UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
(Mark One)
[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  
                                       OR
[  ]     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                                       0-21200

                               MERIDIAN DATA, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                                   77-0188708
(State or other jurisdiction of                            (IRS Employer
incorporation or organization)                             Identification No.)

5615 Scotts Valley Dr., 
Scotts Valley, California                                      95066
(Address of principal executive office)                    (Zip Code)

                                 (831) 438-3100
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, 
                                                            $0.001 par value
                                                            Preferred Share
                                                            Purchase Rights  

     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  in 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. [X]

     The aggregate market value of the voting stock held by  non-affiliates  of
the Registrant as of March 1, 1999, was $17,124,650.37. The number of shares of
Common Stock, $0.001 par value, outstanding on March 1, 1999, was 8,134,660.

     Documents  incorporated  by reference: Portions of the Proxy Statement for
Registrant's  Annual  Meeting of  Stockholders  to be held April 21,  1999, are
incorporated herein by reference into Part III. Certain information  required by
Items 6, 7 and 8 of Form 10-K is incorporated by reference from the Registrant's
annual report to security holders furnished  pursuant to Rule 14a-3 (the "Annual
Report"). 

Index begins on page 23.                                            Page 1 of 65
<PAGE>
     The words "anticipate,"  "believe," "estimate," "expect," "intend," "will,"
and  similar  expressions,  as  they  relate  to the  Company  or the  Company's
management,  including  such items  discussed in  "Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations"  set forth on pages
42-47 of the Company's 1998 Annual Report on Form 10-K, are intended to identify
forward-looking  statements.  Such  statements  reflect the current views of the
Company  with  respect  to future  events  and are  subject  to  certain  risks,
uncertainties   and   assumptions.   Should  one  or  more  of  these  risks  or
uncertainties  materialize,  or should  underlying  assumptions prove incorrect,
actual results may vary significantly from those described..  In accordance with
provisions of Section 27A of the Securities Act of 1933, as amended, and Section
21G of the Securities  Exchange Act of 1934, as amended, we are making investors
aware  that  such  forward-looking  statements,  because  they  relate to future
events,  are by their very nature subject to many important  factors which could
cause  actual  results  to  differ   materially  from  those  contained  in  the
forward-looking  statements.  Factors that might cause such differences include,
but are not limited to, the risk factors beginning on page 9.

                                     PART I
Item 1.  Business.

History

     For the  purposes  of this  discussion,  the term "PCI"  shall refer to the
operations and business of Parallan  Computer,  Inc. prior to the acquisition of
Meridian  Data,  Inc.  on  December  1, 1994.  The term "MDI" shall refer to the
operations and business of Meridian Data,  Inc. prior to its acquisition by PCI.
Any reference to "Meridian" or the "Company"  shall refer to the  operations and
business  of the Company  subsequent  to the  acquisition  of MDI on December 1,
1994.

     PCI was founded in 1988 to develop high-performance, fault-tolerant servers
for enterprise-level  networks of personal computers.  In June 1992, PCI entered
into a strategic  alliance  with  International  Business  Machines  Corporation
("IBM").   The  strategic   alliance  with  IBM   encompassed   certain  product
development,  manufacturing  and support  arrangements (the  "Agreements"). PCI
granted  IBM the  exclusive  rights to PCI's  current  and future  products  and
technologies  in return for guaranteed  minimum  royalties in 1992 and 1993, and
revenue-based  royalties for 1994 and beyond. The Agreements do not apply to any
technology  acquired from or developed by MDI.  After the first quarter of 1994,
sales by IBM of  products  licensed  from PCI,  net of returns,  were zero.  PCI
expected that this trend would continue for the foreseeable  future. As a result
of management's expectations concerning future royalties from IBM, PCI downsized
and  reorganized  its  operations  into two segments:  (i)  developing  original
equipment  manufacturer  ("OEM")  relationships for its latest products and (ii)
focusing  on  potential  acquisition  opportunities.  Over the course of several
months,  PCI engaged in  discussions  with several  large OEMs about the sale or
licensing of its latest server technology. These discussions ultimately resulted
in the sale of certain  subsets of PCI's server  technology  for $1.5 million in
the first quarter of 1995. PCI then narrowed its focus to identifying  potential
acquisition candidates. On December 1, 1994, PCI acquired all of the outstanding
shares of MDI.  MDI was a  privately-held  developer of compact  disc-read  only
memory ("CD-ROM") and compact-disc  recordable ("CD-R") systems and software for
both  networks  and  personal  computers.  With  the  acquisition  of  MDI,  PCI
effectively  ended its reliance on IBM as its primary  source of revenue.  Since
December 1, 1994, the Company's primary source of revenue has derived from sales
of the products of MDI.  Thus,  the remainder of the discussion of the Company's
business,  industry,  operations, or competition  under  this Item will  refer
exclusively to the operations of Meridian.

Overview

     Meridian Data is a developer and manufacturer of network storage  solutions
utilizing   optical  disk   (CD-ROM)  and   conventional   hard  drive   storage
technologies.  The Company provides network attached storage servers ("NAS") for
workgroups  based on optical disk and hard disk storage,  and CD-ROM  enterprise
networking servers and subsystems.

     During 1997,  the Company also  undertook the  development of its first NAS
device based on hard drive  technology.  In March 1998,  Meridian  announced its
first NAS product  based on hard drive  technology,  the Snap!  Server(TM).  The
Snap! Server allows small and medium-sized  businesses and corporate  workgroups
to increase storage capacity on their network with minimal hardware expertise or
time  expenditure.   The  Company's  Snap!   Server  is  a  time-efficient   and
cost-effective  alternative to the current methods of increasing network storage
such as  installing  an  additional  hard  disk to an  existing  file  server or
purchasing a new server  primarily to increase  storage on the network.  Both of
these methods  require more time and expense than the simple  installation  of a
Snap!  Server.  Another  potential benefit of the Snap! Server is an increase in
overall  network  performance  by  offloading  file  serving  duties  from  more
expensive  application  and  general  purpose  servers  and  increasing  network
throughput by placing data  physically  closer to the users who generate  and/or
need the data. As an  independent  file server,  the Snap!  Server  continues to
provide file services to network users even when the other servers are down.

     The   Company's   optical  disk  NAS  servers   allow   workgroups   within
organizations  to  simultaneously  share up to 14 CD-ROM  titles.  The Company's
CD-ROM enterprise  servers provide the same simultaneous  access several hundred
CD-ROM  titles in  addition  to  providing a higher  level of  performance  than
Meridian's optical disk NAS servers. Beginning in 1996, demand for the Company's
enterprise  products  began to  decline  due to a shift  in large  organizations
towards  web-based  data  distribution.  Meridian  believes that this trend will
continue for the foreseeable future. Due to the decreasing demand for enterprise
CD-ROM servers,  the Company  refocused its research  towards the development of
NAS  servers.  The Company  released  its CD-ROM NAS server in 1997.  Since that
time,  the  Company's   CD-ROM   development   efforts  have  been  to  maintain
compatibility  with  existing and  developing  hardware  standards.  For all its
products,  the Company is committed to an open  systems  approach,  supporting a
broad array of personal  computer and network operating  systems,  and providing
desktop  access  to  networked  data,  both  CD-ROM  and  hard  disk  based,  in
heterogeneous environments.

Industry Background

 CD-ROM Enterprise Servers and NAS Servers. Corporations and other organizations
that purchase  information on CD-ROMs  generally need to provide  multiple users
with  simultaneous  access  to  information  stored  on  those  CD-ROMs.   These
organizations  require  software  specifically  designed to enable them to share
CD-ROMs  on  a  network,   manage  multiple  titles  and  control  user  access.
Furthermore,  corporations  are  following  the trend of  migrating to Microsoft
Windows  NT from other  network  operating  systems,  and,  as a result,  CD-ROM
networking systems must be able to operate in heterogeneous  environments during
this  transition.  When CD-ROMs are not  networked,  businesses  must  generally
purchase  multiple  copies of each  CD-ROM  set or  physically  transport  discs
between  desktop  computers.  Purchasing  multiple copies is usually not as cost
effective as relying on site licenses, and physically transporting discs between
desktop  computers  can  be  time-consuming  and  can  result  in  misplaced  or
unreturned  discs.  In addition,  many  commercial  databases are distributed on
multi-volume sets of discs that require  physically  shuffling discs if they are
used at a desktop  computer with a single drive.  As a result of these and other
factors,  many  organizations  seek to implement  networked,  multi-drive CD-ROM
systems.  Networked CD-ROMs can be quickly and easily accessed by multiple users
from their desktop computers.  Because networked CD-ROMs are typically installed
on centrally managed servers,  they can be efficiently  managed and periodically
updated without access to individual desktop computers.

 Emerging Market for Hard Drive based Network  Attached Storage for PC LANs. The
Company  believes  that with the  increasing  use of business  software  suites,
e-mail and internet applications, and rich data type software applications, such
as CAD and multimedia,  corporations are  experiencing a dramatically  increased
need for network storage capacity. At the same time, many small and medium-sized
business  are  implementing  PC LANs and lack the internal  technical  expertise
required to manage or upgrade  their new networks.  Within larger  organizations
with in-house  expertise,  network managers find it difficult to forecast future
storage  requirements and require the ability to quickly and affordably increase
network storage  capacity.  Hard  drive-based  NAS servers are specialized  file
servers  optimized for network data  storage.  Unlike a general  purpose  server
which handles a variety of tasks, from running an intranet to managing e-mail to
delivering  mission-critical  database services,  NAS products are optimized for
data storage and efficiently  manage  input/output  traffic associated with that
task,   freeing  up  primary  network  server  resources  for   mission-critical
applications,  and  enhancing  speed on the network by  offloading  data storage
services.  According  to  Dataquest,  a  leading  research  firm  focused  on IT
technology,  the emerging  market for NAS will grow to $ 2.0 billion in 1999. In
the past,  hard  drive-based NAS devices were targeted  primarily  towards large
Unix-based  enterprise networks. By delivering a PC LAN NAS device below $1,000,
Meridian hopes to include many small and medium-sized businesses,  and corporate
workgroups within the NAS market.

The Meridian Data Solution

     The Company  offers a family of CD-ROM  enterprise  servers and NAS servers
that  enable  organizations  to  provide  multi-user  access  over  networks  to
centrally managed data stored on either optical disks or hard drives. Meridian's
enterprise  servers  provide cost  effective  solutions for  organizations  with
applications or data on CD-ROM by eliminating the need to physically share discs
or purchase multiple copies of often expensive CD-ROM titles.  The Company's NAS
products allow small and medium-sized  businesses and workgroups within a larger
organization  to  implement  networked  CD-ROM or add  additional  file  storage
capacity  easily  without  network  downtime  and  assistance  from  third-party
technical resources.  The Company's products support a broad range of networking
environments,  including  Novell  NetWare  and  Microsoft  Windows  NT, and most
popular PC desktop  operating  systems,  including  Windows 95/98, DOS, OS/2. In
addition,  the  Company's  products  are  compatible  with  most  major  network
protocols.

The Meridian Data Strategy

     Meridian believes that customers want to implement  "plug-and-play" storage
solutions  for both CD-ROMs and network file servers.  In response,  the Company
introduced  its CD Net  Universal  plug-and-play  server  in 1997 and its  Snap!
Server in May 1998. In addition,  the Company offers competitively priced CD-ROM
enterprise  servers.  The Company's goal is to be a leading provider of one-stop
shopping for plug and play network storage  solutions  utilizing CD-ROM and hard
drives. The key elements of the Company's strategy include:

Focus on PC LAN NAS Devices.  To meet the emerging demand for easily  installed,
plug-and-play  storage  products  for  small  and  medium-sized  businesses  and
workgroups,  Meridian  offers NAS  products  based on both CD-ROM and hard drive
technology. In May 1998, the Company premiered its first hard drive NAS product,
the Snap! Server. This represented an entirely new product classification in the
NAS market.  Snap!  Server is a  protocol-independent,  plug-and-play NAS server
targeted for the PC LAN environment. Meridian does not believe that there is any
competing  product  currently on the market that offers the same ease of use and
installation as the Snap! Server.  Initially,  the Company expects that the main
competition for the Snap! Server will be from traditional  methods of increasing
network  storage.  Such methods  include  purchasing new PC servers from vendors
such as Compaq Computer  Corporation  ("Compaq"),  and Dell Computer Corporation
("Dell"),  and installing  additional drives from  manufacturers such as Seagate
Technology,  Inc.  ("Seagate")  and Maxtor  Corporation  ("Maxtor")  in existing
servers. The installation of additional drives or servers requires several hours
of network  downtime,  often the  services  of a network  professional,  and the
potential need for additional network operating software licenses,  all of which
adds  to the  overall  cost of  increasing  storage  on  networks.  The  Company
estimates that the cost of adding a comparable amount of additional storage to a
PC server or  network  runs from  approximately  $3,000 to  $10,000  or  higher,
depending on the server/network  configuration,  the need to purchase additional
network software licenses, and network downtime.  Meridian believes that its new
Snap! Server has significant cost advantages over those competing  methodologies
for increasing  network storage.  The Company's Snap!  Server retails for $1,795
for 16 gigabytes and $995 for 8 gigabytes of storage  capacity.  Installation of
the Snap!  Server involves simply  connecting the server to an Ethernet  network
port and power outlet.  Setup and  administration  are managed via a simple HTML
interface,  accessed through an Internet browser,  such as Netscape Navigator or
Microsoft Internet Explorer. 

     Support  Industry  Standards.  Meridian  believes  that  success in the NAS
market  requires  products  that are able to function in  heterogeneous  network
environments.  The  Company's  products  operate  over a broad  range of desktop
platforms,  network operating systems, and connectivity protocols,  and believes
that  this  interoperability  is  core to a  successful  product  strategy.  The
Company's  products  provide  allows users to access data via standard tools and
interfaces  native to their  network  operating  system  environment.  The Snap!
Server is compatible with all major PC networks  operating  systems  (Microsoft,
Novell,  and UNIX) and  protocols  (including  TCP/IP,  IPX,  NetBEUI  and HTTP)
concurrently.  In  addition,  it  is  able  to  work  in  heterogeneous  network
environments  with the same ease as  networks  with a single  network  operating
system.  Failure to maintain such compatibility  would have an adverse effect on
the market's acceptance of the Snap! Server.

Leverage  Third-Party  Distribution.  The  Company  sells its  products  through
two-tier  distribution,  comprised primarily of large distributors of electronic
hardware and key value added resellers  ("VARs").  The Company seeks to minimize
any conflict  between  third-party  distribution  and direct sales by fulfilling
orders through distributors and VARs, except in special  circumstances  dictated
primarily by customer requests.

Products

     Meridian  provides  support  for a broad range of  networking  environments
(Novell NetWare and Microsoft Windows NT) and desktop operating systems (Windows
95/98 and Windows 3.x,  DOS,  Macintosh and OS/2),  and is compatible  with most
major  connectivity   methodologies  and  network  protocols.  The  table  below
describes selected principal products, their functions and price ranges:

                          DESCRIPTION                              Price Range*
PRODUCTS                  NAS DEVICES
Snap! Server              Plug and play network file server 
                          utilizing hard drive                     $995 - $1,795
                          technology with up to 16 gigabytes
                          of storage.
CD Net Universal Server   Plug and play CD-ROM server with a
                          built-in  Web server                   $1,420 - $4,903
                          enabling easy access to HTML and 
                          graphics files on CDs, and remote
                          Web-based  system  administration. 
                          Available with 7 to 14 CD-ROM drives.

                           CD-ROM ENTERPRISE SERVERS,
                             SUBSYSTEMS AND SOFTWARE
CD/DVD Net               CD-ROM/DVD servers designed to support 
900/TNT/Ultimate         large multi-department networks          $2,780-$24,738
Series Servers           with 7 to 56 CD-ROM/DVD  drives,
                         featuring Pentium 200 processors, 
                         fast Ethernet adapters,for Novell, 
                         NT, Intranets, and VINES, available 
                         in tower or rack mount enclosures.

NetROM                   CD-ROM subsystems for connection to
                         servers via SCSI either directly of       $1,056-$9,388
                         over Ethernet networks

CD Net for NetWare       Client and server software that
CD Net for Windows NT    provides access for CD-ROMs on 
CD Net Plus              Novell NetWare and Microsoft 
                         Windows NT                                $684 - $1,372


*Price range based on domestic end user list price as of October 1998.

Sales, Marketing and Customer Service

     The Meridian  sales  organization  is divided into multiple  North American
territories,  Europe,  the Middle  East,  Latin  America,  and the Pacific  Rim.
Leading each region is a sales director  responsible  for managing the Company's
major distributors,  direct sales of enterprise systems into major accounts, and
OEM  sales.  Each  territory  has  an  assigned  sales  representative,  who  is
responsible  for  developing  marketing  programs  with  all  VARs in his or her
territory,  developing new VAR  relationships,  and sales into smaller  accounts
through the Company's  VARs. A final level of sales support is provided by sales
engineers   who  provide   technical   assistance  to  sales  staff  in  several
territories.  The Company's  workgroup  products are marketed  primarily through
advertising  and the Company's  established  distribution  channel.  The Company
seeks to minimize any conflict between third party distribution and direct sales
by  fulfilling   orders  through   distributors  and  VARs,  except  in  special
circumstances  dictated  primarily by customer  requests.  The  Company's  sales
personnel  that are focused on the  distribution  channel  work closely with the
Company's  largest  distributors  to  ensure  that the  proper  level and mix of
inventory is maintained,  and works with the  distributor  and VAR in developing
cooperative marketing programs for the Company's products.

     To support its sales efforts, the Company's marketing  organization focuses
on increasing end user demand and creating awareness in the distribution channel
of the Company's  products.  The  Company's  marketing  organization  focuses on
educating  end users and network  professionals  on the Company's  simple,  cost
effective  solutions  to  increasing  network  storage  via  Snap!  Servers  and
accessing and sharing CD-ROMs.  The Company's  marketing program includes direct
mail, public relations,  educational  seminars,  specialty trade shows, selected
joint marketing programs,  advertising in leading industry  publications such as
the PC Week, InfoWorld,  PC Magazine,  and Windows Magazine,  and a home page on
the World Wide Web. The Company's sales and marketing  organization consisted of
24 persons as of December 31, 1998.

     The Company began  shipping its new Snap!  Server in the second  quarter of
1998. A key element in the success of the Snap!  Server will be educating  users
about the advantages of utilizing NAS technology for PC LANs. The failure by the
Company to  successfully  educate the market on the benefits of NAS,  especially
its Snap! Server,  would have a material adverse effect on Meridian's  business,
financial  condition  and  results  of  operations.  The Snap!  Server  requires
different  marketing,  sales  and  distribution  strategies  than  those for the
Company's  enterprise  products.  As such, it entails  significant  new risks to
Meridian.  There can be no assurance  that the Company's  distributors  and VARs
will be able to effectively  market this new product or that the Company will be
successful in establishing other modes of marketing, sales, and distribution.  A
failure of the  Company's  distributors  and VARs to  successfully  market  this
product,  or the failure to  establish  other  means of  marketing,  sales,  and
distribution,  would have a material  adverse effect on the Company's  business,
financial condition and results of operations. See "Risk Factors - Dependence on
Third Party  Distributors;  - New  Product  Development;  - Rapid  Technological
Change; Potential for Product Defects; - Competition;  emerging Markets; Product
Concentration."

     The  Company's  customer  service  department  consisted of 7 persons as of
December  31,  1998.  The  Company's   customer  support   department   provides
installation  and maintenance  support via telephone,  a Company bulletin board,
ftp  file   server,   and   Internet   support   on  the   World   Wide  Web  at
http://www.meridian-data.com  and  http://www.snapserver.com.   Meridian  CD-ROM
products are sold with a one or three year  warranty,  which can be extended for
an additional fee. The Company's  Snap!  Server is sold with a 30-day money back
guarantee and a three year warranty.

Distribution

     Approximately  90% of the Company's product sales are derived from two-tier
sales to distributors  and VARs.  Because the Company derives such a significant
portion of its products  through  distributors and VARs, it is difficult for the
Company to determine the identity of the end user of the Company's products. The
Company's  distribution  channel  consists of two North  American  distributors,
Ingram Micro,  Inc.  ("Ingram Micro") and Tech Data  Corporation  ("Tech Data").
Meridian's  VARs  generally  concentrate  their sales  efforts by region,  or by
industry,  such as  Government  Technology  Services,  Inc.  European  sales are
currently the responsibility of a third-party manufacturer's representative. The
Company's systems are installed in numerous  industries,  including  government,
education,  law and accounting.  The Company's  typical  distribution  agreement
gives  the  distributor  the  right,  under  limited  circumstances,  to  return
products.   In  addition,   the  Company  allows  price  protection  to  certain
distributors and VARs, to the extent that they are holding inventory at the time
the Company announces a price decrease.

     Tech Data and Ingram Micro accounted for 41% and 23%, respectively,  of the
Company's  1998  product  sales.  The loss of either of these  distributors,  or
certain other  distributors or VARs, could have a material adverse effect on the
Company's business,  financial  condition and results of operations.  Certain of
the Company's  distributors and VARs also act as distributors for competitors of
the  Company  and  could  devote  greater  effort  and  resources  to  marketing
competitive products. In addition,  effective distributors and VARs must possess
sufficient technical,  marketing and sales resources and must often devote these
resources to a relatively  lengthy sales cycle.  There can be no assurance  that
the Company's  current  distributors and VARs will be able to continue to market
the Company's existing or new products  effectively or that economic  conditions
or industry  demand will not adversely  affect such  distributors  and VARs. New
products may require a different  marketing,  sales and distribution  strategies
than those for the Company's  current  products.  There can be no assurance that
the Company's distributors and VARs will choose or be able to effectively market
these new products or to continue to market the Company's existing  products.  A
failure  of the  Company's  distributors  and VARs to  successfully  market  the
Company's  products  would  have a  material  adverse  effect  on the  Company's
business,  financial  condition and results of  operations.  See "Risk Factors -
Dependence on Third Party Distributors."

Research and Development

     The Company's  research and development  staff consisted of 27 engineers as
of December 31, 1998. The Company's primary focus in 1998 was on the development
and enhancement of the current Snap! Server,  additional  products for inclusion
in the Snap!  Server  family of products,  and  maintaining  compatibility  with
evolving hardware  standards for its CD-ROM products.  There can be no assurance
that Meridian's  research and development  efforts will result in the successful
introduction  any  additional  new  products  or that any of such  products,  if
developed,  will be commercially  successful.  For a discussion of certain other
risks that may  relate to the  Company's  research  and  development,  see "Risk
Factors-Rapid  Technological  Change;  Potential for Product Defects;  and - New
Product Development."

     Meridian  Data's  systems  sold  after  December  31,  1997 do not  utilize
calendar dates.  As such, the Company's  software should have no difficulty with
Year 2000 issues.  Meridian's systems, however,  are reliant on various network
and personal computer operating  systems,  such as MS-DOS,  Novell NetWare,  and
Microsoft  Windows 3.11,  Windows 95/98 and Windows NT. To the extent that those
vendors do not adequately solve their Year 2000 issues, the Company's products,
results of operations, cash flow, and liquidity may be adversely affected.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Year 2000 Issue."

Manufacturing

     The  Company  contracts  with  third  parties  to  manufacture  some of its
products,   and   also   maintains   a   manufacturing   facility   onsite   for
enterprise-level  products.  Finished  products are distributed  from the Scotts
Valley  facility to  customers.  The Company is  dependent  on a small number of
suppliers,  some of whom are located in Asia,  for certain  key  components  and
parts used in its products, including CD-ROM drives, microprocessors, integrated
circuits and power  modules.  In  addition,  certain  subassemblies  used in the
Company's products are manufactured by a single third-party  vendor.  Financial,
market or other  developments  adversely  affecting  the Company's key component
suppliers,  the  loss  of a key  subassembly  manufacturer,  or the  loss of the
contract manufacture would have an adverse effect on their ability to supply the
Company with components or assemblies and,  consequently,  would have a material
adverse effect upon the Company's  business,  financial condition and results of
operations. Although the Company believes that alternative sources of components
or assembly services could be arranged,  the process of qualifying new suppliers
could be lengthy,  could require  re-engineering of the Company's products,  and
there can be no assurance that any  additional  source would be available to the
Company on a timely basis or at a cost acceptable to the Company. Any disruption
or reduction in the future supply of any key components  currently obtained from
limited sources would have a material adverse effect on the Company's  business,
financial condition and results of operations. See "Risk Factors - Dependence on
Third Party Suppliers."

Competition

     The Company's  Snap!  Server  competes with  alternative  methods of adding
storage to PC LAN networks, such as adding new PC servers from companies such as
Dell, Compaq and IBM, and adding additional disk drives from  manufacturers such
as Seagate and Maxtor to existing  servers.  These companies in particular,  and
the Company's  competitors in general,  include large domestic and international
companies,  many of  which  have  significantly  greater  financial,  technical,
manufacturing,  marketing,  sales and  distribution  resources than the Company.
There can be no assurance  that the Company's  current or potential  competitors
will not develop  products  comparable or superior to the Snap!  Server or adapt
more quickly than the Company to new or emerging technologies, evolving industry
trends or changing  customer  requirements.  Meridian's  Snap!  Server  requires
customers  to change  the  method in which they  address  the  problem of adding
additional storage to their PC LAN networks.  There can be no assurance that the
Company  will be  successful  in  educating  the market on the  advisability  of
switching from adding additional  drives to their servers or additional  servers
to their PC LAN and using a Snap! Server in their place.

     The markets for the Company's products are extremely  competitive,  and the
Company  expects that  competition  will  increase as more  companies  enter the
market and as existing  competitors  continue to change and expand their product
offerings. Pricing is very aggressive in the Company's industry, and the Company
expects  pricing  pressures  to continue  to  intensify.  Many of the  Company's
competitors have entrenched market positions,  established patents,  copyrights,
trade  names,  trademarks  and  intellectual  property  rights  and  substantial
technological  capabilities.  The Company's  current  competitors  in the CD-ROM
storage  market  include  other  suppliers  of CD-ROM  networking  software  and
hardware such as Procom  Technology.  The Company also competes  indirectly with
suppliers of personal computers and servers, like Hewlett Packard,  Dell, Compaq
and IBM, and network  operating  systems,  such as Microsoft and Novell,  to the
extent such  companies  include  CD-ROM  networking  utilities  as part of their
operating systems. These companies in particular,  and the Company's competitors
in general,  include large domestic and international  companies,  many of which
have significantly greater financial, technical, manufacturing, marketing, sales
and distribution  resources than the Company. There can be no assurance that the
Company's current or potential  competitors will not develop products comparable
or superior to those  developed  by the Company or adapt more  quickly  than the
Company to new or emerging  technologies,  evolving  industry trends or changing
customer requirements.

     The Company believes that its ability to compete successfully in the CD-ROM
networking  and NAS markets will depend upon a number of factors both within and
outside of its  control,  including  price,  quality,  product  performance  and
features;  timing of new product introductions by the Company, its customers and
competitors;  customer  service and  technical  support;  and the ability of the
Company to respond more quickly than current or potential  competitors to new or
emerging  technologies,   evolving  industry  trends  and  changes  in  customer
requirements  and  to  devote  greater   resources  than  current  or  potential
competitors  to the  development,  promotion  and sale of products.  The Company
believes that it competes favorably with respect to these factors.  There can be
no  assurance  however  that the  Company  will  have the  financial  resources,
technical expertise, or marketing,  sales, distribution and customer service and
technical support capabilities to compete successfully.

                                  Risk Factors

     The following  risk factors  should be considered  carefully in addition to
the  other   information   presented  in  this  report.   This  report  contains
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21G of the Securities Exchange Act of 1934,
as amended,  that involve risks and uncertainties.  The Company's actual results
may differ  significantly  from the  results  discussed  in the  forward-looking
statements.  Factors  that might  cause such  differences  include,  but are not
limited to, the following risk factors.

Operating Losses; Fluctuations in Quarterly Operating Results. The Company (then
known as Parallan Computer, Inc.) fundamentally changed its business in December
1994 with the purchase of Meridian  Data,  Inc.  During 1994, the Company exited
its prior business and product line, which had generated  substantial losses. In
the first half of 1995,  the  Company  incurred  an  operating  loss,  excluding
certain  non-recurring  revenue. From that point the Company operated profitably
until the first quarter of 1997, when it again began  incurring net losses.  The
Company has failed to meet its  expectations  of future revenues in the past and
may not meet future  expectations.  As a result of these and other factors,  the
Company  believes  that its  revenues  and  operating  results are  difficult to
predict and are subject to fluctuations  from period to period.  There can be no
assurance   that  the  Company  will  return  to   profitability,   or  that  if
profitability is achieved,  will be able to sustain  profitability.  In order to
address its disappointing  systems revenue growth,  Meridian increased its sales
and  promotional  expenditures  in  1996  and,  at  the  end  of  January  1997,
significantly reduced system prices in response to competitive  pressures.  Unit
shipments  did not increase  and there can be no  assurance  that prices for the
Company's  products  will  not  decrease  further  due  to  competitive  pricing
pressures. Accordingly, the Company may not meet its total revenue goals and the
Company's  business,  financial  condition  and results of  operations  would be
materially  adversely  affected.   As  a  result  of  expenses  related  to  the
engineering  and marketing  campaign of  Meridian's  Snap!  Server,  the Company
anticipates that it will operate at a substantial net operating loss through the
end of 1999.

     The Company  generally ships its software and systems within a short period
after  receipt of an order,  therefore  the  Company  typically  does not have a
material backlog of unfilled orders. Accordingly,  total revenues in any quarter
are substantially dependent on orders booked in that quarter. This may result in
quarterly  fluctuations in revenue.  The Company's  expense levels are based, in
part, on its  expectations as to future sales. As a result,  if sales levels are
below expectations, net income may be disproportionately affected. The Company's
quarterly  operating  results  may also vary  significantly  depending  on other
factors,   including  the   introduction   of  new  products  by  the  Company's
competitors;  market  acceptance of the Company's new products;  mix of software
and systems sales;  adoption of new technologies and standards;  price and other
forms of  competition;  the long and complex sales cycle for site licenses;  the
timing of site license  revenue;  the cost,  quality and  availability  of third
party  components  used  in the  Company's  systems;  changes  in the  Company's
distribution  arrangements;  and the  inability  of the  Company  to  accurately
monitor end user  demand for its  products  due to the sale of products  through
distributors and VARs.

     In 1998,  identifiable sales to federal governmental agencies accounted for
approximately  8% of the Company's  product sales,  and the Company  anticipates
that such sales will  continue to account for a  significant  percentage  of the
Company's  revenues for the foreseeable  future.  In the event that there is any
reduction or deferral in spending by such governmental  agencies,  the Company's
quarterly and annual  results would be adversely  affected.  Similarly,  if such
government  agencies  reduced their  purchases of Meridian  products in favor of
those of its  competitors,  the Company's  quarterly and annual results would be
adversely  affected.  In  the  past,  the  Company's  business  has  experienced
seasonality  in the form of higher  sales for its  products  during the quarters
ending in September and December and weaker sales during the quarters  ending in
March and June. Due to the shift in the Company's  revenues mix from  enterprise
systems  to NAS  products,  this  trend  is no  longer  evident.  The  Company's
operating  results  will  also be  affected  by the  economic  condition  of the
personal computer  industry,  which has from time to time experienced  cyclical,
depressed business conditions,  often in connection with or in anticipation of a
decline in general economic conditions. Due to all of the foregoing factors, the
Company's total revenues or operating results may in one or more future quarters
be below the expectations of stock market analysts and investors. In such event,
the  price  of  the  Company's  Common  Stock  would  likely  decline,   perhaps
substantially.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Product  Concentration. The Company's future financial performance continues to
be  contingent  primarily  on the  success  of,  and  growth in  demand  for NAS
products. The market for NAS appliances is new and undeveloped.  There can be no
assurance that the Company's  products will be widely  accepted in this emerging
market. If demand for the Snap! Server, or other NAS devices,  fails to develop,
or develops more slowly than the Company  currently  anticipates,  the Company's
business,  financial  condition  and results of  operations  would be materially
adversely affected. In addition,  while there is a substantial installed base of
CD-ROM/DVD  drives in the United  States,  growth in the CD-ROM/DVD  networking
market is primarily in entry-level  systems with low price points. There can be
no assurance that the Company's products will be widely accepted in this market.
If  demand  for  the  Company's  CD-ROM/DVD  networking  products  continues  to
decrease,  and demand for NAS  products  not develop,  the  Company's  business,
financial condition  and results of operations  would be  materially  adversely
affected.

Snap Server.  The Company is actively  developing  additional  products for its
Snap!   Server  family  of  products.   This  entails  further   expansion  into
non-CD-ROM/DVD networking markets, in which the company has minimal experience.
Such entry entails substantially higher risks to the Company in the form of new
and well established competition,  and competitive dynamics different than those
experienced in the CD-ROM/DVD  networking  market. In attempting to successfully
enter the NAS market and other new  markets,  the Company will have to commit to
significant  levels of  engineering,  sales  and  marketing  expenditures.  With
respect to NAS,  Meridian must also  successfully  educate the market concerning
the practicality of changing from conventional  means of adding storage capacity
to PC networks to installing its Snap! Server, or related products. There can be
no assurance  that the Company will be successful in marketing its Snap!  Server
or other new products,  that the Company will not experience  difficulties  that
could delay or prevent the successful development, introduction and marketing of
future Snap! Server products or other new products,  or that its Snap! Server or
other new products will adequately meet the  requirements of the marketplace and
achieve market acceptance.  If the Company is unable, for technological or other
reasons,  to develop and introduce  current and future Snap!  Server products or
other new products in a timely manner in response to changing market  conditions
or customer  requirements,  the  Company's  business,  financial  condition  and
results of operations will all be materially  adversely affected.  The Company's
potential new products likely will be subject to significant  technical risk due
to their  complexity  and the  difficulty  in  gauging  the  engineering  effort
required to produce such  products.  There can be no assurance that future Snap!
Server  products and other potential new products will be introduced on a timely
basis or at all. In addition, there can be no assurance that the Company will be
able to continue to offer the  functionality  and  ease-of-use  that it believes
future Snap! Server products require for a successful  introduction.  If the new
products are delayed, do not offer the functionality and ease-of-use envisioned,
or do not achieve market acceptance, the Company's business, financial condition
and operating  results will be  materially  adversely  affected.  As a result of
uncertainty  with  respect to Snap!  Server  revenues and  anticipated  expenses
required  to  successfully   develop  and  market  this  product,   the  Company
anticipates  that it may operate at a substantial net operating loss through the
end of 1999.

Dependence on New  Distribution  Channels.  The Company  anticipates  that VARs,
catalogs, and business-to-business retailers will play a significant role in its
Snap!  Server  sales  strategy.  In  addition,  as the market for the  Company's
CD-ROM/DVD products transition from enterprise-servers to workgroup-servers, the
Company  anticipates  that  catalogs  and  business-to-business  retailers  will
account for an increasingly greater proportion of the Company's revenues.  Early
in 1998, some of the Company's  existing  CD-ROM/DVD  workgroup-server  products
began  utilizing  the same new  distribution  channels  as the  Company's  Snap!
Server, in addition to the Company's  traditional channels,  distributors,  VARs
and direct sales/telemarketing.  The Company must implement marketing strategies
designed to  indirectly  generate  end-user  demand  thru such new  distribution
channels. There can be no assurance that the Company will be able to effectively
design and implement such  strategies or that such strategies will be successful
in generating such end-user demand. The Company's  agreements or purchase orders
with its catalog and business-to-business retailers typically allow for extended
payment terms and substantial  rights of return.  While the Company will provide
for a reserve for future  returns,  there can be no  assurance  that the reserve
will adequately cover actual product returns. Excessive or unanticipated returns
could materially  adversely affect the Company's  business,  financial condition
and results of  operations.  The  Company's  business,  financial  condition and
results of operations could also be materially  adversely affected by changes in
catalog or  business-to-business  retailers' inventory  strategies,  which could
occur  rapidly,  and may be  unrelated  to end user  demand.  A  failure  of the
Company's  new  distribution  channels  to  successfully  market  the  Company's
products  would  have a  material  adverse  effect  on the  Company's  business,
financial  condition  and  results of  operations.  As a result of the  extended
payment  terms  required by these  customers,  the  Company's  liquidity  may be
adversely  impacted by the timing of payments  required by its vendors preceding
the receipt of payments from retail customers.

Competition. Initially, the Company's Snap! Server will compete with alternative
methods of adding  storage to PC LAN networks such as adding new PC servers from
companies  such as Dell,  Compaq,  Hewlett  Packard and  International  Business
Machines Corporation  ("IBM"),  adding additional disk drives from manufacturers
such as Seagate and Maxtor to existing  servers,  and potential new  competition
from semiconductor manufacturers,  such as Intel Corporation. These companies in
particular and others similar to them, and the Company's competitors in general,
include  large  domestic  and  international  companies,   many  of  which  have
significantly greater financial, technical, manufacturing,  marketing, sales and
distribution  resources  than the Company.  There can be no  assurance  that the
Company's current or potential  competitors will not develop products comparable
or superior to the Snap! Server or adapt more quickly than the Company to new or
emerging   technologies,   evolving   industry   trends  or  changing   customer
requirements. There can be no assurance that the Company will have the financial
resources,  technical expertise, or marketing,  sales, distribution and customer
service and technical support capabilities to compete successfully.

The markets for the Company's CD-ROM/DVD products are extremely competitive. The
Company  expects that  competition  will  increase if more  companies  enter the
market and as existing  competitors  continue to change and expand their product
offerings. Pricing is very aggressive in the Company's industry, and the Company
expects  pricing  pressures  to continue to  intensify.  The  Company's  current
competitors  in the  CD-ROM/DVD  networking  market  include other  suppliers of
CD-ROM/DVD networking software and hardware such as Procom Technology, Inc., and
Hewlett  Packard,  Inc.. The Company also competes  indirectly with suppliers of
personal computers, such as Dell, Compaq, and IBM, and network operating systems
such as Microsoft  Corporation  and Novell,  Inc., to the extent such  companies
include CD-ROM/DVD  networking utilities as part of their operating systems. The
Company's  potential  competitors in the hardware area include  companies in the
personal computer market and certain CD-ROM/DVD  manufacturers.  These companies
in particular,  and the Company's competitors in general, include large domestic
and international companies, many of which have significantly greater financial,
technical,  manufacturing,  marketing, sales and distribution resources than the
Company.  There can be no  assurance  that the  Company's  current or  potential
competitors will not develop products  comparable or superior to those developed
by the  Company  or adapt  more  quickly  than the  Company  to new or  emerging
technologies,  evolving industry trends or changing customer requirements. There
can be no  assurance  that  the  Company  will  have  the  financial  resources,
technical expertise, or marketing,  sales, distribution and customer service and
technical support capabilities to compete successfully.

     The  Company  believes  that its  ability  to compete  successfully  in the
CD-ROM/DVD  networking and NAS markets will depend upon a number of factors both
within and outside of its control, including price, quality, product performance
and features;  timing of new product introductions by the Company, its customers
and competitors;  customer service and technical support; and the ability of the
Company to respond more quickly than current or potential  competitors to new or
emerging  technologies,   evolving  industry  trends  and  changes  in  customer
requirements  and  to  devote  greater   resources  than  current  or  potential
competitors  to the  development,  promotion  and sale of products.  The Company
believes that it competes favorably with respect to these factors.  There can be
no  assurance  however  that the  Company  will  have the  financial  resources,
technical expertise, or marketing,  sales, distribution and customer service and
technical support capabilities to compete successfully.

Dependence on Third Party Distributors. The Company derives substantially all of
its product sales through  distributors,  VARs, and retailers.  Two distributors
accounted for 41% and 23%,  respectively,  of the Company's  1998 product sales.
The loss of either of these distributors,  or certain other distributors,  VARs,
or retailers  would have a material  adverse  effect on the Company's  business,
financial  condition  and  results  of  operations.  The  Company's  contractual
relationships  with its  distributors,  VARs,  and  retailers  can  generally be
canceled  upon notice to the  Company.  Certain of the  Company's  distributors,
VARs, and retailers also act as distributors  for competitors of the Company and
could devote greater effort and resources to marketing  competitive products. In
addition,  effective  distributors,  VARs, and retailers must devote significant
technical,  marketing and sales resources to an often lengthy sales cycle. There
can be no assurance that the Company's current distributors, VARs, and retailers
will continue to market the Company's  products  effectively or that economic or
industry  conditions  will not adversely  affect such  distributors,  VARs,  and
retailers.  Because  the Company  sells a  significant  portion of its  products
through  distributors,  VARs,  and  retailers it is difficult for the Company to
monitor end user demand for its products on a current  basis.  Initial  stocking
orders from  distributors  or retailers  may not be  indicative of long-term end
user demand. The Company's  distributors and retailers  typically are allowed by
contract to return products,  subject to certain limitations,  without charge or
penalty.  While the Company provides for a reserve for future returns, there can
be no assurance that the reserve will adequately  cover actual product  returns.
Excessive  or  unanticipated  returns  could  materially  adversely  affect  the
Company's business, financial condition and results of operations. The Company's
business, financial condition and results of operations could also be materially
adversely   affected  by  changes  in  distributors'   or  retailers   inventory
strategies,  which could occur rapidly, and may be unrelated to end user demand.
There can be no assurance that the Company's  distributors,  VARs, and retailers
will  continue  to market  the  Company's  existing  products.  A failure of the
Company's distributors, VARs, and retailers to successfully market the Company's
products  would  have a  material  adverse  effect  on the  Company's  business,
financial condition and results of operations.

     The Company began  shipping its new Snap!  Server in the second  quarter of
1998. The Snap!  Server requires  different  marketing,  sales and  distribution
strategies than those for the Company's current CD-ROM/DVD products. As such, it
entails  significant  new risks to Meridian.  There can be no assurance that the
Company's  distributors,   VARs,  and  retailers  will  choose  or  be  able  to
effectively  market this new product or that the Company will be  successful  in
developing  alternate  channels of  distribution.  Initial  stocking orders from
distributors  or retailers  may not be  indicative of long-term end user demand.
The Company's  contracts with  distributors  and purchase  orders from retailers
typically  allow  distributors  and retailers of the Snap!  Server and other new
products to return products,  subject to certain limitations,  without charge or
penalty. The Company provides for a reserve for returns based on its contractual
obligations.  A failure of the Company's  distributors,  VARs,  and retailers to
successfully  market this  product,  or the failure to establish  other means of
marketing, sales, and distribution,  would have a material adverse effect on the
Company's business, financial condition and results of operations.

Dependence on Third Party Suppliers.  The Company is dependent on a small number
of suppliers for certain key components used in its products,  including  CD-ROM
and DVD drives,  microprocessors,  integrated  circuits and power  modules.  The
Company purchases these components  pursuant to periodic  purchase orders,  does
not carry  significant  inventories  of these  components,  and has no long-term
supply arrangements.  In addition,  certain  subassemblies used in the Company's
products  are  manufactured  by a single third party  vendor.  The loss of a key
supplier or a disruption to the business of a key supplier could have a material
adverse effect upon the Company's  business,  financial condition and results of
operations. Although the Company believes that alternative sources of components
or  subassemblies  could be arranged,  the process of  qualifying  new suppliers
could be lengthy and could  require  substantial  modification  of the Company's
products to ensure compatibility.  There can be no assurance that any additional
source  would be  available  to the Company at all or on a timely  basis or at a
cost  acceptable to the Company.  Any  disruption or reduction or termination in
the future supply of any key components  currently obtained from limited sources
could  have a  material  adverse  effect on the  Company's  business,  financial
condition  and results of  operations.  In the past,  there has been  unexpected
significant  growth in the  demand  for  CD-ROM/DVD  drives,  which  has  caused
temporary supply disruptions. These components are only available from a limited
number of manufacturers,  most of which are Japanese manufacturers.  The Company
has experienced in the past, and may experience in the future, an adverse impact
on  the  cost  in  dollars  of  certain   components   purchased  from  Japanese
manufacturers  due to fluctuations  in the exchange rate for the yen.  Moreover,
the  Company  has been  required  to make  spot  market  purchases  for  certain
components  at  premium  prices.  In the  third  quarter  of 1995,  the  Company
experienced  temporary delays in obtaining the drives required for its products.
If such delays  reoccur or the Company is required to purchase  components  at a
higher cost due to fluctuating currency exchange rates, spot market shortages or
other  factors,  the  Company  may be unable to ship  products  on the  schedule
anticipated or may sustain higher product costs with a resulting  adverse effect
on the Company's business, financial condition and results of operations.

     The Company  anticipates that the  manufacturing  of its new Snap!  Server,
including  final  assembly and testing,  will be  contracted  out to third party
vendors,  some of whom may be  located  in  Asia.  Initially,  Meridian  will be
dependent on a few third party  contractors.  Like its CD-ROM/DVD  counterparts,
the Snap!  Server will be dependent  on a small number of suppliers  for certain
key components and parts,  including  microprocessors,  integrated  circuits and
power modules. In addition, certain subassemblies used will be manufactured by a
single third party vendor.  Financial,  market or other  developments  adversely
affecting  the  Company's  key  component  suppliers,  or  the  loss  of  a  key
subassembly  manufacturer,  could  have an  adverse  effect on their  ability to
supply the Company with components or assemblies and, consequently, could have a
material  adverse effect upon the Company's  business,  financial  condition and
results of  operations.  The process of qualifying  new suppliers or subassembly
manufacturers  would  be  lengthy,  and  there  can  be no  assurance  that  any
additional  source  would be  available to the Company on a timely basis or at a
cost acceptable to the Company. Any disruption or reduction in the future supply
of any key  components  currently  obtained  from limited  sources  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations

Rapid Technological  Change;  Potential for Product Defects; and Obsolesce.  The
market  for the  Company's  products  is  characterized  by rapid  technological
advances,   evolving  industry  standards  in  computer  hardware  and  software
technology,   changes  in  customer   requirements   and  frequent  new  product
introductions and enhancements.  The Company's future success will depend on its
ability to  continue  to enhance  its  current  product  line and to continue to
develop and  introduce  new  products  that keep pace with  competitive  product
introductions  and  technological  developments,  satisfy  diverse and  evolving
customer  requirements and otherwise achieve market acceptance.  There can be no
assurance  that the Company  will be  successful  in  continuing  to develop and
market on a timely and cost-effective basis new products or product enhancements
that respond to  technological  advances by others,  or that these products will
achieve market  acceptance.  In addition,  companies in the industry have in the
past experienced  delays in the  development,  introduction and marketing of new
and enhanced  products,  and there can be no assurance that the Company will not
experience  delays in the future.  Any failure by the Company to  anticipate  or
respond  adequately to changes in technology  and customer  preferences,  or any
significant delays in product development or introduction, would have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     Due to their  complexity and  sophistication,  the Company's  products from
time to time may contain  hardware or  software  defects or "bugs"  which can be
difficult  to  correct.  Furthermore,  as the Company  continues  to develop and
enhance its products, there can be no assurance that the Company will be able to
identify  and  correct   defects  in  a  manner  that  will  permit  the  timely
introduction of such products.  Moreover, despite extensive testing, the Company
has from time to time  discovered  defects  only  after its  products  have been
commercially  released.  There can be no  assurance  that such  defects will not
cause  delays in  product  introductions  and  shipments  or loss of or delay in
market  acceptance,  result in increased  costs,  require design  modifications,
impair  customer  satisfaction,  or result in customer  returns.  Any such event
could materially  adversely affect the Company's  business,  financial condition
and results of operations.

     Over  the  past  two  years,   CD-ROM/DVD  drive  technology  has  advanced
significantly.  Additionally, the pace of new drive introductions has increased.
As a result,  the  Company  may find  itself  holding an  inventory  of obsolete
drives.  Further,  the Company's  contracts with its  distributors and retailers
allow for product return, or price protection credits,  based on their inventory
levels of current products and, under certain circumstances,  obsolete products.
Meridian estimates and accrues its required allowance for such occurrences,  but
there can be no assurance that actual inventory writedowns,  product returns, or
price protection credits will not exceed the Company's  estimate.  Such an event
could materially  adversely affect the Company's  business,  financial condition
and results of operations.

Expansion  of  International  Operations.  There can be no  assurance  that the
Company  will be able to successfully  localize,  market,  sell and deliver its
products  internationally. The inability of the Company to successfully  expand
its  international  operations in a timely  and  cost  effective  manner  could
materially  adversely  affect the Company's  business,  financial  condition and
results of operations.  International  product sales were  approximately  11% of
total product sales in 1998.  The Company's business,  financial  condition and
results of operations could be materially  adversely  affected by risks inherent
in conducting  business  internationally,  such as changes in currency  exchange
rates,   longer   payment  cycles,   difficulties   in  staffing  and  managing
international  operations,  problems in collecting accounts  receivable,  slower
acceptance  of technology  advances compared  with the United  States,  lack of
published  CD-ROM/DVD  content, seasonal reductions in business activity during
the summer months in Europe and certain  other parts of the world,  and tariffs,
duties and other trade barriers.  For a discussion of the effect of fluctuations
in the exchange rate of the Japanese yen on the cost of certain components used
in the  Company's  products,  see "Risk  Factors  - Dependence  on Third  Party
Suppliers."

Dependence on Key Personnel; Management of Growth. Due to the specialized nature
of the Company's business, the Company's future success is highly dependent upon
the continued  services of its key engineering  personnel and executive officers
and upon its  ability to attract  and retain  qualified  engineering,  sales and
marketing,   management  and   manufacturing   personnel  for  its   operations.
Competition  for such  personnel is intense.  There can be no assurance that the
Company will be successful in attracting or retaining such  personnel.  The loss
of any key personnel or the Company's  inability to attract and retain qualified
employees  could  have a  material  adverse  effect on the  Company's  business,
financial  condition  and  results  of  operations.  None of the  Company's  key
employees has an employment agreement with the Company, and the Company does not
maintain key man insurance policies on the lives of its key employees.  Although
the  Company's  senior  executives  have  lengthy  experience  in  the  computer
industry,  they have no  experience  with the NAS market  that the  Company  has
entered.  To manage its growth,  the Company  must  continue  to  implement  and
improve  its  operational,  financial  and  management  information  systems and
expand,  train and manage its workforce.  Meridian  believes that success in its
industry  requires  substantial  capital in order to maintain the flexibility to
take advantage of opportunities as they may arise. The Company may, from time to
time,  as  market  and  business  conditions  warrant,   invest  in  or  acquire
complementary   businesses,   products  or  technologies.   Such  investment  or
acquisitions may be funded by internally generated cash, marketable  securities,
debt, or the sale of  additional  equity.  The sale of  additional  equity would
result in dilution  in the equity  ownership  of  Meridian's  stockholders.  The
Company's  failure to manage growth  effectively  could have a material  adverse
effect on the Company's business, financial condition and results of operations.

Employees. As of December 31, 1998, the Company employed 83 individuals, of whom
13 were employed in manufacturing,  27 in research and development,  23 in sales
and  marketing,  7 in  customer  support,  1 in  product  management,  and 12 in
administration  and finance.  Competition  in the recruiting of personnel in the
computer  and  networking  industry is intense.  The Company  believes  that its
future  success will depend,  in part,  upon the  continued  services of its key
engineering personnel and executive officers and upon its ability to attract and
retain qualified engineering, sales and marketing,  management and manufacturing
personnel for its operations. None of the Company's employees are represented by
a labor union or are subject to a collective bargaining  agreement.  The Company
believes that relations with its employees are good.

     To manage its growth,  the Company must  continue to implement  and improve
its operational,  financial and management information systems and expand, train
and manage its  workforce.  The Company's  failure to manage growth  effectively
could  have a  material  adverse  effect on the  Company's  business,  financial
condition  and results of  operations.  See "Risk  Factors -  Dependence  on Key
Personnel; Management of Growth."

Dependence on Proprietary  Rights.  The Company's  success  depends in part upon
protecting its  proprietary  technology.  The Company relies on a combination of
intellectual  property  laws,  nondisclosure  agreements  and  other  protective
measures  to protect its  proprietary  information.  There can be no  assurance,
however,  that  the  steps  taken  by the  Company  will be  adequate  to  deter
misappropriation  or  independent  third party  development of its technology or
that  its  intellectual   property  rights  can  be  successfully   defended  if
challenged.  Litigation  may be necessary to protect the  Company's  proprietary
rights. Any such litigation may be time-consuming  and costly. In addition,  the
laws of certain  foreign  countries  do not protect the  Company's  intellectual
property  rights to the same extent as the laws of the United States.  Given the
rapid development of technology,  there can be no assurance that certain aspects
of the  Company's  products  do not or will not  infringe  upon the  existing or
future  proprietary rights of others or that, if licenses or rights are required
to avoid infringement,  such licenses or rights could be obtained or obtained on
terms that are acceptable to the Company.  The Company is not currently aware of
any infringement of its proprietary  rights,  nor is it aware of any claims that
its products infringe the rights of others.

Possible  Volatility of Stock Price.  The Company  believes that factors such as
announcements of developments  related to the Company's business,  announcements
by  competitors,  quarterly  fluctuations  in the Company's  financial  results,
conditions  in the  CD-ROM/DVD  networking  and NAS  industries,  changes in the
general economy and other factors could cause the price of the Company's  Common
Stock to  fluctuate,  perhaps  substantially.  In addition,  in recent years the
stock  market in  general,  and the market  for  shares of small  capitalization
technology stocks in particular,  have experienced  extreme price  fluctuations,
which  have  often been  unrelated  to the  operating  performance  of  affected
companies.  Such fluctuations could have a material adverse effect on the market
price of the Company's Common Stock.

Anti-Takeover  Effect of Stockholder  Rights Plan and Certain  Charter and Bylaw
Provisions.  In July 1997, the Company's Board of Directors  adopted a Preferred
Shares Rights Plan (the "Rights Plan").  The Rights Plan provides for a dividend
distribution  of one  Preferred  Shares  Purchase  Right  (a  "Right")  on  each
outstanding  share  of the  Company's  Common  Stock.  The  Rights  will  become
exercisable   following  the  tenth  day  after  a  person  or  group  announces
acquisition  of  15% or  more  of  the  Company's  Common  Stock,  or  announces
commencement  of a tender  offer,  the  consummation  of which  would  result in
ownership by the person or group of 15% or more of the  Company's  Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the tenth day following  acquisition by a person or group of 15% of
more of the Company's Common Stock.

     The Rights Plan and certain provisions of the Company's Certificate of
Incorporation  and Bylaws may have the effect of making it more  difficult for a
third party to acquire,  or of  discouraging  a third party from  attempting  to
acquire,  control of the Company.  The Company's  Certificate of  Incorporation
allows the Company to issue  Preferred  Stock without any vote or further action
by the  stockholders,  and certain  provisions of the Company's  Certificate  of
Incorporation  and  Bylaws  specify  procedures  for  director  nominations  by
stockholders and submission of other proposals for  consideration at stockholder
meetings, and eliminate cumulative voting in the election of directors.  Certain
provisions  of  Delaware  law could also delay or make more  difficult a merger,
tender offer or proxy  contest  involving  the Company,  including  Section 203,
which prohibits a Delaware corporation from engaging in any business combination
with any  interested  stockholder  for a period of three  years  unless  certain
conditions are met. The Rights Plan, the possible  issuance of Preferred  Stock,
the procedures required for director  nominations and stockholder  proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company,  including without  limitation,  discouraging a proxy
contest or making more difficult the  acquisition of a substantial  block of the
Company's  Common  Stock.  These  provisions  could  also  limit the price  that
investors  might be willing  to pay in the  future  for shares of the  Company's
Common Stock.

Potential  Seismic   Disturbances.   The  Company's   research  and  development
activities,  its corporate headquarters,  other critical business operations and
certain of its suppliers are located near major earthquake  faults. The ultimate
impact on the Company, its significant suppliers and the general  infrastructure
is unknown, but operating results could be materially affected in the event of a
major  earthquake.  The  Company  is  predominantly  uninsured  for  losses  and
interruptions caused by earthquakes.

Item 2.  Properties.

     The Company leases its headquarters  office and  manufacturing  facility in
Scotts Valley,  California,  under a noncancelable operating lease which expires
in December 1999. Other than several small regional sales offices, primarily all
of the Company's  operations are conducted at the Scotts Valley  location.  This
facility is  currently  fully  utilized.  With  respect to the  Company's  lease
expiring  in  1999,   management  believes  that  the  current  lease  could  be
renegotiated or a suitable new location can be found at terms  acceptable to the
Company.

Item 3.  Legal Proceedings

         None.

Item 4.  Submission of Matters to a Vote of Security-Holders.

         No  matters  were submitted  to a vote of the  Company's stockholders
during the quarter ended December 31, 1998.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

As of February 26, 1999, there were 120 stockholders of record of the  Company's
Common Stock and approximately  4,000 beneficial  owners.  The Company has never
declared or paid any cash dividends on its capital stock. The Company  currently
intends  to retain  earnings  for use in its  business  and does not  anticipate
paying  cash  dividends  in  the  foreseeable   future.  The  remainder  of  the
information  required by this item is incorporated by reference from the section
of the  Registrant's  1998 Annual Report to  Stockholders  captioned  "Quarterly
Financial  Data." Such  information  is also set forth in Exhibit 13.1  attached
hereto.

Item 6.  Selected Financial Data.

The  information  required by this item is  incorporated  by reference  from the
section of the Registrant's  1998 Annual Report to Stockholders  captioned "Five
Year  Financial  Summary"  Such  information  is also set forth in Exhibit  13.1
attached hereto.

Item 7. Management's Discussion and Analysis of Financial Condition and Results 
        of Operations.

The information  required by this item is  incorporated  by reference  from the
section  of the  Registrant's  1998  Annual  Report  to  Stockholders  captioned
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations." Such information is also set forth in Exhibit 13.1 attached hereto.

Item 8. Financial Statements and Supplementary Data.

The  information  required by this item is  incorporated  by reference  from the
sections  of the  Registrant's  1998  Annual  Report to  Stockholders  captioned
"Balance  Sheets",  "Statements of  Operations",  "Statements  of  Stockholders'
Equity",  "Statements  of Cash Flows",  "Notes to Financial  Statements  for the
Years  Ended  December  31,  1998,  1997 and 1996" and  "Report  of  Independent
Accountants."  Such  information  is also set  forth in  Exhibit  13.1  attached
hereto.

Item 9.  Changes in and Disagreements With Accountants on Accounting and 
         Financial Disclosures.

         None

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

     Information  regarding  the  Directors  of the Company is  incorporated  by
reference  from the  information  set forth under the caption  "Proposal  No. 1:
Election of  Directors"  in the  Company's  Proxy  Statement for the 1999 Annual
Meeting of  Stockholders  to be filed with the Commission  within 120 days after
the  end of the  Company's  year  ended  December  31,  1998  (the  "1999  Proxy
Statement").  Information  with respect to Directors and Officers of the Company
required by Item 405 of Regulation S-K is incorporated  herein by reference from
information  set forth under the caption  "Section  16(a)  Beneficial  Ownership
Reporting Compliance" in the 1999 Proxy Statement.

Executive and Other Officers of the Company

     The  executive  officers of the Company who are elected by and serve at the
discretion of the Board of Directors, and their ages are as follows:

                               Executive Officers

Name                          Age                         Position
Gianluca U. Rattazzi          46             President, Chief Executive Officer
                                             and Director
Erik E. Miller                38             Sr. Vice President, Finance and 
                                             Chief Financial Officer
Shmuel Shottan                47             Sr. Vice President, Engineering and
                                             Chief Technical Officer

     Dr.  Rattazzi  co-founded  the Company  in July  1988.  He has  served  as
President and a director of the Company since inception and was appointed Chief
Executive  Officer in October  1992.  Dr. Rattazzi is also a director of Socket
Communications,  Inc., a company that develops data communication  solutions for
the  mobile  computer  market.  From 1985 to 1988,  Dr. Rattazzi  held  various
executive level positions at Virtual  Microsystems,  Inc., a computer peripheral
networking  company,  most recently as  President.  Dr. Rattazzi  holds an M.S.
degree in  Electrical Engineering and  Computer  Science  from  University  of
California, Berkeley and a Ph.D. in Physics from University of Rome, Italy.

     Mr. Miller joined the Company as Controller in February 1992. Mr.
Miller was appointed Vice  President,  Finance in October 1992,  Chief Financial
Officer in January 1993,  and Senior Vice  President in October 1996. Mr. Miller
served as  Director  of  Finance  and  Administration  for  Granger-Telettra,  a
microwave telecommunications company, from September 1988 to February 1992.
Mr. Miller holds a B.S. in Accounting from University of California, Berkeley.

     Mr. Shottan  joined  the  Company  in  September  1993 as Vice  President,
Engineering  and Chief  Technical  Officer.  In October  1996,  Mr.  Shottan was
promoted to Sr. Vice President. Prior to joining the Company, Mr. Shottan served
in various  executive and managerial  positions at AST Research,  Inc.  ("AST"),
most  recently  as Director of Server  Development  from 1989 to 1993.  Prior to
joining AST, Mr. Shottan was with ICL North American Development  Operations,  a
manufacturer of UNIX departmental  servers, from 1982 to 1989. Mr. Shottan holds
a B.S. in Electrical Engineering from Technion,  Israel Institute of Technology,
Haifa, Israel.

                                    Officers

Name                                  Age                        Position
----                                  ---                        --------
Luciano Dalle Ore                      40   Vice President, Advanced Development
Carlo Garbagnati                       39   Vice President, Software Development
Trevor Heathorn                        40   Vice President, Advanced Software
Jeff Hill                              52   Vice President, Product Marketing
Kenneth Kuo                            49   Vice President, Manufacturing
Greg Swope                             40   Vice President, Sales

     Mr. Dalle Ore joined the Company in June 1996 as Vice President of Advanced
Development.  Prior to joining the Company,  Mr. Dalle Ore was Vice President of
Research  and  Development  of  Sextant  Corporation,  a  process  manufacturing
software  developer from 1994 through 1996. From 1991 to 1994, Mr. Dalle Ore was
Director of Marketing  for MAI  Systems." Mr. Dalle Ore holds a BSEE from Purdue
University and a MSEE from Stanford University.

     Mr.  Garbagnati  joined the Company in November 1988 as Manager of Software
Engineering and was promoted to Director of Software  Systems in August 1993. In
January 1995, he became Vice President,  Software  Development.  Mr.  Garbagnati
holds a B.S. in Electrical  Engineering  from Northrop  University  and an MS in
Electrical Engineering from Stanford University.

     Mr.  Heathorn  joined  the  Company in August  1988 as Manager of  Software
Engineering and was one of the Company's original employees. In August 1993, Mr.
Heathorn  was  promoted  to director of  Advanced  Software  Development  and in
January 1995 to Vice President,  Software Development. Mr. Heathorn holds a B.A.
in Engineering and an M.A. in Engineering from Cambridge University, England.

     Mr. Hill joined the Company in 1994 as Product Manager, and was promoted to
Director of Product Marketing in 1998 and to Vice President of Product Marketing
in 1999.  Prior to joining  the  company Mr.  Hill held  various  marketing  and
product marketing positions at Metaphor Inc., The Santa Cruz Operation,  and the
H.J.  Heinz  Company.  Mr. Hill holds an MBA in Marketing from the University of
Colorado, and a BA in Advertising from Michigan State University.

     Mr.   Kuo  joined  the   Company  in  January   1990  as  Vice   President,
Manufacturing.  From 1986 to 1989,  Mr. Kuo was the Senior  Manager,  Operations
Engineering  at Sun  Microsystems,  Inc.  Mr.  Kuo  holds a B.S.  in  Electrical
Engineering   from  National  Taiwan   University  and  an  M.S.  in  Electrical
Engineering and Computer Science from the University of Cincinnati,  Cincinnati,
Ohio.

     Mr. Swope joined the Company in November 1995 as Director of OEM Sales.  In
1997 he was promoted to Vice President, Sales. From 1988 to 1995 Mr. Swope held
various sales and marketing  positions  with The Santa Cruz Operation,  Inc., a
UNIX networking  software company.  Mr. Swope holds a B.S. in Computer Sciences
and Business Administration from California State University, Chico.

Item 11. Executive Compensation.

     Information  regarding executive  compensation is incorporated by reference
from  the   information   set  forth  under  the  caption   "Executive   Officer
Compensation" in the 1999 Proxy Statement.

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

     Information regarding security ownership of certain beneficial owners
and management is incorporated by reference from the information set forth under
the caption "Share Ownership" in the 1999 Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

         None.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K.

         (a) The following documents are filed as part of this Report:

1.     Financial Statements.  The following financial statements have been
       incorporated by reference to the Registrant's 1998 Annual Report to
       Stockholders.  The financial statements required by this Item are also 
       set forth in Exhibit 13.1 attached hereto.
       Report of Independent Accountants
       Balance Sheets as of December 31, 1998 and 1997
       Statements of Operations for the years ended December 31, 1998, 1997, 
       and 1996
       Statements of Stockholders'Equity for the years ended December 31, 1998,
       1997, and 1996
       Statements of Cash Flows for the years ended December 31, 1998, 1997, 
       and 1996
       Notes to Financial Statements
2.     Financial Statement Schedule.  The following financial statement schedule
       of the Company as of and for the years ended December 31, 1998,  1997 and
       1996,  and the Report of Independent  Accountants on Financial  Statement
       Schedule  (page 62) are  included  in Part IV of this Report on the pages
       indicated.   This  financial   statement   schedule  should  be  read  in
       conjunction with the Financial Statements,  and notes thereto, which have
       been  incorporated by reference to the Registrant's 1998 Annual Report to
       Stockholders..

       Schedules               Title                                       Page
          II       Valuation and Qualifying Accounts......................   63
       Schedules not listed above have been omitted  because they are not 
       applicable, not required, or the information required to be set forth
       therein is included in the Financial Statements or notes thereto, which
       have been incorporated by reference to the Registrant's 1998 Annual 
       Report to Stockholders.

3.     Exhibits (in accordance with Item 601 of Regulation S-K).
       2.0 Agreement and Plan of Reorganization among Parallan  Computer,  Inc.,
           PAC Acquisition  Subsidiary,  Inc.  and  Meridian  Data,  Inc. dated
           December 1, 1994 previously filed as Exhibit 2 to the Current Report
           on Form 8-K and incorporated herein by reference.
       2.2 Agreement and Plan of Merger between Meridian Data, Inc.,a California
           corporation, and Meridian Data, Inc., a Delaware  corporation, dated
           May 29,1997  previously  filed  as  Exhibit  2.2 to Registration  of
           Securities of Certain Successor  Issues on Form 8-B and incorporated
           herein by reference.
       3.1 Certificate of Incorporation of  Meridian Data,  Inc.,  a Delaware
           corporation,  previously  filed  as  Exhibit  3.1 to Registration of
           Securities of Certain Successor  Issues on Form 8-B and  incorporated
           herein by reference.
       3.2 Bylaws of Meridian Data, Inc., a Delaware corporation, as amended.   
       4.1 Specimen Common Stock certificate of Meridian Data, Inc., a Delaware
           corporation, previously filed as Exhibit 4.1 to the Quarterly Report
           on Form 10-Q for the period ended September 30, 1997, and 
           incorporated herein by reference.
       9.1 Stockholders Agreement, dated as of June 1, 1992, among IBM 
           Corporation, Parallan Computer, Inc. and certain stockholders of
           Parallan Computer, Inc. previously filed as Exhibit 9.1 to
           Registration Statement on Form S-1 (Registration No. 33-57976) and 
           incorporated herein by reference.
      10.1 Form of Indemnification Agreement by and among Meridian Data, Inc., a
           Delaware corporation, and its directors and officers previously filed
           as Exhibit 10.1B to Registration of Securities of Certain  Successor
           Issues on Form 8-B and incorporated herein by reference.
      10.2 Restated and Amended 1988 Incentive Stock Plan and forms of 
           agreements thereunder previously filed under Registration Statement
           on Form S-8 (Registration No. 333-3934) and incorporated herein by 
           reference.
      10.3 1992 Incentive Stock Plan and form of agreement thereunder previously
           filed as  Exhibit  10.3  to  Registration   Statement  on  Form  S-1
           (Registration No. 33-57976) and incorporated herein by reference.
      10.4 1992  Key Employee  Stock  Plan  and  form  of  agreement  thereunder
           previously filed as Exhibit 10.4 to Registration Statement on
           Form S-1 (Registration No. 33-57976) and incorporated herein by 
           reference.
      10.5 Amended and Restated  1992 Employee  Stock  Purchase Plan and form of
           subscription agreement thereunder previously filed as Exhibit 10.5 to
           the Quarterly Reporton Form 10-Q for the period ended March 31, 1995,
           and incorporated herein by reference.
      10.6 Registration Rights  Agreement  between the Registrant and certain of
           the Registrant's  stockholders  previously  filed as Exhibit  10.6 to
           Registration Statement on Form S-1  (Registration  No.  33-57976) and
           incorporated herein by reference.
      10.7 Custodial  Agreement  dated  as  of  May  12, 1992  between  Parallan
           Computer, Inc.,IBM Corporation and File-PROTEK, Inc. previously filed
           as Exhibit 10.7 to Registration  Statement on Form S-1 (Registration
           No. 33-57976) and incorporated herein by reference.
      10.8 Share Purchase  Agreement  dated as of May 15, 1992 between  Parallan
           Computer, Inc., and IBM Corporation, as amended,  previously filed as
           Exhibit 10.8 to Registration  Statement on Form S-1 (Registration No.
           33-57976) and incorporated herein by reference.
      10.9 Marketing Agreement  dated  as  of June  1,  1992  between  Parallan
           Computer, Inc.and IBM Corporation previously filed as Exhibit 10.9 to
           Registration Statement on Form S-1  (Registration  No.  33-57976) and
           incorporated herein by reference.
     10.10 Master Work  Agreement  dated  as of June 1,  1992  between  Parallan
           Computer, Inc. and IBM Corporation  previously filed as Exhibit 10.10
           to Registration Statement on Form S-1 (Registration No. 33-57976) and
           incorporated herein by reference.
     10.11 Secured Loan  Agreement  dated as of June 1,  1992  between  Parallan
           Computer, Inc. and IBM Credit Corporation previously filed as Exhibit
           10.11  to  Registration  Statement  on  Form  S-1 (Registration  No.
           33-57976) and incorporated herein by reference.
     10.13 Master Equipment  Lease  dated as of June 29, 1990  between  Parallan
           Computer, Inc. and Western Technology  Investment previously filed as
           Exhibit 10.13 to Registration Statement on Form S-1 (Registration No.
           33-57976) and incorporated herein by reference.
     10.14 Master Equipment Lease dated as of January 15, 1993 between  Parallan
           Computer, Inc. and Phoenix Leasing  Incorporated  previously filed as
           Exhibit 10.14 to Registration Statement on Form S-1 (Registration No.
           33-57976) and incorporated herein by reference.
     10.15 Amendment to the Master Work Agreement and Marketing  Agreement dated
           as of  March 31,  1994, between  Parallan  Computer,  Inc.  and  IBM
           Corporation.
     10.16 Meridian Data, Inc.1987 Incentive Stock Plan and form of subscription
           agreement  thereunder previously filed as Exhibit 4.3 to Registration
           Statement on Form S-8 (Registration  No. 33-89162) and  incorporated
           herein by reference.
     10.17 Stock Option Assignment and Exercise Agreementbetween the Registrant,
           International Business Machines  Corporation and certain stockholders
           of the Registrant  dated  March 6, 1996  previously  filed as Exhibit
           10.17 to the Annual Report on Form 10-K for the year  ended  December
           31, 1995, and incorporated herein by reference.
     10.18 Meridian Data, Inc. 1995 Director Stock Plan and form of subscription
           agreement  thereunder   previously   filed  as  Exhibit  4.3  to  the
           Registration Statement on Form S-8  (Registration  No,  333-2622) and
           incorporated herein by reference.
     10.19 Meridian Data, Inc. 1997  Incentive  Stock Plan and form of agreement
           thereunder previously  filed  as  Exhibit  10.19 to  Registration  of
           Securities of Certain  Successor Issues on Form 8-B and  incorporated
           herein by reference.
     10.20 Loan and Security Agreement dated July 31, 1998 between Silicon
           Valley Bank and Meridian Data, Inc., previously filed as Exhibit
           10.20 to the Quarterly Report on Form 10-Q for the quarter ended
           September, 30, 1998, and incorporated herein by reference.
     13.1  Portions of the 1998 Annual Report to Stockholders
     23.1  Consent of Independent Accountants
     27    Financial Data Schedule
                                              
         (b) Reports on Form 8-K.

                 None

         (c)  Exhibits.

                 See Item 14(a)3 above.

         (d)  Financial Statement Schedule.

                 See Item 14(a)2 above.
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                  MERIDIAN DATA, INC.
Date:  March 23, 1999                         /s/ Gianluca U. Rattazzi
                                            ----------------------------
                                                  GIANLUCA U. RATTAZZI          
                                          President, Chief Executive Officer,
                                                  and Director
                                        
Date:  March 23, 1999                        /s/  Erik E. Miller
                                            ---------------------               
                                    Sr. Vice-President, Finance, and
                                                Chief Financial Officer

     KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature  appears below constitutes and appoints Gianluca U. Rattazzi and Erik
E. Miller and each of them, jointly and severally, his attorneys-in-fact,  each
with full power of substitution, for him in any capacities, to sign any and all
amendments  to this Report on Form 10-K,  and to file the same,  with  exhibits
thereto and other documents in connection  therewith,  with the  Securities and
Exchange  Commission, hereby  ratifying  and  confirming  all  that  each  said
attorneys-in-fact or his substitute or substitutes,  may do or cause to be done
by virtue hereof.

     Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

   Signature                      Title                                   Date
   ---------                      -----                                   ----
/s/ Charlie Bass              Chairman of the Board               March 23, 1999
------------------
   (CHARLIE BASS)
/s/ Gianluca Rattazzi         President, Chief Executive
---------------------         Officer and Director                March 23, 1999
   (GIANlUCA RATTAZZI)
                
/s/ Erik E. Miller            Vice-President, Finance, 
--------------------          Chief Financial Officer             March 23, 1999
   (ERIK E. MILLER)           (Principal Financial and 
                               Accounting Officer)
                                    
/s/ Peter R. Johnson                 Director                     March 23, 1999
--------------------
   (PETER R. JOHNSON)
/s/ Mario M. Rosati                  Director                     March 23, 1999
-------------------
   (MARIO M. ROSATI)
/s/ Pierluigi M. Zappacosta          Director                     March 23, 1999
---------------------------
   (PIERLUIGI M. ZAPPACOSTA)
<PAGE>
                               MERIDIAN DATA, INC.
                                INDEX TO EXHIBITS

      Exhibit                         Item                                Page
          3.2 Bylaws of Meridian Data, Inc., a Delaware Corporation, 
              as amended....................................................24
         13.1 Portions of the 1998 Annual Report to Stockholders............40
         23.1 Consent of Independent Accountants............................62
           24 Power of attorney.............................................22
           27 Financial Data Schedule.......................................65
<PAGE>
                                                                    EXHIBIT 3.2

        BYLAWS OF MERIDIAN DATA,INC., A DELAWARE CORPORATION, AS AMENDED

                                TABLE OF CONTENTS
                                                                         Page

ARTICLE I CORPORATE OFFICES.................................................1

         1.1      REGISTERED OFFICE.........................................1
         1.2      OTHER OFFICES.............................................1

ARTICLE II MEETINGS OF STOCKHOLDERS.........................................1

         2.1      PLACE OF MEETINGS.........................................1
         2.2      ANNUAL MEETING............................................1
         2.3      SPECIAL MEETING...........................................1
         2.4      NOTICE OF STOCKHOLDERS' MEETINGS..........................1
         2.5      NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS........2
         2.6      MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..............2
         2.7      QUORUM....................................................3
         2.8      ADJOURNED MEETING; NOTICE.................................3
         2.9      VOTING....................................................3
         2.10     WAIVER OF NOTICE..........................................3
         2.11     STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...4
         2.12     RECORD DATE FOR STOCKHOLDER NOTICE; VOTING................4
         2.13     PROXIES...................................................4
         2.14     ORGANIZATION..............................................4
         2.15     LIST OF STOCKHOLDERS ENTITLED TO VOTE.....................4

ARTICLE III DIRECTORS.......................................................5

         3.1      POWERS....................................................5
         3.2      NUMBER OF DIRECTORS.......................................5
         3.3      ELECTION AND TERM OF OFFICE OF DIRECTORS..................5
         3.4      RESIGNATION AND VACANCIES.................................5
         3.5      PLACE OF MEETINGS; MEETINGS BY TELEPHONE..................6
         3.6      REGULAR MEETINGS..........................................6
         3.7      SPECIAL MEETINGS; NOTICE..................................6
         3.8      QUORUM....................................................6
         3.9      WAIVER OF NOTICE..........................................6
         3.10     ADJOURNMENT...............................................6
         3.11     NOTICE OF ADJOURNMENT.....................................7
         3.12     BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.........7
         3.13     FEES AND COMPENSATION OF DIRECTORS........................7
         3.14     APPROVAL OF LOANS TO OFFICERS.............................7

ARTICLE IV COMMITTEES.......................................................7
         4.1      COMMITTEES OF DIRECTORS...................................7
         4.2      MEETINGS AND ACTION OF COMMITTEES.........................8
         4.3      COMMITTEE MINUTES.........................................8

ARTICLE V OFFICERS..........................................................8

         5.1      OFFICERS..................................................8
         5.2      ELECTION OF OFFICERS......................................8
         5.3      SUBORDINATE OFFICERS......................................8
         5.4      REMOVAL AND RESIGNATION OF OFFICERS.......................8
         5.5      VACANCIES IN OFFICES......................................9
         5.6      CHAIRMAN OF THE BOARD.....................................9
         5.7      PRESIDENT.................................................9
         5.8      VICE PRESIDENTS...........................................9
         5.9      SECRETARY.................................................9
         5.10     CHIEF FINANCIAL OFFICER...................................9

ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND 
         OTHER AGENTS......................................................10

         6.1      INDEMNIFICATION OF DIRECTORS AND OFFICERS................10
         6.2      INDEMNIFICATION OF OTHERS................................10
         6.3      INSURANCE................................................10

ARTICLE VII RECORDS AND REPORTS............................................11

         7.1      MAINTENANCE AND INSPECTION OF RECORDS....................11
         7.2      INSPECTION BY DIRECTORS..................................11
         7.3      ANNUAL STATEMENT TO STOCKHOLDERS.........................11
         7.4      REPRESENTATION OF SHARES OF OTHER CORPORATIONS...........11
         7.5      CERTIFICATION AND INSPECTION OF BYLAWS...................11

ARTICLE VIII GENERAL MATTERS...............................................11

         8.1      RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING....11
         8.2      CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS................12
         8.3      CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED........12
         8.4      STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES.........12
         8.5      SPECIAL DESIGNATION ON CERTIFICATES......................12
         8.6      LOST CERTIFICATES........................................13
         8.7      TRANSFER AGENTS AND REGISTRARS...........................13
         8.8      CONSTRUCTION; DEFINITIONS................................13

ARTICLE IX AMENDMENTS......................................................13
<PAGE>
                                     BYLAWS
                                       OF
                               MERIDIAN DATA, INC.
                            (a Delaware corporation)

CORPORATE OFFICES
-----------------
REGISTERED OFFICE
-----------------

     The registered  office of the corporation shall be fixed in the certificate
of incorporation of the corporation.

OTHER OFFICES 
--------------

     The board of  directors  may at any time  establish  branch or  subordinate
offices  at any  place or  places  where  the  corporation  is  qualified  to do
business.

MEETINGS OF STOCKHOLDERS
------------------------
PLACE OF MEETINGS
-----------------

     Meetings of  stockholders  shall be held at any place within or outside the
State of Delaware  designated by the board of  directors.  In the absence of any
such  designation,  stockholders'  meetings  shall  be  held  at  the  principal
executive office of the corporation.

ANNUAL MEETING 
-------------- 

     The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the second Tuesday of May in
each year at 10:00 a.m. However, if such day falls on a legal holiday,  then the
meeting  shall be held at the same  time and place on the next  succeeding  full
business day. At the meeting,  directors shall be elected,  and any other proper
business may be transacted.

SPECIAL MEETING
--------------- 

     A  special  meeting  of the  stockholders  may be called at any time by the
board of directors,  or by the chairman of the board, or by the president, or by
one or more  stockholders  holding shares in the aggregate  entitled to cast not
less than ten percent (10%)of the votes at that meeting. If a special meeting is
called by any  person  or  persons  other  than the  board of  directors  or the
president  or the chairman of the board,  then the request  shall be in writing,
specifying  the time of such  meeting  and the  general  nature of the  business
proposed  to be  transacted,  and  shall  be  delivered  personally  or  sent by
registered  mail  or by  telegraphic  or  other  facsimile  transmission  to the
chairman of the board, the president, any vice president or the secretary of the
corporation. The officer receiving the request shall cause notice to be promptly
given to the stockholders entitled to vote, in accordance with the provisions of
Sections  2.4 and 2.5 of these  bylaws,  that a meeting will be held at the time
requested by the person or persons calling the meeting,  so long as that time is
not less than  thirty-five  (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within twenty (20) days after receipt
of the request,  then the person or persons  requesting the meeting may give the
notice.  Nothing  contained  in this  paragraph  of this  Section  2.3  shall be
construed  as  limiting,  fixing  or  affecting  the  time  when  a  meeting  of
stockholders  called by action of the board of directors may be held.

NOTICE OF STOCKHOLDERS'   MEETINGS  
----------------------------------

     All notices of meetings of stockholders shall be sent or otherwise given in
accordance  with Section 2.6 of these bylaws not less than ten (10) (or, if sent
by  third-class  mail pursuant to Section 2.6 of these bylaws,  thirty (30)) nor
more than  sixty  (60) days  before the date of the  meeting.  The notice  shall
specify  the  place,  date,  and  hour of the  meeting  and (i) in the case of a
special  meeting,  the  general  nature of the  business  to be  transacted  (no
business  other than that  specified in the notice may be transacted) or (ii) in
the case of the annual meeting,  those matters which the board of directors,  at
the time of giving the notice, intends to present for action by the stockholders
(but  subject to the  provisions  of the next  paragraph of this Section 2.4 any
proper  matter may be presented at the meeting for such  action).  The notice of
any meeting at which  directors  are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for   election. 

NOTIFICATIONS   OF   NOMINATIONS   AND   PROPOSED   BUSINESS.
-------------------------------------------------------------

     Subject to the  rights of holders of any class or series of share  having a
preference  over the  Common  Stock as to  dividends  or upon  liquidation,  (a)
nominations  for the  election of  directors,  and (b)  business  proposed to be
brought before any stockholder  meeting may be made by the board of directors or
proxy  committee  appointed  by the  board of  directors  or by any  stockholder
entitled to vote in the election of directors  generally if such  nomination  or
business proposed is otherwise proper business before such meeting. However, any
such stockholder may nominate one or more persons for election as directors at a
meeting or propose  business to be brought  before a meeting,  or both,  only if
such  stockholder has given timely notice in proper written form of their intent
to make such  nomination  or  nominations  or to propose  such  business.  To be
timely, such stockholder's notice must be delivered to or mailed and received at
the principal  executive  offices of the corporation not less than  seventy-five
(75)  calendar days in advance of the first  anniversary  date of mailing of the
corporation's  proxy  statement  released to stockholders in connection with the
previous year's annual meeting of stockholders;  provided,  however, that in the
event that no annual  meeting was held in the  previous  year or the date of the
annual  meeting  has been  changed by more than  thirty  (30) days from the date
contemplated at the time of the previous year's proxy  statement,  notice by the
stockholder  to be timely  must be so  received  a  reasonable  time  before the
solicitation  is made.  To be in  proper  form,  a  stockholder's  notice to the
secretary  shall set  forth:  (i) the name and  address of the  stockholder  who
intends to make the nominations or propose the business and, as the case may be,
of the person or persons to be  nominated  or of the  business  to be  proposed;
(ii)a  representation that the stockholder is a holder of record of share of the
corporation  entitled to vote at such  meeting  and, if  applicable,  intends to
appear in person or by proxy at the  meeting to  nominate  the person or persons
specified in the notice;  (iii)if applicable,  a description of all arrangements
or understandings  between the stockholder and each nominee and any other person
or  persons(naming  such person or  persons)pursuant  to which the nomination or
nominations  are to be  made  by the  stockholder;  (iv)such  other  information
regarding  each  nominee  or each  matter of  business  to be  proposed  by such
stockholder  as would be  required to be  included  in a proxy  statement  filed
pursuant to the proxy rules of the  Securities  and Exchange  Commission had the
nominee  been  nominated,  or  intended  to be  nominated,  or the  matter  been
proposed,  or  intended  to be  proposed  by the board of  directors;  and (v)if
applicable,  the consent of each nominee to serve as director of the corporation
if so elected.  The  chairman of the meeting  shall  refuse to  acknowledge  the
nomination  of any person or the proposal of any business not made in compliance
with the foregoing procedure."

MANNER OF GIVING NOTICE;   AFFIDAVIT   OF  NOTICE 
-------------------------------------------------

     Written  notice  of any  meeting  of  stockholders  shall be  given  either
personally  or  by   first-class   mail  or  by  telegraphic  or  other  written
communication.  Notices not personally  delivered  shall be sent charges prepaid
and shall be addressed  to the  stockholder  at the address of that  stockholder
appearing on the books of the  corporation  or given by the  stockholder  to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the  time  when  delivered  personally  or  deposited  in the mail or sent by
telegram or other means of written communication. An affidavit of the mailing or
other means of giving any notice of any stockholders'  meeting,  executed by the
secretary,  assistant  secretary or any transfer agent of the corporation giving
the notice,  shall be prima facie evidence of the giving of such notice.

QUORUM
------ 

     The  holders  of a  majority  in  voting  power  of the  stock  issued  and
outstanding  and entitled to vote thereat,  present in person or  represented by
proxy,  shall  constitute a quorum at all meetings of the  stockholders  for the
transaction  of  business  except as  otherwise  provided  by  statute or by the
certificate  of  incorporation.  If,  however,  such  quorum is not  present  or
represented at any meeting of the stockholders,  then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented  by proxy,  shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.  When a quorum is present at any meeting,  the
vote of the holders of a majority of the stock having  voting  power  present in
person or  represented  by proxy shall decide any question  brought  before such
meeting, unless the question is one upon which, by express provision of the laws
of the State of Delaware or of the certificate of incorporation or these bylaws,
a different vote is required,  in which case such express provision shall govern
and control the decision of the question.  If a quorum be initially present, the
stockholders   may   continue   to   transact   business   until    adjournment,
notwithstanding  the  withdrawal  of enough  stockholders  to leave  less than a
quorum,  if any  action  taken is  approved  by a majority  of the  stockholders
initially    constituting    the    quorum.  

ADJOURNED    MEETING;     NOTICE
-------------------------- 

     When a meeting is adjourned to another time and place,  unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place  thereof  are  announced  at the meeting at which the  adjournment  is
taken.  At the adjourned  meeting the corporation may transact any business that
might have been  transacted at the original  meeting.  If the adjournment is for
more than thirty  (30) days,  or if after the  adjournment  a new record date is
fixed for the  adjourned  meeting,  a notice of the  adjourned  meeting shall be
given to each  stockholder  of record  entitled to vote at the  meeting.

VOTING
------

     The stockholders  entitled to vote at any meeting of stockholders  shall be
determined  in accordance  with the  provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of  Delaware  (relating  to voting  rights of  fiduciaries,  pledgors  and joint
owners,  and to voting  trusts and other  voting  agreements).  Except as may be
otherwise  provided  in the  articles of  incorporation  or these  bylaws,  each
stockholder  shall be entitled to one vote for each share of capital  stock held
by such  stockholder  and  stockholders  shall not be entitled to cumulate their
votes in the election of directors of with respect to any matter  submitted to a
vote of the stockholders.  Notwithstanding the foregoing, if the stockholders of
the  corporation  are  entitled,  pursuant  to  Sections  2115 and  301.5 of the
California  Corporations  Code,  to  cumulate  their  votes in the  election  of
directors, each such stockholder shall be entitled to cumulate votes (i.e., cast
for any  candidate a number of votes  greater than the number of votes that such
stockholder  normally is entitled  to cast) only if the  candidates'  names have
been properly  placed in nomination (in  accordance  with these bylaws) prior to
commencement of the voting, and the stockholder requesting cumulative voting has
given notice prior to commencement of the voting of the stockholder's  intention
to cumulate votes. If cumulative  voting is properly  requested,  each holder of
stock, or of any class or classes or of a series or series  thereof,  who elects
to  cumulate  votes  shall be  entitled to as many votes as equals the number of
votes that (absent this  provision as to  cumulative  voting) he or she would be
entitled to cast for the election of directors with respect to his or her shares
of stock  multiplied  by the number of directors to be elected by him, and he or
she may cast all of such  votes for a single  director  or may  distribute  them
among the number to be voted for,  or for any two or more of them,  as he or she
may see fit.

WAIVER OF NOTICE 
----------------

     Whenever  notice is required to be given under any provision of the General
Corporation  Law of Delaware or of the  certificate  of  incorporation  or these
bylaws,  a written  waiver  thereof,  signed by the person  entitled  to notice,
whether before or after the time stated therein,  shall be deemed  equivalent to
notice.  Attendance of a person at a meeting shall constitute a waiver of notice
of such  meeting,  except  when the  person  attends a meeting  for the  express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business  because the meeting is not lawfully  called or  convened.  Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders  need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.

STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
------------------------------------------------------- 

     Unless otherwise  provided in the certificate of incorporation,  any action
required  by this  chapter  to be taken at any  annual  or  special  meeting  of
stockholders of a corporation,  or any action that may be taken at any annual or
special meeting of such  stockholders,  may be taken without a meeting,  without
prior  notice,  and  without a vote if a consent in writing,  setting  forth the
action so taken,  is signed by the holders of outstanding  stock having not less
than the minimum  number of votes that would be  necessary  to authorize or take
such  action at a meeting  at which all shares  entitled  to vote  thereon  were
present and voted. Prompt notice of the taking of the corporate action without a
meeting  by less  than  unanimous  written  consent  shall  be  given  to  those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate  under any section
of the General  Corporation  Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state,  in lieu of any statement  required by such section  concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
------------------------------------------

     For  purposes of  determining  the  stockholders  entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date,  which  shall not precede  the date upon which the  resolution  fixing the
record  date is adopted by the board of  directors  and which  shall not be more
than  sixty  (60) days nor less than ten (10) days  before  the date of any such
meeting,  and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote,  notwithstanding  any  transfer of any shares on
the books of the  corporation  after the record date.  If the board of directors
does not so fix a record  date,  the record  date for  determining  stockholders
entitled  to notice of or to vote at a meeting of  stockholders  shall be at the
close of business on the business day next  preceding the day on which notice is
given,  or, if notice is waived,  at the close of business on the  business  day
next  preceding  the day on which  the  meeting  is  held.  A  determination  of
stockholders  of  record  entitled  to  notice  of or to  vote at a  meeting  of
stockholders  shall apply to any  adjournment of the meeting unless the board of
directors  fixes a new record date for the adjourned  meeting,  but the board of
directors  shall fix a new record date if the meeting is adjourned for more than
thirty (30) days from the date set for the original meeting. The record date for
any other purpose  shall be as provided in Section 8.1 of these bylaws.

PROXIES
------- 

     Every person entitled to vote for directors,  or on any other matter, shall
have the right to do so either in person or by one or more agents  authorized by
a  written  proxy  signed by the  person  and filed  with the  secretary  of the
corporation,  but no such proxy  shall be voted or acted  upon  after  three (3)
years from its date unless the proxy provides for a longer period. A proxy shall
be deemed signed if the  stockholder's  name is placed on the proxy  (whether by
manual  signature,  typewriting,  telegraphic  transmission,   telefacsimile  or
otherwise)  by  the  stockholder  or  the  stockholder's  attorney-in-fact.  The
revocability of a proxy that states on its face that it is irrevocable  shall be
governed by the provisions of Section 212(e) of the General  Corporation  Law of
Delaware. 

ORGANIZATION
------------  

     The  president,  or in the absence of the  president,  the  chairman of the
board, or, in the absence of the president and the chairman of the board, one of
the corporation's vice presidents, shall call the meeting of the stockholders to
order,  and  shall  act as  chairman  of the  meeting.  In  the  absence  of the
president,  the  chairman  of the  board,  and all of the vice  presidents,  the
stockholders  shall  appoint a chairman  for such  meeting.  The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of  business.  The  secretary  of the  corporation  shall act as
secretary  of all  meetings  of the  stockholders,  but  in the  absence  of the
secretary  at any meeting of the  stockholders,  the chairman of the meeting may
appoint any person to act as  secretary  of the  meeting.

LIST OF  STOCKHOLDERS ENTITLED  TO VOTE 
--------------------------------------- 

     The officer  who has charge of the stock  ledger of the  corporation  shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders  entitled to vote at the meeting,  arranged in
alphabetical  order,  and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the  examination  of any  stockholder,  for any purpose  germane to the meeting,
during ordinary  business hours, for a period of at least ten (10) days prior to
the meeting,  either at a place within the city where the meeting is to be held,
which  place  shall be  specified  in the notice of the  meeting,  or, if not so
specified,  at the place where the meeting is to be held. The list shall also be
produced  and kept at the time and place of the  meeting  during  the whole time
thereof, and may be inspected by any stockholder who is present.

DIRECTORS
---------
POWERS
------

         Subject to the  provisions of the General  Corporation  Law of Delaware
and any  limitations  in the  certificate  of  incorporation  and  these  bylaws
relating  to  action  required  to be  approved  by the  stockholders  or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all  corporate  powers shall be  exercised by or under the  direction of the
board of directors. 

NUMBER OF DIRECTORS
-------------------

     The board of directors  shall be not less than five (5) nor more than seven
(7)  members.  The exact number of  directors  shall be five (5) until  changed,
within the limits  specified  above by a bylaw  amending  this  Section 3.2 duly
adopted by the board of directors or by the stockholders.  The indefinite number
of directors may be changed, or a definite number may be fixed without provision
for an  indefinite  number,  by an amendment to this bylaw,  duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. No reduction of the authorized number of directors
shall have the effect of removing any director  before that  director's  term of
office    expires.

ELECTION    AND    TERM    OF    OFFICE    OF    DIRECTORS
----------------------------------------------------------

     Except as  provided  in Section  3.4 of these  bylaws,  directors  shall be
elected at each annual  meeting of  stockholders  to hold office  until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy,  shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified. 

RESIGNATION AND VACANCIES
-------------------------- 

     Any director may resign  effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become  effective.  If the
resignation  of a director is effective at a future time, the board of directors
may elect a successor  to take office when the  resignation  becomes  effective.
Vacancies in the board of directors may be filled by a majority of the remaining
directors, even if less than a quorum, or by a sole remaining director; however,
a vacancy  created by the removal of a director by the vote of the  stockholders
or by court  order may be filled only by the  affirmative  vote of a majority of
the shares  represented  and voting at a duly held  meeting at which a quorum is
present  (which shares voting  affirmatively  also  constitute a majority of the
required  quorum).  Each  director so elected  shall hold office  until the next
annual  meeting of the  stockholders  and until a successor has been elected and
qualified.  Unless  otherwise  provided in the certificate of  incorporation  or
these  bylaws:  Vacancies  and newly created  directorships  resulting  from any
increase  in  the  authorized   number  of  directors  elected  by  all  of  the
stockholders  having  the  right to vote as a single  class  may be  filled by a
majority of the directors then in office,  although less than a quorum,  or by a
sole remaining  director.  Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more  directors by  theprovisions
of the certificate of incorporation,  vacancies and newly created  directorships
of such class or classes or series may be filled by a majority of the  directors
elected by such class or classes or series thereof then in office,  or by a sole
remaining director so elected. If at any time, by reason of death or resignation
or other cause,  the  corporation  should have no directors in office,  then any
officer or any stockholder or an executor, administrator, trustee or guardian of
a stockholder,  or other fiduciary  entrusted with like  responsibility  for the
person or estate of a stockholder, may call a special meeting of stockholders in
accordance  with the  provisions of the  certificate of  incorporation  or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General  Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly  created  directorship,  the
directors then in office  constitute less than a majority of the whole board (as
constituted immediately prior to any such increase),  then the Court of Chancery
may, upon  application of any stockholder or  stockholders  holding at least ten
(10)  percent of the total number of the shares at the time  outstanding  having
the right to vote for such directors,  summarily order an election to be held to
fill any such  vacancies  or newly  created  directorships,  or to  replace  the
directors  chosen by the directors  then in office as aforesaid,  which election
shall be governed by the  provisions  of Section 211 of the General  Corporation
Law of Delaware as far as applicable.

PLACE OF MEETINGS;  MEETINGS BY TELEPHONE
-----------------------------------------

     Regular  meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been  designated  from time to time by
resolution of the board. In the absence of such a designation,  regular meetings
shall be held at the  principal  executive  office of the  corporation.  Special
meetings  of the board may be held at any place  within or outside  the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.

     Any meeting, regular or special,  may be held by  conference  telephone or
similar communication  equipment,  so long as all directors participating in the
meeting  can hear one  another;  and all such  directors  shall be  deemed to be
present in person at the meeting.

REGULAR MEETINGS
----------------

     Regular  meetings of the board of directors  may be held without  notice if
the times of such meetings are fixed by the board of  directors.  If any regular
meeting day shall fall on a legal  holiday,  then the meeting shall be held next
succeeding full business day.

SPECIAL  MEETINGS;  NOTICE 
--------------------------

     Special  meetings of the board of directors for any purpose or purposes may
be called at any time by the  chairman  of the board,  the  president,  any vice
president,  the secretary or any two directors.  Notice of the time and place of
special meetings shall be delivered  personally or by telephone to each director
or sent by  first-class  mail or telegram,  charges  prepaid,  addressed to each
director  at that  director's  address  as it is  shown  on the  records  of the
corporation. If the notice is mailed, it shall be deposited in the United States
mail at least four (4) days  before the time of the holding of the  meeting.  If
the notice is delivered  personally  or by  telephone  or telegram,  it shall be
delivered  personally  or by  telephone  or to the  telegraph  company  at least
forty-eight  (48) hours before the time of the holding of the meeting.  Any oral
notice  given  personally  or by  telephone  may be  communicated  either to the
director or to a person at the office of the director who the person  giving the
notice has reason to believe will promptly  communicate it to the director.  The
notice need not specify the purpose or the place of the meeting,  if the meeting
is to be held at the principal executive office of the corporation.

QUORUM
------

     A majority of the authorized  number of directors shall constitute a quorum
for the  transaction of business,  except to adjourn as provided in Section 3.10
of  these  bylaws.  Every  act or  decision  done or made by a  majority  of the
directors  present at a duly held meeting at which a quorum is present  shall be
regarded as the act of the board of directors,  subject to the provisions of the
certificate  of  incorporation  and other  applicable  law. A meeting at which a
quorum is initially  present may continue to transact  business  notwithstanding
the  withdrawal  of  directors,  if any action  taken is  approved by at least a
majority of the required quorum for that meeting.

WAIVER OF NOTICE
----------------

     Notice  of a  meeting  need not be given to any  director  (i) who  signs a
waiver of notice or a consent  to holding  the  meeting  or an  approval  of the
minutes  thereof,  whether before or after the meeting,  or (ii) who attends the
meeting without  protesting,  prior thereto or at its commencement,  the lack of
notice to such  directors.  All such waivers,  consents,  and approvals shall be
filed with the corporate  records or made part of the minutes of the meeting.  A
waiver of notice need not specify the purpose of any regular or special  meeting
of the board of directors.

ADJOURNMENT
-----------

     A majority of the directors present,  whether or not constituting a quorum,
may adjourn any meeting to another time and place.
 
NOTICE OF ADJOURNMENT
---------------------

     Notice of the time and place of holding an  adjourned  meeting  need not be
given unless the meeting is adjourned for more than  twenty-four(24)  hours.  If
the meeting is adjourned for more than  twenty-four  (24) hours,  then notice of
the time and place of the adjourned  meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws,  to
the directors who were not present at the time of the adjournment.

BOARD  ACTION BY WRITTEN CONSENT WITHOUT A MEETING
---------------------------------------------------

     Any action  required or permitted to be taken by the board of directors may
be taken without a meeting,  provided that all members of the board individually
or  collectively  consent  in  writing to that  action.  Such  action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.

FEES AND  COMPENSATION  OF DIRECTORS 
------------------------------------

     Directors and members of committees may receive such compensation,  if any,
for  their  services  and  such  reimbursement  of  expenses  as may be fixed or
determined by resolution of the board of directors.  This Section 3.13 shall not
be construed to preclude any director from serving the  corporation in any other
capacity as an officer,  agent, employee or otherwise and receiving compensation
for those services.

APPROVAL OF LOANS TO OFFICERS
-----------------------------

     The  corporation  may lend money to, or  guarantee  any  obligation  of, or
otherwise  assist any officer or other employee of the corporation or any of its
subsidiaries,  including  any  officer  or  employee  who is a  director  of the
corporation  or any of  its  subsidiaries,  whenever,  in  the  judgment  of the
directors,  such loan,  guaranty or  assistance  may  reasonably  be expected to
benefit the corporation.  The loan,  guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve,  including,  without limitation,  a pledge of shares of
stock of the corporation.  Nothing  contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.

COMMITTEES
----------
COMMITTEES OF DIRECTORS
-----------------------

     The board of  directors  may,  by  resolution  adopted by a majority of the
authorized  number of  directors,  designate  one (1) or more  committees,  each
consisting of two or more directors,  to serve at the pleasure of the board. The
board may  designate  one (1) or more  directors  as  alternate  members  of any
committee,  who may replace any absent  member at any meeting of the  committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the  authorized  number of  directors.  Any  committee,  to the
extent provided in the resolution of the board,  shall have and may exercise all
the powers and  authority  of the board,  but no such  committee  shall have the
power of authority to: amend the  certificate  of  incorporation  (except that a
committee  may,  to the  extent  authorized  in the  resolution  or  resolutions
providing  for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General  Corporation  Law of Delaware,  fix
the designations and any of the preferences or rights of such shares relating to
dividends,   redemption,   dissolution,   any  distribution  of  assets  of  the
corporation or the conversion  into, or the exchange of such shares for,  shares
of any other class or classes or any other series of the same or any other class
or  classes  of stock of the  corporation);  adopt an  agreement  of  merger  or
consolidation  under  Sections  251 or 252 of  the  General  Corporation  Law of
Delaware;  recommend to the  stockholders  the sale, lease or exchange of all or
substantially  all of the  corporation's  property and assets;  recommend to the
stockholders a dissolution of the  corporation or a revocation of a dissolution;
or amend the  bylaws  of the  corporation;  and,  unless  the  board  resolution
establishing  the  committee,  the bylaws or the  certificate  of  incorporation
expressly  so provide,  no such  committee  shall have the power or authority to
declare  a  dividend,  to  authorize  the  issuance  of  stock,  or to  adopt  a
certificate  of  ownership  and merger  pursuant  to Section  253 of the General
Corporation Law of Delaware.

MEETINGS AND ACTION OF COMMITTEES
---------------------------------

     Meetings and actions of committees shall be governed by, and held and taken
in accordance  with, the provisions of Article III of these bylaws,  Section 3.5
(place of  meetings),  Section 3.6  (regular  meetings),  Section  3.7  (special
meetings  and  notice),  Section 3.8  (quorum),  Section 3.9 (waiver of notice),
Section 3.10  (adjournment),  Section 3.11 (notice of adjournment),  and Section
3.12 (action without meeting),  with such changes in the context of those bylaws
as are  necessary to  substitute  the committee and its members for the board of
directors and its members; provided,  however, that the time of regular meetings
of committees  may be determined  either by resolution of the board of directors
or by resolution of the committee,  that special meetings of committees may also
be called by resolution  of the board of  directors,  and that notice of special
meetings of committees shall also be given to all alternate  members,  who shall
have the right to attend all meetings of the  committee.  The board of directors
may adopt rules for the  government of any committee not  inconsistent  with the
provisions of these bylaws.

COMMITTEE  MINUTES.
------------------ 

     Each  committee  shall keep regular  minutes of its meetings and report the
same to the board of directors when required.

OFFICERS
--------
OFFICERS
--------

     The officers of the corporation  shall be a president,  a secretary,  and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant  secretaries,  one or more assistant  treasurers,  and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.

ELECTION  OF OFFICERS
---------------------

     The officers of the  corporation,  except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment.

SUBORDINATE OFFICERS
--------------------

     The board of  directors  may  appoint,  or may  empower  the  president  to
appoint,  such other  officers as the business of the  corporation  may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are  provided in these  bylaws or as the board of  directors  may
from   time  to  time   determine.   

REMOVAL AND  RESIGNATION  OF  OFFICERS  
--------------------------------------

     Subject  to the  rights,  if any,  of an  officer  under  any  contract  of
employment,  any officer may be removed,  either with or without  cause,  by the
board of directors at any regular or special  meeting of the board or, except in
case of an officer  chosen by the board of  directors,  by any officer upon whom
such power of removal may be  conferred by the board of  directors.  Any officer
may  resign  at any  time by  giving  written  notice  to the  corporation.  Any
resignation  shall take  effect at the date of the  receipt of that notice or at
any later time specified in that notice; and, unless otherwise specified in that
notice,  the  acceptance  of the  resignation  shall not be necessary to make it
effective.  Any resignation is without  prejudice to the rights,  if any, of the
corporation under any contract to which the officer is a party.

VACANCIES  IN  OFFICES  
---------------------  

     A  vacancy  in  any  office   because  of  death,   resignation,   removal,
disqualification  or any other cause shall be filled in the manner prescribed in
these  bylaws for regular  appointments  to that  office.

CHAIRMAN OF THE BOARD
---------------------  

     The  chairman  of the  board,  if such an  officer be  elected,  shall,  if
present,  preside at meetings of the board of directors and exercise and perform
such other  powers and duties as may from time to time be assigned to him by the
board of  directors  or as may be  prescribed  by these  bylaws.  If there is no
president,  then the  chairman  of the board  shall also be the chief  executive
officer of the  corporation  and shall have the powers and duties  prescribed in
Section 5.7 of these bylaws.

 PRESIDENT 
 ---------

     Subject to such supervisory powers, if any, as may be given by the board of
directors  to the  chairman  of the  board,  if  there be such an  officer,  the
president  shall be the chief  executive  officer of the  corporation and shall,
subject to the  control of the board of  directors,  have  general  supervision,
direction,  and control of the business and the officers of the corporation.  He
shall  preside  at all  meetings  of the  stockholders  and,  in the  absence or
nonexistence  of a  chairman  of the  board,  at all  meetings  of the  board of
directors.  He shall have the general  powers and duties of  management  usually
vested in the office of  president of a  corporation,  and shall have such other
powers  and  duties  as may be  prescribed  by the board of  directors  or these
bylaws.

VICE PRESIDENTS
---------------

     In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors  or, if not ranked,  a
vice  president  designated  by the board of  directors,  shall  perform all the
duties of the  president and when so acting shall have all the powers of, and be
subject to all the restrictions  upon, the president.  The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them  respectively by the board of directors,  these bylaws,  the
president or the chairman of the board.

SECRETARY
---------

     The secretary  shall keep or cause to be kept,  at the principal  executive
office of the  corporation  or such other  place as the board of  directors  may
direct,  a book of minutes of all meetings and actions of directors,  committees
of directors and stockholders. The minutes shall show the time and place of each
meeting,  whether  regular or special (and, if special,  how  authorized and the
notice  given),  the names of those present at directors'  meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings  thereof.  The secretary shall keep, or cause to be kept, at
the  principal  executive  office  of the  corporation  or at the  office of the
corporation's  transfer  agent or registrar,  as determined by resolution of the
board of directors, a share register, or a duplicate share register, showing the
names of all stockholders and their addresses,  the number and classes of shares
held by each, the number and date of certificates  evidencing  such shares,  and
the  number  and date of  cancellation  of  every  certificate  surrendered  for
cancellation.  The  secretary  shall give,  or cause to be given,  notice of all
meetings of the stockholders and of the board of directors  required to be given
by law or by these bylaws. He shall keep the seal of the corporation,  if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.

CHIEF FINANCIAL OFFICER
-----------------------

     The chief  financial  officer shall keep and maintain,  or cause to be kept
and  maintained,  adequate  and  correct  books and  records of  accounts of the
properties and business  transactions of the corporation,  including accounts of
its  assets,  liabilities,  receipts,  disbursements,  gains,  losses,  capital,
retained  earnings,  and shares.  The books of account  shall at all  reasonable
times be open to inspection by any director.  The chief financial  officer shall
deposit  all  money  and other  valuables  in the name and to the  credit of the
corporation  with  such  depositaries  as may be  designated  by  the  board  of
directors.  He shall disburse the funds of the  corporation as may be ordered by
the board of directors,  shall render to the president and  directors,  whenever
they  request  it, an  account  of all of his  transactions  as chief  financial
officer and of the financial  condition of the corporation,  and shall have such
other powers and perform such other duties as may be  prescribed by the board of
directors or these bylaws.

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
-------------------------------------------------------------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------

     The corporation shall, to the maximum extent and in the manner permitted by
the General  Corporation Law of Delaware as the same now exists or may hereafter
be amended,  indemnify any person against expenses (including  attorneys' fees),
judgments,  fines,  and  amounts  paid in  settlement  actually  and  reasonably
incurred in connection with any threatened,  pending or completed action,  suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such  person is or was a director  or officer
of the corporation.  For purposes of this Section 6.1, a "director" or "officer"
of the corporation shall mean any person (i) who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another  corporation,  partnership,  joint  venture,
trust  or  other  enterprise,  or  (iii)  who was a  director  or  officer  of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation. The corporation shall
be required to  indemnify  a director or officer in  connection  with an action,
suit, or proceeding (or part thereof) initiated by such director or officer only
if the  initiation of such action,  suit, or proceeding (or part thereof) by the
director or officer was authorized by the Board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees) incurred by a
director or officer of the corporation entitled to indemnification  hereunder in
defending  any action,  suit or  proceeding  referred to in this  Section 6.1 in
advance of its final disposition;  provided,  however,  that payment of expenses
incurred  by a director  or officer of the  corporation  in advance of the final
disposition of such action,  suit or proceeding  shall be made only upon receipt
of an undertaking by the director or officer to repay all amounts advanced if it
should  ultimately be determined that the director of officer is not entitled to
be indemnified under this Section 6.1 or otherwise.  The rights conferred on any
person by this  Article  shall not be  exclusive  of any other rights which such
person  may have or  hereafter  acquire  under  any  statute,  provision  of the
corporation's Certificate of Incorporation, these bylaws, agreement, vote of the
stockholders or disinterested directors or otherwise.

         Any repeal or modification of the foregoing  provisions of this Article
shall not adversely  affect any right or  protection  hereunder of any person in
respect of any act or  omission  occurring  prior to the time of such  repeal or
modification.

INDEMNIFICATION OF OTHERS
-------------------------

     The  corporation  shall have the power,  to the  maximum  extent and in the
manner  permitted  by the  General  Corporation  Law of Delaware as the same now
exists or may  hereafter  be  amended,  to  indemnify  any  person  (other  than
directors and officers) against expenses (including attorneys' fees), judgments,
fines,  and amounts  paid in  settlement  actually  and  reasonably  incurred in
connection  with  any  threatened,   pending  or  completed  action,   suit,  or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such  person is or was an  employee or agent of
the  corporation.  For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the  corporation as an employee or agent of another  corporation,
partnership,  joint  venture,  trust or other  enterprise,  or (iii)  who was an
employee or agent of a corporation  which was a predecessor  corporation  of the
corporation  or of  another  enterprise  at  the  request  of  such  predecessor
corporation. 

INSURANCE
---------

     The corporation may purchase and maintain insurance on behalf of any person
who is or was a director,  officer, employee or agent of the corporation,  or is
or was  serving  at the  request  of the  corporation  as a  director,  officer,
employee or agent of another corporation,  partnership,  joint venture, trust or
other enterprise  against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether  or not the  corporation  would have the power to  indemnify  him or her
against such liability  under the provisions of the General  Corporation  Law of
Delaware.

RECORDS AND REPORTS
-------------------
MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------

     The corporation shall,  either at its principal executive office or at such
place or places as designated  by the board of  directors,  keep a record of its
stockholders  listing  their  names and  addresses  and the  number and class of
shares  held by each  stockholder,  a copy of these  bylaws as  amended to date,
accounting  books  and  other  records  of  its  business  and  properties.  Any
stockholder  of record,  in person or by attorney or other  agent,  shall,  upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for  business to inspect  for any proper  purpose the  corporation's
stock ledger, a list of its stockholders, and its other books and records and to
make  copies  or  extracts  therefrom.  A proper  purpose  shall  mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where  an  attorney  or  other  agent  is the  person  who  seeks  the  right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other  writing  that  authorizes  the  attorney or other agent to so act on
behalf of the  stockholder.  The  demand  under oath  shall be  directed  to the
corporation  at its registered  office in Delaware or at its principal  place of
business. 

INSPECTION BY DIRECTORS
-----------------------

     Any  director  shall have the right to examine  (and to make copies of) the
corporation's  stock ledger,  a list of its stockholders and its other books and
records for a purpose  reasonably  related to his or her position as a director.

ANNUAL  STATEMENT TO  STOCKHOLDERS
----------------------------------

     The board of directors  shall  present at each annual  meeting,  and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear  statement of the business  and  condition of the  corporation.

REPRESENTATION  OF SHARES OF OTHER  CORPORATIONS
------------------------------------------------

     The chairman of the board, if any, the president,  any vice president,  the
chief  financial  officer,  the  secretary  or any  assistant  secretary of this
corporation,  or any other  person  authorized  by the board of directors or the
president or a vice president,  is authorized to vote, represent and exercise on
behalf of this  corporation  all  rights  incident  to any and all shares of the
stock of any other  corporation  or  corporations  standing  in the name of this
corporation. The authority herein granted may be exercised either by such person
directly  or by any  other  person  authorized  to do so by  proxy  or  power of
attorney duly executed by such person having the  authority. 

CERTIFICATION  AND INSPECTION  OF BYLAWS
----------------------------------------

     The original or a copy of these bylaws,  as amended or otherwise altered to
date, certified by the secretary,  shall be kept at the corporation's  principal
executive  office and shall be open to  inspection  by the  stockholders  of the
corporation, at all reasonable times during office hours.

GENERAL MATTERS 
---------------
RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------

     For purposes of determining the stockholders entitled to receive payment of
any  dividend  or  other   distribution  or  allotment  of  any  rights  or  the
stockholders  entitled  to  exercise  any rights in respect of any other  lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors  may fix, in advance,  a record date,  which shall not be
more  than  sixty  (60)  days  before  any  such  action.  In  that  case,  only
stockholders  of  record  at the  close of  business  on the  date so fixed  are
entitled to receive the  dividend,  distribution  or allotment of rights,  or to
exercise such rights,  as the case may be,  notwithstanding  any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the General  Corporation Law of Delaware.  If the board of
directors  does not so fix a record date,  then the record date for  determining
stockholders  for any such purpose  shall be at the close of business on the day
on which the board adopts the applicable resolution.

CHECKS; DRAFTS;  EVIDENCES OF  INDEBTEDNESS
-------------------------------------------

     From time to time,  the board of directors  shall  determine by  resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money,  notes or other evidences of  indebtedness  that are issued in
the name of or payable to the  corporation,  and only the persons so  authorized
shall sign or endorse those  instruments.

CORPORATE  CONTRACTS AND INSTRUMENTS: HOW  EXECUTED
---------------------------------------------------
     The board of directors, except as otherwise provided in these
bylaws, may authorize any officer or officers, or agent or agents, to enter into
any  contract  or  execute  any  instrument  in the name of and on behalf of the
corporation;  such  authority may be general or confined to specific  instances.
Unless so  authorized or ratified by the board of directors or within the agency
power of an  officer,  no  officer,  agent or  employee  shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit  or to  render  it  liable  for  any  purpose  or for any  amount.

STOCK CERTIFICATES;  TRANSFER;  PARTLY PAID SHARES 
--------------------------------------------------

     The  shares  of the  corporation  shall  be  represented  by  certificates,
provided  that  the  board  of  directors  of the  corporation  may  provide  by
resolution  or  resolutions  that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation.  Notwithstanding  the adoption of such a resolution by the board of
directors,  every holder of stock represented by certificates and, upon request,
every holder of uncertificated  shares,  shall be entitled to have a certificate
signed by, or in the name of the corporation  by, the chairman or  vice-chairman
of the  board of  directors,  or the  president  or  vice-president,  and by the
treasurer or an assistant treasurer,  or the secretary or an assistant secretary
of such corporation  representing the number of shares registered in certificate
form. Any or all of the  signatures on the  certificate  may be a facsimile.  In
case any officer,  transfer agent or registrar who has signed or whose facsimile
signature  has been placed  upon a  certificate  has ceased to be such  officer,
transfer agent or registrar before such certificate is issued,  it may be issued
by the  corporation  with the same  effect  as if he or she were  such  officer,
transfer agent or registrar at the date of issue.  Certificates for shares shall
be of such form and device as the board of  directors  may  designate  and shall
state the name of the  record  holder of the  shares  represented  thereby;  its
number; date of issuance; the number of shares for which it is issued; a summary
statement or reference to the powers, designations, preferences or other special
rights of such stock and the qualifications, limitations or restrictions of such
preferences  and/or rights,  if any; a statement or summary of liens,  if any; a
conspicuous notice of restrictions upon transfer or registration of transfer, if
any; a statement as to any applicable  voting trust agreement;  if the shares be
assessable,  or, if  assessments  are  collectible by personal  action,  a plain
statement of such facts.  Upon  surrender to the secretary or transfer  agent of
the  corporation  of a certificate  for shares duly endorsed or  accompanied  by
proper evidence of succession,  assignment or authority to transfer, it shall be
the duty of the  corporation to issue a new  certificate to the person  entitled
thereto,  cancel the old certificate and record the transaction  upon its books.
The corporation may issue the whole or any part of its shares as partly paid and
subject to call for the remainder of the consideration to be paid therefor. Upon
the face or back of each stock  certificate  issued to represent any such partly
paid  shares,  or upon the books and records of the  corporation  in the case of
uncertificated  partly paid shares,  the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated.  Upon the declaration
of any dividend on fully paid shares,  the corporation  shall declare a dividend
upon  partly  paid  shares  of the same  class,  but only  upon the basis of the
percentage of the consideration  actually paid thereon. 

SPECIAL  DESIGNATION ON CERTIFICATES
------------------------------------

     If the  corporation  is authorized to issue more than one class of stock or
more than one  series of any  class,  then the  powers,  the  designations,  the
preferences and the relative, participating, optional or other special rights of
each class of stock or series  thereof and the  qualifications,  limitations  or
restrictions  of such  preferences  and/or  rights shall be set forth in full or
summarized on the face or back of the  certificate  that the  corporation  shall
issue to  represent  such  class or series of stock;  provided,  however,  that,
except as otherwise  provided in Section 202 of the General  Corporation  Law of
Delaware,  in lieu of the foregoing  requirements  there may be set forth on the
face or back of the certificate  that the  corporation  shall issue to represent
such class or series of stock a  statement  that the  corporation  will  furnish
without charge to each stockholder who so requests the powers, the designations,
the  preferences  and the  relative,  participating,  optional or other  special
rights  of each  class  of  stock  or  series  thereof  and the  qualifications,
limitations or restrictions of such preferences and/or rights.

LOST CERTIFICATES
-----------------

     Except as provided in this  Section  8.6,  no new  certificates  for shares
shall be issued to replace a previously issued  certificate unless the latter is
surrendered  to the  corporation  and  cancelled at the same time.  The board of
directors  may,  in case any  share  certificate  or  certificate  for any other
security is lost,  stolen or destroyed,  authorize  the issuance of  replacement
certificates  on such terms and  conditions as the board may require;  the board
may  require  indemnification  of the  corporation  secured  by a bond or  other
adequate security  sufficient to protect the corporation  against any claim that
may be made against it,  including any expense or  liability,  on account of the
alleged loss,  theft or  destruction  of the  certificate or the issuance of the
replacement  certificate. 

TRANSFER AGENTS AND REGISTRARS
------------------------------

     The board of directors may appoint one or more transfer  agents or transfer
clerks, and one or more registrars,  each of which shall be an incorporated bank
or trust company -- either  domestic or foreign,  who shall be appointed at such
times and places as the  requirements of the corporation may necessitate and the
board of directors may designate.

CONSTRUCTION;  DEFINITIONS 
--------------------------

     Unless the context requires  otherwise,  the general  provisions,  rules of
construction,  and definitions in the General  Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision,  the singular number includes the plural,  the plural number includes
the singular,  and the term "person"  includes both a corporation  and a natural
person.

AMENDMENTS
----------

     The original or other bylaws of the corporation may be adopted,  amended or
repealed by the  stockholders  entitled to vote or by the board of  directors of
the  corporation.  The fact  that  such  power  has been so  conferred  upon the
directors shall not divest the  stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.

     Whenever an  amendment  or new bylaw is adopted,  it shall be copied in the
book of bylaws with the original bylaws, in the appropriate  place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
<PAGE>
                                                                    EXHIBIT 13.1
               PORTIONS OF THE 1998 ANNUAL REPORT TO STOCKHOLDERS

                            QUARTERLY FINANCIAL DATA

     The following is a summary of the Company's unaudited quarterly results for
the four quarters  ended  December 31, 1998 and 1997. In  management's  opinion,
these  results  have  been  prepared  on a basis  consistent  with  the  audited
financial  statements  contained  elsewhere herein, and include all adjustments,
consisting  only  of  normal  recurring   adjustments,   necessary  for  a  fair
presentation of the information for the periods  presented.  The information set
forth below is not  necessarily  indicative of the results of future  operations
and  should  be read in  conjunction  with the  financial  statements  and notes
thereto beginning on page 27 of this report.  The shares of the Company's Common
Stock are listed on the NASDAQ National Market System under the symbol MDCD.

                                     1998 Quarter Ended
                        March 31,          June 30,       Sept. 30,     Dec. 31,
             ( thousands, except per share data)
Total revenues..........$3,323            $4,237           $4,816        $5,165
Loss from operations ...(2,628)           (5,238)          (3,376)       (3,277)
Net loss................(2,226)           (4,864)          (3,054)       (3,017)
Net loss 
per share (basic)...... $(0.25)           $(0.55)          $(0.35)       $(0.36)
Net loss 
per share (diluted).... $(0.25)           $(0.55)          $(0.35)       $(0.36)
Closing stock price
            High.......  $4.44             $6.31            $5.00         $2.50
            Low........  $3.31             $3.88            $1.50         $1.00

                                     1997 Quarter Ended
                       March 31,          June 30,        Sept. 30,     Dec. 31,
             ( in thousands, except per share data)
Total revenues.........$3,009            $5,547            $6,151        $5,261
Loss from operations...(3,816)             (928)           (1,859)       (3,169)
Net loss ..............(3,299)             (372)           (1,404)       (2,703)
Net loss per share
(basic/diluted)........$(0.34)           $(0.04)           $(0.16)       $(0.31)
Closing stock price
            High....... $7.75             $4.69             $5.50         $5.50
            Low........ $3.88             $3.38             $3.88         $3.50
<PAGE>
                           FIVE YEAR FINANCIAL SUMMARY

     The  following  is a summary of the  Company's  results  for the five years
ended December 31, 1998. In management's opinion,  these have been prepared on a
basis  consistent  with the audited  financial  statements  contained  elsewhere
herein,  and  include  all  adjustments,  consisting  only of  normal  recurring
adjustments,  necessary  for a fair  presentation  of the  information  for  the
periods presented. The information set forth below is not necessarily indicative
of the results of future  operations and should be read in conjunction  with the
financial statements and notes thereto beginning on page 27 of this report.

                             Years ended December 31,
                            1998        1997        1996       1995       1994
                            ----        ----        ----       ----       ----
                   (in thousands, except per share data)
Revenues:
 Product sales.............$17,541     $19,968     $26,116    $23,426   $ 1,957
 Other revenue.............      -           -           -      1,869     3,954
                          --------    --------     --------    ------    ------

Total revenues............. 17,541      19,968      26,116     25,295     5,911
Cost of product sales and 
amortization of purchased
technology................. 10,090       9,570      10,162     12,605     1,070
Cost of product sales and
services to and royalties
from IBM...................      -           -           -          -     4,365
Income (loss) 
from operations (1)........(14,519)     (9,772)      2,909      1,808   (28,534)
Net income (loss) (1)......(13,161)     (7,778)      4,274      2,500   (27,507)
Net income (loss) 
per share (basic).......... $(1.51)     $(0.86)      $0.47      $0.32    $(3.69)
Net income (loss)
per share (diluted)........ $(1.51)     $(0.86)      $0.44      $0.30    $(3.69)

                                    December 31,
                             1998        1997        1996       1995       1994
                             ----        ----        ----       ----       ----
Cash and cash equivalents..$11,049     $15,167     $24,809    $11,752    $8,692
Marketable securities......  7,794      16,722      14,340      5,900     5,077
Restricted cash............      -           -           -          -    21,201
Working capital............ 15,647      29,355      39,760     15,788    10,591
Total assets............... 24,888      37,491      45,245     22,823    39,793
Stockholders' equity....... 16,241      30,085      41,230     16,373    11,445

1)Includes a charge for in-process R&D of $21,245 in 1994.
<PAGE>
           Management's Discussion and Analysis of Financial Condition
                           and Results of Operations.

     The words "anticipate,"  "believe," "estimate," "expect," "intend," "will,"
and  similar  expressions,  as  they  relate  to the  Company  or the  Company's
management,  including  such items  discussed in  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations" set forth below, are
intended to identify  forward-looking  statements.  Such statements  reflect the
current  views of the Company with  respect to future  events and are subject to
certain risks, uncertainties and assumptions.  Should one or more of these risks
or uncertainties materialize,  or should underlying assumptions prove incorrect,
actual results may vary significantly from those described..  In accordance with
provisions of Section 27A of the Securities Act of 1933, as amended, and Section
21G of the Securities  Exchange Act of 1934, as amended, we are making investors
aware  that  such  forward-looking  statements,  because  they  relate to future
events,  are by their very nature subject to many important  factors which could
cause  actual  results  to  differ   materially  from  those  contained  in  the
forward-looking  statements.  Factors that might cause such differences include,
but are not limited to, the risk factors beginning on page 17.

General

     Prior  to  1995,  the  Company  (then  known as  Parallan  Computer,  Inc.)
developed and supported high performance network superservers.  During 1994, the
Company  exited  its prior  business  and  product  line,  which  had  generated
substantial losses. The Company  fundamentally  changed its business in December
1994 with the purchase of Meridian Data, Inc. The total purchase price was $23.1
million.  The  acquisition  was  accounted  for  using  the  purchase  method of
accounting  and included  $21.2  million  allocated to  in-process  research and
development  which was  charged  to  expense  on  December  1,  1994.  Since the
acquisition,  the Company has been  developing  and  marketing  network-attached
storage  (`NAS")  devices  utilizing both optical disk technology for the PC LAN
environment,  as well as CD-ROM enterprise servers. In response to a decrease in
the  market  for  its  CD-ROM  enterprise  servers,  Meridian  embarked  on  the
development of its first non-CD-ROM NAS device,  the Snap!  Server, in late 1996
and  shipped  in May of  1998.  The  Company  believes  that it will be  several
quarters before it achieves significant revenues from sales of the Snap! Server.
Meridian's  expenses related to product development and marketing related to the
Snap!  Server  resulted in the Company  posting a substantial net operating loss
for 1998 and  anticipating  a loss for  1999.  See "Risk  Factors - New  Product
Development;  - Rapid  Technological  Change;  - Potential for Product  Defects;
Competition; - Emerging markets; - Product concentration." The Snap! Server is a
protocol-independent,  NAS  device  targeted  for  the PC LAN  environment.  The
Company  believes  that the  Snap!  Server  provides  superior  ease-of-use  and
installation of any competitive  product or competing  method for adding storage
to PC LAN networks.  The Company's Snap! Server retails for under $1,000.  There
can be no assurance that the Company's current or potential competitors will not
develop  products  comparable  or  superior  to the Snap!  Server or adapt  more
quickly  than the Company to new or  emerging  technologies,  evolving  industry
trends or changing customer  requirements.  The Snap! Server requires  different
marketing,  sales and  distribution  strategies  than  those  for the  Company's
current  CD-ROM  products.   There  can  be  no  assurance  that  the  Company's
distributors and VARs will be able to effectively  market this new product,  nor
that  the  Company  will be  successful  in  developing  alternate  channels  of
distribution.  Nor can there be any  assurance  that the Snap!  Server will be a
commercial  success.  A  failure  of the  Company's  distributors  and  VARs  to
successfully  market the Company's  new products,  or the failure to develop new
channels of  distribution,  or the failure to obtain market  acceptance  for the
Snap!  Server,  would have a material adverse effect on the Company's  business,
financial condition and results of operations.

     Because the Company  generally  ships its  products  within a short  period
after  receipt  of an order,  the  Company  typically  does not have a  material
backlog of unfilled orders,  and total revenues in any quarter are substantially
dependent on orders booked in that quarter.  The Company's  quarterly  operating
results may also vary  significantly  depending on other factors,  including the
introduction of new products by the Company's competitors;  market acceptance of
new products;  seasonality;  mix of software and systems sales;  adoption of new
technologies  and  standards;  price and other forms of  competition;  the cost,
quality  and  availability  of  third  party  components  used in the  Company's
systems; changes in the Company's distribution  arrangements;  and the inability
of the Company to accurately monitor end user demand for its products due to the
sale of  products  through  distributors  and  VARs.  In 1998,  1997  and  1996,
identifiable sales to federal governmental  agencies accounted for approximately
8%, 14% and 11%,  respectively,  of the Company's product sales, and the Company
anticipates  that  such  sales  will  continue  to  account  for  a  significant
percentage of the Company's  revenues for the foreseeable  future.  In the event
that  there is any  reduction  or  deferral  in  spending  by such  governmental
agencies,   the  Company's   quarterly  results  would  be  adversely  affected.
Similarly,  if such  government  agencies  reduced  their  purchases of Meridian
products in favor of those of its competitors,  the Company's  quarterly results
would be  adversely  affected.  The  Company's  operating  results  will also be
affected by the economic condition of the personal computer industry,  which has
from time to time experienced cyclical,  depressed business conditions, often in
connection with or in anticipation of a decline in general economic conditions.

Results of Operations

Revenues

     Product sales.  Meridian's product sales decreased to $17.5 million in 1998
from $20.0 million in 1997. This decrease was due to a continuing  market driven
shift from enterprise-wide CD-ROM/DVD servers towards workgroup attached storage
products,  such as CD Net  Universal,  which have  increased  in volume but have
lower average price points.  This decrease was partially  offset by sales of the
Snap! Server.  Included in product sales for 1998 was approximately $2.7 million
in sales related to the Company's new Snap!  Server.  The markets for Meridian's
products are  extremely  competitive,  and the Company  expects that  Meridian's
revenue  could be  adversely  impacted  as new  competitors  enter  the  market,
existing  competition  continues  to  consolidate,  change  and  expand  product
offerings and react to prior market moves made by the Company,  or Snap!  Server
sales fail to continue their growth. Based on expected increases in sales of the
Company's  workgroup  products,  Snap!  Server  and CD Net  Universal,  Meridian
believes that reported revenues in 1999 will be greater than those for 1998. The
increase in Snap! Server sales assumes increasing market acceptance of the Snap!
Server.  If that acceptance were not to develop,  or to develop more slowly than
the Company anticipates, Meridian's results of operations and liquidity would be
adversely affected.

     Meridian's  product  sales  decreased  to $20.0  million in 1997 from $26.1
million in 1996. Meridian believes that the market for CD-ROM networking systems
fundamentally changed from one in which customers purchase integrated,  high-end
CD-ROM  enterprise  servers,  to one in which  low-cost,  plug  and play  CD-ROM
servers, such as Meridian's CD Net Universal, were in demand. Due to this shift,
Meridian's sales mix in 1997 shifted from its high-end enterprise systems to its
entry-level systems, such as the CD Net Universal server. Sales from its low-end
systems did not grow to the extent required to completely  offset lower sales of
high-end  systems.  As  such,  revenues  from  the  sale  of  Meridian's  CD-ROM
networking products were less in 1998 than in 1997.

     Previously  released  software  products  favorably  impacted the Company's
sales in 1996. Included in the Company's 1996 sales were approximately  $330,000
from the sale of two software site licenses.  Beginning in the second quarter of
1996, and continuing  throughout the remainder of the year,  Meridian's  revenue
mix shifted towards higher  software  content,  and lower sales of systems.  The
Company experienced increased price competition from its largest competitors for
its high-end system sales. As this trend  continued,  Meridian's  revenue growth
slowed, while gross margin increased.

     Approximately  90% of the Company's product sales are derived from two-tier
distribution  sales to distributors  and VARs. Two  distributors,  Ingram Micro,
Inc. and  TechData  Corporation,  accounted  for 41% and 23%,  respectively,  of
Meridian's 1998 product sales.  The loss of either of these  distributors  would
have a material  adverse effect on the Company's  results of  operations.  For a
discussion of certain other risks that may affect the Company's  future  product
sales, see "Risk Factors - Operating Losses; Fluctuations in Quarterly Operating
Results," " - Rapid Technological Change; - Potential for Product Defects" and "
- Emerging Markets; Product Concentration."

Gross margin

     Gross  margin on product  sales  decreased to 42% in 1998 from 52% in 1997.
This was a result of the Company's  transition to workgroup  products like Snap!
Server and CD Net Universal from enterprise products.  Meridian anticipates that
gross  margins  will  decrease in 1999 due to the  continued  shift to workgroup
attached storage products, from the Company's enterprise storage products. Gross
margin  decreased  to 52% in 1997  from 61% in 1996 due to the  price  reduction
announced in January 1997,  lower software  sales,  and a shift in the Company's
system mix to low-end systems.

     For a  discussion  of  certain  risks  affecting  cost of sales  and  gross
margins,  see "Risk  Factors -  Dependence  on Third  Party  Suppliers"  and " -
Expansion of International Operations; Foreign Currency Fluctuations."

Operating expenses

Research and development. 

     Research  and  development  expense  decreased in 1998 to $5.9 million from
$6.3 million in 1997, a decrease of  approximately  $400,000.  This decrease was
due to the  completion  of the  development  of the Snap!  Server.  Research and
development  expense in 1997 was $6.3 million, an increase of approximately $3.0
million over 1996.  This increase was due to costs  incurred in  developing  the
Snap!  Server.  The Company does not  anticipate  that research and  development
expenses will continue to increase in 1999.  Research and development expense in
1996 was $3.3 million,  an increase of $0.8 million over 1995. This increase was
due to higher payroll and overhead expenses,  and the amortization of an advance
made to a development  stage company  ("DSC").  In June of 1997,  DSC repaid the
advance. This was recorded as a credit against research and development expense.
Also included in the Company's  research and development  expense for 1997 was a
$1.0 million charge for the acquisition of technology  used in the  Snap!Server.
This charge was offset by the receipt of the proceeds from the advance.

     Research and development  expense consists of salaries and related expenses
incurred  in the  development  of the  Company's  products,  as well as expenses
related to consultants  and prototype  material  purchased in the development of
the  Company's  new  products.  For a  discussion  of certain  risks  related to
research  and  development,  see  "Risk  Factors - Rapid  Technological  Change;
Potential for Product Defects."

Sales and  marketing.  

     Sales and  marketing  expense  increased  in 1998 by $2.5  million to $13.5
million due to product  introduction  and  marketing  costs related to the Snap!
Server.  Sales and marketing  expense consists  primarily of payroll and related
expenses,  including  commissions,  and advertising related expenses.  Sales and
marketing  expense in 1997 was $11.0  million,  an increase of $3.5 million over
1996.  This  increase  was  primarily  due to  higher  advertising  and  related
expenditures,  increased  payroll,  and expenses related to marketing studies of
the NAS market.  The Company does not expect that sales and  marketing  expenses
will increase in 1999. The new products, such as Snap! Server, require different
marketing,  sales and  distribution  strategies  than  those  for the  Company's
current  enterprise  products.  There  can be no  assurance  that the  Company's
distributors  and  VARs  will be  able to  effectively  market  the new  network
attached storage products or continue to market the Company's existing products.
Nor can there be any assurance  that the Company will  successfully  develop any
such new channels for such products. A failure of the Company's distributors and
VARs to successfully  market the Company's  products,  or the failure to develop
alternate channels of distribution for the Snap!  Server,  would have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     Sales and  marketing  expense  was $7.5  million in 1996,  an  increase  of
approximately  $1.3 million,  over 1995. This increase was due to higher payroll
and related expenses,  and increased advertising and promotional  expenses.  The
increase in advertising  and promotional  expenses was primarily  related to the
heightened competitive environment which began in early 1996.

     For a discussion  of certain  risks  relating to sales and  marketing,  see
"Risk  Factors  -  Dependence  on Third  Party  Distributors"  and " -  Emerging
Markets; Product Concentration"; "- New Product Development."

General  and  administrative.  

     General  and  administrative  expense  consists  primarily  of payroll  and
related expenses and occupancy expenses.  General and administrative expense was
$2.6  million  in 1998,  $2.8  million  in 1997 and $2.2  million  in 1996.  The
decrease in 1998 was due to reduced legal costs. The Company does not anticipate
that general and  administrative  expenses will  decrease in 1999.  The increase
between 1997 and 1996 was  primarily  due to higher  payroll  expenses and costs
incurred with the Company's reincorporation in Delaware.

Other income and expense

Interest income and expense. 

     Interest income decreased in 1998 to $1.4 million from $2.0 million in 1997
due primarily to lower invested cash balances.  The increase of interest  income
in 1997  from  1996 was due to  twelve  months  of  interest  earnings  on funds
provided by a public  offering of the  Company's  Common Stock in April of 1996.
Interest  income  increased  to $1.6  million  in 1996 due to a  partial  year's
earnings on the stock  proceeds.  Interest income will decrease in the future as
the Company  expends  funds for the  marketing  of its network  attached  server
product, Snap! Server.

Income taxes

     At December 31, 1998, the Company has a net operating loss carryforward for
U.S.  federal and state  income tax  purposes of  approximately  $32.3 and $11.7
million,  respectively,  which expire  between 1999 and 2018.  The net operating
loss  carryforwards   include  approximately  $8.9  million  of  tax  deductions
resulting from the exercise of employee  stock options.  The tax benefit of this
deduction,  when  realized,  will be accounted for as a credit to  stockholders'
equity rather than as a reduction in the income tax  provision.  The Company has
federal  research and development tax credit  carryovers of  approximately  $2.4
million at December 31, 1998 that expire in 2003 through 2012. The Company's net
operating  losses,  tax  deductions and credit  carryforwards  may be limited by
changes in ownership  as defined  under the  Internal  Revenue Code of 1986,  as
amended.  Based on the Company's  evaluation of the weight of available evidence
it can not  conclude  that it is more likely than not that  deferred  income tax
assets will be realized and  therefore  the Company has provided a full deferred
income tax valuation allowance at December 31, 1998.

Capital resources and liquidity

     Meridian's  source  of  liquidity  in 1998  was from  cash and  investments
available  at  December  31,  1997.  The  Company's  negative  cash  flows  from
operations in 1998 and 1997 were  principally  due to the net operating  losses,
which included expenses related to the development and introduction of the Snap!
Server and an increase in inventory.  Meridian's  capital  expenditures for 1998
were  approximately  $0.4 million.  The Company's capital  expenditures for 1997
were approximately $0.5 million.  Meridian's source of cash flow from operations
for 1996 was  principally  net  income  from  operations  adjusted  for  noncash
depreciation  and  amortization  charges and the  amortization of an advance for
research  and  development  arrangements.  These were  offset by an  increase in
accounts  receivable  due to the  timing of sales,  and a decrease  in  accounts
payable and accrued payroll related expenses. The Company's capital expenditures
for 1996 were approximately $0.5 million.

     Meridian believes that success in its industry requires substantial capital
in order to maintain the flexibility to take advantage of  opportunities as they
may arise. The Company may, from time to time, as market and business conditions
warrant,   invest  in  or  acquire   complementary   businesses,   products   or
technologies.  The  costs of such  investments  could  be  charged  to  expense.
Internally  generated  cash,  marketable  securities,   debt,  or  the  sale  of
additional  equity  may  fund  such  investment  or  acquisitions.  The  sale of
additional  equity  would  result in  dilution  in the equity  ownership  of the
Company's  stockholders,  while  the  assumption  of  debt  would  increase  the
Company's leverage, and consequently, its financial risk.

Year 2000 Issue

     The Year 2000 (Y2K) Issue refers to computer  programs which use two digits
rather  than four to define a given year and which  therefore  might read a date
using "00" as the year 1900 rather than the year 2000.  The critical areas being
addressed by Meridian are its internal  computer  systems,  products made by the
Company and relationships  with external  organizations.  Meridian is addressing
both information  technology ("IT") and non-IT systems,  which typically include
embedded technology, such as microcontrollers.  There are no known non-IT issues
that will adversely  impact the Company's  information  systems or manufacturing
capabilities.

     Meridian considers a product to be "Y2K ready" if the product's performance
and  functionality  are  unaffected  by processing of dates prior to, during and
after the Year 2000,  but only if the product and all of its component  products
(for example  hardware,  software and firmware)  properly exchange accurate date
data.  The Company  believes that its Snap!  Servers,  CD-ROM/DVD  systems,  and
CD-ROM/DVD  networking software manufactured or released after December 31, 1997
are transparent to Year 2000 requirements,  and rely primarily on software found
in operating systems and applications to function properly.

     The  assessment  of  whether  Meridian's  software  products  will  operate
correctly depends on the computer system and/or network on which the software is
installed.  For many end-users  this will include BIOS,  software and components
provided by companies  other than  Meridian  Data.  After  testing,  the Company
believes its products  manufactured  or released after December 31, 1997 are Y2K
ready,  although products manufactured or released prior to that date may not be
Y2K ready.

     In  early  1999,  the  Company  initiated  formal  communications  with its
significant  suppliers,  contract  manufacturers  and financial  institutions to
evaluate  their Y2K  compliance  plans and state of  readiness  and to determine
whether  any Y2K issues  will  impede the  ability of such  suppliers,  contract
manufacturers,  or  financial  institutions  to  continue  to provide  goods and
services to the Company.  However, our suppliers,  contract  manufacturers,  and
financial  institutions  are under no  contractual  obligation  to provide  such
information  to the  Company.  Accordingly,  the  Company  may  not be  able  to
accurately  evaluate the Y2K impact on its  operations  of products and services
delivered by these third parties.  Meridian has established procedures to ensure
that products and internal  systems from new suppliers are Y2K  compliant.  As a
general  matter,  Meridian is vulnerable to any failure by its key suppliers and
contract  manufacturers  to  remedy  their own Y2K  issues,  which  could  delay
shipments of essential components and systems, thereby disrupting or halting the
Company's  manufacturing   operations.   Further,   Meridian  also  relies  upon
governmental agencies,  utility companies,  telecommunication  service companies
and other  service  providers  outside  of the  Company's  control.  There is no
assurance that such suppliers, governmental agencies, financial institutions, or
other third parties will not suffer business  disruptions caused by a Y2K issue,
and there is little  practical  opportunity  for Meridian to test or require Y2K
compliance  from many of those large  agencies,  companies  or  providers.  Such
failures  could  have a  material  adverse  effect  on the  Company's  business,
financial  condition and results of  operations.  Commencing  in 1999,  Meridian
plans to develop a  contingency  plan designed to address  problems  which might
arise from the failure of its suppliers or contract  manufacturers to timely and
adequately address their Y2K issues.

     To date,  the Company has not incurred any costs related to assessment  and
remediation of Y2K readiness. A formal budget has not been established,  and the
cost to Meridian of achieving  Y2K  readiness is  evolving;  however,  it is not
currently  expected  to  have  a  material  effect  on the  Company's  business,
financial condition,  or results of operations.  During 1998, Meridian completed
the  installation  of upgraded  computer  software for the Company's  financial,
accounting, inventory control, order processing and other management information
systems which the vendors maintain are Y2K ready.
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Meridian Data, Inc.

     In our opinion,  the financial statements listed in the index appearing 
under item  14(a)(1) and (2), present fairly, in  all material respects, the 
financial position of Meridian Data, Inc. (the "Company") at December 31, 1998
and 1997,  and the results of its  operations  and its cash flows for each of 
the three years in the period  ended  December  31,  1998,  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.

PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 27, 1999
<PAGE>
MERIDIAN DATA, INC.
BALANCE SHEETS
                                                         December 31,           
                                                1998                     1997   
                                           (in thousands, except per share data)
Current assets:
   Cash and cash equivalents                     $11,049                $15,167
   Marketable securities                           7,794                 16,722
   Accounts receivable 
     (net of allowancefor returns
      and doubtful accounts of $351
      and $543, respectively)                      2,632                  2,949
     Inventories                                   2,687                  1,795
     Other assets                                    132                    128
                                                ----------              --------
         Total current assets                     24,294                 36,761

Property and equipment at cost,
   less accumulated depreciation                     579                    714
Other assets                                          15                     16
                                                 ----------              -------
                                                 $24,888                $37,491

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                           $  2,895               $  2,371
     Accrued payroll and related expenses          1,675                  1,787
     Accrued advertising and promotion             2,283                  1,353
     Other accrued liabilities                     1,794                  1,895
                                                 --------               --------
         Total current liabilities                 8,647                  7,406
                                                 ---------               -------

Commitments (Note 4)

Stockholders' equity:
     Preferred stock, $0.001 par value, 
     5,000 shares authorized, and no shares
     outstanding                                       -                      -
     Common stock, $0.001 par value, 
     35,000 shares authorized, 8,134 and 
     8,785 shares issued and outstanding               8                      9
     Additional paid-in capital                   65,525                 66,207
     Accumulated deficit                         (49,292)               (36,131)
                                                 -------                 -------
         Total stockholders' equity               16,241                 30,085
                                                --------                 -------
                                                 $24,888                $37,491

The accompanying notes are an integral part of these financial statements 
<PAGE>
MERIDIAN DATA, INC.
STATEMENTS OF OPERATIONS                         Year ended December 31,        
--------------------------------------------------------------------------------
(In thousands, except per share data)   1998             1997              1996
--------------------------------------------------------------------------------
Revenues:
     Product sales                  $  17,541          $19,968        $  26,116
Costs and expenses:
     Cost of product sales             10,090            9,570           10,162
     Research and development           5,931            6,340            3,315
     Sales and marketing               13,466           10,980            7,520
     General and administrative         2,573            2,850            2,210
                                     ----------         -------         --------
         Total costs and expenses      32,060           29,740           23,207
                                     ----------         -------         --------
Income (loss) from operations         (14,519)          (9,772)           2,909
Interest income                         1,358            1,994            1,590
                                     ----------         -------         --------
Income (loss) before income taxes     (13,161)          (7,778)           4,499
Provision for income taxes                  -                -             (225)
                                     ----------       ---------         --------
Net income (loss)                    $(13,161)      $   (7,778)      $    4,274
                                     ==========       ==========       =========

Net income (loss) per share
         Basic                      $   (1.51)      $    (0.86)      $     0.47
                                        ======           ======          =======
         Diluted                    $   (1.51)      $    (0.86)      $     0.44
                                        ======           ======          =======

Weighted average common shares and equivalents
         Basic                          8,696             9,061           9,066
                                        ======           ======           =====
         Diluted                        8,696             9,061           9,686
                                        ======           ======           ======










The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERIDIAN DATA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
                                                               Additional       Unrealized                    Total

                                              Common Stock       paid-in      gains (losses)  Accumulated  Stockholders'

                                             Shares   Amount     capital    on investments     Deficit           Equity  
<S>                                          <C>     <C>        <C>         <C>               <C>          <C>
Balance at December 31,1995 .............    7,979   $48,994      $  --                $6      $(32,627)        $16,373
Common Stock issued under stock plans....      259       978         --                --             --            978
Compensation expense related to stock
options issued below market .............       --        36         --                --             --             36
Unrealized losses on investments.........       --        --         --                (1)            --            (1)
Common Stock issued in a Public Offering,
net of issuance expenses.................    2,645    36,841         --                --             --         36,841
Common Stock repurchased.................   (1,293)  (17,271)        --                --             --       (17,271)
Net income...............................       --        --         --                --          4,274          4,274            
                                                
Balance at December 31, 1996.............    9,590    69,578         --                 5        (28,353)        41,230
Reincorporation in Delaware..............       --   (69,568)    69,568                --             --             --
Common Stock issued under stock
plans....................................      223        --        598                --             --            598
Compensation expense related to stock
options issued below market..............       --        --          6                --             --              6
Unrealized losses on investments.........       --        --         --                (5)            --            (5)
Common Stock repurchased.................   (1,028)       (1)    (3,965)               --             --        (3,966)
Net loss.................................       --        --         --                --         (7,778)       (7,778)
                                                                                 
Balance at December 31, 1997.............    8,785         9     66,207                --        (36,131)       30,085
Common Stock issued under stock plans....      153        --        330                --             --           330
Common Stock repurchased.................     (804)       (1)    (1,012)               --             --        (1,013)
Net loss ................................       --         --        --                --        (13,161)      (13,161)
                                                                                  
Balance December 31, 1998 ...............    8,134     $   8     $65,525             $ --      $ (49,292)       $16,241
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
STATEMENTS OF CASH FLOWS
                                                    Year ended December 31,   
(In thousands)                               1998             1997         1996 
-------------------------------------------------------------------------------
Net income (loss)                       $ (13,161)       $  (7,778)      $4,274
   Adjustments to reconcile net income
         (loss) to net cash provided by 
         (used in) operating activities:
      Compensation expense related to
        stock options issued below
        market value                            -                6           36
      Depreciation and amortization           579              474          401
      Amortization of advance for
        research and development
        arrangements                            -              800          200
      Changes in assets and liabilities:
        Accounts receivable                   317               42         (219)
        Inventories                          (892)            (484)        (193)
        Other assets                           (3)             197         (199)
        Advance for research and 
          development arrangement               -                -       (1,000)
        Accounts payable                      524              739         (787)
        Accrued payroll and related expenses (112)           1,101         (756)
        Accrued advertising and promotion     930              847           76
        Other accrued liabilities            (101)             704         (398)
                                          ---------        --------       ------
           Net cash provided by (used in)
           operating activities           (11,919)          (3,352)       1,435
                                          ---------        --------       ------

Cash flows from investing activities:
   Purchases of property and equipment       (444)            (535)        (485)
   Redemption of marketable securities     31,559           37,547       11,978
   Additions to marketable securities     (22,631)         (39,934)     (20,419)
                                          ---------        --------     --------
           Net cash provided by (used in) 
           investing activities             8,484           (2,922)      (8,926)

   Repurchase of Common Stock              (1,013)          (3,966)     (17,271)
   Issuance of Common Stock, net                -                -       36,841
   Issuance of Common Stock 
     related to stock plans                   330              598          978
                                         -----------        --------    --------
           Net cash provided by (used in)
           financing activities              (683)          (3,368)      20,548
                                         -----------        --------    --------
Net increase (decrease) in cash and 
    cash equivalents                       (4,118)          (9,642)      13,057
Cash and cash equivalents at 
    beginning of year                      15,167           24,809       11,752
                                         ----------         --------    --------
Cash and cash equivalents 
    at end of year                       $ 11,049          $15,167      $24,809
                                         ========          ========     ========

Supplemental disclosure of cash flow  information: 
          Cash paid during the year for:
              Interest                        $38             $  8        $  18
              Taxes                           $46              $32         $126




The accompanying notes are an integral part of these financial statements.
<PAGE>
                               MERIDIAN DATA, INC.
         NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
                              1998, 1997, AND 1996

NOTE 1 _ THE COMPANY:

     Meridian Data, Inc. (the "Company" or "Meridian"), was incorporated in 1988
and is currently  engaged in the  development of network  storage  solutions for
Novell,  Windows NT, and Banyan  networking  environments,  and  related  client
software.

NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash, cash equivalents, and marketable securities

     Cash equivalents consist of highly liquid investment  instruments purchased
with original maturities of three months or less. The carrying value of cash and
cash equivalents approximates their estimated fair market value. At December 31,
1998 and 1997,  the Company's  marketable  securities,  consisting  primarily of
government and corporate  bonds,  certificates of deposit and commercial  paper,
are classified as available for sale and are reported at fair market value based
on quoted market prices, which approximates cost. Any unrealized gains or losses
recorded as a separate component of stockholders' equity.

Concentration of credit risk

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations  of  credit  risk  consist   principally  of  unsecured  accounts
receivable  and  investments  in  government  and high  grade  corporate  bonds,
certificates  of deposit,  and  commercial  paper.  The Company  places its cash
primarily in investment  accounts under professional  management.  The Company's
investment  policy limits the amount of credit  exposure to any one issuer.  The
Company's  investment  policy  also  attempts  to limit  interest  rate  risk by
restricting any concentration of maturities.  Meridian's accounts receivable are
primarily derived from sales to distributors and value added resellers (VARs) in
the United  States.  The Company  performs  ongoing  credit  evaluations  of its
customers'  financial  condition and  maintains an allowance  for  uncollectible
accounts based upon the expected  collectibility of all accounts  receivable and
has not experienced material losses to date. At December 31, 1998, two customers
accounted for 66% of the Company's gross accounts  receivables.  At December 31,
1997 two customers accounted for 44% of the Company's gross accounts receivable.

Inventories

     Inventories are valued at the lower of cost,  using the first-in  first-out
method, or market.

Research and development costs

     The  Company  charges  research  and  development  costs to  operations  as
incurred.  Statement of Financial  Accounting  Standards No. 86 "Accounting  for
Costs of Computer Software to be Sold,  Leased, or Otherwise  Marketed" requires
capitalization  of  certain  software   development  costs  after  technological
feasibility of software is established upon the completion of the working model.
Development  costs incurred by the Company after completion of the working model
and  prior to  commercial  release  have  been  insignificant  and all  software
development costs since 1993 have been expensed as incurred.

Property and equipment

     Property and equipment,  including  leasehold  improvements,  are stated at
cost.  Depreciation and amortization is computed using the straight-line  method
over the estimated useful lives of the assets, generally one to three and a half
years.  Amortization of leasehold  improvements is computed using the shorter of
the  remaining  terms  of  the  leases  or the  estimated  useful  lives  of the
improvements.

Income taxes

     Income taxes are computed using the asset and liability method.  Under this
method,  deferred income tax assets and liabilities are determined  based on the
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities and are measured using currently enacted tax rules and laws.

Revenue recognition

     Product  revenues are recognized  upon shipment to the customer or delivery
to a third party shipper.  Revenue from sales to  distributors is recognized net
of an allowance for product returns,  price  protection,  and other  adjustments
which may be required under the Company's agreements with distributors.

     During 1998, two customers, consisting of large distributors, accounted
for 41% and 23% of Meridian's  1998 product  sales.  During 1997, two customers,
consisting  of large  distributors,  accounted  for 21% and 19% of the company's
1997 product sales. During 1996, two customers, consisting of large distributors
accounted  for  25% and 18% of  Meridian's  1996  product  sales.  There  are no
reporting segments to disclose under FAS 131.

Basic and Diluted Net income (loss) per share

     The Company adopted  Statement of Financial  Accounting  Standards No. 128,
"Earnings  per Share"  ("SFAS 128") during the year ended  December 31, 1997 and
retroactively restated all prior periods under SFAS 128. Basic net income (loss)
per  share is  computed  using the  weighted  average  number  of common  shares
outstanding  during the period.  Diluted net income (loss) per share is computed
using the weighted  average number of common and potential  common shares during
the period.  Potential common shares consist of the incremental  shares issuable
upon the exercise of stock options (using the treasury stock method).  Potential
common   shares  are  excluded   from  the   computation   if  their  effect  is
anti-dilutive.  Options to purchase  2,145,309  shares of common stock at prices
ranging  from $0.03 to $15.13 per share were  outstanding  during the year ended
December  31,  1998 but were not  included  in the  computation  of diluted  EPS
because the options would have been antidilutive.

Use of estimates

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

Bank  Credit  Facilities.

     On October 14, 1998 the Company signed a credit  agreement (the "Facility")
with a bank (the "Bank") for a $7.5 million  revolving credit line which expires
on July 30, 1999.  Borrowing under the Facility is at the Bank's prime rate plus
1/4 %, and is subject to the Company maintaining certain leverage ratios and net
worth  requirements.  All  advances  under  the  Facility  must be repaid by the
expiration  date of July 30,  1999.  As of December  31,  1998,  Meridian has no
amounts due under the Facility.

Recent Accounting Pronouncements

Comprehensive Income

     There are no components of  comprehensive  income which are not included in
the Company's net income (loss).

NOTE 3 _ BALANCE SHEET DETAIL (in thousands):
                                                                  December 31,
                                                              1998        1997
Marketable securities:
United States government and agencies.....................      $-     $ 4,862
Corporate.................................................  18,551      24,735
Other.....................................................       -       1,962
                                                            -------    ---------
                                                            18,551      31,559
Less securities classified as cash equivalents............ (10,757)    (14,837)
                                                           --------    ---------
                                                            $7,794     $16,722

Inventories:
      Raw materials and purchased parts...................   $ 891     $ 1,390
      Work in process.....................................     797         405
      Finished  Goods.....................................     999           -
                                                               ---         ---

                                                            $2,687      $1,795
Property and equipment:
      Computers and purchased software....................  $1,731      $1,459
      Machinery and equipment.............................     244         190
      Furniture and fixtures..............................     259         144
      Leasehold improvements..............................      72          69
                                                            -------       ------
                                                             2,306       1,862
      Less accumulated depreciation and amortization......  (1,727)     (1,148)
                                                            -------     -------
                                                             $ 579       $ 714
                                                             =====       =====
NOTE 4 _ COMMITMENTS:

     The Company rents its office, manufacturing,  and research facilities under
noncancelable  operating  lease which  expires in December  1999.  The Company's
lease  agreement  requires that the Company pay certain  other  expenses such as
property taxes,  insurance,  and common area  maintenance.  Rent expense for all
operating  leases was $0.5  million,  $0.5  million,  and $0.4 million for 1998,
1997,  and  1996,   respectively.   Future  minimum  lease  payments  due  under
noncancelable operating leases at December 31, 1998 are $337,000.

NOTE 5 _ STOCKHOLDERS' EQUITY:

Stock Option Plans

     The Company has  reserved  4,348,789  shares of Common  Stock for  issuance
under the  Company's  various  stock  option  plans (the  "Plans").  The options
granted may be either incentive stock options to employees or nonstatutory stock
options  to  employees  or  consultants,  at  the  discretion  of the  Board  of
Directors.  The  Board  also  has the  discretion  to  grant  to  employees  and
consultants  stock  purchase  rights for shares of stock  reserved  for issuance
under the Plans. Terms and conditions of stock options and stock purchase rights
are set by the Board of Directors.

     Stock options granted to date generally  become  exercisable at the rate of
25% per year.  Shares  purchased  under  stock  purchase  rights are  subject to
repurchase by the Company.  The Company's right of repurchase  expires  ratably,
subject to  continued  employment,  over a four year period.  To date,  no stock
purchase rights have been granted.

1995 Director Stock Option Plan

     The Company has reserved  100,000 of Common  Stock for  issuance  under the
Company's  1995  Director  stock  option plan (the "1995  Plan").  The 1995 Plan
provides for the automatic  grant of a  nonstatutory  option to purchase  12,500
shares of the Company's common stock to each outside Director upon their initial
election to the Board of Directors (the "First  Option").  Upon each  subsequent
re-election to the Board, the outside  Director  receives an additional grant to
purchase 5,000 shares of the Company's common stock (the  "Subsequent  Option").
All options are granted at fair market  value of the Common Stock on the date of
grant.

     The 1995 Plan  provides  that the First Option vests at the rate of 25% per
year on the anniversary of the grant date. Each Subsequent  Option vests ratably
over eight months following the month of grant.

     Stock option activity under the above Plans for years 1998, 1997, and 1996,
is as follows:

                                                   Options Outstanding
                                   Shares                 Weighted
                                  Available                Average
                                  for Grant    Shares       Price   Price range
                                                                                
Balance at December 31, 1995.....    70,256    1,320,559    $4.25   $0.03-$10.00
 Increase in 1988 Plan...........   300,000            -     n/a
 Options granted.................  (401,600)     401,600    $8.69   $7.25-$15.13
 Options canceled................   173,389     (173,389)   $7.20   $1.18-$15.13
 Options exercised...............         -     (214,819)   $3.09   $0.03-$8.50
 Options expired.................   (33,592)           -    $1.18      $1.18
                                    --------    ---------   
Balance at December 31, 1996.....   108,453    1,333,951    $5.45   $0.03-$15.13
 1997 Stock Option Plan..........   900,000            -      n/a
 Options granted.................(1,260,584)   1,260,584    $3.51   $3.38-$5.00
 Options canceled................   471,703     (471,703)   $7.19   $1.18-$11.38
 Options exercised...............         -     (115,522)   $4.55   $3.69-$7.44
 Options expired.................    (2,911)           -    $1.18      $1.18
                                  -----------  ----------
Balance at December 31, 1997.....   216,661    2,007,310    $4.00   $0.03-$15.13
 Increase in 1997 Plan...........  400,000            -      n/a
 Options granted.................  (289,000)     289,000    $5.32  $1.16 - $6.31
 Options canceled................   122,989     (122,989)   $3.68 $1.18 - $10.00
 Options exercised...............         -      (28,012)   $1.31  $1.18 - $3.38
 Options expired.................   (45,685)           -    $2.83  $1.18 - $8.50
                                    -------    -----------
Balance at December 31, 1998.....   404,965     2,145,309   $1.90 $0.03 - $15.13
                                    =======     =========
Options exercisable at December 31, 1998          799,574   $2.52 $0.03 - $15.13
                                                  =======

     On April 23,  1997,  the  Compensation  Committee of the Board of Directors
approved an offer to all employees  permitting an election to amend options with
exercise  prices in excess of $3.38 to  change  the  exercise  price to the fair
market  value of the  Company's  common  stock on that  date,  which was  $3.38,
subject  to a new  vesting  schedule.  Options  for the  purchase  of a total of
366,184  shares  were  amended.  On October  27,  1998,  the Board of  Directors
approved an offer to all  employees,  except certain  executives,  permitting an
election to amend their options to change the exercise  price to the fair market
value of the  Company's  common  stock on  November  9,  1998,  which was $1.56,
subject  to a new  vesting  schedule.  Options  for the  purchase  of a total of
723,309 shares were amended.  At the same time, the Board of Directors  approved
an offer to certain executives  permitting an election to amend their options to
change the exercise price to the fair market value of the Company's common stock
on October 28,  1998,  which was $1.44.  Options for the  purchase of a total of
1,069,413 shares were amended.

1992 Employee Stock Purchase Plan

     In October 1992, the Company  adopted the 1992 Employee Stock Purchase Plan
(Purchase  Plan).  Under the Purchase  Plan,  an eligible  employee may purchase
shares of Common Stock from the Company through payroll  deductions of up to 10%
of their base compensation plus commission, at a price per share equal to 85% of
the fair market  value as of the first day or the last day,  whichever is lower,
of each six-month  offering period under the Purchase Plan. The offering periods
commence on May 1 and  November 1. The Company has  reserved  400,000  shares of
Common Stock for issuance under the Purchase Plan. At December 31, 1998, 346,562
shares of Common  Stock had been  issued  under the  Purchase  Plan,  and 53,438
shares remain available for future issuance under the Purchase Plan.

Stock Compensation

     The Company accounts for its employee stock option plans in accordance with
the provisions of Accounting  Principles  Board Opinion No. 25. In October 1995,
the  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting   Standards  No.  123  ("FAS  123"),   "Accounting   for  Stock-Based
Compensation  " which  established a fair value based method of  accounting  for
employee stock option plans. The Company elected to adopt the disclosure  method
of FAS 123. Had compensation cost for the Company's option plans been determined
based on the fair  value at the  grant  dates,  as  prescribed  in FAS 123,  the
Company's  pro forma net income  (loss) and pro forma  diluted net income (loss)
per share would have been as follows: (in thousands):

                                           1998             1997          1996
                                        ----------        ---------      ------
         Net income (loss):
           As reported                  $(13,161)         $(7,778)       $4,274
                                         ========          =======       ======
           Pro forma                     $(15,532)         $(9,210)      $3,246
                                         =========         ========      ======

         Diluted net income (loss) per share:
           As reported                  $ (1.51)          $  (0.86)     $  0.44
                                         =======          =========     =======
           Pro forma                    $ (1.79)          $  (1.02)     $  0.34
                                         =======          =========     =======

     The fair  value  of stock  options  and  stock  purchase  plan  rights  was
determined  using  the  Black-Sholes  option  pricing  model  incorporating  the
following range of assumptions for 1998, 1997 and 1996 in the calculations:

                                          Stock Options     Stock Purchase Plan
         Expected life                      4.51 years          0.5 years
         Interest rate at date of grant     4.2% to 6.7%      4.6% to 5.5%
         Volatility at date of grant             95%             117%
         Dividend yield                           0%               0%

     The following table summarizes information about all options outstanding as
December 31, 1998:
                       Options Outstanding            Options Exercisable
                       -----------------------        ------------------------
Range of                 Weighted Average               Weighted Average
Exercise                Remaining     Exercise                       Exercise 
Prices        Number    life          Price                Number    Price
--------      ------    ---------     ---------            -------   ---------
$0.03-$1.18    131,420        5.2        $ 0.52             95,420    $ 0.28
$1.44-$1.56  1,773,389        7.7        $ 1.49            498,611    $ 1.48
$3.38-$3.75     63,500        8.3        $ 3.47             34,793    $ 3.54
$4.00-$5.13     72,500        5.8        $ 4.73             69,375    $ 4.71
$6.31-$7.50     89,500        6.0        $ 6.58             86,375    $ 6.59
   $15.13       15,000        7.3        $15.13             15,000    $15.13
             ----------     -------      -------           -------    -------
             2,145,309        7.5        $ 1.90            799,574    $ 2.52
             ----------     -------      -------           -------    ------

     Because  additional stock options are expected to be granted each year, the
above pro forma  disclosures  are not  representative  of pro forma  effects  on
reported financial results for future years.

Preferred Share Purchase Rights

     At December 31, 1998, there were  outstanding  8,134,156 rights to purchase
Series A Participating  Preferred  Stock  ("Preferred  Stock").  The rights were
issued as a dividend  on August  25,  1997 to  stockholders  of record as of the
close of business on that date.  Each right entitles the holder to purchase from
the  Company  a unit (one  one-thousandth)  of  Preferred  Stock at $30 per unit
subject to adjustment. The rights are not exercisable or transferable apart from
the common stock until 10 days after a person or group (a)  acquires  beneficial
ownership of 15% or more of the Company's common stock or (b) announces a tender
or exchange  offer,  the  consummation  of which would  result in ownership by a
person or group of 15% or more of the Company's  common  stock.  Each right will
entitle the holder,  under certain  circumstances  (acquiring person becomes the
beneficial  owner of 15% or more of the  Company's  common  shares  outstanding,
merger or sale of 50% or more of the Company's consolidated assets), to acquire,
at half the value,  common stock of the Company or common stock of the acquiring
person.  The rights expire August 11, 2007 and are redeemable  prior to the time
an acquiring  person  acquires 15% or more of the Company's  common stock at one
cent per right. At December 31, 1998,  5,000,000  shares of Preferred Stock were
authorized  but unissued and were  reserved  for issuance  upon  exercise of the
rights.

NOTE 7 _ FEDERAL AND STATE INCOME TAXES:

         The provision for income taxes in was as follows (in thousands):
                                      Years ended December 31,
                                                              1996
Federal:
 Current.............................................             $167
 Deferred............................................                -
                                                                  ------    
                                                                   167
State:
 Current.............................................               58
 Deferred............................................                -
                                                                  ------    
                                                                    58
                                                                  ------
                                                                  $225

     Deferred tax assets at December 31, 1997 and 1996, consist of the following
(in thousands):

                                           December 31,  December 31, 
                                               1998         1997
                                           ------------  ------------
            
Deferred tax assets:
 Federal and state loss carryforwards......  $11,725          $7,200
 Tax credit carryforwards..................    2,410           1,484
 Inventory reserves and basis differences..      396             396
 Depreciation and amortization.............      (32)            (75)
 Other.....................................    2,201           1,995
                                               -----           -----

                                              16,700          11,000
 Deferred tax asset valuation allowance....  (16,700)        (11,000)
                                             --------        --------

Total net deferred tax assets..............  $     -         $     -
                                            ===========      ===========

         Following is a reconciliation of the effective income tax rates from 
operations and the statutory federal income tax rate:
                                                     Years ended December 31,
                                                   1998       1997        1996
                                                   ----       ----        ----
                                                                               
Statutory federal income tax rate...............  (35%)       (35%)        35%
State income taxes, net of federal benefit......    -           -           6%
Current year loss not benefited.................   35%         35%          -
Other...........................................    -           -          (1%)
Change in valuation allowance...................    -           -         (35%)
                                                  -------    -------      -----

Effective tax rate..............................    -           -           5%
                                                  =======    =======      =====

     At December 31, 1998, the Company has a net operating loss carryforward for
U.S.  federal and state  income tax  purposes of  approximately  $32.3 and $11.7
million,  respectively,  which expire  between 1999 and 2018.  The net operating
loss  carryforward  includes   approximately  $8.9  million  of  tax  deductions
resulting from the exercise of employee  stock options.  The tax benefit of this
deduction,  when  realized,  will be accounted for as a credit to  stockholders'
equity rather than as a reduction in the income tax  provision.  The Company has
federal  research and development tax credit  carryovers of  approximately  $2.4
million at December 31, 1998,  that expire in 2003 through  2012.  The Company's
net operating losses, tax deductions and credit  carryforwards may be limited by
changes in ownership as defined under the Internal  Revenue  Code.  Based on the
Company's  evaluation  of the weight of  available  evidence it can not conclude
that it is more likely than not that deferred income tax assets will be realized
and  therefore  the Company has provided a full  deferred  income tax  valuation
allowance at December 31, 1998.

NOTE 8 _ RELATED PARTY TRANSACTIONS:

     In connection with the Company's stock offering on April 30, 1996, Meridian
entered  into an  agreement  to acquire  and  exercise  an option held by IBM to
purchase 1,229,932 shares of outstanding Common Stock from certain  stockholders
of the Company,  including Bass Associates, an original investor in the Company.
Pursuant  to the  closing of the  offering,  Meridian  exercised  the option and
acquired  1,229,932  shares of Common Stock,  including  66,544 shares from Bass
Associates,  for $11.396 per share. Dr. Bass, General Partner of Bass Associates
and Chairman of the Board of Meridian Data, Inc., disclaims beneficial ownership
of the shares held by Bass Associates,  except to the extent of his proportional
interest therein. The shares acquired were immediately retired.

NOTE 9 _  EMPLOYEE BENEFIT PLANS:

     The Company has  available to all  full-time  employees a retirement  plan.
Under the  plan,  employee  and  employer  contributions  and  accumulated  plan
earnings  qualify  for  favorable  tax  treatment  under  Section  401(k) of the
Internal  Revenue  Code, as amended.  Meridian  matches  employee  contributions
dollar-for-dollar,  up to six percent of gross pay, with an annual cap of $1,200
per employee.
<PAGE>
        REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders
of Meridian Data, Inc.

Our audits of the financial statements of Meridian Data, Inc. referred to in our
report dated January 27, 1999, appearing in this Annual Report on Form 10-K also
included an audit of the Financial  Statement  Schedules listed in Item 14(a) of
this Form 10-K.  In our  opinion,  the  Financial  Statement  Schedules presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements.


PricewaterhouseCoopers LLP
San Jose, California
January 27, 1999
<PAGE>
                                                                   SCHEDULE II

                               MERIDIAN DATA, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
                                 (In thousands)

<TABLE>
<CAPTION>
                                                       Balance at       Charged to      Charged     Balance at End
                                                       Beginning of      Costs and       Against         of Year
                                                            Year          Expenses       Reserves
                                                       ------------      ----------      --------    --------------- 
<S>                                                    <C>               <C>            <C>         <C>
December 31, 1996
 Inventory Reserves................................          $618          $   57        $    -            $675
 Allowance for Doubtful Accounts...................           200               -           (14)            186
 Sales Returns and Allowances......................           570           1,570        (1,814)            326

December 31, 1997
 Inventory Reserves................................          $675          $  643        $ (703)           $615
 Allowance for Doubtful Accounts...................           186              50             -             236
 Sales Returns and Allowances......................           326           2,598        (2,617)            307

December 31, 1998
 Inventory Reserves................................          $615           $ 188         $  (5)           $798
 Allowance for Doubtful Accounts...................           236               -             -             236
 Sales Returns and Allowances......................           307           1,269        (1,461)            115
</TABLE>
<PAGE>
                                                                   EXHIBIT 23.1
                       CONSENT OF INDEPENDENT ACCOUNTANTS

We  hereby  consent  to the  incorporation  by  reference  in  the Registration
Statements  on  Form S-8  (33-89162, 333-30107, 33-62084,  333-2620,  333-3934,
333-53945,  333-27533,  333-2622, and 333-27531) of Meridian Data,  Inc. of our
report  dated January 27, 1999 appearing in Meridian Data, Inc.'s Form 10-K for 
the year ended December 31, 1998.


PricewaterhouseCoopers LLP
San Jose, California
March 23, 1999