U.S. 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: 1-14076

                 SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
                 (Name of small business issuer in its charter)
               Delaware                                     22-3270045
      (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                     Identification No.)

   3A Oak Road, Fairfield, New Jersey                         07004
(Address of principal executive offices)                    (Zip Code)

Issuer's telephone number:  (973) 808-1992

Securities registered under Section 12(b) of the Exchange Act:  
Common Stock, par value $.001

Securities registered under Section 12(g) of the Exchange Act:  
None

     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 No

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  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 net revenues for its most recent fiscal year. $17,156,865.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was $5,398,650, at April 13, 1998, based on the last bid price of
the Common Stock on such date of $.69, as reported by the Nasdaq Stock Market.

     As of April 13, 1998,  there were a total of 9,042,958 shares of the Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

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                              PART I


Introductory Comment - Forward Looking Statements.

     Statements  contained  in this  Annual  Report on Form  10-KSB that are not
based upon historical fact are  "forward-looking  statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements included
in this Form 10-KSB  involve known and unknown  risks,  uncertainties  and other
factors which could cause actual results,  performance  (financial or operating)
or achievements  expressed or implied by such forward looking  statements not to
occur or be realized.  Such forward looking statements  generally are based upon
the best  estimates  by Software  Publishing  Corporation  Holdings,  Inc.  (the
"Company") of future  results,  performance or  achievement,  based upon current
conditions and the most recent results of operations. Forward-looking statements
may be  identified  by the use of  forward-looking  terminology  such as  "may,"
"will," "expect," "believe,"  "estimate,"  "anticipate,"  "continue," or similar
terms, variations of those terms or the negative of those terms.

     As discussed in "Item 1.  Description  of Business,"  the Company  acquired
three operating software  companies in 1996 and conducted a major  restructuring
of its  management  and  operations  in  late  1997  and  early  1998  with  the
expectation that such  transactions and  restructuring  will result in long-term
strategic benefits. The realization of these anticipated benefits will depend in
part on whether the cost savings intended to be realized from the  restructuring
can be achieved. While the Company has substantially implemented its integration
and restructuring  plans,  there can be no assurance that the expected long-term
strategic benefits of the acquisitions and restructuring will be realized.

     Additional potential risks and uncertainties  include,  among other things,
such factors as the overall level of business and consumer spending for computer
software,  the market acceptance and amount of sales of the Company's  products,
the extent that the Company's direct mail programs achieve satisfactory response
rates, the efficiency of the Company's telemarketing operations, the competitive
environment  within the  computer  software  and  direct  mail  industries,  the
Company's  ability to raise  additional  capital,  the ability of the Company to
continue  to  implement  its  reorganization  plan  efficiently  and achieve the
anticipated results therefrom,  the  cost-effectiveness of the Company's product
development  activities,  the  extent  to which the  Company  is  successful  in
developing,  acquiring or licensing successful  products,  and other factors and
information  disclosed and discussed in "Item 1. Description of Business," "Item
6.  Management's  Discussion  and  Analysis or Plan of  Operation"  and in other
sections  of this Form  10-KSB.  Readers of this Form  10-KSB  should  carefully
consider  such  risks,  uncertainties  and other  information,  disclosures  and
discussions which contain cautionary  statements  identifying  important factors
that could cause actual results to differ  materially from those provided in the
forward-looking statements.


Item 1.        Description of Business.

General

     The  Company is an  international  developer,  publisher  and  supplier  of
proprietary computer software applications primarily targeted towards the visual
communications market segment through desktop publishing,  presentation graphics
and business  productivity  software  for the  corporate  and small  office/home
office ("SOHO")  markets.  The Company's  products produce documents through its
easy-to-use desktop publishing,  drawing and presentation graphics applications,
and also improve the  graphical  appeal and overall  effectiveness  of documents
produced  by  either  the  Company's  or  third  parties'  desktop   publishing,
presentation  graphics,  web page,  e-mail,  word  processing  and other similar
applications.  The Company currently offers seventeen products,  primarily Serif
PagePlus  and Harvard  Graphics , that  operate on the Windows 95,  Windows NT ,
Windows  3.1  and  DOS  operating   systems  for  IBM  personal   computers  and
compatibles.  The Company has  established a multi-channel  distribution  system
utilizing direct mail,  telemarketing,  retail, corporate and OEM sales channels
and also disseminates its software programs over the Internet.


<PAGE>

     The  Company  was  incorporated  in Delaware  on  December  23,  1993,  and
succeeded to the business of its predecessor New Jersey  corporation,  which was
formed on July 20, 1992. In July 1996, the Company acquired Serif Inc. and Serif
(Europe)  Limited  (collectively,  "Serif"),  which expanded its product line to
include the Serif PagePlus and DrawPlus desktop  publishing  titles. In December
1996,  the Company  acquired all of the  outstanding  capital  stock of Software
Publishing  Corporation  ("SPC")  pursuant  to  a  merger  (the  "Merger")  of a
wholly-owned  subsidiary of the Company with and into SPC, which resulted in the
further  expansion of the Company's  product line to include SPC's  presentation
graphics and other visual  communications  and  business  productivity  software
products.  The  Company  continues  to operate  the Serif  companies  and SPC as
wholly-owned  subsidiaries.  Since  January  1998,  the  operations  of SPC were
significantly  reduced or eliminated.  The Company's business strategy currently
includes the leveraging of the Serif and Harvard brand names and their user base
for Serif and SPC products in marketing the  Company's  present  product  lines,
products  currently  under  development  and  additional  products  which may be
developed,  licensed or acquired  in the  future.  Unless the context  otherwise
requires,  all  references  herein to the Company  include  Software  Publishing
Corporation Holdings,  Inc. and its subsidiaries,  including SPC and Serif, on a
consolidated basis.

     The  Company's  principal  executive  offices  are  located at 3A Oak Road,
Fairfield,  New Jersey 07004;  telephone (973) 808-1992.  The Company  maintains
websites at www.spco.com, www.serif.com and www.harvardgraphics.com.

Business Strategy

     The  Company's  strategic  objective  is to  become a leading  supplier  of
easy-to-use software  applications that improve the graphical appeal and overall
effectiveness  of  documents  produced  by  desktop   publishing,   drawing  and
presentation graphics applications, as well as to maximize the profitability and
productivity of the Company's  direct mail and  telemarketing  operations in the
United States and Europe.

     The Company  believes  that many current  graphical  presentation  software
applications and  first-generation  Internet  publishing tools were designed for
computer specialists,  corporate MIS departments, computer consultants and other
technically  knowledgeable  users.  The Company  believes that there is a market
opportunity  for software  that makes it easy for the average  computer  user to
create high-quality,  graphically rich documents,  presentations, e-mail and web
pages.

     With respect to sales and  marketing,  the Company  intends to leverage its
multi-million user,  multi-national installed base of Serif PagePlus and Harvard
Graphics through its multi-national direct mail and telemarketing operations, as
well as the corporate and retail sales channels.  The Company  believes that the
Internet may provide  additional  opportunities  for further sales and marketing
success,  and has  established  an on-line  store at its website  from which its
products may be purchased.

     The  Company's  primary  product  families  are the Serif  line of  desktop
publishing  and  drawing  products,  consisting  primarily  of  Serif  PagePlus,
SerifDraw  Plus and  Serif  Publishing  Power  Suite,  and the  Harvard  line of
graphical  information  presentation  products,  consisting primarily of Harvard
Graphics and Harvard  ChartXL.  The Company  believes that Serif PagePlus is the
most popular  desktop  presentation  software  application  in use in the United
Kingdom.  The Company also markets the Active line of companion utility products
(currently  consisting of ActiveOffice , Active Presenter , ActiveMail and Serif
MailPlus ), and the ASAP line of presentation  graphics  products.  In 1996, the
Company introduced new products,  including ASAP WordPower , ASAP WebShow , ASAP
WebShow  Presentation  Kit,  Serif  PagePlus 4, Serif DrawPlus 3, and a suite of
presentation products called the Harvard Graphics Presenter's Pack consisting of
Harvard  Graphics,  Harvard  ChartXL , Harvard  Spotlight  , and  Flamingo  Plus
(distributed  under license from a third  party),  and also created two Internet
plug-ins,  ASAP WebShow for Netscape  Navigator  and an ActiveX  version of ASAP
WebShow  for  Microsoft  Internet  Explorer  3.0. In January  1997,  the Company
introduced  ActiveOffice,  which is a companion product to Microsoft Office that
is designed to give users of  Microsoft  Word,  Excel,  PowerPoint  and Exchange
Mail,  a quick  and easy way to  convert  plain  text and  numbers  into  visual
graphics.  In June  1997,  the  Company  introduced  ActivePresenter,  which  is
designed to enable users to quickly and easily  prepare and publish to the world
wide web real-time or self-running presentations. In September 1997, the Company
introduced Serif Page Plus 5, an upgrade of its popular Serif PagePlus  product.
In November 1997, the Company  introduced  ActiveMail and Serif MailPlus,  which
enable e-mail users to produce  electronic  messages  utilizing a rich graphical
presentation rather than ordinary text.


<PAGE>

Products

     The  Company's   primary   product  lines   include   desktop   publishing,
presentation  graphics and business  productivity  applications.  Certain of the
Company's product lines are available in languages other than English, including
those  product  lines  with  significant  foreign  revenues.  Both the Serif and
Harvard lines of products continue to derive  substantial  revenues from foreign
sales. See "Item 6. Management's Discussion and Analysis or Plan of Operations."

     The Company's primary products, listed by product genre, are:

     Desktop Publishing

                    Serif PagePlus 5 Professional  Edition for Windows 95 is the
          Company's premium desktop  publishing  application  designed to permit
          the   average   computer   user   to   produce    professional-quality
          advertisements,  flyers,  reports,  banners,  brochures,  newsletters,
          greeting cards and other written documents.

                    Serif  PagePlus  Home/Office  for Windows 95 is designed for
          more  price-sensitive  SOHO and home computer desktop publishing users
          who do not need all the  content  and  advanced  features  included in
          PagePlus 5.

                    Serif PagePlus 4 is designed to permit the average  computer
          user to produce professional-quality advertisements,  flyers, reports,
          banners,  brochures,  newsletters,  greeting  cards and other  written
          documents.

                    Serif  DrawPlus 3  Home/Office  Edition  for  Windows 95, is
          designed for both the average and advanced computer user, with a range
          of  drawing  and  design  tools  that  they can use to  create  logos,
          posters, cartoons, certificates, report covers and greeting cards.

                    Serif  Publishing  Power Suite is a combination  of products
          consisting  of Serif  PagePlus  3,  TypePlus,  TablePlus,  DrawPlus 3,
          PhotoPlus,  Arena 3D  Design  ED  (licensed  from a third  party)  and
          PhotoMorph 2.0 (licensed from a third party), along with 7,000 clipart
          images, 500 photos and 400 fonts.

                    Serif PagePlus  Home/Office  Designer Pack provides over 100
          design wizards, 100 additional fonts, 50 photos and over 5,000 clipart
          images.

                    Serif ClipArt Pack contains  75,000 clipart images  licensed
          from a third party.

     Presentation Graphics

                    Harvard   Graphics   4.0  for   Windows   95  is  a  Windows
          presentation   graphics  package  offering  a  range  of  capabilities
          enabling users to create and deliver more effective presentations.

                    Harvard   Graphics   3.0  for   Windows  is  a  Windows  3.1
          presentation  graphics  package  offering  the  Advisor  System and an
          interactive design checker.

                    Harvard ChartXL 2.0 for Windows 95 is a charting application
          program that provides  users of  spreadsheet  software and other major
          Windows-based   applications  a  tool  for   analyzing,   viewing  and
          presenting  their data more effectively with more than 300 unique two-
          and  three-dimensional  business,  statistical,  and  technical  chart
          types, coupled with spreadsheet  capabilities and "what if" analytical
          tools.


<PAGE>

                    Harvard  Spotlight  2.0 for Windows 95 helps assist users to
          control the flow and delivery of their electronic presentations.

                    ActiveMail  and  Serif  MailPlus,  which  were  released  in
          November  1997,  enable  users to send  graphical  e-mail  messages in
          addition to or instead of plain text.

                    ActivePresenter,   which  was  released  in  June  1997,  is
          designed to enable users to quickly and easily  prepare and publish to
          the world wide web real-time presentations,  which can be moderated or
          self-running,  thereby  enabling users to coordinate  presentations to
          any participants with access to the Internet or from any location.

                    Active  Office,  which was  released  in  January  1997,  is
          designed as a companion to Microsoft  Office that gives users of Word,
          Excel, PowerPoint and Exchange Mail a quick and easy way to turn plain
          text and numbers into  high-impact  visual elements which are embedded
          in their text, thereby  increasing the communication  effectiveness of
          their documents.

                    ASAP   WordPower,   v.1.95   is  a   presentation   graphics
          application  that  helps  inexperienced  users  create a  presentation
          within a few  minutes.  ASAP  WordPower  allows the Windows 95 user to
          convert text created in ASAP WordPower or MS Word into a professional,
          well-designed presentation.

                    ASAP WebShow is a viewer for presentations  that are created
          with the Company's ASAP WordPower  presentation software and posted to
          the World Wide Web. The combination of ASAP WebShow and ASAP WordPower
          provides a set of tools to enhance  communications  over the Internet.
          Together,  these two products  offer users a solution for creating and
          viewing  presentations on the World Wide Web. An ASAP WebShow user can
          view a presentation  in  interactive  or auto-run  mode,  download the
          materials for later viewing, or print hard copies for local use.

     Business Productivity Applications

                    Word  Processing  and Other  Products.  The  Company's  word
          processing and other business  productivity products are older, legacy
          products  for  mature  market   segments.   These   products   include
          Professional   Write,   Professional  Write  PLUS,   OfficeWriter  and
          Professional File. The Company has de-emphasized this category.

                    Other  Products.   The  Company  markets  an   interactive
          multimedia  tutorial  under  the Company's  Learn to Do brand,  titled
          Learn  to  Do  Windows  95  with  John  C.  Dvorak.  The  Company  has
          de-emphasized this product.

Intellectual Property and Other Proprietary Rights

     The  Company  believes  that its  success  depends  significantly  upon its
proprietary  technology.  The  Company  currently  relies  on a  combination  of
copyright and trademark  laws,  trade  secrets,  confidentiality  procedures and
contractual  provisions and other written  materials under trade secret,  patent
and  copyright  laws to  protect  its  proprietary  technology;  however,  these
generally afford only limited protection. The Company has registered and applied
for  registration  for  certain  service  marks and  trademarks,  and intends to
continue to evaluate the registration of additional service marks and trademarks
as appropriate.  Additionally, the Company generally copyrights its software and
related user documentation, but the copyright laws afford only limited practical
protection  against  duplication  of the media  embodying  the  programs and the
related user manuals.  Despite the Company's  efforts to protect its proprietary
rights,  unauthorized  parties  may  attempt to copy  aspects  of the  Company's
products or services or to obtain and use  information  that the Company regards
as proprietary.  In addition,  the laws of some foreign countries do not protect
proprietary  rights to as great an extent as do the laws of the  United  States.
Monitoring  and  identifying  unauthorized  use  of  such  broadly  disseminated
products  as  personal  computer  software is  difficult.  The  Company  expects
software  piracy to be a  continuing  problem  for the  software  industry.  The
Company  relies upon software  engineering  and marketing  skills to protect its
market  position,  in addition to the  copyright  and  trademark or trade secret

<PAGE>

protection  discussed  above.  Because  the  software  development  industry  is
characterized by rapid  technological  change, the Company believes that factors
such as the  technological  and creative  skills of its  personnel,  new product
developments, frequent product enhancements, brand name recognition and reliable
product   maintenance  are  as  important  to  establishing  and  maintaining  a
technology   leadership  position  as  the  various  legal  protections  of  its
technology.

     The  Company  currently  has  patent  applications  pending  related to the
technology contained in its Harvard Spotlight product. There can be no assurance
that  any  new  patent   applications  will  be  submitted,   that  any  pending
applications  will be  approved,  that if issued,  any such  patent  will not be
challenged, or that if challenged, any such patent will not be invalidated,  any
of which may have a material adverse effect on the Company. The Company's patent
application relating to its Intelligent Formatting technology has been denied by
the U.S.  Patent  Office.  There can be no assurance that any issued patent will
provide the Company with any competitive  advantages.  The Company believes that
it retains  ownership  rights to all software,  both developed and  commercially
distributed by the Company, except for those components of the software that the
Company licenses from third parties. Software offered by the Company is licensed
and  generally  provided in object code  pursuant to  shrink-wrap  or  on-screen
license agreements or executed license agreements which contain  restrictions on
disclosure and transferability.  In addition,  the Company has from time to time
licensed  to third  parties  the right to use,  modify,  reproduce,  sublicense,
distribute and market certain of the Company's  software products or portions of
its software products. Such licensed software is provided in object code and, in
certain limited circumstances, source code, pursuant to agreements which contain
restrictions on disclosure and transferability.

     Certain  technology  used  in  the  Company's  products  is  licensed  on a
perpetual,  fully paid,  non-royalty-bearing  basis from third  parties.  If any
event  occurred  that  rendered  technology  licensed  from a  third  party  and
incorporated  in the Company's  products  unavailable to the Company,  or if the
technology is not  appropriately  supported  and enhanced by the  licensor,  the
Company could be forced to expend financial and development resources to replace
that  technology.  Such  expenditures  could  materially  adversely  affect  the
Company's business, financial condition and results of operations.

     The Company is not aware that any of its products materially  infringes the
proprietary rights of third parties.  There can be no assurance,  however,  that
third parties will not claim such  infringement  by the Company or its licensors
with respect to current or future  products.  The Company  expects that software
product  developers will increasingly be subject to such claims as the number of
products  and  competitors  in the  Company's  industry  segment  grows  and the
functionality  of products in different  industry  segments  overlaps.  Any such
claims,  with or  without  merit,  could be  time-consuming,  result  in  costly
litigation,  cause product shipment delays or might require the Company to enter
into royalty or licensing agreements.  Such royalty or licensing agreements,  if
required, may not be available on terms acceptable to the Company.

     Litigation   may  be  necessary  to  protect  the   Company's   proprietary
technology.  Any such litigation may be time-consuming and costly.  There can be
no assurance that the Company's means of protecting its proprietary  rights will
be adequate or that the Company's  competitors  will not  independently  develop
similar  technology or duplicate  the  Company's  products or services or design
around patents or other intellectual  property rights of the Company.  There has
been a  substantial  amount of  litigation  in the software  industry  regarding
intellectual  property  rights and there can be no assurance that the patents or
other  intellectual  property rights of others will not have a material  adverse
effect on the Company's ability to do business.

     Competitors  and  potential  competitors  of  the  Company  may  resort  to
litigation as a means of  competition.  Such litigation may be costly and expose
the Company to new claims that it may not have anticipated.  Although patent and
intellectual  property  disputes in the  software  area have often been  settled
through  licensing,  cross-licensing or similar  arrangements,  costs associated
with such  arrangements  may be  substantial if they may be obtained at all. Any
litigation involving the Company, whether as plaintiff or defendant,  regardless
of the outcome,  including any litigation  relating to claims which have been or
may in the future be asserted  against the  Company,  may result in  substantial
costs and  expenses to the Company and  significant  diversion  of effort by the
Company's  technical  and  management  personnel.  In addition,  there can be no
assurance that litigation, either instituted by or against the Company, will not
be  necessary  to resolve  issues that may arise from time to time in the future
with other competitors. Any such litigation could have a material adverse effect
upon the Company's business,  operating results and financial condition.  In the
event of an adverse result in any such litigation, the Company could be required
to expend significant  resources to develop  non-infringing  technology,  obtain

<PAGE>

licenses to the  technology  which is the subject of the litigation on terms not
advantageous to the Company, pay damages, and/or cease the use of any infringing
technology.  There can be no assurance  that the Company  would be successful in
such  development,  that any such  licenses  would be available  and/or that the
Company would have available funds sufficient to satisfy any cash awards.

Product Development

     The  personal   computer   software  industry  is  characterized  by  rapid
technological change, which requires a continuing high level of expenditures for
the  enhancement  of existing  products  as well as  development,  licensing  or
acquisition of new software products.  The Company's current product development
activities  include  enhancing  and updating its present  software  packages and
designing  certain new  products.  The Company  intends to expand and update its
Serif software code to meet the demands of the current market.

     The Company's Serif technology  provides  advanced  desktop  publishing and
drawing  capabilities while also providing a code base to continue to expand the
products as user requirements  evolve.  In 1997, the Company  introduced one new
product based on its updated Serif technology.  The Company has focused research
and development  resources to expand its Serif and Harvard Graphics  technology,
as well as to integrate the  Intelligent  Formatting  technology  into its Serif
products.

     The Company intends to acquire additional  technology through a combination
of internal development,  licensing,  purchasing and strategic alliances.  There
can be no assurance that the Company's  product  development  efforts or product
introductions  will result in commercially  successful  products.  The Company's
revenues are based on a combination of products developed  internally,  acquired
products  and  licensed  products.  The  Company  intends to continue a flexible
approach  to the  development,  acquisition  and  release  of new  products  and
technologies,  recognizing  that the  rapid  changes  in the  software  industry
require  ever  shorter  development  cycles  and ever  higher  levels of product
quality and functionality.  The Company plans to continue to develop and acquire
software  technology  and  products,  and to acquire  licensing or  distribution
rights to third-party products, to enhance and expand its product offerings.

     In  June  1996,  SPC  entered  into a  non-exclusive  licensing  and  joint
development  agreement with Oracle  Corporation  ("Oracle") to embed Intelligent
Formatting  technology  into the  Oracle  InterOffice  Product  Line.  Under the
agreement,  the Company's Intelligent  Formatting engine is being ported to Java
for  use  in  the  Oracle  InterOffice  product  line.   Intelligent  Formatting
technology is intended to enhance the Oracle  InterOffice  product  offerings in
the area of visual communications.  The collaborative services offered by Oracle
InterOffice  -- messaging,  directory  services,  calendar/scheduling,  document
management and workflow -- are designed to enable users to  productively  share,
exchange and manage  information  within their group,  across the enterprise and
beyond.  Intelligent  Formatting  technology  is  expected to  complement  these
services by adding rich  visual  content to the range of the Oracle  InterOffice
applications.  Under the terms of this agreement, Oracle has paid to the Company
a  development  fee and a one-time  license  fee in  installments.  The  Company
believes  that the  development  fee and  license  fee have  not  resulted  in a
material  financial  benefit to the Company.  In addition,  in June 1996, Oracle
Corporation  purchased a worldwide  end-user site license for the Company's ASAP
WordPower visual communications  software. Under the terms of the agreement, the
Company granted Oracle and its  subsidiaries a license for the desktop,  network
and mobile use of ASAP WordPower.

     The  Company  spent  approximately  $3,227,215  in 1997  and  approximately
$1,077,615 in 1996 for product  development  and enhancement  activities.  These
expenditures represented approximately 18.8% and 22.9% of total net revenues for
such years, respectively.

Production

     After approval by quality assurance personnel and management, the Company's
product  development  staff  produces  the master  diskettes,  CD-ROMs  and user
manuals  for  its  proprietary  software  as  part  of its  product  development
activities.  Third party contractors  generally print and assemble CD-ROM discs,
diskettes,  manuals,  catalog inserts and boxes in which the Company's  products
are  shipped.  The Company has  multiple  sources  for major  components  of its
products,  does not rely on any one principal  supplier and has not  experienced
any material  delays in  production  or assembly.  To date,  the Company has not

<PAGE>

experienced  any material  difficulties  or delays in production of its software
products and related documentation.

Sales and Marketing

     The   Company's   products  are  sold   primarily   through   direct  mail,
telemarketing,  retail,  corporate,  and original equipment manufacturer ("OEM")
channels.  The  Company  has also  positioned  itself to take  advantage  of the
Internet as an additional sales medium.  Direct mail sales,  which accounted for
approximately  72.4%  and  75.5% of the  Company's  revenues  in 1997 and  1996,
respectively,  are generated by inbound and outbound telemarketing operations in
the U.S. and U.K. Corporate sales are comprised of both individual product sales
as well as volume sales. Most sales to the retail channel are made on a two-step
basis  with the  initial  sales  being made to  distributors  and then to retail
chains.  The Company also  distributes its products through OEMs on a bundled or
value-added  basis.  In addition,  the  popularity of the Internet and the World
Wide Web has made it  feasible  for the  Company to sell its  products  over the
Internet.  In this  connection,  the Company has established an on-line software
store  from which the  Company's  products  may be  purchased.  As the  Internet
continues to evolve mechanisms for efficiently and securely  charging  customers
directly for  software,  the Company  expects that it may continue to supplement
traditional  forms of software  distribution  with  distribution of its software
directly over the Internet medium.

     The Company utilizes its  telemarketing  operations in conjunction with its
direct mail  operations  to maximize  direct  sales to existing and new end user
customers.  These mailings and direct response advertisements originate from the
Company's  offices  in the  United  States and  England  and are  handled by the
Company's  inbound and  outbound  telemarketers  in Nashua,  New  Hampshire  and
Nottingham,  England. These mailings and advertisements are varied and tested to
attempt to maximize  response rates and  profitability.  The Company maintains a
list of its  registered  user  customers  and sends  periodic  mailings  to sell
upgrade versions and new products.

     The Company assists  distributors  and resellers in selling,  promoting and
merchandising  its products.  Large corporate and government sales are fulfilled
principally  through  resellers  and  distributors  while  all  other  sales are
fulfilled  directly.  The Company also offers site licenses and volume  purchase
discounts to its corporate  customers.  The OEM sales effort is responsible  for
sales to hardware and software original equipment  manufacturers,  which include
the Company's products in bundles with their equipment.

     The  Company's  advertising  programs for its product lines are designed to
increase  corporate and product brand awareness,  as well as to sell directly to
customers.  The  Company's  advertising  targets new  customers,  its  installed
customer  base  and,  with  competitive  upgrade  promotions,  its  competitors'
customers.  The  Company  advertises  primarily  through  promotions  to support
distributors'  and  resellers'  sales  efforts,  including  distributor/reseller
advertising  programs,  rebates,  training and price promotions,  and engages in
joint  promotional  activities  with  personal  computer,  peripheral  and other
manufacturers,  direct mailings and  participation  at trade shows.  The Company
also promotes its products through in-house  training and direct mail as well as
offering volume purchase discounts and site licenses.

     The Company's products continue to derive substantial revenues from foreign
sales.  The Company  translates  certain of its products,  including  packaging,
documentation,  software, and promotional materials,  for international markets.
These translations are generally done by contractors hired by the Company, or by
the Company's  local sales and marketing  agents.  Advertising  and  promotional
programs are customized for local markets where necessary.  International  sales
include localized versions of selected products, as well as the English language
versions of the Company's products throughout the United Kingdom,  Europe, Latin
America,  South America and the Asia/Pacific region.  Localized versions include
German, French, Spanish, Italian, Portuguese and Dutch. Approximately 49% of the
worldwide sales in 1997 of the Company and its subsidiaries were made outside of
the U.S., and, for 1996, on a combined pro forma basis,  foreign sales accounted
for  approximately  44% of the Company's total net sales. The Company expects to
continue to sell internationally and invoice in foreign currencies. Accordingly,
the Company is subject to risks associated with exchange rate fluctuations.

     The Company has a general  return policy for its North  American  resellers
and distributors  whereby they may return any products previously purchased from
the  Company,  provided  that the  aggregate  purchase  price for such  returned
products does not exceed 10% of the  reseller's or  distributor's  net purchases

<PAGE>

for the prior  quarter.  In addition to this return  allowance,  North  American
distributors  and  resellers may generally  exchange any  discontinued  products
within ninety days of notification of  discontinuation  for products of equal or
greater value. For international  distributors and resellers, the general return
policy is the same as for North American resellers and distributors, except that
returns with  respect to sales in a quarter  must be completed  within the first
month of the subsequent quarter.  For international  distributors and resellers,
the policy for the exchange of obsolete products generally allows returns within
thirty days after the  announcement of a product's  obsolescence,  provided that
the product was shipped within thirty days prior to the  announcement.  However,
to maintain good customer relations, the Company may accept returns in excess of
those allowed under its general policy.

     The Company  typically  ships products within several days after receipt of
orders,  which is  customary  in the  personal  computer  applications  software
business.  Accordingly, the Company does not believe that its order backlog is a
meaningful indicator of future business.

Customer Support

     The Company  provides free technical  support directly in the United States
and the United Kingdom and through  third-party  contractors in Europe and other
international  locations  for a period of thirty days from either the first call
to its  technical  support  centers  from the  customer  or from  receipt of the
customer's  product  registration  card.  The Company  expenses the cost of this
support as incurred.  After this initial period,  technical support is available
for  purchase  under a variety of  value-added  support  programs.  However,  to
maintain good customer relations, the Company may provide free technical support
in excess of the initial period.

Competition

     The market for visual  communications and business productivity software is
highly  competitive  and  subject  to rapid  technological  change.  Many of the
Company's  current  and  potential  competitors  possess  significantly  greater
financial,  technical and marketing  resources,  greater name  recognition and a
larger  installed  customer  base than the Company.  In  addition,  any of these
competitors may be able to respond more quickly to new or emerging  technologies
and changes in customer requirements,  as well as to devote greater resources to
the  development,  promotion  and  sale of  their  products  than  the  Company.
Furthermore,  because there are relatively low barriers to entry in the software
industry,  the Company expects additional competition from other established and
emerging companies,  which may choose to enter the market by developing products
that  compete  with those  offered by the  Company  or by  acquiring  companies,
businesses,  products or product lines that compete with the Company. It is also
possible  that the  competitors  may enter into  alliances  and rapidly  acquire
significant  market  share.  The Company also  believes  that  competition  will
increase  as a  result  of  software  industry  consolidation.  There  can be no
assurance that the Company's  current or potential  competitors will not develop
or acquire  products  comparable or superior to those  developed by the Company,
combine or merge to form significant competitors, or adapt more quickly than the
Company to new  technologies,  evolving  industry  trends and changing  customer
requirements.  Increased  competition could result in price reductions,  reduced
margins or loss of market  share,  any of which could  materially  and adversely
affect the Company's business,  operating results and financial condition. There
can be no  assurance  that  the  Company  will be able to  compete  successfully
against current and future  competitors or that  competitive  pressures faced by
the Company will not have a material  adverse effect on its business,  operating
results  and  financial   condition.   If  the  Company  is  unable  to  compete
successfully  against current and future  competitors,  the Company's  business,
operating  results and financial  condition  would be  materially  and adversely
affected.

     Some of the  competitors  of the  Company  sell  "bundles"  or  "suites" of
products  which  include  products  that  directly  compete  with the  Company's
products and which are bundled with other office  software  programs by the same
or multiple  competitors.  These  suite  products  are sold at an  all-inclusive
price.  Additionally,  application software is increasingly  provided as part of
the operating  system,  or bundled and pre-loaded into new computers.  The price
for a  stand-alone  or  pre-loaded  bundle  or suite of  software  is  typically
significantly less than separately  purchased  applications,  and many end users
are likely to prefer the bundle or suite over a more  expensive  combination  of
other individually purchased applications, even if the latter applications offer
superior  performance  or  features.  These  factors  have  resulted  in and are
expected to continue to cause significant  downward pressures on average selling

<PAGE>

prices for the Company's  products.  There is no assurance that the Company will
be able to adopt strategies to compete successfully in this environment.

     Based on product lines and price  points,  the Company  regards  Microsoft,
Symantec Corporation,  Corel Corporation,  Lotus Development Corporation,  Adobe
Systems,  Broderbund  Software,  The Learning  Company,  Micrografix,  Fractile,
Visio, Meditools, Deltapoint, Macromedia,  International Microcomputer Software,
Inc. and Design  Intelligence  as close  competitors.  The dominant  position of
Microsoft in the personal  computer  operating  system and  application  program
market place provides it with a range of competitive  advantages,  including the
ability to determine the direction of future  operating  systems and to leverage
its  strength  existing  in one or more  product  areas to  achieve  a  dominant
position in new  markets.  This  position  may enable  Microsoft to increase its
market position even with respect to products having superior performance, price
and  ease-of-use  features.  Microsoft's  ability  to offer  corporate  and SOHO
productivity software, to bundle software, to provide incentives to customers to
purchase  certain products in order to obtain favorable sales terms or necessary
compatibility  or information  with respect to other  products,  and to pre-load
such bundled software on new computers,  may significantly inhibit the Company's
ability to maintain or expand its business.  In addition,  as Microsoft or other
companies  create  new  operating  systems  and  applications,  there  can be no
assurance  that the  Company  will be able to ensure that its  products  will be
compatible  therewith.  The introduction of upgrades to operating systems or the
introduction of new operating systems and standardized software by Microsoft and
others,  over  which the  Company  has no  control,  may  adversely  affect  the
Company's ability to upgrade its own products,  and may cause reduction in sales
of the Company's products.

     The  Company  believes  that  the  principal  competitive  factors  in  the
corporate and SOHO software market include  pricing (which  includes  individual
product pricing, standard and competitive upgrade pricing,  licensing and volume
discounting), product functionality,  ease-of-use, bundling in suites of related
products,  distribution  through  existing  and  new  channels  and  brand  name
recognition.  The  Company's  ability  to  compete  will  be  contingent  on its
continued  enhancement  of its  existing  products,  its  ability  to  correctly
identify  and  enter  new  markets,  effectively  market  and sell  its  current
products,  develop, acquire or license new products and broaden its distribution
channels.  The Company  believes that  competition will continue to intensify in
the  future  and that  new  product  introductions,  further  price  reductions,
strategic  alliances  and other  actions by  competitors  could  materially  and
adversely affect the Company's competitive position.

Operations

     The  Company  coordinates  its  accounting,  product  development,   sales,
marketing,  purchasing and scheduling primarily at its offices in Fairfield, New
Jersey and its  telemarketing,  sales and fulfillment  operations at Nashua, New
Hampshire,  Nottingham,  England and Munich,  Germany.  The Company's  inventory
control,  order processing,  warehousing and shipping activities related to such
operations are located  primarily at its offices in Nashua and  Nottingham.  The
Company's  computer  systems  handle order  entry,  order  processing,  picking,
billing,  accounts  receivable,  accounts  payable,  general  ledger,  inventory
control, catalog management and analysis, and mailing list management.

Governmental Regulation

     The Company  believes  that it does not need any  government  approval  for
production  and sale of its  products.  In  addition,  the  Company  knows of no
governmental regulations, either federal, state or local which materially affect
its operations or products.  Furthermore,  the Company knows of no environmental
laws,  either  federal,  state or local,  which would  affect the Company or its
products.  Consequently,  the  Company  has not  incurred  any  costs nor has it
experienced  any effects from compliance  with any  governmental  regulations or
environmental laws.

Employees

     As of  December  31,  1997,  the Company had  approximately  144  full-time
employees, of whom 21 were in product development,  87 were in marketing,  sales
and  customer  support,  eleven  were in  production  and 25 were in general and
administrative  functions.  Of the total,  78  employees  were  located in North
America and 66 internationally.  In addition, the Company utilized approximately
four  independent  contractors  in  connection  with  its  product  development,

<PAGE>

administration  and marketing  activities.  The Company has never  experienced a
work stoppage and believes that it has satisfactory relations with its employees
and  contractors.  In January 1998,  the Company  terminated  the  employment of
twelve employees,  of which five were  administrative,  three were in marketing,
three in product  development and one in production.  Also,  three  contractors'
engagements were terminated.


Year 2000 Compliance

     Many currently  installed  computer systems and software products are coded
to accept only two digit entries in the date code field.  These date code fields
will need to accept four digit entries to distinguish twenty-first century dates
from twentieth  century  dates.  As a result,  in less than two years,  computer
systems and software  used by many  companies  may need to be upgraded to comply
with such "Year 2000"  requirements.  The Company believes that its products and
internal systems are Year 2000 compliant. In addition, the Company believes that
the purchasing  patterns of customers and potential customers may be affected by
Year 2000 issues as companies expend  significant  resources to correct or patch
their current software systems for Year 2000 compliance.  These expenditures may
result in reduced funds  available to purchase  software  products such as those
offered by the Company,  which could result in a material  adverse effect on the
Company's business, operating results and financial condition.


Item 2.        Description of Properties.

     The  Company's  principal  executive  offices  are  located at 3A Oak Road,
Fairfield,   New  Jersey,   07004.  The  Company's  North  American   executive,
administrative, sales, marketing and support staff are primarily located at this
facility.  The lease for this facility terminates in September 1999 and provides
for average  annual rental costs of  approximately  $80,400,  for  approximately
13,400 square feet of space.  Approximately  10,000 square feet of this facility
have been subleased for the duration of the lease, providing a net annual rental
cost of  approximately  $19,200.  In addition,  Serif Inc. leases  approximately
18,000  square  feet of office  and  warehouse  space in Nashua,  New  Hampshire
pursuant to a lease ending in March 2002.  This facility serves as the Company's
primary North American  telemarketing,  customer  support,  product  development
warehouse and fulfillment  center.  Rental costs for the Nashua facility average
approximately  $90,000 per year for the remaining term.  Serif (Europe)  Limited
leases  approximately  25,000  square  feet of  office  and  warehouse  space in
Nottingham,  England for a five year period which  commenced  in May 1997.  This
facility  serves  as the  Company's  United  Kingdom  telemarketing  center  and
European  warehouse and fulfillment  center.  The rental cost for the Nottingham
facility is expected to average  approximately  $168,000  per year for the lease
term.  The Company  also  leases  1,200  square feet of office  space in Munich,
Germany pursuant to a lease which expires in November 1999 with a rental cost of
approximately  $26,000 per year for the lease term.  The facility  serves as the
Company's  European sales office.  The Company  believes that its existing space
provides it with adequate space for the foreseeable future. The Company does not
own nor does it contemplate owning any real property in the foreseeable future.


Item 3.        Legal Proceedings.

     On January 30, 1998, an action was commenced  against the Company,  Mark E.
Leininger and Barry A. Cinnamon in the United States  District  Court,  Southern
District of New York,  under the caption  Howard  Milstein and Ronald  Altman v.
Software Publishing  Corporation Holdings,  Inc., Mark E. Leininger and Barry A.
Cinnamon.  Mr. Leininger  currently is President,  Chief Operating Officer and a
director of the Company and Mr.  Cinnamon  formerly  was  Chairman of the Board,
President and Chief Executive Officer of the Company. In the action,  plaintiffs
allege that,  in October 1997,  they  purchased an aggregate  889,000  shares of
Common  Stock for  $919,495  based upon  certain  statements  made to one of the
plaintiffs.  Plaintiffs  further allege that such  statements  were  intentional
misrepresentations  of material fact that were designed to deceive plaintiffs as
to the Company's true financial  state and to induce the plaintiffs to invest in
the Company.  Plaintiffs seek recision of their investment and a return of their
purchase price and certain other relief.  The Company believes that these claims
are without  merit and intends to vigorously  defend itself in this action.  The
Company has filed an answer in this action denying the  plaintiffs'  allegations
and asserting affirmative defenses,  including that the plaintiffs' subscription
agreements bar plaintiffs' claims, and asserting counterclaims that, among other

<PAGE>

things,  plaintiffs breached certain of the  representations  contained in their
subscription agreements,  that plaintiff Altman breached his fiduciary duties to
the Company,  and that plaintiffs' violated Section 13(d) of the Exchange Act by
filing a materially false and misleading Schedule 13D with respect to the Common
Stock.

     On February  13, 1998,  a summons and  complaint  was filed in the Superior
Court of New Jersey,  Essex  County  under the caption  Barry  Cinnamon and Lori
Kramer Cinnamon, suing derivatively on behalf of Software Publishing Corporation
Holdings,  Inc.  and its  shareholders,  and  Barry  Cinnamon  and  Lori  Kramer
Cinnamon,  individually, v. Software Publishing Corporation Holdings, Inc., Neil
M. Kaufman, Mark Leininger and John Does 1-10. Mr. Leininger is President, Chief
Operating  Officer and a director of the Company;  Mr.  Kaufman is a director of
the Company, the principal of Kaufman & Associates, LLC, counsel to the Company,
and was  Secretary  of the Company  from  December  1996 to December  1997;  Mr.
Cinnamon was Chairman of the Board, President and Chief Executive Officer of the
Company  until  December 19, 1997;  and Ms.  Kramer  Cinnamon was an officer and
director  of the Company  until  December  19,  1997.  To date,  the summons and
complaint  has been  served on the  Company and has not been served on either of
the named individual defendants or any of the other defendants.  In this action,
plaintiffs  seek  (i)  the  recision  of  the  Settlement  and  General  Release
Agreement,  dated as of December 19, 1998 (the "Cinnamon Settlement Agreement"),
between the Company and each  plaintiff and the License  Agreement,  dated as of
December 19, 1998 (the  "Cinnamon  License  Agreement,"  and,  together with the
Cinnamon Settlement Agreement,  the "Cinnamon Agreements"),  between the Company
and Mr.  Cinnamon,  (ii)  payment of the full amount of  compensation  due under
their former respective employment  agreements with the Company,  (iii) that Mr.
Kaufman be enjoined  from  continuing  to act as a director  and officer of, and
counsel  to,  the  Company,  (iv) that the  Company  be  required  to provide an
"'opinion  letter'  as  required  by the  Securities  Exchange  Act of 1934,  as
amended,  to permit  the sale of shares of stock held by the  Cinnamons  without
restriction," (v) that the Company be required to immediately register the stock
held by plaintiffs and (vi) compensatory and punitive damages,  attorney's fees,
and other relief.  Plaintiffs seek such relief based upon their allegations that
the  defendants  improperly  caused the  resignation  of  plaintiffs  from their
positions as officers and directors of the Company,  that Mr. Kaufman improperly
influenced  the  decision  of the  Board of  Directors  to adopt  the  Company's
December 1997 restructuring plan (thereby rejecting Mr. Cinnamon's plans for the
Company),  and that the Cinnamon  Agreements were entered into by each plaintiff
under  duress and the coercion of  defendants  (despite  plaintiffs  having been
represented by counsel in connection with these matters).  The Company  believes
that the plaintiff's  allegations  are without merit,  and intends to vigorously
defend itself in this action.  The ultimate outcome of this action is unknown at
the present time.

     In January  1998,  SPC and  Pyramid  Data,  Inc.  ("Pyramid")  settled  the
remaining  cause of action in the action  brought by Pyramid in May 1994 against
SPC in the Santa Clara Superior Court.  The settlement  agreement  resulted in a
payment by the Company to Pyramid of $9,500 and the dismissal of the action. The
Company has made an application  to the court to determine that this  settlement
also acts as a bar to the claims of  indemnification  and contribution under the
cross-complaints  among SPC, Custom Paper Products  ("CPP") and certain officers
and directors of CPP. No assurance  can be given that the Company's  application
to the court will be  granted.  However,  the Company  does not believe  that an
adverse  decision  against the Company on these  claims of  indemnification  and
contribution would have a material affect on the Company's  business,  operating
results or financial condition.


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

     Not applicable.


<PAGE>


                             PART II


Item 5.        Market for Common Equity and Related Stockholder Matters.

(a)  Market Information

     The Company's  Common Stock was traded on the Nasdaq  SmallCap Market under
the symbol  "ANMI" from  December 6, 1995 through  December 27, 1996,  under the
symbol  "SPCOD" from  December 28, 1996 through  January 27, 1997,  and has been
traded under the symbol "SPCO" since January 28, 1997. The Common Stock was also
traded on the Boston Stock Exchange under the symbol "APO" from December 6, 1995
through  January  20,  1997 and has been  traded  under the symbol  "SPO"  since
January  20,  1997.  The  following  table  sets forth the range of high and low
closing  prices for the  Company's  Common  Stock for the periods  indicated  as
derived from reports furnished by Nasdaq. The information reflects  inter-dealer
prices,  without  retail  mark-ups,   mark-downs  or  commissions  and  may  not
necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                High Bid     Low Bid

Fiscal 1996
<S>                                            <C>           <C>
First Quarter . . . . . . . . . . . . .        $  6-3/4      $ 3-1/2
Second Quarter. . . . . . . . . . . . .           6-5/8        2-5/8
Third Quarter . . . . . . . . . . . . .           9-3/8        4
Fourth Quarter. . . . . . . . . . . . .           7-13/16      3-1/2

Fiscal 1997
First Quarter . . . . . . . . . . . . .        $  4-3/4      $ 2-15/16
Second Quarter. . . . . . . . . . . . .           3-3/16       1-7/8
Third Quarter . . . . . . . . . . . . .           2-3/8        1
Fourth Quarter. . . . . . . . . . . . .           2-5/16         23/32
</TABLE>

     As of April 13, 1998, the closing price for the Common Stock as reported on
Nasdaq was $11/16.  At April 13, 1998,  there were 657 stockholders of record of
the Company. The Company estimates, based upon surveys conducted by its transfer
agent in connection with the Company's 1998 Annual Meeting of Stockholders, that
there are approximately 10,000 beneficial stockholders.

     The Company has never paid cash dividends on its capital stock and does not
anticipate  paying  cash  dividends  in  the  foreseeable  future.  The  Company
currently  intends  to  retain  any  future  earnings  for  reinvestment  in its
business.  Any  future  determination  to  pay  cash  dividends  will  be at the
discretion  of the Board of Directors  and will be dependent  upon the Company's
financial  condition,  results of  operations,  capital  requirements  and other
relevant factors.

     The  Company  has been  advised by Nasdaq  that the  Company  may not be in
compliance with certain of Nasdaq's continued listing maintenance  requirements:
(a) NASD  Marketplace  Rule  4310(c)(4),  which  requires  that the Common Stock
maintain a $1.00 per share  minimum  bid price,  and (b) NASD  Marketplace  Rule
4310(c)(2),  which requires that the Company either maintain net tangible assets
of at least $2,000,000, maintain a market capitalization of at least $35,000,000
or have  reported  net income in two of the last three  fiscal years of at least
$500,000.  The Company  believes it is in compliance with Rule 4310(c)(2)  based
upon its audited  financial  statements  for the year ended  December  31, 1997,
which shows that the Company had net tangible assets of approximately $2,874,847
(for NASDAQ purposes) at December 31, 1997, and has provided  Nasdaq with a copy
of such audited  financial  statements and other  information  which the Company
believes  should  overcome the  determination  of Nasdaq's staff that the Common
Stock be delisted from Nasdaq,  which  determination  has been stayed  pending a
hearing. However, in order to comply with Rule 4310(c)(4), the Common Stock must
have a bid  price of at least  $1.00  per  share  for at least  ten  consecutive
trading  days.  The Company  intends to seek  stockholder  approval of a reverse
stock split (the "Reverse Stock Split"),  which the Company believes will result
in the Common Stock having a bid price of at least $1.00 per share,  at the 1998
Annual  Meeting of  Stockholders  of the  Company  scheduled  for May 26,  1998.
However,  no assurance  can be given that the Reverse Stock Split will result in
the Common Stock having

<PAGE>

a bid price of at least  $1.00 per  share for at least ten  consecutive  trading
days,  that,  in the  future,  the bid price for the Common  Stock will not fall
below  $1.00 per share  causing a new  violation  of Rule  4310(c)(4),  that the
Company will  maintain net tangible  assets of at least  $2,000,000  or that the
Company will  maintain  compliance  with all other NASD  Marketplace  Rules with
respect to Nasdaq continued listing maintenance requirements.

(b)  Recent Sales of Unregistered Securities

     The  information  set forth  below is a list of all sales by the Company of
the Company's equity securities occurring during 1997.

     On October 23,  1997,  the  Company  consummated  the sale of an  aggregate
961,000 shares of Common Stock to five accredited  investors for aggregate gross
proceeds  of  $1,021,543  and  estimated  net  proceeds  of  $960,466 in private
transactions  exempt from registration  under Section 4(2) of the Securities Act
and Rule 506 of Regulation D  promulgated  thereunder.  In connection  with such
sale, the Company paid $51,077 and issued a five year option to purchase  96,100
shares  of Common  Stock,  at an  exercise  price of  $1.2756  per  share,  to a
financial consultant. See "Item 3. Legal Proceedings."


Item 6.        Management's Discussion and Analysis or Plan of Operation.

     The following  discussion should be read in conjunction with the historical
financial  statements,  including  the notes  thereto,  of the Company  included
elsewhere herein.

General

     The  Company is an  international  developer,  publisher  and  supplier  of
proprietary  computer  software  applications  primarily,  targeted  towards the
visual  communications  market segment through desktop publishing,  presentation
graphics  and  business  productivity  software  for  the  corporate  and  small
office/home  office ("SOHO") markets.  The Company's  products produce documents
through its easy-to-use  desktop publishing,  drawing and presentation  graphics
applications, and also improve the graphical appeal and overall effectiveness of
documents produced by either the Company's or third parties' desktop publishing,
presentation  graphics,  web page,  e-mail,  word  processing  and other similar
applications.  The Company currently offers seventeen products,  primarily Serif
PagePlus  and Harvard  Graphics , that  operate on the  Windows  95,  Windows NT
Windows  3.1  and  DOS  operating   systems  for  IBM  personal   computers  and
compatibles.  The Company has  established a multi-channel  distribution  system
utilizing direct mail,  telemarketing,  retail, corporate and OEM sales channels
and also  disseminates  its software  programs  over the  Internet.  The Company
currently derives substantially all of its net sales from products sold directly
to end-users by its direct mail and  telemarketing  centers,  and to  retailers,
distributors and corporate purchasers by its internal corporate and retail sales
force and independent sales representatives.

     In July 1996, the Company acquired Serif Inc. and Serif (Europe) Limited in
the Serif Acquisition,  which significantly  expanded the Company's product line
to include desktop  publishing  titles Serif PagePlus and Serif DrawPlus,  among
others.  In December 1996, the Company  acquired all of the outstanding  capital
stock of SPC upon consummation of the Merger, as a result of which the Company's
product line expanded further to include SPC's  presentation  graphics and other
visual communications and business  productivity software products.  The Company
continues to operate the Serif companies and SPC as  wholly-owned  subsidiaries.
Since  January  1998,  the  operations  of SPC  were  significantly  reduced  or
eliminated.

     In  1997,   the  Company   incurred   approximately   $376,000  of  certain
non-recurring  expenses or charges,  relating  primarily to the restructuring of
its California  operations including n expense related to a settlement agreement
with its former  President  approved  in  December  1997.  In 1996,  the Company
incurred approximately $23,199,533 of certain non-recurring expenses or charges,
relating  primarily to the  acquisition  of Serif and SPC. The 1996  expenses or
charges  included  $2,773,180  relating  to the  release  from escrow of 531,000
shares  of  Common  Stock  to two  former  management  stockholders,  $1,026,000
relating to the  issuance  of certain  warrants  to MS  Farrell,  $1,104,353  in
charges relating to the restructuring of the Company's operations  subsequent to
the  acquisitions  of Serif and SPC, an aggregate of  $17,514,000  of in-process
research and

<PAGE>

development  costs  associated  with  the  acquisitions  of  Serif  and  SPC and
approximately  $782,000  associated  with  settlement of outstanding  claims and
employee  severance  not  related to the  Company's  1996  restructuring.  These
expenses and charges accounted for approximately 85.8% of the Company's net loss
for 1996.

     North America and international net revenues for the Company's fiscal years
ended  December 31, 1997,  1996 and 1995 and the  percentage  change of such net
revenues compared to the prior fiscal year, were as follows:

<TABLE>
<CAPTION>
                                   Percentage                   Percentage
                         1997        Change           1996        Change            1995

<S>                  <C>             <C>          <C>              <C>          <C>        
North America......  $ 8,770,684     296.0%       $ 2,214,587      57.0%        $ 1,410,962

International.....     8,386,181     237.3%         2,486,368                            --
                     ___________     ______       ___________                   ___________

Total net revenues   $17,156,865     265.0%       $ 4,700,955    233.2%         $ 1,410,962
</TABLE>

     The Company  believes  that end users are  continuing  to migrate  from the
Windows 3.1 to the  Windows 95 and  Windows NT  platforms  and  potentially  may
migrate to  Internet  computing.  The  Company  expects  increased  competition,
including  price  competition,  in the  Windows  95,  Windows NT and Windows 3.1
markets in the future.  Several of the  Company's  competitors  have  introduced
suites of  products  which  include  products  that  directly  compete  with the
Company's  products.  These  suites of products may be bundled with other office
software  programs by the same or other  competitors,  or are  distributed at no
charge or are included as part of the  operating  system.  The Company  believes
these offerings of product suites have adversely affected net revenues, and will
continue to adversely  affect sales of the  Company's  products in the future as
the individual  products within the suites continue to gain increased  levels of
inter-operability  and  functionality.  The Company  currently  does not offer a
suite of general purpose office products;  however, the Company currently offers
one suite of products,  Serif  Publishing  Power Suite, as well as products that
complement  competitive  suite products.  The Company  believes that in order to
increase its net revenues,  it must continue to expand its direct  marketing and
telemarketing  operations,  introduce new marketing  strategies  and continue to
introduce  new   technologies   and  products   through   strategic   alliances,
acquisitions,  licensing or distribution  arrangements or internal  development.
Any inability or delay in executing these strategies,  difficulties  encountered
in introducing new products or marketing programs,  or failures of the Company's
current and future  products to compete  successfully  with products  offered by
competitors,   could   adversely   affect  the   Company's   net   revenues  and
profitability.

Results of Operations

1997 Compared to 1996

     Net Sales.  Net sales  increased by  $12,455,910 or  approximately  265% to
$17,156,865  in 1997 from  $4,700,955  in 1996 as a result of  inclusion  of the
sales from the Company's Serif and SPC  subsidiaries for the entire 1997 period,
as compared to the inclusion of the Serif  subsidiaries for five months in 1996.
As a result  of a  transition  to  selling  products  primarily  through  direct
channels  instead of at retail,  the  Company  provided  in 1997 for  returns at
approximately 5% of gross sales versus approximately 28% in 1996.

     Cost of Goods Sold. In 1997, cost of goods sold increased by $2,338,061, or
approximately 129% from $1,817,688 in 1996 to $4,155,749 in 1996, primarily as a
result  of  inclusion  of costs of goods  sold by the  Company's  Serif  and SPC
subsidiaries  for the entire 1997  period,  as compared to the  inclusion of the
Serif  subsidiaries  for five months in 1996.  Cost of goods sold decreased as a
percentage of net sales from approximately  38.7% in 1996 to approximately 24.2%
in 1997, as a result of the effect of increased  sales volumes  providing  lower
per unit production costs and an effort to reduce product costs during 1997.

     The  Company's  gross  margins  and  operating  income may be  affected  in
particular  periods  by the  timing of  product  introductions  and  promotional
pricing  and  rebate  offers,  as well as by  return  privileges  and  marketing
promotions  in connection  with new product  introductions  and upgrades.  These
promotions  may have a negative  influence on average  selling  prices and gross
margins.  Gross  margins  have also  been,  and may  continue  to be,  adversely

<PAGE>

affected by competitive pricing strategies in the industry as a whole, including
competitive  upgrade  pricing,  the  OEM  business  and  alternative   licensing
arrangements.

     Costs of goods sold consists  primarily of product costs,  freight charges,
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-ROMs and other media) and assembly.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  ("SG&A")  expenses  increased by  $11,817,720  or  approximately
157.6% from  $7,496,665 in 1996 to $19,314,385  in 1997.  SG&A expenses for 1997
include  $8,432,837 of marketing  and  administrative  expenses  relating to the
operations of the Company's Serif and SPC  subsidiaries,  compared to $2,209,973
of marketing and  administrative  expenses for the Serif  subsidiaries  in 1996;
$5,820,341  of salary and wage  expense  compared  to  $1,746,568  in 1996;  and
$5,862,855 of general and administrative  expense in 1997 compared to $4,608,305
in similar expenses in 1996.

     The Company establishes  several of its marketing  expenditure levels based
on expected net revenues.  If orders and  shipments do not occur when  expected,
expenditure  levels  could be  disproportionately  high  compared to  recognized
revenues for the reported period,  and the Company's  operating results could be
adversely affected.  The Company  periodically  reviews and adjusts its variable
expenditure  levels based on actual sales volumes.  In the future, the Company's
net  revenues and  operating  results  could be adversely  affected by these and
other factors, such as delays in new product  introductions,  the mix of product
sales or distribution channels and customer choices regarding operating systems.

     Costs  Associated  with Release of Escrow  Shares.  1996  expenses  include
non-cash  charges to  compensation  of  $2,773,180  relating to the release from
escrow of  531,000  shares of Common  Stock in April and  September  1996 to the
Company's  former  President  and another  former  management  stockholder.  See
"Escrow Shares." There were no similar expenses in 1997.

     Product  Development.  Product development expenses increased $2,149,600 or
199.4% from  $1,077,615 in 1996 to $3,227,215 in 1997.  The Company's  long-term
goal is to continue to reduce product  development  costs as a percentage of net
sales. The Company's  product  development costs were 18.8% of net sales in 1997
as compared to 22.9% in 1996. All internally  generated  development  costs have
been expensed in the period incurred. The Company intends to continue to acquire
externally developed  technology,  explore strategic alliances and other methods
of  acquiring  or  licensing  technology,  and  invest in  internal  development
projects.  Because  of  the  inherent  uncertainties  associated  with  software
development projects,  there can be no assurance that the Company's research and
development efforts will result in successful product introductions or increased
revenues or profitability.

     Restructuring  Expenses.  In 1997, the Company expensed $375,902 in charges
related to the  restructuring  of its operations.  The expenses  associated with
this restructuring program, which was substantially  completed by February 1998,
included  employee  severance  arrangements,  the settlement and general release
agreement with the Company's former President and Chief Executive  Officer,  and
costs relating to the elimination of lease  facilities in California.  See "Item
3. Legal  Proceedings."  In 1996 the  Company  incurred  restructuring  costs of
$1,104,353  which  consisted of  severance  payments,  expenses  relating to the
elimination of duplicative facilities and other restructuring related costs.

     In-Process Research and Development. In 1996, based on an allocation of the
Serif purchase price, the Company expensed $3,514,000 of in-process research and
development  costs associated with its acquisition of the Serif  companies,  and
based  on an  allocation  of  the  SPC  purchase  price,  the  Company  expensed
$14,000,000 of in-process  research and  development  costs  associated with its
acquisition of SPC. There were no such charges in 1997.

     Other Income.  In 1997, the Company received interest income of $195,655 as
compared to $121,380 in 1996, primarily as a result of higher cash balances.


<PAGE>

Liquidity and Capital Resources

     During  1997,  the  Company's   cash,   cash   equivalents  and  short-term
investments decreased by $8,404,481 to $2,760,353,  primarily as a result of the
Company's loss from operations during the year ended December 31, 1997. In light
of the  stabilization  of the Company's cash flow  resulting  primarily from its
1997  restructuring,  the  Company  believes  that  its  existing  cash and cash
equivalents and cash generated from operations,  if any, should be sufficient to
meet its currently  anticipated  liquidity and capital expenditure  requirements
for at least the next several months. There can be no assurance,  however,  that
the Company will be successful in attaining its sales goals,  nor that attaining
such goals will have the desired  effect on the Company's  cash  resources.  The
Company  received  approximately  $960,466 of net  proceeds  from the sales,  on
October 23,  1997,  of an  aggregate  961,000  shares of Common Stock in private
transactions  to five accredited  investors.  The Company has a letter of credit
facility of $300,000  relating to certain lease  obligations and a debt facility
of approximately  $200,000,  of which $58,000 was outstanding as of December 31,
1997,  from its primary  bank in the United  Kingdom;  however,  there can be no
assurances that the Company will be able to obtain additional  financing,  if at
all, or that such  financing  will be on terms  acceptable  to the Company.  The
Company  is  pursuing  a possible  offering  of its  equity or debt  securities;
however,  there can be no  assurance  that the  Company  will be  successful  in
completing such an offering.

     The  Company's  operating  activities  for 1997  used  cash of  $2,776,974,
primarily  related to costs associated with its operations.  The Company intends
to continue to utilize its  working  capital in 1998 for  software  development,
marketing and advertising, to finance the higher level of inventory necessary to
support   the   anticipated   continued   increase  in  sales  and  for  capital
expenditures,  including  the  purchase  of  computer  equipment  and  software.
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
arising from the sale and shipment of new products.

     In 1997,  approximately  48.9% of the Company's  total sales were generated
outside the U.S. The Company  expects this  practice to continue.  The Company's
exposure for foreign currency exchange gains and losses is partially  mitigated,
as the Company incurs  operating  expenses in most of the currencies in which it
invoices customers. As of December 31, 1997, the Company had no foreign exchange
contracts  outstanding.  The Company's  foreign exchange gains and losses may be
expected  to  fluctuate  from  period to period  depending  on the  movement  in
exchange rates.

     In June 1994,  SPC sold its  Superbase  product  line to Computer  Concepts
Corporation  ("CCC")  (Nasdaq  National  Market:   CCEE)  for  shares  of  CCC's
restricted  common stock.  As of December 31, 1997,  SPC owned the equivalent of
43,400  shares of common stock of CCC,  which were sold in 1998. As of April 14,
1998 the closing price of the CCC common stock on The Nasdaq National Market was
$3.91.

Escrow Shares

     From December 1993 through May 1995, Barry A. Cinnamon and Richard Bergman,
the Company's former Vice President of Product Development,  placed an aggregate
of 542,500 shares of Common Stock in escrow pending the Company's  attainment of
certain  minimum net revenue or Common  Stock price per share  thresholds.  Five
hundred and  thirty-one  thousand  (531,000) of these shares were  released from
escrow  (500,000  shares to Barry A. Cinnamon and 31,000 to Richard  Bergman) by
the Board,  although these thresholds were not reached. In connection therewith,
the Company recognized compensation expense of approximately $2,773,180 in 1996.

Net Operating Loss Carryforwards

     The Company estimates its consolidated tax net operating loss carryforwards
to be  approximately  $84 million at December 31, 1997. Under Section 382 of the
Code, certain changes in the ownership or the business of a corporation that has
net  operating  loss  carryforwards  result  in  the  inability  to  use  or the
imposition of  significant  restrictions  on the use of such net operating  loss
carryforwards  to offset future  income and tax  liability of such  corporation.
After  giving  effect to the Merger,  an  "ownership  change" was deemed to have
occurred  under  Section  382 of the Code and the  regulations  thereunder  with
respect to both the Company and SPC, and, as a result thereof, the use by the

<PAGE>

     Company  of  these  net  operating  loss  carryforwards  will  be  limited.
Utilization  of the net  operating  loss  carryforwards  of SPC  may be  further
limited by reason of the  consolidated  return separate  return  limitation year
rules,  and the SPC net  operating  loss  carryforwards  are also subject to the
additional  limitation  that such  losses  can only be  utilized  to offset  the
separate  company taxable income of SPC. The Company  estimates that the maximum
utilization  of such net  operating  loss  carry  forwards  to be  approximately
$1,200,000  per year through  2012.  There can be no assurance  that the Company
will be able to utilize all or any of its net operating loss carryforwards.  The
Company  has  fully   reserved  the  tax  benefit  of  its  net  operating  loss
carryforward   and  other   deferred  tax  assets   because  of  uncertainty  of
realization.  In addition,  the foreign  losses  incurred by SPC may decrease or
otherwise  restrict  the  ability of the  Company to claim U.S.  tax credits for
foreign income taxes.  The Company has applied for a closing  agreement with the
Internal  Revenue Service  pursuant to which the Company will become jointly and
severally  liable for SPC's tax  obligations  upon  occurrence  of a "triggering
event" requiring  recapture of dual consolidated  losses previously  utilized by
SPC. Such closing  agreement will avoid SPC being required to recognize a tax of
approximately $8 million on  approximately  $24.5 million of SPC's previous dual
consolidated  losses upon the Merger.  While the Company  believes  that it will
obtain this agreement,  failure to do so could result in the recognition of this
tax liability.  Any future acquiror of the Company may also be required to agree
to a similar  closing  agreement,  to the  extent it is able to do so.  Non-U.S.
persons  generally  would be  ineligible  to do so.  This  could have a material
adverse  effect on the  future  ability  of the  Company  to sell SPC to such an
ineligible person.

Seasonality

     The computer  software  market is  characterized  by  significant  seasonal
swings in demand,  which  typically  peak in the fourth quarter of each calendar
year. The seasonal pattern is due primarily to the increased demand for software
during the  year-end  holiday  buying  season and reduced  retail and  corporate
demand for business  software during the European summer  vacation  period.  The
Company expects its net sales and operating  results to continue to reflect this
seasonality.  The Company's revenues may also experience  substantial variations
as a result of a number of factors,  such as 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 the Company will
achieve consistent growth or profitability on a quarterly or annual basis.

Inflation

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


Item 7.        Financial Statements.

     Set  forth  below  is a list of the  financial  statements  of the  Company
included in this Annual Report on Form 10- KSB.

Item                                                                      Page*
Independent Auditors' Reports...............................................F-2
Balance Sheet as of December 31, 1997.......................................F-5
Statements of Operations for the years ended December 31, 1997 and 1996.....F-6
Statements of Stockholders' Equity for the years ended December 31, 1997 
     and 1996...............................................................F-7
Statements of Cash Flows for the years ended December 31, 1997 and 1996.....F-8
Notes to Financial Statements...............................................F-9
----------
* Page F-1 follows page 39 to this Annual Report on Form 10-KSB.

<PAGE>

               Item 8.        Changes In and Disagreements With Accountants on
                              Accounting and Financial Disclosure.

     On February 11, 1998,  the Board of Directors (the "Board") of the Company,
acting upon the  recommendation of the Audit Committee of the Board,  determined
to replace  Ernst & Young LLP ("Ernst & Young") as the  independent  auditors of
the Company's  financial  statements and appointed  Richard A. Eisner & Company,
LLP  ("Eisner")  as  the  Company's  new  independent  auditors  engaged  as the
principal  accountant to audit the Company's  financial  statements,  commencing
with the Company's  fiscal year ended  December 31, 1997. The reports of Ernst &
Young for either of the past two years did not  contain an adverse  opinion or a
disclaimer  of opinion,  and were not  qualified or modified as to  uncertainty,
audit scope or accounting  principles.  There were no disagreements with Ernst &
Young requiring disclosure pursuant to Item 304(a)(1)(iv) of Regulation S-K, nor
were  there  any  reportable  events  requiring   disclosure  pursuant  to  Item
304(a)(1)(v)  of  Regulation  S-K. In addition,  during the  Company's  two most
recent fiscal years and through the date hereof,  neither the Company nor anyone
acting on the  Company's  behalf  consulted  with Eisner on matters  which would
require  disclosure  pursuant to Item  304(a)(2) of Regulation  S-K. The Company
requested  Ernst & Young to  furnish  it a letter  addressed  to the  Commission
stating  whether it agrees with the above  statements and Ernst & Young has done
so.

<PAGE>


                                    PART III


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

Officers and Directors

     The current executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

                                                                                 Director
Name                    Age    Positions and Offices with the Company              Since

<S>                     <C>                                                        <C> 
Mark E. Leininger       47     President, Chief Operating Officer and Director     1996
Kevin D. Sullivan       47     Chief Financial Officer and Treasurer               N/A
Marc E. Jaffe, Esq.     46     Chairman of the Board of Directors and Secretary    1995
Robert Gordon           57     Vice President - Marketing and Sales                N/A
Norman W. Alexander     68     Director                                            1996
Neil R. Austrian, Jr.   33     Director                                            1996
Neil M. Kaufman, Esq.   37     Director                                            1996
Martin F. Schacker      40     Director                                            1997
</TABLE>

     Set forth below is a brief  description  of the  background of the officers
and  directors  of the  Company  based on  information  provided  by them to the
Company.

     Mark E. Leininger was Chief Financial Officer of the Company from July 1995
through  December 1997, and has been the Chief Operating  Officer and a director
of the Company since  September  1996 and President of the Company since January
1998. From February 1994 through April 1995, Mr.  Leininger was the President of
Phoenix  Leasing  Corporation,  a passenger  and cargo air carrier and  aircraft
leasing  company,  which filed for bankruptcy  protection in 1996. From February
1986 through  February 1994, Mr.  Leininger  held various  positions,  including
Chief  Financial  Officer  and Chief  Operating  Officer,  with Mid  Pacific Air
Corporation,  a  transportation  and service  company  whose stock was traded on
NASDAQ.  Mr.  Leininger  received an MBA from  National  University,  San Diego,
California in 1979 and a BA from Miami University, Oxford, Ohio in 1972.

     Kevin D. Sullivan has served as the Company's Chief Financial Officer, Vice
President - Finance and  Treasurer  of the Company  since  December  1997.  From
November 1995 to December  1997,  Mr.  Sullivan was Chief  Financial  Officer of
Prizm  Environmental and Occupational  Health,  Inc., a multi-clinic health care
company. From December 1993 to September 1994, he was Chief Financial Officer of
Scientific  Packaging  Corp., a manufacturer of packaging for household  laundry
products. Mr. Sullivan served as Controller (from 1987 to 1988), Treasurer (from
1989 to 1990) and Manager of Bankruptcy  Claims  Resolutions (from 1990 to 1993)
of Prime Hospitality Corp., a New York Stock Exchange company, when it was known
as Prime Motor Inns,  Inc. Mr. Sullivan  received a BS degree from  Pennsylvania
State University in 1976.

     Marc E. Jaffe,  Esq., has been a director of the Company since May 1995. In
January  1998,  Mr. Jaffe was elected  Chairman of the Board of Directors of the
Company,  in which capacity he does not serve as the Company's  chief  executive
officer.  From 1992 until the present  time,  Mr.  Jaffe has been  President  of
Electronic Licensing Organization,  Inc., which has acted as the Company's agent
in the acquisition of certain electronic  publishing rights.  From 1988 to 1991,
Mr.  Jaffe was  Executive  Vice  President of database  management  for Franklin
Electronic Publishers, a New York Stock Exchange company engaged in the business
of publishing  electronic books on hand held media.  From 1985 through 1987, Mr.
Jaffe was  President of the software and video  division of Simon & Schuster,  a
publishing  company.  Mr. Jaffe  received a JD degree from  Columbia  University
School of Law in 1976 and a BA from Columbia College in 1973.


<PAGE>

     Robert  Gordon has served as the Company's  Vice  President - Marketing and
Sales or Vice  President  Marketing  since June 1996.  From January 1995 to June
1996,  Mr.  Gordon was  Chairman  of the Board of a  family-owned  chain of four
health and fitness clubs.  From 1984 through  December 1994, he was President of
Leber Katz Partners Direct Marketing,  a New York City-based advertising agency.
From 1980 to 1984, Mr. Gordon was President of RCA Record and Tape Club.

     Norman W.  Alexander has been a director of the Company since October 1996.
Mr.  Alexander  is a retired  former  director  of Imperial  Foods Ltd.,  a food
products company, and formerly was the chairman of several subsidiaries thereof.

     Neil R. Austrian, Jr., has been a director of the Company since April 1996.
Since March 1998, Mr. Austrian has been a partner with the Rust Group, a private
venture capital and investment marketing services partnership. From July 1997 to
February 1998, Mr. Austrian was the Chief Financial Officer of Tescorp., Inc., a
cable television company, and was Vice President of Operations of Tescorp., Inc.
from October 1994 through  February 1998. Prior to joining  Tescorp.,  Inc., Mr.
Austrian was an associate at Rust Capital,  Ltd., a venture  capital firm,  from
1988 to October 1994. Mr. Austrian holds a BA Degree from Swarthmore College.

     Neil M. Kaufman,  Esq.,  has been a director of the Company since  December
1996 and served as the Company's  Secretary from December 1996 to December 1997.
Mr. Kaufman is currently the principal of Kaufman & Associates,  LLC, counsel to
the Company.  From January 1997 to December  1997,  Mr. Kaufman was a partner in
Moritt,  Hock & Hamroff,  LLP ("Moritt Hock"). For four years prior thereto,  he
was a member of Blau, Kramer, Wactlar & Lieberman,  P.C. ("Blau Kramer").  Prior
to his affiliation with Blau Kramer,  Mr. Kaufman was associated with Lord Day &
Lord,  Barrett Smith ("Lord Day").  Moritt Hock, Blau Kramer and Lord Day served
as counsel to the Company during the periods in which Mr. Kaufman was affiliated
or associated  with such firms.  Mr. Kaufman  received a JD degree from New York
University School of Law in 1984 and a BA degree from SUNY Binghamton in 1981.

     Martin F. Schacker has been a director of the Company since  December 1997.
Mr.  Schacker  also  served as a director  of the  Company  from  August 1994 to
December 1995.  From 1991 until the current time, Mr. Schacker has been Chairman
of M.S. Farrell & Co., Inc., a Wall Street investment banking and brokerage firm
which serves as the Company's  investment banker and acted as the representative
of the underwriters of the Company's initial public offering.  From 1987 through
1991, Mr.  Schacker served as Senior Vice President of investments and corporate
finance of D.H. Blair & Company, Inc., an investment banking and brokerage firm.
Prior to that, Mr.  Schacker  served as Senior Vice President of Shearson Lehman
Brothers,  a Wall Street  investment  banking and brokerage  firm. Mr.  Schacker
received a BA in Business  from Hofstra  University in 1982.  Mr.  Schacker is a
director of  Innapharma,  Inc.,  a Suffern,  New  York-based  biotechnology  and
contract research company.

     The Company's  Board of Directors is  classified  into three  classes.  The
directors in each class serve for three-year  terms.  Neil R. Austrian,  Jr. and
Marc E.  Jaffe are  members of Class I which  serves  until the  Company's  2000
Annual  Meeting of  Stockholders.  Norman W.  Alexander  and Neil M. Kaufman are
members of Class II which  serves  until the  Company's  1998 Annual  Meeting of
Stockholders.  Mark E. Leininger and Martin F. Schacker are members of Class III
which serves until the Company's 1999 Annual Meeting of Stockholders.  Directors
receive no cash compensation for their services to the Company as directors, but
are  reimbursed  for expenses  actually  incurred in connection  with  attending
meetings of the Board of  Directors.  Members of the Board of Directors  who are
not employees of the Company, of which there currently are four, are eligible to
participate  in the  Company's  Outside  Director and Advisor Stock Option Plan.
During  1997,  the Board of  Directors  met eleven  times and acted by unanimous
written consent on two occasions.  All current directors of the Company attended
not less than 75% of such meetings of the Board and committees  thereof on which
they serve.

     The Audit Committee,  which currently consists of Norman W. Alexander, Neil
R. Austrian,  Jr. and Marc E. Jaffe,  met once during 1997. The Audit  Committee
recommends engagement of the Company's independent certified public accountants,
and is primarily  responsible for reviewing and approving the scope of the audit
and other  services  performed by the  Company's  independent  certified  public
accountants and for reviewing and evaluating the Company's accounting principles
and practices,  systems of internal controls, quality of financial reporting and
accounting and financial staff, as well as any reports or recommendations issued
by the independent accountants.


<PAGE>

     The Compensation Committee, which currently consists of Norman W. Alexander
and Neil R. Austrian,  Jr., held meetings or acted by unanimous  written consent
thirty times during  1997.  The  Compensation  Committee  generally  reviews and
approves of the Company's executive  compensation and currently  administers all
of the Company Stock Plans.

Section 16(a) Beneficial Ownership Reporting Compliance

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company,  together with written representations received by the
Company from applicable  parties that no Form 5 was required to be filed by such
parties,  all parties subject to the reporting  requirements of Section 16(a) of
the Exchange Act filed all such required  reports,  except that Daniel J. Fraisl
failed to timely  file two  Statements  of Changes in  Beneficial  Ownership  of
Securities  on  Form  4 or  an  Annual  Statement  of  Beneficial  Ownership  of
Securities  on Form 5 relating to five grants of stock  options by the  Company;
Lori  Kramer  Cinnamon  failed to timely file a Form 4 relating to two grants of
stock  options by the Company and two stock  purchase  transactions  by Barry A.
Cinnamon,  the husband of Ms. Kramer Cinnamon;  Joseph V. Szczepaniak  failed to
timely file two Forms 4 or a Form 5 relating to three grants of stock options by
the  Company;  George  Lauro (who  resigned as a director on December  20, 1996)
failed to timely file a Form 4 or Form 5 relating to one grant of stock  options
by the  Company;  Marc E.  Jaffe  failed to timely  file two Forms 4 or a Form 5
relating  to two  grants of stock  options  by the  Company;  and each of Norman
Alexander  and Neil R.  Austrian,  Jr.  failed to timely file a Form 4 or Form 5
relating to a grant of stock options by the Company.  Additionally,  pursuant to
the Company's stock option repricing program (the "Repricing Program"), pursuant
to which certain  option  holders are permitted to exchange  their stock options
for 25% fewer options with otherwise  identical terms,  except that the exercise
price  thereof  is  reduced  to $1.25  per  share,  each of  Messrs.  Alexander,
Austrian,  Cinnamon,  Jaffe and Kaufman, Ms. Kramer Cinnamon,  Mark E. Leininger
and Eng Chye Low (since  resigned as a director)  failed to timely file a Form 4
or Form 5 relating  to the deemed  cancellations  and grants of  repriced  stock
options. See "Item 10. Executive Compensation - Repricing of Options."


Item 10.  Executive Compensation.

     The  following  table sets forth,  for the three years ended  December  31,
1997, the cash and other  compensation  paid to all  individuals  serving as the
Company's Chief Executive  Officer (or acting in a similar capacity) during 1997
and the two other  individuals  serving as executive  officers of the Company on
December  31, 1997 whose total salary and bonus,  for  services  rendered to the
Company during 1997, was $100,000 or more (each, a "Named  Executive  Officer").

<TABLE>
<CAPTION>
                                                                              Long-Term
                                                                             Compensation
                              Annual Compensation                               Awards

                                                                               Securities                All
                                                          Other Annual         Underlying               Other
Name and Principal Position   Year   Salary    Bonus     Compensation(1)         Option              Compensation

<S>                           <C>    <C>       <C>                             <C>                        <C>
Barry A. Cinnamon             1997   $145,481  $111,617          --            305,000(3)                 --
 Chairman of Board            1996     95,000    39,892          --             60,500                    --
 Chief Executive Officer      1995     46,822    26,922          --                -0-                    --
 and President(2)

Mark E. Leininger,            1997   $145,000  $ 39,737          --            300,000(5)                 --
 President, Chief Operating   1996     81,000    35,000          --            225,000                    --
 Officer, Chief Financial     1995     29,442        --          --             20,000                    --
 Officer, Treasurer and Vice
 President - Finance(4)

Robert Gordon(6)              1997  $ 75,100   $ 28,521          --            147,291(7)                 --
 Vice President - Marketing   1996    26,809     35,085          --             75,810                    --
 and Sales                    1995        --         --          --                 --                    --
<FN>

----------
(1)  The value of all  perquisites  provided  did not  exceed  the lesser of
     $50,000 or 10% of the officer's salary and bonus.
(2)  Mr. Cinnamon resigned as an officer,  director  and employee of the Company
     on December 19, 1997. See "Item 3. Legal  Proceedings."
(3)  Includes options to purchase 5,000 shares of Common  Stock  granted to Lori
     Kramer  Cinnamon,  Mr.  Cinnamon's wife. 
(4)  Mr. Leininger was appointed President of the Company on January  28,  1998.
     Upon  the  appointment  of  Kevin  D.  Sullivan as Chief Financial Officer,
     Treasurer and Vice President - Finance on December 19, 1997, Mr. Leininger
     no longer served in such positions.  
(5)  Does  not  include  options  to  purchase  545,000  shares  of Common Stock
     repriced and reduced to options to purchase 408,750 shares of  Common Stock 
     under the Repricing Program. See "Repricing  of  Options"  below  and "Item
     12.  Certain Relationships and Related Transactions." 
(6)  Mr. Gordon was hired by the Company on August 2, 1996.  Mr. Gordon receives
     a  quarterly bonus  based  on 2% of the net contribution of the direct mail
     sales of the  Company.  One-third  of this  bonus  is paid to Mr. Gordon in
     cash and the remainder is paid  in  options to purchase  Common Stock at an
     exercise  price equal to the closing price of  the Common Stock on the last
     day of the quarter in which  earned.  
(7)  Does  not  include  options  to  purchase  214,873  shares of Common  Stock
     repriced and reduced to options to purchase 161,154 shares of Common  Stock
     under  the  Repricing  Program.  See  "Repricing  of  Options"  below  and
     "Item 12. Certain Relationships and Related Transactions."
</FN>
</TABLE>

Stock Option Grants in 1997

     The following table sets forth (a) the number of shares underlying  options
granted to each Named  Executive  Officer  during 1997,  (b) the  percentage the
grant represents of the total number of options granted to all Company employees
during  the  1997,  (c) the per share  exercise  price of each  option,  (d) the
expiration date of each option.


<PAGE>
<TABLE>
<CAPTION>

                             Number of Shares     Percentage of Total
                           Underlying Options     Options Granted to         Exercise       Expiration
Name                       Granted During 1997         Employees in 1997       Price            Date

<S>                           <C>                          <C>                 <C>             <C>
Barry A. Cinnamon.......      300,000                      6.7%                $3.43           2/4/07
Barry A. Cinnamon.......        4,000 (1)                  *                    3.875          1/14/07
Barry A. Cinnamon.......        1,000 (1)                  *                    3.43           2/4/07
Robert Gordon...........        1,735                      *                    3.875         12/31/06
Robert Gordon...........        1,000                      *                    3.43           2/4/07
Robert Gordon...........        1,328                      *                    2.9375         3/31/07
Robert Gordon...........      135,000                      3.0                  2.25           5/13/07
Robert Gordon...........        5,512                       .1                  2.0625         6/29/07
Robert Gordon...........        2,716                      *                    1.1875        10/8/07
Robert Gordon...........       56,250 (2)                  1.3                  1.25           7/31/06
Robert Gordon...........          607 (2)                  *                    1.25          10/14/06
Robert Gordon...........        1,301 (2)                  *                    1.25          12/31/06
Robert Gordon...........          750 (2)                  *                    1.25           2/4/07
Robert Gordon...........          996 (2)                  *                    1.25            3/31/07
Robert Gordon...........      101,250 (2)                  2.3                  1.25           5/13/07
Mark E. Leininger.......      300,000                      6.7                  3.43           2/4/07
Mark E. Leininger.......       15,000 (2)                   .3                  1.25           7/20/05
Mark E. Leininger.......        7,500 (2)                   .2                  1.25           2/19/06
Mark E. Leininger.......       52,500 (2)                   .2                  1.25           4/24/06
Mark E. Leininger.......      108,750 (2)                  2.4                  1.25           9/28/06
Mark E. Leininger.......      225,000 (2)                  5.0                  1.25           2/4/07

<FN>
----------
*    Less than .1%.
(1)  Represents  options  granted  to  Lori  Kramer  Cinnamon,  the  wife of Mr.
     Cinnamon.
(2)  Represents repriced options.
</FN>
</TABLE>

Aggregate  Option/SAR  Exercises in Last Fiscal Year and Fiscal Year-End Option/
SAR Values

     Set forth in the table below is  information,  with  respect to each of the
Named  Executive  Officers,  as to the (a) number of shares acquired during 1997
upon each  exercise of options  granted to such  individuals,  (b) the aggregate
value realized upon each such exercise (i.e., the difference  between the market
value of the  shares at  exercise  and their  exercise  price),  (iii) the total
number of unexercised options held on December 31, 1997,  separately  identified
between  those  exercisable  and those not  exercisable,  and (iv) the aggregate
value of in-the-money, unexercised options held on December 31, 1997, separately
identified between those exercisable and those not exercisable.

<TABLE>
<CAPTION>

                                                                                    Value of Unexercised
                          Number of Unexercised Options                           In-the-Money Options at
                             at December 31, 1997                                    December 31, 1997
                         Shares
                        Acquired     Value
Name                   on Exercise  Realized     Exercisable      Unexercisable      Exercisable     Unexercisable
<S>              <C>        <C>         <C>        <C>               <C>                 <C>             <C>
Barry A. Cinnamon(1)..     -0-         -0-         40,080            102,998             -0-             -0-
Mark E. Leininger(2)..     -0-         -0-        147,916            260,834             -0-             -0-
Robert Gordon(2)......     -0-         -0-            -0-            169,382             -0-             -0-
<FN>
---------
     (1)  Includes   options  to  purchase   19,914   (exercisable)   and  7,831
     (unexercisable) shares of Common Stock granted to Lori Kramer Cinnamon, the
     wife of Mr. Cinnamon.
     (2) Gives effect to Repricing Program. See "Repricing of Options" below.
</FN>
</TABLE>


<PAGE>

Employment Agreements

     The  Company  entered  into  employment  agreements  with  each of Barry A.
Cinnamon and Lori Kramer  Cinnamon,  both of which were terminated in connection
with their resignations as directors, officers and employees of the Company. See
"Item 12. Certain Relationships and Related Transactions."

     The employment  agreement with Barry A. Cinnamon  provided for him to serve
as the President and Chief Executive  Officer of the Company for a term expiring
in December 1999,  with an annual base salary of $150,000,  bonuses of 5% of the
Company's  consolidated net income before taxes and extraordinary items, .15% of
the  Company's  consolidated  net sales and .75% of the  Company's  consolidated
gross profits. In October 1996, the Board of Directors  determined to pay to Mr.
Cinnamon a bonus of $25,000 following the first profitable fiscal quarter of the
Company after the Merger.

     The  employment  agreement  with Lori Kramer  Cinnamon  provided for her to
serve as a Vice  President of  Marketing  of the Company for a term  expiring in
December 1999,  with an annual base salary of not more than $40,000,  a bonus of
1% of the Company's net income before taxes and extraordinary  items and .75% of
the Company's gross profit.  Under the terms of Ms.  Cinnamon's  agreement,  the
Board of Directors may increase Ms.  Cinnamon's base salary by not more than 15%
per year.

     The Company also has entered into an agreement  with Mark E. Leininger (the
"Leininger Agreement"),  which contains restrictions on the employee engaging in
competition  with  the  Company  for the  term  thereof  and for up to one  year
thereafter  and  provisions  protecting  the  Company's  proprietary  rights and
information. The Leininger Agreement provides for the payment of three times the
average annual cash  compensation  paid by the Company to Mr. Leininger over the
previous five years, less $1.00, and the accelerated  vesting of all outstanding
stock options granted to Mr.  Leininger,  upon the termination of his employment
within six months after a change in control or within six months  prior  thereto
if such  termination  was without cause. In October 1996, the Board of Directors
determined  to pay to Mr.  Leininger  a bonus of  $25,000  following  the  first
profitable fiscal quarter of the Company after the Merger.

Company Stock Plans

1994 Long Term Incentive Plan

     The Company has adopted the Company's  1994 Long Term  Incentive  Plan (the
"1994 Incentive Plan") in order to motivate qualified  employees of the Company,
to assist the Company in attracting employees and to align the interests of such
persons  with  those of the  Company's  stockholders.  The 1994  Incentive  Plan
provides for the grant of "incentive  stock  options"  within the meaning of the
Section 422 of the  Internal  Revenue Code of 1986,  as amended,  "non-qualified
stock options," stock appreciation rights,  restricted stock, performance grants
and  other  types  of  awards  to  officers,  key  employees,   consultants  and
independent contractors of the Company and its affiliates.

     The  1994  Incentive  Plan,  which  is  administered  by  the  Compensation
Committee of the Board of Directors  (currently comprised of Norman W. Alexander
and Neil R. Austrian,  Jr.),  currently  authorizes the issuance of a maximum of
4,000,000  shares of Common  Stock,  which may be either  newly  issued  shares,
treasury shares,  re-acquired shares, shares purchased in the open market or any
combination  thereof.  Incentive  stock  options  generally may be granted at an
exercise  price of not less than the fair market value of shares of Common Stock
on the date of grant,  and  non-qualified  stock  options  may be  granted at an
exercise  price of not less than 85% of such  fair  market  value.  If any award
under the 1994 Incentive Plan terminates,  expires unexercised,  or is canceled,
the shares of Common  Stock that would  otherwise  have been  issuable  pursuant
thereto will be available for issuance pursuant to the grant of new awards.  The
Company has issued an aggregate  5,000  shares of Common Stock upon  exercise of
options  granted  under the 1994  Incentive  Plan and  options  to  purchase  an
aggregate  3,247,439  shares of  Common  Stock  are  outstanding  under the 1994
Incentive Plan and options to purchase 752,561 shares remain available for grant
under the 1994 Incentive Plan as of March 31, 1998.


<PAGE>

Outside Director and Advisor Stock Option Plan

     The Company adopted the Outside Director and Advisor Stock Option Plan (the
"Director  and  Advisor  Plan") for the  purpose  of  attracting  and  retaining
well-qualified  persons for service as  directors of and advisors to the Company
and to provide such persons with the opportunity to increase their personal
interest in the Company's  continued  success and further align their  interests
with the  interests  of the  stockholders  of the  Company  through the grant of
options to purchase shares of Common Stock. All directors of the Company who are
not employees of the Company (each, a "Non-Employee  Director"),  of which there
are  presently  five,  are eligible to  participate  in the Director and Advisor
Plan.  Currently,  up to 500,000  shares of Common Stock may be issued under the
Director and Advisor Plan.

     Under the  Director and Advisor  Plan,  each  Non-Employee  Director of the
Company and each member of the  Advisory  Committee  of the  Company  (each,  an
"Outside  Director or  Advisor"),  upon first  becoming  an Outside  Director or
Advisor,  receives  options to purchase 25,000 shares of Common Stock at a price
equal to the fair  market  value of the  Common  Stock on the date of grant  and
thereafter receives options to purchase 10,000 shares of Common Stock at a price
equal to the per share fair  market  value of the Common  Stock on August 1st of
each  subsequent  year. In March 1997,  the Advisory  Committee was  eliminated.
Options awarded to each Outside  Director or Advisor become  exercisable  over a
period of two years, and are subject to forfeiture under certain conditions. The
Company has issued an aggregate  19,666  shares of Common Stock upon exercise of
options  granted  under the  Director and Advisor  Plan,  options to purchase an
aggregate  355,334 shares of Common Stock are outstanding under the Director and
Advisor Plan and options to purchase  125,000 shares remain  available for grant
under the Director and Advisor Plan as of March 31, 1998.

SPC 1989 Stock Plan

     In  connection  with the Merger,  pursuant to the  Assumption,  the Company
assumed  all of SPC's  obligations  under  SPC's  1989 Stock Plan (the "SPC 1989
Plan").  The SPC 1989 Plan remains  effective and the Company may, until the SPC
1989 Plan  terminates in accordance  with its terms,  at its  discretion,  grant
additional options under the SPC 1989 Plan.

     The SPC 1989  Plan  provides  for the  grant of  incentive  stock  options,
non-qualified stock options,  stock appreciation  rights, stock purchase rights,
incentive  stock  rights,  performance  grants  and  other  types of  awards  to
officers, key employees,  consultants and independent contractors of SPC and the
Company. The SPC 1989 Plan, which is administered by the Compensation  Committee
of the Board of  Directors,  currently  authorizes  the issuance of a maximum of
268,050  shares  of Common  Stock,  which may be  either  newly  issued  shares,
treasury shares,  re-acquired shares, shares purchased in the open market or any
combination  thereof.  Incentive  stock  options  generally may be granted at an
exercise  price of not less than the fair market value of shares of Common Stock
on the date of grant;  non-qualified stock options may be granted at an exercise
price of not less than 50% of such fair market  value;  incentive  stock  rights
permit the rightsholder to receive cash or shares of Common Stock based upon the
Company  or the  rightsholder  obtaining  results  specified  at the time of the
granting of such  rights;  stock  appreciation  rights  (which may be granted in
connection  with an option grant or as a separate grant) entitles the grantee to
receive a cash payment  based upon the yield of the Common Stock  between  grant
and exercise;  stock purchase rights entitle the rightsholder to purchase shares
of Common Stock at a price of not less than 50% of the fair market price of such
shares with the Company  retaining a diminishing right to repurchase such shares
over a specified period should the rightsholder's  relationship with the Company
terminate;  and long term  performance  awards  allow the  Company to  customize
incentive award programs to permit the awarding of cash or Common Stock upon the
Company or grantee  researching  specified  levels of performance.  If any award
under the SPC 1989 Plan terminates,  expires  unexercised,  or is canceled,  the
shares of Common Stock that would otherwise have been issuable  pursuant thereto
will be  available  for  issuance  pursuant  to the  grant  of new  awards.  The
equivalent  of 13,849  shares of Common Stock have been issued upon  exercise of
options  granted under the SPC 1989 Plan, the Company has options to purchase an
aggregate 32,916 shares of Common Stock  outstanding under the SPC 1989 Plan and
options to purchase 221,285 shares remain available for grant under the SPC 1989
Plan as of March 31, 1998. The SPC 1989 Plan will terminate in October 1999.
<PAGE>

SPC 1991 Stock Option Plan

     In  connection  with the Merger,  pursuant to the  Assumption,  the Company
assumed all of SPC's  obligations  under SPC's 1991 Stock  Option Plan (the "SPC
1991 Plan").  The SPC 1991 Plan remains effective and the Company may, until the
SPC 1991 Plan terminates in accordance with its terms, at its discretion,  grant
additional options under the SPC 1991 Plan.

     The SPC 1991  Plan  provides  for the  grant of  incentive  stock  options,
non-qualified  stock  options  and  stock  purchase  rights  to  officers,   key
employees,  consultants and independent  contractors of SPC and the Company. The
SPC 1991 Plan, which is administered by the Compensation  Committee of the Board
of Directors,  currently  authorizes the issuance of a maximum of 428,880 shares
of Common  Stock,  which may be either newly  issued  shares,  treasury  shares,
re-acquired  shares,  shares  purchased  in the open  market or any  combination
thereof.  Incentive stock options  generally may be granted at an exercise price
of not less than the fair market  value of shares of Common Stock on the date of
grant;  non-qualified  stock options may be granted at an exercise  price of not
less than 85% of such fair market value;  and stock purchase  rights entitle the
rightsholder  to purchase shares of Common Stock at a price of not less than 85%
of the fair market price of such shares with the Company retaining a diminishing
right  to   repurchase   such  shares  over  a  specified   period   should  the
rightsholder's  relationship with the Company terminate.  If any award under the
SPC 1991 Plan terminates,  expires  unexercised,  or is canceled,  the shares of
Common Stock that would  otherwise have been issuable  pursuant  thereto will be
available for issuance  pursuant to the grant of new awards.  The  equivalent of
1,065 shares of Common Stock have been issued upon  exercise of options  granted
under the SPC 1991 Plan, the Company has options to purchase an aggregate 49,244
shares of Common  Stock  outstanding  under  the SPC 1989  Plan and  options  to
purchase 378,571 shares remain available for grant under the SPC 1991 Plan as of
March 31, 1998. The SPC 1991 Plan will terminate in October 2001.

Repricing of Options

     On August 29, 1997, the Board of Directors  approved the Repricing  Program
pursuant  to  which  the  Company  has  offered  to all  then-current  officers,
directors  and employees of the Company the  opportunity  to reduce the exercise
price of their respective options granted under the Company Stock Plans to $1.25
per share of Common  Stock (the fair market  value of the Common Stock as of the
close  of  business  on such  date);  provided,  that,  as a  condition  to such
repricing,  the optionee is required to surrender  for  cancellation  25% of the
options so  repriced,  which would in all cases be the latest  options to become
exercisable under each repriced option. Except for such cancellation  provision,
each repriced option would be identical to the optionee's  prior option,  except
that,  during the six-month period commencing from the date of the acceptance of
the repricing offer,  the options would not be exercisable.  The creation of the
Repricing  Program  was  approved  primarily  because of the  importance  to the
Company of having equity incentives in the hands of key officers,  directors and
employees.  The Board  believed  that stock options which are "out of the money"
provide less compensatory incentive to an officer, director and employee who may
be considering alternative opportunities.  The six month period during which the
repriced  options may not be exercised  was viewed as a means of  retaining  the
services of valued employees for a longer period of time. The Committee  decided
to include  directors  and  officers  in the  Repricing  Program  because of the
importance  of their  leadership,  administrative  and  technical  skills to the
success of the  Company's  business.  See "Item 12.  Certain  Relationships  and
Related Transactions."

Indemnification

     Section  145  of  the  Delaware  General   Corporation  Law  provides  that
indemnification  of  directors,  officers,  employees  and  other  agents  of  a
corporation,  and  persons  who serve at its  request  as  directors,  officers,
employees  or other  agents of another  organization,  may be  provided  by such
corporation.

     The Company's Certificate of Incorporation  includes provisions eliminating
the personal  liability of its directors  for monetary  damages  resulting  from
breaches of their  fiduciary  duty except,  pursuant to the  limitations  of the
Delaware  General  Corporation Law, (i) for any breach of the director's duty of
loyalty to the Company or its  stockholders,  (ii) for acts or omissions  not in
good faith or which involve  intentional  misconduct  or a knowing  violation of
law,  (iii) under Section 174 of the Delaware  General  Corporation  Law, or any
amendatory  or  successor  provisions  thereto,  or  (iv)  with  respect  to any
transaction from which the director derived an improper  personal  benefit.  The

<PAGE>

Company's   By-laws  provide  indemnification  to directors, officers, employees
and agents,  including against claims brought under state or Federal  securities
laws,  to the full extent  allowable  under  Delaware  law. The Company also has
entered  into  indemnification  agreements  with  its  directors  and  executive
officers  providing,  among other things,  that the Company will provide defense
costs against any such claim,  subject to reimbursement  in certain events.  The
Company also maintains a directors and officers liability  insurance policy in a
coverage amount of $3,000,000, subject to a $200,000 deductible.


Item 11.  Security Ownership of Certain Beneficial Owners and Management.

     The following table sets forth the beneficial ownership of shares of voting
stock of the  Company,  as of March 31,  1998,  of (i) each person  known by the
Company to beneficially own 5% or more of the shares of outstanding Common Stock
based on filings with the SEC and certain  other  information,  (ii) each of the
Company's  executive  officers  and  directors,  and (iii) all of the  Company's
executive officers and directors as a group. Except as otherwise indicated,  all
shares are  beneficially  owned, and investment and voting power is held by, the
persons named as owners.

<TABLE>
<CAPTION>
                                 Amount and Nature
Name and Address of               of Common Stock         Percentage Ownership
Beneficial Owner (1)            Beneficial Owned (2)       of Common Stock (3)

<S>                                    <C>       <C>              <C> 
Mark E. Leininger........              1,182,817 (4)              12.8
Barry A. Cinnamon (5)....              1,036,817 (6)              11.2
Lori Kramer Cinnamon (5).              1,036,817 (7)              11.2
Howard Milstein..........                889,000 (8)               9.8
Gwyn Jones...............                469,804 (9)               5.2
M.S. Farrell & Co., Inc..                343,305 (10)              3.7
Martin F. Schacker.......                343,305 (11)              3.7
Norman W. Alexander......                121,245 (12)              1.3
Marc E. Jaffe............                 85,414 (13)              1.0
Neil R. Austrian, Jr.....                 63,582 (14)              *
Neil M. Kaufman..........                 58,665 (15)              *
Robert Gordon............                 31,073 (16)              *
Kevin D. Sullivan........                 12,500 (17)              *

All officers and directors
<FN>
                                                         as a group (10 persons).              1,898,601        (18)         19.5
----------
*    Less than 1.0%.
(1)  Unless  otherwise  indicated,  the  address for each  beneficial  owner
     listed in the table is Software Publishing  Corporation Holdings,  Inc., 3A
     Oak Road, Fairfield,  New Jersey 07004. 
(2)  Unless otherwise indicated, the Company believes that all persons named  in
     the table have sole voting and investment power with respect to all  shares
     of Common Stock beneficially owned by them. A person  is  deemed  to be the
     beneficial owner of securities which may be acquired by such person  within
     60 days from  the  date  on  which  beneficial  ownership  is  to be deter-
     mined upon the exercise of options, warrants or convertible securities.  
(3)  Each beneficial owner's  percentage  ownership  is  determined  by assuming
     that stock options and warrants that are held by such person (but not those
     held by any other  person) and which  are  exercisable  within  such 60 day
     period, have been exercised.  
(4)  Represents  (a) options to purchase  171,249 shares of Common Stock granted
     to Mr. Leininger under the Company Stock Plans which are exercisable within
     the next 60 days,  (b) the 111,248 shares of Common Stock held by the Serif
     (Europe)  Limited Share Ownership  Trust (the "Serif Trust"),  of which Mr.
     Leininger  acts  as  trustee  and  as  to  which  Mr.  Leininger  disclaims
     beneficial  ownership and (c) the 900,320 presently  outstanding  shares of
     Common  Stock  beneficially  owned  by Barry A.  Cinnamon  and Lori  Kramer
     Cinnamon which Mr Leininger,  as President of the Company, has the proxy to
     vote pursuant to the terms of the Cinnamon Settlement  Agreement.  Does not
     include  options to purchase  237,501 shares of Common Stock granted to Mr.
     Leininger  under the Company Stock Plans which are not  exercisable  within
     the next 60 days. 

<PAGE>

(5)  The address for Mr.  Cinnamon  and Ms. Kramer Cinnamon  is  18480  Hillview
     Drive, Los Gatos,  California  95030. 
(6)  Includes (a) an  aggregate  52,778  shares  of  Common  Stock  held  by Mr.
     Cinnamon as custodian  for  his minor children under the New Jersey Uniform
     Gift to Minors Act, (b) options to purchase  115,333 shares of Common Stock
     granted to Mr. Cinnamon under the Company Stock Plans which are exercisable
     within the next 60 days and (c) options to purchase 21,164 shares of Common
     Stock  granted  to  Lori  Kramer  Cinnamon,  Mr. Cinnamon's wife, under the
     Company Stock Plans which  are  exercisable  within the next 60 days.  Does
     not  include  (a)  990,558 shares of Common Stock issued in connection with
     the  Company's  acquisition   of  the  Serif   subsidiaries  and  remaining
     subject to  a  Stockholders  Agreement,  dated  as  of  July  31, 1996 (the
     "Stockholders  Agreement"),  to which Mr. Cinnamon is a party and  pursuant
     to which the holders of such  990,558  shares  (including  the Serif Trust,
     Gwyn Jones and Norman Alexander)  have  agreed  to  vote  their  respective
     shares  of  Common  Stock for the director-nominees  of the Company's Board
     of Directors and Mr. Cinnamon has agreed to vote all of the  securities  of
     the   Company   owned   by   him  for  Mr.  Jones  or  Mr.  Jones'  nominee
     (Norman  Alexander)  as a  director of the Company, in each case until July
     31, 1998 and (b) options to purchase 6,581  shares of Common Stock  granted
     to Ms.  Kramer  Cinnamon  under  the Company  Stock  Plans  which  are  not
     exercisable within the next 60 days.  Pursuant to  the Cinnamon  Settlement
     Agreement,  Mr. Cinnamon and Ms. Kramer Cinnamon have granted the President
     of the Company (presently, Mark E. Leininger) an irrevocable  proxy to vote
     all of  the  shares  of  Common  Stock  owned beneficially or of  record by
     either  of them,  in any  capacity,  in such  manner  as may be  determined
     by the  President  of the Company in his sole discretion.  
(7)  Represents  (a) 847,542  shares of Common  Stock owned of record  by  Barry
     A.  Cinnamon,  Ms.  Kramer Cinnamon's  husband,  (b) an aggregate of 52,778
     shares of Common Stock  held by Mr. Cinnamon  as custodian  for their minor
     children  under the New Jersey  Uniform  Gift to Minors Act, (c) options to
     purchase 21,164 shares of Common Stock granted to Ms. Kramer Cinnamon under
     the Company Stock Plans which are  exercisable within  the next 60 days and
     (d)  options  to  purchase  115,333  shares of Common Stock  granted to Mr.
     Cinnamon  under  the  Company  Stock Plans which are exercisable within the
     next 60 days.  Does not include (a) options to  purchase  6,581  shares  of
     Common Stock granted to Ms. Kramer  Cinnamon under  the Company Stock Plans
     which are not  exercisable  within the  next  60  days  and (b) the 990,558
     shares  remaining  subject  to  the  Stockholders  Agreement  to  which Mr.
     Cinnamon is a party.  
(8)  Represents  865,000 shares of Common Stock registered in the name of Howard
     Milstein  ("H.  Milstein")  and  24,000  shares  registered  in the name of
     Ronald L.  Altman  ("Altman").  Does  not  include  an  option (the "Altman
     Option") to purchase 96,100 shares  of Common  Stock  (the  "Altman  Option
     Shares")  granted  to  Altman  which  is  not  exercisable  within the next
     60 days.  According to a Schedule 13D filed by H. Milstein, Altma,  Michael
     Jesselson  ("Jesselson")   and   Edward   Milstein   ("E.  Milstein"   and,
     collectively with  H.  Milstein,  Altman,  and  Jesselson,  the   "Milstein
     Group"),  the individuals  comprising the Milstein Group have entered  into
     an  agreement,  dated  as  of  October  23,   1997  (the  "Milstein   Group
     Agreement"), which provides that (a) H. Milstein and E. Milstein each  have
     a 25%  beneficial  interest in the aggregate 889,000 shares of Common Stock
     (the "Milstein Group Shares")  registered in the names of H.  Milstein  and
     Altman, and  Jesselson has a 50% beneficial  interest in the Milstein Group
     Shares, (b) Altman has a 15% interest in the net profits or losses  to  the
     others collectively resulting  from the sale of the  Milstein  Group Shares
     and (c) H. Milstein has the sole voting power and dispositive   power  with
     regard  to  all  of   the  Milstein   Group  Shares.   The  Milstein  Group
     Agreement  also appears to provide that (a) in the event of the sale of the
     Altman Option, Altman shall receive 50% of the net proceeds thereof (taking
     into account any sales, commissions or related fees) and the balance of the
     net proceeds shall be divided among H. Milstein,  E. Milstein and Jesselson
     in the  proportion  of 25%,  25% and 50%,  respectively,  (b) if the Altman
     Option is exercised  and the Altman Option  Shares are  subsequently  sold,
     Altman shall  receive 50% of the net proceeds  thereof  (after  taking into
     account the payment of the exercise price and any costs of disposing of the
     Altman Option Shares) and the balance of such net proceeds shall be divided
     among H. Milstein,  E. Milstein and Jesselson in the proportion of 25%, 25%
     and 50%,  respectively,  and (c) H. Milstein has the sole power to dispose,
     transfer  and vote the Altman  Option  Shares and to  exercise,  dispose or
     transfer the Altman Option.  The address for Howard Milstein is c/o Douglas
     Elliman,  575  Madison  Avenue,  New  York,  New  York  10022.  See  "Legal
     Proceedings."  
(9)  Does not include any of the shares of Common  Stock or other securities  of
     the Company  owned  by  any  other  party  to  the Stockholders  Agreement.
     The address for Mr. Jones is Barley Green Farm, Laxfield Road, Stradbrooke
     Eye,  Suffolk,  England IP21 5JT. 

<PAGE>

(10) Includes (a) warrants  owned of record by M.S. Farrell Holdings, Inc. ("MSF
     Holdings"),  the corporate parent of MS Farrell, to purchase 113,500 shares
     of Common Stock which are  exercisable  within the next 60 days, (b) 62,428
     shares  of  Common  Stock  owned  of  record  by  MSF  Holdings,   (c)  the
     Underwriters'  Purchase  Options  ("UPOs") owned of record by MS Farrell to
     purchase  70,244  shares of Common Stock which are  exercisable  within the
     next 60 days,  (d)  warrants  owned of record by  Martin F.  Schacker,  the
     Chairman of the Board of Directors of MS Farrell and controlling  person of
     both MS Farrell and MSF Holdings (see note (11) below),  to purchase 48,500
     shares of Common Stock and (e) options to purchase  33,333 shares of Common
     Stock  granted to Mr.  Schacker  under the  Company  Stock  Plans which are
     exercisable  within the next sixty  days.  Does not  include (a) options to
     purchase  66,667 shares of Common Stock granted to Mr.  Schacker  under the
     Company  Stock Plans which are not  exercisable  within the next 60 days or
     (b) shares of Common  Stock,  UPOs and  warrants to purchase an  additional
     195,561  shares of Common  Stock  originally  granted to MS  Farrell  which
     currently  are owned by  stockholders,  directors,  managing  directors and
     executive  officers of MS Farrell and MSF Holdings and others.  The address
     for MS Farrell is 67 Wall Street, New York, New York 10005. 
(11) Represents (a) warrants owned by Mr. Schacker to purchase 48,500  shares of
     Common  Stock  which  are  exercisable  within the next 60 days, (b) 77,728
     shares of  Common  Stock  owned by MS  Farrell  and MSF  Holdings,  each of
     which  Mr.  Schacker  is Chairman of the Board and the controlling  person,
     (c) options  to  purchase  33,333  shares  of  Common  Stock granted to Mr.
     Schacker under the  Company  Stock Plans which are  exercisable  within the
     next  sixty  days, (d)  warrants  exercisable  within  the  next 60 days to
     purchase 113,500 shares of Common  Stock  owned of record  by MSF  Holdings
     and (e) UPOs owned by MS Farrell to purchase 70,244 shares of Common Stock.
     Does not include (a)  options  to  purchase  66,667  shares of Common Stock
     granted to Mr.  Schacker  under  the  Company  Stock  Plans  which  are not
     exercisable  within the next 60 days or (b)  shares of Common  Stock,  UPOs
     and warrants  to  purchase  an  additional  195,561 shares  of Common Stock
     originally granted to MS Farrell which currently are owned by stockholders,
     directors, managing  directors and executive officers of MS Farrell and MSF
     Holdings  and others.  The address for Mr. Schacker is MS Farrell,  67 Wall
     Street, New York, New York 10005.  
(12) Includes options to purchase 53,332 shares of Common Stock granted  to  Mr.
     Alexander under  the  Company  Stock  Plans  which  are exercisable  within
     the next 60 days.  Does not include (a) options  to purchase  72,918 shares
     of Common Stock granted to Mr.  Alexander  under  the  Company  Stock Plans
     which are not exercisable within the next 60 days or (b) any of the  shares
     of Common  Stock or other  securities  of the Company  owned  by  any other
     party to Stockholders Agreement. The address for Mr. Alexander is Burnside,
     Church Walk, Marholm, Peterborough, PE 67H2 England.
(13) Represents  options  to  purchase  85,414  shares  of  Common Stock granted
     to Mr. Jaffe under the Company Stock Plans which are exercisable within the
     next 60 days. Does not include options to purchase 117,086 shares of Common
     Stock  granted to Mr.  Jaffe  under the  Company  Stock Plans which are not
     exercisable  within the next 60 days. The address for Mr. Jaffe is Electric
     Licensing  Organization,  386 Park Avenue South,  Suite 1900, New York, New
     York  10016.  
(14) Represents (a) 750 shares of Common Stock held in an Individual  Retirement
     Account ("IRA") for the benefit of Mr. Austrian,  (b)  750 shares of Common
     Stock held in  an  IRA  for  the  benefit  of  Mr.  Austrian's  spouse  and
     (c)  options  to  purchase  62,082  shares  of Common  Stock granted to Mr.
     Austrian under the Company  Stock Option Plans which are exercisable within
     the next 60 days. Does not include options to  purchase  71,668  shares  of
     Common  Stock  granted  to  Mr.  Austrian   under the Company  Stock Option
     Plans which are not  exercisable  within the next 60 days.  The address for
     Mr. Austrian is c/o Rust Group,  327 Congress  Avenue,  Suite 200,  Austin,
     Texas 78701.  
(15) Includes options to purchase 36,665 shares of Common  Stock  granted to Mr.
     Kaufman  under the  Company  Stock  Plans  which are exercisable within the
     next 60 days.  Does not include options to purchase  8,335 shares of Common
     Stock granted to Mr. Kaufman under the Company Stock  Plans  which  are not
     exercisable within the next 60 days. The address for Mr. Kaufman is Kaufman
     & Associates,  LLC,  50  Charles  Lindbergh  Boulevard,  Suite 206, Mitchel
     Field, New York 11553. 
(16) Includes options to purchase  26,073  shares of Common Stock granted to Mr.
     Gordon under the Company Stock Option Plans which  are  exercisable  within
     the next 60 days.  Does not include  options to purchase  143,309 shares of
     Common Stock granted to Mr. Gordon   nder the Company  Stock  Option  Plans
     which are not  exercisable within the next 60 days. 
(17) Represents options to purchase 12,500 shares of Common Stock granted to Mr.
     Sullivan under the Company Stock Option Plans which are exercisable  within
     the next 60 days.  Does not  include  options to purchase  37,500 shares of

<PAGE>

     Common  Stock  granted to Mr. Sullivan under the Company Stock Option Plans
     which are not  exercisable  within the next 60 days. 
(18) Includes  (a)  an  aggregate  712,892  shares of Common Stock issuable upon
     exercise  of  the  options  and  warrants  discussed  in notes (4) and (10)
     through (17) above which are exercisable  within the next 60 days,  (b) the
     111,248 shares of Common Stock  registered in the name of the  Serif  Trust
     and  (c)  the  900,320  shares  of  Common Stock  beneficially owned by Mr.
     Cinnamon and Ms. Kramer  Cinnamon which are subject to the proxy granted to
     Mr.  Leininger,  as President of the Company,  pursuant to the terms of the
     Cinnamon Settlement Agreement.
</FN>
</TABLE>


Item 12.  Certain Relationships and Related Transactions.

     Martin F. Schacker,  a director of the Company, is Chairman of the Board of
Directors  of MS Farrell  and MSF  Holdings,  the parent  holding  company of MS
Farrell. MS Farrell acted as placement agent on behalf of the Company in selling
an aggregate of 1,115,250  shares of Class A Convertible  Preferred Stock of the
Company  in June 1994 and an  additional  75,000  shares of Class A  Convertible
Preferred Stock in November 1994 for aggregate gross proceeds of $1,190,250.  In
consideration  for its services in connection  therewith,  MS Farrell received a
10% commission and a 3% non-accountable  expense allowance on the gross proceeds
of such offering, a warrant which became exercisable for an aggregate of 302,354
shares of Common  Stock  which MS  Farrell  has  exercised  in full for  nominal
consideration,  and certain  other  consideration.  As a result of such  warrant
exercise,  MS Farrell became a holder of more than 5% of the outstanding  Common
Stock.

     In May 1995,  MS Farrell  loaned  $100,000 to the Company  (the "MS Farrell
Loan").  The MS Farrell Loan was evidenced by a promissory note in the principal
amount of $100,000,  bearing  interest at a rate equal to fourteen percent (14%)
per  annum,  maturing  on the  earlier  of (i)  December  25,  1995 or (ii)  the
consummation  of a subsequent  offering of securities  other than similar notes.
The MS Farrell Loan was secured by the Company's  accounts  receivable.  In June
through  August 1995,  MS Farrell  acted as  placement  agent with respect to an
aggregate $459,000 principal amount of additional 14% Promissory Notes issued by
the Company to other  persons.  MS Farrell did not receive any  compensation  in
connection  with the sale of these  additional 14% Promissory  Notes. MS Farrell
also acted as  placement  agent on behalf of the Company in selling an aggregate
of $1,250,000  principal amount of promissory notes and 243,902 shares of Common
Stock in August 1995.  In  connection  with its services  therewith,  MS Farrell
received a 10%  commission  and a 3%  non-accountable  expense  allowance on the
gross  proceeds  of such  offering.  The MS  Farrell  Loan was  repaid  from the
Company's proceeds of such offering.

     MS Farrell acted as  representative  of the  underwriters  of the Company's
initial public offering (the "IPO"), which was consummated on December 12, 1995,
pursuant to which the Company sold an aggregate 1,142,400 shares of Common Stock
for gross proceeds of $5,854,800.  As compensation for its underwriting services
in connection with the IPO, MS Farrell received a 10% underwriting  discount and
a 3%  non-accountable  expense  allowance of the gross proceeds from the IPO and
Underwriters'  Purchase  Options to purchase  103,300  shares of Common Stock at
$6.15 per share for a four year period terminating on December 5, 2000.

     Pursuant to an engagement  agreement,  dated December 23, 1993, between the
Company  and MS  Farrell,  the  Company  agreed  (a) to  use MS  Farrell  as its
exclusive  investment  banker  for  a  five-year  period,  (b)  to  pay  monthly
consulting  fees to MS Farrell of $2,500 until December 1998, in connection with
which the Company paid MS Farrell  $138,128  through August 20, 1996, and (c) to
pay to MS Farrell a fee of 2% of the greater of the maximum commitment under, or
the maximum amount actually  borrowed by the Company pursuant to, a conventional
line of credit  extended  to the  Company by a bank or other  short-term  lender
introduced to the Company by MS Farrell.  The Company had the right to terminate
the above-described obligations under this engagement agreement upon the payment
of  $250,000 in cash.  In August  1996,  in  exchange  for the right to pay such
termination  fee in  shares  of Common  Stock,  the  suspension  of  payment  of
obligations under this engagement agreement and certain other consideration, the
Company  granted  to MS  Farrell  and a  designee  thereof  warrants  (the  "MSF
Warrants")to  purchase 500,000 shares of Common Stock  exercisable at $6.875 per
share  for  a  six-year   period  and  extended  the  expiration   date  of  the
Underwriters'  Purchase  Options to August 22, 2002. In March 1997,  the Company
exercised its right to terminate the Company's investment banking obligations to

<PAGE>

MS Farrell and, in connection therewith, issued an aggregate of 71,428 shares of
Common Stock to MSF Holdings,  the parent holding company of MS Farrell,  and to
one other designee thereof.

     In June 1996, the Company loaned  $200,000 to a corporation  (the "Debtor")
of which MS Farrell is an affiliate and of which Martin F. Schacker,  a director
of the  Company  and  Chairman  of the Board of MS  Farrell,  is a director  and
stockholder  and Neil M. Kaufman,  a director of the Company,  is a stockholder.
This loan was  represented  by a  promissory  note (the "Debtor  Note")  bearing
interest  at 14% per annum  which  was  secured  by the  assets  of  Debtor.  In
connection with this loan, the Company also received a warrant (the  "Innapharma
Warrant") to purchase 100,000 shares of the common stock of Innapharma,  Inc., a
pharmaceutical  company  ("Innapharma"),   of  which  MS  Farrell  may  also  be
considered an affiliate and of which Mr. Schacker is a director,  at an exercise
price of $5.50 per share.  In March 1997,  in  consideration  for a warrant (the
"Debtor  Warrant") to purchase  100,000 shares of the common stock of the Debtor
at an exercise price of $1.00 per share,  exercisable for a six year period, the
Company agreed to extend the maturity of the Debtor Note and the Company further
agreed to exchange  the Debtor Note for a similar note (the  "Innapharma  Note")
bearing  interest at 12% per annum issued by Innapharma  maturing on the earlier
of November 27, 1997 or the consummation of an offering of equity  securities of
Innapharma. In July, 1997, the Innapharma Note was repaid in full (including all
accrued interest thereon) and contemporaneously  therewith, the Company assigned
the  Innapharma  Warrant to MS Farrell in exchange for a reduction in the number
of shares of Common Stock that may be purchased under the MS Farrell Warrants by
100,000 to 400,000 shares.

     Pursuant to a Financial Advisory  Agreement,  dated as of November 20, 1997
(the "1997 Farrell Agreement"),  between the Company and MS Farrell, the Company
retained MS Farrell to perform  specified  financial  advisory  services for the
Company on a non-exclusive  basis. In  consideration  for entering into the 1997
Farrell  Agreement,  the number of shares of Common  Stock that may be purchased
upon  exercise  of the MS  Farrell  Warrants  was  reduced  by 60,000 to 340,000
shares, the number of shares of Common Stock that may be purchased upon exercise
of the  Underwriters'  Purchase  Options was reduced by 15,495 to 87,805 shares,
the exercise price of both the MS Farrell  Warrants and  Underwriters'  Purchase
Options was reduced to $2.00 per share and MS Farrell  waived all  anti-dilutive
rights  under the  Underwriters'  Purchase  Options  and MS Farrell  Warrants in
connection  with the  Company's  October  1997 sale of 962,000  shares of Common
Stock in a private placement transaction.  Under the 1997 Farrell Agreement, the
Company  is  obligated  to pay MS  Farrell  between  2% and 7% of the  aggregate
consideration  paid in any  merger,  consolidation,  recapitalization,  business
combination or other stock or asset transaction in which MS Farrell participates
as an identifying or introducing  agent or in connection  with which the Company
seeks the  advice of MS  Farrell.  Pursuant  to an  Amendment  to the  Financial
Advisory  Agreement,  dated  January  10, 1998 (the "1998  Farrell  Agreement"),
between  the Company and MS  Farrell,  MS Farrell  agreed to perform  additional
financial advisory services for the Company.  In consideration for entering into
the 1998  Farrell  Agreement,  the per share  exercise  price of the MS  Farrell
Warrants and Underwriters'  Purchase Options was reduced to the lesser of: $1.27
or 120% of the sale price of any shares of Common Stock sold by the Company to a
source  introduced by MS Farrell within the twelve-month  period  terminating on
January 27, 1999; provided,  however,  that the per share exercise price may not
be less than  $1.06;  and the  expiration  date of the MS Farrell  Warrants  and
Underwriters' Purchase Options was extended to August 20, 2002.

     Prior to the Company's  IPO,  Barry A.  Cinnamon,  formerly the  President,
Chief Executive Officer and Chairman of the Board of the Company and currently a
principal  stockholder of the Company, and Richard Bergman, the Company's former
Vice  President  of Product  Development,  placed  into escrow an  aggregate  of
542,500  shares of Common Stock (the "Escrow  Shares"),  500,000 of which shares
were placed in escrow by Mr.  Cinnamon and 42,500 of which shares were placed in
escrow by Mr.  Bergman.  In April 1996,  upon the  execution 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  then held in escrow  were  released  from  escrow  and  delivered  to the
above-named stockholders, 200,000 of which shares were delivered to Mr. Cinnamon
and 17,000 of which shares were delivered to Mr. Bergman (the "April 1996 Escrow
Release").  In September  1996,  314,000 of the remaining  shares of the Company
Common Stock then held in escrow were  released from escrow and delivered to Mr.
Cinnamon  (300,000  shares) and Mr. Bergman (14,000 shares) (the "September 1996
Escrow  Release";  and together with the April 1996 Escrow Release,  the "Escrow
Releases").  Presently,  no shares remain in escrow and all of the  arrangements
relating to the Escrow  Shares  have been  terminated.  The  Company  incurred a
compensation  expense of approximately  $2,773,180 in connection with the Escrow
Releases in 1996. See "Item 6.  Management's  Discussion and Analysis or Plan of
Operation."


<PAGE>

     In April 1996,  Barry A.  Cinnamon sold 44,000 shares of Common Stock to MS
Farrell for a price equal to $2.00 per share,  and, in August 1996, Mr. Cinnamon
sold 42,946  shares of Common Stock to MS Farrell for a price equal to $6.00 per
share.

     Pursuant to the  Cinnamon  Agreements,  Barry A.  Cinnamon  and Lori Kramer
Cinnamon  resigned as officers,  directors  and employees of the Company and the
Company  granted  Mr.  Cinnamon a license to  certain  aspects of the  Company's
Intelligent  Formatting  technology  in  connection  with an  Internet  database
reporting  software product which had been under preliminary  development by the
Company.  Mr. Cinnamon and Ms. Kramer  Cinnamon are husband and wife.  Under the
terms of the Cinnamon  Settlement  Agreement,  (a) the Company paid Mr. Cinnamon
$56,000,  and agreed to (i) reimburse Mr.  Cinnamon for his verified  reasonable
expenses  incurred in the normal course of the  fulfillment  of his duties as an
officer and director of the Company, (ii) pay Mr. Cinnamon $10,000 per month for
a twenty  month  period,  (iii)  continue to make all  payments  with respect to
health insurance for the Cinnamons' benefit comparable to the coverage available
to the Company's  executive officers through the earlier of December 31, 1999 or
such time as Mr. Cinnamon is employed or retained on a  substantially  full-time
basis, (iv) reimburse Mr. Cinnamon for his reasonable  moving expenses,  up to a
maximum of $15,000,  and (v) register for resale by Mr. Cinnamon  865,000 shares
of Common Stock in the Company's  proposed  Registration  Statement on Form S-3,
and (b) (i) Mr. Cinnamon surrendered for cancellation all 60,520 shares of Class
B  Voting  Preferred  Stock,  Series  A,  of the  Company,  (ii)  the  Cinnamons
irrevocably  appointed  the President of the Company as proxy to vote all shares
of Common  Stock  owned  beneficially  or of  record  by either of them,  in any
capacity, in such manner as may be determined by the President of the Company in
his sole  discretion,  and (iii) the Cinnamons agreed to limit the sale of their
shares of Common Stock to a specified schedule under certain  circumstances.  In
addition,  the  Company  and Mr.  Cinnamon  and Ms.  Kramer  Cinnamon  exchanged
releases,  the release by Mr. Cinnamon and Ms. Kramer Cinnamon  extending to the
Company's subsidiaries, officers, directors, stockholders, attorneys and others.
See "Item 3. Legal Proceedings."

     In July 1996, the Company acquired all of the issued and outstanding shares
of capital stock of Serif Inc. and Serif (Europe) Limited. Pursuant to the terms
of the agreements for such  acquisitions (the "Serif  Acquisition  Agreements"),
the Company  issued to Norman  Alexander  an aggregate  67,913  shares of Common
Stock  and  agreed  to  nominate  Gwyn  Jones or his  designee  to the  Board of
Directors of the Company.  Mr. Jones, who became a holder of more than 5% of the
outstanding  Common  Stock  as  a  result  of  the  consummation  of  the  Serif
Acquisition  Agreements,  designated  Mr.  Alexander  as  his  nominee  and  Mr.
Alexander was elected as a director of the Company in October 1996. In addition,
Barry A. Cinnamon,  Norman  Alexander and the other former  stockholders  of the
Serif companies entered into the Stockholders  Agreement  pursuant to which each
party agreed, for a term of two years, to vote their respective shares of Common
Stock in favor of the  election  as  directors  of the  nominees  for  directors
designated by the Company's Board of Directors and in favor of the election as a
director of Mr. Jones or Mr. Jones' designee. Pursuant to the terms of the Serif
Acquisition  Agreements,  the  Company  entered  into  a  three-year  employment
agreement with Gwyn Jones, the founder and largest stockholder of Serif, and the
Company elected Gwyn Jones as a director in Class II. In October 1996, Mr. Jones
resigned as an officer,  director and employee of the Company and Serif pursuant
to  agreements  under which Mr. Jones  received or is to receive the base salary
payable  under  his  employment   agreement  and  certain  other  consideration,
including the  elimination  of the  prohibition on Mr. Jones selling the 469,804
shares  of  Common  Stock  which  Mr.  Jones  received  pursuant  to  the  Serif
Acquisition  Agreements and the substitution,  in lieu thereof, of a restriction
allowing  him to sell no more than thirty  percent  (30%) of the  average  daily
trading volume of Common Stock in any week and certain other restrictions.

     Digital Paper, Inc. ("Digital Paper"), and its stockholders, one of whom is
Daniel  Fraisl,  formerly  Vice  President  - Research  and  Development  of the
Company,  entered into an amendment to the Stock Purchase Agreement by which SPC
acquired Digital Paper,  which amendment  became effective upon  consummation of
the Merger.  The amendment  provided that a remaining  payment of $1,650,000 and
two incentive  payments with an aggregate  total of $325,000 upon the attainment
of certain  product  sales and  development  criteria,  which is required by the
terms of the  Stock  Purchase  Agreement  to be made by SPC to  Digital  Paper's
stockholders  in cash or in shares of SPC  common  stock,  be paid in cash or in
shares of Common  Stock,  at the  option of each such  stockholder.  None of the
criteria were met in 1996,  but were achieved in 1997.  Pursuant to a Settlement
and General Release Agreement, dated as of July 25, 1997 (the "Fraisl Settlement
Agreement"),  among Mr. Fraisl,  the Company and SPC, Mr. Fraisl  resigned as an
officer  and  employee of the  Company  and SPC and,  in  connection  therewith,
received a lump sum payment of $85,000, payment with respect to accrued vacation
time and the  Company's  agreement  to make all  payments  in  respect of health

<PAGE>

insurance for Fraisl's  benefit for a six month period.  The Company also agreed
that all stock  options  previously  granted to Fraisl would remain  exercisable
through  January 24, 1998, to the extent  exercisable on July 25, 1997.  None of
these options were exercised.  In addition,  pursuant to a Consulting Agreement,
dated as of July 25, 1997 (the "Fraisl Consulting  Agreement"),  between SPC and
Fraisl,  SPC retained Fraisl for a two year period to provide certain consulting
services relating to the Company's Intelligent Formatting technology.

     During  1995,  SPC  entered  into  three-year,   non-interest-bearing  loan
agreements with Irfan Salim,  the then President and Chief Executive  Officer of
SPC,  in the  amount  of  $300,000,  and with  Robert T.  Iguchi,  the then Vice
President of North American Sales and Service of SPC, in the amount of $117,000.
Both of these obligations were secured by the right to a second deed of trust on
their  respective  homes.  During the fourth fiscal  quarter of 1996, Mr. Iguchi
repaid to the  Company  the  outstanding  balance of his loan,  in the amount of
$117,000.  During the SPC 1996 Fiscal Year, SPC forgave  $125,000 of Mr. Salim's
loan,  which was treated as  compensation  to him. The  $175,000  balance of Mr.
Salim's  loan was due on February 17,  1997.  Pursuant to an agreement  with Mr.
Salim,  the Company  received  $125,000 in full payment of the Company's loan to
Mr. Salim.

     During 1996, the Company incurred  approximately  $350,000 in legal fees to
Blau Kramer, then its counsel.  During 1997, the Company incurred  approximately
$480,000 in legal fees to Moritt Hock,  then its  counsel.  Neil M.  Kaufman,  a
director of the Company,  was a member of Blau Kramer  during 1996 and a partner
in Moritt Hock during 1997. Mr. Kaufman  currently is the principal of Kaufman &
Associates,  LLC,  counsel to the  Company.  During 1997,  the Company  incurred
approximately  $55,000 in legal fees to the predecessor of Kaufman & Associates,
LLC.  In 1996 and 1997,  Blau  Kramer  and  Moritt  Hock  acted as counsel to MS
Farrell in  connection  with four private  placement  transactions,  two of such
transactions  involving  Innapharma,  and also acted as  counsel to the  Debtor.
Martin F.  Schacker,  a director of the Company,  is Chairman of the Board of MS
Farrell and a director of  Innapharma;  and MS Farrell may also be considered an
affiliate of Innapharma.

     Pursuant  to a  Settlement  and  General  Release  Agreement,  dated  as of
September 26, 1997 (the  "Szczepaniak  Settlement  Agreement"),  among Joseph V.
Szczepaniak  ("Szczepaniak"),  the Company and SPC,  Szczepaniak  resigned as an
officer  and  employee of the  Company  and SPC and,  in  connection  therewith,
received,  among  other  things,  a lump sum payment of  $50,000,  payment  with
respect  to  accrued  vacation  time  and the  Company's  agreement  to make all
payments in respect of health  insurance for  Szczepaniak's  benefit for a three
month period.  The Company also agreed that all stock options previously granted
to Szczepaniak  would remain  exercisable  through March 26, 1998, to the extent
exercisable on September 26, 1997.

     Pursuant to a Settlement and General Release Agreement, dated as of January
30, 1997 (the "Frazer Settlement Agreement"), among Miriam K. Frazer ("Frazer"),
the Company and SPC,  Frazer  resigned as an officer and employee of the Company
and SPC and, in connection  therewith,  received,  among other things,  payments
aggregating  $165,000 and an additional payment with respect to accrued vacation
time.  The  Company  also agreed that all stock  options  previously  granted to
Frazer would remain exercisable through July 30, 1997, to the extent exercisable
on January 30, 1997.

     On January 28, 1998, the  Compensation  Committee of the Board of Directors
of the  Company  determined  to  compensate  Marc E. Jaffe for his  services  as
Chairman  of the Board of  Directors  of the  Company  at the rate of $5,000 per
month,  payable  $2,500 in the month of service and $2,500  twelve  months after
such  initial  payment.  During  1996,  the Company  paid  $2,000 to  Electronic
Licensing Organization,  Inc. ("ELO") in respect of electronic content licensing
services. There were no payments made to ELO by the Company in 1997.

     With  respect  to  compensation  paid to  Barry  A.  Cinnamon  and  Mark E.
Leininger  in their  capacities  as  employees  of the  Company,  see  "Item 10.
Executive Compensation."

     In  connection  with the Repricing  Program,  options held by directors and
executive  officers  granted  under the  Company  Stock  Plans were  repriced as
follows:


<PAGE>

<TABLE>
<CAPTION>
                                      Prior Option              Repriced Option (1)
                                 Shares          Per Share           Shares
Optionee                    Underlying Option  Exercise Price   Underlying Option    Expiration Date

<S>                            <C>              <C>               <C>                    <C>
Norman W. Alexander.....       25,000            $ 5.03            18,750                 12/19/06
Norman W. Alexander.....       10,000              2.0125           7,500                  7/31/07
Neil R. Austrian, Jr....       25,000              2.75            18,750                  4/25/06
Neil R. Austrian, Jr....       10,000              5.875            7,500                  7/31/06
Neil R. Austrian, Jr....       10,000              2.0125           7,500                  7/31/07
Robert Gordon...........       75,000              5.875           56,250                  7/31/06
Robert Gordon...........          810              6.25               607                 10/14/06
Robert Gordon...........        1,735              3.875            1,301                 12/31/06
Robert Gordon...........        1,000              3.43               750                   2/4/07
Robert Gordon...........        1,328              2.9375             996                  3/31/07
Robert Gordon...........      135,000              2.25           101,250                  5/13/07
Marc E. Jaffe...........        5,000              2.50             3,750                 10/31/04
Marc E. Jaffe...........       25,000              2.75            18,750                   8/2/05
Marc E. Jaffe...........       10,000              5.875            7,500                  7/31/06
Marc E. Jaffe...........       10,000              2.0125           7,500                  7/31/07
Neil M. Kaufman.........       25,000              3.75            18,750                  4/24/06
Neil M. Kaufman.........       25,000              5.03            18,750                 12/19/06
Neil M. Kaufman.........       10,000              2.0125           7,500                  7/31/07
Mark E. Leininger.......       20,000              3.75            15,000                  7/20/05
Mark E. Leininger.......       10,000              4.25             7,500                  2/19/06
Mark E. Leininger.......       70,000              2.75            52,500                  4/25/06
Mark E. Leininger.......      145,000              7.56           108,750                  9/28/06
Mark E. Leininger.......      300,000              3.43           225,000                   2/4/07
<FN>
---------
     (1)  The exercise price of all options were repriced to $1.25 per share.
     (2) Under the terms of the Cinnamon Settlement Agreement all of the options
     granted to Mr. Cinnamon and Ms. Kramer Cinnamon will expire on December 19,
     1998.
</FN>
</TABLE>


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

(a)  Exhibits.

     Set forth below are all exhibits to this Annual Report on Form 10-KSB:

3.1       Composite  of  Certificate of Incorporation of the Company, as amended
          to date.  (Incorporated  by  reference to Exhibit 3.1 to the Company's
          Quarterly  Report  on Form 10-QSB  (Commission File Number:  1-14076),
          for the quarter  ended  June 30, 1997,  filed with the  Commission  on
          August 19,  1997.) 
3.2       Certificate  of  Designations  of the Junior  Participating  Preferred
          Stock,  Series  A, filed with the Delaware Secretary of State on March
          31, 1998. 
3.3       By-laws of the Company, as amended. 
4.1       Specimen Common Stock Certificate.
10.1      Company 1994   Long   Term   Incentive   Plan,  as  amended  to  date.
          (Incorporated by reference to Exhibit 10.46 to the Company's Quarterly
          Report  on  Form  10-QSB  (Commission File Number:  1-14076),  for the
          quarter ended June 30, 1997,  filed with the  Commission on August 19,
          1997.) 
10.2      Company Outside Director and Advisor Stock Option Plan, as amended  to
          date.  (Incorporated  by reference  to Exhibit  10.47 to the Company's
          Quarterly  Report  on Form 10-QSB  (Commission File Number:  1-14076),
          for the quarter  ended  June 30, 1997,  filed with the  Commission  on
          August 19, 1997.)
10.3      SPC 1987 Stock Option Plan. (Incorporated  by reference to Exhibit 4.1
          to  the  Company's  Registration  Statement on Form S-8  (Registration
          Number: 333-19509),  filed with the  Commission on January 10, 1997.)

<PAGE>

10.4      SPC 1989 Stock Plan.  (Incorporated  by  reference  to  Exhibit 4.2 to
          the Company's Registration Statement on Form S-8 (Registration Number:
          333-19509), filed with the Commission on January 10, 1997.) 
10.5      SPC  1991  Stock Option Plan.  (Incorporated  by  reference to Exhibit
          4.3 to the Company's Registration Statement on Form S-8  (Registration
          Number: 333-19509), filed with the Commission on January 10, 1997.) 
10.6      Employment Agreement dated as of December 27, 1993, as amended through
          Amendment  No.  6,  between  the  Company  and  Barry  A.  Cinnamon. 
          (Incorporated by reference to Exhibit 10.3 to the Company's  Amendment
           No. 1 to Registration  Statement on Form  SB-2  (Registration Number:
          33-97184),  filed   with   the   Commission   on   November  6,  1995,
          Exhibit 10.30  to  the  Company's  Quarterly  Report  on  Form  10-QSB
          (Commission  File  Number: 1-14076),  for  the quarter ended March 31,
          1996, filed with the Commission on May 14,  1996,  and  Exhibit  10.35
          to the Company's   Quarterly  Report on Form 10-QSB  (Commission  File
          Number:  1-14076),  for the  quarter  ended  September 30, 1996, filed
          with  the Commission on November 5, 1996.)
10.7      Amendment No. 7 to  Employment Agreement between the Company and Barry
          A.  Cinnamon.   (Incorporated   by  reference  to  Exhibit 10.7 to the
          Company's  Annual  Report  on   Form  10-KSB  (Commission File Number:
          1-14076), for  the  year  ended  December  31,  1996,  filed  with the
          Commission on April 15, 1997.)
10.8      Employment Agreement dated as of December 27, 1993, as amended through
          Amendment  No. 3,  between the  Company  and  Lori  Kramer   Cinnamon.
          (Incorporated  by reference to Exhibit 10.4 to the Company's Amendment
          No. 1  to Registration  Statement on Form SB-2  (Registration  Number:
          33-97184), filed with the Commission on November 6, 1995.) 
10.9      Settlement and General Release Agreement,  dated  as of September  26,
          1997,  among Joseph Szczepaniak, the Company  and  Software Publishing
          Corporation.  (Incorporated  by  reference  to  Exhibit  10.52  to the
          Company's  Quarterly   Report  on Form 10-QSB (Commission File Number:
          1-14076), for the  quarter  ended  September  30, 1997, filed with the
          Commission on November 14, 1997.)
10.10     Settlement and General Release Agreement, dated  s  of  July 25, 1997,
          among   Daniel  J.   Fraisl,   the  Company  and  Software  Publishing
          Corporation.  (Incorporated  by  reference  to  Exhibit  10.48  to the
          Company's Quarterly  Report  on Form 10-QSB  (Commission  File Number:
          1-14076), for  the  quarter  ended  June  30,  1997,  filed  with  the
          Commission on August 19, 1997.) 
10.11     Agreement dated October 25, 1996  between  the  Company  and  Mark  E.
          Leininger.  (Incorporated  by  reference  to  Exhibit  10.36  to   the
          Company's Quarterly  Report  on Form 10-QSB (Commission  File  Number:
          1-14076), for the  quarter  ended  September 30, 1996,  filed with the
          Commission on November 5, 1996.) 
10.12     Agreement  and  Plan  of  Reorganization  dated  as of October 1, 1996
          among  the Company,   SPC   and   SPC   Acquisition   Corporation.   
          (Incorporated by reference to Exhibit 2 to  the Company's Registration
          Statement on Form S-4 (Registration  Number:  333-16449),  filed  with
          the  Commission  on November  21,  1996.) 
10.13     Form  of  Bridge  Unit  Subscription   Agreement.   (Incorporated   by
          reference to Exhibit 10.7  to  the   Company's Registration  Statement
          on  Form  SB-2  (Registration  Number:   33-97184),  filed  with   the
          Commission  on September 21, 1995.) 
10.14     Stock Option Agreement dated as of August 2, 1994  between the Company
          and Berlitz Publishing  Company,  Inc.  (Incorporated  by reference to
          Exhibit  10.10  to  the Company's Registration  Statement on Form SB-2
          (Registration   Number:  33-97184),  filed  with  the  Commission   on
          September 21, 1995.)
10.15     Settlement and General Release Agreement dated as of January  30, 1997
          between the Company and Miriam K. Frazer.  (Incorporated by  reference
          to  Exhibit  10.15  to  the  Company's  Annual  Report on  Form 10-KSB
          (Commission  File  Number:  1-14076),  for the year ended December 31,
          1996, filed with the  Commission  on  April  15,  1997.) 
10.16     Agreement, dated June 14, 1994,  as amended, between the Company, M.S.
          Farrell & Co., Inc. and  the holders of shares of Class A  Convertible
          Preferred Stock. (Incorporated  by reference  to  Exhibit 10.20 to the
          Company's   Registration   Statement  on  Form  SB-2   (Registration 
          Number: 33-97184), filed with the Commission on September  21, 1995.) 
10.17     Form of Indemnification  Agreement between  the  Registrant  and  its
          executive  officers  and  directors.  (Incorporated  by  reference  to
          Exhibit 10.8  to the  Company's  Registration  Statement  on Form SB-2
          (Registration  Number:  33-97184),  filed   with   the  Commission  on
          September  21,  1995.)
10.18     Form of  Underwriters'  Purchase  Option (Specimen).
10.19     Form of Lock-Up Agreement dated  as  of  July  31,  1996  relating  to
          limitations on stock sales between the  Company and each of the former
          stockholders  of  Serif  Inc.  (Incorporated  by  reference to Exhibit
          10.21 to the  Company's  Annual  Report  on  Form 10-KSB   (Commission
          File Number:  1-14076),  for the year ended  December 31, 1996,  filed
          with the  Commission  on April 15,  1997.)  

<PAGE>

10.20     Form  of  Lock-Up  Agreement  dated  as  of  July 31, 1996 relating to
          limitations on  stock sales between the Company and each of the former
          stockholders of  Serif (Europe) Limited. (Incorporated by reference to
          Exhibit   10.22  to  the  Company's  Annual  Report  on  Form  10-KSB 
          (Commission File Number: 1-14076), for the  year  ended  December  31,
          1996, filed  with the Commission   on  April  15,   1997.) 
10.21     Agreement  and  Plan  of  Reorganization  dated  as  of July 31,  1996
          among the Company, Serif Inc.,  Gwyn  Jones and all other stockholders
          of  Serif  Inc. (Incorporated  by  reference  to  Exhibit  4.3  to the
          Company's Current  Report on Form 8-K (Date of Report:  July 31, 1996)
          (Commission File Number: 1-14076), filed with the Commission on August
          13, 1996.) 
10.22     Agreement and Plan of  Reorganization  dated as of July 31, 1996 among
          the  Company,  Serif  (Europe)  Limited,  Gwyn  Jones  and  all  other
          stockholders of Serif (Europe) Limited.  (Incorporated by reference to
          Exhibit  4.4 to the  Company's  Current  Report  on Form 8-K  (Date of
          Report: July 31, 1996) (Commission File Number:  1-14076),  filed with
          the  Commission  on  August  13,  1996.)  
10.23     Registration   Rights  Agreement  dated  July  31,  1996  between  the
          Company  and the former  stockholders of Serif Inc. and Serif (Europe)
          Limited.  (Incorporated by reference to Exhibit 10.31 to the Company's
          Current Report on Form 8-K (Date of Report: July 31, 1996) (Commission
          File Number: 1-14076), filed with the Commission on August 13, 1996.)
10.24     Escrow  Agreement dated July 31, 1996, among the Company, Serif  Inc.,
          the  former stockholders  of Serif Inc., Gwyn Jones and Blau,  Kramer,
          Wactlar & Lieberman, P.C. (Incorporated  by  reference  to  Exhibit  2
          to  the Schedule 13D  Statement  of Barry A.  Cinnamon,  with  respect
          to  the  Common  Stock  of  the Company,  filed with the Commission on
          October 31, 1996.)  
10.25     Localization and Distribution Agreement for Harvard  Graphics  Windows
          Products  dated  February  16,  1995  between  Choten,  Inc. and  SPC.
          (Incorporated  by  reference  to Exhibit  10.21 to Software Publishing
          Corporation's  Annual  Report  on Form 10-K (Commission  File  Number:
          0-14025), for the fiscal year ended September 30, 1995, filed with the
          Commission  on December 29,  1995.)  
10.26     Escrow  Agreement  dated  July  31,  1996,  among  the Company,  Serif
          (Europe)  Limited, the former Stockholders of Serif (Europe)  Limited,
          Gwyn Jones and Blau, Kramer, Wactlar & Lieberman, P.C.   (Incorporated
          by  reference  to Exhibit  10.28  to  the   Company's   Annual  Report
          on  Form 10-KSB (Commission File Number:  1-14076), for the year ended
          December 31, 1996,  filed  with the  Commission  on April 15,  1997.)
10.27     Lease  Agreement  dated September 7, 1995 between Community Towers LLC
          and the  Company,  for  facilities located at 111 North Market Street,
          San Jose, California.  (Incorporated by reference to Exhibit  10.22 to
          Software   Publishing   Corporation's   Annual  Report  on  Form  10-K
          (Commission File Number: 0-14025), for the fiscal year ended September
          30, 1995, filed with  the  Commission  on  December  29,  1995.)
10.28     Stockholders'  Agreement  dated  as  of July 31,  1996 among  Barry A.
          Cinnamon,  Gwyn Jones and the former  stockholders  of Serif Inc.  and
          Serif  (Europe)  Limited.  (Incorporated  by reference to Exhibit 1 to
          the Schedule 13D Statement of Barry A.  Cinnamon,  with respect to the
          Common Stock of the Company, filed with the Commission  on October 31,
          1996.) 
10.29     Letter  Agreement  dated October 24, 1996 between the Company and Gwyn
          Jones.  (Incorporated  by reference to Exhibit  10.31 to the Company's
          Annual Report on Form 10-KSB  (Commission File Number:  1-14076),  for
          the year ended  December 31, 1996,  filed with the Commission on April
          15,  1997.)  
10.30     Compromise  Agreement  executed  October 24, 1996 between  the Company
          and Gwyn Jones. (Incorporated by reference  to Exhibit  10.32  to  the
          Company's   Annual  Report  on  Form  10-KSB (Commission  File Number:
          1-14076),  for  the  year  ended  December  31, 1996,  filed  with the
          Commission on April 15, 1997.)
10.31     Settlement and General  Release  Agreement  dated as of July 23,  1996
          among  the  Company,   Richard   Bergman   and   Barry   Cinnamon.
          (Incorporated  by  reference to Exhibit 10.32 to the Company's Current
          Report on Form 8-K (Date of Report:  July 31, 1996)  (Commission  File
          Number:  1-14076), filed with the Commission on August 13, 1996.)
10.32     Escrow  Agreement  dated  as of December 27, 1993, as amended  through
          September 5, 1996,  among  the  Company,  Barry A.  Cinnamon,  Richard
          Bergman  and Blau, Kramer,  Wactlar &  Lieberman,  P.C.  (Incorporated
          by  reference to Exhibit 10.25 to the  Company's  Amendment  No. 1 to
          Registration  Statement  on Form SB-2 (Registration Number: 33-97184),
          filed with the Commission  on  November  6,  1995,  Exhibit  10.32  to
          the Company's Quarterly Report on Form 10-QSB (Commission File Number:
          1-14076),  for  the  quarter  ended  March  31,  1996,  filed with the
          Commission  on  May  14,  1996,  and  Exhibit  10.34 to the  Company's
          Quarterly Report on Form 10-QSB  (Commission  File  Number:  1-14076),
          for the quarter ended September  30, 1996,  filed with the  Commission
          on November 5, 1996.)

<PAGE>

10.33     Escrow   Agreement   dated  as  of  May  25, 1995, as amended  through
          September  5, 1996,  among the  Company,  Barry A.  Cinnamon,  Richard
          Bergman and Blau, Kramer,  Wactlar & Lieberman,  P.C. (Incorporated by
          reference  to  Exhibit  10.26  to the  Company's  Amendment  No.  1 to
          Registration  Statement on Form SB-2 (Registration Number:  33-97184),
          filed with the  Commission  on November 6, 1995,  and Exhibit 10.34 to
          the Company's Quarterly Report on Form 10-QSB (Commission File Number:
          1-14076),  for the quarter ended  September  30, 1996,  filed with the
          Commission on November 5, 1996.) 
10.34     Stock  Purchase  Agreement  dated  March  31,  1995 among SPC, Digital
          Paper, Inc., Daniel J. Fraisl,  Carl  Meyer  and  Anthony  N.  Hoeber.
          (Incorporated  by  reference to Exhibit 10.4  to  Software  Publishing
          Corporation's  Quarterly Report on Form 10-Q  (Commission File Number:
          0-14025),  for  the quarter  ended  March  31, 1995,  filed  with  the
          Commission on May 15, 1995.)
10.35     Amendment  to  Stock  Purchase  Agreement  dated  as of April 2,  1996
          among  SPC, Digital  Paper,  Inc.  Daniel J.  Fraisl,  Carl  Meyer and
          Anthony N. Hoeber. (Incorporated  by reference to Exhibit 10.39 to the
          Company's  Annual  Report  on  Form  10-KSB  (Commission  File Number:
          1-14076),  for  the  year  ended  December  31,  1996,  filed with the
          Commission  on  April  15,  1997.) 
10.36     Amendment No. 2 to Stock  Purchase  Agreement  dated  October  1, 1996
          among  SPC,  Digital  Paper,  Inc.,  Daniel  J. Fraisl, Carl Meyer and
          Anthony N.  Hoeber.  (Incorporated  by  reference to Exhibit 10.40  to
          the Company's  Annual Report on Form 10-KSB  (Commission File  Number:
          1-14076),  for  the  year  ended  December  31,  1996,  filed with the
          Commission on April 15, 1997.) 
10.37     Asset Purchase Agreement dated as  of  May 1, 1996 between the Company
          and BizEd, Inc.  (Incorporated  by reference  to Exhibit  10.41 to the
          Company's  Annual  Report  on  Form  10-KSB  (Commission  File Number:
          1-14076),  for  the  year  ended  December  31, 1996,  filed  with the
          Commission  on  April  15,  1997.)  
10.38     Consulting  Agreement  dated as of May 1, 1996 between the Company and
          Clifford J. Schorer,  Jr.  (Incorporated by reference to Exhibit 10.42
          to the Company's Annual Report on Form 10-KSB (Commission File Number:
          1-14076),  for the  year  ended  December  31,  1996,  filed  with the
          Commission  on April  15,  1997.)  
10.39     Form of MS  Farrell  Warrant Certificate issued to MS  Farrell  & Co.,
          Inc.  and  certain  other persons.
10.40     Letter  Agreement  dated March 27,  1997  between the Company and M.S.
          Farrell & Co.,  Inc.  (Incorporated  by  reference  to  Exhibit  10.45
          to the Company's   Annual  Report  on  Form  10-KSB  (Commission  File
          Number:  1-14076),  for the year ended  December 31, 1996,  filed with
          the Commission on April 15, 1997.) 
10.41     Consulting Agreement,  dated as of July 25, 1997,  between the Company
          and Daniel J.  Fraisl. (Incorporated  by reference  to  Exhibit  10.49
          to  the Company's  Quarterly  Report on Form 10-QSB  (Commission  File
          Number: 1-14076), for the quarter ended  June  30,  1997,  filed  with
          the Commission on August 19, 1997.)
10.42     Form of Subscription Agreements, each dated October 23, 1997,  between
          the Company and each of  Ronald  L.  Altman  (with  respect  to 24,000
          shares of Common  Stock),   Gerold  M.  Fleischner  (with  respect  to
          24,000  shares  of  Common  Stock),  Howard Milstein  (with respect to
          865,000  shares of Common  Stock),  Patriot Group, LP (with respect to
          24,000 shares of Common Stock) and Stephen P. Rosenblatt (with respect
          to 24,000  shares  of  Common  Stock).  (Incorporated  by reference to
          Exhibit  10.50  to  the  Company's  Quarterly  Report  on Form  10-QSB
          (Commission  File  Number:  1-14076),  for the quarter ended September
          30,  1997,  filed  with the  Commission on November 14, 1997.)
10.43     Registration  Rights  Agreement,  dated  October  23, 1997,  among the
          Company,  Ronald  L.  Altman,  Gerold M. Fleischner, Howard  Milstein,
          Patriot   Group,  LP  and  Stephen  P. Rosenblatt.   (Incorporated  by
          reference to Exhibit 10.51 to the Company's  Quarterly  Report on Form
          10-QSB  (Commission  File  Number:  1-14076),  for the  quarter  ended
          September  30,  1997,  filed  with  the  Commission   on  November 14,
          1997.) 
10.44     Option,  dated  October  23,  1997,  issued  to  Ronald  L.   Altman.
          Incorporated  by reference to Exhibit 10.53 to the Company's Quarterly
          Report  on  Form 10-QSB  (Commission  File Number: 1-14076),  for  the
          quarter ended  September  30, 1997,  filed   with  the  Commission  on
          November  14,  1997.)  
10.45     Settlement  and  Release  Agreement,  dated  December 19, 1997,  among
          the  Registrant,  Barry  A.  Cinnamon  and  Lori  Kramer  Cinnamon.
          (Incorporated  by  reference  to  Exhibit  10.54  to  the  Company's
          Current  Report  on  Form  8-K  (Date  of  Report:  December 19, 1997)
          (Commission File Number:  1-14076),  filed  with  the  Commission  on
          December 30,  1997.) 
10.46     License   Agreement,   dated  December  19,  1997,  between  Software
          Publishing  Corporation  and  Barry  A.  Cinnamon.  (Incorporated  by
          reference to Exhibit 10.55 to  the Company's  Current  Report on Form
          8-K (Date of Report:  December  19,  1997) (Commission  File  Number:
          1-14076), filed with the Commission on December 30, 1997.) 

<PAGE>

10.47     Financial  Advisory  Agreement,  dated  as  of  November  20,  1997,
          between the Registrant and M.S. Farrell & Co., Inc.
10.48     Amendment  to  the  Financial  Advisory   Agreement,  dated  as   of
          January 28, 1998,  between the Registrant and M.S. Farrell & Co., Inc.
10.49     Amendment  No.  1  to  Escrow  Agreement,  dated as of April 1, 1997,
          among the Company,  Serif Inc.,  Norman W. Alexander,  Moritt,  Hock &
          Hamroff,  LLP and  Blau,  Kramer,  Wactlar  &  Lieberman,  P.C.
10.50     Amendment No. 1 to Escrow Agreement,  dated as of April 1, 1997, among
          the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt, Hock
          & Hamroff,  LLP and Blau,  Kramer,  Wactlar &  Lieberman,  P.C.  
10.51     Rights Agreement,  dated as of March 31, 1998, between the Company and
          American Stock Transfer & Trust Company.
21        Subsidiaries of the Company.
23.1      Consent of Ernst & Young LLP.
23.2      Consent of Richard A. Eisner & Company,  LLP. 23.3 Consent of Ernest &
          Young U.K.
24        Powers  of  Attorney  (set forth on the signature  page of this Annual
          Report on Form 10-KSB).
27        Financial Data Schedule.

(b) Reports on Form 8-K.

     On December 30, 1997,  the Company filed a Current Report on Form 8-K (Date
of Report:  December  19,  1997)  with the  Commission  reporting,  as an Item 5
disclosure,  the  restructuring of the Company's  operations and management.  No
financial  statements were required to be or were filed with this Form 8-K. This
Form 8-K was amended by Amendment No. 1 on Form 8-K/A, filed with the Commission
on January 9, 1998.

     On February 13, 1998 the Company  filed a Current  Report on Form 8-K (Date
of Report:  February  11,  1998)  with the  Commission  reporting,  as an Item 4
disclosure,  the change in the Company's auditors.  This Form 8-K was amended by
Amendment No.1 on Form 8-K/A filed with the Commission on February 17, 1998.


<PAGE>


                          Index to Financial Statements

Independent Auditors' Reports..............................................F-2
Balance Sheet at December 31, 1997 ........................................F-5
Statements of Operations for the years ended December 31, 
  1997 and 1996............................................................F-6
Statements of Stockholders' Equity for the years ended 
  December 31, 1997 and 1996...............................................F-7
Statements of Cash Flows for the years ended December 
  31, 1997 and 1996........................................................F-8
Notes to Financial Statements..............................................F-9

                                      F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Software Publishing Corporation Holdings, Inc.
Fairfield, New Jersey

We  have  audited  the  consolidated  balance  sheet  of   Software   Publishing
Corporation  Holdings,  Inc. and subsidiaries  (formerly Allegro New Media, Inc.
and  subsidiaries)  as of  December  31,  1997,  and  the  related  consolidated
statements  of  operations,  stockholders'  equity  and  cash flows for the year
then ended.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We did not audit the  financial  statements  of
Serif (Europe) Limited,  a wholly owned subsidiary,  which statements  reflected
total assets of $2,594,742 at December 31, 1997 and total revenues of $7,266,486
for the year then  ended.  Those  financial  statements  were  audited  by other
auditors whose report has been  furnished to us, and our opinion,  insofar as it
relates to the amounts  included for Serif  (Europe)  Limited is based solely on
the report of the other auditors.

We  conducted  our  audit  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 audit  and the  report  of the  other  auditors  provide a
reasonable basis for our opinion.

In  our  opinion,  based  on  our  audit  and the report of the other  auditors,
the  financial  statements  enumerated  above  present  fairly,  in all material
respects, the consolidated financial position of Software Publishing Corporation
Holdings,  Inc. and  subsidiaries as of December 31, 1997, and the  consolidated
results of their operations and their  consolidated cash flows for the year then
ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a working  capital  deficiency  that raise  substantial  doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

As  described  in  Note  9,  the  Company  has  applied  to enter into a closing
agreement with the Internal  Revenue  Service with respect to dual  consolidated
losses previously utilized by a wholly owned subsidiary of the Company, Software
Publishing Corporation ("SPC"). Such closing agreement, if not consummated, will
require  the  Company  to  recognize  a  tax  of  approximately  $8  million  on
approximately $24.5 million of SPC's previous dual consolidated losses.

                                        /s/ Richard A. Eisner & Company, LLP
New York, New York
April 15, 1998

                                      F-2

<PAGE>


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Serif (Europe) Limited

We have audited the  accompanying  balance sheet of Serif (Europe) Limited as of
December 31, 1997,  and the related  statements  of  operations,  cash flows and
shareholders'  equity for the year then ended. The financial  statements are the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted  our audit in  accordance  with United  States  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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Serif  (Europe)  Limited at
December 31, 1997,  and the results of its operations and its cash flows for the
year then ended in conformity with United States generally  accepted  accounting
principles.


                                                  /s/ Ernst & Young
                                                  Ernst & Young
                                                  Chartered Accountants

April 9, 1998
Nottingham, England

                                      F-3

<PAGE>



Board of Directors
Software Publishing Corporation Holdings, Inc.

We  have  audited  the  accompanying  consolidated  statements  of   operations,
stockholders' equity (deficit) and cash flows of Software Publishing Corporation
Holdings, Inc. and subsidiaries (formerly, Allegro New Media, Inc.) for the year
ended December 31, 1996. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

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 audit provides a reasonable basis for our opinion.

In  our  opinion,  the  financial  statements  referred to above present fairly,
in all material  respects,  the consolidated  results of operations,  changes in
stockholders' equity and cash flows of Software Publishing Corporation Holdings,
Inc. and  subsidiaries  (formerly,  Allegro New Media,  Inc.) for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.


                                                  /s/Ernst & Young

Hackensack, New Jersey
April 14, 1997

                                      F-4
<PAGE>


        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 1997



                                     ASSETS

<TABLE>
<CAPTION>
Current assets:
    <S>                                                          <C>
    Cash and cash equivalents. . . . . . . . . . . . . . .         $ 2,586,753
    Marketable securities. . . . . . . . . . . . . . . . .             173,600
    Accounts receivable, less allowances of $623,000                 1,324,102
    Inventories. . . . . . . . . . . . . . . . . . . . . .             567,336
    Prepaid expenses and other current assets. . . .                   329,591
                                                                   ___________
              Total current assets . . . . . . . . . . . .           4,981,382

Property and equipment, net. . . . . . . . . . . . . . . .             568,888
Acquired software, net of accumulated amortization of $2,460,250     4,446,750
Goodwill, net of accumulated amortization of $106,173. . .             268,559
Restricted cash. . . . . . . . . . . . . . . . . . . . . .             300,000
Other assets . . . . . . . . . . . . . . . . . . . . . . .              63,923
                                                                   ___________
              Total assets . . . . . . . . . . . . . . . .         $10,629,502
                                                                   ___________
</TABLE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Current liabilities:
    <S>                                                            <C>
    Accounts payable . . . . . . . . . . . . . . . . . . .         $ 3,015,198
    Accrued liabilities. . . . . . . . . . . . . . . . . .           4,112,267
    Current portion of long-term debt. . . . . . . . . . .             173,866
                                                                   ___________

              Total current liabilities. . . . . . . . .             7,301,331

Long-term debt, less current maturities. . . . . . . . .               184,765
                                                                   ___________
              Total liabilities. . . . . . . . . . . . .             7,486,096
                                                                   ___________

Commitments and contingencies. . . .. . . . . . . . . . .                   --

Stockholders' equity: . . . . . . . . . . . . . . . . . .                   --
  Serial Preferred Stock,  authorized  1,939,480 shares,
    none issued and  outstanding. . . . . . . . . . . . .                   --
  Class B Voting  Preferred  Stock,  Series  A,  60,520 
    shares authorized, none issued and outstanding. . . .                   --
  Common stock, par value $.001 per share, authorized 
    30,000,000 shares; issued and outstanding 9,011,418
    shares. . . . . . . . . . . . . . . . . . . . . . . .                9,011
  Additional paid-in capital. . . . . . . . . . . . . . .           42,965,813
  Accumulated deficit . . . . . . . . . . . . . . . . . .          (39,831,418)
                                                                   ___________
              Total stockholders' equity. . . . . . . . .            3,143,406
                                                                   ___________
              Total liabilities and stockholders' equity.   $       10,629,502

<FN>

           See report of independent auditors and accompanying notes.
</FN>
</TABLE>

                                      F-5

<PAGE>


        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                   1997                   1996
<S>                                            <C>                 <C>
Net sales................................      $ 17,156,865        $  4,700,955
Cost of goods sold.......................         4,155,749           1,817,688
                                               ____________         ___________
             Gross profit................        13,001,116           2,883,267

Selling, general and administrative expenses    (19,314,385)         (7,496,665)
Costs associated with release of escrow shares           --          (2,773,180)
Product development.....................         (3,227,215)         (1,077,615)
In-process research and development acquired             --         (17,514,000)
Restructuring expenses.................            (375,902)         (1,104,353)
Other income, net......................             195,655             121,380
                                               ____________         ___________
             Loss before income taxes..        $ (9,720,731)       $(26,961,166)
              
Income taxes...........................             (47,035)            (78,201)
                                               ____________         ___________


              Net loss.................        $ (9,767,766)       $(27,039,367)
                                               ____________         ___________

Loss per common share:
  Net loss per common share - 
    basic and diluted..................        $      (1.19)       $      (7.48)
  Weighted average number of common shares
    outstanding - basic and diluted....           8,203,065           3,614,479


<FN>
    See report of independent auditors and accompanying notes.
</FN>
</TABLE>

                                      F-6

<PAGE>


                Software Publishing Corporation Holdings, Inc. and Subsidiaries
                      (Formerly Allegro New Media, Inc. and Subsidiaries)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                   Class B                                Additional                    Total
                                               Voting Preferred        Common Stock         Paid-In    Accumulated   Stockholders'
                                                Stock Series A       $.001 Par Value        Capital      Deficit        Equity
                                              -----------------      ---------------      ----------   -----------   ------------
                                              Shares      Amount     Shares    Amount
<S>                                           <C>         <C>      <C>        <C>       <C>           <C>            <C> 
Balance at December 31, 1995.............     60,520      $   61   3,335,077  $ 3,335   $ 6,158,753   $ (3,024,285)  $  3,137,864
Issuance of common stock from exercise  
    of options...........................                             19,666       20        73,728                        73,748
Issuance of common stock upon exercise of 
    over-allotment option................                            109,400      109       464,777                       464,886
Issuance of common stock purchase warrants                                                  767,297                       767,297
Issuance of common stock and options in
    connection with business combinations                          4,376,162    4,376    31,352,643                    31,357,019
Issuance of common stock and common stock to
    be issued for services and compensation                           19,938       20       141,059                       141,079
Costs associated with the release of 
    escrow shares........................                                                 2,773,180                     2,773,180
Net loss.................................                                                               (27,039,367)  (27,039,367)
                                             _______      ______   _________  _______    ___________  _____________  _____________
Balance at December 31, 1996.............    60,520       $   61   7,860,243  $ 7,860    $41,731,437  $(30,063,652)  $ 11,675,706

Issuance of common stock in payment of
    liabilities for services in connection
    with business combinations...........                            111,272      111           (111)
Issuance of common stock in payment of
    liability for services...............                              2,475        3         14,997                       15,000
Issuance of common stock in connection with
    cancellation of agreement for services                            71,428       71        249,929                      250,000
Issuance of common stock from exercise
    of options...........................                              5,000        5          9,995                       10,000
Sale of common stock.....................                            961,000      961        959,505                      960,466
Retirement of Class B Voting Preferred
    Stock, Series A......................   (60,520)      $  (61)                                 61                           --
Net loss.................................                                                               (9,767,766)     (9,767,766)
                                             _______      ______   _________  _______    ___________  _____________  _____________
Balance at December 31, 1997.............          0      $    0   9,011,418  $ 9,011    $42,965,813  $(39,831,418)  $   3,143,406

<FN>

                                       See report of independent auditors and accompanying notes.
</FN>
</TABLE>

                                                                    F-7
<PAGE>

        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                        1997               1996
<S>                                               <C>              <C>
Operating activities:
Net loss....................................      $ (9,767,766)    $(27,039,367)
Adjustments to reconcile net loss to net 
    cash used in operating activities:
  Depreciation and amortization.............         6,358,731          293,781
  Costs associated with the release of 
    escrow stock...........................                 --        2,773,180
  Costs associated with issuance of common
    stock and common stock purchase warrants                --          908,376
  In-process research and development acquired              --       17,514,000
  Provisions for accounts receivable........           171,000          501,000
  Sale of marketable securities.............         6,154,580
  Changes in operating assets and liabilities:
    Accounts receivable.....................           496,688          209,231
    Inventories.............................           146,251           14,850
    Prepaid expenses and other current assets          (93,742)         (37,417)
    Other assets............................            59,938          171,613
    Accounts payable........................          (493,863)          22,782
    Accrued liabilities.....................        (5,808,791)       4,454,367
                                                  _____________    _____________
    Net cash used in operating activities...        (2,776,974)        (213,604)
                                                  _____________    _____________

Investing activities:
Purchase of property and equipment..........          (266,275)        (116,896)
Restricted cash draw downs..................         1,350,000
Cash and cash equivalents acquired in 
  business combination, net of cash paid....               --         1,963,342
                                                  _____________    _____________

              Net cash provided by investing 
              activities....................        1,083,725         1,846,446
                                                  _____________    _____________

Financing activities:
Proceeds from issuance of notes payable.....                            124,873
Proceeds from sale of common stock..........          970,466           538,634
Payment of long-term debt...................       (1,523,918)
Costs incurred to register common stock.....               --          (391,167)
                                                  _____________    _____________
              Net cash (used in) provided
              by financing activities.......         (553,452)          272,340
                                                  _____________    _____________

(Decrease) increase in cash and cash equivalents   (2,246,701)        1,905,182
Cash and cash equivalents at beginning of year      4,833,454         2,928,272
                                                  _____________    _____________
Cash and cash equivalents at end of year....      $ 2,586,753      $  4,833,454

Supplemental   disclosure  of  noncash   financing  and  investing   activities:
Activities in connection with business combinations:
  Short-term investments acquired...........               --      $  6,328,180
  Common stock and stock options issued, net               --        31,357,019
  Notes payable assumed.....................               --         1,757,675
  Restricted cash...........................               --         1,650,000
Common stock issued in payment of 
    liabilities for services................      $   265,000

Supplemental  disclosures  of cash flow  information:  
Cash paid during the year for:
  Interest paid.............................      $    60,328
  Income taxes..............................            1,974

<FN>
           See report of independent auditors and accompanying notes.
</FN>
</TABLE>

                                      F-8
<PAGE>

        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

     1.   Summary of Significant Accounting Policies

Nature of Business

     Software Publishing  Corporation Holdings,  Inc. (formerly known as Allegro
New Media, Inc.) ("SPCH") and subsidiaries (collectively,  the "Company"), is an
international  developer  and  supplier  of  desktop  publishing,   presentation
graphics  and  business  productivity  computer  software  products to corporate
customers,  consumers,  retail and wholesale  customers  and original  equipment
manufacturers primarily in the United States and Europe.

Liquidity and Basis of Presentation

     The accompanying  financial statements have been prepared assuming that the
Company will  continue as a going  concern.  The Company has suffered  recurring
losses from operations and has a working capital  deficiency of $2,319,949 as of
December  31,  1997.  If the  Company  does  not  attain  its  revenue  and cash
collection  goals or if the Company's cash resources are not sufficient,  it may
be necessary to obtain additional  financing  to fund the Company's  operations.
The  Company  is  considering  an  equity  offering;  however,  there  can be no
assurance  that  the  Company  will be  successful  in such  an  offering  or in
obtaining other sources of  financing.  The financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

     The consolidated  financial statements include the accounts of SPCH and its
wholly-owned   subsidiaries.   All   significant   intercompany   accounts   and
transactions  have been eliminated.  The translation of foreign  currencies into
United  States  dollars  for  subsidiaries  where  the  local  currency  is  the
functional  currency is performed for balance sheet  accounts using the exchange
rate in effect at year end and for revenue and expense accounts using an average
rate for the period. For foreign operations which are considered an extension of
United States  operations,  the United  States dollar is used as the  functional
currency.  Gains and losses  resulting from  remeasurement  and foreign currency
transactions are included in the results of operations.

Business Combinations

     The Company has accounted for all business  combinations under the purchase
method of  accounting.  Under this method the purchase price is allocated to the
assets and  liabilities of the acquired  enterprise as of the  acquisition  date
based on their estimated  respective fair values and are subject to revision for
a period not to exceed  one year from the date of  acquisition.  The  results of
operations of the acquired enterprise are included in the Company's consolidated
financial statements for the period subsequent to the acquisition. Stockholders'
equity as of December 31, 1996 includes amounts for shares required to be issued
in connection with one of these transactions.

Concentration of Credit Risk

     The Company  performs  periodic  credit  evaluations  of its  customers but
generally does not require collateral from its customers.

Revenue Recognition

     Revenue is generally  recognized upon shipment of products to customers and
is recorded net of  allowances  for  anticipated  returns for  potential  excess
quantities in the  distribution  channel.  Certain  customers have been provided

                                      F-9
<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

goods on a consignment basis. Revenues on these transactions are recognized upon
the sale of products to the ultimate customer.  Revenue for "locked versions" of
software are recognized when customers purchase an unlocking code.

Cash Equivalents

     Cash  equivalents  consist of highly liquid  investments with a maturity of
three months or less when purchased.

Inventories

     Inventories,  which are principally finished goods, are stated at the lower
of cost (first-in, first-out) or market.

Royalty Advances

     Non-refundable  royalty payments in connection with licensing contracts for
the  Company's  products  are  generally   amortized  based  on  product  sales.
Management evaluates the future realization of royalty advances periodically and
charges to cost of goods sold any amounts  they  believe  will not be  recovered
through future sales.

Product Development Costs and Acquired Software

     Costs incurred in the development of new software products and enhancements
to existing  software  products  are  expensed as incurred  until  technological
feasibility has been established. To date, the Company's product development has
been completed  concurrent with the  establishment of technological  feasibility
and, accordingly, no costs have been capitalized.

     Acquired software consists of the value of product development  acquired as
a result of  business  combinations  and is being  amortized  over a three  year
period.

Property and Equipment

     Property and  equipment are stated at cost.  Depreciation  is provided on a
straight-line basis based upon the estimated useful lives of the related assets,
generally 3 to 7 years.  Leasehold improvements are amortized on a straight-line
basis over the shorter of the life of the  improvement  or the  remainder of the
lease term.

Goodwill

     Goodwill represents costs in excess of net assets of businesses acquired in
purchase transactions. Goodwill is being amortized on a straight-line basis over
5  years.   Goodwill  associated  with  the  Software   Publishing   Corporation
acquisition (Note 2) was reduced during to reflect the settlement and adjustment
of acquisition and pre-acquisition liabilities and accruals.

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts in the financial  statements  and
accompanying  notes.  These estimates  principally  include provisions for sales
returns and allowances,  purchase price  allocations,  and contingent assets and
liabilities. Actual results could differ from these estimates.

                                      F-10

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

Income Taxes

     The  liability  method is used in accounting  for income taxes.  Under this
method,  deferred tax assets and liabilities are determined based on differences
between  financial  reporting  and tax basis of assets and  liabilities  and are
measured  using the  enacted  tax rates and laws that will be in effect when the
differences  are expected to reverse.  The resulting  asset at December 31, 1997
was fully reserved since management believes it is more likely than not that the
realization of such benefit will not be realized.

Loss Per Share

     The Company adopted  Statement of Financial  Accounting  Standards No. 128,
"Earnings  Per Share"  ("SFAS No. 128") in the year ended  December 31, 1997 and
has  retroactively  applied the affects  thereof to the year ended  December 31,
1996.  SFAS No.  128  replaced  the  calculation  of primary  and fully  diluted
earnings  per share with basic and diluted  earnings per share.  Unlike  primary
earnings per share, basic earnings per share excludes  anti-dilutive  effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share.

     Basic loss per share is computed based upon the weighted  average number of
common shares outstanding during each year. Stock options did not have an effect
on the  computation  of diluted  earnings  per share in 1997 and 1996 since they
were anti-dilutive.

Marketable Securities

     The Company accounts for investments in marketable  securities  pursuant to
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments  in Debt and  Equity  Securities"   ("SFAS No.  115").  SFAS No. 115
requires,  among other things, the classification of investments in one of three
categories  based upon the Company's  intent:  trading,  available-for-sale  and
held-to-maturity,  with trading and  available-for  sale  securities  carried at
market  value and held to  maturity  carried  at  amortized  cost.  The  Company
accounts for  marketable  securities as trading  securities and gains and losses
are included in the statement of operations.

Fair Value of Financial Investments

     The fair value of the Company's financial  instruments,  including cash and
cash equivalents,  marketable securities, accounts receivable, accounts payable,
accrued liabilities and long-term debt approximate their carrying values because
of short-term  maturities or because their  interest rates  approximate  current
market rates.

Recently Issued Accounting Announcements

     In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  130,  "Reporting  Comprehensive  Income"  ("SFAS  No.  130").  SFAS No. 130
establishes standards for reporting and displaying  comprehensive income and its
components in financial  statements.  SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997.  Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company is in
the process of determining  its preferred  format.  The adoption of SFAS No. 130
will  have no  impact  on the  Company's  consolidated  results  of  operations,
financial position or cash flows.

     In June 1997, the FASB issued SFAS No. 131,  "Disclosures About Segments of
an  Enterprise  and  Related   Information"  ("SFAS  No.  131").  SFAS  No.  131
establishes  standards  for the way  that  public  business  enterprises  report

                                      F-11

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports issued to stockholders.  It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers.  SFAS No. 131 is effective for financial  statements for fiscal years
beginning  after December 15, 1997.  Financial  statement  disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's  consolidated  results of operations,  financial  position or cash
flows.

Advertising and Promotion Costs

     Advertising   and  promotion   costs  include  the  costs  of  advertising,
catalogues,  direct mail and postage and are expensed as  incurred.  These costs
amounted  to   approximately   $6,978,000  and  $1,818,000  in  1997  and  1996,
respectively.


     2.   Business Combinations

     On July 31, 1996, the Company acquired all of the outstanding  common stock
of Serif Inc. and all of the outstanding  preference  shares and ordinary shares
of Serif  (Europe)  Limited  (collectively,  "Serif").  Serif is  engaged in the
development and marketing of personal  computer  software products in the United
States and Europe, principally the United Kingdom. The aggregate purchase price,
including all direct costs,  was  approximately  $4,200,000 and was  principally
financed through the issuance of 1,000,000 shares of the Company's common stock.
As a result of the preliminary  purchase price allocation,  a charge to earnings
of approximately $3,514,000 was recorded on the date of acquisition representing
the cost  assigned  to  in-process  research  and  development.  The cost of the
acquisition  exceeded  the fair  value of Serif's  net  assets by  approximately
$400,000, which was recorded as goodwill.

     On December 27, 1996, the Company  acquired all of the  outstanding  common
stock  of  Software  Publishing  Corporation  ("SPC").  SPC  is  engaged  in the
development and marketing of personal computer software products, principally in
the United States. The aggregate purchase price, including all direct costs, was
approximately  $30,000,000 and was principally  financed through the issuance of
3,376,162  shares of the Company's  common stock. As a result of the preliminary
purchase price allocation, a charge to earnings of approximately $14,000,000 was
recorded on the date of acquisition representing the cost assigned to in-process
research and development. The cost of the acquisition exceeded the fair value of
SPC's net assets by approximately $3,795,000,  which was recorded as goodwill as
of the acquisition date and was  subsequently  eliminated in 1997 as a result of
settlement and adjustment of pre-acquisition liabilities and accruals.

     The following unaudited pro forma summary presents the consolidated results
of  operations as if the  acquisitions  had occurred on January 1, 1996 and does
not purport to be indicative  of what would have  occurred had the  acquisitions
occurred on the date indicated or of the results which may occur in the future.

                                                  Year Ended December 31, 1996
                                                  ----------------------------

Net sales.........................                          $21,781,955
Net loss..........................                          $22,259,598
Net loss per share................                                $2.94


                                      F-12
<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997


     3.   Marketable Securities

<TABLE>
<CAPTION>
     Marketable  securities  at fair market  value  consist of the  following at
December 31, 1997:

     <S>                                                             <C>
     Common stock of Computer Concepts Corporation.........          $ 173,600
                                                                     ___________


     4.   Property and Equipment

     Property and equipment consists of the following as of December 31, 1997:

     Office furniture and equipment........................          $  961,784
     Leasehold improvements................................             101,000
                                                                     ___________

                                                                      1,062,784
     Less accumulated depreciation.........................            (493,896)
                                                                     ___________

     Total.................................................          $  568,888
                                                                     ___________
</TABLE>


5.   Long-term Debt

<TABLE>
<CAPTION>
     Long-term debt consists of the following at December 31, 1997:

     <S>                                                             <C>
     Note payable - vendor payable in monthly varying installments
       commencing March 1998 through May 1999 and bearing
       interest at 7% per annum............................          $  145,000
     Notes payable - landlord payable in monthly installments
       of $1,402 through March 2002 and bearing interest at
       10% per annum.......................................              58,068
     Bank loans payable in monthly installments of $4,100 through
       July 2000 and bearing interest at 9.5% per annum....              58,435
     Capital lease obligation payable in quarterly installments
       of $6,300 through June 2002 and bearing interest
       at 10.25% per annum.................................              97,128
                                                                     ___________
                                                                     $  358,631
     Less current maturities...............................            (173,866)
                                                                     ___________
                                                                     $  184,765
                                                                     ___________

</TABLE>

     Maturities of long-term debt as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
          Year Ending
          December 31,                   Amount
             <S>                       <C>
             1998 . . . . .            $ 173,866
             1999 . . . . .               84,701
             2000 . . . . .               39,492
             2001 . . . . .               38,759
             2002 . . . . .               21,813
                                       _________
             Total. . . . .            $ 358,631
                                       _________
</TABLE>

                                      F-13

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

     6.   Accrued Liabilities
     Accrued liabilities at December 31, 1997 consist of the following:

<TABLE>
<CAPTION>
          <S>                                         <C>
          Accrued legal costs. . . . . . . .          $   412,739
          Accrued restructuring costs. . . .              375,902
          Income taxes payable . . . . . . .              924,835
          Other accruals . . . . . . . . . .            2,398,791
                                                      ___________
                                                      $ 4,112,267
                                                      ___________
</TABLE>

7.   Stockholders' Equity

     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.  In 1994,  677,500 of these  shares  were
canceled with the approval of such  stockholders.  Under the terms of the escrow
agreement,  the remaining shares were to be released to the  stockholders  based
upon the Company  achieving certain financial  results,  as defined.  On May 25,
1995,  certain  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
were to be  released to the  stockholders  upon the  Company  attaining  certain
financial  results,  as defined.  During 1996, the Company's  Board of Directors
released  a total of 531,000  shares  held  under the  escrow  agreements.  This
release resulted in the recognition of compensation  expense totaling $2,773,180
based on the fair  value of the  shares on the date of  release.  The  remaining
11,500 shares were canceled by the Company.

     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 this  offering the Company  repaid all of the 10% notes
payable then  outstanding  and issued  243,902 shares of its common stock to the
holders thereof. The Company incurred an extraordinary loss of $990,928 relating
to deemed interest and deferred financing costs associated with the repayment of
the 10% notes  payable.  In January 1996,  the Company  issued 109,400 shares of
common stock in connection with the exercise of the over-allotment option by the
underwriter of the Company's  initial public  offering and received net proceeds
of $464,886 in connection therewith.

     In connection with a license agreement, in 1994 the licensor was granted an
option to purchase up to 100,000 shares of the Company's common stock at a price
per  share  equal  to the  initial  public  offering  price  (less  underwriting
discounts). This agreement expires on July 31, 1998.

     On July 31, 1996, the Company acquired all of the outstanding  common stock
and preferred  shares of Serif. The aggregate  purchase price was  approximately
$4,200,000 and was principally financed through the issuance of 1,000,000 shares
of Common Stock.

     On December 27, 1996, the Company  acquired all of the  outstanding  common
stock of SPC. The aggregate purchase price was approximately $30,000,000 and was
principally financed through the issuance of 3,376,162 shares of Common Stock.

     In February 1997, the Company issued an aggregate  111,272 shares of common
stock in payment for services  associated  with the  acquisition of SPC to three
financial  advisors  which was accrued for and reflected in  additional  paid-in

                                      F-14

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

capital in 1996.  Also, in February 1997, the Company issued 2,475 shares of its
common  stock for payment of $15,000 in  consulting  fees which was accrued as a
liability in 1996.

     In 1996,  the Company  granted  warrants,  exercisable  at $6.875 per share
until August 22, 2002, to purchase  500,000 shares of the Company's common stock
and agreed to issue 71,428 shares of its common stock to the  underwriter of its
initial  public  offering,  and a designee  thereof,  to modify  and  terminate,
respectively,  certain contractual rights of such underwriter. The related costs
amounted  to  $1,026,000  in 1996  and are  included  in  selling,  general  and
administrative  expenses in 1996.  The 71,428 shares of common stock were issued
in 1997 in satisfaction of the related liability of $250,000 recorded in 1996.

     In March 1997, the Company received proceeds of $10,000 for the issuance of
5,000 shares of Common Stock for the exercise of certain stock options.

     In October 1997, the Company  consummated the sale of an aggregate  961,000
shares of Common Stock to five investors for net proceeds of $960,466 in private
transactions.  In  connection  with such sale,  the  Company  issued a five year
option to  purchase  96,100  shares of common  stock,  at an  exercise  price of
$1.2756 per share, to a financial advisor.

Preferred Stock

     There are 1,939,480  authorized shares of Serial Preferred Stock, par value
$.001 per share.  Any shares of Serial  Preferred  Stock that have been redeemed
are deemed retired and extinguished and may be reissued.  The Board of Directors
establishes  and  designates  the  series and fixes the number of shares and the
relative  rights,  preferences and  limitations of the respective  series of the
Serial  Preferred  Stock.  No shares were issued or  outstanding at December 31,
1997.

     The Class B Voting Preferred Stock,  Series A ("Class B Voting  Preferred")
has  maximum  liquidation  rights of $.001 per share,  but is not  permitted  to
receive  dividends.  The issued shares of the Class B Voting Preferred have been
retired and canceled.

     In  March  1998,   the  Company   authorized   100,000   shares  of  Junior
Participating  Preferred Stock,  Series A, par value $.001 per share. The Junior
Preferred Stock has preferential  voting,  dividend and liquidation  rights over
the Common Stock.

     On March 31, 1998, the Company  declared a dividend  distribution,  payable
April 30, 1998, of one Preferred Share Purchase Right ("Right") on each share of
Common Stock.  Each Right,  when  exercisable,  entitles the  registered  holder
thereof to purchase  from the Company  one  one-thousandth  of a share of Junior
Preferred Stock at a price of $1.00 per one  one-thousandth  of a share (subject
to  adjustment).  The  one  one-thousandth  of a  share  is  intended  to be the
functional equivalent of one share of the Common Stock.

     The Rights will not be  exercisable or  transferable  apart from the Common
Stock until an Acquiring Person, as defined in the Rights Agreement, dated as of
March 31, 1998, between the Company and American Stock Transfer & Trust Company,
without the prior consent of the Company's  Board of Directors,  acquires 20% or
more of the voting  power of the Common  Stock or  announces a tender offer that
would result in 20% ownership.  The Company is entitled to redeem the Rights, at
$.001  per  Right,  any time  before a 20%  position  has  been  acquired  or in
connection  with  certain  transactions  thereafter  announced.   Under  certain
circumstances,  including the acquisition of 20% of the Common Stock, each Right
not owned by a potential  Acquiring  Person will entitle its holder to purchase,
at the Right's  then-current  exercise price,  shares of Junior  Preferred Stock
having a market value of twice the Right's exercise price.

                                      F-15


<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

     Holders of a Right will be entitled to buy stock of an Acquiring  Person at
a similar  discount if, after the  acquisition  of 20% or more of the  Company's
voting power, the Company is involved in a merger or other business  combination
transaction  with  another  person in which its  common  shares  are  changed or
converted,  or the Company sells 50% or more of its assets or earning  power  to
another person. The Rights expire on April 20, 2008.


     8.   Restructuring Expenses

     In  connection  with the closure of its  California  offices  initiated  in
December  1997  and  completed  in  February  1998,  the  Company   initiated  a
restructuring  program,  the expenses and charges  relating to which  consist of
employee  severance  arrangements  ($84,292),  a settlement  agreement  with its
former  President and Chief  Executive  Officer  ($256,000),  the elimination of
lease facilities in California and other related costs ($35,610).


     9.   Income Taxes

     At  December  31,  1997  the  Company  has  available  net  operating  loss
carryforwards  of  approximately  $84,000,000  that expire in years 2002 through
2012, and general business credit carryovers of approximately $1,500,000,  which
expire  in  years  2005  and  2006.  These  carryforwards  are  subject  to  the
limitations as described below.

     The  significant  components  of the  Company's  deferred  tax  assets  and
liabilities, as of December 31, 1997, are as follows:

<TABLE>
<CAPTION>
      Current:
          <S>                                                      <C>
          Reserve for accounts receivable, inventory and other..   $   832,000
          Valuation allowance for current deferred tax assets...      (832,000)
                                                                   ____________
            Net current deferred tax assets.                            -0-
                                                                   ____________
      Non-current:
          Depreciation..........................................     1,721,000
          General business credit carryforwards.................     1,527,000
          Net operating loss carryforwards                          33,696,000
                                                                   ____________
            Total non-current deferred tax assets...............    36,944,000
                                                                   ____________
          Valuation allowance for non-current deferred tax 
            assets..............................................   (34,528,000)
                                                                   ____________
            Net non-current deferred tax assets.................        -0-
                                                                   ____________
                                                                   $    -0-
                                                                   ____________
</TABLE>

     The increase in the valuation  allowance during the year ended December 31,
1997 in the amount of $980,000  was due  principally to the net operating loss
incurred.

                                      F-16

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

    The Company's loss before taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                   ----------------------------
                                                   1997                    1996
                                                   ----                    ----
     <S>                                      <C>                 <C>
     United States.......................     $(9,871,203)        $(27,154,223)
     Foreign.............................         150,472              193,057
                                              ____________        _____________
                                              $(9,720,731)        $(26,961,166)
</TABLE>

     The  provision  for income  taxes of $47,035  for 1997 and  $78,201 in 1996
consists principally of foreign taxes which are currently payable.

     The  reconciliation  of income tax  computed at the United  States  federal
statutory tax rates to the recorded income tax expense is as follows:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                   ----------------------------
                                                   1997                    1996
                                                   ----                    ----

     <S>                                      <C>                 <C>
     Tax (benefit) at United States federal
       statutory rates..................      $(3,305,000)        $ (9,167,000)
     Permanent differences..............        1,322,000
     Write-off of in-process research 
       and development costs............                             5,955,000
     Costs associated with release of 
       escrow shares....................                               942,900
     Change in valuation allowance from
       operations.......................        1,900,000            2,262,600
     Foreign and state income taxes.....           47,205               78,201
     Other..............................           83,000                6,500
                                              ____________        _____________
                                              $    47,205         $     78,201
                                              ____________        _____________
</TABLE>

     The Tax  Reform Act of 1986  enacted a complex  set of rules  limiting  the
potential  utilization  of net operating  loss and tax credit  carryforwards  in
periods following a corporate "ownership change". In general, for federal income
tax purposes,  an ownership change is deemed to occur if the percentage of stock
of a loss  corporation  owned  (actually,  constructively  and,  in some  cases,
deemed)  by one or  more  "5%  shareholders"  has  increased  by  more  than  50
percentage  points  over the lowest  percentage  ownership  of such stock  owned
during a three-year  testing period.  With regard to the purchase of SPC, such a
change in ownership  occurred.  As a result of the change, the Company's ability
to utilize its net operating loss  carryforwards  and general  business  credits
will be limited to  approximately  $1.2 million of taxable income per year as of
December 31, 1997 and losses  subsequent to 1996 can be fully  utilized until it
is used or expired.  The SPC  portion of the net  operating  loss  carryforwards
totaling approximately $69 million are also subject to the additional limitation
that such  losses can only be utilized to offset the  separate  company  taxable
income of SPC.

     In connection  with the purchase of SPC, the Company  applied for a closing
agreement with the Internal  Revenue Service  pursuant to which the Company will
become jointly and severally liable for SPC's tax obligations upon occurrence of
a "triggering event" requiring  recapture of dual consolidated losses previously
utilized by SPC. Such closing agreement will avoid the Company being required to
recognize a tax of approximately  $8 million on  approximately  $24.5 million of
SPC's previous dual consolidated losses at the acquisition date.

                                      F-17

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

    While the Company  believes it will obtain this agreement,  failure to do so
could result in the recognition of this tax liability.


    10. Stock Option Plans

     The Company has five stock options plans: the Allegro New Media,  Inc. 1994
Long-Term  Incentive Plan (the "1994 Incentive Plan"), the Outside Directors and
Advisors  Stock  Option  Plan  (the  "Company  Directors  Plan"),  the  Software
Publishing   Corporation  1987  Stock  Option  Plan,  the  Software   Publishing
Corporation 1989 Stock Option Plan and the Software Publishing  Corporation 1991
Stock Option Plan  (collectively,  the "SPC Stock Option Plans").  All plans are
administered by the Board of Directors or a committee thereof.

     The Company has elected to follow  Accounting  Principles Board Opinion No.
25,   "Accounting  for  Stock  Issued  to  Employees"  ("APB  25")  and  related
interpretations  in  accounting  for its  employee  stock  options  because,  as
discussed below,  the alternative fair value accounting  provided for under FASB
Statement No. 123, "Accounting for Stock-Based  Compensation."  ("SFAS No. 123")
requires  use of option  valuation  models  that were not  developed  for use in
valuing employee stock options.  Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

    Elements of the Company's various stock option plans include the following:

     The  1994  Incentive  Plan - In  December  1993,  the  Company's  Board  of
Directors and  stockholders  adopted the 1994 Incentive Plan. Under the terms of
the 1994 Incentive Plan, the Company's Board of Directors or a committee thereof
may grant options,  stock  appreciation  rights,  restricted  stock  performance
grants  of the  Company's  common  stock,  cash or other  assets  to  employees,
consultants  and others who perform  services  for the Company at such prices as
may be determined by the Board of Directors (which price may be no less than 85%
of the fair market value of the common stock on the date of grant in the case of
nonqualified stock options).  In June 1997, the Company's  stockholders approved
the increase of the maximum  number of shares under the 1994 Incentive Plan from
3,000,000 to 4,000,000.  The options currently outstanding vest over a period of
up to five years and expire after 10 years.

     The  Company's  Directors  Plan - In August 1995,  the  Company's  Board of
Directors and  stockholders  approved the Company's  Directors  Plan.  Under the
terms of this plan,  each new  non-employee  director and member of the Advisory
Committee  receives options to purchase 25,000 shares exercisable at fair market
value on the date of grant upon becoming such a director or member. In addition,
on each August 1 thereafter  each such person will  receive  options to purchase
10,000  shares of the Company's  common stock at an exercise  price equal to the
fair market value at the respective  dates of grant.  The Advisory  Committee of
the Company was dissolved in 1997.  The maximum number of shares of common stock
subject to this plan is 500,000. The options vest over a period of two years and
expire after 10 years.

     The SPC Plans - Options under the SPC Stock Option plans may be granted for
periods of up to ten years,  for the 1987 and 1989 plans, at prices no less than
50% of fair value and for the 1991 plan, an exercise  price no lower than 85% of
fair value,  in each case for non qualified  options,  and at not less than fair
market value for incentive  stock options.  To date all options have been issued
at  fair  value.  Options  become  exercisable  at such  times  and  under  such
conditions  as  determined  by  the  Board  of  Directors.  As a  result  of the
acquisition  of SPC by the Company all options  outstanding  under the SPC Plans
were converted (based on the exchange ratio used to complete the acquisition) to
options to acquire the Company's common stock.

                                      F-18

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

     In addition to the Plan's described above, the Company's Board of Directors
from time-to-time has granted outside  consultants and vendors non-plan options.
Specific  terms of each such  grant are at the sole  discretion  of the Board of
Directors and are generally at prices not less than the fair market value at the
date of grant.

     Option activities under the plans and for the non-plan options are detailed
in the following table:

<TABLE>
<CAPTION>
                                                                              Weighted
                                                                               Average
                              1994          Company's                         Exercise
                            Incentive       Directors      SPC      Non-     Price Per
                              Plan           Plan         Plans     Plan       Share

Outstanding at 
  <S>                      <C>             <C>           <C>        <C>        <C>
  January 1, 1996.....       354,737       175,000                  100,000    $ 3.13
    Granted...........     1,119,310       215,000                   50,000      4.43
    Assumed...........            --                     651,360                 5.01
    Exercised.........            --       (19,666)                              3.75
    Forfeited.........       (12,500)                                            3.75
                          ___________      _______      ________    _______    ______
Outstanding at 
  January 1, 1997.....     1,461,547       370,334       651,360    150,000      3.99
    Granted...........     3,512,467        50,000        55,000                 2.06
    Exercised.........        (5,000)                                            2.00
    Forfeited.........    (1,249,000)      (25,000)     (488,989)                3.43
    Repriced - granted       736,725       120,000         4,871                 1.25
    Repriced - forfeited    (982,300)     (160,000)       (6,494)                2.96
                          ___________      _______      ________    _______    ______
Outstanding at 
  December 31, 1997...     3,474,689       355,334       215,748    150,000    $ 2.29
                          ___________      _______      ________    _______    ______

Exercisable at 
  December 31, 1997...       308,434       277,740       142,832    150,000    $ 3.84
                          ___________      _______      ________    _______    ______

Exercisable at 
  December 31, 1996...        98,128       160,325       109,627    150,000    $ 4.76
                          ___________      _______      ________    _______    ______
</TABLE>


     As of December 31, 1997,  5,208,196 shares of common stock are reserved for
issuance under the plans described above.

     In August  1997,  the  Board of  Directors  approved  a  repricing  program
pursuant to which the Company  offered to the Company's  then current  officers,
employees  and directors  holding  options  granted under the Company's  various
stock  option  plans an  opportunity  to  reprice  the  exercise  price of their
respective  options  granted under the Company's stock option plans to $1.25 per
share of common  stock  which was the fair  value as of the  repricing  program,
provided that the option holder surrender 25% of their options.

     The weighted average fair value of options granted was $1.57 and  $3.36 for
1997 and 1996, respectively.

                                      F-19

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

     At  December  31,  1997,  for each of the  following  classes of options as
determined  by range of exercise  price,  the  following  information  regarding
weighted-average  exercise  prices and weighted  average  remaining  contractual
lives of each class is as follows:
<TABLE>
<CAPTION>
                                                                               Weighted
                                                  Weighted                      Average
                                 Weighted          Average                     Exercise
                                 Average          Remaining      Number of     Price of
                       Number   Exercise       Contract Life     Options        Options
                        of      Price of      of Outstanding     Currently     Currently
     Option Class     Options    Options           Options      Exercisable    Exercisable

  <S>                <C>         <C>                <C>           <C>           <C>
  Prices ranging from:
  $0.81 - $1.99...   2,389,488   $ 1.19             9.48          259,503       $ 1.18
  $2.00 - $3.99...   1,358,406     2.87             8.47          259,129         2.87
  $4.00 - $5.99...     387,877     5.07             4.25          310,374         4.96
  $6.00 - $7.99...      60,000     6.92             4.62           50,000         6.75
</TABLE>

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by SFAS No.  123,  and has been  determined  as if the Company had been
accounting  for its employee  stock  options under the fair value method of that
statement.  The fair value of these  options was  estimated at the date of grant
using a  Black-Scholes  option pricing model with the following  assumptions for
1997 and 1996, respectively:  weighted-average risk-free interest rates of 6.25%
for 1997 and 6.5% for 1996;  no  dividends;  volatility  factors of the expected
market price of the Company's common stock of 1.2046 for 1997 and .7601 for 1996
and a  weighted-average  expected life of the options of 5.13 years for 1997 and
7.5 years for 1996.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and 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 employee stock options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options  granted  in 1997 and 1996 is  amortized  to expense  over the  options'
vesting period. The Company's pro forma information follows:
<TABLE>

                                                   1997                    1996
  <S>                                           <C>                     <C>
  Pro forma net loss........................    $(11,204,354)            $(27,626,144)
  Pro forma net loss per share-basic and
      diluted...............................    $      (1.37)            $      (7.64)
</TABLE>

     The pro forma disclosures presented above for 1997 and 1996,  respectively,
reflect  compensation  expense only for options granted in 1997 and 1996.  These
amounts may not  necessarily  be  indicative of the pro forma effect of SFAS No.
123 for future periods in which options may be granted.

                                      F-20
<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997



     11.  Commitments and Contingencies

Leases

     The Company  leases  certain  office space under  non-cancelable  operating
leases.  In addition  to the fixed  rentals,  certain of the leases  require the
Company to pay certain  additional amounts based on certain costs related to the
property.  Certain of the leases  have  renewal  options  for periods of up to 2
years. Rental expense was approximately  $540,000 and $108,000 in 1997 and 1996,
respectively.

     Future minimum lease payments under  non-cancelable  operating  leases with
terms of one year or more are as follows:

<TABLE>

                    <S>                         <C>
                    1998 . . . . .              $  255,000
                    1999 . . . . .                 255,000
                    2000 . . . . .                 248,000
                    2001 . . . . .                 254,000
                    2002 . . . . .                  72,000
                                                __________
                    Total. . . . .   $           1,084,000
                                                __________

</TABLE>

Pending Litigation

     On January 30, 1998, an action was commenced  against the Company,  Mark E.
Leininger and Barry A. Cinnamon in the United States  District  Court,  Southern
District of New York.  Mr.  Leininger  currently is President,  Chief  Operating
Officer and a director of the Company and Mr. Cinnamon  formerly was Chairman of
the Board,  President and Chief Executive Officer of the Company. In the action,
plaintiffs  allege that, in October 1997,  they  purchased an aggregate  889,000
shares of the Company's  common stock for gross  proceeds of $919,495 based upon
certain statements made to one of the plaintiffs. Plaintiffs further allege that
such statements were intentional  misrepresentations  of material fact that were
designed to deceive  plaintiffs as to the Company's true financial  state and to
induce the  plaintiffs  to invest in the Company.  Plaintiffs  seek  recision of
their  investment and a return of their purchase price and certain other relief.
The  Company  believes  that  these  claims  are  without  merit and  intends to
vigorously defend itself in this action. The Company has filed an answer in this
action denying the plaintiffs'  allegations and asserting  affirmative defenses,
including that the plaintiffs'  subscription  agreements bar plaintiffs' claims,
and  asserting  counterclaims  that,  among other  things,  plaintiffs  breached
certain of the representations contained in their subscription agreements,  that
plaintiff  Altman  breached  his  fiduciary  duties  to  the  Company  and  that
plaintiffs'  violated  Section  13(d) of the Exchange Act by filing a materially
false and misleading Schedule 13D with respect to the Common Stock.

     On February  13, 1998,  a summons and  complaint  was filed in the Superior
Court of New Jersey,  Essex  County  under the caption  Barry  Cinnamon and Lori
Kramer Cinnamon, suing derivatively on behalf of Software Publishing Corporation
Holdings,  Inc.  and its  shareholders,  and  Barry  Cinnamon  and  Lori  Kramer
Cinnamon,  individually, v. Software Publishing Corporation Holdings, Inc., Neil
M. Kaufman, Mark Leininger and John Does 1-10. Mr. Leininger is President, Chief
Operating  Officer and a director of the Company;  Mr.  Kaufman is a director of
the Company, the principal of Kaufman & Associates, LLC, counsel to the Company,
and was  Secretary  of the Company  from  December  1996 to December  1997;  Mr.
Cinnamon was Chairman of the Board, President and Chief Executive Officer of the
Company  until  December  19,  1997;  and Ms Kramer  Cinnamon was an officer and
director  of the Company  until  December  19,  1997.  To date,  the summons and
complaint  has been served on the Company,  and has not been served on either of
the named individual defendants or any of the other defendants.  In this action,
plaintiffs  seek  (i)  the  recision  of  the  Settlement  and  General  Release
Agreement,  dated as of December 19, 1998 (the "Cinnamon Settlement Agreement"),

                                      F-21

<PAGE>
        Software Publishing Corporation Holdings, Inc. and Subsidiaries
               (Formerly Allegro New Media, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1997

between the Company and each  plaintiff and the License  Agreement,  dated as of
December 19, 1998 (the  "Cinnamon  License  Agreement,"  and,  together with the
Cinnamon Settlement Agreement,  the "Cinnamon Agreements"),  between the Company
and Mr.  Cinnamon,  (ii)  payment of the full amount of  compensation  due under
their former respective employment  agreements with the Company,  (iii) that Mr.
Kaufman be enjoined  from  continuing  to act as a director  and officer of, and
counsel  to,  the  Company,  (iv) that the  Company  be  required  to provide an
"'opinion  letter'  as  required  by the  Securities  Exchange  Act of 1934,  as
amended,  to permit  the sale of shares of stock held by the  Cinnamons  without
restriction," (v) that the Company be required to immediately register the stock
held by plaintiffs and (vi) compensatory and punitive damages,  attorney's fees,
and other relief.  Plaintiffs seek such relief based upon their allegations that
the  defendants  improperly  caused the  resignation  of  plaintiffs  from their
positions as officers and directors of the Company,  that Mr. Kaufman improperly
influenced  the  decision  of the  Board of  Directors  to adopt  the  Company's
December 1997 restructuring plan (thereby rejecting Mr. Cinnamon's plans for the
Company),  and that the Cinnamon  Agreements were entered into by each plaintiff
under  duress and the coercion of  defendants  (despite  plaintiffs  having been
represented by counsel in connection with these matters).  The Company  believes
that the plaintiff's  allegations  are without merit,  and intends to vigorously
defend itself in this action.

     The Company has other litigation matters in progress in the ordinary course
of business. In the opinion of management,  all of such other pending litigation
of the  Company  will be  resolved  without  a  material  adverse  effect of the
Company's financial position, results of operations or cash flows.


    12. Foreign Operations

     The Company  conducts its business  within the computer  software  industry
segment.

     Foreign  operations as of December 31, 1997 and for the year then ended are
as follows:

<TABLE>
<CAPTION>
                                United
                                States        Europe         Eliminations      Consolidated

<S>                             <C>           <C>            <C>               <C>
Net sales....................   $  8,770,684   $8,386,181                      $17,156,865
(Loss) income before income
  taxes......................   $(10,445,713)  $  724,982                      $(9,720,731)

Identifiable assets as of
  December 31, 1997..........   $  7,554,216   $3,489,164    $(413,878)        $10,629,502
                                ============   ==========    ==========        ===========

</TABLE>


     13.  Related Party Transaction

     The Company incurred legal expenses of  approximately  $600,000 in 1997 and
$350,000  in 1996 to a law firm in which a director of the Company was a member,
of which approximately  $176,000 is included in accounts payable at December 31,
1997.

                                      F-22
<PAGE>


                                   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.



                                    SOFTWARE PUBLISHING CORPORATION
                                             HOLDINGS, INC.



Date:  April 15, 1998               By: /s/ Mark E. Leininger
                                        Mark E. Leininger
                                        President and Chief Operating Officer


                                POWER OF ATTORNEY

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  this Annual Report on Form 10-KSB has been signed on April 15, 1998 by
the following persons in the capacities  indicated.  Each person whose signature
appears below  constitutes and appoints Mark E. Leininger and Kevin D. Sullivan,
or either of them,  with full  power of  substitution,  his/her  true and lawful
attorneys-in-fact  and agents to do any and all acts and things in his/her  name
and on his/her behalf in his/her capacities indicated below which they or either
of  them  may  deem  necessary  or  advisable  to  enable  Software   Publishing
Corporation  Holdings,  Inc. to comply with the Securities Exchange Act of 1934,
as amended,  and any rules,  regulations and  requirements of the Securities and
Exchange  Commission,  in  connection  with this Annual  Report on Form  10-KSB,
including  specifically,  but not limited to,  power and  authority  to sign for
him/her in his/her name in the capacities  stated below,  any and all amendments
thereto, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in such connection, as fully to all intents and purposes as
he/her might or could do in person,  hereby  ratifying and  confirming  all that
said  attorneys-in-fact  and  agents,  or his  substitute  or  substitutes,  may
lawfully do or cause to be done by virtue thereof.



/s/ Mark E.  Leininger             Chief Operating Officer and Director
Mark E. Leininger                  (Principal Executive Officer)


/s/ Kevin D. Sullivan              Chief Financial Officer, Vice President - 
Kevin D. Sullivan                  Finance, Treasurer

/s/ Marc E. Jaffe                  Chairman of the Board of Directors
Marc E. Jaffe


/s/ Neil M. Kaufman                Director
Neil M. Kaufman


/s/ Norman W. Alexander            Director
Norman W. Alexander


<PAGE>


/s/ Neil R. Austrian, Jr.          Director
Neil R. Austrian, Jr.


/s/ Martin F. Schacker             Director
Martin F. Schacker


<PAGE>


                 SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

                           ANNUAL REPORT ON FORM 10-K
                       Fiscal Year Ended December 31, 1997

                                  EXHIBIT INDEX


     Set forth below are all exhibits to this Annual Report on Form 10-KSB:

3.1       Composite  of  Certificate of Incorporation of the Company, as amended
          to date.  (Incorporated  by  reference to Exhibit 3.1 to the Company's
          Quarterly  Report  on Form 10-QSB  (Commission File Number:  1-14076),
          for the quarter  ended  June 30, 1997,  filed with the  Commission  on
          August 19,  1997.) 
3.2       Certificate  of  Designations  of the Junior  Participating  Preferred
          Stock,  Series  A, filed with the Delaware Secretary of State on March
          31, 1998. 
3.3       By-laws of the Company, as amended. 
4.1       Specimen Common Stock Certificate.
10.1      Company 1994   Long   Term   Incentive   Plan,  as  amended  to  date.
          (Incorporated by reference to Exhibit 10.46 to the Company's Quarterly
          Report  on  Form  10-QSB  (Commission File Number:  1-14076),  for the
          quarter ended June 30, 1997,  filed with the  Commission on August 19,
          1997.) 
10.2      Company Outside Director and Advisor Stock Option Plan, as amended  to
          date.  (Incorporated  by reference  to Exhibit  10.47 to the Company's
          Quarterly  Report  on Form 10-QSB  (Commission File Number:  1-14076),
          for the quarter  ended  June 30, 1997,  filed with the  Commission  on
          August 19, 1997.)
10.3      SPC 1987 Stock Option Plan. (Incorporated  by reference to Exhibit 4.1
          to  the  Company's  Registration  Statement on Form S-8  (Registration
          Number: 333-19509),  filed with the  Commission on January 10, 1997.)
10.4      SPC 1989 Stock Plan.  (Incorporated  by  reference  to  Exhibit 4.2 to
          the Company's Registration Statement on Form S-8 (Registration Number:
          333-19509), filed with the Commission on January 10, 1997.) 
10.5      SPC  1991  Stock Option Plan.  (Incorporated  by  reference to Exhibit
          4.3 to the Company's Registration Statement on Form S-8  (Registration
          Number: 333-19509), filed with the Commission on January 10, 1997.) 
10.6      Employment Agreement dated as of December 27, 1993, as amended through
          Amendment  No.  6,  between  the  Company  and  Barry  A.  Cinnamon. 
          (Incorporated by reference to Exhibit 10.3 to the Company's  Amendment
           No. 1 to Registration  Statement on Form  SB-2  (Registration Number:
          33-97184),  filed   with   the   Commission   on   November  6,  1995,
          Exhibit 10.30  to  the  Company's  Quarterly  Report  on  Form  10-QSB
          (Commission  File  Number: 1-14076),  for  the quarter ended March 31,
          1996, filed with the Commission on May 14,  1996,  and  Exhibit  10.35
          to the Company's   Quarterly  Report on Form 10-QSB  (Commission  File
          Number:  1-14076),  for the  quarter  ended  September 30, 1996, filed
          with  the Commission on November 5, 1996.)
10.7      Amendment No. 7 to  Employment Agreement between the Company and Barry
          A.  Cinnamon.   (Incorporated   by  reference  to  Exhibit 10.7 to the
          Company's  Annual  Report  on   Form  10-KSB  (Commission File Number:
          1-14076), for  the  year  ended  December  31,  1996,  filed  with the
          Commission on April 15, 1997.)
10.8      Employment Agreement dated as of December 27, 1993, as amended through
          Amendment  No. 3,  between the  Company  and  Lori  Kramer   Cinnamon.
          (Incorporated  by reference to Exhibit 10.4 to the Company's Amendment
          No. 1  to Registration  Statement on Form SB-2  (Registration  Number:
          33-97184), filed with the Commission on November 6, 1995.) 
10.9      Settlement and General Release Agreement,  dated  as of September  26,
          1997,  among Joseph Szczepaniak, the Company  and  Software Publishing
          Corporation.  (Incorporated  by  reference  to  Exhibit  10.52  to the
          Company's  Quarterly   Report  on Form 10-QSB (Commission File Number:
          1-14076), for the  quarter  ended  September  30, 1997, filed with the
          Commission on November 14, 1997.)
10.10     Settlement and General Release Agreement, dated  s  of  July 25, 1997,
          among   Daniel  J.   Fraisl,   the  Company  and  Software  Publishing
          Corporation.  (Incorporated  by  reference  to  Exhibit  10.48  to the
          Company's Quarterly  Report  on Form 10-QSB  (Commission  File Number:
          1-14076), for  the  quarter  ended  June  30,  1997,  filed  with  the
          Commission on August 19, 1997.) 
10.11     Agreement dated October 25, 1996  between  the  Company  and  Mark  E.
          Leininger.  (Incorporated  by  reference  to  Exhibit  10.36  to   the
          Company's Quarterly  Report  on Form 10-QSB (Commission  File  Number:
          1-14076), for the  quarter  ended  September 30, 1996,  filed with the
          Commission on November 5, 1996.) 

<PAGE>

10.12     Agreement  and  Plan  of  Reorganization  dated  as of October 1, 1996
          among  the Company,   SPC   and   SPC   Acquisition   Corporation.   
          (Incorporated by reference to Exhibit 2 to  the Company's Registration
          Statement on Form S-4 (Registration  Number:  333-16449),  filed  with
          the  Commission  on November  21,  1996.) 
10.13     Form  of  Bridge  Unit  Subscription   Agreement.   (Incorporated   by
          reference to Exhibit 10.7  to  the   Company's Registration  Statement
          on  Form  SB-2  (Registration  Number:   33-97184),  filed  with   the
          Commission  on September 21, 1995.) 
10.14     Stock Option Agreement dated as of August 2, 1994  between the Company
          and Berlitz Publishing  Company,  Inc.  (Incorporated  by reference to
          Exhibit  10.10  to  the Company's Registration  Statement on Form SB-2
          (Registration   Number:  33-97184),  filed  with  the  Commission   on
          September 21, 1995.)
10.15     Settlement and General Release Agreement dated as of January  30, 1997
          between the Company and Miriam K. Frazer.  (Incorporated by  reference
          to  Exhibit  10.15  to  the  Company's  Annual  Report on  Form 10-KSB
          (Commission  File  Number:  1-14076),  for the year ended December 31,
          1996, filed with the  Commission  on  April  15,  1997.) 
10.16     Agreement, dated June 14, 1994,  as amended, between the Company, M.S.
          Farrell & Co., Inc. and  the holders of shares of Class A  Convertible
          Preferred Stock. (Incorporated  by reference  to  Exhibit 10.20 to the
          Company's   Registration   Statement  on  Form  SB-2   (Registration 
          Number: 33-97184), filed with the Commission on September  21, 1995.) 
10.17     Form of Indemnification  Agreement between  the  Registrant  and  its
          executive  officers  and  directors.  (Incorporated  by  reference  to
          Exhibit 10.8  to the  Company's  Registration  Statement  on Form SB-2
          (Registration  Number:  33-97184),  filed   with   the  Commission  on
          September  21,  1995.)
10.18     Form of  Underwriters'  Purchase  Option (Specimen).
10.19     Form of Lock-Up Agreement dated  as  of  July  31,  1996  relating  to
          limitations on stock sales between the  Company and each of the former
          stockholders  of  Serif  Inc.  (Incorporated  by  reference to Exhibit
          10.21 to the  Company's  Annual  Report  on  Form 10-KSB   (Commission
          File Number:  1-14076),  for the year ended  December 31, 1996,  filed
          with the  Commission  on April 15,  1997.)  
10.20     Form  of  Lock-Up  Agreement  dated  as  of  July 31, 1996 relating to
          limitations on  stock sales between the Company and each of the former
          stockholders of  Serif (Europe) Limited. (Incorporated by reference to
          Exhibit   10.22  to  the  Company's  Annual  Report  on  Form  10-KSB 
          (Commission File Number: 1-14076), for the  year  ended  December  31,
          1996, filed  with the Commission   on  April  15,   1997.) 
10.21     Agreement  and  Plan  of  Reorganization  dated  as  of July 31,  1996
          among the Company, Serif Inc.,  Gwyn  Jones and all other stockholders
          of  Serif  Inc. (Incorporated  by  reference  to  Exhibit  4.3  to the
          Company's Current  Report on Form 8-K (Date of Report:  July 31, 1996)
          (Commission File Number: 1-14076), filed with the Commission on August
          13, 1996.) 
10.22     Agreement and Plan of  Reorganization  dated as of July 31, 1996 among
          the  Company,  Serif  (Europe)  Limited,  Gwyn  Jones  and  all  other
          stockholders of Serif (Europe) Limited.  (Incorporated by reference to
          Exhibit  4.4 to the  Company's  Current  Report  on Form 8-K  (Date of
          Report: July 31, 1996) (Commission File Number:  1-14076),  filed with
          the  Commission  on  August  13,  1996.)  
10.23     Registration   Rights  Agreement  dated  July  31,  1996  between  the
          Company  and the former  stockholders of Serif Inc. and Serif (Europe)
          Limited.  (Incorporated by reference to Exhibit 10.31 to the Company's
          Current Report on Form 8-K (Date of Report: July 31, 1996) (Commission
          File Number: 1-14076), filed with the Commission on August 13, 1996.)
10.24     Escrow  Agreement dated July 31, 1996, among the Company, Serif  Inc.,
          the  former stockholders  of Serif Inc., Gwyn Jones and Blau,  Kramer,
          Wactlar & Lieberman, P.C. (Incorporated  by  reference  to  Exhibit  2
          to  the Schedule 13D  Statement  of Barry A.  Cinnamon,  with  respect
          to  the  Common  Stock  of  the Company,  filed with the Commission on
          October 31, 1996.)  
10.25     Localization and Distribution Agreement for Harvard  Graphics  Windows
          Products  dated  February  16,  1995  between  Choten,  Inc. and  SPC.
          (Incorporated  by  reference  to Exhibit  10.21 to Software Publishing
          Corporation's  Annual  Report  on Form 10-K (Commission  File  Number:
          0-14025), for the fiscal year ended September 30, 1995, filed with the
          Commission  on December 29,  1995.)  
10.26     Escrow  Agreement  dated  July  31,  1996,  among  the Company,  Serif
          (Europe)  Limited, the former Stockholders of Serif (Europe)  Limited,
          Gwyn Jones and Blau, Kramer, Wactlar & Lieberman, P.C.   (Incorporated
          by  reference  to Exhibit  10.28  to  the   Company's   Annual  Report
          on  Form 10-KSB (Commission File Number:  1-14076), for the year ended
          December 31, 1996,  filed  with the  Commission  on April 15,  1997.)

<PAGE>

10.27     Lease  Agreement  dated September 7, 1995 between Community Towers LLC
          and the  Company,  for  facilities located at 111 North Market Street,
          San Jose, California.  (Incorporated by reference to Exhibit  10.22 to
          Software   Publishing   Corporation's   Annual  Report  on  Form  10-K
          (Commission File Number: 0-14025), for the fiscal year ended September
          30, 1995, filed with  the  Commission  on  December  29,  1995.)
10.28     Stockholders'  Agreement  dated  as  of July 31,  1996 among  Barry A.
          Cinnamon,  Gwyn Jones and the former  stockholders  of Serif Inc.  and
          Serif  (Europe)  Limited.  (Incorporated  by reference to Exhibit 1 to
          the Schedule 13D Statement of Barry A.  Cinnamon,  with respect to the
          Common Stock of the Company, filed with the Commission  on October 31,
          1996.) 
10.29     Letter  Agreement  dated October 24, 1996 between the Company and Gwyn
          Jones.  (Incorporated  by reference to Exhibit  10.31 to the Company's
          Annual Report on Form 10-KSB  (Commission File Number:  1-14076),  for
          the year ended  December 31, 1996,  filed with the Commission on April
          15,  1997.)  
10.30     Compromise  Agreement  executed  October 24, 1996 between  the Company
          and Gwyn Jones. (Incorporated by reference  to Exhibit  10.32  to  the
          Company's   Annual  Report  on  Form  10-KSB (Commission  File Number:
          1-14076),  for  the  year  ended  December  31, 1996,  filed  with the
          Commission on April 15, 1997.)
10.31     Settlement and General  Release  Agreement  dated as of July 23,  1996
          among  the  Company,   Richard   Bergman   and   Barry   Cinnamon.
          (Incorporated  by  reference to Exhibit 10.32 to the Company's Current
          Report on Form 8-K (Date of Report:  July 31, 1996)  (Commission  File
          Number:  1-14076), filed with the Commission on August 13, 1996.)
10.32     Escrow  Agreement  dated  as of December 27, 1993, as amended  through
          September 5, 1996,  among  the  Company,  Barry A.  Cinnamon,  Richard
          Bergman  and Blau, Kramer,  Wactlar &  Lieberman,  P.C.  (Incorporated
          by  reference to Exhibit 10.25 to the  Company's  Amendment  No. 1 to
          Registration  Statement  on Form SB-2 (Registration Number: 33-97184),
          filed with the Commission  on  November  6,  1995,  Exhibit  10.32  to
          the Company's Quarterly Report on Form 10-QSB (Commission File Number:
          1-14076),  for  the  quarter  ended  March  31,  1996,  filed with the
          Commission  on  May  14,  1996,  and  Exhibit  10.34 to the  Company's
          Quarterly Report on Form 10-QSB  (Commission  File  Number:  1-14076),
          for the quarter ended September  30, 1996,  filed with the  Commission
          on November 5, 1996.)
10.33     Escrow   Agreement   dated  as  of  May  25, 1995, as amended  through
          September  5, 1996,  among the  Company,  Barry A.  Cinnamon,  Richard
          Bergman and Blau, Kramer,  Wactlar & Lieberman,  P.C. (Incorporated by
          reference  to  Exhibit  10.26  to the  Company's  Amendment  No.  1 to
          Registration  Statement on Form SB-2 (Registration Number:  33-97184),
          filed with the  Commission  on November 6, 1995,  and Exhibit 10.34 to
          the Company's Quarterly Report on Form 10-QSB (Commission File Number:
          1-14076),  for the quarter ended  September  30, 1996,  filed with the
          Commission on November 5, 1996.) 
10.34     Stock  Purchase  Agreement  dated  March  31,  1995 among SPC, Digital
          Paper, Inc., Daniel J. Fraisl,  Carl  Meyer  and  Anthony  N.  Hoeber.
          (Incorporated  by  reference to Exhibit 10.4  to  Software  Publishing
          Corporation's  Quarterly Report on Form 10-Q  (Commission File Number:
          0-14025),  for  the quarter  ended  March  31, 1995,  filed  with  the
          Commission on May 15, 1995.)
10.35     Amendment  to  Stock  Purchase  Agreement  dated  as of April 2,  1996
          among  SPC, Digital  Paper,  Inc.  Daniel J.  Fraisl,  Carl  Meyer and
          Anthony N. Hoeber. (Incorporated  by reference to Exhibit 10.39 to the
          Company's  Annual  Report  on  Form  10-KSB  (Commission  File Number:
          1-14076),  for  the  year  ended  December  31,  1996,  filed with the
          Commission  on  April  15,  1997.) 
10.36     Amendment No. 2 to Stock  Purchase  Agreement  dated  October  1, 1996
          among  SPC,  Digital  Paper,  Inc.,  Daniel  J. Fraisl, Carl Meyer and
          Anthony N.  Hoeber.  (Incorporated  by  reference to Exhibit 10.40  to
          the Company's  Annual Report on Form 10-KSB  (Commission File  Number:
          1-14076),  for  the  year  ended  December  31,  1996,  filed with the
          Commission on April 15, 1997.) 
10.37     Asset Purchase Agreement dated as  of  May 1, 1996 between the Company
          and BizEd, Inc.  (Incorporated  by reference  to Exhibit  10.41 to the
          Company's  Annual  Report  on  Form  10-KSB  (Commission  File Number:
          1-14076),  for  the  year  ended  December  31, 1996,  filed  with the
          Commission  on  April  15,  1997.)  
10.38     Consulting  Agreement  dated as of May 1, 1996 between the Company and
          Clifford J. Schorer,  Jr.  (Incorporated by reference to Exhibit 10.42
          to the Company's Annual Report on Form 10-KSB (Commission File Number:
          1-14076),  for the  year  ended  December  31,  1996,  filed  with the
          Commission  on April  15,  1997.)  
10.39     Form of MS  Farrell  Warrant Certificate issued to MS  Farrell  & Co.,
          Inc.  and  certain  other persons.
10.40     Letter  Agreement  dated March 27,  1997  between the Company and M.S.
          Farrell & Co.,  Inc.  (Incorporated  by  reference  to  Exhibit  10.45
          to the Company's   Annual  Report  on  Form  10-KSB  (Commission  File
          Number:  1-14076),  for the year ended  December 31, 1996,  filed with
          the Commission on April 15, 1997.) 

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10.41     Consulting Agreement,  dated as of July 25, 1997,  between the Company
          and Daniel J.  Fraisl. (Incorporated  by reference  to  Exhibit  10.49
          to  the Company's  Quarterly  Report on Form 10-QSB  (Commission  File
          Number: 1-14076), for the quarter ended  June  30,  1997,  filed  with
          the Commission on August 19, 1997.)
10.42     Form of Subscription Agreements, each dated October 23, 1997,  between
          the Company and each of  Ronald  L.  Altman  (with  respect  to 24,000
          shares of Common  Stock),   Gerold  M.  Fleischner  (with  respect  to
          24,000  shares  of  Common  Stock),  Howard Milstein  (with respect to
          865,000  shares of Common  Stock),  Patriot Group, LP (with respect to
          24,000 shares of Common Stock) and Stephen P. Rosenblatt (with respect
          to 24,000  shares  of  Common  Stock).  (Incorporated  by reference to
          Exhibit  10.50  to  the  Company's  Quarterly  Report  on Form  10-QSB
          (Commission  File  Number:  1-14076),  for the quarter ended September
          30,  1997,  filed  with the  Commission on November 14, 1997.)
10.43     Registration  Rights  Agreement,  dated  October  23, 1997,  among the
          Company,  Ronald  L.  Altman,  Gerold M. Fleischner, Howard  Milstein,
          Patriot   Group,  LP  and  Stephen  P. Rosenblatt.   (Incorporated  by
          reference to Exhibit 10.51 to the Company's  Quarterly  Report on Form
          10-QSB  (Commission  File  Number:  1-14076),  for the  quarter  ended
          September  30,  1997,  filed  with  the  Commission   on  November 14,
          1997.) 
10.44     Option,  dated  October  23,  1997,  issued  to  Ronald  L.   Altman.
          Incorporated  by reference to Exhibit 10.53 to the Company's Quarterly
          Report  on  Form 10-QSB  (Commission  File Number: 1-14076),  for  the
          quarter ended  September  30, 1997,  filed   with  the  Commission  on
          November  14,  1997.)  
10.45     Settlement  and  Release  Agreement,  dated  December 19, 1997,  among
          the  Registrant,  Barry  A.  Cinnamon  and  Lori  Kramer  Cinnamon.
          (Incorporated  by  reference  to  Exhibit  10.54  to  the  Company's
          Current  Report  on  Form  8-K  (Date  of  Report:  December 19, 1997)
          (Commission File Number:  1-14076),  filed  with  the  Commission  on
          December 30,  1997.) 
10.46     License   Agreement,   dated  December  19,  1997,  between  Software
          Publishing  Corporation  and  Barry  A.  Cinnamon.  (Incorporated  by
          reference to Exhibit 10.55 to  the Company's  Current  Report on Form
          8-K (Date of Report:  December  19,  1997) (Commission  File  Number:
          1-14076), filed with the Commission on December 30, 1997.) 
10.47     Financial  Advisory  Agreement,  dated  as  of  November  20,  1997,
          between the Registrant and M.S. Farrell & Co., Inc.
10.48     Amendment  to  the  Financial  Advisory   Agreement,  dated  as   of
          January 28, 1998,  between the Registrant and M.S. Farrell & Co., Inc.
10.49     Amendment  No.  1  to  Escrow  Agreement,  dated as of April 1, 1997,
          among the Company,  Serif Inc.,  Norman W. Alexander,  Moritt,  Hock &
          Hamroff,  LLP and  Blau,  Kramer,  Wactlar  &  Lieberman,  P.C.
10.50     Amendment No. 1 to Escrow Agreement,  dated as of April 1, 1997, among
          the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt, Hock
          & Hamroff,  LLP and Blau,  Kramer,  Wactlar &  Lieberman,  P.C.  
10.51     Rights Agreement,  dated as of March 31, 1998, between the Company and
          American Stock Transfer & Trust Company.
21        Subsidiaries of the Company.
23.1      Consent of Ernst & Young LLP.
23.2      Consent of Richard A. Eisner & Company,  LLP. 23.3 Consent of Ernest &
          Young U.K.
24        Powers  of  Attorney  (set forth on the signature  page of this Annual
          Report on Form 10-KSB).
27        Financial Data Schedule.