations and others. ClassPoint combines real-time audio, video, text chat,
white board sharing, and Web touring. It also provides a Web-based framework for
materials to be shared before and after classes and training sessions.

    ClassPoint provides a framework for education that can be used in a number
of applications. K-12 schools can use it to connect children and classrooms
together from different cultures, bring in guest lecturers, facilitate home
schooling, enable teacher mentoring programs, and conduct moderated parent
conferences. Colleges and universities can use ClassPoint to increase their
full-time enrollment by offering distance learning courses. ClassPoint also
enables colleges and universities to conduct on-line lab and tutoring sessions,
and to offer adult continuing education in partnership with business and
government. ClassPoint makes corporate training increasingly accessible to all
levels of employees by bringing it to the desktop, enabling businesses to
improve the availability and reach of their training programs with a cost-
efficient solution.

    The Company expects to make initial commercial shipments of ClassPoint in
April 1998. Licenses to ClassPoint are expected to be sold in 10-, 25- and
50-user bundles, with prices ranging from $6,395 to $22,995 for businesses and
from $5,095 to $17,995 for education, government and non-profit organizations.
The Company expects to make an introductory trial offer of a ClassPoint license
for five students and one instructor for $995. The Company also expects to offer
site licenses and volume discounts for larger purchases.

LEGACY CONNECTIVITY

    WebTerm

    WebTerm provides the means for Microsoft Windows and Macintosh users to
access critical information on a corporate intranet through their Web browser.
WebTerm enables interactive, browser-based access to legacy host applications.
WebTerm can be used to embed live, interactive TN3270, TN5250, or VT420 terminal
emulators within the Web browser; centrally administer all emulation,
connectivity, and automation updates from one location with no user involvement;
and automate interactions in the host window, reducing or eliminating end-user
application training.

    WebTerm accesses data from hosts that support Telnet sessions. WebTerm macro
automation is always available, and can be enhanced with JavaScript on browsers
that support LiveConnect or Active X.

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    WebTerm X 2.0 gives Windows 95 and Windows NT users access to X Windows
applications from their Web browser and as a stand-alone application. The
WebTerm X Administrator is a Webmaster or system administrator tool that
centrally configures Web pages with X Windows sessions.

    As a stand-alone X Windows application with clickable desktop icons for
desktop X client launching, WebTerm permits a user to embed live X Windows
applications within users' Web browsers; enables a user to launch X Windows
desktop sessions (such as Common Desktop Environment) and individual X Windows
applications from their Web browser, and centrally administer all configurations
and updates from one location with no user involvement.

    Single-user WebTerm products have suggested retail prices of $169 to $229.
The Company also offers site licenses and volume discounts for larger purchases.

    eXodus

    eXodus is White Pine's family of X Windows connectivity products. Running on
all Microsoft Windows-based systems and Macintosh platforms, eXodus is a
comprehensive connectivity package that provides easy access to all X Windows
applications, and to many other legacy applications as well. eXodus provides the
solution for connecting to Unix, VMS, and Windows NT environments via the X
Windows protocol. Connecting to popular X Windows environments such as Common
Desktop Environment, Sun Open Windows, Hewlett Packard HP-VUE, and Digital
DECwindows is both seamless and simple.

    The eXodus software for a single-user has a suggested retail price of $295
for either Windows or Macintosh. The Company also offers site licenses and
volume discounts for larger purchases.

    5PM Term

    5PM Term is a modular terminal emulation solution providing connections from
Windows 95, Windows, Power Macintosh, and Macintosh desktops to IBM Mainframe,
AS/400, UNIX, VAX and HP hosts. 5PM Term replaces terminal screens and offers
value-added features that enable organizations to customize their environment
with productivity enhancements like multiple sessions, WatchMe macro scripting,
HotKeys, HotSpots, keyboard macros, toolbars, graphical keyboard mapping,
full-screen support, and on-line help. 5PM Term also has its own script editor
with macro recording function, which allows the non-technical user to create and
modify the user's own macros directly in 5PM Term.

    5PM Term for a single-user has a suggested retail price of between $249 and
$399. depending upon the platform. The Company also offers site licenses and
volume discounts for larger purchases.

RESEARCH AND DEVELOPMENT

    Since its inception, the Company has specialized in IP-based connectivity
solutions for corporate customers and now provides what it believes to be the
broadest line of multi-platform, software connectivity solutions in the market.
Research and development has traditionally been divided into legacy connectivity
product and group conferencing product development. As the Company believes that
its future success is dependent on its group conferencing solutions technology,
it has been gradually migrating its research and development resources from
legacy connectivity technology to group conferencing technology. Approximately
13% of research and development expense in 1997 was attributable to legacy
connectivity development and 87% was devoted to group conferencing, compared
with 58% and 42%, respectively, in 1996. The Company expects the percentage of
its research and development resources devoted to group conferencing products to
continue to increase in the foreseeable future, as the Company intends to
continue to limit its legacy connectivity research and development to
maintenance of existing products.

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    The Company's research and development expenditures totaled $5,722,000 and
$3,819,000 in the fiscal years ended December 31, 1997 and 1996, respectively.
The Company intends to continue to devote substantial resources to research and
development in fiscal 1998, although the actual amount of research and
development expenses in 1998 will depend on a number of factors, including the
level of market acceptance of the Company's current products and the rate of
technological change in the group conferencing industry.

MARKETING AND DISTRIBUTION

    The Company markets and sells its products through a combination of
distributors, OEMs and strategic partners, the Company's direct sales
organization and directly over the Internet. The Company conducts marketing
programs, including direct mail, advertising, public relations, distribution of
product literature and other programs to support each of the channels, in order
to position and promote its products and services. The Company maintains a Web
site where prospective customers can obtain information about the Company's
products and services and download certain software for evaluation. Marketing
personnel provide price lists and product descriptions and assist the direct
sales force through lead generation and sales training.

    The Company's primary strategy for marketing and distributing its group
conferencing products is to establish new strategic and OEM relationships and
extend existing relationships with multinational firms that provide particular
marketing or distribution opportunities or technological capabilities for the
Company's group conferencing products. The Company has already established
distribution relationships in Australia, France, Hong Kong, Japan, Korea and the
United Kingdom. The Company has also formed OEM or bundling relationships in
order to provide customers with turnkey solutions and to facilitate product
sales through distribution channels. The Company has established such
relationships with Symantec, a developer and marketer of software, Philips, a
manufacturer of digital cameras, and Digital Vision Inc. and Winnov, Inc.,
manufacturers of video boards. In 1996, the Company began to employ Tech Data
Corporation and Ingram Micro, Inc. as distributors to deliver CU-SeeMe to
consumers through retail channels including store chains and superstores, such
as CompUSA, Egghead Software and RCS. The Company also sells its software
videoconferencing products and WebTerm directly from its Web site.

    The Company also promotes its videoconferencing products by participating in
major videoconferencing and other trade shows such as the Networld+Interop, PC
Expo, Comdex, Internet World, Telcon and MacWorld. The Company periodically
sponsors special events, such as cybercasts of the Little League 50th
Anniversary World Series and the 1996 Republican National Convention, in an
effort to enhance the visibility of the Company and its products.

    The Company markets and sells its legacy connectivity products in the United
States through its direct sales force and distributors and in other countries
primarily through distributor relationships.

    International sales represented 27% and 30% of total revenue in the fiscal
years ended December 31, 1997 and 1996.

    The Company's sales force is located in Nashua, New Hampshire, San Jose,
California, LaGaude, France, and Glasgow, United Kingdom.

CUSTOMERS

    The Company's customers include businesses, educational institutions,
government organizations, and individual consumers. The Company sells its
software to end users and to OEMs that bundle the Company's software with other
products.

    Sales to Ingram Micro, Inc. represented 14% of the Company's total revenue
in the fiscal years ended December 31, 1997 and 1996, respectively. Sales to
Tech Data Corporation represented 14% of the Company's total revenue in the
fiscal year ended December 31, 1997. The loss of either of these customers

                                       10
<PAGE>
could have a material adverse effect on the Company's business, financial
condition, and results of operations.

CUSTOMER SERVICE AND SUPPORT

    White Pine is committed to maintaining customer satisfaction and loyalty.
White Pine employs technical customer representatives located in New Hampshire
to support and service its customer base. Certain of the Company's distributors
and OEM customers maintain separate customer support organizations for their
respective customers. The Company provides back-up support to such
organizations.

    The Company maintains a technical support hotline to answer customer
inquiries and provides an on-line database of technical product information. The
Company's support staff also responds to e-mail inquiries and monitors several
e-mail mailing lists. Customer support specialists diagnose and solve technical
problems related not only to the Company's products but also to other hardware
and software with which the Company's products may interact. The Company tracks
all support requests, including current status reports and historical customer
interaction logs, using a series of customer databases. The Company uses
customer feedback as a source of ideas for product improvements and
enhancements.

    The Company intends to provide maintenance for CU-SeeMe and MeetingPoint
through a program of periodic technical upgrades. For a fee, the Company will
provide extended maintenance services to its MeetingPoint customers and to
certain volume purchasers of CU-SeeMe. Customers who purchase site licenses for
MeetingPoint are required to enter into a customer support and maintenance
agreement. The Company's X Windows and terminal emulation customers can obtain
service and support through the Company's eXtend Support Program, which for a
fee entitles customers to priority service through a toll-free number and to
free, automatic shipments of all enhancements and upgrades for legacy
connectivity products licensed from the Company.

COMPETITION

    The market for multimedia conferencing products and services is extremely
competitive, and the Company expects that competition will intensify in the
future. The Company believes that the principal competitive factors in the
multimedia group conferencing industry are price, video and audio quality,
interoperability, functionality, reliability, service and support, hardware
platforms supported, and vendor and product reputation. The Company believes
that its ability to compete successfully will depend on a number of factors both
within and outside its control, including the adoption and evolution of industry
standards, the pricing policies of its competitors and suppliers, the timing of
the introduction of new software products and services by the Company and
others, the Company's ability to hire and retain quality employees, and industry
and general economic trends. In addition, because the barriers to entry in the
software market are relatively low and the potential market is large, the
Company anticipates continued growth in the industry and the entrance of new
competitors in the future.

    In the multimedia conferencing market, the Company currently competes, or
expects to compete, directly or indirectly with the following categories of
companies: (i) traditional hardware-based videoconferencing companies, such as
Intel Corporation, PictureTel Corporation, VTEL Corporation and Compression Labs
Incorporated; (ii) emerging videoconferencing technology companies, such as
Cinecom Corporation, Connectix Corporation, Creative Labs, Inc. and VDONet
Corp.; (iii) vendors of operating systems and browsers such as Microsoft
Corporation, which in 1997 introduced NetMeeting, a product that enables video,
audio and data communication over the Internet; (iv) videoconferencing support
companies, such as VideoServer, Inc., Lucent Technologies, Inc. and Accord Ltd.;
and (v) distance learning solution vendors, such as Centra Software,
Incorporated, and DataBeam Corporation.

    Currently, Microsoft's NetMeeting, introduced in 1997, presents the most
direct competition for CU-SeeMe. Microsoft has significantly greater resources,
including sales and marketing resources, than the

                                       11
<PAGE>
Company, and is able to bundle NetMeeting with its Internet Explorer software.
NetMeeting supports Windows 95 and Windows NT, and is H.323 compliant.

    H.323 is being rapidly adopted by the industry as the global standard for
group conferencing products. A number of companies have announced their
intention to develop and commercialize a server product to compete directly with
MeetingPoint, including PictureTel Corporation, VideoServer Incorporated, and
DataBeam Corporation. In addition, it is likely that other companies will also
enter this market in the near future.

    ClassPoint will compete with other distance learning and distance training
products in educational, corporate and governmental markets. Competing products
include Contigo Itinerary (Web-based Java PowerPoint delivery), Lotus
LearningSpace (Domino-based materials delivery and asynchronous discussions),
RealNetworks (one-to-many streaming video and media), PlaceWare Auditorium
(delivery of interactive presentations to multiple sites), Ilinc's LearnLinc
(instructor-controlled, multi-point audio and Web tours, with point-to-point
video supplied by Intel for extra cost), and DataBeam's LearningServer
(instructor-led application-sharing without audio or video).

    In the market for X Windows products, the Company faces significant direct
competition from a number of PC X server software vendors, including Hummingbird
Communications Ltd., NetManage, Inc., Network Computing Devices, Inc. and Walker
Richer and Quinn Inc., as well as indirect competition from manufacturers of
dedicated X terminals. The Company's principal competitor in this market is
Hummingbird Communications Ltd., the largest supplier of X server software
products for the PC platform. To the extent that these and other companies
introduce new or enhanced PC X server software products, the Company will face
increased competition.

    In the terminal emulation market, the Company currently competes with the
following categories of companies: (i) vendors of International Business
Machines Corporation host connectivity products, including Attachmate Corp. and
Wall Data Incorporated; (ii) vendors of TCP/IP terminal emulation products,
including FTP Software, Inc. and NetManage, Inc.; and (iii) vendors of Digital
Equipment Corporation and Hewlett-Packard Company host connectivity products,
including Walker Richer and Quinn Inc. In the Web-based terminal emulation
environment, the Company expects to compete, directly or indirectly, with
International Business Machines Corporation, Open Connect, Wall Data
Incorporated, Attachmate Corp., and Walker Richer and Quinn Inc.

    The Company plans to continue updating the legacy software offerings,
primarily in support of its large installed base. Legacy connectivity products
represented 35% of total revenue in the year ended December 31, 1997 as compared
with 56% in the year ended December 31, 1996. The Company expects these revenues
to continue to decline as the Company maintains a marketing strategy focus on
group conferencing products.

    Many of the Company's current and potential competitors, including
Hummingbird Communications Ltd., Intel Corporation, International Business
Machines Corporation, Microsoft Corporation, PictureTel Corporation and
VideoServer, Inc., have significantly longer operating histories and
significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than the Company. As
a result, the Company's competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the promotion and sale of their products and
services. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.

                                       12
<PAGE>
    To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance that
the Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to remain
competitive. In addition, current and potential competitors have established or
may in the future establish collaborative relationships among themselves or with
third parties, including third parties with which the Company has a
relationship, to increase the visibility and utility of their products and
services. Accordingly, it is possible that new competitors or alliances may
emerge and rapidly acquire a significant market share. Such an eventuality could
have a material adverse effect on the Company's business, financial condition
and results of operations.

GOVERNMENT REGULATION

    The Company is not currently subject to direct federal, state or local
government regulation, other than regulations applicable to businesses
generally. There is currently only a small body of laws and regulations directly
applicable to access to or commence on the Internet. However, due to the
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted at the federal, state and local levels with
respect to the Internet, covering issues such as user privacy, freedom of
expression, pricing, characteristics and quality of products and services,
taxation, advertising, intellectual property rights, information security and
the convergence of traditional telecommunications services with Internet
communications. Although sections of the Communications Decency Act of 1996 (the
"CDA") that, among other things, proposed to impose criminal penalties on anyone
distributing "indecent" material to minors over the Internet, were held to be
unconstitutional by the U.S. Supreme Court, there can be no assurance that
similar laws will not be proposed and adopted. The nature of such similar
legislation and the manner in which it may be interpreted and enforced cannot be
fully determined and, therefore, legislation similar to the CDA could subject
the Company or its customers to potential liability, which in turn could have an
adverse effect on the Company's business, results of operations and financial
condition. The adoption of any such laws or regulations might decrease the
growth of the Internet, which in turn could decrease the demand for the services
of the Company or increase the cost of doing business or in some other manner
have a material adverse effect on the Company's business, results of operations
or financial condition. In addition, applicability to the Internet of existing
laws governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, libel, obscenity and personal privacy is
uncertain. The vast majority of such laws were adopted prior to the advent of
the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Changes to
such laws intended to address these issues, including some recently proposed
changes, could create uncertainty in the marketplace which could reduce demand
for the services of the Company or increase the cost of doing business as a
result of costs of litigation or increased service delivery costs, or could in
some other manner have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, as the Company's
products are available over the Internet in multiple states and foreign
countries, such jurisdictions may claim that the Company is required to qualify
to do business as a foreign corporation in each such state or foreign country.
The Company is qualified to do business in only a limited number of states, and
failure by the Company to qualify as a foreign corporation in a jurisdiction
where it is required to do so could subject the Company to taxes and penalties
for the failure to qualify and could result in the inability of the Company to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to the Company's business, could have a material adverse effect
on the Company's business, results of operations and financial condition.

    In March 1996, the America's Carriers Telecommunication Association
("ACTA"), a group of telecommunications common carriers, filed a petition (the
"ACTA Petition") with the Federal Communications Commission (the "FCC"), arguing
that providers (such as the Company) of computer software products that enable
voice transmission over the Internet ("Internet telephone" services) are
operating as common carriers without complying with various regulatory
requirements and without paying certain

                                       13
<PAGE>
charges required by law. The ACTA Petition argues that the FCC has the authority
to regulate both the Internet and the providers of "Internet telephone" services
and requests that the FCC declare its authority over interstate and
international telecommunications services using the Internet, initiate
rulemaking proceedings to consider rules governing the use of the Internet for
the provision of telecommunications services, and order providers of "Internet
telephone" software to immediately cease the sale of such software pending such
rulemaking. Certain parties have filed comments with the FCC regarding the ACTA
Petition. The Company is unable to predict the outcome of this proceeding. In
December 1996 the FCC stated that it intended to address the legal questions
raised by the ACTA Petition in a future proceeding but has not yet done so. Any
action by the FCC to grant the relief sought by ACTA or otherwise to regulate
use of the Internet as a medium of communication, including any action to permit
local exchange carriers to impose additional charges for connections used for
Internet access, could have a material adverse effect on the Company's business,
financial condition and results of operations.

PROPRIETARY RIGHTS

    The Company's videoconferencing client product, CU-SeeMe, is a commercial
version of Freeware CU-SeeMe. Freeware CU-SeeMe and its related server were
developed by Cornell Information Technologies, a research institute at Cornell
University, and are freely available on the Web. In June 1995, the Company and
the Cornell Foundation entered into an Exclusive Software License Agreement (the
"Original License Agreement") that granted to the Company the exclusive
worldwide right to develop, modify, market, distribute and sublicense commercial
versions of Freeware CU-SeeMe and its related server, as well as the rights to
appoint licensee distributors and to use the trademark "CU-SeeMe," which
agreement was modified by the First Amendment to Exclusive Software License
Agreement dated May 22, 1997 (the "Amendment," and together with the Original
License Agreement, the "License Agreement").

    The License Agreement requires that the Company pay royalties based on the
Company's net revenue from its commercial versions of Freeware CU-SeeMe and its
related server (subject to certain minimum per-copy royalties) and share
sublicensing income with the Cornell Foundation. The License Agreement also
requires that the Company make certain annual minimum royalty payments. Under
the terms of the Amendment, the Company prepaid $1,000,000 to the Cornell
Foundation in the second quarter of 1997 as an advance against royalties due
under the License Agreement. Under the Original License Agreement, the Company
issued to the Cornell Foundation a warrant, which Cornell exercised during
December 1996 to purchase 20,000 shares of Common Stock at an exercise price of
$3.00 per share. Under the Amendment, the Company issued to the Cornell
Foundation a currently outstanding warrant to purchase 150,000 shares of Common
Stock at an exercise price of $6.00 per share.

    The License Agreement has an initial term expiring December 31, 2000 and
renews automatically for periods of one year unless and until terminated by
either party for "cause" or by the Company for convenience. For purposes of the
License Agreement, "cause" means failure by the Company to pay any amount due
under the License Agreement, if not cured within 30 days of written notice of
such failure to pay, or any material breach of the License Agreement by either
party, if not cured within 90 days of written notice of such breach. "Material
breach" includes failure to exercise due diligence to develop, manufacture and
market commercial versions of Freeware CU-SeeMe and its related server, failure
to grant sublicenses as required by the License Agreement, failure to maintain
quality control over the Company's commercial versions of Freeware CU-SeeMe and
its related server, and failure to develop and exploit the market to the extent
necessary to meet the Company's minimum royalty obligations under the License
Agreement. The failure of the Company to meet certain staffing, product
introduction and sublicensing obligations will permit the Cornell Foundation to
terminate the exclusivity provisions of the License Agreement.

    As part of the License Agreement, the Cornell Foundation, acting through
Cornell Information Technologies, and the Company agreed to provide technical
support to each other to maintain the compatibility and interoperability of
Freeware CU-SeeMe and CU-SeeMe and their respective servers. The Cornell
Foundation and Cornell University are entitled to use any portion of the source
code of the

                                       14
<PAGE>
Company's commercial versions of Freeware CU-SeeMe and its related server that
may be necessary to maintain basic compatibility and interoperability with
Freeware CU-SeeMe and such server. The Company must provide to the Cornell
Foundation and Cornell University, at no cost, all information required to
maintain such compatibility and interoperability.

    Under the terms of the License Agreement, the Company also agreed to offer
sublicenses to the source code of Freeware CU-SeeMe and its related server for a
nominal fee, provided that any sublicensee agrees (i) to distribute only
executable versions of Freeware CU-SeeMe and its related server, (ii) to realize
no profit or gain, either directly or indirectly, from the use or distribution
of Freeware CU-SeeMe or its related server, (iii) to grant each of the Company
and the Cornell Foundation, at no cost, a royalty-free, perpetual, irrevocable,
unrestricted license to use modifications and enhancements to Freeware CU-SeeMe
and its related server developed and distributed by the sublicensee, as well as
related documentation, and (iv) to freely distribute on the Internet the
executable code for Freeware CU-SeeMe and its related server as modified by the
sublicensee. Moreover, the Company agreed to permit third parties to use
unmodified source code of Freeware CU-SeeMe and its related server for the
development, manufacture and marketing of commercial products in executable code
form that incorporate unmodified or re-engineered versions of Freeware CU-SeeMe
or its related server, subject to reasonable licensing terms.

    Under the terms of the License Agreement, the Cornell Foundation retained
the right on behalf of Cornell University to issue licenses and maintenance and
other releases of Freeware CU-SeeMe and its related server to third parties as
not-for-profit freeware. The Cornell Foundation and Cornell University may also
use any portion of Freeware CU-SeeMe and its related server to develop
commercial products and services to be licensed to others, provided that those
products and services do not compete directly with the Company's commercial
versions of Freeware CU-SeeMe and its related server.

EMPLOYEES

    At March 18, 1998, the Company had 120 full-time employees, including 47 in
research and development, 36 in sales and marketing, 17 in technical support,
and 20 in general and administrative and software manufacturing. Seventeen of
these employees were located in France and, in accordance with applicable French
law, were represented by a labor union. The Company's other employees were
located in the United States and were not represented by any labor organization.
The Company has experienced no work stoppages and believes that its relations
with its employees are good.

ITEM 1A. RISK FACTORS

RECENT OPERATING LOSSES

    The Company incurred losses from operations of $6,826,000 and $3,637,000 in
the years ended December 31, 1997 and 1996, respectively. At December 31, 1997,
the Company had an accumulated deficit of approximately $20,437,000. In the
fiscal years ended December 31, 1997 and 1996, the Company made significant
expenditures for product development and sales and marketing in support of the
product launches of CU-SeeMe and MeetingPoint, which became commercially
available in March 1996 and November 1997, respectively. The Company expects to
continue investing heavily in the marketing of MeetingPoint and related
follow-on applications such as ClassPoint. These product rollout expenditures
may negatively impact the Company's results of operations in the future,
particularly if sales of new products fall below expectations.

    Sales of the Company's legacy connectivity products comprised 35% and 56% of
total revenue for the years ended December 31, 1997 and 1996, respectively. The
Company expects that the dollar amount of sales of legacy connectivity products
will continue to decline for the foreseeable future. In addition, the Company
expects that revenue from CU-SeeMe also will decrease during the foreseeable
future. No

                                       15
<PAGE>
assurance can be given that sales of MeetingPoint, ClassPoint or other new
products will offset any declines in revenues from CU-SeeMe and White Pine's
legacy connectivity products in fiscal 1998.

    As a result of the foregoing factors, the Company may incur further losses
in the future. There can be no assurance that the Company will achieve
profitable operations in any future period.

RELIANCE ON UNPROVEN NEW PRODUCT

    MeetingPoint was released in November 1997, and White Pine therefore has had
only a limited opportunity to determine the extent to which MeetingPoint will
succeed in the marketplace. MeetingPoint represents the first available Internet
server that incorporates H.323 industry standards, effectively allowing
interoperability among various videoconferencing clients. As is typical for a
new product in a rapidly developing industry, demand for and market acceptance
of MeetingPoint are subject to a high level of uncertainty. The Company expects
that sales of its legacy connectivity products and CU-SeeMe will decline during
the foreseeable future. As a result, the Company's future success will depend
significantly on its ability to market MeetingPoint successfully and on its
ability to develop and introduce new products and to continue to improve the
performance, features and reliability of its products, including MeetingPoint,
in response to both competing product offerings and evolving marketplace
demands. There can be no assurance that the Company will be successful in
marketing MeetingPoint or developing new products or that any new products will
be accepted in the marketplace. The inability of MeetingPoint to achieve
anticipated revenue volumes or operational difficulties with the product could
all have a material adverse effect on the Company's business, financial
condition and results of operations.

COMPETITION

    The market for multimedia conferencing products and services is extremely
competitive, and the Company expects that competition will intensify in the
future. The Company believes that the principal competitive factors in the
multimedia group conferencing industry are price, video and audio quality,
interoperability, functionality, reliability, service and support, hardware
platforms supported, and vendor and product reputation. The Company believes
that its ability to compete successfully will depend on a number of factors both
within and outside its control, including the adoption and evolution of industry
standards, the pricing policies of its competitors and suppliers, the timing of
the introduction of new software products and services by the Company and
others, the Company's ability to hire and retain quality employees, and industry
and general economic trends. In addition, because the barriers to entry in the
software market are relatively low and the potential market is large, the
Company anticipates continued growth in the industry and the entrance of new
competitors in the future.

    In the multimedia conferencing market, the Company currently competes, or
expects to compete, directly or indirectly with the following categories of
companies: (i) traditional hardware-based videoconferencing companies, such as
Intel Corporation, PictureTel Corporation, VTEL Corporation and Compression Labs
Incorporated; (ii) emerging videoconferencing technology companies, such as
Cinecom Corporation, Connectix Corporation, Creative Labs, Inc. and VDONet
Corp.; (iii) vendors of operating systems and browsers such as Microsoft
Corporation, which in 1997 introduced NetMeeting, a product that enables video,
audio and data communication over the Internet; (iv) videoconferencing support
companies, such as VideoServer, Inc., Lucent Technologies, Inc. and Accord Ltd.;
and (v) distance learning solution vendors, such as Centra Software,
Incorporated, and DataBeam Corporation.

    Currently, Microsoft's NetMeeting, introduced in 1997, presents the most
direct competition for CU-SeeMe. Microsoft has significantly greater resources,
including sales and marketing resources, than the Company, and is able to bundle
NetMeeting with its Internet Explorer software. NetMeeting supports Windows 95
and Windows NT, and is H.323 compliant.

    H.323 is being rapidly adopted by the industry as the global standard for
group conferencing products. A number of companies have announced their
intention to develop and commercialize a server product to

                                       16
<PAGE>
compete directly with MeetingPoint, including PictureTel Corporation,
VideoServer Incorporated, and DataBeam Corporation. In addition, it is likely
that other companies will also enter this market in the near future.

    ClassPoint will compete with other distance learning and distance training
products in educational, corporate and governmental markets. Competing products
include Contigo Itinerary (Web-based Java PowerPoint delivery), Lotus
LearningSpace (Domino-based materials delivery and asynchronous discussions),
RealNetworks (one-to-many streaming video and media), PlaceWare Auditorium
(delivery of interactive presentations to multiple sites), Ilinc's LearnLinc
(instructor-controlled, multi-point audio and Web tours, with point-to-point
video supplied by Intel for extra cost), and DataBeam's LearningServer
(instructor-led application-sharing without audio or video).

    In the market for X Windows products, the Company faces significant direct
competition from a number of PC X server software vendors, including Hummingbird
Communications Ltd., NetManage, Inc., Network Computing Devices, Inc. and Walker
Richer and Quinn Inc., as well as indirect competition from manufacturers of
dedicated X terminals. The Company's principal competitor in this market is
Hummingbird Communications Ltd., the largest supplier of X server software
products for the PC platform. To the extent that these and other companies
introduce new or enhanced PC X server software products, the Company will face
increased competition.

    In the terminal emulation market, the Company currently competes with the
following categories of companies: (i) vendors of International Business
Machines Corporation host connectivity products, including Attachmate Corp. and
Wall Data Incorporated; (ii) vendors of TCP/IP terminal emulation products,
including FTP Software, Inc. and NetManage, Inc.; and (iii) vendors of Digital
Equipment Corporation and Hewlett-Packard Company host connectivity products,
including Walker Richer and Quinn Inc. In the Web-based terminal emulation
environment, the Company expects to compete, directly or indirectly, with
International Business Machines Corporation, Open Connect, Wall Data
Incorporated, Attachmate Corp., and Walker Richer and Quinn Inc.

    The Company plans to continue updating the legacy software offerings,
primarily in support of its large installed base. Legacy connectivity products
represented 35% of total revenue in the year ended December 31, 1997 as compared
with 56% in the year ended December 31, 1996. The Company expects these revenues
to continue to decline as the Company maintains a marketing strategy focus on
group conferencing products.

    Many of the Company's current and potential competitors, including
Hummingbird Communications Ltd., Intel Corporation, International Business
Machines Corporation, Microsoft Corporation, PictureTel Corporation and
VideoServer, Inc., have significantly longer operating histories and
significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than the Company. As
a result, the Company's competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the promotion and sale of their products and
services. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.

    To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance that
the Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to remain
competitive. In addition, current and potential competitors have established or
may in the future establish collaborative relationships among themselves or with
third parties, including third parties with which the Company has a
relationship, to increase the visibility and utility of their products and
services. Accordingly,

                                       17
<PAGE>
it is possible that new competitors or alliances may emerge and rapidly acquire
a significant market share. Such an eventuality could have a material adverse
effect on the Company's business, financial condition and results of operations.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

    The Company has experienced fluctuations in its quarterly results of
operations and anticipates that such fluctuations will continue and could
increase. The Company's quarterly results of operations may vary significantly
depending on a number of factors, some of which are outside of the Company's
control. These factors include the timing of the introduction or acceptance of
new products offered by the Company or its competitors, changes in demand for
Internet services, changes in the mix of products provided by the Company,
changes in pricing strategies by the Company and its competitors, changes in the
markets served by the Company, changes in regulations affecting the industry,
changes in the Company's operating expenses, capital expenditures and other
costs relating to the expansion of operations, changes in its personnel and
general economic conditions. In addition, fluctuations in exchange rates may
render the Company's products less competitive relative to local product
offerings or result in foreign exchange losses. To date, the Company has not
engaged in exchange rate hedging activities to minimize the risks of such
fluctuations. Although the Company may seek to implement hedging techniques in
the future with respect to its foreign currency transactions, there can be no
assurance that such hedging techniques will be successful. Historically, the
Company's revenue in the third quarter of each calendar year has been adversely
affected by seasonal reductions in business activity in Europe and certain other
parts of the world during the summer months. There can be no assurance that the
Company will be able to achieve or maintain profitability in the future or that
its levels of profitability will not vary significantly among quarterly periods.
Fluctuations in results of operations may result in volatility in the price of
the Common Stock.

    A significant portion of the Company's expenses are fixed and difficult to
reduce in the event that revenue does not meet the Company's expectations, thus
magnifying the adverse effect of any revenue shortfall. Furthermore,
announcements by the Company or its competitors of new products, services or
technologies could cause customers to defer or cancel purchases of the Company's
products. Any such deferral or cancellation could have a material adverse effect
on the Company's business, financial condition and results of operations.
Accordingly, revenue shortfalls can cause significant variations in results of
operations from quarter to quarter and could have a material adverse effect on
the Company's business, financial condition and results of operations.

    As a result of the foregoing factors, it is possible that in some future
quarter the Company's results of operations will be below prior results or the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially and adversely affected.

RELIANCE ON SIGNIFICANT CUSTOMERS

    Sales to a primary distributor represented 14% of the Company's total
revenue in the each of fiscal years ended December 31, 1997, and 1996. Sales to
a second primary distributor represented 14% in the fiscal year ended December
31, 1997. The loss of, or a significant curtailment of, purchases by either
distributor, including a loss or curtailment due to factors outside of the
Company's control, would have a material adverse effect on the Company's
business, financial condition, and results of operations.

DEPENDENCE UPON LICENSE AGREEMENT; LIMITED PROPRIETARY PROTECTION

    The Company's success is heavily dependent upon its proprietary technology.
The Company's videoconferencing products, CU-SeeMe and MeetingPoint, are
commercial versions of Freeware CU-SeeMe and its related server. The Company's
ability to develop, modify, market, distribute and sublicense CU-SeeMe and
MeetingPoint, as well as the right to use the trademark "CU-SeeMe," derives
entirely

                                       18
<PAGE>
from the License Agreement with the Cornell Foundation. In order to maintain the
exclusivity provisions of the License Agreement, the Company must meet certain
staffing, product introduction and sublicensing obligations. There can be no
assurance that the Company will meet these obligations. Any failure to meet such
obligations will permit the Cornell Foundation to grant licenses to other
companies, including competitors of the Company, to develop, sell and sublicense
commercial versions of Freeware CU-SeeMe and its related server. In addition,
the Company's right to issue sublicenses is contingent upon the Company's
continued marketing of commercial versions of Freeware CU-SeeMe and its related
server. Even if the Company fulfills such obligations, the License Agreement has
a fixed term ending December 31, 2000. Although the License Agreement contains
certain provisions for automatic annual renewal, the License Agreement may be
terminated by the Cornell Foundation for "cause." Under the License Agreement,
"cause" includes failure by the Company to pay any amount due under the License
Agreement, if not cured within 30 days of written notice of such failure to pay,
or any "material breach" of the License Agreement by the Company, if not cured
within 90 days of written notice of such breach. Material breach includes
failure to exercise due diligence to develop, manufacture and market commercial
versions of Freeware CU-SeeMe and its related server, failure to grant
sublicenses as required by the License Agreement, failure to maintain quality
control over the Company's commercial versions of Freeware CU-SeeMe and its
related server, and failure to develop and exploit the market to the extent
necessary to meet the Company's minimum royalty obligations under the License
Agreement. Any termination of the License Agreement would have a material
adverse effect on the Company's business, financial condition and results of
operations. The License Agreement requires that the Company pay royalties based
on the Company's net revenue from its commercial versions of Freeware CU-SeeMe
and its related server (subject to certain minimum per-copy royalties) and share
sublicensing income with the Cornell Foundation. The License Agreement also
requires that the Company make certain annual minimum royalty payments. The
failure to pay any such minimum amount would constitute "cause" for termination
of the License Agreement, as described above. Moreover, Freeware CU-SeeMe and
its related server are freely available on the Internet. Such availability may
adversely affect sales of licenses for CU-SeeMe and MeetingPoint. The Company
also depends upon the Cornell Foundation, as the owner of the trademark
"CU-SeeMe," to protect and enforce rights in the trademark. Any failure of the
Cornell Foundation to protect or enforce such rights could substantially impair
the value of such trademark and the Company's rights to use such trademark.

    The Company currently has no patents and relies primarily on copyright,
trademark and trade secrets law, as well as employee and third-party
non-disclosure agreements, to protect its intellectual property. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to prevent misappropriation of its technology or independent
development by others of similar technology. The Company's products, including
CU-SeeMe, MeetingPoint and ClassPoint, are licensed to customers under "shrink
wrap" licenses included as part of the product packaging. Although in certain
sales the Company's shrink wrap licenses are accompanied by specifically
negotiated agreements signed by the licensee, in most cases its shrink wrap
licenses are not negotiated with or signed by individual licensees. Certain
provisions of the Company's shrink wrap licenses, including provisions limiting
the Company's liability and protecting against unauthorized use, copying,
transfer and disclosure of the licensed program, may be unenforceable under the
laws of certain jurisdictions. Also, the Company has delivered certain technical
data and information relating to CU-SeeMe and MeetingPoint to the United States
government and, as a result, the United States government may have unlimited
rights to use such technical data and information or to authorize others to use
such technical data and information. There can be no assurance that the United
States government will not authorize others to use such technical data and
information for purposes competitive with those of the Company. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
to the same extent as do laws in the United States. There can be no assurance
that the protections afforded by the laws of such countries will be adequate to
protect the Company's proprietary rights, the unenforceability of any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Litigation may be necessary to

                                       19
<PAGE>
enforce the Company's intellectual property rights or to protect the Company's
trade secrets. Any such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition and results of operations.

    Although the Company believes that its products and technology do not
infringe the proprietary rights of others, there can be no assurance that third
parties will not assert infringement and other claims against the Company or
that such claims will not be successful. From time to time, the Company has
received and may receive in the future notice of claims of infringement of other
parties' proprietary rights. Many participants in the software industry have an
increasing number of patents and have frequently demonstrated a readiness to
commence litigation based on allegations of patent or other intellectual
property infringement. Third parties may assert exclusive patent, trademark,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any such
assertion or prosecution will not have a material adverse effect on the
Company's business, financial condition or results of operations. Regardless of
the validity or the successful assertion of any such claims, the Company could
incur significant costs and diversion of resources in defending such claims,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, any party making such claims
could secure a judgment awarding substantial damages, as well as injunctive or
other equitable relief, which could effectively block the Company's ability to
make, use, sell, distribute or market its products and services in the United
States or abroad. Any such judgment could have a material adverse effect on the
Company's business, financial condition and results of operations. In
circumstances where claims relating to proprietary technology or information are
asserted against the Company, the Company may seek licenses to such intellectual
property. There can be no assurance, however, that such licenses would be
available or, if available, that such licenses could be obtained on terms that
are commercially reasonable and acceptable to the Company. The failure to obtain
the necessary licenses or other rights could preclude the sale, manufacture or
distribution of the Company's products and, therefore, could have a material
adverse effect on the Company's business, financial condition and results of
operations.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

    Revenue from international sales represented 27% and 30% of the Company's
total revenue in the fiscal years ended December 31, 1997 and 1996,
respectively. As part of its business strategy, the Company intends to seek
opportunities to expand its product and service offerings into additional
international markets. The Company believes that expansion into new
international markets is critical to the Company's ability to continue to grow
and to market its products and services. There can be no assurance that the
Company will be successful in developing localized versions of its products for
new international markets or in marketing or distributing products and services
in these markets. The Company's international business may be adversely affected
by changing economic conditions in foreign countries. The majority of the
Company's sales are currently denominated in U.S. dollars, but there can be no
assurance that a significantly higher level of future sales will not be
denominated in foreign currencies. To the extent the Company makes sales
denominated in currencies other than U.S. dollars, fluctuations in exchange
rates may contribute to fluctuations in the Company's business, financial
condition and results of operations. Conducting an international business
inherently involves a number of other difficulties and risks, such as export
restrictions, export controls relating to technology, compliance with existing
and changing regulatory requirements, tariffs and other trade barriers,
difficulties in staffing and managing international operations, longer payment
cycles, problems in collecting accounts receivable, software piracy, political
instability, seasonal reductions in business activity in Europe and certain
other parts of the world during the summer months, and potentially adverse tax
consequences. There can be no assurance that one or more of these factors will
not have a material adverse effect on any international operations established
by the Company and, consequently, on the Company's business, financial condition
and results of operations.

                                       20
<PAGE>
RISKS ASSOCIATED WITH CREATING AND ACCESSING NEW DISTRIBUTION CHANNELS

    The Company's primary strategy for marketing its group conferencing products
is to form channel relationships in key markets with major distributors. The
Company also intends to license its group conferencing products to OEMs,
value-added resellers ("VARs") and additional distributors for bundling with
their products and services. The Company expects that its future success will
depend in large part upon these OEMs, VARs and distributors. The performance of
these OEMs, VARs and distributors will be outside the control of the Company,
and the Company is unable to predict the extent to which these organizations
will be successful in marketing and selling its group conferencing products or
products incorporating its group conferencing products. The Company's failure to
establish relationships with OEMs, VARs and distributors could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's distributors typically carry the products of
competitors of the Company, many of whom have substantially greater financial
resources than the Company. The distributors have limited capital to invest in
inventory, and their decisions to purchase the Company's products and, in the
case of retail stores, to give them critical shelf space, are partly a function
of pricing, terms and special promotions offered by the Company and its
competitors, over which the Company has no control and which it cannot predict.

    The Company also distributes certain of its products electronically through
the Internet. By distributing its products through the Internet, the Company may
decrease demand for its products and increase the likelihood of unauthorized
copying and use of its software. The Company has allowed and intends to continue
to allow customers to download certain of its products for a free evaluation
period.

RISK OF PRODUCT DEFECTS, INCLUDING YEAR 2000 DEFECTS

    Software developed and incorporated by the Company may contain significant
undetected errors when first released or as new versions are released. Although
the Company tests its software before commercial release, there can be no
assurance that errors in the software will not be found after customers begin to
use the software. CU-SeeMe 3.1 which was released in November 1997, corrects a
number of such errors in CU-SeeMe 3.0 and supports relevant Internet and ITU
standards and incorporates a number of new features. Any error in MeetingPoint
3.0 and CU-SeeMe 3.1, or the Company's other products may result in decreased
revenue or increased expenses because of adverse publicity, reduced orders,
product returns, uncollectible accounts receivable, delays in collecting
accounts receivable, and additional and unexpected costs of further product
development to correct the errors. Any of these results could have a material
adverse effect on the Company's business, financial condition and results of
operations.

    The Company is a defendant in six lawsuits pending in New York federal and
state courts in which the plaintiffs claim to suffer from carpal tunnel
syndrome, or "repetitive stress injuries," as a result of having used computer
keyboards that are alleged to have been defectively designed by a predecessor of
the Company. See "Item 3--Legal Proceedings". None of these suits has reached
trial and additional information detrimental to the Company could be developed
in the course of discovery. Although the Company has established a reserve for
these suits that the Company believes is adequate, there can be no assurance
that the Company's liabilities under these suits will not substantially exceed
that reserve.

    Many currently installed computer 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, computer systems and software used by many
companies may need to be upgraded to comply with these "Year 2000" requirements.
Significant uncertainty exists in the computer and software industry concerning
the potential effects associated with Year 2000 compliance.

                                       21
<PAGE>
    Since initial development, White Pine's software products have been designed
and tested to properly interpret dates for the Year 2000 and beyond. As a
result, the Company believes that its software products are Year 2000 capable
and reflect all necessary date code changes.

    The Company utilizes off-the-shelf and custom software developed internally
and by third parties. For example, the Company's group conferencing products
(CU-SeeMe, MeetingPoint and ClassPoint) integrate third-party software that may
not be Year 2000 compliant. Any failure by the Company to identify a Year 2000
problem in other third-party software could cause errors that materially impair
the utility of one or more of the Company's products. Even if such a problem is
defined, resolution of the problem may require significant expenditures and may
not be achievable by January 1, 2000. In addition, certain of the third-party
software or hardware used by customers of the Company in conjunction with the
Company's software products may not be Year 2000 compliant. For example, the
host computers to which the Company's legacy connectivity products (WebTerm,
eXodus and 5PM Term) are connected may not be Year 2000 compliant.

    Based upon its testing to date, White Pine does not expect that its
business, financial condition, results of operations or cash flows will be
materially adversely affected by any failure of third-party software or hardware
to interpret Year 2000 data correctly. No assurance can be given, however, that
the Company will not be required to make significant expenditures in connection
with the ongoing design and testing of its software products for Year 2000
compatability, and any related modifications or other developmental work that
may be required to cause those services and products to be Year 2000 compatible.
Further, there can be no assurance that potential interruptions or the costs
necessary for such testing and modifications will not have a material adverse
effect on the Company's business, financial condition, results of operations and
cash flows.

DEPENDENCE ON THIRD-PARTY SOFTWARE

    In addition to Freeware CU-SeeMe and its related server, the Company depends
upon certain other software and products that it licenses from third parties,
including voice compression technology from Voxware, Inc., global Internet
conferencing "white pages" software from Four11 Corporation, audio and video
codec software from Lucent Technologies and white board software from DataBeam
Corporation. Certain of these licenses are for limited terms, have certain
minimum royalty obligations or may be terminated if the Company breaches the
terms of the license. There can be no assurance that these suppliers will
continue to license this software to the Company on commercially reasonable
terms.

    Most of the Company's third-party licenses are non-exclusive and there can
be no assurance that the Company's competitors will not obtain licenses to and
utilize such software in competition with the Company. There can be no assurance
that licensors of software utilized in the Company's products will continue to
provide, enhance or support such software in the form utilized by the Company,
nor can there be any assurance that the Company will be able to modify its own
software to adapt to any changes in the licensed software. In addition, there
can be no assurance that financial or other difficulties that may be experienced
by such third-party suppliers will not have a material adverse effect on the
availability, quality or support of software incorporated in the Company's
products, or that, if such software becomes unavailable, the Company would be
able to find suitable alternatives on a timely basis and on commercially
reasonable terms. The loss of or inability to maintain any of these licenses
could result in the discontinuation of, or delays or reductions in, product
shipments unless and until equivalent technology is identified, licensed and
integrated with the Company's software, and could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Item 1. Description of Business-- Proprietary Rights."

                                       22
<PAGE>
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

    The Company is not currently subject to direct federal, state or local
government regulation, other than regulations applicable to businesses
generally. There is currently only a small body of laws and regulations directly
applicable to access to or commence on the Internet. However, due to the
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted at the federal, state and local levels with
respect to the Internet, covering issues such as user privacy, freedom of
expression, pricing, characteristics and quality of products and services,
taxation, advertising, intellectual property rights, information security and
the convergence of traditional telecommunications services with Internet
communications. Although sections of the CDA that, among other things, proposed
to impose criminal penalties on anyone distributing "indecent" material to
minors over the Internet, were held to be unconstitutional by the U.S. Supreme
Court, there can be no assurance that similar laws will not be proposed and
adopted. The nature of such similar legislation and the manner in which it may
be interpreted and enforced cannot be fully determined, and, therefore,
legislation similar to the CDA could subject to the Company and/or its customers
to potential liability, which in turn could have an adverse effect on the
Company's business, results of operations and financial condition. The adoption
of any such laws or regulations might decrease the growth of the Internet, which
in turn could decrease the demand for the services of the Company or increase
the cost of doing business or in some other manner have a material adverse
effect on the Company's business, results of operations or financial condition.
In addition, applicability to the Internet of existing laws governing issues
such as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of such laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Changes to such laws intended to
address these issues, including some recently proposed changes, could create
uncertainty in the marketplace which could reduce demand for the services of the
Company or increase the cost of doing business as a result of costs of
litigation or increased service delivery costs, or could in some other manner
have a material adverse effect on the Company's business, results of operations
and financial condition. In addition, as the Company's products are available
over the Internet in multiple states and foreign countries, such jurisdictions
may claim that the Company is required to qualify to do business as a foreign
corporation in each such state or foreign country. The Company is qualified to
do business in only a limited number of states, and failure by the Company to
qualify as a foreign corporation in a jurisdiction where it is required to do so
could subject the Company to taxes and penalties for the failure to qualify and
could result in the inability of the Company to enforce contracts in such
jurisdictions. Any such new legislation or regulation, or the application of
laws or regulations from jurisdictions whose laws do not currently apply to the
Company's business, could have a material adverse effect on the Company's
business, results of operations and financial condition.

    In March 1996, ACTA, a group of telecommunications common carriers, filed
the ACTA Petition with the FCC, arguing that providers (such as the Company) of
computer software products that enable voice transmission over the Internet
("Internet telephone" services) are operating as common carriers without
complying with various regulatory requirements and without paying certain
charges required by law. The ACTA Petition argues that the FCC has the authority
to regulate both the Internet and the providers of "Internet telephone" services
and requests that the FCC declare its authority over interstate and
international telecommunications services using the Internet, initiate
rulemaking proceedings to consider rules governing the use of the Internet for
the provision of telecommunications services, and order providers of "Internet
telephone" software to immediately cease the sale of such software pending such
rulemaking. Certain parties have filed comments with the FCC regarding the ACTA
Petition. The Company is unable to predict the outcome of this proceeding. In
December 1996 the FCC stated that it intended to address the legal questions
raised by the ACTA Petition in a future proceeding but has not yet done so. Any
action by the FCC to grant the relief sought by ACTA or otherwise to regulate
use of the Internet as a medium of communication, including any action to permit
local exchange carriers to impose

                                       23
<PAGE>
additional charges for connections used for Internet access, could have a
material adverse effect on the Company's business, financial condition and
results of operations.

POSSIBLE VOLATILITY OF STOCK PRICE

    Factors such as quarterly variations in the Company's results of operations,
announcements of technological innovations or new products by the Company, its
competitors and others, market conditions in the industry and changes in
financial estimates by public market analysts may cause the market price of the
Company's Common Stock to fluctuate significantly. In addition, the stock market
in general has recently experienced substantial price and volume fluctuations,
which have affected the market prices of many high technology companies,
particularly Internet-related companies, and which have often been unrelated to
the operating performance of such companies. These broad market fluctuations may
materially and adversely affect the market price of the Company's Common Stock.
Following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Any such litigation against the Company could result in substantial
costs and diversion of management's attention and other resources, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Item 5. Market for Common Equity and Related
Stockholder Matters."

ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND DELAWARE LAW

    The Company's Amended and Restated Certificate of Incorporation (the
"Charter") and Amended and Restated By-Laws (the "By-Laws") contain provisions
that could discourage takeover attempts or make more difficult the acquisition
of a substantial block of the Company's Common Stock. The Charter provides that
stockholders may act only at meetings of stockholders and not by written consent
in lieu of a stockholders' meeting. The By-Laws provide that special meetings of
the Company's stockholders may be called by the President and must be called by
the President or the Secretary at the written request of a majority of the
directors. The By-Laws provide that nominations for directors may not be made by
a stockholder at any annual or special meeting thereof unless the stockholder
intending to make a nomination notifies the Company of its intentions a
specified number of days in advance of the meeting and furnishes to the Company
certain information regarding itself and the intended nominee. The By-Laws also
require a stockholder to provide to the Secretary of the Company advance notice
of business to be brought by such stockholder before any annual or special
meeting of stockholders as well as certain information regarding such
stockholder and others known to support such proposal and any material interest
they may have in the proposed business. These provisions could delay any
stockholder actions that are favored by the holders of a majority of the
outstanding stock of the Company until the next stockholders' meeting. These
provisions may also discourage another person or entity from making a tender
offer for the Common Stock, because such person or entity, even if it acquired a
majority of the outstanding stock of the Company, could only take action at a
duly called stockholders' meeting and not by written consent. In addition, the
Board of Directors is authorized to issue shares of Common Stock and Preferred
Stock which, if issued, could dilute and adversely affect various rights of the
holders of Common Stock and, in addition, could be used to discourage an
unsolicited attempt to acquire control of the Company.

    The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person becomes an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 may limit the ability of
stockholders to approve a transaction that they may deem to be in their best
interests. The foregoing and other provisions of the Charter and the By-Laws and
the application of Section 203 of the Delaware General Corporation Law could
deter certain takeovers or tender offers or could delay or prevent certain
changes in control or management of the Company,

                                       24
<PAGE>
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices.

ITEM 2. DESCRIPTION OF PROPERTY

    The Company conducts its operations from its headquarters in Nashua, New
Hampshire and facilities in San Jose, California and LaGaude, France.

    The facility in New Hampshire contains approximately 27,000 square feet,
including 16,000 square feet for engineering and office space, 4,500 square feet
for production space, and 6,500 square feet for storage. The Company leases its
office in New Hampshire from an unaffiliated party under the terms of a
five-year lease ending July 1, 2001 in which the Company is responsible for
maintenance, repairs, taxes, insurance, and utilities. Base rent is $117,975 for
1998, $130,453 for 1999, $142,931 for 2000, and $81,675 for the first half of
2001. Renewal options for 3 two-year terms are available to the Company.

    The facility in California contains approximately 5,000 square feet of
engineering and office space, which was reduced from 10,000 square feet in the
first half of 1997. The Company leases its office in California from an
unaffiliated party under the terms of a five year lease ending December 31,
2001. The Company is responsible only for its own utility expenses and increases
in common operating expenses beyond the level incurred in the first year of the
lease. Base rent is $78,756 for 1998, $83,628 for 1999, $83,628 for 2000, and
$88,788 for 2001. The Company has the right to terminate the lease, with proper
notice, at any time after July 1, 1999.

    The facility in France contains approximately 8,000 square feet of
engineering and office space and 2,000 square feet of production space. The
Company leases its office in France from several unaffiliated parties under a
series of similar leases which end July 31, 1999, in which the Company is
responsible for maintenance, repairs, taxes, insurance, and utilities. Base rent
is $60,889 for 1998 and $28,501 for the first seven months of 1999.

ITEM 3. LEGAL PROCEEDINGS

    The Company is a defendant in six lawsuits pending in New York federal and
state courts (the "RSI Suits") in which the plaintiffs claim to suffer from
carpal tunnel syndrome, or "repetitive stress injuries," as a result of having
used computer keyboards (the "Keyboards") that are alleged to have been
defectively designed. The Keyboards were supplied, and possibly designed and
manufactured, by Ontel Corporation. The assets of Ontel Corporation were
purchased in 1982 by Visual Technology, Inc. ("Visual"), a predecessor of Visual
T.I., Inc. ("VTI"), which in turn is a predecessor of the Company. See "Item 1.
Description of Business--Overview." The RSI Suits, which seek money damages,
were brought from February 1992 to June 1996 by employees of New York Telephone,
which purchased the Keyboards from Lockheed Electronics Corporation. One or more
of Visual, Ontel Corporation, Lockheed Electronic Corporation and Key Tronics
Corporation, a subcontractor for certain of the Keyboards, are named as co-
defendants in certain of the RSI Suits. New York Telephone employees are also
proceeding with 29 suits that name as defendants only Visual and/or Ontel
Corporation. The Company could be named as a defendant in these cases. None of
the RSI Suits has reached trial and additional information detrimental to the
Company could be developed in the course of discovery.

    In May 1993, VTI's product liability coverage terminated. Certain of the RSI
Suits appear to be based on claims that allegedly arose after May 1993, and
therefore may be uninsured. The insurers for VTI, the Company and others (the
"Insurers") are defending the RSI Suits under a reservation of rights. To date,
the Company's proportionate share of the defense costs of the RSI Suits has not
been material. There can be no assurance, however, that the Company will not
incur material legal expenses defending the RSI Suits. The Company has a reserve
of approximately $291,000 in connection with the RSI Suits, based upon the
Company's belief that (i) certain of the RSI Suits are covered by product
liability insurance, (ii) the

                                       25
<PAGE>
Company is contractually indemnified by Lockheed Electronics Corporation and/or
Key Tronics Corporation against all or a portion of the damages to which the
Company may be subject and (iii) the Company has defenses to substantially all
of the claims under the RSI Suits. Although the Company believes that its
reserve for the RSI Suits is adequate, there can be no assurance that the
Company's liabilities under the RSI Suits will not substantially exceed that
reserve.

    New York Telephone and others may continue to use certain of the Keyboards
and, accordingly, there can be no assurance that additional product liability
claims will not be asserted against the Company in the future.

    From time to time, the Company has received and may receive in the future
notice of claims of infringement of other parties' proprietary rights. Although
the Company believes that its products and technology do not infringe the
proprietary rights of others, there can be no assurance that additional third
parties will not assert infringement and other claims against the Company or
that any infringement claims will not be successful.

    From time to time, the Company may be exposed to litigation arising out of
its products, services and operations. As of the date of this Annual Report, the
Company is not engaged in any legal proceedings of a material nature, other than
the RSI Suits.

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

    No matter was submitted to a vote of securities holders of the Company
during the quarter ended December 31, 1997.

                                       26
<PAGE>
                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's Common Stock commenced trading on the Nasdaq National Market
on October 11, 1996 under the symbol "WPNE". Prior to October 11, 1996, the
Common Stock was not publicly traded. The following table sets forth the high
and low closing sales price for each quarterly period since October 11, 1996 for
the Common Stock, as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                                          HIGH        LOW
                                                                        ---------  ---------
<S>                                                                     <C>        <C>
FISCAL 1996
  Fourth Quarter (commencing October 11, 1996)........................  9 1/8      6 1/2

FISCAL 1997
  First Quarter.......................................................  6 5/8      2 1/4
  Second Quarter......................................................  3 3/8      2 1/2
  Third Quarter.......................................................  4 15/16    2
  Fourth Quarter......................................................  5 13/16    2 5/8
</TABLE>

    As of March 18, 1998 there were 163 holders of record of the Common Stock
who held an aggregate of 9,309,020 shares of Common Stock as nominees for an
undisclosed number of beneficial holders.

    The Company has never declared or paid any cash dividends on its capital
stock. The Company currently anticipates that it will retain future earnings, if
any, to fund the development and growth of its business and therefore does not
expect to pay any cash dividends in the foreseeable future. Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including the Company's financial
condition, results of operations, current and anticipated cash needs, and plans
for expansion. The terms of the Company's existing bank line of credit and term
loan prohibit the Company from declaring or paying cash dividends on Common
Stock. See "Item 6. Management's Discussion and Analysis or Plan of
Operation--Liquidity and Capital Resources."

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

    THIS FORM 10-KSB CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS, INCLUDING THE FACTORS SET FORTH ABOVE IN "ITEM 1A. RISK FACTORS,"
THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS OF WHITE PINE
SOFTWARE, INC. TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING
STATEMENTS.

OVERVIEW

    The Company develops, markets and supports multi-platform desktop multimedia
software that facilitates worldwide video and audio communication and data
collaboration across the Internet, intranets and other networks using IP. The
Company's desktop videoconferencing software products, CU-SeeMe and
MeetingPoint, create a client-server solution that allows users to participate
in real-time, multipoint videoconferences over the Internet and intranets. In
November 1997, the Company began commercial

                                       27
<PAGE>
shipments of MeetingPoint, the first multimedia conferencing server software to
implement the ITU H.323 standard for conferencing over packet networks.
MeetingPoint enables any standards-based client to participate in full
multipoint group conferences. Further building upon the core CU-SeeMe and
MeetingPoint technologies, the Company has developed ClassPoint, an integrated
vertical solution for distance learning and distance training, which is
scheduled to be shipped commercially in April 1998.

    In June 1995, as a part of its continuing plan to focus on software
connectivity products, the Company entered into the License Agreement with the
Cornell Foundation, which granted to the Company the exclusive worldwide right
to develop, modify, market, distribute and sublicense commercial versions of
Freeware CU-SeeMe and its related software-only multipoint conferencing server.
The Company commenced shipments of the initial commercial versions of CU-SeeMe
and the White Pine Reflector (the predecessor of MeetingPoint) in March 1996 and
May 1996, respectively. The Company anticipates that its revenue growth, if any,
will depend on increased sales of MeetingPoint and other multimedia server
solutions, such as ClassPoint. Accordingly, the Company intends to continue to
devote a substantial portion of its research and development and sales and
marketing resources to technologies related to group conferencing.

    On May 22, 1997, the Company renegotiated the terms of its License Agreement
with the Cornell Foundation. The principal changes to the agreement were a
$1,000,000 prepayment of royalties by the Company to the Cornell Foundation and
a decrease in the revenue-based royalties. The renegotiated terms were
retroactive to January 1, 1997. The Company is still subject to minimum royalty
payments.

    Effective January 1, 1997, the Company changed its interim fiscal reporting
periods from calendar quarters to quarters consisting of thirteen weeks.

    The Company's revenue is derived from software license fees and fees for
services related to its software products, primarily software maintenance fees.
During fiscal 1997, the Company recognized revenue in accordance with the
American Institute of Certified Public Accountants Statement of Position No.
91-1, "Software Revenue Recognition." For fiscal year 1998, the Company is
recognizing revenue in accordance with AICPA Statement of Position 97-2,
"Software Revenue Recognition." See "Item 6. Recent Accounting Pronouncements."
Software license revenue is recognized upon execution of a contract or purchase
order and shipment of the software, net of allowances for estimated future
returns, provided that no significant obligations on the part of the Company
remain outstanding and collection of the related receivable is deemed probable
by management. An allowance for product returns is recorded by the Company at
the time of sale and is measured periodically to adjust to changing
circumstances, including changes in retail sales. Software maintenance fees,
which are generally payable in advance and are non-refundable, are recognized
ratably over the period of the maintenance contract, typically twelve months.
Revenue from training and consulting services is recognized as services are
provided. Software license fees, consulting fees and training fees that have
been prepaid or invoiced but that do not yet qualify for recognition as revenue
under the Company's policy, and prepaid maintenance fees not yet recognized as
revenue, are reflected as deferred revenue.

    Research and development expenses are charged to income as incurred. In
accordance with the Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," the Company capitalizes software development costs once the
technological feasibility of a product has been established, which the Company
considers to occur when a commercially viable working model of a product has
been produced and tested. Capitalized software development costs at December 31,
1997 were not material.

                                       28
<PAGE>
RESULTS OF OPERATIONS

    The following table sets forth certain consolidated financial data from the
Company's statement of operations as a percentage of total revenue for the
fiscal years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER
                                                                      31,
                                                              --------------------
<S>                                                           <C>        <C>
                                                                1997       1996
                                                              ---------  ---------
Revenue:
  Software license fees.....................................       88.6%      90.0%
  Services and other........................................       11.4       10.0
                                                              ---------  ---------
    Total revenue...........................................      100.0      100.0
Cost of revenue.............................................       17.1       19.0
                                                              ---------  ---------
Gross Profit................................................       82.9       81.0
                                                              ---------  ---------
Operating expenses:
  Sales and marketing.......................................       71.8       56.8
  Research and development..................................       51.8       32.7
  General and administrative................................       23.4       23.9
  Restructuring charge......................................        6.0     --
                                                              ---------  ---------
    Total operating expenses................................      153.0      113.5
                                                              ---------  ---------
Income (loss) from operations...............................      (70.1)     (32.5)
Interest income and other, net..............................        8.4        2.0
Provision for income taxes..................................       (0.1)      (0.7)
                                                              ---------  ---------
Net income (loss)...........................................      (61.8)%     (31.2)%
                                                              ---------  ---------
                                                              ---------  ---------
</TABLE>

FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
  1996

    REVENUE.  Total revenue decreased by 5% to $11,052,000 in the year ended
December 31, 1997 from $11,666,000 in the year ended December 31, 1996. The
decrease resulted primarily from the 41% decline in legacy connectivity revenues
year-over-year, offset in part by the 43% increase in multimedia group
conferencing revenues over prior year. Multimedia group conferencing revenue was
$6,369,000 in 1997 as compared to $4,461,000 in 1996. In 1997, 75% of multimedia
group conferencing revenue was from the client and 25% was from the server. This
compared to 93% and 7%, respectively, in 1996. Server revenue was $1,592,000 in
1997, 37% of which was from MeetingPoint which shipped only in November and
December of 1997. Revenue from sales outside the United States comprised 27% and
30% of total revenue for the years ended December 31, 1997 and 1996,
respectively. During the years ended December 31, 1997 and 1996, one distributor
accounted for approximately 14% of the Company's total revenue, and a second
distributor accounted for 14% of total revenue for the year ended December 31,
1997.

    COST OF REVENUE.  Cost of revenue consists principally of royalties and
associated amortization of paid license fees relating to third-party software
included in the Company's products, as well as costs of product media, manuals,
packaging materials, product localization for international markets, duplication
and shipping. Cost of revenue as a percentage of total revenue decreased to 17%
for the year ended December 31, 1997 as compared to 19% for the year ended
December 31, 1996. The percentage decrease resulted primarily from lower royalty
payments under the Company's revised agreement with the Cornell Foundation.
Certain third-party software incorporated within CU-SeeMe and MeetingPoint bears
higher royalty rates than the software incorporated in the Company's other
product lines and also requires payment of up-front fees that are amortized over
the respective periods of the software licenses. The Company intends to continue
its strategy of improving the features and functionality of its products,

                                       29
<PAGE>
particularly MeetingPoint and future products incorporating MeetingPoint
technology, through the incorporation of third-party software and, as a result,
the cost of revenue as a percentage of total revenue may continue to fluctuate.

    SALES AND MARKETING.  Sales and marketing expense consists primarily of
costs associated with sales and marketing personnel, sales commissions, trade
shows, advertising and promotional materials. Sales and marketing expense
increased by 20% to $7,939,000 in the year ended December 31, 1997 from
$6,631,000 in the year ended December 31, 1996, and increased as a percentage of
total revenue to 72% in the year ended December 31, 1997 from 57% in the year
ended December 31, 1996. The dollar and percentage increases in sales and
marketing expense for the year ended December 31, 1997 were attributable to
increased advertising, ad production, and trade show activity, particularly in
connection with the product launch of MeetingPoint.

    RESEARCH AND DEVELOPMENT.  Research and development expense consists
primarily of costs of personnel and equipment. Research and development expense
increased by 50% to $5,722,000 in the year ended December 31, 1997 from
$3,819,000 in the year ended December 31, 1996. Research and development expense
represented 52% and 33% of total revenue for the years ended December 31, 1997
and 1996, respectively. The dollar and percentage increases in research and
development expenses for the year ended December 31, 1997 were primarily
attributable to rapid personnel growth in the first two quarters of the fiscal
year. A Company-wide restructuring in June 1997 reduced the number of research
and development personnel. See "Restructuring Charge" below. To a lesser extent,
consulting fees related to server development also contributed to the increased
expense in the year ended December 31, 1997.

    GENERAL AND ADMINISTRATIVE.  General and administrative expense consists of
administrative, financial and general management activities, including legal,
accounting and other professional fees. General and administrative expense
decreased by 7% to $2,586,000 in the year ended December 31, 1997 from
$2,794,000 in the year ended December 31, 1996 and remained flat as a percentage
of total revenue of 24% in the years ended December 31, 1997 and 1996. The
decrease in total general and administrative expense was due primarily to the
change in senior management and reduction in headcount in June 1997.

    PROVISION FOR INCOME TAXES.  The Company's provision for income taxes
consists of federal alternative minimum taxes and state and foreign income
taxes. At December 31, 1997, the Company had cumulative federal net operating
loss carryforwards of approximately $15,695,000. See Note 5 of Notes to the
Company's Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

    The Company used cash of $8,594,000 in the year ended December 31, 1997, as
compared with $21,524,000 cash generated in the year ended December 31, 1996.

    Cash used in the year ended December 31, 1997 was comprised largely of the
net loss of $6,826,000, and investing activities of $1,316,000 for the purchases
of third-party software licenses and capital expenditures. These capital
expenditures consisted principally of purchases of computer and networking
systems. The Company also paid the Cornell Foundation $1,000,000 in prepaid
software royalties in the year ended December 31, 1997. The Company's investing
activities used cash of $1,121,000 in the year ended December 31, 1996. Cash
used in investing activities in 1996 was primarily for the purchase of capital
expenditures, and for third-party software licenses. Capital expenditures
totaled $703,000 for the year ended December 31, 1996.

    The Company's financing activities provided cash of $25,689,000 in the year
ended December 31, 1996. The Company received gross proceeds of $2,300,000 from
a private placement of equity securities in March and April 1996. On October 17,
1996, the Company completed its initial public offering of common stock. The
Company issued and sold 3,000,000 shares of common stock in the public offering
for net

                                       30
<PAGE>
proceeds of approximately $23,743,000, after deducting the underwriting discount
and an estimated $1,350,000 of offering expenses.

    On December 20, 1996, the Company entered into a new commercial loan
agreement with Fleet Bank-NH (the "Bank") providing for a $3,000,000 revolving
line of credit and a separate term loan in the initial principal amount of
$53,000. The revolving line of credit expires on June 30, 1998. Borrowings under
the line of credit and the term loan are secured by substantially all of the
Company's assets, including a $515,000 certificate of deposit and all of the
Company's computer software products (including all source code, object code,
copyrights, trademarks and patents, if any, relating thereto). Amounts
outstanding under the line of credit and the term loan bear interest at the
Bank's prime rate plus 0.5% (9.0% at December 31, 1997).

    The commercial loan agreement requires that the Company provide the Bank
with certain periodic financial reports and comply with certain financial and
other ratios, including maintenance of a minimum net worth, a maximum ratio of
total liabilities to tangible net worth, a minimum ratio of current assets to
current liabilities and cumulative profitability levels for the years 1997 and
1998. At December 31, 1997 and December 31, 1996, no borrowings were outstanding
under the revolving line of credit and $28,000 and $39,000 were outstanding
under the term loan, respectively. At December 31, 1997, the available borrowing
amount was $645,000 based on qualified accounts receivables.

    Since initial development, White Pine's software products have been designed
and tested to properly interpret dates for the Year 2000 and beyond. As a
result, the Company believes that its software products are Year 2000 capable
and reflect all necessary date code changes. Based upon its testing to date,
White Pine does not expect that its business, financial condition, results of
operation or cash flows will be materially adversely affected by any failure of
third-party software or hardware to interpret Year 2000 data correctly. No
assurance can be given, however, that the Company will not be required to make
significant expenditures in connection with the ongoing design and testing of
its software products for Year 2000 compatibility, and any related modifications
or other developmental work that may be required to cause those services and
products to be Year 2000 compatible. Further, there can be no assurance that
potential interruptions or the costs necessary for such testing and
modifications will not have a material adverse effect on the Company's business,
financial condition, results of operations and cash flows. See "Item 1A. Risk
Factors--Risk of Product Defects, including Year 2000 Defects."

    At December 31, 1997, the Company had cash and cash equivalents of
$14,704,000 and working capital of $15,732,000. The Company believes that its
current cash and cash equivalents (including proceeds from its initial public
offering), funds generated from operations (if any) and borrowings under its
bank line of credit, will be sufficient to fund the Company's operations and
capital expenditures through fiscal 1998. Thereafter, the Company's liquidity
will be materially dependent upon its internally generated funds and its ability
to obtain funds from additional equity or debt financings from external sources.

RESTRUCTURING CHARGE

    In the fiscal quarter ended July 4, 1997, the Company reorganized its
operations and recorded a restructuring charge in the amount of $661,000 as a
result of a change in senior management and a reduction in its workforce. This
amount consisted primarily of severance payments, outplacement expenses, and
related fees for 26 employees who were laid off at the quarter end. The
reorganization reflected the Company's decision to focus its resources on its
Web-based conferencing and connectivity products, and to terminate support,
development, and sales of certain older product lines. At December 31, 1997, the
Company's remaining restructuring liability was $91,000. This amount represents
severance payments that will continue to be paid through June 1998.

INFLATION

    Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial condition or results of operations to date.

                                       31
<PAGE>
NET LOSS PER COMMON SHARE

    In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. Pursuant to the
previous requirements of the Securities and Exchange Commission (the "SEC"),
common shares and common share equivalents issued by the Company during the
twelve-month period prior to the initial public offering of the Company's common
stock had been included in the calculations as if they were outstanding for all
periods prior to the offering in August 1996 whether or not they were
anti-dilutive. In February 1998, the SEC issued Staff Accounting Bulletin 98
which, among other things, conformed prior SEC requirements to SFAS 128 and
eliminated inclusion of such shares in the computation of earnings per share.
All earnings per share amounts for all periods have been presented, and, where
appropriate, restated to conform to SFAS 128 and SEC requirements.

    Basic net loss per common share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted net loss
is computed using the weighted average number of shares of common stock and
dilutive common equivalent shares outstanding during the period. Common
equivalent shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants using the treasury stock method.

RECENT ACCOUNTING PRONOUNCEMENTS

    In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure" ("SFAS 129"). SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure. SFAS 129 was
effective for financial statements for the periods ending after December 15,
1997 and did not have a material impact on the Company's financial statement
disclosures.

    In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements for periods
beginning after December 15, 1997. Comprehensive income, as defined, includes
all changes in equity (net assets) during a period from nonowner sources.
Examples of items to be included in comprehensive income which are excluded from
net income include cumulative translations adjustments resulting from
consolidation of foreign subsidiaries' financial statements and unrealized gains
and losses on available-for-sale securities. Reclassification of financial
statements for earlier periods for comparative purposes is required. The Company
will adopt SFAS 130 beginning in 1998 and does not expect such adoption to have
a material effect on its consolidated financial statements.

    In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). This statement establishes
standards for the way companies report information about operating segments in
annual financial statements for periods beginning after December 15, 1997. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt SFAS 131 beginning
in fiscal 1998 and does not expect such adoption to have a material effect on
its consolidated financial statements.

    In October 1997 the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2 SOFTWARE REVENUE RECOGNITION. This
statement supersedes SOP 91-1, SOFTWARE REVENUE RECOGNITION, and provides
guidance on applying generally accepted accounting principles in recognizing
revenue on software transactions entered into fiscal years beginning after
December 15, 1997. The Company will adopt SOP 97-2 beginning in fiscal 1998 and
does not expect such adoption to have a material effect on its consolidated
financial statements.

                                       32
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

    The following statements are included after page 41 of this Annual Report
and form a part hereof:

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>

Report of Independent Auditors.............................................................................        F-1
Consolidated Balance Sheets as of December 31, 1997 and 1996...............................................        F-2
Consolidated Statements of Operations for the years ended December 31, 1997 and 1996.......................        F-3
Consolidated Statements of Stockholders', Equity for the years ended December 31, 1997 and 1996............        F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1996.......................        F-5
Notes to Consolidated Financial Statements.................................................................        F-6
</TABLE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    There were no changes or disagreements with accountants on accounting or
financial disclosure matters during the fiscal year ended December 31, 1997 or
the fiscal year ended December 31, 1996.

                                       33
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

    The Directors and executive officers of the Company, and their ages and
positions as of March 18, 1998, are as follows:

<TABLE>
<CAPTION>
NAME                                                          AGE                           POSITION
------------------------------------------------------------  --- ------------------------------------------------------------
<S>                                                           <C> <C>
Killko A. Caballero.........................................  38  President and Director
David O. Bundy..............................................  39  Vice President of Engineering
Christine J. Cox............................................  39  Vice President of Finance
Brian L. Lichorowic.........................................  36  Vice President of Marketing
Arthur H. Bruno(1)..........................................  64  Director
Jonathan G. Morgan(1).......................................  43  Director
</TABLE>

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

(1) Member of the Audit Committee and Compensation Committee.

    KILLKO A. CABALLERO has been the President of the Company since August 1997,
and has served as a Director since November 1995. Mr. Caballero served as
interim President during June and July 1997, and as Senior Vice President of
Research and Development and Chief Technology Officer from November 1995 until
June 1997. Mr. Caballero was a co-founder of White Pine Software, Europe
(formerly About Software Corporation), and served as President, Chief Executive
Officer and Chairman of the Board of White Pine Software, Europe from July 1991
until November 1995.

    DAVID O. BUNDY has served as the Vice President of Engineering of the
Company since January 1994. Mr. Bundy was the Vice President and Principal
Engineer of the Company (then known as Visual International, Inc.) from August
1993 to December 1993 and of Visual T.I., Inc. from September 1991 until it
merged into Visual International, Inc. in August 1993.

    CHRISTINE J. COX has been the Vice President of Finance of the Company since
August 1997, and served as Corporate Controller from October 1996 to August
1997. Ms. Cox served as Division Controller and Treasurer of Sequoia Systems,
Inc., a fault-tolerant and business-critical microcomputer company, from May
1996 to October 1996, Operations Controller from June 1995 to May 1996, and held
other financial management positions from August 1993 to June 1995. Ms. Cox
served as Planning and Analysis Manager of Baird Corporation, a spectrometer and
optical equipment company, from August 1991 to August 1993.

    BRIAN L. LICHOROWIC joined the Company in August 1996 as Vice President of
Marketing. From January 1996 to August 1996, Mr. Lichorowic served as Executive
Director Strategic Alliance for CyberCash Inc., a company specializing in secure
Internet transactions. Mr. Lichorowic was a co-founder of InterCon Systems
Corporation, a wholly owned subsidiary of PSINet Inc. that specializes in
software and Internet services, and served as its Vice President of Marketing
from January 1991 to December 1995.

    In addition, BRUCE W. LICHOROWIC, who has been engaged by the Company as a
consultant since December 1997, will become Vice President of Sales for the
Americas and Pacific Rim on April 1, 1998. Mr. Lichorowic was the Vice President
of Sales and Marketing for Warp Drive Networks, a wireless Internet broadcaster
company, from January 1997 until December 1997. He was the Acting Vice President
of Sales and Marketing for Best Internet Communications, an Internet service
provider, from December 1995 to December 1996, and the Acting Vice President of
Sales and Marketing for Proteon Corporation, a high-tech router company, from
December 1994 to December 1995. Prior to December 1995, Mr. Lichorowic was the
Co-Founder and Vice President of Marketing and Sales for Raylan Corporation,

                                       34
<PAGE>
the developer of an electro-optic chip set for fiber optic LANS. Brian
Lichorowic and Bruce Lichorowic are brothers.

    ARTHUR H. BRUNO has served as a Director of the Company since February 1994,
and as Chairman of the Board since June 1997. Mr. Bruno has served as the
Chairman of Castelle, Inc., a networking and telecommunications company, since
October 1993, as Chief Executive Officer of Castelle, Inc., from October 1993
through April 1997 and from November 1997 to date and as President of Castelle,
Inc. from October 1993 through April 1997. From 1991 to 1993, Mr. Bruno served
as the Company's Chairman and Chief Executive Officer.

    JONATHAN G. MORGAN has served as a Director of the Company since May 1996.
Since June 1993, Mr. Morgan has been Managing Director/Group Head of Investment
Banking-Technology of Prudential Securities Incorporated, an investment banking
firm. From June 1992 to June 1993, Mr. Morgan was Managing Director/Group Head
of Corporate Finance of the San Francisco office of Sutro & Co., Inc., an
investment banking firm.

    Directors of the Company are elected to serve until the next annual meeting
of stockholders (or special meeting in lieu thereof) and until their successors
are duly elected and qualified. Executive officers of the Company are appointed
by and serve at the discretion of the Board of Directors.

    The Board of Directors has a Compensation Committee, which provides
recommendations concerning salaries and incentive compensation for directors,
officers and employees of and consultants to the Company, and an Audit
Committee, which reviews the results and scope of the audit and other services
provided by the Company's independent auditors.

    The Company does not pay fees to members of the Board of Directors and
presently has no plans to pay directors' fees. The Company grants stock options
to members of the Company's Board who are not employees of the Company or any
parent or subsidiary of the Company ("Outside Directors") pursuant to the White
Pine Software, Inc. 1997 Director Stock Option Plan (the "Director Option
Plan"). The purpose of the Director Option Plan is to encourage ownership of
capital stock of the Company by Outside Directors in order to help the Company
attract and retain persons of exceptional competence to the Company's Board and
to furnish an added incentive for Outside Directors to increase their efforts on
behalf of the Company. The two directors who constitute Outside Directors are
Arthur H. Bruno and Jonathan G. Morgan.

    Under the terms of the Director Option Plan, the Company grants automatic
formula stock options to Outside Directors as follows: (i) upon the initial
election of any Outside Director to the Board of Directors, such director is
entitled to receive a stock option to purchase 15,000 shares of Common Stock
(subject to adjustment as provided in the Director Option Plan) and (ii) upon
the re-election of any Outside Director to the Board of Directors, such director
is entitled to receive a stock option to purchase 15,000 shares of Common Stock
(subject to adjustment as provided in the Director Option Plan), provided that
he or she has served as an Outside Director of the Company for at least the
three months immediately preceding that meeting. The exercise price of the
options granted under the Director Option Plan must equal the fair market value
of the Common Stock on the grant date. Each option granted under the Director
Option Plan is subject to vesting under the terms of such plan and expires upon
the earlier of (i) the date which is the ten-year anniversary of the date on
which the option was granted, and (b) the date which is the one-year anniversary
of the date on which the option holder ceased serving as an Outside Director of
the Company.

    Pursuant to the Director Option Plan, each of Messrs. Bruno and Morgan
received an option to purchase 15,000 shares of the Common Stock in September
1997 upon the adoption of the Director Option Plan by the stockholders of the
Company.

                                       35
<PAGE>
SECTION 16(a) REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and officers, and persons who own more than ten percent of the
Company's Common Stock, to file with the Securities and Exchange Commission
reports of ownership on Form 3 and reports of changes in ownership on Forms 4
and 5. Such officers, Directors and ten-percent stockholders are also required
to furnish the Company with copies of all Section 16(a) reports they file. Based
solely on its review of the copies of such forms received by the Company and on
written representations from certain reporting persons that no Form 5s were
required by the Company for such persons, the Company believes that all Section
16(a) reports applicable to its officers, Directors and ten-percent stockholders
with respect to the fiscal year ended December 31, 1997 were filed on a timely
basis.

ITEM 10. EXECUTIVE COMPENSATION

    The following table sets forth certain information concerning the
compensation earned by the Company's President and the other three executive
officers whose compensation for services rendered in all capacities to the
Company was in excess of $100,000 for the fiscal year ended December 31, 1997
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                   LONG-TERM
                                                                                 COMPENSATION
                                                                                    AWARDS
                                                                                 -------------
                                                                                  SECURITIES
                                                           ANNUAL COMPENSATION    UNDERLYING      ALL OTHER
                                                          ---------------------    OPTIONS/     COMPENSATION
NAME AND PRINCIPAL POSITION                      YEAR     SALARY($)   BONUS($)    SARS(#)(1)         ($)
---------------------------------------------  ---------  ----------  ---------  -------------  -------------
<S>                                            <C>        <C>         <C>        <C>            <C>
Howard R. Berke(2)...........................       1997  $   99,005     --          150,000(3)  $  87,500(4)
Chief Executive Officer and President               1996  $  165,600  $  40,000(5)      --           --
                                                    1995  $  148,433  $  50,000       --             --
Killko A. Caballero..........................       1997  $  124,347  $  20,000       50,000(6)      --
President                                           1996  $   90,420  $  15,000       --             --
                                                    1995  $   15,070     --           --             --
David O. Bundy...............................       1997  $  119,909  $  15,000       60,000(7)      --
Vice President of Engineering                       1996  $  110,000  $  15,000       10,000(8)      --
                                                    1995  $   89,661  $  20,000       --             --
Brian L. Lichorowic..........................       1997  $  100,470  $  15,000       75,000(9)      --
Vice President of Marketing                         1996  $   33,167  $  22,000       50,000(10)      --
                                                    1995      --         --           --             --
Robert Hadden(11)............................       1997  $   97,578  $  30,000       70,000(12)      --
Vice President of Sales                             1996      --         --           --             --
                                                    1995      --         --           --             --
</TABLE>

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

(1) All of the options have a maximum term of 7-10 years, subject to earlier
    termination in the event of the optionee's cessation of service with the
    Company. The options are exercisable during the optionee's lifetime only by
    the optionee; they are exercisable by the optionee only while the optionee
    is an employee or advisor of the Company and for certain limited periods of
    time thereafter in the event of termination of employment.

(2) Mr. Berke resigned from the Company on June 4, 1997.

(3) Options were granted on January 10, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. A total of 25,002 of the
    options vested on August 1, 1997; 4,165 of the options vested monthly from
    September 1, 1997 through December 1, 1997; 4,166 of the options vest
    monthly from January 1, 1998 through November 1, 1999; 4,163 of the options
    vest on December 1, 1999; 4,164 of the options vest on January 1, 2000; and
    4,193 of the options vest on February 1, 2000. These options were granted as
    part of Mr. Berke's bonus earned during the year ended December 31, 1996.

                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)

                                       36
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(4) Represents payments received pursuant to a separation agreement dated June
    4, 1997 between the Company and Mr. Berke. See "Employment and Separation
    Agreements" below.

(5) Paid in 1997 as part of Mr. Berke's bonus earned during the year ended
    December 31, 1996.

(6) Options were granted on November 24, 1997 under the White Pine Software,
    Inc. 1996 Incentive and Nonqualified Stock Option Plan. One-eighth of the
    options vested on May 24, 1998. An additional one-eighth of the options vest
    on each of the next six semi-annual anniversary dates, and the balance vests
    on November 24, 2001.

(7) A total of 30,000 options were granted on February 14, 1997 under the White
    Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option Plan.
    One-sixth of these options vested on August 14, 1997. An additional one
    thirty-sixth of the options vest on the first day of each of the following
    twenty-nine months. The balance vests on February 14, 2001. These 30,000
    options were subsequently repriced on August 5, 1997; pursuant to an
    amendment adopted in connection with the repricing, the vesting of those
    options was extended so that the options shall vest in eight semi-annual
    installments, commencing on August 14, 1997. An additional 25,000 options
    were granted on August 11, 1997 under the White Pine Software, Inc. 1996
    Incentive and Nonqualified Stock Option Plan. One-eighth of the options
    vested on February 11, 1998. An additional one-eighth of the options vest on
    each of the next six semi-annual anniversary dates, and the balance vests on
    August 11, 2001. In addition, a total of 5,000 options previously granted
    under the White Pine Software, Inc. Stock Option Plan (1993) on May 6, 1996
    (see Note (8) below) were repriced from $5.00 to $2.50 as of August 5, 1997;
    pursuant to an amendment adopted in connection with the repricing, the
    vesting of those options was extended so that the options shall vest in
    eight semi-annual installments, commencing on November 6, 1996.

(8) Options were granted on February 29, 1996 and May 6, 1996 under the White
    Pine Software, Inc. Stock Option Plan (1995) and the White Pine Software,
    Inc. Stock Option Plan (1993), respectively. One thirty-sixth of the options
    granted vest on a monthly basis commencing on the respective dates of grant.
    The options granted on May 6, 1996 were repriced from $5.00 to $2.50 on
    August 5, 1997 and, in connection therewith, the vesting schedule of those
    options was extended. See Note (7) above.

(9) Options were granted on April 7, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. One-sixth of the options
    vested on October 7, 1997. An additional one-thirty-sixth of the options
    vest on the first day of each of the following twenty-nine months. The
    balance vests on April 7, 2000. In addition, a total of 50,000 options
    previously granted under the White Pine Software, Inc. 1996 Incentive and
    Nonqualified Stock Option Plan on August 26, 1996 (see Note (10) below) were
    repriced from $7.00 to $2.50 as of August 5, 1997; pursuant to an amendment
    adopted in connection with the repricing, the vesting of the options was
    extended so that the options shall vest in eight semi-annual installments,
    commencing on February 26, 1997.

(10) Options were granted on August 26, 1996 under the White Pine Software, Inc.
    Stock Option Plan (1995). As initially granted, seven thirty-sixths of the
    options granted vested on March 1, 1997, an additional one thirty-sixth were
    to vest on the first day of each of the following twenty-eight months, and
    the balance was to vest on August 1, 1999. These options were repriced from
    on August 5, 1997 and, in connection therewith, the vesting schedule of the
    options was extended. See Note (9) above.

(11) Mr. Hadden resigned from the Company on March 16, 1998.

(12) Options were granted on April 21, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. One-sixth of the options
    vested on October 21, 1997. An additional one thirty-sixth of the options
    vest on the first day of each of the following twenty-nine months. The
    balance vests on April 21, 2000.

                                       37
<PAGE>
OPTION GRANTS AND EXERCISE

    The following table summarizes (i) option grants to the Named Executive
Officers during the year ended December 31, 1997 and (ii) the value of the
options held by the Named Executive Officers at December 31, 1997.

                       OPTION GRANTS IN LAST FISCAL YEAR
                               INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
                                                                                                         POTENTIAL REALIZABLE
                                                                                                                VALUE
                                                                                                          AT ASSUMED ANNUAL
                                                                                                                RATES
                                             NUMBER OF     PERCENT OF                                       OF STOCK PRICE
                                            SECURITIES    TOTAL OPTIONS                                      APPRECIATION
                                            UNDERLYING     GRANTED TO       EXERCISE OR                   FOR OPTION TERM(1)
                                              OPTIONS     EMPLOYEES IN    BASE PRICE PER   EXPIRATION   ----------------------
NAME                                          GRANTED      FISCAL YEAR      SHARE($/SH)       DATE          5%         10%
------------------------------------------  -----------  ---------------  ---------------  -----------  ----------  ----------
<S>                                         <C>          <C>              <C>              <C>          <C>         <C>
Howard R. Berke...........................     57,364(2)            7%       $    6.00        1/10/07   $  216,262  $  548,400
                                               92,636(3)           11%       $    6.00        1/10/07   $  349,238  $  885,600
Killko A. Caballero.......................     50,000(4)            6%       $    2.50       11/24/07   $   78,500  $  199,000
David O. Bundy............................     30,000(5)            3%       $    2.50        2/14/07   $  147,100  $  119,400
                                               25,000(6)            3%       $    2.50        8/11/07   $   39,200  $   99,500
                                                5,000(7)            1%       $    2.50        5/06/06   $    7,850  $   19,900
Brian L. Lichorowic.......................     25,000(8)            3%       $    2.50        4/07/07   $   39,200  $   99,500
                                               50,000(9)            6%       $    2.50        8/26/06   $   78,500  $  199,000
Robert Hadden.............................    32,000(10)            4%       $   3.125        4/21/07   $   62,880  $  159,520
                                              38,000(10)            4%       $   3.125        4/21/07   $   74,670  $  189,430
</TABLE>

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

(1) The amounts shown represent hypothetical gains that could be achieved for
    the respective options if exercised at the end of their option terms. These
    gains are based on assumed rates of stock appreciation of five percent and
    ten percent, compounded annually from the date the respective options were
    granted to the date of their expiration. The gains shown are net of the
    option price, but do not include deductions for taxes or other expenses that
    may be associated with the exercise. Actual gains, if any, on stock option
    exercises will depend on future performance of the Common Stock, the
    optionholders' continued employment through the option term and the date on
    which the options are exercised.

(2) Options were granted on January 10, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. A total of 9,420 of the
    options vested on August 1, 1997; 1,569 of the options vested monthly from
    September 1, 1997 through December 1, 1997; 1,388 of the options vest
    monthly from January 1, 1998 through November 1, 1999; 1,387 of the options
    vest on December 1, 1999; 4,164 of the options vest on January 1, 2000; and
    4,193 of the options vest on February 1, 2000.

(3) Options were granted on January 10, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. A total of 15,582 of the
    options vested on August 1, 1997; 2,596 of the options vested monthly from
    September 1, 1997 through December 1, 1997; 2,778 of the options vest
    monthly from January 1, 1998 through November 1, 1999; 2,776 of the options
    vest on December 1, 1999.

(4) Options were granted on November 24, 1997 under the White Pine Software,
    Inc. 1996 Incentive and Nonqualified Stock Option Plan. One-eighth of the
    options vested on May 24, 1998. An additional one-eighth of the options vest
    on each of the next six semi-annual anniversary dates, and the balance vests
    on November 24, 2001.

(5) Options were granted on February 14, 1997 under the White Pine Software,
    Inc. 1996 Incentive and Nonqualified Stock Option Plan and repriced on
    August 5, 1997. One-eighth of these options vested on each of August 14,
    1997 and February 14, 1998. An additional one-eighth of the options vest on
    each of the next five semi-annual anniversary dates, and the balance vests
    on February 14, 2001.

(6) Options were granted on August 11, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. One-eighth of the options
    vested on February 11, 1998. An additional one-eighth of the options vest on
    each of the next six semi-annual anniversary dates, and the balance vests on
    August 11, 2001.

(7) Options previously granted under the White Pine Software, Inc. Stock Option
    Plan (1993) on May 6, 1996 were repriced from $5.00 to $2.50 as of August 5,
    1997; pursuant to an amendment adopted in connection with the repricing, the
    vesting of those options was extended so that one-eighth of those 5,000
    options vest on a semi-annual basis commencing on November 6, 1996.

(8) Options were granted on April 7, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. One-sixth of the options
    vested on October 7, 1997. An additional one-thirty-sixth of the options
    vest the first day of each of the following twenty-nine months, and the
    balance vests on April 7, 2000.

                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)

                                       38
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(9) Options previously granted under the White Pine Software, Inc. 1996
    Incentive and Nonqualified Stock Option plan on August 26, 1996 were
    repriced from $7.00 to $2.50 as of August 5, 1997; pursuant to an amendment
    adopted in connection with the repricing, the vesting of the options was
    extended so that one-eighth of the options granted vested on February 26,
    1997, an additional one-eighth vests on each of the following semi-annual
    periods, and the balance vests on August 26, 2000.

(10) Options were granted on April 21, 1997 under the White Pine Software, Inc.
    1996 Incentive and Nonqualified Stock Option Plan. One-sixth of the options
    vested on October 21, 1997. An additional one thirty-sixth of the options
    vest the first day of each of the following twenty-nine months, and the
    balance vests on April 21, 2000.

    The following table sets forth information with respect to the exercise of
stock options by the Named Executive Officers during the year ended December 31,
1997 and unexercised options held by the Named Executive Officers on December
31, 1997.

                      AGGREGATED OPTION EXERCISES IN LAST
                 FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                                                  VALUE OF UNEXERCISED
                                                                                NUMBER OF         IN-THE-MONEY OPTIONS
                                                                           UNEXERCISED OPTIONS
                                                                                                           AT
                                                                              AT FISCAL YEAR     FISCAL YEAR END($)(1)
                                                                                  END(#)
                                             SHARES ACQUIRED     VALUE         EXERCISABLE/           EXERCISABLE/
NAME                                         ON EXERCISE(#)   REALIZED($)     UNEXERCISABLE          UNEXERCISABLE
-------------------------------------------  ---------------  -----------  --------------------  ----------------------
<S>                                          <C>              <C>          <C>        <C>        <C>          <C>
Howard R. Berke............................        60,000      $ 221,875    170,729/  108,338      $225,867/  $0
Killko A. Caballero........................        --             --              0/  50,000             $0/  $12,500
David O. Bundy.............................        --             --         43,819/  56,191        $73,446/  $14,025
Brian L. Lichorowic........................        --             --         26,390/  48,610         $1,389/  $4,861
Robert Hadden..............................        --             --         15,557/  54,443             $0/  $0
</TABLE>

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

(1) The closing sale price for the Company's Common Stock as reported on the
    Nasdaq National Market on December 31, 1997 was $2.75. Value is calculated
    on the basis of the difference between the option exercise price and $2.75,
    multiplied by the number of shares of Common Stock underlying the options.

EMPLOYMENT AND SEPARATION AGREEMENTS

    The Company entered into a Nondisclosure and Noncompetition Agreement with
David O. Bundy dated February 15, 1996. Pursuant to the agreement, Mr. Bundy
agreed that while employed by the Company and for a period of 19 months
following the termination of his employment with the Company for any reason, he
will not, directly or indirectly, compete with the Company or solicit any of the
Company's employees, contractors, suppliers, existing customers or prospective
customers on behalf of himself or any other entity that engages in the sale,
distribution or development of or research concerning computer software and
technology in breach of the agreement. Either party may terminate the agreement
by giving the other party 30 days' prior written notice. If Mr. Bundy's
employment is terminated without cause during the term of the agreement, he will
be entitled to his base salary for six months or until he becomes employed
elsewhere, whichever occurs first; provided, however, that if his new salary is
lower than his base salary at the Company, the Company will pay the difference
for the balance of this six-month period. Pursuant to the agreement, Mr. Bundy
was granted a stock option to purchase 5,000 shares of Common Stock at an
exercise price of $2.50 per share.

    On July 29, 1996, the Company entered into a letter agreement with Brian
Lichorowic, whereby Mr. Lichorowic agreed to serve as Vice President of
Marketing of the Company. Pursuant to the letter agreement, Mr. Lichorowic
receives a base salary equal initially to $90,000 per year and increasing to
$100,000 upon completion of the Company's initial public offering. Mr.
Lichorowic is eligible to receive an annual bonus of up to $40,000 depending on
the achievement of certain revenue goals for the connectivity and conferencing
product lines. He is also eligible to receive an annual commission contingent on
closure

                                       39
<PAGE>
of OEM, strategic and other partnerships. If Mr. Lichorowic's employment is
terminated without cause, he is entitled to three months' severance pay.

    On June 4, 1997, Howard R. Berke resigned as President and Chief Executive
Officer of the Company. In connection with the resignation, the Company entered
into a separation agreement with Mr. Berke, effective as of June 4, 1997.
Pursuant to the terms of the agreement, Mr. Berke received payments for a period
of six months beginning on June 5, 1997 and ending on December 4, 1997. The
payments were made at an annualized rate of $175,000 per year. In addition, Mr.
Berke is entitled to receive reduced payments, based on a formula, beginning on
December 5, 1997 and at two-week intervals thereafter if he is not employed in
any capacity by any employer. The agreement also permits Mr. Berke to exercise
his stock options, regardless of their original terms, at any time until
December 30, 1998.

    On March 16, 1998, Robert Hadden resigned as Vice President of Sales of the
Company. In connection with the resignation, the Company entered into a
separation agreement with Mr. Hadden, effective as of March 16, 1998. Pursuant
to the terms of the agreement, Mr. Hadden will receive payments for a period of
six months beginning March 17, 1998 and ending on September 16, 1998. The
payments will be made at an annualized rate of $100,000.

    On March 30, 1998, the Company entered into a letter agreement with Bruce
Lichorowic, whereby Mr. Lichorowic agreed to serve as Vice President of Sales
for the Americas and the Pacific Rim of the Company. Pursuant to the letter
agreement Mr. Lichorowic receives an annual base salary of $100,000 which is
reviewed annually. Mr. Lichorowic is eligible to receive an annual bonus of
$20,000 depending on the achievement of certain global revenue goals,
profitability of his assigned sales territory and individual sales and strategic
partnering milestones. Mr. Lichorowic is also eligible to receive an annual
commission of up to $80,000 contingent on the achievement of the annual global
revenue goals. In 1998 the amounts payable under this commission plan will be
prorated to 75% of the commission otherwise due. If Mr. Lichorowic's employment
is terminated without cause after September 23, 1998, he is entitled to three
months' severance pay, on the same terms and conditions as his base salary.

REPRICING OF OPTIONS

    On August 5, 1997, the Board of Directors of the Company voted to decrease
to $2.50 per share the exercise price of outstanding options that were held by
current employees of the Company, including certain executive officers. The new
exercise price represented the last sales price of the Common Stock on August 5,
1997.

    As consideration for the repricing of any eligible options, the holder of
the options was required to extend the vesting period of the options, so that
the options would vest in eight semi-annual installments, commencing 6 months
after the date of the initial grant of the options. Generally, the options
eligible for repricing has been subject to three-year schedules.

    Options to acquire a total of 437,188 shares of Common Stock were eligible
for repricing pursuant to the Board vote. As of March 31, 1998, a total of
208,688 options had been repriced. The holders of the remaining 228,500 options
eligible for repricing must consent to the extended vesting schedule by April
30, 1998 or their right to have their options repriced will terminate.

    The Board determined to proceed with a repricing because substantially all
of the then-outstanding options held by employees either has vested or had
exercise prices markedly higher than the level at which the Company's Common
stock had traded over the preceding several months. As a result, the Board
determined that the outstanding options were not serving the function of
providing continuing incentive for employees.

                                       40
<PAGE>
    Options of four executive officers were eligible for repricing under the
board vote:

    - Options issued to David Bundy on May 6, 1996 to acquire 5,000 shares of
      Common Stock were repriced from $5.00 to $2.50 and options issued to Mr.
      Bundy on February 14, 1997 to acquire 30,000 shares of Common Stock were
      repriced from $4.50 to $2.50

    - Options issued to Christine Cox on November 15, 1996 to acquire 6,000
      shares of Common Stock were repriced from $7.875 to $2.50, and options
      issued to Ms. Cox on March 21, 1997 to acquire 3,000 shares of Common
      Stock were repriced from $3.25 to $2.50.

    - Options issued to Brian Lichorowic on August 26, 1996 to acquire 50,000
      shares of Common Stock were repriced from $7.00 to $2.50.

Options issued on April 21, 1997 to Robert Hadden, who resigned from the Company
on March 16, 1998, to acquire 70,000 shares of Common Stock were eligible for
repricing from $3.125 to $2.50. Mr. Hadden did not, however, agree to the
extension of the vesting schedule for those options and as a result, those
options were not repriced.

                                       41
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of March 18, 1998, by (i) each person
(or group of affiliated persons) known by the Company to own beneficially more
than five percent of the outstanding shares of Common Stock, (ii) each of the
Directors of the Company, (iii) each of the Named Executive Officers and (iv)
all Directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
                                                                                            SHARES        PERCENT
                                                                                          BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS(1)                                                                        OWNED(2)        OWNED
----------------------------------------------------------------------------------------  -----------  -------------
<S>                                                                                       <C>          <C>
Austin W. Marxe and David Greenhouse(3).................................................   1,290,000          13.9%
153 East 53 Street, 51st Floor
New York, New York 10022

Hambrecht & Quist Group(4)..............................................................   1,158,693          12.4
One Bush Street
San Francisco, California 94104

Consortium de Realisation(5)............................................................     820,330           8.8
27-29 rue Le Peletier
75009 Paris, France

Charles Lingel(6).......................................................................     562,340           6.0
c/o Infoconix Inc.
704 228th Avenue, N.E.
Redmond, Washington 98053

Killko A. Caballero.....................................................................     403,324           4.3

Arthur H. Bruno(7)......................................................................     135,124           1.4

David O. Bundy(7).......................................................................      53,580         *

Robert Hadden(7)........................................................................      19,445         *

Brian L. Lichorowic(7)..................................................................      36,806         *

Jonathan G. Morgan(7)...................................................................       3,056         *

All Directors and executive officers as a group (6 persons)(7)..........................   1,810,027          19.4
</TABLE>

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

*   Represents less than 1% of the outstanding shares of Common Stock.

(1) The address of all persons who are executive officers or Directors of the
    Company is in care of the Company, 542 Amherst Street, Nashua, New Hampshire
    03063.

(2) Unless otherwise noted, each person or group identified possesses sole
    voting and investment power with respect to such shares, subject to
    community property laws, where applicable. Shares not outstanding but deemed
    beneficially owned by virtue of the right of a person or group to acquire
    them within 60 days of March 18, 1998 are treated as outstanding only for
    purposes of determining the amount and percentages beneficially owned by
    such person or group.

(3) The information reported is based on Amendment No. 1 to Schedule 13(d),
    dated September 5, 1997, filed with the SEC by Special Situations Fund III,
    L.P., MGP Advisers Limited Partnership, Special Situations Technology Fund,
    L.P., SST Advisers, L.L.C., Special Situations Cayman Fund, L.P., AWM
    Investment Company, Inc., Austin W. Marxe and David Greenhouse. Of the
    1,290,000 shares, (a) 834,600 shares are beneficially owned by Special
    Situations Fund III, L.P. and MGP Advisers Limited Partnership (the general
    partner of and investment advisor to Special Situations Fund III, L.P.), (b)
    175,100 shares are beneficially owned by Special Situations Technology Fund,
    L.P. and SST Advisers, L.L.C. (the general partner of and investment advisor
    to Special Situations Technology Fund, L.P.), and (c) 280,300 shares are
    beneficially owned by Special Situations Cayman Fund, L.P. and AWM
    Investment Company Inc. (the general partner of and investment advisor to
    Special Situations Cayman Fund, L.P.). Messrs. Marxe and Greenhouse, who
    serve as officers, directors and members or principal shareholders of the
    three investment advisers, claim sole voting and dispositive powers for all
    of the 1,290,000 shares.

                                              (FOOTNOTES CONTINUED ON NEXT PAGE)

                                       42
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(4) The information reported is based on Amendment No. 1 to Schedule 13(g),
    dated February 10, 1998, filed with the SEC by Phoenix Venture (BVI)
    Limited, H&Q London Ventures, H&Q Ventures International C.V., H&Q Ventures
    IV, Venture Associates (BVI) Limited, Hamquist, Hambrecht & Quist Ventures
    Partners, Hambrecht & Quist California, Hambrecht & Quist Group and William
    R. Hambrecht. Of the 1,158,693 shares, (a) 623,167 shares are directly owned
    by H&Q London Ventures, (b) 4,882 shares are directly owned by Venture
    Associates (BVI) Limited, (c) 16 shares are directly owned by Hamquist, (d)
    243,862 shares are directly owned by Hambrecht & Quist Ventures Partners,
    (e) 1,000 shares are directly owned by Hambrecht & Quist Group and (f)
    285,766 shares are directly owned by William R. Hambrecht. All of the
    reporting parties claim shared voting and dispositive powers for all of the
    1,158,693 shares.

(5) The information reported is based on Schedule 13(g), dated October 2, 1997,
    filed with the SEC by Consortium de Realisation, CDR Entreprises and Land
    Free Investment. All of the 820,330 shares are directly owned by Land Free
    Investment, which is a direct subsidiary of CDR Entreprises and an indirect
    subsidiary of Consortium de Realisation. All of the reporting parties claim
    shared voting and dispositive powers for all of the 820,330 shares.

(6) The information reported is based on Amendment No. 1 to Schedule 13(g),
    dated February 9, 1998, filed with the SEC by Charles Lingel.

(7) Includes shares subject to stock options exercisable within 60 days of March
    18, 1998.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    For a description of certain employment and other arrangements between the
Company and its executive officers and the terms of repricings of certain
options held by executive officers, see "Management--Employment and Separation
Agreements" and "--Repricing of Options."

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

    (a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO.                                               DESCRIPTION
-----------  -----------------------------------------------------------------------------------------------------
<C>          <S>

     1.1*    Form of Underwriting Agreement

     3.1*    Amended and Restated Certificate of Incorporation of the Company

     3.2*    Amended and Restated By-Laws of the Company

     4.1*    Specimen certificate for common stock, $.01 par value, of the Company

    10.1*    Standard Office Lease-Gross (American Industrial Real Estate Association) dated October 24, 1996 by
             and between PBP Limited Partnership, as lessor and the Company, as lessee.

    10.2*    White Pine Software, Inc. Stock Option Plan (1993), as amended

    10.3*    White Pine Software, Inc. Stock Option Plan (1994)

    10.4*    White Pine Software, Inc. Stock Option Plan (1995), as amended

    10.5*    White Pine Software, Inc. Stock Option Plan (1996)

    10.6*    White Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option Plan

    10.7*    White Pine Software, Inc. 1996 Employee Stock Purchase Plan

    10.8     White Pine Software, Inc. 1997 Director Stock Option Plan

    10.9*    Employment Agreement dated January 3, 1994 between the Company and Howard R. Berke, as amended

    10.10    Severance Agreement dated June 4, 1997 between the Company and Howard R. Berke

    10.11*   Nondisclosure and Noncompetition Agreement dated February 15, 1996 with David O. Bundy

    10.12    Severance Agreement dated March 16, 1998 between the Company and Robert Hadden
</TABLE>

                                       43
<PAGE>
<TABLE>
<C>          <S>
    10.13    Employment Agreement dated July 29, 1996 between the Company and Brian L. Lichorowic

    10.14    Employment Agreement dated March 30, 1998 between the Company and Bruce Lichorowic

    10.15^   Exclusive Software License Agreement dated June 1, 1996 between Cornell Research Foundation, Inc. and
             the Company

    10.16^^  First Amendment dated May 22, 1997 to Exclusive Software License Agreement included as Exhibit 10.15

    10.17*   Common Stock Purchase Warrant of the Company dated July 31, 1996, issued to Cornell Research
             Foundation, Inc.

    10.18*   Commercial Loan Agreement dated December 30, 1994 between Fleet Bank-NH and the Company, as amended

    10.19*   Collateral Assignment and Security Agreement dated December 30, 1994 between Fleet Bank-NH and the
             Company, as amended

    10.20*   $53,000 Commercial Promissory Note of the Company dated August 25, 1995, issued to Fleet Bank-NH

    10.21**  $3,000,000 Revolving Line of Credit Promissory Note

    10.22*   Stock Purchase Agreement dated March 19, 1996 among certain investors and the Company, as amended

    10.23*   Stock Purchase Agreement dated April 17, 1996 between J.F. Shea, Co., Inc. and the Company, as
             amended

    10.24*   Amended and Restated Registration Rights Agreement dated March 19, 1996 among certain stockholders of
             the Company and the Company, as amended

    10.25*   Acquisition Agreement dated October 10, 1995 among former stockholders of About Software Corporation
             S.A. and the Company

    10.26*   Indenture of Lease dated May 15, 1996 by Nash-Tamposi Limited Partnership, Five N Associates,
             Ballinger Properties, L.L.C. and the Company

    11.1     Statement re: computation of per share earnings

    21.1     List of subsidiaries of the Company

    23.1     Consent of Ernst & Young LLP

    27.1     Financial Data Schedule for fiscal year ended December 31, 1997
</TABLE>

^  Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (File No. 333-09525) in the form in which it was declared effective by
    the Securities and Exchange Commission. Subject to application for
    confidential treatment.

^^Subject to application for confidential treatment.

*   Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (File No. 333-09525) in the form in which it was declared effective by
    the Securities and Exchange Commission.

**  Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the fiscal year ended December 31, 1996.

    (b) Reports on Form 8-K

    None.

                                       44
<PAGE>
                                   SIGNATURES

    In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, as of March 30, 1998.

<TABLE>
<S>                             <C>  <C>
                                WHITE PINE SOFTWARE, INC.

                                By:           /s/ KILLKO A. CABALLERO
                                     -----------------------------------------
                                                Killko A. Caballero
                                                     PRESIDENT

                                By:             /s/ CHRISTINE J. COX
                                     -----------------------------------------
                                                  Christine J. Cox
                                             VICE PRESIDENT OF FINANCE
</TABLE>

    Each person whose signature appears below hereby appoints Killko A.
Caballero and Christine J. Cox and each of them severally, acting alone and
without the other, his (or her) true and lawful attorney-in-fact with the
authority to execute in the name of each such person, and to file with the
Securities and Exchange Commission, together with any exhibits thereto and other
documents therewith, any and all amendments to this Annual Report on Form 10-KSB
necessary or advisable to enable the Registrant to comply with the rules,
regulations, and requirements of the Securities Act of 1934, as amended, in
respect thereof, which amendments may make such other changes in the Annual
Report as the aforesaid attorney-in-fact executing the same deems appropriate.

    In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant, and in the capacities
indicated, as of March 30, 1998.

          SIGNATURE                       TITLE
------------------------------  --------------------------

   /s/ KILLKO A. CABALLERO      President and Director
------------------------------    (Principal Executive
     Killko A. Caballero          Officer)

     /s/ CHRISTINE J. COX       Vice President of Finance
------------------------------    (Principal Financial and
       Christine J. Cox           Accounting Officer)

     /s/ ARTHUR H. BRUNO        Chairman of the Board and
------------------------------    Director
       Arthur H. Bruno

                                Director
------------------------------
      Jonathan G. Morgan

                                       45
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
White Pine Software, Inc.

    We have audited the accompanying consolidated balance sheets of White Pine
Software, Inc. and subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of White Pine
Software, Inc. and subsidiary at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1997 and 1996, in conformity with generally accepted
accounting principles.

                                          /S/ ERNST & YOUNG LLP

Manchester, New Hampshire
February 2, 1998

                                      F-1
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                    ------------------------------
                                                                                         1997            1996
                                                                                    --------------  --------------
<S>                                                                                 <C>             <C>
ASSETS
Current assets:
    Cash and cash equivalents.....................................................  $   14,703,644  $   23,298,274
    Accounts receivable, less allowance of $124,000 in 1997 and $163,000 in
      1996........................................................................       2,403,194       2,552,710
    Inventories...................................................................          98,455         113,130
    Prepaid expenses..............................................................       1,263,223         422,342
    Other current assets..........................................................         114,943          27,743
                                                                                    --------------  --------------
        Total current assets......................................................      18,583,459      26,414,199
Property and equipment:
    Computer equipment............................................................       2,282,583       1,862,502
    Furniture and fixtures........................................................         546,726         521,364
    Software......................................................................         623,641         188,326
    Equipment.....................................................................         185,185         169,438
    Leasehold improvements........................................................         201,251         223,922
                                                                                    --------------  --------------
                                                                                         3,839,386       2,965,552
Accumulated depreciation and amortization.........................................      (2,325,827)     (1,901,948)
                                                                                    --------------  --------------
                                                                                         1,513,559       1,063,604
Other assets:
    Third party licenses, less accumulated amortization of $1,140,000 in 1997 and
      $724,000 in 1996............................................................         669,044         701,961
    Goodwill, less accumulated amortization of $517,000 in 1997 and $278,000 in
      1996........................................................................         676,078         914,855
    Other assets..................................................................         168,000         309,664
                                                                                    --------------  --------------
                                                                                         1,513,122       1,926,480
                                                                                    --------------  --------------
Total assets......................................................................  $   21,610,140  $   29,404,283
                                                                                    --------------  --------------
                                                                                    --------------  --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
    Accounts payable..............................................................  $      573,704  $      363,399
    Accrued expenses and other accrued liabilities................................       1,976,538       2,540,775
    Deferred revenue..............................................................         246,440         827,361
    Current portion of long-term debt.............................................          55,010         112,321
                                                                                    --------------  --------------
        Total current liabilities.................................................       2,851,692       3,843,856
Long term debt, less current portion..............................................          32,588         113,339
Long term portion of accrued third-party licenses.................................              --         210,744
Stockholders' equity:
    Common stock, $.01 par value:
        Authorized shares -- 15,000,000 issued and outstanding shares -- 9,305,714
          in 1997 and 9,030,730 in 1996...........................................          93,057          90,307
    Additional paid-in capital....................................................      38,984,024      38,669,653
    Accumulated deficit...........................................................     (20,437,194)    (13,611,558)
    Currency translation adjustments..............................................          85,973          87,942
                                                                                    --------------  --------------
        Total stockholders' equity................................................      18,725,860      25,236,344
                                                                                    --------------  --------------
Total liabilities and stockholders' equity........................................  $   21,610,140  $   29,404,283
                                                                                    --------------  --------------
                                                                                    --------------  --------------
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-2
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                   --------------------------
                                                       1997          1996
                                                   ------------  ------------
<S>                                                <C>           <C>
Revenue:
    Software license fees......................... $  9,797,290  $ 10,500,322
    Services and other............................    1,254,487     1,165,407
                                                   ------------  ------------
        Total revenue.............................   11,051,777    11,665,729
Cost of revenue...................................    1,889,893     2,211,694
                                                   ------------  ------------
Gross profit......................................    9,161,884     9,454,035
Operating expenses:
    Sales and marketing...........................    7,939,254     6,631,527
    Research and development......................    5,721,856     3,819,001
    General and administrative....................    2,585,709     2,793,536
    Restructuring.................................      660,871            --
                                                   ------------  ------------
        Total operating expenses..................   16,907,690    13,244,064
                                                   ------------  ------------
Loss from Operations..............................   (7,745,806)   (3,790,029)
Other income (expense):
    Interest income...............................    1,036,723       251,143
    Other, net....................................     (109,792)      (20,595)
                                                   ------------  ------------
                                                        926,931       230,548
                                                   ------------  ------------
Net loss before provision for income taxes........   (6,818,875)   (3,559,481)
Provision for income taxes........................        6,761        77,177
                                                   ------------  ------------
Net loss.......................................... $ (6,825,636) $ (3,636,658)
                                                   ------------  ------------
                                                   ------------  ------------
Net loss per share: Basic......................... $      (0.75) $      (0.55)
                                                   ------------  ------------
                                                   ------------  ------------
                Diluted........................... $      (0.75) $      (0.55)
                                                   ------------  ------------
                                                   ------------  ------------
Weighted average number of common and common
  equivalent shares outstanding...................    9,147,661     6,618,108
                                                   ------------  ------------
                                                   ------------  ------------
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-3
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   ADDITIONAL                   CURRENCY        TOTAL
                                                                    PAID-IN-     ACCUMULATED   TRANSLATION  STOCKHOLDERS'
                                           SHARES    PAR VALUE      CAPITAL        DEFICIT     ADJUSTMENT      EQUITY
                                          --------- ------------  ------------  -------------  -----------  -------------
 <S>                                      <C>       <C>           <C>           <C>            <C>          <C>
 BALANCES AT DECEMBER 31, 1995........... 5,589,764 $     55,898  $ 12,637,430  $ (9,974,900)  $   61,933   $  2,780,361
   Net loss..............................                                         (3,636,658)                 (3,636,658)
   Common stock issued as $5.83 par value
     stock redeemable as $.01 par value
     stock...............................   394,511    2,300,000       (66,298)                                2,233,702
   Common stock issued for conversion of
     redeemable $5.83 par value common
     stock to $.01 par value common
     stock...............................             (2,296,055)    2,296,055                                        --
   Common stock issued in connection with
     an initial public offering of
     3,000,000 shares.................... 3,000,000       30,000    23,713,318                                23,743,318
   Common stock issued in connection with
     the exercise of stock warrant.......    20,000          200        59,800                                    60,000
   Common stock issued upon exercise of
     stock options.......................    26,512          265        29,347                                    29,612
   Cancellation of fractional Shares.....       (57)           (1)            1                                       --
   Currency translation Adjustment.......                                                          26,009         26,009
                                          --------- ------------  ------------  -------------  -----------  -------------
 BALANCES AT DECEMBER 31, 1996........... 9,030,730       90,307    38,669,653   (13,611,558)      87,942     25,236,344
   Net Loss..............................                                         (6,825,636)                 (6,825,636)
   Common stock issued upon exercise of
     stock options.......................   249,086        2,491       239,989                                   242,480
   Common stock issued as payment for
     license fees........................    11,111          111        41,555                                    41,666
   Common stock issued under Employee
     Stock Purchase Plan.................    14,787          148        32,827                                    32,975
   Currency translation adjustment.......                                                          (1,969)        (1,969)
                                          --------- ------------  ------------  -------------  -----------  -------------
 BALANCES AT DECEMBER 31, 1997........... 9,305,714 $     93,057  $ 38,984,024  $(20,437,194)  $   85,973   $ 18,725,860
                                          --------- ------------  ------------  -------------  -----------  -------------
                                          --------- ------------  ------------  -------------  -----------  -------------
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-4
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31,
                                          --------------------------
                                              1997          1996
                                          ------------  ------------
 <S>                                      <C>           <C>
 OPERATING ACTIVITIES
 Net loss................................ $ (6,825,636) $ (3,636,658)
 Adjustments to reconcile net loss to net
   cash used in operating activities:
     Depreciation and amortization.......      458,694       253,109
     Amortization of goodwill and
       third-party licenses..............      655,965       719,935
     Common stock issued as payment for
       license fees......................       41,666            --
     Changes in operating assets and
       liabilities:
         Accounts receivable.............      117,272    (1,114,182)
         Inventories.....................       11,132        65,416
         Prepaid expenses................     (842,139)     (272,735)
         Other assets....................       35,441        27,453
         Accounts payable................      225,443      (102,526)
         Accrued expenses and other
           accrued liabilities...........     (507,367)      609,186
         Deferred revenue................     (567,079)      381,575
                                          ------------  ------------
 Net cash used in operating activities...   (7,196,608)   (3,069,427)

 INVESTING ACTIVITIES
 Purchase of property and equipment,
   net...................................     (931,977)     (703,452)
 Purchase of third party licenses, net...     (383,841)     (418,000)
                                          ------------  ------------
 Net cash used in investing activities...   (1,315,818)   (1,121,452)

 FINANCING ACTIVITIES
 Principal payments on long-term debt and
   third-party licenses..................     (327,809)     (377,343)
 Proceeds from common stock issued at
   $5.83 par value common stock
   redeemable as $.01 par value common
   stock.................................           --     2,233,702
 Proceeds from common stock issued in
   connection with an initial public
   offering..............................           --    23,743,318
 Proceeds from common stock issued in
   connection with the exercise of stock
   warrant...............................           --        60,000
 Proceeds from common stock issued upon
   exercise of stock options.............      242,480        29,612
 Proceeds from common stock issued under
   Employee Stock Purchase Plan..........       32,975            --
                                          ------------  ------------
 Net cash provided by (used in) financing
   activities............................      (52,354)   25,689,289
 Currency translation effect on cash and
   cash equivalents......................      (29,850)       26,009
                                          ------------  ------------
 Net increase (decrease) in cash and cash
   equivalents...........................   (8,594,630)   21,524,419
 Cash and cash equivalents at beginning
   of period.............................   23,298,274     1,773,855
                                          ------------  ------------
 Cash and cash equivalents at end of
   period................................ $ 14,703,644  $ 23,298,274
                                          ------------  ------------
                                          ------------  ------------
</TABLE>

                 See Notes to Consolidated Financial Statements

                                      F-5
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1997

1. ACCOUNTING POLICIES

  DESCRIPTION OF BUSINESS

    The Company develops, markets and supports multiplatform desktop multimedia
software that facilitates worldwide video and audio communication and data
collaboration across the Internet, intranets and other networks that use the
Internet Protocol ("IP"). The Company's desktop videoconferencing software
products allow users to participate in real-time, multipoint videoconferences
over the Internet and intranets. The Company recently introduced MeetingPoint,
the industry's first H.323 multimedia conferencing server software. MeetingPoint
represents the first conferencing server software to implement the International
Telecommunications Union ("ITU") H.323 standard for conferencing over packet
networks. This enables any standards-based client to participate in full
multipoint group conferences. MeetingPoint began shipping in November 1997. The
Company also offers desktop X Windows and terminal emulation software. The
Company's customers include businesses, educational institutions, government
organizations and individual consumers. The Company markets and sells its
products in the United States, Canada, Europe, and the Pacific Rim through
distributors, a combination of strategic partners and OEMs, and its direct sales
organization, as well as over the Internet. The Company was incorporated in
April 1992.

  PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
and its wholly-owned foreign subsidiary, White Pine Software, Europe. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

  USE OF ESTIMATES

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

  CASH AND CASH EQUIVALENTS

    Cash and cash equivalents consist of cash on hand and investments in high
grade commercial paper having maturities of three months or less when purchased.
Commercial paper qualifying as cash equivalents totaled $13,440,000 and
$22,440,000 at December 31, 1997 and 1996, respectively. These investments have
been categorized as held to maturity under the provisions of Statement of
Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. Accordingly, the balances are stated at amortized
cost, which approximates fair value, because of the short maturity of these
instruments.

  INTANGIBLE ASSETS

    Intangible assets are amortized on a straight line basis over three to five
years.

  CONCENTRATION OF CREDIT RISK

    Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. Cash and cash equivalents include cash

                                      F-6
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

1. ACCOUNTING POLICIES --(CONTINUED)
on deposit in checking accounts, commercial paper, and certificates of deposit.
These cash and cash equivalents are maintained with high credit quality
financial institutions.

    The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. The Company maintains reserves for potential
credit losses; historically, such losses have not been material and have been
within management's expectations. At December 31, 1997, two customers accounted
for approximately 65% of accounts receivable.

    Included in the Company's balance sheet at December 31, 1997 are the assets
of the Company's foreign subsidiary, White Pine Software, Europe, of which
approximately $506,000 of tangible assets are located in France.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

    The carrying amounts reported in the balance sheet for the Company's cash
and cash equivalents and borrowings approximates fair value.

  INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out method) or
market.

  PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of two
to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset.

  THIRD-PARTY LICENSES

    The cost of agreements entered into with third parties for the right to use
the third parties' technology in the Company's products is amortized on a
straight-line basis over the lives of the agreements.

  INCOME TAXES

    Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

  REVENUE RECOGNITION

    The Company's revenue is derived from software license fees and fees for
services related to its software products, primarily software maintenance fees.
The Company recognizes revenue in accordance with the provisions of AICPA
Statement of Position No. 91-1, SOFTWARE REVENUE RECOGNITION.

    Software license revenue is recognized upon receipt of a firm customer order
and shipment of the software, net of allowances for estimated future returns,
provided that no significant obligations remain on the part of the Company and
collection of the related receivable is deemed probable. Revenue under certain
license agreements is recognized upon execution of a signed contract and
fulfillment of the

                                      F-7
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

1. ACCOUNTING POLICIES --(CONTINUED)
contractual obligations, provided that no significant obligations remain on the
part of the Company and collection is deemed probable.

    Software maintenance fees, which are generally payable in advance and are
non-refundable, are recognized ratably over the period of the maintenance
contract, typically twelve months. Revenue from training and consulting services
is recognized as services are provided.

    Software license fees, consulting fees, and training fees that have been
prepaid or invoiced but that do not yet qualify for recognition as revenue under
the Company's policy, and prepaid maintenance fees not yet recognized as
revenue, are reflected as deferred revenue.

  CAPITALIZED SOFTWARE

    Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based upon the Company's product
development process, technological feasibility is established upon completion of
a commercially viable working model. Costs incurred by the Company between
completion of the commercially viable working model and the point at which the
product is ready for general release have been capitalized. Such amounts are
included in other assets, are amortized over a three-year period and are not
material at December 31, 1997 and 1996.

  FOREIGN CURRENCY TRANSLATION

    The financial statements of the Company's foreign subsidiary have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, FOREIGN CURRENCY TRANSLATION. All balance sheet
amounts have been translated using the exchange rates in effect at the balance
sheet date. Statement of operations amounts have been translated using average
exchange rates. The gains and losses resulting from the changes in exchange
rates from the date of acquisition of White Pine Software, Europe to December
31, 1997 have been reported separately as a component of stockholders' equity.

    The aggregate transaction gains and losses are insignificant for all periods
presented.

  ADVERTISING COSTS

    All costs related to advertising the Company's products are expensed in the
period incurred. Amounts charged to expense were $907,000 and $1,179,000, during
the years ended December 31, 1997 and 1996, respectively.

  NET LOSS PER COMMON SHARE

    In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. Pursuant to the
previous requirements of the Securities and Exchange Commission (the "SEC"),
common shares and common share equivalents issued by the Company during the
twelve-month period prior to the

                                      F-8
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

1. ACCOUNTING POLICIES --(CONTINUED)
initial public offering of the Company's common stock had been included in the
calculations as if they were outstanding for all periods prior to the offering
in August 1996 whether or not they were anti-dilutive. In February 1998, the SEC
issued Staff Accounting Bulletin 98 which, among other things, conformed prior
SEC requirements to SFAS 128 and eliminated inclusion of such shares in the
computation of earnings per share. All earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to SFAS
128 and SEC requirements.

    Basic net loss per common share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted net loss
is computed using the weighted average number of shares of common stock and
dilutive common equivalent shares outstanding during the period. Common
equivalent shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants using the treasury stock method.

  RECENT ACCOUNTING PRONOUNCEMENTS

    In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure" ("SFAS 129"). SFAS No. 129 establishes standards for
disclosing information about an entity's capital structure. SFAS 129 was
effective for financial statements for the periods ending after December 15,
1997 and did not have a material impact on the Company's financial statement
disclosures.

    In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements for periods
beginning after December 15, 1997. Comprehensive income, as defined, includes
all changes in equity (net assets) during a period from nonowner sources.
Examples of items to be included in comprehensive income which are excluded from
net income include cumulative translation adjustments resulting from
consolidation of foreign subsidiaries' financial statements and unrealized gains
and losses on available-for-sale securities. Reclassification of financial
statements for earlier periods for comparative purposes is required. The Company
will adopt SFAS 130 beginning in 1998 and does not expect such adoption to have
a material effect on its consolidated financial statements.

    In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). This statement establishes
standards for the way companies report information about operating segments in
annual financial statements for periods beginning after December 15, 1997. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt SFAS 131 beginning
in fiscal 1998 and does not expect such adoption to have a material effect on
its consolidated financial statements.

    In October 1997 the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2 SOFTWARE REVENUE RECOGNITION. This
statement supersedes SOP 91-1, SOFTWARE REVENUE RECOGNITION, and provides
guidance on applying generally accepted accounting principles in recognizing
revenue on software transactions entered into for fiscal years beginning after
December 15, 1997. The Company will adopt SOP 97-2 beginning in fiscal 1998 and
does not expect such adoption to have a material effect on its consolidated
financial statements.

                                      F-9
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

2. RESTRUCTURING

    In the fiscal quarter ended July 4, 1997, the Company reorganized its
operations and recorded a restructuring charge in the amount of $661,000 as a
result of a change in senior management and a reduction in its workforce. This
amount consisted primarily of severance payments, outplacement expenses, and
related fees for 26 employees who were laid off at the quarter end. The
reorganization reflected the Company's decision to focus its resources on its
web-based conferencing and connectivity products, and to terminate support,
development, and sales of certain older product lines. At December 31, 1997, the
Company's restructuring liability was $91,000. This amount represents severance
payments that will continue to be paid through June 1998.

3. INDEBTEDNESS

  LINE OF CREDIT

    The Company has a line of credit with a financial institution which provides
for maximum available borrowings of $3,000,000. Interest on the line is payable
monthly at the bank's prime rate plus .5% (9.00% at December 31, 1997).
Borrowings under the line are due on demand and are secured by substantially all
assets of the Company, including a $515,000 certificate of deposit. This
agreement expires on June 30, 1998. At December 31, 1997, there were no amounts
outstanding under the line of credit.

    The line of credit agreement contains various restrictive covenants, the
most significant of which include the maintenance of a minimum net worth, a
maximum ratio of total liabilities to tangible net worth, a minimum ratio of
current assets to current liabilities, and profitability levels.

  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                         ---------------------
                                                                           1997        1996
                                                                         ---------  ----------
<S>                                                                      <C>        <C>
Secured, non-interest bearing, term loan from a foreign governmental
  agency, due in annual installments of $44,408, with the final
  installment due in September 1999....................................  $  59,000  $  186,000
Note payable, due in monthly installments of $883 plus interest at
  9.5%, with remaining balances due August 2000........................     28,000      39,000
                                                                         ---------  ----------
                                                                            87,000     225,000
Less current portion...................................................     55,000     112,000
                                                                         ---------  ----------
                                                                         $  32,000  $  113,000
                                                                         ---------  ----------
                                                                         ---------  ----------
</TABLE>

    Aggregate maturities of long-term debt are as follows: 1998--$55,000;
1999--$25,000; and 2000-- $7,000.

    Total interest expense for the years ended December 31, 1997 and 1996, was
approximately $59,000 and $37,000, respectively, and is included in other
expense.

                                      F-10
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

4. ACCRUED EXPENSES AND OTHER ACCRUED LIABILITIES

    Accrued expenses and other accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                    --------------------------
                                                                        1997          1996
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
Accrued compensation and related benefits.........................  $    782,000  $    798,000
Pending litigation................................................       291,000       292,000
Royalties.........................................................       229,000       523,000
Other accruals....................................................       675,000       928,000
                                                                    ------------  ------------
                                                                    $  1,977,000  $  2,541,000
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>

    The Company is a co-defendant in various lawsuits filed in federal and state
courts in New York. The lawsuits seek damages for alleged injuries sustained
while using products which the plaintiffs assert were designed and manufactured
by a predecessor of the Company. Although the Company is defending these claims,
exposure is partially limited by insurance and indemnification by the primary
contractor. While management believes that losses from these claims are not
probable (as defined by Statement of Financial Accounting Standards No. 5), it
has an accrual of approximately $291,000 as of December 31, 1997 for legal fees
and potential losses which could arise from such claims. The actual amount of
such losses may range from $0 to $8,250,000, which represents the sum of the
damages sought by the plaintiffs in such lawsuits.

5. INCOME TAXES

    The Company's deferred tax assets and related valuation allowances are as
follows:

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                  ----------------------------
                                                                      1997           1996
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Deferred tax assets.............................................  $   6,500,000  $   4,200,000
Valuation allowance for deferred tax assets.....................     (6,500,000)    (4,200,000)
                                                                  -------------  -------------
Net deferred tax asset..........................................  $    --        $    --
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>

    Deferred tax assets consist primarily of net operating and capital loss
carryforwards and accrued liabilities.

    The Company recorded a valuation allowance of $6,500,000 and $4,200,000 at
December 31, 1997 and 1996, respectively, against its deferred tax assets since
it is believed to be more likely than not that the net operating loss
carryforwards and other temporary differences will not provide a future tax
benefit.

    At December 31, 1997, the Company had cumulative federal net operating loss
carryforwards of approximately $15,695,000 for income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant annual limitations. The loss carryforwards
expire at various dates through 2012.

                                      F-11
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

6. LEASE COMMITMENTS

  OPERATING LEASES

    The Company leases its office facilities under various operating leases
expiring at various times through fiscal 2001. Future minimum annual rental
commitments under the lease agreements for the years ending December 31 are as
follows:

<TABLE>
<S>                                                                 <C>
1998..............................................................  $ 258,000
1999..............................................................    243,000
2000..............................................................    226,000
2001..............................................................    170,000
                                                                    ---------
                                                                    $ 897,000
                                                                    ---------
                                                                    ---------
</TABLE>

    Total rent expense for the years ended December 31, 1997 and 1996, was
approximately $332,000 and $399,000, respectively.

7. SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL SALES

    During the years ended December 31, 1997 and 1996, one customer accounted
for approximately 14% of the Company's total revenue.

    The Company's sales by geographic location are summarized below:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                                 ----------------------------
                                                                     1997           1996
                                                                 -------------  -------------
<S>                                                              <C>            <C>
United States and Canada.......................................  $   8,228,000  $   8,394,000
Europe.........................................................      1,554,000      1,911,000
Pacific Rim....................................................      1,270,000      1,361,000
                                                                 -------------  -------------
                                                                 $  11,052,000  $  11,666,000
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>

8. EMPLOYEE BENEFITS

  PROFIT SHARING PLAN

    The Company has a Profit Sharing Plan (the "Plan") under Section 401(k) of
the Internal Revenue Code for all employees meeting age and service
requirements. Eligible employees may elect to contribute up to 16% of their
compensation, subject to limitations established by the Internal Revenue Code.
The Company may elect to contribute a discretionary amount to the Plan which
would be allocated to the employees based upon the employees' contributions to
the Plan. There have been no discretionary contributions to date.

STOCK OPTION PLANS

    The Company has elected to follow Accounting Principals Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires use of
option valuation models that were not

                                      F-12
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

8. EMPLOYEE BENEFITS --(CONTINUED)
developed for use in valuing employee stock options. No compensation expense is
recognized under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant.

  EMPLOYEE STOCK PURCHASE PLAN

    In 1997, the Company adopted the 1996 Employee Stock Purchase Plan (the
"ESPP"). Under the ESPP, an aggregate of 100,000 shares of Common Stock are
reserved for purchase by qualified employees, at 85% of the appropriate market
price. The ESPP provides that qualified employees may authorize payroll
deductions from 1% to 6% of their base pay to purchase shares at the lower of
the market price in effect on the day the offering starts or the day the
offering terminates. In 1997, the Company issued 14,787 shares under the ESPP at
$2.23 per share.

  1996 STOCK OPTION PLAN

    In 1996, the Company adopted the 1996 Stock Option Plan (the "Stock Option
Plan"). Under the Stock Option Plan, 550,000 shares of the Company's Common
Stock are available for grant to employees. On September 30, 1997 the Company
amended the Stock Option Plan increasing the number of available shares from
550,000 to 1,000,000. Option prices and exercise periods are determined by the
Board of Directors on the date of grant. All options granted under the Stock
Option Plan become exercisable in installments over a three to four year period
commencing from the date of grant and expire 10 years from the date of grant.

  DIRECTOR STOCK OPTION PLAN

    In 1997, the Company adopted the 1997 Outside Director Stock Option Plan
(the "Director's Plan"). The Company has reserved 150,000 shares of Common Stock
under the Director's Plan. The Director's Plan authorizes a one time automatic
grant of options to acquire 15,000 shares of Common Stock as an initial award
for being a Director. Each subsequent year, at re-election, Directors are
granted an additional 10,000 options. All options granted are exercisable at the
next annual meeting subsequent to being granted. All options expire 10 years
from the date of grant and have an exercise price equal to the fair market value
of the Company's Common Stock on the date of grant.

OPTION REPRICING

    On August 5, 1997, the Board of Directors authorized the repricing of
128,550 stock options which had a weighted average exercise price of $5.33 to
the fair market value of $2.50 per share, if elected by the option holder. As a
part of the repricing, vesting periods for the repriced options were extended
from three years to four years.

FAS 123 DISCLOSURES

    Pro forma information regarding net loss and loss per common and common
equivalent share is required by Statement 123, which also requires that the
information be determined as if the Company has accounted for its employee stock
options granted subsequent to December 31, 1994 under the fair value

                                      F-13
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

8. EMPLOYEE BENEFITS --(CONTINUED)
method of that Statement. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:

<TABLE>
<CAPTION>
                                                      OPTIONS        ESPP
                                                    -----------   -----------
                                                    1997   1996   1997   1996
                                                    ----   ----   ----   ----
<S>                                                 <C>    <C>    <C>    <C>
Expected life (years).............................  4.1    4.9     .5     --
Interest rate.....................................  6.2%   6.2%   6.2%    --
Volatility........................................   .6     .5     .6     --
</TABLE>

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands except for per share
information):

<TABLE>
<CAPTION>
                                                                    1997       1996
                                                                  ---------  ---------
<S>                               <C>                             <C>        <C>
Pro forma net loss..............................................  ($  7,403) ($  3,786)
Pro forma net loss per share:     Basic.........................  ($    .81) ($    .57)
                                  Diluted.......................  ($    .89) ($    .57)
</TABLE>

    Because FAS 123 is applicable only to options granted and shares issued
pursuant to the ESPP subsequent to December 15, 1995, its pro forma effect will
not be fully reflected until fiscal year 1999.

    Option activity under the Plans is summarized below:

<TABLE>
<CAPTION>
                                                          1997                     1996
                                                 -----------------------  -----------------------
                                                              WEIGHTED                 WEIGHTED
                                                               AVERAGE                  AVERAGE
                                                              EXERCISE                 EXERCISE
                                                   SHARES       PRICE       SHARES       PRICE
                                                 ----------  -----------  ----------  -----------
<S>                                              <C>         <C>          <C>         <C>
Outstanding at beginning of year...............   1,088,437   $    2.29      882,749   $    1.01
Granted........................................     864,050        3.46      262,350        6.47
Expired or canceled............................    (295,536)       5.02      (30,151)       1.12
Exercised......................................    (248,703)        .97      (26,511)       2.20
                                                 ----------               ----------
Outstanding at end of year.....................   1,408,248        2.65    1,088,437        2.29
                                                 ----------               ----------
                                                 ----------               ----------
Exercisable at end of year.....................     673,261   $    1.71      732,651   $    0.95
                                                 ----------       -----   ----------       -----
                                                 ----------       -----   ----------       -----
</TABLE>

                                      F-14
<PAGE>
                    WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)

                               DECEMBER 31, 1997

8. EMPLOYEE BENEFITS --(CONTINUED)
    The following table presents weighted-average price and fair value
information about options granted equal to, and greater than fair market value
during fiscal year 1997:

<TABLE>
<CAPTION>
                                                NUMBER OF
                                                 OPTIONS    WEIGHTED-AVERAGE   WEIGHTED-AVERAGE
EXERCISE PRICE ON DATE OF GRANT                  GRANTED     EXERCISE PRICE       FAIR VALUE
---------------------------------------------  -----------  -----------------  -----------------
<S>                                            <C>          <C>                <C>
Equal to fair market value...................     797,550       $    3.54          $    3.54
Less than fair market value..................      66,500       $    2.50          $    3.47
                                               -----------
                                                  864,050
                                               -----------
                                               -----------
</TABLE>

    The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                              OPTIONS OUTSTANDING
                ------------------------------------------------       OPTIONS EXERCISABLE
   RANGE OF                  WEIGHTED AVERAGE                     ------------------------------
   EXERCISE       NUMBER        REMAINING      WEIGHTED AVERAGE     NUMBER     WEIGHTED AVERAGE
    PRICES      OUTSTANDING  CONTRACTUAL LIFE   EXERCISE PRICE    EXERCISABLE   EXERCISE PRICE
--------------  -----------  ----------------  -----------------  -----------  -----------------
<S>             <C>          <C>               <C>                <C>          <C>
 $ .50 - $ .80     280,392         4 years         $     .52         280,392       $     .52
  1.00 -  2.00     267,956         7 years              1.30         246,570            1.25
  2.50 -  3.88     610,650         9 years              2.70          65,612            2.69
  5.00 -  7.88     249,250         9 years              6.38          80,687            6.40
                -----------                                       -----------
                 1,408,248                                           673,261
                -----------                                       -----------
                -----------                                       -----------
</TABLE>

9. RECAPITALIZATION

    On February 29, 1996, the Board of Directors and the stockholders approved
an amendment to the Company's charter to authorize 500,000 shares of $5.83 par
value common stock and to decrease the number of authorized shares of $.01 par
value common stock to 7,500,000 shares.

    On March 19, 1996, the Company entered into a Stock Purchase Agreement with
certain investors whereby, for consideration of $2,000,000, the Company issued
343,053 shares of $5.83 par value common stock.

    On April 17, 1996, the Company entered into a Stock Purchase Agreement with
an additional investor whereby, for consideration of $300,000, the Company
issued 51,458 shares of $5.83 par value common stock.

    In October 1996, the Company filed an amendment and restatement of its
charter to, among other things, cause each share of $5.83 par value common stock
to be converted into one share of $.01 par value common stock on the closing
date of the Company's initial public offering (October 17, 1996).

                                      F-15