United States
                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549

                                   Form 10-KSB


(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, 1997

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

      For the transition period from ___________ to ___________

                    Commission file number:  0-26624
                     Alternate Postal Delivery, Inc.
______________________________________________________________________________
               (Name of small business issuer in its charter)

       Michigan                             38-2841197
______________________________________________________________________________
(State or other jurisdiction of           (I.R.S. Employer incorporation or    
     organization)                            Identification No.)

 One Ionia S.W., Suite 300, Grand Rapids, Michigan             49503
______________________________________________________________________________
(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number  (616) 235-0698

Securities registered under Section 12(g) of the Exchange Act:  Common Stock,
no par value.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X]  No [ ]

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

State issuer's revenues for its most recent fiscal year:  $18,442,056

State the total number of pages included in this report: 35.

The Exhibit index is on page: 34.


State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days:  $1,857,495, based on 1,485,996 shares held by non-affiliates as of
March  13, 1998, and the average of the closing bid and asked prices for said
shares in the Nasdaq Small-Cap Market as of such date.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,030,127 shares of Common
Stock, as of March 15, 1998.


                     DOCUMENTS INCORPORATED BY REFERENCE

The Company's definitive proxy materials to be filed on or about April 6, 1998
are incorporated by reference in Part III of this Form 10-KSB.  In addition
certain exhibits identified in Part III, Item 12 are incorporated by reference
to said exhibits as filed with (i) Form SB-2 Registration Statement
(Commission File No. 33-95332C), (ii) Report on Form 10-KSB for the fiscal
year ended December 31, 1995, and (iii) Reports on Form 8-K (dated April 11,
1996) and Form 8-K/A (dated April 4, 1996).

                              TABLE OF CONTENTS

                                                                          Page

PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4

Item 1.  Description of Business . . . . . . . . . . . . . . . . . . . . .  4

Item 2.  Description of Property . . . . . . . . . . . . . . . . . . . . .  6

Item 3.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .  6

Item 4.  Submission of Matters to a Vote of Security Holders . . . . . . .  6

PART II  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

Item 5.  Market for the Common Equity and Related Stockholder Matters
         Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . .  7

Item 6.  Management's Discussion and Analysis  . . . . . . . . . . . . . .  7

Item 7.  Financial Statements  . . . . . . . . . . . . . . . . . . . . . . 12

Item 8.  Changes in and Disagreement with Accountants on Accounting and
         Financial Disclosure  . . . . . . . . . . . . . . . . . . . . . . 32

PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act . . . . . . . . 32

Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 32
 
Item 11. Security Ownership of Certain Beneficial Owners and Management. . 32

Item 12. Certain Relationships and Related Transactions  . . . . . . . . . 32

Item 13. Exhibits and Reports on Form 8-K  . . . . . . . . . . . . . . . . 32
         Reports on Form 8-K   . . . . . . . . . . . . . . . . . . . . . . 32

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

                                   PART I

Item 1.  DESCRIPTION OF BUSINESS

OVERVIEW

     During the past two fiscal years, Alternate Postal Delivery, Inc. (the
"Company")has evolved from a delivery company to a marketing services company.
In 1998, the Company began using the dba Alternate Marketing Networks to more
accurately reflect the Company's shift in strategic direction.  The Company
plans to officially change its name to "Alternate Marketing Networks, Inc."
upon ratification by the shareholders at the annual meeting in April 1998.

     The Company has built unique and powerful marketing networks for national
advertisers who wish to deliver their message to targeted consumer households
throughout the United States and believes that it is now positioned as the in-
home target marketing specialist and a consolidator in the fast growing
marketing services industry.  The Company's current networks are primarily
comprised of private delivery and newspaper delivery systems, augmented by
utilization of mailing services, for a total reach of approximately 100
million households nationwide.  The Company distributes samples, suburban
newspaper advertisements, free standing inserts, phone directories and
specialty catalogs to targeted households throughout the United States.

     The mix of these unique networks (Mixed Media TM), plus the Company's
proprietary database system (Media Optimizer TM)and an experienced management
team offers national advertisers and publishers:

                    - Unrestricted Reach
                    - Unequaled Access
                    - Unduplicated Delivery

     The Company currently markets its services under the following brand
names:

                    - APD Direct-to-Door Sampling
                    - APD In-Pac TM Inserts
                    - APD Billboard Pouch Bag
                    - U.S. Suburban Press (USSPI)
                    - Alternate Postal Direct

Targeting the Consumer Message/Database Marketing

     In 1997, the Company invested in the development of the Media Optimizer
TM, a sophisticated database system combining targeting systems, 
comprehensive delivery capabilities, contract rates negotiated by the Company,
and a proprietary tracking system known as End to End Tracking TM.  This
database system, which is now substantially complete, allows for the Company
to analyze customer needs and provide them with the most cost efficient Mixed
Media TM.  In addition, the Media Optimizer TM contains features for
accounting, shipping and quality control purposes.  The Company intends to
update this database monthly and add enhancements to keep the system
comprehensive and leading edge.

     The Media Optimizer TM provides a functional integration of PRIZM and
Pro*Filer , two separate data platforms utilized by the Company when targeting
an advertisers' needs. PRIZM (which the Company utilizes through a license
agreement with Claritas, Inc.) provides geo-demographic consumer profiles
which identify zip codes containing households with a propensity to buy a
particular product or service.  Using a custom-built software program, the
Company is able to match these zip codes of targeted consumers, to the
newspaper delivery database covering the same targeted area.  Mapping
capabilities are also an important feature of the PRIZM software.

     The Company's own proprietary program known as Pro*Filer, allows the
Company to target, profile and analyze geo-demographic and psychographic data
from either R.L. Polk or Metromail   considered to contain the most accurate
and robust consumer information available in the U.S. Pro*Filer software
performs fast segmentation analysis, identifies the appropriate recipients for
specific products; generates "look-alikes" from a customer list; and targets
individuals, households, block groups, carrier routes and zip codes by using
multiple data formats.  This enables advertisers to increase the efficiency of
their sales and marketing dollars by identifying the most likely prospects for
their products.

DESCRIPTION OF OPERATIONS

     During the year, management consolidated the operations of its previous
four operating areas.  This consolidation reduced the annual operating
expenses to $4,738,167 compared to $5,831,111 in 1996.  The consolidation
occurred as management realized that customers need not be limited to the
marketing services offered by one area of the Company's business as opposed to
another.  Management encouraged its sales people to offer their customers the
flexibility of choosing from all of the services offered by the Company,
rather than only those products which the sales person had been used to
offering.  This consultative approach to selling has allowed the Company to
operate more effectively.  In addition, the Company was able to reduce the
number of employees due to the implementation of an outsourcing agreement with
Media Passage.  The Company believes it can increase revenues in 1998 without
increasing overhead due to the implementation of the Media Optimizer TM
system.

PRINCIPAL CUSTOMERS

     During the years ended December 31, 1997 and 1996, the Company had no
single customer which accounted for 10% or more of the Company's revenues for
either period.


ACQUISITIONS AND STRATEGIC ALLIANCES

     Although the Company made no acquisitions during 1997, it intends to
continue efforts to identify complementary businesses for acquisitions.

     In the fourth quarter of 1997, the Company signed an extension to its
News America FSI (News Corp.) Agreement through June 30, 1998.  At that time,
the Company will review the agreement with News America.

     Also in the fourth quarter of 1997, the Company entered into an alliance
with Supermarket Promotions, Inc.  The alliance will enable the Company to
offer additional complementary services to its product sample customers.


COMPETITION

     The Company's primary competitor for newspaper sample deliveries is
Valassis Communications, Inc. (NYSE:VCI).  Its primary competitors for
representing suburban newspapers are Landon and Associates, and Pappert and
Associates.  Its primary competitors for direct delivery of telephone
directories are Product Development Corporation and Directory Distributing
Associates (DDA).  The Company has no primary competitors that offer a
combination (Mixed Media TM) of direct delivery, newspaper delivery and mail
delivery.

EMPLOYEES

     As of December 31, 1997, the Company had 40 full-time employees,
including 11 in sales and sales support, 16 in operations, 4 in computer
systems, and 9 in general and administrative support.  In addition, as of
December 31, 1997, the Company had approximately 25 part-time employees in
operations, which number varies from month to month.  The Company does not
foresee any material changes to the current number of employees.

SERVICE MARKS, TRADEMARKS, AND PATENTS

    The Alternate Postal Delivery, Inc. Plus Design mark was registered with
the U.S. Patent and Trademark Office on May 10, 1994, as Reg. No. 1,835,717,
for private mail delivery services.  This registration is owned by Alternate
Postal Delivery, Inc.

     The Alternate Postal Direct mark was registered with the U.S. Patent and
Trademark Office on March 10, 1998 and was assigned Reg. No. 2,143,361 for
private mail delivery services.  This registration is owned by Alternate
Postal Direct, Inc.

ITEM 2.  DESCRIPTION OF PROPERTY

     The Company currently leases its principal executive offices in Grand
Rapids, Michigan at a monthly base rent of approximately $2,440 and sales
office space in New York City, New York at a monthly base rent of $2,867.  In
addition, one of the Company's wholly-owned subsidiaries Alternate Postal
Direct, Inc., rents warehouse space in Minneapolis, Minnesota at a monthly
rent of $1,407; warehouse and office space in St.Petersburg, Florida at a
monthly rent of $3,210; and office and warehouse space in San Francisco,
California pursuant to two leases at an aggregate monthly rent of $2,340.
Another wholly-owned subsidiary, National Home Delivery, Inc. (d/b/a USSPI)
rents sales office space in Schaumburg, Illinois, at an aggregate monthly rent
of $2,496.  The Company does not deem any of these leases to be material,
since all of these facilities could be replaced with substantially equivalent
facilities at similar cost without great difficulty.

ITEM 3.  LEGAL PROCEEDINGS

     None.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     None.


                                    PART II

ITEM 5.  MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The following table sets forth the quarterly high and low bid prices in
the market for the Company's Common Stock (which is its only class of security
outstanding), as reported in the Nasdaq Small-Cap Market, for the last two
years.  The Company's Common Stock is traded under the symbol "ALTD." 
Following the Company's change of name to Alternate Marketing networks, Inc.,
which is anticipated to occur on or about April 30, 1998, the Company intends
to apply for a change in its symbol to "ALTM" or another symbol which reflects
its new name.  Such quotations represent interdealer prices, without retail
markup, markdown or commission, and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
                                                           Closing Bid Price
                                                             Low        High
               Year ended December 31, 1997:
               <S>                                         <C>         <C>
               First quarter . . . . . . . . . . . . . . .  3           3
               Second quarter  . . . . . . . . . . . . . .  2 3/4       2 3/4
               Third quarter   . . . . . . . . . . . . . .  2           2
               Fourth quarter  . . . . . . . . . . . . . .  1           1 1/4

               Year ended December 31, 1996
               First quarter . . . . . . . . . . . . . . .  5 1/4       6
               Second quarter  . . . . . . . . . . . . . .  4           5 1/8
               Third quarter . . . . . . . . . . . . . . .  3 1/4       4
               Fourth quarter  . . . . . . . . . . . . . .  2 3/4       3 1/2
</TABLE>
 
     As of March 10, 1998, the Company's Common Stock was held of record by 28
holders.  Registered ownership includes nominees who may hold securities on
behalf of multiple beneficial owners.  The Company estimates that the number
of beneficial owners as of March 10, 1998 is approximately 300.

DIVIDEND POLICY

     The Company has never paid cash dividends on its Common Stock.  The
Company currently intends to retain any earnings for use in its operations and
does not anticipate paying cash dividends in the foreseeable future.  Future
dividend policy will be determined by the Company's Board of Directors based
upon the Company's earnings, if any, its capital needs and other relevant
factors.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

     Except for historical information contained herein, the matters set forth
in this management discussion are forward-looking statements based on current
expectations.  These forward-looking statements involve a number of risks and
uncertainties including, but not limited to competition; timing of receipt and
fulfillment of customer orders; the results of marketing efforts; the expense
and time required to complete research, and marketing efforts; and the
integration of acquired businesses.


THE YEAR IN REVIEW

     During 1997, the Company continued with the integration of the
acquisitions made in the previous year.  All corporate, accounting, and
administrative functions were consolidated in the corporate office in Grand
Rapids, Michigan.

     A major focus during the year was development of the Media Optimizer TM.
This comprehensive database system represents a combination of the separate
database systems previously used by the Company's personnel.  The result is a
database which provides sales employees with all of the tools necessary to
give knowledgeable, efficient client proposals, and which provides operational
and quality control employees with the tools necessary to track and monitor a
contracted job from beginning to end (i.e. End to End Tracking TM).  In
conjunction with the implementation of the combined, more efficient database,
the Company initiated an outsourcing agreement with Media Passage for one
order-one bill for suburban newspaper Run-of-Press (ROP) advertisements.

RESULTS OF OPERATIONS

     Results of operations for the years ended December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
                                               1997          1996
                                              ------        ------
     <S>                                   <C>           <C>
     Net sales . . . . . . . . . . . . . . $18,442,056   $19,937,151
     Cost of sales . . . . . . . . . . . .  13,709,762    14,972,771
                                           -----------   -----------
     Gross profit. . . . . . . . . . . . .   4,732,294     4,964,380
                                           -----------   -----------
     Selling, general and
      administrative expenses. . . . . . .   4,738,167     5,578,338
     Other operating expenses. . . . . . .                   252,773
                                           -----------   -----------
     Operating loss. . . . . . . . . . . .(      5,873) (    866,731)
                                           -----------   -----------
     Extraordinary gain from early
      extinguishment of debt . . . . . . .      38,145       232,909
                                           -----------   -----------
     Net profit (loss) . . . . . . . . . . $    87,806  ($   603,543)
                                           ===========   ===========
     Profit (loss) per share:
        Basic. . . . . . . . . . . . . . .       $0.02  (      $0.15)
                                           ===========   ===========
        Diluted . . . . . . . . . . . . .        $0.02  (      $0.18)
                                           ===========   ===========

     Weighted average number of shares
      outstanding:
        Basic. . . . . . . . . . . . . . . . 4,022,894     4,019,069
        Diluted  . . . . . . . . . . . . . . 4,022,894     3,343,825

</TABLE>

     The following table sets forth selected consolidated earnings data of the
Company expressed as a percentage of sales for the years ended December 31,
1997 and 1996:

<TABLE>
<CAPTION>
                                               1997          1996
                                             --------      --------
     <S>                                      <C>           <C>
     Net sales . . . . . . . . . . . . . .    100.0 %       100.0 %
     Gross profit. . . . . . . . . . . . .     25.7 %        24.9 %
     Operating expenses. . . . . . . . . .     25.7 %        29.2 %
     Operating loss. . . . . . . . . . . .   (  0.0)%      (  4.3)%
     Net profit(loss). . . . . . . . . . .      0.5 %      (  3.0)%
                                             ========      ========
</TABLE>

     Net Sales.  The net sales for 1997 decreased slightly compared to those
of 1996 primarily due to a $2.8 million decrease in the specific address
delivery of magazines and catalogs resulting from the USPS Rate
Reclassification case, which encouraged mail deliveries of these items.
Revenues for deliveries of product samples increased approximately $3 million.
Revenues for the placement of suburban newspaper space advertising decreased
approximately $1.7 million, largely due to changes in the automotive industry.
Revenues for the placement of inserts into suburban newspapers increased
approximately $300,000.  Other decreases occurred in the local delivery of
newspaper TMC (total market coverage) products, while increases occurred in
revenues from the delivery of telephone directories.

     Gross Profit.  The gross profit percentage increased in 1997 due to a
change in the mix of revenues.  Magazine deliveries revenues, which decreased
in 1997, generally produce lower margins than other sources of revenue.

     Selling, general and administrative expenses. Operating expenses
decreased approximately $1.1 million as management consolidated functions to
gain efficiencies.  The Company reduced full-time employees by 10 people which
decreased overall expenses by approximately $600,000.  In addition, during
1996 the Company incurred one-time expenses of $252,773 in connection with the
start up of a project which it chose not to pursue.  There were no similar
expenses of this type in 1997.

     Operating profit (loss). Due to the savings in operating expenses which
the Company achieved in 1997, operating profit improved by over $800,000, even
though the revenues decreased compared with the prior year.

     Extraordinary gain.  The Company recorded extraordinary gains on the
early retirement of debt in the amount of $38,145 in 1997 and $232,909 in
1996. 

     Net income (loss).  The net income (loss) for both 1997 and 1996 was
positively affected by the interest income and interest expense. Interest
income and interest expense for the year ended December 31, 1997 were $81,256
and $20,756 respectively.  Interest income and interest expense in 1996 were
$153,397 and $103,336, respectively.


     FOURTH QUARTER RESULTS:

     The results of the fourth quarter of 1997 as compared to the same period
in 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                           Quarter ending December 31,
                                               1997          1996
                                              ------        ------
     <S>                                   <C>           <C>
     Net sales . . . . . . . . . . . . . . $ 4,615,834   $ 5,007,403
     Cost of sales . . . . . . . . . . . .   3,461,347     3,756,804
                                           -----------   -----------
     Gross profit. . . . . . . . . . . . .   1,154,487     1,250,599
     Selling, general and
      Administrative expenses. . . . . . .   1,146,079     1,262,511
     Other operating expenses. . . . . . .              (      1,449)
                                           -----------   -----------
     Operating profit(loss). . . . . . . .       8,408  (     10,463)
                                           -----------   -----------
     Net profit . . .  . . . . . . . . . . $    22,250   $    22,238
                                           ===========   ===========
</TABLE>

     The decrease in revenue for the fourth quarter of 1997 as compared to the
fourth quarter of 1996 is principally attributable to the decrease of $443,614
(45%)in revenues from the delivery of magazines and catalogs.  Other revenue
sources fluctuate based on the timing of orders.  During the fourth quarter of
1997 as compared to the fourth quarter of 1996, increases in the deliveries of
product samples offset decreases from the deliveries of newspaper space
advertising and newspaper TMC deliveries.

     Operating results during the fourth quarter of 1997 were positively
affected by the reduction in operating expenses.

     Net profit for the fourth quarters of 1997 and 1996 was approximately the
same due to the fourth quarter 1996 recognition of an extraordinary gain of
$16,533 on the early retirement of debt.  There was no corresponding gain in
the fourth quarter of 1997.  Interest income and interest expense for the
fourth quarter of 1997 were $15,186 and $2,596 respectively.  Interest income
and interest expense for the fourth quarter of 1996 were $27,308 and $11,140,
respectively.

INFLATION

     The Company believes that inflation has not had a material impact on its
operations or liquidity to date.

SEASONALITY AND OTHER BUSINESS FLUCTUATIONS
     
     Although the Company experiences some seasonality in operations
corresponding with holiday advertising, such variations are not material to
overall annual results of operations.

     The events from the national economy that impact the Company include
employment levels, postal regulations, and newsprint and coated paper price
changes.  An increase in employment levels affect, to some degree, the
available pool of contract carriers that make the deliveries for the Company's
distribution network.  This usually increases the cost of recruitment for the
private delivery and newspaper networks, including the Alternate Postal
Direct, Inc. subsidiary, and may contribute subtle pressure on negotiated
delivery costs.

YEAR 2000 READINESS

     The Company believes that the impact of the Year 2000, will not have a
major impact on any future results and plans to have all of its internal
systems Year 2000 compliant by December 31, 1998.  The Company has upgraded
its accounting  system to be Year 2000 compliant and the Media Optimizer TM
was developed with Year 2000 compliant software.  All other software and
hardware are being analyzed to be certain that each is or can be Year 2000
compliant prior to year 2000.  Any additional upgrades will be non-material
and part of the normal course of operations.  In addition, the Company has
contacted its suppliers and customers to request verification of compliance.

LIQUIDITY AND CAPITAL RESOURCES

     During 1997, the Company was able to fund its operations with available
funds from the Company's initial public offering completed in September 1995.
The Company has established a bank line of credit for $500,000 to assist in
future cash flow needs.  Cash and equivalents decreased by $800,057 to
$1,057,898 at December 31, 1997.

SUMMARY OF CASH FLOWS

     Cash flows from operating activities.  Cash provided from (used in)
operating activities was $59,720 in 1997 compared to ($771,074) in 1996.  This
change was largely attributable to the improvement in the Company's net income
(loss).

     Cash flows from investing activities.  During 1997 the Company made
expenditures for property and equipment and computer software of $189,815 as
compared to $35,070 in 1996.  Most of the purchases in 1997 were for computer
equipment and upgrades and the development of the Media Optimizer TM.  In 1996
the Company made cash payments of $197,621 for costs of the acquisition of
Preferred Customer Delivery, Inc.

     Cash flows from financing activities.  During 1996, the Company
implemented a debt reduction strategy whereby it offered to pay long-term
noteholders of National Home Delivery, Inc. 60% of the principal balance due
upon an early retirement of the debt.  The offer was continued during 1997,
except that the Company offered 75% rather than 60% of the principal balance.
The Company paid down this debt by $488,257 and recognized a gain on early
retirement of debt of $232,909 in 1996.  It paid down this debt by $336,386 in
1997 and recognized a gain on early retirement of debt of $38,145.

     The Company believes that cash flows from operations, along with the
balance of the proceeds of the public offering will be adequate to fund its
current growth plans and meet its presently anticipated capital expenditure
requirements for the next twelve months.

OUTLOOK FOR THE FUTURE

     The Company intends to transform itself into a pure marketing services
business in 1998.  Due to this transformation, the Company will discontinue
revenue streams with limited potential growth, aggressively seek out revenue
streams with higher growth potential from sources that complement the
Company's current client base, and continue integration of all of the
marketing services offered to the Company's customers.

     With this transformation in mind, the Company intends to suspend its
monthly magazine delivery business by July 1, 1998.  While monthly magazine
delivery was the major portion of address specific revenue, the Company will
continue to work with its magazine publisher clients to offer other creative
services such as subscription promotions.

     The Company also intends to develop mail capabilities throughout the
United States to bundle with its private delivery and newspaper capabilities.
This service will complement the Company's existing services, especially in
less populated C & D counties.  The Company believes that this development,
which is expected to take place in the third quarter of 1998, represents a
growth areas for the Company and that it will replace the revenue loss from
monthly magazine deliveries.

     During 1998, the Company plans to maintain tight controls of its
operating expenses.  In addition, it will continue to add options and
versatility to its Media Optimizer TM to enhance its ability to identify the
best target markets for its clients and track activity for improved quality
control.  The Company will continue working with its core suppliers to
implement "Good Manufacturing Practices" and achieve maximum cost efficiency. 
The Company also intends to analyze packaging options to improve polybag
production and cost.


ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS

                                                            Page
      Report of Independent Accountants                     13
      Consolidated Balance Sheets                           14-15
      Consolidated Statements of Operations                 16
      Consolidated Statements of Changes in 
          Shareholders' Equity                              17
      Consolidated Statements of Cash Flows                 18-19
      Notes to Consolidated Financial Statements            20-31



                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders of
Alternate Postal Delivery, Inc.
and Subsidiaries

We have audited the accompanying consolidated balance sheets of Alternate
Postal Delivery, Inc. and Subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended.  These consolidated financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Alternate Postal Delivery, Inc. and Subsidiaries as of December 31, 1997
and 1996, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

Grand Rapids, Michigan
March 20, 1998


                 ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                   ASSETS

                                                   1997            1996
                                               ------------    ------------
Current assets:
  <S>                                          <C>             <C>
  Cash and cash equivalents                    $ 1,057,898     $ 1,857,955
  Accounts receivable, trade, less
   allowance of $103,800 and $100,000 in
   1997 and 1996, respectively                   2,392,855       2,511,361
  Notes receivable, current portion                                 37,375
  Prepaid expenses and other assets                164,902         255,863
                                               ------------    ------------
          Total current assets                   3,615,655       4,662,554

Notes receivable, less current portion              36,005          34,595

Property and equipment:
  Computer equipment                               562,741         508,813
  Furniture and fixtures                           411,087         383,020
                                               ------------    ------------
                                                   973,828         891,833
  Accumulated depreciation and
   amortization                                   (780,450)       (658,877)
                                               ------------    ------------
                                                   193,378         232,956

Computer software, net                             126,486          43,151

Intangible assets, net                           1,138,876       1,220,490

Other assets                                         7,241          32,241
                                               ------------    ------------
                                               $ 5,117,641     $ 6,225,987
                                               ============    ============

</TABLE>

                                   Continued



                 ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS, CONTINUED

                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                   LIABILITIES

                                                   1997            1996
                                               ------------    ------------
Current liabilities:
     <S>                                       <C>             <C>
     Notes payable, bank                       $               $   300,000
     Accounts payable                              630,792         760,389
     Accounts payable, related parties              76,993         100,321
     Accrued liabilities                           315,644         416,947
     Deferred revenue                               68,369         302,096
     Current portion of capitalized lease
      obligations                                    7,116          27,802
     Current portion of long-term debt              97,500         153,348
                                               ------------    ------------
          Total current liabilities              1,196,414       2,060,903

Long-term debt, less current portion                               324,933
Capitalized lease obligations, less current
 portion                                             3,278          10,008

Commitments and contingencies (Note A)

                              SHAREHOLDERS' EQUITY

Preferred stock-no par value, 2,000,000
 authorized, no shares issued and outstanding
Common stock-no par value, voting, 8,000,000
 authorized shares; 4,022,894 shares issued
 and outstanding                                 9,677,530       9,677,530
Accumulated losses, through 
 September 30, 1993 (Note A)                    (1,291,039)     (1,291,039)
                                               ------------    ------------
          Total common stock                     8,386,491       8,386,491

Accumulated losses, since
 October 1, 1993 (Note A)                       (4,468,542)     (4,556,348)
                                               ------------    ------------
          Total shareholders' equity             3,917,949       3,830,143
                                               ------------    ------------
                                               $ 5,117,641     $ 6,225,987
                                               ============    ============

</TABLE>

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

 
               ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                 1997             1996
                                             -----------      -----------
<S>                                          <C>              <C>
Net sales                                    $18,442,056      $19,937,151
Cost of sales                                 13,709,762       14,972,771
                                             -----------      -----------
     Gross profit                              4,732,294        4,964,380

Selling, general and
 administrative expenses                       4,738,167        5,578,338
Other operating expenses (Note H)                                 252,773
                                             -----------      -----------
                                               4,738,167        5,831,111
                                             -----------      -----------
     Loss from operations                    (     5,873)     (   866,731)

Other income, net (Note K)                        59,751           36,709
                                             -----------      -----------
Income (loss) before income taxes
 and extraordinary gain                           53,878      (   830,022)

Income tax expense                                 4,217            6,430
                                             -----------      -----------
Income (loss) before extraordinary gain           49,661      (   836,452)

Extraordinary gain from early
 retirement of debt                               38,145          232,909
                                             -----------      -----------
Net income (loss)                             $   87,806      ($  603,543)
                                             ===========      ===========
Net income (loss) per share: (Note F)
  Basic:
   Income (loss) before extraordinary gain    $      .01      ($      .21)
   Extraordinary gain                                .01              .06
                                             -----------      -----------
   Net income (loss)                          $      .02      ($      .15)
                                             ===========      ===========
  Diluted:
   Income (loss) before extraordinary gain    $      .01      ($      .25)
   Extraordinary gain                                .01              .07
                                             -----------      -----------
   Net income (loss)                          $      .02      ($      .18)
                                             ===========      ===========
Weighted average number of shares
  outstanding: (Note F)
  Basic                                        4,022,894        4,019,069
                                             ===========      ===========
  Diluted                                      4,022,894        3,343,825
                                             ===========      ===========
</TABLE>

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

                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                               Accumulated        Accumulated      Total
                    Common   Losses, through     Losses, since  Shareholders'
                    Stock   September 30, 1993  October 1, 1993    Equity
                    ------  ------------------  --------------- -------------
Balances,
 <S>               <C>          <C>               <C>             <C>
 December 31, 1995  9,418,780   ( 1,291,039)      ( 3,952,805)     4,174,936

Issuance of
 Common Stock         258,750                                        258,750

Net loss                                          (   603,543)   (   603,543)
                   ----------   ------------      ------------   ------------
Balances,
 December 31, 1996 $9,677,530   ($1,291,039)      ($4,556,348)    $3,830,143

Net income                                             87,806         87,806
                   ----------   ------------      ------------   ------------
Balances,
 December 31, 1997 $9,677,530   ($1,291,039)      ($4,468,542)    $3,917,949
                   ==========   ============      ============   ============
</TABLE>

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


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                   1997            1996
                                               ------------    ------------
Cash flows from operating activities:
  <S>                                           <C>            <C>
  Net income (loss)                             $    87,806    ($   603,543)
  Adjustments to reconcile net income (loss)
   to net cash provided by (used in) operating
   activities:
  Depreciation                                      124,599         137,837
  Amortization                                      128,073         115,333
  Extraordinary gain on settlement of debt     (     38,145)   (    232,909)
  (Gain) loss on sale of assets                (      1,500)          7,140
  Changes in assets and liabilities:
    (Increase) decrease in:
     Accounts receivable                            118,506    (     66,786)
     Prepaid and other assets                       128,336         221,030
    (Decrease) increase in:
     Accounts payable                          (    152,925)   (    212,162)
     Accrued liabilities                       (    101,303)         44,339
     Deferred revenue                          (    233,727)   (    181,353)
                                                ------------    ------------
     Net cash provided by (used in) operating
       activities                                    59,720    (    771,074)
                                                ------------    ------------
Cash flows from investing activities:
   Purchases of property and equipment         (     85,021)   (     32,085)
   Proceeds from sale of equipment                    1,500           1,500
   Purchases of software                       (    104,794)   (      2,985)
   Payment for business acquisition                            (    197,621)
   Payments received for notes receivable            12,002           3,864
   Issuance of notes receivable                (     13,412)
                                                ------------    ------------
     Net cash used in investing activities     (    189,725)   (    227,327)
                                                ------------    ------------
Cash flows from financing activities:
   Payments on notes payable,bank              (  1,740,000)   (  7,169,239)
   Proceeds from borrowings on notes
     payable, bank                                1,440,000       7,175,000
   Principal payments on long-term debt
     and lease obligations                     (    370,052)   (    540,470)
                                                ------------    ------------
     Net cash used in financing
       activities                              (    670,052)   (    534,709)
                                                ------------    ------------
</TABLE>
                                    Continued


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                 for the years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                   1997            1996
                                               ------------    ------------
<S>                                            <C>             <C>
Net decrease in cash and cash equivalents      (    800,057)   (  1,533,110)

Cash and cash equivalents, beginning of year      1,857,955       3,391,065
                                                ------------    ------------
Cash and cash equivalents, end of year          $ 1,057,898    $  1,857,955
                                                ============    ============

Supplemental Disclosure of Cash Flow
 Information:
  Income taxes paid                             $     4,217    $      6,430
                                                ============    ============
  Interest paid                                 $    48,818    $    103,325
                                                ============    ============

</TABLE>

Supplemental Schedule of Noncash Investing and Financing Activities:

     During the year ended December 31, 1996, capital lease obligations of
$8,454 were incurred when the Company entered into leases for new equipment.
In addition, in connection with the acquisition of certain assets of Preferred
Customer Delivery, Inc.(Note B), the Company assumed a note payable in the
amount of $110,000 and issued 50,000 shares of its common stock valued at
$258,750.

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

                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.   Summary of Significant Accounting Policies:

     The following is a summary of significant accounting policies followed in
the preparation of the financial statements.

Principles of Consolidation

     The consolidated financial statements include the accounts of Alternate
Postal Delivery, Inc. (APD) and its wholly-owned subsidiaries Alternate Postal
Direct, Inc., Newspaper Marketing Solutions, Inc., and National Home Delivery,
Inc.(NHD)(collectively referred to as the Company).  All significant
intercompany transactions have been eliminated.

Business

     The Company is a consolidator in the direct marketing services industry
and provides delivery of targeted sales and marketing materials to the home by
means that can be more flexible and less expensive than delivery by the United
States Postal Service (USPS).  The Company provides its services throughout
the United States.  The Company's customers are comprised of advertising
agencies, magazine publishers, catalogers, newspaper publishers, and packaged
goods manufacturers.  Decreases in USPS rates could negatively impact the
direct marketing services industry and, because barriers to enter local
markets are not significant, positive changes may attract additional
competitors to the industry.

Revenue Recognition

     Revenues for delivery services are recognized at the time of delivery. 
Revenues for advertising in newspapers are recognized when the ads run in the
newspapers.  Revenues for software sales are recognized at the time of
installation.  Revenues for affiliate activation fees are deferred until such
time as the affiliates are no longer eligible for a refund.

     During the years ended December 31, 1997 and 1996, the Company had no
customers which accounted for 10 percent or more of the Company's revenues.

Cash Equivalents

     The Company considers all highly liquid instruments to be cash
equivalents.

Property and Equipment

     Property and equipment are recorded at cost.  Upon sale or retirement,
the cost and related accumulated depreciation are eliminated from the
respective accounts and the resulting gain or loss is included in operations.
Maintenance and repairs which do not improve or extend the lives of the
respective assets are charged to expense as incurred.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

A.   Summary of Significant Accounting Policies, continued:

     Depreciation and amortization are computed over the estimated useful
lives of the assets using the straight-line and accelerated methods:

                  Computer equipment          5 years
                  Furniture and fixtures      5 to 7 years

     Property and equipment includes computer equipment and furniture and
fixtures under capital leases of $119,159 at December 31, 1997 and 1996 and
accumulated amortization of $92,657 and $68,529 respectively.

Computer Software

     Purchased computer software is recorded at cost and is amortized over the
estimated useful lives of the assets.  Computer software developed for
internal use is amortized over the estimated useful life of the asset.  The
costs which are capitalized include external direct costs of materials and
services incurred in the developing or obtaining internal-use software.  At
December 31, 1997 and 1996, accumulated amortization was $123,051 and
$101,593, respectively.

Intangible Assets

     Intangible assets consist of the excess cost over fair market value of
net assets of acquired businesses and are being amortized ratably over 20
years.  The carrying value of goodwill is periodically reviewed to determine
if an impairment has occurred.

     At December 31, 1997 and 1996, accumulated amortization of goodwill was
$521,774 and $440,160, respectively.

Income taxes

     Since inception the Company had been an S Corporation, whereby income or
loss was included in the federal income tax returns of the shareholders.  On
October 1, 1993 the Company formed a wholly-owned subsidiary, which caused a
change in the Company's tax status from an S Corporation to a C Corporation
(see Income Taxes Note).  As a result of this change, accumulated losses at
September 30, 1993 were reclassified to reduce common stock to zero with the
remaining balance presented as a separate component of shareholders' equity.

Advertising

     The cost of advertising and marketing programs are charged to operations
in the year incurred.  Advertising expense was $116,441 and $208,749 for the
years ended December 31, 1997 and 1996, respectively.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

A.   Summary of Significant Accounting Policies, continued:

Financial Instruments

     At December 31, 1997 and 1996, the Company has cash and cash equivalents,
notes receivable, and debt which are considered financial instruments.  The
market value of these financial instruments, as determined through information
obtained from banking sources and management estimates, approximate the
carrying value reported in the balance sheet.

Income (loss) Per Share

     The Company implemented Statement of Financial Accounting Standards No.
128, "Earnings per Share", for financial statements for the year ended
December 31, 1997.  This Statement simplifies the standards for computing
earnings per share, replacing the presentation of primary earnings per share
with a presentation of basic earnings per share.  SFAS No. 128 also requires
dual presentation of basic and diluted earnings per share on the face of the
income statement for all entities with complex capital structures.  Basic
earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period.  Diluted earnings per share is computed similarly to fully diluted
earnings per share pursuant to APB Opinion No.15, "Earnings per Share", which
is superseded by this Statement.  Loss per share for 1996 has been restated to
conform to SFAS No. 128.  Adoption of this standard did not have a material
effect on reported income per share in 1997 and 1996.

     Basic income (loss) per share is determined by dividing the net income
(loss) by the weighted average number of shares of common stock outstanding.
Diluted income (loss) per share is determined by dividing the net income
(loss) by the weighted average number of shares of common stock outstanding
while giving effect to all dilutive potential common shares.

Recent Accounting Pronouncement

     In June of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income."  This statement establishes standards for the reporting and display
of comprehensive income and its components within the financial statements.
Comprehensive income includes items such as foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities.  This statement is effective for
fiscal years beginning after December 15, 1997, with reclassification of prior
periods required.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

A.   Summary of Significant Accounting Policies, continued:

     In June of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information."  This statement
establishes standards for the way in which public entities report information
about operating segments in annual financial statements.  It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers.  This statement requires that general-purpose
financial statements include selected information reported on a single basis
of segmentation.  This statement is effective for fiscal years beginning after
December 15, 1997, with restatement of comparative information for earlier
years being required.

Estimates

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

B.   Acquisitions:

     On January 29, 1996, the Company acquired certain assets of Preferred
Customer Delivery, Inc.(PCD) in a transaction accounted for by the purchase
method. The purchase price included a cash payment of $165,000, $110,000
assumption of debt and the issuance of 50,000 shares of the Company's common
stock valued at $258,750.  The Company recorded goodwill of approximately
$477,000 as a result of this acquisition.  The results of operations of PCD
are included in the consolidated financial statements from the date of
acquisition.  PCD's results of operations were not significant to the
consolidated financial statements for the period in 1996 prior to the
acquisition.

     On March 29, 1996, the Company acquired National Home Delivery, Inc. in a
transaction accounted for by the pooling-of-interests method.  The Company
issued 700,000 shares of its common stock for all of the outstanding shares of
NHD.  Additionally, stock options outstanding under NHD's plan were exchanged
for 129,069 stock options of the Company.  The options were issued at an
exercise price of $5.02 (in January 1997, the options were repriced - see Note
J).  In June 1994, the U.S. Bankruptcy Court approved a reorganization plan
for NHD.  At the date of the pooling, certain notes payable were still
outstanding and subject to the provisions of the reorganization plan. The
Company recognized an extraordinary gain of $38,145 and $232,909 on the
settlement of notes payable for the years ended December 31, 1997 and 1996,
respectively. (Note D)


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

B.   Acquisitions, continued:

     The following table sets forth the unaudited pro forma results of
operations for the period ended December 31, 1996 as if the acquisition were
consummated at the beginning of the period.  This pro forma information does
not purport to be indicative of what would have occurred had the acquisition
been made as of that date or of results which may occur in the future.

<TABLE>
<CAPTION>
              Revenue:
               Pre-merger:
                 <S>                     <C>
                 APD                     $ 2,249,577
                 NHD                       3,613,911
                 PCD                          --
               Post-merger                14,073,663
                                         -----------
                                         $19,937,151
                                         ===========
              Net income (loss):
               Pre-merger:
                 APD                    ($   276,223) 
                 NHD                          22,165
                 PCD                          --
               Post-merger              (    349,485)
                                         -----------
                                        ($   603,543)
                                         ===========
</TABLE>

C.   Retirement Plan:

     On September 1, 1996, the Company established a qualified 401(k)
retirement plan covering all employees who have met certain requirements as to
age and date of service.  The plan allows for employees to make contributions
by salary reductions.  Company contributions are determined annually at the
discretion of the Board of Directors.  Company contributions for the years
ended December 31, 1997 and 1996 were $14,172 and $4,331, respectively.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

D.   Debt:

     Debt consisted of the following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                    1997          1996
                                                 ----------    ----------
Note payable to shareholder, interest
 at 7.5 percent, due June 1997, collateralized
 <S>                                             <C>            <C>
 by accounts receivable                               -         $140,000

Notes payable, unsecured, in settlement of trade
 and other claims, interest at 8 percent
                                                      -          227,433

Note payable, non interest bearing,
 payable in monthly installments of $521,
 with the remaining balance due August 1, 1998.   $  97,500      103,750

Other                                                 -            7,098
                                                  ---------    ---------
                                                     97,500      478,281
Less current maturities                              97,500      153,348
                                                  ---------    ---------
                                                  $   -         $324,933
                                                  =========   ==========
</TABLE>

     During 1997, the Company retired approximately $336,000 of unsecured
notes payable at a discount.  The Company paid 75 cents on the dollar for
certain notes and accordingly recognized an extraordinary gain on early
retirement of the debt of $38,145. During 1996, the Company retired
approximately $488,000 of unsecured notes payable at a discount.  The Company
paid 60 cents on the dollar and accordingly recognized an extraordinary gain
on early retirement of the debt of $232,909.

     The Company has a line of credit agreement with a bank, providing for
borrowings not to exceed $500,000, based upon a percentage of eligible
accounts receivable.  The agreement, which expires November 30, 1998, bears
interest at one-half percent over the bank's prime rate.  At December 31, 1997
the Company had no outstanding balance on the line of credit.

E.   Common Stock:

     The Company has an Outside Directors Deferred Compensation Plan (the
"Deferred Compensation Plan") which provides for the deferral of directors
fees and, ultimately the issuance of common stock in lieu of the deferred cash
fee.  In connection with this plan, the Company has reserved 50,000 shares of
common stock.

     At December 31, 1997, the Company has outstanding warrants aggregating
354,875 shares of Common Stock exercisable at $6 per share.  These warrants
are exercisable through September 2000.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>

F.   Net Income (Loss) Per Share Calculation:
                                                   1997            1996
                                               ------------    ------------
Income (Numerator):
<S>                                             <C>            <C>
Income (loss) before extraordinary gain         $   49,661     ($  836,452)
Extraordinary gain from early
 retirement of debt                                 38,145         232,909
                                                -----------     -----------
 Net income (loss)                              $   87,806     ($  603,543)
                                                ===========     ===========
Shares (Denominator):
 Basic income (loss) per share:
  Actual weighted average shares outstanding     4,022,894       4,019,069
                                                ===========     ===========
  Basic income (loss) per share:
   Income (loss) before extraordinary gain      $      .01     ($      .21)
   Extraordinary gain                                  .01             .06
                                                -----------     -----------
   Net income (loss) per share                  $      .02     ($      .15)
                                                ===========     ===========
Shares (Denominator):
 Diluted income (loss) per share:
  Actual weighted average shares outstanding     4,022,894       4,019,069
  Net reduction in shares upon conversion of
   warrants and options                              *        (    675,244)
                                               ------------    ------------
    Adjusted shares outstanding                  4,022,894       3,343,825
                                               ============    ============
  Diluted income (loss) per share:
   Income (loss) before extraordinary gain      $      .01    ($       .25)
   Extraordinary gain                                  .01             .07
                                               ------------    ------------
   Net income (loss) per share                  $      .02    ($       .18)
                                               ============    ============
</TABLE>

*Net reduction of shares of 667,335 is anti-dilutive and therefore not
presented.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

G.   Leases:

     The Company leases certain office facilities, warehouse facilities, and
equipment used in its operations.  Future minimum rental payments required
under leases that have initial or remaining terms in excess of one year at
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
             Year                         Capital      Operating
             <C>                          <C>           <C>
             1998                         $  8,409      $110,166
             1999                            3,548        41,082
             2000                                         18,543
                                         ---------    ----------
                                            11,957      $169,791
                                                      ==========
             Less amount representing
                  imputed interest           1,563
                                         ---------    
                                            10,394
             Less current portion            7,116
                                         ---------
                                          $  3,278
                                         =========
</TABLE>

     Rental expense for facilities, transportation vehicles and equipment for
the years ended December 31, 1997 and 1996 was approximately $273,900 and
$300,900, respectively.

H.   Other Operating Expenses:

     In 1996, the Company incurred start-up expenses for a project which the
Company chose not to pursue in the amount of $193,525.  In addition, the
Company incurred acquisition expenses of $59,248 in connection with the
pooling-of-interest transaction completed on March 29, 1996.

I.   Income Taxes:

     Deferred income taxes are recognized for the temporary differences
between the tax bases of assets and liabilities and their financial reporting
amounts.  The income tax provision is the tax payable/recoverable for the
period and the change during the period in deferred tax assets and
liabilities.


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

I.  Income Taxes, continued:

     Income tax expense for the years ended December 31, 1997 and 1996
consists of the following:

<TABLE>
<CAPTION>
                                               Year Ended
                                               December 31,
                                             1997       1996
                                           ---------  ---------
       Federal:
            <S>                            <C>        <C>
            Deferred expense (benefit)     $ 59,000   ($183,000)
            Change in valuation allowance (  59,000)    183,000
       State:                                 4,217       6,430


                                           --------    --------
                                           $  4,217    $  6,430
                                           ========    ========

     Major components of the Company's deferred taxes are as follows:

                                               December 31,
                                             1997        1996
                                           --------   ---------
       Receivable allowance              $   35,000  $   34,000
       Vacation accrual                      43,000      50,000
       Deferred compensation                 11,000
       Net operating loss carryforward    1,662,000   1,726,000
       Valuation allowance               (1,751,000) (1,810,000)
                                         ----------   ---------
                                         $     -     $     -
                                         ==========   =========
</TABLE>

     At December 31, 1997, the Company has net operating loss carryforwards of
approximately $4,900,000, which are available to reduce future taxable income.
These carryforwards expire in 2005 to 2010.  The net operating loss
carryforwards include approximately $3,100,000 which relate to the operations
of NHD prior to the pooling of interest and are subject to certain
limitations.

J.   Stock Options:

     The Company has a Long-Term Incentive Stock Option Plan (the "Incentive
Plan") and an Outside Directors and Advisors Stock Option Plan (the "Directors
& Advisors Plan"), to encourage stock ownership by employees, officers,
directors and other individuals as determined by the Board of Directors or a
committee appointed by the Board of Directors.  Options granted under the
Incentive Plan may be either incentive stock options as defined by the
Internal Revenue Code, or nonqualified stock options.  All options under the
Directors & Advisors Plan are nonqualified options.  Options granted under the
Directors and Advisors Plan are vested when granted and have a term of 10
years.  Options granted under the Incentive Plan have a vesting period of 6
months to 5 years with terms ranging from 5 to 10 years. In connection with


                ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

J.  Stock Options, continued:

these plans, the Company has reserved a total of 450,000 shares of common
stock.  Options were not granted at less than the fair market value of the
Company's common stock on the date of grant, therefore, no compensation
expense has been recognized in 1997 or 1996.

     In conjunction with the acquisition in 1996 of National Home Delivery,
Inc., stock options of National Home Delivery, Inc. were exchanged for 129,069
incentive options of the Company.  As of December 31, 1997, these options are
outstanding and exercisable.

     In January 1997, the Company's Stock Option Committee elected to reprice
certain stock options as an incentive for retention and motivation of the
Company's personnel, including certain options granted to executive officers.
The Committee believed that outstanding stock options with an exercise price
substantially in excess of the current market price no longer served to
encourage employee retention or to motivate high levels of performance.
Eligible employees were permitted to exchange all eligible outstanding
options, whether vested or unvested, on a one-for-one basis for new options
under the Company's Incentive Plan and options issued in connection with the
acquisition of National Home Delivery, Inc.  The exercise price of all of the
repriced options is equal to the closing price on the Nasdaq Small Cap market
on January 21, 1997 of $3.125.  All options previously vested were exchanged
for options with a new one year vesting.  All options not previously vested
were issued with a two year vesting.

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans.  Had compensation cost for the
Company's stock based plans been determined based on the fair value at the
1997 and 1996 grant dates, consistent with the method prescribed by the
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation", the Company's net income (loss) and income (loss) per
share would have been adjusted to the proforma amounts indicated in the
following table:

<TABLE>
<CAPTION>
                                         Year Ended
                                        December 31,
                                      1997        1996
                                   -----------  -----------
          Net Income (Loss)
            <S>                      <C>         <C>
            As Reported              $ 87,806    ($603,543)
            Pro Forma               ($187,935)   ($856,163)

          Income (Loss) Per Share
            As Reported
              Basic                     $0.02       ($0.15)
              Diluted                   $0.02       ($0.18)
            Pro Forma
              Basic                    ($0.05)      ($0.21)
              Diluted                  ($0.06)      ($0.26)

</TABLE>

                 ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

J.   Stock Options, continued:

     The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions
for December 31, 1997 and 1996; risk free rate of six percent; no dividend
yield for all years; expected life 5 years; and volatility of 41 percent.
Option valuation models, like the stock price Black-Scholes model, require the
input of highly subjective assumptions including the expected stock price
volatility.  Because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its stock options.

<TABLE>
<CAPTION>
                          December 31, 1997      December 31, 1996
                         --------------------   ---------------------
                         Options    Weighted-    Options    Weighted-
                                       Avg.                    Avg.
                                    Exercise                Exercise
                                      Price                   Price
                        ---------   ---------   ---------   ---------
Outstanding-beginning
<S>                      <C>         <C>         <C>         <C>
of year                  298,546     $5.07       235,569     $5.00

Granted                   64,800     $2.78        84,927     $5.24

Forfeited                 20,627     $5.38         9,150     $5.10

Expired                    7,850     $5.07        12,800     $5.00

Repriced                 224,096     $3.15

Outstanding-end of year  334,869     $3.42       298,546     $5.07

Exercisable at end of
year                      47,500     $4.01       227,019     $5.01

Weighted-average fair
value of options granted
during the year            $1.23                   $2.35
</TABLE>

Options outstanding as of December 31, 1997 are described below:
<TABLE>
<CAPTION>
                                       Weighted Avg     Weighted Avg
    Range of Prices        Options    Exercise Price   Remaining Term
    ----------------       -------    --------------   ---------------
    <S>                     <C>          <C>               <C>
    $2.500 to $2.625        37,500        $2.53            9.41 years
    $2.626 to $3.625       249,869        $3.19            7.34 years
    $3.626 to $5.875        47,500        $5.35            8.08 years
    ----------------       -------        -----            ----------
    $2.500 to $5.875       334,869        $3.42            7.68 years

</TABLE>

                 ALTERNATE POSTAL DELIVERY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued

K.   Other Income, net:

<TABLE>
<CAPTION>

     Other income, net consists of the following:

                                                 1997             1996
                                             -----------      -----------
         <S>                                 <C>              <C>
         Interest income                     $   81,256       $  153,397
         Interest expense                   (    20,756)     (   103,336)
         Loss on sale of assets             (       749)     (    13,352)
                                             -----------      -----------
                                             $   59,751       $   36,709
                                             ===========      ===========
</TABLE>

L.   Related Party Transactions:

     Amounts due for the delivery of materials by private delivery affiliates
that are affiliated through common shareholders are presented in accounts
payable, related parties on the accompanying consolidated balance sheet.


Item 8. Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure

     None.
                             PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

     Incorporated by reference to the Company's definitive proxy materials to
be filed with the Commission on or about April 6, 1998.

Item 10.  Executive Compensation

     Incorporated by reference to the Company's definitive proxy materials to
be filed with the Commission on or about April 6, 1998.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     Incorporated by reference to the Company's definitive proxy materials to
be filed with the Commission on or about April 6, 1998.

Item 12.  Certain Relationships and Related Transactions

     Incorporated by reference to the Company's definitive proxy materials to
be filed with the Commission on or about April 6, 1998.

Item 13.  Exhibits and Reports on Form 8-K

Reports on Form 8-K

     The following reports on Form 8-K were filed by the Company during the
last quarter of the fiscal year ended December 31, 1997.

     None.                            SIGNATURES


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


                              ALTERNATE POSTAL DELIVERY, INC.



Dated: March 30, 1998               By:/s/Phillip D. Miller


     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
Company and in the capacities and on the dates indicated.

                                                              Dated

/s/Phillip D. Miller                                          March 30, 1998
Phillip D. Miller, Chief Executive Officer and
President (Principal executive officer) and Chairman of the 
Board of Directors



/s/Sandra J. Smith                                            March 30, 1998
Sandra J. Smith, Chief Financial Officer and
Treasurer (Principal accounting and financial officer)



/s/Stan Henry                                                 March 30, 1998
Stan Henry, Director



/s/Thomas Hiatt                                               March 30, 1998
Thomas Hiatt, Director



/s/Harry Edelson                                              March 30, 1998
Harry Edelson, Director

                              INDEX TO EXHIBITS

Index No.  Description                                                  Page#

2.1        Asset Purchase Agreement with Preferred Customer Delivery, Inc.
           dated January 24, 1996 (3)
2.2        Acquisition Agreement with National Home Delivery, Inc.
           dated March 29, 1996 (4)
3.1        Amended and Restated Articles of Incorporation of
           the Company (1)
3.2        Bylaws of the Company, as amended (1)
4.1        Form of Stock Certificate evidencing Common Stock,
           no par value (1)
4.2        Form of Lock-Up Agreement executed by certain
           shareholders (1)
4.3        1995 Long-Term Incentive and Stock Option Plan (1)
4.4        1995 Outside Directors and Advisors Stock Option Plan (1)
4.5        Outside Directors Deferred Compensation Plan (1)
4.6        Form of Noteholder Warrant (1)
4.7        Form of Registration Rights Agreement with Noteholders(1)
10.1       Forms of Agreement with Newspaper Affiliates (1)
10.2       Form of Agreement with Magazine Publishers (1)
10.3       Employment Agreement dated July 21, 1995 between the
           Company and Phillip D. Miller (1)
10.4       Agreement dated July 21, 1995 between the Company and
           D.B. Krieger regarding his role as Chairman (1)
10.5       Form of Software License Agreement (1)
10.7       Financial Services Agreement dated October 21, 1994
           between the Company and Carnegie Hill Company, and
           amendment dated January 3, 1995 (1)
10.8       Lease Renewal dated August 8, 1995 for Grand Rapids,
           MI Executive Offices (2)
10.9       Lease for Santa Rosa, CA warehouse and office space (2)
10.10      Lease for Concord, CA warehouse and office space (2)
10.11      Lease for San Leandro, CA warehouse and office space (2)
10.12      Sublease for San Leandro, CA warehouse and office space (2)
10.13      Lease for St. Petersburg, FL warehouse sites (2)
10.14      Lease for St. Petersburg, FL warehouse and office space (2)
21.1       List of Subsidiaries of the Company (5)                       35
________________________

(1)   Incorporated by reference to said exhibit included in Registration
      Statement on form SB-2, Commission File No. 33-95332C.
(2)   Incorporated by reference to said exhibit filed with the Registrant's 
      Annual Report on Form 10-KSB for the year ended December 31, 1995.
(3)   Incorporated by reference to Form 8-K/A (dated April 4, 1996)
(4)   Incorporated by reference to Form 8-K (dated April 11, 1996)
(5)   Filed herewith.
(6)   All other schedules for which provision is made in the applicable
      accounting regulation of the Securities and Exchange Commission
      are either included within the financial statements, not required under
      the related instruction, or are not applicable and, therefore, have been
      omitted.