WHITE PINE SOFTWARE INC, 10KSB, 2000-03-28

WHITE PINE SOFTWARE INC
10KSB, 2000-03-28
PREPACKAGED SOFTWARE

Previous: WHITE PINE SOFTWARE INC, SB-2/A, 2000-03-28

Next: GATEWAY BANCSHARES INC /GA/, 10KSB, 2000-03-28

<PAGE>

================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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

FORM 10-KSB

(MARK ONE)

x Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________

Commission File Number: 000-21415

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

WHITE PINE SOFTWARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

DELAWARE 04-3151064
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

542 AMHERST STREET, NASHUA, NEW HAMPSHIRE 03063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(603) 886-9050
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

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

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

Check whether the issuer: (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes x No

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

State issuer's revenues for its most recent fiscal year: $12,001,618.

The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 1, 2000, was $419,070,934, based on a total of
10,542,665 shares held by non-affiliates and on the last published sale price on
the Nasdaq National Market of $39.75.

The number of shares of the Registrant's common stock outstanding as of
March 1, 2000 was 12,073,662.

Transitional Small Business Disclosure Format (check one): Yes No x

===============================================================================

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------------
PART I
<S> <C> <C>
Item 1. Description of Business 4
Item 1A. Risk Factors 16
Item 2. Description of Property 23
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security Holders 24

PART II

Item 5. Market for Common Equity and Related Stockholder Matters 25
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations 26
Item 7. Financial Statements 29
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 30

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 31
Item 10. Executive Compensation 34
Item 11. Security Ownership of Certain Beneficial Owners and Management 37
Item 12. Certain Relationships and Related Transactions 38
Item 13. Exhibits and Reports on Form 8-K 39
</TABLE>

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

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

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

Unless the context requires otherwise, "White Pine," "we," "us" and
similar terms refer to White Pine Software, Inc. and its subsidiary.

CLASSPOINT, CU-SEEME, MEETINGPOINT and WHITE PINE are our
trademarks. This Annual Report also contains additional trademarks and trade
names of White Pine and other companies.

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

We develop software solutions that facilitate worldwide video and
audio communication and data collaboration across the Internet, intranets,
extranets and other networks using the Internet Protocol (IP). Our CU-SeeMe
Web product provides the industry's first multipoint video instant messaging
over the Internet. Our CU-SeeMe Pro and MeetingPoint create a client-server
solution that allows multiple users to participate simultaneously in
conferences over the Internet. ClassPoint is a MeetingPoint add-on that
provides a complete solution for corporate training and distance learning. We
support multiple platforms, including Windows 95, 98 and NT, Sun Solaris, and
Red Hat Linux. Our web site is located at WWW.WPINE.COM. CU-SeeMe Web can be
experienced at WWW.CUSEEMEWORLD.COM. Information contained in our web site is
not a part of this Annual Report.

We have established White Pine as a leader in visual communications
technology. We offer technologies such as streaming media integration and a
Web-based client that we believe are not offered by any other provider today.
Our CU-SeeMe client is widely distributed, and we believe that there is
strong brand equity in the CU-SeeMe name.

We intend to capitalize on these attributes by targeting increased
distribution of our client software, which will ultimately create additional
demand for MeetingPoint servers. Targeting Internet service providers, portal
sites, and enterprises, we will either sell a complete end-to-end solution
for Internet communications or sell Internet communications services whereby
the customer pays a recurring fee to video/audio-enable and maintain their
web site.

As the Internet continues to evolve from an information exchange to an
integrated communications medium, we believe our technology can help facilitate
this transition by providing visual communications on demand that are simple
enough for the average Internet user to engage, and powerful enough to provide
robust functionality for web-based businesses.

OUR CU-SEEME WEB/MEETINGPOINT SOLUTION

Our CU-SeeMe Web technology, introduced in October 1999, enables live
audio, video and text chat to be embedded in a standard web browser. CU-SeeMe
Web facilitates on-demand Visual Instant Messaging, web-based videochat,
live interactive web events, and face-to-face, online call centers for
e-commerce and support services.

With CU-SeeMe Web, we believe that Internet portals and web sites can
customize their web pages with new interactive features that will attract more
visitors to their sites and keep them there for longer periods of time. Internet
service providers, or ISPs, and applications service providers, or ASPs, can
offer a broad range of value-added services to their enterprise and consumer
customers. E-commerce sites can offer live, personalized assistance to buyers
while they are in the process of shopping online. CU-SeeMe Web gives Internet
web sites a new set of tools to grow membership, create online
communications, increase revenue streams, and offer services that have not
previously been available. As portal sites deploy CU-SeeMe Web to enhance the
communications capabilities of their sites, we believe that consumers will
adopt visual communications on the Internet as an accepted medium. This will
accelerate all forms of visual communications as mainstream Internet
applications.

Portals and businesses with a strong Internet presence are constantly
engaged in activities to bring consumers to their sites and keep them there
longer. CU-SeeMe Web allows these sites to create

<PAGE>

interactive communities for sharing information about their products and
services through live videochat experiences. CU-SeeMe Web allows Internet
businesses to provide community-based videochat inside a browser window of their
design.

Instant Messaging and e-mail have become powerful services provided
by Internet portals to add value to their sites and keep consumers coming
back. Video Instant Messaging provides a new enhancement to this accepted
Internet activity by adding audio and video to the Instant Message
experience. The product provides innovative web developers with the
flexibility of choice as Instant Messaging becomes embedded into new Internet
applications. CU-SeeMe Web allows Internet call centers to be developed that
enable interactive two-way communications over the Internet, including
two-way visual communications. Product demonstrations, personalized customer
service, interactive press and analyst briefings, and employment interviews
are a few of the many applications for CU-SeeMe Web. The consumer is
automatically connected, visually, audibly, and with text-based chat simply
by clicking on a browser button. For sites that host text-based chat rooms
today, CU-SeeMe Web offers the possibility to enhance the user experience and
add a new dimension of communication with video and audio. CU-SeeMe Web
provides significant differentiation from other companies that offer only
text chat or text and audio interaction over the Internet. Visitors can
access a page that is CU-SeeMe Web-enabled using either Netscape Navigator or
Microsoft Internet Explorer. Users can access live video and audio without
having any related software previously installed on their machines.

Should the end user decide to upgrade from CU-SeeMe Web into a more
feature-rich client software, we provide CU-SeeMe Pro for sale over our web site
and in retail stores. CU-SeeMe Pro offers the user the additional features of
H.323 standards compliance, integrated desktop application sharing, a flexible
user interface, a Conference Companion that simplifies storing and retrieving
contact information, and additional audio and visual enhancements.

CU-SeeMe Web integrates with our MeetingPoint conference server, which
provides many of the back-end functions needed for applications like videochat,
collaboration, IP call centers, Internet event management, and other multipoint
applications. MeetingPoint also enables back-end services like call transfer,
queuing, and agent log-in and management. MeetingPoint allows for additional
innovation on the site - for example, a small group of people could participate
interactively with CU-SeeMe Web in a live event, while the entire event could be
streamed out to a large number of viewers using MeetingPoint's Streaming Media
integration technology.

MeetingPoint, the software-only server component of our multimedia
conferencing solution, allows users of CU-SeeMe to participate in multipoint,
multimedia conferences with a nearly unlimited number of users. Administrators
create and host conferences using MeetingPoint. End users then connect to the
conference, using either CU-SeeMe or any other third-party H.323 compliant
multimedia conferencing client product. MeetingPoint's core "multimedia router"
technology enables the group interaction to take place by "routing" it to the
other conference participants. MeetingPoint solves the complex problem of
enabling real-time multipoint communication over the Internet between users
operating at different connection speeds without degrading the quality of the
entire conference to that of the slowest connection speed.

5
<PAGE>

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

OUR APPLICATION SERVICE PROVIDER SOLUTION

We believe that certain ISPs, portal sites, and enterprises would like
to offer visual communications services, but are unwilling to take on the added
burden of infrastructure costs, technology training, and resource allocation
necessary to deploy these services well. Part of our strategy is to accelerate
broadscale deployment and facilitate site adoption of our technology by
providing customers with the services necessary to get them up and running, and
keep them running reliably and smoothly.

We plan to assist our customers with our technology deployments,
MeetingPoint-specific systems integration services, network design, and
MeetingPoint server installation and configuration. Hosting of conferencing
services will be provided on shared or dedicated MeetingPoint servers,
providing greater scalability and flexibility than the customer could provide
on its own. Our ASP will provide a full suite of Internet communications
services, enabling our customers to provide community management, directory
services, point-to-point calls, broadcast and server-based conferencing.
These services are ideally suited for enterprise customers; however, ISPs and
portal sites interested in hosting their own sites can also benefit from our
deployment assistance.

Our ASP business can be divided into two discrete offerings: Hosting
Services and Professional Services.

HOSTING SERVICES

When introduced in the second fiscal quarter of 2000, our hosting
services will enable the customer to offer video/audio-enhanced applications
leveraging our back-end infrastructure and service operations center, or SOC.
The customer can realize greater economies of scale by utilizing our shared
server hosting model and forgoing the actual purchase of MeetingPoint
conferencing servers and necessary supporting infrastructure. The SOC will
serve as our interface with the network operation functions provided by our
outsourced network partner, as well as provide the customer with monitoring
and analytical functions as follows:

- application and performance monitoring, configuration and
support;

- primary interface to the customer site via a secure browser;

- trouble ticket and ticket status reporting, application
configuration, application monitoring, and electronic help;

- traditional dial-in support, staffed 24 hours every day; and

- real-time monitoring of customer's web site in an effort to
prevent and curtail inappropriate behavior and maintain
secure, G-rated sites for a customer's subscribers.

6
<PAGE>

Hosting services will be offered for both White Pine technologies and other
supported technologies. Our ASP will provide communications services from PC
to PC and from PC to telephone, on both a one-to-one and a group basis.

PROFESSIONAL SERVICES

Our Professional Services unit will offer the customer an integrated
service plan, regardless of the customer's intention to self-host or outsource
hosting. Professional Services will provide ongoing or periodic support for the
following:

- hardware deployment;

- software deployment, including engineering support to optimize
the customer's network to render it audio- and video-enabled;

- network management of customer-hosted services through the SOC
(regardless of whose network the operations are deployed on);

- ongoing status monitoring (hardware failure, software usage,
saturation forecasting, ongoing maintenance and support, and
extranet interface reporting); and

- capacity management.

We have secured our first network operations center, or NOC, from
where the majority of these services will be deployed, and begun the buildout
necessary to render the facility operational by the second fiscal quarter of
2000. We are in the process of securing partnerships with a major network
provider as well as a major hardware provider in order to provide an optimal
and complete service offering. Services offered through the ASP business will
be compensated through hourly fees or contractual agreements.

OUR PORTAL SITE SOLUTION

In an effort to expose the Internet community to the positive and
highly adaptable concept of Internet communications, we have launched our own
communications portal site, CUSeeMe World. The site enables anyone with Internet
access the opportunity to "click to videochat" by downloading a thin CU-SeeMe
Web client and initiating video and audio communication immediately, either in a
preconfigured topic-specific chat room or a customized chat room created by the
user. The site is designed to not only expose the average user to video
communications, but to present ISPs and portal sites with proof of concept for
their own anticipated communications deployments. An important aspect of the
site is its ability to draw users into the online communication experience,
without the prerequisites of purchasing software or hardware. The user needs no
special software or hardware to participate; users without cameras can readily
text- and audio-chat with, as well as see, users with cameras. We believe that
many users choose to purchase a camera after experiencing the CUSeeMe World
site. The site offers free membership to users, and is sponsored by a number of
topic-specific web sites.

STRATEGY

Our objective is to be the leading supplier of software solutions that
facilitate worldwide video and audio communication and data collaboration across
the Internet. To achieve this objective, we are implementing the following
strategies:

MAINTAIN TECHNOLOGICAL LEADERSHIP. Since 1996, we have developed and
introduced leading-edge visual communications technology for the Internet.
Products such as CU-SeeMe and MeetingPoint have won numerous industry awards for
their market-leading technology. We intend to extend our leadership position by
continuing to invest in research and development and to build upon our existing
technology.

7
<PAGE>

DRIVE MARKET ACCEPTANCE OF OUR APPLICATION SERVICE PROVIDER
CAPABILITIES. We believe that a number of potential users of Internet-based
visual communications services are hesitant to make a significant
infrastructure and training investment viewed as necessary to deploy and
support these services. We believe that our introduction of hosting services
and related professional services will ease the implementation of
Internet-based visual communications services for customers such as ISPs,
portal sites and enterprises. We intend to increase market awareness and
acceptance of our software products, such as CU-SeeMe and MeetingPoint,
through the introduction of our hosting services and professional services in
the second fiscal quarter of 2000.

EXPAND MARKET PENETRATION OF MEETINGPOINT. We believe our future
success will depend significantly on our ability to market MeetingPoint. We
believe that opportunities exist to market MeetingPoint to Internet Service
Providers, corporations and other entities seeking to enable and promote
multimedia group conferencing. We believe that our leadership position in
this market space has positioned us to achieve revenue growth as the H.323
market matures and expands.

CONTINUE TO DEVELOP PORTFOLIO OF PROPRIETARY TECHNOLOGY. Our success
depends heavily upon our proprietary technology. Through several
transactions, such as our purchase of T.120 whiteboard and data collaboration
technology from Labtam Communications and our acquisition of trademark,
source code and other intellectual property rights related to the CU-SeeMe
and MeetingPoint technologies from Cornell Research Foundation, we have
significantly strengthened our proprietary technology. We intent to continue
to develop proprietary technology internally through our research and
development efforts, as well as to continue to seek selected opportunities to
acquire intellectual property rights from third parties.

PRODUCTS

INTERNET COMMUNICATIONS

Our multimedia conferencing products, CU-SeeMe and MeetingPoint,
provide a real-time, multipoint video and audio communication and data solution
over the Internet, intranets, extranets and other networks using the Internet
Protocol. By developing multimedia conferencing products that require no
proprietary hardware, we are able to offer multimedia conferencing at a
substantially lower price than vendors of traditional hardware-based systems,
thereby encouraging businesses and others to adopt it as a mass communication
medium. Our CU-SeeMe product has afforded our company brand name recognition, an
installed base and a time-to-market advantage over other vendors seeking to
develop software multimedia conferencing solutions.

CU-SeeMe Web, our latest offering to improve Internet communications,
enables live audio, video and text chat to be embedded in a standard web
browser. CU-SeeMe Web opens up a new world of applications for the Internet,
enabling on-demand Visual Instant Messaging, web-based videochat, live
interactive web events, and face-to-face, on-line call centers for ecommerce and
support services. CU-SeeMe Web is a software application that allows web page
developers to embed audio, video, text chat and conference control features into
a web page. The design of the web page can be completely customized by the
developer, as can the destination of the CU-SeeMe Web connection. CU-SeeMe
Web integrates with our MeetingPoint conference server, which provides many
of the back-end functions needed for applications like videochat,
collaboration, IP call centers, Internet event management, and other
multipoint applications. MeetingPoint also allows for additional innovation
on the site - for example, a small group of people could participate
interactively

8
<PAGE>

with CU-SeeMe Web in a live event, while the entire event could be streamed
out to a large group of viewers using MeetingPoint's Streaming Media
integration technology.

- October 1999
White Pine's CU-SeeMe Web Technology Named Bast of Show at Fall
Internet World

- November 1999
White Pine's CU-SeeMe Web Technology Named 1999 Product of the Year
by INTERNET TELEPHONY Magazine

- December 1999
White Pine's CU-SeeMe Web Technology Named 1999 Product of the Year
by CALL CENTER SOLUTIONS Magazine

VIDEOCHAT YOUR SITE

In March 2000, we introduced the commercial package of our CU-SeeMe
Web technology. The package, called Videochat Your Site, enables Internet
websites to embed live, interactive audio, video, and text chat into their
site. Videochat Your Site gives portals and affiliate sites a way to grow
their user communities and increase the amount of time that people spend on
their sites. It gives site users the value of participating in live visual
communications, all with the ease of a standard web browser.

Videochat Your Site includes a software developers kit for CU-SeeMe
Web which enables a web developer to integrate the live audio, video and text
components into a site-branded page. It also includes a number of templates
to get websites up and running with the technology quickly and the
MeetingPoint server, which manages all of the backend aspects of group
chatting and conferencing. Pricing begins at $23,990 for the CU-SeeMe Web SDK
and the MeetingPoint license. A distribution license for the CU-SeeMe Web
plug-in is based on a revenue sharing model between our company and the
customer.

CU-SEEME

CU-SeeMe is our desktop multimedia conferencing software for real time
person-to-person or group conferencing. CU-SeeMe works in conjunction with our
MeetingPoint conference server to provide a complete software-based, multipoint
conferencing solution.

CU-SeeMe can be used over the Internet or any Internet
protocol-based network, providing the user with the power to communicate
globally without expensive hardware. By operating over the Internet, CU-SeeMe
substantially broadens the base of businesses, organizations and individuals
able to engage in multimedia conferencing. This software-only solution runs
on both Windows and Macintosh platforms and offers full-color video, audio,
chat window and whiteboard communications. The user can participate in "Live
over the Internet" conferences, broadcasts or chats. CU-SeeMe can be launched
directly from web pages with the user's favorite web browser, using 28.8 Kbps
modem, ISDN link or faster connections. For audio-only telephony use,
CU-SeeMe works effectively over a 14.4 Kbps modem. CU-SeeMe is the only
desktop conferencing client capable of displaying up to twelve simultaneous
video windows, allowing the user to see everyone in a small-group conference
without video switching. CU-SeeMe also is the only cross-platform product
capable of H.323 interoperability on Windows 95, 98 and NT, and MacOS.

The initial version of CU-SeeMe, introduced in March 1996, was the
first commercially available Internet-based multimedia conferencing product.
CU-SeeMe has been featured in a number of online and industry publications and
has won a substantial number of awards in its three years of commercial
availability, including:

January 1998
PC Computing names CU-SeeMe V3.0 Best Web Communications
Product of the Year 1997

January 1998
Internet World names CU-SeeMe Best of the Net 1997

January 1998
CU-SeeMe receives CTI Magazine's 1997 Editors' Choice Award

January 1998
CU-SeeMe receives 5 Star Shareware Award

July 1998
CU-SeeMe receives PC Computing's A-List Award

In addition, CU-SeeMe was recognized by PC Data, a leading marketing
intelligence firm, as the Top-Selling Retail Multimedia Conferencing Title for
the First Half of 1998.

We currently offer two versions of CU-SeeMe:

- CU-SEEME 3.1.2 began shipping in November 1998 and includes
Contact List feature. CU-SeeMe 3.1.2 is available on Windows
95, 98 and NT, and MacOS platforms. However, with the
introduction of CU-SeeMe Pro, we expect future sales of
CU-SeeMe 3.1.2 to be made principally to Macintosh users and
original equipment manufacturers. CU-SeeMe has a suggested
retail price of $99.

9
<PAGE>

- CU-SEEME PRO began shipping in March 1999 and represents our
next-generation client offering. CU-SeeMe Pro is available on
Windows 95, 98 and NT platforms, has a suggested retail price
of $99 and includes the following features:

- full H.323 support, enabling direct interoperability
with other H.323 clients such as Microsoft
NetMeeting, Intel ProShare and PictureTel LiveLAN;

- integrated desktop application sharing, whiteboard
and data collaboration via Microsoft NetMeeting;

- a set-up wizard that automatically defines the
optimal settings based on the user's network
connection and capture device; and

- a "Conference Companion," which simplifies the way
users make connections, keep a contact list and
access directory services. This new feature replaces
the address list found in prior versions and enables
a user to make a connection using only an e-mail
address as opposed to an Internet protocol address.
It includes a Web-based home page that can be
customized for internal use by businesses.

We ship CU-SeeMe as packaged software and also make CU-SeeMe available
for downloading over the Internet. We also offer CU-SeeMe as a bundled package
with MeetingPoint and with third-party cameras. In December 1998, we began
shipping CU-SeeMe bundled with our private label camera, the CU-SeeMe Cam, a
parallel port, 256 color desktop camera. The CU-SeeMe Cam bundled package has a
suggested list price of $99.

CU-SEEME WORLD

In March 1999, we introduced our portal Web site,
www.cuseemeworld.com. We believe CU-SeeMe World will help us promote
CU-SeeMe, MeetingPoint, and professional services sales by:

- providing a showcase for our visual communications and
related "tools";

- building a centralized community of group conferencing users;

- facilitating user interaction through the utilization of member
directors, Web-based Internet Locator Service for locating users
online, "safe" email interchanges in which email addresses are
masked and users exchange email via user names, and threaded
discussion groups;

- generating strategic alliances through sponsorships and partnering
opportunities; and

- encouraging content providers to offer structured conferencing
and programming.

We believe that successful management of the site will not only
serve to promote our ASP service offerings, but will generate advertising
revenue and strategic alliances through sponsorships and partnering
opportunities.

MEETINGPOINT

MeetingPoint, introduced in November 1997, was the industry's first
H.323 compliant multimedia conferencing server. MeetingPoint's software-only
architecture makes it scalable and deployable over a variety of hardware
platforms and operating systems, including Windows NT and Solaris, a UNIX-based
user environment developed by Sun Microsystems. MeetingPoint for Solaris is the
only software-only conferencing server available on a UNIX platform.
MeetingPoint received two leading industry awards within the first few months of
its release: "1997 Product of the Year" by CTI MAGAZINE in the "Video
Conferencing" category and the "1997 Editors' Choice Award" from INTERNET
TELEPHONY magazine. It garnered "1998 Product of the Year" from both CTI
MAGAZINE and INTERNET TELEPHONY magazine during its first year of shipment.

In 1999, Meeting Point received the following awards:

January 1999
MeetingPoint named 1998 Product of the Year by Internet
Telephony Magazine.

February 1999
MeetingPoint named 1998 Product of the Year by CTI
Magazine.

December 1999
MeetingPoint named 1999 Product of the Year by Communications
Solutions Magazine (formerly CTI Magazine).

10
<PAGE>

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

MeetingPoint's ability to manage the use of network resources while
hosting group conferencing arises from its core multimedia router technology.
This technology is focused on a single, very specific task: routing real-time
multimedia information among clients participating in group communications.
MeetingPoint manages and limits bandwidth use by using built-in intelligence
regarding the specific nature of multimedia data and real-time group
communications. Increased economies are achieved when wide-area communications
are routed through servers spread out across an organization's network, either
to network service provider "points of presence" or to remote offices on an
intranet.

In October 1998, we became the first company to demonstrate continuous
presence for H.323 conferencing, as an add-on to MeetingPoint. Continuous
presence enhances the conferencing experience by enabling the conference
participants to see up to four video windows at one time. Prior to the
continuous presence capability, H.323 client users could only see the
participant that was talking, and not any of the other participants. We made it
possible, for the first time, for many popular H.323 clients in a multipoint
group conferencing environment to utilize continuous presence, including users
of Microsoft NetMeeting, Intel ProShare and PictureTel LiveLAN. Continuous
Presence is delivered to these desktop H.323 clients through a software add-on
option to MeetingPoint and represents a feature add previously only
available through H.320 conferencing. Continuous presence was made generally
available to the public in the second fiscal quarter of 1999.

Additionally, we offer a Streaming Media Integration add-on to
MeetingPoint. With the option for integration of streaming media,
MeetingPoint is able to broadcast a live interactive conference to hundreds
or even thousands of people using a streaming media server and player such as
the Microsoft NetShow Server and a Windows Media Player. Conferences can be
broadcast live, or recorded and replayed on demand. Because the Windows Media
Player is widely available as a free applet, it extends the possibilities for
conferencing with and communicating to a much wider audience. This
combination of technologies, with both an interactive group of participants
and a viewing group of participants, lends itself to a number of corporate
and Internet scenarios.

MeetingPoint pricing begins at a suggested retail price of $8,995
for ten user connections. Continuous presence and Streaming Integration
options are available as add-ons at a suggested retail price of $4,995 each.
We also license CU-SeeMe and MeetingPoint as a bundled package and offer site
licenses and volume discounts for larger purchases.

RESEARCH AND DEVELOPMENT

Our research and development activities historically were separated
between legacy connectivity products and group conferencing products. We
believe our future success depends on our group conferencing solutions, and,
in conjunction with our sale of the assets of our legacy connectivity
business in February 2000, we have focused all of our research and
development resources on group conferencing technology.

Our research and development expenditures totaled $4.8 million in 1999
and $5.0 million in 1998. We intend to increase levels of resources devoted to
research and development in 2000, although the actual amount of research and
development expenses will depend on a number of factors, including the

11
<PAGE>

level of market acceptance of our current products, our ability to fill
headcount requisitions on a timely basis, and the rate of technological change
in the group conferencing industry.

MARKETING AND DISTRIBUTION

We market and sell our products through a combination of distributors,
original equipment manufacturers and strategic partners, our Certified Alliance
Partners program for resellers, our direct sales organization, and directly over
the Internet. Our sales force is located in Nashua, New Hampshire, San Jose,
California, and La Gaude, France. We maintain web sites where prospective
customers can obtain information about our products and services and download
our multimedia conferencing products. We conduct marketing programs, including
direct mail, advertising, public relations and product literature, to support
each of our sale channels and to position and promote our products and services.
Marketing personnel provide price lists and product descriptions and assist the
direct sales force through lead generation and sales training.

Our primary strategy for marketing and distributing our group
conferencing products is to establish new strategic and original equipment
manufacturer relationships and extend existing relationships with multinational
firms that provide particular marketing or distribution opportunities or
technological capabilities for our group conferencing products. We have already
established distribution relationships in Australia, Austria, Belgium, Egypt,
Finland, France, Germany, Greece, Hong Kong, Hungary, Israel, Italy, Japan,
Korea, Netherlands, Norway, Slovania, South Africa, Spain, Sweden, Switzerland
and the United Kingdom. We have also formed original equipment manufacturer or
bundling relationships in order to provide customers with turnkey solutions and
to facilitate product sales through distribution channels. In 1996, we began to
employ Tech Data and Ingram Micro as distributors to deliver CU-SeeMe to
consumers through retail channels including store chains and superstores.

CUSTOMERS

Our customers include ISPs, portal sites, businesses, educational
institutions, government organizations and individual consumers. We sell our
software to end users and to original equipment manufacturers that bundle our
software with other products. We intend to sell our Internet communications
services to ISPs, portal sites and businesses.

CUSTOMER SERVICE AND SUPPORT

We are committed to maintaining customer satisfaction and loyalty.
We employ technical customer representatives located in Nashua, New Hampshire
to support and service our customer base. Certain of our distributors and
original equipment manufacturer customers maintain separate customer support
organizaitons for their own customers. We provide second-tier support to
those organizations.

We provide customer support via telephone, fax and e-mail during
normal business hours for our warranty product customers. We also offer a
variety of fee-based maintenance and support options, including a 24 x 7
option, and automatic shipments of all enhancements and upgrades for licensed
products. To augment our optional support services, we provide online
frequently asked questions and an auto-response knowledge base for e-mail
inquiries. We monitor a number of third-party mail lists and related web
sites in order to ensure technical accuracy for our products. Customer
support specialists diagnose and solve technical problems related not only to
our products but also to other hardware and software with which our products
may interact. We track all support requests, including current status reports
and historical customer interaction logs, using a series of customer
databases. We use customer feedback as a source of ideas for product
improvements and enhancements.

In February 1999, we began charging CU-SeeMe customers for technical
support on a per-incident basis if they are not covered by a maintenance
contract.

12
<PAGE>

PROPRIETARY RIGHTS

Our success is heavily dependent upon our proprietary technology. We
currently have no patents and rely primarily on copyright, trademark and trade
secrets law, as well as employee and third-party non-disclosure agreements, to
protect our intellectual property. We have applied for a patent on a portion of
the technology underlying the continuous presence feature of MeetingPoint. There
can be no assurance that the steps taken by us to protect our proprietary rights
will be adequate to prevent misappropriation of our technology or independent
development by others of similar technology. Litigation may be necessary to
enforce our intellectual property rights or to protect our trade secrets. Any
such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, financial condition and
results of operations. Moreover, while we believe that our products and
technology do not infringe the proprietary rights of others, there can be no
assurance that third parties will not assert infringement and other claims
against us or that such claims will not be successful. See "Item 1A. Risk
Factors--We may be unable to protect our proprietary technology."

As described below, in 1998, we took several steps to acquire ownership
of technology embedded in our software offerings.

ACQUISITION OF TECHNOLOGY FROM CORNELL RESEARCH FOUNDATION

Our multimedia conferencing products, CU-SeeMe and MeetingPoint, are
commercial, enhanced versions of Freeware CU-SeeMe and its related server.
Freeware CU-SeeMe and its related server were developed by a research institute
at Cornell University and were freely available on the Web. In June 1995, we
entered into an software license agreement with the Cornell Research Foundation
that granted us the exclusive worldwide right to develop, modify, market,
distribute and sublicense commercial versions of Freeware CU-SeeMe and its
related server, as well as the rights to appoint licensee distributors and to
use the trademark "CU-SeeMe."

We commenced shipments of the initial commercial versions of CU-SeeMe
and the White Pine Reflector (the predecessor of MeetingPoint) in March 1996 and
May 1996, respectively. In May 1997, we renegotiated the terms of the license
agreement to provide for a $1,000,000 prepayment of royalties in exchange for a
decrease in the level of revenue-based royalties payable to the Cornell Research
Foundation. The renegotiated terms were retroactive to January 1, 1997, and we
remained subject to minimum royalty payments.

In November 1998, we acquired the Cornell Research Foundation's
trademark and other intellectual property rights in Freeware CU-SeeMe, upon
which our current versions of CU-SeeMe are based, and the related server
technology, which underlies MeetingPoint. The purchase price for these rights
consisted of (1) a note in the principal amount of $900,000, of which $300,000
is due on each of June 30, 2000, June 30, 2001 and June 30, 2002, and (2)
warrants to purchase 150,000 shares of our common stock at a price of $1.00 per
share. The warrants were issued in exchange for outstanding warrants issued
previously to the Cornell Research Foundation; these prior warrants had an
exercise price of $6.00 per share but otherwise had terms substantially
identical to those of the new warrants.

13
<PAGE>

ACQUISITION OF TECHNOLOGY FROM LABTAM COMMUNICATIONS

In July 1998, we purchased certain assets, including intellectual
property, comprising certain T.120 whiteboard and data collaboration technology
from Labtam Communications, an Australian corporation. The purchase price for
these assets consisted of 900,000 shares of our common stock and cash payments
of U.S.$628,000 in July 1998 and A$201,606 (or U.S.$133,000) in January 1999.
The terms of, and consideration paid in, this transaction were the result of
arm's length negotiations between Labtam Communications and us, which had no
relationship prior to the transaction. We used cash and cash equivalents to pay
the cash portion of the purchase price. An aggregate of 450,000 shares was
deposited in escrow as security for potential claims by us against Labtam
Communications for breaches of certain representations, warranties, covenants
and agreements contained in the purchase agreement relating to the Labtam
assets. A total of 225,000 of the escrowed shares were released to Labtam
Communications in January 1999 and the remaining 225,000 escrowed shares were
released in July 1999.

We have incorporated the purchased T.120 technology into our
MeetingPoint and ClassPoint conferencing solutions. T.120 is the protocol that
defines whiteboard, application sharing and data collaboration for multipoint
conferencing applications.

TECHNOLOGY ACQUISITION FROM RADVISION

In December 1998, we acquired from RADVision a one-time source code
snapshot of a H.323 protocol stack. This acquisition has allowed us to modify
and enhance certain source code embedded in our products.

COMPETITION

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

In offering Internet communications products and services, we currently
compete, or expect to compete, directly or indirectly with the following
categories of companies:

- - H.323 MCU providers, such as PictureTel, Ezenia!, RADVision and
Accord;

- - videoconferencing client providers, including MicroSoft NetMeeting,
Polycom, PictureTel, Vtel, Intel and VCON;

- - nonvideoconferencing collaborative product providers, such as Centra,
Placeware, Astound and WebEx; and

- - application service providers PictureTel, FVC, HearMe.com and
Lipstream.

The H.323 MCU market encompasses two types of MCUs: a software-only server
and a hardware server. There is a substantial price variance between software
and hardware servers, which tends to dictate the suitability of one or the
other in specific situations. From a price and scaleability standpoint, the
software server lends itself well to large, distributed and expandable
deployments, whereas the hardware server is often best suited to finite
centralized deployments. White Pine and PictureTel market the only
software-only MCUs; Ezenia!, Radvision and Accord market hardware MCUs. Most
of these companies work with third-party endpoints. White Pine and PictureTel
are the only vendors offering a complete end-to-end (client/server) solution.

As with MCUs, client vendors can be split into software or hardware
categories. In the software client category, our CU-SeeMe competes with
MicroSoft's NetMeeting. Polycom, PictureTel, Vtel, Intel and VCON all provide
hardware clients. The hardware assist typically allowed the hardware clients
to demonstrate performance superior to software-only clients, justifying the
$1,000 to $12,000 price point. Intel ProShare and TeamStation are both
hardware-based endpoints, and utilize technology which Intel has licensed to
PictureTel. Sales of these products are targeted to the high-end
videoconferencing enterprise market. Integrators and value-added resellers
wrap solutions around ProShare and TeamSolution endpoints, using their API,
along with MeetingPoint's API, to provide full solution to enterprise and
high-end NSP's. This includes distance learning and videoconferencing service
offerings.

The disparate nonvideoconferencing category encompasses semi-interactive
presentation software solutions. Semi-interactive presentation software
solutions is a broad term utilized here to represent products integrating
streaming with some form of limited interactive technology. These companies
offer products that combine streaming media, shared text, and separate
telephony integration in one solution. Centra, Placeware, Astound and WebEx
all provide business collaboration products. NetPodium and LearnLinc provide
educational solutions.

In the emerging ASP market, there are a number of companies that provide
IP communications services. PictureTel and FVC offer conferencing services to
their business-to-business customers. WebEx primarily concentrates its
services in the data collaboration arena, and EVC offers educational content
conferencing services to its customers. HearMe.com and Lipstream leverage
their nonstandard Voice over IP (VOIP) technology into Internet community
development, Internet media products, and portals with communication
services.

14
<PAGE>

H.323 is being rapidly adopted by the industry as the global standard
for group conferencing products. A number of companies have announced
standards-based server products that compete directly with MeetingPoint,
including PictureTel, Ezenia! and RADVision. It is likely that other companies
will also enter this market in the near future.

Many of our current and potential competitors, including Intel,
Microsoft, PictureTel and Ezenia!, have significantly longer operating
histories and significantly greater managerial, financial, marketing,
technical and other competitive resources, as well as greater name
recognition, than we do. As a result, our competitors may be able to adapt
more quickly to new or emerging technologies and changes in customer
requirements or may be able to devote greater resources to the promotion and
sale of their products and services. We cannot assure you that we will be
able to compete successfully with existing or new competitors. In addition,
competition could increase if new companies enter the market or if existing
competitors expand their service offerings. An increase in competition could
result in material price reductions or loss of market share by us and could
have a material adverse effect on our business, financial condition and
results of operations.

To remain competitive, we will need to continue to invest in research
and development and sales and marketing. We cannot assure you that we will have
sufficient resources to make such investments or that we will be able to make
the technological advances necessary to remain competitive. In addition, current
and potential competitors have established or may in the future establish
collaborative relationships among themselves or with third parties, including
third parties with which we have a relationship, to increase the visibility and
utility of their products and services. Accordingly, it is possible that new
competitors or alliances may emerge and rapidly acquire a significant market
share. Such an eventuality could have a material adverse effect on our business,
financial condition and results of operations.

EMPLOYEES

At March 1, 2000, we had 126 full-time employees, including 55 in
research and development, 36 in sales and marketing, 14 in technical support,
and 21 in general and administrative and software manufacturing. Sixteen of
these employees were located in France and, in accordance with applicable French
law, were represented by a labor union. Our other employees were located in the
United States and were not represented by any labor organization. We have
experienced no work stoppages and believe that our relations with our employees
are good.

15
<PAGE>

ITEM 1A. RISK FACTORS

RISK FACTORS

WE HAVE INCURRED SUBSTANTIAL LOSSES IN THE PAST AND MAY NOT BE PROFITABLE IN THE
FUTURE.

We may never generate significant revenue or be profitable. Since we
began operations, we have incurred substantial losses. We incurred net losses of
$8.4 million in 1998 and $4.8 million in 1999. We had an accumulated deficit of
$33.7 million at December 31, 1999.

We expect to incur substantial losses for the foreseeable future,
because we intend to continue investing heavily in the development and marketing
of MeetingPoint and our application hosting services. In February 2000, we
completed the sale of our legacy connectivity products business. In addition, we
expect that revenue from CU-SeeMe will not increase substantially, and may
decrease, during the foreseeable future. We cannot be certain that sales of
MeetingPoint and application hosting services and other new products and
services will offset lost revenue from the sale of our legacy connectivity
products business and declines in revenue from CU-SeeMe in 2000 or in later
years.

OUR QUARTERLY RESULTS MAY FLUCTUATE AND CAUSE THE PRICE OF OUR COMMON STOCK TO
FALL.

Our quarterly revenue and operating results are difficult to predict
and may fluctuate significantly from quarter to quarter. If our quarterly
revenue or operating results fall below the expectations of investors or public
market analysts, the price of our common stock could fall substantially. Our
quarterly operating results may vary significantly depending on a number of
factors, some of which are outside of our control. These factors include:

- the timing of the introduction or acceptance of new products
offered by us or our competitors;

- changes in demand for Internet services;

- changes in the mix of products sold by us;

- announcements of new products, services or technologies by us
or our competitors that cause customers to defer or cancel
purchases of our products;

- changes in pricing strategies by us or competitors;

- changes in regulations affecting the multimedia conferencing
industry; and

- changes in currency exchange rates.

As a result of these factors, we may not be able to predict our
operating results accurately. In addition, MeetingPoint continues to undergo
long evaluation and sale cycles by potential users. The lengths of these cycles
make it particularly difficult for us to predict the amount and timing of
revenue from this product.

We base our expense levels on our product development plans and our
estimates of future revenue. To a large extent, our expenses are fixed. We may
be unable to adjust our spending in time to compensate for any unexpected
revenue shortfall, thus magnifying the adverse effect of any revenue shortfall.

16
<PAGE>

OUR APPLICATION HOSTING SERVICES HAVE NOT YET BEEN INTRODUCED AND MAY NOT
ACHIEVE SIGNIFICANT MARKET ACCEPTANCE.

We expect to introduce our application hosting services in the
second fiscal quarter of 2000. Broad acceptance of our application hosting
services is critical to our future success and is subject to a number of
significant risks, many of which are outside of our control. These risks
include:

- the ability of our system infrastructure to support large
numbers of concurrent users is unproven;

- corporate users may not be willing to outsource control and
management of their multimedia conferencing to a third party
due to possible security, reliability or other concerns;

- the introduction of competing products and technologies; and

- our dependence on third-party hardware and network providers.

WE FACE INTENSE COMPETITION FROM OTHER INDUSTRY PARTICIPANTS AND MAY NOT BE ABLE
TO COMPETE EFFECTIVELY.

The market for Internet communications products and services is
extremely competitive. Because the barriers to entry in the market are
relatively low and the potential market is large, we expect continued growth
in the industry and the entrance of new competitors in the future. Many
of our current and potential competitors, particularly Intel, Microsoft,
PictureTel and Ezenia!, have significantly longer operating histories and
significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than we do. As a
result, these companies may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements and may be able to devote
greater resources to the promotion and sale of their conferencing products
and services. In addition, to the extent that competitors choose to bundle
competing multimedia conferencing applications with other products, the
demand for our products and services might be substantially reduced.

As a result, we cannot assure you that we will be able to compete
successfully with existing or new competitors in the multimedia conferencing
market. We believe that our ability to compete successfully in this market will
depend on a number of factors both within and outside our control, including:

17
<PAGE>

- the adoption and evolution of industry standards;

- the pricing policies of our competitors and suppliers;

- the timing of the introduction of new software products and
services by us and our competitors; and

- our ability to hire and retain highly qualified employees.

To remain competitive in the multimedia conferencing market, we must
continue to invest heavily in research and development and in sales and
marketing. We may not have sufficient resources to make those investments, or we
may not be able to make the technological advances necessary to continue to be
competitive. In addition, current and potential competitors have established or
may establish collaborative relationships among themselves and with third
parties to increase the visibility and utility of their products and services.
Accordingly, it is possible that new competitors or alliances may emerge and
rapidly acquire significant market share, which could have a material adverse
effect on our business.

WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A COMPETITIVE LABOR MARKET.

Qualified personnel are in great demand throughout the software and
Internet industries. Our success depends in large part upon our ability to
attract, train, motivate and retain highly skilled employees, particularly sales
and marketing personnel, professional services personnel and software engineers.
If we fail to attract and retain the highly trained technical personnel that are
integral to our sales, professional services and product development teams, the
rate at which we can generate sales and develop new products or services may be
limited. This could have a material adverse effect on our business, operating
results and financial condition.

IF WE LOSE THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER OR ANY OTHER KEY MEMBER
OF OUR MANAGEMENT TEAM, OUR BUSINESS COULD SUFFER.

Our future success depends to a significant degree on the skill,
experience and efforts of Killko Caballero, our chief executive officer, and
other key members of our management team. The loss of any key member of our
management team could have a material adverse effect on our business.

WE RELY ON ONE DISTRIBUTOR FOR A SIGNIFICANT PORTION OF OUR TOTAL REVENUE.

Sales to Ingram Micro represented 8% of our total revenue in 1999
and 26% of our total revenue in 1998. The loss of, or a significant
curtailment of purchases by, Ingram Micro, including a loss or curtailment
due to factors outside of our control, could have a material adverse effect
on our business.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.

Our business could be seriously harmed if we are unable to protect
adequately our proprietary software and our other proprietary intellectual
property rights. We may be unable to deter misappropriation of our proprietary
technology, detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. Our competitors could, without violating our
proprietary rights, develop technologies that are as good or better than our
technology.

Some of our multimedia conferencing products are licensed to customers
under "shrink wrap" licenses included as part of the product packaging. In most
cases our shrink wrap licenses are not negotiated with or signed by individual
licensees. Some of the provisions of our shrink wrap licenses,

18
<PAGE>

including provisions limiting our liability and protecting us against
unauthorized use, copying, transfer and disclosure of the licensed program, may
be unenforceable under the laws of certain jurisdictions. Also, we have
delivered technical data and information relating to CU-SeeMe and MeetingPoint
to the United States government, and as a result, the United States government
may have unlimited rights to use the technical data and information or to
authorize others to use the technical data and information. We can not assure
you that the United States government will not authorize others to use our
technical data and information for purposes competitive with our products. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do laws in the United States.

CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
PREVENT US FROM OFFERING OUR PRODUCTS OR OTHERWISE HURT OUR BUSINESS AND OUR
FINANCIAL CONDITION.

Because the protection of intellectual property rights is often
critically important to the success of companies in the multimedia conferencing
industry, our competitors or others could assert claims that our technologies
infringe their proprietary rights. From time to time, we have received and may
receive in the future notice of claims of infringement of other parties'
proprietary rights. Many participants in the software industry have an
increasing number of patents and have frequently demonstrated a readiness to
commence litigation based on allegations of patent or other intellectual
property infringement. For example, a third party has objected to our use of the
name "MeetingPoint." We may not have the financial resources necessary to pursue
any resulting litigation to a final judgment, and we may not prevail in any
litigation. In defending against such litigation, we could incur significant
legal and other expenses and our management could be distracted from our
principal business operations. If any party making a claim against us were to
prevail in litigation against us, we may have to pay substantial damages. The
court could also grant injunctive or other equitable relief that could prevent
us from offering our products and services without a license or other permission
from others, which may not be available on commercially available terms or at
all. Any of these outcomes could seriously harm our business and our financial
condition.

WE FACE ADDITIONAL RISKS FROM OUR INTERNATIONAL OPERATIONS.

Our international business involves a number of risks that could hurt
our operating results or contribute to fluctuations in those results. Our
revenue from international sales represented 24% of our total revenue in 1999
and 26% of our total revenue in 1998. We intend to seek opportunities to expand
our product and service offerings into additional international markets,
although we cannot be certain that we will succeed in developing localized
versions of our products for new international markets or in marketing or
distributing products and services in those markets.

The majority of our international sales are currently denominated in
U.S. dollars, but there can be no assurance that a significantly higher level of
future sales will not be denominated in foreign currencies. To the extent our
sales are denominated in currencies other than U.S. dollars, fluctuations in
exchange rates may render our products less competitive relative to local
product offerings or result in foreign exchange losses. We have no experience in
implementing hedging techniques that might minimize our risks from exchange rate
fluctuations.

Our international business also involves a number of other difficulties
and risks, including risks associated with:

- changing economic conditions in foreign countries;

- export restrictions and export controls relating to
technology;

19
<PAGE>

- compliance with existing and changing regulatory requirements;

- tariffs and other trade barriers;

- difficulties in staffing and managing international
operations;

- longer payment cycles and problems in collecting accounts
receivable;

- software piracy;

- political instability;

- seasonal reductions in business activity in Europe and certain
other parts of the world during the summer months; and

- potentially adverse tax consequences.

OUR SOFTWARE PRODUCTS MAY CONTAIN UNDETECTED DEFECTS.

Software developed by us or developed by others and incorporated by us
into our products may contain significant undetected errors when first released
or as new versions are released. Although we test our software products before
commercial release, we cannot be certain that errors in the products will not be
found after customers begin to use the software. Any defects in CU-SeeMe or
MeetingPoint, or any future products, may result in significant decreases in
revenue or increases in expenses because of adverse publicity, reduced orders,
product returns, uncollectible accounts receivable, delays in collecting
accounts receivable, and additional and unexpected costs of further product
development to correct the defects.

OUR SUCCESS DEPENDS ON THE PERFORMANCE OF PARTICIPANTS IN OUR DISTRIBUTION
CHANNELS.

We market our group conferencing products by forming channel
relationships in key markets with major distributors. We also license our group
conferencing products to original equipment manufacturers, value-added resellers
and additional distributors for bundling with their products and services. We
expect that our future success will depend in large part upon these original
equipment manufacturers, value-added resellers and distributors. The performance
of these original equipment manufacturers, value-added resellers and
distributors is outside our control, and we are unable to predict the extent to
which these organizations will be successful in marketing and selling our group
conferencing products or products incorporating our group conferencing products.
We cannot assure you that we will be successful in establishing relationships
with original equipment manufacturers, value-added resellers and distributors,
and if we fail, our business could be seriously harmed.

Our distributors typically carry the products of some of our
competitors. The distributors have limited capital to invest in inventory, and
their decisions to purchase our products and, in the case of retail stores, to
give them critical shelf space, are partly a function of pricing, terms and
special promotions offered by our competitors, which we cannot predict or
control.

We distribute certain of our products directly over the Internet. By
distributing our products over the Internet, we may increase the likelihood of
unauthorized copying and use of our software.

20
<PAGE>

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY ADVERSELY AFFECT OUR BUSINESS.

The application of existing laws to the Internet is uncertain and may
take years to resolve, particularly with respect to property ownership, user
privacy, freedom of expression, pricing, characteristics and quality of products
and services, taxation, advertising, intellectual property rights, information
security and the convergence of traditional telecommunications services with
Internet communications. Because the Internet is becoming increasingly popular,
various foreign or domestic governmental bodies may seek to adopt laws and
control use of the Internet. We cannot predict the nature of any such laws.
Legislation could subject us or our customers to potential liability or could
decrease the growth of the Internet, either of which could have an adverse
effect on our business.

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

WE MAY REQUIRE ADDITIONAL CAPITAL.

We may need to raise additional capital in order to fund the
development and marketing of our products and services. Although we expect our
cash and cash equivalents to provide us with sufficient working capital for the
remainder of 2000, our current plans and projections may prove to be inaccurate
or our expected cash flow may prove to be insufficient to fund our operations
because of product delays, unanticipated expenses or other unforeseen
difficulties. Our ability to obtain additional financing will depend on a number
of factors, including market conditions, our operating performance and investor
interest. These factors may make the timing, amount, terms and conditions of any
financing unattractive. They may also result in our incurring additional
indebtedness or accepting stockholder dilution. If adequate funds are not
available or are not available on acceptable terms, we may have to forego
strategic acquisitions or investments, defer our development activities, or
delay our introduction of new products and services. Any of these actions may
seriously harm our business and operating results.

THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN EXTREMELY VOLATILE.

The market price of our common stock has been extremely volatile in the
past, and may be expected to be volatile in the future for many reasons,
including:

- actual or anticipated variations in our revenue and operating
results;

- announcements of the development of improved technology;

21
<PAGE>

- changes in estimates of our financial performance, or the
absence of coverage, by securities analysts;

- conditions and trends in the Internet and multimedia
conferencing industries;

- adoption of new accounting standards; and

- general market conditions.

Recently the stock markets have experienced extreme price and volume
fluctuations that have dramatically affected the market prices of the stocks of
many technology companies, particularly companies associated with the Internet.
These fluctuations often have been unrelated or disproportionate to the
operating performance of those companies. These factors may adversely affect the
market price of our common stock.

VOLATILITY IN OUR STOCK PRICE MAY LEAD TO LITIGATION AGAINST US.

Stockholders frequently commence securities class action litigation
against a company after a significant decrease in the company's stock price. If
our stock price drops and our stockholders commence litigation against us, we
could incur significant legal and other expenses defending the litigation and
our management could be distracted from our principal business operations.
Either of these outcomes could seriously harm our business.

DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN ANTI-TAKEOVER AND INDEMNIFICATION
PROVISIONS THAT MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR STOCK.

Section 203 of the Delaware General Corporation Laws and our charter
and by-laws contain provisions that might enable our management to resist a
takeover of our company. These provisions might discourage, delay or prevent a
change in the control of our company or a change in our management. These
provisions could also discourage proxy contests and make it more difficult for
you and other stockholders to elect directors and take other corporate actions.
The existence of these provisions could limit the price that investors might be
willing to pay in the future for shares of our common stock.

22
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

We conduct our operations from our headquarters in Nashua, New
Hampshire and facilities in San Jose, California and La Gaude, France.

The facility in New Hampshire contains approximately 27,000 square
feet, including 23,500 square feet for engineering and office space, 2,500
square feet for production space and 1,000 square feet for storage. We lease our
office in New Hampshire from an unaffiliated party under the terms of a
five-year lease ending July 1, 2001 under which we are responsible for
maintenance, repairs, taxes, insurance and utilities. Base rent is $143,000 for
2000, and $82,000 for the first half of 2001. Renewal options for three two-year
terms are available to us.

The facility in San Jose contains approximately 370 square feet of
office space. We rent our office in San Jose from an unaffiliated party under
the terms of a renewable six-month rental agreement expiring April 15, 2000.
Base rent for this office space for 2000 is $19,000.

We previously occupied 5,000 square feet of engineering and office
space at a different site in San Jose. This space has been subleased to an
unaffiliated party under the terms of a five-year lease ending December 31,
2001. Base rent for this space is $84,000 for 2000 and $89,000 for 2001. Our
base income under the sublease exceeds our base rent under the primary lease.

The facility in La Gaude contains approximately 8,000 square feet of
engineering and office space. We lease our office in France from several
unaffiliated parties under a series of similar leases ending on December 31,
2001, under which we are responsible for maintenance, repairs, taxes,
insurance and utilities. Base rent for this space is $7,400 for 2000 and 2001.

We expect to move our headquarters to a larger facility before the end
of 2000. We also expect to extend or renew the leases for our San Jose and La
Gaude facilities and to continue to occupy those facilities for the foreseeable
future. If we are unable to extend or renew those leases on acceptable terms, we
believe that alternative space would be available at acceptable rates.

23
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

We were a defendant in two lawsuits pending in New York federal
court (the "RSI Suits") in which the plaintiffs claimed to have suffered from
carpal tunnel syndrome, or "repetitive stress injuries," as a result of
having used computer keyboards that are alleged to have been defectively
designed. The keyboards were supplied, and possibly designed and
manufactured, by Ontel. The assets of Ontel were purchased in 1982 by Visual
Technology, a predecessor of White Pine. The RSI Suits, which sought money
damages, were brought by employees of New York Telephone, which purchased the
keyboards from Lockheed Electronics. One or more of Visual Technology, Ontel,
Lockheed Electronics and Key Tronics, a subcontractor for certain of the
keyboards, were named as co-defendants in a number of suits, including the
RSI Suits.

We established a reserve for legal fees and losses that could arise
from the RSI Suits and a number of similar actions against us. The amount of
this reserve was based upon our belief that (1) the RSI Suits might be covered
by product liability insurance, (2) we were contractually indemnified by
Lockheed Electronics and Key Tronics against all or a portion of the damages to
which we might be subject and (3) we had defenses to substantially all of the
claims under the RSI Suits. We reduced this reserve from $291,000 to $51,000 as
of December 31, 1998, in recognition of the fact that four similar lawsuits had
been resolved at no expense to us. We reduced the remaining $51,000 as of
December 31, 1999 in recognition of the fact that the remaining lawsuits had
been resolved at no expense to us.

From time to time, we have received and may receive in the future
notice of claims of infringement of other parties' proprietary rights. Although
we believe that our products and technology do not infringe the proprietary
rights of others, there can be no assurance that additional third parties will
not assert infringement and other claims against us or that any infringement
claims will not be successful. See "Item 1A. Risk Factors--We may be unable to
protect our proprietary technology."

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

No matter was submitted to a vote of our securities holders during the
fourth fiscal quarter of 1999.

24
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock commenced trading on the Nasdaq National Market on
October 11, 1996 under the symbol "WPNE." The following table sets forth the
high and low closing sales price for the common stock for each quarter during
the past two years, as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
High Low
---------- ----------
<S> <C> <C>
1998:
First Quarter $3.125 $2.000
Second Quarter 3.28125 1.500
Third Quarter 2.15625 .84375
Fourth Quarter 2.375 .75
1999:
First Quarter 4.000 1.875
Second Quarter 8.750 3.5625
Third Quarter 7.625 4.000
Fourth Quarter 28.5625 6.875

</TABLE>

As of March 1, 2000 there were 171 holders of record of common stock
who held an aggregate of 12,073,662 shares of common stock as nominees for an
undisclosed number of beneficial holders.

We have never declared or paid any cash dividends on our capital stock.
We currently anticipate that we will retain future earnings, if any, to fund the
development and growth of our business, and therefore do not expect to pay any
cash dividends in the foreseeable future. Payment of future dividends, if any,
will be at the discretion of our board of directors after taking into account
various factors, including our financial condition, results of operations,
current and anticipated cash needs, and plans for expansion.

25
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

We develop software solutions that facilitate worldwide video and
audio communication and data collaboration across the Internet, intranets,
extranets and other networks using the Internet protocol. Our CU-SeeMe Web
provides the industry's first multipoint video instant messaging over the
Internet. Our CU-SeeMe Pro and MeetingPoint create a client-server solution
that allows multiple users to participate simultaneously in conferences over
the Internet. ClassPoint is a MeetingPoint add-on that provides a complete
solution for corporate training and distance learning. We support multiple
platforms, including Windows 95, 98 and NT, Sun Solaris, and Red Hat Linux. In
February 2000, we sold the assets of our legacy connectivity business to
Powerlan USA, a wholly owned subsidiary of Powerlan Limited, an Australian
company. We can be found on the World Wide Web at www.wpine.com. CU-SeeMe Web
can be experienced at www.cuseemeworld.com.

RESULTS OF OPERATIONS

The following table sets forth certain consolidated financial data
from our statement of operations as a percentage of total revenue for 1999
and 1998.

YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- -------
<S> <C> <C>
Revenue:

Software license fees 89.3% 89.2%
Services and other 10.7 10.8
-------- -------
Total revenue 100.0 100.0
Cost of revenue 21.2 21.1
-------- -------
Gross profit 78.8 78.9
Operating expenses:
Sales and marketing 60.5 99.3
Research and development 39.7 64.7
General and administrative 19.7 29.2
-------- -------
Total operating expenses 119.9 193.2
-------- -------
Loss from operations (41.1) (114.3)
Other income (expense), net 0.7 6.3
Provision for income taxes 0.0 (0.1)
-------- -------
Net loss (40.4)% (108.1)%
======== =======
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31,
1998

REVENUE

Total revenue increased by 54% to $12,002,000 in 1999 from $7,793,000
in 1998.

Revenue from conferencing software increased by 69% to $9,783,000 in
1999 from $5,781,000 in 1998. This increase resulted largely from a 93% increase
in MeetingPoint sales from $2,947,000 in 1998 to $5,684,000 in 1999. The
increase in MeetingPoint sales is attributable primarily to a higher average
selling price, resulting from a higher ratio of direct sales versus distributor
sales, increased sales of add-on functionality such as Continuous Presence, and
increased sales of higher port-count servers. In addition, CUSeeMe client sales
of $4,099,000 in 1999 represented a 45% increase over the previous year. The
CU-SeeMe revenue increase is due in part to significantly higher sales of the
CU-SeeMe camera bundle during the December holiday season.

Our legacy connectivity product sales continued to decline as we
focused fewer resources on these older product lines. Legacy connectivity
revenue declined by 17% to $1,844,000 in 1999 from $2,226,000 in 1998. The
percentage of total revenue represented by revenue from legacy connectivity
products decreased to 15% in 1999 from 29% in 1998. On February 29, 2000, we
sold the assets of our legacy connectivity business to Powerlan USA, a wholly
owned subsidiary of Powerlan Limited, an Australian company. We received
$1,000,000 in cash and 467,730 ordinary shares of Powerlan Limited as
consideration for the sale.

Maintenance revenue increased 86% to $1,275,000 in 1999 from
$686,000 in 1998 in conjunction with the growth in server conferencing
revenue.

26
<PAGE>

Revenue from sales outside the United States comprised 24% of total
revenue in 1999 and 26% of total revenue in 1998. See "Item 1A. Risk Factors--We
face additional risks from our international operations."

Sales to Ingram Micro represented 8% of total revenue in 1999 and 26%
of total revenue in 1998. See "Item 1A. Risk Factors--We rely on one distributor
for a significant portion of our total revenue."

COST OF REVENUE

Cost of revenue consists principally of royalties and associated
amortization of paid license fees relating to third-party software included in
our products, as well as costs of product media, manuals, packaging materials,
cameras, duplication and shipping. Cost of revenue as a percentage of total
revenue was 21% for both 1999 and 1998.

In May 1997, we renegotiated the terms of the license agreement to
provide for a $1,000,000 prepayment of royalties in exchange for a decrease in
the level of revenue-based royalties payable to the Cornell Research Foundation.
The renegotiated terms were retroactive to January 1, 1997, and we remained
subject to minimum royalty payments. In the fourth fiscal quarter of 1998, we
acquired the Cornell Research Foundation's trademark and other intellectual
property rights in CU-SeeMe, upon which our current versions of CU-SeeMe are
based, and the related server technology, which underlies MeetingPoint. The
purchase price for these rights consisted of (1) a note in the principal amount
of $900,000, of which $300,000 is due on each of June 30, 2000, June 30, 2001
and June 30, 2002, and (2) warrants to purchase 150,000 shares of our common
stock at a price of $1.00 per share. The warrants were issued in exchange for
outstanding warrants issued previously to the Cornell Research Foundation; these
prior warrants had an exchange price of $6.00 per share but otherwise had terms
substantially identical to those of the new warrants. As a result of this
acquisition, we are no longer required to pay any royalties to the Cornell
Research Foundation. See "Item 1. Description of Business--Proprietary Rights."

We intend to continue our strategy of improving the features and
functionality of our products, particularly MeetingPoint and future products
incorporating MeetingPoint technology, through the incorporation of third-party
software. As a result, the cost of revenue as a percentage of total revenue may
fluctuate in the future.

SALES AND MARKETING

Sales and marketing expense consists primarily of costs associated with
sales and marketing personnel, sales commissions, trade shows, advertising and
promotional materials. Sales and marketing expense decreased by 6% to $7,265,000
in 1999 from $7,739,000 in 1998, and decreased as a percentage of total revenue
to 61% in 1999 and 99% in 1998. The decrease in sales and marketing expense in
1999 was primarily attributable to decreased marketing programs.

RESEARCH AND DEVELOPMENT

Research and development expense consists primarily of costs of
personnel and noncapitalized equipment. Research and development expense
decreased by 6% to $4,761,000 in 1999 from $5,042,000 in 1998. Research and
development expense decreased as a percentage of total revenue to 40% in 1999
from 65% in 1998. The decrease in research and development expense was
attributable primarily to lower headcount and consulting support.

27
<PAGE>

GENERAL AND ADMINISTRATIVE

General and administrative expense consists of costs of
administrative, financial and general management activities, including legal,
accounting and other professional fees. General and administrative expense
increased by 4% to $2,359,000 in 1999 from $2,278,000 in 1998. It represented
20% of total revenue in 1999 and 29% of total revenue in 1998. The dollar
increase in general and administrative expense was due primarily to a
one-time $240,000 reversal of a portion of the legal reserve for the RSI
Suits in 1998. See "Item 3. Legal Proceedings."

PROVISION FOR INCOME TAXES

Provision for income taxes consists of federal alternative minimum
taxes and state and foreign income taxes. We recorded no tax provision in 1999
and $5,000 in 1998. At December 31, 1999, we had cumulative federal net
operating loss carryforwards of $26,848,000. See Note 6 of Notes to Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

We generated $15,667,000 of cash in 1999, as compared with using
$8,283,000 of cash in 1998. Cash generated in 1999 was comprised largely of
$20,000,000 in gross proceeds from our private placement of common stock in
December 1999, partially offset by our net loss of $4,850,000 and the net
increase in accounts receivable of $2,033,000.

In late December, we secured $20,000,000 in a private placement of
shares of our common stock to GE Capital, Private Equity Holding (Cayman) Ltd.,
Altamira Management Ltd., and Special Situations Funds. In four private
placements of $5,000,000 each, the named investors each secured 325,521 shares
at a price of $15.36 per share. The price was based on a 30-day weighted average
at the time the terms were negotiated.

At December 31, 1999, we had cash and cash equivalents of $22,088,000
and working capital of $22,943,000. We believe that our current cash and cash
equivalents will be sufficient to fund our operations and capital expenditures
through 2000. Thereafter, our liquidity will be materially dependent on our
internally generated funds and our ability to obtain funds from additional
equity or debt financings from external sources. We continue to experience a
negative cash flow from operations in each fiscal quarter. Our capital
requirements may vary materially from those we now anticipate, depending on a
number of factors including:

- the level of our research and development activities;

- the expansion of our facility and Service Operations Center
and related staffing;

- the rate of market acceptance of our software offerings; and

- the success of our sales, marketing and distribution
strategy.

If we do not meet our goals with respect to revenue or if our costs are higher
than anticipated, substantial additional funds may be required.

28
<PAGE>

INFLATION

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

RECENT ACCOUNTING PRONOUNCEMENTS

We adopted Statement of Financial Accounting Standards No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS
131"), in fiscal 1998. SFAS 131 establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial
reports issued to stockholders. SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. Our chief decision maker, as defined under
SFAS 131, is Killko Caballero, our Chief Executive Officer and President. To
date, we have viewed our operations as principally one segment, software sales
and associated services. As a result, the financial information disclosed in our
consolidated financial statements materially represents all of the financial
information related to our principal operating segment.

Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. SFAS 133
is effective for our fiscal year ending December 31, 2001. The adoption of
SFAS 133 is not expected to have a material impact on our financial position
or results of operations.

Statement of Position 98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE
RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, modifies certain provisions
of Statement of Position 97-2. Our accounting policy on software
revenue recognition currently is in compliance with Statement of Position 97-2,
as amended by Statement of Position 98-9, and adoption of this Statement of
Position, as currently issued, is not expected to have a material impact on our
financial position or results of operations.

ITEM 7. FINANCIAL STATEMENTS

The following statements are included after page 42 of this Annual
Report and form a part hereof:

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the years ended December 31, 1999 and 1998 F-4
</TABLE>

29
<PAGE>

<TABLE>
<S> <C>
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>

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

There were no changes or disagreements with accountants on accounting
or financial disclosure matters during fiscal 1999 or fiscal 1998.

30
<PAGE>

PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of White Pine, and their ages and
positions as of March 1, 2000, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- ---------- ------------------
<S> <C> <C>
Killko A. Caballero 40 Chief Executive Officer, President and Director
Christine J. Cox 41 Chief Financial Officer and Vice President of Finance
David O. Bundy 41 Chief Technical Officer
John E. Kelly 46 Vice President of Worldwide Sales and Marketing
Joseph J. Esposito (1) 48 Director
Jonathan G. Morgan(1)(2) 46 Director
Adam Stettner (2) 36 Director

</TABLE>

- -----------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee

Arthur H. Bruno, who served as the Chairman of the Board in 1999,
retired from his post in January 2000.

KILLKO A. CABALLERO was appointed as Chairman of the Board on January
18, 2000. He has been the Chief Executive Officer of White Pine since December
1998, and has been the President of White Pine since August 1997. He has served
as a director since November 1995. Mr. Caballero served as interim President
during June and July 1997, and as Senior Vice President of Research and
Development and Chief Technology Officer from November 1995 until June 1997. Mr.
Caballero was a co-founder of White Pine Software, Europe (formerly About
Software), and served as President, Chief Executive Officer and Chairman of the
Board of White Pine Software, Europe from July 1991 until November 1995.

CHRISTINE J. COX was appointed as Chief Financial Officer in December
1998, and has been the Vice President of Finance of White Pine since August
1997, and Corporate Controller from October 1996 to August 1997. Ms. Cox served
as Division Controller and Treasurer of Sequoia Systems, Inc., a fault-tolerant
and business-critical microcomputer company, from May 1996 to October 1996,
Operations Controller from June 1995 to May 1996, and held other financial
management positions from August 1993 to June 1995.

DAVID O. BUNDY has served as Chief Technology Officer since July 1998
and as Vice President of Engineering of White Pine from January 1994 to July
1998. Mr. Bundy was the Vice President and Principal Engineer of White Pine
(then known as Visual International, Inc.) from August 1993 to December 1993 and
of Visual T.I., Inc. from September 1991 until it merged into Visual
International, Inc. in August 1993.

JOHN E. KELLY has served as the Vice President of Worldwide Sales and
Marketing since March 1999. Mr. Kelly founded Aura Networks, a developer of
datacentric digital loop carrier products, in May 1997, and served as the
President of Aura Networks from May 1997 until November 1998. From 1993 to

31
<PAGE>

April 1997, Mr. Kelly was Vice President of Marketing at Intraplex,
Incorporated, a developer of digital network products for broadcast and
wireless communications, which was acquired by Harris Corporation in November
1998.

JONATHAN G. MORGAN has served as a director of White Pine since May
1996. Since June 1993, Mr. Morgan has been Managing Director/Group Head of
Investment Banking-Technology of Prudential Securities Incorporated, an
investment banking firm.

ADAM STETTNER has served as a director of White Pine since March
1999. Mr. Stettner has been the managing director of the Special Situations
Technology Fund since April 1997. He has also served as the President of
Stettner Consultants, Inc., a computer consulting company, from 1989 to date.
Special Situations Technology Fund and affiliated funds beneficially own 9.3%
of our common stock. See "Item 11. Security Ownership of Certain Beneficial
Owners and Management."

JOSEPH J. ESPOSITO has served as a director since January 2000. He was
the President and CEO of Tribal Voice, a provider of instant messaging,
interactive communications and online community solutions, until it was sold to
CMGI late in 1999. Currently he works as a consultant, focusing on strategy for
the communications and information industries. Prior to joining Tribal Voice,
Mr. Esposito worked in the publishing industry, with tenures at Simon & Schuster
and Random House. Mr. Esposito also served as CEO of Encyclopaedia Britannica.

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

The board of directors has a Compensation Committee, which provides
recommendations concerning salaries and incentive compensation for directors,
officers and employees of and consultants to White Pine, and an Audit Committee,
which reviews the results and scope of the audit and other services provided by
our independent auditors.

We do not pay fees to members of the board of directors and presently
have no plans to pay directors' fees. We grant stock options to members of our
board who are not employees of White Pine or any parent or subsidiary of White
Pine ("Outside Directors") pursuant to the White Pine Software, Inc. 1997
Director Stock Option Plan (the "Director Plan"). The purpose of the Director
Plan is to encourage ownership of our capital stock by Outside Directors in
order to help us attract and retain persons of exceptional competence to our
board and to furnish an added incentive for Outside Directors to increase their
efforts on our behalf. Joesph J. Esposito, Jonathan G. Morgan and Adam Stettner
are Outside Directors for purposes of the Director Plan.

Under the terms of the Director Plan, we grant automatic formula stock
options to Outside Directors as follows:

- upon the initial election of any Outside Director to the board
of directors, such director is entitled to receive a stock
option to purchase 15,000 shares of common stock (subject to
adjustment as provided in the Director Plan); and

- upon the re-election of any Outside Director to the board of
directors, such director is entitled to receive a stock option
to purchase 10,000 shares of common stock (subject to
adjustment as provided in the Director Plan), provided that he
or she has served as an Outside Director of White Pine for at
least the three months immediately preceding that meeting.

32
<PAGE>

The exercise price of the options granted under the Director Plan must equal the
fair market value of the common stock on the grant date. Each option granted
under the Director Plan is subject to vesting under the terms of such plan and
expires upon the earlier of (a) the tenth anniversary of the grant date and (b)
the first anniversary of the date on which the option holder ceased serving as
an Outside Director.

Pursuant to the Director Plan, each of Messrs. Bruno and Morgan
received an option to purchase 15,000 shares of common stock in September 1997
upon the adoption of the Director Plan by our stockholders. Mr. Stettner
received an option to purchase 15,000 shares of common stock in March 1999 upon
his election to the board of directors. Mr. Esposito received an option to
purchase 15,000 shares of common stock in January 2000.

In addition, on December 16, 1998, the board of directors voted to
grant to each of Messrs. Bruno and Morgan, as the only outside directors then
serving, options to purchase 35,000 shares of common stock at the price of
$1.875 per share, which represented the closing price of the common stock on
such date. These options were issued under our 1996 Incentive and Nonqualified
Stock Option Plan. They vest over a two-year period.

Pursuant to the Directors Plan, each of Messrs. Bruno, Morgan and
Stettner received an option to purchase 10,000 shares of common stock in July
1999 upon the re-election to the board of directors at the price of $6.9375 per
share, which represented the closing price of the common stock on such date.

SECTION 16(A) REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and officers, and persons who own more than ten percent of our common
stock, to file with the Securities and Exchange Commission reports of ownership
on Form 3 and reports of changes in ownership on Forms 4 and 5. Such officers,
directors and ten-percent stockholders are also required to furnish us with
copies of all Section 16(a) reports they file. Based solely on our review of the
copies of such forms received by us and on written representations from certain
reporting persons that no Form 5s were required for such persons, we believe
that all Section 16(a) reports applicable to our officers, directors and
ten-percent stockholders with respect to fiscal 1999 were filed on a timely
basis.

33
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth certain information concerning the
compensation earned by our chief executive officer and the other three executive
officers whose compensation for services rendered in all capacities to White
Pine exceeded $100,000 during 1999 (collectively, the "Named Executive
Officers").

All of the options described in the following table have a maximum term
of seven to ten years, subject to earlier termination in the event of the
optionee's cessation of service with White Pine. The options are exercisable
during the optionee's lifetime only by the optionee; they are exercisable by the
optionee only while the optionee is an employee or advisor of White Pine and for
certain limited periods of time thereafter in the event of termination of
employment.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Awards
Annual --------------
Compensation Securities
---------------------------- Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation($)
- ------------------------------------------ ----- ------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Killko A. Caballero 1999 $155,140 $45,000 115,000 --
Chief Executive Officer and President 1998 150,445 -- 35,000
1997 124,347 20,000 50,000 --

David O. Bundy 1999 128,546 25,000 30,000
Chief Technology Officer 1998 132,405 -- 20,000 $20,000(1)
1997 119,909 15,000 60,000 --

Christine J. Cox 1999 112,470 20,000 66,000 --
Chief Financial Officer and 1998 105,467 -- 20,000 --
Vice President of Finance 1997 83,384 15,000 37,000 --

John E. Kelly(2) 1999 140,905(3) -- 75,000
Vice President of Wordwide
Sales and Marketing
</TABLE>

(1) The other compensation paid to Mr. Bundy in 1998 consisted of amounts
paid in connection with Mr. Bundy's relocation, at our request, to New
Hampshire.

(2) Mr. Kelly joined White Pine in March 1999.

(3) Includes commissions paid to Mr. Kelly in 1999.

OPTION GRANTS AND EXERCISES

The following table summarizes (a) option grants to the Named Executive
Officers during 1999 and (b) the value of the options held by the Named
Executive Officers at December 31, 1999. The amounts shown in the last two
columns represent hypothetical gains that could be achieved for the respective
options if exercised at the end of their option terms. These gains are based on
assumed rates of stock appreciation of five percent and ten percent, compounded
annually from the date the respective options were granted to the date of their
expiration. The gains shown are net of the option price, but do not include
deductions for taxes or other expenses that may be associated with the exercise.
Actual gains, if

34
<PAGE>

any, on stock option exercises will depend on future performance of the common
stock, the option holders' continued employment through the option term and the
date on which the options are exercised.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE PER EXPIRATION -----------------------------------------
NAME GRANTED FISCAL YEAR SHARE($/SH) DATE 5% 10%
- -------------- ----------- ----------- ---------------- --------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Killko A. Caballero 115,000 13% $25.375 12/17/09 $1,835,193 $4,650,740
David O. Bundy 30,000 3 25.375 12/17/09 478,746 1,213,236
Christine J. Cox 50,000 6 25.375 12/17/09 797,910 2,022,061
16,000 2 6.625 07/23/09 66,663 168,937
John E. Kelly 75,000 8 2.8125 03/15/09 132,657 336,180
</TABLE>

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

The following table sets forth information with respect to the exercise
of stock options by the Named Executive Officers during the year ended December
31, 1999 and unexercised options held by the Named Executive Officers on
December 31, 1999. The closing sale price for White Pine's common stock as
reported on the Nasdaq National Market on December 31, 1999 was $24.50. For
purposes of the last column in the table, value is calculated on the basis of
the difference between the option exercise price and $24.50, multiplied by the
number of shares of common stock underlying the options.

<TABLE>
<CAPTION>
Shares Number of Value of Unexercised
Acquired Unexercised Options In-The-Money Options at
on Value at Fiscal Year End(#) Fiscal Year End($)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Killko A. Caballero -- -- 33,750 166,250 $ 747,969 $1,143,906
David O. Bundy 35,000 $405,000 45,625 69,375 1,006,875 875,625
Christine J. Cox -- -- 23,875 96,125 528,375 958,125
John E. Kelly -- -- 9,375 65,625 203,320 1,423,242
</TABLE>

EMPLOYMENT AGREEMENTS

We entered into a nondisclosure and noncompetition agreement with David
O. Bundy dated February 15, 1996. Pursuant to the agreement, Mr. Bundy agreed
that while employed by us and for a period of 19 months following the
termination of his employment with us for any reason, he will not, directly or
indirectly, compete with us or solicit any of our employees, contractors,
suppliers, existing customers or prospective customers on behalf of himself or
any other entity that engages in the sale, distribution or development of or
research concerning computer software and technology in breach of the agreement.
Either party may terminate the agreement by giving the other party thirty days'
prior written notice. If Mr. Bundy's employment is terminated without cause
during the term of the agreement, he will be entitled to his base salary for six
months or until he becomes employed elsewhere, whichever occurs first; provided,
however, that if his new salary is lower than his base salary at White Pine, we
will pay the difference for the balance of this six-month period.

35
<PAGE>

We entered into a letter agreement dated August 5, 1997 with
Christine J. Cox with respect to her employment as our Vice President of
Finance. The letter agreement establishes a base salary of $100,000 per year
and provides for a maximum annual incentive bonus of $15,000, based upon
achievement of specific milestones to be established by us. If Ms. Cox's
employment is terminated without cause during the term of the agreement, she
will be entitled to her base salary for six months. The letter agreement does
not provide for any minimum period of employment, and therefore Ms. Cox
continues to be an at-will employee.

36
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of common stock as of March 1, 2000, by (a) each person (or
group of affiliated persons) known by us to own beneficially more than five
percent of the outstanding shares of common stock, (b) each of our directors,
(c) each of the Named Executive Officers and (d) all of our directors and
executive officers as a group. Unless otherwise noted:

- The address of all persons who are executive officers or
directors is in care of White Pine Software, Inc., 542 Amherst
Street, Nashua, New Hampshire 03063.

- Each person or group identified in the table possesses sole
voting and investment power with respect to such shares,
subject to community property laws, where applicable. Shares
not outstanding but deemed beneficially owned by virtue of the
right of a person or group to acquire them within 60 days of
March 1, 2000 are treated as outstanding only for purposes of
determining the amount and percentages beneficially owned by
such person or group.

<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
- ------------------------------------------ ------------------------------- ------------------------
<S> <C> <C>
Austin W. Marxe and David Greenhouse 1,108,421 9.2%
153 East 53 Street, 51st Floor
New York, New York 10022

Adam Stettner 1,123,421 9.3
153 East 53 Street, 51st Floor
New York, New York 10022

Consortium de Realisation 820,330 6.8
27-29 rue Le Peletier
75009 Paris, France

Killko A. Caballero 437,074 3.6
David O. Bundy 69,205 *
Joseph J. Esposito - -
Jonathan G. Morgan 43,333 *
Christine J. Cox 31,922 *
John E. Kelly 18,750 *
All directors and executive officers as a
group (seven persons) 1,723,705 14.1
</TABLE>
- --------------------------------
* Represents less than 1% of the outstanding shares of common stock.

The information reported regarding Messrs. Marxe and Greenhouse is
based on Amendment No. 2 to Schedule 13G, filed with the Securities and Exchange
Commission on March 2, 2000 by Special Situations Fund III, L.P., MGP Advisers
Limited Partnership, Special Situations Technology Fund, L.P., SST Advisers,
L.L.C., Special Situations Cayman Fund, L.P., AWM Investment Company, Inc.,
Special Situations Private Equity Fund, L.P., MG Advisors L.L.C., Austin W.
Marxe and David Greenhouse. Of the 1,108,421 shares, (a) 665,192 shares are
beneficially owned by Special Situations Fund III, L.P. and MGP Advisers Limited
Partnership (the general partner of and investment advisor to Special Situations
Fund III, L.P.), (b) 143,600 shares are beneficially owned by Special Situations
Technology Fund, L.P. and SST Advisers, L.L.C. (the general partner of and
investment advisor to Special Situations Technology Fund, L.P.), (c) 221,504
shares are beneficially owned by Special Situations Cayman Fund,

37
<PAGE>

L.P. and AWM Investment Company Inc. (the general partner of and investment
advisor to Special Situations Cayman Fund, L.P.), and (d) 78,125 shares are
beneficially owned by Special Situations Private Equity Fund, L.P., and MG
Advisors, L.L.C. Messrs. Marxe and Greenhouse, who serve as officers, directors
and members or principal shareholders of the four investment advisers, claim
sole voting and dispositive powers for all of the 1,108,421 shares.

Of the 1,123,421 shares deemed to be beneficially owned by Mr.
Stettner, 1,108,421 consist of the shares described in the preceding
paragraph. Mr. Stettner is an employee of an entity controlled by Messrs.
Marxe and Greenhouse. Mr. Stettner disclaims ownership of all of these
shares, other than the 143,600 shares owned by Special Situations Technology
Fund, L.P., of which he is the managing director.

The information reported regarding the Consortium de Realisation is
based on a Schedule 13G filed with the Securities and Exchange Commission on
October 2, 1997 by Consortium de Realisation, CDR Enterprises and Land Free
Investment. All of the 820,330 shares are directly owned by Land Free
Investment, which is a direct subsidiary of CDR Enterprises and an indirect
subsidiary of Consortium de Realisation. All of the reporting parties claim
shared voting and dispositive powers for all of the 820,330 shares.

The information reported regarding the directors and executive officers
includes options, exercisable by the following, within 60 days of March 1, 2000,
to purchase the indicated numbers of shares of common stock:

<TABLE>
<S> <C>
Adam Stettner 15,000
Killko A. Caballero 33,750
David O. Bundy 52,500
Jonathan G. Morgan 43,333
Christine J. Cox 29,375
John E. Kelly 18,750
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In December 1999, we sold 78,125 shares of common stock to Special
Situations Private Equity Fund, L.P., 65,104 shares of common stock to
Special Situations Cayman Fund, L.P., and 182,292 shares of common stock to
Special Situations Fund III, L.P., at a price of $15.36 per share. Under SEC
regulations, these funds may be deemed to be affiliated with Austin W. Marxe
and David Greenhouse, who beneficially owned 9.2% of our common stock as of
March 1, 2000, and Adam Stettner, one of our directors. The shares sold to
these funds were sold on terms identical to the terms under which we sold an
additional 976,563 shares of common stock to third parties in December 1999.

For a description of certain employment arrangements between us and
two of our executive officers, see "Management--Employment Agreements."

38
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<S> <C>
3.1(1) Amended and Restated Certificate of Incorporation of White Pine Software, Inc.
3.2(1) Amended and Restated By-Laws of White Pine Software, Inc.
4.1(1) Specimen certificate for common stock, $.01 par value, of White Pine Software, Inc.
10.1(1) Standard Office Lease-Gross (American Industrial Real Estate Association) dated October 24, 1996 by and
between PBP Limited Partnership, as lessor and White Pine
Software, Inc., as lessee.
10.2(1) Indenture of Lease dated May 15, 1996 by Nash-Tamposi Limited Partnership, Five N Associates, Ballinger
Properties, L.L.C. and White Pine Software, Inc.
10.3(1) White Pine Software, Inc. Stock Option Plan (1993), as amended
10.4(1) White Pine Software, Inc. Stock Option Plan (1994)
10.5(1) White Pine Software, Inc. Stock Option Plan (1995), as amended
10.6(1) White Pine Software, Inc. Stock Option Plan (1996)
10.7(1) White Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option Plan
10.8(5) White Pine Software, Inc. 1996 Amended and Restated Employee Stock Purchase Plan
10.9(3) White Pine Software, Inc. 1997 Director Stock Option Plan
10.10(3) Severance Agreement dated June 4, 1997 between White Pine Software, Inc. and Howard R. Berke
10.11(1) Nondisclosure and Noncompetition Agreement dated February 15, 1996 with David O. Bundy
10.12(3) Severance Agreement dated March 16, 1998 between White Pine Software, Inc. and Robert Hadden
10.13(5) Letter agreement dated August 5, 1997 between White Pine Software, Inc. and Christine J. Cox
10.14(1) Commercial Loan Agreement dated December 30, 1994 between Fleet Bank-NH and White Pine Software, Inc.,
as amended
10.15(1) Collateral Assignment and Security Agreement dated December 30, 1994 between Fleet Bank-NH and White Pine
Software, Inc., as amended
10.16(1) Commercial Promissory Note of White Pine Software, Inc. dated August 25, 1995, issued to Fleet Bank-NH
10.17(2) Revolving Line of Credit Promissory Note
10.18(1) Stock Purchase Agreement dated March 19, 1996 among certain investors and White Pine Software, Inc.,
as amended
10.19(1) Stock Purchase Agreement dated April 17, 1996 between J.F. Shea, Co., Inc. and White Pine Software, Inc.,
as amended
10.20(1) Amended and Restated Registration Rights Agreement dated March 19, 1996 among certain stockholders of White
Pine Software, Inc. and White Pine Software, Inc., as amended
10.21(1) Acquisition Agreement dated October 10, 1995 among former stockholders of About Software Corporation S.A.
and White Pine Software, Inc.
10.22(4) Sale of Assets Agreement dated as of July 6, 1998 by and among White Pine Software, Inc., Labtam
Communications Pty. Ltd., Creative Software Technologies Pty. Ltd., Dawson Noy Johns and Anthony
James Oxley
10.23(5) Technology Transfer Agreement dated as of November 11, 1998 between White Pine Software, Inc. and Cornell
Research Foundation, Inc.
21.1(3) List of subsidiaries of White Pine Software, Inc.
</TABLE>

39
<PAGE>
<TABLE>
<S> <C>
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule for fiscal year ended December 31, 1999
</TABLE>
- -------------
(1) Incorporated by reference to White Pine's Registration Statement on
Form SB-2 (File No. 333-09525) in the form in which it was declared
effective by the Securities and Exchange Commission.

(2) Incorporated by reference to White Pine's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.

(3) Incorporated by reference to White Pine's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997.

(4) Incorporated by reference to White Pine's Current Report on Form 8-K
filed on July 23, 1998.

(5) Incorporated by reference to White Pine's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1998.

(b) Reports on Form 8-K

None.

40
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, as of March 27, 2000.

WHITE PINE SOFTWARE, INC.

By: /s/ KILLKO A. CABALLERO
-----------------------------------------
Killko A. Caballero
CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND PRESIDENT

By: /s/ CHRISTINE J. COX
-----------------------------------------
Christine J. Cox
CHIEF FINANCIAL OFFICER AND VICE PRESIDENT OF
FINANCE

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

In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant, and in the capacities
indicated, as of March 27, 2000.

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

<S> <C>
/s/ KILLKO A. CABALLERO Chairman, Chief Executive Officer, President
- ---------------------------------- and Director
Killko A. Caballero (Principal Executive Officer)

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

/s/ JOSEPH J. ESPOSITO Director
- ----------------------------------
Joseph J. Esposito

/s/ JONATHAN G. MORGAN Director
- ----------------------------------
Jonathan G. Morgan

/s/ ADAM STETTNER Director
- ----------------------------------
Adam Stettner
</TABLE>

<PAGE>

REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS
WHITE PINE SOFTWARE, INC.

We have audited the accompanying consolidated balance sheets of White
Pine Software, Inc. and subsidiary as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
White Pine Software, Inc. and subsidiary at December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for the
years ended December 31, 1999 and 1998, in conformity with accounting
principles generally accepted in the United States.

/s/ ERNST & YOUNG LLP

Manchester, New Hampshire
February 1, 2000, except for
Note 10, as to which the
date is February 29, 2000.

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

December 31,
----------------------------------------
1999 1998
------------------- --------------------

ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents...................................... $ 22,087,638 $ 6,420,686
Accounts receivable, less allowance of $176,000 at December
31, 1999 and $146,000 at December 31, 1998.................... 4,158,603 2,122,275
Inventories.................................................... 53,769 64,916
Prepaid expenses............................................... 237,628 328,562
Other current assets........................................... 79,337 108,871
------------ ------------
Total current assets..................................... 26,616,975 9,045,310
Property and equipment:
Computer equipment............................................. 1,278,157 1,227,647
Furniture and fixtures......................................... 240,596 245,823
Software....................................................... 625,699 536,285
Equipment...................................................... 87,691 88,733
Leasehold improvements......................................... 202,689 240,552
------------ ------------
2,434,832 2,339,040
Accumulated depreciation and amortization........................... (1,274,302) (985,405)
------------ ------------
1,160,530 1,353,635
Other assets:
Third party licenses, less accumulated amortization of
$432,000 at December 31, 1999 and $460,000 at
December 31, 1998.......................................... 559,844 933,914
Purchased Software, less accumulated amortization of $608,000
at December 31, 1999 and $0 at December 31, 1998........... 2,533,352 3,141,521
Trademark, less accumulated amortization of $93,000 at
December 31, 1999 and $13,000 at December 31, 1998........ 870,728 951,104
Goodwill, less accumulated amortization of $995,000 at
December 31, 1999 and $756,000 at December 31, 1998......... 198,845 437,463
Other assets.................................................... 105,908 132,823
------------ ------------
4,268,677 5,596,825
------------ ------------
Total assets......................................................... 32,046,182 15,995,770
============ ============

</TABLE>

(CONTINUED)

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)

December 31,
----------------------------------------
1999 1998
------------------- --------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Accounts payable ............................................... 717,932 491,626
Accrued expenses and other accrued liabilities ................. 2,253,800 1,555,055
Deferred revenue ............................................... 695,147 345,945
Current portion of long-term debt .............................. 7,067 26,521
------------ ------------
Total current liabilities .................................. 3,673,946 2,419,147

Long term debt, less current portion ................................ - 7,067
Other long term liabilities ......................................... 600,000 1,154,808
Stockholders' equity:

Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued or outstanding at December 31,
1999 or December 31, 1998................................... -- --
Common stock, $.01 par value:
Authorized shares - 30,000,000
Issued and outstanding shares--12,049,476 at
December 31, 1999 and 10,460,227 at December 31, 1998 ...... 120,495 104,602
Additional paid-in capital ..................................... 61,269,773 41,137,186
Accumulated deficit ............................................ (33,710,591) (28,861,083)
Accumulated other comprehensive income ......................... 92,559 34,043
------------ ------------
Total stockholders' equity ................................. 27,772,236 12,414,748
------------ ------------
Total liabilities and stockholders' equity .......................... $ 32,046,182 $ 15,995,770
============ ============

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
----- ----
Revenue:
<S> <C> <C>
Software license fees .................................................. $ 10,714,541 $ 6,948,222
Services and other ..................................................... 1,287,077 844,936
------------ ------------
Total revenue .......................................................... 12,001,618 7,793,158
Cost of revenue .......................................................... 2,547,509 1,645,249
------------ ------------
Gross profit ............................................................. 9,454,109 6,147,909
Operating expenses:
Sales and marketing .................................................... 7,265,224 7,739,075
Research and development ............................................... 4,761,107 5,041,872
General and administrative ............................................. 2,359,341 2,277,849
------------- ------------
Total operating expenses ............................................... 14,385,672 15,058,796
------------- ------------
Loss from operations ..................................................... (4,931,563) (8,910,887)
Other income (expense):
Interest income ........................................................ 177,679 577,393
Other, net ............................................................. (95,624) (85,089)
------------- ------------
82,055 492,304
------------- ------------
Loss before provision for income taxes ................................... (4,849,508) (8,418,583)
Provision for income taxes ............................................... -- 5,306
------------- ------------
Net loss ................................................................. $ (4,849,508) $ (8,423,889)
============= ============
Net loss per share: basic and diluted..................................... $ (0.46) $ (0.86)
============= ============
Weighted average number of common and common equivalent shares outstanding 10,619,696 9,798,307
============= ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated
Common stock Additional other Total
----------------------- paid-in Accumulated comprehensive stockholders'
Shares Par value capital deficit income equity
---------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1997 .... 9,305,714 93,057 38,984,024 (20,437,194) 85,973 18,725,860
Net loss ......................... (8,423,889) (8,423,889)
Common stock issued upon
exercise of stock options ..... 198,111 1,981 199,036 -- -- 201,017
Common stock issued under
Employee Stock Purchase Plan .. 56,402 564 70,456 -- -- 71,020
Common stock issued
upon purchase of intangible
assets ........................ 900,000 9,000 1,819,170 -- -- 1,828,170
Warrants ......................... 64,500 64,500
Accumulated other comprehensive
Income ........................ (51,930) (51,930)
---------- ------- ---------- ------------- ------- ----------
BALANCES AT DECEMBER 31, 1998 .... 10,460,227 104,602 41,137,186 (28,861,083) 34,043 12,414,748

Net loss ......................... (4,849,508) (4,849,508)
Common stock issued upon
exercise of stock options ..... 225,530 2,256 315,556 -- -- 317,812
Common stock issued under
Employee Stock Purchase Plan .. 61,635 616 107,641 -- -- 108,257
Common stock issued in private
placement ..................... 1,302,084 13,021 19,709,390 -- -- 19,722,411
Accumulated Other
Comprehensive Income .......... 58,516 58,516
---------- ------- ---------- ------------- ------- ----------
BALANCES AT DECEMBER 31, 1999 .... 12,049,476 120,495 61,269,773 (33,710,591) 92,559 27,772,236
========== ======= ========== ============ ====== ===========

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss....................................................................................... $(4,849,508) $(8,423,889)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................................ 454,258 522,766
Amortization of intangible assets............................................................ 1,301,234 533,043
Loss on disposal of fixed assets............................................................. -- 30,000
Changes in operating assets and liabilities:
Accounts receivable...................................................................... (2,033,030) 283,866
Inventories.............................................................................. 11,735 33,430
Prepaid expenses......................................................................... 88,485 435,859
Other assets............................................................................. 49,221 43,821
Accounts payable......................................................................... 245,177 (180,912)
Accrued expenses and other accrued liabilities........................................... 172,819 (616,318)
Deferred revenue......................................................................... 351,018 96,929
------------------ ------------
Net cash used in operating activities.......................................................... (4,208,591) (7,241,405)
------------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment, net........................................................ (276,158) (371,310)
Purchase of third party licenses, net.......................................................... -- (163,846)
Purchase of Purchased Software................................................................. -- (685,351)
------------------ ------------
Net cash used in investing activities.......................................................... (276,158) (1,220,507)
------------------ ------------
FINANCING ACTIVITIES
Principal payments on long-term debt and third-party licenses.................................. (25,136) (55,830)
Proceeds from common stock issued upon exercise of stock options............................... 317,812 201,017
Proceeds from common stock issued under Employee Stock Purchase Plan........................... 108,257 71,020
Proceeds from private placements, net.......................................................... 19,722,411 --
------------------ ------------
Net cash provided by financing activities...................................................... 20,123,344 216,207
------------------ ------------
Currency translation effect on cash and cash equivalents....................................... 28,357 (37,253)
------------------ ------------
Net increase (decrease) in cash and cash equivalents........................................... 15,666,952 (8,282,958)
Cash and cash equivalents at beginning of period............................................... 6,420,686 14,703,644
------------------ ------------
Cash and cash equivalents at end of period..................................................... $22,087,638 $6,420,686
================== ============

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

WHITE PINE SOFTWARE, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1999

1. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

White Pine Software, Inc. and its subsidiary ("the Company") operates in one
business segment, which develops, markets and supports multi-platform desktop
multimedia software that facilitates worldwide video and audio communication
and data collaboration across the Internet, intranets and other networks
using Internet protocol.

The Company markets and sells its products in the United States, Canada,
Europe, and the Pacific Rim through distributors, a combination of strategic
partners and OEMs, and its direct sales organization, as well as over the
Internet.

PRINCIPLES OF CONSOLIDATION

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

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

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

INTANGIBLE ASSETS

Intangible assets except trademark are amortized on a straight line
basis over three to five years. Trademark is amortized over twelve years.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to
significant concentrations of

<PAGE>

credit risk consist primarily of cash, cash equivalents and accounts receivable.
Cash and cash equivalents include cash on deposit in checking accounts,
commercial paper, and overnight repurchase agreements. These cash and cash
equivalents are maintained with high credit quality financial institutions.

The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. The Company maintains reserves for potential
credit losses; historically, such losses have not been material and have been
within management's expectations. Two customers accounted for approximately 38%
and 59% of accounts receivable at December 31, 1999 and 1998.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

INVENTORIES

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

PROPERTY AND EQUIPMENT

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

Included in the Company's balance sheet at December 31, 1999 and 1998
are the assets of the Company's foreign subsidiary, White Pine Software, Europe,
of which $186,000 and $254,000 of tangible assets are located in France.

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for Impairment of Long-Lived Assets," the Company will
record impairment losses on long-lived assets used in operations when
indicators of impairment are present. On an on-going basis, management
reviews the value and period of amortization or depreciation of long-lived
assets. During this review, the Company reevaluates the significant
assumptions used in determining the original cost of long-lived assets.
Although the assumptions may vary from transaction to transaction, they
generally include revenue growth, operating results, cash flows, and other
indicators of value. Management then determines whether there has been a
permanent impairment of the value of long-lived assets based upon events or
circumstances, which have occurred since acquisition. To date, there have
been no impairment losses recorded.

THIRD-PARTY LICENSES

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

INCOME TAXES

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

REVENUE RECOGNITION

The Company's revenue is derived from software license fees and fees
for services related to its software products, primarily software maintenance
fees. The Company recognizes revenue in accordance with the provisions of AICPA
Statement of Position No. 97-2, SOFTWARE REVENUE RECOGNITION, as amended.

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

Software maintenance fees, which are generally payable in advance and
are non-refundable,

<PAGE>

are recognized ratably over the period of the maintenance contract, typically
twelve months. Revenue from training and consulting services is recognized as
services are provided.

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

CAPITALIZED SOFTWARE

Software development costs meeting recoverability test are
capitalized under Statement of Financial Accounting Standards No. 86,
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED. The cost of software capitalized is amortized based on its
estimated economic life.

EARNINGS PER SHARE

The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS
128 requires calculation and presentation of basic and diluted earnings per
share. Basic earnings per share is calculated based on the weighted average
number of common shares outstanding and excludes any dilutive effects of
warrants, stock options or other type securities. Diluted earnings per share
is calculated based on the weighted average number of common shares
outstanding and the dilutive effect of stock options, warrants and related
securities calculated using the treasury stock method. Dilutive securities
are excluded from the diluted earnings per share calculation if their effect
is antidilutive.

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's foreign subsidiary have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, FOREIGN CURRENCY TRANSLATION. All balance sheet
amounts have been translated using the exchange rates in effect at the balance
sheet date. Statement of operations amounts have been translated using average
exchange rates. The gains and losses resulting from the changes in exchange
rates from the date of acquisition of White Pine Software, Europe to December
31, 1999, have been reported separately as a component of stockholders' equity.

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

ADVERTISING COSTS

All costs related to advertising the Company's products are expensed in
the period incurred. Amounts charged to expense were $252,000 and $655,000,
during the years ended December 31, 1999 and 1998, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Position 98-9, MODIFICATION OF SOP 97-2, SOFTWARE
REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS, modifies certain
provisions of Statement of Position 97-2. The Company's accounting policy on
software revenue recognition currently is in compliance with Statement 97-2,
as amended by Statement of Position 98-9, and adoption of this Statement of
Position has not had a material impact on the financial position or results
of operations of the Company.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," which
establishes standards for the recognition, measurement, and reporting of
derivatives and hedging activities and is effective for the Company's year
ending December 31, 2001. The Company anticipates that the adoption of this
new accounting standard will not have a material impact on the Company's
consolidated financial statements.

2. TECHNOLOGY ACQUISITIONS

ACQUISITION FROM LABTAM COMMUNICATIONS PTY. LTD.

On July 8, 1998 the Company purchased certain assets, including
intellectual property, comprising certain T.120 whiteboarding and data
collaboration technology from Labtam Communications Pty. Ltd. The purchase price
for these assets consisted of 900,000 shares of the Company's Common Stock and
cash payments of U.S.$628,000 in July 1998 and A$201,606 (or U.S.$133,000) in
January 1999. The Company recorded capitalized software of $2,641,000 in
connection with the acquisition, consisting of (i) $1,828,000 attributable to
the Common Stock issued in the acquisition, based upon the Common Stock's
closing price of $2.03 on July 8, 1998, (ii) the two cash payments totaling
$761,000 and (iii) $52,000 of accounting, legal and other fees incurred in
connection with the acquisition.

ACQUISITION FROM CORNELL RESEARCH FOUNDATION, INC.

During 1998, the Company obtained certain trademark and intellectual
property rights to CU-SeeMe and the underlying MeetingPoint technology from
Cornell Research Foundation, Inc. The purchase price for these rights
consisted of (i) a note in the principal amount of $900,000, of which
$300,000 is due on each of June 30,2000, June 30, 2001 and June 30, 2002, and
(ii) warrants to purchase 150,000 shares of the Company's Common Stock at a
price of $1.00 per share. The Company recorded as trademark a total of
$964,500 in connection with the acquisition, consisting of the $900,000
principal amount of the long-term note and $64,500 attributable to the
warrants, which were valued in accordance with SFAS 123. The warrants were
issued in exchange for outstanding warrants issued previously to Cornell
Research Foundation, Inc.; these prior warrants had an exchange price of
$6.00 per share but otherwise had terms substantially identical to those of
the new warrants.

The acquired trademark rights were capitalized and are being amortized
over their estimated economic life of twelve years.

<PAGE>

As a result of the acquisition, the Company recorded as capitalized
software a total of $500,000 previously recorded as prepaid royalties.

3. FINANCINGS

In December 1999, the Company received approximately $20 million from four
different investors through the issuance of 1,302,084 shares of its common
stock. The shares were sold at a price of $15.36 per share, which was the
30-day weighted average closing price of the common stock at the date the
terms of the financings were negotiated.

4. INDEBTEDNESS

LINE OF CREDIT

On March 31, 1999, the Company terminated its commercial loan agreement with a
financial institution, which had provided for a $1,000,000 revolving line of
credit.

LONG TERM DEBT

Debt obligations consist of the following:

DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Secured, non-interest bearing, term loan from a foreign governmental agency, due
in annual installments of $44,408, with the final installment due in
September 1999.................................................................. $- $16,000
Note payable, due in monthly installments of $883 plus interest at 9.5%, with
remaining balances due August 2000.............................................. 7,000 17,000
--------------------------
7,000 33,000
Less current portion............................................................. 7,000 26,000
--------------------------

</TABLE>

<PAGE>

<TABLE>

<S> <C>
$- $7,000
==========================

</TABLE>

Total interest expense for the years ended December 31, 1999 and 1998,
was approximately $3,000 and $4,000, respectively, and is included in other
expense.

5. ACCRUED EXPENSES AND OTHER ACCRUED LIABILITIES

Accrued expenses and other accrued liabilities consist of the
following:

DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Accrued compensation and related benefits................................. $1,001,000 $647,000
Pending litigation........................................................ - 51,000
Royalties................................................................. 106,000 246,000
Other accruals............................................................ 1,147,000 611,000
---------------------------------
$2,254,000 $1,555,000
========== ==========

</TABLE>

In prior years, the Company was a co-defendant in various lawsuits
that sought damages for alleged injuries sustained while using products which
the plaintiffs assert were designed and manufactured by a predecessor company.
The Company reduced its reserve for pending lawsuits from $291,000 to $51,000
as of December 31, 1998, in recognition of the fact that all but two lawsuits
had been resolved. The Company reversed the final $51,000 reserve upon
notification that the two remaining lawsuits had been dismissed during 1999.
Subsequent to this transaction, there are no outstanding lawsuits against the
Company.

6. INCOME TAXES

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

DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets.................................................. $10,150,000 $8,866,000
Valuation allowance for deferred tax assets.......................... (10,150,000) (8,866,000)
--------------------------------------
Net deferred tax asset............................................... $- $-
============ ===========

</TABLE>

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

<PAGE>

The Company recorded a valuation allowance of $10,150,000 and
$8,866,000 at December 31, 1999 and 1998, respectively, against its deferred tax
assets since it is believed to be more likely than not that the net operating
loss carryforwards and other temporary differences will not provide a future tax
benefit.

At December 31, 1999, the Company had cumulative federal net operating
loss carryforwards of approximately $26,848,000 for income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant annual limitations. The loss carryforwards
expire at various dates through 2020.

7. LEASE COMMITMENTS

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

<TABLE>

<S> <C>
2000......................................................................................... $253,000
2001......................................................................................... 178,000
--------------
$431,000
--------------

</TABLE>

Total rent expense for the years ended December 31, 1999 and 1998, was
approximately $229,000 and $253,000, respectively.

8. SIGNIFICANT CUSTOMERS AND GEOGRAPHICAL SALES

During the years ended December 31, 1999 and 1998, two customers
accounted for approximately 13% and 35%, respectively, of the Company's total
revenue.

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

YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
United States and Canada................................................ $9,494,000 $5,887,000
Europe.................................................................. 1,533,000 1,449,000
Pacific Rim............................................................. 975,000 457,000
------------------------------------
$12,002,000 $7,793,000
====================================

</TABLE>

9. EMPLOYEE BENEFITS

401(k) PLAN

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

<PAGE>

EMPLOYEE STOCK PURCHASE PLAN

In 1996 the Company adopted the 1996 Employee Stock Purchase Plan
(the "ESPP"). Under the ESPP, an aggregate of 100,000 shares of Common Stock
are reserved for purchase by qualified employees, at 85% of the appropriate
market price. On December 16, 1998, the Board of Directors amended the total
shares of the ESPP plan to 200,000 shares and deleted a provision that had
prohibited certain "highly compensated" officers of the Company from
participating in the ESPP. The ESPP provides that qualified employees may
authorize payroll deductions from 1% to 6% of their base pay to purchase
shares at the lower of the market price in effect on the day the offering
starts or the day the offering terminates. In 1998, the company issued 56,402
shares. 17,474 shares were issued at $2.23 per share, and 38,928 shares were
issued at $0.82 per share. In 1999, the company issued 61,635 shares. 48,500
shares were issued at $0.82 per share, and 13,135 shares were issued at $5.10
per share.

STOCK OPTION PLANS

The Company has elected to follow Accounting Principals Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires use of
option valuation models that were not developed for use in valuing employee
stock options. No compensation expense is recognized under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant.

1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
- -------------------------------------------------

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

1997 DIRECTOR STOCK OPTION PLAN
- -------------------------------

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

SFAS 123 DISCLOSURES

Pro forma information regarding net loss and loss per common and common
equivalent share is required by Statement 123, which also requires that the
information be determined as if the Company has accounted for its employee stock
options granted subsequent to December 31, 1994 under the fair value method of
that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:

<TABLE>
<S> <C>
OPTIONS ESPP
------- ----
</TABLE>

<PAGE>

1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Expected life (years)................................................ 4.66 4.05 0.50 0.50
Interest rate........................................................ 5.75% 5.50% 5.75% 5.5%
Volatility........................................................... 1.23 0.97 1.23 0.97

</TABLE>

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

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

<PAGE>

1999 1998
---- ----
<S> <C> <C>
Pro forma net loss........................................................... $(5,474) ($8,925)
Pro forma net loss per share: basic and diluted.............................. $(0.52) ($0.91)

</TABLE>

Option activity under the Company's stock option plans is summarized below:

1999 1998
----------------------- ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year.................. 1,108,644 $1.88 1,408,248 $2.65
Granted........................................... 895,000 17.51 492,650 1.82
Expired or canceled............................... (121,910) 12.05 (594,143) 4.12
Exercised......................................... (225,530) 1.41 (198,111) 1.01
---------- ----------
Outstanding at end of year........................ 1,656,204 9.63 1,108,644 1.88
========== ==========
Exercisable at end of year........................ 471,190 2.00 462,828 $1.67

</TABLE>

The following table presents weighted-average price and fair value
information about options granted at fair market value during fiscal years
1999 and 1998:

<PAGE>

NUMBER OF
OPTIONS WEIGHTED-AVERAGE WEIGHTED-AVERAGE FAIR
EXERCISE PRICE ON DATE OF GRANT GRANTED EXERCISE PRICE VALUE
------------------------------- --------- ---------------- ---------------------
<S> <C> <C> <C>
1999
Equal to fair market value................. 895,000 $17.51 $14.78
Less than fair market value................ - N/A N/A
---------------
895,000
---------------
---------------
1998
Equal to fair market value................. 492,650 $1.82 $1.29
Less than fair market value................ - N/A N/A
---------------
492,650
---------------
---------------

</TABLE>

The following table presents weighted-average price and life
information about significant option groups outstanding at December 31, 1999 and
1998:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------------- ------------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE AVERAGE AVERAGE AVERAGE
OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
PRICES ----------- ---------------- -------- ----------- --------
--------
1999
<S> <C> <C> <C> <C> <C>
$ 0.50 - $ 1.875 542,107 7.35 years $ 1.46 228,582 $ 1.16
2.00 - 2.50 338,872 7.42 years 2.45 187,508 2.45
2.625 - 7.875 249,225 9.05 years 4.35 55,100 3.99
8.75 - 25.50 526,000 9.96 years 25.19 -- --
----------------- ---------------
1,656,204 471,190
----------------- ---------------
----------------- ---------------
1998
$ 0.50 - $ .80 185,392 2.55 years $0.53 185,392 $0.53
0.84 - 1.25 171,454 8.74 years 1.15 37,954 1.00
1.50 - 1.88 254,300 9.69 years 1.85 18,500 1.50
2.00 - 2.63 439,148 8.29 years 2.43 178,445 2.36
3.75 - 7.88 58,300 8.58 years 4.38 42,537 4.39
----------------- ---------------
1,108,644 462,828
================= ===============

</TABLE>

10. SUBSEQUENT EVENTS

The Company sold the assets of its legacy connectivity business to
an Australian company on February 29, 2000 for $1,000,000 in cash and 467,730
ordinary shares of the Australian company. These shares were valued at U.S.
$500,000 on February 29, 2000. The gain generated from this sale will be
calculated in the first quarter of 2000.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration
Statements (Form S-8 Nos. 333-21269 and 333-26973) pertaining to the:

White Pine Software, Inc. Stock Option Plan (1992),

White Pine Software, Inc. Stock Option Plan (1993),

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

White Pine Software, Inc. Stock Option Plan (1995),

Letter Agreement between White Pine Software, Inc. and Richard Kennerly
delivered as of April 16, 1996,

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

White Pine Software, Inc. 1996 Employee Stock Purchase Plan

of our report dated February 1, 2000, except for Note 10, as to which the
date is February 29, 2000, with respect to the consolidated financial
statements of White Pine Software, Inc. included in the Annual Report (Form
10-KSB) for the year ended December 31, 1999.

/s/ ERNST & YOUNG LLP

Manchester, New Hampshire
March 24, 2000

<PAGE>
<ARTICLE> 5
<CIK> 0001006591
<NAME> WHITE PINE SOFTWARE, INC.
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,087,638
<SECURITIES> 0
<RECEIVABLES> 4,334,172
<ALLOWANCES> 175,569
<INVENTORY> 53,769
<CURRENT-ASSETS> 316,965
<PP&E> 2,434,832
<DEPRECIATION> (1,274,302)
<TOTAL-ASSETS> 32,046,182
<CURRENT-LIABILITIES> 3,673,946
<BONDS> 0
0
0
<COMMON> 120,495
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,046,182
<SALES> 0
<TOTAL-REVENUES> 12,001,618
<CGS> 0
<TOTAL-COSTS> 2,547,509
<OTHER-EXPENSES> 14,385,672
<LOSS-PROVISION> 31,865
<INTEREST-EXPENSE> 3,321
<INCOME-PRETAX> (4,849,508)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,849,508)
<EPS-BASIC> (0.46)
<EPS-DILUTED> (0.46)

</TABLE>