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

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------

                                   Form 10-QSB

  (Mark One)
      [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
            Exchange Act of 1934

            For the period ended September 30, 1996

      [   ] 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 1-14076

                             ALLEGRO NEW MEDIA, INC.
              (Exact name of small business issuer in its charter)

          Delaware                                          22-3270045
     (State or other jurisdiction                        (I.R.S. Employer
   of incorporation or organization)                   Identification Number)


                  3 Oak Road, Fairfield, NJ              07004
         (Address of principal executive offices)       (Zip Code)


                                 (201) 808-1992
                (Issuer's telephone number, including area code)


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

     State the number of shares  outstanding of each of the issuer's  classes of
common equity,  as of the latest  practicable  date:  4,464,431 shares of common
stock as of October 1, 1996.

     Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]


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


<PAGE>





                     CROSS REFERENCE SHEET

                                                                    Page
                                                                   Number
Cover Page                                                            1

Index                                                                 2

                 Part I. Financial Information

Item 1.   Financial Statements (Unaudited):

          Condensed consolidated balance sheets - September 
          30, 1996 and December 31, 1995                              3
          Condensed consolidated statements of operations - 
          For the three and nine months ended September 30, 
          1996 and 1995                                               4
          Condensed consolidated statements of cash flows - 
          For the nine months ended September 30, 1996 and 1995       5
          Notes to condensed financial statements - 
          September 30, 1996                                          6

Item 2.   Management's Discussion and Analysis of Financial 
          Condition and Results of Operations.                        8

                   Part II. Other Information

Item 1.   Legal Proceedings.                                          11

Item 2.   Changes In Securities.                                      11

Item 3.   Defaults upon Senior Securities.                            11

Item 4.   Submission of Matters to a Vote of Security Holders.        12

Item 5.   Other Information.                                          12

Item 6.   Exhibits and Reports on Form 8-K                            12

Signature Page                                                        13

Index to Exhibits                                                     14


<PAGE>


                          Part I. Financial Information

                             ALLEGRO NEW MEDIA, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET
  
<TABLE>
<CAPTION>
                                                       September 30,       December 31,
                                                          1996                  1995
                                                        (Unaudited)
                    ASSETS
<S>                                                     <C>                 <C> 
Current assets:
   Cash                                                 $  990,516          $2,928,272
   Accounts receivable, net                              1,347,991             342,425
   Inventories (Note 3)                                    421,870             225,013
   Other current assets                                    226,039             103,380
                                                        ----------          ----------
       Total current assets                              2,986,416           3,599,090
Equipment, furniture and leasehold improvements -net       145,737              53,150
Goodwill and other intangibles - net                     1,376,065                  --
Royalty advances and other assets                          276,239             206,366
                                                        ----------          ----------
                                                        $4,784,457          $3,858,606
                                                        ----------          ----------
</TABLE>

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                    <C>                  <C> 
Current liabilities:
  Accounts payable                                     $ 1,164,711          $  410,818
  Accrued liabilities and current portion of debt        1,470,670             309,924
                                                       -----------          ----------
   Total current liabilities                             2,635,381             720,742
  Long-term debt                                            58,539                  --
   Total Liabilities                                     2,693,920             720,742

Stockholders' equity:
  Serial Preferred Stock, authorized 2,000,000 shares:
   Class B Voting Preferred Stock, 60,520 shares
   issued and outstanding                                       61                  61
  Common stock, par value $.001 per share,
   authorized 18,000,000 shares; issued and 
   outstanding 4,464,431 shares in 1996 and 
   3,335,077 shares in 1995                                  4,464               3,335
 Additional paid-in capital                             13,156,779           6,158,753
 Accumulated deficit                                   (11,070,767)         (3,024,285)
                                                        ----------          ----------
   Total stockholders' equity                            2,090,537           3,137,864
                                                        ----------          ----------
   Total liabilities and stockholders' equity          $ 4,784,457          $3,858,606
                                                        ----------          ----------
<FN>

     Note:  The balance  sheet at December  31, 1995 has been  derived  from the
audited  financial  statements  at that  date but does  not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.

     See notes to condensed financial statements.
</FN>
</TABLE>

<PAGE>

                             ALLEGRO NEW MEDIA, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended          Nine Months Ended
                                                         September 30,               September 30,
                                                     1996              1995      1996             1995

<S>                                               <C>             <C>         <C>             <C>       
Net sales                                         $ 1,687,889     $ 298,342   $ 2,554,937     $  913,041
Cost of goods sold                                    387,344        90,241       729,513        430,015
                                                  -----------     ----------  -----------     -----------
Gross profit                                        1,300,544       208,101     1,825,424        483,026

Selling, general and administrative
 expenses                                           3,968,380       270,166     5,623,831        987,996
Product development                                   158,172        78,009       597,738        249,894
In-process research and development                 3,886,000             -     3,886,000              -
Other (income) expense   net                          (82,685)       71,643      (135,663)        71,678
                                                  -----------     ----------  -----------     -----------
Net loss                                           (6,629,322)     (211,717)   (8,146,482)      (826,542)
Accretion of carrying value and dividends
  attributable to Class A Preferred Stock                ___         83,822          ___         251,466
                                                  -----------     ----------  -----------     -----------
Net loss attributable to common
  stockholders                                    $(6,629,322)   $ (295,539)  $(8,146,482)    $(1,078,008)
                                                  -----------     ----------  -----------     -----------

Net loss per share                                     $(1.80)        $(.25)       $(2.44)          $(.72)

Weighted average number of common
   shares outstanding                                3,680,435    1,198,994     3,331,920       1,498,133
                                                  -----------     ----------  -----------     -----------

<FN>
See notes to condensed financial statements.
</FN>
</TABLE>


<PAGE>


                             ALLEGRO NEW MEDIA, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
  
<TABLE>
<CAPTION>
                                                        For the Nine Months Ended September 30,
                                                           1996                        1995


<S>                                                     <C>                        <C>       
Operating activities
Cash (used in) operations                               $(1,783,155)               $(878,321)

Investment activities
Purchase of equipment and furniture                         (28,602)                 (17,151)
Loans/note receivable                                      (200,000)
Acquisition of Serif Inc. and Serif
   (Europe) Ltd.--net of cash acquired                     (390,906)
                                                        ------------               -----------

                                                           (619,508)                 (17,151)

Financing activities
Proceeds from sale of common stock                          464,907
Issuance of notes payable                                                          1,648,717
Payment of notes payable                                   (559,000)
Deferred costs                                             (185,685)
                                                        ------------               -----------
                                                            464,907                  904,032

Net (decrease) increase in cash                          (1,937,756)                   8,650
Cash at beginning of period                               2,928,272                  212,749
                                                        ------------               -----------
Cash at end of period                                    $  990,516                $ 221,309
                                                        ------------               -----------

<FN>

See notes to condensed financial statements.
</FN>
</TABLE>

<PAGE>


                             ALLEGRO NEW MEDIA, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.     Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information  and with the  instructions  to Form  10-QSB and
Article  310 of  Regulation  S-B.  Accordingly,  they do not  include all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation have been included.  Operating results for the three month and nine
month periods ended  September  30, 1996 are not  necessarily  indicative of the
results that may be expected for the year ended  December 31, 1996.  For further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto included in the Company's annual report on Form 10-KSB and Form 10-KSB/A
for the year ended December 31, 1995.

2.     Loss Per Share.

     Net loss per share is computed  based upon the weighted  average  number of
shares of common  stock and  common  share  equivalents  outstanding  during the
periods  presented.  In accordance  with the Securities and Exchange  Commission
Staff  Accounting  Bulletin No. 83,  shares  issuable  upon  exercise of options
granted  during the twelve  months  immediately  preceding  the  initial  public
offering have been included in the  calculation  of shares used in computing net
loss per share as if they were  outstanding for all periods  presented using the
treasury stock method. For the period subsequent to the initial public offering,
common share equivalents  resulting from outstanding  options to purchase common
stock are excluded as the impact is anti-dilutive.

3.     Inventories

Inventories consist of the following:

<TABLE>
<CAPTION>
                                     September 30, 1996       December 31, 1995

       <S>                               <C>                      <C>      
       Raw materials                     $ 210,851                $  65,586
       Finished goods                      211,019                  125,777
                                         ---------                ---------
                                         $ 421,870                $ 225,013
                                         ---------                ---------
</TABLE>


4.     Shareholder's Equity

     During 1994 the Company  issued an  aggregate  of  1,190,250  shares of its
Class A Cumulative,  Convertible,  Redeemable 10% Preferred  Stock  ("Redeemable
Preferred  Stock") in a private  placement  transaction.  In accordance with its
terms,  all of the shares of Redeemable  Preferred  Stock were converted into an
aggregate of 491,821 shares of the Company's common stock upon completion of the
Company's  initial public  offering in December 1995. No dividends were declared
or paid on the Redeemable Preferred Stock.

     In connection with certain financing  transactions  during 1993, certain of
the  then  existing  employee/stockholders  of the  Company  agreed  to place an
aggregate of 1,000,000  newly issued shares of the  Company's  common stock into
escrow.  Under the terms of the escrow  agreement such shares are to be released
to the stockholders  based upon the Company achieving certain financial results,
as defined.  When such  escrowed  shares are released,  Securities  and Exchange
Commission  rules require  recognition  by the Company of  compensation  expense
based on the fair  value  of the  shares  at the  date of  release.  The  escrow
agreement expires the earlier of the release of all of the escrow shares or June
30, 1999.  Any shares not  released  are to be returned to the  Company.  During
1994, with the approval of such  stockholders,  677,500 of these escrowed shares
were canceled.


<PAGE>

                             ALLEGRO NEW MEDIA, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     4.  Shareholder's  Equity  (continued)

     On March 31, 1995, certain existing  stockholder  employees  surrendered to
the Company a total of 280,000  shares of the Company's  common stock and agreed
to place an additional  220,000  shares under the terms of an additional  escrow
agreement.  These shares are to be released to the stockholders upon the Company
attaining certain financial results, as defined. Release of these shares results
in recognition of compensation  expense based on the fair value of the shares at
the date of release.

     In December  1995,  the Company  completed  an initial  public  offering of
1,033,000  shares of its common stock and  received net proceeds of  $4,156,411.
Upon the  completion  of the  offering  the Company  repaid all of its 10% notes
payable and in addition  issued 243,902 shares of its common stock to the former
note holders  pursuant to the terms of their  subscription.  On January 23, 1996
the Company issued 109,400 shares of common stock to its  underwriter,  upon the
underwriter's  exercise of its over-allotment  option, and received net proceeds
of $464,907.

     On April 26, 1996,  upon the  execution of and delivery by the Company of a
letter of intent to acquire all of the issued and  outstanding  capital stock of
Serif Inc. and Serif  (Europe)  Limited,  217,000 shares of Common Stock held in
escrow  pursuant to the above described  arrangements  were released from escrow
and delivered to the two stockholder employees.  In connection with this release
of escrow shares,  the Company  recorded  compensation  expense of $637,980.  On
September 5, 1996, in recognition of the performance of the Company's management
team,  the Board of Directors  released  314,000  shares of Common Stock held in
escrow pursuant to the above described  arrangements  and authorized such shares
to be delivered  to the two  stockholder  employees,  and the  remaining  11,500
shares held in escrow were canceled.  In connection  with this release of escrow
shares, the Company recorded  compensation  expense of $2,135,200.  There are no
shares remaining in escrow.

     In May 1996, the company issued 17,273 shares of common stock, which had an
aggregate  value  of  $95,000,  as  part  compensation  for the  acquisition  of
software.

     On July 31, 1996 the Company issued  1,000,000  shares of common stock upon
the completion of the acquisition of Serif Inc. and Serif (Europe)  Limited.  In
addition,  the Company  issued 14,181  shares of common stock to its  investment
banker  as  partial  payment  for  services  rendered  in  conjunction  with the
acquisition of Serif Inc. and Serif (Europe) Limited.

     On September  18, 1996 the Company  granted to M. S. Farrell & Co.  ("MSF")
and a designee thereof warrants to purchase 500,000 shares of common stock at an
exercise  price of  $6.875,  which  approximated  current  market  value.  These
warrants  have a term of six years.  In exchange for these  warrants the Company
received a waiver of certain cash  compensation  and consulting  fees payable by
the Company to MSF as well as the right to pay in cash or common  stock,  valued
at time of payment,  MSF's fee to terminate  its  exclusive  investment  banking
relationship,   right  of  first  refusal  with  respect  to  future   financing
transactions,  right to  certain  merger  and  acquisition  fees  and  financial
consultant  fees. The Company ascribed a value of $100,000 to these warrants and
recorded a charge to current  operations  for this  amount.  In  addition to the
grant of warrants,  the Company  extended the  expiration  date of MSF's 103,300
underwriter  warrants to purchase shares of common stock at an exercise price of
$6.15 per share to August 20, 2002.


<PAGE>

                             ALLEGRO NEW MEDIA, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

5.     Business Combination

     On July 31, 1996,  Allegro New Media, Inc. (the "Company")  acquired all of
the outstanding common stock of Serif, Inc. and all of the outstanding preferred
and common stock of Serif  (Europe) Ltd.  (collectively  "Serif".) The aggregate
purchase price was approximately $5,300,000.  The acquisition has been accounted
for as a purchase  and the results of  operations  of Serif are  included in the
Company's  consolidated financial statements beginning August 1, 1996. Under the
purchase method of accounting,  the assets and liabilities have been adjusted to
their preliminary  estimated fair values based upon available  information and
are  subject  to  revision.  As a  result  of  the  preliminary  purchase  price
allocation, a charge to earnings of approximately $3,886,000 was recorded on the
date of acquisition  representing  the cost assigned to in-process  research and
development.

     The following unaudited pro forma summary presents the consolidated results
of operations as if the  acquisition  had been completed at the beginning of the
respective  periods  and does not  purport to be  indicative  of what would have
occurred had the acquisition been made as of those dates or of results which may
occur in the future.

<TABLE>
<CAPTION>
                                             Year ended      Nine Months Ended
                                            December 31,       September 30,
                                                1995         1996          1995

<S>                                           <C>           <C>          <C>   
Net sales                                     $11,445       $6,660       $9,006

(Loss) before extraordinary item              $ 5,552            -            -

Net (loss)                                    $ 6,523       $8,351       $1,327

Net (loss) per share                          $  2.62       $ 2.03       $ 0.54
</TABLE>

 6.     Subsequent Events.

     On  October 1, 1996,  the  Company  announced  that it had  entered  into a
definitive merger agreement with Software Publishing Corporation (NASDAQ: SPCO).
Under the terms of the agreement,  Software Publishing  Corporation ("SPC") will
become a  wholly-owned  subsidiary  of the  Company  and SPC  stockholders  will
receive  approximately  0.26805  shares of the  Company's  common stock for each
share of SPC  stock.  In  connection  with this  transaction,  SPC has agreed to
provide a loan to the Company of $1,000,000. The merger requires the approval of
the  shareholders  of SPC.  Following  the merger,  SPC  stockholders  will hold
approximately 43% of the outstanding shares of Allegro.  The acquisition will be
accounted for under the purchase  method of accounting.  In connection with this
transaction,  the Company will file a registration statement with the Securities
and  Exchange  Commission  to  register  the  shares of its  common  stock to be
exchanged.

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.

General

     The Company  designs,  develops  and  markets a line of  computer  software
products  principally  for the SOHO and small  business  markets  and intends to
de-emphasize  its  family  lifestyle  and  home  reference  product  lines  upon
completion of the  anticipated  merger with SPC. The Company  currently  derives
substantially  all of its net sales from  products  sold by its direct  mail and
call centers, its internal sales force and independent sales  representatives to
retailers, distributors and OEMs.

<PAGE>

     The development of the Company's computer software  publishing business has
involved the development and acquisition of proprietary  computer software,  the
licensing  of CD-ROM  and, in certain  instances,  other  electronic  publishing
rights to content,  and the creation and conversion of original and supplemental
text, video,  audio,  graphics and animation.  The Company's continued growth is
expected  to  require  continued  increases  in  the  number  of  the  Company's
employees,  expenditures for new product development, the acquisition of product
rights,  sales and marketing expenses,  and general and administrative  expenses
relating  to the  development  of a  management  infrastructure  and  facilities
necessary to support the Company's growth.

     Costs of goods sold consists  primarily of product costs,  royalties and an
inventory allowance for damaged and obsolete products.  Product costs consist of
the costs to purchase the underlying materials and print both boxes and manuals,
media costs  (CD-ROM's  and other media) and assembly.  The product  development
costs associated with the Company's products are expensed as incurred.

Results of Operations

     Three Month Period  Ended  September  30, 1996  Compared to the Three Month
     Period Ended September 30, 1995

     Net Sales.  Net sales  increased  approximately  466% from  $298,342 in the
three month period ended  September  30, 1995 to  $1,687,889  in the three month
period  ended  September  30,  1996.  This  increase in net sales was  partially
attributable to an increased  number of products  available for sale, due to the
introduction  of four new products in the Serif line into the  Company's  retail
product mix, an expansion of its retail distribution channel through contracting
with two  additional  software  distributors,  as well as the  inclusion  of two
months of sales  provided  by the  Company's  Serif  subsidiaries.  The  Company
provided  in the three  month  period  ended  September  30, 1996 for returns at
approximately  25% of gross sales  versus  approximately  20% in the three month
period ended September 30, 1995.

     Cost of Goods Sold.  Cost of goods sold increased  approximately  329% from
$90,241 in the three month  period ended  September  30, 1995 to $387,344 in the
three month period ended September 30, 1996, as a result of higher sales volume.
As a percentage of net sales,  cost of goods sold decreased  from  approximately
30% of net  sales  in the  three  month  period  ended  September  30,  1995  to
approximately  23% of net sales in the three month  period ended  September  30,
1996 as a result of lower unit costs and product mix.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by $3,698,214 or  approximately  1,370% from
$270,166 in the three month period ended September 30, 1995 to $3,968,380 in the
three month period ended September 30, 1996.  Approximately 60% of the increase,
or $2,135,200, resulted from a charge to compensation expense resulting from the
release  in  September   1996  of  314,000   escrow  shares  to  two  management
stockholders. All expenses have increased year-over-year due to the inclusion of
two months of expenditures  associated with the Company's Serif operations which
were  not  included  in  the  1995  period.  Total  selling  expenses  increased
approximately  1,324% from $47,090 in the three month period ended September 30,
1995 to $670,994 in the three month period ended  September 30, 1996,  primarily
as a result of an increase in direct mail  advertising and costs associated with
the Company's Serif operations.  In addition to the above mentioned compensation
charge,  total salaries and wages increased $429,980 or approximately 415%, from
$103,639 in the three month period ended  September  30, 1995 to $533,619 in the
three month period ended September 30, 1996. This increase is largely due to the
inclusion of wages  attributable  to the Company's  Serif  operations as well as
wage increases to key personnel in accordance with their employment  agreements.
Bad debt expense  increased by approximately  $106,734 in the current period due
to the Chapter 11 bankruptcy filing of one of the major software distributors.

     Product Development.  Product development expenses increased  approximately
103% from $78,009 in three month period ended  September 30, 1995 to $158,172 in
the three month period ended  September 30, 1996  principally  as a result of an
increase in product  development  costs associated with producing four new Serif
products. The Company believes that development expenses will increase in dollar
amount in the future as the Company expands its development activities, although
the Company's  long-term goal is to continue to reduce product development costs
as a percentage of sales. All development  costs are been expensed in the period
incurred.

<PAGE>

     In Process Research and Development.  Based on a preliminary  allocation of
the purchase price, the Company expensed  $3,886,000 of in-process  research and
development associated with its acquisition of the Serif Companies.

     Other Income.  Other income  increased from a net expense of $71,643 in the
three month  period ended  September  30, 1995 to income of $82,685 in the three
month  period  ended  September  30, 1996  primarily  as a result of higher cash
balances and royalty income from Serif operations.

     Nine  Months  Ended  September  30,  1996  Compared  to Nine  Months  Ended
     September 30, 1995

     Net Sales. Net sales increased approximately 180% from $913,041 in the nine
month period ended  September  30, 1995 to  $2,554,937  in the nine month period
ended  September 30, 1996 largely as a result of inclusion of the sales from the
Company's  Serif  subsidiaries  for two months in the 1996 period.  There are no
Serif  results  included  in  the  1995  period.  The  Company's  year-over-year
comparable  sales results  increased 38%. As a result of an increased  number of
products and increased sales to certain larger  customers,  the Company provided
in the nine month period ended  September 30, 1996 for returns at  approximately
25% of gross  sales  versus  approximately  20% in the nine month  period  ended
September 30, 1995.

     Cost of Goods Sold. On a year-over-year basis, cost of goods sold increased
approximately  69% or $299,498  from the nine month period ended  September  30,
1995  versus the nine month  period  ended  September  30,  1996  largely due to
increased  sales  volumes.  Cost of goods sold  decreased as a percentage of net
sales from  approximately  47% in the nine month period ended September 30, 1995
to  approximately  29% in the nine month period ended  September  30, 1996, as a
result of increased sales volume providing lower per unit production costs and a
change in product mix.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by  $4,635,883  or  approximately  469% from
$987,996 in the nine month period ended  September 30, 1995 to $5,623,831 in the
nine month period ended  September  30, 1996.  Expenses in the nine month period
ended September 30, 1996 include a charge to compensation  expense of $2,135,200
due to the release of 314,000  shares of common  stock from escrow in  September
and  $637,980 in  compensation  expense  related to the  release  from escrow of
217,000  shares  of common  stock in April to two  management  stockholders.  In
addition to the escrow  release,  the 1996  expenses  include  expenses  for two
months of operations of the Company's Serif operations which are not included in
the 1995  period.  Total  selling  expenses  increased  approximately  305% from
$243,875 in nine month period ended  September  30, 1995 to $987,437 in the nine
month period ended  September  30, 1996,  primarily as a result of the Company's
direct mail operations and increased advertising.  Bad debt expense increased by
approximately  $180,572  due to the chapter 11  bankruptcy  filing of one of its
software distributors.

     Product Development.  Product development expenses increased  approximately
139% from $249,894 in the nine month period ended September 30, 1995 to $597,738
in the nine month period ended September 30, 1996,  primarily as a result of the
Company  expensing  $243,750  relating  to the  acquisition  of a  developmental
software program, the Company's  development of new Serif products and continued
development  of  proposed  new  Internet  products.  The Company  believes  that
development expenses will increase in dollar amount in the future as the Company
expands its development activities,  although the Company's long-term goal is to
continue to reduce  product  development  costs as a  percentage  of sales.  All
development costs have been expensed in the period incurred.

     In  Process  Research  and  Development.  In the nine  month  period  ended
September 30, 1996,  based on a  preliminary  allocation of the Serif  purchase
price,  the Company expensed  $3,886,000 of in-process  research and development
costs associated with the acquisition of the Serif companies.

     Other Income. In the nine month period ended September 30, 1996 the Company
received  other  income of $135,663  versus a net expense of $71,678 in the nine
month period  ended  September  30,  1995,  primarily as a result of higher cash
balances and royalty income. The Company had no royalty income in 1995.

<PAGE>

Liquidity and Capital Resources

     The Company  historically has been unable to generate  sufficient cash flow
to fund operations.  Working capital  deficiencies  had been funded  principally
through  private  placements of securities  until the Company's  initial  public
offering  ("IPO"),   completed  in  December  1995,  and  the  exercise  by  the
underwriter  of its  over-allotment  option on January  23,  1996.  The  Company
through its IPO raised net funds of $4,156,411  ($2,906,411 after retiring debt)
and $464,907 from the exercise of the over-allotment  option. As a result of the
Merger  Agreement with SPC, the Company  obtained a loan facility of $1,000,000.
As of September 30, 1996 the Company had working capital of $351,035,  including
cash and  cash  equivalents  of  $990,516  and a note  receivable  of  $200,000.
Management  believes  that the Company has working  capital  sufficient  for the
Company's  current  operations for at least the next twelve months.  The Company
has no bank or other credit  facility  other than the loan facility from SPC and
there  can be no  assurances  that  the  Company  will be able  to  obtain  such
financing on favorable terms, if at all, or that such financing will be on terms
acceptable to the Company.  See Note 6 to the Condensed  Consolidated  Financial
Statements.

     The Company's  operating  activities for the first nine months of 1996 used
cash of $1,783,155, primarily related to costs associated with and loans made to
Serif as part of a the Company's  acquisition of Serif,  an increase in accounts
receivable and  inventories  associated with higher net revenues and a reduction
of trade  accounts  payable.  The  Company  intends to  continue  to utilize its
working capital in 1996 for product development,  marketing and advertising,  to
finance the higher  level of  inventory  and  accounts  receivable  necessary to
support the anticipated  continued increase in sales, for capital  expenditures,
including  the  purchase of computer  equipment,  and for  internal and external
software  development.  However,  the Company's working capital requirements may
change depending upon numerous factors, including,  without limitation, the need
to finance the  licensing  or  acquisition  of third  party  software as well as
increased  inventory and accounts  receivable arising from the sale and shipment
of new products.

     The Company estimates its consolidated tax net operating loss carryforwards
to be  approximately  $10.2 million at September 30, 1996.  The Company  expects
that  after  giving  effect to its  proposed  merger  with  Software  Publishing
Corporation, an "ownership change" will be deemed to have occurred under Section
382 of the Code and the regulations thereunder with respect to it, and that as a
result  thereof the use by the Company of its net operating  loss carry forwards
will be limited.

     From December 1993 through May 1995, Barry A. Cinnamon and Richard Bergman,
Allegro's former Vice President of Product  Development,  placed an aggregate of
542,500 shares of Allegro Common Stock in escrow pending Allegro's attainment of
certain minimum net revenue or Allegro Common Stock price per share  thresholds.
Five  hundred  and  thirty-one  thousand  (531,000)  of these  shares  have been
released from escrow  (500,000 shares to Barry A. Cinnamon and 31,000 to Richard
Bergman) by the Allegro Board,  with the consent of MS Farrell and the remaining
11,500 of these shares have been  surrendered  for  cancellation.  In connection
therewith,   Allegro  has  recognized   compensation  expense  of  approximately
$2,773,180 in the nine-month period ended September 30, 1996.

     Except for historical  information  contained herein, the matters set forth
herein  are  forward   looking   statements   that  involve  certain  risks  and
uncertainties that could cause actual results to differ materially from those in
the forward looking statements. Potential risks and uncertainties include, among
other  things,  such factors as the level of business and consumer  spending for
computer  software,   the  amount  of  sales  of  the  Company's  products,  the
competitive  environment within the computer software  industry,  the ability of
the Company to integrate the Serif  operations,  the level and costs incurred in
connection  with the  Company's  product  development  efforts and the financial
strength of the retail industry.

Seasonality

     The computer  software  market is  characterized  by  significant  seasonal
swings in demand,  which  typically peak in the fourth quarter of each year. The
seasonal  pattern is due primarily to the increased  demand for software  during
the year-end holiday buying season.  Allegro expects its net sales and operating
results to continue to reflect  this  seasonality.  Allegro's  revenues may also
experience  substantial  variations as a result of a number of factors,  such as

<PAGE>

consumer and  business  preferences  and  introduction  of  competing  titles by
competitors, as well as limited time promotional pricing offers. There can be no
assurance  that Allegro will achieve  consistent  growth or  profitability  on a
quarterly or annual basis.

Inflation

     Allegro  believes that inflation has generally not had a material impact on
its operations.

                    PART II. Other Information

Item 1.   Legal Proceedings.

     The Company is not involved in any material pending legal  proceedings.  In
August 1995,  the Company  commenced an  arbitration  proceeding  against  Media
Depot,  Inc., a  distributor  of products to the OEM market,  seeking to collect
approximately  $78,000 in past due accounts  receivable.  A hearing  relating to
this  arbitration  proceeding was held in April 1996 and the Company was awarded
$78,262  in  respect  of  its  claim.  No  assurance  can  be  given  as to  the
collectability  of the award the Company has received in  connection  therewith.
The Company has provided for the potential  loss of the receivable and is in the
process of attempting to collect this award through the California courts.

 Item 2.            Changes in Securities.

           None.

 Item 3.            Defaults upon Senior Securities.

       None.

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

      The Company held its Annual Meeting of  Stockholders on September 5, 1996.
      The following proposals were adopted by the votes indicated:

           1)  Three  directors  were  elected  to  Class  III of the  Board  of
           Directors to serve until the Annual Meeting of  Stockholders in 1999,
           in addition to the other six directors whose term of office continued
           after the meeting. The names of the newly elected directors and votes
           cast in favor of their election and shares withheld are as follows:

                   Name                 Votes For      Votes Withheld
          Lori Kramer Cinnamon          2,584,467           51,454
          George L. Lauro               2,584,467           51,454
          Mark E. Leininger             2,584,467           51,454

          2) Approval of the amendment of the Company's 1994 Long Term Incentive
           Plan to increase the number of authorized  shares from 400,000 shares
           to 1,000,000 shares. The votes cast in favor of the proposal, against
           the proposal and those votes which abstained are as follows:

               Votes For                Votes Against       Votes Abstained
               2,347,201                    100,659                 14,650

           3) Approval of the  amendment of the Company's  Outside  Director and
           Advisor Stock Option Plan to increase the number of authorized shares
           from 300,000 shares to 500,000 shares.  The votes cast in favor of
           the proposal, against the proposal and those votes which abstained
           are as follows:

                    Votes For           Votes Against       Votes Abstained
                    2,345,311               105,729                 11,470


<PAGE>

Item 5.   Other Information.

     On October 1, 1996, the Company entered into a definitive  merger agreement
with Software  Publishing  Corporation  (NASDAQ:  SPCO).  Under the terms of the
agreement,  Software  Publishing  Corporation ("SPC") will become a wholly-owned
subsidiary of the Company and SPC  stockholders  will receive  0.26805 shares of
the  Company's  common stock for each share of SPC stock.  Following the merger,
SPC  stockholders and vested option holders will hold  approximately  45% of the
outstanding  shares  and vested  options of  Allegro.  The  acquisition  will be
accounted for under the purchase method of accounting.

     On October  24,  1996,  Gwyn Jones  resigned  as a  director,  officer  and
employee of the  Company.  On October 25,  1996,  Joseph  Cirillo  resigned as a
director of the Company.

Item 6.   Exhibits and Reports on Form 8-K

     (a) The Exhibits listed on the accompanying index immediately following the
signature page are filed as part of this report.

     (b) Reports filed on Form 8-K during the quarter ended September 30, 1996:

                    The  Company  filed a Form 8-K dated July 31,  1996 with the
               Securities  and  Exchange  Commission  covering  items 2, 5 and 7
               relating  to the  acquisition  of Serif Inc.  and Serif  (Europe)
               Limited.

                    The Company  filed a Form 8-K/A on October 15, 1996 with the
               Securities  and Exchange  Commission  updating item 7 of the July
               31, 1996 report.



                            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.


                                      ALLEGRO NEW MEDIA, INC.

Date:     October 31, 1996            By:    /s/ Barry A. Cinnamon
                                             Barry A. Cinnamon
                                      Chairman of the Board, President and
                                          Chief Executive Officer
                                       (Principal Executive Officer)

Date:     October 31, 1996            By:    /s/  Mark E. Leininger
                                             Mark E. Leininger
                                       Chief Operating Officer, Vice President-
                                       Finance, Treasurer, Chief Financial
                                                   Officer
                                           (Principal Accounting Officer)

<PAGE>


                        INDEX TO EXHIBITS

Exhibit
Number                         Exhibit

 10.33       -- Agreement and Plan of  Reorganization  dated as of October 1,
                1996 by and among the Registrant,  SPC  Acquisition  Corporation
                and Software Publishing Corporation.

 10.34       -- Amendment to Escrow Agreements dated December 27, 1993 and 
                May 25, 1995.

 10.35       -- Amendment No. 6 to Employment Agreement dated as of December 
                27, 1993 between the Company and Barry A. Cinnamon.

 10.36       -- Agreement dated October 25, 1996 between the Company and Mark
                E. Leininger.


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