Bitstream reports fourth quarter results.

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 12, 1997--Bitstream Inc. (Nasdaq: BITS) today reported revenues of $2,502,000 for the three months ended Dec. 31, 1996, an increase of 6 percent over revenues of $2,355,000 for the three months ended Dec. 31, 1995. Net income for the quarter ended Dec. 31, 1996 was $157,000, as compared to net income of $738,000 for the three months ended Dec. 31, 1995. Net income for the three months ended Dec. 31, 1995 was positively impacted by a $600,000 reduction in the valuation allowance for deferred tax assets, versus a benefit of $30,000 for the three months ended Dec. 31, 1996. Net income per share was $0.03 for the three months ended Dec. 31, 1996, versus $0.17 for the three months ended Dec. 31, 1995.

Revenues for the fiscal year ended Dec. 31, 1996 increased 18 percent to $10,551,000, compared to $8,970,000 for the fiscal year ended Sept. 30, 1995. Net income for the fiscal year ended Dec. 31, 1996 was $1,337,000, as compared to net income of $1,688,000, for the fiscal year ended Sept. 30, 1995. Net income per share was $0.27 for the fiscal year ended Dec. 31, 1996 versus $0.38 for the fiscal year ended Sept. 30, 1995. The preceding fiscal year comparison reflects a change in Bitstream's fiscal year, effective Dec. 31, 1995 from a fiscal year end of Sept. 30 to a fiscal year end of Dec. 31.

"While we did expect stronger revenue growth in the fourth quarter, we are encouraged by the continued success and increased visibility of our award-winning Bitstream TrueDoc technology in traditional markets such as Internet/intranet publishing markets and especially in the emerging markets of embedded systems and thin-client/memory-constrained devices," said Ray Boelig, president and chairman of Bitstream.

In the past quarter, Bitstream was granted two U.S. patents for its Bitstream TrueDoc technology. Also, Bitstream announced the licensing of its TrueDoc Technology to Pitango Multimedia Ltd. for implementation in its award-winning ClickWorks multimedia publishing software, and to Peerless Systems Corp. for its PeerlessPage Imaging Environment. During the past three months, Bitstream licensed its fonts and type services to a number of leading hardware and software developers and corporations including Corel Corp., Lotus Development Corp., Hewlett-Packard Company, Eastman Kodak Company and others.

Bitstream Inc. develops and sells software solutions for the creation, enhancement, transport, viewing and printing of electronic information. In addition, Bitstream licenses type libraries and font technology to hardware and software developers worldwide. Headquartered in Cambridge, Mass. USA, Bitstream licenses its products and technologies both directly and through its subsidiaries, business agents and distributors in the USA, Europe and the Pacific Rim. More information on Bitstream and its products may be obtained from the company's home page at www.bitstream.com . -0-

Bitstream and TrueDoc are registered trademarks of Bitstream Inc. All other trademarks mentioned are for identification purposes only and may be trademarks of their respective owners. -0-

                         BITSTREAM INC.
        Unaudited Consolidated Statement of Operations Data
           (Dollars in Thousands Except Per Share Data)

                         Three Months Ended    Twelve Months Ended
                              Dec. 31          Sept. 30     Dec. 31
                          1995         1996      1995         1996

Revenues               $  2,355     $  2,502   $  8,970   $  10,551
Cost of revenues            411          406      1,579       1,858

Gross profit:             1,944        2,096      7,391       8,693

Operating expenses:
 Marketing and selling      978        1,124      3,264       4,386
 Research and development   331          498      1,071       1,512
 General and
   administrative           385          359      1,261       1,533

Total operating expenses: 1,694        1,981      5,596       7,431

Operating income:           250          115      1,795       1,262

Other income
 (expense), net:             17           43         11         (19)

Provision for
 (benefit from)
 income taxes              (471)           2        118         (94)

Net income:            $    738      $   157    $ 1,688   $   1,337

Net income per share:       .17          .03        .38         .27

Weighted average
  common and common
  equivalent shares
  outstanding:        4,704,805    6,215,192  4,983,678   5,043,935

-0-

                            BITSTREAM INC.
             Unaudited Consolidated Balance Sheet Data
                       (Dollars in Thousands)

                                Dec. 31, 1995           Dec. 31, 1996
ASSETS

Current Assets:
Cash and cash equivalents         $     390             $     11,718
Trade receivables, net                1,846                    1,552
Current portion of long-term
  account and extended
  plan accounts
  receivable, net                       536                    1,667
Deferred income taxes                   600                      868
Other current assets                    194                      493

Total current assets:                 3,566                   16,298
Property and
  equipment, net:                       530                      924
Other assets:                           232                      255
Total Assets:                     $   4,328             $     17,477


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
 Short term debt                  $     434             $         36
 Accounts payable                       466                      513
 Accrued expenses                     1,412                    1,470
 Total current liabilities:           2,312                    2,019
 Leases & LTD                           210                       99
 Total Shareholders' Equity:          1,806                   15,359

Total Liabilities &
  Shareholders' Equity:           $   4,328             $     17,477

CONTACT: Bitstream Inc.

Colleen Cronin

617/520-8329

[e-mail]

or

James D. Hart

617/520-8341

[e-mail]