DELTAPOINT INC, POS AM, 1997-04-25

DELTAPOINT INC
POS AM, 1997-04-25
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997.

REGISTRATION NO. 333-17733
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DELTAPOINT, INC.

(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
CALIFORNIA 7372 77-0216760
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>

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<TABLE>
<S> <C>
22 LOWER RAGSDALE DRIVE JEFFREY F. AIT
MONTEREY, CALIFORNIA 93940 CHIEF EXECUTIVE OFFICER
(408) 648-4000 DELTAPOINT, INC.
(Address, including zip code, and 22 LOWER RAGSDALE DRIVE
telephone number, including area code, MONTEREY, CALIFORNIA 93940
of registrant's principal executive (408) 648-4000
offices) (Name, address, including zip code,
and telephone number, including area
code, of agent for service)
</TABLE>

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COPIES TO:

BROOKS STOUGH, ESQ.
HOWARD L. CHABNER, ESQ.
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
(415) 321-2400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value (1)........ 300,896 $7.875(2) $2,369,556 $719.00
</TABLE>

(1) Such securities have been registered for resale by the Selling Shareholders
and their assigns and transferees on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, as amended (the "Act").

(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(c) promulgated under the Securities Act of
1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.

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<PAGE>
PROSPECTUS

300,896 SHARES OF COMMON STOCK

THE 300,896 SHARES (THE "SHARES") OF COMMON STOCK (THE "COMMON STOCK") OF
DELTAPOINT, INC., A CALIFORNIA CORPORATION (THE "COMPANY"), COVERED BY THIS
PROSPECTUS ARE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY THAT MAY BE
SOLD FROM TIME TO TIME BY CERTAIN SHAREHOLDERS OF THE COMPANY (THE "SELLING
SHAREHOLDERS"). THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE
OF THE SHARES BY THE SELLING SHAREHOLDERS.

The Company has been advised by the Selling Shareholders that they may sell
all or a portion of the Shares from time to time over the counter or in the
Pacific Stock Exchange, to the extent such shares may be traded on such markets,
in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The Selling Shareholders and any broker-dealers, agents or
underwriters that participate with the Selling Shareholders in the distribution
of any of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution."

The Company will bear all of the cost of preparing and printing the
Registration Statement, Prospectus and any Prospectus supplements and all filing
fees and legal and accounting expenses associated with registration under
federal and state securities laws, which are estimated at $30,000. The Selling
Shareholders will pay all other expenses including brokerage fees, if any,
related to the distribution of the Shares. See "Plan of Distribution."

On April 24, 1997, the last sale price of the Company's Common Stock, as
reported on the OTC Bulletin Board under the symbol DTPT, was $2.06.

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS APRIL 25, 1997

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AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. In addition, registration statements and certain other
documents filed with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system are publicly available through the
Commission's site on the Internet's World Wide Web, located at
HTTP://WWW.SEC.GOV. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR. Copies
of such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Company's Common Stock is quoted on the OTC Bulletin Board under the
symbol "DTPT." Reports, proxy statements and other information concerning the
Company may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement on Form
SB-2, including amendments thereto, under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith. Statements contained in this Prospectus regarding the contents
of any contract or any other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission, each statement being qualified in all respects by such
reference. The Registration Statement may be inspected without charge at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part thereof may be obtained from such office upon the
payment of the fees prescribed by the Commission.

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DeltaPoint and DeltaGraph are registered trademarks of the Company and Chart
Server, Drag 'n Draw, DeltaPoint, WebAnimator, Web Tools and QuickSite are or
may be trademarks of the Company. All other product, brand or trade names are
trademarks or registered trademarks of their respective owners.

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SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS
URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

DeltaPoint, Inc. ("DeltaPoint" or the "Company") develops and markets
Internet software tools designed to allow users to effectively and easily
create, manage and enhance sites on the Internet's World Wide Web. The Company
introduced QuickSite in February 1996 to enable novice and experienced site
publishers to rapidly create, maintain and enhance robust Web sites. Since its
introduction, the Company believes that QuickSite has received more awards than
any other Web site creation and management tool, winning the PC WEEK Analyst's
Choice award in March 1996, WINDOWS MAGAZINE recommended seal and the PC WEEK
Labs IT Excellence Award in April 1996, and the PC COMPUTING 5 Star rating in
June 1996. The Company introduced WebTools in March 1996 to allow developers,
value-added resellers ("VARs") and corporate MIS directors to add Web publishing
capabilities to existing applications and introduced WebAnimator in July 1996 to
allow a broad range of Web users to easily add multimedia and interactive
animation to a Web site. In addition, in September 1996 the Company introduced
QuickSite Developer's Edition, a new high end version of QuickSite designed for
professional Web developers and corporate Intranet developers. QuickSite
Developer's Edition earned the PC COMPUTING 5 Star rating in February 1997.

A key element of the Company's objective of becoming a leading Internet
software tools provider is to increase its strategic alliances with key
partners. In September 1996, the Company entered into an agreement with the
Commerce Division of IBM to develop and license a customized version of
QuickSite for inclusion in IBM's recently announced World Distributor, an
on-line interactive electronic commerce service. In January 1997, the Company
delivered a beta version of the product to IBM and in February 1997 received a
$150,000 milestone payment. The Company has also entered into agreements with
Borland International, Sony, McGraw-Hill, Earthlink, Compaq and Netcom
Interactive to distribute existing or planned versions of QuickSite with their
products or services.

In the past, the Company has derived most of its revenues from the sale of
charting and graphics software products. The Company currently offers
DeltaGraph, an advanced cross-platform charting and graphics product. The
Company continues to de-emphasize its charting and graphics products and expects
that they will represent a declining percentage of its business in the future.

The Company was incorporated in California in 1989, its headquarters are
located at 22 Lower Ragsdale Drive, Monterey, California 93940, and its
telephone number is (408) 648-4000.

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3
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
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<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................................................................... $ 4,043 $ 4,950
Gross profit............................................................................... 2,706 3,769
Loss from operations....................................................................... (2,486) (4,922)
Net loss................................................................................... (2,632) (4,848)
Net loss per share (1)..................................................................... $ (2.42) $ (2.17)
Shares used to compute net loss per share (1).............................................. 1,086 2,231
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
1996
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BALANCE SHEET DATA:
<S> <C>
Cash and cash equivalents................................................. $ 3,142
Working capital........................................................... 431
Total assets.............................................................. 6,346
Accumulated deficit....................................................... (13,666)
Total shareholders' equity................................................ $ 1,041
</TABLE>

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(1) For an explanation of the number of shares used to compute net loss per
share, see Note 1 of Notes to Financial Statements.

THE OFFERING

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<S> <C>
Common Stock offered by the Selling
Shareholders.......................... 300,896 shares
Common Stock outstanding as of March
31, 1997 (1).......................... 2,489,873 shares
OTC Bulletin Board Symbol.............. DTPT
</TABLE>

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(1) Excludes (i) 110,000 shares of Common Stock issuable upon exercise of a
warrant (the "Representative's Warrant") granted to the representative of
the underwriters (the "Representative") in connection with the initial
public offering of the Company's Common Stock on December 20, 1995 ("IPO"),
(ii) 71,875 shares of Common Stock issuable pursuant to warrants outstanding
at March 31, 1997 at an exercise price of $7.20 per share, (iii) 736,175
shares of Common Stock issuable pursuant to options outstanding at December
31, 1996, (iv) 1,048,780 shares of Common Stock issuable upon conversion of
Convertible Notes (as defined below) issued in the Debt Financing (as
defined below), based upon an assumed conversion price of $2.05 per share,
and (v) 16,538 shares of Common Stock issuable upon exercise of a placement
agent's warrant (the "Placement Agent's Warrant") issued in the Debt
Financing. See "Management -- 1990 Key Employee Incentive Stock Option
Plan," "Management -- 1992 Non-Statutory Stock Option Plan," "Management --
1995 Stock Option Plan," "Description of Capital Stock -- Warrants and
Convertible Notes; and -- Preferred Stock" and Notes 5, 8, 9 and 11 to
Financial Statements.

4
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RISK FACTORS

The shares of Common Stock offered hereby involve a high degree of risk and
should be considered only by persons who can afford the loss of their entire
investment. See "Risk Factors" beginning on page 6.

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EXCEPT AS OTHERWISE SPECIFIED, ALL INFORMATION IN THIS PROSPECTUS DOES NOT
REFLECT THE EXERCISE OF OPTIONS OR WARRANTS AFTER DECEMBER 31, 1996. IN
ADDITION, THIS PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS."

5
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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED
HEREBY. NO INVESTOR SHOULD PARTICIPATE IN THE OFFERING UNLESS SUCH INVESTOR CAN
AFFORD A COMPLETE LOSS OF HIS OR HER INVESTMENT. THE DISCUSSION IN THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS."

RECENT AND EXPECTED LOSSES; ACCUMULATED DEFICIT; GOING CONCERN ASSUMPTION;
QUARTERLY FLUCTUATIONS IN PERFORMANCE

The Company incurred a net loss of $4,848,000 for the year ended December
31, 1996, and had an accumulated deficit of $13,666,000 as of December 31, 1996.
The Company expects to incur losses for at least the next 12 months, and perhaps
longer. There can be no assurance that the Company will not incur significant
additional losses until it successfully markets and sells existing Internet
software tools or develops or acquires new Internet software tools or
enhancements to existing Internet software tools that generate significant
revenues.

The Company's independent accountants' report on its financial statements as
of and for the years ended December 31, 1996 and 1995 contains an explanatory
paragraph indicating that the Company's accumulated deficit and historical
operating losses raise substantial doubts about its ability to continue as a
going concern. The factors leading to, and the existence of, the explanatory
paragraph may materially adversely affect the Company's relationship with
customers and suppliers, its ability to obtain revenue and manufacture products
and its ability to obtain financing. Although the financial statements have been
prepared assuming the Company will continue as a going concern, additional
equity or debt financing may be required to enable the Company to continue its
operations and achieve its plans for 1997 and beyond. Management is currently
pursuing additional capital financing, although recent attempts to secure such
financing on acceptable terms have not been successful. If the Company is unable
to obtain such financing, it will be required to seek financing from other
sources or reduce discretionary spending in order to maintain operations at a
reduced level. Among other things, the Company may seek to raise additional
financing through a corporate partnering relationship or by selling assets and
may seek to reduce discretionary spending by reducing existing programs.
Management believes that it will be able to obtain additional financing or
reduce discretionary spending if required. The accompanying financial statements
do not include any adjustments that may result from the outcome of these
uncertainties. See Notes 1 and 11 of Notes to Financial Statements.

The Company's results of operations have historically varied substantially
from quarter to quarter and the Company expects they will continue to do so. In
the past, the Company's operating results have varied significantly as a result
of a number of factors, including the size and timing of customer orders or
license agreements, product mix, the revenues derived from product sales and
license fees, the existence and terms of royalty and packaging arrangements,
seasonality, the timing of the introduction and customer acceptance of new
products or product enhancements by the Company's competitors, new product or
version releases by the Company, changes in pricing policies by the Company or
its competitors, marketing and promotional expenditures, research and
development expenditures and changes in general economic conditions.
Furthermore, the Company has often recognized a substantial portion of its
revenues in the last month of the quarter, with these revenues frequently
concentrated in the last week or weeks of the quarter.

The Company's operating and other expenses are relatively fixed in the short
term. As a result, variations in timing of revenues can cause significant
variations in quarterly results of operations. For example, the Company intends
to continue to make significant expenditures to enhance its sales and marketing
activities and to continue to make significant expenditures for research and
development

6
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activities. As such expenditures occur, the Company may be unable to reduce such
expenditures quickly if revenue is less than expected. The Company generally
does not operate with a significant order backlog and a substantial portion of
its revenue in any quarter is derived from orders booked in that quarter, which
are difficult to forecast and which are typically concentrated at the end of the
quarter. Accordingly, the Company's sales expectations are based almost entirely
on its internal estimates of future demand and not on firm customer orders. Due
to the foregoing factors, the Company believes that quarter to quarter
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. In addition,
there can be no assurance the Company will be profitable on a quarter to quarter
or any other basis in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Financial Statements.

CRITICAL NEED FOR ADDITIONAL CAPITAL; NO ASSURANCE OF FUTURE FINANCING

As of December 31, 1996, the Company's cash and cash equivalents was
approximately $3,142,000, including approximately $1,949,000 in net proceeds
from a convertible debt financing (the "Debt Financing"). In the Debt Financing,
the Company issued $2,150,000 principal amount of 6% convertible subordinated
notes (the "Convertible Notes") that are convertible at the option of the
holders thereof into shares of Common Stock in three (3) separate tranches
beginning 60, 90 and 120 days after the date of issuance of such Convertible
Notes (the "Debt Financing Closing"), at a conversion price ("the Conversion
Price") equal to the lower of (i) 80% of the average closing bid price of the
Common Stock, as publicly reported, for the five business days prior to the
business day on which notice of conversion is transmitted by the note holder
(or, in the event of automatic conversion as described below, five business days
prior to the business day on which the conversion is deemed to take place) or
(ii) $6.70. All unconverted Convertible Notes will convert automatically into
Common Stock at the Conversion Price on the second anniversary of the Debt
Financing Closing, or earlier in the event of a merger of the Company into
another entity, a change in control of the Company or a sale of all or
substantially all the Company's assets. The Conversion Price is subject to
adjustment in certain circumstances. In addition, the Conversion Price is
subject to reduction as specified in the Convertible Notes if the Company does
not fulfill certain obligations to file a registration statement in a timely
manner for the shares of Common Stock issuable upon conversion of the
Convertible Notes. The Convertible Notes may be redeemed by the Company at 120%
of the principal amount being redeemed, plus accrued interest, at the Company's
sole election if the average closing offer price for the Common Stock for any
five-day period is below $4.00. Moreover, no holder may convert any principal
amount of Convertible Notes, without the Company's prior written consent, if
such conversion would cause such holder's aggregate ownership of the Company's
capital stock to exceed 4.9% of the Company's then issued and outstanding
capital stock. Although the Company believes that its existing and available
cash resources should be sufficient to meet its operating requirements through
1997, there can be no assurance that such cash resources will be sufficient to
satisfy the Company's operating requirements. The Company's actual capital
needs, however, will depend upon numerous factors, including the progress of the
Company's software development activities, the cost of increasing the Company's
sales and marketing activities and the amount of revenues generated from
operations, none of which can be predicted with certainty. There can be no
assurance that the Company will not require additional capital sooner than
currently anticipated. There can be no assurance that any additional required
financing will be available to the Company on acceptable terms, or at all. The
inability to obtain required financing would have a material adverse effect on
the Company's business, financial condition and results of operation. The
Company could be required to significantly reduce or suspend its operations,
seek a merger partner or sell additional securities on terms that are highly
dilutive for current investors in the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Financial
Statements.

SUBSTANTIAL DEPENDENCE ON RECENTLY INTRODUCED INTERNET SOFTWARE TOOLS

Prior to 1996, DeltaPoint derived substantially all of its product revenues
from licenses of DeltaGraph, its advanced charting and graphics software
product. However, DeltaPoint's future

7
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revenue growth will continue to depend largely on the successful development,
introduction and commercial acceptance of its Internet software tools. These
consist of: QuickSite, its Web page creation and site management product
introduced in February 1996; WebTools, its Web publishing capability tool
introduced in March 1996; WebAnimator, its multimedia authoring tool for the Web
introduced in July 1996; and QuickSite Developer's Edition, its enhanced version
of QuickSite for Web site developers and corporate Intranet developers
introduced in September 1996. Commercial acceptance of the Company's Internet
software tools will require the Company to establish additional distribution
channels and sales and marketing methods, of which there can also be no
assurance, because these products will be targeted to existing customers as well
as to a significantly different potential end user population. There can be no
assurance that the Company can successfully manage the introduction of new
versions of its existing Internet software tools or any other potential Internet
software tools or that any of its existing or potential products will achieve
significant market acceptance. Failure of any of the Company's existing or
potential products to achieve significant market acceptance will have a material
adverse effect on the Company's business, financial condition and results of
operation. See "Business -- Strategy," "-- Products" and "-- Marketing and
Distribution."

DEPENDENCE ON INTERNET

Sales of the Company's Internet software tools will depend in part upon a
robust industry and infrastructure for providing Internet access and carrying
Internet traffic. The Internet continues to be at an early stage of development.
There can be no assurance that the infrastructure or complementary products
necessary to make the Internet a viable commercial marketplace will be
developed, or, if developed, that the Internet will become a viable commercial
marketplace. If the Internet does not become a viable commercial marketplace,
the commercial benefits derived from the Company's Internet software tools would
be materially adversely effected. See "Business -- Products" and "-- Marketing
and Distribution."

RISKS ASSOCIATED WITH RETAIL DISTRIBUTION; SUBSTANTIAL CUSTOMER CONCENTRATION

DeltaPoint sells its products to distributors for resale to certain
retailers, including computer superstores and mass merchandisers. Sales to a
limited number of distributors and retailers have constituted, and are
anticipated to continue to constitute, a significant portion of DeltaPoint's
retail software sales. In particular, revenues from licenses sold to Nippon
Polaroid Kabushiki Kaisha, the Company's Japanese distributor, constituted
approximately 35% and 21% of the Company's net revenues for the years ended
December 31, 1995 and 1996, respectively. Sales to Ingram Micro Inc. constituted
approximately 13% and 30% of the Company's net revenues for the years ended
December 31, 1995 and 1996, respectively. Any termination or significant
disruption of DeltaPoint's relationship with any major distributor or retailer,
or a significant reduction in sales volume attributable to any of such entities,
could, unless or until replaced, materially adversely affect the Company's
business, financial condition and results of operations. A deterioration in
financial condition or other business difficulties of a distributor or retailer
could render the Company's accounts receivable from such entity uncollectible,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that DeltaPoint's
existing distributors and retailers will continue to provide DeltaPoint's
products with adequate levels of shelf space or promotional support. In
addition, personal computer hardware and software companies have generally
reported declines in gross margins and greater product returns as they have
increased sales through the mass merchandise distribution channel. The Company
expects that its margins will be similarly affected as it increases sales
through this channel. See "Business -- Marketing and Distribution."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

The Company's revenues from international operations accounted for
approximately 40% and 26% of the Company's net revenues in 1995 and 1996,
respectively, of which approximately 87% and 79%, respectively, were derived
from sales in Japan. The Company expects that revenues from these international
operations will continue to represent a large percentage of its net revenues.
International revenues are subject to a number of risks, including greater
difficulties in accounts receivable

8
<PAGE>
collection, longer payment cycles, exposure to currency fluctuations, political
and economic instability and the burden of complying with a wide variety of
foreign laws and regulatory requirements. The Company also believes that it is
exposed to greater levels of software piracy in international markets because of
the weaker protection afforded to intellectual property in some foreign
jurisdictions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business -- Strategy" and "-- Marketing and
Distribution."

RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DELAYS; RISK OF PRODUCT DEFECTS

The markets in which the Company competes are characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer requirements.
The introduction of products embodying new technologies and the emergence of new
industry standards and practices can render existing products obsolete and
unmarketable. The Company's future success depends upon its ability on a timely
basis to enhance its existing products, introduce new products that address the
changing requirements of its customers and anticipate or respond to
technological advances, emerging industry standards and practices in a timely,
cost-effective manner. There can be no assurance that the Company will be
successful in developing, introducing and marketing new products or enhancements
to existing products or will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of these products,
or that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve any significant degree of commercial
acceptance. Software products such as those offered by the Company often contain
errors or "bugs" that can adversely affect the performance of the product or
damage a user's data. The Company has in the past discovered software defects in
its products that have adversely affected its business and operating results. If
the Company is unable, for technological or other reasons, to develop and
introduce new products or enhancements of existing products in a timely manner
or if new versions of existing products contain unacceptable levels of product
defects or do not achieve a significant degree of market acceptance, or any of
the above situations occur there could be a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Marketing and Distribution" and "-- Research and Development."

COMPETITION

The Company competes on the basis of certain factors, including product
quality, first-to-market product capabilities, product performance, ease of use,
customer support and price. The Company believes it currently competes favorably
overall with respect to these factors.

The markets in which the Company competes are highly competitive and
characterized by rapid technological change, frequent new product introductions,
short product lives, evolving industry standards and significant price erosion
over the life of the product. The Company anticipates increased competition in
these markets from both existing vendors and new market entrants. In the
charting market, the Company has, to date, encountered competition primarily
from larger vendors such as Adobe Systems Incorporated, Microsoft Corporation
("Microsoft"), Software Publishing Corporation, Lotus, Corel and Computer
Associates International, Inc. In the structured drawing market, the Company
has, to date, encountered competition primarily from larger vendors such as
Corel, Visio and Micrografx Incorporated. In the Internet software tools market,
the Company has encountered competition primarily from Netscape Communications
Corporation, Macromedia, Inc., Adobe Systems Incorporated, Microsoft, NetObjects
and Quarterdeck, Inc. IBM agreed in March, 1997 to acquire a majority interest
in NetObjects. In addition, the Company expects that existing vendors and new
market entrants will develop products that will compete directly with the
Company's products and that competition will increase significantly to the
extent that markets for the Company's products grow. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any of which could have material adverse effect on the Company's
business, financial condition and results of operations. Most of the Company's
current and potential competitors have substantially greater financial,
technical, marketing, sales and customer support resources, greater name
recognition and larger installed customer bases than the Company. Because there
are

9
<PAGE>
minimal barriers to entry into the software market, the Company believes sources
of competition will continue to proliferate. The market for the Company's
products is characterized by significant price competition, and the Company
expects it will face increasing pricing pressures. There can be no assurance the
Company will be able to maintain its historic pricing structure, and an
inability to do so would have a material adverse effect on the Company's
business, financial condition and results of operations. If the Company is
unable to compete effectively against current and future competitors, the
Company's business, financial condition and results of operations will be
materially adversely affected. See "Business -- Competition."

RELIANCE ON MICROSOFT

Microsoft Windows has gained widespread market acceptance as the dominant
computer operating system. Accordingly, the Company's products have been and it
is intended that they will continue to be designed to function in the Microsoft
Windows, Windows '95 or Windows NT environments, and anticipates future products
will also be designed for use in these Microsoft environments. Because the
Company expects that its Microsoft-based applications of these products will
account for a significant portion of new license revenue for the foreseeable
future, sales of these products would be materially and adversely affected by
market developments adverse to Microsoft Windows, Windows '95 and Windows NT.
The Company's ability to develop products using the Microsoft Windows, Windows
'95 and NT environments is substantially dependent on its ability to gain timely
access to, and to develop expertise in, current and future developments by
Microsoft, of which there can be no assurance. Moreover, the abandonment by
Microsoft of its current operating system, product line or strategy, or the
decision by Microsoft to develop and market products that directly or indirectly
compete with the Company's products would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Strategy" and "-- Competition."

DEPENDENCE ON LIMITED NUMBER OF KEY PERSONNEL

The Company's success depends to a significant extent upon the contributions
of several key personnel, some of whom were only recently hired by the Company.
The failure to attract and retain key personnel could have a material adverse
affect on the Company's business, financial condition and results of operations.
See "Management -- Executive Officers and Directors" and " -- Employment
Contracts."

RISKS ASSOCIATED WITH MANAGING BUSINESS

In recent years, the transition of the Company's business to Internet
software tools has challenged, and is expected to continue to challenge, the
Company's management and operations, including its sales, marketing, customer
support, research and development and finance and administrative operations. The
Company's future performance will depend in part on its ability to manage
growth, should it occur, both in its domestic and international operations and
to adapt its operational and financial control systems, if necessary, to respond
to changes resulting from such growth. The Company intends to continue to invest
in improving its financial systems and controls in connection with anticipated
increases in the level of its operations. Although the Company believes that its
systems and controls are adequate for its current level of operations, the
Company anticipates that it may need to add additional personnel and expand and
upgrade its financial systems to manage any future growth. The failure of the
Company's management to respond to and manage growth effectively could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

RELIANCE ON SOLE PRODUCT ASSEMBLER

All of the Company's software products are currently assembled (i.e., the
disk media, operating manual and other documentation are inserted in shrink wrap
packaging) by a related third party assembler that beneficially owns
approximately 1.5% of the Company's Common Stock as of March 31, 1997. Although
reliance on third party assemblers is common in the software industry and
DeltaPoint believes that other assemblers are available, the Company has no
formal contract with the

10
<PAGE>
assembler and the termination or interruption of this assembly arrangement could
have a material adverse effect on the Company's business, financial condition
and results of operations until an alternate assembler is secured.

RISKS ASSOCIATED WITH PRODUCT RETURNS; PRICE PROTECTION

Consistent with industry practice, the Company allows distributors,
retailers and end users to return products for credits towards the purchase of
additional products. In addition, DeltaPoint's promotional activities, including
free trial and satisfaction guaranteed offers, and competitors' promotional or
other activities could cause returns to increase sharply at any time. Further,
the Company expects that the rate of product returns could increase to the
extent that the Company introduces new versions of its existing products. For
example, product returns may increase above historical levels as a result of new
product introductions. In addition, if the Company reduces its prices, the
Company credits its distributors for the difference between the purchase price
of products remaining in their inventory and the Company's reduced price for
such products. Although the Company provides allowances for anticipated returns
and price protection obligations, and believes its existing policies have
resulted in the establishment of allowances that are adequate and have been
adequate in the past, there can be no assurance that such product returns and
price protection obligations will not exceed such allowances in the future and
as a result will not have a material adverse effect on future operating results,
particularly since the Company seeks to continually introduce new and enhanced
products and is likely to face increasing price competition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

LIMITED INTELLECTUAL PROPERTY PROTECTION

The Company's ability to compete effectively depends in large part on its
ability to develop and maintain proprietary aspects of its technology. Despite
precautions taken by the Company, it may be possible for unauthorized third
parties to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Moreover, the laws of some
foreign countries do not protect the Company's proprietary rights in its
products to the same extent as do the laws of the United States. The Company
licenses some of its products under "shrink wrap" license agreements that are
included in products shipped by the Company and are not signed by licensees,
therefore they may be unenforceable under the laws of certain jurisdictions. In
addition, some aspects of the Company's products are not subject to intellectual
property protection.

The Company cannot be certain that others will not independently develop
substantially equivalent or superseding proprietary technology, or that an
equivalent product will not be marketed in competition with the Company's
products, thereby substantially reducing the value of the Company's proprietary
rights. There can be no assurance that any confidentiality agreements between
the Company and its employees will provide adequate protection for the Company's
proprietary information in the event of any unauthorized use or disclosure of
such proprietary information. See "Business -- Proprietary Rights and Licenses."

Although the Company is not currently engaged in any intellectual property
litigation or proceedings, there can be no assurance that the Company will not
become involved in such proceedings. An adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities to
third parties, require disputed rights to be licensed from others or require the
Company to cease the marketing or use of certain products, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company may be required to obtain licenses to
patents or proprietary rights of others, and there can be no assurance that any
licenses required under any patents or proprietary rights would be made
available on terms acceptable to the Company, if at all. See "Business --
Property Rights and Licenses."

11
<PAGE>
CONCENTRATION OF SHARE OWNERSHIP

As of March 31, 1997, the executive officers and directors of the Company
and their affiliates, as a group, owned or controlled approximately 23.2% of the
outstanding capital stock of the Company. As a result, such persons and entities
will continue to exert significant influence over the business and affairs of
the Company. See "Principal and Selling Shareholders."

SHARES ELIGIBLE FOR FUTURE SALE

Sales in the public market of substantial amounts of Common Stock (including
sales in connection with an exercise of certain registration rights relating to
shares of Common Stock) or the perception that such sales could occur could
depress prevailing market prices for the Common Stock. In addition to the shares
of Common Stock registered for resale pursuant to the Registration Statement of
which this Prospectus is a part, the Company is filing with the Commission a
post-effective amendment to a registration statement covering the resale of up
to 123,625 shares of Common Stock, 259,610 shares of Common Stock issued or
issuable upon exercise of certain warrants and 71,875 warrants. In addition, the
Company has agreed to use its best efforts to register for resale under the
Securities Act the shares of Common Stock that are issuable upon conversion of
the Convertible Notes and to maintain the effectiveness of such registration for
a minimum of two years. The Company has filed an amendment to a registration
statement covering 1,048,780 of such shares (based on an assumed conversion
price of $2.05 per share). See "Description of Capital Stock -- Registration
Rights."

SUBSTANTIAL SHARES OF COMMON STOCK RESERVED

The Company has reserved 198,413 shares of Common Stock for issuance upon
exercise of outstanding warrants and 887,223 shares of Common Stock for issuance
to key employees, officers, directors and consultants pursuant to option
exercises or sales of Common Stock under the Stock Plans. The existence of the
aforementioned warrants and options and any other options or warrants may prove
to be a hindrance to future equity financing by the Company. Further, the
holders of such warrants, options and notes may exercise them at a time when the
Company would otherwise be able to obtain additional equity capital on terms
more favorable to the Company. See "Description of Capital Stock."

VOLATILITY OF STOCK PRICE; POSSIBLE ILLIQUIDITY OF TRADING MARKET; RECENT
DE-LISTING FROM NASDAQ SMALLCAP MARKET

The Company's stock price has exhibited substantial volatility since the
Company's IPO in December 1995. The trading price of the Company's Common Stock
could be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' estimates, announcements of
technological innovations by the Company or its competitors, general conditions
in the Internet tools and visualization software industries and other factors.
In addition, the stock market is subject to price and volume fluctuations that
affect the market prices for companies in general, and small capitalization,
high technology companies in particular, and are often unrelated to their
operating performance.

The shares of Common Stock were quoted on the Nasdaq SmallCap Market from
December 1995 until March 18, 1997 and are traded on the Pacific Stock Exchange
and quoted on the OTC Bulletin Board and the "pink sheets." The Common Stock was
delisted from the Nasdaq SmallCap Market effective March 19, 1997 because of
Nasdaq's determination that the Company failed to maintain certain requirements
for continued listing. As a result, it is more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's Common Stock. In
addition, because the Company's Common Stock was removed from the Nasdaq
SmallCap Market and its market price is less than $5.00 per share, it is subject
to so-called "penny stock" rules that impose additional sales practice and
market making requirements on broker-dealers who sell and/or make a market in
such securities. Consequently, removal from the Nasdaq SmallCap Market and the
applicability of such

12
<PAGE>

"penny stock" rules could adversely affect the ability or willingness of
broker-dealers to sell and/or make a market in the Company's Common Stock and
the ability of purchasers of the Company's Common Stock to sell their securities
in the secondary market.

NO ANTICIPATED DIVIDENDS

The Company has not previously paid any dividends on its Common Stock and
for the foreseeable future intends to continue its policy of retaining any
earnings to finance the development and expansion of its business and therefore
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

As permitted by California General Corporation Law, the Company has included
in its Restated Articles of Incorporation a provision to eliminate the personal
liability of its directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In addition,
the Bylaws of the Company provide that the Company is required to indemnify its
officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, and the
Company is required to advance expenses to its officers and directors as
incurred in connection with proceeding against them for which they may be
indemnified. The Company has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the California General
Corporation Law. See "Management -- Limitations on Liability and Indemnification
Matters."

13
<PAGE>
PRICE RANGE OF COMMON STOCK

The Company's Common Stock was quoted on the Nasdaq SmallCap Market under
the symbol "DTPT" from December 20, 1995 through March 18, 1997, when it was
delisted, and has been traded on the Pacific Exchange (formerly the Pacific
Stock Exchange) since December 1995 through the present, under the symbol
"DTP.P." The Common Stock is traded over-the-counter and is quoted on the OTC
Bulletin Board under the symbol "DTPT" and on the "pink sheets" and remains on
the Pacific Exchange. There can be no assurance that the Company will continue
to meet the requirements for listing on the Pacific Exchange.

The table below sets forth the high and low closing sale price of the Common
Stock for the periods indicated, as reported by the Nasdaq SmallCap Market
through March 18, 1997 and the OTC Bulletin Board thereafter. Prior to the
offering in December 1995, no established public trading market for the
Company's Common Stock existed.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------

<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Fourth quarter (from December 20,1995)............................................. $ 8.75 $ 8.00
YEAR ENDED DECEMBER 31, 1996
First quarter...................................................................... $ 9.75 $ 6.50
Second quarter..................................................................... $ 17.25 $ 9.50
Third Quarter...................................................................... $ 13.75 $ 5.88
Fourth quarter..................................................................... $ 11.75 $ 6.00
YEAR ENDING DECEMBER 31, 1997
First quarter...................................................................... $ 8.25 $ 2.25
Second quarter (through April 24, 1997)............................................ $ 3.00 $ 2.06
--------- ---------
</TABLE>

On April 24, 1997, the closing sale price for a share of the Company's
Common Stock, as reported on the OTC Bulletin Board, was $2.06. The Company's
Common Stock was quoted on the Nasdaq SmallCap Market from December 20, 1995
through March 18, 1997 under the symbol "DTPT." The Common Stock was delisted
from the Nasdaq SmallCap Market effective March 19, 1997 because of Nasdaq's
determination that the Company failed to meet certain requirements for continued
listing. See "Risk Factors -- Volatility of Stock Price; Illiquidity of Trading
Market; Delisting from Nasdaq SmallCap Market."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock, and the Company currently intends to retain any future earnings to fund
the development of its business and therefore does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future.

14
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company at December 31, 1996:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------
(IN THOUSANDS)
<S> <C>
Short-term debt..................................................................... $ 2,150
--------
--------

Shareholders' equity:
Preferred Stock, no par value, 4,000,000 shares authorized, none issued or
outstanding...................................................................... $ --
Common stock, no par value, 25,000,000 shares authorized, 2,485,540 shares issued
and outstanding; (1)............................................................. $ 14,707
Accumulated deficit............................................................... (13,666)
--------
Total shareholders' equity...................................................... $ 1,041
--------
Total capitalization.......................................................... $ 1,041
--------
--------
</TABLE>

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

(1) Excludes (i) 110,000 shares of Common Stock issuable upon exercise of a
warrant (the "Representative's Warrant") granted to the representative of
the several underwriters (the "Representative") in connection with the
initial public offering of the Company's Common Stock on December 20, 1995
("IPO"), (ii) 71,875 shares of Common Stock issuable pursuant to warrants
outstanding at December 31, 1996 at an exercise price of $7.20 per share,
(iii) 740,508 shares of Common Stock issuable pursuant to options
outstanding at December 31, 1996, (iv) the shares of Common Stock issuable
upon conversion of the Convertible Notes (a maximum of 1,048,780 shares of
Common Stock being so issuable assuming of the Convertible Notes are
immediately convertible in full and were converted as of April 7, 1997), and
(v) 16,538 shares of Common Stock issuable upon exercise of the Placement
Agent's Warrant issued in the Debt Financing. See "Management -- 1990 Key
Employee Incentive Stock Option Plan," "Management -- 1992 Non-Statutory
Stock Option Plan," "Management -- 1995 Stock Option Plan," "Description of
Capital Stock -- Warrants and Convertible Notes; and -- Preferred Stock" and
Notes 5, 8, 9 and 11 to Financial Statements.

15
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
Financial Statements and related Notes thereto appearing elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The statement of operations data for the years ended
December 31, 1995 and 1996 and the balance sheet data at December 31, 1995 and
1996 have been derived from the audited financial statements of the Company
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (IN THOUSANDS, EXCEPT FOR PER SHARE
DATA):
Net revenues.......................................................... $ 4,043 4,950
Cost of revenues...................................................... 1,337 1,181
---------- ----------
Gross profit........................................................ 2,706 3,769
---------- ----------
Operating expenses:
Sales and marketing................................................. 1,922 4,685
Research and development............................................ 2,036 2,618
General and administrative.......................................... 1,234 1,388
---------- ----------
5,192 8,691
---------- ----------
Loss from operations.................................................. (2,486) (4,922)
Interest income (expense)............................................. (146) 74
---------- ----------
Net loss.............................................................. $ (2,632) $ (4,848)
---------- ----------
---------- ----------
Net loss per share (1)................................................ $ (2.42) $ (2.17)
---------- ----------
---------- ----------
Shares used to compute net loss per share (1)......................... 1,086 2,231
---------- ----------
---------- ----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital........................................................................... $ 2,915 $ 431
Total assets.............................................................................. 6,764 6,346
Current liabilities....................................................................... 3,315 5,305
Total shareholders' equity................................................................ $ 3,449 $ 1,041
</TABLE>

- ------------------------
(1) For an explanation of the number of shares used to compute net loss per
share, see Note 1 of Notes to Financial Statements.

16
<PAGE>
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 SECTION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW AND IN "RISK FACTORS" AND "BUSINESS."

OVERVIEW

DeltaPoint was incorporated on February 1, 1989 to design, develop and
market visualization software products for personal computers. DeltaPoint
commenced shipments of its initial product, DeltaGraph, at the end of 1989. In
November 1995, the Company acquired technology required to develop WebAnimator,
a multimedia authoring tool for the Web. In December 1995, the Company acquired
technology to develop QuickSite, a Web site creation and management tool which
was released in February 1996. The Company introduced WebTools in March 1996,
WebAnimator in July 1996 and QuickSite Developer's Edition in September 1996.
The Company plans to incur additional expenditures to develop Internet software
tools or new versions of existing software tools over the next several quarters.
Although the Company has historically derived substantially all of its revenues
from charting and graphics software products for desktop applications, the
Company's strategy is to realize a significant and growing percentage of future
revenues from the sale of Internet software tools.

The Company's revenues consist of license revenues from sales of software
products to distributors, resellers and end users. In addition, the Company
derives license revenues from royalty and packaging agreements with certain
customers. Under these agreements, the Company typically receives a large
percentage of the aggregate revenues in the form of a nonrefundable royalty paid
upon shipping of the master copy of software, which allows the customer to
license a specified number of copies of the Company's software, and a smaller
percentage of aggregate revenues in the form of packaging fees, which are paid
to the Company based on the manufacturing cost of products that the Company
packages and ships for the customer over the life of the agreement. As a result,
these agreements can lead to quarterly fluctuations in revenues and gross
profit.

Software product sales are recognized upon shipment of the product, net of
appropriate allowances for estimated returns. Revenues from software royalty and
packaging agreements are recognized upon shipment of a master copy of the
software product and packaging if no significant vendor obligations remain under
the term of the license agreements and any amounts to be paid are nonrefundable.
Payments received in advance of revenue recognition are recorded as deferred
revenue. The Company grants distributors and resellers certain rights of return,
price protection and stock rotation rights on unsold merchandise. Accordingly,
reserves for estimated future returns and credits for price protection and stock
rotation rights are accrued at the time of shipment.

Net revenues increased from $4,043,000 in 1995 to $4,950,000 in 1996. The
increase of net revenues was primarily attributable to a refocusing of the
Company's business into the Internet market. The Company believes that net
revenues may remain flat until it has realized significant revenues from its
Internet software tools released in 1996, such as QuickSite, QuickSite
Developer's Edition, WebTools and WebAnimator, and from products that the
Company develops or acquires in the future.

The Company's gross profit has historically fluctuated from quarter to
quarter based on the mix of revenues derived from software product sales, and,
for the reasons discussed above, royalty fees and packaging fees. The Company
obtains higher than average gross profit on revenues derived from royalty fees
because of the negligible costs associated with generating such revenues, and
lower than average gross profit on packaging fees from these products, because
packaging is sold at a price based on the manufacturing cost of the finished
software product. The Company's gross profit has also fluctuated based on the
mix of product revenues derived from sales of the Company's higher-margin

17
<PAGE>
DeltaGraph product and sales of lower-margin graphics utilities and Internet
products where the Company must pay royalties to third parties. The Company
believes these factors may impact its gross profit in the future. See "Risk
Factors -- Substantial Dependence on Recent and Anticipated Product
Introductions."

The Company's limited operating history makes the prediction of future
operating results difficult or impossible. Future operating results will depend
on many factors, including demand for the Company's products, the mix of
revenues derived from product sales and royalty and packaging fees, the level of
product and price competition, the Company's success in expanding its direct
sales efforts for its software products and indirect distribution channels for
its Internet products and the ability of the Company to successfully develop and
market new products and control costs. In particular, the Company's ability to
achieve revenue growth and profitability in the future will be significantly
dependent on the timely introduction and market acceptance of products the
Company has recently introduced or is developing and the ability of the Company
to successfully develop products for new and existing markets.

The Company incurred a loss for the year ended December 31, 1995, in part
due to a charge to operations recorded in the fourth quarter of approximately
$1,240,000 resulting from the acquisition of certain Internet technologies for
the portion of the purchase price determined to be in-process research and
development and a decline in revenues from traditional products. In addition,
the Company incurred a loss of $4,848,000 for the year ended December 31, 1996,
in part due to the Company's investment in marketing and research for its
Internet product line. The Company expects to incur losses from operations for
at least the next 12 months, and perhaps longer, particularly if revenues do not
increase significantly above current levels. There can be no assurance that the
Company will not incur significant additional losses until it successfully
develops or acquires new products or enhancements to existing products that
generate significant revenues and profits. See "Risk Factors -- Recent and
Expected Losses; Accumulated Deficit; Quarterly Fluctuations in Performance."

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, certain statement
of operations data as a percentage of net revenues.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net revenues.................................................................... 100.0% 100.0%
Cost of revenues................................................................ 33.1 23.9
----- -----
Gross profit................................................................ 66.9 76.1
----- -----
Operating expenses:
Sales and marketing........................................................... 47.5 94.6
Research and development...................................................... 50.4 52.9
General and administrative.................................................... 30.5 28.0
----- -----
Total operating expenses.................................................... 128.4 175.5
----- -----
Loss from operations............................................................ (61.5) (99.4)
Interest income (expense)....................................................... (3.6) 1.5
----- -----
Net loss.................................................................... (65.1)% (97.9)%
----- -----
----- -----
</TABLE>

YEARS ENDED DECEMBER 31, 1995 AND 1996

NET REVENUES. Net revenues increased by 22.4% from $4,043,000 for 1995 to
$4,950,000 for 1996. The increase in revenue was primarily attributable to the
introduction of Internet products, especially of QuickSite, DeltaPoint's
award-winning Web site creation and management tool. International sales
accounted for 39.8% of net revenues during 1995 and 26.3% for 1996. The decrease
in

18
<PAGE>
international revenues was due to fewer Japanese license agreements offset
partially by the release of QuickSite for the Japanese market. The Company's
domestic and international sales are principally denominated in United States
dollars. Movements in currency exchange rates did not have a material impact on
the total revenue in the periods presented. However, there can be no assurance
that future movements in currency exchange rates will not have a material
adverse effect on the Company's future revenues and results of operations.

GROSS PROFIT. Cost of revenues consists of direct materials, labor,
overhead, freight, post customer support, royalties and contract manufacturing
costs associated with the manufacturing of the Company's products. The Company
believes that these and other factors will contribute to the fluctuations of
gross profit as a percentage of revenue. Gross profit increased from 66.9% of
net revenues in 1995 to 76.1% of net revenues in 1996, primarily as a result of
lower inventory write-offs and an absence of packaging fees in 1996. The
Company's gross profit has varied quarter to quarter as a result of a number of
factors including changes in customer and product mix, inventory write-offs due
to new product releases, third party royalty obligations for the Company's
Internet products and packaging revenues from the Company's Japanese
distributor.

SALES AND MARKETING. Sales and marketing expenses include sales
commissions, compensation of sales and marketing personnel and cost of
promotional activities. Sales and marketing expenses increased to $4,685,000 or
94.6% of revenues for 1996 from $1,922,000 or 47.5% of revenues in 1995. The
increase in sales and marketing expenses was primarily due to an increase in
headcount and an increase in the use of direct mail, telemarketing, consultants,
print advertising, tradeshows and channel promotions used to promote the
Company's Internet software tools which were released in 1996. The Company
expects that sales and marketing costs will increase in future periods because
the Company intends to add sales and marketing personnel to support the
anticipated introduction of new products and updated versions of the Company's
existing products.

RESEARCH AND DEVELOPMENT. Research and development expenses include
personnel, consultants and amortization of purchased software. Research and
development expenses increased to $2,618,000 or 52.9% of revenues for 1996
compared to $2,036,000 or 50.4% of revenues in 1995. The increase in research
and development expenses was primarily due to a staffing increase for the
development of QuickSite, QuickSite Developer's Edition, WebAnimator and
DeltaGraph. In addition, the Company retained several consultants to aid in the
development process. In 1995, the Company had a charge to operations of
$1,240,000 resulting from the acquisition of certain Internet technologies for
the portion of the purchase price determined to be in-process technology as such
technology had not reached technological feasibility and had no alternative
future use. The Company expects that research and development costs will
increase in future periods due to further development of the Company's new
products and updated and cross platform versions of the Company's existing
products.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $1,388,000 or 28.0% of revenues for 1996 compared to $1,234,000 or 30.5% of
revenues in 1995. The increase in general and administrative expenses was
primarily attributable to a severance expense charge of $505,000 relating to the
departure of the Company's former Chief Executive Officer offset by a decrease
in bad debt expenses of $176,000. The Company expects that general and
administrative expenses will increase in absolute dollars in future periods to
the extent that the Company expands its operations.

PROVISION FOR INCOME TAXES. There was no provision for taxes in 1995 or
1996 due to net operating losses. At December 31, 1996, the Company had
approximately $7,000,000 of federal net operating loss carryforwards which
expire in varying amounts through 2011. Due to certain changes in the ownership
of the Company, approximately $1,700,000 and $1,200,000 of these losses are
subject to annual limitations of approximately $142,000 and $301,000,
respectively. If certain additional changes in the Company's ownership occur,
the Company's use of net operating loss carryforwards may be subject to a lower
annual limitation.

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LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Company had a working capital balance of
$431,000 and shareholders' equity of $1,041,000. The Company has financed its
operations primarily through private and public sales of equity securities,
borrowings under a term loan and the private sale of debt securities. Since
inception, the Company has received approximately $15 million in proceeds from
private sales of preferred stock and convertible debt and from the Company's
initial public offering of common stock.

The Company used net cash in operations of $1,646,000 in 1995 and $4,618,000
in 1996. Net cash used in 1995 consisted primarily of a net loss of $2,632,000,
an increase in accounts receivable of $642,000, largely because of significant
sales of the Company's products in the last 30 days of the third quarter of 1995
with extended payment terms, a decrease in accounts payable of $751,000,
partially offset by a $1,240,000 charge to operations from the acquisition of
certain Internet technologies for the portion of the purchase price determined
to be in-process technology and an increase in accrued liabilities of $670,000.
Net cash used in 1996 consisted primarily of a net loss of $4,848,000.

The Company obtained net cash from financing activities of $6,499,000 in
1995 and $3,474,000 in 1996. Net cash obtained in 1995 consisted primarily of
$5,143,000 in net proceeds from the Company's initial public offering of common
stock and other equity financing. Net cash from financing activities in 1996
consisted primarily of $831,000 in net proceeds from the exercise of the
overallotment from the initial public offering of common stock, proceeds
resulting from the exercise of stock options and warrants of $1,609,000 and the
issuance of Convertible Notes with net proceeds of $1,949,000 offset by the
payment of $865,000 for prior notes payable.

For the year ended December 31, 1996, the Company's capital expenditures
totaled approximately $343,000 and were attributable to acquisitions of personal
computer and computer workstation equipment used to support the Company's
development efforts.

In November and December of 1995, the Company acquired technology required
to develop WebAnimator, QuickSite, and WebTools. The Company acquired the
technologies for an aggregate purchase price of $1,690,000 of which $1,090,000
was to be paid in cash. As of December 31, 1996, $1,090,000 of these aggregate
cash payments had been made. The Company recorded a charge of $1,240,000 to
operations in 1995 from the acquisition of these technologies for the portion of
the purchase price determined to be in-process technology.

As of December 31, 1996 the Company's cash and cash equivalents was
$3,142,000, including approximately $1,949,000 in net proceeds from the Debt
Financing in December 1996. See "Risk Factors -- Critical Need For Additional
Capital; No Assurance of Future Financing." Although the Company believes that
its existing and available cash resources should be sufficient to meet its
operating requirements through 1997, there can be no assurance that such cash
resources will be sufficient to satisfy the Company's operating requirements. To
the extent the Company continues to incur losses or grows in the future, its
operating and investing activities may use cash and, consequently, such losses
or growth may require the Company to obtain additional sources of financing. In
addition, the Company's actual capital needs will depend upon numerous factors,
including the progress of the Company's software development activities, the
cost of increasing the Company's sales and marketing activities and the amount
of cash generated from operations, none of which can be predicted with
certainty. There can be no assurance that the Company will not require
additional capital sooner than currently anticipated. Management is currently
pursuing additional capital financing, although recent attempts to secure such
financing on acceptable terms have been unsuccessful. There can be no assurance
that any additional required financing will be available to the Company on
acceptable terms, or at all. If the Company is unable to obtain additional
financing, it will be required to reduce discretionary spending in order to
maintain operations at a reduced level, seek a merger partner or sell additional
securities on terms that are highly dilutive to current investors. The inability
to obtain required financing or reduce discretionary spending would have a
material adverse effect on the Company's business, financial condition and
results of operation. See "Risk Factors -- Critical Need for Additional Capital;
No Assurance of Future Financing" and Notes 1 and 11 of Notes to Financial
Statements.

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BUSINESS

A key element of the Company's objective of becoming a leading Internet
software tools provider is to increase its strategic alliances with key
partners. In September 1996, the Company entered into an agreement with IBM to
develop and license a customized version of QuickSite for inclusion in IBM's
recently announced World Distributor, an on-line interactive electronic commerce
service. The Company has also entered into agreements with Borland
International, Sony, McGraw-Hill, Earthlink, Compaq and Netcom Interactive to
distribute existing or planned versions of QuickSite with their products or
services.

In the past, the Company has derived most of its revenues from the sale of
charting and graphics software products such as DeltaGraph, an advanced
multi-platform charting and graphics product. The Company has de-emphasized its
charting and graphing products and expects that they will represent a declining
percentage of its business.

BACKGROUND

The rapid growth of the Internet, combined with the emergence of the World
Wide Web, the graphical multimedia-rich portion of the Internet, has resulted in
the development of the Internet as a new mass communications medium. The demand
to access the World Wide Web has fueled the rapid growth and proliferation of
"Web browsers," such as the Netscape Navigator and Microsoft Internet Explorer,
which allow users to passively view information on the World Wide Web. In
addition, search engines such as those provided by Yahoo! and InfoSeek simplify
the process of locating information on the Web.

Increasingly, however, Web users are no longer satisfied simply to browse
and search the Web. The worldwide, cost-effective communication benefits of the
Web are leading many individuals and organizations to actively "publish"
information on the Web by creating a Web "site," a collection of individual Web
pages, each hand-crafted using a relatively new and quickly evolving tagging
language called HTML.

Many large corporations, having already established sophisticated Web sites
for external communications, and are now encouraging smaller internal groups and
departments to build private "Intranet" Web sites. Small businesses, home-based
businesses, individuals and others are also creating Web sites to reach target
audiences.

For many individuals and organizations, establishing a robust Web site
remains a time-consuming and expensive proposition. The free-form nature of HTML
has inhibited the emergence to date of a standard for HTML page creation.
Further, an increasing number of competing extensions and modifications to the
HTML language continue to be proposed, making it difficult for Web site
publishers to support the latest technical advances.

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A first generation of third-party Web "page creation" tools has emerged.
These limited-function tools focus on the creation of a single page at a time.
Content within pages and between pages must be manually linked and manually
maintained. Further, the content of the site has no inherent structural
intelligence, making global changes, consistency of design and reorganization of
sections difficult and time-consuming. A second generation of Web page creation
tools, such as Microsoft's Front Page and NetObjects' Fusion, has also been
introduced. Although this generation offers some ease-of-use improvements over
the first generation, these products continue to be based on architectures that
primarily emphasize the layout and design aspects of individual pages.

The Company believes that a compelling Web site consists of a robust and
growing collection of interrelated pages and links. As a result, the Company
believes that effective software tools for creating and managing Web sites must
not only simplify initial content creation but enable site authors to easily
update, maintain, expand and manage their sites on an ongoing basis, regardless
of whether the sites consist of five pages or 5,000 pages. Further, the Company
believes that an open architecture is important to maintaining maximum
flexibility as Internet standards emerge and evolve rapidly.

DELTAPOINT APPROACH

The Company offers a family of products that enables Web site creators to
easily and cost-effectively generate, manage and enhance Web content using a
structured approach. QuickSite and QuickSite Developer's Edition, the Company's
Web site creation and management products, utilize an advanced product design
featuring a database architecture and incorporate a series of query-based
"wizards" that guide the site developer through a "point and click" process that
results in a completed, fully linked Web site structure in minutes. The
Company's database design enables the automatic generation and maintenance of
links between Web pages, eliminating or reducing the need for any programmer or
technical intervention. Additionally, this approach enables all components of an
entire Web site to be captured, collected and easily managed as fully indexed
data objects within the database engine. The Company believes that its database
approach to Web site creation and management provides fundamental advantages
over existing page creation methodologies which will become increasingly
apparent as the volume and complexity of content contained in the Web sites
increases.

The Company's Web site creation and management tools are designed with full
client-side functionality to free the site designer from costly server
connection time during the site creation and testing process. Further, these
tools utilize an open architecture that provides browsers and server
independence. The Company intends to incorporate this level of flexibility into
all of its Internet software tools.

DELTAPOINT STRATEGY

DeltaPoint's objective is to be a leading provider of software products that
enable users of all experience levels to quickly and easily create, manage and
enhance compelling sites on the World Wide Web. The Company's strategy for
achieving this objective includes the following elements:

CREATE BRAND AWARENESS. The Company intends to increase its brand awareness
through a coordinated strategy of building brand equity in the QuickSite product
name, emphasizing QuickSite's Web site management capabilities and database
architecture, and demonstrating its growing acceptance through a growing array
of relationships with industry leaders. Since March 1996, the Company has
entered into agreements with companies such as IBM, Borland International, Sony,
McGraw-Hill, Earthlink, Compaq and Netcom Interactive. To build brand identity,
the Company may also increase and expand its print and online advertising
efforts and increase its participation in major industry conferences and trade
shows.

EXPAND DISTRIBUTION. The Company plans to expand distribution of its
Internet software tools by increasing its retail distribution relationships to
ensure wide commercial availability of its shrink-

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wrapped products and by partnering with alternative channel and vertical segment
leaders, including distribution and co-marketing relationships with key PC
manufacturers and Internet Service Providers (ISPs) that can increase market
penetration and that offer revenue sharing business models.

BROADEN PRODUCT OFFERING. The Company intends to identify and develop,
license or acquire technologies or products to extend market position in two
areas: Web site creation and Web site management. In the area of Web site
creation, the Company intends to continue expanding the range of pre-designed
templates, graphics, forms and wizards contained within the QuickSite product.
The Company also plans to develop and market complementary content enhancement
products, such as WebAnimator, which allow Web site creators to improve content
through special effects. In the area of Web site management, the Company expects
to continue to update and enhance the management features of QuickSite.

DEVELOP PRODUCTS THAT SUPPORT OPEN ARCHITECTURE. The Company plans to
introduce Internet software tools based on an open, client-based architectures.
The Company intends to develop Web products which will support any widely used
Web browser, including Netscape Navigator and Microsoft Internet Explorer, as
well as any major server software environment, including Windows NT, Netscape
Commerce Server and Unix. Additionally, the Company plans to architech
additional products that will enable the entire Web site creation process to
occur on a client-side desktop personal computer.

TARGET CORPORATE INTRANET MARKET. The design of the Company's Internet
software tools enable them to be used with little or no modification in the
corporate Intranet environment. The Company plans to develop and implement a
focused effort to target the Intranet marketplace. Specifically, the Company
plans to create a dedicated market development and sales team with specialized
expertise in providing corporate solutions.

DELTAPOINT PRODUCTS

The Company introduced five Internet software tools in 1996. QuickSite is
designed as a low cost, easy to use Web site creation and management tool that
is designed to enable novice and experienced site publishers to rapidly create,
maintain and grow a robust Web site. QuickSite Developer's Edition offers
additional functionality and is targeted for software programmers, Webmasters,
commercial Web site developers and corporate Web site managers. WebTools has
been designed to enable developers, VAR's and corporate MIS directors to add Web
publishing capabilities to existing applications. WebAnimator is designed to
allow a broad range of Web users to easily add multimedia and interactive
animation to a Web site.

The Company's charting and graphics software products currently include
DeltaGraph, a cross platform application which is used to transform numerical
data into charts and graphs.

QUICKSITE

In December 1995, the Company acquired an exclusive license to core
technologies which serve as the basis for a family of Web site creation and
management software tools. QuickSite, the first of these tools which began
shipping to retail distributors on March 28, 1996, is designed to enable non-
technical individuals and organizational users to rapidly create and efficiently
manage a Web site. The following are the key attributes of the DeltaPoint
solution:

EASE OF SITE CREATION. The Company has designed a collection of site
creation wizards aimed at eliminating the initial stumbling blocks encountered
by novice Web site authors. These wizards guide the user through a
point-and-click process that designs and builds an entire Web site, complete
with page links, table of contents, and other important site creation elements
such as e-mail return addresses, copyright notices, consistent menu designs and
flags for pages containing special content. The Company believes that QuickSite
can significantly shorten the time required to design and build a Web site.
Wizards also enable users to select and modify the stylistic elements of a site
such as the

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colors and textures of backgrounds, graphics, headers and footers. By masking
the complexities of HTML, Java and other site creation conventions, these
wizards eliminate the requirement for Web site authors to develop specialized
technical expertise before they can become productive.

EASILY UPDATABLE CONTENT. The Company's product architecture passively
enforces a Web structure such that as the author populates the site, content
components are captured as data objects which are automatically indexed and
stored within the product's database engine. As a result, content can be more
quickly updated and global changes can be reflected through an entire Web site
with a few simple keystrokes. Further, any content element, including text,
graphics, data files, and images, can be stored and re-used, savings users time
as they build additional sites or add to existing sites.

EXTENSIBLE ARCHITECTURE. By employing a componentized architecture, the
Company provides an extensible platform that can adapt as new technical
innovations evolve. Tables, forms, and other new extensions to HTML, as well as
user-definable functions, are supported through a point-and-click component
library management system.

BROWSER AND SERVER INDEPENDENCE. QuickSite supports most Web browsers,
including Netscape Navigator and Microsoft Internet Explorer, which together are
estimated to account for over 90% of the current marketplace. Additionally,
QuickSite is architected to enable all the entire Web site creation process to
occur on a client-side desktop personal computer. The Company believes that this
client-biased approach provides several key advantages, including: (i)
elimination of dependencies on any single third-party Internet or network-server
technology; (ii) lower overall cost by eliminating the need to connect to a
server for interim testing of an in-progress site; and (iii) reduced risk of
investing in the "wrong" server environment.

QUICKSITE DEVELOPER'S EDITION

QuickSite Developer's Edition is designed for Internet Web site developers
and corporate Intranet developers. The QuickSite Developer's Edition gives
professional Web site developers significantly enhanced control over the web
site creation and management process. Among the new features included in
QuickSite Developer's Edition are: (i) support for the emerging WWW Consortium
web style sheets standard; (ii) 3D Web Site Builder, a visual VRML (virtual
reality mark-up language) creation tool from Virtus included with the product;
(iii) advanced web site automation, including the QuickScript scripting
language, powerful page macros and unique caret technology that automate
repetitive tasks that bog down large-scale projects; (iv) embedded "graphics
factory" technology, based on a variety of DigitalStyle templates, that allows
developers to create custom graphics and style elements on-the-fly, and also
helps to enforce stylistic consistency throughout a site; and (v) sophisticated
project reporting capabilities that help the developer track and document the
on-going status of their work.

WEBTOOLS

WebTools is designed to allow database developers to add Web-enabling
features to existing database applications. DeltaPoint will license WebTools to
software development companies including Borland International in return for a
license fee or royalty arrangement. Currently WebTools is available for Visual
dBASE for Windows and for CA Clipper.

WEBANIMATOR

In November 1995, the Company acquired core technologies which serve as the
basis for WebAnimator, a multimedia authoring tool for the Web from Richard
Blum, d.b.a. Knowledge Vision ("Knowledge Vision"). WebAnimator is designed to
enable a broad range of Web users to easily add multimedia and interactive
animation to a Web site. The Company believes that WebAnimator represents an
advance over current commercially available products by offering the following
key attributes: (i) extensive use of predefined templates that will enable users
to combine text, graphics and sound to produce multimedia rich content
components; (ii) content components created in WebAnimator's native format are
vector based and therefore are expected to be compressed to small files that

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can be quickly downloaded and played from within a Web browser; (iii) graphic
objects in WebAnimator act as interactive buttons that enable users to branch to
different Web site locations; and (iv) advanced digital sound and motion
synchronization tools are expected to enable users to easily and accurately add
sound and motion to an animated content component.

GRAPHICS PRODUCTS

The Company's charting and graphics software product, DeltaGraph, can be
used as either a stand-alone product or as a complement to software programs
such as spreadsheets, databases and presentation graphics. DeltaGraph offers a
broad range of business, scientific and technical charts with flexible
formatting features that enables charts to be fine tuned with high resolution
output. Presentation tools such as slide show managers and outliners enhance
DeltaGraph's functionality. DeltaGraph is primarily used by chemists,
biologists, geologists, pharmacists, and professionals in the financial
services, aerospace and publishing industries.

PRODUCTS UNDER DEVELOPMENT

The Company believes that its future success depends in part on its ability
to maintain and improve its core technologies, enhance and expand its products
and develop new products that meet evolving customer requirements and industry
standards. The Company's current efforts are focused on the development of
products that further enhance development capablities in the areas of Web site
creation and Web site management.

COMPETITION

The markets in which the Company competes are highly competitive and
characterized by rapid technological change, frequent new product introductions,
short product lives, evolving industry standards and significant price erosion
over the life of a product. The Company anticipates increased competition in
these markets from both existing vendors and new market entrants. In the
charting market, the Company has, to date, encountered competition primarily
from larger vendors such as Adobe Systems Incorporated, Microsoft Corporation
("Microsoft"), Software Publishing Corporation, Lotus, Corel and Computer
Associates International, Inc. In the structured drawing market, the Company
has, to date, encountered competition primarily from larger vendors such as
Corel, Visio and Micrografx Incorporated. In the Internet add-in market, the
Company has encountered competition primarily from Netscape Communications
Corporation, Macromedia, Inc., Adobe Systems Incorporated, Microsoft, NetObjects
and Quarterdeck, Inc. IBM agreed in March 1997 to acquire a majority interest in
NetObjects. In addition, the Company expects that existing vendors and new
market entrants will develop products that will compete directly with the
Company's products and that competition will increase significantly to the
extent that markets for the Company's products grow. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Most of the Company's
current and potential competitors have substantially greater financial,
technical, marketing, sales and customer support resources, greater name
recognition and larger installed customer bases than the Company. Because there
are minimal barriers to entry into the software market, the Company believes
sources of competition will continue to proliferate. The market for the
Company's products is characterized by significant price competition, and the
Company expects it will face increasing pricing pressures. There can be no
assurance the Company will be able to maintain its historic pricing structure,
and an inability to do so would adversely affect the Company's business,
financial condition and results of operations. If the Company is unable to
compete effectively against current and future competitors, the Company's
business, financial condition and results of operations will be materially
adversely affected.

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MARKETING AND SALES

The Company markets and sells its products through the coordinated efforts
of its corporate marketing department and its direct sales organization. For
retail, the Company uses a two-tier distribution model with product sold through
Ingram, TechData, Merisel and other distributors to more than 500 retail outlets
such as Best Buy, Computer City, Comp USA, Egghead, Fry's and others. The
Company intends to expand the number of U.S. retail locations in 1997 and will
seek to selectively add major new distributors.

Internationally, the Company's strategy is to work with highly-motivated
publishers who can invest in a full array of local services including marketing
and localization support as well as provide access to distribution. The Company
will continue to localize its products first for the Japanese market, which
accounted for 35% of revenues in 1995 and 21% of revenue in 1996. Furthermore,
the Company intends to pursue the expansion of its international presence by
establishing new partnerships in key European markets such as the U.K. and
Germany.

The Company also allows fully functional versions of many of its products to
be downloaded from its secure Web site server (Deltapoint.com). The downloadable
versions enable worldwide access to the products 24-hours a day and allow people
to become productive with and reliant on the product functionality. Users are
prompted to purchase a license to the product with a 30-day grace period after
which encrypted technology within the downloadable versions automatically
disables the product. The Company will promote and encourage the availability of
its downloadable products.

The Company pursues relationships and alliances with a broad spectrum of
industry leaders. Distribution alliances in the PC manufacturing area have been
announced with Compaq and Sony, and in the ISP marketplace with Netcom
Interactive, Earthlink and more than half a dozen regional ISPs. In addition,
the Company has entered into an agreement with the Commerce Division of IBM to
develop and license a customized version of QuickSite for inclusion in IBM's
recently announced World Distributor electronic service and announced a
relationship with McGraw Hill which will offer site licenses to QuickSite to
school districts and State Boards of Education. To address the developers
market, the Company has established an alliance with Borland International, a
leading provider of language tools for software programmers. Under the
agreement, Borland licensed the Company's WebTools product and bundled a version
of QuickSite with all Borland products through the end of 1996. The Company also
has announced relationships with technology partners such as DigitalStyle, a
leading maker of on-the-fly graphics generation tools, and Virtus, a leading
developer of Virtual Reality Modeling Language technology for creating 3D Web
sites. See "Strategic Alliances."

Historically a significant portion of the Company's revenues have been
derived from sales of upgrades of its DeltaGraph charting product to its user
base through direct mail campaigns. Presently the Company is focusing on
strengthening its distribution network by adding distributors and retailers, and
entering into additional partner relationships that will enhance the
distribution of the Company's Internet products. In addition, the Company
intends to continue to implement its OEM strategy by pursuing other major PC
manufactures of the Sony and Compaq caliber.

In support of its sales organization, the Company conducts a number of
marketing programs intended to promote and market the Company's Internet
products. These efforts include product advertising, public relations and press
tours, trade show participation, direct mail and telemarketing campaigns,
preparation of marketing collateral and participation in industry programs, user
groups and forums. The Company also maintains a QuickSite Web site on the World
Wide Web that contains information on its products, distribution channels,
awards, personnel and other information relating to the Company.

As of December 31, 1996, the Company had 12 employees in marketing and
sales. For the year ended December 31, 1996, the Company spent $4.7 million or
94.6% of revenue for sales and marketing expenses compared to $1.9 million and
47.5% of revenue in the year ended December 31, 1995.

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STRATEGIC ALLIANCES

A key element of the Company's strategy is the continued creation and
development of strategic alliances with key participants. The Company's goals in
establishing these relationships are to create marketing alliances that will
endorse and promote the Company's products to a larger potential customer base
than can be reached through the Company's direct marketing efforts. To date the
Company has entered into strategic alliances with companies such as IBM, Borland
International, Sony, McGraw-Hill, Earthlink, Compaq and Netcom Interactive.

IBM. The Company entered into an agreement with the Commerce Division of
IBM to develop and license to IBM a customized version of QuickSite for
inclusion in IBM's recently announced World Distributor, an on-line interactive
electronic commerce service. The agreement requires the Company to develop a
customized version of QuickSite and requires IBM, to the extent it sublicenses
or otherwise provides QuickSite on a revenue-bearing basis as part of its
electronic commerce service, to pay the Company a royalty based on the number of
copies of QuickSite so sublicensed or provided. In January 1997 the Company
delivered a beta version of the product to IBM and in February 1997 received a
$150,000 milestone payment. The agreement may be terminated by IBM on 60 days'
advance notice. In March 1997, another division of IBM announced that it would
acquire a majority interest in NetObjects, a competitor of the Company. There
can be no assurance that the acquisition will not have a material adverse effect
on the Company's relationship with IBM.

BORLAND INTERNATIONAL. The Company entered into an agreement with Borland
International in May 1996 under which Borland may bundle and distribute
QuickSite with its programming tools through December 1996 in consideration for
license fees, brand promotion activities and certain marketing services.

SONY. The Company entered into an agreement in June 1996 whereby Sony will
pre-install a custom version of the Company's QuickSite product on its new line
of Vaio personal computer systems. This version of the product incorporates an
encrypted algorithm that allows the Sony customers to use the full functionality
of the product for a 30-day trial period after which the user is required to
purchase the product electronically from DeltaPoint for continued use. In
December 1996, an addendum to the contract was done. This agreement allows for
Sony to pre-install and ship an unencrypted version of QuickSite on the Vaio
personal computers. A royalty will be paid for each unit sold.

MCGRAW-HILL SCHOOL SYSTEMS. In June 1996, the Company entered into an
agreement under which McGraw-Hill will market and distribute QuickSite products
and site licenses to the education sector, including school districts and state
boards of education.

EARTHLINK. The Company entered into an agreement in June 1996 with
Earthlink, a leading Internet Service Provider, under which the companies will
perform mutually beneficial cross-bundling and cross merchandising. Earthlink
has agreed to purchase a minimum number of QuickSite licenses.

COMPAQ. In July 1996, the Company entered into an agreement under with
Compaq will offer QuickSite as part of an optional software bundle on one of its
Pressario systems and has rights to bundle on other platforms for a per unit
license fee.

NETCOM INTERACTIVE. The Company entered into an agreement with Netcom
Interactive in July 1996 under which the companies intend to cooperate on a
custom developed, jointly marketed integrated offering.

Many of these relationships are in the early stages of development and have
not yet resulted in material revenue for the Company. Generally, existing
agreements outlining the Company's alliances do not impose significant financial
obligations or liabilities on either party and have terms no longer than one
year. There can be no assurance these relationships will successfully develop to
the extent that they will contribute materially to the Company's financial
results in the future.

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RESEARCH AND DEVELOPMENT

Historically, the Company has licensed or acquired core technologies and has
expended its development expertise on transforming these technologies into
commercially viable, easy-to-use products. In November 1995, the Company
acquired core technology including source code and related documentation,
required to develop WebAnimator from KnowledgeVision. The purchase price for the
technology was $250,000, payable in installments. The Company will also pay a
royalty based on net revenue from sales of WebAnimator, subject to a maximum.
Under the terms of the acquisition agreement, the individual will work as a
consultant to the Company to assist in developing WebAnimator.

In December 1995, the Company acquired core technology, including source
code and related documentation, required to develop QuickSite, from Global
Technologies and from certain individuals. The purchase price for the technology
was (i) $800,000 in cash, payable in installments and (ii) the issuance of
100,000 shares of Common Stock. The Company will also pay a royalty during the
first two years of commercial shipments of QuickSite based on net revenues from
sales of QuickSite, subject to a maximum and subject to the right of the Company
to pay a portion of the royalty in its Common Stock. Pursuant to the agreement,
the individual became an employee of the Company to assist in the development of
QuickSite.

The Company has made substantial investments in research and development
through both internal development and technology acquisition. The Company
believes its future performance will depend in large part on its ability to
maintain and enhance its current product line, develop new products, maintain
technological competitiveness and meet an expanding range of customer
requirements.

As of December 31, 1996 the Company had 19 employees in its research and
development organization. The Company's research and development expenses for
the years ended December 31, 1995 and 1996 were $2.0 million and $2.6 million,
respectively. The Company plans to continue to make significant investments in
research and development. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

PROPRIETARY RIGHTS AND LICENSES

The Company relies on a combination of copyright, trademark, trade secret
laws, confidentiality procedures and other intellectual property protection
methods to protect its proprietary rights. The Company owns certain registered
trademarks in the United States and abroad. Although the Company relies to a
great extent on trade secret protection for much of its technology, and
generally obtains written confidentiality agreements from its employees, there
can be no assurance that third parties will not independently develop the same
or similar technology, obtain unauthorized access to the Company's proprietary
technology or misuse the technology to which the Company has granted access. The
Company believes that, due to the rapid proliferation of new technology in the
industry, legal protection through means such as the patent and copyright laws
will be less influential on the Company's ability to compete than such factors
as the creativity of its development staff and its ability to develop new
markets and to service its customers. The Company licenses its products to
individual end users primarily under "shrink wrap" license agreements that are
included in products shipped by the Company and that are not signed by the
licensees and therefore may be unenforceable under the laws of certain
jurisdictions. These agreements provide that by breaking the "shrink wrap" a
software purchaser agrees to be bound by the terms and conditions of the license
agreement.

There has been substantial industry litigation regarding patent, trademark
and other intellectual property rights involving technology companies. In the
future, litigation may be necessary to enforce any patents issued to the
Company, to protect trade secrets, trademarks and other intellectual property
rights owned by the Company, to defend the Company against claimed infringement
of the rights of others and to determine the scope and validity of the
proprietary rights of others. Any such litigation could be costly and result in
a diversion of management's attention, which could have material adverse effects
on the Company's business, financial condition and results of operations.

28
<PAGE>
Adverse determinations in such litigation could result in the loss of the
Company's proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from third parties or prevent the Company
from manufacturing or selling its products, any of which could have material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Limited Intellectual Property Protection."

The laws of certain foreign countries treat the protection of proprietary
rights of the Company in its products differently from those in the United
States, and in many cases the protection afforded by such foreign laws is weaker
than in the United States. The Company believes that its products and their use
do not infringe the proprietary rights of third parties. There can be no
assurance, however, that infringement claims will not successfully be made.

The Company has received and will continue to receive from time to time
communications from third parties asserting infringement upon intellectual
property rights of such parties as a result of either features or content of its
software products. Although the Company is not currently engaged in any
intellectual property litigation or proceedings, there can be no assurance that
the Company will not become involved in such proceedings for which the ultimate
resolution could have a material adverse effect on the Company's business
financial condition and results of operations.

In March 1997 the Company entered into an agreement with Unisys Corporation
("Unisys") pursuant to which the Company has licensed a patent which will
require the Company to pay Unisys a license fee of 0.45% of the Company's
revenues from the sale of each product covered by such license agreement,
subject to a minimum license fee of ten cents ($0.10) for each such product. The
products subject to this agreement are QuickSite version 2.5 (which has not yet
been released), WebAnimator and Graphics Tools.

In June 1992, the Company entered into an agreement (the "Halcyon License
Agreement") with Halcyon Software, Inc. ("Halcyon") pursuant to which Halcyon
granted the Company a non-exclusive, perpetual, sub-licensable license to
prepare, make, reproduce, use, perform, modify, adapt, sell or otherwise dispose
of or distribute the following programs and derivative works thereof, whether or
not in combination with or incorporated into any other product: Snap, Thumbnail,
Viewer, Conversion, Trace and Paint (the "Products"). The Company pays Halcyon a
royalty equal to two to five percent of the Company's net revenues received from
sales of the Products, depending on the extent to which the Products incorporate
technology not provided by Halcyon. To date, the Company has paid Halcyon
non-refundable license fees in the amount of $150,000. No further royalty
payments are payable until accrued royalty payments exceed $150,000. Pursuant to
the Halcyon License Agreement, in November 1992 the Company granted Don Hsi an
option to purchase 18,867 shares of Common Stock at an exercise price of $6.63
per share. The option lapsed on February 20, 1996 without being exercised. The
Halcyon License Agreement has an indefinite term, but is terminable at the
Company's option upon written notice if the Company determines in good faith
that it is not technically and commercially advantageous to continue with a
Product.

The Company has also licensed from Altura Software Inc. ("Altura") the
Mac2Win Software for use in creating a Windows platform version of DeltaGraph
and WebAnimator. The Company was granted a non-exclusive license to copy,
distribute and sublicense the Mac2Win Software only when packaged with, and as
part of, DeltaGraph and WebAnimator ported to run on the Windows platforms. The
Company has made a series of payments to Altura in the total amount of $72,000.
License fees of $6,000 per month are payable by the Company in advance during
each month the agreement remains in effect. The Company also pays a royalty
equal to three percent of net revenues received from sales of DeltaGraph and
WebAnimator ported for the Windows platform with a first year minimum of $36,000
and a minimum of $48,000 for the next two years. The license agreement is
terminable by the Company upon 30 days prior written notice and the payment of
all amounts owed to Altura.

In November 1995, the Company acquired core technology, including source
code and related documentation, required to develop WebAnimator from Knowledge
Vision. The purchase price for the

29
<PAGE>
technology was $250,000, payable in installments. The Company will also pay a
royalty based on net revenues from sales of WebAnimator, if any, subject to a
maximum. Under the terms of the acquisition agreement, the individual works as a
consultant to the Company to assist in developing WebAnimator.

In December 1995, the Company acquired core technology, including source
code and related documentation, required to develop QuickSite, from Global
Technologies Corporation, and an individual. The purchase price for the
technology was (i) $800,000 in cash, payable in installments, and (ii) the
issuance of 100,000 shares of the Company's Common Stock. The Company will also
pay a royalty during the first two years of commercial shipments of QuickSite
based on net revenues from sales of QuickSite, if any, subject to a maximum and
subject to the right of the Company to pay a portion of the royalty in Common
Stock. Pursuant to the agreement, the individual became an employee of the
Company to assist in developing QuickSite.

FACILITIES

The Company currently leases an approximately 12,000 square foot office
suite located at 22 Lower Ragsdale Drive, Monterey, California under a lease
that expires in September 1998 with a monthly rental of approximately $16,200.
The Company holds an option to renew such lease at the end of the initial term
for an additional three year term. The Company believes that these new
facilities will be adequate to meet its requirements for the near term and that
additional space will be available on commercially reasonable terms if needed.

LEGAL PROCEEDINGS

There are no material pending legal proceedings against the Company.

EMPLOYEES

As of December 31, 1996, DeltaPoint had 45 full-time employees located
throughout the United States. This number includes 24 persons in Research and
Development and Technical Support, 12 persons in Marketing, Sales and Sales
Support and 9 persons in Operations and Finance. None of the Company's employees
is represented by a labor union or is subject to a collective bargaining
agreement. DeltaPoint believes that its relations with its employees are good.

30
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The current executive officers and directors of the Company, and their ages
as of March 31, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ ---- ------------------------------------
<S> <C> <C>
Jeffrey F. Ait...................... 40 Chief Executive Officer and Director
Donald B. Witmer.................... 43 Chief Operating Officer, Chief
Financial Officer and Director
William G. Pryor.................... 46 Vice President of Development
John Hummer......................... 48 Director
Patrick Grady....................... 29 Director
</TABLE>

MR. AIT joined the Company in March 1997 as Chief Executive Officer. From
January 1996 until March 1997 he served as Vice President of Internet at The
Santa Cruz Organization, Inc. ("SCO"), a software developer and publisher. From
October 1995 until January 1996 he served as Vice President of acquisitions at
SCO. From October 1993 until October 1995 he served as Vice President of Sales
and Marketing at SCO.

MR. WITMER joined the Company as Vice President of Finance and
Administration and Chief Financial Officer in November 1995, became a director
of the Company in December 1995 and became Chief Operating Officer in February
1996. From 1990 to 1995 he served as controller and then Chief Financial Officer
of Catalyst Semiconductor, Inc. From 1987 to 1990, Mr. Witmer served as an
accountant for Price Waterhouse LLP, independent accountants. Prior to joining
Price Waterhouse LLP, Mr. Witmer was a senior controller at United Technologies
and a legislative analyst for the State of Montana. Mr. Witmer holds a B.A. in
History from Northern Montana College and an M.B.A. from the University of
Montana. Mr. Witmer is a Certified Public Accountant.

MR. PRYOR co-founded the Company in February 1989 and has served as Vice
President of Development since such time to the present. Mr. Pryor was a
director of the Company from the Company's inception through March 1997. From
June 1988 to February 1989, Mr. Pryor served as a Director of Product
Development at Access Technology, Inc. From May 1986 to June 1988, he served as
Vice President of Research and Development at Working Software, a developer of
word processing software. Prior thereto, Mr. Pryor served as President of
Pryority Software, an entertainment software publisher. Mr. Pryor holds an A.A.
in Liberal Arts from the Monterey Peninsula College.

MR. HUMMER has been a director of the Company since October 1990. In 1989,
Mr. Hummer founded, and is currently a partner at, Hummer Winblad Venture
Partners. Mr. Hummer serves as a director of several privately held companies
including Books That Work, Centerview Software and Netgravity. From April 1991
to February 1995 he was a director of Powersoft Corporation prior to its
acquisition by Sybase Incorporated and from August 1990 to April 1995 he was a
director of Wind River Systems, Inc. Mr. Hummer received a B.A. in English from
Princeton University and an M.B.A. from the Stanford Graduate School of
Business.

MR. GRADY became a director of the Company in August 1996. Mr. Grady is
currently Managing Director, Venture Capital of H.J. Meyers & Co. Inc. From June
1993 to March 1996 Mr. Grady served as Senior Vice President of Corporate
Finance at H.J. Meyers & Co., Inc. from March 1991 to May 1993 he was Vice
President of Corporate Finance at Josephthal, Lyon & Ross. Mr. Grady serves as a
director of Borealis Technology Corp. an enterprise wide sales force automation
software company & SoloPoint, Inc. a provider of small office/home office
communication products.

Directors receive reimbursement of expenses incurred in attending Board
meetings. Except as otherwise described in this Prospectus, the Company has not
paid cash or other compensation to its directors. See "-- 1995 Stock Option
Plan."

31
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the compensation earned by the Company's two
former Chief Executive Officers and two other executive officers who earned
salary and bonus for the 1996 fiscal year in excess of $100,000 (collectively,
the "Named Officers") for services rendered in all capacities to the Company and
its subsidiaries for that fiscal year:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS COMPENSATION($) OPTIONS COMPENSATION($)
- --------------------------- --------- -------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John J. Ambrose (1) 1996 $ 78,461(1) $ 25,000(3) $ 4,500(4) 145,000 $ 26(5)
Chief Executive Officer, 1995 0 0 0 0 0
and Director
Raymond R. Kingman, Jr. (2) 1996 32,000 0 900(6) 0 141,253(7)
Chairman of the Board, 1995 108,000 0 4,708(6) 100,000 66(5)
President and Chief
Executive Officer
Donald B. Witmer 1996 120,000 0 30,000(9) 50,000 251(5)
Chief Operating Officer, 1995 19,845(8) 0 5,000(9) 135,000 0
Chief Financial Officer
and Director
William G. Pryor 1996 104,950 0 0 0 87(5)
Vice President of 1995 92,500 0 0 100,000 87(5)
Development and Director
</TABLE>

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

(1) Mr. Ambrose served as the Company's Chief Executive Officer from April 22,
1996 through March 1997.

(2) Mr. Kingman resigned as Chief Executive Officer and a director of the
Company, effective April 5, 1996.

(3) Represents a signing bonus of $25,000.

(4) Represents a $500 per month car allowance.

(5) Represents life insurance premiums made by the Company with respect to
insurance policies on the lives of Messrs. Ambrose, Kingman, Pryor and
Witmer.

(6) Represents a $300 per month car allowance.

(7) Represents a $22 life insurance premium and a severance payment of $141,231.

(8) Mr. Witmer joined the Company in November 1995.

(9) Represents a $2,000 per month housing allowance and a $500 per month car
allowance.

EMPLOYMENT CONTRACTS

On November 10, 1995, the Company entered into employment agreements with
Raymond R. Kingman, Jr., who served as President and Chief Executive Officer of
the Company until his resignation as an officer and director on April 5, 1996,
and William G. Pryor, Vice President of Development.

32
<PAGE>
The agreements provide for a grant to each individual of an option to purchase
100,000 shares of Common Stock at an exercise price of $3.50 per share. The
option is immediately exercisable but subject to a right of repurchase by the
Company at the original exercise price paid per share upon the optionee's
cessation of service prior to vesting in such shares. The repurchase right
lapses and the optionee vests in a series of equal monthly installments over 36
months, beginning on the one-month anniversary of the grant date, and lapses in
full upon a specified Change in Control of the Company. A Change in Control
includes liquidation or dissolution of the Company or a merger or consolidation
in which at least fifty percent (50%) of the Company's shares are transferred to
an entity different than the entity holding such shares prior to such Change in
Control. Each option has a maximum term of ten (10) years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. The agreement also provides that each of Messrs. Kingman and Pryor will
receive a severance payment in the amount of six to twelve months of his base
salary and other benefits if his employment is terminated in certain
circumstances, such as an involuntary termination other than for cause (six
months base salary) or an involuntary termination within twenty-four months of a
Change in Control (twelve months base salary).

In November, 1995, the Company entered into an employment agreement with
Donald B. Witmer, pursuant to which Mr. Witmer became Vice President of Finance
and Administration and Chief Financial Officer of the Company. The agreement
provides for an annual salary of $120,000, a $2,000 per month housing allowance
and a $500 per month car allowance. The agreement also provides for a grant of
an option to purchase 135,000 shares of Common Stock at an exercise price of
$3.50 per share. The option is immediately exercisable but subject to a right of
repurchase by the Company at the original exercise price paid per share upon the
optionee's cessation of service prior to vesting in such shares. The repurchase
right lapses and the optionee vests in a series of equal monthly installments
over 36 months, beginning on the date Mr. Witmer commences employment, and
lapses in full upon a specified Change in Control of the Company, as defined
above. The option has a maximum term of ten (10) years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. The agreement also provides that Mr. Witmer will receive a severance
payment in the amount of six to twelve months of his base salary and other
benefits if his employment is terminated in certain circumstances, such as an
involuntary termination other than for cause (six months base salary plus bonus
and other benefits) or an involuntary termination within twenty-four months of a
Change in Control (twelve months base salary plus bonus and other benefits).

In March 1996 John J. Ambrose executed an offer letter with the Company,
pursuant to which Mr. Ambrose became Chief Executive Officer in April 1996. The
offer letter provides for an annual salary of $120,000, a signing bonus of
$25,000 and a grant of an option to purchase 145,000 shares of Common Stock.

On April 5, 1996, the Company entered into a Separation Agreement and
Release with Mr. Kingman in connection with his resignation which, among other
things, provided for certain payments and other financial compensation. Pursuant
to the Separation Agreement, the Company agreed to pay Mr. Kingman a severance
payment of $108,000 and to accelerate vesting of 62,500 of his 100,000-share
option grant. The Company also agreed to provide continued health care for a
period of up to 12 months.

On March 24, 1997, Jeffrey F. Ait executed an offer letter with the Company
pursuant to which Mr. Ait became Chief Executive Officer of the Company. The
offer letter provides for an annual salary of $165,000 and for the grant of an
option to purchase 225,000 shares of common stock at an exercise price of the
fair market value per share on the date the option is granted. The option will
become exercisable for 25% of the shares after one year of service and for the
remainder in equal monthly installments over the next 36 months of service. If
Mr. Ait's employment with the Company is terminated for reasons other than cause
within six months following a specified change in control of the Company, the
letter provides that Mr. Ait's base salary shall continue to be paid for one
year following his last day of employment. All stock options vest in full and
become exercisable as to all of the shares immediately prior to a specified
change in control of the Company. A change of control

33
<PAGE>

includes the acquisition by any person of at least 50% of the total outstanding
voting securities of the Company, or a merger or consolidation of the Company
other than a merger which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent at least 50% of
the total outstanding voting securities of the Company or the surviving entity,
or a liquidation of the Company or the sale of all of the Company's assets.

EXECUTIVE BONUS PLAN

The Company plans to adopt a bonus plan for executive officers that would
provide for payment of cash bonuses based on individual and overall Company
performance in 1997. Aggregate bonuses payable under the plan would not exceed
10% of the Company's 1997 net income. Adoption of the plan is subject to
approval by the Company's Compensation Committee.

STOCK OPTION INFORMATION

The following table contains information concerning stock option grants made
to the Named Officers during the year ended December 31, 1996. No stock
appreciation rights were granted to these individuals during such year.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)(2)
-----------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL EXERCISE
UNDERLYING OPTIONS GRANTED PRICE
OPTIONS TO EMPLOYEES IN ($/SH) EXPIRATION
NAME GRANTED FISCAL YEAR (2) DATE
- ------------------------------------------------------------------ ----------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
John J. Ambrose................................................... 145,000 33% $ 9.50 04/21/06
Raymond R. Kingman, Jr............................................ 0 0 0 --
Donald B. Witmer.................................................. 10,000 2% 9.50 04/21/06
Donald B. Witmer.................................................. 40,000 9% 7.50 11/03/06
William G. Pryor.................................................. 0 0 0 --
</TABLE>

- ------------------------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchasable thereunder are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation of
service prior to vesting in such shares. The repurchase right lapses and the
optionee vests in a series of equal monthly installments over thirty-six
months of service commencing on the date of grant of the option. These
options were granted at an exercise price equal to the fair market value of
the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant. Each option has a maximum term of ten (10)
years, subject to earlier termination in the event of the optionee's
cessation of employment with the Company.

(2) In March 1997, the Board of Directors approved a repricing of all options
granted under the Company's stock option plans that were outstanding on such
date and had an exercise price in excess of the fair market value on such
date of $2.25 per share. This option repricing resulted in the cancellation
of all the options granted in the last fiscal year to the named officers and
a regrant of options for the same number of shares.

(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise.

The following table sets forth information concerning option holdings for
the year ended December 31, 1996 with respect to each of the Named Officers. No
stock appreciation rights were exercised during such year or were outstanding at
the end of that year.

34
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL
YEAR END(1)
SHARES ACQUIRED VALUE -------------------------------- -----------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------ --------------- ----------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
John J. Ambrose..................... 0 $ 0 145,000 0 $ 0
Raymond R. Kingman, Jr.............. 72,000 379,517 5,894 0 4,028
Donald B. Witmer.................... 0 0 185,000 0 337,500
William G. Pryor.................... 0 0 101,894 0 250,000

NAME UNEXERCISABLE
- ------------------------------------ -------------------
<S> <C>
John J. Ambrose..................... 0
Raymond R. Kingman, Jr.............. 0
Donald B. Witmer.................... 0
William G. Pryor.................... 0
</TABLE>

- ------------------------
(1) Based on the closing price per share of the Company's Common Stock as listed
on the Nasdaq Small Cap Market as of December 31, 1996 of $6.00, less the
per share exercise price.

1990 KEY EMPLOYEE INCENTIVE STOCK OPTION PLAN

The Company's 1990 Key Employee Incentive Stock Option Plan (the "1990
Plan") was originally adopted by the Board of Directors and approved by the
Company's shareholders effective July 1, 1990 and was restated by the Board on
June 17, 1992, which restatement was approved by the shareholders on August 27,
1992. The 1990 Plan authorizes for issuance 38,922 shares of Common Stock. As of
March 31, 1997, 2,143 shares had been issued under the 1990 Plan, options to
purchase an aggregate of 33,720 shares were outstanding and 3,059 shares
remained available for future grant. Shares of Common Stock subject to
outstanding options which expire or terminate prior to exercise will be
available for future issuance under the 1990 Plan.

Under the 1990 Plan, key employees (including officers) may, at the
discretion of the plan administrator, be granted options to purchase shares of
Common Stock at an exercise price not less than the fair market value of such
shares on the grant date. Options granted under the 1990 Plan become exercisable
for 25% of the option shares on the first anniversary of the grant date and for
the balance of the shares in 36 equal monthly installments thereafter, unless
otherwise provided by the plan administrator. In the event the Company or its
shareholders enter into an agreement to dispose of all or substantially all of
the assets or stock of the Company by means of a sale, a reorganization, a
liquidation or otherwise, each outstanding option shall become immediately
exercisable in full for all of the option shares. Each such option shall
thereupon terminate. Each option shall have a maximum term of ten (10) years.

The 1990 Plan may be administered by the Board or the Compensation Committee
of the Board. The plan administrator has complete discretion to determine which
eligible individuals are to receive option grants, the number of shares subject
to each such grant, the status of any granted option as either an incentive
option or a non-statutory option under the Federal tax laws, the vesting
schedule to be in effect for each option grant and the maximum term for which
each granted option is to remain outstanding.

The exercise price for options granted under the 1990 Plan may be paid in
cash or in outstanding shares of Common Stock.

The Board may amend or modify the 1990 Plan at any time. Certain amendments
require shareholder approval. The 1990 Plan will terminate on June 30, 2000,
unless sooner terminated by the Board.

1992 NON-STATUTORY STOCK OPTION PLAN

The Company's 1992 Non-Statutory Stock Option Plan (the "1992 Plan") was
originally adopted by the Board of Directors and approved by the Company's
shareholders effective July 1, 1992 and was restated by the Board on June 17,
1992, which restatement was approved by the shareholders on August 27, 1992. The
1992 Plan authorizes for issuance 28,301 shares of Common Stock. As of March 31,
1997, no shares had been issued under the 1992 Plan, options to purchase an
aggregate of

35
<PAGE>

13,780 shares were outstanding and 14,521 shares remained available for future
grant. Shares of Common Stock subject to outstanding options which expire or
terminate prior to exercise will be available for future issuance under the 1992
Plan.

Under the 1992 Plan, key employees (including officers) and consultants of
the Company or of any subsidiary and certain entities may, at the discretion of
the plan administrator, be granted non-statutory options to purchase shares of
Common Stock at an exercise price not less than the fair market value of such
shares on the grant date. Options granted under the 1992 Plan are fully vested
and immediately exercisable on the grant date. In the event the Company or its
shareholders enter into an agreement to dispose of all or substantially all of
the assets or stock of the Company by means of a sale, a reorganization, a
liquidation or otherwise, each outstanding option shall thereupon terminate. In
no event, may an option have a term of more than five (5) years.

The 1992 Plan may be administered by the Board or the Compensation Committee
of the Board. The plan administrator has complete discretion to determine which
eligible individuals are to receive option grants, the number of shares subject
to each such grant and the terms and conditions of exercise with respect to each
option grant.

The exercise price for options granted under the 1992 Plan may be paid in
cash, in outstanding shares of Common Stock, or through the net exercise of the
option. Shares may be deducted from the shares to be issued upon exercise of an
option granted under the 1992 Plan to satisfy the optionee's income tax
withholding obligations. Options may also be exercised on a cashless basis
through the same-day sale of the purchased shares.

The plan administrator has the authority to effect, from time to time, the
cancellation of outstanding options under the 1992 Plan, in exchange for the
grant of new options for the same or different number of option shares with an
exercise price per share based upon the fair market value of the Common Stock on
the new grant date.

The Board may amend or modify the 1992 Plan at any time. Certain amendments
require shareholder approval. The 1992 Plan will terminate on June 30, 2002,
unless sooner terminated by the Board.

1995 STOCK OPTION PLAN

The Company's 1995 Stock Option Plan (the "1995 Plan") was adopted by the
Board of Directors on November 8, 1995, and approved by shareholders of the
Company in December, 1995. The Company initially reserved 620,000 shares of
Common Stock for issuance under the 1995 Plan. On February 15, 1996 and April
22, 1996, the Board of Directors approved a total share increase of 200,000
shares to be reserved for issuance under the 1995 Plan to 820,000 shares, which
was subsequently approved by the Company's shareholders. As of March 31, 1997,
85,333 shares had been issued under the 1995 Plan, options for 733,837 shares
were outstanding and 830 shares reserved for issuance under the 1995 Plan
remained available for future grant. Shares of Common Stock subject to
outstanding options which expire or terminate prior to exercise will be
available for future issuance under the 1995 Plan.

Under the 1995 Plan, employees (including officers) and independent
consultants may, at the discretion of the plan administrator, be granted options
to purchase shares of Common Stock at an exercise price not less than 85% of the
fair market value of such shares on the grant date. Non-employee members of the
Board of Directors will be eligible solely for automatic option grants under the
1995 Plan.

The 1995 Plan may be administered by the Compensation Committee of the
Board. The Compensation Committee has complete discretion to determine which
eligible individuals are to receive option grants, the number of shares subject
to each such grant, the status of any granted option as either an incentive
option or a non-statutory option under the Federal tax laws, the vesting
schedule to be in

36
<PAGE>
effect for each option grant and the maximum term for which each granted option
is to remain outstanding. In no event, however, may any one participant in the
1995 Plan acquire shares of Common Stock under the 1995 Plan in excess of
360,000 shares of Common Stock.

The exercise price for options granted under the 1995 Plan may be paid in
cash or in outstanding shares of Common Stock. Options may also be exercised on
a cashless basis through the same-day sale of the purchased shares. The
Compensation Committee may also permit the optionee to pay the exercise price
through a promissory note payable in installments over a period of years. The
amount financed may include any Federal or state income and employment taxes
incurred by reason of the option exercise.

Each option granted to an officer of the Company subject to the short-swing
profit restrictions of the Federal securities laws includes a special stock
appreciation right that provides that, upon the acquisition of more than 50% of
the Company's outstanding voting stock pursuant to a hostile tender offer, such
option, if outstanding for at least six months, may be surrendered to the
Company in exchange for a cash distribution to the officer based upon the tender
offer price per share of Common Stock at the time subject to the surrendered
option.

The Compensation Committee has the authority to effect, from time to time,
the cancellation of outstanding options under the 1995 Plan in return for the
grant of new options for the same or different number of option shares with an
exercise price per share based upon the fair market value of the Common Stock on
the new grant date.

In the event the Company is acquired by merger, consolidation or asset sale,
except as provided otherwise in specific option grants, the shares of Common
Stock subject to each option outstanding at the time under the 1995 Plan will
immediately vest in full, except to the extent the Company's repurchase rights
with respect to those shares are to be assigned to the acquiring entity, and
options will accelerate to the extent not assumed by the acquiring entity. The
Compensation Committee also has discretion to provide for the acceleration of
one or more outstanding options under the 1995 Plan and the vesting of shares
subject to outstanding options upon the occurrence of certain hostile tender
offers. Such accelerated vesting may be conditioned upon the subsequent
termination of the affected optionee's service.

Under the automatic grant program, each individual who first joins the Board
as a non-employee director on or after the effective date of the 1995 Plan will
receive at that time, an automatic option grant for 20,000 shares of Common
Stock. In addition, at each annual shareholders meeting, beginning in 1997, each
non-employee director will automatically be granted at that meeting, whether or
not he or she is standing for re-election at that particular meeting, a stock
option to purchase 1,000 shares of Common Stock, provided such individual has
served on the Board for at least six months prior to such meeting. Each option
will have an exercise price equal to the fair market value of the Common Stock
on the automatic grant date and a maximum term of ten years, subject to earlier
termination following the optionee's cessation of Board service. Each option
will be immediately exercisable for all of the shares but the shares will be
subject to repurchase at original cost. The repurchase right shall lapse and the
optionee vest in a series of three equal annual installments over the optionee's
period of Board service, beginning one year from the grant date. However,
vesting of the shares will automatically accelerate upon (i) an acquisition of
the Company by merger, consolidation or asset sale, (ii) a hostile take-over of
the Company effected by tender offer for more than 50% of the outstanding voting
stock or proxy contest for Board membership or (iii) the death or disability of
the optionee while serving as a Board member.

In the event that more than 50% of the Company's outstanding voting stock
were to be acquired pursuant to a hostile tender offer, each automatic option
grant that has been outstanding for at least six months may be surrendered by
the optionee in return for a cash distribution from the Company based upon the
tender offer price per share of Common Stock at the time subject to the canceled
option.

37
<PAGE>
The Board may amend or modify the 1995 Plan at any time. The 1995 Plan will
terminate on November 7, 2005, unless sooner terminated by the Board.

401(K) PLAN

During 1992, the Company established a deferred compensation plan (the
"401(k) Plan") pursuant to Section 401(k) of the Internal Revenue Code (the
"Code"), whereby substantially all employees are eligible to contribute up to
20% of their pre-tax earnings, not to exceed amounts allowed under the Code. The
Company may make contributions to the 401(k) Plan at the discretion of the Board
of Directors. No Company contributions have been made to the 401(k) Plan by the
Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Restated Articles of Incorporation
that eliminate to the fullest extent permissible under California law the
liability of its directors to the Company for monetary damages. Such limitation
of liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. The Company's Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
California law, including in circumstances in which indemnification is otherwise
discretionary under California law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which may
require the Company, among other things, to indemnify the officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

At the present time, there is no pending litigation or proceeding involving
a director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.

38
<PAGE>
CERTAIN TRANSACTIONS

TRANSACTIONS WITH FOUNDERS

On May 31, 1994, the Company entered into a Software Acquisition Agreement
with Cary Wyman, a founder, pursuant to which Mr. Wyman acquired all the rights,
title and interest in and to certain software products. In addition, the Company
received from Mr. Wyman all of Mr. Wyman's right, title and interest in and to
11,792 shares of DeltaPoint's Common Stock previously owned and held by and in
the name of Mr. Wyman.

PRIVATE PLACEMENT TRANSACTIONS

The Company has issued and sold the following securities to persons who are
principal shareholders or directors of the Company. Each share of Series A,
Series B, Series C and Series D Preferred Stock was affected by a one-for-5.3
reverse stock split before giving effect to the conversion of such outstanding
Preferred Stock upon the closing of the Company's initial public offering in
December 1995 (the "IPO"):

<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF SHARES OF WARRANTS TO SHARES OF COMMON
SERIES A SERIES B SERIES C SERIES D PURCHASE STOCK ISSUED UPON
PREFERRED PREFERRED PREFERRED PREFERRED COMMON PROMISSORY NOTE
INVESTOR (1) STOCK (2) STOCK (3) STOCK (4) STOCK (5) STOCK (6) CONVERSION (7)
- -------------------------------------- ----------- ----------- ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Entities Affiliated with Hummer
Winblad Venture Partners (8)......... 55,341 22,641 43,620 26,801 27,629 31,667
Entities Affiliated with Oak
Investment Partners V. Fund, L.P..... -- 60,377 34,269 48,242 45,209 31,667
</TABLE>

- ------------------------------
(1) Shares held by all affiliated persons and entities have been aggregated. See
"Principal and Selling Shareholders."

(2) The shares were issued in October 1990. The per share purchase for the
Series A Preferred Stock was $18.10 per share.

(3) The shares were issued in June 1992. The per share purchase price for the
Series B Preferred Stock was $33.13.

(4) The shares were issued in April 1994. The per share purchase price for the
Series C Preferred Stock was $5.78.

(5) The shares were issued in May 1995. The per share purchase price for the
Series D Preferred Stock was $9.33. The consideration paid for such stock
was a combination of cash and cancellation of indebtedness.

(6) The warrants were issued in March 1992, March 1993 and May 1995.

(7) Represents shares of Common Stock issued upon the conversion of the notes at
a conversion price of $3.25 per share. Of the $300,000 principal amount of
the notes, $150,000 was issued to Hummer Winblad Venture Partners ("Hummer
Winblad Ventures") and an affliate and $150,000 was issued to Oak Investment
Partners V., L.P. ("Oak Investment") and an affliate. In November 1995,
Hummer Winblad Ventures and Oak Investment and their respective affliates
agreed to convert the principal amount of said notes, plus accrued interest,
into an aggregate of 63,334 shares of Common Stock. In consideration for
such agreement, in November 1995 the Company issued each of Hummer Winblad
Ventures and Oak Investment warrants to purchase 31,667 shares of Common
Stock exercisable at a price of $7.20 per share for a period of 30 months
following December 26, 1995 and at a price of $8.40 per share thereafter
through November 6, 2000. See "Description of Capital Stock -- Convertible
Notes and Warrants."

(8) Mr. Hummer, an affiliate of Hummer Winblad Venture Partners and Hummer
Winblad Technology Fund ("Hummer Winblad Technology"), is a director of the
Company.

In November 1995, the Company issued 125,000 units (the "Unit Offering"),
each unit consisting of two shares of Series E Preferred Stock and a warrant to
purchase one share of Common Stock, for $8.00 per unit. Each share of Series E
Preferred Stock converted into one share of Common Stock upon the closing of the
Company's initial public offering in December, 1995. Hummer Winblad Ventures
purchased 3,125 units, Oak Investment purchased 6,113 units and its affliate,
Oak V Affiliates Fund, L.P. ("Oak Affiliates") purchased 137 units. American
High Growth Equities Retirement Fund Trust purchased 50,000 units. See
"Description of Capital Stock -- Warrants and Convertible Notes."

In November 1996, the Company issued 30,970 shares of Common Stock to Oak
Investment, 697 shares of Common Stock to Oak Affiliates, 30,084 shares of
Common Stock to Hummer Winblad Ventures and 1,583 shares of Common Stock to
Hummer Winblad Technology, all pursuant to the conversion of the notes described
in the chart and footnote 7 above.

39
<PAGE>
In December 1996, the Company issued an aggregate of 145,547 shares of
Common Stock to Oak Investment and Oak Affiliates at a price of $5.00 per share
pursuant to the exercise of warrants, including the warrants described in the
chart and footnote 7 above, of which warrants to purchase 62,421 shares were
acquired from Hummer Winblad Ventures and Hummer Winblad Technology.

In December 1996, the Company issued $2,000,000 in principal amount of
Convertible Notes to High Risk Opportunities Hub Fund Ltd. pursuant to the Debt
Financing. Based on an assumed conversion price of $6.50 per share, such
Convertible Notes are convertible at the option of the holder into 102,564
shares of Common Stock on or after March 1, 1997, an additional 102,564 shares
on or after March 31, 1997 and an additional 102,564 shares on or after April
30, 1997; provided, however, that the holder may not convert Convertible Notes,
without the Company's prior written consent, if such conversion would cause such
holder's aggregate ownership of the Company's capital stock to exceed 4.9% of
the Company's then issued and outstanding capital stock. See "Description of
Capital Stock -- Warrants and Convertible Notes."

The Company believes that the foregoing transactions were in its best
interests. All future transactions by the Company with officers, directors, 5%
shareholders and their affiliates will be entered into only if the Company
believes that such transactions are reasonably expected to benefit the Company
and the terms of such transactions are no less favorable to the Company than
could be obtained from unaffiliated parties.

H.J. MEYERS & CO., INC.

Patrick W. Grady, a director of the Company, is a Managing Director Venture
Capital of H.J. Meyers & Co., Inc. ("H.J. Meyers"). The Company retained H.J.
Meyers to act as placement agent in connection with the Unit Offering. For
acting as placement agent, H.J. Meyers received a fee of 10% of the aggregate
proceeds from the Unit Offering and a non-accountable expense allowance of 3% of
such gross proceeds. The Company also agreed to indemnity H.J. Meyers for
certain liabilities, including those arising under the Securities Act, for
serving as placement agent. The Company also retained H.J. Meyers as managing
underwriter in the IPO. For acting as managing underwriter, H.J. Meyers received
a portion of the 6% underwriting commission, a non-accountable expense allowance
equal to 2.5% of the gross proceeds from the IPO and a warrant to purchase
110,000 shares of Common Stock exercisable for a four-year period commencing
December 20, 1996. The exercise price of the Representative's Warrant is $7.20
per share. The Company has granted the holder of the Representative's Warrant
certain registration rights with respect to the warrant and the shares of Common
Stock issuable upon its exercise. The Company also agreed to indemnify H.J.
Meyers for certain liabilities, including those arising under the Securities
Act, for serving as managing underwriter.

The Company also retained H.J. Meyers to act as placement agent in
connection with the Debt Financing. Under the terms of the placement agent
agreement, H.J. Meyers received a placement fee of 7% of the gross proceeds from
the Debt Financing, reimbursement of accountable expenses of 1% of such gross
proceeds and a warrant (the "Placement Agent's Warrant") to purchase 16,538
shares of Common Stock at an exercise price of $6.50 per share. The Company has
agreed to grant the holder of the Placement Agent's Warrant certain registration
rights with respect to the Placement Agent's Warrant and the shares of Common
Stock issuable upon its exercise. See "Registration Rights." The Company has
also agreed to indemnify H.J. Meyers for certain liabilities, including those
arising under the Securities Act, for serving as placement agent in connection
with the Debt Financing.

REPRICING OF STOCK OPTIONS

See Note 2 to "Management -- Option Grants in Last Fiscal Year" for a
description of the repricing of options granted under the Stock Option Plans.

40
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1997, and as adjusted to
reflect the sale of shares offered hereby, by (i) each person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director of the Company, (iii) each Named Officer (iv) all directors and
executive officers as a group, and (v) the Selling Shareholders. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners have
investment and voting power with respect to such shares, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER OFFERING
OFFERING SHARES TO
---------------------- BE SOLD IN ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT OFFERING NUMBER PERCENT
- ----------------------------------------------------------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
Hummer Winblad Venture Partners (1)........................ 186,321 7.5% 58,467 127,854 5.1%
5900 Hollis St., Suite R
Emeryville, CA 94608
Entities affiliated with Oak Investment
Partners V, L.P. (2)...................................... 332,601 13.4% 79,908 252,693 10.1%
One Gorham Island
Westport, CT 06880
William G. Pryor (3)....................................... 142,535 5.5% -- 142,535 5.5%
c/o DeltaPoint, Inc.
22 Lower Ragsdale Drive
Monterey, CA 93940
Donald B. Witmer (4)....................................... 203,750 7.6% -- 203,750 7.6%
c/o Delta Point, Inc.
22 Lower Ragsdale Drive
Monterey, CA 93940
John Hummer (1)............................................ 186,321 7.5% 58,467 127,854 5.1%
Patrick W. Grady (5)....................................... 146,538 5.6% -- 146,538 5.6%
William A. French (6)...................................... 43,750 1.9% 25,000 18,750 *%
Global Technology.......................................... 50,000 2.0% 50,000 0 0.0%
155 Snowberry Way
Dillon, CO 80435
David Kaplow............................................... 50,000 2.0% 50,000 0 0.0%
Gregory Walberg............................................ 37,521 1.5% 37,521 0 0.0%
All directors and executive officers as a group (4 persons)
(7)........................................................ 679,144 23.2% 58,467 620,677 21.2%
</TABLE>

- ------------------------
* Less than 1%.

(1) Consists of 181,877 shares of Common Stock held by Hummer Winblad Venture
Partners and 4,444 shares of Common Stock held by Hummer Winblad Technology
Fund ("Hummer Winblad Technology"). Mr. Hummer, a director of the Company,
is a General Partner of Hummer Winblad Equity Partners, which is the General
Partner of Hummer Winblad Venture Partners and Hummer Winblad Technology.
Mr. Hummer disclaims beneficial ownership of the securities held by these
entities except to the extent of his pecuniary interest therein arising from
his general partnership interest in Hummer Winblad Equity Partners.

41
<PAGE>
(2) Consists of 325,289 shares of Common Stock, held by Oak Investment Partners
V, L.P. ("Oak Investment") and 7,312 shares of Common Stock held by Oak V
Affiliates Fund, L.P. ("Oak Affiliates"). Edward F. Glassmeyer is a general
partner of Oak Investment and Oak Affiliates. Mr. Glassmeyer disclaims
beneficial ownership of the securities held by these entities, except to the
extent of his pecuniary interest therein arising from his general
partnership in Oak Investment. See "Description of Capital Stock --
Convertible Notes and Warrants." Oak Affiliates is an affiliate of Oak
Investment.

(3) Includes 101,894 shares of Common Stock subject to stock options currently
exercisable or exercisable within sixty (60) days after March 31, 1997,
including an option to purchase 100,000 shares of Common Stock granted on
November 10, 1995 that is immediately exercisable but subject to a right of
repurchase upon termination of employment that lapses in equal monthly
installments over 36 months and lapses in full upon a specified change in
control. See "Management -- Stock Option Information."

(4) Consists of 12,500 shares of Common Stock, an immediately exercisable
warrant to purchase 6,250 shares of Common Stock and an option to purchase
135,000, 10,000 and 40,000 shares of Common Stock, respectively granted on
November 10, 1995, April 22, 1996 and November 4, 1996, respectively that is
immediately exercisable but subject to a right of repurchase upon
termination of employment that lapses in equal monthly installments over 36
months and lapses in full upon a specified change in control. See
"Management -- Employment Contracts."

(5) Includes an option to purchase 20,000 shares of Common Stock granted on
August 13, 1996 that is immediately exercisable but subject to a right of
repurchase upon termination of service as a director that lapses in equal
annual installments over three years and lapses in full on a specified
change in control. See "Management -- 1995 Stock Option Plan." Also includes
110,000 shares of Common Stock that may be acquired by H.J. Meyers upon
exercise of the Representative's Warrant commencing on December 20, 1996 and
16,538 shares of Common Stock that may be acquired by H.J. Meyers upon
exercise of the Placement Agent's Warrant issued in the Debt Financing. Mr.
Grady, a director of the Company, is a Managing Director -- Venture Capital
of H.J. Meyers. Mr. Grady disclaims beneficial ownership of the securities
that may be acquired by H.J. Meyers except to the extent of his pecuniary
interest therein.

(6) Includes 16,667 shares of Common Stock subject to stock options currently
exercisable within sixty (60) days of March 31, 1997.

(7) Consists of 239,462 shares of Common Stock, immediately exercisable warrants
to purchase 132,788 shares of Common Stock and 306,894 shares of Common
Stock subject to stock options currently exercisable or exercisable within
sixty (60) days of March 31, 1997.

42
<PAGE>
DESCRIPTION OF CAPITAL STOCK

As of March 31, 1997 the Company is authorized to issue 25,000,000 shares of
Common Stock, no par value, and 4,000,000 shares of Preferred Stock, no par
value.

COMMON STOCK

As of March 31, 1997, there were 2,489,873 shares of Common Stock
outstanding held of record by approximately 46 shareholders. The holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
shareholders. In the election of directors, however, cumulative voting is
authorized for all shareholders if any shareholder gives notice at a meeting,
prior to voting for the election of directors, of his or her intention to
cumulate votes. Subject to the prior rights of holders of Preferred Stock, if
any, the holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors in its discretion
from funds legally available therefor. The Common Stock has no preemptive or
other subscription rights and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. All of the outstanding
shares of Common Stock are fully paid and non-assessable.

PREFERRED STOCK

At the closing of the Company's IPO in December 1995, all previously
outstanding shares of Preferred Stock were converted into Common Stock. As of
March 31, 1997, the Company is authorized to issue up to 4,000,000 shares of
undesignated Preferred Stock. The Board of Directors will have the authority to
issue the undesignated Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued shares of undesignated Preferred Stock, as well as to fix the
number of shares constituting any series and the designations of such series,
without any further vote or action by the shareholders. The Board of Directors,
without shareholder approval, may issue Preferred Stock with voting and
conversion rights which could materially adversely affect the voting power of
the holders of Common Stock. The issuance of Preferred Stock could also decrease
the amount of earnings and assets available for distribution to holders of
Common Stock. In addition, the issuance of Preferred Stock may have the effect
of delaying, deferring or preventing a change in control of the Company.

In connection with a possible preferred stock financing, the Company filed a
Certificate of Determination of Series A Preferred Stock with the California
Secretary of State on March 13, 1997. The Certificate of Determination creates
2,500 shares of Series A Preferred Stock. Each share of Series A Preferred Stock
would be convertible at any time, at the option of the holder, into such number
of shares of Common Stock as may be determined by dividing the original purchase
price of a share of Series A Preferred Stock by 80% of the market price of
Common Stock on the conversion date, subject to certain adjustments; provided,
however, that no holder may convert Series A Preferred Stock, without the
Company's prior written consent, if such conversion would cause such holder's
aggregate ownership of the Company's capital stock to exceed 4.9% of the
Company's then issued and outstanding capital stock. Such shares would also be
convertible automatically two years from their issue date or, if earlier, upon
the occurrence of certain other events. The holder of Series A Preferred Stock
would be entitled to cumulative cash dividends at an annual rate of $85.72 per
share. Upon liquidation of the Company or a merger of the Company that results
in the transfer of 50% or more of the voting power of the Company or the sale of
all or substantially all of the Company's assets (a "Liquidation Event"),
holders of shares of Series A Preferred Stock would be entitled to receive from
the proceeds from such Liquidation Event the aggregate purchase price of any
shares of Series A Preferred Stock held by such holders plus any accrued but
unpaid dividends, subject to certain adjustments. The Company has not issued any
shares of Series A Preferred Stock.

WARRANTS AND CONVERTIBLE NOTES

The Company issued warrants to purchase an aggregate of 125,000 shares of
Common Stock on November 6, 1995. The warrants are exercisable for a five-year
period commencing on November 6, 1995. The exercise price of the warrants is
$7.20 per share of Common Stock through June 26, 1998 and $8.40 per share of
Common Stock thereafter through November 6, 2000. The warrants contain

43
<PAGE>

anti-dilution provisions providing adjustment in the event of any
recapitalization, stock dividend, stock split or similar transaction. The
warrants do not entitle the holder thereof to any rights as a shareholder of the
Company until such warrant is exercised and shares are purchased thereunder. The
warrants and the shares of Common Stock issuable upon exercise thereof may not
be offered for sale except in compliance with the applicable provisions of the
Securities Act. Holders of warrants have registration rights as summarized
below. A registration statement covering such warrants and shares of Common
Stock issuable upon the exercise thereof is being filed substantially
concurrently herewith. See "Registration Rights." Of these warrants, warrants to
purchase an aggregate of 53,125 shares were exercised during December, 1996 and
warrants to purchase an aggregate of 71,875 shares were outstanding at March 31,
1997.

The Company issued to the Representative the Representative's Warrant to
purchase for investment a maximum of 110,000 shares of Common Stock. The
Representative's Warrant is exercisable for a four-year period commencing
December 20, 1996. The exercise price of the Representative's Warrant will be
$7.20 per share. The Representative's Warrant will not be transferable prior to
its exercise date except to officers of the Representative and members of the
selling group and officers and partners thereof. The Representative's Warrant
contains anti-dilution provisions providing adjustment in the event of any
recapitalization, stock dividend, stock split or similar transaction. The
Representative's Warrant does not entitle the Representative to any rights as a
shareholder of the Company until such warrant is exercised and shares are
purchased thereunder. The Representative's Warrant and the shares of Common
Stock thereunder may not be offered for sale except in compliance with the
applicable provisions of the Securities Act. The Company has agreed that, if it
shall cause to be filed with the Securities and Exchange Commission either an
amendment to the Registration Statement filed upon the initial public offering
of the Company in December, 1995 or a separate registration statement, the
Representative has the right during the five-year period which commenced on
December 19, 1995 to include in such amendment or Registration Statement
Representative's Warrant and the shares of Common Stock issuable upon its
exercise at no expense to the Representative Additionally, the Company has
agreed that, upon written request by a holder or holders of 50% or more of the
warrant which is made during the exercise period of the warrant, the Company
will, on two separate occasions, register the warrant and the shares of Common
Stock issuable upon exercise thereof. The initial such registration will be at
the Company's expense and the second such registration will be at the expense of
the holder(s) of such Warrant.

The Company also retained H.J. Meyers to act as placement agent in
connection with the Debt Financing. Under the terms of the placement agent
agreement, H.J. Meyers received a placement fee of 7% of the gross proceeds from
the Debt Financing, reimbursement of accountable expenses of 1% of such gross
proceeds and the Placement Agent's Warrant. The Placement Agent's Warrant is for
the purchase of 16,538 shares of Common Stock, is exercisable for five years and
will have an exercise price of $6.50 per share. The Company has agreed to grant
the holder of the warrant certain registration rights with respect to the
warrant and the shares of Common Stock issuable upon its exercise.

In December 1996, the Company raised approximately $1,949,000 in net
proceeds from the Debt Financing. The Company issued $2,150,000 principal amount
of Convertible Notes that are convertible at the option of the holders thereof
into shares of Common Stock in three (3) separate tranches beginning 60, 90 and
120 days after the Debt Financing Closing, at a conversion price (the
"Conversion Price") equal to the lower of (i) 80% of the average closing bid
price of the Common Stock, as publicly reported, for the five business days
prior to the business day on which notice of conversion is transmitted by the
note holder (or, in the event of automatic conversion, as described below, five
business days prior to the business day on which the conversion is deemed to
take place) or (ii) $6.70. All unconverted Convertible Notes will convert
automatically into Common Stock at the Conversion Price on the second
anniversary of the Debt Financing Closing, or earlier in the event of a merger
of the Company into another entity, a change in control of the Company or a sale
of all or substantially all the Company's assets. The Conversion Price is
subject to adjustment in certain circumstances. The

44
<PAGE>
Convertible Notes may be redeemed by the Company at 120% of the principal amount
being redeemed, plus accrued interest, at the Company's sole election if the
average closing offer price for the Common Stock for any five-day period is
below $4.00. Moreover, no holder may convert any principal amount of Convertible
Notes, without the Company's prior written consent, if such conversion would
cause such holder's aggregate ownership of the Company's capital stock to exceed
4.9% of the Company's then issued and outstanding capital stock.

REGISTRATION RIGHTS

The Company has filed a registration statement on Form SB-2 (No. 333-3784)
covering an aggregate of 148,625 shares of Common Stock issued upon conversion
of Series E Preferred Stock, 261,172 shares of Common Stock issuable or issued
upon exercise of warrants and 261,172 warrants (of which warrants to purchase
189,297 shares of Common Stock were exercised in December 1996). Substantially
concurrently herewith, the Company is filing a post effective amendment to such
registration statement covering 123,625 of such shares of Common Stock, 259,610
of such shares of Common Stock issued or issuable upon exercise of warrants and
the 71,875 warrants that remain outstanding. Further, the Company has agreed
that, thereafter to the extent necessary to permit resale of such Common Stock,
the Company shall use its best efforts to maintain the effectiveness of such
registration statement and keep current the prospectus included therein until
the Company is satisfied that Rule 144(k) is available for the resale by the
then-current holders of such Common Stock, but in no event later than three
years following effective date of such registration statement.

The Company has also granted registration rights to the holder of the
Representatives' Warrant, which provide such holder with certain rights to
register such warrant and the shares of Common Stock underlying such warrant.
See "Certain Transactions -- H.J. Meyers, Inc." and "Description of Capital
Stock -- Warrants and Convertible Notes."

In addition, the Company has agreed to use its best efforts to register for
resale under the Securities Act the shares of Common Stock that are issuable
upon conversion of the Convertible Notes and to maintain the effectiveness of
such registration for a minimum of two years. The Company has filed an amendment
to a registration statement covering 1,048,780 of such shares (based on an
assumed conversion price of $2.05 per share). Moreover, the Company has agreed
that, if it files a registration statement covering its equity securities, the
Placement Agent shall have the right, during the five-year period beginning on
the date of issuance of the Placement Agent's Warrant, to include in such
registration statement the shares issuable upon exercise of the Placement
Agent's Warrant. The Company has agreed to maintain the effectiveness of such
registration as long as such shares remain outstanding. 16,538 shares of Common
Stock will be issuable upon exercise of the Placement Agent's Warrant issued in
the Debt Financing.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is U.S. Stock Transfer
Corporation.

SHARES ELIGIBLE FOR FUTURE SALE

Sale of substantial amounts of the Company's Common Stock in the public
market or the prospect of such sales could materially adversely affect the
market price of the Common Stock. See "Risk Factors -- Shares Eligible for
Future Sale" and "Description of Capital Stock -- Registration Rights."

PLAN OF DISTRIBUTION

The Company has been advised by the Selling Shareholders that they may sell
all or a portion of the shares from time to time over-the-counter or on the
Pacific Stock Exchange, to the extent such shares may be traded on such markets,
in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The shares may be sold by one or more of the following methods: (a)
a block trade in which the broker or dealer so engaged will attempt to sell the
shares as an agent, but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a

45
<PAGE>

broker or dealer as principal and resale by such broker or dealer for its own
account pursuant to this Prospectus; (c) an over the counter distribution; (d) a
transaction in accordance with the rules of the Pacific Stock Exchange; and (e)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. There is no assurance that any of the Selling Shareholders will sell
any or all of the shares offered by them.

In effecting sales, brokers or dealers engaged by the Selling Shareholders
may arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the Selling Shareholders in amounts to be
negotiated prior to the sale. Participating brokers or dealers may be deemed to
be "underwriters" within the meaning of the Securities Act, in connection with
such sales. The Company will not receive any proceeds from the sale of the
shares by the Selling Shareholders.

The Company may at its discretion withdraw the Registration Statement of
which this Prospectus constitutes a part at any time.

LEGAL MATTERS

The validity of the shares offered hereby has been passed upon for the
Company by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo
Park, California.

EXPERTS

The financial statements as of December 31, 1995 and 1996 and for each of
the two years in the period ended December 31, 1996 included in this Prospectus
have been so included in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern, as
described in Note 1 to the financial statements) of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

46
<PAGE>
DELTAPOINT, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet as of December 31, 1995 and 1996.............. F-3
Statement of Operations for the Years Ended December 31,
1995 and 1996.............................................. F-4
Statement of Shareholders' Equity (Deficit) for the Years
Ended December 31, 1995 and 1996........................... F-5
Statement of Cash Flows for the Years Ended December 31,
1995 and 1996.............................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of DeltaPoint, Inc.

In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity (deficit) and of cash flows present fairly,
in all material respects, the financial position of DeltaPoint, Inc. at December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting 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.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has an accumulated deficit of $13,666,000 and
has incurred recent significant losses that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

PRICE WATERHOUSE LLP

San Jose, California
January 27, 1997, except for the first paragraph
of Note 11, which is as of February 26, 1997
and the second paragraphs of Note 1 and Note 11
which are as of March 25, 1997

F-2
<PAGE>
DELTAPOINT, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
-------- ---------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 4,629 $ 3,142
Accounts receivable, net of allowance for doubtful
accounts of $259 and $118................................ 1,225 1,904
Inventories............................................... 182 133
Prepaid expenses and other current assets................. 194 557
-------- ---------
Total current assets.................................... 6,230 5,736
Property and equipment, net................................. 49 277
Purchased software, net..................................... 438 299
Deposits and other assets................................... 47 34
-------- ---------
$ 6,764 $ 6,346
-------- ---------
-------- ---------
</TABLE>

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $ 665 $ 1,238
Accrued liabilities....................................... 1,337 1,146
Reserve for returns....................................... 398 771
Notes payable............................................. 865 2,150
Current portion of capital lease obligations.............. 50 --
-------- ---------
Total current liabilities............................... 3,315 5,305
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock, no par value, 4,000,000 shares
authorized, none issued or outstanding................... -- --
Common stock, no par value, 25,000,000 shares authorized,
2,025,243 and 2,485,540 shares were issued and
outstanding.............................................. 12,267 14,707
Accumulated deficit....................................... (8,818) (13,666)
-------- ---------
Total shareholders' equity.............................. 3,449 1,041
-------- ---------
$ 6,764 $ 6,346
-------- ---------
-------- ---------
</TABLE>

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

F-3
<PAGE>
DELTAPOINT, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net revenues................................................................................ $ 4,043 $ 4,950
Cost of revenues............................................................................ 1,337 1,181
--------- ---------
Gross profit.............................................................................. 2,706 3,769
--------- ---------
Operating expenses:
Sales and marketing....................................................................... 1,922 4,685
Research and development.................................................................. 2,036 2,618
General and administrative................................................................ 1,234 1,388
--------- ---------
5,192 8,691
--------- ---------
Loss from operations........................................................................ (2,486) (4,922)
Interest income (expense)................................................................... (146) 74
--------- ---------
Net loss.................................................................................... $ (2,632) $ (4,848)
--------- ---------
--------- ---------
Net loss per share.......................................................................... $ (2.42) $ (2.17)
--------- ---------
--------- ---------
Shares and share equivalents used in per share calculations................................. 1,086 2,231
--------- ---------
--------- ---------
</TABLE>

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

F-4
<PAGE>
DELTAPOINT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................................... 182,717 $ 145 $ (6,186) $ (6,041)
Exercise of stock options.................................... 382 1 -- 1
Issuance of warrants......................................... -- 6 -- 6
Sale of common stock......................................... 1,100,000 5,143 -- 5,143
Issuance of common stock for acquisition of purchased
technology.................................................. 100,000 600 -- 600
Conversion of mandatorily redeemable convertible preferred
stock....................................................... 578,810 5,992 -- 5,992
Conversion of notes payable and accrued interest............. 63,334 380 -- 380
Net loss..................................................... -- -- (2,632) (2,632)
----------- --------- ------------ ---------
Balance at December 31, 1995................................... 2,025,243 12,267 (8,818) 3,449
Issuance of common stock..................................... 379,297 1,797 -- 1,797
Exercise of stock options.................................... 81,000 643 -- 643
Net loss..................................................... -- -- (4,848) (4,848)
----------- --------- ------------ ---------
Balance at December 31, 1996................................... 2,485,540 $ 14,707 $ (13,666) $ 1,041
----------- --------- ------------ ---------
----------- --------- ------------ ---------
</TABLE>

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

F-5
<PAGE>
DELTAPOINT, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................................. $ (2,632) $ (4,848)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization........................................................... 163 254
In process research and development..................................................... 1,240 --
Other................................................................................... 40 --
Change in assets and liabilities:
Accounts receivable................................................................... (642) (679)
Inventories........................................................................... 44 49
Prepaid expenses and other current assets............................................. (113) (162)
Accounts payable...................................................................... (751) 573
Accrued liabilities................................................................... 670 (191)
Reserve for returns................................................................... 326 373
Deposits and other assets............................................................. 9 13
--------- ---------
Net cash used in operating activities............................................... (1,646) (4,618)
--------- ---------
Cash flows used in investing activities:
Acquisition of property and equipment..................................................... (29) (340)
Acquisition of purchased software......................................................... (225) (3)
--------- ---------
Net cash used in investing activities............................................... (254) (343)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock, net............................................ 1,815 --
Proceeds from issuance of common stock and warrants, net.................................. 5,150 2,440
Proceeds from issuance of notes payable, net.............................................. -- 1,949
Repayment of notes payable................................................................ (289) (865)
Repayment of capitalized lease obligations................................................ (177) (50)
--------- ---------
Net cash provided by financing activities........................................... 6,499 3,474
--------- ---------
Increase (decrease) in cash and cash equivalents............................................ 4,599 (1,487)
Cash and cash equivalents at beginning of year.............................................. 30 4,629
--------- ---------
Cash and cash equivalents at end of year.................................................... $ 4,629 $ 3,142
--------- ---------
--------- ---------
</TABLE>

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

F-6
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
Founded in 1989, DeltaPoint, Inc. (the Company), has headquarters in
Monterey, California, and distribution partners in the United States, Europe,
Japan, and Asia-Pacific. DeltaPoint, Inc. provides developers of individual,
corporate and commercial Web sites with advanced Web site creation and
management tools based on database component technology. In addition, the
Company provides visualization software products that are designed to facilitate
the collection, interpretation and management of business and technical
information across multiple computing environments.

At December 31, 1996, the Company has an accumulated deficit of $13,666,000
and has incurred significant recent losses from operations. The Company plans to
continue to develop and introduce updated versions of its existing products and
to continue to promote its Web tools software products. There can be no
assurance that the Company will not incur additional losses until its planned
and existing products generate significant revenues. The accompanying financial
statements have been prepared assuming the Company will continue as a going
concern. Additional equity or debt financing may be required to enable the
Company to continue its operations and achieve its plans for 1997 and beyond.
Management is currently pursuing additional capital financing although recent
attempts to secure such financing on acceptable terms have been unsuccessful
(see Note 11). If the Company is unable to obtain such financing, it will be
required to reduce discretionary spending in order to maintain operations at a
reduced level. Management believes that it will be able to reduce discretionary
spending if required. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

The following is a summary of the Company's significant accounting policies:

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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 these estimates.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 91-1 (SOP 91-1) on Software
Revenue Recognition.

Software product sales are recognized upon shipment of the product, net of
appropriate allowances for estimated returns. Revenues from software royalty and
packaging agreements are recognized upon shipment of a master copy of the
software product and packaging if no significant vendor obligations remain under
the terms of the agreements, any amounts paid are nonrefundable and collection
is probable. Payments received in advance of revenue recognition are recorded as
deferred revenue. The Company grants distributors and resellers certain rights
of return, price protection and stock rotation rights on unsold merchandise.
Accordingly, reserves for estimated future returns, credits for price protection
and stock rotation rights are accrued upon shipment based upon historical
experience.

The Company provides a limited amount of free telephone technical support to
customers. These activities are generally considered insignificant post contract
customer support obligations. Estimated costs of these activities are accrued at
the time of product shipment.

F-7
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Revenue from international customers, primarily in Japan accounted for 40%
and 26% of net revenues in 1995 and 1996, respectively. Sales to customers in
excess of 10% of net revenues is presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Customer A.................................................................. 35% 21%
Customer B.................................................................. 13% 30%
</TABLE>

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Included in the cash
equivalent balance at December 31, 1996, were $1,000,000 in certificates of
deposit. The Company did not have any short-term investments outstanding at
December 31, 1995 and 1996.

STOCK BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock-based compensation plans, as permitted by the Financial Accounting
Standards Board's Statement No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation." FAS 123 defines a "fair value" based method of accounting for an
employee stock option or similar equity instrument and encourages, but does not
require, entities to adopt that method of accounting for their employee stock
compensation plans. The pro forma disclosures of the difference between
compensation cost included in net loss and the related cost measured by the fair
value method are presented in Note 9.

INVENTORIES

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

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method based upon the estimated useful life of the assets
ranging from three to five years. Leasehold improvements are amortized over the
shorter of the remaining term of the lease or the estimated useful life of the
asset.

PURCHASED SOFTWARE

Purchased software is recorded at cost and amortized using the straight line
method over the three-year estimated life of the asset.

SOFTWARE DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Statement of
Financial Accounting Standards No. 86 (FAS 86) requires the capitalization of
certain software development costs once technological feasibility is
established. The capitalized costs are then amortized on a straight-line basis
over the estimated product life, or on the ratio of current revenues to total
projected product revenues, whichever is greater. Based upon the Company's
product development process, technological feasibility is established upon
completion of a working model. Costs incurred by the Company between completion
of the working model and the point at which the product is ready for general
release have been insignificant and accordingly have not been capitalized.

F-8
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CONCENTRATION OF CREDIT RISKS

Financial instruments that potentially subject the Company to significant
concentrations of credit risks consist principally of cash and accounts
receivable. The Company places its cash in interest bearing accounts and
certificates of deposit in high quality financial institutions. The Company
sells its products primarily to end-users, distributors and resellers in a
variety of industries located primarily in the United States and Japan. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. The Company
maintains an allowance for uncollectible accounts receivable based upon the
expected collectibility of all accounts receivable. To date, the Company has not
experienced any material credit losses.

At December 31, 1995, five customers accounted for 86% of accounts
receivable. At December 31, 1996, three customers accounted for 83% of accounts
receivable.

NET LOSS PER SHARE

Net loss per share is based upon the weighted average number of common
shares outstanding during the period. Common equivalent shares (consisting of
warrants and stock options) are excluded from the computation if their effect is
anti-dilutive except that, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued during
the period from November 1994 to November 1995 have been included in the
calculation as if they were outstanding for all periods through November 1995
(using the treasury stock method for the options and warrants at the initial
public offering price).

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments, including
accounts receivable and notes payable, approximates fair values.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes and
accordingly, deferred tax liabilities and assets are recognized for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of the Company's assets and liabilities.

RECLASSIFICATIONS

Certain reclassifications have been made to the financial statements in
order to conform to the 1996 presentation.

F-9
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- BALANCE SHEET DETAILS (IN THOUSANDS):

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
--------- ---------
Inventories:
<S> <C> <C>
Raw materials.................................................. $ 119 $ 84
Finished goods................................................. 63 49
--------- ---------
$ 182 $ 133
--------- ---------
--------- ---------
Purchased software:
Purchased software............................................. $ 450 $ 453
Less: accumulated amortization................................. (12) (154)
--------- ---------
$ 438 $ 299
--------- ---------
--------- ---------
Property and equipment:
Computer equipment and software................................ $ 936 $ 1,160
Furniture and fixtures......................................... 139 139
Leasehold improvements......................................... -- 31
--------- ---------
1,075 1,330
Less: accumulated depreciation................................. (1,026) (1,053)
--------- ---------
$ 49 $ 277
--------- ---------
--------- ---------
Accrued liabilities:
Accrued royalties.............................................. $ 351 $ 315
Accrued compensation........................................... 303 369
Other.......................................................... 683 462
--------- ---------
$ 1,337 $ 1,146
--------- ---------
--------- ---------
</TABLE>

Included in the December 31, 1995 and 1996 balances of computer equipment
and software are $531,000 of assets acquired under capital leases. Accumulated
depreciation associated with these leases approximates $481,000 and $531,000 at
December 31, 1995 and December 31, 1996, respectively.

In 1995, the Company acquired certain Internet technologies, including the
source code and related documentation. The aggregate purchase price of these
technologies was $1,690,000, which was comprised of (i) $1,090,000 in cash,
payable in installments through August 1996 and (ii) the issuance of 100,000
shares of the Company's common stock. The Company is also required to pay
royalties on sales of the products developed from these technologies. The
Company made installment payments for the technology of $225,000 and $865,000
for the years ended December 31, 1995 and 1996, respectively. Cash paid for
royalties on sales of the product totaled $0 in 1995 and $33,000 in 1996.
Amounts due to these suppliers for royalties are included in accrued liabilities
at December 31, 1996 and totaled $205,000.

Approximately $1,240,000 of the purchase price was allocated to in-process
technology. In connection with these acquisitions, the Company determined that
the majority of the purchase price represented in-process technology and because
such technology had not reached the stage of technological feasibility and had
no alternative future use, the amount was immediately charged to operations.

F-10
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION
In December 1995, upon the closing of the Company's initial public offering,
all outstanding shares of Mandatorily Redeemable Convertible Preferred Stock
were converted into common stock. In addition, the Company converted notes
payable to preferred shareholders totaling $300,000 and accrued interest on the
notes totaling $80,000 into 63,334 shares of common stock.

In November and December 1995, the Company acquired intellectual property
for a total purchase price of $1,690,000 which was comprised of the (i) issuance
of 100,000 shares of common stock at $6.00 per share, (ii) a cash payment of
$225,000 and (iii) $865,000 which was paid in installments through August 1996.

Cash paid during the year for interest totaled $146,000 and $28,000 for 1995
and 1996, respectively.

NOTE 4 -- RELATED PARTY TRANSACTIONS:
The Company purchases goods and services from a supplier who is a
shareholder of the Company. Purchases from this supplier totaled $354,000 and
$271,000 for the years ended December 31, 1995 and 1996, respectively. Amounts
due to this supplier are included in accounts payable at December 31, 1995 and
1996 and totaled $55,000 and $72,000, respectively.

NOTE 5 -- NOTES PAYABLE:
On December 31, 1996, the Company issued $2,150,000 of convertible
promissory notes payable. The notes bear interest at 6% payable semi-annually
over their two year term. The notes are convertible into common stock at the
option of the holder with a total of 33%, 67%, and 100% of the principal value
of the notes convertible on March 1, March 31, and April 30, 1997, respectively.
The notes automatically convert upon a change in control of the Company or on
December 31, 1998. The conversion price of the notes is calculated as the lower
of (a) 80% of the average closing bid price of the Company's common stock, as
reported by the Nasdaq Small Cap Market, for the five business days prior to a
written notice of conversion by the holder or (b) the average closing offer
price of the Company's common stock, as reported by the Nasdaq Small Cap Market,
for the five business days prior to the notes' issuance. The notes are
convertible into a total of 105,392, 210,784 and 316,176 shares of common stock
on March 1, March 31, and April 30, 1997, respectively based upon the average
closing price of the Company's common stock for the five business days prior to
the notes' issuance date. The Company may call all or part of the outstanding
notes within a ten day period if the average closing offer price of the
Company's common stock, as determined by the Nasdaq Small Cap Market, is less
than $4.00 for any five day period. The call price is equal to 120% of the
principal called.

The Company has deferred and included in other current assets $230,000 of
debt issuance costs related to the notes which will be amortized over the two
year term using the interest method. In connection with the issuance of the
notes, the Company granted the underwriters 16,538 common stock warrants at an
exercise price of $6.50 per share and exercisable through December 2001.
Included in the deferred debt issuance costs is $29,000 representing the
estimated value of the warrants on the date of grant.

The Company has reserved 316,176 shares of common stock for issuance upon
the conversion of the notes.

NOTE 6 -- COMMITMENTS AND CONTINGENCIES:

COMMITMENTS

The Company leases its facilities under noncancellable operating leases.
Rent expense was $262,000 and $194,000 for the years ended December 31, 1995 and
1996, respectively.

F-11
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 -- COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Future minimum lease payments are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING
YEAR ENDING DECEMBER 31, LEASES
- --------------------------------------------------------------------------------------------- -----------
<S> <C>
1997 $ 206
1998......................................................................................... 155
-----
Total minimum lease payments................................................................. $ 361
-----
-----
</TABLE>

CONTINGENCIES

In the normal course of business, the Company from time to time receives
inquiries with regards to possible patent infringement. Management believes that
it is unlikely that the outcome of these inquiries will have a material adverse
effect on the Company's financial position or results of operations or
liquidity.

NOTE 7 -- INCOME TAXES:
No provision for income taxes has been recorded for any periods presented
due to net operating losses. At December 31, 1996, the Company had approximately
$7,000,000 of federal net operating loss carryforwards which expire in varying
amounts through 2011. Due to certain changes in the ownership of the Company,
approximately $1,700,000 and $1,200,000 of these losses are subject to annual
limitations of approximately $142,000 and $301,000, respectively.

A reconciliation of the Company's effective tax rate to the U.S. federal
statutory rate follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
U.S. federal statutory rate................................. (34.0)% (34.0 )%
State and local taxes, net of U.S. federal benefit.......... (9.1 ) (8.8 )
Reserved net deferred tax assets and others................. 43.1 42.8
----- -----
--% --%
----- -----
----- -----
</TABLE>

The components of the net deferred tax assets consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating losses...................................... $ 940 $ 2,788
Reserves, accruals and depreciation....................... 885 767
Tax credit carryforwards.................................. 10 --
--------- ---------
1,835 3,555
Deferred tax valuation allowance........................ (1,835) (3,555)
--------- ---------
Net deferred tax asset...................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>

The Company has determined that, under FAS 109, it is more likely than not
that the deferred tax assets at December 31, 1995 and 1996 would not be realized
and, accordingly, a full valuation reserve has been established. Management's
assessment is based on the Company's history of net operating losses.

F-12
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- COMMON STOCK AND WARRANTS:

COMMON STOCK:

In December 1995, the Company completed its initial public offering of
1,100,000 shares of its common stock at a per share price of $6.00 and realized
net proceeds of $5,143,000. In addition, common stock as of December 31, 1996
reflects the January 1996 sale of 165,000 shares of common stock issued in the
overallotment of the Company's initial public offering. Net proceeds to the
Company resulting from the overallotment were $831,000. Common stock also
reflects net proceeds resulting from the exercise of warrants totaling $966,000
and the exercise of stock options from the 1995 Stock Option Plan of $643,000.

WARRANTS:

The following warrants were outstanding and exercisable at December 31,
1996:

<TABLE>
<CAPTION>
ISSUED IN
WARRANTS OUTSTANDING CONNECTION WITH ISSUANCE DATE EXPIRATION DATE WARRANT EXERCISE PRICE
- -------------------- --------------- ------------- --------------- -----------------------
<S> <C> <C> <C> <C>
71,875 Equity Nov. 1995 Nov. 2000 $ 7.20
110,000 Equity Dec. 1995 Dec. 2000 $ 7.20

Convertible
16,538 Notes Dec. 1996 Dec. 2002 $ 6.50
--------
198,413
--------
--------
</TABLE>

The 71,875 outstanding warrants issued in November 1995 have an exercise
price of $7.20 per share for the first thirty (30) months of the warrant term
and $8.40 per share for the remaining warrant term. The Company has reserved
198,413 shares of common stock for issuance upon the exercise of the outstanding
warrants.

NOTE 9 -- STOCK OPTION PLANS:
The Company has three Stock Option Plans (the Plans) which provide for the
issuance of stock options to employees of the Company. The Company has reserved
an aggregate of 885,462 shares of Common Stock for issuance upon the exercise of
options granted under these plans, including 200,000 shares approved by the
Company's shareholders at the annual meeting in June 1996. Options to purchase
41,588 and 171,804 shares were vested and exercisable at December 31, 1995 and
1996 respectively. Options granted under the Plans are for periods not to exceed
10 years. Non-employee members of the Board of Directors are eligible for
automatic option grants under the 1995 Stock Option Plan (the 1995 Plan). All
options granted under the Plans must be at prices not less than fair market
value at the date of grant, except for the 1995 Plan for which options can be
granted at prices not less than 85% of the fair market value at the date of
grant. The Board of Directors may amend, modify or terminate the Plans at their
discretion.

F-13
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- STOCK OPTION PLANS: (CONTINUED)
The following table summarizes activity under the Company's Stock Option
Plans:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ---------------------------------
AVAILABLE WEIGHTED AVERAGE
FOR GRANT SHARES EXERCISE PRICE
---------- ---------- ---------------------
<S> <C> <C> <C>
Balance at December 31, 1994............................ 27,230 38,127 6.63
Additional shares reserved.............................. 620,000 -- --
Options granted......................................... (525,000) 525,000 4.08
Options exercised....................................... -- (382) 6.63
Options canceled........................................ 3,321 (3,321) 6.63
---------- ----------
Balance at December 31, 1995............................ 125,551 559,424 3.89
Additional shares reserved.............................. 200,000 -- --
Options granted......................................... (433,677) 433,677 8.54
Options exercised....................................... -- (81,000) 3.64
Options canceled........................................ 171,593 (171,593) 4.85
---------- ----------
Balance at December 31, 1996............................ 63,467 740,508 6.68
---------- ----------
---------- ----------
</TABLE>

The following table summarizes information about employee stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- --------------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED AVERAGE
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT EXERCISE PRICE AT
RANGE OF EXERCISE PRICES DECEMBER 31, 1996 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1996 DECEMBER 31, 1996
- ------------------------ ----------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
$3.50................... 236,611 8.9 3.50 92,998 3.50
$4.80-6.63.............. 75,759 9.0 5.95 37,834 5.89
$7.50................... 140,000 9.9 7.50 2,222 7.50
$7.75-7.83.............. 99,788 9.3 7.82 -- --
$9.50-11.50............. 188,350 9.4 9.78 38,750 9.50
-------- --------
Total................. 740,508 9.3 6.68 171,804 5.43
-------- --------
-------- --------
</TABLE>

FAIR VALUE DISCLOSURES

Had compensation cost for the Plans been determined based on the fair value
of each stock option grant on its grant date, as prescribed in FAS 123, the
Company's net loss and net loss per share would have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net loss:
As reported............................................... $ (2,632) $ (4,848)
Pro forma................................................. $ (2,704) $ (5,450)
Net loss per share:
As reported............................................... $ (2.42) $ (2.17)
Pro forma................................................. $ (2.49) $ (2.44)
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants during the applicable

F-14
<PAGE>
DELTAPOINT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- STOCK OPTION PLANS: (CONTINUED)
period: dividend yields of 0% for both periods; expected volatility of 80.6%;
risk-free interest rate of 5.57% for 1995 and 6.07% for 1996 for options
granted; and a weighted average expected option term of 4.3 years for 1995 and
3.9 years for 1996.

The above pro forma amounts include compensation expense based on the fair
value of options granted and vesting during the years ended December 31, 1995
and 1996 and exclude the effects of options granted prior to January 1, 1995.
Accordingly, the above pro forma net loss and net loss per share are not
representative of the effects of computing stock option compensation expense
using the fair value method for future periods.

NOTE 10 -- 401(K) PLAN:
During 1992, the Company established a deferred compensation plan (the
401(k) Plan) pursuant to Section 401(k) of the Internal Revenue Code (the
"Code"), whereby substantially all employees are eligible to contribute up to
20% of their pre-tax earnings, not to exceed amounts allowed under the Code. The
Company may make contributions to the 401(k) Plan at the discretion of the Board
of Directors. No employer contributions have been made to the 401(k) Plan by the
Company.

NOTE 11 -- SUBSEQUENT EVENTS:

On February 26, 1997, the Company reached an agreement with a third party to
issue and sell to such party an aggregate of 1,000 shares of Series A Preferred
Stock for cash in the aggregate amount of $1,000,000. Each share of Series A
Preferred Stock would have been convertible at any time, at the option of the
holder, into such number of shares of Common Stock.

For various reasons, the closing conditions to this agreement did not occur
and the financing was subsequently terminated. The Company is seeking additional
financing (see Note 1).

F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Available Information............................. 2
Summary........................................... 3
Risk Factors...................................... 6
Price Range of Common Stock....................... 14
Dividend Policy................................... 14
Capitalization.................................... 15
Selected Financial Data........................... 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 17
Business.......................................... 21
Management........................................ 31
Certain Transactions.............................. 39
Principal and Selling Shareholders................ 41
Description of Capital Stock...................... 43
Shares Eligible for Future Sale................... 45
Plan of Distribution.............................. 45
Legal Matters..................................... 46
Experts........................................... 46
Financial Statements.............................. F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 204(a) of the California General Corporation Law,
the Registrant's Articles of Incorporation eliminate a director's personal
liability for monetary damages to the Registrants and its shareholders arising
from a breach or alleged breach of the director's fiduciary duty, except for
liability arising under Sections 310 and 316 of the California General
Corporation Law or liability for (i) acts or omissions that involve intentional
misconduct or knowing and culpable violation of law, (ii) acts or omissions that
a director believes to be contrary to the best interests of the Registrant or
its shareholders or that involve the absence of good faith on the part of the
director, (iii) any transaction from which a director derived an improper
personal benefit, (iv) acts or omissions that show a reckless disregard for the
director's duty to the Registrant or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the Registrant or
its shareholders and (v) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Registrants or its shareholders. This provision does not eliminate the
directors' duty of care, and in appropriate circumstances equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under California law.

Sections 204(a) and 317 of the California General Corporation Law authorize
a corporation to indemnify its directors, officers, employees and other agents
in terms sufficiently broad to permit indemnification (including reimbursement
for expense) under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Articles of Incorporation and Bylaws contain provisions covering indemnification
of corporate directors, officers and other agents against certain liabilities
and expenses incurred as a result of proceedings involving such persons in their
capacities as directors, officers, employees or agents, including proceedings
under the Securities Act or the Securities Exchange Act of 1934, as amended. The
Company has entered into Indemnification Agreements with its directors and
executive officers.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee.

<TABLE>
<S> <C>
SEC Registration fee...................................................... $ 719
Printing and engraving expenses........................................... 5,000
Legal fees and expenses................................................... 7,500
Accounting fees and expenses.............................................. 2,000
Blue sky fees and expenses................................................ 10,000
Transfer agent fees....................................................... 2,500
Miscellaneous fees and expenses........................................... 2,281
---------
Total................................................................. $ 30,000
---------
---------
</TABLE>

II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1994, the Registrant has issued and sold the following
securities (after giving effect to the one-for-5.3 reverse split of the Common
Stock effected on the closing of the Company's Initial Public Offering in
December 1995):

1. The Registrant has granted options to purchase 7,165 shares of Common
Stock and issued and sold 2,143 shares of its Common Stock upon exercise
of such options to a number of employees pursuant to direct issuances and
to exercises of options under its 1990 Stock Option Plan.

2. The Registrant has granted options to purchase 8,063 shares of Common
Stock and issued and sold no shares of its Common Stock upon exercise of
such options to employees and a third party pursuant to direct issuances
and to exercises of options under its 1992 Stock Option Plan, including
options granted to Raymond R. Kingman, Jr., William G. Pryor to purchase
4,283 and 1,894 shares of Common Stock, respectively.

3. The Registrant has granted options to purchase 499,844 shares of Common
Stock and issued and sold no shares of its Common Stock upon exercise of
such options to a number of employees and directors pursuant to direct
issuances and to exercises of options under its 1995 Stock Option Plan.

4. On April 6, 1994, Registrant sold and issued an aggregate of 77,894
shares of its Series C Preferred Stock for cash in the aggregate amount
of $450,000 to entities affiliated with Hummer Winblad Venture Partners
and entities affiliated with Oak V Affiliates Fund, L.P. pursuant to a
Series C Preferred Stock Purchase Agreement. See "Certain Transactions."

5. On May 24, 1995 Registrant sold and issued an aggregate of 112,564
shares of its Series D Preferred Stock for cash in the aggregate amount
of $1,050,000 to entities affiliated with Hummer Winblad Venture
Partners, entities affiliated with Oak V Affiliates Fund, L.P. and
Pinnacle Manufacturing Professionals pursuant to a Series D Preferred
Stock Purchase Agreement. See "Certain Transactions" and "Capital Stock
-- Convertible Notes and Warrants."

6. On May 24, 1995, Registrant issued to Hummer Winblad Venture Partners
and entities affiliated with Oak V. Affiliates Fund, L.P., Warrants to
purchase 69,272 shares of Common Stock at an exercise price of $9.33 per
share, or in the event Registrant consummates the sale of its Common
Stock pursuant to a registration statement filed on Form S-1 filed under
the Securities Act for an aggregate offering price of $5 million. See
"Certain Transactions."

7. On November 6, 1995, Registrant sold and issued 125,000 units, each unit
consisting of two shares of Series E Preferred Stock, and one Warrant at
a purchase price of $8.00 per unit, for cash of $765,000, net of issuance
costs, to the following investors in the following amount of units:
Hummer Winblad Ventures (3,125 units), Oak V Affiliates Fund, L.P. (6,250
units), American High Growth Equities Retirement Trust (50,000 units),
Jack Balter (3,125 units), Dr. Mannie Magid (3,125 units), George L.
Black Trust (6,250 units), Leon Feldan (3,125 units), Ronald Mickwee
(3,125 units), Joan Plastiras Myers (3,125 units), Nicholas W. and
Geraldine Perilli (3,125 units), James R. Ratliff (6,250 units), David
Rosenberg (3,125 units), Alan J. Rubin (6,250 units), The Salzman Group,
Ltd. (6,250 units), Donald L. & Lucy A. Stoner Trust (6,250 units),
Lawrence S. Weisman (6,250 units), Donald B. Witmer (6,250 units). See
"Certain Transactions."

8. On November 10, 1995, Registrant granted options to purchase an
aggregate of 335,000 shares of Common Stock under its 1995 Stock Option
Plan, at an exercise price of $3.50 per share to Raymond R. Kingman, Jr.,
William G. Pryor and Donald B. Witmer to purchase 100,000, 100,000 and
135,000 shares of Common Stock, respectively.

II-2
<PAGE>
9. On November 8, 1995 issued to each of Hummer Winblad Ventures and Oak
Affiliates a warrant to purchase 31,667 of Common Stock exercisable at a
price of $7.20 per share for a period of 30 months following December 26,
1995 and a price of $8.40 per share from such time until November 6,
2000.

10. On April 22, 1996, Registrant granted options to purchase an aggregate
of 155,000 shares of Common Stock under its 1995 Stock Option Plan, at an
exercise price of $9.50 per share to John J. Ambrose and Donald B. Witmer
to purchase 145,000 and 10,000 shares of Common Stock, respectively.

11. On August 13, 1996, Registrant granted options to purchase 20,000 shares
of Common Stock under its 1995 Stock Option Plan, at an exercise price of
$7.50 per share to Patrick Grady.

12. On November 4, 1996, Registrant granted options to purchase 40,000
shares of Common Stock under its 1995 Stock Option Plan, at an exercise
price of $7.50 per share to Donald Witmer.

13. In December 1996, holders of warrants exercised warrants to purchase an
aggregate of 189,297 shares of Common Stock at a purchase price of $5.00
per share, including warrants to purchase an aggregate of 145,547 shares
of Common Stock exercised by Oak Investment Partners V, L.P. and Oak V
Affiliates Fund, L.P. The shares issued are covered by Post-Effective
Amendment No. 2 to Registration Statement on Form SB-2 (Registration No.
333-3784).

14. On December 31, 1996, Registrant issued $2,000,000 principal amount of
6% Convertible Subordinated Debentures to High Risk Opportunities Hub
Fund Ltd. and $150,000 principal amount thereof to American High Growth
Equities Retirement Trust.

15. In November 1996, Registrant issued 30,970 shares of Common Stock to Oak
Investment Partners V, L.P., 697 shares of Common Stock to Oak V
Affiliates Fund, L.P., 30,084 shares of Common Stock to Hummer Winblad
Venture Partners and 1,583 shares of Common Stock to Hummer Winblad
Technology Fund, all pursuant to the conversion of the notes described in
the chart and footnote 7 in "Certain Transactions." Such shares are
covered by this Registration Statement.

16. On December 31, 1996, Registrant issued the Placement Agent's Warrant to
purchase 16,538 shares of Common Stock at an exercise price of $6.50 per
share to H.J. Meyers & Co., Inc.

The issuance described in Items 1 through 16 were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) under the
Securities Act as transactions by an issuer not involving a public offering or
on Rule 701 promulgated under the Securities Act. In addition, the recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Registrant, to information about the
Registrant.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
3.1(1) Registrant's Amended and Restated Articles of Incorporation
3.2(2) Registrant's Bylaws
3.3(1) Certificate of Determination of Series A Preferred Stock
4.1(2) Specimen Certificate of Registrant's Common Stock
4.2(2) Form of Warrant
4.3(2) Form of H.J. Meyers & Co.'s Warrant
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
4.4(2) Loan and Warrant Agreement between Registrant and certain investors dated as of March 29, 1993
4.5(2) Amended and Restated Investor Rights Agreement between Registrant and the investors specified
therein dated as of November 6, 1995
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
10.1(2) Real Property Lease between Registrant and Owens Mortgage Investment Fund dated as of August 18,
1995
10.2(2) 1990 Stock Option Plan
10.3(2) 1992 Stock Option Plan
10.4(2)(4) 1995 Stock Option Plan
10.5(2) Form of Indemnification Agreement
10.6(2)(3) License Agreement between Registrant and Smart Draw Software, Inc. dated as of April 19, 1995
10.7(2) License Agreement between Registrant and Halcyon Software, Inc. dated as of June 30, 1992
10.8.1(2)(3) Distribution Agreement between Registrant and Nippon Polaroid Kabushiki Kaishi dated as of
November 12, 1991
10.8.2(2)(3) Distributor Software License Agreement between Registrant and Nippon Polaroid K.K. Supplements
dated as of December 24, 1993, June 6, 1994 and two supplements dated as of June 28, 1995
10.9(2) Series C Preferred Stock Purchase Agreement dated April 6, 1994 among the Registrant and the
investors named therein
10.10(2) Series D Preferred Stock and Warrant Purchase Agreement dated May 24, 1995 among Registrant and
the investors named therein
10.11(2) Series E Preferred Stock and Warrant Purchase Agreement dated November 6, 1995 among Registrant
and the investors named therein
10.12(2) Employment Agreement dated as of November 1, 1995 between Registrant and Donald B. Witmer
10.13.1(2) Business Loan Agreement between Registrant and Silicon Valley Bank dated as of August 24, 1994
10.13.2(2) Promissory Note between Registrant and Silicon Valley Bank dated as of August 24, 1994
10.14(2) Conversion of Promissory Notes and Exchange of Warrants Agreement dated as of November 8, 1995
among Registrant, Hummer Winblad Venture Partners, Hummer Winblad Technology Fund, Oak
Investment Partners V, Limited Partnership and Oak V Affiliates Fund, Limited Partnership.
10.15(2) License Agreement between Registrant and Altura Software, Inc. dated June 7, 1994
10.16(2) Employment Agreement dated November 8, 1995 between Registrant and Raymond R. Kingman, Jr.
10.17(2) Employment Agreement dated November 8, 1995 between Registrant and William G. Pryor
10.18(2) Offer letter dated December 5, 1995 between the Registrant and Spencer A. Leyton
10.19(2)(3) Letter of Intent dated November 21, 1995 between DeltaPoint and Richard Blum
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
10.20(2)(3) Agreement dated December 15, 1995 among Registrant, Global Technologies Corporation and William
French
10.21(2) Termination Agreement dated as of November 8, 1995 among the Registrant and certain shareholders
of the Company named therein
10.22(2) Amendment Agreement dated as of December , 1995 among the Registrant and certain shareholders
of the Company named therein
10.23(4) Employment Agreement dated December 26, 1995 between Registrant and William A. French
10.24(5) Separation Agreement and Release between Registrant and Raymond R. Kingman, Jr. dated April 5,
1996
10.25(5) Offer letter dated March 29, 1996 between Registrant and John J. Ambrose
10.26* Form of 6% Convertible Subordinated Debentures issued by Registrant on December 31, 1996 to High
Risk Opportunities Hub Fund Ltd. and American High Growth Equities Retirement Trust
10.27* Form of Subscription Agreement governing issuance of 6% Convertible Subordinated Debentures
10.28(6) Offer letter dated as of March 24, 1997 between the Registrant and Jeffrey F. Ait
23.1* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (included in Exhibit
5.1)
23.2** Consent of Price Waterhouse LLP
24.1* Power of Attorney
</TABLE>

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

(1) Incorporated by reference to Registrant's Annual Report on Form 10-KSB,
filed March 26, 1997.

(2) Incorporated by reference to Registrant's Registration Statement on Form
SB-2, filed December 19, 1995 (File No. 33-99300).

(3) Confidential treatment requested as to certain portions of this exhibit.

(4) Incorporated by reference to Registrant's Registration Statement on Form S-8
filed March 6, 1996 (File No. 333-2192).

(5) Incorporated by reference to Registrant's Registration Statement on Form
SB-2, filed April 17, 1996 (File No. 333-3784).

(6) Incorporated by reference to Registrant's Amendment No. 1 to Registration
Statement on Form SB-2, filed April 9, 1997 (File No. 333-22565).

* Previously filed.

** Filed herewith.

ITEM 28. UNDERTAKINGS

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-5
<PAGE>
The undersigned Registrant hereby undertakes:

That for purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

The Registrant further undertakes to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the Offering.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Monterey,
State of California, on April 25, 1997.

DELTAPOINT, INC.

By: /s/ JEFFREY F. AIT

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

Jeffrey F. Ait

CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 25TH DAY OF APRIL, 1997 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED:

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ --------------------------------------

<C> <S> <C>
/s/ JEFFREY F. AIT
------------------------------------------- Chief Executive Officer and Director
Jeffrey F. Ait (Principal Executive Officer)

Chief Financial Officer, Chief
/s/ DONALD B. WITMER Operating Officer and Director
------------------------------------------- (Principal Financial and Accounting
Donald B. Witmer Officer)

/s/ JOHN HUMMER*
------------------------------------------- Director
John Hummer

/s/ PATRICK GRADY*
------------------------------------------- Director
Patrick Grady

*By: /s/ DONALD B. WITMER
--------------------------------------
Donald B. Witmer Director
ATTORNEY-IN-FACT
</TABLE>

II-7
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBITS NUMBERED PAGE
- ---------- ------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
23.2 Consent of Price Waterhouse, LLP...........................................................
</TABLE>

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 2 to this Registration Statement on Form SB-2 of
our report dated January 27, 1997, except for the first paragraph of Note 11
which is as of February 26, 1997 and the second paragraph of Note 1 and Note 11
which are as of March 25, 1997, relating to the financial statements of
DeltaPoint, Inc., which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP
San Jose, California
April 24, 1997