<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                 AMENDMENT NO. 1

[X]                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998


[ ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         Commission File Number: 0-21894

                               SOURCE MEDIA, INC.
             (Exact Name of Registrant as Specified in its Charter)


               DELAWARE                                    13-3700438
        (State of incorporation)            (I.R.S. Employer Identification No.)
                                                          
           5400 LBJ FREEWAY                                  75240     
               SUITE 680                                   (Zip Code)   
             DALLAS, TEXAS                                 
(Address of principal executive offices)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 701-5400

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                     COMMON STOCK, PAR VALUE $.001 PER SHARE
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No

         Aggregate market value of Common Stock held by nonaffiliates as of
March 31, 1999: $201,238,684

         Number of shares of Common Stock outstanding as of March 31, 1999:
13,141,689

                    DOCUMENTS INCORPORATED BY REFERENCE: None




<PAGE>   2


         The following items of Source Media, Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 are hereby amended. Each such item
is set forth herein in its entirety, as amended.

<TABLE>
<CAPTION>

                                                                               Page
                                                                               ----
<S>                                                                            <C>
                                    PART III

Item 10.  Directors and Executive Officers of the Company                       3

Item 11.  Executive Compensation                                                5

Item 12.  Security Ownership of Certain Beneficial Owners and Management        8

Item 13.  Certain Relationships and Related Transactions                        9
</TABLE>


                                      -2-
<PAGE>   3


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         Certain information with respect to persons who are executive officers
of the Company is set forth under the caption "Executive Officers of the
Company" in Part I of this report.

         The directors of the Company are as follows:

         Timothy P. Peters, age 41, has served as a director and officer of the
Company since its inception in 1988, as President from inception through May
1996, as Chief Executive Officer from December 1992 through March 1999 and was
elected Chairman of the Board in August 1994. In 1986, Mr. Peters founded
Information Express, Co., an operator-assisted Yellow Pages company that served
the Denver area, where he acted as a Vice President from 1986 to 1988. From 1979
to 1986 Mr. Peters served as Regional Manager for Penn Central
Telecommunications Company.

         John J. Reed, age 41, has served as a director and officer of the
Company since its inception in 1988 and as President since 1996. Mr. Reed was
Chairman of the Board of Interactive Channel Technologies, Inc. from November
1991 to October 1993, and President of Interactive Channel from 1994 to 1996.
From 1986 to 1989, Mr. Reed was President of Reed & Associates, a Dallas-based
real estate brokerage and professional services firm, of which he is the sole
shareholder. Mr. Reed has conducted business through this firm from time to time
since 1989.

         Michael J. Marocco, age 40, has served as a director of the Company
since May 1996. Mr. Marocco is a Managing Director of Sandler Capital Management
("Sandler") and has been associated with Sandler since April 1989. Prior to
that, Mr. Marocco was a vice president at Morgan Stanley & Co., Inc. where he
was involved in raising capital and merger and acquisition transactions. Mr.
Marocco serves as a director of numerous private companies involved in cable
television, advertising and cellular telephone industries.

         James L. Greenwald, age 72, has served as a director of the Company
since May 1996. Mr. Greenwald has served as chairman emeritus of Katz Media
Corporation ("Katz"), a communications representative firm, since August 1995.
Mr. Greenwald joined Katz in 1956 and has held various positions, including
President of the radio division from 1965 through 1970, Executive Vice President
from 1970 through 1975, President from 1975 through 1982 and Chairman of the
Board of Directors and Chief Executive Officer from 1975 through 1994. Mr.
Greenwald is a director of Granite Broadcasting Company, Paxon Communications
and an honorary trustee of the Foundation of American Women in Radio and
Television, a past President of the International Radio and Television
Foundation and the Station Representatives Association and a Director of the
Touchdown Club.

         Robert H. Alter, age 70, has served as a director of the Company since
May 1997. Mr. Alter has served as the President of Alter Associates, Inc., a
domestic and international television consulting firm, since its founding in
1992. Mr. Alter is currently vice-chairman of Cabletelevision Advertising
Bureau, Inc., with which he held the position of founding president and chief
executive officer from 1981 to 1991. From November 1991 through December 1992,
he was a senior advisor to the Board of Star TV in Hong Kong. From 1958 through
1981, he was employed with the Radio Advertising Bureau, where his last position
was that of Executive Vice President. Mr. Alter is a director of Video Services
Corporation and AdCom, Inc.

         Barry Rubenstein, age 55, has served as a director of the Company since
September 1997. Since October 1988, Mr. Rubenstein has served as Chairman of
Care Management Group, a non-public organization. Mr. Rubenstein has been a
principal in Wheatley Partners, L.P. since 1996. In 1994, Mr. Rubenstein
co-founded the 21st Century partnerships, of which he is presently a principal.
In 1992, Mr. Rubenstein co-founded Applewood Associates, L.P., of which he is
presently a principal. Prior to 1992, Mr. Rubenstein was a founder of, or
founding consultant to, Applied Digital Data Systems, Inc., Novell, Inc., and
Cheyenne Software, Inc. From 1983 to 1987, Mr. Rubenstein held various positions
with Cheyenne Software, Inc., including President, Chief Executive Officer,
Director and Chairman of the Board. Mr. Rubenstein is a director of, or advisor
to, Infonautics Corporation, Millbrook Press, Network-1 Security Solutions,
Inc., US Web Corp. and several private technology companies.

         Michael S. Willner, age 47, has served as a director of the Company
since April 1998. Mr. Willner is President and Chief Executive Officer of ICI
Communications, Inc., a company he co-founded in 1985. 









                                      -3-
<PAGE>   4


Mr. Willner presently serves on the boards of NTL Incorporated, the National
Cable Television Association and C-SPAN.

         The following are executive officers of the Company, not already
included in the directors table:

         Stephen W. Palley, age 54, joined the Company in April 1999 as Chief
Executive Officer. Mr. Palley was Chief Operating Officer of King World
Productions, Inc., from 1986 to 1996. Mr. Palley's background includes
entertainment, music and television and securities law. He is a member of the
New York State Bar and the Museum of Radio and Television Council.

         F. Paul Tigh, age 46, has served as Chief Financial Officer and
Treasurer since July 1998. Mr. Tigh joined the Company in April 1998 as Vice
President and Corporate Controller. Prior to joining Source Media, Mr. Tigh was
Chief Financial Officer for Advanced Telemarketing Corporation. His previous
employment includes increasingly responsible positions with Scientific Atlanta,
Inc., Allied Signal, Inc. and Bendix Corporation.

         Maryann Walsh, age 51, has served as General Counsel of the Company
since January 1995 and Secretary of the Company since March 1995. Together with
Mr. Peters, she founded Information Express Co. and served as its Corporate
Counsel and Secretary. In 1981, she worked for a law firm in London, England and
from 1989 through 1994, she was with a law firm in Jakarta, Indonesia. She was
also a counsel with Mobil Oil Corporation in New York City and Denver and
handled U. S. Supreme Court and Federal Court matters for the U.S. Department of
Justice.

         Daniel D. Maitland, age 48, has served as President of IT Network since
October 1997. He had served as President of the Company's telephone division
since November 1996 and as an Executive Vice President of the Company since
September 1997. In 1986, Mr. Maitland founded BDR Audiotex, Inc., a telephone
information services company. In 1990, that company merged with Perception
Technology, and Mr. Maitland became the Executive Vice President and General
Manager of Perception Electronic Publishing . In 1993, Perception Technology
merged with Brite Voice Systems.

         W. Thomas Oliver, age 56, has served as President of the Interactive
Channel since October 1997, prior to which he had served as President of the
Company's television division since June 1996 and as an Executive Vice President
of the Company since September 1997. Mr. Oliver was Executive Vice President of
DMX from 1994 to 1995; President and Chief Executive Officer of International
Cablecasting Technologies from 1987 to 1994; and a Senior Vice President of Home
Box Office from 1973 to 1987.

         Victoria Hamilton, age 45, has served as a consultant to the Company
since January 1999 and as Interim Chief Operating Officer since March 1999.
Prior to that time she was Chief Operating Officer of General American
Investors, a closed end investment fund which trades on the NYSE. Prior to her
seven years at General American Investors, Ms. Hamilton was in venture capital
for a decade with SRK Management Company.


             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires directors and officers of
the Company, and persons who own more than ten percent of the Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Directors, officers and more than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1998, all directors, officers and more than ten percent beneficial
owners were in compliance with all applicable Section 16(a) filing requirements.








                                      -4-
<PAGE>   5
ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following summary compensation table sets forth the annual
compensation paid or accrued, together with the number of shares covered by
options granted, to the Company's Chief Executive Officer and the four other
highest paid executive officers in 1998 (the "named executive officers") for the
years indicated:


<TABLE>
<CAPTION>

                                                                                     LONG TERM
                                                 ANNUAL COMPENSATION                COMPENSATION       
                                         ----------------------------------      ------------------
                                                                                   COMMON STOCK
NAME AND PRINCIPAL POSITION              YEAR      SALARY          BONUS          UNDERLYING OPTIONS
---------------------------              ----   -----------    ------------      ------------------

<S>                               <C>        <C>            <C>          <C>    

Timothy P. Peters                        1998   $    225,000   $          0           212,500
Chairman of the Board and                1997        225,000        132,656            12,500
Chief Executive Officer                  1996        200,580         27,323            75,000

John J. Reed                             1998   $    210,000   $      2,363            70,000
President                                1997        210,000         44,012            38,000
                                         1996        189,330         21,210            70,000

W. Scott Bedford(1)                      1998   $    210,000   $      1,181           110,000
Chief Financial Officer                  1997        210,000        107,120            10,000
and Treasurer                            1996        189,330         23,607            70,000

Daniel D. Maitland(2)                    1998   $    170,000   $      3,974           100,000
Executive Vice President                 1997        170,000        105,002             5,000
                                         1996             --             --            60,000(3)

W. Thomas Oliver(4)                      1998   $    250,000   $      1,910            60,000
Executive Vice President                 1997        250,000         37,856            25,000
                                         1996        140,224         12,375           225,000
</TABLE>


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

(1)   Mr. Bedford resigned effective January 6, 1999.

(2)   Mr. Maitland was elected as an Executive Vice President of the Company in
      September 1997. Mr. Maitland agreed in November 1996 to become President
      of IT Network and began serving as such in January 1997. During 1996, Mr.
      Maitland served as a consultant to the Company, for which he was paid
      $88,125 in compensation.

(3)   Mr. Maitland was awarded these options in November 1996 in connection with
      his acceptance of full-time employment with the Company.

(4)   Mr. Oliver was elected as an Executive Vice President of the Company in
      September 1997. Mr. Oliver became employed by the Company in June 1996, as
      President of its Interactive TV division.



                                      -5-

<PAGE>   6



OPTIONS GRANTS IN LAST FISCAL YEAR

       The following table sets forth information with respect to all options
granted during the Company's 1998 fiscal year to each of the Company's named
executive officers.



<TABLE>
<CAPTION>

                                   
                                               PERCENT OF                                 POTENTIAL REALIZED VALUE
                                                 TOTAL                                        AT ASSUMED ANNUAL
                               NUMBER           OPTIONS                                         RATES OF STOCK
                              OF SHARES       GRANTED TO       EXERCISE                      PRICE APPRECIATION
                             UNDERLYING       EMPLOYEES         PRICE                        FOR OPTION TERMS(2)
                              OPTIONS          IN 1998           PER      EXPIRATION      -------------------------
NAME                          GRANTED         FISCAL YEAR      SHARE(1)      DATE             5%             10%
----                         ----------       -----------      --------   ----------      ---------      ----------
<S>                          <C>              <C>             <C>         <C>            <C>             <C>
Timothy P. Peters              12,500            1.2%          $9.30       01/01/08          60,689         165,495
                              200,000           18.7%          $8.69       01/02/08       1,093,519       2,770,424

John J. Reed                   10,000            0.9%          $9.30       01/01/08          48,551         132,396
                               60,000            5.6%          $8.69       01/02/08         328,056         831,127
                                                                                                                    
W. Scott Bedford               10,000            0.9%          $9.30       01/01/08          48,551         132,396
                              100,000            9.4%          $8.69       01/02/08         546,759       1,385,212

Daniel D. Maitland            100,000            9.4%          $8.69       01/02/08         546,759       1,385,212
                                                                                                                   
W. Thomas Oliver               60,000            5.6%          $8.69       01/02/08         328,056         831,127
</TABLE>                                                                   



(1)   All options were granted at or above fair market value on the date of
      grant.

(2)   The assumed 5% and 10% rates of stock price appreciation are specified by
      the proxy rules and do not reflect expected appreciation. The amount shown
      represents the assumed value of the stock options (less exercise price) at
      the end of the ten year period beginning on the date of grant and ending
      on the option expiration date. For a ten-year period beginning January 2,
      1998, based on the closing price on The Nasdaq Stock Market's National
      Market of the Common Stock of $8.69 on such date, a share of the Company's
      Common Stock would have a value on January 2, 2008 of approximately $14.16
      at an assumed appreciation rate of 5% and approximately $22.54 at an
      assumed appreciation rate of 10%.

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

       The following table sets forth for each of the named executive officers
of the Company information concerning exercised and unexercised options.

<TABLE>
<CAPTION>

                                                                   NUMBER OF SHARES               VALUE OF UNEXERCISED
                                                              UNDERLYING UNEXERCISED OPTIONS    IN-THE-MONEY OPTIONS AT
                                   SHARES                           AT DECEMBER 31, 1998            DECEMBER 31, 1998
                                  ACQUIRED         VALUE      -----------------------------   ---------------------------
      NAME                       ON EXERCISE      REALIZED     EXERCISABLE   UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
-----------------------         -------------    -----------  -------------  --------------   -----------   -------------

<S>                             <C>              <C>          <C>            <C>             <C>            <C>
Timothy P. Peters                          --             --         69,403        240,167   $    664,769   $  2,276,469

John J. Reed                               --             --         56,447        127,666        549,037      1,211,834

W. Scott Bedford                           --             --         41,447        157,666        397,467      1,493,099

Daniel D. Maitland                         --             --         70,999         94,001        678,526        877,119

W. Thomas Oliver                           --             --        190,000        120,000      1,520,408        989,123
</TABLE>




DIRECTOR COMPENSATION

         Directors of the Company who are not full-time employees are paid a
retainer of $2,500 per fiscal quarter and $1,000 for each meeting of the Board
of Directors and of any Committee thereof that they attend (so long as the
Committee meeting is not on the same day as a Board of Directors meeting), or
$500 for each telephonic meeting in which they participate and are reimbursed
for travel and related expenses incurred in connection with attendance at Board
and Committee meetings. Pursuant to the 1995 Nonqualified Stock Option Plan for




                                      -6-
<PAGE>   7
Non-Employee Directors, during 1998 each non-employee director of the Company
was granted an option to purchase 3,000 shares of Common Stock, with an exercise
price of $22.84, the fair market value of a share of Common stock on the date of
grant (based on a trailing five-day average).

         In certain instances, directors of the Company who are not full-time
employees may be engaged by the Board of Directors to participate in projects
for the benefit of the Company. In such instances, the Board of Directors has
authorized payment to those directors at a rate of $125 per hour, up to a
maximum of $1,000 per day, in addition to reimbursement of expenses incurred in
the performance of services.

EMPLOYMENT CONTRACTS

         The Company has entered into an employment agreement with Stephen W.
Palley dated March 29, 1999 pursuant to which Mr. Palley is employed for three
years as Chief Executive Officer at a base salary of $200,000 per year plus a
bonus, the timing and amount of such bonus to be determined in the discretion of
the Board. In addition, Mr. Palley is entitled to benefits generally available
to other senior management employees of the Company. At the time Mr. Palley
entered into his employment agreement, the Company granted him stock options to
purchase 500,000 shares of common stock at $15.31 per share, vesting in equal
amounts (125,000 per year) on March 29, 1999, 2000, 2001 and 2002. If the
Company terminates Mr. Palley's employment, other than for cause, death or
disability, or if Mr. Palley resigns within a 60-day period beginning six months
after a "change of control" (as defined in the agreement), the Company has
agreed to continue making monthly base salary payments for the remainder of the
agreement's term or until Mr. Palley obtains other employment, whichever comes
first, and to continue to provide insurance coverage until Mr. Palley obtains
other employment.

         In 1996, the Company entered into an agreement with W. Thomas Oliver
which provides that Mr. Oliver will serve as the President and Chief Operating
Officer of the Interactive Channel division at an annual base salary of $250,000
per year, subject to normal merit increases, and employee benefits similar to
those given to senior executive officers of the Company. Upon execution of the
agreement, Mr. Oliver was granted stock options to purchase 200,000 shares of
common stock at $10.50 per share pursuant to the 1995 Performance Equity Plan.
Mr. Oliver's employment agreement provides for certain protections in the event
his employment is terminated by the Company "without cause" (as defined in his
employment agreement). Specifically, in the event Mr. Oliver's employment is
terminated without cause, the Company shall make a lump sum severance payment in
an amount equal to the sum of (a) the greater of (i) Mr. Oliver's then current
annual base salary or (ii) his base salary to be paid through June 9, 1999 and
(b) all accrued but unpaid bonuses. Additionally, upon an assignment by the
Company of Mr. Oliver's employment agreement or in the event of a transfer of
control of the Company (defined as a transfer or sale of 25% or more of the
issued and outstanding stock) all of Mr. Oliver's stock options become
immediately exercisable. Mr. Oliver's employment agreement is for a term of
three years, expiring on June 9, 1999.

         The Company has also entered into an employment agreement with Victoria
Hamilton effective as of March 11, 1999 which expires upon the earlier of August
10, 1999 or the closing of the transaction with Prevue contemplated by the
Letter of Intent dated February 11, 1999 (or a transaction similar in scope and
significance). Ms. Hamilton serves as the Interim Chief Operating Officer at a
base salary of $50,000 per month. In addition, on March 29, 1999, Ms. Hamilton
was granted stock options to purchase 100,000 shares of common stock at $15.31
per share pursuant to the 1995 Performance Equity Plan which become exercisable
at the rate of 20,000 shares per month beginning March 29, 1999 and ending July
29, 1999 at which time, the stock options will be fully exercisable. Upon the
termination of Ms. Hamilton's employment with the Company, other than for cause,
death or disability, she will be paid an additional $50,000.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the Compensation Committee of the Board of Directors
(the "Compensation Committee") are currently Robert H. Alter, James L. Greenwald
and Michael J. Marocco. Mr. Alter and Mr. Greenwald became members of the
Compensation Committee on May 21, 1997. Mr. Marocco joined the Committee on July
28, 1998. None of these members is or has been an officer of the Company, nor
has any been involved in related transactions with the Company.




                                      -7-
<PAGE>   8

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the ownership
of the Company's common stock as of March 31, 1999 by (i) each director of the
Company, (ii) each person known by the Company to own beneficially 5% or more of
the Company's common stock, (iii) each named executive officer and (iv) all
directors and executive officers as a group:

<TABLE>
<CAPTION>

                                                                 SHARES              PERCENT OF
NAME                                                      BENEFICIALLY OWNED(1)        CLASS 
----                                                     ----------------------      ----------

<S>                                                       <C>                      <C>   
Timothy P. Peters(2)                                              789,064               5.9%  
   5400 LBJ Freeway, Suite 680                                                                
   Dallas, Texas 75240                                                                        
                                                                                              
John J. Reed(3)                                                   302,928               2.3%  
                                                                                              
Michael J. Marocco(4)                                             968,726               6.9%  
                                                                                              
James L. Greenwald(5)                                               9,000                 *   
                                                                                              
Robert H. Alter(6)                                                  6,000                 *   
                                                                                              
Barry Rubenstein(7)                                             1,132,627               8.0%  
                                                                                              
Michael S. Willner(8)                                              18,000                 *   
                                                                                              
W. Scott Bedford(9)                                               566,329               4.3%  
                                                                                              
Daniel D. Maitland(10)                                             89,665                 *   
                                                                                              
W. Thomas Oliver(11)                                              200,000               1.5%  
                                                                                              
Tudor Investment Corporation(12)                                  989,500               7.5%  
600 Steamboat Road                                                                            
Greenwich, CT 06830                                                                           
                                                                                              
E B Investor (Jersey) Limited(13)                                 720,000               5.5%  
c/o A&A Early Bird AG                                                                         
Innere Guterstrasse 4                                                                         
6304 Zug                                                                                      
Switzerland                                                                                   
                                                                                              
All current directors and executive                                                           
  officers as a group (14 persons)                              3,541,318             23.40%  
</TABLE>


(1)   Includes shares underlying currently exercisable options and warrants as
      well as those options and warrants which will become exercisable within 60
      days. Except as otherwise indicated, the named persons herein have sole
      voting and dispositive power with respect to beneficially owned shares.

(2)   Includes 145,237 shares of Common Stock issuable upon exercise of options.

(3)   Includes 104,447 shares of Common Stock issuable upon exercise of options.









                                      -8-
<PAGE>   9

(4)   Includes (i) 9,675 shares of Common Stock issuable upon exercise of
      exercisable warrants and (ii) 9,000 shares of Common Stock issuable upon
      exercise of options. Through an affiliate, Mr. Marocco is a general
      partner of Sandler Capital Management, which through an affiliate is
      managing general partner of 21st Century Communications Partners, L.P.,
      21st Century Communications T-E Partners, L.P. and 21st Century
      Communications Foreign Partners, L.P. Accordingly, also includes (iii)
      635,949 shares of Common Stock issuable upon exercise of exercisable
      warrants held by 21st Century Communications Partners, L.P., (iv) 216,374
      shares of Common Stock issuable upon exercise of exercisable warrants held
      by 21st Century Communications T-E Partners, L.P., and (v) 85,615 shares
      of Common Stock issuable upon exercise of exercisable warrants held by
      21st Century Communications Foreign Partners, L.P. Mr. Marocco disclaims
      beneficial ownership to all of the preceding shares except to the extent
      of his pecuniary interest.

(5)   Includes 9,000 shares of Common Stock issuable upon exercise of options.

(6)   Includes 6,000 shares of Common Stock issuable upon exercise of options.

(7)   Includes (i) 16,125 shares of Common Stock issuable upon exercise of
      exercisable warrants. Mr. Rubenstein is a general partner of Applewood
      Associates, L.P. and Woodland Partners, L.P. Accordingly, also includes
      (ii) 50,000 shares of Common Stock beneficially owned by Applewood
      Associates, L.P. and (iii) 101,875 shares of Common Stock issuable upon
      exercise of exercisable warrants held by Woodland Partners, L.P. as to
      which he disclaims beneficial ownership except to the extent of his
      pecuniary interest. Mr. Rubenstein is an officer and shareholder of
      Infomedia Associates, Ltd. which is one of the general partners of 21st
      Century Communications Partners, L.P., 21st Century Communications T-E
      Partners, L.P. and 21st Century Communications Foreign Partners, L.P.
      Accordingly, also includes (iv) 635,949 shares of Common Stock issuable
      upon exercise of exercisable warrants held by 21st Century Communications
      Partners, L.P., (v) 216,374 shares of Common Stock issuable upon exercise
      of exercisable warrants held by 21st Century Communications T-E Partners,
      L.P., (vi) 85,615 shares of Common Stock issuable upon exercise of
      exercisable warrants held by 21st Century Communications Foreign Partners,
      L.P., and (vii) 3,000 shares of Common Stock issuable upon exercise of
      options.

(8)   Includes 18,000 shares of Common Stock issuable upon exercise of options.

(9)   Includes 96,113 shares of Common Stock issuable upon exercise of options.

(10)  Includes 87,665 shares of Common Stock issuable upon exercise of options.

(11)  Includes 200,000 shares of Common Stock issuable upon exercise of options.

(12)  Based on a Report on Schedule 13G dated April 16, 1999, which was jointly
      filed with the Commission by Tudor Investment Corporation, Paul Tudor
      Jones, II, The Raptor Global Fund Ltd., The Raptor Global Fund L.P., Tudor
      Proprietary Trading, L.L.C., Tudor BVI Futures, Ltd., and The Upper Mill
      Capital Appreciation Fund Ltd,. Tudor Investment Corporation reported
      beneficial ownership of and shared dispositive power with respect to
      927,700 shares. Paul Tudor Jones, II reported beneficial ownership of and
      shared dispositive power with respect to 989,500 shares. Tudor BVI
      Futures, Ltd. reported beneficial ownership of and shared dispositive
      power with respect to 249,300 shares. Tudor Proprietary Trading, L.L.C.
      reported beneficial ownership of and shared dispositive power with respect
      to 61,800 shares. The Raptor Global Fund L.P. reported beneficial
      ownership of and shared dispositive power with respect to 130,800 shares.
      The Raptor Global Fund Ltd. reported beneficial ownership of and shared
      dispositive power with respect to 489,100 shares. The Upper Mill Capital
      Appreciation Fund Ltd. reported beneficial ownership of and shared
      dispositive power with respect to 58,500 shares. Tudor Investment
      Corporation and Mr. Jones expressly disclaim such beneficial ownership.

(13)  Based on a Report on Schedule 13G dated February 23, 1999 stating shares
      were acquired on January 5, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In June 1993, John Reed, President and a director of the Company, exercised
an option he had received in 1989 to purchase an aggregate of 70,546 shares of
common Stock at an aggregate price of $50,000, or 









                                       -9-
<PAGE>   10


approximately $0.71 per share. Mr. Reed paid for the shares by delivering to the
company a nonrecourse promissory note in the original principal amount of
$50,000, bearing interest at a rate of 10% per annum with all principal and
interest payable in May 1995. This note was cancelled and replaced by a similar
note dated December 1, 1993 in the principal amount of $52,083, and the shares
of Common Stock were reissued as of such date. As of May 1995, the repayment
date was extended to May 31, 1997. Effective May 15, 1997, the repayment date
was extended to May 31, 1999. On February 20, 1998, the note was amended to
prohibit prepayment and to add certain other provisions. As of March 31, 1999,
the aggregate principal and accrued interest outstanding was $78,759.

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            SOURCE MEDIA, INC.



Date: April 30, 1999                        By:  /s/ Timothy P. Peters
                                               ---------------------------------
                                                 Chairman of the Board




                                      -10-