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                       SECURITIES AND EXCHANGE COMMISSION
 
                              WASHINGTON, DC 20549
 
                            ------------------------
 
                                   FORM 10-K
 
(MARK ONE)
 
  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED
         DECEMBER 31, 1998
                                    OR
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
 
                        COMMISSION FILE NUMBER 000-21171
                            ------------------------
 
                        SPLASH TECHNOLOGY HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)
 
                  DELAWARE                             77-0418472
      (State or other jurisdiction of       (IRS Employer Identification No.)
       incorporation or organization)
 
     555 DEL REY AVENUE, SUNNYVALE, CA                    94086
  (Address of principal executive offices)             (Zip Code)
 
       Registrant's telephone number, including area code: (408) 328-6300
 
        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 16, 1999 was approximately $96.3 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 16, 1999 was 13,975,979.
 
    Documents incorporated by reference: Items 10, 11, 12 and 13 of Part Ill are
incorporated by reference from the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 26, 1999. This Report contains
sequentially numbered pages of which this is Number 1.
 
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                                     PART 1
 
    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 TWELVE MONTHS ENDED DECEMBER 31,
1996, 1997, AND 1998 ARE REFERRED TO AS THE CALENDAR YEARS ("CALENDAR"). IN
ADDITION, FOR COMPARATIVE PURPOSES THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
AND 1997, ARE REFERRED TO AS THE FISCAL YEARS ("FISCAL").
 
ITEM 1.  BUSINESS
 
    Splash develops, produces and markets color servers that provide an
integrated link between desktop computers and digital color laser copiers and
large 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, wide 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 affiliate in
Europe, Xerox Ltd.) ("Xerox") and Fuji Xerox Company Ltd. ("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.
 
    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 preconfigured 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 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,
 
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where they are currently 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, and the Splash M Series, first
introduced in November 1998. The PCI and DC products generally use Apple Power
Macintosh 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 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 PCI Series products currently
range from $13,000 to $27,500 in the United States and Y1.6 million to Y4.1
million in Japan. The retail price to end users of the DC Series product
marketed in the United States is $40,000 and the retail prices to end users of
DC Series products marketed in Japan range from Y4.0 million to Y4.4 million.
The retail price to end users of the M Series ranges from $10,500 to $18,500.
 
    To expand its product offerings targeted at the low-end and mid-range market
for color servers, Splash consummated two acquisitions in 1997. In May 1997,
Splash acquired Quintar Holdings Corporation ("Quintar"), a company based in
Southern California, that designed, manufactured and marketed embedded
controllers for desktop color printers, as well as proprietary servers for
high-speed, multifunction monochrome and color printers and copiers. In October
1997, Splash acquired ColorAge Inc. ("ColorAge"), a company based in Billerica,
Massachusetts, that designed, manufactured and marketed DocuPress, a line of
color document print servers targeted principally at the emerging market for
high speed color printing in the office.
 
    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 FGAs 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.
 
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    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.
 
    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 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.
 
    LARGE FORMAT.  The wide format product eliminates the difficulties of
achieving accurate color associated with large format printing.
 
    VARIABLE DATA PRINTING.  Combined with a Xerox 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
 
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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 COLOR 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.
 
    FURTHER ENHANCED CALIBRATION (COLORCAL).  The ColorCal feature enhances the
ability to store up to 10 custom color profiles. In addition, ColorCal works
with Fuji Xerox DocuColor 40 copiers and Xerox DocuColor 4040 copiers through
the use of desktop scanners.
 
    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.
 
SALES AND MARKETING
 
    Splash sells its color server products primarily to two of the leading
providers of color copiers, Xerox and 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. Any
decrease in the level of sales to Xerox or Fuji Xerox would have a material
adverse effect on the Company's business, operating results and financial
condition.
 
    As of December 31, 1998, the Company employed 57 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 and enhance
brand awareness, 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.
 
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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.
 
    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 Applied
Computer Services, Inc. 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 Digital Cafe, a wholly-owned subsidiary of
Boston Photo Imaging, and smaller, local operators.
 
    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 Corp. Corel,
Corel Ventura Publisher, MetaCreations Live Picture and Macromedia Freehand. End
users of Splash products in this segment include DRC Advertising, 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 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,
 
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and the Company believes the ability of color servers to operate across
corporate networks will help expand this market.
 
MANUFACTURING
 
    The Company outsources the manufacture of its products to third party
subcontract manufacturers including Manufacturing Services, LTD ("MSL"), located
in Arden Hills, Minnesota, Logistix Incorporated ("Logistix"), located in
Fremont, California, and Space Craft Industries ("SCI"), located in San Jose,
California. MSL and 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. MSL and SCI also perform in-warranty and
out-of-warranty repair of failed boards for the Splash products. The Company
purchases Power PC computers, Intel designed components, monitors and memory,
and furnishes these components, as well as the MSL and SCI assembled boards, to
Logistix and SCI for final assembly. Logistix and SCI directly purchase a small
portion of the components used in Splash color servers and does all final
assembly and system configuration.
 
    While the Company's subcontract manufacturers conduct quality control and
testing procedures specified by the Company, the Company has from time to time
experienced manufacturing quality problems. Although the Company does not
believe any such problem had a material adverse effect on 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 the Logistix, MSL, 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
Apple Power Macintosh computers, certain ASICs and other semiconductor
components. The Company does not maintain any long-term agreements with any of
its suppliers of components. Because the purchase of certain key components
involves long lead times, in the event of unanticipated increases in demand for
the Company's products, the Company could be unable to manufacture certain
products in a quantity sufficient to meet end user demand. In addition, 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.
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 Power 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 and 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 assurances that the Company will not experience similar
difficulties in the future. The Company also purchases memory modules from a
single supplier. Although other sources are available, a change in memory
supplier could require time to effect and could impact production. This risk
would be exacerbated in times of short memory supply. 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
 
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operating results. Moreover, there can be no assurance that alternative sources
of supply would be available on reasonably acceptable terms, on a timely basis,
or at all. The Company has from time to time experienced shortages in deliveries
of ASICs from Toshiba Corporation, which shortages have impacted production
volume capabilities. In order to attempt to mitigate the risk of such shortages
in the future, the Company 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 Power 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 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, 1998, the Company had 92
employees engaged in research and development. Research and development expenses
in calendar years ended 1996, 1997 and 1998 were $4.0 million, $7.6 million and
$13.6 million, respectively. Research and development expenses in the fiscal
years ended 1996 and 1997 were $4.1 million and $6.1 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
 
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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.
 
    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, such as portions of Europe, 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
 
                                       9
<PAGE>
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 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 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.
 
    The Company has been required to place the source code for certain of its
software 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 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, 1998, the Company employed 181 people, including 92 in
research and development, 9 in operations, 57 in sales and marketing, and 23 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.
 
                                       10
<PAGE>
    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 that the
Company will be successful in retaining its key employees or 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,
1998:
 
<TABLE>
<CAPTION>
NAME                                      AGE                                    POSITION
------------------------------------  -----------  ---------------------------------------------------------------------
<S>                                   <C>          <C>
Kevin K. Macgillivray...............          39   President, Chief Executive Officer and Chairman
 
Joan P. Platt.......................          44   Chief Financial Officer and Vice President, Finance and
                                                   Administration
 
Timothy D. Kleffman.................          40   Vice President, Business Development and Product Planning
 
Richard A. Falk.....................          39   Chief Scientist
 
Michael Orr.........................          47   Vice President, Sales & Marketing
</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.
 
    JOAN P. PLATT joined the Company in March 1996 as Vice President, Finance
and Administration and Chief Financial Officer. From October 1986 to March 1996,
Ms. Platt was a general practice partner at Coopers & Lybrand L.L.P., a public
accounting firm. Prior to 1986, Ms. Platt was a staff accountant and manager in
the business advisory, accounting and audit practice of Coopers & Lybrand L.L.P.
Ms. Platt received a B.S. in Business Administration from The Pennsylvania State
University.
 
    TIMOTHY D. KLEFFMAN has served as Vice President, Business Development and
Product Planning since July 1997 and served as Vice President Engineering
Operations from the Splash Acquisition to June 1997. Mr. Kleffman was Director
of Printer Systems within the CSG at Radius and SuperMac from October 1992 until
the Splash Acquisition. From August 1985 to October 1992, Mr. Kleffman held
various management positions at ROLM Corporation. Mr. Kleffman received a B.S.
in Electrical and Computer Engineering from the University of California, Davis.
Effective January 4, 1999 Mr. Kleffman resigned from the Company.
 
    MICHAEL ORR joined the Company as Vice President, Sales and Marketing. Most
recently, Mr. Orr worked for Amdahl where, from 1988 to 1998, he held a number
of positions including vice president and general manager of the software
business group, the telecom business group and open enterprise systems group, as
well as vice president of strategic solutions. Prior to joining Amdahl, from
1974 to 1988, Mr. Orr worked for IBM in the positions of systems engineer,
sales, sales management, and marketing management. He has a Master of Arts
Degree (M.A.) in mathematics from Oxford University, England.
 
    RICHARD A. FALK has 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
 
                                       11
<PAGE>
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.
 
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 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, and are expected to be lower, in the December and March quarters than in
the preceding September and June quarters. In addition, any increases in
inventories held by the Company's customers could also result in variations in
the timing of purchases by such customers. For example, in May 1996, as the
Company transitioned from its Power Series line of products to its PCI Series
line of products, Xerox informed Splash that it held in its inventory a
substantial quantity of Power Series products accumulated since January 1996. As
a result of the Company's product transition and Xerox's accumulation of
inventory of these products, sales of Power Series products shipped to Xerox
between January 1996 and April 1996 were generally recorded as net revenue when
Xerox sold these products to end users. All other product sales are recorded as
net revenue upon shipment to the OEM customer. There can be no assurance that
the Company will receive sufficient inventory information from its OEM customers
or that the Company will be able to prevent a recurrence of a similar problem in
the future. In addition, particularly in light of the current adverse economic
circumstances in Japan, the Company believes that inventory levels in 1998 were
higher than normal at Fuji Xerox which has materially adversely affected the
Company's business and operating results. 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 from end users fail to materialize, or delivery schedules are deferred or
canceled as a result of the above factors or other unanticipated factors, it
would materially and adversely affect the Company's business, operating results
and financial condition.
 
    Results in any period could also be affected by changes in market demand,
competitive market conditions, sales promotion activities by the Company, its
OEM customers or its competitors, market acceptance of new or existing products,
sales of color copiers with which the Company's products are compatible, the
cost and availability of components, the mix of the Company's customer base and
sales channels, the amount of any third party funding of development expenses,
the mix of products sold, the Company's ability to effectively expand its sales
and marketing organization, the Company's ability to attract and retain key
technical and managerial employees, and general economic conditions. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indicative of future performance. Due to all of the foregoing factors, the
Company's operating results in one or more future periods may be subject to
significant fluctuations. In the event this results in the Company's financial
performance being below the expectations of public market analysts and
investors, the price of the Company's Common Stock would be materially and
adversely affected.
 
    The Company's gross margin is affected by a number of factors, including
product mix, product pricing, and manufacturing and component costs. The average
selling price of the Company's products has decreased in the past primarily as a
result of competitive market pressures, the introduction of lower priced
products and, in certain cases, in response to new product introductions by the
Company's customers. The Company expects this trend to continue. In the event of
significant price competition in the market for color copier servers or
competitive systems, the Company could be at a significant disadvantage compared
to its competitors, many of which have substantially greater resources or lower
product costs than the Company and therefore could more readily withstand an
extended period of downward pricing
 
                                       12
<PAGE>
pressure. Any decline in average selling prices of a particular product which is
not offset by a reduction in production costs or by sales of other products with
higher gross margins would decrease the Company's overall gross margin and
adversely affect the Company's operating results. The Company establishes its
expenditure levels for product development and other operating expenses based on
projected sales levels and margins, and expenses are relatively fixed in the
short term. Moreover, the Company's overall expense level is expected to
increase as the Company continues to build corporate infrastructure and to
support expansion of operations. Accordingly, if sales are below expectations in
any given period, the adverse impact of the shortfall on the Company's operating
results may be increased by the Company's inability to adjust spending in the
short term to compensate for the shortfall.
 
    EMERGING COLOR SERVER MARKET.  The market for the Company's color server
products has only recently begun to develop. Because the markets for digital
color copiers and connected color servers are relatively new, and because
current and future competitors are likely to continue to introduce competing
solutions, it is difficult to predict the rate at which these markets will grow,
if at all. The color server market has 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 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 calendar 1996, 1997 and 1998 accounted for
approximately 36%, 51% and 76%, respectively, of the Company's net revenue, and
sales to Fuji Xerox in such periods accounted for approximately 64%, 47%, and
19%, respectively, of net revenue. Sales to Xerox in fiscal 1996 and 1997
accounted for approximately 43% and 44%, respectively, of the Company's net
revenue, and sales to Fuji Xerox in such periods accounted for approximately 57%
and 56%, 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 copiers of Xerox and Fuji Xerox with which
Splash's products are compatible decrease the Company's business, operating
results and financial condition has been and would be materially and adversely
affected. During calendar 1998, sales of Splash compatible copiers by Fuji Xerox
were significantly lower than in prior periods. 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
 
                                       13
<PAGE>
and marketing efforts of Xerox or Fuji Xerox with respect to Splash's products,
including any reduction in the size or effectiveness of the Xerox or Fuji Xerox
sales and marketing forces, or changes in incentives for Xerox or Fuji Xerox
salespersons to sell Splash products or color servers produced by competitors of
Splash, could have a material adverse effect on the Company's business,
operating results and financial condition.
 
    Xerox currently sells a substantial number of color servers made by
companies other than Splash, including those of the Company's principal
competitor, 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 meets their respective quality standards. 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
(particularly in light of the current adverse economic situation in Japan and
Asia) 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. For example, in May 1996, as the Company transitioned from
its Power Series line of products to its PCI Series line of products, Xerox
informed Splash that it held in its inventory a substantial quantity of Power
Series products accumulated since January 1996. Xerox indicated to Splash that,
to eliminate this inventory and to permit Xerox to introduce the PCI Series
products, Xerox substantially reduced the selling prices of the Power Series
products beginning in June 1996. Sales by Xerox of the Power Series products at
a discount may have resulted in reduced sales of the Company's PCI Series
products. In addition, particularly in light of the current adverse economic
circumstances in Japan, the Company believes that inventory levels in 1998 were
higher than normal at Fuji Xerox 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.
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
 
                                       14
<PAGE>
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
September 1999, subject to renewal upon mutual consent. There can be no
assurance that Adobe will continue to enjoy its leadership position in the
market, renew the current license at the end of its term or license future
versions of PostScript to Splash on terms favorable to Splash or at all. If the
license agreement between Adobe and the Company is terminated for any reason or
the Company's relationship with Adobe is impaired, the Company could be required
to change to an alternative page description language which would require the
expenditure of significant resources and time and could significantly limit the
marketability of the Company's products. Any increase in royalties payable to
Adobe also could have a material adverse effect on the Company's operating
results. In addition, the Adobe PostScript software is incorporated in the
products of certain of the Company's competitors. The Company's business could
be materially and adversely affected if Adobe were to make available to the
Company's competitors future versions of Adobe PostScript software that include
enhancements to the Adobe PostScript software that were originally developed or
implemented by Splash.
 
    DEPENDENCE ON APPLE COMPUTER INC.  The majority of the Company's current
products require the use of an Apple Power Macintosh computer as a computer
platform. 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 the Power Macintosh models with which
Splash products operate or were unable to provide or otherwise cease to provide
an acceptable level of end user customer support, the Company's business,
operating results and financial condition would be materially and adversely
affected. For example, Apple phased out the manufacture of Power Macintosh
products based on the NuBus architecture in the second half of calendar 1995 in
favor of Power Macintosh products based on the PCI bus architecture. As a
result, the Company had to expend significant resources and faced substantial
risk of technological failure or lack of market acceptance in developing and
introducing its PCI-based products. In addition, the Company has experienced
sourcing difficulties related to Apple's delay in the release of new models. 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 its products to a
different computer platform would require a substantial expenditure of resources
and time, and there can be no assurance that any such products can be
successfully developed or introduced in a timely fashion and at competitive cost
or otherwise achieve widespread market acceptance.
 
    DEPENDENCE ON SINGLE PRODUCT LINE.  Substantially all of Splash's current
shipments consist, and are expected to continue to consist, of the Company's
color server products. Because of this product concentration, a significant
decline in demand for or pricing of these products would have a material adverse
effect on the Company's business, operating results and financial condition,
whether as a result of a decline in sales of complementary Xerox and Fuji Xerox
copiers; a further decline in the market for Apple Power Macintosh computers;
increased sales by Xerox or Fuji Xerox of color servers offered by competitors
of the Company or developed internally by Xerox or Fuji Xerox; new product
introductions by competitors; price competition; or technological change. Any
decline in the market for this product line or any failure to timely produce new
and enhanced products would have a material adverse effect on the Company's
business, financial condition and results of operations.
 
                                       15
<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 products.
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.
 
    There can be no assurance that any of the Company's future products will
achieve widespread market acceptance. In addition, the Company has in the past
experienced delays in the development of new products and the enhancement of
existing products, and such delays may occur in the future. If the Company is
unable, due to resource constraints or technological or other reasons, to
develop and introduce new products or versions in a timely manner, or if such
new products or releases do not achieve timely and widespread market acceptance,
it would have a material adverse effect on the Company's business, operating
results and financial condition.
 
    COMPETITION.  The markets for the Company's products are characterized by
intense competition and rapid change. The Company competes directly with other
independent manufacturers of color servers and with copier manufacturers, and
indirectly with printer manufacturers and others. The Company has a number of
direct competitors for color server products, the most significant of which is
EFI. Splash also faces competition from copier manufacturers that offer
internally developed color server products, such as a non-PostScript color
server offered by Fuji Xerox, or that incorporate color server features into
their copiers. In addition, the Company faces competition from desktop color
laser printers that offer increasing speed and color server capability. As
component prices decrease and the processing power and other functionality of
copiers, printers and computers increases, it becomes more likely that copier,
printer and computer manufacturers will continue to add color server
functionality to their systems, which could reduce the market for the Company's
existing line of products.
 
    The Company also competes indirectly with manufacturers of electronic color
prepress systems, which offer similar functionality for the short-run and
commercial printing market as is provided by the Company's products. The Company
also competes indirectly with providers of color separation, color editing and
page layout software. While such software typically is complementary to the
Company's systems, such software can also be competitive with the Company's
systems and may become increasingly competitive to the extent that the providers
of such software extend the functionality of their products in future releases.
 
    Many of the Company's current and potential direct and indirect competitors
have longer operating histories, are substantially larger, and have
substantially greater financial, technical, manufacturing, marketing and other
resources than Splash. A number of these current and potential competitors also
have substantially greater name recognition and a significantly larger installed
base of products than the Company, which could provide leverage to such
companies in their competition with Splash. The Company expects competition to
increase to the extent the color server market grows, and such increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, operating results and financial condition. As a result of their
greater resources, many of such competitors are in a better position than Splash
to withstand significant price competition or downturns in the economy. There
can be no assurance that Splash will be
 
                                       16
<PAGE>
able to continue to compete effectively, and any failure to do so would have a
material adverse effect upon the Company's business, operating results and
financial condition.
 
    RISKS ASSOCIATED WITH ACQUISITIONS.  The Company frequently evaluates
potential acquisitions of complementary businesses, products and technologies.
As part of the Company's expansion plans, the Company has acquired and may
continue to acquire companies that have an installed base of products not yet
offered by the Company, have strategic distribution channels or customer
relationships, or otherwise present opportunities which management believes may
enhance the Company's competitive position. The success of any acquisition could
depend not only upon the ability of the Company to acquire such businesses,
products and technologies on a cost-effective basis, but also upon the ability
of the Company to integrate the acquired operations or technologies effectively
into its organization, to retain and motivate key personnel of the acquired
businesses, and to retain the significant customers of the acquired businesses.
Any acquisition, depending upon its size, could result in the use of a
significant portion of the Company's cash, or if such acquisition is made
utilizing the Company's securities, could result in significant dilution to the
Company's stockholders. Moreover, such transactions involve the diversion of
substantial management resources and evaluation of such opportunities requires
substantial diversion of engineering and technological resources. In addition,
such transactions could result in large one time write-offs or the creation of
goodwill or other intangible assets that would result in amortization expenses.
For example, in connection with the Quintar and ColorAge acquisitions, Splash
recorded an expense related to purchased in-process research and development of
$11.0 million and $26.9 million, respectively. Both Quintar and ColorAge had
technology under development. There can be no assurance that the acquired
technology can be successfully developed on a timely basis or at all, or that
products based on this technology will receive widespread market acceptance.
Moreover, there can be no assurance that the Company can successfully integrate
the acquired technology. The failure to successfully evaluate, negotiate and
effect acquisition transactions could have a material adverse effect on the
Company's business, operating results and financial condition.
 
    MANAGEMENT OF EXPANDING OPERATIONS.  The growth in the Company's business
has placed, and any further expansion would continue to place, a significant
strain on the Company's limited personnel, management and other resources. The
Company's ability to manage any future expansion effectively will require it to
attract, train, motivate and manage new employees successfully, to integrate new
management and employees into its overall operations and to continue to improve
its operational, financial and management systems. 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, MSL and Logistix. MSL 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. MSL
and SCI also performs in-warranty and out-of-warranty repair of failed boards
for the Company's products. The Company directly purchases Apple Power Macintosh
computers, Intel designed components, monitors and memory, and furnishes these
components, as well as the MSL and SCI-assembled boards, to Logistix and SCI for
final assembly. Logistix and SCI directly purchase a small 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
 
                                       17
<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 the SCI, Logistix, MSL or other third party manufacturing facilities
utilized by the Company become unavailable to the Company, or if the
manufacturing operations at these facilities are slowed, interrupted or
terminated, the Company's business, operating results and financial condition
could be adversely affected. Although the Company believes that there are a
variety of companies available with the capability to provide the Company with
such services, there can be no assurance that the Company would be able to enter
into alternative third party manufacturing arrangements on terms satisfactory to
the Company, in a timely fashion, or at all.
 
    DEPENDENCE ON COMPONENT AVAILABILITY AND COST.  The Company purchases
components comprising a significant portion of the total cost of its color
servers. The balance of the inventory required to manufacture the Company's
products is purchased by Logistix and SCI. The Company currently sources most of
its Power Macintosh computers that serve as the platforms for its DC and PCI
color servers from Apple. The Company is currently operating on a purchase order
basis with Apple.
 
    Certain components necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. These include
Apple Power Macintosh computers, certain ASICs and other semiconductor
components. The Company does not maintain any long-term agreements with any of
its suppliers of components. Because the purchase of certain key components
involves long lead times, in the event of unanticipated increases in demand for
the Company's products, the Company could be unable to manufacture certain
products in a quantity sufficient to meet end user demand. The Company has
experienced difficulties related to Apple's delay in the release of new systems
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 a single supplier.
Although other sources are available, a change in memory supplier could require
time to effect and could impact production. This risk would be exacerbated in
times of memory supply shortages. Any inability to obtain adequate deliveries of
any of the components or any other circumstance that would require the Company
to seek alternative sources of supply could affect the Company's ability to ship
its products on a timely basis, which could damage relationships with current
and prospective customers and could therefore have a material adverse effect on
the Company's business, financial condition and operating results. Moreover,
there can be no assurance that alternative sources of supply would be available
on reasonably acceptable terms, on a timely basis, or at all. The Company has
from time to time experienced shortages in deliveries of ASICs from Toshiba
Corporation, which shortages have impacted production volume capabilities. In
order to attempt to mitigate the risk of such shortages in the future, the
Company has increased its inventory of components for which the Company is
dependent upon sole or limited source suppliers. As a result, the Company is
subject to an increasing risk of inventory obsolescence, which could materially
and adversely affect its operating results and financial condition.
 
    The market prices and availability of certain components, particularly
memory, other semiconductor components, Apple Power 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.
 
    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
 
                                       18
<PAGE>
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. Any need to redesign the products or enter into any royalty or
licensing agreement could have a material adverse effect on the Company's
business, operating results and financial condition.
 
    The Company relies upon certain software licensed from third parties. There
can be no assurance that the software licensed by the Company will continue to
provide competitive features and functionality or that licenses for software
currently utilized by the Company or other software which the Company may seek
to license in the future will be available to the Company on commercially
reasonable terms. The loss of, or inability to maintain, existing licenses could
result in shipment delays or reductions until equivalent software or suitable
alternative products could be developed, identified, licensed and integrated,
and the inability to license key new software that may be developed, on
commercially reasonable terms, would have a material adverse effect on the
Company's competitive position. Any such event would materially adversely affect
the Company's business, operating results and financial condition.
 
    NEED FOR ADDITIONAL CAPITAL.  The Company believes that in order to remain
competitive it may require additional financial resources over the next several
years for working capital, research and development, expansion of sales and
marketing resources, capital expenditures and potential acquisitions. Although
the Company believes that it will be able to fund planned expenditures for at
least the next twelve months from a combination of the proceeds of its public
offerings, cash flow from operations, existing cash balances and the Company's
bank line of credit, there can be no assurance that the Company will be able to
obtain any additional financing which may be required in the future on
acceptable terms or at all.
 
    RISK OF PRODUCT DEFECTS.  The Company's products consist of hardware and
software developed by Splash and others. Products such as those of the Company
may contain undetected errors when first
 
                                       19
<PAGE>
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 are international sales.
International sales accounted for approximately 64%, 62%, and 50% of net revenue
in calendar 1996, 1997 and 1998, respectively. International sales accounted for
approximately 57% and 65%, of net revenue in fiscal 1996 and 1997, 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, other than one employee from the ColorAge
acquisition, and does not maintain key person life insurance policies on any of
its employees.
 
    YEAR 2000 ISSUES.  Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
These date code fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. Although the Company
believes that its products and systems are Year 2000 compliant, the Company
utilizes third party equipment and software that may not be Year 2000 compliant.
Failure of such third-party equipment or software to operate properly with
regard to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Furthermore, the purchasing patterns of customers or potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct their current systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase products and
services such as those
 
                                       20
<PAGE>
offered by the Company, which could have a material adverse effect on the
Company's business, operating results and financial condition.
 
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
a period of up to five additional years. The Company also leases office suites
in Paris, France, and Singapore 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
1999. The Company believes that its existing facilities are adequate to meet its
needs for the near term and is evaluating its future facility needs.
 
ITEM 3.  LEGAL PROCEEDINGS
 
    On January 13, 1999 and 28th, two class action complaints were filed in the
United States district Court for the Norther 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.
 
    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, 1999. Net proceeds to the Company from this
offering was approximately $48.4 million.
 
    As of December 31, 1998 the Company has retained substantially all of the
proceeds from the aforementioned offering.
 
    As of March 16, 1999, the Company's common stock was held by approximately
116 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, 1998, 1997 and the
period October 9, 1996 to December 31, 1996.
<TABLE>
<CAPTION>
                                                                                     1998
                                                                             --------------------
                                                                                HI         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
 
<CAPTION>
 
                                                                                     1997
                                                                             --------------------
                                                                                HI         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
<CAPTION>
 
                                                                                     1996
                                                                             --------------------
                                                                                HI         LOW
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
First Quarter from October 9, 1996.........................................  $   26.50  $   10.38
</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>
                                          PREDECESSOR
                                            BUSINESS                SPLASH TECHNOLOGY HOLDING, INC.
                                          ------------  --------------------------------------------------------
                                          FOUR MONTHS   EIGHT MONTHS                  THREE MONTHS
                                             ENDED          ENDED       YEAR ENDED       ENDED       YEAR ENDED
                                          JANUARY 31,   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,  DECEMBER 31,
                                              1996          1996           1997           1997          1998
                                          ------------  -------------  -------------  ------------  ------------
<S>                                       <C>           <C>            <C>            <C>           <C>
                                                           (IN THOUSANDS EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Net revenue.............................   $   13,008    $    34,713     $  76,327     $   22,237    $   84,778
Cost of net revenue.....................        8,427         19,381        37,229         10,477        38,943
                                          ------------  -------------  -------------  ------------  ------------
  Gross profit..........................        4,581         15,332        39,098         11,760        45,835
                                          ------------  -------------  -------------  ------------  ------------
Operating expenses:
  Research and development..............        1,498          2,627         6,062          2,638        13,602
  Sales and marketing...................          688          1,756         6,051          2,623        10,952
  General administrative................          287          1,276         2,690            633         3,878
  Amortization and write-off of
    technology..........................           --         22,803        11,039         26,900            --
                                          ------------  -------------  -------------  ------------  ------------
    Total operating expenses............        2,473         28,462        25,842         32,794        28,432
                                          ------------  -------------  -------------  ------------  ------------
Income (loss) from operations...........        2,108        (13,130)       13,256        (21,034)       17,403
Other income............................           --             --           600             --            --
Interest income (expense), net..........          (18)          (575)          655            590         1,979
                                          ------------  -------------  -------------  ------------  ------------
Income (loss) before income taxes.......        2,090        (13,705)       14,511        (20,444)       19,382
Provision for (benefit from) income
  taxes.................................          836         (5,509)        9,420          2,330         6,079
                                          ------------  -------------  -------------  ------------  ------------
Net income (loss).......................   $    1,254    $    (8,196)    $   5,091     $  (22,774)   $   13,303
                                          ------------  -------------  -------------  ------------  ------------
                                          ------------  -------------  -------------  ------------  ------------
Basic net income (loss) per share(1)....                 $     (1.27)    $    0.42     $    (1.65)   $     0.96
                                                        -------------  -------------  ------------  ------------
                                                        -------------  -------------  ------------  ------------
Diluted net income (loss) per
  share(1)..............................                 $     (1.27)    $    0.41     $    (1.65)   $     0.94
                                                        -------------  -------------  ------------  ------------
                                                        -------------  -------------  ------------  ------------
Shares used in per share
  calculations--Basic(1)................                       7,009        12,120         13,821        13,903
                                                        -------------  -------------  ------------  ------------
                                                        -------------  -------------  ------------  ------------
Shares used in per share
  calculations--Diluted(1)..............                       7,009        12,423         13,821        14,170
                                                        -------------  -------------  ------------  ------------
                                                        -------------  -------------  ------------  ------------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                             SPLASH TECHNOLOGY
                                                                                               HOLDINGS, INC.
                                                                                            --------------------
                                                                                                DECEMBER 31,
                                                                                            --------------------
                                                                                              1997       1998
                                                                                            ---------  ---------
<S>                                                                                         <C>        <C>
                                                                                               (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
  Working capital.........................................................................  $  43,577  $  58,153
  Total assets............................................................................     82,493     93,732
  Total liabilities.......................................................................     23,626     20,439
  Stockholders' equity....................................................................     58,867     73,293
</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. References below to the results of
operations for the fiscal year ended September 30, 1996 refer to the results of
operations ("The Splash Acquisition") of CSG for the four months ended January
31,1996 plus the results of operations of the Company for the eight months ended
September 30, 1996.
 
    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 fiscal years ended September 30, 1996 and the calendar years ended
December 31, 1996 and 1997. In addition, the fiscal years ended September 30,
1996 and 1997 are referred to as fiscal 1996 and 1997, respectively, and the
calendar years ended December 31, 1996, 1997 and 1998 are referred to as
calendar 1996, 1997 and 1998, respectively.
 
    In the past, 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, the
impact of economic conditions in Japan (including the dollar/yen currency
exchange rate) on 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 has been difficult to
sustain and will be difficult to 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 quarter, the adverse impact of the shortfall in revenues on operating
results may be increased by the Company's inability to adjust spending in the
short term to compensate for the shortfall.
 
                                       24
<PAGE>
RESULTS OF OPERATIONS
 
    The following table sets forth the consolidated statements of operations:
<TABLE>
<CAPTION>
                                                    YEAR ENDED SEPTEMBER 30,                  YEAR ENDED DECEMBER 31,
                                         ----------------------------------------------  ---------------------------------
                                                  1996                    1997                    1996             1997
                                         ----------------------  ----------------------  ----------------------  ---------
<S>                                      <C>        <C>          <C>        <C>          <C>        <C>          <C>
                                         (PRO FORMA, UNAUDITED)                                     (PRO FORMA,
                                                                                                    UNAUDITED)
 
<CAPTION>
                                                                      (AMOUNTS IN THOUSANDS)
<S>                                      <C>        <C>          <C>        <C>          <C>        <C>          <C>
Net revenue............................  $  47,721         100%  $  76,327         100%  $  55,887         100%  $  83,192
Cost of net revenue....................     27,808          58      37,229          49      30,472          55      40,195
                                         ---------         ---   ---------         ---   ---------         ---   ---------
  Gross profit.........................     19,913          42      39,098          51      25,415          45      42,997
                                         ---------         ---   ---------         ---   ---------         ---   ---------
Operating expenses:
  Research and development.............      4,125           9       6,062           8       4,009           7       7,560
  Sales and marketing..................      2,444           5       6,051           8       2,829           5       7,721
  General and administrative...........      1,563           3       2,690           4       2,067           4       2,583
  Technology write-off.................     22,803          48      11,039          14      22,803          41      37,939
                                         ---------         ---   ---------         ---   ---------         ---   ---------
    Total operating expenses...........     30,935          65      25,842          34      31,708          57      55,803
                                         ---------         ---   ---------         ---   ---------         ---   ---------
Income (loss) from operations..........    (11,022)        (23)     13,256          17      (6,293)        (12)    (12,806)
Other income...........................         --          --         600           1         600           1          --
Interest income (expense), net.........       (593)         (1)        655           1        (510)         (1)      1,162
                                         ---------         ---   ---------         ---   ---------         ---   ---------
  Income (loss) before taxes...........    (11,615)        (24)     14,511          19      (6,203)        (12)    (11,644)
Benefit from (provision for taxes).....      4,673          10      (9,420)        (12)      2,623           5      (9,580)
                                         ---------         ---   ---------         ---   ---------         ---   ---------
Net income (loss)......................  $  (6,942)        (14)% $   5,091          7%   $  (3,580)         (7)% $ (21,224)
                                         ---------         ---   ---------         ---   ---------         ---   ---------
                                         ---------         ---   ---------         ---   ---------         ---   ---------
 
<CAPTION>
 
                                                             1998
                                                    ----------------------
<S>                                      <C>        <C>        <C>
 
<S>                                      <C>        <C>        <C>
Net revenue............................        100% $  84,778         100%
Cost of net revenue....................         48     38,943          46
                                         ---------  ---------         ---
  Gross profit.........................         52     45,835          54
                                         ---------  ---------         ---
Operating expenses:
  Research and development.............          9     13,602          16
  Sales and marketing..................          9     10,952          13
  General and administrative...........          3      3,878           4
  Technology write-off.................         46         --          --
                                         ---------  ---------         ---
    Total operating expenses...........         67     28,432          33
                                         ---------  ---------         ---
Income (loss) from operations..........        (15)    17,403          21
Other income...........................         --         --          --
Interest income (expense), net.........          1      1,979           2
                                         ---------  ---------         ---
  Income (loss) before taxes...........        (14)    19,382          23
Benefit from (provision for taxes).....        (12)    (6,079)         (7)
                                         ---------  ---------         ---
Net income (loss)......................        (26)% $  13,303         16%
                                         ---------  ---------         ---
                                         ---------  ---------         ---
</TABLE>
 
    NET REVENUE.  The Company's net revenue increased 49% to $83.2 million in
calendar 1997 from $55.9 million in calendar 1996, and 2% to $84.8 million in
calendar 1998 from calendar 1997. The Company's net revenue increased 60% to
$76.3 million in fiscal 1997 from $47.7 million in fiscal 1996. Overall, these
increases were primarily attributable to higher unit sales of systems and color
server kits due to increasing market acceptance of the Company's products and
expanded product offerings. Primarily due to poor economic conditions in Asia in
calendar 1998, the Company has experienced a significant decrease in sales to
its customer in Japan, partially offset by a significant increase in sales in
other regions. In addition, particularly in light of the current adverse
economic circumstances in Japan, the Company believes that inventory levels are
currently higher than normal at Fuji Xerox which has adversely affected and may,
in the future, materially adversely affect the Company's business and operating
results.
 
    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,
particularly in light of the current adverse economic circumstances in Japan, 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 64%, 62% and 50% of
net revenue in calendar 1996, 1997 and 1998, respectively. International sales
accounted for 57% and 65% of net revenue in fiscal 1996 and 1997, 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 45%, 52% and 54% in calendar 1996, 1997
and 1998, respectively, and were 42% and 51% in fiscal 1996 and 1997,
respectively. The increases in gross margin 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, partially
offset by a sales shift toward certain lower margin pre-configured server
models. 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 90%
to $7.6 million in calendar 1997 from $4.0 million in calendar 1996, and
increased 79% to $13.6 million in calendar 1998 from calendar 1997. As a
percentage of net revenue, research and development expenses were 7%, 9% and 16%
in calendar 1996, 1997 and 1998, respectively. Research and development expenses
increased 49% to $6.1 million in fiscal 1997 from $4.1 million in fiscal 1996.
As a percentage of net revenue, research and development expenses were 9% and 8%
in fiscal 1996 and 1997, respectively. The increases in the absolute dollar
amount of these expenses for both the calendar and fiscal periods in 1996, 1997
and 1998 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 ("Quintar") and ColorAge Corporation ("ColorAge")
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 the acquisitions and current projects under development and
planned, research and development expenses are expected to increase in absolute
dollars and as a percentage of net revenue in future periods.
 
    SALES AND MARKETING.  Sales and marketing expenses increased 175% to $7.7
million in calendar 1997 from $2.8 million in calendar 1996, and increased 43%
to $11.0 million in calendar 1998 from calendar 1997. Such expenses represented
5%, 9% and 13% of net revenue for such respective periods. Sales and marketing
expenses increased 154% to $6.1 million in fiscal 1997 from $2.4 million in
fiscal 1996. Such expenses represented 5% and 8% of net revenue in fiscal 1996
and 1997, respectively. 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
24% to $2.6 million in calendar 1997 from $2.1 million in calendar 1996, and
increased 50% to $3.9 million in calendar 1998 from calendar 1997. Such expenses
represented 4%, 3% and 4% of net revenue for calendar 1996, 1997 and 1998,
respectively. General and administrative expenses increased 69% to $2.7 million
in fiscal 1997 from $1.6 million in fiscal 1996. Such expenses represented 3%
and 4% of net revenue for fiscal 1996 and 1997,
 
                                       26
<PAGE>
respectively. The increases 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 and, in addition, to cover costs related to being a
public company. The Company believes that its general and administrative
expenses will increase in absolute dollars in the foreseeable future as it
continues to implement additional management and operational systems, and
expands its administrative staff.
 
    ACQUISITION-RELATED AND NON-OPERATING EXPENSES.  In calendar and fiscal
1996, the Company recorded certain costs related to the Splash Acquisition,
including a write-off of $19.4 million of in-process research and development
and the amortization in full through May 1996 of $3.4 million of purchased
technology. These in-process research and development projects were related to
the development of the Company's PCI Series product line, which was introduced
in May 1996. Through calendar and fiscal 1996, the Company had incurred interest
costs pursuant to the subordinated notes and line of credit established in
connection with the Splash Acquisition, offset in part by interest earned on
short term investments.
 
    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.
 
    OTHER INCOME.  The Splash Acquisition was recorded under the purchase method
of accounting. Concurrent with the Splash Acquisition, the Company issued
subordinated promissory notes with an aggregate face value of $8.0 million. The
valuation of the subordinated debt by an independent third party resulted in an
assigned value of $8.6 million. In October 1996, the Company utilized $8.0
million of the proceeds of its initial public offering to repay the subordinated
promissory notes payable and recorded $600,000 of other income to eliminate the
face value of the subordinated debt from the consolidated balance sheet.
 
    PROVISION FOR INCOME TAXES.  For fiscal 1996 and calendar 1996, the Company
estimated a pro forma benefit for income taxes at 40%, and 42%, respectively, as
if CSG had been operating as a separate company. In addition, as a result of the
Splash acquisition (a taxable event), the Company recorded a deferred tax asset
of approximately $9.1 million and realized a corresponding credit to the
provision for income taxes, arising from the difference in treatment of acquired
intangible assets for tax and financial reporting purposes. 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 acquisitions) was 40%, 37%, 42%, 39%, 36% and 31%
for fiscal 1996, 1997 and calendar 1996, 1997 and 1998, 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 SEPTEMBER
                                                        30,                YEAR ENDED DECEMBER 31,
                                               ----------------------  -------------------------------
                                                  1996        1997       1996       1997       1998
                                               -----------  ---------  ---------  ---------  ---------
                                               (PRO FORMA,                 (PRO FORMA,
                                               UNAUDITED)                   UNAUDITED)
<S>                                            <C>          <C>        <C>        <C>        <C>
Cash flows from operating activities:
Net income (loss)............................   $  (6,942)  $   5,091  $  (3,580) $ (21,224) $  13,303
  Adjustments to operating activities........     (10,275)        117    (11,002)       622      2,626
Purchased technology.........................      22,729      11,039     22,729     37,939         --
Changes in assets and liabilities............       1,161       3,800      5,431      5,110     (8,802)
                                               -----------  ---------  ---------  ---------  ---------
  Cash provided by operating activities......       6,673      20,047     13,578     22,447      7,127
                                               -----------  ---------  ---------  ---------  ---------
 
Cash flows from investing activities:
(Purchase) redemption of marketable
  securities.................................          --     (11,350)        --    (10,073)       259
Purchase of fixed assets.....................        (667)       (797)      (870)      (598)    (1,133)
Acquisition of businesses, net...............     (23,421)    (11,196)   (23,421)   (36,393)        --
                                               -----------  ---------  ---------  ---------  ---------
  Cash used in investing activities..........     (24,088)    (23,343)   (24,291)   (47,064)      (874)
                                               -----------  ---------  ---------  ---------  ---------
 
Cash flows from financing activities:
Proceeds from common stock sales.............         306      75,570     27,420     48,397        809
Proceeds from (redemption of) preferred
  stock......................................      14,700     (14,700)      (726)        --         --
Premium paid on preferred stock..............          --        (726)        --         --         --
Subordinated debt............................       8,600      (8,000)       600         --         --
Benefit from disqualifying disposition of
  common stock...............................          --         804         --        804        314
Net change in parent company investment......         (12)         --      2,472         --         --
                                               -----------  ---------  ---------  ---------  ---------
  Cash provided by financing activities......      23,594      52,948     29,766     49,201      1,123
                                               -----------  ---------  ---------  ---------  ---------
Net increase in cash.........................       6,179      49,652     19,053     24,584      7,376
Cash and cash equivalents beginning of
  period.....................................          --       6,179         --     19,053     43,637
                                               -----------  ---------  ---------  ---------  ---------
Cash and cash equivalents end of period......   $   6,179   $  55,831  $  19,053  $  43,637  $  51,013
                                               -----------  ---------  ---------  ---------  ---------
                                               -----------  ---------  ---------  ---------  ---------
</TABLE>
 
    From fiscal 1995 until the Splash Acquisition in January 1996, the Company
satisfied its liquidity requirements through cash flows generated from
operations. The Company had limited cash balances following the Splash
Acquisition and satisfied its cash needs through a $4.0 million revolving line
of credit and cash flows from operations. Subsequently, the Company has obtained
sufficient cash from its public offerings and operations to satisfy its
liquidity requirements.
 
    As of December 31, 1996, 1997 and 1998, the Company had $19.1 million, $43.6
million and $51.0 million, respectively, of cash, cash equivalents and short
term investments. As of September 30, 1996 and 1997, the Company had $6.2
million and $55.8 million, respectively, of cash, cash equivalents and short
term investments. 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, 2000.
 
    For calendar 1996, the Company generated $13.6 million in cash from
operations primarily due to decreases in accounts receivable and other assets
and increases in trade accounts payable and accrued and
 
                                       28
<PAGE>
other liabilities partially offset by a net loss and increases in inventory. In
calendar 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 activity generated $7.1
million in calendar 1998 primarily from net income offset by increases in
accounts receivable and a decrease in accrued and other liabilities.
 
    For fiscal 1996, the Company generated $6.7 million in cash from operations,
primarily due to increases in accrued and other liabilities and deferred revenue
and decreases in accounts receivable and trade accounts payables offset by a net
loss. The Company's operating activities provided $20.0 million in cash in
fiscal 1997, primarily from net income and increases in accounts payable and
accrued and other liabilities, offset in part by an increase in inventories and
a decrease in deferred revenue.
 
    Investing activities used $24.3 million, $47.1 million and $.9 million in
calendar 1996, 1997 and 1998, respectively. In calendar 1996, these amounts
resulted primarily from $23.4 million in cash used in connection with the Splash
acquisition. In calendar 1997, $36.4 million in cash was used in the Quintar and
ColorAge acquisitions and the purchase of marketable securities used $10.1
million in cash.
 
    Investing activities used $24.1 million and $23.3 million in fiscal 1996 and
1997, respectively. In fiscal 1996, these amounts resulted primarily from $23.4
million in cash used in connection with the Splash acquisition. In fiscal 1997,
$11.2 million in cash was used in connection with the Quintar acquisition and
the purchase of marketable securities used $11.4 million. For calendar 1996,
financing activities generated $29.8 million primarily due to the Company's
initial public offering from which the Company received approximately $27.4
million in net proceeds. In calendar 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.
 
    Financing activities provided $23.6 million in cash in fiscal 1996,
consisting primarily of financing related to the Splash acquisition. Financing
activities in fiscal 1997 provided $52.9 million in cash, including the
Company's two public offerings from which the Company received net proceeds of
$75.6 million. From these net proceeds, the Company redeemed all of its Series A
Preferred Stock for $15.4 million and repaid outstanding promissory notes
payable to stockholders of $8.0 million. The remaining net proceeds from the
Company's public offerings are being used for working capital, acquisitions and
general corporate purposes. The Company has no material financing commitments
other than its 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.
 
YEAR 2000 ISSUES
 
    Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish twenty-first century dates
from twentieth century dates. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. The Company has tested its current products for Year 2000
compliance and believes that its current products are mostly Year 2000
compliant. However, the failure of the Company's current or prior products to
operate properly with regard to the Year 2000 requirements could cause the
Company to incur unanticipated expenses to remedy any problems, could cause a
reduction in sales and could expose the Company to related litigation by its
customers, each of which could have a material adverse effect on the Company's
business, operating results and financial condition.
 
    Although the Company tests its products and systems for Year 2000
compliance, the Company utilizes third party equipment and software that may not
be Year 2000 compliant. The Company has made
 
                                       29
<PAGE>
inquiries to the majority of its material equipment and software suppliers as to
the Year 2000 compliance of their products. Most respondents have indicated that
their equipment and/or software either is, or will be by December 31, 1999, Year
2000 compliant. Failure of such third-party equipment or software to operate
properly with regard to the year 2000 and thereafter could require the Company
to incur unanticipated expenses to remedy any problems, which could have a
material adverse effect on the Company's business, operating results and
financial condition.
 
    The Company also has material relationships with third party suppliers and
service providers who may utilize equipment or software that may not be Year
2000 compliant, such as financial institutions, shipping companies and payroll
services. The Company is in the process of conducting Year 2000 compliance
inquiries of such third parties. Based upon the results of such inquiries, the
Company intends to take appropriate action. Nonetheless, while the Company would
be affected by any such failure, the Company believes that it could continue to
operate despite any such failure of a material party to be Year 2000 compliant.
Failure of any third-party's equipment or software to operate properly with
regard to the Year 2000 requirements could cause the Company to incur
unanticipated expenses to remedy any problems and could cause a reduction in
sales, each of which could have a material adverse effect on the Company's
business, operating results and financial condition.
 
    The business, operating results and financial condition of the Company's
customers could also be adversely affected to the extent that they utilize
equipment or software that is not Year 2000 compliant. Furthermore, the
purchasing patterns of customers or potential customers may be affected by Year
2000 issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase products and services such as those offered by the
Company, which could have a material adverse effect on the Company's business,
operating results and financial condition.
 
    The Company has not established a formal contingency plan for any potential
failure of any of the Company's or any third party's equipment or software, but
the Company plans to create such a formal contingency plan.
 
    The Company has, and will continue to make, certain investments in its
equipment, software systems and applications to ensure that the Company is Year
2000 compliant and to evaluate the Year 2000 preparedness of the material third
parties with whom it deals. To date, the Company has primarily used existing
personnel to evaluate the Year 2000 exposure. The financial impact to the
Company for Year 2000 compliance has not been and is not anticipated to be
material to its financial position, results of operations or cash flows in any
given year.
 
                                       30
<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 26, 1999, 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
 
    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 26, 1999.
 
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 26, 1999.
 
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 26, 1999.
 
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 26, 1999.
 
                                       31
<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................................................................           33
 
           Consolidated Balance Sheets:.....................................................................           34
           December 31, 1997 and 1998
 
           Consolidated Statements of Operations:...........................................................           35
           Four months ended January 31, 1996, the eight months ended September 30, 1996, the year ended
            September 30, 1997, the three months ended December 31, 1997 and the year ended December 31,
            1998
 
           Consolidated Statements of Stockholder's Equity:.................................................           36
           Eight months ended September 30, 1996, the year ended September 30, 1997, the three months ended
            December 31, 1997 and the year ended December 31, 1998
 
           Predecessor Business Statements of Parent Company Investment:....................................           37
           Year ended September 30, 1995 and the four months ended January 31, 1996
 
           Consolidated Statements of Cash Flows:...........................................................           37
           Four months ended January 31, 1996, the eight months ended September 30, 1996, the year ended
            September 30, 1997, the three months ended December 31, 1997 and the year ended December 31,
            1998
 
           Notes to Consolidated Financial Statements.......................................................           39
 
(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.
 
           (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.
</TABLE>
 
                                       32
<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, 1997 and 1998,
and results of their operations and their cash flows for the eight months ended
September 30, 1996, the year ended September 30, 1997, the three months ended
December 31, 1997 and the year ended December 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statements of the Predecessor Business present fairly, in all material respects,
the results of its operations and its cash flows for the Predecessor Business
for the four months ended January 30, 1996, in conformity with generally
accepted account principles. 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 generally accepted auditing standards 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 27, 1999
 
                                       33
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                              --------------------
                                                                                                1997       1998
                                                                                              ---------  ---------
<S>                                                                                           <C>        <C>
                                                      ASSETS
Current Assets:
  Cash and cash equivalents.................................................................  $  43,637  $  51,013
  Marketable securities.....................................................................     10,073      9,814
  Accounts receivable, net of allowance for doubtful accounts of $369 in 1997 and $303 in
    1998....................................................................................      4,399      9,316
  Inventories...............................................................................      3,541      2,830
  Prepaid expenses and other current assets.................................................        527        997
  Deferred income taxes.....................................................................      4,094      3,880
                                                                                              ---------  ---------
        Total current assets................................................................     66,271     77,850
  Property and equipment, net...............................................................      1,385      2,256
  Deferred income taxes.....................................................................     11,198     10,514
  Other assets..............................................................................      3,639      3,112
                                                                                              ---------  ---------
        Total assets........................................................................  $  82,493  $  93,732
                                                                                              ---------  ---------
                                                                                              ---------  ---------
 
                                                   LIABILITIES
 
Current Liabilities:
  Trade accounts payable....................................................................  $   2,283  $   2,056
  Accrued and other liabilities.............................................................     18,711     16,286
  Deferred revenue..........................................................................      1,700      1,355
                                                                                              ---------  ---------
        Total current liabilities...........................................................     22,694     19,697
  Other long term liabilities...............................................................        932        742
                                                                                              ---------  ---------
        Total liabilities...................................................................     23,626     20,439
                                                                                              ---------  ---------
                                                                                              ---------  ---------
Commitments and contingencies (Note 6)
 
                                               STOCKHOLDERS' EQUITY
 
Preferred stock, par value $.001 per share:.................................................         --         --
  Authorized: 5,000,000 shares
  Issued and outstanding: none
Common stock, par value $.001 per share:....................................................         14         14
  Authorized: 50,000,000 shares
  Issued and outstanding: 13,855,089 shares in 1997 and 13,962,863 shares in 1998
Additional paid-in capital..................................................................     85,458     86,581
Accumulated deficit.........................................................................    (26,605)   (13,302)
                                                                                              ---------  ---------
        Total stockholders' equity..........................................................     58,867     73,293
                                                                                              ---------  ---------
        Total liabilities and stockholders' equity..........................................  $  82,493  $  93,732
                                                                                              ---------  ---------
                                                                                              ---------  ---------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       34
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                         PREDECESSOR
                                           BUSINESS                SPLASH TECHNOLOGY HOLDINGS, INC.
                                         ------------  ---------------------------------------------------------
                                         FOUR MONTHS   EIGHT MONTHS                  THREE MONTHS
                                            ENDED          ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                         JANUARY 31,   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                             1996          1996           1997           1997           1998
                                         ------------  -------------  -------------  -------------  ------------
<S>                                      <C>           <C>            <C>            <C>            <C>
Net revenue............................   $   13,008    $    34,713     $  76,327     $    22,237    $   84,778
Cost of net revenue....................        8,427         19,381        37,229          10,477        38,943
                                         ------------  -------------  -------------  -------------  ------------
        Gross profit...................        4,581         15,332        39,098          11,760        45,835
                                         ------------  -------------  -------------  -------------  ------------
Operating expenses:
  Research and development.............        1,498          2,627         6,062           2,638        13,602
  Sales and marketing..................          688          1,756         6,051           2,623        10,952
  General and administrative...........          287          1,276         2,690             633         3,878
  Amortization and write-off of
    technology.........................           --         22,803        11,039          26,900            --
                                         ------------  -------------  -------------  -------------  ------------
        Total operating expenses.......        2,473         28,462        25,842          32,794        28,432
                                         ------------  -------------  -------------  -------------  ------------
        Income (loss) from
          operations...................        2,108        (13,130)       13,256         (21,034)       17,403
Other income...........................           --             --           600              --            --
Interest income (expense), net.........          (18)          (575)          655             590         1,979
                                         ------------  -------------  -------------  -------------  ------------
        Income (loss) before income
          taxes........................        2,090        (13,705)       14,511         (20,444)       19,382
Provision for (benefit from) income
  taxes................................          836         (5,509)        9,420           2,330         6,079
                                         ------------  -------------  -------------  -------------  ------------
        Net income (loss)..............   $    1,254    $    (8,196)    $   5,091     $   (22,774)   $   13,303
                                         ------------  -------------  -------------  -------------  ------------
                                         ------------  -------------  -------------  -------------  ------------
Basic net income (loss) per share......                 $     (1.27)    $    0.42     $     (1.65)   $     0.96
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
Diluted net income (loss) per share....                 $     (1.27)    $    0.41     $     (1.65)   $     0.94
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
Shares used in per share
  calculation--basic...................                       7,009        12,002          13,821        13,903
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
Shares used in per share
  calculation--diluted.................                       7,009        12,423          13,821        14,170
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       35
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                     PREFERRED STOCK            COMMON STOCK        ADDITIONAL
                                  ----------------------  ------------------------    PAID-IN    ACCUMULATED
                                   SHARES      AMOUNT       SHARES       AMOUNT       CAPITAL      DEFICIT       TOTAL
                                  ---------  -----------  -----------  -----------  -----------  ------------  ----------
<S>                               <C>        <C>          <C>          <C>          <C>          <C>           <C>
Balances, February 1, 1996
  Issuance of preferred stock:
    Series A....................     15,426   $       1                              $  14,699                 $   14,700
    Series B....................      4,282           1                                  4,099                      4,100
  Issuance of common stock......                            7,008,746   $       8          198                        206
  Issuance (repurchase) of
    common stock under stock
    plans.......................                              594,377                      100                        100
  Accretion for dividends on
    Series A & B preferred
    stock.......................                                                           730    $     (730)
  Net loss......................         --          --            --          --           --        (8,196)      (8,196)
                                  ---------         ---   -----------         ---   -----------  ------------  ----------
Balances, September 30, 1996....     19,708           2     7,603,123           8       19,826        (8,926)      10,910
  Redemption of preferred stock:
    Series A....................    (15,426)         (1)                               (14,699)         (726)     (15,426)
    Series B....................     (4,282)         (1)    1,741,127           2                                       1
  Reversal of accretion for
    dividends on preferred
    stock.......................                                                          (730)          730
  Issuance of common stock......                            4,284,750           3       75,095                     75,098
  Issuance (repurchase) of
    common stock under stock
    plans and warrants..........                              106,730           1          471                        472
  Disqualifying dispositions of
    common stock................                                                           804                        804
  Acquisition related
    compensation................                                                         1,588                      1,588
  Net income....................         --          --            --          --           --         5,091        5,091
                                  ---------         ---   -----------         ---   -----------  ------------  ----------
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
                                  ---------         ---   -----------         ---   -----------  ------------  ----------
                                  ---------         ---   -----------         ---   -----------  ------------  ----------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       36
<PAGE>
                         PREDECESSOR BUSINESS STATEMENT
                          OF PARENT COMPANY INVESTMENT
                                 (IN THOUSANDS)
 
<TABLE>
<S>                                                                                   <C>
Balance, September 30, 1995.........................................................  $   2,703
  Net change in parent company investment...........................................        (12)
  Net income........................................................................      1,254
                                                                                      ---------
Balance, January 31, 1996...........................................................  $   3,945
                                                                                      ---------
                                                                                      ---------
</TABLE>
 
                        SPLASH TECHNOLOGY HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                          PREDECESSOR
                                           BUSINESS                  SPLASH TECHNOLOGY HOLDINGS, INC.
                                         -------------  ----------------------------------------------------------
                                          FOUR MONTHS   EIGHT MONTHS                  THREE MONTHS
                                             ENDED          ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                          JANUARY 31,   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                             1996           1996           1997           1997           1998
                                         -------------  -------------  -------------  -------------  -------------
<S>                                      <C>            <C>            <C>            <C>            <C>
Cash flows from operating activities:
  Net income (loss)....................    $   1,254      $  (8,196)     $   5,091      $ (22,774)     $  13,303
  Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
    Depreciation and amortization......          102            195            528            204          1,728
    Provision for doubtful accounts....           17            198           (274)            --             --
    Gain on repayment of subordinated
      debt.............................           --             --           (600)            --             --
    Purchased and in-process
      technology.......................           --         22,729         11,039         26,900             --
    Deferred income taxes..............          622        (11,409)           463            134            898
  Changes in assets and liabilities:
    Accounts receivable................       (4,597)         3,330           (361)         3,754         (4,917)
    Inventories........................        2,231         (1,917)        (1,065)         1,826            711
    Prepaid expenses and other current
      assets...........................           --           (119)          (215)           (83)          (470)
    Other assets.......................           --           (464)           172           (134)          (938)
    Trade accounts payable.............       (2,391)         1,093          6,136         (4,081)          (227)
    Accrued and other liabilities......        2,861           (851)         2,065          5,889         (2,615)
    Deferred revenue...................          905          1,080         (2,932)           217           (346)
                                         -------------  -------------  -------------  -------------  -------------
      Net cash provided by operating
        activities.....................        1,004          5,669         20,047         11,852          7,127
                                         -------------  -------------  -------------  -------------  -------------
 
Cash flows from investing activities:
    (Purchase) redemption of marketable
      securities.......................           --             --        (11,350)         1,277            259
  Purchase of property and equipment...          (63)          (604)          (797)           (67)        (1,133)
  Acquisition of businesses (net of
    cash acquired).....................           --        (23,421)       (11,196)       (25,197)            --
                                         -------------  -------------  -------------  -------------  -------------
    Net cash used in investing
      activities.......................          (63)       (24,025)       (23,343)       (23,987)          (874)
                                         -------------  -------------  -------------  -------------  -------------
</TABLE>
 
                                       37
<PAGE>
<TABLE>
<CAPTION>
                                          PREDECESSOR
                                           BUSINESS                  SPLASH TECHNOLOGY HOLDINGS, INC.
                                         -------------  ----------------------------------------------------------
                                          FOUR MONTHS   EIGHT MONTHS                  THREE MONTHS
                                             ENDED          ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                          JANUARY 31,   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                             1996           1996           1997           1997           1998
                                         -------------  -------------  -------------  -------------  -------------
<S>                                      <C>            <C>            <C>            <C>            <C>
Cash flows from financing activities:
    Proceeds from public offerings.....           --             --         75,098           (157)            --
    Proceeds (redemption) from Series A
      preferred stock..................           --         14,700        (14,700)            --             --
    Premium paid on Series A preferred
      stock............................           --             --           (726)            --             --
    Proceeds from (repayment of)
      subordinated debt................           --          8,600         (8,000)          (252)            --
    Issuance and repurchase of common
      stock under stock plans..........           --            306            472            350            809
    Benefit from disqualifying
      dispositions of common stock.....           --             --            804             --            314
    Net change in Parent Company
      Investment.......................          (12)            --             --             --             --
                                         -------------  -------------  -------------  -------------  -------------
      Net cash provided by (used in)
        financing activities...........          (12)        23,606         52,948            (59)         1,123
                                         -------------  -------------  -------------  -------------  -------------
 
Net increase (decrease) in cash........          929          5,250         49,652        (12,194)         7,376
 
Cash and cash equivalents, beginning of
  period...............................           --            929          6,179         55,831         43,637
                                         -------------  -------------  -------------  -------------  -------------
 
Cash and cash equivalents, end of
  period...............................    $     929      $   6,179      $  55,831      $  43,637      $  51,013
                                         -------------  -------------  -------------  -------------  -------------
                                         -------------  -------------  -------------  -------------  -------------
 
Supplemental disclosure of cash flow
  information:
    Taxes paid.........................    $      --      $   4,175      $   8,019      $      --      $   2,954
    Interest paid......................    $      --      $     704      $      42      $      --      $      --
 
Non-cash financing activities:
    Accretion of preferred stock.......    $      --      $     730      $    (730)     $      --      $      --
    Issuance (redemption) of Series B
      preferred stock..................    $      --      $   4,100      $  (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.
 
                                       38
<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.
 
    The acquisition of Splash Technology, Inc. (the "Splash Acquisition") was
regarded as a purchase of net assets accounted for under the purchase method of
accounting as of January 31, 1996. The total purchase price of $27,843,000
(including the costs of the acquisition of $321,000), consisting of cash and the
fair value of Series B preferred stock of $4,100,000, has been allocated to the
net assets acquired based on their estimated fair values as of January 31, 1996.
The two principal components of the initial excess purchase price allocation
included in-process research and development projects ($19,398,000) and existing
purchased technology ($3,405,000). The Company allocated a portion of the
purchase price to various in-process research and development projects that had
an identifiable economic value and expensed this value as of the date of the
acquisition. The purchased technology is related to the Company's Power Series
product for which the Company was developing a replacement product at the time
of the Splash Acquisition due to the discontinuance of the Apple NuBus
architecture on which the Power Series product relied. The Company transitioned
to the new product in May 1996, and accordingly, the fair value of the purchased
technology was fully amortized over the four months to May 31, 1996.
 
    The fair value of the assets acquired (net of cash acquired of $929,000) and
liabilities assumed were as follows:
 
<TABLE>
<S>                                                                  <C>
In-process and purchased technology................................  $  22,729
Receivables........................................................      9,296
Inventories........................................................      1,734
Long term assets...................................................      1,551
Payables and other accrued liabilities.............................     (6,196)
Deferred revenue...................................................     (2,200)
                                                                     ---------
                                                                     $  26,914
                                                                     ---------
                                                                     ---------
</TABLE>
 
                                       39
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
1.  REORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
    The Predecessor Business' financial statements presented herein include the
results of operations and cash flows for the four months ended January 31, 1996,
as if the Color Server Group existed as a corporation separate from Radius
during such period and on a historical basis. 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 eight months ended September 30, 1996, the
year ended September 30, 1997, the three month period ended December 31, 1997,
and the year ended December 31, 1998, and the balance sheets as of December 31,
1997 and 1998.
 
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.
 
    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.
 
                                       40
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    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.
 
    Income taxes have been provided in the Predecessor Business statements of
operations as if the Predecessor Business was a separate taxable entity. Since
the division was not a separate taxable entity but was included in the
consolidated income tax returns of the Radius and SuperMac companies, the
current benefit from or provision for U.S. federal and state income taxes was
ultimately assumed to be receivable from or payable to Radius or SuperMac in the
period presented. In accordance with the merger agreement with Radius, the
Company is not required to repay Radius for the utilization of their tax losses
against the Company's taxable income as a Predecessor Business. Such benefits
are reflected as capital contributions.
 
    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.
 
    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, the Company had
approximately $1.6 million of "available-for-sale" securities which had
maturities greater than one year.
 
                                       41
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    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. The Predecessor Business' accounting
policy was to expense all items of property and equipment upon acquisition.
Accordingly, appropriate adjustments have been included in the financial
statements to reflect the capitalization and depreciation of property and
equipment during the applicable periods presented.
 
    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 two OEM customers, Xerox and
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
receivables and maintains an allowance for potential credit losses. At December
31, 1997 and 1998, accounts receivable was comprised primarily of the two
customers, Xerox and Fuji Xerox, which represented 65% and 28%, and 71% and 25%
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
 
    In March 1998, the Accounting Standards Executive Committee, or AcSEC,
released Statement of Position 98-1 ("SOP 98-1") "Accounting for the Costs of
Computer Software Developed or obtained for Internal Use". SOP 98-1 requires
companies to capitalize certain costs of computer software developed or obtained
for internal use, provided that those costs are not research and development.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The
Company is evaluating the requirements of SOP 98-1 and the effects, if any, on
the Company's current policies on accounting for software costs.
 
                                       42
<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>
                                                       EIGHT MONTHS                  THREE MONTHS
                                                           ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                                       SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                                           1996           1997           1997           1998
                                                       -------------  -------------  -------------  ------------
<S>                                                    <C>            <C>            <C>            <C>
Numerator--Basic and Diluted EPS
  Net income (loss)..................................    $  (8,196)     $   5,091     $   (22,774)   $   13,303
  Cumulative dividends on preferred stock............         (730)            --              --            --
                                                       -------------  -------------  -------------  ------------
  Net income (loss) available to common
    stockholders.....................................    $  (8,926)     $   5,091     $   (22,774)   $   13,303
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
Denominator--Basic EPS shares
  Weighted average shares outstanding................        7,009         12,002          13,821        13,903
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
  Basic net (loss) income per share..................    $   (1.27)     $    0.42     $     (1.65)   $     0.96
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
Denominator--Diluted EPS shares
  Denominator--Basic EPS shares......................        7,009         12,002          13,821        13,903
  Dilutive effect of common stock options and
    conversion of preferred stock....................           --            421              --           267
                                                       -------------  -------------  -------------  ------------
  Diluted EPS shares.................................        7,009         12,423          13,821        14,170
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
  Diluted net income (loss) per share................    $   (1.27)     $    0.41     $     (1.65)   $     0.94
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------
</TABLE>
 
    Options to purchase approximately 0.1 million and 1.2 million shares of
common stock were outstanding at September 30, 1997 and December 31, 1998,
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 0.3 million
and 1.7 million shares of common stock were outstanding at September 30, 1996
and December 31, 1997, respectively, but were not included in the calculation of
diluted earnings per share because they have been anti-dilutive.
 
                                       43
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
4.  BALANCE SHEET DETAIL (IN THOUSANDS):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1998
                                                                   ------------  ------------
<S>                                                                <C>           <C>
INVENTORIES
  Raw materials..................................................   $    2,403    $    1,447
  Finished goods.................................................        1,138         1,383
                                                                   ------------  ------------
                                                                    $    3,541    $    2,830
                                                                   ------------  ------------
                                                                   ------------  ------------
PROPERTY AND EQUIPMENT:
  Furniture and fixtures.........................................   $      642    $      918
  Computer equipment.............................................        1,708         3,547
  Leasehold improvements.........................................          150           312
  Marketing equipment............................................          163           173
                                                                   ------------  ------------
                                                                         2,663         4,950
  Less accumulated depreciation and amortization.................       (1,278)       (2,694)
                                                                   ------------  ------------
                                                                    $    1,385    $    2,256
                                                                   ------------  ------------
                                                                   ------------  ------------
ACCRUED AND OTHER LIABILITIES:
  Royalties payable..............................................   $    5,391    $    1,335
  Accrued product-related obligations............................        4,063         5,234
  Accrued compensation and related expenses......................          682         1,487
  Income taxes payable...........................................        4,193         4,583
  Other liabilities..............................................        4,382         3,647
                                                                   ------------  ------------
                                                                    $   18,711    $   16,286
                                                                   ------------  ------------
                                                                   ------------  ------------
</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, 2000. 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, 1998.
 
6.  COMMITMENTS AND CONTINGENCIES
 
    LEASES
 
    The Company leases certain office facilities under noncancelable 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.
 
                                       44
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6.  COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Future minimum annual lease payments under the lease are as follows (in
thousands):
 
<TABLE>
<CAPTION>
YEAR ENDING
-------------------------------------------------------------------------------------
<S>                                                                                    <C>
December 31, 1999....................................................................  $     846
December 31, 2000....................................................................        730
December 31, 2001....................................................................        490
December 31, 2002....................................................................        313
December 31, 2003....................................................................         64
                                                                                       ---------
                                                                                       $   2,443
                                                                                       ---------
                                                                                       ---------
</TABLE>
 
    Rent expense for the eight months ended September 30, 1996, the year ended
September 30, 1997, the three months ended December 31, 1997 and the year ended
December 31, 1998 was $226,000, $439,000, $146,000 and $1,057,000, 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.
 
    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.
 
7.  PREFERRED STOCK
 
    The Company authorized and issued 15,426 shares of Series A preferred stock
at a face value of $1,000 per share and 4,282 shares of Series B preferred stock
in a non-cash transaction as part of the consideration for the Splash
Acquisition. The valuation of the Series A and Series B preferred stock by an
independent third party resulted in values of $14,700,000 and $4,100,000,
respectively, for those instruments. The carrying amounts of both Series A and
Series B preferred stock were increased by amounts representing dividends not
currently declared or paid but which may be payable under each series' dividend
rights. The increases were effected by a charge against retained earnings.
 
    On October 9, 1996, the Company initiated trading of its common stock
following an initial public offering and the Series B preferred stock converted
to common stock. On October 18, 1996, the Company redeemed the Series A
preferred stock.
 
                                       45
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
7.  PREFERRED STOCK (CONTINUED)
    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 sock.
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 (the "Purchase Plan"), effective upon the closing
of the Company's initial public offering, and reserved an aggregate of 175,000
shares of common stock for issuance thereunder. As of December 31, 1998, the
Company had issued 112,871 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 nonstatutory 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, 1998, 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 cancelled 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.
 
                                       46
<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>
                                                                     PRICE RANGE                    WEIGHTED AVERAGE
                                          AVAILABLE   OUTSTANDING     PER SHARE        AMOUNT        EXERCISE PRICE
                                          ----------  -----------   -------------  --------------   ----------------
<S>                                       <C>         <C>           <C>            <C>              <C>
                                                                                   (IN THOUSANDS)
  Options authorized on plan
    inception...........................   3,150,000
  Options granted.......................    (894,880)     894,880   $ 0.14-$11.00     $    776           $ 0.87
  Options canceled......................      27,128      (27,128)           0.14           (4)            0.14
  Options repurchased...................       5,250                                        --
  Options exercised.....................          --     (599,627)      0.14-0.29         (101)            0.17
                                          ----------  -----------   -------------  --------------
Balances, September 30, 1996............   2,287,498      268,125      0.14-11.00          671             2.50
  Options granted.......................    (600,643)     600,643      0.80-41.88       13,366            22.25
  Options canceled......................      14,870      (14,870)     1.60-26.50         (315)           21.18
  Options repurchased                          5,471                                        --
  Options exercised.....................          --      (48,668)      0.14-4.00          (27)            0.55
                                          ----------  -----------   -------------  --------------
Balances, September 30, 1997............   1,707,196      805,230      0.14-41.88       13,695            17.01
  Options granted.......................    (961,500)     961,500     21.75-44.75       22,663            23.57
  Options canceled......................      41,440      (41,440)     4.00-33.63         (906)           21.87
  Options repurchased...................      22,071           --                           --
  Options exercised.....................          --      (14,540)     0.14-11.00         (123)            8.43
                                          ----------  -----------   -------------  --------------
Balances, December 31, 1997.............     809,207    1,710,750      0.14-44.75       35,329            20.65
  Options authorized....................     750,000           --
  Options granted.......................  (2,314,534)   2,314,534      7.50-25.00       24,490            10.58
  Options canceled......................   1,989,457   (1,989,457)     0.86-44.75      (44,662)           22.65
  Options exercised.....................          --      (50,743)     0.14-21.00         (221)            3.92
                                          ----------  -----------   -------------  --------------
Balances, December 31, 1998.............   1,234,130    1,985,084     $0.14-26.50     $ 14,936             7.73
                                          ----------  -----------   -------------  --------------
                                          ----------  -----------   -------------  --------------
</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.
 
                                       47
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
8.  COMMON STOCK (CONTINUED)
    The following table summarizes information with respect to stock options
outstanding at December 31, 1998.
 
<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING
--------------------------------------------------------------------
                               WEIGHTED AVERAGE
   RANGE OF      NUMBER AT         REMAINING
   EXERCISE     DECEMBER 31,   CONTRACTUAL LIFE    WEIGHTED AVERAGE
    PRICES          1998            (YEARS)         EXERCISE PRICE
--------------  ------------  -------------------  -----------------
<S>             <C>           <C>                  <C>
$0.14               100,926             7.14           $    0.14
$0.80-$ 7.50         42,589             7.78                2.85
$7.59-$ 7.63        498,000             9.95                7.59
$8.25-$ 8.31      1,267,389             8.84                8.31
$8.44-$26.50         76,180             8.45               11.71
                ------------
                  1,985,084             9.00                7.73
                ------------
                ------------
</TABLE>
 
    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>
                                   EIGHT MONTHS                  THREE MONTHS
                                       ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                       1996           1997           1997           1998
                                   -------------  -------------  -------------  ------------
<S>                                <C>            <C>            <C>            <C>
Risk-free interest rates.........      6.44%          6.32%          5.71%         4.54%
Expected life....................    4.92 years     4.92 years     3.50 years    3.50 years
Volatility.......................      0.0%           60.0%          86.0%         119.0%
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 No. 123:
 
<TABLE>
<CAPTION>
                                   EIGHT MONTHS                  THREE MONTHS
                                       ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                       1996           1997           1997           1998
                                   -------------  -------------  -------------  -------------
                                             (IN THOUSANDS EXCEPT PER SHARE DATA):
<S>                                <C>            <C>            <C>            <C>
Net loss--pro forma..............    $  (8,362)     $  (3,736)    $   (36,560)    $    (847)
Basic and diluted net loss per
  share..........................    $   (1.30)     $   (0.31)    $     (2.65)    $   (0.06)
</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.
 
                                       48
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
9.  BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS (CONTINUED)
    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 61%, 55%, 65%, 57% and 50% of net revenue for the
four months ended January 31, 1996, the eight months ended September 30, 1996,
the year ended September 30, 1997, the three months ended December 31, 1997 and
the year ended December 31, 1998, respectively.
 
    In the four months ended January 31,1996, the eight months ended September
30, 1996, the year ended September 30, 1997, the three months ended December 31,
1997 and the year ended December 31, 1998, two customers accounted for 61% and
39%; 55% and 45%; 56% and 44%, 32% and 65%; and 19% and 76% 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.
 
10. INCOME TAXES
 
    The provision for (benefit from) income taxes consists of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                SPLASH TECHNOLOGY HOLDINGS INC.
                                   ----------------------------------------------------------
                                   EIGHT MONTHS                  THREE MONTHS
                                       ENDED       YEAR ENDED        ENDED       YEAR ENDED
                                   SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,   DECEMBER 31,
                                       1996           1997           1997           1998
                                   -------------  -------------  -------------  -------------
<S>                                <C>            <C>            <C>            <C>
Current:
  Federal........................   $     4,690     $   7,635      $   1,822      $   4,510
  State..........................         1,210         1,322            374            671
                                   -------------       ------         ------         ------
                                          5,900         8,957          2,196          5,181
                                   -------------       ------         ------         ------
Deferred:
  Federal........................        (9,794)          401            143            901
  State..........................        (1,615)           62             (9)            (3)
                                   -------------       ------         ------         ------
                                        (11,409)          463            134            898
                                   -------------       ------         ------         ------
  Total..........................   $    (5,509)    $   9,420      $   2,330      $   6,079
                                   -------------       ------         ------         ------
                                   -------------       ------         ------         ------
</TABLE>
 
                                       49
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
10. INCOME TAXES (CONTINUED)
    The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
 
<TABLE>
<CAPTION>
                                          PREDECESSOR                       SPLASH TECHNOLOGY HOLDINGS, INC.
                                           BUSINESS       --------------------------------------------------------------------
                                       -----------------   EIGHT MONTHS       YEAR ENDED       THREE MONTHS      YEAR ENDED
                                       FOUR MONTHS ENDED  ENDED SEPTEMBER    SEPTEMBER 30,    ENDED DECEMBER    DECEMBER 31,
                                       JANUARY 31, 1996      30, 1996            1997            31, 1997           1998
                                       -----------------  ---------------  -----------------  ---------------  ---------------
<S>                                    <C>                <C>              <C>                <C>              <C>
Tax provision at federal statutory
  rate...............................           34.0%            (35.0)%            35.0%            (35.0)%           35.0%
State taxes, net of federal tax
  benefit............................            6.1              (6.0)              6.2              (4.3)             4.9
Write-off of in-process and purchased
  technology.........................             --                --              29.7              51.7               --
Foreign sales corporation benefit....             --              (2.7)             (7.1)             (1.6)            (2.8)
Tax exempt interest..................             --                --              (1.5)               --             (3.4)
Other................................           (0.1)              3.5               2.6               0.6             (2.3)
                                                 ---             -----               ---             -----              ---
  Total..............................           40.0%            (40.2)%            64.9%             11.4%            31.4%
                                                 ---             -----               ---             -----              ---
                                                 ---             -----               ---             -----              ---
</TABLE>
 
    The components of the deferred tax asset are as follows (IN THOUSANDS):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,  DECEMBER 31,
                                                                       1997          1998
                                                                   ------------  ------------
<S>                                                                <C>           <C>
Deferred tax assets:
In-process and purchased technology..............................   $    8,287    $    7,675
Receivable allowances and product related liabilities............          695         2,136
Inventory valuation allowance....................................        1,149           769
State taxes......................................................          447            --
Deferred revenue.................................................          164           304
Net operating losses.............................................        2,797         2,891
All other........................................................        1,753           619
                                                                   ------------  ------------
  Total deferred tax assets......................................       15,292        14,394
Long term portion of deferred tax asset..........................      (11,198)      (10,514)
                                                                   ------------  ------------
Current portion of deferred tax asset............................   $    4,094    $    3,880
                                                                   ------------  ------------
                                                                   ------------  ------------
</TABLE>
 
    At December 31, 1998, 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 $804,000 and $314,000 for the years ended
September 30, 1997 and December 31, 1998, was credited directly to additional
paid-in-capital. There was no benefit for the year ended September 30, 1996 and
the three months ended December 31, 1997.
 
                                       50
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
10. INCOME TAXES (CONTINUED)
    At December 31, 1998, the Company had approximately $8.1 million of federal
net operating loss carryforwards and $369,000 of research and development tax
credits available to offset future federal income taxes. The federal
carryforwards expire in 2005 through 2012 if not utilized. For state income tax
purposes, the Company had approximately $1.8 million of net operating loss
carryforwards and research and development tax credits of approximately $.3
million. The state carryforwards expire in 1999 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 $700,000.
 
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 15% 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 year
ended December 31, 1998, the Company recorded approximately $180,000, $78,000
and $261,000, respectively, of contributions to the Plan.
 
12. ACQUISITIONS
 
    On May 28, 1997, the Company acquired the shares of Quintar Holdings
Corporation ("Quintar") for an aggregate purchase price of $13,532,000. The
purchase price was comprised of a cash payment of $11,519,000, issuance of
Company stock options valued at $1,588,000 in exchange for Quintar stock options
and net acquisition costs of $425,000.
 
    On October 30, 1997, the Company acquired the shares of ColorAge Corporation
("ColorAge") for an aggregate purchase price of $29.4 million. The purchase
price was comprised of a cash payment of approximately $25.5 million, issuance
of common stock with a fair value of approximately $2.9 million in exchange for
all outstanding ColorAge stock, and net acquisition costs of $1.0 million. The
shares of the Company's common stock, which have been placed in escrow, have
been included in the purchase consideration at consummation because the outcome
of the contingency upon which release of the escrowed shares is dependent can be
determined in the Company's judgment, based upon the applicable facts and
circumstances, beyond reasonable doubt.
 
    The acquisitions were accounted for using the purchase method of accounting
and the results of acquisitions were included in the Company's results from the
dates of acquisition. The purchase price was
 
                                       51
<PAGE>
                        SPLASH TECHNOLOGY HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
12. ACQUISITIONS (CONTINUED)
allocated to the tangible and intangible assets and liabilities acquired based
on their estimated fair values at the transaction closing date as follows (IN
THOUSANDS):
 
<TABLE>
<CAPTION>
                                                                           QUINTAR   COLORAGE
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Current assets..........................................................  $     784  $   1,917
Other assets............................................................        170        192
Deferred tax asset......................................................      3,300        266
Goodwill................................................................         --      1,355
Liabilities.............................................................     (1,761)    (2,035)
In-process research and development and purchased technology............     11,039     27,735
                                                                          ---------  ---------
                                                                          $  13,532  $  29,430
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    Summary unaudited pro forma information for the combined results of
operations of acquisitions and the Company is presented below. The pro forma
information assumes the acquisitions occurred on October 1, 1995 and presents
the combined results of the companies, excluding the $11.0 million and $26.9
million nonrecurring write-offs of in-process research and development
activities for Quintar and ColorAge, respectively, for which there were no
alternative future uses and technological feasibility had not been established.
 
<TABLE>
<CAPTION>
                                                                                THREE MONTHS
                                                   YEAR ENDED     YEAR ENDED        ENDED
                                                  SEPTEMBER 30,  SEPTEMBER 30,  DECEMBER 31,
                                                      1996           1997           1997
                                                  -------------  -------------  -------------
                                                     (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                               <C>            <C>            <C>
Net revenue.....................................   $    53,104     $  78,922      $  23,025
Operating income (loss).........................   $   (12,541)    $  22,847      $   5,963
Net income (loss)...............................   $    (8,530)    $  14,666      $   4,242
Basic net income (loss) per share...............   $     (0.89)    $    1.22      $    0.31
Shares used in computing basic per share
  amounts.......................................         9,583        12,002         13,859
Diluted net income (loss) per share.............   $     (0.89)    $    1.18      $    0.30
Shares used in computing diluted per share
  amounts.......................................         9,583        12,423         14,265
</TABLE>
 
                                       52
<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 31, 1999.
 
<TABLE>
<S>                             <C>  <C>
                                SPLASH TECHNOLOGY HOLDINGS, INC.
 
                                By:          /s/ KEVIN K. MACGILLIVRAY
                                     -----------------------------------------
                                               Kevin K. Macgillivray
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
 
                               POWER OF ATTORNEY
 
    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Kevin Macgillivray and Joan Platt 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
  /s/ KEVIN K. MACGILLIVRAY       Chief Officer
------------------------------    (Principal Executive        March 31, 1999
    Kevin K. Macgillivray         Officer)
 
                                Chief Financial Officer
                                  and Vice President,
      /s/ JOAN P. PLATT           Finance
------------------------------    and Administration          March 31, 1999
        Joan P. Platt             (Principal Financial and
                                  Accounting Officer)
 
     /s/ GREGORY M. AVIS
------------------------------  Director                      March 31, 1999
       Gregory M. Avis
 
    /s/ CHARLES W. BERGER
------------------------------  Director                      March 31, 1999
      Charles W. Berger
 
      /s/ PETER Y. CHUNG
------------------------------  Director                      March 31, 1999
        Peter Y. Chung
 
    /s/ LAWRENCE G. FINCH
------------------------------  Director                      March 31, 1999
      Lawrence G. Finch
</TABLE>
 
                                       53
<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 form10-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
 
January 27, 1999
San Jose, California
 
                                       54
<PAGE>
                          FINANCIAL STATEMENT SCHEDULE
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                         BALANCE AT BEGINNING                               BALANCE AT
VALUATION FOR DOUBTFUL ACCOUNTS                                OF PERIOD         ADDITIONS   DEDUCTIONS    END OF PERIOD
-------------------------------------------------------  ---------------------  -----------  -----------  ---------------
<S>                                                      <C>                    <C>          <C>          <C>
Four months ended January 31, 1996(1)..................        $      84         $      17    $      --      $     101
Eight months ended September 30, 1996..................              101               198           --            299
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
</TABLE>
 
<TABLE>
<CAPTION>
                                                             BALANCE AT                                  BALANCE AT
VALUATION FOR INVENTORY RESERVES                         BEGINNING OF PERIOD   ADDITIONS   DEDUCTIONS   END OF PERIOD
-------------------------------------------------------  -------------------  -----------  -----------  -------------
<S>                                                      <C>                  <C>          <C>          <C>
Four months ended January 31, 1996(1)..................       $     550        $      --    $    (550)    $      --
Eight months ended September 30, 1996..................              --            1,028           --         1,028
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
</TABLE>
 
------------------------
 
(1) Predecessor Business
 
                                       55
<PAGE>
                                 EXHIBIT 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 February 26, 1998.
 
    10.2b(1)     Form of 1996 Stock Option Plan Stock Option Agreement.
 
     10.3(1)     1996 Employee Stock Purchase Plan 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.
 
     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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER                                        DESCRIPTION OF DOCUMENT
---------------  -------------------------------------------------------------------------------------------------
<C>              <S>
        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 Securities and Exchange
    Commission on August 5, 1996.
 
(2) Incorporated by reference to the Registrant's filing on Form 8-K filed with
    the Securities and Exchange Commission 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 Securities and Exchange Commission on November 13, 1997, as amended on
    December 24, 1997.
 
(4) Incorporated by reference to Registrant's Report on form 8A filed with the
    Securities and Commission on January 28, 1999
 
(5) Incorporated by reference to Registrant's filing on Form 10Q filed with the
    Securities and Exchange Commission on August 14, 1998.
 
(6) Incorporated by reference to Registrant's filing on Form 10Q filed with the
    Securities and Exchange Commission on May 15, 1998.
 
(B) FINANCIAL STATEMENT SCHEDULES
 
    Schedule II--Valuation and Qualifying Accounts
    Consent of PricewaterhouseCoopers LLP