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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

(MARK ONE)

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<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934.
</TABLE>

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                        COMMISSION FILE NUMBER 000-21171

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

                        SPLASH TECHNOLOGY HOLDINGS, INC.

             (Exact name of registrant as specified in its charter)

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<S>                                            <C>
               DELAWARE                                     77-0418472
    (State or other jurisdiction of             (IRS Employer Identification No.)
    incorporation or organization)

   555 DEL REY AVENUE, SUNNYVALE, CA                          94086
    (Address of principal executive                         (Zip Code)
               offices)
</TABLE>

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

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

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001
                                   PAR VALUE

                                                                 (Title of
Class)

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 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 / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  /X/

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 6, 2000 was approximately $207.7 million based upon the
closing price of the common stock on the Nasdaq Stock Market for such date.
Shares of common stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such person may, under certain circumstances, be deemed to be an affiliate.
This determination of executive officer or affiliate status is not necessarily a
conclusive determination for other purposes. The number of outstanding shares of
Registrant's Common Stock as of March 6, 2000 was 14,139,775.

    Documents incorporated by reference: Items 10,11,12 and 13 of Part III are
incorporated by reference from the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 24, 2000. This Report contains 55
sequentially numbered pages of which this is Number 1.

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                                     PART I

    THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS
AFFECTING FUTURE RESULTS". UNLESS THE CONTEXT OTHERWISE SPECIFIES, REFERENCES IN
THIS REPORT ON FORM 10-K TO "SPLASH" AND THE "COMPANY" REFER TO SPLASH
TECHNOLOGY HOLDINGS, INC. AND ITS SUBSIDIARIES, INCLUDING ITS PRINCIPAL
OPERATING SUBSIDIARY, SPLASH TECHNOLOGY INC., AS WELL AS PREDECESSOR ENTITIES.

    ON OCTOBER 13, 1997, THE COMPANY'S BOARD OF DIRECTORS APPROVED A CHANGE IN
THE COMPANY'S FISCAL YEAR END FROM SEPTEMBER 30 TO DECEMBER 31, COMMENCING
JANUARY 1, 1998. FOR COMPARATIVE PURPOSES THE CONSOLIDATED STATEMENT OF
OPERATIONS AND CONDENSED CASH FLOW STATEMENTS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1997 ARE PRESENTED ON A PRO FORMA BASIS.

ITEM 1.  BUSINESS

    Splash develops, produces and markets color servers that provide an
integrated link between desktop computers and digital color laser copiers and
wide format printers and enable such devices to provide high quality, high
speed, networked color printing. These hybrid systems, consisting of color
servers and digital color laser copiers (referred to as connected or
multifunction copiers), support multiple uses including image scanning, image
manipulation, printing and photocopying. The Company's products feature advanced
color correction, color calibration and separations support, variable data
printing, large format, ease of use, time-saving work flow functionality,
simulation of many color monitors and printing presses, and automatic correction
for certain printing workflow problems. Splash's color servers are commonly
accessed by users across networks of Windows-based personal computers, Power-PC
personal computers and UNIX-based computers.

    Splash sells its color server products primarily to two of the leading
providers of color copiers, Xerox Corporation including its affiliates, such as
Xerox Ltd. in Europe, ("Xerox") and, to a significantly lesser extent, Fuji
Xerox Company Ltd., including its affiliates ("Fuji Xerox"). The original
equipment manufacturers ("OEMs") integrate the Company's color servers with
their digital color copiers and sell the connected systems to end users through
a worldwide direct distribution network. Users of the Company's color servers
include magazine publishers, advertising firms, graphic arts firms, publishing
services providers, prepress and printing firms, and Fortune 500 companies with
in-house graphics, marketing and advertising and publishing needs.

    On February 29, 2000, the Company announced its T Series product line. This
product will be distributed exclusively through IKON Office Solutions ("IKON")
in North America. This is the Company's newest channel partner.

    Splash Technology Holdings, Inc. was incorporated in Delaware in
December 1995. The Company's business operated as the Color Server Group ("CSG")
division of SuperMac Technology, Inc. ("SuperMac") from late 1992 to
August 1994, and after the merger of SuperMac into Radius Inc. ("Radius") as the
CSG division of Radius from August 1994 until January 1996. In January 1996, the
Company was acquired by an investor group led by certain entities affiliated
with Summit Partners, L.P. and Sigma Partners, L.P. (the "Splash Acquisition").
The Company's executive offices are located at 555 Del Rey Avenue, Sunnyvale, CA
94086, and its telephone number is (408) 328-6300.

PRODUCTS AND TECHNOLOGY

    PRODUCT LINES

    Splash offers both pre-configured color server systems and board-level
server kits. The pre-configured color server systems include a Splash copier
interface board and frame buffer installed in an Intel based or a Power PC based
computer and feature Splash software and an interface cable. They can also
include a

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color display and a keyboard. The server kits do not include the computer,
display and keyboard, thereby allowing the customer or reseller to install the
Splash color server on a locally procured or existing compatible system. Splash
products are primarily sold under the Splash brand worldwide except in Japan,
where they are sold under the SM ICS brand name of Fuji Xerox. The fundamental
architectures of the SM ICS and Splash products are substantially identical
other than localization differences for user interface and documentation. In
addition, Visutech AB of Sweden combines Splash server kits into color server
systems that are sold in Europe under the DiamondPress brand.

    Splash's primary product lines include the Splash Professional Color Imaging
("PCI" Series), first introduced in May 1996, the Splash for DocuColor ("DC"
Series), first introduced in September 1996, the Splash M Series, first
introduced in November 1998, the Splash G Series, first introduced in
September 1999, and the Company's integrated controller product, first
introduced in October 1999. The PCI, DC, and G products generally use Apple
computers and are compatible with the PCI bus architecture. The Splash M Series
is based on the Intel family of processors using the Linux operating system. The
integrated controller products use Motorola processors. The retail prices to end
users of Splash products vary by geographical region, model and configuration.
For example, depending on the model and configuration, the retail prices to end
users of the G Series currently range from approximately $26,000 to $40,000 in
the United States. The retail price to end users of the M Series ranges from
approximately $10,000 to $15,000.

    PRODUCT FEATURES AND TECHNOLOGY

    Splash servers are based on open systems, enabling the Company to leverage
the development efforts of computer and operating system suppliers, and thereby
concentrate its development resources in those areas specific to the concerns of
color users. This open systems approach has provided an advantage in bringing
innovative color and workflow solutions to the market rapidly. It has also
enabled the Company to provide its customers with performance increases by
taking advantage of improvements in industry standard computers.

    The Company's products include Splash-designed copier interface boards
integrated with a standard computer system and Splash software written for the
server and its networked clients. The Splash copier interface board uses
double-sided surface mount technology and includes a number of advanced design
features such as a proprietary application specific integrated circuit (ASIC),
certain other custom FPGAs and ASICs, and can contain a large frame buffer, all
in a PCI form factor.

    Splash software includes: driver software written for several different
types of client workstations; server software including network interface,
spooling, and imaging engine modules that can reside on the standard computer
system; and server software including print interface and device control modules
that can reside on the Splash board itself. These software modules are layered
on a standard computer operating system to provide compatibility with a variety
of off-the-shelf peripherals and third-party software applications. Technical
innovations first introduced to market by Splash include techniques that enhance
color quality, such as accurate printing of RGB monitor blues (avoiding the
common blue to purple shift upon printing); techniques that enhance print
quality, such as traps and overprints (as described below); and features that
enhance productivity workflow, such as advanced color calibration capabilities
and the ability to interpret and print multiple RGB formats or mixed RGB and
CMYK formats from the same electronic file.

    The following describes these and other key features offered by Splash.

    CMYK SEPARATION SUPPORT.  Splash's CMYK separation capability enables users
to employ page layout and publishing software to print pre-proofs from color
copiers that incorporate overprinting (overlapping mixing of colors) and Desktop
Color Separations (high-resolution separation files). This feature allows the
printing of high quality pre-proofs and thereby saves professional color
publishing end users time and money by reducing the number of cycles of film
proofs required for the design and production process.

                                       3
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    SPLASH MATCH.  Splash Match is a unique color management solution that
permits rapid, automatic and accurate color correction of image files. The user
can select among a variety of color profiles including RGB monitor matching and
CMYK press matching-through "check box" selections within a printing window in
the graphical user interface from a networked client.

    SPLASH COLORCAL.  Splash ColorCal is a fast, easy-to-use calibration utility
that utilizes a unique randomized calibration target and a copier's built-in
digital scanning capability for calibration. By making calibration fast and
simple, 3-step process, and eliminating the need for separate, expensive
densitometers, Splash provides a mechanism for frequent calibration that assures
reproducible, consistent color. All Splash Match color profiles (RGB and CMYK)
are updated simultaneously upon completion of calibration. Splash Match also
provides an "expert mode" of operation that allows the user to customize a
copier's output to the unique print characteristics of a given press intended
for final printing.

    SPLASH ACCUCOLOR.  Splash AccuColor, implemented as part of Splash Match,
allows for more accurate translation and printing of monitor blues without the
significant purple shift that occurs with almost all other printing
alternatives. This is a performance advantage in printing applications where the
desired goal is producing output that comes as close as possible to matching the
RGB colors on a user's display. Splash AccuColor allows for screen-to-press
matching through the use of one of several Splash press profiles selectable in
Adobe Photoshop.

    SPLASH INTELLICOLOR.  Splash IntelliColor compensates for mistakes commonly
made during the design process such as mixing different RGB file formats or
combining RGB and CMYK formats in the same document. Images combined in the same
file are separately and accurately color corrected. This capability is
independent of the end user's application or computer workstation.

    SPLASH SCAN AND SPLASH PRINT.  Both Splash Scan and Splash Print are Adobe
Photoshop Plug-in modules that provide 400-dpi, 24-bit color scanning from the
copier and ultra high-speed bit map printing to a copier, respectively. In this
way, scans can be made, retouched and printed locally without tying up the
network.

    SPLASH FIDELITY COMPRESSION.  Splash Fidelity Compression enhances the print
quality of color servers that have limited print buffer memory. Splash Fidelity
Compression delivers true, continuous tone (contone) or near-contone quality
output optimized to the available print buffer memory. Splash Fidelity
Compression is automatically engaged whenever the Splash server has too little
memory to print a given page size with full color quality.

    VARIABLE DATA PRINTING.  Combined with a digital color copier/printer, this
solution can provide printers, service bureaus and trade shops with the ability
to offer their customers cost effective, personalized, or one-to-one marketing
materials.

    SPLASH EDIT.  Splash Edit is a utility that enables the user to change
certain print settings at the Splash server after the print job has been sent by
the user across the network. Changeable print settings include; number of
copies, tray selection, color correction choice, page range and sorter. Because
these settings can be changed at the Splash server next to the copier, the user
saves time by not having to return to the client computer to resend the file.

    SPOT PROOF MATCHING.  Spot Color Matching allows the printing of spot colors
(within the color gamut of the copier) without converting them to process color
and without interrupting the user's existing work flow. This feature is
optionally engaged for composite printing and automatically engaged for
separations printing.

    PROGRESSIVES.  The Progressives feature enables the printing of any of the
four CMYK plates, in any combination, and in the resulting color of that
combination. Proofing four-color work on a two-color press is one of the many
uses of Progressives.

                                       4
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    WORLD WIDE WEB/INTERNET/INTRANET PRINTING.  The Web Server option allows
users to print or manage a print job from any workstation on an intranet or the
Internet.

    SPLASH WEBQUE MANAGER.  Allows users to remotely manage jobs of the color
server from any web-browser.

    AUTO TRAPPING.  Improves image quality by removing random mis-registration
problems of the print engine.

SALES AND MARKETING

    Splash sells its color server products primarily to two of the leading
providers of color copiers, Xerox and, to a significantly lesser extent, Fuji
Xerox. These OEMs integrate the Company's color servers with their digital color
copiers and sell the connected systems to end users through a worldwide direct
distribution network. Xerox sells primarily in North America, South America and
Europe, while Fuji Xerox sells primarily in Japan and the Asia Pacific region.
Xerox and Fuji Xerox each provide primary customer service through their
worldwide networks, while Splash provides backup support to Xerox and Fuji
Xerox. These relationships allow Splash to provide strong customer support at
the local level as well as providing Splash with a valuable source of input for
product enhancement. Splash believes that the strength of Xerox and Fuji Xerox
in the office equipment market provides the Company with a significant
opportunity to expand its presence in the end user office printing market.

    Xerox and Fuji Xerox sell Splash products as well as competing color
servers. Although the Company has a contract with Xerox, the Company does not
have a contract with Fuji Xerox with respect to its products and is currently
operating on a purchase order basis with Fuji Xerox. There can be no assurance
that the Company will continue to receive orders from Xerox or Fuji Xerox. The
Company has experienced declines in sale levels to its customers, in particular,
in 1999, sales to Fuji Xerox fell substantially. Any additional decreases in the
level of sales to Xerox or Fuji Xerox would have a material adverse effect on
the Company's business, operating results and financial condition.

    As of December 31, 1999, the Company employed 65 people in sales and
marketing. These people primarily support Xerox's sales force while Fuji Xerox
is supported by its own personnel. Splash's sales and marketing personnel
typically provide this support through sales literature, periodic training,
customer symposia, pre-sales support and joint sales calls. The Company also
participates in industry trade shows and conferences, distributes sales and
product literature and has a public relations plan intended to generate coverage
of the Company's products and technology by editors of trade journals.

    Splash believes that in order to increase its market penetration, enhance
brand awareness, and to open new distribution channels, such as the recently
announced IKON distribution channel, it must continue to expand its sales and
marketing efforts. The Company plans to recruit and hire additional field
personnel in Europe, the United States, the Asia Pacific region and Latin
America, as well as to expand its marketing programs. There can be no assurance
that the Company will be able to hire additional personnel, expand its marketing
programs or that the Company will be able to increase its market penetration.

MARKETS AND CUSTOMERS

    Splash products are employed by users in five principal markets: commercial
and short-run printing, prepress and photo labs, graphic arts and professional
color publishing, print-for-pay and office color printing. The Company to date
has focused principally on the prepress and graphic arts markets, where end
users who are discerning about color and print quality require high quality
innovative color server solutions. The Company believes that the emerging use of
color in a variety of printing applications is creating an opportunity for the
Company's products in the other market segments.

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    COMMERCIAL AND SHORT-RUN PRINTING.  The commercial printing market
represents the highest quality and highest volume color printing production.
Firms in this market typically have their roots in traditional offset press
printing, in which output is developed in-house at businesses and other
organizations, prepared for printing by service bureaus and trade shops (which
often perform prepress services as described below) and then delivered to the
commercial printer for printing on large, expensive printing presses. In recent
years, many firms in the commercial printing market have begun to expand into
prepress and short-run printing services. These firms use color server-based
printing devices to more rapidly and less expensively produce pre-proofs of
color output. In addition, many of these firms have begun to use color
server-based printing devices as a less expensive alternative for printing in
smaller quantities. End users of Splash products in this segment include Quad
Graphics, Quebecor, and R.R. Donnelley & Sons Company.

    PREPRESS AND PHOTO LABS.  The prepress market consists of service bureaus
and trade shops which handle complex color production for end users that intend
to send print jobs to short-run and commercial printing firms for high quality
or high volume printing, as well as photo labs which provide high-end
photographic services. Prepress firms work closely with end users and the local
commercial printers that perform the print jobs. Prepress firms provide high end
scanning, image retouching, imagesetter output of color separation films for
proofing and, in some cases, the production of contract proofs which serve as
the standard for the commercial print run. Firms in this market are utilizing
color server-based printing devices as a means to reduce the cost and turnaround
time for image design, modification and pre-proofing. End users of Splash
products in this segment include the Fleet Graphics and One Hour Photo Express.

    GRAPHIC ARTS AND PROFESSIONAL COLOR PUBLISHING.  The graphic arts and
professional color publishing market consists of in-house creative staffs and
advertising agencies and design firms. These creative professionals perform
extensive color design and layout, but historically have not performed print
production. Users typically utilize networked personal computers and
workstations for color design and use color server-based printing devices for
conceptual and comprehensive designs as well as pre-proofs. Users typically
compose the color image to be printed utilizing applications such as Adobe
Photoshop, Adobe Illustrator, QuarkxPress, Adobe PageMaker, Corel Ventura
Publisher, MetaCreations Live Picture and Macromedia Freehand. End users of
Splash products in this segment include Penton Publishing, Newsday, Scholastic
Canada Ltd.,, Hearst Magazines and Gibson Greetings, Inc.

    PRINT FOR-PAY.  Print-for-pay firms provide a broad range of walk-in
services including faxing, copying and desktop publishing. Recently these firms
have begun to use connected color copiers to offer expanded color printing and
copier services. Users in this market segment range from franchised and local
storefronts traditionally focused on black and white copying services to
specialized firms. End users of Splash products in this segment include Mail
Boxes Etc., Kwik Kopy, and PIP Printing.

    OFFICE COLOR PRINTING.  The office color printing market consists of
networked office printing and central reproduction departments in businesses and
other organizations. These organizations, which have typically used black and
white laser printers and desktop color ink jet printers for production of word
processed documents, spreadsheets and presentations, are increasingly using
connected copiers to produce materials such as product brochures and internal
communications. This market segment is still emerging, and the Company believes
the ability of color servers to operate across corporate networks will help
expand this market.

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MANUFACTURING

    The Company outsources the manufacture of its products to third party
subcontract manufacturers including Logistix Incorporated ("Logistix"), located
in Fremont, California, and Space Craft Industries ("SCI"), located in San Jose,
California. SCI purchase the components used in Splash boards from their
suppliers and perform double-sided active surface mount assembly, in-circuit
test, functional test and system test of the printed circuit boards used in the
Splash products, on a turnkey basis. SCI also performs in-warranty and
out-of-warranty repair of failed boards for the Splash products. The Company
purchases Apple computers, Intel designed components, monitors and memory, and
furnishes these components, as well as the SCI assembled boards, to Logistix and
SCI for final assembly. Logistix and SCI also purchase a portion of the
components used in Splash color servers and perform all final assembly and
system configuration.

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

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

    Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These include
Macintosh computers, certain ASICs and other semiconductor components. The
Company does not maintain any long-term agreements with any of its suppliers of
components. Because the purchase of certain key components involves long lead
times, in the event of unanticipated increases in demand for the Company's
products, the Company could be unable to manufacture certain products in a
quantity sufficient to meet end user demand. In addition, Apple has previously
experienced significant financial difficulties and losses in market acceptance,
and its products have particularly low levels of market acceptance in the office
color printing market into which the Company is seeking to expand. The Company
has also experienced difficulties related to Apple's delay in the release of new
models. If Apple were to continue to experience such delays or discontinue
production of the Macintosh models with which Splash products operate or were
unable to provide or otherwise ceased to provide an acceptable level of end user
customer support, the Company's business, operating results and financial
condition would be materially adversely affected. The Company ships products
which may contain discontinued components. The Company has experienced sourcing
difficulties in procuring discontinued components in the past. There can be no
assurance that the Company will not experience similar difficulties in the
future. The Company also purchases memory modules from a limited number of
suppliers. Although other sources are available, a change in memory suppliers
could require time to effect and could impact production. This risk would be
exacerbated in times of short memory supply as was experienced in the Company's
fourth quarter of 1999. Any inability to obtain adequate deliveries of any of
the components or any other circumstance that would require the Company to seek
alternative sources of supply could affect the Company's ability to ship its
products on a timely basis, which could damage relationships with current and
prospective customers and could therefore have a material adverse effect on the
Company's business, financial condition and operating results. Moreover, there
can be no assurance that alternative sources of supply would be available on
reasonably acceptable terms, on a timely basis, or at all. The Company has from
time to time experienced shortages in deliveries of components, which shortages
have impacted production volume capabilities. In order to attempt to mitigate
the risk of such

                                       7
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shortages in the future, the Company increased its inventory of components for
which the Company is dependent upon sole or limited source suppliers. As a
result, the Company may be subject to an increasing risk of inventory
obsolescence in the future, which could materially and adversely affect the
operating results and financial condition.

    The market prices and availability of certain components, particularly
memory and other semiconductor components, Apple Macintosh computers, and Intel
designed components, which collectively represent a substantial portion of the
total manufactured cost of the Company's products, have fluctuated significantly
in the past. Such significant fluctuations have had and may continue to have a
material adverse effect on the Company's business, operating results and
financial condition.

RESEARCH AND DEVELOPMENT

    Splash's research and development efforts are focused on color science,
application workflow, ASIC and board design, software and computer systems
integration and the continued development of new and enhanced products. The
Company also works closely with key technology partners including Adobe, Apple,
Fuji Xerox and Xerox.

    The Company has historically devoted a significant amount of its resources
to research and development. As of December 31, 1999, the Company had 68
employees engaged in research and development. Research and development expenses
in the years ended 1997, 1998 and 1999 were $7.6 million, $13.6 million and
$15.2 million, respectively. The graphics and color reproduction, color
processing and personal computing markets are characterized by rapid changes in
customer requirements, frequent introductions of new and enhanced products, and
continuing and rapid technological advancement. To compete successfully, the
Company must continue to design, develop, manufacture and sell new products that
provide increasingly higher levels of performance and reliability, take
advantage of technological advancements and changes and respond to new customer
requirements. The Company's success in designing, developing, manufacturing and
selling new products will depend on a variety of factors, including the
identification of market demand for new products, product selection, timely
implementation of product design and development, product performance,
cost-effectiveness of products under development, effective manufacturing
processes and the success of promotional efforts.

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

COMPETITION

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

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

    The Company believes that the principal competitive factors in its markets
are product features, functionality and performance; strength of distribution
channels, including sales capability and after-market support; brand name
recognition and market share; and price. The Company believes that it competes
favorably with respect to product features, functionality and performance,
including color and print quality and the open architecture of the Company's
systems. Splash was the first to introduce a number of significant features to
the multifunction color copier market, and its products currently provide
certain features and functionality not offered by competitors. However, Splash's
competitors also offer certain unique features and functionality that are not
offered by the Company. EFI also has substantially greater name recognition and
a significantly larger installed base than the Company, its products operate
with a broader range of color photocopier systems and its products are generally
priced less than those of Splash. EFI has historically had higher operating
margins than Splash which could allow EFI to increase pricing pressure on Splash
or to respond more effectively to any third party pricing pressures. The Company
also believes that it competes favorably in many distribution channels addressed
by Xerox and Fuji Xerox, but the Company's products do not support the range of
products from different manufacturers supported by EFI and other competitors,
and the Company's relationship with the Xerox distribution channel is currently
not as strong in certain geographical areas, where the Company historically has
had a smaller market presence and lesser support capabilities.

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

INTELLECTUAL PROPERTY

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

                                       9
<PAGE>
United States. Thus, effective intellectual property protection may be
unavailable or limited in certain foreign countries. There can be no assurance
that the Company's means of protecting its proprietary rights in the United
States or abroad will be adequate or that competition will not independently
develop technologies that are similar or superior to the Company's technology,
duplicate the Company's technology or design around any patent of the Company.
Moreover, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result and has resulted in substantial costs
and diversion of management time and resources and could have a material adverse
effect on the Company's business, operating results and financial condition.

    There have been substantial amounts of litigation in the computer and
related industries regarding intellectual property rights, and there can be no
assurance that third parties will not claim infringement by the Company of their
intellectual property rights. There can be no assurance that any such litigation
against Splash would not have a material adverse effect on the Company's
business, operating results and financial condition. The addition of Splash as a
defendant in any third party claims that the Company is infringing on
proprietary rights of others, with or without merit, could be time-consuming to
defend, result in costly litigation, divert management's attention and
resources, and cause product shipment delays. If the Company were found to be
infringing on the intellectual property rights of any third party, the Company
could be subject to liabilities for such infringement, which liabilities could
be material, and could be required to seek licenses from other companies or to
refrain from using, manufacturing or selling certain products or using certain
processes. Although holders of patents and other intellectual property rights
often offer licenses to their patent or other intellectual property rights, no
assurance can he given that licenses would be offered or that the terms of any
offered license would be acceptable to the Company. Any need to redesign the
products or enter into any royalty or licensing agreement could have a material
adverse effect on the Company's business, operating results and financial
condition.

    On December 20, 1999 Electronics For Imaging ("EFI") filed a complaint in
the United States District Court for the Northern District of California against
the Company ("The EFI Complaint"). The complaint alleges that the defendant's
products infringe upon three EFI patents. The suit is aimed at enforcing patents
in the areas of color management, color calibrations, and continuous printing
technologies.

    On January 10, 2000 the Company filed a counter complaint in the United
States District Court for the Northern California District of California against
EFI ("The Splash Complaint"). The Complaint alleges EFI infringed upon a Company
patent. The Company's complaint also alleges that EFI has engaged in a
continuing pattern of anti-competitive practices in an effort to control the
market for color servers.

    There has been no discovery to date and no trial is scheduled in these
actions. The Company believes it has meritorious defenses regarding the EFI
Complaint and intends to defend them vigorously. Failure by the Company to
obtain a favorable resolution of the claims set forth in these actions could
have a material adverse affect on the Company's business, results of operations
and financial condition. Currently, the amount of such material effect cannot be
reasonably estimated.

    The Company is contractually required to place the source code for software
related to Xerox products in escrow for the benefit of Xerox, and such software
will be released to Xerox in the event that the Company either files bankruptcy
and as a result is unable to deliver products for the thirty (30) days of the
previously committed date, or ceases operations.

    The Company relies upon certain software licensed from third parties. There
can be no assurance that the software licensed by the Company will continue to
provide competitive features and functionality or that licenses for software
currently utilized by the Company or other software which the Company may seek
to license in the future will be available to the Company on commercially
reasonable terms. The loss of, or inability to maintain, existing licenses could
result in shipment delays or reductions until equivalent

                                       10
<PAGE>
software or suitable alternative products could be developed, identified,
licensed and integrated, and the inability to license key new software that may
be developed, on commercially reasonable terms, would have a material adverse
effect on the Company's competitive position. Any such event would materially
adversely affect the Company's business, operating results and financial
condition.

EMPLOYEES

    As of December 31, 1999, the Company employed 168 people, including 68 in
research and development, 15 in operations, 65 in sales and marketing, and 20 in
a general and administrative capacity. The Company also employs a number of
temporary employees and consultants on a contract basis. None of the Company's
employees is represented by a labor union with respect to his or her employment
by the Company. The Company has not experienced any work stoppages and considers
its relations with its employees to be good.

    The Company's future success will depend, in part, upon its ability to
attract and retain qualified personnel. Competition for qualified personnel in
the Company's industry is intense, and there can be no assurance the Company
will be successful in retaining its key employees or replacing employees who
leave the Company, that it will be able to attract skilled personnel necessary
for the development of its business.

EXECUTIVE OFFICERS AND KEY PERSONNEL

    The following table sets forth certain information regarding the executive
officers, directors and other key personnel of the Company as of December 31,
1999:

<TABLE>
<CAPTION>
NAME                         AGE                         POSITION
----                         ---                         --------
<S>                        <C>        <C>
Kevin K. Macgillivray....     40      President, Chief Executive Officer and Chairman
John Ritchie.............     34      Vice President, Finance
Sally Cabbell............     60      Vice President, Human Resources
Richard A. Falk..........     40      Chief Technical Officer
</TABLE>

    KEVIN K. MACGILLIVRAY has served as President, Chief Executive Officer and a
director of the Company since January 1996. From April 1995 until the Splash
Acquisition, Mr. Macgillivray was Vice President and General Manager of the
Publishing Division of Radius Inc., a manufacturer of computer video cards and
display products. From May 1993 to April 1995, Mr. Macgillivray held other
managerial positions within Radius Inc. and SuperMac Technology, Inc., which
merged into Radius Inc. in 1994. From May 1991 to May 1993, Mr. Macgillivray was
Vice President and General Manager of Oce Graphics USA, a computer peripherals
manufacturer. Mr. Macgillivray received a B.S. in Mechanical Engineering from
Stanford University.

    JOHN RITCHIE was promoted to Chief Financial Officer effective
January 2000. Previous to that he served as Vice President, Finance for the
Company. Mr. Ritchie joined the Company in early 1996 and served as the
Corporate Controller until July 1999. From 1993 to 1996, Mr. Ritchie was a
divisional controller for Western Waste Industries, an environmental services
firm. From 1989 to 1993, Mr. Ritchie held various financial positions at Oce
Graphics USA, a computer peripherals manufacturer. Mr. Ritchie received a B.S.
in Business Administration with a concentration in accounting from San Jose
State University.

    SALLY CABBELL joined Splash after serving at PricewaterhouseCoopers from
1983-1999, where she led the Compensation and Human Resources Consulting
practice in the West Region, with a 2 year departure to serve as a private
consultant to Longs Drug Stores. Ms. Cabbell's previous four years were spent as
Vice President, Consulting Services at Borgman Associates. Ms. Cabbell held
other corporate human resources management positions at Litton Microwave, Tonka
Toys, Cities Service Company, and Royal Insurance Company.

                                       11
<PAGE>
    RICHARD A. FALK was promoted to Splash's Chief Technical Officer in 1999.
Previously Mr. Falk served as Splash's Chief Scientist since the Splash
Acquisition in January 1996. From October 1992 until the Splash Acquisition,
Mr. Falk served in various engineering positions with SuperMac and Radius. From
July 1983 to October 1992, Mr. Falk worked for ROLM Corporation in a variety of
development, engineering and management positions. Mr. Falk received a B.A. in
Physical Sciences and an M.B.A. from the University of California, Berkeley.

    DAVID EMMETT joined Splash in February 2000 as Senior Vice President,
Engineering after spending 2 years as senior Vice President, Engineering at
Peerless Systems Corporation in El Segundo, California. Mr. Emmett's previous
4 years were spent at Adobe Systems, where he managed the Acrobat business unit,
and subsequently transferred to the Printing and Systems Division where he was
Vice President, Engineering. Mr. Emmett studied Physics and Pure Mathematics at
Exeter University in England, and has an MBA from Pepperdine University.

FACTORS AFFECTING FUTURE RESULTS

    FLUCTUATIONS IN OPERATING RESULTS; SEASONAL PURCHASING PATTERNS.  The
Company's operating results have fluctuated and will likely continue to
fluctuate in the future on a quarterly and annual basis as a result of a number
of factors, many of which are outside the Company's control. These fluctuations
are in part due to the purchasing patterns of the Company's two large customers,
Xerox and, to a significantly lesser extent, Fuji Xerox. These customers have
historically made a significant portion of their purchases of the Company's
products in the June quarter and September quarter. As a result, the Company's
sales have historically been lower in the December and March quarters than in
the preceding September and June quarters. In addition, inventory balancing
activities by the Company's customers have resulted and may continue to result
in variations in the timing of purchases by such customers. There can be no
assurance that the Company will receive sufficient inventory information from
its OEM customers or that the Company will be able to prevent significant
inventory issues in the future. In 1999 the Company suffered a substantial
decrease in sales to its customer, Fuji Xerox. This materially adversely
affected the Company's business and operating results for 1999. Also,
announcements by the Company or its competitors of new products and technologies
could cause customers to defer purchases of the Company's existing products. In
the event that anticipated orders fail to materialize, or delivery schedules are
deferred or canceled as a result of the above factors or other unanticipated
factors, it would materially and adversely affect the Company's business,
operating results and financial condition.

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

    The Company's gross margin is affected by a number of factors, including
product mix, product pricing, and manufacturing, component and royalty costs.
The average selling price of the Company's products has decreased substantially
in the past and may continue to do so, primarily as a result of competitive
market pressures, the introduction of lower priced products and, in certain
cases, in response to new product introductions by the Company's customers. The
Company expects this trend to continue.

                                       12
<PAGE>
During the quarter ended June 30, 1999 unit sales of Intel based M Series
products, for the first time, exceeded unit sales of the higher priced PCI and
DC Series. During the second half of 1999, the Company delivered its first
controller device incorporated into the structure of the copier ("Integrated
Product"). This product line is expected to have significantly lower gross
margins. The Company's M Series and integrated products have selling prices that
are significantly lower than those of the PCI, DC, and G Series. For example,
the Company's lowest priced M Series product has a selling price of
approximately less than half that of the lowest priced G Series product. In
addition, the Company expects a decrease in shipments of its Intel based M
Series products primarily related to Xerox's reduced shipments of M Series
compatible copiers. A decrease in M Series shipments in the fourth quarter of
1999, in addition to substantial shipments of integrated product, had a
significant adverse affect on the Company's operating results. In
September 1999, the Company also launched its G610 and G710 server products.
These products replaced the Company's PCI and DC Series products, respectively.
The average selling price ("ASPs") of these newly introduced products are lower
than those of the PCI and DC Series products they replaced. The G610 is only
compatible with Xerox's newly introduced DC12 color laser copier. If the newly
introduced Xerox DC12 color laser copier has low levels of market acceptance,
the Company's operating results would be adversely affected. The Company expects
a lower gross margin on its G Series products. In the event of significant price
competition in the market for color copier servers or competitive systems, the
Company could be at a significant disadvantage compared to its competitors, many
of which have substantially greater resources or lower product costs than the
Company and therefore could more readily withstand an extended period of
downward pricing pressure. Any decline in average selling prices of a particular
product, such as was experienced in 1999, which is not offset by a reduction in
production costs or by sales of other products with higher gross margins would
decrease the Company's overall gross margin and adversely affect the Company's
operating results. The Company establishes its expenditure levels for product
development and other operating expenses based on projected sales levels and
margins, and expenses are relatively fixed in the short term. Accordingly, if
sales are below expectations, as they were in 1999, the adverse impact of the
shortfall on the Company's operating results may be increased by the Company's
inability to adjust spending in the short term to compensate for the shortfall.

    EMERGING COLOR SERVER MARKET.  The markets for digital color copiers and
connected color servers are relatively new, and because current and future
competitors are likely to continue to introduce competing solutions, it is
difficult to predict the rate at which these markets will grow, if at all. The
color server market has, in the past, grown more slowly than anticipated. If the
market continues to grow slowly, or not grow at all, the Company's business,
operating results and financial condition will be adversely affected. The
Company intends to continue to spend resources educating potential customers
about color servers. However, there can be no assurance that such expenditures
will enable the Company's products to achieve any additional degree of market
acceptance. Moreover, the Company has historically focused on certain segments
of the market (the prepress and graphic arts segments) and has had only limited
penetration to date into the broader office segment or other market segments.
There can be no assurance that the Company will be able to maintain or increase
its presence in its existing market segments or to successfully penetrate such
additional market segments.

    DEPENDENCE ON XEROX AND FUJI XEROX.  The Company's products operate
primarily with certain color laser copiers offered by Xerox and, to a
substantially lesser extent, Fuji Xerox, and the Company currently sells its
products primarily to Xerox and Fuji Xerox, which resell the Company's products
on an OEM basis to their color copier end users. Sales to Xerox in the years
ending December 31, 1997, 1998, and 1999 accounted for approximately 51%, 77%,
and 88% respectively, of the Company's net revenue, and sales to Fuji Xerox in
such periods accounted for approximately 48%, 19%, and 11%, respectively, of net
revenue. As a result, sales of the Company's products have been and will
continue to be heavily influenced by the market acceptance of the Xerox and Fuji
Xerox color copiers with which the Company's products operate and the sales
efforts of Xerox and Fuji Xerox with respect to Splash products. Xerox and Fuji
Xerox face substantial competition from other manufacturers of color copiers,
including Canon Inc. ("Canon"), which the Company believes has the largest share
of the worldwide market for color copiers. If sales of the color

                                       13
<PAGE>
copiers of Xerox and Fuji Xerox with which Splash's products are compatible
decrease, the Company's business, operating results and financial condition
would be and have been in the past, materially and adversely affected. During
1999, sales of Splash compatible copiers were significantly lower than in prior
periods. In particular, sales to Fuji Xerox of products for resale in Japan were
negligible in 1999. This reduction in sales has, and any continued reduction
from historical levels could, materially and adversely affect the Company's
business, operating results and financial condition. Similarly, if Xerox or Fuji
Xerox were to introduce color copiers that are not compatible with the Company's
products, or if Xerox or Fuji Xerox were to introduce color copiers that already
contain a significant portion of the functionality of the Company's products so
as to render the Company's products unnecessary, the Company's business,
operating results and financial condition will be materially and adversely
affected. In addition, Fuji Xerox color copiers are produced in a single
location in Japan, and any disruption of production at such facility could
materially and adversely affect the Company's business, operating results and
financial condition.

    As a result of its reliance on Xerox and Fuji Xerox, the Company currently
has a relatively small sales and marketing organization and has limited
experience with direct sales efforts. Any change in the sales and marketing
efforts of Xerox or Fuji Xerox with respect to Splash's products, including any
reduction in the size or effectiveness of the Xerox or Fuji Xerox sales and
marketing forces, or changes in incentives for Xerox or Fuji Xerox salespersons
to sell Splash products or color servers produced by competitors of Splash,
could have and has had a material adverse effect on the Company's business,
operating results and financial condition. During 1999, Fuji Xerox changed the
means by which it sold products in Japan, requiring that its OEM suppliers have
a sales support and marketing organization in Japan. Until recently, the Company
had a limited sales support and marketing presence in Japan and only recently
began the process of adding personnel in Japan.

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

    INVENTORY RISKS.  Xerox and Fuji Xerox may from time to time carry excess
inventory of Splash color servers, inaccurately project future demand for Splash
products or fail to optimally manage their ordering of Splash products, any of
which could result in a significant decrease in orders from such customers in
subsequent periods. In addition, the Company believes that inventory levels in
1998 were higher than normal at Fuji Xerox Japan, which has materially adversely
affected the Company's business and operating results. There can be no assurance
that the Company will receive sufficient information from Xerox, Fuji Xerox or
other customers over time or that the Company will in any event be able to
prevent the recurrence of similar problems in the future. As a result, Splash's
customers, among other things, may be required to discount excess inventory, may
experience difficulty in selling excess inventory, may experience reduced sales
of new products or may become dissatisfied with their relationship with Splash.
The

                                       14
<PAGE>
Company's customers, in an effort to reduce their inventory levels, order
product with increasingly shorter lead times. If the Company can not deliver
product within these shortened lead times it would have a materially adverse
affect on the Company's results. Although customers have no commercial right of
return with respect to the Company's products, there can be no assurance that
the Company will not elect to make accommodations to significant customers.
Reduced sales of Splash products by Xerox or Fuji Xerox or any financial or
other accommodation made to Xerox or Fuji Xerox could have a material adverse
effect on the business, operating results and financial condition of Splash.

    DEPENDENCE ON ADOBE SYSTEMS INCORPORATED.  The majority of the Company's
products depend on the PostScript page description language software developed
by Adobe Systems Incorporated ("Adobe") and licensed by the Company from Adobe
on a non-exclusive basis. Any delay in the release of future versions of
PostScript by Adobe or in the upgrade of the Company's products to be compatible
with current or future versions of PostScript, or any material defects in any
versions of PostScript software (including defects identified in connection with
upgrades of the Company's products), could have a material adverse effect on the
Company's business, operating results and financial condition. The Company has,
and may continue to experience, delays in the release of its products due to
Adobe product delays. The Company is required to pay a royalty for each copy of
PostScript that is incorporated in Splash products, which royalty constitutes a
substantial portion of the total manufactured cost of the Company's products. In
addition, the Company is required to permit testing by Adobe of the beta release
version of the Company's products, and the Company cannot begin shipping any
version until such version meets Adobe's quality standards. The license
agreement between the Company and Adobe expires in March 2003, subject to
renewal upon mutual consent. There can be no assurance that Adobe will continue
to enjoy its leadership position in the market, renew the current license at the
end of its term or license future versions of PostScript to Splash on terms
favorable to Splash or at all. If the license agreement between Adobe and the
Company is terminated for any reason or the Company's relationship with Adobe is
impaired, the Company could be required to change to an alternative page
description language which would require the expenditure of significant
resources and time and could significantly limit the marketability of the
Company's products. Any increase in royalties payable to Adobe also could have a
material adverse effect on the Company's operating results. In addition, the
Adobe PostScript software is incorporated in the products of certain of the
Company's competitors. The Company's business could be materially and adversely
affected if Adobe were to make available to the Company's competitors future
versions of Adobe PostScript software that include enhancements to the Adobe
PostScript software that were originally developed or implemented by Splash.

    DEPENDENCE ON COMPONENT AVAILABILITY, COST, AND CERTAIN SUPPLIERS.  The
majority of the Company's current products require the use of an Apple as a
computer platform. In the past, Apple has experienced significant financial
difficulties and losses in market acceptance, and its products have particularly
low levels of market acceptance in the office color printing market into which
the Company is seeking to expand. In addition, Apple has experienced significant
changes in management. If Apple were to discontinue production of models with
which Splash products operate or were unable to provide or otherwise cease to
provide an acceptable level of end user customer support, the Company's
business, operating results and financial condition would be materially and
adversely affected. For example, Apple phased out the manufacture of Power
Macintosh products based on the NuBus architecture in the second half of
calendar 1995 in favor of Power Macintosh products based on the PCI bus
architecture. As a result, the Company had to expend significant resources and
faced substantial risk of technological failure or lack of market acceptance in
developing and introducing its PCI-based products. In addition, the Company has
experienced sourcing difficulties related to Apple's delay in the release of new
models. The Company ships products which may contain discontinued components.
The Company has experienced sourcing difficulties in procuring discontinued
components in the past. There can be no assurance that the Company will not
experience similar difficulties in the future. Any extended delay between the
discontinuation of an existing model and the release of an enhanced model by
Apple could have a material adverse effect on the Company's business, financial
condition and results of operations. Any efforts of the Company to migrate

                                       15
<PAGE>
its products to different computer platforms will require a substantial
expenditure of resources and time, and there can be no assurance that any such
products can be successfully developed or introduced in a timely fashion and at
competitive cost or otherwise achieve widespread market acceptance.

    Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These include
Intel motherboards and processors, certain ASICs and other semiconductor
components. The Company does not maintain any long-term agreements with any of
its suppliers of components. Because the purchase of certain key components
involves long lead times, in the event of unanticipated increases in demand for
the Company's products, the Company could be unable to manufacture certain
products in a quantity sufficient to meet end user demand. The Company has
experienced difficulties related to Apple's delay in the release of new systems
and the discontinuation of computers used in Splash's current products. There
can be no assurance that the Company will not experience similar difficulties in
the future. The Company also purchases memory modules from several suppliers. A
change in memory suppliers could require time to effect and could impact
production. This risk would be exacerbated in times of memory supply shortages.
During the second half of 1999, the memory market was extremely volatile. Any
inability to obtain adequate deliveries of any of the components or any other
circumstance that would require the Company to seek alternative sources of
supply could affect the Company's ability to ship its products on a timely
basis, which could damage relationships with current and prospective customers
and could therefore have a material adverse effect on the Company's business,
financial condition and operating results. Moreover, there can be no assurance
that alternative sources of supply would be available on reasonably acceptable
terms, on a timely basis, or at all. The Company has from time to time,
including several instances in 1999, experienced shortages in deliveries of
certain ASICs sourced exclusively from Toshiba Corporation, which shortages have
impacted production. In order to attempt to mitigate the risk of such shortages
in the future, the Company has increased its inventory of components for which
the Company is dependent upon sole or limited source suppliers. As a result, the
Company is subject to an increasing risk of inventory obsolescence, which could
materially and adversely affect its operating results and financial condition.

    The Company purchases components comprising a portion of the total cost of
its color servers. The balance of the inventory required to manufacture the
Company's products is purchased by Logistix and SCI. The Company currently
sources most of its Apple Macintosh computers that serve as the platforms for
its DC, PCI, and G Series color servers from Apple. The Company is currently
operating on a purchase order basis with Apple.

    The market prices and availability of certain components, particularly
memory, other semiconductor components, Apple Macintosh computers and Intel
designed components, which collectively represent a substantial portion of the
total manufactured cost of the Company's products, have fluctuated significantly
in the past. Significant fluctuations in the future could have a material
adverse effect on the Company's operating results and financial condition.
During late 1999, the Company experienced a significant increase in the price of
memory. This resulted in a reduction in gross margins.

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

                                       16
<PAGE>
    RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCT INTRODUCTIONS.  The
graphics and color reproduction, color processing and personal computing markets
are characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid
technological advancement. To compete successfully, the Company must continue to
design, develop, manufacture and sell new products that provide increasingly
higher levels of performance and reliability, take advantage of technological
advancements and changes and respond to new customer requirements. In 1998, the
Company's main competitor added enhancements to its product that competed with
the Company's DC Series products. These enhancements have had, and may continue
to have, an adverse effect on the market acceptance of the Company's DC Series
products and its successor, the G710 product. The Company's success in
designing, developing, manufacturing and selling new products will depend on a
variety of factors, including the identification of market demand for new
products, product selection, timely implementation of product design and
development, product performance, cost-effectiveness of current products and
products under development, effective manufacturing processes and the success of
promotional efforts.

    In 1999, the Company began significant volume shipments of products based on
Intel designed components as well as its new generation of Apple based product.
There can be no assurance that these Intel or Apple based products or, for that
matter, any of the Company's future products will achieve widespread market
acceptance. In addition, the Company has in the past experienced delays in the
development of new products and the enhancement of existing products, and such
delays may occur in the future. If the Company is unable, due to resource
constraints or technological or other reasons, to develop and introduce new
products or versions in a timely manner, or if such new products or releases do
not achieve timely and widespread market acceptance, it would have a material
adverse effect on the Company's business, operating results and financial
condition.

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

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

    Many of the Company's current and potential direct and indirect competitors
have longer operating histories, are substantially larger, and have
substantially greater financial, technical, manufacturing, marketing and other
resources than Splash. A number of these current and potential competitors also
have substantially greater name recognition and a significantly larger installed
base of products than the Company, which could provide leverage to such
companies in their competition with Splash. The Company expects competition to
increase to the extent the color server market grows, and such increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, operating results and financial condition. As a result of

                                       17
<PAGE>
their greater resources, many of such competitors are in a better position than
Splash to withstand significant price competition or downturns in the economy.
There can be no assurance that Splash will be able to continue to compete
effectively, and any failure to do so would have a material adverse effect upon
the Company's business, operating results and financial condition.

    RISKS ASSOCIATED WITH ACQUISITIONS.  The Company frequently evaluates
potential acquisitions of complementary businesses, products and technologies.
As part of the Company's expansion plans, the Company has acquired and may
continue to acquire companies that have an installed base of products not yet
offered by the Company, have strategic distribution channels or customer
relationships, or otherwise present opportunities which management believes may
enhance the Company's competitive position. The success of any acquisition could
depend not only upon the ability of the Company to acquire such businesses,
products and technologies on a cost-effective basis, but also upon the ability
of the Company to integrate the acquired operations or technologies effectively
into its organization, to retain and motivate key personnel of the acquired
businesses, and to retain the significant customers of the acquired businesses.
Any acquisition, depending upon its size, could result in the use of a
significant portion of the Company's cash, or if such acquisition is made
utilizing the Company's securities, could result in significant dilution to the
Company's stockholders. Moreover, such transactions involve the diversion of
substantial management resources and evaluation of such opportunities requires
substantial diversion of engineering and technological resources. In addition,
such transactions could result in large one time write-offs or the creation of
goodwill or other intangible assets that would result in amortization expenses.
To date, the Company has completed two acquisitions: Quintar Company ("Quintar")
and ColorAge ("ColorAge") in May and October of 1997, respectively.

    There can be no assurance that acquired technology can be successfully
developed on a timely basis or at all, or that products based on acquired
technology will receive widespread market acceptance. Moreover, there can be no
assurance that the Company can successfully integrate acquired technology. The
failure to successfully evaluate, negotiate and effect acquisition transactions
could have a material adverse effect on the Company's business, operating
results and financial condition.

    MANAGEMENT OF EXPANDING OPERATIONS.  The growth in the Company's business
has placed, and any further expansion would continue to place, a significant
strain on the Company's limited personnel, management and other resources. The
Company's ability to manage any future expansion effectively will require it to
attract, train, motivate and manage new employees successfully, to integrate new
management and employees into its overall operations and to continue to improve
its operational, financial and management systems. Moreover, the Company expects
to continue to increase the size of its domestic and international sales support
staff and the scope of its sales and marketing activities, and to hire
additional research and development personnel. The Company's failure to manage
any expansion effectively, including any failure to integrate new management and
employees or failure to continue to implement and improve financial, operational
and management controls, systems and procedures, could have a material adverse
effect on the Company's business, operating results and financial condition.

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

    While the Company's subcontract manufacturers conduct quality control and
testing procedures specified by the Company, the Company has from time to time
experienced manufacturing quality

                                       18
<PAGE>
problems. There can be no assurance that quality problems will not occur again
in the future or that any such problem would not have a material adverse effect
on the Company's business, operating results and financial condition.

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

    DEPENDENCE ON PROPRIETARY TECHNOLOGY; RELIANCE ON THIRD PARTY LICENSES.  The
Company relies in part on trademark, copyright and trade secret law to protect
its intellectual property in the United States and abroad. The Company seeks to
protect its software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection, and there can
be no assurances that the steps taken by the Company will prevent
misappropriation of its technology. The Splash software included as a part of
the Company's products is sold pursuant to "shrink wrap" licenses that are not
signed by the end user and, therefore, may be unenforceable under the laws of
certain jurisdictions. The Company owns several patents. There can be no
assurance that any patent, trademark or copyright owned by the Company, or any
patent, trademark or copyright obtained by the Company in the future, will not
be invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights as fully as do the
laws of the United States. Thus, effective intellectual property protection may
be unavailable or limited in certain foreign countries. There can be no
assurance that the Company's means of protecting its proprietary rights in the
United States or abroad will be adequate or that others will not independently
develop technologies that are similar or superior to the Company's technology,
duplicate the Company's technology or design around any patent of the Company.
Moreover, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
management time and resources and could have a material adverse effect on the
Company's business, operating results and financial condition.

    There have been substantial amounts of litigation in the computer and
related industries regarding intellectual property rights, and there can be no
assurance that third parties will not claim infringement by the Company of their
intellectual property rights. The addition of Splash as a defendant in any
claims that the Company is infringing on proprietary rights of others, with or
without merit, could be time-consuming to defend, result in costly litigation,
divert management's attention and resources, and cause product shipment delays.
If the Company were found to be infringing on the intellectual property rights
of any third party, the Company could be subject to liabilities for such
infringement, which liabilities could be material, and could be required to seek
licenses from other companies or to refrain from using, manufacturing or selling
certain products or using certain processes. Although holders of patents and
other intellectual property rights often offer licenses to their patent or other
intellectual property rights, no assurance can be given that licenses would be
offered or that the terms of any offered license would be acceptable to the
Company. In December 1999 EFI filed suit against Splash for patent infringement.
Any need to redesign the products or enter into any royalty or licensing
agreement as the result of any alleged infringement could have a material
adverse effect on the Company's business, operating results and financial
condition.

    The Company relies upon certain software licensed from third parties. There
can be no assurance that the software licensed by the Company will continue to
provide competitive features and functionality or

                                       19
<PAGE>
that licenses for software currently utilized by the Company or other software
which the Company may seek to license in the future will be available to the
Company on commercially reasonable terms. The loss of, or inability to maintain,
existing licenses could result in shipment delays or reductions until equivalent
software or suitable alternative products could be developed, identified,
licensed and integrated, and the inability to license key new software that may
be developed, on commercially reasonable terms, would have a material adverse
effect on the Company's competitive position. Any such event would materially
adversely affect the Company's business, operating results and financial
condition.

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

    INTERNATIONAL SALES.  All sales to Fuji Xerox and some Xerox affiliated
entities are international sales. International sales accounted for
approximately 62%, 49%, and 44% of net revenue in 1997, 1998, and 1999,
respectively. In addition, although a majority of sales to Xerox are accounted
for as U.S. sales, Xerox has a significant international customer base, and the
Company believes that a portion of Splash products purchased by Xerox are resold
outside the United States. The Company expects that direct and indirect
international sales will continue to represent a substantial portion of its net
revenue for the foreseeable future. While the Company's international sales are
generally denominated in U.S. dollars, fluctuations in currency exchange rates
could cause the Company's products to become relatively more expensive to end
users in a particular country, leading to pressure to reduce the U.S. dollar
denominated price to the Company's OEM customers, which could in turn result in
a reduction in net revenue and profitability. In addition, to the extent that an
increased portion the Company's sales are denominated in foreign currencies, the
Company could be exposed to currency exchange risks. Other risks inherent in
international sales include unexpected changes in regulatory requirements,
tariffs and other trade barriers and uncertainties relative to regional
circumstances. These risks, and in particular risks related to the economic
circumstances in Japan, could have a material adverse affect on the Company's
business, operating results and financial condition. In addition, the Company's
business, operating results and financial condition would be materially
adversely affected if foreign markets do not continue to develop.

    DEPENDENCE ON KEY PERSONNEL.  Because of the nature of the Company's
business, the Company is highly dependent on the continued service of, and on
its ability to attract and retain, qualified technical, marketing, sales and
managerial personnel, including senior members of management. The competition
for such personnel is intense, and the loss of any of such persons, as well as
the failure to recruit additional key technical and sales personnel in a timely
manner, would have a material adverse effect on the Company's business and
operating results. There can be no assurance that the Company will be able to
continue to attract and retain the qualified personnel necessary for the
development of its business. The Company currently does not have employment
contracts with any of its employees and does not maintain key person life
insurance policies on any of its employees. During the first half of 1999 the
Company's chief financial officer and vice president of sales and marketing left
the Company. The position of Chief Financial Officer was filled in early
January 2000. The Company is highly dependent on the services of its Chief
Executive Officer, Kevin Macgillivray. The loss of his services could have a
material adverse effect on the Company's business.

                                       20
<PAGE>
ITEM 2.  PROPERTIES

    The Company's principal operations are located in a leased facility of
approximately 24,000 square feet in Sunnyvale, California. The lease on this
building expires in 2001, and the Company has an option to extend the lease for
five additional years. The Company also leases office suites in Paris, France,
Singapore, United Kingdom, and Germany primarily for sales and marketing efforts
in Europe and South East Asia. The initial lease term for the French offices
expired in April 1998, and the lease is automatically renewed every three months
after April 1998 unless one of the parties to the lease gives prior notice of
termination. The lease term for the Singapore office expires in April 2000. The
Company also leases office space in Westminster, California, which expires in
March 2003 and office space in Billerica, Massachusetts, which expires in
May 2002. The Company is evaluating its future facility needs.

ITEM 3.  LEGAL PROCEEDINGS

    In January 1999, two class action complaints were filed in the United States
district Court for the Northern District of California against the Company,
certain of its officers and directors, and certain underwriters. The complaints
allege that defendants made false and misleading statements about the Company's
business condition and prospects during a class period of January 7,
1997--October 13, 1998, and assert claims for violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The complaints
in both actions seek damages of an unspecified amount.

    On December 20, 1999 Electronics For Imaging ("EFI") filed a complaint in
the United States District Court for the Northern District of California against
the Company. The complaint alleges that the defendant's products infringe upon
three EFI patents. The suit is aimed at enforcing patents in the areas of color
management, color calibrations, and continuous printing technologies.

    On January 10, 2000 the Company filed a counter complaint in the United
States District Court for the Northern California District of California against
EFI. The complaint alleges EFI infringed upon a Company patent. The Company's
complaint also alleges that EFI has engaged in a continuing pattern of
anti-competitive business practices in an effort to control the market for color
servers.

    There has been no discovery to date and no trial is scheduled in these
actions. The Company believes it has meritorious defenses in these actions and
intends to defend them vigorously. Failure by the Company to obtain a favorable
resolution of the claims set forth in these actions could have a material
adverse affect on the Company's business, results of operations and financial
condition. Currently, the amount of such material effect cannot be reasonable
estimated.

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

    None

                                       21
<PAGE>
                                    PART II

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

    Since the Company's initial public offering on October 9, 1996, the
Company's common stock has traded on the Nasdaq Stock Market under the symbol
"SPLH". The Company has never declared or paid cash dividends on its common
stock. The Company currently intends to retain any earnings for use in its
business and does not anticipate paying any cash dividends on its common stock
in the foreseeable future. In addition, the Company's borrowing arrangements,
including the Company's line of credit, prohibit the payment of cash dividends
without the lender's prior written consent.

    The Company's secondary public offering of common stock was effected through
the Registration Statements on Form S-1 (File No. 333-32243) that was declared
effective by the SEC on August 20, 1997. Net proceeds to the Company from this
offering was approximately $48.4 million.

    As of March 6, 2000, the Company's common stock was held by approximately
100 stockholders of record.

    The following table lists the high and low closing quotations during each
quarter the stock traded in the years ended December 31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>
                                                                     1999
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................   $10.31     $ 6.00
Second Quarter..............................................     9.63       5.56
Third Quarter...............................................     7.88       5.67
Fourth Quarter..............................................     9.50       5.44
</TABLE>

<TABLE>
<CAPTION>
                                                                     1998
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................   $23.81     $11.00
Second Quarter..............................................    21.38      15.00
Third Quarter...............................................    25.13      13.13
Fourth Quarter..............................................    14.25       6.50
</TABLE>

<TABLE>
<CAPTION>
                                                                     1997
                                                              -------------------
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
First Quarter...............................................   $39.00     $21.00
Second Quarter..............................................    36.13      21.00
Third Quarter...............................................    43.88      32.00
Fourth Quarter..............................................    47.69      19.88
</TABLE>

                                       22
<PAGE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

    The following information has been summarized from the Company's
consolidated financial statements included elsewhere in this Annual Report on
Form 10-K and should be read in connection with such consolidated financial
statements and the related notes thereto.

<TABLE>
<CAPTION>
                                                          SPLASH TECHNOLOGY HOLDINGS, INC.
                                             ----------------------------------------------------------
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
                                                        (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                          <C>             <C>            <C>            <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
  Net revenue..............................     $76,327        $ 22,237        $84,778        $70,008
  Cost of net revenue......................      37,229          10,477         38,943         33,413
                                                -------        --------        -------        -------
    Gross profit...........................      39,098          11,760         45,835         36,595
                                                -------        --------        -------        -------
  Operating expenses:
    Research and development...............       6,062           2,638         13,602         15,244
    Sales and marketing....................       6,051           2,623         10,952         12,638
    General and administrative.............       2,690             633          3,878          3,738
    Technology write-off...................      11,039          26,900             --             --
    Facility write-off.....................          --              --             --            998
                                                -------        --------        -------        -------
      Total operating expenses.............      25,842          32,794         28,432         32,618
                                                -------        --------        -------        -------
  Income (loss) from operations............      13,256         (21,034)        17,403          3,977
  Other income.............................         600              --             --             --
  Interest income (expense), net...........         655             590          1,979          3,250
                                                -------        --------        -------        -------
  Income (loss) before income taxes........      14,511         (20,444)        19,382          7,227
  Provision for income taxes...............       9,420           2,330          6,079          1,436
                                                -------        --------        -------        -------
  Net income (loss)........................     $ 5,091        $(22,774)       $13,303        $ 5,791
                                                =======        ========        =======        =======
  Basic net income (loss) per share........     $  0.42        $  (1.65)       $  0.96        $  0.41
                                                =======        ========        =======        =======
  Diluted net income (loss) per share......     $  0.41        $  (1.65)       $  0.94        $  0.41
                                                =======        ========        =======        =======
  Shares used in per share calculations--
    Basic(1)...............................      12,002          13,821         13,903         14,018
                                                =======        ========        =======        =======
  Shares used in per share calculations--
    Diluted(1).............................      12,423          13,821         14,170         14,144
                                                =======        ========        =======        =======
</TABLE>

<TABLE>
<CAPTION>
                                                              SPLASH TECHNOLOGY HOLDINGS, INC.
                                                              --------------------------------
                                                                        DECEMBER 31,
                                                              --------------------------------
                                                                   1998              1999
                                                              ---------------   --------------
<S>                                                           <C>               <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
  Working capital...........................................      $58,153          $ 64,443
  Total assets..............................................       93,732            98,894
  Total liabilities.........................................       20,439            18,836
  Stockholder's equity......................................       73,293            80,058
</TABLE>

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

(1) See Note 3 of Notes to Consolidated Financial Statements for computation of
    the number of shares used in the earnings per share calculation.

                                       23
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

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

OVERVIEW

    The Company operated as the Color Server Group ("CSG") division of SuperMac
Technology Inc. ("SuperMac") from late 1992 to August 1994 and, after the merger
of SuperMac into Radius, Inc. ("Radius") as the CSG division of Radius from
August 1994 until January 1996. In January 1996, Splash was acquired by an
investor group in a leveraged transaction. ("The Splash Acquisition")

    On October 13, 1997, the Company's Board of Directors approved a change in
the Company's fiscal year end from September 30 to December 31, commencing
January 1, 1998. The following tables and descriptions present, on a pro forma
basis, the year ended December 31, 1997.

    Prior to 1998, the Company had achieved significant growth in net revenue
and operating income, before purchase accounting adjustments. The Company's
growth is contingent on a number of factors, many of which are outside of its
control. These factors include the overall rate of growth in the color server
market, global and regional economic conditions (including the currency exchange
rates), the demand for Splash's products, and customer purchasing patterns. Due
to these and other factors (including an increasingly higher base from which to
grow), the Company's historical growth rate was difficult to sustain and will be
difficult to meet or exceed in the future. In addition, the Company's overall
expense level has increased and is expected to increase as the Company continues
to build corporate infrastructure and expand its operations. Accordingly, the
Company believes that period-to-period comparisons of its financial results
should not be relied upon as an indication of future performance.

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

                                       24
<PAGE>
RESULTS OF OPERATIONS

    The following table sets forth the consolidated statements of operations:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                              ---------------------------------------------------------------
                                                     1997                  1998                  1999
                                              -------------------   -------------------   -------------------
                                                  (PRO FORMA,
                                                  UNAUDITED)
                                                                  (AMOUNTS IN THOUSANDS)
<S>                                           <C>        <C>        <C>        <C>        <C>        <C>
Net revenue.................................  $ 83,192     100%     $84,778      100%     $70,008      100%
Cost of net revenue.........................    40,195      48       38,943       46       33,413       48
                                              --------     ---      -------      ---      -------      ---
  Gross profit..............................    42,997      52       45,835       54       36,595       52
                                              --------     ---      -------      ---      -------      ---
Operating expenses:
  Research and development..................     7,560       9       13,602       16       15,244       22
  Sales and marketing.......................     7,721       9       10,952       13       12,638       19
  General and administrative................     2,583       3        3,878        4        3,738        5
  Technology write-off......................    37,939      46           --       --           --        1
  Facility write-off........................        --      --           --       --          998       --
                                              --------     ---      -------      ---      -------      ---
    Total operating expenses................    55,803      67       28,432       33       32,618       47
Income (loss) from operations...............   (12,806)    (15)      17,403       21        3,977        5
Other income................................        --      --           --       --           --       --
Interest income (expense), net..............     1,162       1        1,979        2        3,250        5
                                              --------     ---      -------      ---      -------      ---
    Income (loss) before taxes..............   (11,644)    (14)      19,382       23        7,227       10
Provision for taxes.........................     9,580      12        6,079        7        1,436        2
                                              --------     ---      -------      ---      -------      ---
Net income (loss)...........................  $(21,224)    (26)%    $13,303       16%     $ 5,791        8%
                                              ========     ===      =======      ===      =======      ===
</TABLE>

    NET REVENUE.  The Company's revenue was relatively flat in 1998 at
$84.8 million when compared to 1997 revenues of $83.2 million. In 1999 the
Company's revenue decreased $14.8 million or 17% when compared to 1998. The flat
revenue experienced in 1997 and 1998 was primarily attributable to poor economic
conditions in Asia. The Company had also experienced a significant decrease in
sales to its customer in Japan, partially offset by an increase in sales to Fuji
Xerox in other Asian regions. In addition, particularly in light of the adverse
economic circumstances in Japan, the Company believes that in 1998 inventory
levels were higher than normal at Fuji Xerox which adversely affected business
and operating results. The sales decrease in 1999 was primarily attributable to
a continued severe decline in sales to Fuji Xerox in Japan. The Company's other
significant customer, Xerox, also had lower sales activity.

    The Company sells a range of products, and the revenue for any period will
be determined by the product mix sold in that period. In addition, the Company
sells a substantial portion of its products to two customers, Fuji Xerox and
Xerox Corporation on an OEM basis and, historically, fluctuations in net revenue
are in part due to the purchasing patterns of these customers. There can be no
assurance that either of the Company's two major customers, Fuji Xerox or Xerox,
will not change their mix of product or purchasing patterns in a manner which
would adversely impact net revenue.

    All sales to Fuji Xerox, and a portion of the Company's sales to Xerox, are
international sales. In addition, given Xerox's international customer base, the
Company believes that a portion of Splash products purchased by Xerox are resold
outside the United States. International sales accounted for 62%, 49% and 44% of
net revenue in 1997, 1998 and 1999, respectively. The Company expects that
direct and indirect international sales will continue to represent a substantial
portion of its net revenue for the foreseeable future. While the Company's
international sales are generally denominated in U.S. dollars, fluctuations in
currency exchange rates could cause and, in the case of Japan, have caused, the
Company's products to become relatively more expensive to end users in a
particular country, leading to pressure to

                                       25
<PAGE>
reduce the U.S. dollar denominated price to the Company's OEM customers, and
ultimately to lost sales. Such pressure has and could in the future result in a
reduction in net revenue and profitability.

    GROSS MARGIN.  Gross margins were 52%, 54%, and 52% in 1997, 1998 and 1999,
respectively. The variances in gross margins were primarily due to economies of
scale derived from higher sales volumes, and reductions in component costs
achieved through new product designs and favorable component pricing, offset by
a sales shift toward certain lower margin pre-configured server models. In 1999
the Company introduced its first integrated controller product. This product has
substantially lower margins than the Company's other products. The Company
expects that gross margins will fluctuate from period to period and may decrease
in future periods. Gross margin is affected by a number of factors, including
product mix, product pricing and manufacturing and component costs. The average
selling price of the Company's products has decreased in the past primarily as a
result of competitive market pressures, the introduction of lower priced
products and, in certain cases, in response to new product introductions by the
Company's customers. The Company expects this trend to continue in the future.
Any decline in average selling prices of a particular product which is not
offset by a reduction in production costs or by sales of other products with
higher gross margins would decrease the Company's overall gross margin and
adversely affect the Company's operating results.

    RESEARCH AND DEVELOPMENT.  Research and development expenses increased 79%
to $13.6 million in 1998 from $7.6 million in 1997, and increased 12% to
$15.2 million in 1999 from 1998. As a percentage of net revenue, research and
development expenses were 9%, 16% and 22% in calendar 1997, 1998 and 1999,
respectively. The increases in the absolute dollar amount of these expenses for
1997, 1998 and 1999 were primarily attributable to increased staffing and
associated support required to enhance the Company's product line and to
introduce new product lines. In addition, the increase in research and
development expenses reflects the addition of engineering resources through the
acquisitions of Quintar Holdings Corporation and ColorAge Corporation in
May 1997 and October 1997, respectively. Except for charges related to the
acquisitions, all research and development costs to date have been expensed as
incurred. In view of current projects under development and planned, research
and development expenses may increase in absolute dollars and as a percentage of
net revenue in future periods.

    SALES AND MARKETING.  Sales and marketing expenses increased 43% to
$11.0 million in 1998 from $7.7 million in 1997, and increased 15% to
$12.6 million in 1999 from 1998. Such expenses represented 9%, 13% and 19% of
net revenue for such respective periods. The increases in the absolute dollar
amount of these expenditures were primarily related to expansion of the
Company's sales support and marketing staff and associated costs (primarily to
increase the Company's level of support for Xerox's sales organization), the
implementation of promotional programs designed to improve name and product
recognition in the end user community and the Company's increased participation
in industry trade shows. Sales and marketing expenses are expected to increase
in future periods as the Company increases its sales support and marketing staff
and associated costs to expand its presence in sales channels other than Xerox
and Fuji Xerox. There is no assurance that the Company will be able to maintain
or increase its presence in its existing customers or to successfully penetrate
any additional sales channels.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
50% to $3.9 million in 1998 from $2.6 million in 1997, and decreased 5% to
$3.7 million in 1999 from 1998. Such expenses represented 3%, 4% and 5% of net
revenue for 1997, 1998 and 1999, respectively. The variances in these
expenditures were primarily due to increased salary and related costs due to
increased headcount related to the Company's efforts to enhance its corporate
infrastructure to support expansion of the Company's operations. Such expenses
were partially offset by administrative efficiencies. The Company believes that
its general and administrative expenses may increase in absolute dollars in the
foreseeable future as it continues to implement additional management and
operational systems, and expands its administrative staff.

                                       26
<PAGE>
ACQUISITION RELATED AND NON OPERATING EXPENSES

    On May 30, 1997 and October 31, 1997, the Company acquired Quintar and
ColorAge, respectively, and wrote-off approximately $11.0 million and
$26.9 million, respectively, of in-process research and development in
connection with such acquisitions. These in-process research and development
activities, which were related to projects for the development of Quintar's
embedded controllers and low-end color servers and ColorAge's next generation
product line, had no alternative future uses and had not reached technological
feasibility.

    FACILITY CLOSURE CHARGE.  During the year ended December 31, 1999, the
Company consolidated its research and development efforts for its integrated
controller product lines into its Sunnyvale, California facility. As a result of
this consolidation the Company closed its facility in Westminster, California.
This facility closure resulted in a non-recurring charge of approximately
$1.0 million. This charge was comprised of severance costs, a write down in
fixed assets, and losses related to the vacated building lease.

    PROVISION FOR INCOME TAXES.  In connection with the ColorAge and Quintar
acquisitions (non-taxable events for the Company), the Company recorded
$0.3 million of deferred tax liabilities relating to the ColorAge acquisition
and $3.3 million of deferred tax assets relating to Quintar's net operating loss
carryforwards. These net operating loss carryforwards are subject to certain
limitations. The Company has not reduced the deferred tax assets by a valuation
allowance as it is more likely than not that all of the deferred tax assets will
be realized through future taxable income.

    The Company's effective tax rate (excluding the purchase accounting
adjustments relating to the ColorAge and Quintar acquisitions) was 36%, 31% and
20% in 1997, 1998, and 1999, respectively. The Company's effective tax rate
differs from the statutory rate primarily due to the benefits derived from the
Splash Foreign Sales Corporation, tax exempt interest and research and
development credits.

                                       27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

    The following table sets forth the condensed cash flow statements for the
periods indicated (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------------
                                                     1997                 1998             1999
                                            ----------------------   --------------   --------------
                                            (PRO FORMA, UNAUDITED)
<S>                                         <C>                      <C>              <C>
Cash flows from operating activities:
Net income (loss).........................         $(21,224)            $13,303          $  5,791
  Adjustments to operating activities.....              622               2,626             2,516
Purchased technology......................           37,939                  --                --
Changes in assets and liabilities.........            5,110              (8,802)           (7,239)
                                                   --------             -------          --------
  Cash provided by operating activities...           22,447               7,127             1,068
                                                   --------             -------          --------
Cash flows from investing activities:
Purchase of (redemption) marketable
  securities..............................          (10,073)                259           (15,815)
Purchase of fixed assets..................             (598)             (1,133)             (972)
Acquisition of businesses, net............          (36,393)                 --                --
                                                   --------             -------          --------
  Cash used in investing activities.......          (47,064)               (874)          (16,787)
                                                   --------             -------          --------
Cash flows from financing activities:
Proceeds from common stock sales..........           48,397                 809               952
Benefit from disqualifying disposition of
  common stock............................              804                 314                22
                                                   --------             -------          --------
  Cash provided by financing activities...           49,201               1,123               974
                                                   --------             -------          --------
Net increase in cash......................           24,584               7,376           (14,745)
Cash and cash equivalents beginning of
  period..................................           19,053              43,637            51,013
                                                   --------             -------          --------
Cash and cash equivalents end of period...         $ 43,637             $51,013          $ 36,268
                                                   ========             =======          ========
</TABLE>

    As of December 31, 1997, 1998, and 1999 the Company had $53.7 million,
$60.8 million, and $61.9 million, respectively, of cash, cash equivalents,
short-term investments, and marketable securities. The Company had no
outstanding borrowing at the end of any of the calendar or fiscal periods. The
Company has a $10 million line of credit and borrowings under the line of credit
bear interest at the prime rate less 0.50% or at libor plus 1.25% to 2% and are
available under the line of credit based on a percentage of eligible accounts
receivable. The line of credit expires on March 1, 2002.

    In the period ended December 31, 1997, the Company generated $22.4 million
in cash from operations primarily from decreases in inventory and increases in
accrued and other liabilities offset by a net loss and increases in accounts
receivable and decreases in deferred revenue. The Company's operating activities
generated $7.1 million in 1998 primarily from net income offset by an increase
in accounts receivable and a decrease in accrued and other liabilities. The
Company's operating activities generated $1.1 million in 1999 primarily from net
income and an increase in accounts payable, partially offset by an increase in
accounts receivable and other assets and a decrease in accrued and other
liabilities and deferred revenue.

    Investing activities used $47.1 million, $0.9 million, and $16.8 million in
1997, 1998, and 1999 respectively. In 1997, $36.4 million in cash was used in
the Quintar and ColorAge acquisitions. In 1998 investing activities were
primarily related to the purchase of property and equipment. In 1999 investing
activities primarily were related to the purchase and redemption of marketable
securities.

                                       28
<PAGE>
    In 1997, the Company's financing activities generated $49.2 million
primarily due to the proceeds of the Company's secondary public offering
totaling $48.4 million and the employee stock purchase plan. In calendar year
1998 and 1999 financing activities were immaterial. The Company has no material
financing commitments other than obligations under operating leases.

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

                                       29
<PAGE>
                                    PART III

    Certain information required by Part III is omitted from this Report on
Form 10-K in that registrant will file its definitive Proxy Statement for its
Annual Meeting of Stockholders to be held on May 24, 2000, pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Proxy
Statement"), not later than 120 days after the end of the fiscal year covered by
this Report, and certain information included in the Proxy Statement is
incorporated herein by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    Quantitative and qualitative disclosure about market risk is set forth at
"Factors Affecting Future Results" under Item 1.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The Financial Statements and supplementary data of the Company required by
this item are set forth at the pages indicated at Item 14(a).

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

    Not applicable.

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

    The information required hereunder is incorporated by reference from the
Company's Proxy Statement filed in connection with Company's Annual Meeting of
Stockholders to be held on May 24, 2000.

ITEM 11.  EXECUTIVE COMPENSATION

    The information required hereunder is incorporated by reference from the
Company's Proxy Statement filed in connection with Company's Annual Meeting of
Stockholders to be held on May 24, 2000.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required hereunder is incorporated by reference from the
Company's Proxy Statement filed in connection with Company's Annual Meeting of
Stockholders to be held on May 24, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required hereunder is incorporated by reference from the
Company's Proxy Statement filed in connection with Company's Annual Meeting of
Stockholders to be held on May 24, 2000.

                                       30
<PAGE>
                                    PART IV

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

<TABLE>
<CAPTION>
                                                                       PAGE NUMBER
                                                                       -----------
<S>      <C>                                                           <C>
(a)(1)   Consolidated Financial Statements:
         Report of Independent Accountants...........................      32
         Consolidated Balance Sheets:
           December 31, 1998 and 1999................................      33
         Consolidated Statements of Operations:
           The year ended September 30, 1997, the three months ended
           December 31, 1997 years ended December 31, 1998 and
           1999......................................................      34
         Consolidated Statements of Stockholder's Equity:
           The year ended September 30, 1997, the three months ended
           December 31, 1997 and the years ended December 31, 1998
           and 1999..................................................      35
         Consolidated Statements of Cash Flows:
           The year ended September 30, 1997, the three months ended
           December 31, 1997 and the years ended December 31, 1998
           and 1999..................................................      36
         Notes to Consolidated Financial Statements..................      37

(a)(2)   Financial Statement Schedules:
         Report of Independent Accountants
         Schedule II--Valuation and Qualifying Accounts

         Other Schedules are omitted because the conditions required
           for filing do not exist or the required information is
           included in the financial statements or notes thereto.

(a)(3)   Exhibits: See Index to Exhibits Page.
         The Exhibits listed in the accompanying Index of Exhibits
           are filed as part of this Report.
</TABLE>

       (a) Exhibits:
           27.0 Financial Data Schedule

       (b) Reports on Form 8-K
           None

       (c) Exhibits: See Index to Exhibits Page.
           The Exhibits listed in the accompanying Index of Exhibits are filed
       as part of this Report.

       (d) Consolidated Financial Statement Schedules: See (a)(1) above.

                                       31
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Splash Technology Holdings, Inc.

    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Splash
Technology Holdings, Inc. and its subsidiaries at December 31, 1998 and 1999,
and results of their operations and their cash flows the year ended
September 30, 1997, the three months ended December 31, 1997 and the years ended
December 31, 1998 and 1999, in conformity with accounting principles generally
accepted in the United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

San Jose, California
January 18, 2000

                                       32
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
Current Assets:
  Cash and cash equivalents.................................  $ 51,013   $36,268
  Marketable securities.....................................     9,814    25,629
  Accounts receivable, net of allowance for doubtful
    accounts for $303 in 1998 and $280 in 1999..............     9,316    14,920
  Inventories...............................................     2,830     3,134
  Prepaid expenses and other current assets.................       997       930
  Deferred income taxes.....................................     3,880     2,024
                                                              --------   -------
      Total current assets..................................    77,850    82,905
  Property and equipment, net...............................     2,256     1,847
  Deferred income taxes.....................................    10,514    10,651
  Other assets..............................................     3,112     3,491
                                                              --------   -------
      Total assets..........................................  $ 93,732   $98,894
                                                              ========   =======

                                   LIABILITIES

Current Liabilities:
  Trade accounts payable....................................  $  2,056   $ 7,608
  Accrued and other liabilities.............................    17,641    10,854
                                                              --------   -------
      Total current liabilities.............................    19,697    18,462
Other long term liabilities.................................       742       374
                                                              --------   -------
      Total liabilities.....................................    20,439    18,836
                                                              --------   -------

Commitments and contingencies (Note 6)

                              STOCKHOLDERS' EQUITY

Common stock, par value $.001 per share:
  Authorized: 50,000,000 shares
  Issued and outstanding: 13,962,863 shares in 1998 and
    14,085,342 shares in 1999...............................        14        14
  Additional paid-in capital................................    86,581    89,469
  Deferred stock based compensation.........................        --    (1,914)
  Accumulated deficit.......................................   (13,302)   (7,511)
                                                              --------   -------
      Total stockholders' equity............................    73,293    80,058
                                                              --------   -------
      Total liabilities and stockholders' equity............  $ 93,732   $98,894
                                                              ========   =======
</TABLE>

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

                                       33
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          SPLASH TECHNOLOGY HOLDINGS, INC.
                                             ----------------------------------------------------------
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
<S>                                          <C>             <C>            <C>            <C>
Net revenue................................     $76,327        $ 22,237        $84,778        $70,008
Cost of net revenue........................      37,229          10,477         38,943         33,413
                                                -------        --------        -------        -------
    Gross profit...........................      39,098          11,760         45,835         36,595
                                                -------        --------        -------        -------
Operating expenses:
  Research and development.................       6,062           2,638         13,602         15,244
  Sales and marketing......................       6,051           2,623         10,952         12,638
  General and administrative...............       2,690             633          3,878          3,738
  Technology write-off.....................      11,039          26,900             --             --
  Facility write-off.......................          --              --             --            998
                                                -------        --------        -------        -------
    Total operating expenses...............      25,842          32,794         28,432         32,618
                                                -------        --------        -------        -------
      Income (loss) before income taxes....      13,256         (21,034)        17,403          3,977
Other income...............................         600              --             --             --
Interest income net........................         655             590          1,979          3,250
                                                -------        --------        -------        -------
      Income (loss) before income taxes....      14,511         (20,444)        19,382          7,227
Provision for income taxes.................       9,420           2,330          6,079          1,436
                                                -------        --------        -------        -------
        Net income (loss)..................     $ 5,091        $(22,774)       $13,303        $ 5,791
                                                =======        ========        =======        =======
Basic net income (loss) per share..........     $  0.42        $  (1.65)       $  0.96        $  0.41
                                                =======        ========        =======        =======
Diluted net income (loss) per share........     $  0.41        $  (1.65)       $  0.94        $  0.41
                                                =======        ========        =======        =======
Shares used in per share
  calculations--basic......................      12,002          13,821         13,903         14,018
                                                =======        ========        =======        =======
Shares used in per share
  calculations--diluted....................      12,423          13,821         14,170         14,144
                                                =======        ========        =======        =======
</TABLE>

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

                                       34
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                            COMMON STOCK        ADDITIONAL     DEFERRED
                                        ---------------------    PAID-IN     STOCK BASED    ACCUMULATED
                                          SHARES      AMOUNT     CAPITAL     COMPENSATION     DEFICIT      TOTAL
                                        ----------   --------   ----------   ------------   -----------   --------
<S>                                     <C>          <C>        <C>          <C>            <C>           <C>
Balances, September 30, 1997..........  13,735,730     $14        $82,355                     $ (3,831)   $ 78,538
  Issuance of common stock for
    acquisitions......................     113,596                  2,910                                    2,910
  Issuance (repurchase) of common
    stock under stock plans...........       5,763                    193                                      193
  Net loss............................                                                         (22,774)    (22,774)
                                        ----------     ---        -------      -------        --------    --------
Balances, December 31, 1997...........  13,855,089      14         85,458                      (26,605)     58,867
  Issuance (repurchase) of common
    stock under stock plans...........     107,774                    809                                      809
  Disqualifying dispositions of common
    stock.............................                                314                                      314
  Net income..........................                                                          13,303      13,303
                                        ----------     ---        -------      -------        --------    --------
Balances, December 31, 1998...........  13,962,863      14         86,581                     $(13,302)   $ 73,293
  Issuance (repurchase) of common
    stock under stock plans...........     122,479                    952                                      952
  Unearned stock compensation.........                              2,182       (2,182)
  Stock based compensation............                               (268)         268
  Disqualifying dispositions of common
    stock.............................                                 22                                       22
  Net income..........................                                                           5,791       5,791
                                        ----------     ---        -------      -------        --------    --------
Balanced, December 31, 1999...........  14,085,342     $14        $89,469      $(1,914)       $ (7,511)   $ 80,058
                                        ==========     ===        =======      =======        ========    ========
</TABLE>

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

                                       35
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     SPLASH TECHNOLOGY HOLDINGS, INC.
                                                        -----------------------------------------------------------
                                                                        THREE MONTHS
                                                         YEAR ENDED         ENDED        YEAR ENDED     YEAR ENDED
                                                        SEPTEMBER 30,   DECEMBER 31,    DECEMBER 31,   DECEMBER 31,
                                                            1997            1997            1998           1999
                                                        -------------   -------------   ------------   ------------
<S>                                                     <C>             <C>             <C>            <C>
Cash flows from operating activities:
  Net income (loss)...................................    $  5,091        $(22,774)       $13,303        $  5,791
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
    Depreciation and amortization.....................         528             204          1,728           1,518
    Provision for doubtful accounts...................        (274)             --             --              --
    Gain on repayment of subordinated debt............        (600)             --             --              --
    Technology write-off..............................      11,039          26,900             --              --
    Facility write-off................................          --              --             --             998
    Deferred income taxes.............................         463             134            898
    Changes in assets and liabilities:
      Accounts receivable.............................        (361)          3,754         (4,917)         (5,604)
      Inventories.....................................      (1,065)          1,826            711            (304)
      Prepaid expenses and other current assets.......        (215)            (83)          (470)             67
      Current portion of deferred income taxes........          --              --             --           1,856
      Other assets....................................         172            (134)          (938)         (1,651)
      Trade accounts payable..........................       6,136          (4,081)          (227)          5,552
      Accrued and other liabilities...................       2,065           5,889         (2,615)         (5,800)
      Deferred revenue................................      (2,932)            217           (346)         (1,355)
                                                          --------        --------        -------        --------
      Net cash provided by operating activities.......      20,047          11,852          7,127           1,068
                                                          --------        --------        -------        --------
Cash flows from investing activities:
  Redemption (purchase) of marketable securities......     (11,350)          1,277            259         (15,815)
  Purchase of property and equipment..................        (797)            (67)        (1,133)           (972)
  Acquisition of business (net of cash acquired)......     (11,196)        (25,197)            --              --
                                                          --------        --------        -------        --------
      Net cash used in investing activities...........     (23,343)        (23,987)          (874)        (16,787)
                                                          --------        --------        -------        --------
Cash flows from financing activities:
  Proceeds from public offerings......................      75,098            (157)            --              --
  Proceeds (redemption) from Series A preferred
    stock.............................................     (14,700)             --             --              --
  Premium paid on Series A preferred stock............        (726)             --             --              --
  Proceeds from (repayment of) subordinated debt......      (8,000)           (252)            --              --
  Issuance and repurchase of common stock under stock
    plans.............................................         472             350            809             952
  Benefit from disqualifying dispositions of common
    stock.............................................         804              --            314              22
                                                          --------        --------        -------        --------
      Net cash provided by (used in) financing
        activities....................................      52,948             (59)         1,123             974
                                                          --------        --------        -------        --------
Net increase (decrease) in cash.......................      49,652         (12,194)         7,376         (14,745)
Cash and cash equivalents, beginning of period........       6,179          55,831         43,637          51,013
                                                          --------        --------        -------        --------
Cash and cash equivalent, end of period...............    $ 55,831        $ 43,637        $51,013        $ 36,268
                                                          ========        ========        =======        ========
Supplemental disclosure of cash flow information:
  Taxes paid..........................................    $  8,019        $     --        $ 2,954        $  1,765
  Interest paid.......................................    $     42        $     --        $    --        $     --

Non-cash financing activities:
  Accretion of preferred stock........................    $   (730)       $     --        $    --        $     --
  Issuance (redemption) of Series B preferred stock...    $ (4,100)       $     --        $    --        $     --
  Issuance of stock options in connection with
    acquisition.......................................    $  1,588        $     --        $    --        $     --
</TABLE>

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

                                       36
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. REORGANIZATION AND BASIS OF PRESENTATION

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

    The business of the Company was previously operated as the unincorporated
Color Server Group of SuperMac Technology Inc. ("SuperMac") until August 1994
when SuperMac merged with Radius Inc. ("Radius"). In January 1996, the assets
and liabilities of the Color Server Group of Radius were transferred by Radius
into its newly created wholly-owned subsidiary, Splash Technology, Inc. In
December 1995, Splash Technology Holdings, Inc. was incorporated in Delaware and
was capitalized by the sale of Series A preferred stock and common stock and
subordinated debt to an investor group led by certain affiliates of Summit
Partners, L.P., and Sigma Partners, L.P. On January 31, 1996, Splash
Technology, Inc. merged with a wholly-owned subsidiary of Splash Technology
Holdings, Inc. and as part of the consideration for the merger, Splash
Technology Holdings, Inc. issued Series B preferred stock to Radius. The
surviving corporation in the merger was Splash Technology, Inc., a wholly-owned
subsidiary of the Company. Upon completion of the Company's initial public
offering on October 9, 1996, the Company redeemed its Series A preferred and
redeemed the subordinated debt. The Series B preferred stock was converted to
common.

    Effective January 1, 1998, the Company changed its fiscal year end from
September 30 to December 31. The Company's financial statements presented herein
include the results of operations and cash flows for the year ended
September 30, 1997, the three month period ended December 31, 1997, and the
years ended December 31, 1998 and 1999, and the balance sheets as of
December 31, 1998 and 1999.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF CONSOLIDATION

    The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated.

    USE OF ESTIMATES

    The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

    REVENUE RECOGNITION

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

                                       37
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Revenue is generally recognized when the product is shipped to the customer,
remaining obligations are insignificant and collection of the resulting
receivable is probable. The Company generally does not grant rights of return.
Provisions for product-related obligations are recorded when revenue is
recognized.

    In May 1996, the Company made the transition from its Power Series products
to its new PCI Series products. In calendar year 1996, one of the Company's OEM
customers accumulated a substantial quantity of the Power Series product. During
the year ended September 30, 1996, due to the transition of products and the
accumulation of Power Series product, the Company had recognized revenue from
the sales of the Power Series product upon notification from the OEM that the
product had been sold to their end user.

    For the year ended September 30, 1997, the Company continued to evaluate the
carrying value of the Power Series product inventory and the related deferred
revenue on a quarterly basis and determined that the amount of future returns of
the Power Series product could be reasonably estimated based on historical
experience. Accordingly, the net revenue relating to the Power Series products
was fully recognized and, in accordance with the Company's policy, an allowance
for expected returns of the Power Series products was recorded in the year ended
September 30, 1997.

    Comprehensive Income

    The Company has adopted Statement No. 130 ("SFAS"), "Reporting Comprehensive
Income." Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. As the components of comprehensive income are not
material, the Company has not reflected the additional reporting and display
provisions of SFAS 130 in the accompanying financial statements.

    WARRANTIES

    The Company's products are generally warranted for three to 15 months.
Estimated future costs of repair, replacement, or customer accommodations are
reflected in the accompanying consolidated financial statements.

    RESEARCH AND DEVELOPMENT

    Costs incurred in the research and development of new software products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility of the Company's products
and general release substantially coincide. As a result, the Company has not
capitalized any software development costs since such costs have not been
significant.

    INCOME TAXES

    The Company uses the liability method to calculate deferred income taxes.
The realization of deferred tax assets is based on historical tax positions and
expectations about future taxable income.

    CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

    All highly liquid investments with an original, or remaining, maturity of
three months or less at the date of purchase, and money market funds are
considered cash equivalents. All investments with an original or remaining
maturity of greater than three months at the date of purchase are considered
marketable securities.

                                       38
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Cash, cash equivalents and marketable securities consist primarily of cash
deposits, money market funds and municipal and U.S. government securities held
in banks and other financial institutions located primarily in the United
States.

    The Company classifies all of its marketable securities as
"available-for-sale" in accordance with the provisions of Financial Accounting
Standards Board Statement No.115 "Accounting for Certain Investments in Debt and
Equity Securities". Accordingly, the Company states its investments at estimated
fair value, with material unrealized gains and losses reported in stockholders'
equity. The cost of securities sold is based on the specific identification
method. Such securities are anticipated to be used for current operations and
are, therefore, classified as current assets, even though maturities may extend
beyond one year.

    At December 31, 1998 and 1999, short-term investments were $9.8 million and
$25.6 million, respectively. The December 31, 1998 short-term investments
consisted primarily of municipal bonds, of which $8.2 million had maturity dates
between 91 days and one year. The short-term investments as of December 31, 1999
consisted of $5.9 million in commercial paper, $11.2 million in corporate bonds
and $8.5 million in government bonds. All commercial paper and corporate bonds
have maturity dates between 91 days and one year and all government bonds have
maturity dates greater than one year.

    FINANCIAL INSTRUMENTS

    The Company's financial instruments, including cash and cash equivalents,
marketable securities are stated at fair value.

    INVENTORIES

    Inventories are stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.

    PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives, ranging from three to
seven years, or, in the case of leasehold improvements, the lease period, if
shorter. Upon disposal, the assets and related accumulated depreciation are
removed from the Company's accounts and the resulting gains or losses are
reflected in the statements of operations.

    CONCENTRATION OF CREDIT RISKS

    Cash, cash equivalents and marketable securities are deposited with major
banks and financial institutions primarily in the United States. Deposits in
these financial institutions may exceed the amount of insurance provided on such
deposits. The Company is exposed to credit risk in the event of default by the
financial institutions or issuers of these investments to the extent of amounts
recorded in the consolidated balance sheet. The Company has not experienced any
losses on its deposits of cash, cash equivalents and marketable securities.

    The Company sells its products primarily to Xerox and, to a lesser extent,
Fuji Xerox, who distribute the Company's products with their own color
photocopier systems on a worldwide basis. The Company performs ongoing credit
evaluations of its customers. The Company does not require collateral for its

                                       39
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
receivables and maintains an allowance for potential credit losses. At
December 31, 1998 and 1999, accounts receivable was comprised primarily of the
two customers, Xerox and Fuji Xerox, which represented 71% and 25%, and 84% and
3% of accounts receivable, respectively.

    Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers.

    RECENT PRONOUNCEMENTS

    Accounting for Derivative Instruments and Hedging

    In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for
Derivative Instruments and Hedging." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires, among other things, that all derivatives be recognized as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value.

    Accounting for Derivative Instruments and Hedging Activities

    In June 1999, the FASB issued Statement of Financial Accounting Standards
No. 137 (SFAS 137), "Accounting for Derivative Instruments and Hedging
Activities--Deferral of Effective Date of FASB Statement No. 133." SFAS 133, as
amended by SFAS 137, is effective for fiscal quarters and fiscal years beginning
after June 15, 2000. The Company is currently studying the provisions of the
SFAS 133 and the potential impact it may have on its financial statements.

                                       40
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. COMPUTATION OF NET INCOME (LOSS) PER SHARE

    In accordance with the disclosure requirements of Statement of Financial
Accounting Standards 128 "Earnings Per Share," a reconciliation of the numerator
and the denominator of basic and diluted earnings per share ("EPS") is provided
as follows (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):

<TABLE>
<CAPTION>
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECMEBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
<S>                                          <C>             <C>            <C>            <C>
Numerator--Basic and Diluted EPS
  Net income (loss) available to common
    stockholders...........................     $ 5,091        $(22,774)       $13,303        $ 5,791
                                                =======        ========        =======        =======
Denominator--Basic EPS shares
  Weighted average shares outstanding......      12,002          13,821         13,903         14,018
                                                =======        ========        =======        =======
  Basic net (loss) income per share........     $  0.42        $  (1.65)       $  0.96        $  0.41
                                                =======        ========        =======        =======
Denominator--Diluted EPS shares
  Denominator--Basic EPS shares............      12,002          13,821         13,903         14,018
  Diluted effect of common stock options
    and conversion of preferred stock......         421              --            267            126
                                                -------        --------        -------        -------
  Diluted EPS shares.......................      12,423          13,821         14,170         14,144
                                                =======        ========        =======        =======
  Diluted net income (loss) per share......     $  0.41        $  (1.65)       $  0.94        $  0.41
                                                =======        ========        =======        =======
</TABLE>

    Options to purchase approximately 0.1 million, 1.2 million, and 1.8 million
shares of common stock were outstanding at September 30, 1997 and December 31,
1998, and 1999, respectively, but were not included in the calculation of
diluted earnings per share because the exercise prices of the options were
greater than the average market price of the common shares. Options to purchase
approximately 1.7 million shares of common stock were outstanding at
December 31, 1997, but were not included in the calculation of diluted earnings
per share because they were anti-dilutive.

                                       41
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BALANCE SHEET DETAIL (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1998           1999
                                                              ------------   ------------
<S>                                                           <C>            <C>
INVENTORIES:
  Raw materials.............................................     $ 1,447        $ 2,612
  Finished goods............................................       1,383            522
                                                                 -------        -------
                                                                 $ 2,830        $ 3,134
                                                                 =======        =======
PROPERTY AND EQUIPMENT:
  Furniture and fixtures....................................     $   918        $   772
  Computer equipment........................................       3,547          3,635
  Leasehold improvements....................................         312            304
  Marketing equipment.......................................         173            190
                                                                 -------        -------
                                                                   4,950          4,901
Less accumulated depreciation and amortization..............      (2,694)        (3,054)
                                                                 -------        -------
                                                                 $ 2,256        $ 1,847
                                                                 =======        =======
ACCRUED AND OTHER LIABILITIES:
  Royalties payable.........................................     $ 1,335        $ 1,464
  Accrued product-related obligations.......................       5,234          1,784
  Deferred revenue..........................................       1,355             --
  Accrued compensation and related expenses.................       1,487          1,613
  Income taxes payable......................................       4,583          3,074
  Other liabilities.........................................       3,647          2,919
                                                                 -------        -------
                                                                 $17,641        $10,854
                                                                 =======        =======
</TABLE>

5. REVOLVING CREDIT FACILITY

    The Company has an agreement with a bank to borrow up to a maximum of
$10,000,000 under a revolving line of credit subject to a borrowing base of 80%
and 75% of eligible domestic and foreign accounts receivable, respectively. The
line bears interest at prime rate less 0.50%, or libor plus 1.25% to 2.0%, is
collateralized by accounts receivable, owned property and equipment and
inventory of the Company, and matures on March 1, 2002. The agreement contains
dividend restrictions and certain financial covenants concerning required
liquidity, net worth and indebtedness ratios as well as required profitability.
The Company has no borrowings outstanding under the line of credit as of
December 31, 1999.

                                       42
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

    LEASES

    The Company leases certain office facilities under non-cancelable operating
leases which expire through March 2003. The Company is responsible for taxes,
insurance and maintenance expenses related to the leased facilities. Under the
term of certain lease agreements, the leases may be extended, at the Company's
option, and certain leases provide for adjustments of the minimum monthly rent.

    Future minimum annual lease payments under the lease are as follows (IN
THOUSANDS):

<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S>                                                           <C>
December 31, 2000...........................................      730
December 31, 2001...........................................      490
December 31, 2002...........................................      313
December 31, 2003...........................................       64
                                                               ------
                                                               $1,597
                                                               ======
</TABLE>

    Rent expense for the year ended September 30, 1997, the three months ended
December 31, 1997 and the years ended December 31, 1998 and 1999 was
approximately $439,000, $146,000, $1,057,000, and $1,071,000, respectively.

    CONTINGENCIES

    In January 1999, two class action complaints were filed against the Company,
certain of its officers and directors, and its investment bankers in the United
States District Court for the Northern District of California, alleging
violations of the federal securities laws. The class period runs from
January 7, 1997 to October 13, 1998 and the complaints allege that the
defendants concealed and/or misrepresented material adverse information about
the Company and the individual defendants sold shares of the Company's stock
based upon material nonpublic information. The complaints seek unspecified
monetary damages. There has been no discovery and no actions have been taken.

    On December 20, 1999 Electronics For Imaging ("EFI") filed a complaint in
the United States District Court for the Northern District of California against
the Company. The complaint alleges that the defendant's products infringe upon
three EFI patents. The suit is aimed at enforcing patents in the areas of color
management, color calibrations, and continuous printing technologies.

    The Company believes that the above complaints are without merit and intends
to defend them vigorously. However, litigation is subject to inherent
uncertainties and, thus, there can be no assurance that these complaints will be
resolved favorably to the Company or that they will not have a material adverse
affect on the Company's financial condition and results of operations. No
provision for any liability that may result upon adjudication has been made in
the accompanying financial statements.

    The Company and its subsidiaries are also parties to various other legal
actions and administrative proceedings. The Company believes that the
disposition of these matters will not have a material effect on the financial
position of the Company.

                                       42
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. PREFERRED STOCK

    On January 27, 1999, the Splash Board of Directors adopted a shareholders'
rights plan pursuant to which each share of common stock received one Preferred
Share Purchase Right ("Right"). Each Right will entitle stockholders to buy
one-one thousandth of a share of the Company's Series A Participating Preferred
Stock at an exercise price of $55.00. The Rights will become exercisable
following the tenth day after a person or group announces acquisition of 15% or
more of the common stock or announces commencement of a tender or exchange offer
the consummation of which would result in ownership by the person or group of
15% or more of the common stock. The Company will be entitled to redeem the
Rights at $0.01 per Right at any time on or before the tenth day following
acquisition by a person or group of 15% or more of the Company's common stock.
The Rights will expire on February 16, 2009.

8. COMMON STOCK

    On July 31, 1996, the Board of Directors adopted a payroll deduction
Employee Stock Purchase Plan (as amended May 26, 1999 the "Purchase Plan"). The
Company has reserved 350,000 shares of common stock for issuance under this
plan. The plan also provides for an automatic replenishment of shares in an
amount equal to the lesser of (i) 75,000 shares, (ii) that number of shares
issued pursuant to the plan in the one year ending on the date of said annual
increase or, (iii) a lesser amount determined by the board. As of December 31,
1999, the Company had issued 113,057 shares under the Purchase Plan.

    STOCK OPTIONS AND REPURCHASE AGREEMENTS

    The Company reserved 3,900,000 shares of common stock for issuance under its
stock option plan, as amended. Under this plan, the Board of Directors may grant
incentive or non-statutory stock options at a price not less than 100% or 85%,
respectively, of fair market value of common stock at grant date. Options under
the plan are immediately exercisable. The terms of each option are no more than
10 years from the date of grant. Stock issued through option exercises are
subject to the Company's right of repurchase at the original exercise price. The
number of shares subject to repurchase generally decrease by 25% of the options
shares one year after the grant date, and, thereafter, ratably over 36 months.
At December 31, 1999, approximately 1.7 million shares of common stock relating
to exercised and unexercised option shares under the stock option plan were
subject to the Company's right of repurchase.

    In October 1998, the Board of Directors of the Company approved a plan by
which employees could elect to have their existing options to purchase shares
cancelled and have an amount equal to eighty percent of the canceled options
regranted. Approximately 1.6 million options were cancelled at prices ranging
from $9.90 to $41.88. Approximately 1.3 million options were regranted at $8.31.

                                       43
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMON STOCK (CONTINUED)
    Activity for the Company's stock option plan is summarized as follows:

<TABLE>
<CAPTION>
                                                                                          WEIGHTED
                                                                        PRICE RANGE   AVERAGE EXERCISE
                                             AVAILABLE    OUTSTANDING    PER SHARE         PRICE
                                             ----------   -----------   -----------   ----------------
<S>                                          <C>          <C>           <C>           <C>
Balances, September 30, 1997...............   1,707,196      805,230     0.14-41.88         17.01
  Options granted..........................    (961,500)     961,500    21.75-44.75         23.57
  Options canceled.........................      41,440      (41,440)    4.00-33.63         21.87
  Options repurchased......................      22,071           --             --
  Options exercised........................          --      (14,540)    0.14-11.00          8.43
                                             ----------   ----------    -----------         -----
Balances, December 31, 1997................     809,207    1,710,750     0.14-44.75         20.65
  Options authorized.......................     750,000           --             --
  Options granted..........................  (2,314,534)   2,314,534     7.50-25.00         10.58
  Options canceled.........................   1,989,457   (1,989,457)    0.86-44.75         22.65
  Options exercised........................          --      (50,743)    0.14-21.00          3.92
                                             ----------   ----------    -----------         -----
Balances, December 31, 1998................   1,234,130    1,985,084     0.14-26.50          7.73
  Options granted..........................    (419,500)     419,500      5.44-9.63          7.27
  Options canceled.........................     606,705     (606,705)    0.14-26.50          7.94
  Repurchased..............................      27,965           --             --            --
  Options exercised........................          --      (50,266)     0.14-8.31          2.82
                                             ----------   ----------    -----------         -----
Balances, December 31, 1999................   1,449,300    1,747,613     0.14-26.50          7.64
</TABLE>

    The Company follows the requirements of APB Opinion No. 25, with disclosure
of pro forma information concerning its stock option plan and employee stock
purchase plan in accordance with SFAS 123. "Accounting for Stock Issued to
Employees."

    The following table summarizes information with respect to stock options
outstanding at December 31, 1999.

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING
-------------------------------------------------------------------
                                WEIGHTED AVERAGE
                  NUMBER AT        REMAINING
   RANGE OF      DECEMBER 31,   CONTRACTUAL LIFE   WEIGHTED AVERAGE
EXERCISE PRICES      1999           (YEARS)         EXERCISE PRICE
---------------  ------------   ----------------   ----------------
<S>              <C>            <C>                <C>
  $0.14-$6.00         99,603          6.07              $ 1.06
  $6.01-$7.00        122,000          7.40                6.74
  $7.01-$8.00        499,250          8.70                7.51
  $8.01-$9.00        967,948          7.50                8.33
  $9.01-$10.00        41,312          7.00                9.77
 $10.01-$16.00        17,500          6.98               12.26
---------------    ---------          ----              ------
  $.014-$16.00     1,747,613          7.74                7.64
</TABLE>

                                       44
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMON STOCK (CONTINUED)
    The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in the periods presented.

<TABLE>
<CAPTION>
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
<S>                                          <C>             <C>            <C>            <C>
Risk-free interest rates...................     6.32%           5.71%          4.54%          6.00%
Expected life..............................  4.92 years      3.50 years     3.50 years     4.25 years
Volatility.................................     60.0%           86.0%         119.0%          77.0%
Dividend yield.............................     0.0%            0.0%           0.0%           0.0%
</TABLE>

    The following pro forma net loss information has been prepared following the
provisions of SFAS 123:

<TABLE>
<CAPTION>
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
                                                       (IN THOUSANDS EXCEPT PER SHARE DATA):
<S>                                          <C>             <C>            <C>            <C>
Net Loss--pro forma........................     $(3,736)       $(36,560)       $ (847)        $(3,597)
Basic (loss) per share.....................     $ (0.31)       $  (2.65)       $(0.06)        $ (0.26)
</TABLE>

    The above pro forma effects on income may not be representative of the
effects on net income for future years as option grants typically vest over
several years and additional options are generally granted each year.

9. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS

    The Company operates in a single industry segment encompassing the
development, manufacture, sales and support of high performance color servers.
Management uses one measure of profitability for its business.

    The Company sells its product primarily to OEM customers in the United
States, Europe, Africa, South America, Japan and Asia Pacific. Net revenue from
export sales accounted for 65%, 57%, 49%, and 44% of net revenue for the year
ended September 30, 1997, the three months ended December 31, 1997 and the years
ended December 31, 1998 and 1999, respectively.

    In the year ended September 30, 1997, the three months ended December 31,
1997 and the years ended December 31, 1998 and 1999, two customers accounted for
56% and 44%; 32% and 65%; 19% and 76%; and 88% and 11% of net revenue,
respectively. In addition, although all sales made to the Company's U.S. based
customer are considered U.S. sales, the Company believes that a portion of the
Company's products purchased by the customer are resold outside the U.S.

                                       45
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES

    The provision for income taxes consists of the following (IN THOUSANDS):

<TABLE>
<CAPTION>
                                          SPLASH TECHNOLOGY HOLDINGS INC.
                             ----------------------------------------------------------
                                             THREE MONTHS
                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                 1997            1997           1998           1999
                             -------------   ------------   ------------   ------------
<S>                          <C>             <C>            <C>            <C>
Current:
  Federal..................     $7,635          $1,822         $4,510         $  241
  State....................      1,322             374            671            (69)
                                ------          ------         ------         ------
                                 8,957           2,196          5,181            172
                                ------          ------         ------         ------
Deferred:
  Federal..................     $  401          $  143         $  901         $1,227
  State....................         62              (9)            (3)            37
                                ------          ------         ------         ------
                                   463             134            898          1,264
                                ------          ------         ------         ------
Total......................     $9,420          $2,330         $6,079         $1,436
                                ======          ======         ======         ======
</TABLE>

    The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:

<TABLE>
<CAPTION>
                                                          SPLASH TECHNOLOGY HOLDINGS, INC.
                                             ----------------------------------------------------------
                                                             THREE MONTHS
                                              YEAR ENDED        ENDED        YEAR ENDED     YEAR ENDED
                                             SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1997            1997           1998           1999
                                             -------------   ------------   ------------   ------------
<S>                                          <C>             <C>            <C>            <C>
Tax provision at federal statutory rate....      35.0%           (35.0)%        35.0%          35.0%
State taxes, net of federal tax benefit....       6.2             (4.3)          4.9           (3.9)
Write-off of in-process and purchased
  technology...............................      29.7             51.7            --             --
Foreign sales corporation benefit..........      (7.1)            (1.6)         (2.8)          (3.2)
Tax exempt interest........................      (1.5)              --          (3.4)          (1.0)
Other......................................       2.6              0.6          (2.3)          (7.0)
                                                 ----            -----          ----           ----
  Total....................................      64.9%            11.4%         31.4%          19.9%
                                                 ====            =====          ====           ====
</TABLE>

                                       46
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)
    The components of the deferred tax asset are as follows (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                      DECEMBER 31,   DECEMBER 31,
                                                          1998           1999
                                                      ------------   ------------
<S>                                                   <C>            <C>
Deferred tax assets:
  In-process and purchased technology...............    $  7,675       $  6,692
  Receivable allowances and product related
    liabilities.....................................       2,136            802
  Inventory valuation allowance.....................         769            772
  State taxes.......................................          --             --
  Deferred revenue..................................         304             --
  Net operating losses..............................       2,891          2,633
  All other.........................................         619          1,776
                                                        --------       --------
    Total deferred tax asset........................      14,394         12,675
  Long term portion of deferred tax asset...........     (10,514)       (10,651)
                                                        --------       --------
    Current portion of deferred tax asset...........    $  3,880       $  2,024
                                                        ========       ========
</TABLE>

    At December 31, 1999, the Company assessed the recoverability of the
deferred tax asset and, based on its expectations about taxable income for
future periods, determined that it was more likely than not that the deferred
tax asset would be recovered.

    The Company's income tax currently payable for both federal and state
purposes have been reduced by the tax benefit derived from the disqualifying
dispositions of incentive stock options and the exercise of non-qualified stock
options. The benefit, which totaled $314,000 and $22,000 for the years ended
December 31, 1998 and 1999, was credited directly to additional paid-in-capital.
There was no benefit for the three months ended December 31, 1997.

    At December 31, 1999, the Company had approximately $7.5 million of federal
net operating loss carryforwards and $995,000 of research and development tax
credits available to offset future federal income taxes. The federal
carryforwards expire in 2006 through 2012 if not utilized. For state income tax
purposes, the Company had approximately $323,000 of net operating loss
carryforwards and research and development tax credits of approximately
$637,000. The state carryforwards expire in 2000 through 2002 if not utilized.
The Company's net operating loss and tax credit carryforwards primarily relate
to Quintar for which utilization is subject to an annual limitation of $739,000.

11. EMPLOYEE BENEFIT PLAN

    The Company adopted the Splash Technology, Inc. 401(k) Profit Sharing Plan
(the "Plan") effective April 1996, which qualifies under Section 401(k) of the
Internal Revenue Code of 1986, as amended, and covers essentially all employees.
Each eligible employee may elect to contribute to the Plan, through payroll
deductions, up to 20% of compensation, subject to certain limitations. The
Company, at its discretion, may make additional contributions. All employer
contributions are 100% vested after four years of employment. During the year
ended September 30, 1997, the three months ended December 31, 1997 and the years
ended December 31, 1998 and 1999, the Company recorded approximately $180,000,
$78,000, $261,000, and $275,000, respectively, of contributions to the Plan.

                                       47
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of the Securities Act of 1934, this report has
been signed and thereunto duly authorized, in the City of Sunnyvale, State of
California, on March 30, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       SPLASH TECHNOLOGY HOLDINGS, INC

                                                       By:          /s/ KEVIN K. MACGILLIVRAY
                                                            -----------------------------------------
                                                                      Kevin K. Macgillivray
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

                                       49
<PAGE>
                               POWER OF ATTORNEY

    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Kevin Macgillivray and John Ritchie and
each of them acting individually, as his or her attorney-in-fact, each with full
power of substitution, for him or her in any and all capacities, to sign any and
all amendments to this report and to file the same, with exhibits thereto and
other documents in connections therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorney to any and all amendments to said report.

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

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>
                                                       Director, President and Chief
              /s/ KEVIN K. MACGILLIVRAY                  Executive Officer (Principal
     -------------------------------------------         Executive Officer) Chairman   March 30, 2000
                Kevin K. Macgillivray                    of the Board

                                                       Vice President, Finance and
                  /s/ JOHN RITCHIE                       Chief Financial Officer
     -------------------------------------------         (Principal Financial and      March 30, 2000
                    John Ritchie                         Accounting Officer)

                 /s/ GREGORY M. AVIS
     -------------------------------------------       Director                        March 30, 2000
                   Gregory M. Avis

                /s/ CHARLES W. BERGER
     -------------------------------------------       Director                        March 30, 2000
                  Charles W. Berger

                 /s/ PETER Y. CHUNG
     -------------------------------------------       Director                        March 30, 2000
                   Peter Y. Chung
</TABLE>

                                       50
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

    Our report on the consolidated financial statements of Splash Technology
Holdings Inc. is included on Page 26. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule in this form 10-K.

    In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

PricewaterhouseCoopers LLP

March, 30, 2000
San Jose, California

                                       51
<PAGE>
                          FINANCIAL STATEMENT SCHEDULE
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    BALANCE AT
                                                   BEGINNING OF                             BALANCE AT
VALUATION FOR DOUBTFUL ACCOUNTS                       PERIOD      ADDITIONS   DEDUCTIONS   END OF PERIOD
-------------------------------                    ------------   ---------   ----------   -------------
<S>                                                <C>            <C>         <C>          <C>
Year ended September 30, 1997....................       299          153         (279)          173
Three months ended December 31, 1997.............       173          196           --           369
Year ended December 31, 1998.....................       369           --          (66)          303
Year ended December 31, 1999.....................       303           --          (23)          280
</TABLE>

<TABLE>
<CAPTION>
                                                    BALANCE AT
                                                   BEGINNING OF                             BALANCE AT
VALUATION FOR INVENTORY RESERVES                      PERIOD      ADDITIONS   DEDUCTIONS   END OF PERIOD
--------------------------------                   ------------   ---------   ----------   -------------
<S>                                                <C>            <C>         <C>          <C>
Year ended September 30, 1997....................      1,028        2,050         (458)        2,620
Three months ended December 31, 1997.............      2,620          457         (601)        2,476
Year ended December 31, 1998.....................      2,476        2,530       (2,996)        2,010
Year ended December 31, 1999.....................      2,010        2,644       (2,667)        1,987
</TABLE>

                                       52
<PAGE>
                                  EXHBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER                            DESCRIPTION OF DOCUMENT
--------------                            -----------------------
<C>                     <S>
         2.1(1)         Merger Agreement, dated December 21, 1995, among Radius
                        Inc., Splash Technology, Inc., Summit Subordinated Debt
                        Fund, L.P., Summit Ventures IV, L.P., Summit Investors II,
                        L.P., Splash Technology Holdings, Inc. and Splash Merger
                        Company, Inc.
         2.2(1)         Amendment No. 1 to Merger Agreement dated January 30, 1996.
         2.3(2)         Agreement and Plan of Reorganization dated as of May 1,
                        1997, by and among Splash Technology Holdings, Inc., Splash
                        Acquisition Corporation and Quintar Holdings Corporation.
         2.4(3)         Agreement and Plan of Reorganization dated as of October 30,
                        1997, by and among Splash Technology Holdings, Inc., CA
                        Acquisition Corporation and ColorAge Corporation
         3.1(1)         Amended and Restated Certificate of Incorporation of
                        Registrant.
         3.2(1)         Amended and Restated Bylaws of Registrant.
         3.2(4)         Certificate of Designation of Series A Preferred Stock of
                        the Registrant.
         4.1(4)         Preferred Shares Rights Agreement, dated as of January 27,
                        1999 between Registrant and BankBoston, N.A., including the
                        form of Certificate and the Summary of rights of rights
                        attached thereto as Exhibits A, B, and C, respectively.
        10.1(1)         Form of Indemnification Agreement.
        10.2a(6)        1996 Stock Option Plan, as amended December 16, 1999.
        10.2b(1)        Form of 1996 Stock Option Plan Stock Option Agreement.
        10.3(1)         1996 Employee Stock Purchase Plan as amended December 16,
                        1999 and form of Subscription Agreement.
        10.4(1)         Registration Rights Agreement dated January 30, 1996 among
                        the Registrant and certain stockholders of the Registrant.
        10.5(1)         Configurable Postscript Interpreter OEM License Agreement
                        dated September 18, 1992 between the Registrant and Adobe
                        Systems Incorporated.
        10.5a(1)        Amendment No. 2 and Appendix No. 2 to Configurable
                        Postscript Interpreter OEM License Agreement dated September
                        18, 1992 between the Registrant and Adobe Systems
                        Incorporated.
        10.5b(5)        Amendment No. 4 to the Configurable Postscript Interpreter
                        OEM License Agreement and Amendment No. 4 to Appendix No. 1,
                        Amendment No. 2 to Appendix No. 2 and Amendment No. 2 to
                        Appendix No. 3 between the Company and Adobe Systems
                        Incorporated and Amendment No. 5 to the Configurable
                        Postscript Interpreter OEM License Agreement between the
                        Company and Adobe Systems Incorporated.
        10.6(1)         Xerox and SMT Hardware Purchase and Software
                        Development/License Agreement between the Registrant and
                        Xerox Corporation dated November 13, 1993.
        10.6a(1)        Attachments I and II to Xerox and SMT Hardware Purchase and
                        Software Development/License Agreement between the
                        Registrant and Xerox Corporation dated November 13, 1993.
        10.6b(5)        Amendment to Xerox Hardware Purchase and Software
                        Development/License Agreement between the Company and Xerox
                        Corporation and Amendment to Attachment III to Xerox
                        Hardware Purchase and Software Development/License Agreement
                        between the Company and Xerox Corporation.
        10.7(1)         Property Lease covering Registrant's facilities in
                        Sunnyvale, California.
</TABLE>

                                       53
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NUMBER                            DESCRIPTION OF DOCUMENT
--------------                            -----------------------
<C>                     <S>
        10.8(1)         Security and Loan Agreement dated January 31, 1996, between
                        the Registrant and Imperial Bank.
        10.9(1)         Revolving Loan & Security Agreement between the Registrant
                        and Comerica Bank-California dated September 3, 1996;
                        Collateral Assignment, Patent Mortgage and Security
                        Agreement between the Registrant and Comerica
                        Bank-California dated September 3, 1996; and Modification to
                        the Loan & Security Agreement dated February 4, 1997.
        10.10(6)        Splash-Xerox OEM Purchase Agreement dated April 6, 1998.
        21.1(1)         Subsidiaries of Registrant.
        23.1            Consent of PricewaterhouseCoopers LLP
        27.1            Financial Data Schedule
</TABLE>

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

(1) Incorporated by reference to the Registrant's Registration Statement on
    Form S-1 (No. 333-09591) originally filed with the SEC on August 5, 1996.

(2) Incorporated by reference to the Registrant's filing on Form 8-K filed with
    the SEC on May 30, 1997, as amended on August 11, 1997.

(3) Incorporated by reference to the Registrant's filing on Form 8-K filed with
    the SEC on November 13, 1997, as amended on December 24, 1997.

(4) Incorporated by reference to Registrant's Report on Form 8A filed with the
    SEC on January 28, 1999.

(5) Incorporated by reference to Registrant's filing on Form 10Q filed with the
    SEC on August 14, 1998.

(6) Incorporated by reference to Registrant's filing on Form 10Q filed with the
    SEC on May 15, 1998.

(b) Financial Statement Schedules

    Schedule II--Valuation and Qualifying Accounts

23.1 Consent of PricewaterhouseCoopers LLP

                                       54