AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
REGISTRATION STATEMENT NO. 333-

---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------
POINTCAST INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7372 77-0315081
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)

---------------
501 MACARA AVENUE
SUNNYVALE, CA 94086
(408) 990-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------
DAVID W. DORMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHAIRMAN OF THE BOARD
POINTCAST INCORPORATED,
501 MACARA AVENUE
SUNNYVALE, CA 94086
(408) 990-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

---------------
COPIES TO:
LARRY W. SONSINI, ESQ. SCOTT C. DETTMER, ESQ.
JUDITH M. O'BRIEN, ESQ. BENNETT L. YEE, ESQ.
DONNA M. PETKANICS, ESQ. JONATHAN J. NOBLE, ESQ.
BRUCE M. MCNAMARA, ESQ. GUNDERSON DETTMER STOUGH
WILSON SONSINI GOODRICH & ROSATI VILLENEUVE FRANKLIN & HACHIGIAN, LLP
PROFESSIONAL CORPORATION 155 CONSTITUTION DRIVE
650 PAGE MILL ROAD MENLO PARK, CA 94025
PALO ALTO, CA 94304 (650) 321-2400
(650) 493-9300

---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE

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

TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------

Common Stock, $0.001 par
value................. 4,312,500 shares $12.00 $51,750,000 $15,266.25
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------

(1) Includes 562,500 shares issuable upon exercise of an option granted by the
Company to the Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457.

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated May 14, 1998

PROSPECTUS

3,750,000 SHARES
POINTCAST INCORPORATED
COMMON STOCK

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

All of the shares of Common Stock offered hereby are being sold by PointCast
Incorporated ("PointCast" or the "Company"). Prior to this offering, there has
been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $10.00 and
$12.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market, subject to
notice of issuance, under the symbol "PCST."

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------

Per Share............................... $ $ $
- --------------------------------------------------------------------------------
Total(3)................................ $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $850,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
562,500 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery and acceptance by the Underwriters and to
certain further conditions. It is expected that delivery of certificates
representing the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1998.

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

LEHMAN BROTHERS
BT ALEX. BROWN
BANCAMERICA ROBERTSON STEPHENS

, 1998

Inside Front Cover of the Prospectus

The PointCast Network broadcasts news from approximately 700 sources,
including: AccuWeather, Advertising Age, American Banker, American Medical
Association, Associated Press, Aviation Week, Boston Globe, Business Wire,
Chicago Tribune, CMPnet, CNN Interactive, CNNfn, Edgar Online, Fortune,
Government Executive, Hoovers Online, International Mass Retail Association,
Johns Hopkins Health News, Los Angeles Times, Money, Morningstar, National
Association of Realtors, New York Times, Reuters, Standard & Poor's ComStock,
Telecommunications Reports International, Wall Street Journal Interactive
Edition, Washington Post, Zacks Investment Research, Zdnet

PointCast is partnering with vertical market leaders to provide content in the
following industries: Aerospace - EDS, Automotive -- EDS, Banking and Finance
- -- KPMG, Consumer Markets -- KPMG, Federal Government -- BTG, Healthcare --
IntelliHealth and Perot Systems, Insurance -- KPMG, Real Estate -- RealSelect
and Real Estate On-line, State and Local Government -- Ambac Connect,
Telecommunications -- Coopers & Lybrand, Utilities/Energy -- Coopers & Lybrand

The PointCast Network Broadcasts Personalized News to Business consumers' PC
Screens

(Picture of the ChannelViewer displaying the CNN channel)

(Picture of the ChannelViewer displaying the Wall Street Journal channel)

(Picture of the ChannelViewer displaying the Corporate Banking channel)

(Picture of the ChannelViewer displaying the Weather channel)

(Picture of the ChannelViewer displaying the New York Times channel)
The PointCast Network's SmartScreen technology replaces traditional
screensavers with news broadcast directly to viewers' idle computer screens.
The Corporate Banking Channel is expected to be released in June 1998.

(Picture of the ChannelViewer displaying the Company's channel)
With the click of a mouse, viewers receive personalized in-depth coverage in
the PointCast Channel Viewer.

(Picture of the ticker)
The PointCast Network's scrolling ticker displays timely stock quotes, weather
forecasts, news headlines, and other information.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY, INCLUDING EFFECTING SYNDICATE COVERING TRANSACTIONS,
INITIATING BIDS OR EFFECTING PURCHASES ON THE NASDAQ NATIONAL MARKET FOR THE
PURPOSE OF PREVENTING OR RETARDING A DECLINE IN THE MARKET PRICE OF THE COMMON
STOCK, OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

Since the PointCast Network's launch in 1996, the Company has won more than 75
industry awards and honors.

(Pictures of eight of the awards won by the Company)

The PointCast Network Enables Advertisers to Reach the Elusive Business
Consumer.
(Picture of the Company's ChannelViewer with an enlargement of the advertising
window displaying an advertisement for Mercedes-Benz)

PointCast's innovative ad model enables advertisers to access the attractive
and hard-to-reach business consumer audience with engaging, 30-second
animated commercials.

Advertisers representing a wide range of products - from automotive and
consumer goods to personal finance and technology - have successfully utilized
the innovative properties of PointCast's advertising medium to build brand
awareness and generate sales.

(Picture of the ChannelViewer with an enlargement of the advertising window
displaying an advertisement for Visa)

Select Advertising Customers

Consumer/Travel/Automotive: Avis, Boise Office Products, BMW,
Colgate-Palmolive, Continental Airlines, InteliHealth, Kodak, Korean Air, Land
Rover, Mercedes Benz, Pfizer, Procter & Gamble, Saturn, Levi Strauss & Company
(Slates), Toyota

Financial: American Express, Ameritrade, Charles Schwab, DLJ Direct, The
Dreyfus Corporation, E*Trade, Fidelity Investments, First Chicago, Founders
Funds, NationsBank, Northwestern Mutual Life Insurance Company, Quick &
Reilly, The Vanguard Group, VISA, Wells Fargo

Technology/Telecommunications: 3Com/US Robotics, Compaq Works, Comp USA,
Computer Associates, Gateway 2000, Hewlett-Packard, IBM, Intel, MCI,
Microsoft, Nortel, Oracle, SAP, Texas Instruments, Toshiba

An Exceptionally Affluent and Influential Audience
(Chart)
Average Age: 39 years
Average Household Income: $109,080
College Degree or Greater: 69%
Management: 44%
Professional/Technical: 41%
Purchased Online: 63%

Source: IntelliQuest, Inc., November 1997 PointCast Viewer Survey of 4,065
respondents between September 22, 1997 and October 14, 1997.

(Picture of the Company's ticker)

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with, the more detailed information and the consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. Except as
otherwise noted, the information contained in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and gives effect to (i) the
conversion of all outstanding shares of Mandatorily Redeemable Convertible
Preferred Stock ("Preferred Stock") of the Company into Common Stock, which
will occur upon the completion of this offering, and the conversion of all
outstanding Warrants to purchase Preferred Stock into warrants to purchase
Common Stock, (ii) a reincorporation of the Company into Delaware and (iii) a
two-for-three reverse stock split of all issued and outstanding Common Stock
that will be effected pursuant to the reincorporation into Delaware prior to
the effectiveness of this offering. See "Capitalization" and "Description of
Capital Stock."

THE COMPANY

PointCast is the leading broadcaster of personalized news and information to
business consumers over the Internet and corporate intranets. The PointCast
Network automatically appears whenever the computer is idle, replacing a
screensaver with a constant stream of useful, personalized news and
information. Viewers can effortlessly absorb headlines, stock quotes and other
personalized news on screen or in the scrolling ticker, and can click on any
headline to obtain in-depth information. The PointCast Network consists of four
principal components: (i) general and business content; (ii) the PointCast
Central Broadcast Facility, which receives, translates and transmits content;
(iii) the PointCast Network Client that resides on a viewer's PC; and (iv) the
PointCast Intranet Broadcast Solution, a suite of free software tools. The
PointCast Network is a free, advertising-supported service that has been
specifically designed to meet the needs of business consumers, corporations and
advertisers.

PointCast aggregates content from approximately 700 news and information
sources globally, including Associated Press, CNN, The New York Times and The
Wall Street Journal Interactive Edition. The Company also offers in-depth
vertical market information through relationships with leading industry
partners, such as Ambac Connect, Inc., Coopers & Lybrand L.L.P., Electronic
Data Systems Corporation and KPMG Peat Marwick LLP. The Company believes it is
the largest aggregator of general, business, vertical market and local
newspaper content on the Internet. Through its Central Broadcast Facility, the
Company broadcasts approximately 450 million news and information items to
viewers on a daily basis.

New trends are affecting how and where people access and absorb news and
information. Business professionals are shifting their news consumption from
home to the office, where speed, timeliness and efficiency are key requirements
for the media they use. At the same time, new technologies like cellular
telephones, fax machines and pagers are accelerating the pace of business and
enabling people to work where and when they need to, from home, office and in
transit. These technologies are blurring the line between personal and
professional activities. As a result, people are increasingly making purchase
decisions in the work environment and business people are emerging as "business
consumers."

The growth of the Internet and corporate intranets is accelerating this
fundamental change in business media consumption, making the desktop PC
increasingly a focal point for news and information delivery. As business
consumers move online for news and information, advertisers are looking for
better ways to communicate with this audience and are beginning to allocate
advertising dollars to the Internet. Online advertising is expected to grow
from an estimated $940 million in 1997 to $5.8 billion in 2001, according to
Jupiter Communications. Business consumers are a desirable advertising audience
due to their affluence and acquisitiveness as consumers and their influence
over business-to-business purchase decisions. In 1997, the Leading National
Advertisers/Publishers Information Bureau reported that the value of
advertising placements totaled $1.9 billion in the four leading business
publications--Business Week, Forbes, Fortune and The Wall Street Journal--whose
circulations range from approximately 766,000 to 1.8 million.

The Company's strategy is to provide advertisers with a highly effective and
efficient vehicle to reach a premium business audience in the work environment,
where previously they have been hard to reach through traditional media. The
PointCast Network employs a client/server-based advertising model that provides
advertisers with more complete audience data, larger and richer advertising
units and more detailed advertising statistics than current leading web sites,
as well as the ability to target specific audiences. Advertising opportunities
on the PointCast Network currently consist of 30-second animated commercials, a
variety of SmartScreen, ticker and content sponsorships and banner
advertisements. Representative companies that advertised on the PointCast
Network during 1997 include Avis Rent A Car, Inc., Charles Schwab & Co., Inc.,
Fidelity Investments Institutional Services Company, Inc., Hewlett-Packard
Company, Levi Strauss & Company, MCI Communications Corporation, Daimler-Benz
North America Corp., Microsoft Corporation, The Procter & Gamble Company and
Wells Fargo & Company. The Company had an average of approximately 1.2 million
active viewers worldwide in the first quarter of 1998. Based on independent
survey data, the Company believes its viewers are well educated, affluent
individuals who are likely to purchase products and services online. In
addition, the Company believes its viewers use its service more days per month
and more minutes per day than the typical visitor to leading Web sites, based
on the Company's own usage data and ongoing metering studies conducted by Media
Metrix.

An important part of the Company's strategy is to capitalize on its high rate
of historical viewer registration, which has ranged between 850,000 and
1,000,000 registrations per quarter throughout 1997 and the first quarter of
1998. The Company has experienced a low retention rate during the initial 90
days after registration and has conducted extensive market research, which it
believes identifies the causes. According to a survey conducted by the Company
approximately two-thirds of respondents indicated they left the PointCast
Network for specific performance reasons related to the PointCast Network
Client. Based on its research, the Company intends to release a new version of
the PointCast Network Client in the second half of 1998, which is designed to
improve performance in order to increase viewer retention.

The Company believes corporate acceptance is a significant factor in
increasing viewership and has invested substantially in creating a unique value
proposition for corporations. The Company's strategy is to offer its free
PointCast Intranet Broadcast Solution and employ multiple distribution channels
to promote its deployment within corporations. The PointCast Intranet Broadcast
Solution is designed to motivate corporate-wide adoption by providing efficient
network management, enabling control of content on employee desktops, and
integrating internal company news broadcasts. Since the introduction of the
PointCast Intranet Broadcast Solution in January 1998, more than 40
corporations have deployed at least 500 desktops utilizing the PointCast
Intranet Broadcast Solution, including American International Life Assurance
Company of New York, BankAmerica Corporation, E.I. du Pont de Nemours and
Company, MCI Communications Corporation, Monsanto Company, Northrop Grumman and
The Procter & Gamble Company. In addition to a direct enterprise marketing
team, there are more than 60 Solution Partners/VAR organizations that have been
trained and certified to install and deploy the PointCast Intranet Broadcast
Solution in their own client accounts. The enterprise marketing team also works
closely with the Company's partners in vertical markets to capture enterprise
accounts.

The Company has financed its operations to date through private equity
investments from media and technology companies, as well as financial
investors. These investors include Adobe Systems, Inc., Asahi Shimbun,
Benchmark Capital, Cendant Corporation, Gannett Media Technologies
International, Knight-Ridder, Inc., KPMG Peat Marwick LLP, Merrill, Pickard,
Anderson & Eyre, Mohr, Davidow Ventures, SOFTBANK Holdings, Inc. and Times
Mirror.

The Company was incorporated in California in 1992 as PED Software
Corporation. The Company changed its name to PointCast Incorporated in 1995 and
will reincorporate in Delaware in 1998. The Company's web site can be found at
http://www.pointcast.com. Information contained in the Company's web site shall
not be deemed to be a part of this Prospectus. The Company's principal
executive office is located at 501 Macara Avenue, Sunnyvale, CA 94086, and its
telephone number at that location is (408) 990-7000.

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

PointCast is a registered trademark of the Company. The Company has also
applied for registration of the following trademarks: PointCast Network,
SmartScreen, EntryPoint and the Company's logo. This Prospectus also includes
product names and other trade names and trademarks of the Company and of other
organizations.

THE OFFERING

Common Stock offered................... 3,750,000 shares
Common Stock to be outstanding after
the offering.......................... 21,337,112 shares(1)
Use of proceeds........................ For general corporate purposes,
including working capital and capital
expenditures and expansion of sales
capabilities and marketing efforts. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol. PCST

SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA

THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
----- ------- ------- -------- -------- ------- -------
(in thousands, except per share data)

CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue................ $ 146 $ 816 $ 765 $ 5,199 $ 17,993 $ 2,967 $ 5,106
Gross profit........... 127 603 756 2,573 10,595 1,926 2,579
Total operating
expenses(2)........... 342 1,779 5,006 18,375 40,528 8,428 9,189
Loss from operations... (215) (1,176) (4,250) (15,802) (29,933) (6,502) (6,610)
Net loss............... (215) (1,059) (4,221) (15,134) (29,111) (6,238) (6,395)

MARCH 31, 1998
-------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
(in thousands)

CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments............................ $ 19,066 $ 19,066 $ 56,579
Working capital......................... 9,243 9,243 46,756
Total assets............................ 32,800 32,800 70,313
Long-term obligations................... 2,679 2,679 2,679
Mandatorily redeemable securities....... 72,240 -- --
Stockholders' (deficit) equity.......... (58,119) 14,121 51,634

- --------
(1) As of March 31, 1998. Excludes: (i) 936,370 shares of the Company's Common
Stock reserved for issuance pursuant to warrants at a weighted average
exercise price of $12.41 per share, (ii) 4,720,160 shares subject to
outstanding options at March 31, 1998 and (iii) 2,927,018 shares reserved
for issuance under the Company's 1994 Stock Plan, 1998 Employee Stock
Purchase Plan and 1998 Director Option Plan. Subsequent to March 31, 1998,
options to purchase 471,846 shares were exercised at a weighted average
exercise price of $1.69 per share and the Company granted additional
options to purchase an aggregate of 746,094 shares of Common Stock under
the 1994 Stock Plan at a weighted average exercise price of $7.66 per
share. See "Management--Stock Plans," "Certain Transactions," "Description
of Capital Stock" and Notes 6, 8 and 11 of Notes to Consolidated Financial
Statements.

(2) Total operating expenses include non-recurring and non-cash stock
compensation expense and amortization of warrants aggregating $562,000 and
$6,059,000 for the years ended December 31, 1996 and 1997, respectively,
and $459,000 and $696,000 for the three months ended March 31, 1997 and
1998. There were no such expenses for the years ended December 31, 1993,
1994 and 1995.

(3) Pro forma to reflect the assumed conversion of all outstanding shares of
Preferred Stock into 11,775,560 shares of Common Stock upon the completion
of this offering and conversion of warrants to purchase 701,756 shares of
Preferred Stock into warrants to purchase 701,756 shares of Common Stock.

(4) As adjusted to reflect the sale of the 3,750,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $11.00 per
share and the receipt of net proceeds therefrom. Assumes no exercise of the
Underwriters' over-allotment option. See "Use of Proceeds,"
"Capitalization" and "Underwriting."

RISK FACTORS

Prospective investors should consider carefully the following risk factors,
in addition to the other information contained in this Prospectus concerning
the Company and its business, before purchasing the shares of Common Stock
offered hereby. Certain statements contained in "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," including statements regarding the
anticipated growth in the market for Internet advertising and the belief of
the Company as to its future operating performance and other statements
contained in this Prospectus that are not historical facts, are "forward-
looking" statements within the meaning of the U.S. federal securities laws.
Because such statements include risks and uncertainties, actual results may
differ materially from those anticipated in such forward-looking statements as
a result of certain factors, including those set forth herein and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

History of Net Losses; Accumulated Deficit; Expected Future Net Losses. The
Company has incurred net losses since its inception in July 1992. The Company
incurred net losses of $4.2 million, $15.1 million, $29.1 million and $6.4
million in fiscal 1995, 1996, 1997 and for the three months ended March 31,
1998, respectively. As of March 31, 1998, the Company had an accumulated
deficit of $56.8 million. In addition, the Company did not recognize revenue
relating to the PointCast Network until February 1996. Accordingly, the
Company has a history of net losses and its prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies with limited histories of generating revenue from their core
services, particularly companies in the new and rapidly evolving markets for
the Internet and Internet services, including the Internet advertising market.
To increase revenue, the Company must, among other things, enhance performance
of the PointCast Network by further developing and upgrading its technology,
significantly grow and increase retention of its viewing audience, effectively
develop new relationships and maintain existing relationships with its
advertising customers, particularly advertisers who have historically relied
on traditional media for advertising, their advertising agencies and other
third parties, obtain widespread acceptance of enterprise-wide deployment of
the PointCast Network, maintain and form new relationships with third-party
content providers and media partners, obtain, aggregate and distribute
original and compelling content to Internet users, increase PointCast brand
awareness, successfully expand international operations, respond to
competitive developments and attract, retain and motivate qualified personnel.
There can be no assurance that the Company will be able to successfully
address these and other risks and increase revenue, and the failure to do so
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company does not expect significant growth, if any, in revenue for at
least the next two quarters, and the Company expects to incur increased net
losses for at least the next two quarters and significant net losses for the
foreseeable future. There can be no assurance that revenue from advertisers or
other sources will not decline in the future or that the Company's net losses
will not continue to increase in the future or that the Company will ever
achieve or maintain profitability. The Company intends to substantially
increase its operating expenses in order to increase brand awareness, increase
its sales and marketing operations and continue to expand internationally. The
Company also expects its operating expenses to increase as a result of the
costs associated with becoming a public company. The Company expects its costs
of revenue to increase due to increased costs of data transmission, content
acquisition and international expansion. To the extent that revenue does not
grow at anticipated rates, the Company would be unable to decrease operating
expense levels quickly enough to offset the lack of growth in revenue. In such
event, the Company's business, financial condition and results of operations
would be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Need to Retain and Increase Viewer Base. The Company's advertising revenue
is based primarily on the size and demographics of the Company's viewer base
and the Company's future success depends in part upon the Company's ability to
retain and increase the number of active viewers, particularly among business
consumers. The Company had an average of approximately 1.2 million active
viewers worldwide in the first quarter of 1998. Although the Company received
between 850,000 and 1,000,000 registrations per quarter during the last five
fiscal quarters, the Company's active viewer base has been relatively flat
during this period. A

substantial majority of the attrition occurs during the initial 90 days after
registration. After conducting surveys of former viewers to identify the issues
underlying the attrition rate, the Company believes that the high rate of
attrition during the first 90 days of viewer use is due to a variety of
factors, including poor performance and stability issues with the PointCast
Network Client. The Company released version 2.5 of the PointCast Network
Client in May 1998 to begin addressing some of these problems and expects to
release version 2.6 in the second half of 1998 to address additional specific
performance and stability issues. There can be no assurance that these and
future versions of the PointCast Network Client will adequately resolve these
performance, stability and other software problems or that the Company will be
successful in increasing its number of active viewers, including by reducing
viewer attrition. The failure by the Company to reduce attrition levels and
increase its installed viewer base would have a material adverse effect on the
Company's ability to increase advertising revenues which would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "--Need to Improve Performance and Stability of the PointCast
Network Client; New Product Development and Technological Change."

In addition, the format of the PointCast Network represents a paradigm shift
from active Internet exploration to passive information consumption, and there
can be no assurance that viewers accustomed to active Internet exploration will
widely accept passive information consumption. If the Company is unable to
obtain widespread viewer acceptance of passive information consumption, it will
be unable to retain and increase the number of active viewers possessing
demographic characteristics attractive to advertisers. In such event,
advertising revenues would likely decline and the Company's business, financial
condition and results of operations would be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Need to Improve Performance and Stability of the PointCast Network Client;
New Product Development and Technological Change. The Company has a high viewer
attrition rate during the initial 90 days after registration, which the Company
believes is due to poor performance of the PointCast Network Client, including
high usage of certain operating system resources, lengthy update times,
connection and downloading problems and other stability issues. A key element
of the Company's strategy to increase and retain its viewer base is to improve
the performance and stability of the PointCast Network through the introduction
and release of enhancements and upgrades to its PointCast Network Client. The
Company has recently released version 2.5 of its PointCast Network Client to
begin to address certain stability issues. In addition, the Company is
currently developing version 2.6, which it expects to be commercially released
in the second half of 1998. Version 2.6 is being developed to address specific
performance and stability issues, in particular to redesign the PointCast
Network's animation engine to reduce its consumption of the graphical display
interface resources on a PC. There can be no assurance that the Company will
not experience difficulties that could prevent the successful rollout of
version 2.5 or that could delay or prevent the successful development,
introduction and rollout of version 2.6, that versions 2.5 and 2.6 will provide
the technological improvements the Company expects, that these versions will
adequately meet viewer requirements or that they will gain widespread market
acceptance. Furthermore, there is no assurance that during the rollout periods
for both versions 2.5 and 2.6 the Company will not continue to experience
significant viewer attrition. If the Company were to incur delays in the
introduction of these products, or if these products do not provide the
improvements expected or do not gain widespread market acceptance, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Business--PointCast Viewership."

The Company's success will depend on its ability to continue to enhance the
PointCast Network Client, including the addition of features, functions and
channels, and to continue to develop and introduce, on a timely and cost-
effective basis, new versions of the PointCast Network Client that keep pace
with technological developments, address increasingly sophisticated customer
requirements and resolve any future performance problems with the PointCast
Network Client. The markets for the Company's product offerings are
characterized by rapidly changing technology and frequent new product and
service offerings. The introduction of new technologies can render existing
products and services obsolete or unmarketable. In addition, changes in
firewall and other security applications could prevent or impair the Company's
ability to receive information from its

viewers, including important demographic information for the Company's
advertising customers. The research, development and marketing of enhancements
to the PointCast Network, including the addition of features, functions and
channels, can be time consuming and require considerable resources. In order
to add new features and enhancements to the PointCast Network Client, the
Company has in the past and may in the future enter into partnering,
development and/or marketing agreements with third parties who pay certain
fees to the Company. There can be no assurance that the Company will be
successful in identifying, developing and marketing enhancements, including
the addition of new channels that respond to technological changes or
problems, or meet the Company's or third-party requirements, that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of product enhancements with new
features, functionality or channels or new products, or that its product
enhancements and new products will adequately meet viewer requirements and
achieve widespread market acceptance. Any failure to meet, or delay in meeting
performance requirements the Company is contractually obligated to provide
could result in claims for liability. In addition, the Company's business,
financial condition and operating results could be materially adversely
affected should the Company incur delays in developing and releasing
enhancements or new versions of the PointCast Network Client or if such
enhancements or new versions do not gain widespread market acceptance. See
"Business--PointCast Viewership" and "Business--Central Broadcast Facility and
Technology."

Potential Fluctuations in Quarterly Operating Results; Seasonality. The
Company's results of operations may fluctuate significantly in the future as a
result of a variety of factors, many of which are beyond the Company's
control. These factors include the number, timing and performance of upgrades
and enhancements to the PointCast Network, the addition or loss of viewers
using the PointCast Network, the addition or loss of advertisers, the
demographics of the installed base of viewers, demand for and market
acceptance of Internet advertising, seasonal trends in Internet usage and
advertising placements, advertisers' budgeting cycles, the commitment of
advertising budgets to Internet advertising, changes in pricing models for
Internet advertising, the loss of one or more third-party content providers,
technical difficulties or Central Broadcast Facility downtime, capacity
constraints of the Central Broadcast Facility, the amount and timing of costs
relating to the expansion of the Company's Internet operations and the scaling
of the PointCast Network infrastructure, introduction of or improvements in
competing products or services, price competition or pricing changes in the
industry, the level of use of the Internet and general economic conditions.
Due to all of the foregoing factors, the Company believes that period-to-
period comparisons of its results of operations are not necessarily meaningful
and should not be relied upon as indications of future performance.

In addition, the Company has been, and expects in the future to be, subject
to seasonal fluctuations in the amount of Internet advertising revenue, as
advertisers have historically spent more during the fourth calendar quarter of
each year and less during the first calendar quarter of each year. Additional
seasonal patterns in Internet advertising spending and other seasonal
fluctuations may emerge as the market matures. Due to all of the foregoing
factors, it is possible that in some future quarters the Company's results of
operations may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock
would likely be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Quarterly Results of Operations."

Dependence on Advertising Revenue and Cancelable Advertising
Contracts. Since the launch of the PointCast Network, the Company has
primarily derived its revenues from the sale of advertisements. In 1997 and
the first quarter of 1998, advertising revenue represented 87% and 96%,
respectively, of the Company's total revenue. The Company expects that
advertising revenue will account for substantially all of its revenue for the
foreseeable future. The Company's ability to increase its advertising revenue
and inventory of advertisements is a function of several factors, including
the ability of the Company to retain and increase the number of active viewers
of the PointCast Network, the amount of usage of the PointCast Network by such
viewers and the level of advertising rates charged. Advertising revenues are
recognized in the period the advertisement is displayed, provided no
significant Company obligations remain and collection of the resulting
receivable is probable. Company obligations typically include guarantees of a
minimum number of "billable deliveries," a measurement of the number of times
an advertisement is delivered to viewers of the PointCast Network. To the

extent billable delivery guarantees are met, the Company recognizes revenue
and invoices the advertiser for the billable deliveries provided or, if an
amount has been invoiced in excess of the billable deliveries provided, the
Company defers recognition of the corresponding revenue until minimum billable
delivery guarantees are satisfied. In addition, the Company may be committed
to "make good" or provide additional billable deliveries, which may adversely
affect the availability of advertising inventory. The Company's expense levels
are based in part on its expectations concerning future revenue and to a large
extent are fixed. Quarterly revenues and operating results depend
substantially upon the advertising revenues received within the quarter, which
are difficult to forecast accurately. Accordingly, the cancellation or
deferral of a small number of advertising contracts could have a material
adverse effect on the Company's business, results of operations or financial
condition.

Advertisements delivered by the Company are typically sold pursuant to
purchase order agreements which can be cancelled by the customer at any time
on two weeks notice. Consequently, the Company's advertising customers may
change or cancel their advertising expenditures, move their advertising to
competing Internet sites, or from the Internet to traditional media, quickly
and with minimal penalty, thereby increasing the Company's exposure to
competitive pressures and fluctuations in revenue and operating results. In
selling Internet advertising, the Company also depends to a significant extent
on advertising agencies, which exercise substantial control over the placement
of advertisements for the Company's existing and potential advertising
customers. There can be no assurance that current advertisers will continue to
purchase advertising from the Company or that the Company will be able to
attract additional advertisers. If the Company loses advertising customers,
fails to attract new customers or is forced to reduce advertising rates in
order to retain or attract customers, the Company's business, financial
condition and results of operations will be materially adversely affected. See
"Business--Advertising on the PointCast Network."

The Company received 8% and 11% of its total advertising revenue from
TransCosmos Incorporated ("TransCosmos") in the three months ended December
31, 1997 and March 31, 1998, respectively. TransCosmos is the holder of
approximately 2% of the Company's outstanding capital stock (prior to this
offering). The Company expects advertising revenue from TransCosmos to account
for less than 10% of the Company's total advertising revenue for fiscal 1998.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

Developing Internet Advertising Market; Unproven Acceptance and
Effectiveness of Internet Advertising. The market for Internet advertising has
only recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants. As is typical in the case of a new and
rapidly evolving industry, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty.
Since the Company expects to derive substantially all of its revenues in the
foreseeable future from Internet advertising, the future success of the
Company is highly dependent on the increased use of the Internet as an
advertising medium. The Internet as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as
compared with traditional advertising media. Most of the Company's current or
potential advertising customers have limited or no experience using the
Internet as an advertising medium, have not devoted a significant portion of
their advertising expenditures to Internet advertising and may not find
Internet advertising to be effective for promoting their products and services
relative to advertising on traditional media. Also, certain advertising filter
software programs are available that limit or remove advertising from an
Internet user's desktop. Such software, if generally adopted by viewers, may
have a material adverse effect upon the viability of advertising on the
Internet. In addition, the Company's advertising model is based in substantial
part on the Company's ability to attract advertisers who have historically
relied upon traditional media for advertising. This will require such
advertisers to accept the Internet as a viable advertising medium. There can
be no assurance that the market for Internet advertising will continue to
emerge or become sustainable. If the market fails to develop or develops more
slowly than expected, or if advertisers who rely on traditional media do not
accept the Internet as an advertising medium, the Company's business, results
of operations and financial condition would be materially and adversely
affected.

A majority of the advertisements placed on the Internet today are banner
advertisements. The Company's advertising model and future revenue, are based
in substantial part on its advertising customers' use of highly

interactive, animated advertisements sometimes called intermercials or
commercials. The cost per advertisement is substantially higher for an
intermercial than a banner advertisement and intermercials are substantially
more expensive and time consuming to create. There can be no assurance that
the Company's advertising customers will consider the Company's commercials to
be more effective than other less expensive forms of Internet advertisements,
such as banners, or that the Company's advertising customers will be willing
to spend the time and money to create such advertisements. The failure to
achieve widespread acceptance of the intermercial could result in flat or
reduced advertising revenue, which would have a material adverse effect on the
Company's business, financial condition and results of operations.

There are no widely accepted standards for the measurement of the
effectiveness of Internet advertising, and there can be no assurance that such
standards will develop sufficiently to support Internet advertising as a
significant advertising medium. In addition, there also can be no assurance
that advertisers will accept the Company's or other third-party measurements
of the effectiveness of the Company's advertisements or that such measurements
will not contain errors. In addition, the effectiveness of Internet
advertising is dependent upon the accuracy of information contained in the
databases used to target advertisements to particular viewers. Like any
database, there can be no assurance that the information in the Company's
database will be accurate or that advertisers will be willing to have
advertisements targeted by any database containing such potential
inaccuracies.

Acceptance of Corporate-Wide Deployment of the PointCast Network. The
Company's PointCast Network broadcasts news and information to viewers
primarily in the work environment. Some companies have prohibited their
employees from using the PointCast Network because of the adverse impact that
large numbers of PointCast Network viewers within those companies have had on
local area network performance. The Company has addressed and continues to
address the system performance and reliability issues of the PointCast Network
through the release of improvements and enhancements to the PointCast Network
Client. However, there can be no assurance that such enhancements or
improvements will not prevent companies from prohibiting the use of the
PointCast Network by their employees, which would have a material adverse
effect on the Company's business, financial condition and operating results.
See "--Need to Improve Performance and Stability of the PointCast Network
Client; New Product Development and Technological Change."

The Company believes that corporate-wide adoption of the PointCast Network
is a key element in the Company's strategy to increase its viewer base. In
order to implement this strategy, the Company must obtain the support of
corporate information technology departments, corporate librarians, corporate
communications departments, as well as company management that the deployment
of the PointCast Network within company local area networks is a useful
addition to the corporate intranet and not as a distraction to their
employees. There can be no assurance that the Company will be able to do so.
The Company recently began delivery of its Intranet Broadcast Solution in
January 1998, which is designed to both alleviate network congestion problems
that may be caused by the PointCast Network and to allow managers of corporate
intranets to broadcast content tailored to employees and thereby reduce
resistance to PointCast Network deployment. There can be no assurance,
however, that such tools will work as planned or that the Company will be able
to convince the various corporate constituencies to use the tools or to adopt
the PointCast Network as an intranet broadcast system. If the Company fails to
convince company management and the other corporate constituencies to support
the PointCast Network, the Company's business, financial condition and results
of operations could be materially adversely affected. See "Business--
Strategy."

Intense Competition. The market for Internet content and information
services and Internet advertising is new and rapidly evolving, and competition
for viewers and advertisers is intense and is expected to increase
significantly in the future. The Company competes for viewers with many other
Internet content and service providers, including Web directories, search
engines, shareware archives, sites that offer original editorial content,
commercial online services and sites maintained by Internet service providers,
as well as thousands of Internet sites operated by individuals and government
and educational institutions. These competitors include subscription services
such as Bloomberg L.P. ("Bloomberg"), Dow Jones & Company Inc. ("Dow Jones
Telerate"), NewsEdge Corporation ("NewsEdge"), Reuters America Holdings, Inc.
("Reuters Limited"),

The Wall Street Journal Interactive and other business-oriented internet
sites, as well as free information, search and content sites or services, such
as America Online, Inc. ("AOL"), CNet, Inc. ("CNet"), CNN/Time Warner,
Inc.("CNN/TimeWarner"), Excite, Inc., Infoseek Corporation ("Infoseek"),
Lycos, Inc. ("Lycos"), Netscape Communications Corporation ("Netscape") and
Yahoo! Inc. ("Yahoo!"), some of whom, such as CNN/Time Warner, Inc., may also
provide content to the PointCast Network. The Company believes that the
principal competitive factors in attracting Internet viewers include the
quality of presentation, the PointCast Network Client performance and the
relevance, timeliness, depth and breadth of information and services offered
by the Company. The Company also competes with many companies for advertisers,
including those companies with whom the Company competes for viewers as well
as traditional forms of media such as newspapers, magazines, radio and
television. The Company believes that the principal competitive factors in
attracting advertisers include the number of viewers of the PointCast Network,
the demographics of the Company's viewers, the Company's ability to deliver
focused advertising through the PointCast Network and the overall cost-
effectiveness and value of advertising offered by the Company. The Company
also believes that companies with access to large installed bases of end users
through the telecommunications infrastructure are potential competitors of the
PointCast Network. Such potential competitors could include regional Bell
operating companies, cable television companies, long-distance telephone
service providers and large content publishers.

The Company currently has an agreement with Microsoft Corporation
("Microsoft") pursuant to which Microsoft includes the PointCast Network on
its Active Desktop product. This agreement is scheduled to expire in September
1998. Currently, the Company is not receiving a significant number of new
viewer registrations as a result of this agreement and the Company does not
expect Microsoft to renew the agreement. Although the Company is not aware of
any plan by Microsoft to develop any directly competing product or service,
Microsoft has a vastly greater installed user base and vastly greater
financial, research and development, marketing, sales and distribution
resources than the Company. The announcement or introduction by Microsoft of a
directly competitive product could have an immediate, material adverse affect
on the Company's business, financial condition and operating results. There is
no provision in the Company's agreement with Microsoft which would prohibit
Microsoft from competing with the Company.

The Company expects competition to persist and intensify and the number of
competitors to increase significantly in the future. Many of the Company's
current competitors have significantly greater financial, editorial, technical
and marketing resources, longer operating histories, greater name recognition
and more established relationships with advertisers and advertising agencies
than the Company. Such competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies and devote
substantially more resources to attract viewers and advertisers than the
Company. In addition, although the Company believes that it currently collects
more data regarding its viewer profiles than its competitors, other companies
are currently collecting, or have announced their intention to collect, more
detailed viewer profile information. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not
materially adversely affect the Company's business, financial condition and
operating results. See "Business--Competition."

Dependence on Intellectual Property Rights; Risks of Infringement; Potential
Patent Claims. The Company regards its intellectual property as critical to
its success, and the Company relies on patent, trademark, copyright and trade
secret laws in the United States and other jurisdictions to protect its
proprietary rights. The Company has been issued one patent, has filed nine
patent applications with the United States Patent and Trademark Office and has
filed one patent application in three foreign jurisdictions to protect certain
aspects of its technology. The Company pursues the protection of its
trademarks by applying to register the trademarks in the United States and
(based upon anticipated use) internationally, and is the owner of a
registration for the PointCast trademark. There can be no assurance that any
of the Company's pending or future patent or trademark applications will be
granted or approved. In addition, there can be no assurance that the Company's
current patent and trademarks or any future patents or trademarks will not be
successfully challenged by others or invalidated or narrowed through the
administrative process or litigation. Patent, trademark, copyright and trade
secret protection may not be available or enforceable in every country in
which the Company's products are distributed

or made available. In addition, the Company seeks to protect its proprietary
rights through the use of confidentiality agreements with employees,
consultants, advisors and others. There can be no assurance that such
agreements will provide adequate protection for the Company's proprietary
rights in the event of any unauthorized use or disclosure, that employees of
the Company, consultants, advisors or others will maintain the confidentiality
of such proprietary information or that such proprietary information will not
otherwise become known, or be independently developed, by competitors or
others.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of the Company or other companies
within the industry. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or that third
parties will not infringe or misappropriate the Company's proprietary rights.
Policing unauthorized use of the Company's proprietary technology and other
intellectual property rights could entail significant expenses and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford the Company little or
no effective protection of its intellectual property. Any such infringement or
misappropriation, should it occur, could have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, there can be no assurance that third parties will not bring claims
of patent, copyright or trademark infringement or claims of trade secret
misappropriation against the Company. The Company anticipates an increase in
patent infringement claims involving Internet-related technologies as the
number of products and competitors in this market grows and as related patents
are issued. Any claims of infringement or misappropriation, with or without
merit, could be time consuming to defend, result in costly litigation, divert
the Company's resources, require the Company to enter into costly royalty or
licensing arrangements, if available, or prevent the Company from using
important technologies or methods, any of which could have a material adverse
effect on the Company's business, financial condition or operating results.
There can be no assurance that the Company would be able to enter into
arrangements with such third parties on commercially reasonable terms allowing
the Company to continue to use such patented technology or trademarks.

From time to time, the Company receives notices that its products and
services may infringe the intellectual property rights of others. In 1995,
Unisys Corporation ("Unisys") announced its intention to require the payment
of royalties for the use of compression technology associated with the popular
Graphics Interchange Format ("GIF"). In March 1998 the Company received a
letter from Unisys stating that it holds a patent (the "Welch" patent) on
certain data compression/decompression technology that it claims is applicable
to the graphics incorporated in GIF file format in certain of the content and
advertising delivered on the PointCast Network. The Company is currently
reviewing the matter with its patent counsel in order to determine the scope
of the claims in the Welch patent and to determine its response to Unisys'
request that the Company license the Welch patent. The Company could incur
additional expense and liability if the Company enters into a license with
Unisys under the Welch patent or if the Company becomes involved in litigation
with Unisys relating to the Welch patent. There is no assurance the Company
would prevail in such litigation. If the Company's incorporation of GIF files
in the content and advertising distributed on the PointCast Network is found
to be within the scope of the Welch patent, the Company could incur liability
and related expense resulting from such infringement. The assertion of these
patent rights by Unisys, if successful, could result in additional expense to
the Company should it decide to utilize a different graphics file format for
the content and advertising distributed on the PointCast Network. There can be
no assurance that the Company's products or services are not subject to the
Welch patent.

In March 1997, the Company received a letter from Wang Corporation ("Wang"),
stating that Wang was interested in licensing a portion of its patent
portfolio to PointCast or other interested parties involved in Internet-
related technology. The Company reviewed the proffered patents with its patent
counsel and has informed Wang that the Company is not interested in pursuing a
purchase or license agreement at this time. Wang filed a lawsuit alleging
patent infringement regarding some or all of the profferred patents against
Netscape and AOL. In May 1998, this lawsuit was dismissed on summary judgment.
There can be no assurance that Wang's lawsuit against

Netscape and AOL will not be reinstated on appeal, or that Wang will not
assert claims against the Company, notwithstanding the Company's belief that
its products do not infringe the profferred Wang patents.

In April 1997 the Company received a letter from Charles Hill & Associates
stating that the operation of the PointCast Network infringes one or more
claims of a patent which relates to updating an electronic product catalog
across a network. After reviewing the patent, the Company's patent counsel
concluded that the PointCast Network does not infringe any of the claims of
the patent.

There can be no assurance that infringement claims, or claims for
indemnification resulting from infringement claims, based upon the foregoing
or upon future claims will not be asserted or prosecuted against the Company
or that any such assertions or prosecutions will not materially adversely
affect the Company's business, financial condition or results of operations.
Irrespective of the validity or the successful assertion of such claims, the
Company would incur significant costs and diversion of resources with respect
to the defense thereof which could have a material adverse effect on the
Company's business, financial condition or results of operations. If any
claims or actions are asserted against the Company, the Company may seek to
obtain a license under a third-party's intellectual property rights. There can
be no assurance, however, that under such circumstances, a license would be
available on commercially reasonable terms or at all. See "Business--
Intellectual Property."

Need to Continue to Obtain Compelling Content; Reliance on Third-Party
Content Providers. The Company's future success depends in part upon the
Company's ability to deliver original and compelling content through the
PointCast Network to attract viewers with demographic characteristics valuable
to the Company's advertising customers. There can be no assurance that the
Company's existing and future content sources will continue to provide
content, that such content will be original and compelling, that such sources
will not seek to charge the Company a significant fee for the supply of such
content, that they will not enter into similar arrangements with or provide
similar content to the Company's competitors, that they will continue their
relationship with the Company, or that they will not establish their own
services to compete against the Company for advertising revenue. Termination
of one or more of the Company's current significant content provider
agreements would decrease the availability of information which the Company
can offer its customers and could have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, if the Company's costs with respect to obtaining such content
significantly increase, the Company's business, results of operations and
financial condition could be materially adversely affected. The Company relies
on certain of its content providers and business partners to develop and
provide industry-specific content for one or more PointCast Industry Insider
channels. The agreements with such content providers and business partners
generally have a one to two year term. Termination or nonrenewal of one or
more of the Company's agreements with these parties could result in suspension
of one or more of the Company vertical market channels, loss of content and
termination of running advertising units on such channel, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The content on certain of the Company's broadcast
channels is currently controlled by the Company's sponsors for those channels.
Therefore, in certain cases the Company has no contractual relationship with
the actual content providers. If the agreements between the Company's sponsors
and the content providers are inadequate, or the relationship between the
sponsor and the content provider is terminated, supply to such content could
be terminated and the Company's business, financial condition and results of
operations could be materially adversely affected. See "Business--The
PointCast Network Offerings."

Risk of System Failure. The continuing and uninterrupted performance of the
PointCast Network is critical to the success of the Company's business. Any
system failure that causes interruptions in the Company's ability to broadcast
to its viewers, including failures that affect the ability of the Company to
deliver advertisements without significant delay to the viewer, could reduce
viewer satisfaction and, if sustained or repeated, would reduce the
attractiveness of the PointCast Network to advertisers and viewers, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. If there is a sudden increase in
viewership that exceeds the PointCast Network's capacity, there will be a
degradation in system

performance. There are also many other risks attendant to the PointCast
Network, including, without limitation, network shutdowns and outages, whether
caused by natural disaster, human interference or mistake, unannounced or
unexpected changes in transmission protocols or other technology or content
format changes by content providers. The Company and its Internet access
providers on occasion have had network outages and it is reasonable to expect
that additional such outages will occur in the future. Pursuant to an agreement
with Electronic Data Systems Corporation ("EDS"), EDS maintains a back-up
facility in Plano, Texas, which replicates a portion of the functionality of
the Central Broadcast Facility. There can be no assurance, however, that
simultaneous outages would not occur at both the Sunnyvale and Plano
facilities. Currently, there is no automated method to monitor the Company's
servers. If one or more of the Company's servers were to experience errors in
transmission, shutdowns or outages and such errors, shutdowns or outages were
not detected in a timely manner, the Company's ability to broadcast content
updates to is viewers could be materially adversely affected.

In addition, third-party content from PointCast's various content providers
flows into the Company's Central Broadcast Facility via satellite, the Internet
and leased lines, with secondary delivery methods in place as back-up for the
most important data sources, where it is reconfigured and sent out to the
Company's viewers for periodic updates. Currently, other than the most
important data sources, the Company has no backup capability with respect to
the collection of third-party content and does not expect to have fully
operational backup capability until the first quarter of 1999, if ever. If the
Central Broadcast Facility were to experience a shutdown or outage, the Company
would be unable to feed content updates to its viewers, which, if sustained or
repeated, could result in the loss of viewers and reduce the attractiveness of
the PointCast Network to advertisers, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Central Broadcast Facility and Technology."

Risks Associated with International Expansion. In August 1997, the Company
launched its PointCast Network in Japan. A key component of the Company's
strategy is to continue to expand its international operations and
international sales and marketing efforts. The Company is still in the early
stages of launching its PointCast Network in Japan. The Company needs to
continue to develop third-party relationships with content providers,
advertisers and distributors in Japan and other countries in order for its
international expansion efforts to be successful. To date, the Company has
limited experience in developing localized versions of its PointCast Network
and in marketing, selling and distributing its PointCast Network
internationally. There can be no assurance that the Company will be able to
successfully market, sell and deliver its products in these markets. In Japan,
the Company is relying on its business partner for conducting operations,
establishing local networks and coordinating sales and marketing efforts and
the Company expects to enter into similar partnering arrangements for other
international markets. The Company's success in such markets will be directly
dependent on the success of its business partners in such activities. No
assurance can be given that such business partners will be successful or that
such business partners will dedicate sufficient resources to the business
relationship. The failure of the Company's business partners to successfully
establish operations and sales and marketing efforts in such markets could have
a material adverse effect on the Company's business, financial condition and
results of operations.

In addition, there are certain material risks inherent in doing business in
international markets, such as unexpected changes in regulatory requirements,
export restrictions, export controls relating to encryption technology, tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, political instability, fluctuations in
currency exchange rates and potentially adverse tax consequences, which could
adversely impact the success of the Company's international operations.
Furthermore, the telecommunications infrastructure in much of the rest of the
world is undeveloped and therefore typically has less bandwidth, higher cost
and poor reliability, which could significantly hamper the Company's efforts to
distribute the PointCast Network abroad, any of which could have a material
adverse effect on the success of the Company's international operations and,
consequently, on the Company's business, financial condition and results of
operations.

Management of Growth; Dependence on and Need to Recruit and Retain Key
Management and Technical Personnel; Recent Additions to Senior Management. The
Company has experienced rapid growth in its

operations and the Company anticipates that significant growth of its
operations may continue for the foreseeable future. This rapid growth has
placed, and is expected to continue to place, a strain on the Company's
management and its operational and financial resources. The Company has grown
from 57 employees as of January 1, 1996 to 267 employees as of March 31, 1998.
In 1997, the Company added a number of key managerial and technical employees
including a new Chief Executive Officer and a new Chief Financial Officer. In
addition, the Company recently experienced a transition in senior management
of its advertising sales organization. In addition, improving the PointCast
Network Client's performance is critical to the success of the Company and the
Company is currently seeking to hire a Senior Vice President of Engineering.
Competition for such personnel is intense and there can be no assurance the
Company will be able to hire such personnel on a timely basis. In order to
effectively manage the Company, these new members of senior management must be
integrated into the Company. The increase in the number of employees and the
Company's product development activities have resulted in increased
responsibility for the Company's management. In order to manage the expected
growth of its operations, the Company will be required to implement and
improve its operational and financial systems, procedures and controls,
including the improvement of its accounting and other internal management
systems, on a timely basis, and to train, manage and expand its already
growing employee base. There can be no assurance that the Company's systems,
procedures or controls will be adequate to support the Company's expanding
operations or that Company management will be able to achieve the rapid
execution necessary to successfully implement its business plan. The failure
of the Company to manage its growth effectively would have a material adverse
effect on the Company's business, financial condition and results of
operations.

The Company's future success depends, in significant part, upon the
continued service of its key technical, sales and senior management personnel.
The loss of the services of one or more of the Company's key personnel,
including David Dorman, the Company's Chairman, President and Chief Executive
Officer, could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's future success
also depends on its continuing ability to attract and retain highly qualified
technical, sales and marketing, customer support, financial and accounting and
managerial personnel. Competition for such personnel in the Internet industry
is intense, and there can be no assurance that the Company will be able to
retain its key personnel or that it can attract, assimilate or retain other
highly qualified personnel in the future. The Company has in the past
experienced, and expects to continue to experience in the future, difficulty
in hiring and retaining candidates with appropriate qualifications. The
failure by the Company to successfully hire and retain candidates with
appropriate qualifications could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Employees" and "Management."

Dependence on the Internet Infrastructure. The Company's success will
depend, in large part, upon the maintenance of the Internet infrastructure,
such as a reliable network backbone with the necessary speed, data capacity
and security, and timely development of enabling products such as high speed
modems, for providing reliable Internet access and services. To the extent
that the Internet continues to experience increased numbers of users,
frequency of use or increased bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it or that the performance or reliability of the
Internet will not be adversely affected. Furthermore, the Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and such outages and delays, including outages
and delays resulting from the inability of certain computers or software to
distinguish dates in the 21st century from dates in the 20th century, could
materially adversely affect the Company's ability to broadcast the PointCast
Network. In addition, the Internet could lose its viability as a form of media
due to delays in the development or adoption of new standards and protocols
(for example, the next generation Internet Protocol) that can handle increased
levels of activity. There can be no assurance that the infrastructure or
complementary products or services necessary to establish and maintain the
Internet as a viable commercial medium will be developed, or, if they are
developed, that the Internet will become a viable commercial medium for
advertisers. If the necessary infrastructure, standards or protocols, or
complementary products, services or facilities are not developed, or if the
Internet does not become a viable commercial medium, the Company's business,
financial condition and results of operations will be materially and adversely
affected. Even if such infrastructure, standards or protocols,

or complementary products, services or facilities are developed, there can be
no assurance that the Company will not be required to incur substantial
expenditures in order to adapt its solutions to changing or emerging
technologies, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, critical
issues concerning the commercial use and government regulation of the Internet
(including security, cost, ease of use and access, intellectual property
ownership and other legal liability issues) remain unresolved and could
materially and adversely impact both the growth of the Internet and the
Company's business, financial condition and results of operations. See "--
Potential Litigation/Liability Related to Year 2000 Compliance."

Security Risks. The Company has experienced attempts by experienced
programmers or "hackers" to penetrate the Company's network security, and
believes it is reasonable to expect that they will continue to do so. If
successful, such actions could have a material adverse effect on the Company's
business, financial condition and results of operations. A party who is able to
penetrate the Company's network security could misappropriate proprietary
information or cause interruptions in the Company's Internet operations. The
Company may be required to expend significant capital and resources to protect
against the threat of such security breaches or to alleviate problems caused by
such breaches. Concerns over the security of Internet transactions and the
privacy of users, as well as concerns related to computer viruses, may also
inhibit the growth of the Internet generally, particularly as a means of
conducting commercial transactions. Security breaches or the inadvertent
transmission of computer viruses could expose the Company to a risk of loss or
litigation and possible liability. There can be no assurance that contractual
provisions attempting to limit the Company's liability in such areas will be
successful or enforceable, or that other parties will accept such contractual
provisions as part of the Company's agreements. See "Business--Central
Broadcast Facility and Technology."

Liability for Internet Content. The Company faces possible liability for
defamation, negligence, copyright, patent or trademark infringement and other
claims, such as product or service liability, based on the nature and content
of the materials that it distributes. Such claims have been brought, and
sometimes successfully pressed, against online services. The law in these areas
is highly unclear and, accordingly, the Company has no ability to predict the
possible existence or extent of its liability in this area or related areas. In
addition, the Company could be subject to liability with respect to content
that may be accessible through the Company's Web sites or third-party Web sites
linked from the PointCast Network. The Company currently does not carry
insurance that covers liability for content. Any costs or imposition of
liability that is not covered by insurance could have a material adverse effect
on the Company's business, financial condition or results of operations.

Potential Litigation/Liability Related to Year 2000 Compliance. The "Year
2000" issue arises from computer programs that use two digits rather than four
to define the applicable year. Such computer programs may cause computer
systems to recognize a date using "00" as the calendar year 1900 rather than
the calendar year 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail. The Company believes
all of its products are Year 2000 compliant. There is no assurance, however,
that the Company's financial systems software or its PointCast Network Client
do not contain undetected errors or defects associated with Year 2000 date
functions, which could cause a disruption of the Company's accounting systems
or ability to provide its PointCast Network, which could result in a loss of
revenue, diversion of development resources or damage to the Company's
reputation, any of which could materially adversely affect the Company's
business, financial condition, or results of operations. Some commentators have
predicted significant litigation regarding Year 2000 compliance issues. Because
of the unprecedented nature of such litigation, it is uncertain whether or to
what extent the Company may be affected by it. Although the Company currently
believes that this issue will not pose significant operational problems, delays
in the modification or conversion of its systems, or the failure to fully
identify all Year 2000 dependencies in the Company's systems could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company cannot be sure that systems of
other companies on which the Company's systems rely will be converted in a
timely manner. The Company relies on third-party systems to facilitate
broadcast from the Central Broadcast Facility to its clients. The disruption of
a broadcast to its clients could prevent the Company from obtaining the minimum
"billable deliveries" required by its advertisers and

could therefore have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company relies
on the integration of many systems in aggregating the content from multiple
sources. The failure of any of those systems as a result of Year 2000
compliance issues could prevent the Company from delivering the content, which
could have a material adverse effect on the Company's retention and
acquisition of viewers, resulting in a material adverse effect on the
Company's ability to sell advertising and meet its billable delivery
requirements under its advertising contracts. The failure of other companies
to successfully address Year 2000 issues in the systems on which the Company's
systems rely, may have a material adverse effect on the Company's business,
financial condition and results of operations.

Government Regulation and Legal Uncertainties. Due to concerns arising in
connection with the increasing popularity and use of the Internet, a number of
laws and regulations may be adopted covering issues such as user privacy,
pricing, acceptable content, taxation and quality of products and services.
Such legislation could dampen the growth in use of the Internet generally and
decrease the acceptance of the Internet as a communications and commercial
medium, which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, because the
growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure and many areas with high Internet use have
begun to experience interruptions in phone service, certain local telephone
carriers have petitioned governmental bodies to regulate Internet service
providers ("ISPs") and online service providers ("OSPs") in a manner similar
to long distance telephone carriers and to impose access fees on ISPs and
OSPs. If any of these petitions or the relief sought therein is granted, the
costs of communicating on the Internet would increase substantially,
potentially adversely affecting the growth in use of the Internet. Further,
due to the global nature of the Internet, it is possible that, although
transmissions relating to the Company's solutions originate in the State of
California, the governments of other states or foreign countries might attempt
to regulate the Company's transmissions or levy sales or other taxes relating
to the Company's activities. There can be no assurance that violations of
local laws will not be alleged or charged by state or foreign governments,
that the Company might not unintentionally violate such laws or that such laws
will not be modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on the Company's business,
results of operations and financial condition.

Lack of Public Market; Offering Price; Possible Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will develop
or be sustained after this offering. The price of the Common Stock to be
offered hereby will be determined through negotiations between the Company and
the representatives of the Underwriters and may not reflect the market price
of the Common Stock after this offering. The market price of the Common Stock
could be subject to wide fluctuations in response to quarterly variations in
the Company's results of operations, changes in earnings estimates by research
analysts, conditions in the personal computer industry or general market or
economic conditions. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations. These fluctuations have had
a substantial effect on the market prices for many technology companies, often
unrelated to the operating performance of the specific companies. Such market
fluctuations could materially adversely affect the market price for the
Company's Common Stock. See "Underwriting."

Concentration of Stock Ownership. Upon completion of this offering, the
present directors, executive officers and their respective affiliates will
beneficially own approximately 60% of the outstanding Common Stock assuming no
exercise of the Underwriters' over-allotment option and 58% of the outstanding
Common Stock assuming full exercise of the Underwriters' over-allotment
option. As a result, these stockholders will be able to exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying or preventing
a change in control of the Company. See "Principal Stockholders" and
"Description of Capital Stock--Anti-takeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and Delaware Law."

Shares Eligible for Future Sale. Following the completion of this offering,
21,337,112 shares of Common Stock will be outstanding. The 3,750,000 shares of
Common Stock offered hereby will be tradeable in the public

market without restriction, unless purchased by an affiliate of the Company.
The remaining 17,587,112 shares of outstanding Common Stock will be
"restricted securities" within the meaning of Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"), which may not be sold other
than pursuant to an effective registration statement or pursuant to an
exemption from such registration requirement, including the exemption
available pursuant to Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"). Other than the shares offered hereby (i) no shares
will be eligible for sale prior to 180 days after the date of this Prospectus,
except in certain limited exceptions, without the prior written consent of
Lehman Brothers Inc., (ii) 16,846,945 shares will be eligible for sale 180
days after the date of this Prospectus upon the expiration of lock-up
agreements with the Underwriters and (iii) an additional 740,167 shares will
become eligible for sale thereafter pursuant to Rule 144 under the Securities
Act. As of March 31, 1998 there were outstanding options and warrants to
purchase 5,656,530 shares of Common Stock of which holders of options and
warrants exercisable for 5,649,653 shares have also agreed not to sell shares
of Common Stock issued upon exercise of such options and warrants for a period
of 180 days after the date of this Prospectus, without the prior written
consent of Lehman Brothers Inc. Sales of a substantial number of shares of
Common Stock in the public market subsequent to this offering, or the
perception that such sales could occur, could materially adversely affect the
prevailing market price of the Common Stock and could materially adversely
affect the Company's ability to raise capital. The Company has agreed not to
issue any securities or file a registration statement under the Securities
Act, subject to certain exceptions, for a period of 180 days following the
date of this Prospectus without the prior written consent of Lehman Brothers
Inc. See "Shares Eligible for Future Sale" and "Underwriting." See
"Description of Capital Stock--Registration Rights" for a description of the
rights of certain persons to cause the Company to register shares of Common
Stock for offer and sale to the public.

Possible Issuance of Preferred Stock; Anti-Takeover Effects of Certain
Charter, Bylaws and Delaware Law Provisions. Following the closing of the
offering, the Company's Board of Directors will have the authority to issue up
to 5,000,000 shares of preferred stock without any further vote or action by
the stockholders, and to determine the price, rights, preferences, privileges
and restrictions, including voting rights of such shares. Since the preferred
stock could be issued with voting, liquidation, dividend and other rights
superior to those of the Common Stock, the rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any such preferred stock. The issuance of preferred stock could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. Further, certain
provisions of the Company's Restated Certificate of Incorporation and certain
provisions of the Company's Bylaws and of Delaware law could have the effect
of delaying or preventing a change in control of the Company. See "Description
of Securities--Certain Charter Provisions and Anti-Takeover Effects of
Delaware Law."

Immediate and Substantial Dilution. Purchasers of shares of Common Stock in
this offering will experience immediate and substantial dilution in the net
tangible book value per share of their investment of approximately $8.58 per
share. See "Dilution."

USE OF PROCEEDS

The net proceeds to the Company from the 3,750,000 sale of the shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share are estimated to be $37.5 million ($43.3 million if the over-
allotment option is exercised in full) after deducting underwriting discounts
and commissions and estimated offering expenses.

The Company intends to use the net proceeds from this offering for general
corporate purposes, including working capital and capital expenditures, and
for the expansion of its sales capabilities and marketing efforts. In
addition, the Company may use a portion of the net proceeds of the offering to
acquire or invest in complementary businesses, technologies, services or
products, although there are no current agreements or negotiations with
respect to any such acquisitions, investments or other transactions.

Pending such uses, the net proceeds will be invested in short-term,
interest-bearing investment grade obligations.

DIVIDEND POLICY

The Company does not anticipate declaring or paying any cash dividends in
the foreseeable future. In addition, certain provisions of the Company's line
of credit place certain restrictions on the Company's ability to pay
dividends.

CAPITALIZATION

The following table sets forth (i) the actual capitalization of the Company
as of March 31, 1998, (ii) the pro forma capitalization of the Company as of
such date, after giving effect to the conversion of all outstanding shares of
Preferred Stock into 11,775,560 shares of Common Stock, the conversion of
warrants to purchase Preferred Stock into warrants to purchase Common Stock
and the increase in the number of authorized shares of Common Stock and
Preferred Stock effected as part of the Company's planned reincorporation, and
(iii) the pro forma capitalization of the Company as of March 31, 1998 as
adjusted to reflect the sale of 3,750,000 shares of Common Stock offered by
the Company hereby at an estimated initial public offering price of $11.00 per
share (after deduction of the underwriting discount and estimated expenses of
the offering).

MARCH 31, 1998
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------

Current portion of notes payable (1). $ 2,895,000 $ 2,895,000 $ 2,895,000
Long-term portion of notes payable
(1)................................. 2,044,000 2,044,000 2,044,000
------------ ------------ ------------
4,939,000 4,939,000 4,939,000
------------ ------------ ------------
Mandatorily redeemable convertible
preferred stock, $0.001 par value;
13,000,000 designated, 11,775,560
issued and outstanding, actual; no
shares designated issued and
outstanding, pro forma and pro forma
as adjusted......................... 69,240,000 -- --
Mandatorily redeemable convertible
preferred stock warrants (2)........ 3,000,000 -- --
------------ ------------ ------------
72,240,000 -- --
------------ ------------ ------------
STOCKHOLDERS' (DEFICIT) EQUITY
Preferred stock, $0.001 par value;
13,466,667 authorized; 13,000,000
designated, actual; 5,000,000
authorized, no shares designated,
issued or outstanding, pro forma and
pro forma as adjusted............... -- -- --
Common stock, $0.001 par value;
33,333,334 authorized 5,811,552
issued and outstanding, actual;
100,000,000 authorized, 17,587,112
issued and outstanding, pro forma;
100,000,000 authorized, 21,337,112,
issued and outstanding, pro forma as
adjusted (3)........................ 6,000 18,000 21,000
Additional paid-in capital........... 2,384,000 74,612,000 112,122,000
Accumulated deficit.................. (56,786,000) (56,786,000) (56,786,000)
Other, primarily deferred stock
compensation........................ (3,723,000) (3,723,000) (3,723,000)
------------ ------------ ------------
Total stockholders' (deficit) equity. (58,119,000) 14,121,000 51,634,000
------------ ------------ ------------
Total capitalization................. $ 19,060,000 $ 19,060,000 $ 56,573,000
============ ============ ============

- --------
(1) See Note 4 of Notes to the Consolidated Financial Statements.
(2) Represents warrants to purchase 701,756 shares of the Company's Common
Stock. See Note 6 of Notes to Consolidated Financial Statements.
(3) As of March 31, 1998. Excludes: (i) 936,370 shares of the Company's Common
Stock reserved for issuance pursuant to warrants at a weighted average
exercise price of $12.41 per share, (ii) 4,720,160 shares subject to
outstanding options at March 31, 1998 and (iii) 2,927,018 shares reserved
for issuance under the Company's 1994 Stock Plan, 1998 Employee Stock
Purchase Plan and 1998 Director Option Plan. Subsequent to March 31, 1998,
options to purchase 471,846 shares were exercised at weighted average
exercise price of $1.69 per share and the Company granted additional
options to purchase an aggregate of 746,094 shares of Common Stock under
the 1994 Stock Plan at a weighted average exercise price of $7.66 per
share. See "Management--Stock Plans," "Certain Transactions," "Description
of Capital Stock" and Notes 6, 8 and 11 of Notes to Consolidated Financial
Statements.

DILUTION

The pro forma tangible book value of the Company as of March 31, 1998, after
giving effect to the assumed conversion of all outstanding shares of Preferred
Stock into 11,775,560 shares of Common Stock and the conversion of warrants to
purchase Preferred Stock into warrants to purchase Common Stock was
approximately $14,121,000 or $0.80 per share. "Pro forma net tangible book
value" represents the amount of total tangible assets of the Company reduced
by the amount of its total liabilities divided by the total number of shares
of Common Stock outstanding. After giving effect to the sale of 3,750,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $11.00 per share, the adjusted pro forma net tangible
book value of the Company as of March 31, 1998 would have been $51,634,000 or
$2.42 per share. This represents an immediate increase in the pro forma net
tangible book value of $1.62 per share to existing stockholders, including
holders of Mandatorily Redeemable Convertible Preferred Stock and an immediate
dilution of $8.58 per share to new investors. The following table illustrates
the per share dilution in pro forma net tangible book value to new investors:

Initial public offering price per share...................... $11.00
Pro forma net tangible book value per share before the
offering................................................... $ 0.80
Increase per share attributable to new investors............ 1.62
------
Adjusted pro forma net tangible book value per share after
the offering................................................ 2.42
------
Dilution per share to new investors.......................... $ 8.58
======

The following table summarizes as of March 31, 1998, on a pro forma basis,
the differences in the total consideration paid and the average price per
share paid to the Company by existing stockholders, including holders of
mandatorily redeemable convertible preferred stock, and by new investors with
respect to the number of shares of Common Stock purchased from the Company.

SHARES TOTAL
PURCHASED CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------

Existing stockholders... 17,587,112 82.4% $ 70,773,000 63.2% $4.02
New investors........... 3,750,000 17.6 41,250,000 36.8% 11.00
---------- ----- ------------ -----
Total................... 21,337,112 100.0% $112,023,000 100.0%
========== ===== ============ =====

The foregoing discussion and tables assume no exercise of stock options
outstanding at March 31, 1998. As of March 31, 1998, an aggregate of 4,720,160
shares of Common Stock were issuable upon the exercise of outstanding options
with a weighted average exercise price of $4.10 per share. The foregoing
discussion also excludes 936,370 shares of Common Stock reserved for issuance
pursuant to warrants at a weighted average exercise price of $12.41 per share.
The foregoing discussion also excludes an aggregate of an additional 2,927,018
shares reserved for issuance under the Company's 1994 Stock Plan, 1998
Employee Stock Purchase Plan and 1998 Director Option Plan. Subsequent to
March 31, 1998, options to purchase 471,846 shares were exercised at weighted
average exercise price of $1.69 per share and the Company granted additional
options to purchase an aggregate of 746,094 shares of Common Stock under the
1994 Stock Plan at a weighted average exercise price of $7.66 per share. The
issuance of Common Stock under these plans will result in further dilution to
new investors. See "Management--Stock Plans," "Certain Transactions,"
"Description of Capital Stock" and Notes 6, 8 and 11 of Notes to Consolidated
Financial Statements.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes
hereto appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The selected
consolidated financial data as of and for each of the years in the three-year
period ended December 31, 1997 are derived from consolidated financial
statements of the Company included herein that have been audited by Price
Waterhouse LLP, independent accountants. The selected consolidated financial
data for the fiscal years ended December 31, 1993 and 1994 are derived from
financial statements not included herein and the Company's accounting records.
The selected consolidated financial data as of March 31, 1998 and for the
three months ended March 31, 1997 and 1998 are derived from unaudited
consolidated financial statements appearing herein. In the opinion of the
Company, such unaudited data reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair statement of the financial
data for such period. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of results that may be expected
for the full year.

THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
------ ------- ------- -------- --------- ------- -------
(in thousands, except per share data)

CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue................. $ 146 $ 816 $ 765 $ 5,199 $ 17,993 $ 2,967 $ 5,106
Cost of revenue......... 19 213 9 2,626 7,398 1,041 2,527
------ ------- ------- -------- --------- ------- -------
Gross profit............ 127 603 756 2,573 10,595 1,926 2,579
------ ------- ------- -------- --------- ------- -------
Operating expenses:
Sales and marketing.... -- -- 1,220 9,182 18,844 4,569 4,504
Product development.... 110 880 1,733 5,496 10,645 2,357 2,728
General and
administrative........ 232 899 2,053 3,135 4,980 1,043 1,261
Non-recurring expenses. -- -- -- -- 2,918 -- --
Non-cash stock
compensation expense
and amortization of
warrants.............. -- -- -- 562 3,141 459 696
------ ------- ------- -------- --------- ------- -------
Total operating
expenses.............. 342 1,779 5,006 18,375 40,528 8,428 9,189
------ ------- ------- -------- --------- ------- -------
Loss from operations.... (215) (1,176) (4,250) (15,802) (29,933) (6,502) (6,610)
Interest and other
income................. -- 117 67 830 924 302 210
Interest expense........ -- -- (38) (162) (277) (38) (110)
Minority interest in
losses of consolidated
subsidiary............. -- -- -- -- 175 -- 115
------ ------- ------- -------- --------- ------- -------
Net loss................ $ (215) $(1,059) $(4,221) $(15,134) $ (29,111) $(6,238) $(6,395)
====== ======= ======= ======== ========= ======= =======
Net loss per share:
Basic and diluted(1)... $(2.21) $ (0.38) $ (1.45) $ (4.28) $ (6.38) $ (1.45) $ (1.18)
====== ======= ======= ======== ========= ======= =======
Proforma net loss per
share:
Basic and diluted(1)... $ (1.95) $ (0.38)
========= =======

DECEMBER 31, MARCH 31, 1998
------------------------------------------- ---------------------------------
PRO PRO FORMA
1993 1994 1995 1996 1997 ACTUAL FORMA(2) AS ADJUSTED(3)
----- ------- ------- -------- -------- -------- -------- --------------
(in thousands)

CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and short-term
investments............ $ 82 $ 3,097 $ 4,918 $ 27,142 $ 22,720 $ 19,066 $19,066 $56,579
Working capital
(deficit).............. (161) 2,309 2,733 26,619 14,176 9,243 9,243 46,756
Total assets............ 108 3,476 6,292 37,626 37,427 32,800 32,800 70,313
Long-term obligations... -- 169 678 1,559 4,535 2,679 2,679 2,679
Minority interest....... -- -- -- -- 1,825 1,710 1,710 1,710
Mandatorily redeemable
preferred securities... -- 3,999 9,152 50,298 69,785 72,240 -- --
Stockholders' (deficit)
equity................. (141) (1,594) (5,310) (20,672) (52,400) (58,119) 14,121 51,634

- --------
(1) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the calculation of net loss and pro forma net loss per share.
(2) Pro forma capitalization after giving effect to the conversion of all
outstanding shares of Preferred Stock into Common Stock and the conversion
of warrants to purchase Preferred Stock into warrants to purchase Common
Stock.
(3) As adjusted to reflect the sale of 3,750,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $11.00 per
share and the receipt of net proceeds therefrom. Assumes no exercise of
the Underwriters over-allotment option. See "Use of Proceeds,"
"Capitalization" and "Underwriters."

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Prospective investors should consider carefully the following discussion of
the financial condition and results of operations of the Company in addition
to the other information contained in this Prospectus concerning the Company
and its business before purchasing the shares of Common Stock offered hereby.
Certain statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in addition to statements
contained in "Prospectus Summary," "Risk Factors" and Business," contain
forward-looking statements, including statements regarding the anticipated
growth in the market for Internet advertising and the belief of the Company as
to its future operating performance. Such statements are not historical facts
and are forward looking statements within the meaning of the U.S. Federal
Securities Laws. Because such statements include risks and uncertainties the
Company's actual results may differ materially from those anticipated in these
forward-looking statements, including but not limited to, those set forth
herein and in "Risk Factors" and "Business."

OVERVIEW

PointCast is the leading broadcaster of news and information to business
consumers over the Internet and corporate intranets. From inception through
1995 the Company primarily derived its revenue from the sale of software which
allowed users to automatically acquire, format and present news and other
content from certain online services. In 1995, the Company redirected its
focus towards the development of the PointCast Network. In early 1996, the
Company launched the PointCast Network and commenced selling advertisements.

Since the launch of the PointCast Network, the Company has primarily derived
its revenue from the sale of advertisements. The Company generates its
advertising revenue from three sources: the sale of 30-second animated
commercials, and to a lesser extent, the sale of banner advertisements and
sponsorships. The Company expects that advertising revenue, and specifically
30-second commercials, will account for substantially all of its revenue for
the forseeable future. The Company's ability to increase its advertising
revenue and inventory of advertisements is a function of several factors,
including the ability of the Company to retain and increase the number of its
active viewers, the amount of usage of the PointCast Network by its viewers
and the level of advertising rates charged. The Company sells commercials
based on displaying an advertisement over a two to four week period on
specific content channels. The pricing of an advertisement is based in part on
a guaranteed number of billable deliveries over the specified period of time.
A billable delivery is determined by the number of unique viewers to whom the
advertisement is delivered multiplied by two impressions (the number of times
a viewer sees the advertisement). The Company's experience has been that the
number of impressions delivered per viewer has exceeded the two impressions
contractually specified. Based on the Company's current rate card, a typical
advertisement over a four week period on a National channel yields between
$38,000 and $54,000. The revenue that the Company receives from advertisements
can vary between the National and Affiliate channels due to certain revenue
sharing agreements with Affiliate partners. If the Company sells an
advertisement on either the National or Affiliate channel, it records the
gross amount of revenue billed to the advertiser. On an Affiliate channel, if
the Affiliate partner sells the advertisement, the Company records only its
portion of revenue due under such agreements. To date, the majority of the
Company's revenue has been generated from advertisements sold on its National
channels.

The Company recognizes advertising revenue in the period the advertisement
is displayed, provided no significant Company obligations remain and
collection of the resulting receivable is probable. Company obligations
typically include guarantees of a minimum number of billable deliveries. To
the extent billable delivery guarantees are met, the Company recognizes
revenue and invoices the advertiser for the billable deliveries provided or,
if an amount has been invoiced in excess of the billable deliveries provided,
the Company defers recognition of the corresponding revenue until minimum
billable delivery guarantees are satisfied. In addition, the Company may be
committed to "make good" or provide additional billable deliveries in order to
satisfy minimum billable delivery guarantees, which may adversely affect the
availability of advertising inventory.

The Company generates revenue from development, license and other fees,
which primarily consists of development fees from the Company's Industry
Insider channels. Pursuant to its agreement with its Industry Insider
partners, upon the launch of an Industry Insider channel the Company earns a
development fee. The Company expects that it will continue to earn development
fees in the foreseeable future from the launch of new Industry Insider partner
programs but that as a percentage of total revenue these amounts will not be
significant.

The Company received 8% and 11% of its total advertising revenue from
TransCosmos in the three months ended December 31, 1997 and March 31, 1998,
respectively. TransCosmos is the holder of approximately 2% of the Company's
outstanding capital stock (prior to this offering). The Company believes that
the terms of advertising contracts with TransCosmos were similar to those
given on orders of similar size to unaffiliated customers. The Company expects
advertising revenue from TransCosmos to account for less than 10% of the
Company's total advertising revenues for fiscal 1998.

The Company's operating expenses have generally increased in absolute dollar
amounts since inception through March 1998. This trend reflects the Company's
expansion from the product development stage to marketing and offering its
services. The Company believes that the continued expansion of operations,
product development and investment in viewership growth is essential to
achieving and maintaining market leadership. Therefore, the Company
anticipates that its operating expenses will continue to increase in the
foreseeable future. The Company expenses its product development costs as
incurred until technological feasibility has been achieved. After
technological feasibility has been demonstrated, the Company capitalizes costs
incurred and amortizes the capitalized costs over the estimated product life.
No such costs were capitalized through March 31, 1998.

During the second quarter of 1997, the Company entered into a joint venture
agreement pursuant to which the Company holds a majority interest in a
Japanese subsidiary. The subsidiary is still in the early stages of
development and expects that the minority interest in operations of the
consolidated subsidiary will continue to fluctuate in future periods. Under
the terms of the joint venture agreement, the joint venture will pay to the
joint venture's 40% stockholder 47% of revenue pursuant to a two year
administrative services and management agreement. For the year ended December
31, 1997 and the three months ended March 31, 1998, such fees were $0 and
$77,000, respectively.

In 1997, the Company recognized non-cash compensation expense and
amortization of warrants in the amount of $3.1 million. Of this amount,
$900,000 was related to stock compensation expenses and $2.3 million was
related to amortization of the cost of warrants granted by the Company in 1996
in exchange for certain advertising space. The deferred stock compensation
expense amounts are being recognized ratably over the vesting period of the
shares and options granted. The Company recorded $3.6 million of deferred
compensation expense in connection with the issuance of 250,000 shares of
Preferred Stock to the Company's Chief Executive Officer pursuant to a
restricted stock purchase agreement, at the date of hiring based on the price
of Preferred Stock sold to unaffiliated investors in contemporaneous
transactions. The unamortized balance of this expense, estimated at $2.3
million, will be recorded as a one-time expense upon the closing of the
Company's initial public offering due to a contractual obligation to
accelerate the vesting of the Preferred Stock at that time. In addition, the
Company recorded $1.0 million of deferred compensation expense in connection
with options to purchase Common Stock granted with an exercise price below the
fair market value at the date of grant as determined primarily in cash
transactions between unaffiliated investors.

The Company also will record a stock compensation charge of $1.3 million
associated with a grant in the three month period ending June 30, 1998 of
options to purchase 746,018 shares of Common Stock below the fair market value
at the date of grant to be recognized over the four year vesting period.

The Company has incurred net losses since its inception in July 1992. The
Company incurred net losses of $4.2 million, $15.1 million, $29.1 million and
$6.4 million in fiscal 1995, 1996, 1997 and for the three months ended March
31, 1998, respectively. As of March 31, 1998, the Company had an accumulated
deficit of $56.8 million. In addition, the Company did not recognize revenue
relating to the PointCast Network until February 1996. Accordingly, the
Company has a history of net losses and its prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies with limited histories of generating revenue from its core services,
particularly companies in the new and rapidly evolving markets for the
Internet and Internet services, including the Internet advertising market. To
increase revenue, the Company must, among other things, enhance performance of
the PointCast Network by further developing and upgrading its technology,
significantly grow and increase retention of its viewing audience,
particularly the business consumer, effectively develop new relationships and
maintain existing relationships with its advertising customers, particularly
advertisers who have historically relied on traditional media for advertising,
their advertising agencies and other third parties, obtain widespread
acceptance of corporate-wide deployment of the PointCast Network, maintain and
form new relationships with third-party content providers and media partners,
obtain, aggregate and distribute original and compelling content to Internet
users, increase PointCast brand awareness, successfully expand international
operations, respond to competitive developments and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will
be able to successfully address these and other risks and to increase revenue
and the failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company does not expect significant growth, if any, in revenue from
advertisers for at least the next two quarters, and the Company expects to
incur increased net losses for at least the next two quarters and significant
net losses for the foreseeable future. There can be no assurance that revenue
from advertisers or other sources will not decline in the future or that the
Company's net losses will not continue to increase in the future or that the
Company will ever achieve or maintain profitability. The Company intends to
substantially increase its operating expenses in order to increase brand
awareness, increase its sales and marketing operations and continue to expand
internationally. The Company also expects its operating expenses to increase
as a result of the costs associated with becoming a public company. The
Company expects its costs of revenue to increase due to increased costs of
data transmission, content acquisition and international expansion. To the
extent that revenue does not grow at anticipated rates, the Company would be
unable to decrease operating expense levels quickly enough to offset the lack
of growth in revenue. In such event, the Company's business, financial
condition and results of operations would be materially adversely affected.

Three Months Ended March 31, 1998 and 1997 and the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995

RESULTS OF OPERATIONS

The following table sets forth consolidated statement of operations data for
the periods indicated as a percentage of total revenue:

THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ---------------
1995 1996 1997 1997 1998
-------- -------- -------- ------ ------

CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue............. 1.2 50.5 41.1 35.1 49.5
-------- -------- -------- ------ ------
Gross margin................ 98.8 49.5 58.9 64.9 50.5
-------- -------- -------- ------ ------
Operating expenses:
Sales and marketing........ 159.5 176.6 104.7 154.0 88.2
Products development....... 226.5 105.7 59.2 79.4 53.4
General and administrative. 268.4 60.3 27.7 35.1 24.7
Non-recurring expenses..... -- -- 16.2 -- --
Non-cash stock compensation
expense and amortization
of warrants............... -- 10.8 17.4 15.5 13.7
-------- -------- -------- ------ ------
Total operating expenses. 654.4 353.4 225.2 284.0 180.0
-------- -------- -------- ------ ------
Loss from operations........ (555.6) (303.9) (166.3) (219.1) (129.5)
Interest and other income... 8.8 16.0 5.1 10.2 4.1
Interest expense............ (5.0) (3.2) (1.5) (1.3) (2.2)
Minority interest in losses
of consolidated subsidiary. -- -- 1.0 -- 2.3
-------- -------- -------- ------ ------
Net loss.................... (551.8)% (291.1)% (161.7)% (210.2)% (125.3)%
======== ======== ======== ====== ======

Total Revenue

Total revenue principally consists of advertising revenue from the sales of
commercials, banners and sponsorships and also includes development, license
and other fees from the Company's Industry Insider Agreements. Total revenue
for the three month period ended March 31, 1998 and 1997 was $5.1 million and
$3.0 million, respectively. Total revenue for the years ended December 31,
1997, 1996 and 1995 was $18.0 million, $5.2 million and $765,000,
respectively.

The Company began recognizing advertising revenue in the first quarter of
1996. The increase in advertising revenue in 1997 as compared to 1996 is
primarily the result of increased sales of advertisements on the PointCast
Network, the impact of new revenue sources from the sales of banner
advertising which began in the third quarter of 1997 and the sale of
sponsorships on the EntryPoint Service which began in the fourth quarter of
1997. The Company expects to continue to derive substantially all of its
revenue from the sale of advertisements on its networks. EDS accounted for 13%
of advertising revenue in the year ended December 31, 1996. No one customer
accounted for 10% or more of advertising revenue for the year ended December
31, 1997 or the three month period ended March 31, 1997. TransCosmos accounted
for 11% of advertising revenue for the three month period ended March 31,
1998. In addition, barter revenue represented less than 10% of revenue for the
years ended December 31, 1997 and 1996 and for the three month periods ended
March 31, 1998 and 1997. The Company derived insignificant revenue from
international operations in the three month period ended March 31, 1998. Prior
to the three month period ended March 31, 1998, the Company did not have any
revenue from international operations.

Cost of Revenue

Cost of revenue primarily includes costs associated with the operation of
the Company's Central Broadcast Facility which consists of payroll and related
expenses and expenses for facilities and equipment, content costs, costs
associated with certain revenue sharing agreements for the Company's
affiliated channels and costs associated with the production of
advertisements. Cost of revenue for the three month period ended March 31,
1998 and 1997 was $2.5 million and $1.0 million, respectively. Cost of revenue
for the years ended December 31, 1997, 1996 and 1995 was $7.4 million, $2.6
million and $9,000, respectively.

Gross margin decreased to 51% for the three month period ended March 31,
1998 from 65% for the three month period ended March 31, 1997. The decrease in
gross margin is primarily attributable to increases in fixed costs as the
Company expanded its Central Broadcast Facility capacity, as well as the
effect of increased content costs. The Company expects that gross margins will
continue to be negatively affected by increased content costs, costs
associated with the Central Broadcast Facility and the effect of certain
revenue sharing agreements. Gross margin increased to 59% from 50% for the
years ended December 31, 1997 and 1996, respectively. The increase in gross
margin is primarily attributable to cost efficiencies associated with the
spread of fixed costs across higher sales volume offset by the effect of
increased content costs and the effect of certain revenue sharing
arrangements.

Sales and Marketing

Sales and marketing expenses consist primarily of payroll and related
expenses, consulting fees and advertising expenses for marketing programs
incurred in promoting and selling advertisements on the PointCast Network.
Sales and marketing expenses were $4.5 million and $4.6 million for the
respective periods ended March 31, 1998 and 1997. Sales and marketing expenses
increased to $18.8 million from $9.2 million for the years ended December 31,
1997 and 1996, respectively. Sales and marketing expenses increased period
over period primarily as a result of increased headcount. The Company expects
that in order to achieve its strategic objectives it will need to increase
promotional and advertising expenses. Accordingly, the Company expects that
while sales and marketing costs as a percentage of revenue will decrease these
expenses will increase in absolute dollars.

Product Development

Product development expenses consist of payroll and related expenses and
depreciation. Product development efforts have primarily been focused on the
development of new or improved technologies designed to enhance the
performance and reliability of the PointCast Network. Product development
expenses were $2.7 million and $2.4 million for the three month period ended
March 31, 1998 and 1997, respectively. Product development expenses were $10.6
million, $5.5 million and $1.7 million for the years ended December 31, 1997,
1996 and 1995, respectively. The increase in absolute dollars period over
period was primarily attributable to increases in headcount. The Company
believes that continued investment in product development and enhancements is
critical to obtaining its strategic objectives, and as a result expects
product development to increase in absolute dollars but decrease as a
percentage of revenue.

General and Administrative

General and administrative expenses consist of payroll and related expenses
for executive, finance and administrative personnel, professional fees and
other general corporate expenses. General and administrative expenses were
$1.3 million and $1.0 million for the three months ended March 31, 1998 and
1997, respectively. General and administrative expenses were $5.0 million,
$3.1 million and $2.1 million for the years ended December 31, 1997, 1996 and
1995, respectively. The increase in absolute dollars spent on general and
administrative expenses resulted primarily from increases in salaries and
related benefits to support the expansion of the Company's operations. The
Company anticipates that its general and administrative expenses will continue
to increase significantly in absolute dollar amounts as the Company adds
infrastructure and incurs additional costs related to being a public company.

Non-Cash Compensation Expense and Amortization of Warrants

During the year ended December 31, 1997, the Company recorded deferred stock
compensation aggregating $4.6 million related to preferred stock issued in
1997 and options granted in 1997. The Company is recognizing this compensation
expense over the associated vesting periods. The Company recognized $618,000
of this expense during the year ended December 31, 1997. Additionally, the
Company recognized compensation expense of $247,000 and $312,000 for the years
ended December 31, 1997 and 1996, respectively related to the acceleration of
the vesting of certain options upon the termination of certain employees. No
deferred compensation charges were recorded during the year ended December 31,
1995. The Company recognized $596,000 of this expense during the three month
period ended March 31, 1998. Additionally, the Company recorded $2.3 million,
$250,000 and $100,000 in the years ended December 31, 1997 and 1996 and for
the three months ended March 31, 1998 related to the amortization of the fair
market value of warrants issued in exchange for advertising services.

Non-Recurring Expenses

During the year ended December 31, 1997, the Company recorded non-recurring
expenses of $2.9 million principally in connection with the hiring of the
Company's Chief Executive Officer and losses incurred on the sublease of
certain excess office space.

Interest and Other Income (Expense)

Interest and other income (expense) for the three month period ended March
31, 1998 and 1997 was $100,000 and $264,000, respectively. For the years ended
December 31, 1997, 1996 and 1995, interest and other income (expense) was
$647,000, $668,000 and $29,000, respectively.

Minority Interest in Operations of Consolidated Subsidiary

The minority interest in losses from operations of the Japanese joint
venture was $115,000 for the three months ended March 31, 1998 and $175,000
for the year ended December 31, 1997.

Income Taxes

No provision for federal and state income taxes has been recorded as the
Company incurred net operating losses through March 31, 1998. At December 31,
1997, the Company had approximately $42.0 million of federal net operating
loss carry forwards for tax reporting purposes available to offset future
taxable income; such losses expire in 2011. Under the Tax Reform Act of 1986,
the amounts of and benefits from net operating loss carryforwards may be
impaired or limited in certain circumstances. Events which cause limitations
in the amount of net operating losses that the Company may utilize in any one
year, include but are not limited to, a cumulative ownership change of more
than 50%, as defined, over a three year period. During 1997, in connection
with the sale of preferred stock the Company triggered a limitation, and as a
result, is limited to utilizing approximately $11.0 million of federal net
operating losses annually to offset taxable income.

QUARTERLY RESULTS

The following table presents unaudited quarterly data for each of the five
quarters ended March 31, 1998 and such data expressed as a percentage of
revenue for such quarters. In the Company's opinion, this information has been
presented on the same basis as the annual consolidated financial statements
appearing elsewhere in the Prospectus, and reflects all adjustments, which
include only normal returning adjustments, necessary to present fairly the
unaudited quarterly results when read in conjunction with the audited
financial statements of the Company. Results of operations for any quarter are
not necessarily indicative of the results to be expected for the entire year
of any future period.

THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
---------- --------- ---------- --------- ----------
(in thousands)

CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue............. $ 2,967 $ 3,535 $ 4,409 $ 7,082 $ 5,106
Cost of revenue........... 1,041 1,565 1,950 2,842 2,527
------- ------- ------- ------- -------
Gross profit.............. 1,926 1,970 2,459 4,240 2,579
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing...... 4,569 5,009 4,536 4,730 4,504
Product development...... 2,357 2,658 2,855 2,775 2,728
General and
administrative.......... 1,043 1,159 1,142 1,636 1,261
Non-recurring expenses... -- 413 165 2,340 --
Non-cash stock
compensation expense and
amortization of
warrants................ 459 623 756 1,303 696
------- ------- ------- ------- -------
Total operating
expenses.............. 8,428 9,862 9,454 12,784 9,189
------- ------- ------- ------- -------
Loss from operations...... (6,502) (7,892) (6,995) (8,544) (6,610)
Interest and other income. 302 244 150 228 210
Interest expense.......... (38) (51) (37) (151) (110)
Minority interest in
losses of consolidated
subsidiary............... -- -- 35 140 115
------- ------- ------- ------- -------
Net loss.................. $(6,238) $(7,699) $(6,847) $(8,327) $(6,395)
======= ======= ======= ======= =======

THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
---------- --------- ---------- --------- ----------

AS A PERCENTAGE OF TOTAL
REVENUE:
Total revenue............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........... 35.1 44.3 44.2 40.2 49.5
------ ------ ------ ------ ------
Gross margin.............. 64.9 55.7 55.8 59.8 50.5
------ ------ ------ ------ ------
Operating expenses:
Sales and marketing...... 154.0 141.7 102.9 66.8 88.2
Product development...... 79.4 75.2 64.8 39.2 53.4
General and
administrative.......... 35.1 32.8 25.9 23.1 24.7
Non-recurring expenses... -- 11.7 3.7 33.1 --
Non-cash stock
compensation expense and
amortization of
warrants................ 15.5 17.6 17.2 18.3 13.7
------ ------ ------ ------ ------
Total operating
expenses.............. 284.0 279.0 214.5 180.5 180.0
------ ------ ------ ------ ------
Loss from operations...... (219.1) (223.3) (158.7) (120.7) (129.5)
Interest and other income. 10.2 6.9 3.4 3.2 4.1
Interest and other income. (1.3) (1.5) (0.8) (2.1) (2.2)
Minority interest in
losses of consolidated
subsidiary............... -- -- 0.8 2.0 2.3
------ ------ ------ ------ ------
Net loss.................. (210.2)% (217.9)% (155.3)% (117.6)% (125.3)%
====== ====== ====== ====== ======

Revenue for the three month period ended March 31, 1998 decreased by $2.0
million compared to the three month period ended December 31, 1997.
Approximately $1.1 million of this decrease is due to decreased advertising
sales which the Company believes is primarily the result of seasonality.
Advertisers typically spend more in the fourth calendar quarter of the year
then in the first calendar quarter. In addition, in the three month period
ended December 31, 1997, the Company had approximately $900,000 of revenue
related to the customization and development of industry specific channels for
use in connection with the Industry Insider program to various Industry
Insider partner agreements.

Gross margin percentages over the five quarters have varied primarily
because of increased fixed costs associated with expanding the Central
Broadcast Facility capacity to support increased future viewership levels.
Gross margin percentages have also been impacted by varied content costs and
the effect of various revenue sharing arrangements. The Company expects that
gross margins will continue to be affected by increased content costs and the
effect of various revenue sharing arrangements.

The Company's results of operations may fluctuate significantly in the
future as a result of a variety of factors, many of which are beyond the
Company's control. These factors include the number, timing and performance of
upgrades and enhancements to the PointCast Network, the addition or loss of
viewers using the PointCast Network, the addition or loss of advertisers, the
demographics of the installed base of viewers, demand for and market
acceptance of Internet advertising, seasonal trends in Internet usage and
advertising placements, advertisers' budgeting cycles, the commitment of
advertising budgets to Internet advertising, changes in pricing models for
Internet advertising, the loss of one or more third-party content providers,
technical difficulties or Central Broadcast Facility downtime, capacity
constraints of the Company's Central Broadcast Facility, the amount and timing
of costs relating to the expansion of the Company's Internet operations and
the scaling of the PointCast Network infrastructure, introduction of or
improvements in competing products or services, price competition or pricing
changes in the industry, the level of use of the Internet and general economic
conditions. Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.

In addition, the Company has been, and expects in the future to be, subject
to seasonal fluctuations in the amount of Internet advertising revenues, as
advertisers historically spend more during the fourth calendar quarter of each
year and less during the first calendar quarter of each year. Additional
seasonal patterns in Internet advertising spending and other seasonal
fluctuations may emerge as the market matures. Furthermore, it is possible
that in some future quarters the Company's results of operations may fall
below the expectations of securities analysts and investors. In such event,
the trading price of the Company's Common Stock would likely be materially and
adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1998, the Company had cash, cash equivalents and short-term
investments totaling $19.0 million comprised of $16.5 million in cash and cash
equivalents and $2.5 million in short-term investments. The Company invests
principally in instruments that are highly liquid, of high quality investment
grade, and predominantly have maturities of less than one year with the intent
to make such funds readily available for operating purposes. The Company
believes that the net proceeds from this offering together with existing
sources of liquidity will provide adequate cash to fund its operations for at
least the next twelve months.

Since inception, the Company has raised approximately $68.2 million through
private equity placements to leading media and technology companies, as well
as financial investors. These investors include: Adobe Systems, Inc.
("Adobe"), Asahi Shimbun, Benchmark Capital, Cendant Corporation ("Cendant"),
Gannett Media Technologies International ("Gannett Media Technologies"),
Knight-Ridder, Inc. ("Knight-Ridder"), KPMG Peat Marwick LLP ("KPMG"),
Merrill, Pickard, Anderson & Eyre ("Merrill, Pickard, Anderson & Eyre"), Mohr,
Davidow Ventures ("Mohr, Davidow"), Softbank Holdings, Inc. ("Softbank
Holdings") and Times Mirror. Additionally, during the years ended December 31,
1997, 1996 and 1995 the Company raised approximately $4.8 million, $1.0
million and $707,000 through the issuance of notes payable. During 1997, the
Company repaid $1.7 million of notes payable and issued a note to a
stockholder for $2.0 million. At March 31, 1997, the Company had $1.4 million
payable under a line of credit with a financial institution and $3.1 million

of borrowings outstanding under a note payable due to an insurance company.
The line of credit with the financial institution provides for borrowings up
to $5.0 million, however, advances in excess of $2.0 million must be supported
by a borrowing base calculated on accounts receivable. The line of credit is
secured by certain specified assets of the Company, expires March 31, 1999 and
charges interest at a variable rate based on the bank's prime rate (8.5% at
December 31, 1997 and March 31, 1998). Under the line of credit, the Company
is required to maintain certain financial covenants. The Company was in
compliance with all such covenants at March 31, 1998. The note payable due to
the insurance company bears interest at 9.7% and is secured by the Company's
property and equipment. The Company is required to make monthly payments of
principal and interest under the note of $107,000 through December 2001.

Net cash used in operating activities was $2.8 million, $13.4 million, $17.4
million, $2.8 million and $5.4 million for the years ended December 31, 1995,
1996 and 1997 and the three months ended March 31, 1997 and 1998,
respectively. The increases in cash used in operating activities were
primarily due to increasing losses, offset by non cash charges for
depreciation and amortization, stock compensation expense and amortization of
the fair value of warrants issued in exchange for advertising.

Net cash (used in) provided by investing activities totaled ($1.1) million,
($26.9) million, $5.0 million, $4.5 million and $9.5 million for the years
ended December 31, 1995, 1996 and 1997 and the three months ended March 31,
1997 and 1998, respectively. Cash flows from investing activities reflect the
purchase, maturity and sale of short-term investments and capital expenditures
of $1.1 million, $3.2 million, $6.2 million, $1.2 million and $0.4 million for
the years ended December 31, 1995, 1996 and 1997 and the three months ended
March 31, 1997 and 1998, respectively.

Net cash provided by (used in) financing activities totaled $5.8 million,
$38.8 million, $19.3 million, ($41,000) and $2.2 million for the years ended
December 31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and
1998, respectively. Net cash provided by financing activities primarily
relates to proceeds from private equity sales and borrowings under notes
payable.

The Company believes all of its products are Year 2000 compliant. There is
no assurance, however, that the Company's financial systems software or its
PointCast Network Client do not contain undetected errors or defects
associated with Year 2000 date functions, which could result in a disruption
of the Company's accounting systems or ability to provide the PointCast
Network, which could result in a loss of revenue, diversion of development
resources, or damage to the Company's reputation, or any of which could
materially adversely affect the Company's business, financial condition, or
results of operations. In addition, the Company cannot be sure that systems of
other companies on which the Company's systems rely will be converted in a
timely manner. The Company relies on third-party systems to facilitate
broadcast from the Central Broadcast Facility to its clients. The disruption
of a broadcast to its clients could prevent the Company from obtaining the
minimum "billable deliveries" required by its advertisers and could therefore
have a material adverse affect on the Company's business, results of
operations and financial condition. In addition, the Company relies on the
integration of many systems in aggregating the content from multiple sources.
The failure of any of those systems as a result of Year 2000 compliance issues
could prevent the Company from delivering the content, which could have
material adverse affect on the Company's retention and acquisition of viewers
and the resulting material adverse affect on the Company's ability to sell
advertising and meet its billable deliveries requirements under its
advertising contract. The failure of other companies to successfully address
Year 2000 issues in their systems on which the Company's systems rely, may
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Risk Factors--Potential Litigation/Liability
Related to Year 2000 Compliance."

NEW ACCOUNTING PRONOUNCEMENTS

See Note 1 of Notes to Consolidated Financial Statements for recently
adopted and recently issued accounting standards.

BUSINESS

OVERVIEW

PointCast is the leading broadcaster of personalized news and information to
business consumers over the Internet and corporate intranets. The PointCast
Network is a free, advertising-supported service that has been specifically
designed to meet the needs of business consumers, corporations and
advertisers. The PointCast Network automatically appears whenever the computer
is idle, replacing a screensaver with a continuous stream of useful,
personalized news and information. With approximately 700 content sources, the
Company believes it is the largest aggregator of free general, business,
vertical market and local newspaper content on the Internet. The Company had
an average of approximately 1.2 million active viewers worldwide in the first
quarter of 1998.

Since January 1998, the Company has offered its free PointCast Intranet
Broadcast Solution to stimulate corporate-wide deployment of the PointCast
Network. PointCast's corporate customers include American International Life
Assurance Company of New York ("AIG"), BankAmerica Corporation ("Bank of
America"), E.I. du Pont de Nemours and Company ("DuPont"), Goodyear Tire and
Rubber Company ("Goodyear"), MCI Communications Corporation ("MCI"), Monsanto
Company ("Monsanto"), Northrop Grumman Corporation ("Northrop Grumman") and
The Procter & Gamble Company ("Procter & Gamble"). The PointCast Network
employs a client/server-based advertising model that the Company believes
provides advertisers with richer advertising units in the form of 30 second,
animated commercials, more complete audience data and more detailed
advertising performance statistics than leading Web sites, as well as the
ability to target specific audiences. Based on independent survey data, the
Company believes its viewers are more affluent and better educated than
typical Internet users, and are likely to purchase products and services
online. Representative advertisers include Charles Schwab & Co., Inc.
("Charles Schwab"), Hewlett-Packard Company ("Hewlett-Packard"), Levi Strauss
& Company ("Levi Strauss"), MCI, Daimler-Benz North America Corp. ("Mercedes
Benz"), Microsoft and Procter & Gamble.

INDUSTRY BACKGROUND

Each major change in the form and delivery of modern media has brought
benefits to both consumers and to advertisers wishing to reach those
consumers. The advent of the newspaper allowed mass audiences to receive
timely news and analysis for the first time. Radio introduced sound and
immediacy. Television brought the captivating power of visual imagery,
allowing new forms of programming and advertising to engage an audience. Most
recently, the Internet has emerged as a cost-effective, interactive network
that is capable of rapidly distributing personalized information to millions
of computer users worldwide.

The Emerging Business Consumer and Changes in Media Consumption

New trends are affecting how and where people work, as well as how and where
they access and absorb news and information. New information and communication
technologies like cellular phones, pagers, e-mail and fax machines keep people
continuously connected and are accelerating the pace of business. Due to
competitive pressures, companies are increasingly seeking greater productivity
and often require employees to perform a multitude of tasks and functions in
compressed timeframes. Business professionals experience a hectic work day
punctuated by frequent interruptions. As a result, speed, timeliness and the
efficiency with which an individual can absorb information are the key
requirements for the media they use.

These new information and communication technologies are blurring the
distinction between business and personal life. Business professionals are
working longer hours, spending more time working at home and while in transit.
Moreover, these business professionals are shifting their news and information
consumption patterns from early morning or evening review of the latest events
at home to absorption in the work environment throughout the day. The
increasingly blurred line between home and work is causing business
professionals to make more purchase decisions in a work environment and is
transforming the business professional into a "business consumer."

The growth of the Internet and corporate intranets is accelerating this
fundamental change in business media consumption, making the desktop PC
increasingly a focal point for news and information delivery. International
Data Corporation estimates that by the end of 1998 there will be approximately
40 million people worldwide connected to the Web in a work environment, of
which approximately 21 million will be in the United States. Obtaining news
and information is a common activity on the Internet, and according to
published research is engaged in by 82% of all Internet users.

Electronic publishers have made unprecedented amounts of news and
information available on the Internet, and search engines and directories have
emerged as the most common tools for finding information. However, these tools
can be time-consuming and inefficient, because users must proactively seek
information, know what they are looking for, and generally monitor multiple
sources to get the latest news. Some search engines allow users to customize
Web pages to receive selected types of information, but the user is still
required to initiate contact with the Web and thus can miss timely receipt of
relevant information.

Information Needs of the Corporation

In order to improve employee productivity and build competitive advantage,
corporations are integrating the use of information and technological
innovation into their business strategies. Corporations are making significant
investments in distributed computing systems utilizing client/server
architectures. The PC has become an important corporate asset, although the
typical computer may sit idle for several hours a day and thus be under
utilized. Nevertheless, the PC is emerging as a focal point for the
distribution of news and information. In addition to general and business
news, the corporation itself often has high priority internal and industry
news it wishes employees to receive on a timely basis. For this reason, an
increasing number of companies are setting up corporate intranets. However,
intranets, much like the Internet itself, require employees to proactively
initiate a search through large volumes of data, and therefore, companies
cannot be assured that important information is widely seen and read.

Because the Internet allows access to an unprecedented amount of timely
information, employees can now often find information directly, eliminating
the wait for reports from corporate librarians and/or information technology
("IT") departments. However, corporations are striving to balance the benefits
of broadly available news and information with the need for relevance and
corporate control.

Advertising to the Business Consumer

Business professionals, or business consumers, are a desirable demographic
group to advertisers due to their affluence and acquisitiveness as consumers,
as well as their influence over business-to-business purchase decisions. The
median annual household income of Business Week and Forbes subscribers is
approximately $72,000 and $70,000, respectively, compared to the median annual
household income in the U.S. of approximately $35,500. This group is also
highly educated, with 80% and 83% of Business Week and Forbes readers,
respectively, having a college or higher degree. To date, the business
consumer has been difficult for advertisers to reach for a variety of reasons,
including limited advertising media typically available in a work environment.
Advertisers have typically used business print and trade publications to reach
the business consumer. In 1997, the Leading National Advertisers/Publishers
Information Bureau reported that the value of advertising placements totalled
$1.9 billion in four leading business publications: Business Week, Forbes,
Fortune, and The Wall Street Journal, which had circulations of approximately
902,000, 786,000, 766,000 and 1,775,000, respectively. The average advertising
dollars spent per subscriber for Business Week and The Wall Street Journal in
1997 were $365 and $623, respectively.

As media consumption habits of these business professionals move online,
advertising spending is beginning to follow. As this transition occurs, the
Company believes advertisers will place higher expectations on the Internet
and will look to combine the Internet's potential for interactivity, targeting
and accountability with the proven strengths of traditional forms of
advertising, such as brand building capabilities.

In order to accomplish these objectives, Internet advertisers will require
flexible and robust advertising units. Industry sources estimate that the
revenue share of these rich creative units will increase significantly, while
the revenue share of traditional advertisement banners on the Internet will
decline. Jupiter Communications projects that the market share for long play
animated Internet advertisements, sometimes referred to as "intermercials,"
will increase from 5% of online advertising in 1997 to 25% in 2001 or
approximately $1.5 billion in the year 2001. The total online advertising
market is expected to grow from an estimated $940 million in 1997 to $5.8
billion in 2001, according to Jupiter Communications. This market opportunity
represents only 3.3% of the estimated $175 billion in total advertising
expenditures across all media in 2001. Currently, however, the bandwidth
constraints of the Internet limit the ability of marketers to effectively
deliver advertisements that are rich enough to accomplish their objectives
without an unacceptable delay. This delay is due to the fact that such
advertisements require that large files be downloaded and transferred to the
viewer over the Internet when the viewer accesses the web page on which the
advertisement appears.

In order to take advantage of the Internet's potential, advertisers are
demanding better audience information, the ability to target advertisements to
specific audience segments and more extensive reporting capabilities to
measure a return on investment ("ROI"), in addition to the branding
capabilities enjoyed with traditional media. To date, the leading Internet
advertisers have been technology companies, financial service companies and
Web publishers. Traditional media advertisers, including consumer products
companies, automobile manufacturers and others, have been hesitant to allocate
significant advertising dollars to the Internet without more accurate audience
data, and the ability to target advertisements and to measure the results of
this advertising. Because few Web sites require viewers to register and
provide personal information, the majority of these sites are currently unable
to provide advertisers with audience demographic data. In addition, most
advertising reporting contains general statistics but does not offer specific
information about the individual who responded unless the data is captured at
the advertiser's Web site. Because of these factors, most Web publishers only
give advertisers the opportunity to expose their message to "anonymous" users.

The Company believes there is an opportunity for a free business media
service that broadcasts timely news and information via the Internet to
business consumers on their PCs continuously during the workday. The Company
believes that corporations will increasingly need to deliver rich and relevant
information to their employees throughout the corporation in a highly
efficient and cost-effective manner. The Company also believes that
advertisers will value the opportunity to reach the business consumer in the
workplace through rich advertising content and to receive detailed reports on
the effectiveness of their marketing campaigns.

THE POINTCAST SOLUTION

PointCast is the pioneer and leader in broadcasting personalized news and
information to business consumers through the Internet and corporate
intranets. The PointCast Network is a free, advertising-supported service that
automatically appears in place of a screensaver and broadcasts current news to
viewers' PC screens over the Internet. The Company believes that the PointCast
Network better meets the needs of business consumers, corporations and
advertisers than current media alternatives by providing the following
benefits:

Business Consumers. PointCast is designed to meet the information
consumption patterns of busy, multi-tasking business professionals at work.
The PointCast Network allows its viewers to receive updated, relevant
information efficiently and automatically. PointCast viewers also have the
ability to personalize the PointCast Network Client to specify in detail which
news and information topics they wish to follow. With the PointCast Network,
updated news automatically appears when the computer is idle. In addition, a
news ticker can always be "on" while other work is performed, scrolling
dynamically across the viewer's screen with news, internal corporate messages,
stock quotes and other information. PointCast designed its screens and ticker
with simple, scrolling headlines after careful study of the most effective way
time constrained individuals absorb news in an information saturated world.
Viewers can quickly digest news headlines, while simultaneously performing
other work. If desired, viewers can click on a headline to view the full-text
article.

Corporate Customers. The PointCast Intranet Broadcast Solution, which became
available in January 1998, is a suite of software tools that allows
corporations to manage network traffic, configure the PointCast Network client
on employee desktops and broadcast internal news and information. These tools
are free and designed to increase the usage of the PointCast Network in large
companies. The Company believes that the PointCast Network is the only free
service that gives companies general, business, industry and internal
corporate news in one integrated newscast. By utilizing the PC's idle time to
broadcast useful, personalized news and information, PointCast leverages
companies' existing computing investments to build more competitive and
responsive organizations.

Advertisers. PointCast believes that it provides advertisers with an
innovative and compelling advertising proposition based on its ability to: (i)
reach a highly affluent and influential viewer base that is hard to reach via
traditional media sources; (ii) provide better access to these business
consumers during the business day; (iii) offer a rich and flexible animated
advertising unit; (iv) target advertisements by a variety of measures; and (v)
provide advertisers audience information and advertising results. PointCast
allows advertisers to present dynamic, 30-second advertisements to viewers,
which are animated in a manner similar to commercials on television. The
animation and repeated exposures of these advertisements to viewers is
desirable to advertisers because they can capture and hold a viewer's
attention, increasing brand impact and communication value. PointCast's
client/server system allows these rich, animated advertisements to be
downloaded in advance of their presentation, stored on a viewer's system and
played without delay. The Company believes this capability is a distinct
advantage over advertising-supported Web sites, whose creative capabilities
are limited by the difficulty and delay in transmitting large animation files
from back-end Web servers. Because PointCast registers its viewers, the
Company has the ability to target advertisements by a variety of factors,
including gender, location, age, occupation, industry, special interest and
channel selection. PointCast also enables a high degree of accountability to
advertisers through audits, registration data, online reporting and monthly
campaign summaries. A broad range and depth of advertising characteristics can
be measured, including the number of unique viewers that received and viewed
the advertisement, the number of viewers that clicked through to an
advertiser's Web site and the demographic characteristics of those who
clicked. The Company believes that the specific data it can provide its
advertisers provides it with a competitive advantage over leading search
engines and other Web sites today.

STRATEGY

PointCast's objective is to be the leading broadcast news provider to
business consumers throughout the business day. The Company aggregates a hard-
to-reach business audience in the work environment with attractive
demographics for advertisers. The Company intends to grow its viewer base,
stimulate greater engagement with the PointCast Network among its viewers and
differentiate itself by obtaining more relevant information about its viewers
than other online, advertising-based news and information services. Key
elements of the Company's strategy include:

Maintain Leadership in Content Breadth and Depth. PointCast plans to
maintain its competitive advantage by continuing to add relevant business,
industry and other content to the PointCast Network offerings. With
approximately 700 content sources, the Company believes it is the largest
aggregator of free general, business, vertical market and local newspaper
content on the Internet and that it is currently the only online service which
offers world, business, industry and internal corporate news in one place. The
Company also offers a Japanese edition of its network with local content
delivered in Japanese, and intends to strategically expand to other
international markets in the future.

Leverage and Promote the PointCast Brand. PointCast believes that developing
a strong brand is important to its ability to continue to build a high-quality
audience and to attract advertisers. PointCast has been established as one of
the most recognized Internet-related brand names, primarily through word of
mouth and press coverage. Advertising Age's 1997 Annual Marketing 100 Salute
honored those whose ideas have built strong brands, and included PointCast as
one of only five technology brands. Since the Company released the PointCast
Network in 1996, it has won more than 75 awards and honors, including C/net's
Best Internet

Application, PC Magazine's Technical Excellence Award and PC Computing's Most
Valuable Product award. The Company intends to increase the resources
allocated to building equity in the PointCast brand.

Increase Viewer Retention and Reacquire Former Viewers. The Company had an
average of approximately 1.2 million active viewers worldwide in the first
quarter of 1998. PointCast intends to capitalize on its historically high rate
of viewer registration, which has ranged between 850,000 and 1,000,000
registrations per quarter throughout 1997 and the first quarter of 1998.
However, the Company has experienced a low retention rate during the initial
90 days after the registration. The Company has conducted extensive market
research to identify the causes of low viewer retention. According to a survey
conducted by the Company, approximately two-thirds of respondents indicated
that they left the PointCast Network for identifiable performance reasons.
Based on its research, the Company intends to release a new version of the
PointCast Network Client in the second half of 1998, which is designed to
improve performance of the PointCast Network Client in specified areas in
order to increase viewer retention. After the new software is released,
PointCast also intends to leverage its large viewer database to contact former
viewers with targeted messages to motivate them to use the PointCast Network
again.

Capture the Corporate Desktop. The Company believes corporate acceptance is
a significant factor in increasing viewership and has invested substantially
in creating a unique value proposition for the corporate environment. The
Company's strategy is to offer its free PointCast Intranet Broadcast Solution
and employ multiple distribution channels to promote deployment of the
PointCast Intranet Broadcast Solution within corporations. Since the PointCast
Intranet Broadcast Solution became available in January 1998, more than 40
corporations have deployed at least 500 desktops, including AIG, Bank of
America, DuPont, Goodyear, MCI, Monsanto, Northrop Grumman and Procter &
Gamble. In addition to a direct, enterprise marketing team, there are more
than 60 Solution Partners/VAR organizations that have been trained and
certified to install and deploy the PointCast Intranet Broadcast Solution in
their own corporate accounts. The enterprise marketing team also works closely
with the Company's partners, who are leaders in their markets, to leverage
their existing corporate relationships and penetrate accounts in vertical
industries such as banking, healthcare, telecommunications and government.

Create and Communicate a Compelling Value Proposition for Advertisers. The
Company's strategy is to provide advertisers with the most efficient and
effective vehicle to reach a premium business audience at work. The Company
believes that it is well positioned to capture advertising dollars that
migrate from traditional media, particularly from print media targeted at
business consumers. PointCast intends to enhance its value proposition to
advertisers and expand its advertising base by: (i) utilizing a highly
experienced direct sales force; (ii) enhancing and extending its leadership
position on the Internet in the delivery of rich, animated commercial units;
(iii) developing new advertising and sponsorship opportunities to accommodate
a larger number of advertisers with varying objectives and budgets; (iv)
leveraging its database of aggregated viewer profile and behavioral
information to allow advertisers to target their messages more specifically;
(v) providing high-quality research and reporting to advertisers; and (vi)
engaging in high-visibility marketing efforts to advertisers.

Maintain and Enhance Intelligent Client/Server Based Network. PointCast
intends to maintain and enhance its technology lead in media broadcast
solutions over the Internet. The Company has built a robust, scalable,
intelligent, end-to-end client/server network that has been designed from the
ground up to work efficiently on the Internet and within corporate intranets.
The Company's client/server solution allows it to capture a knowledge base
about its viewers and generate reports regarding usage to its advertisers that
a purely Web-based provider would have difficulty providing. The Company
intends to leverage its Central Broadcast Facility and intellectual property
to continue to enhance the performance of its broadcasting services.

THE POINTCAST NETWORK OFFERINGS

The PointCast Network is a scalable, end-to-end client/server news and
information service for business consumers and corporations. The PointCast
Network combines the latest news and information with innovative technology to
broadcast personalized news and business information to the viewer
automatically. The PointCast Network service consists of four principal
components: (i) general and business content aggregated from approximately 700
sources; (ii) the PointCast Central Broadcast Facility, which receives,
translates and transmits content; (iii) the PointCast Network Client that
resides on a viewer's PC and displays customized news broadcasts; and (iv) the
PointCast Intranet Broadcast Solution, a suite of free software tools that are
designed to enable corporations to control and configure PointCast Network
broadcasts throughout the company. For the past three years, the Company has
developed and refined this technology solution in order to effectively and
efficiently addresses the complex tasks of retrieving content feeds,
compressing and delivering data and synchronizing delivery to software clients
globally. The Company believes that this robust, end-to-end client/server
Internet solution gives it significant strategic and operational advantages
over other means of distributing news and information via the Internet.

[CHART APPEARS HERE]

A chart depicting the flow of content into the Company's Central Broadcast
Facility and out to the Company's PointCast Network Client both directly and
through Corporate Intranets.

PointCast Content

PointCast aggregates content from approximately 700 news and information
sources globally. Using television's "channel" format, PointCast integrates
this information from disparate sources into a consistent and easy-to-navigate
format. Viewers can select up to 12 of the 54 channels available on the
PointCast Network as well as the intranet channel, which is provided by the
viewer's organization using the PointCast Intranet Broadcast Solution. Each
channel represents either a specific source, such as CNN, or general category
of news or information topic, such as weather. Within each channel, viewers
can select the subtopics for which they wish to receive news updates. For
example, within The New York Times channel, viewers may choose to receive
world and business news and exclude politics and sports.

PointCast's content channels include the following categories: (i) general
and business content; (ii) vertical market content; (iii) internal corporate
content; and (iv) international content.

POINTCAST NETWORK CHANNELS

POINTCAST-OPERATED NATIONAL CHANNELS INDUSTRY INSIDER CHANNELS

Companies Banking (scheduled for release third
Industries quarter 1998):
Lifestyles Consumer Banking
News Corporate Banking
Sports Investment Management
Weather
Consumer Markets:
AFFILIATE CHANNELS Apparel & Accessories
Consumer Products
National Affiliates: Food
CMPnet Holiday
CNN What's New!
CNNfn
Health Federal Government:
The New York Times Agencies
ParentTime@Work Defense
Time-Warner/Pathfinder: FCC
Fortune, Money and Government Executive
Time Magazines Legislative
The Wall Street Journal Interactive NASA
Edition Procurement
WIRED News Technology
ZDNet
Healthcare:
Regional Affiliates: Health News
The Boston Globe Health Careers & Education
Chicago Tribune Health Resources
Detroit
Globe and Mail Real Estate:
Hot CoCo Commerical Real Estate
Los Angeles Times Residential Real Estate
Mercury Center
Miami Herald State & Local Government:
Philadelphia Online Grassroots
Seattle Times Heartland
Star Tribune Stateline
The Tampa Tribune Money Matters
washingtonpost.com
Telecommunications:
Telecom Buzz
Managment
Equipment/Services

In addition, the Company anticipates releasing the following additional
vertical markets in 1998: Aerospace & Defense, Automotive, Insurance and
Utilities. There can be no assurance that these channels will be released on
schedule or at all.

General & Business Content. PointCast organizes its wide range of general
news and business content into two types of programming: National channels and
Affiliate channels. National channels represent specific topic areas and are
based upon content that the Company licenses from suppliers, including
AccuWeather, Inc., Associated Press, Business Wire, Hoover's, Morningstar,
Inc., P.R. Newswire, Reuters Limited, Standard &

Poor's Comstock, The Weather Network and Zack's Investment Research.
PointCast's six PointCast-operated National channels include Companies,
Industries, News, Weather, Sports and Lifestyle. The Companies channel is
PointCast's most popular, enabling viewers to obtain information on up to 50
companies (including stock prices) of their choice, as well as monitor
multiple personal investment portfolios and initiate online securities trading
through PointCast's online trading sponsors. These online trading partners
include AmeriTrade Holding Corporation ("AmeriTrade"), Charles Schwab, Datek
Online, E*TRADE Group, Inc. ("E*TRADE"), Donaldson, Lufkin & Jenrette, Inc.
("DLJdirect"), Fidelity Investments Institutional Services Company, Inc.
("Fidelity Investments") and SURETRADE.

Leading national news brands, such as CNN, The Wall Street Journal
Interactive Edition and The New York Times, are broadcast to viewers via
PointCast's Affiliate channels, which provide the unique editorial value of
these respected sources integrated within PointCast's consistent interface.
PointCast believes it also offers the broadest selection of free local
newspapers available on the Internet, including The Boston Globe, Chicago
Tribune, Los Angeles Times, San Jose Mercury News, Washington Post and many
others. Based on viewers' zip codes, PointCast automatically displays the
appropriate regional newspaper channel when available as a default.

Vertical Market Content. PointCast leverages the knowledge and market power
of certain key vertical market leaders, or "Industry Insider" partners, to
provide in-depth current industry news broadcasts in strategic markets to
business viewers. PointCast has partnered with seven leading professional
services firms representing the following 11 vertical markets:

[GRAPHIC APPEARS HERE]

A picture of the Company's current and proposed
eleven vertical market channels.

* Scheduled to be released in 1998. There can be no assurance that the
channels scheduled for release in 1998 will be released on schedule or at all.

To date the Company has deployed 25 vertical market channels, covering
consumer markets, federal government, real estate, state and local government
and telecommunications, and the Company intends to launch additional vertical
channels in the future.

The Industry Insider partners allow PointCast to leverage their
organizations' marketing and distribution power in their respective vertical
markets to obtain access both to leading industry information sources and to
key corporate accounts. The Industry Insider partners are responsible for
identifying compelling industry news sources, obtaining the content and
integrating it into channels on the PointCast Network. In addition, the
Company's Industry Insider partners have their own sales forces who seek to
deploy the PointCast Network within their customers' organizations. In
exchange, these Industry Insider partners receive prominent co-branding on the
PointCast Network Client, expanding their brand awareness among key
constituents. Additionally, their PointCast Network deployment efforts provide
them with new opportunities to strengthen and extend customer relationships.
Vertical market content can also be obtained through a separate co-branded
version of the PointCast Network Client offered by PointCast's Industry
Insider partners.

Internal Corporate Content. PointCast Network viewers within a corporation
can receive, at the company's discretion, a private, internal company channel
integrated into the PointCast Network and broadcast over the organization's
secure intranet. Typically, this channel is used to communicate corporate
messages and promote the use of the corporate intranet. By broadcasting
important company information directly to employees' desktops, the PointCast
Network provides corporations with a powerful complement to standard
communication tools, such as e-mail and bulletin boards.

Below are a few examples of how certain corporations are using the PointCast
Network:

. Federal Aviation Administration. Titan Software Systems, a PointCast
Premier Solution Partner, has integrated the PointCast Network with
secure executive information for the Air Traffic Service of the Federal
Aviation Administration ("FAA"). Air Traffic Service operates and
maintains the United States air traffic control system. The PointCast
solution replaces labor intensive paper, fax and e-mail processes with a
fully automated process, delivering the same up-to-date, time-sensitive
information to the desktops of Air Traffic Service executives
nationwide. With a single user interface, FAA management can see
internal information on air traffic alerts, key performance metrics,
long term trends and facility profiles along with the latest relevant
news, weather, congressional and aviation-related information delivered
from the PointCast Network.

. Hewlett-Packard. Hewlett-Packard's Software and Services Group ("SSG")
is in the process of rolling out the PointCast Network to its sales
force and delivery organization. In addition to receiving news and
information about their customers and competitors, SSG employees will
also receive a summary of time-sensitive news items about the company's
products and industry broadcasts via their intranet channel. The
PointCast/SSG news service, called "The Edge," is also used as a way to
promote company events, individual accomplishments and departmental
announcements.

. Houston Industries. Houston Industries, a diversified international
energy services company, uses the PointCast Network and the PointCast
Intranet Broadcast Solution to highlight important company and industry
news in a compelling manner. Information is broadcast via their intranet
channel, including competitive news flashes, company stock price, gas
and electric futures, industry legislation and key plant operating
statistics such as overtime, inventory and outages. With the
deregulation of the energy industry, PointCast is helping Houston
Industries compete by focusing employees on competition, industry
changes and customer service.

. National Semiconductor. National Semiconductor Corporation ("National
Semiconductor") developed a reporting system based on the PointCast
Network and the PointCast Intranet Broadcast Solution that consolidates
sales and forecast information from National Semiconductor's Web site
and intranet. Information broadcast to employees includes customer and
reseller orders, sales forecasting, production levels, shipping history
and mainframe-based billing, booking and backlog data. The system
provides product planners with the information they need to quickly
respond to market shifts and generate more product turns and more
revenue.

. PNC Bank. PNC Bank uses its intranet channel to broadcast headlines from
various lines of business as well as breaking news items about the
banking industry. All information is stored in a Lotus Notes database
which PNC has seamlessly integrated with their PointCast Network
intranet channel. PNC is also using the PointCast Network Banking
channels to receive pertinent industry information.

International Content. The Company's long-term growth strategy includes
incorporating local-language content and advertising into the PointCast
Network offerings. In October 1997, the Company launched a separate Japanese-
language edition of the PointCast Network. The Japanese edition broadcasts
information from Japanese content sources such as Asahi Shimbun and Japanese
advertisements from its own local broadcast facility to local viewers. The
Company intends to continue to strategically expand the PointCast Network to
include content from other countries and geographic regions.

The PointCast Central Broadcast Facility

In order to deliver personalized information and advertising to a mass
audience, PointCast developed and operates a sophisticated client/server
network that can scale to millions of viewers. Over the past three years, the

Company has refined a broadcast server solution that effectively and
efficiently addresses the complex tasks of retrieving content feeds,
compressing and delivering data and synchronizing delivery to clients
globally. PointCast's Central Broadcast Facility transforms incoming news
streams from approximately 700 sources into an efficient and consistent
broadcast which it delivers to PointCast's viewers. The Central Broadcast
Facility, located in the Company's Sunnyvale, California headquarters,
receives continuously updated news feeds via satellite, the Internet and
leased lines. These feeds are automatically formatted and characterized, then
encoded, compressed, and populated into databases in preparation for
broadcast. Dedicated servers utilizing proprietary software broadcast
approximately 450 million news articles and information items each day in
response to requests from individual PointCast Network Clients.

The PointCast Network Client

The PointCast Network Client is a free software program that resides on the
PC's hard drive and frequently communicates through the Internet with the
Company's Central Broadcast Facility. The PointCast Network Client receives
content feeds from the Central Broadcast Facility or the PointCast Caching
Manager and displays it on the viewer's PC, as well as collects viewer
information and transmits it back to the Central Broadcast Facility. Viewers
can consume news, information and advertising in three principal modes: (i)
SmartScreen mode; (ii) Channel Viewer mode; and (iii) via the scrolling ticker
at the bottom or top of the viewer's screen. Advertising is displayed in 30-
second animated commercials in the SmartScreen and Channel Viewer modes, as
banners in the Channel Viewer Mode, and as ticker, SmartScreen and content
sponsorships. PointCast complements its broadcast service with EntryPoint, a
Web-based offering that enables viewers to quickly retrieve information or
access services on demand. PointCast intends to continue to expand its
offerings to include other services that capitalize on the depth and
interactivity of the Web.

[GRAPHIC APPEARS HERE]

A picture of the Company's SmartScreen

A picture of the Company's Channel Viewer Screen

A picture of the Company's Ticker

. SmartScreen. The PointCast SmartScreen incorporates the Company's
patented technology and replaces the traditional PC screensaver with a
dynamic news broadcast. When the computer is idle, the SmartScreen
automatically displays headlines and advertisements in a graphical, eye-
catching newscast. The PointCast Network channels rotate continuously
while in SmartScreen mode. When viewers are interested in more detail
regarding a news story, they can click on the SmartScreen headline to
retrieve full-text articles in the Channel Viewer mode.

. Channel Viewer. The Channel Viewer enables viewers to read news articles
and review in-depth information, navigate between content channels and
personalize their PointCast Network preferences.

. Ticker. The PointCast Network's configurable ticker displays a
continuous stream of breaking news such as stock quotes, headlines,
weather forecasts and internal company announcements. In addition to
being integrated with the Channel Viewer and SmartScreen, the ticker can
also run independently along the top or bottom of the computer screen,
enabling viewers to monitor current news and information while using
other desktop applications.

The PointCast Intranet Broadcast Solution

PointCast offers a suite of free corporate intranet tools that are designed
to increase viewership in the business environment by delivering substantial
value to executive management, IT departments, corporate communications
departments and corporate librarians. The PointCast Intranet Broadcast
Solution allows companies to enjoy the benefits of PointCast's free news and
information while minimizing PointCast Network traffic. In addition, the
Company's Intranet Broadcast Solution is designed to allow customers to
preconfigure desktops and manage the content and advertising within their
corporations, and by allowing them to broadcast internal news and information
to employees. The PointCast Intranet Broadcast Solution consists of the
following four components:

. PointCast Caching Manager. The PointCast Caching Manager is designed to
reduce traffic through the corporate firewall from use of the PointCast
Network by approximately 85%. It supports corporate alerts, allowing
companies to rapidly inform employees of time-sensitive breaking news
via multicast.

. PointCast Intranet Broadcast Manager. The PointCast Intranet Broadcast
Manager is designed to allow corporations to broadcast timely internal
news and information, such as new product announcements, news on
competitors, changes in employee benefits and other timely company
information. A customized intranet channel runs alongside the public
PointCast Network channels and is available only to employees securely
behind the firewall.

. PointCast Administrator. The PointCast Administrator is designed to
enable IT professionals to control and configure PointCast Network
channels for their employees. The IT department can filter up to five
competitive advertisers and five channels and recommend or mandate that
certain broadcasts such as those from suppliers or key partners appear
on employee desktops. In addition, corporations can also optimize
network performance by using PointCast Administrator to designate client
update schedules.

. PointCast Studio. The PointCast Studio is designed to enable
corporations to use this bandwidth-optimized animation tool to create a
customized look for their internal corporate channel and the animated
advertising they may choose to run on their intranet channel. PointCast
Studio supports dynamic animation effects, drag-and-drop graphics and
precise creative control.

POINTCAST VIEWERSHIP

The PointCast Network reaches a premium business audience that is highly
attractive to advertisers. The value of the audience to advertisers is a
function of demographic characteristics as well as the amount of time viewers
spend with the PointCast Network to stay informed. The Company believes that
its viewers are well-educated, affluent individuals who are likely to buy
products and services online. Surveys indicate that the median annual income
of a PointCast viewer is substantially higher than the median annual income of
readers of Business Week and Forbes as reported by those publications. The
Company believes its viewers spend more time using its service than users of
any other leading Web site today. The Company had an average of approximately
1.2 million active viewers worldwide in the first quarter of 1998. An active
viewer is someone who received at least one content update automatically or
manually in the last month. In addition, since the PointCast Network was
introduced in February 1996, the Company has received approximately 7.0
million registrations. A registration is generated when a viewer installs and
registers the PointCast Network Client.

The table below contains certain information from two 1997 surveys conducted
by IntelliQuest Inc. which reflect differences that the Company believes exist
between PointCast Network viewers and other Internet users.

POINTCAST INTERNET
DEMOGRAPHIC TRAITS: VIEWERS (1) USERS
------------------- ----------- ---------

Average Age............................................ 39 years 35 years
Average Annual Household Income........................ $109,080 $ 66,025
College Degree or Greater.............................. 69% 42%
Management............................................. 44% 33%
Administrative/Services/Other.......................... 15% 30%
Purchased Online in 30 Days Prior to Survey............ 32% 16%

- --------
Sources: November 1997 PointCast Viewer Study, IntelliQuest Inc., and 1997
IntelliQuest WWITS Study

The Company believes its viewers are more engaged, as measured by the
duration and frequency of use, than are readers of business magazines and
typical visitors to leading Web sites. For example, according to a report by
Media Metrix in March 1998, the typical PointCast Network viewer is exposed to
PointCast 6.8 days per month and an average of 57.2 minutes per usage day.
According to the same report, a typical Yahoo! viewer uses Yahoo! for an
average of 3.9 days per month and 7.0 minutes per usage day. In addition,
Business Week reports that its average reader spends approximately 1.4 hours
per weekly issue.

Primarily through word of mouth and press articles, the Company has
experienced a consistently high rate of new viewer registrations. Throughout
1997 and the first quarter of 1998, the Company has received between 850,000
and 1,000,000 registrations per quarter. Despite the strong awareness and
interest in the PointCast Network, the Company has experienced a low retention
rate in the first 90 days after registration. The Company has conducted market
research to identify the causes of viewer attrition. According to a survey
conducted by the Company, approximately two-thirds of respondents indicated
that they left the PointCast Network for identifiable performance reasons
associated with the PointCast Network Client. Based on this research, the
Company intends to release a new version of the PointCast Network Client in
the second half of 1998, which is designed to improve performance of the
PointCast Network Client in specified areas. The Company believes that release
of this new version will help improve viewer retention and may motivate former
PointCast Network viewers to again use the PointCast Network. Many former
PointCast Network viewers have indicated that they believe that the PointCast
Network is a useful information source for business people. See "Risk
Factors--Need to Retain and Increase Viewer Base."

The Company released version 2.5 of the PointCast Network Client in April
1998, which begins to address certain identified software reliability issues.
In addition, the Company is developing version 2.6 to specifically address
performance issues. The Company expects that version 2.6 will be in beta
testing in the third quarter of 1998. Importantly, version 2.6 is being
developed to redesign the PointCast Network Client's animation engine to
reduce its consumption of the PC's graphical display interface ("GDI")
resource by more than two-thirds from an average of 43% to less than 7%,
making it comparable to non-graphically intense desktop applications like
popular word processors and spreadsheets. The Company believes version 2.6
will substantially improve PointCast Network Client's performance in key
areas, including reducing the transition time between the SmartScreen and
other applications and improving stability in a multi-tasking environment. The
Company believes this is an important factor in increasing viewer retention.
The Company intends to continue to improve and enhance the performance of the
PointCast Network Client with new versions. For example, the Company is
developing future upgrades to continue maximizing performance, address
connectivity issues and assist viewers in the download and installation
process.

There can be no assurance that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of versions 2.5, 2.6 or future upgrades, or that these products will
provide the technological improvements the Company expects or that they will
adequately meet the market's requirements. If the Company were to incur delays
in the introduction of these versions, or if such versions do

not provide the improvements expected, the Company's business, financial
condition and results of operations could be materially adversely affected.
See "Risk Factors--Need to Improve System Performance and Stability; New
Product Development and Technological Changes."

ADVERTISING ON THE POINTCAST NETWORK

The Company derives substantially all of its revenue from the sale of
advertisements. Advertisements appear to viewers in the SmartScreen and the
Channel Viewer modes and as logo sponsorships on the ticker. Advertising
revenue represented 87.2% and 96.1% of the Company's total revenue for fiscal
1997 and the first quarter of 1998, respectively. The Company believes it has
been able to achieve its advertising revenue to date primarily through the
value proposition it offers to advertisers, the extensive knowledge and
relationship base of its direct sales force, its regular marketing efforts
targeted to the advertising community and through the sales efforts of the
Company's local and national media partners.

Advertising opportunities on the PointCast Network currently consist of 30-
second animated commercials, a variety of SmartScreen, ticker and content
sponsorships and banner advertisements, which are designed to meet a broad
range of marketing objectives, including brand marketing, direct-response
marketing and new product introductions. Each advertising unit includes an
interactive element through a link to the advertisers' Web site. The majority
of advertising sales today are based on the 30-second animated advertisements
that PointCast pioneered. The Company believes it has produced and deployed
more animated advertising units than any other internet-based property. These
commercials combine attention-drawing advertisements with frequency of
delivery to generate awareness and stimulate interest. Such advertisements
also capitalize on the strengths of the Internet, allowing customers immediate
access to more information and the ability to transact through an advertiser's
Web site. Based upon the current rate card, a typical advertisement over a
four week period on a National channel would yield between $38,000 and
$54,000.

Key Advantages

PointCast believes that the characteristics of its viewer environment and
demographics offer compelling reasons for advertisers to choose the PointCast
Network to deliver their marketing messages. Advertisements on the PointCast
Network are primarily seen by consumers at work who constitute an attractive
audience in an environment that has previously been difficult for marketers to
access. The ability to reach business consumers in their offices allows
advertisers to appeal to the interests and needs of premium business audiences
with products such as financial services, computers and automobiles, as well
as products and services that can be purchased on behalf of their companies
and organizations.

Because all of the PointCast Network's viewers are registered, the Company
has the ability to target advertisements by a variety of factors, including
gender, location, age, occupation, special interest and channel selection. The
PointCast Network is unique in its ability to download in advance, store on
the viewer's system and sequentially play rich, 30-second animated commercials
with no delay. PointCast's technology also includes the ability to track and
report detailed advertising performance statistics. This data is collected on
the viewer's computer and periodically uploaded to PointCast. The Company has
created advertising reports which are more detailed than those available
through other advertising venues. Like most advertising-supported Web sites,
the PointCast Network can also report the total number of impressions and
number of clicks generated. Unlike most advertising-supported Web sites, the
PointCast Network reports tally the number of unique viewers who received a
commercial, the frequency with which a commercial played and a demographic
profile of those who clicked.

Top Advertising Customers

The Company has attracted a broad range of advertisers. During 1997, more
than 200 advertisers placed advertisements on the PointCast Network. The
following is a representative list of companies that purchased more than
$30,000 in advertising on the PointCast Network during 1997:

TECHNOLOGY/
CONSUMER/TRAVEL/AUTOMOTIVE FINANCIAL TELECOMMUNICATIONS
- -------------------------- ------------------------- ---------------------

Avis Rent A Car, Inc. American Express Company 3Com Corporation
Boise Cascade Office AmeriTrade Holding Compaq Computer
Products Corporation Corporation
BMW AG Charles Schwab & Co., Comp USA
Colgate-Palmolive Inc. Computer Associates
Company Donaldson, Lufkin & International, Inc.
Continental Airlines, Jenrette, Inc. Gateway 2000 Inc.
Inc. The Dreyfus Corporation Hewlett-Packard Company
Inteli-Health, Inc. E*TRADE Group, Inc. International Business
Eastman Kodak Company Fidelity Investments Machines Corporation
Korean Air Lines Institutional Services Intel Corporation
Land Rover North Company, Inc. MCI Communications
America, Inc. First Chicago NDB Corporation
Daimler-Benz North Corporation Microsoft Corporation
America Corp. Founders Asset Northern Telecom Limited
Pfizer, Inc. Management LLC Oracle Corporation
The Procter & Gamble NationsBank Corporation SAP AG
Company Northwestern Mutual Life Texas Instruments
Saturn Corporation Insurance Company Incorporated
Levi Strauss & Company Quick & Reilly Toshiba America, Inc.
(Slates) The Vanguard Group, Inc.
Toyota Motor Sales VISA International
(TMS), U.S.A., Inc. Wells Fargo & Company

Each of the Company's advertising contracts can be cancelled by the customer
at any time on two weeks notice. Consequently, the Company's advertising
customers may move their advertising to competing Internet sites, or from the
Internet to traditional media, quickly and with minimal penalty, thereby
increasing the Company's exposure to competitive pressures and fluctuations in
net revenues and operating results. In selling Internet advertising, the
Company also depends to a significant extent on advertising agencies, which
exercise substantial control over the placement of advertising for the
Company's existing and potential advertising customers. If the Company loses
advertising customers, fails to attract new customers or is forced to reduce
advertising rates in order to retain or attract customers, the Company's
business, financial condition and operating results will be materially
adversely affected. There can be no assurance that any of the Company's
advertising customers, including those listed above, will continue to purchase
advertising in the future. See "Risk Factors--Dependence on Advertising."

Advertising Sales Organization

As of March 31, 1998, the Company's sales organization consisted of 48
employees, including 24 advertising sales representatives located in
Sunnyvale, New York, Los Angeles, Chicago and Miami. The staff collectively
has advertising experience at traditional and online publishing firms and
advertising agencies such as AOL, CMP Media Inc. ("CMP Media"), Foote Cone &
Belding, The Hearst Corporation, The New York Times Company ("New York
Times"), Prodigy Services Corporation, Time Warner Inc., Wired Ventures, Inc.
("Wired Ventures") and Ziff-Davis Inc. ("Ziff-Davis"). The Company believes
that having an internal sales force with significant prior experience will
allow it to better understand and meet advertisers' needs, increase its access
to potential advertisers and maintain strong relationships with its existing
base of advertising clients.

MARKETING AND DISTRIBUTION

To date, the Company has built awareness of the PointCast Network primarily
through press coverage and word of mouth. The Company's strategy is to
increase its brand equity and overall awareness through formalized campaigns,
including advertising, direct mail and other promotions. PointCast's extensive
viewer database

enables the Company to target service-related messages to active and former
viewers. PointCast plans to leverage this asset to increase viewership by
contacting past viewers with incentives to try new service upgrades or other
offerings. The Company intends to conduct aggressive viewer reacquisition and
reactivation programs around future software releases that address key
performance issues. Similarly, PointCast plans to encourage viewer loyalty and
referrals by targeting messages and offers to appropriate subsets of its
installed base of viewers.

The Company is highly focused on attracting corporate viewers. The Company
works closely with IT professionals, executive management, corporate
communications and corporate librarians in Fortune 1000 companies to build
support for corporate-wide deployment of the PointCast Network. The Company is
utilizing multiple distribution methods to increase corporate deployment,
including a direct sales force, Solution Partners/VARs and vertical market
partners.

Direct Corporate. The Company has an enterprise sales and marketing force
which is compensated based on the number of viewers acquired in corporations.
In addition, the Company has a post-sale group that assists key accounts in
the technical and marketing aspects of deploying throughout the enterprise.
The Company has active relationships with more than 150 Fortune 1000 accounts.

Solution Partners/VARs. The Company has recruited and trained more than 60
Solution Partners or VARs. Each Solution Partner creates customized PointCast
intranet solutions and markets and distributes the PointCast Network in their
own corporate accounts. Solution Partners extend the PointCast Network's
capabilities by performing such functions as custom application development,
database integration and corporate SmartScreen design. The Company's Solution
Partners are compensated directly by corporate accounts for their assistance
in installation, intranet content development, integration with legacy systems
and other services. Examples of some of the Company's Solution Partners
include:

. Brainstorm Technology, Inc. With eight offices worldwide, Brainstorm
Technology, Inc. provides business solutions for intranets, extranets
and the Internet. Clients of Brainstorm utilizing the PointCast Network
include Texaco, Continental Airlines, Security Capital Group and Dayton
Hudson.

. Randall Marsden Design. Randall Marsden Design is a developer of high-
quality multimedia solutions, emphasizing content design, animation and
graphics, whose clients utilizing the PointCast Network include Charles
Schwab and Lockheed Martin.

. SenseNet, Inc. SenseNet, Inc. ("SenseNet") is a premier provider of
high-end Internet and intranet business solutions. Clients of SenseNet
that utilize the PointCast Network include ConEdison, Kodak and Pfizer.

. USWeb Northcoast. USWeb Northcoast is part of the USWeb network of
qualified Internet/intranet systems integrators. Clients of USWeb
utilizing the PointCast Network include CNA Insurance and Dana
Corporation.

Vertical Market Partners: The Company's vertical market partners, called
Industry Insider partners, are leading firms such as Ambac, Coopers & Lybrand,
EDS, Inteli-Health and KPMG, which are co-developing with the Company 27
industry channels covering 11 vertical markets. Each of the Company's vertical
market partners markets and distributes the PointCast Network to its clients
as part of its overall offerings. The Company works closely with these
partners to win corporate accounts. For example, recently PointCast and KPMG
persuaded several banks to test the PointCast Network Banking channels for
future rollout in their organizations. In exchange for the content and
distribution they offer PointCast, vertical market partners receive prominent
co-branding on the PointCast Network Client, which increases awareness of
their brand within their market. These professional services firms can also
leverage their PointCast Network deployment activities to expand existing
relationships with key customers.

CENTRAL BROADCAST FACILITY AND TECHNOLOGY

Company has refined a broadcast server solution that effectively and
efficiently addresses the complex tasks of retrieving content feeds,
compressing and delivering data and synchronizing delivery to clients
globally. This internal server development effort has produced an intelligent
server-based broadcast solution that is highly reliable, scales on the
Internet and corporate Intranets and allows the collection of demographic and
usage data from the PointCast Network Clients. In addition, the Company has
leveraged this client/server architecture to implement proprietary methods for
the description of information and identification of viewers that makes the
sophisticated display modes in its client possible. Because it designed both
the client and the server, the Company can tailor the service to provide
additional value to corporate managers by allowing them to control the
operation of PointCast Network Clients within their intranets in a manner that
is extremely difficult to do with Web sites. The Company considers these
proprietary client and server-side technologies and know-how to be significant
strategic advantages over conventional Web site operators and other
competitors.

The Company intends to continue to develop internally its technology and
broadcast infrastructure, as well as to integrate with externally developed,
third-party server software where appropriate. For the initial client
development, a number of proprietary technologies, including the networking
layer and browser, needed to be built internally in order to achieve the level
of integration and automation desired. Over time, it is the Company's
intention to replace some of these client-side components with licensable or
freely available technologies, so that the Company's technical teams can focus
on future opportunities.

The PointCast Network Internet Infrastructure

[GRAPHIC APPEARS HERE]

A drawing depicting the Company's Network Internet Infrastructure within the
United States and out to international viewers.

The Company's Central Broadcast Facility, based on proprietary technologies
and housed in a custom-built data broadcast facility located in the Company's
Sunnyvale, California headquarters, is designed to be fully scalable, reliable
and secure. The Company believes its robust end-to-end client/server Internet
broadcast solution gives it significant strategic and operational advantages
over others distributing news and information via the

Internet. On an average day, the Company estimates that the Central Broadcast
Facility broadcasts approximately 450 million individual news and information
items. The scalability of the server system is designed to accommodate rapid
and efficient growth of PointCast Network viewership. The end-to-end structure
of the PointCast Network client/server system allows the Company to seamlessly
provide the entire installed viewer base with new versions of the PointCast
Network Client software which contain new technologies. Without proprietary
software on an individual's PC, it is extremely difficult for Web site
operators publishing to standard browser software to automatically distribute
new technologies to their entire user base.

The PointCast Network broadcasting process begins with the acquisition and
processing of over 150 independent streams of content from PointCast's various
media providers. Content feeds flow into the Central Broadcast Facility via
satellite, the Internet and leased lines, with secondary delivery methods in
place as back-up for the most important data sources. The Company has
developed technology that continuously formats and characterizes the raw
feeds, without operator or editorial intervention. The individual news
articles are then encoded, compressed, and populated into databases in
preparation for broadcast to viewers. Content is broadcast to PointCast's
viewers through a series of dedicated servers linked by proprietary software
that is optimized for speed, load balancing and redundancy.

The Central Broadcast Facility is linked to the Internet via a state-of-the-
art OC48 fiber-optic connection to the Sunnyvale headquarters, with a second
redundant fiber connection available in the case of catastrophic failure. The
Company presently utilizes Internet connectivity distributed across several
leading top-tier service providers, including ANS, InterNEX Technologies, Inc.
("InterNEX"), SAVVIS Communications Corporation ("SAVVIS") and UUNet
Technologies, Inc. ("UUNET"), via private peering arrangements. Two Internet
connections, InterNEX and UUNet, are available through the Palo Alto Internet
Exchange maintained by Digital Equipment Corporation. A back-up facility,
maintained in Plano, Texas under contract with EDS, replicates a portion of
the functionality of the Central Broadcast Facility. Emergency electricity
supplies are provided in the case of a power failure at the Sunnyvale
headquarters through UPS and on-site generators. Since the launch of the
PointCast Network in February 1996, the Central Broadcast Facility has been a
reliable, mission-critical facility, sustaining constant operations 24 hours a
day, seven days a week without interruption for well over 99% of the time. See
"Risk Factors--Risk of System Failure."

The PointCast Network Client

PointCast Network viewers receive news and information from the Central
Broadcast Facility through the PointCast Network Client. The PointCast Network
Client software is based upon the Company's patented, proprietary
technologies. The software confers advantages upon PointCast Network viewers
through close integration with features supported by the Central Broadcast
Facility. These competitive advantages include:

. Minimization of bandwidth usage through data compression, differential
downloading of content and intelligent client-side caching;

. Personalization of content for each viewer in accordance with their
individual selections and demographic interests;

. Dynamic construction and playback of SmartScreen and ticker animations
based upon the viewer's personalization and demographics;

. The ability to pre-download, store on the viewer's system and
sequentially play rich, 30-second animated commercials with no delay;

. The ability to view a full news article even when the viewer is not
actively connected to the Internet;

. The collection and uploading of detailed viewership statistics, even for
periods when a viewer is not actively connected to the Internet; and

. The invisible downloading of the PointCast Network Client updates.

A key element of the Company's strategy to retain and increase its viewer
base is to improve the performance and reliability of the PointCast Network
through the introduction and release of enhancements and upgrades to its
PointCast Network Client. The Company released version 2.5 of its PointCast
Network Client in April 1998. The Company is currently developing version 2.6
and expects it to be released in the second half of 1998. There can be no
assurance that the Company will not experience difficulties in the rollout of
version 2.5 or difficulties that could delay or prevent the successful
development, introduction and rollout of version 2.6, that versions 2.5 and
2.6 will provide the technological improvements the Company expects, that
these products will adequately meet the market's requirements or that they
will gain market acceptance. Furthermore, there is no assurance that during
the rollout period of the new versions the Company will not continue to
experience significant viewer attrition. If the Company were to incur delays
in the introduction of version 2.6, or if these versions 2.5 and 2.6 do not
provide the improvements expected or do not gain market acceptance, the
Company's business, financial condition and results of operations could be
materially adversely affected.

COMPETITION

The market for Internet content and information services, and Internet
advertising is new and rapidly evolving, and competition for viewers and
advertisers is intense and is expected to increase significantly in the
future. The Company competes for viewers with many other Internet content and
service providers, including Web directories, search engines, shareware
archives, sites that offer original editorial content, commercial online
services and sites maintained by Internet service providers, as well as
thousands of Internet sites operated by individuals, government and
educational institutions. These competitors include subscription services such
as Bloomberg, Dow Jones Telerate, NewsEdge, Reuters Limited, The Wall Street
Journal Interactive Edition and other business-oriented internet sites, as
well as free information, search and content sites or services offered by
companies such as AOL, CNet, CNN/Time Warner, Excite, Infoseek, Lycos,
Netscape and Yahoo! some of whom, such as CNN/Time Warner, may also provide
content to the PointCast Network. The Company believes that the principal
competitive factors in attracting Internet viewers include the quality of
presentation the PointCast Network Client performance and the relevance,
timeliness, depth and breadth of information and services offered by the
Company. The Company also competes with many companies for advertisers,
including those companies with whom the Company competes for viewers as well
as traditional forms of media such as newspapers, magazines, radio and
television. The Company believes that the principal competitive factors in
attracting advertisers include the number of viewers of the PointCast Network,
the demographics of the Company's viewers, the Company's ability to deliver
focused advertising through the PointCast Network and the overall cost-
effectiveness and value of advertising offered by the Company. The Company
also believes that companies with access to large installed bases of end users
through the telecommunications infrastructure are potential competitors of the
PointCast Network. Such potential competitors could include regional Bell
operating companies, cable television companies, long-distance telephone
service providers and large content publishers.

The Company currently has an agreement with Microsoft pursuant to which
Microsoft includes the PointCast Network on its Active Desktop product. This
agreement is scheduled to expire in September 1998, subject to Microsoft's
right to renew the agreement for an additional year. Currently, the Company is
not receiving a significant number of new viewer registrations as a result of
this agreement and the Company does not believe Microsoft intends to renew the
agreement. Although the Company is not aware of any plan by Microsoft to
develop any directly competing product or service, Microsoft has a vastly
greater installed user base and vastly greater financial, research and
development, marketing, sales and distribution resources than the Company. The
announcement or introduction by Microsoft of a directly competitive product
could have an immediate, material adverse affect on the Company's business,
financial condition and operating results. There is no provision in the
Company's agreement with Microsoft which would prohibit Microsoft from
competing with the Company.

established relationships with advertisers and advertising agencies than the
Company. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to attract viewers and advertisers than the Company. In addition,
although the Company believes that it currently collects more data regarding
its viewer profiles than its competitors, other companies are currently or have
announced their intention to collect more detailed viewer profile information.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by
the Company will not materially adversely affect the Company's business,
financial condition and operating results.

INTELLECTUAL PROPERTY

The Company regards its intellectual property as critical to its success, and
the Company relies on patent, trademark, copyright and trade secret laws in the
United States laws and other jurisdictions to protect its proprietary rights.
The Company has been issued one patent, has filed nine patent applications with
the United States Patent and Trademark Office and has filed one patent
applications in three foreign jurisdictions to protect certain aspects of its
technology. The Company pursues the protection of its trademarks by applying to
register the trademarks in the United States and (based on anticipated use)
internationally, and is the owner of a registration for the PointCast
trademark. There can be no assurance that any of the Company's pending or
future patent or trademark applications will be granted or approved. In
addition, there can be no assurance that the Company's current patent and
trademarks or any future patents or trademarks will not be successfully
challenged by others or invalidated or narrowed through the administrative
process or litigation. Patent, trademark, copyright and trade secret protection
may not be available or enforceable in every country in which the country in
which the Company's products are distributed or made available. In addition,
the Company seeks to protect its proprietary rights through the use of
confidentiality agreements with employees, consultants, advisors and others.
There can be no assurance that such agreements will provide adequate protection
for the Company's proprietary rights in the event of any unauthorized use or
disclosure, that employees of the Company, consultants, advisors or others will
maintain the confidentiality of such proprietary information or that such
proprietary information will not otherwise become known, or be independently
developed, by competitors or others. The Company incorporates an electronic
version of a "shrink wrap" license into all of its software distributed to end
users in order to protect the Company's intellectual property rights in such
software products. Since the electronic "shrink wrap" licenses are not signed
by the end user, they may not be deemed enforceable under the laws of certain
jurisdictions.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of the Company or other companies
within the industry. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or that third
parties will not infringe or misappropriate the Company's proprietary rights.
Policing unauthorized use of the Company's proprietary technology and other
intellectual property rights could entail significant expenses and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford the Company little or
no effective protection of its intellectual property. Any such infringement or
misappropriation, should it occur, could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
there can be no assurance that third parties will not bring claims of patent,
copyright or trademark infringement against the Company. The Company
anticipates an increase in patent infringement claims involving Internet-
related technologies as the number of products and competitors in this market
grows and as related patents are issued. Further, there can be no assurance
that third parties will not claim that the Company has misappropriated their
trade secrets or otherwise infringed upon their proprietary rights. Any claims
of infringement, with or without merit, could be time consuming to defend,
result in costly litigation, divert the Company's resources, require the
Company to enter into costly royalty or licensing arrangements, if available,
or prevent the Company from using important technologies or methods, any of
which could have a material adverse effect on the Company's business, financial
condition or operating results. There can be no assurance that the Company
would be able to enter into

arrangements with such third parties on commercially reasonable terms allowing
the Company to continue to use such patented technology or trademarks.

From time to time, the Company receives notices that its products and
services may infringe the intellectual property rights of others. In 1995,
Unisys announced its intention to require the payment of royalties for the use
of compression technology associated with the popular Graphics Interchange
Format ("GIF"). In March 1998 the Company received a letter from Unisys
stating that it holds a patent (the "Welch" patent) on certain data
compression/decompression technology that it claims is applicable to the
graphics incorporated in GIF file format in certain of the content and
advertising delivered on the PointCast Network. The Company is currently
reviewing the matter with its patent counsel in order to determine the scope
of the claims in the Welch patent and to determine its response to Unisys'
request that the Company license the Welch patent. The Company could incur
additional expense and liability if the Company enters into a license with
Unisys under the Welch patent or if the Company becomes involved in litigation
with Unisys relating to the Welch patent. There is no assurance the Company
will prevail in such litigation. If the Company's incorporation of GIF files
in the content and advertising distributed on the PointCast Network is found
to be within the scope of the Welch patent, the Company could incur liability
and related expense resulting from such infringement. The assertion of these
patent rights by Unisys, if successful, could result in additional expense to
the Company should it decide to utilize a different graphics file format for
the content and advertising distributed on the PointCast Network. There can be
no assurance that the Company's products or services are not subject to the
Welch patent.

In March 1997, the Company received a letter from Wang, stating that Wang
was interested in licensing a portion of its patent portfolio to PointCast or
other interested parties involved in Internet-related technology. The Company
reviewed the proffered patents with its patent counsel and has informed Wang
that the Company is not interested in pursuing a purchase or license agreement
at this time. Wang filed a lawsuit alleging patent infringement regarding some
or all of the profferred patents against Netscape and AOL. In May 1998, this
lawsuit was dismissed on summary judgment. There can be no assurance that
Wang's lawsuit against Netscape and AOL will not be reinstated on appeal, or
that Wang will not assert claims against the Company, notwithstanding the
Company's belief that its products do not infringe the profferred Wang
patents.

EMPLOYEES

As of March 31, 1998, the Company had a total of 267 employees, of which 259
are based in the United States and 8 are based in Japan. Of the employees
based in the United States, 91 were involved in engineering, 59 were engaged
in marketing and customer support, 48 were involved in sales, and 61 had
general and administrative duties. None of the Company's employees is
represented by a labor union. The Company has not experienced any work
stoppages and considers its relations with its employees to be good.

The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. This

rapid growth has placed, and is expected to continue to place, a significant
strain on the Company's management, operational and financial resources. From
January 1, 1996 to March 31, 1998, the Company grew from 57 to 267 employees.
The Company has also recently added a number of key managerial and technical
employees and the Company expects to add additional key personnel in the
future.

FACILITIES

The Company leases approximately 64,800 square feet of office space in a
building in Sunnyvale, California that houses the Company's principal
administrative, finance, sales, marketing, Internet broadcasting operations and
product development.

The Company's Sunnyvale headquarters facility is leased for a term of 5 1/2
years through October 31, 2002 and the Company has two five-year renewal
options. The Company subleases a facility contiguous to its headquarters
through August 2000. The Company is obligated under the lease for this facility
through October 31, 2002. The Company also has a short term operating lease for
a sales office in New York and is seeking office space of approximately 2,500
square feet to replace this short term lease. The Company anticipates that
additional facilities will be required if the Company is successful in
achieving its growth objectives and believes that suitable additional space
will be available on commercially reasonable terms.

LEGAL PROCEEDINGS

The Company is from time to time a party to legal proceedings that arise in
the ordinary course of business. There is no pending or threatened legal
proceeding to which the Company is a party that, in the opinion of the
Company's management, is likely to have a material adverse effect on the
Company's business, financial condition or operating results.

MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

The following table sets forth the names, ages and positions of the executive
officers, key employees and directors of the Company, as of April 30, 1998:

NAME AGE POSITION(S)
---- --- -----------

David W. Dorman......... 44 Chairman, President and Chief Executive Officer
Philip J. Koen.......... 46 Senior Vice President, Finance and Operations
and Chief Financial Officer
Jaleh Bisharat.......... 39 Senior Vice President, Marketing
Douglas W.C. Boake...... 32 Senior Vice President, Strategic Sales and Affiliate Development
James F. Wickett........ 47 Senior Vice President, Worldwide Business Development
Gary A. Paranzino....... 37 Vice President, General Counsel and Secretary
Sanford R. Climan....... 42 Director
Jonathan Feiber(2)...... 41 Director
Charles Geschke(1)...... 58 Director
Kevin R. Harvey(1)...... 33 Director
Gregory P. Hassett...... 32 Director
Steven Heyer............ 45 Director
Andrew S. Rachleff(2)... 39 Director

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

David W. Dorman has served as the Company's President and Chief Executive
Officer since November 1997 and as the Company's Chairman since February 1998.
Mr. Dorman served as the Executive Vice President of SBC Communications, a
telecommunications company, from August 1997 to November 1997 following last
year's merger between SBC Communications Inc. and Pacific Telesis Group,
Pacific Bell's parent company. Prior to the merger, Mr. Dorman served as
Chairman of the Board of Directors, President and CEO of Pacific Bell, a
telecommunications company, from July 1994 to July 1997. From 1981 to 1994, Mr.
Dorman held several senior management positions, including President of the
Sprint Business division of Sprint Corporation, a telecommunications company.
Mr. Dorman is also a director of 3Com Corporation and Scientific-Atlanta, Inc.
Mr. Dorman received a B.S. from the Georgia Institute of Technology.

Philip J. Koen has served as Senior Vice President, Finance and Operations
and Chief Financial Officer of the Company since May 1997. From December 1993
to May 1997, he served as Chief Financial Officer of Etec Systems, Inc., a
maker of semiconductor equipment used to create photolithography mask patterns.
From April 1989 to December 1993, he served as Chief Financial Officer and Vice
President of Manufacturing at Levolor Corporation, a consumer products
manufacturer. Mr. Koen is a director of Centura Software Corporation, a
software developer. Mr. Koen received a B.A. from Claremont McKenna College and
an M.B.A. from the University of Virginia. Mr. Koen is a certified public
accountant, inactive status.

Jaleh Bisharat has served as Senior Vice President, Marketing of the Company
since February 1997. Ms. Bisharat served as Vice President, Marketing upon
joining the Company in January 1996. From January 1995 through January 1996,
Ms. Bisharat served as General Manager, Lotus Database Division of Lotus
Development Corporation. From September 1991 through December 1995, she served
as Vice President, Marketing of Approach Software, a database software company
acquired by Lotus Development Corporation in July 1993. Ms. Bisharat holds an
A.B. from Harvard University and an M.B.A. from Harvard Business School.

Douglas W.C. Boake has served as Senior Vice President, Strategic Sales and
Affiliate Development of the Company since March 1998. From December 1997 to
February 1998, Mr. Boake served as Vice President, International for the
Company and from May 1996 to December 1997, he served as the Company's Vice

President, Pacific Rim. From October 1993 to April 1996, Mr. Boake served as
Vice President, International of Radius Inc., a graphics peripherals and
software company. From October 1988 to October 1993, Mr. Boake served as
President, Representative Director and Managing Director, Pacific Rim of Claris
Japan, Inc., a wholly owned Japanese subsidiary of Claris Corporation (now
FileMaker, Inc.), a database software company. Mr. Boake earned a B.A. from
Rice University.

James F. Wickett has served as Senior Vice President, Worldwide Business
Development of the Company since February 1997. He served as Vice President,
Worldwide Business Development upon joining the Company in July 1996. Mr.
Wickett served as Chief Operating Officer and as a director of Rocket Science
Games, Inc., an interactive video game company, from March 1995 to July 1996
and as Vice President, Business Development from December 1993 to March 1995.
Mr. Wickett served as Chief Operating Officer of Structural Analysis
Technologies, Inc., a software developer, from June 1991 through June 1993.
Previously, Mr. Wickett served in executive positions with companies in the
video services industry including One Pass, Inc. Mr. Wickett is a director of
Epiphany, Inc., a marketing software company. Mr. Wickett is a member of the
California state bar (inactive status).

Gary A. Paranzino has served as Vice President, General Counsel and Secretary
of the Company since February 1998. He served as Assistant General Counsel upon
joining the Company in July 1996. From September 1986 to July 1996, Mr.
Paranzino practiced law in New York, most recently with Morgan, Lewis & Bockius
LLP. Mr. Paranzino earned an A.B. from Cornell University and a J.D. from
Cornell Law School and is a member of the California and New York state bars.

Sanford R. Climan has served as a director of the Company since December
1995. Since June 1997, Mr. Climan has been a Senior Management Team Member at
Creative Artists Agency, Inc., a literary and talent agency. From October 1995
to May 1997, Mr. Climan served as an Executive Vice President of MCA (now
Universal Studios, Inc.), an entertainment company. From June 1986 to September
1995, Mr. Climan held various executive management positions at Creative
Artists Agency, Inc. Mr. Climan is also a director of Signature Resorts, Inc.,
a time-share resort developer and operator. Mr. Climan has a B.A. from Harvard
College, an M.B.A. from Harvard Business School and an M.S. in Health Policy
and Management from the Harvard School of Public Health.

Jonathan Feiber has served as a director of the Company since June 1994. Mr.
Feiber has been a General Partner of Mohr, Davidow Ventures, a venture capital
firm, since 1991. From 1983 to 1991, Mr. Feiber held numerous management
positions at Sun Microsystems, Inc., most recently as Vice President,
Networking. Mr. Feiber is also a director of several privately held companies.
Mr. Feiber earned a B.A. in Computer Sciences from the University of Colorado.

Dr. Charles Geschke has served as a director of the Company since October
1994. Dr. Geschke founded Adobe Systems, Inc. ("Adobe"), a computer software
company, in December 1982 and has served as its President since April 1989 and
as the Chairman of the board of directors since September 1997. Dr. Geschke is
also a director of Rambus Inc., a semiconductor technology company. Prior to
founding Adobe in December 1982, Dr. Geschke was the manager of the imaging
sciences laboratory at Xerox Corporation's Palo Alto, California research
center. Dr. Geschke received an A.B. and an M.S. from Xavier University and a
Ph.D. from Carnegie Mellon University.

Kevin R. Harvey has served as a director of the Company since June 1994. Mr.
Harvey has been a General Partner of Benchmark Capital, a venture capital firm,
since January 1995. In August 1990, Mr. Harvey founded Approach Software
("Approach"), a software company, where he served as the President and Chief
Executive Officer until July 1993 when Approach was sold to Lotus Development
Corporation. From July 1993 to January 1995, he served as General Manager for
Lotus Development Corporation. Prior to founding Approach, Mr. Harvey founded
Styleware, a software company, which was subsequently sold to Claris
Corporation. Mr. Harvey is also a director of Silicon Gaming, Inc., an
entertainment and gaming technology company and a director of several privately
held companies. Mr. Harvey holds a B.S.E.E. from Rice University.

Gregory P. Hassett co-founded the Company in 1992 and has served as a
director of the Company since June 1997. He previously served as the Company's
Senior Vice President, Engineering from January 1998 to April 1998 and as the
Company's Vice President, Engineering from June 1992 to January 1998. From 1981
to May 1992, Mr. Hassett was a software engineer for Digital Equipment
Corporation, a computer hardware and technical services company.

Steven Heyer has served as a director of the Company since October 1997.
Since January 1998, Mr. Heyer has been the President and Chief Operating
Officer of Turner Broadcasting Systems, Inc., a wholly owned subsidiary of Time
Warner Inc., an entertainment company. From September 1992 through May 1994, he
was the President and Chief Operating Officer of Young & Rubicam Inc., an
advertising company. Mr. Heyer is also a director of Vistana Inc., a time-share
resort development and operating company. Mr. Heyer received an A.B. from
Cornell University and an M.B.A. from the New York University Stern School of
Business.

Andrew S. Rachleff has served as a director of the Company since June 1994.
Mr Rachleff has been a General Partner of Benchmark Capital, a venture capital
firm, since January 1995 and a General Partner of Merrill, Pickard, Anderson &
Eyre V, L.P., a venture capital firm, since 1989. Mr. Rachleff is also a
director of CATS Software Inc. and several privately held companies. Mr.
Rachleff received a B.S. degree from the University of Pennsylvania and an
M.B.A. from the Stanford University Graduate School of Business.

The number of directors of the Company is currently fixed at nine. At each
annual meeting of stockholders, the successors to directors whose terms will
then expire will be elected to serve from the time of election and
qualification until the next annual meeting following election and until their
successors have been duly elected and qualified.

Each officer serves at the discretion of the Board of Directors. There are no
family relationships among any of the directors or officers of the Company.

DIRECTOR COMPENSATION

The Company does not pay cash compensation to its directors, but does
reimburse directors for expenses incurred in attending board and committee
meetings. The Company has also adopted the 1998 Director Option Plan. See
"Stock Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee was formed in April 1996 to review and
approve all forms of compensation and benefits for the executive officers and
directors of the Company and its subsidiaries, administer the Company's stock
purchase and stock option plans and make recommendations to the Board of
Directors regarding such matters. The committee is currently composed of
Charles Geschke and Kevin R. Harvey. No interlocking relationship exists
between the Company's Board of Directors or Compensation Committee and the
board of directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past.

AUDIT COMMITTEE

The Company's Audit Committee was formed in April 1996 to review, act on and
report to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's independent
auditors, the scope of the annual audits, fees to be paid to the independent
auditors and the accounting practices of the Company. The committee is
currently composed of Jonathan Feiber and Andrew S. Rachleff.

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS

The Company entered into employment agreements with Messrs. Christopher
Hassett and Gregory Hassett in June 1997, setting forth terms under which
Messrs. Hassett agreed to serve as part-time employees of the

Company upon cessation of their respective full-time employment arrangements.
The employment agreements provide for compensation of $250,000 to Christopher
Hassett and $150,000 to Gregory Hassett for the 12 months after the termination
of their respective employment arrangements and that Messrs. Hassett shall be
free to serve as directors, employees, consultants or advisors to any other
corporation or other business enterprise without the prior written consent of
the Company so long as such activities do not interfere with their duties and
obligations under the respective agreements, including covenants not to compete
and solicit. The covenants not to compete and not to solicit terminate upon a
change of control of the Company.

The Company entered into an employment agreement with Mr. David Dorman in
October 1997, which was amended in February 1998 (as amended, the "Employment
Agreement"), pursuant to which Mr. Dorman agreed to serve as Chief Executive
Officer and President of the Company, as well as Chairman of the Company's
Board of Directors. In addition, the Company agreed to re-nominate Mr. Dorman
for Board membership when his initial term expires. Under the Employment
Agreement, Mr. Dorman received a starting bonus of $1,437,500 and an annual
base salary of $250,000. The Employment Agreement provides that Mr. Dorman is
eligible to receive a bonus in the Company's fiscal year ended December 31,
1999, with installment payments to be paid at the end of each quarter of such
fiscal year based upon performance criteria mutually acceptable to Mr. Dorman
and the Board of Directors; provided, however, that the amount of such bonus
payments shall not be less than $250,000 in the aggregate; and provided
further, that the payment of any such bonuses shall be subject to Mr. Dorman's
continued employment with the Company through the end of such fiscal quarters.
In addition, Mr. Dorman is entitled to receive at the end of the Company's 1999
fiscal year an additional bonus of $1,800,000 if (i) the Company has achieved a
total year-end viewership of at least 3,000,000 viewers; (ii) the Company's
audited financial statements for fiscal 1999 determined on a consolidated basis
reflect positive operating income in the aggregate of at least $0.01; and (iii)
Mr. Dorman remains employed by the Company through the end of that fiscal year.
The Company periodically evaluates the available evidence to determine whether
it is probable that the goals associated with the bonus will be achieved and
will begin to record expense associated with the bonus in the period such a
determination is made.

In connection with the Employment Agreement, the Company loaned Mr. Dorman
$1,400,000, all of which remains outstanding. Mr. Dorman has entered into a
full-recourse promissory note for this loan. The note is also secured by 70% of
the 83,334 shares of Series E Preferred Stock of the Company purchased by Mr.
Dorman and 70% of the 250,000 shares of Series E Preferred Stock granted to Mr.
Dorman. The loan is due and payable upon the earlier of the four-year
anniversary of Mr. Dorman's employment date or ninety days following the date
upon which Mr. Dorman's employment with the Company terminates. The loan bears
interest at the rate of 6.01%, compounded semi-annually and interest is payable
annually.

Also pursuant to the Employment Agreement, the Company extended a second loan
to Mr. Dorman of $600,000, all of which remains outstanding Mr. Dorman has
entered into a full-recourse promissory note for this loan. The note is also
secured by the remaining 30% of the Series E Preferred Stock not securing the
loan described above. This loan is due and payable upon the earlier of the
four-year anniversary of Mr. Dorman's employment date or ninety days following
the date upon which Mr. Dorman's employment with the Company terminates. This
loan bears interest at the rate of 6.01% compounded semi-annually and interest
is payable annually.

In connection with the Employment Agreement, Mr. Dorman received a stock
option to purchase 1,666,667 shares of the Company's Common Stock at an
exercise price of $6.00 per share, which vests at the rate of 1/48th of the
shares on each month following the first day of Mr. Dorman's employment with
the Company. The Employment Agreement provides Mr. Dorman with the right to
purchase 83,334 shares of the Company's Series E Preferred Stock at a purchase
price of $14.25 per share. This right was exercised in December 1997. Mr.
Dorman also received a stock bonus of 250,000 shares of the Company's Series E
Preferred Stock with a fair market value equal to $14.25 per share (the
"Restricted Stock"), which vests with respect to 62,500 shares on October 22,
1998, and with respect to 5,208 shares on the 22nd day of each month
thereafter, until all shares are vested on October 22, 2001, subject in each
case to Mr. Dorman's continued employment. If within two years following Mr.
Dorman's employment commencement date, Mr. Dorman's employment with the Company

is involuntarily terminated by the Company without cause, then Mr. Dorman's
Restricted Stock and stock options shall vest as to an additional 25% of the
remaining unvested shares covered by such awards on the date of such
termination of employment and Mr. Dorman shall receive a lump sum payment of
$250,000, less applicable withholding, promptly following such termination of
employment. An additional 25% of the remaining unvested shares covered by such
awards vest in the event of Mr. Dorman's death. In the event of a change of
control or upon the closing of this offering, Mr. Dorman's Restricted Stock and
his stock options shall become 100% vested.

Under the terms of an employment agreement reached in May 1997, the Company
granted to Mr. Philip J. Koen an option to purchase 339,458 shares of the
Company's Common Stock at an exercise price of $1.50 per share. Such shares are
subject to certain vesting provisions, but shall become fully vested and
exercisable upon a merger of the Company in which greater than 50% of the total
voting power is transferred. In the event that Mr. Koen is involuntarily
terminated, he will continue to receive salary and benefits for six months and
his unvested options shall be accelerated by two years. See "Certain
Transactions."

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for
breach of their fiduciary duties as directors, except for liability (i) for any
breach of their duty of loyalty to the corporation or its stockholders; (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided in Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its employees and agents to the fullest extent
permitted by law. The Company believes that indemnification under its Bylaws
covers at least negligence and gross negligence on the part of indemnified
parties.

The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Bylaws. These agreements, among other things, indemnify the Company's directors
and officers for certain expenses (including attorneys' fees), judgments, fines
and settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or officer of the Company, any subsidiary of
the Company or any other company or enterprise to which the person provides
services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain qualified
directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation earned
during the Company's fiscal year ended December 31, 1997 by the Company's Chief
Executive Officer and each of the Company's other most highly compensated
current executive officers and executive officers serving at December 31, 1997
whose total annual salary and bonus during such fiscal year exceeded $100,000
(collectively, the "Named Officers"):

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
-------------------- -----------------------
RESTRICTED
STOCK SECURITIES
AWARDS UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) ($) OPTIONS(#)
--------------------------- --------- ---------- ----------- -----------

David W. Dorman(1)............. $ 49,359 $1,437,500 $3,562,500 1,750,001
Chairman, President and Chief
Executive Officer
Christopher R. Hassett(2)...... 175,000 50,000 -- --
Chairman, President and Chief
Executive Officer
Philip J. Koen(3).............. 111,923 44,769 -- 339,458
Senior Vice President, Finance
and Operations and Chief
Financial Officer
Jaleh Bisharat................. 184,328 50,000 -- 133,334
Senior Vice President, Market-
ing
James F. Wickett............... 150,000 75,000 -- 233,334
Senior Vice President,
Worldwide Business Development
Anna Zornosa(4)................ 135,000 85,500(5) -- --
Senior Vice President,
Advertising, Sales and
Affiliate Development
Douglas Boake.................. 141,667 25,000 -- 20,000
Senior Vice President,
Strategic Sales and Affiliate
Development

- --------
(1) Mr. Dorman joined the Company in October 1997. Mr. Dorman's salary for 1997
reflects a partial year of service. Mr. Dorman's annual base salary is
$250,000. Under his Employment Agreement, Mr. Dorman received a bonus of
restricted stock of 250,000 shares of the Company's Series E Preferred
Stock with a fair market value of $14.25 per share, which shall be fully
vested upon the closing of this offering. No dividends are paid on Mr.
Dorman's Restricted Stock. See "Management--Employment Agreements and
Change of Control Arrangements."
(2) Mr. Hassett served as the Company's President and Chief Executive Officer
until July 1997 and as Chairman of the Board of Directors from June 25,
1997 until December 31, 1997.
(3) Mr. Koen joined the Company in May 1997. Mr. Koen's salary for 1997
reflects a partial year of service. Mr. Koen's annual base salary is
$180,000.
(4) Ms. Zornosa resigned from her position effective April 1, 1998.
(5) Represents amounts paid to Ms. Zornosa as commissions.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth for each of the Named Officers certain
information concerning stock options granted during the Company's fiscal year
ended December 31, 1997. No stock appreciation rights were granted during the
Company's fiscal year ended December 31, 1997.

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(5)
------------------------------------------------------- ---------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES PRICE MARKET EXPIRATION
NAME (#)(1) IN 1997(2) ($ / SH)(3) PRICE DATE(4) 0%($) 5%($) 10%($)
- ------------------------ ---------- ---------- ----------- ------ ---------- ---------- ---------- -----------

David W. Dorman(6)...... 1,666,667 50.81% $ 6.00 $ 6.00 10/21/07 -- $6,288,950 $15,937,420
83,334 2.54 14.25 14.25 -- -- 746,810 1,892,560
Christopher R. Hassett.. -- -- -- -- -- -- -- --
Philip J. Koen(7)....... 339,458 10.35 1.50 4.50 6/24/07 $1,018,370 1,979,040 3,452,910
Jaleh Bisharat.......... 66,667(8) 2.03 6.00 6.00 8/26/07 -- 251,560 637,500
66,667(9) 2.03 6.00 6.00 8/26/07 -- 251,560 637,500
Douglas W.C. Boake...... 20,000 0.61 6.75 6.75 10/30/07 -- 84,900 215,160
James F. Wickett........ 66,667(10) 2.03 3.00 3.00 1/06/02 -- 125,780 318,750
100,000(11) 3.05 6.00 6.00 8/26/07 -- 377,340 956,250
66,667(12) 2.03 6.00 6.00 8/26/07 -- 251,560 637,500
Anna Zornosa............ -- -- -- -- -- -- -- --

- --------
(1) Except as noted, options were granted under the Company's 1994 Option
Plan and generally vest over four years as to 1/4 of the total after one
year and 1/48 of the total at the end of each subsequent month. In each
case, vesting is subject to the optionees' continued relationship with
the Company. Once exercised, the unvested shares become subject to the
Company's right to repurchase the shares at the original purchase price.
The Company's repurchase right lapses over time at such times and in such
amounts as the shares would have vested and become exercisable under the
option agreement(s) pursuant to which the options were granted.
(2) In 1997, the Company granted options to purchase an aggregate of
3,279,963 shares of Common Stock.
(3) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for its Common Stock and the risks normally
associated with high technology companies. The exercise price may be paid
in cash, check or promissory note, or any combination of such methods.
(4) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated or upon the optionee's
death or disability.
(5) The 0%, 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the Company's future Common Stock prices.
(6) In October 1997, in connection with his Employment Agreement, Mr. Dorman
also received options to purchase 1,666,667 shares of the Company's
Common Stock at an exercise price of $6.00 per share which vests at the
rate of 1/48 of the shares on each month following the first day of
Mr. Dorman's employment with the Company. With regard to this grant
83,334 shares are incentive stock options, and 1,583,333 shares are
nonstatutory stock options. The Employment Agreement also provided Mr.
Dorman with the fully vested right to purchase 83,334 shares of the
Company's Series E Preferred Stock at a purchase price of $14.25 per
share. See "Employment Agreements and Change of Control Arrangements" and
"Certain Transactions."
(7) Mr. Koen received an option outside of the Company's existing stock
plans. See "Employment Agreements and Change of Control Arrangements" and
"Certain Transactions."
(8) The shares subject to this option vest over 12 months. With regard to
this grant, 55,978 shares are incentive stock options, and 10,689 shares
are nonstatutory stock options.
(9) With regard to this grant, 5,555 shares are incentive stock options, and
61,112 shares are nonstatutory stock options.
(10) With regard to this grant, 595 shares are incentive stock options, and
66,072 shares are nonstatutory stock options.
(11) The shares subject to this option vest over 12 months. With regard to
this grant, 46,369 shares are incentive stock options, and 53,631 shares
are nonstatutory stock options.
(12) All of the options subject to this grant are nonstatutory stock options.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

The following table sets forth certain information with respect to the Named
Officers concerning options exercised during the year ended December 31, 1997
and the number of shares subject to both exercisable and unexercisable stock
options as of December 31, 1997. Also reported are values for "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding options and the fair market value of the Company's Common
Stock as of December 31, 1997.

VALUE REALIZED NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF (MARKET PRICE AT UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES EXERCISE LESS OPTIONS AT FY-END(#) FY-END($)(1)
ACQUIRED ON EXERCISE ------------------------- -------------------------
NAME EXERCISE(#) PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------------- ----------- ------------- ----------- -------------

David W. Dorman......... 86,668 $ 10,000 69,444 1,597,223 $104,170 $2,395,840
Christopher R. Hassett.. -- -- -- -- -- --
Philip J. Koen.......... 133,334 600,000 -- 206,125 -- 1,236,750
Jaleh Bisharat.......... 65,692 182,293 82,442 247,967 471,430 1,162,290
Douglas W. C. Boake..... -- -- 35,626 74,374 240,480 382,030
James F. Wickett........ -- -- 108,889 271,112 467,920 960,090
Anna Zornosa............ 43,317 127,349 58,875 111,080 410,830 776,840

- --------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at December 31, 1997 ($7.50 per share
as determined by the Board of Directors) and the exercise price of the
Named Officer's option. In determining the fair market value of the
Company's Common Stock, the Board of Directors considered various factors,
including the Company's financial condition and business prospects, its
operating results, the absence of a market for its Common Stock and the
risks normally associated with high technology companies.

STOCK PLANS

1994 Stock Plan

The Company's 1994 Stock Plan (the "1994 Plan") was adopted by the Board of
Directors in July 1994 and approved by the stockholders in July 1994 and as
amended from time to time. A total of 8,333,334 shares of Common Stock, plus
annual increases to be added on the first day of the Company's fiscal year
(beginning in 1999) equal to the lesser of (i) 2,000,000 shares; (ii) 5% of the
outstanding shares; or (iii) a lesser amount determined by the Board of
Directors, are currently reserved for issuance pursuant to the 1994 Plan.
Unless terminated sooner, the 1994 Plan will terminate automatically in May
2008.

The 1994 Plan provides for the grant of incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, (the
"Code") to employees (including officers and employee directors) and for the
grant of nonstatutory stock options and stock purchase rights ("SPRs") to
employees, directors and consultants.

The 1994 Plan may be administered by the Board of Directors or a committee of
the Board (as applicable, the "Administrator"). The Administrator has the power
to determine the terms of the options or SPRs granted, including the exercise
price of the option or SPR, the number of shares subject to each option or SPR,
the exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Administrator has the authority to amend, suspend or
terminate the 1994 Plan, provided that no such action may affect any share of
Common Stock previously issued and sold or any option previously granted under
the 1994 Plan.

The exercise price of all incentive stock options granted under the 1994 Plan
must be at least equal to the fair market value of the Common Stock on the date
of grant. The exercise price of nonstatutory stock options and SPRs granted
under the 1994 Plan is determined by the Administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the

Code, the exercise price must be at least equal to the fair market value of the
Common Stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any incentive stock
option granted must be at least equal to 110% of the fair market value on the
grant date and the term of such incentive stock option must not exceed five
years. The term of all other options granted under the 1994 Plan may not exceed
ten years. No employee may be granted options to purchase more than 2,000,000
shares in any fiscal year of the Company.

In the case of SPRs, unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason
(including death or disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Administrator.

Options and SPRs granted under the 1994 Plan are generally not transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1994 Plan must
generally be exercised within three months after the end of the optionee's
status as an employee, director or consultant of the Company, or within six
months or twelve months after such optionee's termination by disability or
death, respectively, but in no event later than the expiration of the option's
term.

The 1994 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, (i) the vesting of each outstanding option and share that was subject
to an option but is still subject to vesting pursuant to a restricted stock
purchase agreement shall accelerate as to an additional one year's vesting; and
(ii) each option and SPR shall be assumed or an equivalent option substituted
for by the successor corporation. If the outstanding options and SPRs are not
assumed or substituted for by the successor corporation, the option or SPR will
terminate as of the closing of the merger or asset sale.

1998 Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan (the "1998 Purchase Plan")
was adopted by the Board of Directors in May 1998, subject to stockholder
approval. A total of 500,000 shares of Common Stock has been reserved for
issuance under the 1998 Purchase Plan, plus annual increases to be added on the
first day of the Company's fiscal year (beginning in 1999) equal to the lesser
of (i) 750,000 shares; (ii) 2.5% of the outstanding shares on such date; or
(iii) a lesser amount determined by the Board.

The 1998 Purchase Plan, which is intended to qualify under Section 423 of the
Code, contains consecutive, overlapping, twenty-four month offering periods.
Each offering period includes four six-month purchase periods. The offering
periods generally start on the first trading day on or after February 1 and
August 1 of each year, except for the first such offering period which
commences on the first trading day on or after the effective date of this
offering and ends on the last trading day before August 1, 2000.

Employees are eligible to participate if they are customarily employed by the
Company or any participating subsidiary for at least 20 hours per week and more
than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of the Company; or
(ii) whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for each
calendar year may not be granted an option to purchase stock under the 1998
Purchase Plan. The 1998 Purchase Plan permits participants to purchase Common
Stock through payroll deductions of up to 15% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings and commissions but excludes payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 1,667 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each purchase period. The price of stock
purchased under the 1998 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock (i) at the beginning of the offering period; or (ii)
at the end of the purchase period; provided, however, that the Board may change
the determination of the purchase price with respect to subsequent offering
periods to 85% of the fair market value of the Common Stock at the end of the
purchase period. In the event the fair market value at the end of a purchase
period is less than the fair market value at the beginning of the offering
period, the participants will be withdrawn from the current offering period
following exercise and automatically re-enrolled in a new offering period. The
new offering period will use the lower fair market value as of the first date
of the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with the
Company.

Rights granted under the 1998 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1998 Purchase Plan. The 1998 Purchase Plan
provides that, in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be shortened
and a new exercise date will be set. The 1998 Purchase Plan will terminate in
2008. The Board of Directors has the authority to amend or terminate the 1998
Purchase Plan, including shortening or terminating an offering period at any
time, except that no such action may adversely affect any outstanding options
under the 1998 Purchase Plan.

1998 Director Option Plan

The 1998 Director Option Plan (the "Director Plan") was adopted by the Board
of Directors in May 1998, and is subject to stockholder approval. The Director
Plan provides for the grant of nonstatutory stock options to non-employee
directors. The Director Plan has a term of ten years, unless terminated sooner
by the Board. A total of 200,000 shares of Common Stock has been reserved for
issuance under the Director Plan, plus annual increases to be added on the
first day of the Company's fiscal year (beginning in 1999) equal to the lesser
of (i) the number of shares needed to restore the maximum aggregate number of
shares available for sale under the Director Plan to 200,000 shares; or (ii) a
lesser amount determined by the Board.

The Director Plan provides that each non-employee director will receive an
automatic grant of nonqualified stock options to purchase 20,000 shares of
Common Stock (the "First Option") at an exercise price per share equal to the
fair market value on the date of grant. In addition to the First Option, each
non-employee director shall automatically be granted an option to purchase
5,000 shares (a "Subsequent Option") each year on the date of the Company's
annual meeting of stockholders, if on such date he or she shall have served on
the Board for at least six months. Each First Option and Subsequent Option
shall have a term of 10 years. The shares subject to the First Option shall
vest as to 25% of the optioned stock one year from the date of grant, and 1/48
of the optioned stock shall vest each month thereafter, so long as the optionee
remains a director of the Company on such dates. The shares subject to the
Subsequent Option shall vest as to 100% of the optioned stock on the fourth
anniversary of the date of grant.

In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, (i) each outstanding option shall accelerate as to
25% of the option shares; and (ii) each outstanding option may be assumed or an
equivalent option substituted for by the successor corporation. If an option is
not assumed or substituted for by the successor corporation, the option will
terminate as of the closing of the merger or asset sale. If an option is
assumed or substituted for by the successor corporation, it shall continue to
vest as provided in the Director Plan. Options granted under the Director Plan
must be exercised within three months of the end of the optionee's tenure as a
director of the Company, or within twelve months after such director's
termination by death or disability, but in no event later than the expiration
of the option's ten-year term. No option granted under the Director Plan is
transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee. The Director Plan will terminate in 2008.

CERTAIN TRANSACTIONS

In December 1997, the Company granted to Benchmark Capital Partners, L.P. a
Common Stock Purchase Warrant to purchase 182,786 shares of Common Stock at an
exercise price of $7.50 per share and to Benchmark Founders' Fund, L.P. a
Common Stock Purchase Warrant to purchase 25,548 shares of Common Stock at an
exercise price of $7.50 per share. Kevin R. Harvey and Andrew S. Rachleff,
members of the Company's Board of Directors, are managing members of Benchmark
Capital Management Co., LLC, the General Partner of Benchmark Capital
Partners, L.P. and Benchmark Founders' Fund, L.P. The warrants were granted in
exchange for services rendered by Mr. Harvey as acting Chief Executive Officer
while the Company completed its search for a Chief Executive Officer. Mr.
Harvey received no cash compensation for such services.

In December 1997, the Company loaned Mr. Dorman $421,000. This loan bore no
interest and was repaid in full in March 1998.

In December 1997, pursuant to the Employment Agreement entered into in
October 1997, the Company granted a stock bonus to Mr. Dorman of 250,000
shares of the Company's Series E Preferred Stock. The Company recorded a
deferred stock compensation expense of $3.6 million in connection with the
stock bonus based on the prices of shares sold to unaffiliated investors in
contemporaneous transactions. See "Employment Agreements and Change of Control
Arrangements."

In November 1997, in connection with the Employment Agreement, the Company
extended loans to Mr. Dorman in the amount of $1,400,000 and $600,000. See
"Employment Agreements and Change of Control Arrangements."

In May 1997, the Company granted to Mr. Koen an option outside of the
Company's existing option plans to purchase 339,458 shares of Common Stock at
an exercise price of $1.50 per share, which was below the then fair market
value of the Company's Common Stock of $4.50 per share. The option is
exercisable as to 1/4th of the shares on the first anniversary of the vesting
commencement date of May 19, 1997 and an additional 1/48th of the shares
become exercisable at the end of each month thereafter. In addition, the
shares subject to such option become fully vested and exercisable upon a
merger of the Company in which greater than 50% of the total voting power is
transferred. The Company recorded a deferred stock compensation expense of
$1.0 million which is being amortized over the four-year vesting period of the
options. In October 1997, Mr. Koen exercised stock options to purchase 133,334
shares of Common Stock with a full recourse promissory note in the amount of
$200,000 with an interest rate of 6.01%. The entire principal amount under the
loan remains outstanding.

In June 1997, Messrs. Christopher and Gregory Hassett sold 216,667 and
125,000 shares of the Company's Common Stock, respectively, at a purchase
price $6.00 per share, to Benchmark Capital Partners, L.P., Benchmark
Founders' Fund, L.P., Merrill, Pickard, Anderson & Eyre V, L.P. and Mohr,
Davidow Ventures III. Kevin Harvey and Andrew S. Rachleff, members of the
Company's Board of Directors, are managing members of Benchmark Capital
Management Co., LLC, the General Partner of Benchmark Capital Partners, L.P.
and Benchmark Founders' Fund, L.P. Mr. Rachleff is also a General Partner of
MPAE V Management Co., the General Partner of Merrill, Pickard, Anderson &
Eyre V, L.P. Jonathan Feiber, also a member of the Company's Board of
Directors, is a General Partner of WLPJ Partners, the General Partner of Mohr,
Davidow Ventures III. The Company waived its rights of first refusal related
to the sales of such shares and any notice requirements in connection
therewith.

The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify its officers and directors against certain liabilities
that may arise by reason of their status or service as officers or directors
(other than liabilities arising from willful misconduct of a culpable nature)
and to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified. The Company also intends to
execute such agreements with its future directors and executive officers. See
"Management--Limitation of Liability and Indemnification Matters."

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 1, 1998 and as
adjusted to reflect the sale of Common Stock offered hereby for (i) each
person or entity who is known by the Company to beneficially own five percent
(5%) or more of the outstanding Common Stock of the Company; (ii) each of the
Company's directors; (iii) each of the Named Officers; and (iv) all current
directors and executive officers of the Company as a group:

PERCENTAGE OF
SHARES
BENEFICIALLY
OWNED(3)
NUMBER OF SHARES -----------------
BENEFICIALLY BEFORE AFTER
NAME OR GROUP OF BENEFICIAL OWNERS(1)(2) OWNED OFFERING OFFERING
---------------------------------------- ----------------- -------- --------

Andrew S. Rachleff(4)...................... 4,768,352 26.80% 22.13%
Jonathan Feiber(5)......................... 3,447,102 19.60 16.16
David W. Dorman(6)......................... 2,003,335 10.40 8.71
Kevin R. Harvey(7)......................... 1,883,861 10.59 8.74
Christopher R. Hassett..................... 1,576,935 8.97 7.39
Gregory P. Hassett......................... 1,199,801 6.82 5.62
Jaleh Bisharat(8).......................... 396,102 2.22 1.83
James F. Wickett(9)........................ 380,001 2.11 1.75
Philip J. Koen(10)......................... 339,458 1.91 1.58
Anna Zornosa(11)........................... 116,632 * *
Douglas W.C. Boake(12)..................... 110,000 * *
Charles Geschke(13)........................ 106,625 * *
Sanford R. Climan.......................... 66,667 * *
Steven Heyer(14)........................... 66,667 * *
Mohr, Davidow Ventures III................. 3,447,102 19.60 16.16
2775 Sand Hill Road
Suite 240
Menlo Park, CA 94025
Entities affiliated with Merrill Pickard
Anderson & Eyre(15)....................... 2,884,491 16.40 13.52
2480 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Entities affiliated with Benchmark
Capital(16)............................... 1,883,861 10.59 8.74
2480 Sand Hill Road
Suite 200
Menlo Park, CA 94025
All current directors and executive
officers as a group (14 persons)(17)...... 14,597,679 70.36 59.59

- --------
(*) Represents beneficial ownership of less than 1% of the Company's Common
Stock.
(1) Assumes no exercise of the Underwriters' over-allotment option except as
specifically described in the footnotes below. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common
Stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of April 1, 1998 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table
has sole voting and investment power with respect to the shares set forth
opposite such stockholder's name.
(2) Unless otherwise indicated, the address of each beneficial owner is c/o
PointCast Incorporated, 501 Macara Avenue, Sunnyvale, California 94086.

(3) Percentage of shares beneficially owned is based upon 17,587,112 shares
of the Company's Common Stock outstanding as of April 1, 1998 and
21,337,112 shares outstanding after the Offering.
(4) Consists of 1,499,137 shares held by the Benchmark Capital Partners,
L.P., 176,390 shares held by Benchmark Founders' Fund, L.P., 2,813,874
shares held by Merrill Pickard Anderson & Eyre V, L.P. and 70,617 shares
held by MPAE V Affiliates Fund. Also includes 182,786 shares and 25,548
shares issuable upon exercise of warrants exercisable within 60 days of
April 1, 1998 held by Benchmark Capital Partners, L.P. and Benchmark
Founders' Fund, L.P., respectively. Mr. Rachleff, a director of the
Company, is a managing member of Benchmark Capital Management Co., LLC,
the General Partner of Benchmark Capital Partners, L.P. and Benchmark
Founders' Fund, L.P. and a General Partner of MPAE V Management Co., the
General Partner of Merrill Pickard Anderson & Eyre V, L.P. and MPAE V
Affiliates Fund, L.P. He shares voting and dispositive power with respect
to the shares held by each such entity and disclaims beneficial ownership
of such shares in which he has no pecuniary interest.
(5) Consists of 3,447,102 shares held by Mohr, Davidow Ventures III. Mr.
Feiber, a director of the Company, is a general partner of WLPJ Partners,
the General Partner of Mohr, Davidow Ventures III, shares voting and
dispositive power with respect to the shares held by such entity and
disclaims beneficial ownership of such shares in which he has no
pecuniary interest.
(6) Includes 1,666,667 shares issuable upon exercise of options exercisable
within 60 days.
(7) Consists of 1,499,137 shares held by the Benchmark Capital Partners, L.P.
and 176,390 shares held by Benchmark Founders' Fund, L.P. Also includes
182,786 shares and 25,548 shares issuable upon exercise of warrants
exerciseable within 60 days of April 1, 1998 held by Benchmark Capital
Partners, L.P. and Benchmark Founders' Fund, L.P., respectively. Mr.
Harvey, a director of the Company, is a managing member of Benchmark
Capital Management Co., LLC, the General Partner of Benchmark Capital
Partners, L.P., and Benchmark Founders' Fund, L.P. He shares voting and
dispositive power with respect to the shares held by each such entity and
disclaims beneficial ownership of such shares in which he has no
pecuniary interest.
(8) Includes 264,718 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(9) Includes 380,001 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(10) Includes 206,124 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(11) Includes 30,000 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(12) Includes 110,000 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(13) Dr. Geschke is the President of Adobe Systems Incorporated, which holds
561,404 shares of the Company. Dr. Geschke disclaims beneficial ownership
of such shares in which he has no pecuniary interest.
(14) Includes 66,667 shares issuable upon exercise of options exercisable
within 60 days of April 1, 1998.
(15) Consists of 2,813,874 shares held by Merrill Pickard Anderson & Eyre V,
L.P. and 70,617 shares held by MPAE V Affiliates Fund.
(16) Consists of 1,681,923 shares held by Benchmark Capital Partners, L.P. and
201,938 shares held by Benchmark Founders' Fund, L.P.
(17) Includes 3,130,847 shares issuable upon exercise of options and warrants,
exercisable within 60 days of April 1, 1998.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the closing of this offering, the Company will be authorized to issue
100,000,000 shares of Common Stock, $0.001 par value and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. Upon the closing of the
offering, 21,337,112 shares of Common Stock will be issued and outstanding and
no shares of preferred stock will be issued and outstanding. The discussion
herein describes the Company's capital stock, the Bylaws and the Restated
Certificate of Incorporation (the "Restated Certificate"). The following
summary of certain provisions of the Company's capital stock describes all
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, the Restated Certificate and the Bylaws of
the Company that are included as exhibits to the Registration Statement of
which this prospectus forms a part and by the provisions of applicable law.

The Restated Certificate and Bylaws contain certain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and which may have the effect of
delaying, deferring or preventing a future takeover or change in control of the
Company unless such a takeover or change is approved by the Board of Directors.

COMMON STOCK

Subject to the prior rights of the holders of any preferred stock, the
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available for
the payment of dividends. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences of any outstanding shares of preferred stock.
Holders of Common Stock have no preemptive rights or rights to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable, and the shares of Common Stock to be
issued upon completion of this offering will be fully paid and non-assessable.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders.

PREFERRED STOCK

The Company is authorized to issue up to 5,000,000 shares of preferred stock
in one or more series and to fix the designations, powers, preferences,
privileges and relative participating, optional or special rights and the
qualifications, limitations or restrictions thereof, without any further vote
or action by the Company's stockholders, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock. The issuance
of preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the market price of
the Common Stock, and the voting and other rights of the holders of Common
Stock. As of the closing of the offering, there will be no shares of preferred
stock outstanding, and the Company has no plan to issue any of the preferred
stock.

WARRANTS

In July 1995, pursuant to an equipment lease line, the Company issued
warrants to purchase an aggregate of 26,280 shares of Common Stock at an
exercise price of $2.11 per share to Lighthouse Capital Partners; such warrants
expire on July 31, 2002. In December 1997, the Company issued a warrant to
Benchmark Capital Partners, L.P. to purchase 182,786 shares of Common Stock at
an exercise price of $7.50 per share and a warrant to Benchmark Founders' Fund
L.P. to purchase 25,548 shares of Common Stock at an exercise price of $7.50
per share; such warrants expire 18 months after the effective date of this
offering. In December 1996, the Company issued warrants to purchase an
aggregate of 701,756 shares of Common Stock at an exercise price of

$14.25 per share to CNN and Time Inc. New Media; such warrants expire on
December 10, 2001. All of the warrants will be outstanding as of the closing of
this offering.

CERTAIN CHARTER PROVISIONS AND ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

Restated Certificate of Incorporation and Bylaws

The Company's Restated Certificate and Bylaws contain several provisions that
could have the effect of delaying, deterring or preventing the acquisition of
control of the Company by means of tender offer, open market purchases, a proxy
contest or otherwise. Set forth below is a description of those provisions.

The Company's Restated Certificate provides that the directors of the Company
will be elected without the application of cumulative voting. The Restated
Certificate also provides that any action permitted to be taken by stockholders
of the Company must be effected at a duly called annual or special meeting of
the stockholders and may not be effected by a consent in writing. The Company's
Restated Certificate also requires the affirmative vote of two-thirds of the
outstanding shares entitled to vote for the adoption, amendment or repeal of
certain sections of the Company's Bylaws. Pursuant to the Restated Certificate,
the Board of Directors will have the authority to issue up to 5,000,000 shares
of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further vote
or action by the stockholders. In addition, the Company's Bylaws also contain
certain of the above provisions found in the Company's Restated Certificate.
The Bylaws provide that special meetings may be called only by the Board of
Directors, the Chairman of the Board, or the President of the Company. The
Bylaws also establish advance notice procedures with regard to the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors and with regard to certain matters to be brought before
an annual meeting of stockholders of the Company. Moreover, the Bylaws provide
that the business permitted to be conducted in any annual meeting or special
meeting of stockholders is limited to business properly brought before the
meeting.

Delaware Takeover Statute

The Company is subject to Section 203 of the Delaware General Corporation Law
("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and an interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving an interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to an interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing
the proportionate share of the stock of any class or series of the corporation
beneficially owned by an interested stockholder; or (v) the receipt by an
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

REGISTRATION RIGHTS

After the offering, the holders of approximately 14,552,277 shares of Common
Stock (the "Registrable Securities") will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. These
rights are provided under the terms of an agreement between the Company and the
holders of Registrable Securities. Subject to certain limitations in the
agreement, the holders of Registrable Securities may require, on two occasions
beginning after the earlier of July 19, 2001 or six months after the effective
date of this Offering, that the Company use its best efforts to register the
Registrable Securities for public resale. If the Company registers any of its
Common Stock either for its own account or for the account of other
securityholders, the holders of Registrable Securities are entitled to include
their shares of Common Stock in such registration, subject to the ability of
the underwriters to limit the number of shares included in such offering. The
holders of Registrable Securities may also require the Company (not more than
once in any twelve-month period) to register all or a portion of their
Registrable Securities on Form S-3 when use of such form becomes available to
the Company; provided, among other limitations, that the proposed aggregate
selling price to the public exceeds $500,000. All registration expenses must be
borne by the Company, and all selling expenses related to securities registered
on behalf of the holders of Registrable Securities shall be borne by the
holders of the securities being registered.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is . Its
telephone number is .

LISTING

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "PCST."

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the offering, there has been no market for the Common Stock of the
Company. The amount and timing of any future sales of substantial amounts of
Common Stock in the public market could adversely affect market prices
prevailing from time to time.

Following the completion of this offering, 21,337,112 shares of Common Stock
will be outstanding. The 3,750,000 shares of Common Stock offered hereby will
be tradeable in the public market without restriction, unless purchased by an
affiliate of the Company. The remaining 17,587,112 shares of outstanding Common
Stock will be "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), which may not be
sold other than pursuant to an effective registration statement or pursuant to
an exemption from such registration requirement, including the exemption
available pursuant to Rule 144. Other than the shares offered hereby (i) no
shares will be eligible for sale prior to 180 days after the date of this
Prospectus, except in certain limited exceptions, without the prior written
consent of Lehman Brothers Inc., (ii) 16,846,945 shares will be eligible for
sale 180 days after the date of this Prospectus upon the expiration of lock-up
agreements with the Underwriters and (iii) an additional 740,167 shares will
become eligible for sale thereafter pursuant to Rule 144 under the Securities
Act. As of March 31, 1998 there were outstanding options and warrants to
purchase 5,656,530 shares of Common Stock of which holders of options and
warrants exercisable for 5,649,653 shares have also agreed not to sell shares
of Common Stock issued upon exercise of such options and warrants for a period
of 180 days after the date of this Prospectus, without the prior written
consent of Lehman Brothers Inc. Sales of a substantial number of shares of
Common Stock in the public market subsequent to this offering, or the
perception that such sales could occur, could materially adversely affect the
prevailing market price of the Common Stock and could materially adversely
affect the Company's ability to raise capital. The Company has agreed not to
issue any securities or file a registration statement under the Securities Act,
subject to certain exceptions, for a period of 180 days following the date of
this Prospectus without the prior written consent of Lehman Brothers Inc. See
"Underwriting."

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
is entitled to sell any "restricted shares" beneficially owned by him or her,
provided that at least one year has elapsed since such shares were acquired
from the Company or an affiliate of the Company and subject to certain volume
limitations and requirements as to the manner of sale, notice and the
availability of current public information regarding the Company. Under the
volume limitations of Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year
(including the holding period of any prior except an affiliate) would be
entitled to sell within a three-month period a number of shares that does not
exceed the greater of (i) one percent of the then outstanding shares of Common
Stock (approximately 213,370 shares immediately after the offering) or (ii) the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding the filing of a form 144 with respect to such sale. However, a
person who has not been an "affiliate" of the Company at any time within three
months prior to the sale is entitled to sell his or her shares without regard
to the volume limitations or other requirements of Rule 144, provided that at
least two years have elapsed since such shares were acquired from the Company
or an affiliate of the Company. Pursuant to Rule 701 under the Securities Act,
shares purchased by an employee, officer or director of the Company pursuant to
a written compensatory plan or contract may be resold under Rule 144 without
complying with the holding period requirement, provided that the Company has
been subject to the reporting requirements of the Exchange Act for at least 90
days.

Upon completion of this offering, the holders of approximately 14,302,296
shares of Common Stock, or their transferees, will be entitled to certain
rights with respect to the registration of such shares under the Securities
Act. See "Description of Capital Stock--Registration Rights." Registration of
such shares under the Securities Act would result in such shares becoming
freely tradeable without restriction under the Securities Act (except for
shares purchased by Affiliates) immediately upon the effectiveness of such
registration.

Following the offering, the Company intends to file registration statements
under the Securities Act covering approximately shares of Common Stock
issued and outstanding, subject to outstanding options or reserved for issuance
under the Company's stock plans. See "Management--Stock Plans." Accordingly,
shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, the Underwriters named below,
for whom Lehman Brothers Inc., BT Alex. Brown Incorporated and BancAmerica
Robertson Stephens are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to each Underwriter, the aggregate number of shares set forth opposite the
name of each such Underwriter below:

NUMBER OF
UNDERWRITERS SHARES
------------ ---------

Lehman Brothers Inc................................................
BT Alex. Brown Incorporated........................................
BancAmerica Robertson Stephens.....................................
---------
Total............................................................ 3,750,000
=========

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares to the public at the initial public offering price
set forth on the cover page hereof, and to certain dealers at such initial
public offering price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other Underwriters or to certain other
brokers or dealers. After the initial offering to the public, the offering
price and other selling terms may be changed by the Representatives.

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions, including the condition that no stop order suspending the
effectiveness of the Registration Statement is in effect and no proceedings for
such purpose are pending or threatened by the Securities and Exchange
Commission and that there has been no material adverse change or any
development involving a prospective material adverse change in the condition of
the Company and its subsidiaries, taken as a whole, from that set forth in the
Registration Statement, and that certain certificates, opinions and letters
have been received from the Company and its counsel and independent auditors.

The Company and the Underwriters have agreed in the Underwriting Agreement to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Company has granted to the Underwriters an option to purchase up to an
additional 562,500 shares of Common Stock, exercisable solely to cover over-
allotments, at the initial public offering price, less the underwriting
discounts and commissions shown on the cover page of this Prospectus. Such
option may be exercised at any time until 30 days after the date of the
Underwriting Agreement. To the extent that such option is exercised, each
Underwriter will be committed, subject to certain conditions, to purchase a
number of the additional shares of Common Stock that is proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

All of the directors and executive officers and substantially all of the
stockholders and optionholders of the Company have each agreed, subject to
certain limited exceptions, not to offer, sell, contract to sell, hypothecate
or otherwise dispose (or enter into any transaction which is designed to, or
could be expected to, result in the disposition by any person) of, directly or
indirectly, any shares of Common Stock (including, without limitation, shares
which may be deemed to be beneficially owned in accordance with the Rules and
Regulations of the

Securities and Exchange Commission under the Securities Act of 1933, as
amended), or any security convertible into or exercisable for Common Stock, or
any rights to purchase or acquire, Common Stock of the Company (other than
pursuant to bona fide gifts to persons who agree in writing to be bound by the
provisions of the agreement) for a period of 180 days from the date of this
Prospectus without the prior written consent of Lehman Brothers Inc. In
addition, certain of the stockholders and optionholders are subject to separate
180-day lock-up agreements with the Company. The Company has agreed that it
will not release any of such stockholders or optionholders from these lock-up
agreements without the prior consent of Lehman Brothers Inc. Except for the
Common Stock to be sold in the offering, the Company has agreed, with certain
limited exceptions relating to the grant of options and issuance of Common
Stock pursuant to the Company's stock option plans and stock purchase plans,
not to offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition by any person at any time in the future of), directly or
indirectly, any shares of Common Stock or other capital stock or any securities
convertible into or exchangeable or exercisable for, or any rights to acquire,
Common Stock or other capital stock, prior to the expiration of 180 days from
the date of this Prospectus without the prior written consent of Lehman
Brothers Inc. on behalf of the Representatives.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.

Until the distribution of the shares is completed, the rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to
these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock. In addition, if the Representatives
over-allot (sell more shares of Common Stock than are set forth on the cover
page of this Prospectus), and thereby create a short position in the Common
Stock in connection with this offering, the Representatives may reduce that
short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option described herein.

The Representatives may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Representatives purchase shares
of the Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of this offering. In general, purchases
of shares of Common Stock for the purpose of stabilization or to reduce a
syndicate short position could cause the price of the Common Stock to be higher
than it might otherwise be in the absence of such purchases. The imposition of
a penalty bid might have an effect on the price of a security to the extent
that it were to discourage resales of the security by purchasers in the
offering. Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.

Prior to this offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be determined through
negotiations among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, capital structure, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's
management, consideration of the above factors in relation to market valuation
of companies in related businesses and other factors deemed relevant.

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road,
Palo Alto, California 94304. As of the date of this Prospectus, an affiliated
investment partnership of Wilson Sonsini Goodrich & Rosati owns 42,812 shares
of the Company's Common Stock. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo Park, CA
94025.

EXPERTS

The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on authority of said firm as
experts in auditing and accounting.

CHANGE IN ACCOUNTANTS

Effective June 1997, Price Waterhouse LLP was engaged as the Company's
independent accountants and replaced Arthur Andersen LLP who were dismissed as
the Company's independent accountants. The decision to change independent
accountants was approved by the Company's Board of Directors. Prior to June
1997, Arthur Andersen LLP issued no audit report which was qualified or
modified as to uncertainty, audit scope or accounting principles, no adverse
opinions or disclaimers of opinion on any of the Company's consolidated
financial statements, and there were no disagreements with Arthur Andersen LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures. Arthur Andersen LLP has not
audited or reported on any of the financial statements or information included
in this Prospectus. Prior to June 1997, the Company had not consulted with
Price Waterhouse LLP on items which involved the Company's accounting
principles or the form of audit opinion to be issued on the Company's
consolidated financial statements.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. Certain
items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed therewith. Statements contained in this Prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement, and the exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commissions regional offices located at the Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, 13th Floor, New York, New York 10048, and copies of
all or any part of the Registration Statement may be obtained from such offices
upon the payment of the fees prescribed by the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the site is http://www.sec.gov.

POINTCAST INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Deficit........................... F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

The Delaware reincorporation, including the reverse stock split described in
the first paragraph of Note 11 to the consolidated financial statements has
not been consummated at May 13, 1998. When it has been consummated, we will be
able to furnish the following report:

"To the Board of Directors and Stockholders of PointCast Incorporated

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' deficit and
of cash flows present fairly, in all material respects, the financial
position of PointCast Incorporated and its subsidiary at December 31, 1996
and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."

San Jose, California
February 18, 1998, except for Note 11, which is as of May 13, 1998

F-2

POINTCAST INCORPORATED
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(unaudited)

ASSETS
Current assets:
Cash and cash equivalents.......... $ 3,459,000 $ 10,282,000 $ 16,531,000
Short-term investments............. 23,683,000 12,438,000 2,535,000
Accounts receivable, net of allow-
ance for doubtful accounts of
$721,000, $604,000 and $630,000
(unaudited)....................... 3,145,000 4,266,000 3,253,000
Prepaid expenses and other current
assets............................ 2,773,000 872,000 1,214,000
------------ ------------ ------------
Total current assets............. 33,060,000 27,858,000 23,533,000
Property and equipment, net ......... 3,981,000 7,438,000 7,025,000
Notes receivable from stockholder.... -- 2,000,000 2,000,000
Other assets......................... 585,000 131,000 242,000
------------ ------------ ------------
$ 37,626,000 $ 37,427,000 $ 32,800,000
============ ============ ============
LIABILITIES, MANDATORILY REDEEMABLE
SECURITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of notes payable... $ 594,000 $ 1,450,000 $ 2,895,000
Accounts payable................... 3,085,000 6,254,000 6,048,000
Accrued expenses................... 1,103,000 2,309,000 2,993,000
Deferred revenue................... 1,659,000 3,669,000 2,354,000
------------ ------------ ------------
Total current liabilities........ 6,441,000 13,682,000 14,290,000
Notes payable........................ 1,559,000 3,820,000 2,044,000
Other liabilities, primarily deferred
rent obligations.................... -- 715,000 635,000
------------ ------------ ------------
8,000,000 18,217,000 16,969,000
------------ ------------ ------------
Minority interest in consolidated
subsidiary.......................... -- 1,825,000 1,710,000
------------ ------------ ------------
Mandatorily redeemable convertible
preferred stock $0.001 par value,
13,000,000 shares designated,
10,241,941, 11,635,209 and
11,775,560 (unaudited) shares issued
and outstanding..................... 47,298,000 66,785,000 69,240,000
Mandatorily redeemable convertible
preferred stock warrants............ 3,000,000 3,000,000 3,000,000
------------ ------------ ------------
50,298,000 69,785,000 72,240,000
------------ ------------ ------------
Commitments and contingencies (Note
5)
Stockholders' deficit:
Preferred stock, 13,466,667 shares
authorized, 13,000,000 shares
designated as mandatorily
redeemable convertible preferred
stock............................. -- -- --
Common stock, $0.001 par value,
33,333,334 authorized; 4,772,245,
5,587,750 and 5,811,552
(unaudited) shares issued and
outstanding....................... 5,000 6,000 6,000
Additional paid-in capital......... 436,000 2,304,000 2,384,000
Accumulated deficit................ (21,113,000) (50,357,000) (56,786,000)
Other, primarily deferred stock
compensation...................... -- (4,353,000) (3,723,000)
------------ ------------ ------------
Total stockholders' deficit...... (20,672,000) (52,400,000) (58,119,000)
------------ ------------ ------------
$ 37,626,000 $ 37,427,000 $ 32,800,000
============ ============ ============

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

F-3

POINTCAST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ------------ ------------ ----------- -----------
(unaudited)

Revenue:
Advertising............ $ -- $ 4,114,000 $ 15,690,000 $ 2,548,000 $ 4,909,000
Development, license
and other fees........ 765,000 1,085,000 2,303,000 419,000 197,000
----------- ------------ ------------ ----------- -----------
Total revenue.......... 765,000 5,199,000 17,993,000 2,967,000 5,106,000
----------- ------------ ------------ ----------- -----------
Cost of revenue:
Advertising............ -- 2,433,000 6,985,000 948,000 2,527,000
Development, license
and other fees........ 9,000 193,000 413,000 93,000 --
----------- ------------ ------------ ----------- -----------
Total cost of revenue.. 9,000 2,626,000 7,398,000 1,041,000 2,527,000
----------- ------------ ------------ ----------- -----------
Gross profit............ 756,000 2,573,000 10,595,000 1,926,000 2,579,000
----------- ------------ ------------ ----------- -----------
Operating expenses:
Sales and marketing.... 1,220,000 9,182,000 18,844,000 4,569,000 4,504,000
Product development.... 1,733,000 5,496,000 10,645,000 2,357,000 2,728,000
General and
administrative........ 2,053,000 3,135,000 4,980,000 1,043,000 1,261,000
Non-recurring expenses. -- -- 2,918,000 -- --
Non-cash stock
compensation expense
and amortization of
warrants.............. -- 562,000 3,141,000 459,000 696,000
----------- ------------ ------------ ----------- -----------
Total operating
expenses.............. 5,006,000 18,375,000 40,528,000 8,428,000 9,189,000
----------- ------------ ------------ ----------- -----------
Loss from operations.... (4,250,000) (15,802,000) (29,933,000) (6,502,000) (6,610,000)
Interest and other
income................. 67,000 830,000 924,000 302,000 210,000
Interest expense........ (38,000) (162,000) (277,000) (38,000) (110,000)
Minority interest in
losses of consolidated
subsidiary............. -- -- 175,000 -- 115,000
----------- ------------ ------------ ----------- -----------
Net loss................ $(4,221,000) $(15,134,000) $(29,111,000) $(6,238,000) $(6,395,000)
=========== ============ ============ =========== ===========
Net loss per share:
Basic and diluted...... $ (1.45) $ (4.28) $ (6.38) $ (1.45) $ (1.18)
=========== ============ ============ =========== ===========
Shares used in
calculation........... 2,909,135 3,550,561 4,586,079 4,324,383 5,448,150
=========== ============ ============ =========== ===========
Pro forma net loss per
share:
Basic and diluted...... $ (1.95) $ (0.38)
============ ===========
Shares used in
calculation........... 14,974,857 16,723,694
============ ===========

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

F-4

POINTCAST INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

COMMON STOCK ADDITIONAL
---------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT OTHER TOTAL
--------- ------ ---------- ------------ ----------- ------------

Balance at December 31,
1994................... 4,360,958 $5,000 $ 92,000 $ (1,691,000) $ -- $ (1,594,000)
Issuance of common
stock, net of issuance
costs................. 66,667 -- 4,000 -- -- 4,000
Issuance of common
stock in connection
with the exercise of
stock options......... 17,548 -- 1,000 -- -- 1,000
Net loss............... -- -- -- (4,221,000) -- (4,221,000)
--------- ------ ---------- ------------ ----------- ------------
Balance at December 31,
1995................... 4,445,173 5,000 97,000 (5,912,000) -- (5,810,000)
Issuance of common
stock in connection
with the exercise of
stock options......... 327,072 -- 27,000 -- -- 27,000
Stock compensation
expense............... -- -- 312,000 -- -- 312,000
Accretion of
mandatorily redeemable
convertible preferred
stock redemption
value................. -- -- -- (67,000) -- (67,000)
Net loss............... -- -- -- (15,134,000) -- (15,134,000)
--------- ------ ---------- ------------ ----------- ------------
Balance at December 31,
1996................... 4,772,245 5,000 436,000 (21,113,000) -- (20,672,000)
Issuance of common
stock in connection
with the exercise of
stock options in
exchange for cash and
notes receivable...... 815,505 1,000 1,621,000 -- (1,218,000) 404,000
Deferred stock
compensation expense
recorded in connection
with CEO Agreement
(Note 6).............. -- -- -- -- (3,563,000) (3,563,000)
Stock compensation
expense............... -- -- 247,000 -- 618,000 865,000
Accretion of
mandatorily redeemable
convertible preferred
stock redemption
value................. -- -- -- (133,000) -- (133,000)
Net loss............... -- -- -- (29,111,000) -- (29,111,000)
Foreign currency
translation
adjustment............ -- -- -- -- (190,000) (190,000)
--------- ------ ---------- ------------ ----------- ------------
Balance at December 31,
1997................... 5,587,750 6,000 2,304,000 (50,357,000) (4,353,000) (52,400,000)
Issuance of common
stock in connection
with the exercise of
stock options
(unaudited)........... 223,802 -- 80,000 -- -- 80,000
Stock compensation
expense (unaudited)... -- -- -- -- 596,000 596,000
Accretion of
mandatorily redeemable
convertible preferred
stock redemption value
(unaudited)........... -- -- -- (34,000) -- (34,000)
Net loss (unaudited)... -- -- -- (6,395,000) -- (6,395,000)
Foreign currency
translation adjustment
(unaudited)........... -- -- -- -- 34,000 34,000
--------- ------ ---------- ------------ ----------- ------------
Balance at March 31,
1998 (unaudited)....... 5,811,552 $6,000 $2,384,000 $(56,786,000) $(3,723,000) $(58,119,000)
========= ====== ========== ============ =========== ============

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

F-5

POINTCAST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ------------ ------------ ----------- -----------
(unaudited) (unaudited)

Cash flows from operat-
ing activities:
Net loss............... $(4,221,000) $(15,134,000) $(29,111,000) $(6,238,000) $(6,395,000)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and amor-
tization.............. 142,000 1,055,000 2,723,000 492,000 831,000
Minority interest in
losses of subsidiary.. -- -- (175,000) -- (115,000)
Stock compensation ex-
pense ................ -- 312,000 865,000 24,000 596,000
Amortization of war-
rants................. -- 250,000 2,276,000 435,000 100,000
Changes in current as-
sets and liabilities:
Accounts receivable... 45,000 (3,141,000) (1,121,000) 693,000 1,013,000
Prepaid expenses and
other assets......... (51,000) (493,000) 79,000 (38,000) (553,000)
Accounts payable...... 754,000 2,193,000 3,169,000 1,168,000 (206,000)
Accrued expenses...... 569,000 456,000 1,206,000 266,000 684,000
Deferred revenue...... (76,000) 1,125,000 2,010,000 351,000 (1,315,000)
Other liabilities..... -- -- 715,000 -- (80,000)
----------- ------------ ------------ ----------- -----------
Net cash used in op-
erating activities.. (2,838,000) (13,377,000) (17,364,000) (2,847,000) (5,440,000)
----------- ------------ ------------ ----------- -----------
Cash flows from invest-
ing activities:
Purchase of short-term
investments........... -- (23,683,000) (21,090,000) -- (2,511,000)
Maturity of short-term
investments........... -- -- 32,335,000 5,743,000 12,414,000
Purchase of property
and equipment......... (1,131,000) (3,247,000) (6,180,000) (1,243,000) (418,000)
----------- ------------ ------------ ----------- -----------
Net cash (used in)
provided by invest-
ing activities ..... (1,131,000) (26,930,000) 5,065,000 4,500,000 9,485,000
----------- ------------ ------------ ----------- -----------
Cash flows from financ-
ing activities:
Proceeds from issuance
of common stock, net
of issuance costs..... 5,000 27,000 404,000 55,000 80,000
Proceeds from issuance
of mandatorily
redeemable convertible
preferred stock, net
of issuance costs..... 5,153,000 38,079,000 15,791,000 -- 2,000,000
Repayment of note pay-
able.................. (75,000) (258,000) (1,669,000) (96,000) (331,000)
Proceeds from repay-
ments on notes receiv-
ables................. -- -- -- -- 421,000
Proceeds from issuance
of notes payable...... 707,000 1,000,000 4,786,000 -- --
Issuance of note re-
ceivable due from
stockholder........... -- -- (2,000,000) -- --
Proceeds from minority
investment in subsidi-
ary................... -- -- 2,000,000 -- --
----------- ------------ ------------ ----------- -----------
Net cash provided by
(used in) financing
activities.......... 5,790,000 38,848,000 19,312,000 (41,000) 2,170,000
----------- ------------ ------------ ----------- -----------
Effects of exchange rate
changes on cash........ -- -- (190,000) -- 34,000
Net increase (decrease)
in cash and cash
equivalents............ 1,821,000 (1,459,000) 6,823,000 1,612,000 6,249,000
Cash and cash equiva-
lents at beginning of
year .................. 3,097,000 4,918,000 3,459,000 3,459,000 10,282,000
----------- ------------ ------------ ----------- -----------
Cash and cash equiva-
lents at end of year... $ 4,918,000 $ 3,459,000 $ 10,282,000 $ 5,071,000 $16,531,000
=========== ============ ============ =========== ===========
Supplemental cash flow
information:
Cash paid for interest. $ 33,000 $ 162,000 $ 277,000 $ 33,000 $ 73,000
=========== ============ ============ =========== ===========

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

F-6

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

PointCast Incorporated, (the "Company"), was incorporated in July 1992. In
February 1996, the Company launched the PointCast Network, offering
personalized news and information to business consumers over the Internet and
corporate intranets. The Company operates in one business segment.

Basis of presentation

The consolidated financial statements include the accounts of PointCast and
its majority-owned subsidiary, PointCast Japan L.L.C. ("PointCast Japan").
During 1997, the Company established PointCast Japan, a joint venture to offer
the Company's services in Japan. The Company contributed $1.0 million of cash
and certain rights to technology and trademarks for use in Japan in
consideration of its 60% ownership interest. The minority shareholder
contributed $2.0 million in cash in exchange for its 40% interest. No gain was
recognized on the formation of the joint venture.

The equity and losses attributable to the minority shareholder interest in
PointCast Japan are shown separately in the consolidated balance sheets and
consolidated statements of operations, respectively. Losses in excess of the
minority interest equity would be charged against the Company, if incurred.
Under the terms of the joint venture agreement, the joint venture will pay to
the 40% shareholder a management fee equal to 47% of the joint venture's
revenue over the two year life of the administrative services and management
agreement. For the year ended December 31, 1997 and the three-months ended
March 31, 1998 such management fees were $0 and $77,000, respectively.

Revenue recognition

Advertising revenue is derived from the sale of advertising space on the
PointCast Network. Advertising revenue is recognized in the period the
advertisement is displayed, provided no significant Company obligations remain
and collection of the resulting receivable is probable. Company obligations
typically include guarantees of a minimum number of "billable deliveries," a
measurement of the number of times an advertisement is downloaded to a unique
user of the PointCast Network. To the extent minimum billable delivery
guarantees are met, the Company recognizes revenue and invoices the advertiser
for the billable deliveries provided or, if an amount has been invoiced in the
excess of the billable deliveries provided, the Company defers recognition of
the corresponding revenue until the minimum billable delivery guarantees are
satisfied. Deferred revenue primarily represents billings in excess of revenue
recognized on advertising contracts. For the years ended December 31, 1996 and
1997, and the three months ended, March 31, 1997 and 1998 advertising revenue
represented 79%, 87%, 86% (unaudited) and 96% (unaudited) of total revenue,
respectively. Revenue from the sale of certain advertising space on the
PointCast Network is shared with third parties under the terms of certain
agreements. Where the Company shares collection risk or is not responsible for
invoicing or collection of the receivable, the Company recognizes only its pro
rata share of revenue from the contract. Development, license and other fees
primarily consist of development fees from the Company's agreements with
partners ("Industry Insider Agreements") and fees for the customization of
versions of the PointCast Network Client. Fees for the development of industry
specific channels and customization of the PointCast Network Client are
recognized using the completed contract method. Revenue from barter
transactions is recognized as advertisements are run on the PointCast Network.
Barter transactions are recorded at the estimated fair value of the goods or
services provided or received, whichever is more readily determinable. To
date, the value of barter transactions has been less than 10% of the Company's
revenue.

During 1995, 1996 and 1997, the Company licensed software under
noncancelable license agreements. Revenue from perpetual software license
agreements was recognized upon shipment of the software if there were

F-7

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

no significant post-delivery obligations, if collection was probable, and if
payment was due within one year. Revenue from post contract support services
was recognized ratably over the term of the support period. Software licenses
represented less than 5% of the Company's 1997 revenue. The Company's
PointCast Network Client is provided to users without charge and the Company
does not expect revenue from the licensing of software or post-contract
support to be a significant component of revenue in the future.

Cost of advertising revenue

Cost of advertising revenue is expensed as incurred and includes the costs
to run the Company's Central Broadcasting Facility and the costs associated
with licensed content.

Cash equivalents and short-term investments

The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. Those with original
maturities greater than three months and current maturities less than twelve
months from the balance sheet date are considered short-term investments, and
those with maturities greater than twelve months from the balance sheet date
are considered long-term investments.

Short-term investments in marketable securities are classified as available-
for-sale and consist primarily of high-grade commercial paper and debt
instruments of U.S. Government agencies. The fair value of the investments
approximates cost.

Concentration of credit risk

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents, short-term
investments and accounts receivable. Substantially all of the Company's cash,
cash equivalents and short-term investments are invested in high-grade
commercial paper and debt instruments of U.S. Government agencies. The
Company's accounts receivable have been derived primarily from revenue earned
from customers located in the United States and are denominated in U.S.
dollars. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral. The Company
maintains an allowance for doubtful accounts receivable based upon the
expected collectibility of accounts receivable.

The following table summarizes revenue from customers comprising 10% or more
of the revenues for the periods indicated:

THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------- -------------
1995 1996 1997 1997 1998
---- ---- ---- ------ ------
(unaudited)

Company A....................................... -- 10% 3% 4% 3%
Company B....................................... 69% 2% -- -- --
Company C....................................... -- -- 3% -- 10%

Company C is a holder of approximately 2% of the Company's pro forma
outstanding Common Stock at March 31, 1998 (Note 1). One customer accounted
for 26% of net accounts receivable at December 31, 1996.

Net loss per share and pro forma net loss per share

The Company computes net loss per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earning per share"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98

F-8

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic and diluted net
loss per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of common shares
outstanding during the period. The weighted average shares used to compute
basic and diluted net loss per share include outstanding shares of Common
Stock from the date of issuance if such shares are vested. Additionally, the
weighted average number of common shares outstanding excludes certain unvested
shares until the date such shares vest. Weighted averaged shares used to
compute basic and diluted net loss per share excludes 1,260,191, 733,079,
265,104, 616,085 (unaudited) and 202,303 (unaudited) shares of issued and
outstanding Common Stock subject to repurchase rights for the years ended
December 31, 1995, 1996, and 1997 and the three-months ended March 31, 1997
and 1998. The calculation of diluted net loss per share excludes 8,064,839,
12,999,946, 17,401,376, 13,725,005 (unaudited) and 17,431,930 (unaudited)
shares of Common Stock for the years ended December 31, 1995, 1996, and 1997
and the three months ended March 31, 1997 and 1998 issuable upon the exercise
of employee stock options, the exercise of warrants to purchase common stock,
the conversion of the mandatorily redeemable convertible preferred stock into
common stock and the exercise of warrants to purchase mandatorily redeemable
convertible preferred stock and the conversion of such shares into common
stock as the effect of the exercise or conversion would be antidilutive.

Pro forma basic and diluted net loss per share gives effect to the
conversion of mandatorily redeemable convertible preferred stock, less 250,000
shares of mandatorily redeemable convertible preferred stock subject to
repurchase rights for the year ended December 31, 1997 and the three months
ended March 31, 1998 (unaudited), respectively. Weighted average shares used
to compute pro forma basic and diluted loss per share excludes the 701,756
shares of mandatorily redeemable convertible preferred stock issuable upon the
exercise of outstanding warrants. (Note 6)

A reconciliation of basic and diluted net loss per share and pro forma basic
and diluted net loss per share is as follows:

YEAR ENDED DECEMBER 31, 1997 THREE MONTH PERIOD ENDED MARCH 31, 1998
------------------------------------- ----------------------------------------------
(LOSS) SHARES PER SHARE (LOSS) SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- --------- --------------- -------------- ------------
(unaudited) (unaudited) (unaudited)

Net loss................ $(29,111,000) -- -- $ (6,395,000) -- --
Accretion to redemption
value of Mandatorily
Redeemable Convertible
Preferred Stock....... (133,000) -- -- (34,000) -- --
------------ ------ --------------- ----------
Basic and diluted net
loss per share......... (29,244,000) 4,586,079 $(6.38) (6,429,000) 5,448,150 $ (1.18)
====== ==========
Pro forma effect of
dilutive securities
Assumed conversion of
Mandatorily Redeemable
Convertible Preferred
Stock to Common Stock. 133,000 10,388,778 34,000 11,275,544
------------ ---------- --------------- --------------
Pro forma basic and di-
luted net loss per
share.................. $(29,111,000) 14,947,857 $(1.95) $ (6,395,000) 16,723,694 $ (0.38)
============ ========== ====== =============== ============== ==========

Product development costs

Product development costs are expensed as incurred. After technological
feasibility is established, product development costs are capitalized. The
capitalized costs are then amortized on a straight line basis over the
estimated product life or on the ratio of current revenues to total projected
product revenue, whichever is greater. To date, the period between achieving
technological feasibility, which the Company has defined as the establishment
of a working model and which typically occurs when beta testing commences, and
the general availability of such products has been short and product
development costs qualifying for capitalization have been insignificant.
Accordingly, the Company has not capitalized any product development costs.

F-9

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and equipment

Property and equipment are stated at historical cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, generally three to five years, or the shorter of the lease term or the
estimated useful life of the respective assets, if applicable.

Advertising expense

Advertising is expensed as incurred. Advertising expense totaled $2,435,000,
$4,844,000, $1,396,000 (unaudited) and $476,000 (unaudited) for the years
ended December 31, 1996 and 1997 and the three months ended March 31, 1997 and
1998, respectively. There was no advertising expense in the year ended
December 31, 1995.

Non-recurring expenses

Non-recurring expenses represent one-time charges incurred during 1997,
principally in connection with the hiring of the Company's Chief Executive
Officer and losses incurred on the sublease of certain excess office space.

Stock-based compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with
the disclosure provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," ("SFAS No. 123"). Under APB
No. 25, compensation expense is recognized based on the difference, if any, on
the date of grant between the fair value of the Company's stock and the amount
an employee must pay to acquire the stock. The compensation expense is
recognized over the option vesting period.

Foreign currency and international operations

The functional currency of the Company's subsidiary is the local currency.
The financial statements of the subsidiary are translated to United States
dollars using the year-end rate of exchange for assets and liabilities and
average rates for the year for revenue, costs and expenses. Translation losses
are deferred and accumulated as a component of stockholders' equity. Net gains
and losses resulting from foreign exchange transactions are included in the
consolidated statements of operations and were not significant. International
revenues and assets were not significant for all periods presented.

Other comprehensive income (loss)

Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive
income (loss) and its components in financial statements. Comprehensive income
(loss) as defined, includes all changes in equity (net assets) during a period
from nonowner sources. The only item included in other comprehensive income
(loss) which is excluded from net income (loss) is the foreign currency
translation adjustment. Other comprehensive loss totaled $(6,238,000)
(unaudited) and $(6,361,000) (unaudited) for the three months ended March 31,
1997 and 1998, respectively.

New accounting pronouncement

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information." ("SFAS 131"). This statement establishes
standards for the way companies report information about operating segments in

F-10

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

annual financial statements. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. The disclosures prescribed by SFAS 131 will be effective for the
year ending December 31, 1998.

Use of estimates

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

Pro forma stockholders' equity (unaudited)

If the offering contemplated in this Prospectus (the "Offering") is
consummated, unaudited pro forma stockholders' equity at March 31, 1998 as
adjusted for (i) the assumed conversion of 11,775,560 shares of Mandatorily
Redeemable Convertible Preferred Stock into shares of Common Stock and (ii)
giving effect to the reverse stock split and recapitalization described in
Note 11, would be as follows:

Preferred Stock, $0.001 par value; 5,000,000 shares authorized
No shares issued and outstanding............................. $ --
Common Stock, $0.001 par value; 100,000,000 shares authorized;
17,587,112 issued and outstanding............................ 18,000
Additional paid-in-capital.................................... 74,612,000
Accumulated deficit........................................... (56,786,000)
Other......................................................... (3,723,000)
------------
$ 14,121,000
============

Interim results (unaudited)

The accompanying interim consolidated financial statements as of March 31,
1998 and for the three months ended March 31, 1997 and 1998 are unaudited. In
the opinion of management, the unaudited interim financial statements have
been prepared on the same basis as the annual consolidated financial
statements and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the consolidated financial position
as of March 31, 1998 and the consolidated results of the Company's operations
and its cash flows for the three months ended March 31, 1997 and 1998. The
financial data and other information disclosed in these notes to the
consolidated financial statements related to these periods are unaudited. The
results for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31,
1998.

NOTE 2--BALANCE SHEET COMPONENTS

DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
----------- ----------- -----------
(unaudited)

Property and equipment, net:
Computer and equipment.............. $ 4,770,000 $ 8,314,000 $ 8,676,000
Furniture and fixtures.............. 246,000 1,549,000 1,589,000
Leasehold and fixtures.............. 207,000 1,257,000 1,273,000
----------- ----------- -----------
5,223,000 11,120,000 11,538,000
Less: accumulated depreciation...... (1,242,000) (3,682,000) (4,513,000)
----------- ----------- -----------
$ 3,981,000 $ 7,438,000 $ 7,025,000
=========== =========== ===========

F-11

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and equipment included $1,273,000 of fixed assets under capital
leases at December 31, 1996 and 1997 and March 31, 1998 (unaudited).
Accumulated amortization of such assets was $372,000, $796,000 and $902,000
(unaudited) at December 31, 1996 and 1997 and March 31, 1998, respectively.

DECEMBER 31,
--------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(unaudited)

Accrued expenses:
Administrative expenses.................. $ 700,000 $ 750,000 $ 951,000
Payroll and related expenses............. 391,000 1,456,000 1,297,000
Other.................................... 12,000 103,000 745,000
---------- ---------- ----------
$1,103,000 $2,309,000 $2,993,000
========== ========== ==========

NOTE 3--RELATED PARTY TRANSACTIONS

Industry Insider Agreements

During 1996 and 1997, the Company entered into Industry Insider Agreements
with certain stockholders who own in the aggregate 3% of the Company's pro
forma outstanding Common Stock at March 31, 1998 (Note 1). Management believes
that the terms of these agreements were similar to those terms given to
unaffiliated Industry Insider partners. During 1997, the Company recognized
$457,000 of revenue from Industry Insider Agreements with related parties.
There was no revenue recognized during the years ended December 31, 1995 and
1996 or for the three months ended March 31, 1997 and 1998. Fees for
customization and channel development are recognized using the completed
contract method.

Advertising revenue

In 1997 and the three months ended March 31, 1997 and 1998, the Company
recognized advertising revenue from holders of 2% of the Company's pro forma
outstanding Common Stock at March 31, 1998 in the amount of $527,000, $58,000
(unaudited) and $648,000 (unaudited), respectively, in exchange for cash. The
Company believes that the terms of advertising contracts with related parties
were similar to those given on orders of similar size to unaffiliated
customers.

Note receivable due from stockholder

Under the terms of a 1997 employment agreement with the Company's Chief
Executive Officer (the "CEO Agreement"), the Company in October 1997 entered
into two full recourse notes receivable amounting to $2,000,000. The notes
issued are further secured by approximately 233,000 shares of Series E
mandatorily redeemable convertible preferred stock, bear interest at the rate
of 6.01% compounded semi-annually and are due no later than 2002. The notes
were classified as Notes Receivable from Stockholder in the accompanying
balance sheet at December 31, 1997 and March 31, 1998.

Another loan for $421,000 was made in 1997 in connection with the purchase
of Series E mandatorily redeemable convertible preferred stock by the Chief
Executive Officer. The loan was recorded as a reduction of the carrying value
of mandatorily redeemable convertible preferred stock at December 31, 1997 and
was repaid in full in March 1998. The Chief Executive Officer is entitled to
receive at December 31, 1999 a bonus of $1,800,000 if the executive remains
employed at that date, the Company has achieved a total year-end viewership of
at least 3,000,000 viewers and the Company's audited consolidated financial
statements for the year ended December 31, 1999, reflect operating income. The
bonus may be paid in cash or through the forgiveness of

F-12

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

amounts due from the Chief Executive Officer. The Company periodically
evaluates the available evidence to determine whether it is probable that the
goals associated with the bonus will be achieved and will record expense
associated with the bonus in the period such a determination is made. Based on
the Company's results through March 31, 1998, the Company does not consider it
probable that the goals associated with the bonus will be achieved and no
amount has been accrued.

NOTE 4--BORROWINGS

At December 31, 1997 and March 31, 1998, the Company had $1,439,000 and
$1,439,000 (unaudited), respectively, payable under a line of credit with a
financial institution. The line of credit provides for borrowings of up to
$5,000,000. Advances in excess of $2,000,000 must be supported by a borrowing
base calculated based on qualified accounts receivable. The line of credit is
secured by certain specified assets of the Company, expires March 31, 1999 and
bears interest at a variable rate based on the prime rate (8.5% at December
31, 1997 and March 31, 1998) . Under the line of credit, the Company is
required to maintain certain financial covenants. The Company was in
compliance with all covenants at December 31, 1997 and March 31, 1998.

At December 31, 1997 and March 31, 1998, the Company had $3,079,000 and
$2,831,000 (unaudited) of borrowings outstanding under a note payable due to
an insurance company. The note payable bears interest at an annual rate of
9.7% and is secured by the Company's property and equipment. The Company is
required to make monthly payments of principal and interest under the note of
$107,000 through December 2001.

At December 31, 1996, the Company had loans outstanding totaling $1,088,000
payable to a bank. The loans were repaid during 1997.

At December 31, 1996 and 1997 and March 31, 1998, the Company had
$1,065,000, $752,000 and $669,000 (unaudited), respectively, outstanding and
due under two capital lease agreements with third parties. The capital lease
agreements charge interest at rates ranging up to eleven percent per annum.

As of December 31, 1997, the maturities under the line of credit, note
payable and capital leases are as follows:

YEAR ENDING DECEMBER 31,
1998............................................................ $1,450,000
1999............................................................ 2,763,000
2000............................................................ 1,014,000
2001............................................................ 43,000
----------
5,270,000
Less current portion.............................................. 1,450,000
----------
Long-term portion................................................. $3,820,000
==========

NOTE 5--COMMITMENTS AND CONTINGENCIES

Operating leases

The Company leases office space and equipment under noncancelable operating
leases with various expiration dates through 2002. Rent expense for the years
ended December 31, 1995, 1996 and 1997 and the three-months ended March 31,
1997 and 1998 was $168,000, $680,000, $1,751,000, $222,000 (unaudited) and
$394,000 (unaudited), respectively. The terms of a facility lease and certain
equipment leases provide for rental payments that increase over the term of
the lease. The Company recognizes the expense on a straight-line basis over
the lease period, and has accrued for rent expense incurred but not paid.

F-13

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under noncancelable operating leases and
future minimum sub-lease rental income under noncancelable operating leases
are as follows:

OPERATING SUB-LEASE
LEASE INCOME
----------- -----------

Year Ending December 31,
1998.............................................. $ 3,043,000 $ (872,000)
1999.............................................. 2,755,000 (898,000)
2000.............................................. 2,546,000 (610,000)
2001.............................................. 2,577,000 --
2002.............................................. 2,701,000 --
Thereafter........................................ -- --
----------- -----------
Total........................................... $13,622,000 $(2,380,000)
=========== ===========

Litigation

From time to time, the Company is subject to legal proceedings and claims in
the ordinary course of business, including claims against the Company of
alleged infringement of patents, trademarks and other intellectual property
rights and challenges to the validity or enforceability of certain
intellectual property rights held by the Company. The Company has received
inquiries from patent holders alleging that elements of The PointCast Network
infringe their rights and offering to license such patents to the Company.
Legal standards relating to the validity, enforceability and scope of
protection of intellectual property rights in Internet-related industries are
evolving. Accordingly, the ultimate outcome of intellectual property claims
against the Company and the ability of the Company to defend against such
claims are difficult to predict. However, the Company is not currently aware
of any legal proceedings or claims that the Company believes will have,
individually or in the aggregate, a material adverse impact on the Company's
financial condition, results of operations or cash flows.

NOTE 6--MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

Mandatorily redeemable convertible preferred stock at December 31, 1997
consists of the following series:

SHARES
---------------------- PAR VALUE LIQUIDATION
SERIES AUTHORIZED OUTSTANDING PER SHARE AMOUNT
------ ---------- ----------- --------- -----------

A............................... 4,333,334 4,280,925 $0.001 $ 4,025,000
B............................... 2,666,667 2,449,634 $0.001 5,170,000
C............................... 1,000,000 971,038 $0.001 2,913,000
D............................... 3,533,333 2,540,356 $0.001 36,200,000
E............................... 1,933,333 1,393,256 $0.001 19,854,000
---------- ---------- -----------
13,466,667 11,635,209 $68,162,000
========== ========== ===========

During the three months ended March 31, 1998, the Company issued 140,351
shares of Series E mandatorily redeemable convertible preferred stock for
total proceeds of approximately $2,000,000 (unaudited). At March 31, 1998, the
liquidation amount of Series E mandatorily redeemable convertible preferred
stock was $21,854,000 (unaudited).

F-14

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The holders of mandatorily redeemable convertible preferred stock have
various rights and preferences as follows:

Voting

Each share of mandatorily redeemable convertible preferred stock has voting
rights equal to an equivalent number of shares of common stock into which it
is convertible and votes together as one class with the common stock.

As long as any of the shares of mandatorily redeemable convertible preferred
stock remain outstanding, the Company must obtain approval from the holders of
at least 55% of the shares of mandatorily redeemable convertible preferred
stock in order to alter the articles of incorporation as they relate to
mandatorily redeemable convertible preferred stock, change the authorized
number of shares of mandatorily redeemable convertible preferred stock,
authorize or issue other equity having a preference over the preferred stock
with respect to voting dividends, redemption, or upon liquidation, repurchase
any shares of common stock other than shares subject to the right of
repurchase by the Company, pay any dividends on common stock, or change the
authorized number of directors.

Dividends

Holders of Series A, B, C, D and E mandatorily redeemable convertible
preferred stock are entitled to receive noncumulative dividends at the rate of
$0.093, $0.21, $0.30 $1.425 and $1.425 per share, respectively, when and if
declared by the Board of Directors. The holders of the Series A, B, C, D and E
of mandatorily redeemable convertible preferred stock will also be entitled to
participate in dividends on common stock, when and if declared by the Board of
Directors, based on the number of shares of common stock held on an converted
basis. No dividends on mandatorily redeemable convertible preferred stock or
common stock have been declared by the Board from inception through March 31,
1998.

Liquidation

In the event of any acquisition, liquidation, dissolution or winding up of
the Company, or in the event of a sale of greater than 50% of the assets of
the Company, the holders of Series A, B, C, D, and E mandatorily redeemable
convertible preferred stock are entitled to receive an amount of $0.9402,
$2.1104, $3.00, $14.25 and $14.25 per share, respectively, plus any declared
but unpaid dividends prior to and in preference to any distribution to the
holders of common stock. After payment has been made to the holders of the
mandatorily redeemable convertible preferred stock of the full liquidation
amount, any remaining assets of the Company would be distributed with equal
priority and pro rata among the holders of common stock.

Conversion

Each share of mandatorily redeemable convertible preferred stock is
convertible into common stock on a one-for-one basis at the option of the
holder subject to adjustment for dilution. Each share of mandatorily
redeemable convertible preferred stock automatically converts into common
stock at the then prevailing conversion ratio upon the closing of a public
offering of common stock with gross proceeds in excess of $20,000,000.

Redemption

The holders may request that the shares of mandatorily redeemable
convertible preferred stock be redeemed at any time after June 3, 2001. Shares
of mandatorily redeemable convertible preferred stock may be redeemed at a
price equal to the original issue price, subject to adjustment for dilution
and declared but unpaid dividends. The difference between the carrying value
of shares of mandatorily redeemable convertible preferred stock and their
redemption value is being accreted through June 3, 2001. Accretion is charged
directly to accumulated

F-15

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

deficit and totaled $67,000, $133,000 and $34,000 (unaudited) for 1996, 1997
and the three months ended March 31, 1998, respectively.

Other

In connection with a lease agreement, the Company issued warrants to
purchase 26,280 shares of Series B mandatorily redeemable convertible
preferred stock during 1995. The warrants are exercisable at a price of
$2.1104 per share and expire on July 31, 2002. Management determined that the
value of the warrants at the date of grant was insignificant.

In connection with an advertising agreement under the terms of which the
Company received certain advertising space during December 1996, the Company
issued immediately exercisable warrants to purchase 701,756 shares of the
Company's Series D mandatorily redeemable convertible preferred stock at a per
share price of $14.25 of which warrants to purchase 350,878 shares expire in
1999 and warrants to purchase 350,878 shares expire in 2001, subject to
provisions for acceleration of the expiration date due to an initial public
offering or the acquisition of the Company. The Company calculated the fair
value of the warrants, which approximated the value of advertising received at
the date of grant, as $3,000,000 (using an established option pricing model)
which was recorded as prepaid advertising. The Company is recognizing the
advertising expense over the greater of straight-line over the advertising
period or as such advertising is used by the Company. The Company has recorded
advertising expense of $250,000, $2,276,000, $435,000 (unaudited) and $100,000
(unaudited) for the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1997 and 1998, respectively, related to the advertising
agreement which is included in "non-cash compensation expense and amortization
of warrants" in the accompanying statements of operations.

Under the terms of the CEO Agreement, the Chief Executive Officer received
250,000 shares of the Company's Series E mandatorily redeemable convertible
preferred stock at the date of hiring. The shares are subject to repurchase by
the Company in the event of termination for any reason; provided, however,
that such repurchase right lapses as to 62,500 shares on October 22, 1998 and
as to 5,208 shares on the 22nd day of each month thereafter. Such shares shall
fully vest upon a change in control or upon the closing of an initial public
offering. The Company recorded deferred stock compensation of $3,563,000 in
connection with the Executive Agreement based on the price of preferred shares
sold to unaffiliated investors in contemporaneous transactions. The deferred
stock compensation is being amortized over the vesting period of the shares.
Upon closing of the Company's initial public offering, the unamortized balance
will be expensed. Deferred compensation expense of $309,000 and $463,000
(unaudited) was amortized during 1997 and the three months ended March 31,
1998, respectively. Additionally, the Chief Executive Officer purchased 83,334
shares of the Company's Series E mandatorily redeemable convertible preferred
stock at $14.25 per share under the Executive Agreement. The purchase price of
the shares was similar to that paid by unaffiliated investors in
contemporaneous transactions.

NOTE 7--COMMON STOCK

A portion of the outstanding shares are subject to a right of repurchase by
the Company at the original price paid by the purchaser subject to vesting,
which is generally over a four year period from the earlier of grant date or
employee hire date, as applicable. At December 31, 1997 and March 31, 1998,
there were 299,164 and 202,299 (unaudited) shares subject to repurchase.

As of March 31, 1998, the Company has reserved shares of common stock as
follows:

Conversion of mandatorily redeemable convertible preferred stock
(unaudited)..................................................... 11,775,560
Exercise of common stock and mandatorily redeemable convertible
preferred stock warrants (unaudited)............................ 936,370
Options under stock option plan (Note 8) (unaudited)............. 6,947,018
----------
Total shares reserved.......................................... 19,658,948
==========

F-16

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--COMMON STOCK OPTIONS AND WARRANTS

In 1994, the Company adopted the 1994 Stock Option Plan (the "Plan"). The
Plan provides for the granting of stock options to employees and consultants
of the Company. Options granted under the Plan may be either incentive stock
options or nonqualified stock options. Incentive stock options ("ISO") may be
granted only to Company employees (including officers and directors who are
also employees). Nonqualified stock options ("NSO") may be granted to Company
employees and consultants.

Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO shall not be less than 100% and 85% of
the estimated fair value of the shares on the date of grant, respectively, and
(ii) the exercise price of an ISO and NSO granted to a 10% shareholder shall
not be less than 110% of the estimated fair value of the shares on the date of
grant, respectively. Options are exercisable immediately and if exercised
prior to vesting subject to a repurchase option which expires over the four
year vesting period. To date, options granted generally vest over four years.

During 1997, the Company granted 339,458 non-qualified options to purchase
common stock at an exercise price below the fair market value at the date of
grant primarily based on the value of the Company's common stock as
established in cash transactions between unaffiliated investors. The Company
recorded deferred stock compensation of $1,018,000 which it is recognizing
over the four year vesting period of the options. The Company recognized
$309,000 and $132,000 (unaudited) of compensation expense during 1997 and the
three months ended March 31, 1998 in connection with the options.
Approximately 133,334 of such options were exercised by the holder in exchange
for a full recourse note receivable. The note bears interest at an annual rate
of 6.01%, is due in October 2001 and has been recorded in Other Stockholders'
Equity in the accompanying balance sheet at December 31, 1997 and March 31,
1998. Amounts outstanding under the note totaled $200,000 at December 31, 1997
and March 31, 1998 (unaudited).

During 1996 and 1997, the Company accelerated the vesting of common stock
options for certain executives in connection with severance agreements and
recorded compensation expense of $312,000 and $243,000 respectively. Such
compensation expense represents the difference between the exercise price and
the then-deemed fair value of the shares on the date that vesting was
accelerated.

During December 1997, the Company issued warrants to purchase 208,334 shares
of the Company's Common Stock to partnerships associated with two directors.
The warrants have an exercise price of $7.50, which the Company believes
represents the fair value of the Company's Common Stock at the date of grant,
and expire in 2002. The warrants were issued in exchange for services by a
director as an acting Chief Executive Officer while the Company completed its
search for a Chief Executive Officer. The director received no cash
compensation for his services.

A summary of options outstanding under the Plan and certain other options
noted below outstanding as of December 31, 1995, 1996, 1997 and March 31,
1998, and changes during the periods then ended is presented below:

OPTIONS OUTSTANDING
-------------------------------
DECEMBER 31,
------------------------------- MARCH 31,
1995 1996 1997 1998
--------- --------- --------- -----------
(unaudited)

Outstanding at beginning of
year.......................... 612,000 1,308,000 2,733,000 4,830,000
Granted...................... 786,000 1,929,000 3,280,000 200,000
Exercised.................... (17,000) (327,000) (813,000) (226,000)
Canceled..................... (73,000) (177,000) (370,000) (84,000)
--------- --------- --------- ---------
Outstanding at end of year..... 1,308,000 2,733,000 4,830,000 4,720,000
========= ========= ========= =========
Weighted average fair value of
options granted during the
year.......................... $ 0.06 $ 0.95 $ 5.24 $ 7.50
========= ========= ========= =========

F-17

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At March 31, 1998, 2,227,018 options were available for grant under the
Plan.

OPTIONS OUTSTANDING AT MARCH 31, OPTIONS VESTED AT
1998 MARCH 31, 1998
-------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
----------------------- ----------- ----------- -------- ----------- --------

$0.00 - 0.75............ 1,035,128 2.7 $0.40 442,691 $0.36
0.76 - 1.50............ 499,016 3.4 1.50 128,447 1.50
1.51 - 4.50............ 630,089 3.8 3.54 168,120 3.31
4.51 - 7.50............ 2,555,767 5.0 6.24 279,895 6.03
--------- ---------
4,720,000 1,019,153
========= =========

Fair value disclosures

Had the Company's stock based compensation cost been determined based on the
minimum value at the grant dates for the awards under the Plan and the grant
of warrants to a director consistent with the method of SFAS No. 123, the
Company's net loss would have been increased to the pro forma amounts
indicated below:

YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ----------- -----------

Net loss:
As reported............................. $4,221,000 $15,134,000 $29,111,000
========== =========== ===========
Pro forma............................... $4,222,000 $15,533,000 $30,253,000
========== =========== ===========

The Company calculated the minimum value of each option grant on the date of
grant using the minimum value method with the following assumptions: no
dividend yield, weighted average expected option term of 2.75 years; risk free
interest rate of 5.06%, 5.87% and 5.51% for the years ended December 31, 1995,
1996 and 1997.

NOTE 9--EMPLOYEE BENEFIT PLANS

In 1995, the Company adopted a 401(k) Plan that is intended to qualify under
section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k)
Plan covers substantially all of the Company's employees. Participants may
elect to contribute a percentage of their compensation to this plan, up to the
statutory maximum amount. Through March 31, 1998, the Company has made no
discretionary contributions to the 401(k) Plan.

NOTE 10--INCOME TAXES

No provision for income taxes was recorded from inception through December
31, 1997 as the Company incurred net operating losses during the period. The
components of the net deferred tax asset as of December 31, 1996, and 1997
were as follows:

DECEMBER 31,
-------------------------
1996 1997
----------- ------------

Net operating loss carryforwards.................. $ 6,524,000 $ 16,020,000
Cumulative temporary differences.................. 755,000 1,305,000
Tax credit carryforwards.......................... 413,000 1,059,000
----------- ------------
7,692,000 18,384,000
Valuation allowance............................... (7,692,000) (18,384,000)
----------- ------------
Net deferred tax asset............................ $ -- $ --
=========== ============

F-18

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Management believes that, based on a number of factors including the absence
of taxable income to date, the available objective evidence creates sufficient
uncertainty regarding the realizability of the deferred tax assets such that a
full valuation allowance has been recorded.

At December 31, 1997, the Company had approximately $42,000,000 of federal
and $22,000,000 of California net operating loss carryforwards available to
offset future taxable income. The federal loss carryforwards expire through
the year 2017 and the California loss carry forwards expire at various dates
from 1997 through the year 2001. Under the Tax Reform Act of 1986, the amounts
of and benefits from net operating loss carryforwards may be impaired or
limited in certain circumstances. Events which cause limitations in the amount
of net operating losses that the Company may utilize in any one year include,
but are not limited to, a cumulative ownership change of more than 50%, as
defined, over a three year period. At December 31, 1997, the Company may
utilize approximately $11,000,000 of federal net operating losses annually to
offset taxable income.

NOTE 11--SUBSEQUENT EVENTS

Reincorporation, amendment to the Articles of Incorporation and reverse stock
split

During May 1998, the Company's Board of Directors authorized the
reincorporation, effective prior to the Company's initial public offering of
the Company in the State of Delaware, including a 2 for 3 reverse stock split
of the outstanding shares of the Company's Common Stock effected through the
exchange ratio of the reincorporation merger. Upon reincorporation, the
Company will be authorized to issue 100,000,000 shares of Common Stock, $0.001
par value and 5,000,000 shares of undesignated Preferred Stock, $0.001 par
value. Also during May 1998, the Company's Board of Directors approved an
amendment to the Company's Articles of Incorporation to provide that upon the
closing of a public offering by the Company with gross proceeds of at least
$20,000,000, all outstanding shares of mandatorily redeemable convertible
preferred stock will convert to shares of Common Stock at the then-prevailing
conversion ratio (Note 6) and all outstanding warrants to purchase shares of
mandatorily redeemable convertible preferred stock will convert into warrants
to purchase common stock. All share and per share data have been retroactively
adjusted to reflect the reverse stock split.

1994 Stock Plan

In May 1998, the Company's Board of Director amended the 1994 Stock Plan to
provide for the maximum aggregate number of shares subject to the plan to be
8,333,334 shares of Common Stock, plus annual increases to be added on the
first day of the Company's fiscal year (beginning in 1999) equal to the lesser
of (i) 2,000,000 shares, (ii) 5% of the outstanding shares, or (iii) a lesser
amount determined by the Board of Directors.

Stock option grants

In April and May 1998, the Company's Board of Directors authorized the grant
of options to acquire an aggregate of 746,094 shares of the Company's Common
Stock with a weighted average exercise price of $7.66 per share. The Company
will record deferred stock compensation expense of $1,252,000 in connection
with these options which it will recognize over the vesting period of the
options.

Employee stock purchase plan

In May 1998, the Company's Board of Directors adopted the 1998 Employee
Stock Purchase Plan (the "Purchase Plan") and reserved 500,000 shares of
Common Stock for issuance thereunder with annual increases equal to the lesser
of (i) 750,000 shares, (ii) 2.5% of the outstanding shares on such date, or
(iii) a lesser amount determined by the Board of Directors. Adoption of the
Purchase Plan requires approval of the Company's Stockholders who are expected
to vote on adoption during June 1998. The Purchase Plan permits eligible

F-19

POINTCAST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

employees to acquire shares of the Company's Common Stock through periodic
payroll deductions of up to 15% of their annual compensation, with annual
contributions not to exceed $25,000. Each offering period will have a maximum
duration of 24 months. Each offering period includes four six-month purchase
periods. Eligible employees may purchase up to 5,000 shares in any purchase
period. The price at which the Common Stock is purchased under the Purchase
Plan is 85% of the lesser of the fair market value of the Company's Common
Stock on the first day of the applicable offering period or on the last day of
the respective purchase period. The initial offering period will commence on
the effectiveness of the Offering and will end on the last trading day before
August 1, 2000. The Purchase Plan will terminate after a period of 10 years
unless terminated earlier as permitted by the plan.

Directors stock option plan

In May 1998, the Company's Board of Directors adopted the 1998 Directors
Stock Option Plan (the "Directors Plan") and reserved 200,000 shares of Common
Stock for issuance thereunder with annual increases to be added on the first
day of the Company's fiscal year, beginning in 1999, equal to the lesser of
(i) the number of shares needed to restore the maximum aggregate number of
shares available for sale under the Directors Plan to 200,000, or (ii) a
lesser amount determined by the Board of Directors. Adoption of the Directors
Plan requires approval of the Company's Stockholders who are expected to vote
on adoption during June 1998. Only non-employee directors may be granted
options under the Directors Plan. The Directors Plan provides for an initial
grant to outside directors of 20,000 shares. In addition, the Directors Plan
provides for automatic annual grants on the date of the Company's annual
meeting of stockholders of 5,000 shares thereafter to all directors who have
served on the Board for at least six months. The exercise price must be 100%
of the fair market value of the Company's Common Stock on the date of the
grant.

F-20

Back Inside Cover of Prospectus

PointCast Helps Companies Build More Informed Organizations

Content Feeds
The PointCast Network receives continuously updated news feeds from
approximately 700 sources via satellite, the Internet and leased lines.

(Pictorial flow chart depicting the flow of content into the Company's Central
Broadcast Facility and out to the Company's PointCast network Client both
directly and through Corporate Intranets)

(Picture of the Company's Central Broadcast Facility)
PointCast Central Broadcast Facility
PointCast's Central Broadcast Facility organizes incoming news streams into an
efficient and consistent broadcast.

(Picture of people viewing the Company's Pointcast Network Client)
Individual viewers receive PointCast Network broadcasts over the Internet
to their small business or home office.

(Picture displaying the Company's Intranet Broadcast Solution tools and the
flow of information through the corporate intranet tools to the viewer)
Firewall
PointCast Administrator
PointCast Intranet Broadcast Manager
PointCast Studio
Web Server
PointCast Caching Manager
Corporate Intranet
PointCast Intranet Broadcast Solution
With PointCast's Intranet Broadcast Solution, companies can equip employees
with internal company, industry and world news, delivered right to their
computer screens.

The PointCast Network's robust, end-to-end broadcast infrastructure transforms
news fees into personalized news broadcasts, delivering approximately 450
million news and information items each day.

(Picture of the Company's ticker)

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

PAGE
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
Selected Consolidated Financial Data...................................... 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 32
Management................................................................ 53
Certain Transactions...................................................... 63
Principal Stockholders.................................................... 64
Description of Capital Stock.............................................. 66
Shares Eligible for Future Sale........................................... 69
Underwriting.............................................................. 71
Legal Matters............................................................. 73
Experts................................................................... 73
Change in Accountants..................................................... 73
Additional Information.................................................... 73
Index to Consolidated Financial Statements................................ F-1

THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

3,750,000 SHARES

POINTCAST INCORPORATED

COMMON STOCK

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

PROSPECTUS

JULY 1998

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

LEHMAN BROTHERS

BT ALEX. BROWN

BANCAMERICA ROBERTSON STEPHENS

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

AMOUNT
TO BE PAID
----------

SEC registration fee........................................... $15,267
NASD filing fee................................................ 5,675
Nasdaq National Market listing fee............................. *
Printing and shipping fees..................................... *
Legal fees and expenses........................................ *
Accounting fees and expenses................................... *
Directors and officers liability insurance..................... *
Blue Sky qualification fees and expenses....................... *
Transfer agent and registrar fees.............................. *
Miscellaneous fees............................................. *
-------
Total........................................................ $ *
=======

- --------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:

EXHIBIT
DOCUMENT NUMBER
-------- -------

Form of Underwriting Agreement................................... 1.1
Restated Certificate of Incorporation............................ 3.2
Bylaws........................................................... 3.2
Amended and Restated Investors Rights Agreement.................. 4.2
Form of Indemnification Agreement entered into by the Registrant
with each of its directors and executive officers............... 10.1

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since March 31, 1995, the Registrant has issued and sold the following
securities:

1. Since March 31, 1995, the Registrant issued and sold 1,386,155 shares
of Common Stock to directors, employees and consultants at prices ranging
from $0.06 to $7.50 per share, upon exercise of stock options pursuant to
the Registrant's 1994 Stock Plan and pursuant to Common Stock Purchase
Agreements.

2. On December 7, 1995, the Registrant issued and sold an aggregate of
2,449,634 shares of Series B Preferred Stock to a total of seven investors
at $2.11 per share, for an aggregate purchase price of $5,169,578.08.

3. On February 9, 1996, the Registrant issued and sold an aggregate of
971,038 shares of Series C Preferred Stock to a total of five investors at
$3.00 per share, for an aggregate purchase price of $2,913,108.00.

4. From July 19, 1996 to July 31, 1996, the Registrant issued and sold an
aggregate of 2,540,356 shares of Series D Preferred Stock to a total of 14
investors at $14.25 per share, for an aggregate purchase price of
$36,200,006.50.

II-1

5. From September 12, 1997 to January 13, 1998, the Registrant issued and
sold an aggregate of 1,533,607 shares of Series E Preferred Stock to a
total of nine investors at $14.25 per share, for an aggregate purchase
price of $21,853,838.00.

6. On July 31, 1995, the Registrant granted warrants to purchase an
aggregate of 26,280 shares of Series B Preferred Stock to one investor at
$2.1104 per share.

7. On December 10, 1996, the Registrant granted a warrant to purchase an
aggregate of 701,756 shares of Series D Preferred Stock to two investors at
$14.25 per share.

8. On December 11, 1997, the Registrant granted warrants to purchase an
aggregate of 208,334 shares of Common Stock to two investors at $7.50 per
share.

The sale of the above securities was deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act
or Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act as transactions by an issuer not involving any
public offering or transactions pursuant to compensation benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof, and appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had adequate access, through their relationships with the Registrant, to
information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

EXHIBIT NO. DESCRIPTION
----------- -----------

II-2

EXHIBIT NO. DESCRIPTION
----------- -----------

10.11+* Sub-License of Technology and Trademark Rights by and between
PointCast Japan, L.L.C. and PointCast K.K. effective as of July
25, 1997.
10.12+* Maintenance and Support Agreement by and between the Registrant
and PointCast K.K. dated as of July 25, 1997.
10.13+* Technology and Trademark License Agreement by and between the
Registrant and PointCast Japan, L.L.C. dated as of May 30, 1997.
10.14 Employment Agreement by and between the Registrant and David
Dorman dated as of November 1, 1997 and related agreements.
10.15 Lease Agreement by and between John Arrillaga, Trustee, UTA dated
7/20/77 as amended, and Richard T. Peery, Trustee, UTA dated
7/20/77 as amended, and the Registrant dated as of January 22,
1997.
10.16 Sublease by and between the Registrant and Internet Shopping
Network, Inc. dated as of August 29, 1997.
10.17 Lease Agreement by and between John Arrillaga, Trustee, UTA dated
7/20/77 as amended, and Richard T. Peery, Trustee, UTA dated
7/30/77 as amended, and the Registrant dated as of May 21, 1996,
and the amendment thereto.
10.18+* Services Agreement by and between Electronic Data Systems
Corporation and the Registrant dated as of December 19, 1996.
10.19 Part-Time Employment and Non-Competition Agreement by and between
the Registrant and Christopher R. Hassett.
10.20 Part-Time Employment and Non-Competition Agreement by and between
the Registrant and Gregory P. Hassett.
10.21* Preferred Stock Purchase Warrant granted to Lighthouse Capital
Partners, L.P. dated as of August 10, 1995.
10.22* Common Stock Purchase Warrant granted to Benchmark Capital
Partners, L.P.
10.23* Common Stock Purchase Warrant granted to Benchmark Founders' Fund,
L.P.
16.1 Letter of Arthur Andersen LLP, Independent Auditors.
21.1 Subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1).
23.2 Consent of Price Waterhouse LLP, Independent Accountants (see page
II-7).
24.1 Power of Attorney (see page II-5 of the Registration Statement).
27.1 Financial Data Schedule.

- --------
* To be filed by amendment.
+ Confidential treatment will be requested for certain portions which have
been blacked out in the copy of the exhibit to be filed with the Securities
and Exchange Commission. The omitted information will be filed separately
with the Securities and Exchange Commission pursuant to the application for
confidential treatment.

(b) Financial Statement Schedule

Schedule II--Valuation and Qualifying Accounts........................ S-1

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-3

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

The undersigned Registrant hereby undertakes that:

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

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

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on this 14th day of May 1998.

PointCast Incorporated

/s/ David W. Dorman
By: _________________________________
DAVID W. DORMAN,
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, David W. Dorman and
Philip J. Koen, and each one of them, his true and lawful attorney-in-fact and
agents, each with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents or any of them,
or his or their substitute or substitutes, may lawfully do or cause to be done
or by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ David W. Dorman Chairman of the May 14, 1998
- ------------------------------------- Board, President
(DAVID W. DORMAN) and Chief Executive
Officer (Principal
Executive Officer)

/s/ Philip J. Koen Senior Vice May 14, 1998
- ------------------------------------- President, Finance
(PHILIP J. KOEN) and Chief Financial
Officer (Principal
Financial and
Accounting Officer)

II-5

SIGNATURE TITLE DATE

/s/ Sanford R. Climan Director May 14, 1998
- ------------------------------------
(SANFORD R. CLIMAN)

/s/ Jonathan Feiber Director May 14, 1998
- ------------------------------------
(JONATHAN FEIBER)

/s/ Charles Geschke Director May 14, 1998
- ------------------------------------
(CHARLES GESCHKE)

/s/ Kevin R. Harvey Director May 14, 1998
- ------------------------------------
(KEVIN R. HARVEY)

/s/ Gregory P. Hassett Director May 14, 1998
- ------------------------------------
(GREGORY P. HASSETT)

/s/ Steven Heyer Director May 14, 1998
- ------------------------------------
(STEVEN HEYER)

/s/ Andrew S. Rachleff Director May 14, 1998
- ------------------------------------
(ANDREW S. RACHLEFF)

II-6

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 18, 1998,
except Note 11, which is as of May 13, 1998, relating to the consolidated
financial statements of PointCast Incorporated, which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the three years ended December 31, 1997 listed under
Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the consolidated financial statements referred to in our
report. The audits referred to in such report also included this schedule. We
also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Prospectus. However, it should be noted that
Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."

Price Waterhouse LLP

San Jose, California
May 13, 1998

II-7

SCHEDULE II

POINTCAST INCORPORATED

VALUATION AND QUALIFYING ACCOUNTS

FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)

BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING STATEMENTS FROM END OF
OF PERIOD OF OPERATIONS RESERVES PERIOD
---------- ------------- ---------- ----------

December 31, 1997:
Allowance for doubtful
accounts...................... $721 $ 27 $(144) $604
December 31, 1996:
Allowance for doubtful
accounts...................... 30 722 (32) 721
December 31, 1995:
Allowance for doubtful
accounts...................... 30 -- -- 30

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
----------- -----------

1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of Registrant.
3.2* Amended and Restated Certificate of Incorporation.
3.3* Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2* Amended and Restated Investors' Rights Agreement dated September
12, 1997.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati regarding legality of
the securities being issued.
10.1 Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers.
10.2* Option Agreement with Philip J. Koen dated May 1997.
10.3 1994 Stock Plan and related agreements, as amended.
10.4 1998 Employee Stock Purchase Plan and related agreements.
10.5 1998 Director Option Plan and related agreements.
10.6+* PointCast Japan, L.L.C. Limited Liability Company Agreement by and
between the Registrant and TransCosmos, Incorporated dated as of
May 30, 1997.
10.7+* Assignment of Commercial Exploitation Rights Agreement by and
among the Registrant, TransCosmos, Incorporated and PointCast
Japan, L.L.C. effective as of May 30, 1997.
10.8+* Assignment of Commercial Exploitation Rights by and between
PointCast Japan, L.L.C. and PointCast K.K. effective as of July
25, 1997.
10.9+* Commercial Exploitation Rights Agreement by and between
TransCosmos, Incorporated and the Registrant dated as of July 25,
1997.
10.10+* Administrative Services and Management Agreement by and between
PointCast K.K. and TransCosmos, Incorporated dated as of July 25,
1997.
10.11+* Sub-License of Technology and Trademark Rights by and between
PointCast Japan, L.L.C. and PointCast K.K. effective as of July
25, 1997.
10.12+* Maintenance and Support Agreement by and between the Registrant
and PointCast K.K. dated as of July 25, 1997.
10.13+* Technology and Trademark License Agreement by and between the
Registrant and PointCast Japan, L.L.C. dated as of May 30, 1997.
10.14 Employment Agreement by and between the Registrant and David
Dorman dated as of November 1, 1997 and related agreements.
10.15 Lease Agreement by and between John Arrillaga, Trustee, UTA dated
7/20/77 as amended, and Richard T. Peery, Trustee, UTA dated
7/20/77 as amended, and the Registrant dated as of January 22,
1997.
10.16 Sublease by and between the Registrant and Internet Shopping
Network, Inc. dated as of August 29, 1997.
10.17 Lease Agreement by and between John Arrillaga, Trustee, UTA dated
7/20/77 as amended, and Richard T. Peery, Trustee, UTA dated
7/30/77 as amended, and the Registrant dated as of May 21, 1996,
and the amendment thereto.
10.18+* Services Agreement by and between Electronic Data Systems
Corporation and the Registrant dated as of December 19, 1996.

EXHIBIT NO. DESCRIPTION
----------- -----------

10.19 Part-Time Employment and Non-Competition Agreement by and between
the Registrant and Christopher R. Hassett.
10.20 Part-Time Employment and Non-Competition Agreement by and between
the Registrant and Gregory P. Hassett.
10.21* Preferred Stock Purchase Warrant granted to Lighthouse Capital
Partners, L.P. dated as of August 10, 1995.
10.22* Common Stock Purchase Warrant granted to Benchmark Capital
Partners, L.P.
10.23* Common Stock Purchase Warrant granted to Benchmark Founders' Fund,
L.P.
16.1 Letter of Arthur Andersen LLP, Independent Auditors.
21.1 Subsidiaries.
23.1* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1).
23.2 Consent of Price Waterhouse LLP, Independent Accountants (see page
II-7).
24.1 Power of Attorney (see page II-5 of the Registration Statement).
27.1 Financial Data Schedule.