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, 1998
     [ ]  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  X           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:   $18,271,733.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was $5,962,773, at March 26, 1999, based on the last bid price of
the Common  Stock on such date of $1-3/16  per share,  as reported by The Nasdaq
Stock Market, Inc.

   As of March 26, 1999, there were a total of 5,263,891 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  include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the  Exchange  Act.  Forward-looking  statements  involve
known and unknown risks,  uncertainties  and other factors which could cause the
actual results of Software Publishing Corporation Holdings,  Inc. ("we," "us" or
the "Company"),  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  Company's  best
estimates 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. 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  marketing  programs  achieve
          satisfactory  response rates,
     -    the efficiency of  the  Company's telemarketing operations,
     -    the competitive  environment  within the computer software  and direct
          marketing  industries,
     -    the  Company's ability to raise additional capital,
     -    unforeseen  operational difficulties  and financial losses due to year
          2000 computer problems,
     -    the  cost-effectiveness   of   the   Company's   product   development
          activities,
     -    the extent to which the Company is successful in developing, acquiring
          or licensing  products which are accepted by the market, and
     -    the  other  factors and  information  disclosed  and  discussed  under
          "Risk Factors"  below  and  in other sections of this Annual Report on
          Form 10-KSB.

     Investors 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.  The Company
undertakes  no  obligation  to  publicly  update or revise  any  forward-looking
statements, whether as a result of new information, future events or otherwise.

                                  RISK FACTORS

     You should carefully consider the following risk factors.

No Assurance of Profitability; Losses to Date

     The  Company has been  unprofitable  since  inception  in July 1992 and may
continue to incur  operating  losses in the future.  For the year ended December
31, 1998, we had a net loss of  approximately  $2,407,000.  Our operating losses
may  increase  as  we  develop,  produce  and  distribute  additional  products,
de-emphasize other products and continue to develop our business.  We may not be
able to  become  profitable  or, if we become  profitable,  thereafter  maintain
profitability.

Competition May Adversely Affect Results of Operations

     The market for our software products is characterized by:

     -    ongoing technological developments,
     -    evolving industry standards,
     -    licensing of technology between companies,
     -    cross and collateral  marketing  of products by two or more companies,

                                       -2-
<PAGE>

     -    alliances  between  companies,
     -    joint  marketing campaigns  and
     -    rapid  changes  in  customer  requirements  and  increasing   customer
          demands.

     We believe that the principal  competitive factors in the corporate,  small
office and home office ("SOHO") and consumer software markets 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.

     As a result,  we believe  that our success in this market  depends upon our
ability to continue to:

     -    provide  continued  enhancement  of our  existing and future products,
     -    correctly   identify   and  enter  new  markets,
     -    effectively market and sell our current and future products,
     -    expand  our  existing  distribution channels while also developing new
          distribution channels including e-commerce,
     -    timely and efficiently acquire, license or develop and introduce new
          products that take advantage of technological advances and
     -    respond to new requirements and demands of the market.

     To the extent one or more of our competitors introduce products that better
address market  requirements,  our business could be adversely affected.  We may
not be  successful  in developing  and  marketing  enhancements  to our existing
products or new products  incorporating new technology on a timely basis.  Also,
our existing and new products may not  adequately  address the changing needs of
the  marketplace.  If we are unable to timely develop and introduce new products
or enhance  existing  products,  our business and results of operations could be
materially and adversely affected.

     The  dominant  position  of  Microsoft  Corporation  ("Microsoft")  in  the
personal computer operating system and application program marketplace  provides
Microsoft  with a range of  competitive  advantages,  including  its  ability to
determine the direction of future operating systems and to leverage its strength
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  operating  systems  combined with its own
          productivity software,
     -    bundle software, 
     -    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,
     -    pre-load  such bundled software on new computers, and
     -    purchase advantageous product positioning and presentations in various
          distribution channels 

may  significantly  inhibit our ability to maintain or expand our  business.  In
addition,  as  Microsoft or other  companies  create new  operating  systems and
applications,  we may not be able to  re-work  our  products  in  order  for the
products  to remain  compatible  with these new systems  and  applications.  The
introduction  of  upgrades  to  operating  systems  or the  introduction  of new
operating systems and standardized  software by Microsoft and others, over which
we have no control, may adversely affect our ability to upgrade our own products
and may cause a reduction in sales of our products.

                                      -3-

<PAGE>

     We believe that  competition  will  continue to intensify in the future and
that new product introductions, as well as potential price reductions, strategic
alliances and other actions by competitors could materially and adversely affect
our competitive position.

Short Product Life Cycles May Adversely Affect Revenues

     From  time  to  time  we or our  competitors  may  announce  new  products,
capabilities or  technologies  that have the potential to replace or shorten the
life cycles of our existing products. Such announcements of currently planned or
other  new  products  may  cause  customers  to defer  purchasing  our  existing
products.

Seasonality Is Expected to Cause Fluctuations in Revenues and Operating Results

     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 summer vacation  period.  We expect our
net sales and operating results to reflect this seasonality.

Fluctuations  in  Quarterly  Results  and  the  Uncertainty  of Future Operating
Results May Cause Significant Fluctuations Our Stock Price 

     Our  quarterly  operating  results have and, in the future,  may  fluctuate
significantly, depending on factors such as:

     -    demand for our products, 
     -    the size, timing and timely fulfilment of orders, 
     -    the number, timing and significance of new product announcements by us
          and our  competitors,
     -    our  ability  to develop, introduce and  market new  products, as well
          as enhanced versions of our current products on a timely basis,
     -    the level of product and price competition,
     -    changes in operating expenses,
     -    changes in average selling prices and product mix,
     -    changes in our sales  incentive  strategy,  as well as sales personnel
          changes,
     -    the mix of direct and  indirect  sales, product returns and rebates,
     -    changes in technology,
     -    general economic factors, and
     -    seasonality.

     Our expense levels,  however, are expected to be based in large part on our
expectations  of  future  revenues.  Therefore,  if  revenue  levels  are  below
expectations,  operating results are likely to be adversely affected. Net income
may be disproportionately  affected by an unanticipated decline in revenue for a
particular  quarter because a relatively  small amount of our expenses will vary
with  our  revenue  in  the  short   term.   As  a  result,   we  believe   that
period-to-period  comparisons  of our results of operations are not and will not
necessarily  be  meaningful  and should not be relied upon as any  indication of
future  performance.  Due to all of the foregoing factors,  it is likely that in
some future quarter our operating  results will be below  expectations.  In such
event,  the  market  price of the Common  Stock  could be  materially  adversely
affected.

Volatility of Stock Prices 

     The market for the Common Stock is highly  volatile.  The trading  price of
the Common  Stock could be subject to wide  fluctuations  in response  to, among
other things:

     -    quarterly variations in operating and financial results,
     -    announcements  of  technological  innovations or new products by us or
          our competitors,
     -    changes in prices of our products or  our  competitors'  products  and
          services,

                                      -4-

<PAGE>

     -    changes in product mix,
     -    changes  in  our  revenue  and  revenue growth rates as a whole or for
          individual  geographic  areas,  business  units,  products  or product
          categories, and
     -    response  to  the  Company's  strategies concerning e-commerce and the
          Internet.

     Statements or changes in opinions,  ratings,  or earnings estimates made by
brokerage  firms or  industry  analysts  relating  to the  market in which we do
business or relating to us could  result in an immediate  and adverse  effect on
the market price of the Common  Stock.  In  addition,  the stock market has from
time to time  experienced  extreme  price and  volume  fluctuations  which  have
particularly  affected the market price for the  securities of many software and
Internet  companies  and  which  often  have  been  unrelated  to the  operating
performance of these  companies.  These broad market  fluctuations may adversely
affect the market price of the Common Stock.

Rapid  Technological Changes Could Cause Delay in New Products; Delays May Cause
Reduced Revenues 

     The software market is characterized by ongoing technological developments,
evolving  industry  standards,  frequent  new  product  introductions  and rapid
changes in customer  requirements and preferences.  The introduction of products
embodying  new  technologies  and the  emergence of new industry  standards  and
practices can rapidly render existing products obsolete and unmarketable. In the
past, we have  experienced  delays in software  development  and may  experience
delays in connection  with current product  developments  or future  development
activities.  Such delays may prevent the successful introduction or marketing of
these  products.  Further,  our new  products and product  enhancements  may not
adequately  meet  the   requirements  of  the  marketplace  and  achieve  market
acceptance.  Delays in the commencement of commercial  shipments of new products
or enhancements may also result in customer dissatisfaction and delay or loss of
product revenues.

Product Defects  Could  Delay  or  Prevent  Market Acceptance of New or Upgraded
Products

     Software  products  as complex as those  offered by the Company may contain
undetected  errors or failures  when first  introduced  or as new  versions  are
released.  Despite  testing  internally  or by current or  potential  customers,
errors may be found in new products after commencement of commercial  shipments,
resulting in loss of or delay in market acceptance.

     Although we have a number of ongoing  development  projects,  the following
risks still exist:

     -    development may  not  be  completed successfully on time or within our
          projected  cost,
     -    projects  may not  include the features   required  to  achieve market
          acceptance,  and
     -    enhancements  to our products may not keep pace with broadening market
          requirements.

Product  Returns and Difficulties in the Collection of Accounts Receivable Could
Result in Reductions in Cash Flows

     Some of our sales are made on credit terms which may vary substantially. We
do not hold collateral to secure payment.  Therefore,  a default in payment on a
significant  scale could materially  adversely  affect our business,  results of
operations  and  financial  condition.  In addition,  it is difficult  for us to
ascertain  future demand for our existing  products and  anticipated  demand for
newly introduced  products.  Consistent with industry  practices,  we may accept
product  returns or  provide  other  credits  in the event  that a  retailer  or
distributor holds excess inventory of our products, even when we are not legally
required to do so.  Accordingly,  we are exposed to the risk of product  returns
from retailers,  distributors and direct sales customers.  While we believe that
we  have  established   appropriate   allowances  for  collection  problems  and
anticipated  returns  based on our  historical  experience  and industry  norms,
actual  returns  and  uncollectible  receivables  may  exceed  such  allowances.
Defective  products also may result in higher customer support costs and product
returns.

Customer Concentration and Credit Risk

     The Company had one customer which  accounted for  approximately  12.7% and
12.9%  of net  revenues  for  the  years  ended  December  31,  1998  and  1997,
respectively.  This same customer accounted for approximately  36.0% and

                                      -5-

<PAGE>

4.0%  of  net  outstanding  accounts  receivable  at December 31, 1998 and 1997,
respectively.  The Company considers several of its customers to be significant.
The loss of any of such customers,  a significant  decrease in product shipments
to one or more of them or an inability to collect  receivables  from one or more
of them could adversely  affect the Company's  business,  operating  results and
financial condition.

Dependence on Key Personnel

     Significant   historical   growth   from   acquisitions   and   operational
restructurings  have placed strain upon our  personnel,  management  systems and
resources.  In the future,  we expect to continue to improve our  financial  and
management  controls,  reporting  systems and  procedures  on a timely basis and
train and manage our employee work force.  An inability to do so may inhibit our
ability to grow.  Competition for qualified sales, technical and other qualified
personnel, including expert Windows-environment  programmers, is intense, and we
may not be able to attract or retain highly  qualified  employees in the future.
Our future success depends in significant part upon the continued service of our
current key technical,  sales and senior management  personnel.  The loss of the
services  of one or more of these key  employees  could have a material  adverse
effect on our business, operating results and financial condition.  Additions of
new and departures of existing personnel,  particularly in key positions, can be
disruptive, which could have a material adverse effect upon the Company.

International  Sales  and  Operations  and  Currency  Fluctuations Could Have an
Adverse Affect 

     International  sales are a  significant  source of revenue for the Company.
International  sales represented  approximately  53.9% of our total revenues for
1998  and  48.9%  of  total   revenues  for  1997.  We  believe  that  achieving
profitability will require,  among other matters,  additional expansion of sales
in foreign markets. In order to increase international sales, we may be required
to establish  additional  foreign  operations,  hire  additional  personnel  and
recruit additional international  resellers.  Currently, our international sales
are denominated in either U.S. dollars, the Euro or local currency and we do not
anticipate engaging in any hedging activities.  The introduction of the Euro may
have  an  impact  on  currency  fluctuations.   Although  exposure  to  currency
fluctuations to date has not been significant, fluctuations in currency exchange
rates in the  future  could  have a  material  adverse  impact  on the  Company.
Additional risks inherent in our international business activities include:

     -    unexpected changes in regulatory  requirements,
     -    tariffs and other  trade  barriers,
     -    costs of  localizing  products  for foreign countries,
     -    lack of acceptance of localized products in foreign  countries,
     -    longer accounts  receivable  payment cycles,
     -    difficulties in collecting payment,
     -    difficulties in managing international operations,
     -    potentially  adverse  tax  consequences  including  limitations on the
          repatriation  of  earnings,
     -    reduced   protection   for   intellectual property,
     -    the burdens of complying with a wide variety of foreign laws, and
     -    the  effects of potentially high local wage scales, employment customs
          and other expenses.

     Any of these  factors or others not presently  contemplated  by the Company
could have a material adverse effect on our future international operations.

Litigation and Potential Litigation May be Costly and/or Time-Consuming

     Our  competitors  and potential  competitors  may resort to litigation as a
means of competition. Any litigation involving the Company, whether as plaintiff
or defendant,  regardless of the outcome,  may result in  substantial  costs and
expenses to the Company and  significant  diversion of effort by our  management
and  technical  personnel.  In the  event  of an  adverse  result  in  any  such
litigation, we could be required to:

     -    expend significant resources to develop non-infringing technology,

                                      -6-

<PAGE>

     -    obtain  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 we would be successful in such  development,
that any such licenses  would be available  and/or that we would have  available
funds sufficient to satisfy any cash awards.

     In the first  quarter of 1998,  the  Company and certain of our current and
former  executive  officers and directors  were named as defendants in an action
claiming that such defendants made  intentional  misrepresentations  of material
facts in  connection  with such  plaintiffs'  purchases of an aggregate  296,333
shares of Common Stock for $919,495.  While we believe this action to be without
merit, the ultimate outcome of such lawsuit is unknown at this time. Any adverse
decision  in this  action may have a material  adverse  effect on our  business,
operating results and financial condition.

     We are also a defendant in litigations  involving  disputes with a landlord
and several  vendors.  These  litigations  generally  arise out of our  ordinary
course of business,  and we believe that any adverse decision resulting from any
of these  litigations will not have a materially  adverse effect on the Company;
however, no assurance can be given in this regard.

Software  Piracy and Intellectual Property Infringement May Adversely Affect Our
Revenues

     We believe  that our success  depends  significantly  upon our  proprietary
technology.  We currently rely 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 our
proprietary  technology;  however,  these methods  generally afford only limited
protection.  Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or services or to obtain and
use  information  that we regard 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
personal  computer  software is  difficult.  We expect  software  piracy to be a
continuing problem resulting in a reduction of our potential revenues.

Dependence on Third Party Licenses Could Have Adverse Affects

     We rely on certain software, technology and content that we license or have
licensed from third parties, including software,  technology and content that is
integrated  with  internally  developed  software  and used in our  products  to
perform key functions.  These third-party  software licenses may not continue to
be available to us on commercially reasonable terms. Also, such software may not
be  appropriately  supported,  maintained or enhanced by the licensors such that
the licensed  software  would not continue to provide the  necessary  commercial
benefits  to our  products.  In  addition,  we may not be able to  license  such
software,  technology and content on terms advantageous to the Company. The loss
of or  inability  to obtain or replace  licenses  to, or  inability  to support,
maintain and enhance,  any of such licensed software,  could result in increased
costs,  including the expense of internally  developing  the required  software,
technology and/or content, as well as delays or reductions in product shipments.

Dependence  on  Retailers,  Distributors and Sales Representatives May Adversely
Affect Sales and Cash Flows

     Our customers are not  contractually  required to make future  purchases of
our products and could discontinue  carrying or purchasing our products,  at any
time and for any reason.  Retailers and  distributors  generally are in a strong
position to negotiate  favorable  terms of sale,  including  price discounts and
product return policies. Retailers also often require software publishers to pay
fees in exchange for preferred shelf space.  Further,  resellers may give higher
priority to products  other than ours,  thus reducing  their efforts to sell our
products.  We may not be able to increase  or sustain the current  amount of our
retail shelf space and, as a result,  our  operating  results could be adversely
affected.

                                      -7-

<PAGE>

Use of Net Operating Loss Carry Forwards is Limited

     We estimate our  consolidated  tax net operating loss  carryforwards  to be
approximately  $84  million at December  31,  1998,  which  expire in years 2002
through 2018, and our general business credit carryover to be approximately $1.5
million,  which expires in years 2005 and 2006. These  carryforwards are subject
to certain  limitations  described  below.  Under  Section  382 of the  Internal
Revenue Code of 1986, as amended (the  "Code"),  changes in the ownership or the
business of a corporation  that has net operating loss carry forwards can result
in the inability to use or the imposition of significant restrictions on the use
of such net  operating  loss  carry  forwards  to offset  future  income and tax
liability  of such  corporation.  An  "ownership  change"  may be deemed to have
occurred  under  Section  382 of the Code and the  regulations  thereunder  with
respect to both the Company and its wholly-owned subsidiary, Software Publishing
Corporation ("SPC"), which the Company acquired in December 1996, and the use by
the  Company  of these  net  operating  loss  carry  forwards  will be  limited.
Utilization  of the net  operating  loss  carry  forwards  of SPC may be further
limited by reason of the  consolidated  return/separate  return  limitation year
rules.  In addition,  the SPC net operating loss carry forwards are also subject
to the additional limitation that such losses can only be utilized to offset the
separate taxable income of SPC. We estimate the maximum  utilization of such net
operating loss carry forwards to be approximately $1,200,000 per year for losses
through  December 31, 1996;  losses  incurred  thereafter  can be fully utilized
until  expired under present  circumstances.  There can be no assurance  that we
will  be able to  utilize  all of our net  operating  loss  carry  forwards.  In
addition,  the foreign losses incurred by SPC may decrease or otherwise restrict
our ability to claim U.S. tax credits for foreign income taxes.

Failure to Obtain IRS Closing Agreement Could Result in Large Tax Payment

     We have applied for a closing  agreement with the Internal  Revenue Service
(the "IRS")  pursuant to which we would 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  would avoid SPC's being required to recognize a tax of  approximately
$8 million on  approximately  $24.5 million of SPC's previous dual  consolidated
losses.  The IRS has, to date,  refused to grant the Company's  application  for
such  a  closing   agreement   because   of   alleged   deficiencies   in  SPC's
pre-acquisition  dual loss  certifications.  The IRS has indicated  that it will
consider alternative  measures,  which the Company is presently  evaluating,  to
correct these  deficiencies  and allow for such a closing  agreement.  While the
Company  believes  that the IRS  should  agree to such a closing  agreement,  no
assurance can be given that the IRS will do so and, absent extraordinary relief,
any  failure to do so could  result in the  recognition  of this tax  liability.
Should such a closing agreement be obtained, in certain circumstances,  a future
acquirer  of the  Company  may also be  required  to agree to a similar  closing
agreement in order to avoid the same tax liability,  to the extent it is able to
do so. This could have a material  adverse  effect on our future ability to sell
SPC.  The report of our auditors  covering  the  December 31, 1998  consolidated
financial  statements  contains a paragraph  emphasizing these dual consolidated
losses.

Year 2000 Compliance Issues

     We are in the process of conducting a review of issues  related to our Year
2000  compliance.  In connection with this  evaluation,  we intend to review all
Company products for Year 2000 compliance,  as well as to review our vendors and
suppliers for Year 2000 compliance,  and to effect changes where  necessary.  We
expect to be able to conduct  our review  within our current  resources,  but no
assurance can be given that we have sufficient  resources to complete the review
process in a timely manner.  We have not  determined,  at this time,  what total
costs we will incur to conduct the review process and to implement any necessary
corrections.  At this time, we do not know of any of our products,  processes or
systems,  which,  if  found  to be  non-Year  2000  compliant,  would  have  any
significant  impact on the Company.  We believe that all of our current products
are Year  2000  compliant.  We are  currently  developing  contingency  plans to
address the failure of our products,  vendors or information  technology systems
to be Year 2000 compliant.

Change in Product Strategy May Not be Successful

     The Company  acquired  SPC in  December  1996.  In SPC's  fiscal year ended
September 30, 1996,  approximately 70% of SPC's net revenue was derived from the
Harvard  Graphics  line of  products.  However,  net

                                      -8-

<PAGE>

revenues  for  that  line  of  products declined substantially over the previous
few years and has continued to decline. While we believe that the market for the
Harvard Graphics product line has matured,  we also believe that our Harvard and
Serif brands have attracted significant customer bases.  Accordingly,  we intend
to utilize  these brand  strengths for our current and certain  anticipated  new
products,  including our proposed Visualcities.com Internet portal. This product
line and brand transition,  and the development of the Visualcities.com Internet
portal,  may not be accomplished in a timely or efficient  manner and may not be
successful.

Potential  Anti-Takeover  Effects of Delaware Law, Certificate of Incorporation,
Stockholder Rights Plan and  Possible of Preferred Stock Could Impede a Takeover
of the Company

     Certain  provisions of Delaware law and our  Certificate  of  Incorporation
could make it more difficult to complete a merger, tender offer or proxy contest
involving the Company,  even if such events could be beneficial to the interests
of our stockholders. These provisions include:

     -    Section 203 of the Delaware General Corporation Law,
     -    the  classification  of  the  Company's  Board of Directors into three
          classes,
     -    the requirement that 66-2/3% of our stockholders are needed to request
          a special meeting of stockholders (other than a special meeting called
          by the Board of Directors  or  the   President),
     -    the "golden parachute" provisions of the Company's agreement  with its
          President,
     -    the  requirement  that  66-2/3% of  the  stockholders  of  the Company
          entitled  to  vote  thereon  approve  transactions  such  as a merger,
          consolidation or sale of assets with or to an  entity  controlling 15%
          or more  of the voting  power of the Company's  capital  stock, unless
          approved by the Board of Directors prior to such  entity's acquisition
          of 15% or  more of such  voting power,
     -    the existence of "blank check"  preferred  stock that may be issued by
          our  Board of Directors without stockholder  approval on such terms as
          the Board may determine, and
     -    the existence of a "poison pill."

     Under the poison pill, the Company has declared a dividend of one Preferred
Share  Purchase  Right  (each,  a "Right") on each  outstanding  share of Common
Stock. Each Right becomes  exercisable only if a person or group acquires 20% or
more  of  the  outstanding   Common  Stock  or  announces  a  tender  offer  the
consummation  of which would  result in ownership by a person or group of 20% or
more of the  Common  Stock.  If we are  acquired  in a merger or other  business
combination  transaction after a person or group has acquired 20% or more of the
outstanding Common Stock, each Right will entitle its holder to purchase, at the
Right's  then  current  exercise  price  (currently,  $1,000),  a number  of the
acquiring  company's common shares having a market value of twice such price. In
addition,  if a person or group acquires 20% or more of the  outstanding  Common
Stock,  each Right will entitle its holder (other than such person or members of
such group) to purchase, at the Right's then current exercise price, a number of
shares of Common Stock having a market value of twice such price.

     The rights of the holders of Common  Stock also will be subject to, and may
be  adversely  affected  by, the rights of the  holders of  additional  or other
classes of preferred stock that may be issued in the future, including the blank
check  preferred  stock.  Such  issuance may make it more  difficult for a third
party to acquire, or may discourage a third party from acquiring,  a majority of
the voting stock of the  Company.  These  provisions  could limit the price that
certain  investors  might be  willing  to pay in the future for shares of Common
Stock.

Limited  Directors'  Liability Could Prevent Stockholders From Holding Directors
Responsible for a Lack of Care

     The Company's Certificate of Incorporation provides that our directors (but
not our officers) will not be held liable to the Company or our stockholders for
monetary  damages  upon breach of a  director's  fiduciary  duty,  except to the
extent otherwise required by law.

No Dividends

     The Company has never paid any cash dividends on the Common Stock and we do
not anticipate paying any dividends in the foreseeable future.

                                      -9-

<PAGE>

Possible  Issuance  of  Substantial  Amounts   of   Additional   Shares  Without
Stockholder Approval Could Dilute Stockholders

     As of March 26, 1999,  we have an  aggregate of 5,263,891  shares of Common
Stock outstanding.  In addition,  as of March 26, 1999, we have 1,939,480 shares
of Serial  Preferred Stock authorized but unissued,  of which,  1,836,980 shares
are not reserved for  specific  purposes,  and an  additional  (a)  aggregate of
1,717,115  shares of Common Stock  issuable  upon the exercise of stock  options
granted or available  for grant under our various  stock plans and (b) aggregate
of  2,236,337  shares of Common  Stock  issuable  upon  exercise  of other stock
options or warrants  previously granted and outstanding.  All of such shares may
be issued without any action or approval by our stockholders. Although there are
no other material present plans,  agreements,  commitments or undertakings  with
respect to the  issuance  of  additional  shares of Common  Stock or  securities
convertible into any such shares,  other than in connection with the exercise of
outstanding  stock options and warrants,  any shares issued would further dilute
the percentage ownership of the Company held by our stockholders.

Any  Delisting  of  Securities  from  Nasdaq  System  Could  Precipitate   Risks
Associated with Low-Priced Stocks

     The  Common  Stock is listed on the Nasdaq  SmallCap  Market and the Boston
Stock Exchange. To remain eligible for listing on the Nasdaq SmallCap Market, we
must comply with the following:

     -    The Common Stock must have a minimum bid price of $1.00,

     -    we  must have either   minimum   tangible  net  assets  of $2,000,000,
          a  market  capitalization  of $35,000,000 or net income of $500,000 in
          two of the three prior fiscal years and

     -    we  must have a public float of at least 500,000  shares with a market
          value  of  at  least  $1,000,000,  at least 300 stockholders must hold
          shares of Common Stock  and  at  least  two  market makers must make a
          market in the Common Stock.

     These  maintenance  standards may be changed by Nasdaq.  While we presently
comply with the Nasdaq listing maintenance requirements, the failure to maintain
these requirements or other requirements of Nasdaq could result in de-listing of
our  securities  from Nasdaq.  In the event our  securities  are de-listed  from
Nasdaq, you may be affected in any one or more of the following ways:

     -    our  securities  will have to trade on a non-Nasdaq, and possibly less
          efficient, "over-the-counter" market,

     -    fewer  brokerage firms and dealers may make a market in our securities
          which may cause a decline in the trading price of our securities,

     -    you  may also find it more difficult to dispose of, or obtain accurate
          quotations, as to the market value of our securities,

     -    our  securities  may  no  longer  be  eligible  for  sale  in  certain
          jurisdictions  without additional  compliance with such jurisdictions'
          laws and regulations and

     -    the market for our securities may become illiquid.

                                      -10-
<PAGE>

Item 1.        Description of Business.

General    

     The Company makes and sells computer  software products for both the United
States domestic and  international  markets.  Most of these products are desktop
publishing,   presentation  graphics  and  graphics/drawing   software  for  the
corporate,  SOHO and consumer markets.  Our products are intended to 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.  We currently  offer
twenty-five  products that operate on the Windows 98, Windows 95, Windows NT(R),
Windows(R) 3.1 and  DOS  operating  systems  for  IBM  personal   computers  and
compatibles.  We also sell  software  products  together  with certain  computer
hardware,  such as "mouse pens," new personal computers and digital cameras.  We
have  established a multi-channel  distribution  system  utilizing  direct mail,
telemarketing, retail, corporate and OEM sales channels and also disseminate our
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 sales force and independent sales representatives. We
estimate that  approximately  84.0% of our net sales for the year ended December
31, 1998 (the "1998 Fiscal Year") were  generated  through the Company's  direct
sales and  telemarketing  efforts and 16.0% were  generated  through  non-direct
channels.

     North America and  international  net revenues for the 1998 Fiscal Year and
the year ended December 31, 1997 (the "1997 Fiscal Year") were as follows:

<TABLE>
<CAPTION>
                                        Year Ended December 31,
                              --------------------------------------------------
                                       1998                         1997
                              ------------------------      --------------------
                                  Amount           %          Amount        %
                              ------------       -----      -----------    -----
<S>                           <C>                <C>        <C>            <C> 
North America . . . . . . .   $  8,431,271        46.1      $ 8,770,684     51.1
International . . . . . . .      9,840,462        53.9        8,386,181     48.9
                              ------------       -----      -----------    -----
Total . . . . . . . . . . .     18,271,733       100.0      $17,156,865    100.0
                              ============       =====      ===========    =====
</TABLE>

     We believe  that end users are  continuing  to migrate from the Windows 3.1
and Windows 95  environments  to the Windows NT and Windows 98 platforms  and to
Internet   computing.   We  expect   increased   competition,   including  price
competition,  in the  computer  software  and  hardware  markets in the  future.
Several of our competitors  sell suites of products which include  products that
directly  compete with our products.  We believe that these offerings of product
suites have and will  continue to adversely  affect sales of our products 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,  we  currently  offer one
product suite, Serif Publishing Power Suite, as well as products that complement
competitive suite products.

     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, we acquired Serif Inc. and Serif (Europe)
Limited (collectively,  the "Serif companies"), which significantly expanded our
product line to include desktop publishing and drawing titles Serif PagePlus and
Serif  DrawPlus,  among  others.  In  December  1996,  we  acquired  all  of the
outstanding  capital  stock of Software  Publishing  Corporation  ("SPC"),  as a
result of which our product line expanded further to include SPC's  presentation
graphics and other visual  communications  and  business  productivity  software
products.  We continue to operate the Serif  companies  and SPC as  wholly-owned
subsidiaries.  Since January 1998, the operations of SPC have been significantly
reduced.

     We are currently  substantially  dependent  upon sales of our Serif line of
software programs. Microsoft Corporation,  Corel Corporation,  Adobe Systems and
others sell  products  targeted for  substantially  the same market as the Serif
product line, some of which are included in product suites.

     We believe  that in order to increase  net  revenues,  we must  continue to
develop  and  introduce  new  technologies  and  products   internally,   obtain
additional   technologies   and  products   through   strategic   alliances  and
acquisitions and introduce new marketing strategies to include strengthening our
marketing  through  e-commerce  and the  Internet.  Any

                                      -11-

<PAGE>

inability  or  delay  in  executing  these strategies,  difficulties encountered
in introducing  new products or marketing  programs,  or failures of our current
and future  products  to compete  successfully  with  products  offered by other
vendors,  could  adversely  affect  our  performance.  The  Company's  growth is
expected to require  increases in the number of employees,  expenditures for new
product  development  and expansion of our  e-commerce and Internet  sites,  the
acquisition of product  rights,  sales and marketing  expenses,  and general and
administrative expenses.

     In the third  quarter of the 1998  Fiscal  Year,  we began  selling  our Go
Digital  Camera  Pak,  which  consists of a digital  camera and digital  imaging
software  licensed  from a third  party,  as well as  certain  accessories.  The
digital  imaging market is fairly new and we may not sustain a profitable  level
of sales as competitors focus their marketing efforts,  develop  enhancements to
their  products  and  develop  products  that take  advantage  of  technological
advances.

     The  Company  currently  is in the  process  of  developing  a new  website
entitled Visualcities.com. The Company contemplates that this website will be an
Internet  portal/community  which would provide information,  content, goods and
services to users.  No  assurance  can be given that the Company will be able to
successfully  develop  and  operate  this  website,   that  it  will  attract  a
significant  number  of users  or that  the  Company  will  achieve  significant
revenues therefrom.

     Unless the context otherwise requires, all references herein to the Company
include Software  Publishing  Corporation  Holdings,  Inc. and its subsidiaries,
including SPC and the Serif companies, 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.spch.com, www.serif.com and www.harvardgraphics.com.

Business Strategy

     The  Company's  strategic  objective,  with  respect  to its core  software
business,  is to become a leading supplier of easy-to-use software  applications
that improve the  graphical  appeal and overall  effectiveness  of documents and
digital images produced or used by desktop publishing,  web publishing,  drawing
and presentation graphics applications, as well as to maximize the profitability
and productivity of the Company's direct marketing 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 or to enhance digital images.

     With respect to sales and  marketing,  the Company  intends to leverage its
multi-million user,  multi-national installed base of Serif and Harvard Graphics
customers  through  its   multi-national   direct  marketing  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,  Serif  DesignStudio  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 , ActiveMail and Serif
MailPlus ), and the ASAP line of presentation graphics products.

     The  Company's  strategy with respect to its  anticipated  Visualcities.com
business is to create a compelling  environment on the World Wide Web which will
attract  large  numbers of  computer  users,  including  users of the

                                      -12-

<PAGE>

Company's  software  products.   The  Company  expects to generate revenues from
this usage through  transaction  fees,  including  collection of  commissions on
electronic commerce transacted by users of the Visualcities.com portal.

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.  Both the
Serif and Harvard lines of products continue to derive substantial revenues from
foreign sales. See "Item 6. Management's Discussion and Analysis."  

     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  ArtGallery  contains   100,000  clipart images  licensed from a
          third party.

     -    Harvard  Publisher is a desktop  publishing  program for SOHO and home
          users.

     Drawing/Special Effects

     -    Harvard  Draw  98  is  an easy to use drawing,  illustration and photo
          editing solution for SOHO, educational and home users.

     -    Serif   3DPlus  offers easy  three-dimensional  rendering capabilities
          for   text   and  scenes,   complementing   the  graphics capabilities
          of other Serif products.

     -    Serif  DrawPlus  4  provides dozens of advanced  drawing, illustration
          and animation development technologies.

                                      -13-

<PAGE>

     -    Harvard   Design  Studio   is  the  Company's   premium   U.S.  retail
          drawing and  illustration  application  software  product  designed to
          permit  the  average  computer  user to produce  professional  quality
          drawings and graphics.

     -    Serif   Design   Studio   is  the  Company's  U.K.   premium   drawing
          and illustration  application  software product designed to permit the
          average  computer user to produce  professional  quality  drawings and
          graphics.

     Digital Imaging

     -    Go  Digital   Photo   Pak  is   a   complete  digital color camera and
          digital image  editing  software  solution  designed to allow users an
          affordable entry into digital photography.

     -    Go   Video   Pak   contains   two   digital video cameras and software
          designed for entry-level users.

     Presentation Graphics

     -    Harvard    Graphics   98    is   a   premium   Windows    presentation
          graphics  software 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.

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

     -    ActiveMail  and  Serif  MailPlus enable users to send graphical e-mail
          messages in addition to or instead of plain text.

     -    Harvard  InstantCharts is  designed  as  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

                                      -14-

<PAGE>

          Professional   Write, Professional   Write  PLUS,   OfficeWriter  and
          Professional File. The Company has de-emphasized this category.

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.   The  Company's  patent  application  relating  to  its
Intelligent  Formatting  technology  has been denied by the U.S.  Patent Office.
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 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.

     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

                                      -15-

<PAGE>

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, instituted either 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
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,  as well as the continued  development  of the
Company's planned Visualcities.com  Internet portal website. The Company intends
to expand  and update  its Serif  desktop  publishing  software  code  through a
rewrite  of the code  base to allow  the  products  using  the code base to more
easily accept anticipated future technological advancements beyond Year 2000.

     The Company's Serif  technology  includes two advanced code bases,  desktop
publishing and drawing,  which can continue to be expanded as user  requirements
evolve. In 1998, the Company  introduced three new products based on its updated
Serif technology. The Company has focused its research and development resources
on  expanding  its  Serif and  Harvard  Graphics  technology,  as well as on its
planned Visualcities.com website and other Internet technologies and 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

                                      -16-

<PAGE>

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  $1,266,000 in 1998 and $3,227,000 in 1997
for  product   development  and  enhancement   activities.   These  expenditures
represented  approximately  6.9% and 18.8% of total net revenues for such years,
respectively, and are expected to increase in the future.

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

     The Company  generally  purchases  computer hardware products such as mouse
pens and digital  cameras  from third  parties.  From time to time,  supplies of
these products have not been sufficient to meet customer demand,  primarily as a
result of the  Company's  just-in-time  inventory  policy and less than  optimal
amounts of letter of credit facilities or other resources  sufficient to finance
such purchases.

Sales and Marketing

     The  Company's   software   products  are  sold  primarily  through  direct
marketing, telemarketing, retail, corporate, and original equipment manufacturer
("OEM") channels.  Hardware products are sold almost exclusively  through direct
marketing.  The  Company has also  positioned  itself to take  advantage  of the
Internet as an  additional  sales  medium.  Direct  sales,  which  accounted for
approximately  84.0%  and  72.4% of the  Company's  revenues  in 1998 and  1997,
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 license 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 will continue to
expand its software and hardware  distribution  over the  Internet.  The Company
expects to market its anticipated  Visualcities.com business initially primarily
to its existing  user base of its software  products  through  direct  marketing
efforts.

     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 Nashua,  New  Hampshire  and  Nottingham,  England and are
handled by the Company's  inbound and outbound  telemarketers in such locations.
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  attempts to assist  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.

                                      -17-

<PAGE>

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'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 53.9% of
the Company's  worldwide sales in 1998 and 48.9% of worldwide sales in 1997 were
made outside of the U.S. 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
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 software  products  within several days after
receipt of orders,  which is  customary in the  personal  computer  applications
software  business.  The Company  also  attempts to ship its  hardware  products
within  several days after  receipt of orders;  however,  when  supplies of such
products are not on hand within such the periods,  delays of up to several weeks
may  occur.  As of  December  31,  1998 and  1997,  the  Company's  backlog  was
approximately  $389,000  and  $125,000,  respectively.  The Company  expects all
backlogged orders to be shipped within several weeks.

Customer Concentration and Credit Risk

     The Company had one customer which  accounted for  approximately  12.7% and
12.9%  of net  revenues  for  the  years  ended  December  31,  1998  and  1997,
respectively.  This same customer accounted for approximately  36.0% and 4.0% of
net outstanding accounts receivable at December 31, 1998 and 1997, respectively.
The Company  considers  several of its customers to be significant.  The loss of
any of such  customers,  a significant  decrease in product  shipments to one or
more of them or an  inability  to collect  receivables  from one or more of them
could adversely affect the Company's  business,  operating results and financial
condition.

Customer Support

     With respect to its software and hardware  products,  the Company  provides
free technical support directly in the United States, United Kingdom and Germany
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

                                      -18-

<PAGE>

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   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
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,  The  Learning  Company,   Micrografix,   Fractile,  Visio,  Metatools,
Deltapoint,   Macromedia  and  International  Microcomputer  Software,  Inc.  as
competitors to its software business.  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.

                                      -19-

<PAGE>

     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 materially 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, 1998, the Company had 149 full-time  employees,  of whom
fifteen were in product development,  105 were in marketing,  sales and customer
support,  seven were in  production  and 22 were in general  and  administrative
functions.  Of the total,  74  employees  were  located in North  America and 75
internationally.  In  addition,  as of December  31,  1998,  the Company had two
part-time  employees  and two  temporary  employees.  The Company  also  Company
utilized two independent contractors in connection with its product development,
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.


Item 2.        Description of Property.

     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  $73,000,  for  approximately
13,300 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  20,000  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.

                                      -20-

<PAGE>

The   rental   cost   for  the   Nottingham  facility  is  expected  to  average
approximately  $128,000  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 and
German  customer  support office.  The Company  believes that its existing space
provides it with  adequate  space for the  foreseeable  future,  except that the
Company  intends to re-locate its New Jersey office by the end of the lease term
for such facility.  The Company does not own nor does it contemplate  owning any
real property in the foreseeable future.

     The  Company  does not  currently  have any  policy  imposing  limitations,
whether by  quantity  or type,  with  respect to  investments  in real estate or
interests in real estate, investments in real estate mortgages or the securities
of or  interests  in  persons  primarily  engaged  in  real  estate  activities.
Additionally,  there is no policy currently in effect  regarding  investments in
real estate for possible capital gain or income.  It is not anticipated that the
creation of any policy  regarding  real estate  investments,  and changes to any
such  policy  once  created,  will  require a vote of holders  of the  Company's
securities.


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  296,333  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 status and to induce the plaintiffs to invest in
the Company. Plaintiffs seek recission of their investment and a return of their
purchase price and certain other relief.  The Company believes that these claims
are without merit and is vigorously defending itself in this action. The Company
has filed an answer in this action  denying the  plaintiffs'  allegations.  This
action currently is in the discovery stage. The Company has asserted affirmative
defenses, including that the plaintiffs' subscription agreements bar plaintiffs'
claims, and asserted counterclaims that, among other things:

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

     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.  In
addition,  claims of indemnification and contribution under the cross-complaints
among SPC, Custom Paper Products  ("CPP") and certain  officers and directors of
CPP have been dismissed with prejudice.

     In the fourth  quarter of 1998,  an action was  commenced  in the  Superior
Court of the State of California in and for the County of Santa Clara, under the
caption  Community Towers,  LLC vs. Software  Publishing  Corporation  Holdings,
Inc.,  pursuant to which the plaintiff is seeking $300,000.00 in damages for the
Company's  alleged  violation of a lease for office  space  located in San Jose,
California.  This is the  location  at  which  SPC had its  principal  place  of
business and at which the Company had its principal executive offices during the
period of January  1997  through  January  1998.  The  Company no longer has any
offices at this location.  The Company  believes that plaintiffs  claims in this
action 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 this action is currently in the discovery stage.

                                      -21-

<PAGE>

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

     Not applicable.

                                      -22-

<PAGE>

                                     PART II

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

(a)  Market Information

     The 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 from May 28, 1998 through
June 24, 1998,  under the symbol  "SPCOC" from October 23, 1998 through  January
14, 1999,  and  otherwise  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 bid prices for the Common  Stock for the periods
indicated as derived from reports  furnished by Nasdaq,  adjusted to reflect the
Company's  one-for-three  (1:3) reverse stock split effective as of May 27, 1998
(the "Reverse Stock Split").  Such  adjustment has been made by multiplying  the
bid prices by three and does not  necessarily  reflect the prices for the Common
Stock had the Reverse Stock Split occurred prior to the periods  indicated.  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 1997
-----------
<S>                                          <C>                  <C>
First Quarter . . . . . . . . . . . . .      $ 14-1/4             $ 8-13/16
Second Quarter. . . . . . . . . . . . .         9-9/16              5-5/8
Third Quarter . . . . . . . . . . . . .         7-1/8               3
Fourth Quarter. . . . . . . . . . . . .         6-15/16             2-5/32

Fiscal 1998
-----------
First Quarter . . . . . . . . . . . . .      $  2-13/16           $ 1-1/2
Second Quarter  . . . . . . . . . . . .         3                   1-3/8
Third Quarter . . . . . . . . . . . . .         1-5/8                 5/8
Fourth Quarter. . . . . . . . . . . . .         1-1/8                 9/16

</TABLE>

     As of March  26,  1999,  the  closing  bid price  for the  Common  Stock as
reported on Nasdaq was $1-3/16.  At March 22, 1999,  there were 658 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 7,000 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.

(b)  Recent Sales of Unregistered Securities

     The information set forth below is a list of all sales and issuances by the
Company of the Company's equity  securities  occurring during 1998 not otherwise
disclosed in the Company's Quarterly Reports on Form 10-QSB.

     In May 1998, the Company issued 7,812 shares (as adjusted to give effect to
the Reverse Stock Split) (the "Abrams  Shares") of Common Stock to Joseph Abrams
in payment for consulting services valued at $15,000. The issuance of the Abrams
Shares was a private  transaction exempt from registration under Section 4(2) of
the Securities Act.

                                      -23-

<PAGE>

     In May 1998,  the Company  issued 27,299 shares (as adjusted to give effect
to the  Reverse  Stock  Split)  (the "F-B  Shares")  of Common  Stock to Frost &
Berman, Inc. in payment for consulting services.  The issuance of the F-B Shares
was a private  transaction  exempt from  registration  under Section 4(2) of the
Securities Act.

     Effective  October 1998, the Company issued warrants (the "SERP  Warrants")
to purchase  150,000  shares of Common Stock,  at an exercise  price of $.86 per
share, to Southeast  Research Partners,  Inc. ("SERP"),  pursuant to a Financial
Advisory and Investment Banking  Agreement,  dated October 23, 1998, between the
Company and SERP. The SERP Warrants are  exercisable  during the period of April
23,  1999  through  October 23,  2003.  The Company has the right to cancel SERP
Warrants  to  purchase  75,000  shares of Common  Stock in the event the Company
terminates SERP's  investment  banking services on or before April 23, 1999. The
issuance of the SERP Warrants was a private transaction exempt from registration
under Section 4(2) of the Securities Act.

     On December 11, 1998,  pursuant to a private  placement (the "December 1998
Private Placement")  conducted in accordance with Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities  Act"), the Company sold
an aggregate  243,604 shares (the "December 1998 Private  Placement  Shares") of
Common Stock, to a total of six accredited  investors for aggregate  proceeds of
$161,997.  In connection with the December 1998 Private  Placement,  the Company
incurred sales commissions and other expenses aggregating  approximately $30,000
and issued warrants (the "Agency Warrants"), to purchase 17,052 shares of Common
Stock,  at an exercise price of $1.50 per share,  exercisable  from December 11,
1998  through  December  10, 2000.  The  issuances of the December  1998 Private
Placement  Shares and Agency  Warrants  were  private  transactions  exempt from
registration under Section 4(2) of the Securities Act.

     On December 15, 1998, the Company  purchased an aggregate of 120,000 freely
tradeable  shares (the "X-Ceed  Shares") of the common stock, par value $.01 per
share (the "X-Ceed  Common  Stock"),  of X-Ceed,  Inc. from Seafish  Partners in
exchange for the Company's  issuance of an aggregate of 930 shares (the "Class A
Preferred  Shares")  of the Class A 14%  Cumulative  Non-Convertible  Redeemable
Preferred  Stock,  Series A, par value  $.001 per share (the  "Class A Preferred
Stock"),  of the Company.  The Certificate of  Designations  with respect to the
Class A  Preferred  Stock,  which was filed with the  Secretary  of State of the
State of Delaware on December  15,  1998,  authorizes a class of 1,500 shares of
Preferred  Stock.  Holders of shares of Class A Preferred Stock were entitled to
(a) cumulative dividends of $140 per share per annum,  payable  semi-annually on
June 30 and December 31 of each calendar year,  commencing on June 30, 1999, (b)
a  liquidation  preference  of  $1,000  per share and (c) the right to elect one
director in the event the Corporation  fails to tender in full three consecutive
semi-annual dividend payments. In addition,  the Company has the right to redeem
the Class A Preferred  Stock,  in part or whole,  at any time,  upon  payment of
$1,300 per share.  The  issuance of the Class A  Preferred  Shares was a private
transaction  exempt from registration  under Section 4(2) of the Securities Act.
Thereafter,  pursuant to a Letter Agreement,  dated January 4, 1999, between the
Company and Seafish Partners,  Seafish Partners  exchanged the Class A Preferred
Shares for (i) the  issuance of 930 shares  (the "Class C Preferred  Shares") of
the Class C 11% Cumulative Non-Convertible Redeemable Preferred Stock, par value
$.001 per  share  (the  "Class C  Preferred  Stock),  of the  Company,  (ii) the
issuance of warrants (the  "Seafish  Warrants")  to purchase  260,000  shares of
Common Stock, at an exercise price of $1.0625 per share, exercisable immediately
and  expiring on January 3, 2006,  (c) a payment of $7,134.25  representing  all
accrued  dividends on the Class A Shares through  January 4, 1999. On January 4,
1999,  the  closing bid price of the Common  Stock was  $1.0625  per share.  The
Certificate  of  Designations  with  respect  to the  Class  C  Preferred  Stock
authorizes a class of 1,000 shares of Class C Preferred Stock. Holders of shares
of Class C Preferred Stock will be entitled to (a) cumulative  dividends of $110
per share per annum,  payable  semi-annually  on June 30 and December 31 of each
calendar  year,  commencing on June 30, 1999,  (b) a  liquidation  preference of
$1,000  per  share  and (c) the  right to elect  one  director  in the event the
Corporation  fails to  tender in full  three  consecutive  semi-annual  dividend
payments. In addition, the Company has the right to redeem the Class C Preferred
Stock,  in part or whole, at any time, upon payment of $1,000 per share of Class
C Preferred Stock. The Class C Shares and Seafish Warrants are exempt securities
under Section 3(9) of the Securities Act and the issuances of the Class C Shares
and Seafish Warrants were private  transactions  exempt from registration  under
the Securities Act pursuant to Section 4(2) thereof.

     On December  15,  1998,  the  Company  also sold (the  "Common  Stock Sales
Transaction"),  in accordance with Regulation D promulgated under the Securities
Act, an aggregate of 840,000  shares (the "Common Stock Sales Shares") of Common
Stock  to a  total  of four  accredited  investors  for  aggregate  proceeds  of
$336,000.  In connection  with the

                                      -24-

<PAGE>

Common   Stock   Sales    Transaction,    the   Company  incurred   expenses  of
approximately  $5,000.  The  issuances  of the Common  Stock  Sales  Shares were
private  transactions exempt from registration under the Securities Act pursuant
to Section 4(2) thereof.

     Pursuant to a Consulting  Agreement  between the Company and Target Capital
Corporation  ("Target"),  the  Company  retained  Target to  provide  consulting
services  to the Company  for a five year  period in  consideration  for (i) the
issuance of warrants  (the  "Target  Warrants")  to purchase  520,000  shares of
Common Stock,  at an exercise price of $.75 per share,  exercisable  immediately
and expiring on December 16, 2005, (ii) the agreement to pay Target certain cash
consideration,  including an amount equal to .30% of the  Company's net revenue,
with a minimum of $125,000  per annum and a maximum of $250,000  per annum,  and
(iii) the  issuance to United  Krasna  Organizations  of warrants  (the  "Krasna
Warrants") to purchase  120,000 shares of Common Stock,  at an exercise price of
$.75 per share,  exercisable  immediately and expiring on December 16, 2005. The
issuances of the Target Warrants and Krasna  Warrants were private  transactions
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereof.

     Pursuant  to  a  Consulting  Agreement,  between  the  Company  and  Michel
Ladovitch  (the  "European  Consulting  Agreement"),  the Company  retained  Mr.
Ladovitch to provide public and investor  relations  consulting  services to the
Company in the European  Union and the United  Kingdom for a five year period in
consideration for the issuance of warrants (the "European  Warrant") to purchase
600,000  shares  of  Common  Stock,  at an  exercise  price of $.75  per  share,
exercisable  immediately  with respect to 500,000 shares and commencing June 17,
1999, with respect to 100,000 shares, and all expiring on December 16, 2005. The
issuance of the European  Consultant  Warrant was a private  transaction  exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.

     Pursuant to a letter agreement, dated December 17, 1998, the Company issued
30,000 shares (the "Jaffe Shares") of Common Stock to Marc E. Jaffe, Chairman of
the Board of the Company,  in payment of $22,500 of compensation  due Mr. Jaffe.
The  issuance  of  the  Jaffe  Shares  was a  private  transaction  exempt  from
registration under Section 4(2) of the Securities Act.


Item 6.        Management's Discussion and Analysis.

     The following  discussion should be read in conjunction with the historical
financial  statements,  including  the notes  thereto,  of the Company  included
elsewhere in this Annual Report on Form 10-KSB.

General    

     The Company makes and sells computer  software products for both the United
States domestic and  international  markets.  Most of these products are desktop
publishing,   presentation  graphics  and  graphics/drawing   software  for  the
corporate,  SOHO and consumer markets.  Our products are intended to improve the
graphical  appeal and overall  effectiveness  of  documents  and digital  images
produced by either the  Company's  or third  parties'  desktop  publishing,  web
publishing,  presentation  graphics,  e-mail,  word processing and other similar
applications and products.  We currently offer twenty-five products that operate
on the  Windows  98, Windows 95, Windows NT(R), Windows(R) 3.1 and DOS operating
systems  for IBM  personal  computers  and  compatibles.  We also sell  software
products  together  with certain  computer  hardware,  such as "mouse pens," new
personal  computers and digital  cameras.  We have  established a  multi-channel
distribution system utilizing direct mail, telemarketing,  retail, corporate and
OEM sales channels and also disseminate our 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 sales force and
independent sales  representatives.  We estimate that approximately 84.0% of our
net sales for the 1998 Fiscal Year were generated  through the Company's  direct
sales and  telemarketing  efforts and 16.0% were  generated  through  non-direct
channels.

     North America and  international  net revenues for the 1998 Fiscal Year and
1997 Fiscal Year were as follows:

                                      -25-
<PAGE>

<TABLE>
<CAPTION>

                                            Year Ended December 31,
                                   ---------------------------------------------
                                           1998                    1997
                                   ---------------------    --------------------
                                     Amount         %         Amount         %
                                   -----------     -----    -----------    -----
<S>                                <C>             <C>      <C>            <C> 
North America . . . . . . . . .    $ 8,431,271      46.1    $ 8,770,684     51.1
International . . . . . . . . .      9,840,462      53.9      8,386,181     48.9
                                   -----------     -----    -----------    -----
Total . . . . . . . . . . . . .     18,271,733     100.0    $17,156,865    100.0
                                   ===========     =====    ===========    =====
</TABLE>

     We believe  that end users are  continuing  to migrate from the Windows 3.1
and Windows 95  environments  to the Windows NT and Windows 98 platforms  and to
Internet   computing.   We  expect   increased   competition,   including  price
competition,  in the  computer  software  and  hardware  markets in the  future.
Several of our competitors  sell suites of products which include  products that
directly  compete with our products.  We believe that these offerings of product
suites have and will  continue to adversely  affect sales of our products 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,  we  currently  offer one
product suite, Serif Publishing Power Suite, as well as products that complement
competitive suite products.

     In  July  1996,  we  acquired  Serif  Inc.  and  Serif   (Europe)   Limited
(collectively,  the "Serif companies"), which significantly expanded our product
line to include  desktop  publishing and drawing titles Serif PagePlus and Serif
DrawPlus,  among others.  In December  1996, we acquired all of the  outstanding
capital stock of Software Publishing  Corporation  ("SPC"), as a result of which
our product line  expanded  further to include SPC's  presentation  graphics and
other visual  communications and business  productivity  software  products.  We
continue to operate the Serif  companies and SPC as  wholly-owned  subsidiaries.
Since January 1998, the operations of SPC have been significantly reduced.

     We are currently  substantially  dependent  upon sales of our Serif line of
software programs. Microsoft Corporation,  Corel Corporation,  Adobe Systems and
others sell  products  targeted for  substantially  the same market as the Serif
product line, some of which are included in product suites.

     We believe  that in order to increase  net  revenues,  we must  continue to
develop  and  introduce  new  technologies  and  products   internally,   obtain
additional   technologies   and  products   through   strategic   alliances  and
acquisitions and introduce new marketing strategies to include strengthening our
marketing  through  e-commerce  and the  Internet.  Any  inability  or  delay in
executing these strategies, difficulties encountered in introducing new products
or marketing programs, or failures of our current and future products to compete
successfully with products offered by other vendors,  could adversely affect our
performance. The Company's growth is expected to require increases in the number
of  employees,  expenditures  for new product  development  and expansion of our
e-commerce and Internet  sites,  the  acquisition of product  rights,  sales and
marketing expenses, and general and administrative expenses.

     In the third  quarter of the 1998  Fiscal  Year,  we began  selling  our Go
Digital  Camera  Pak,  which  consists of a digital  camera and digital  imaging
software  licensed  from a third  party,  as well as  certain  accessories.  The
digital  imaging market is fairly new and we may not sustain a profitable  level
of sales as competitors focus their marketing efforts,  develop  enhancements to
their  products  and  develop  products  that take  advantage  of  technological
advances.

     The  Company  currently  is in the  process  of  developing  a new  website
entitled Visualcities.com. The Company contemplates that this website will be an
Internet  portal/community  which would provide information,  content, goods and
services to users.  No  assurance  can be given that the Company will be able to
successfully  develop  and  operate  this  website,   that  it  will  attract  a
significant  number  of users  or that  the  Company  will  achieve  significant
revenues therefrom.

Results of Operations

1998 Compared to 1997

     Net Sales.  Net sales  increased  by  approximately  $1,115,000  or 6.5% to
$18,272,000  for the 1998 Fiscal Year from  $17,157,000 for the 1997 Fiscal Year
primarily  as a result of the  introduction  of several new  software  products,
expanded operations in Germany and sales of the Company's Go Digital Camera Pak,
which more than offset  continued  declining  revenues from Harvard Graphics and
the Active line of products. The Company provided for returns in the

                                      -26-

<PAGE>

1998  Fiscal   Year  at  10%  of gross  sales  compared to 5% in the 1997 Fiscal
Year as a result of selling  hardware as well as  software  products in the 1998
Fiscal Year.

     Cost of Goods Sold. In the 1998 Fiscal Year,  cost of goods sold  increased
by  approximately  $192,000,  or 4.6% to $4,348,000  from $4,156,000 in the 1997
Fiscal Year,  primarily as a result of increased unit sales and the inclusion of
higher costs  associated with hardware sales.  Cost of goods sold decreased as a
percentage  of net sales to 23.8% for the 1998  Fiscal  Year from  24.2% for the
1997 Fiscal Year, as a result of lower  production  costs resulting from greater
unit volume and  increased  multi-seat  licenses,  which more than offset higher
cost of goods associated with sales of more hardware products.

     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
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,  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  decreased by  approximately  $3,906,000,  or
23.3%,  to $12,842,000  for the 1998 Fiscal Year from  $16,748,000  for the 1997
Fiscal  Year,  primarily  as a result  of the  Company's  restructuring  efforts
effected  in January  1998.  SG&A  expenses  for the 1998  Fiscal  Year  include
$6,507,000 in marketing and  administrative  expenses,  $4,522,000 in salary and
wage expense and $1,813,000 in general and administrative  expense,  compared to
$8,573,000 in marketing and  administrative  expenses,  $5,913,000 in salary and
wage expense and $2,262,000 in general and  administrative  expense for the 1997
Fiscal Year.

     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.

     Product Development.  Product development expenses decreased  approximately
$1,961,000 or 60.8% to $1,266,000  for the 1998 Fiscal Year from  $3,227,000 for
the 1997 Fiscal  Year,  primarily  as a result of the  substantial  reduction in
operations of the Company's SPC subsidiary.  The Company's  product  development
costs  represents  6.9% of net sales for the 1998 Fiscal Year  compared to 18.8%
for the 1997 Fiscal  Year.  The  Company  expects to  increase  its  development
efforts in the future.  However,  the Company's long-term goal is to continue to
reduce product  development  costs as a percentage of net sales.  All internally
generated  development  costs  have been  expensed  in the period  incurred.  In
addition to the Company's  intention to increase its development  efforts in the
future,  the Company  also intends to continue to acquire  externally  developed
technology,  explore  strategic  alliances  and other  methods of  acquiring  or
licensing  technology and is  considering  lower cost  development  resources in
Asia. 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.

     Amortization of Goodwill and Purchased Technology. In the 1998 Fiscal Year,
the Company  incurred an expense of  approximately  $2,377,000 in respect of the
amortization of goodwill and purchased  technology  associated with acquisitions
of the Serif  companies and SPC, a decrease of $189,000 or 7.4% from  $2,566,000
in the 1997 Fiscal Year,  primarily due to the  restructurings of SPC operations
effectuated  in 1997 and  early  1998.  The  Company  expects

                                      -27-

<PAGE>

to  complete  the  amortization  of  purchased   technology  associated with the
Serif companies and SPC by the end of the fiscal year ending December 31, 1999.

     Restructuring  Expenses.  In the 1997 Fiscal  Year,  the  Company  expensed
approximately   $376,000  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. No similar expenses were incurred
in the 1998 Fiscal Year. See "Item 3.
Legal Proceedings." 

     Other Income.  For the 1998 Fiscal Year, the Company  received other income
of  approximately  $185,000,  as compared to $196,000  for the 1997 Fiscal Year,
primarily as a result of lower cash balances.

Liquidity and Capital Resources

     During the 1998 Fiscal Year,  the  Company's  cash,  cash  equivalents  and
marketable  securities  increased  by  approximately   $637,000  to  $3,398,000,
primarily as a result of the Company's receipt of proceeds of its sale of shares
of Common  Stock  during 1998 and the  issuance  of Class A  Preferred  Stock in
connection  with the  acquisition  of 120,000  shares of X-Ceed  Common Stock in
December  1998,  offset in part by net cash used in operations of  approximately
$1,497,000.  In light of the  stabilization of the Company's cash flow resulting
primarily   from   increased   revenues   and  reduced   selling,   general  and
administrative  expenses,  together  with the Company's  significantly  improved
working capital  position,  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 through December 31, 1999. 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 has a letter of credit  facility of $200,000  relating to certain  lease
obligations.  Serif  (Europe)  Limited  has  a  letter  of  credit  facility  of
approximately  $400,000,  none of which was drawn upon as of December  31, 1998,
with its primary bank in the United Kingdom,  which is secured by  substantially
all of the assets of Serif (Europe) Limited. 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 the 1998 Fiscal Year used cash of
approximately  $1,497,000,  compared to $2,777,000 in 1997, primarily related to
cash  costs  associated  with  implementing  its 1997  restructuring  which were
expended in 1998,  expansion of the Company's  European  operations and expanded
product  offerings,  which more than offset the reductions in operating expenses
resulting from the Company's restructurings.  The Company intends to continue to
utilize  its  working  capital in 1999 for  software  and  website  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.

     For the 1998 Fiscal Year,  approximately  53.9% of the  Company's net sales
were generated outside the U.S., compared to 48.9% for the 1997 Fiscal Year. The
Company's  exposure for foreign currency  exchange gains and losses is partially
mitigated by the  incurrence of operating  expenses in most of the currencies in
which it invoices customers. As of December 31, 1998, 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 December  1998,  the Company  acquired  120,000  shares of X-Ceed Common
Stock (Nasdaq National Market Symbol: XCED). The Company has recorded the X-Ceed
Shares as marketable securities with a value of $1,020,000 at December 31, 1998.
As of March 19, 1999,  the per share  closing  price of X-Ceed  Common Stock was
$11.625.

                                      -28-

<PAGE>

Net Operating Loss Carryforwards; Possible Tax Obligation

     We estimate our  consolidated  tax net operating loss  carryforwards  to be
approximately  $84  million at December  31,  1998,  which  expire in years 2002
through 2018, and our general business credit carryover to be approximately $1.5
million,  which expires in years 2005 and 2006. These  carryforwards are subject
to certain  limitations  described  below.  Under  Section  382 of the  Internal
Revenue Code of 1986, as amended (the  "Code"),  changes in the ownership or the
business of a corporation  that has net operating loss carry forwards can result
in the inability to use or the imposition of significant restrictions on the use
of such net  operating  loss  carry  forwards  to offset  future  income and tax
liability  of such  corporation.  An  "ownership  change"  may be deemed to have
occurred  under  Section  382 of the Code and the  regulations  thereunder  with
respect to both the  Company  and SPC,  and the use by the  Company of these net
operating loss carry forwards will be limited.  Utilization of the net operating
loss carry forwards of SPC may be further limited by reason of the  consolidated
return/separate return limitation year rules. In addition, the SPC net operating
loss carry  forwards are also  subject to the  additional  limitation  that such
losses can only be utilized  to offset the  separate  taxable  income of SPC. We
estimate the maximum utilization of such net operating loss carry forwards to be
approximately  $1,200,000 per year for losses through December 31, 1996;  losses
incurred   thereafter   can  be  fully  utilized  until  expired  under  present
circumstances.  There can be no assurance that we will be able to utilize all of
our net operating loss carry forwards. In addition,  the foreign losses incurred
by SPC may decrease or otherwise  restrict our ability to claim U.S. tax credits
for foreign income taxes.

     We have applied for a closing  agreement with the Internal  Revenue Service
(the "IRS")  pursuant to which we would 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  would avoid SPC's being required to recognize a tax of  approximately
$8 million on  approximately  $24.5 million of SPC's previous dual  consolidated
losses.  The IRS has, to date,  refused to grant the Company's  application  for
such  a  closing   agreement   because   of   alleged   deficiencies   in  SPC's
pre-acquisition  dual loss  certifications.  The IRS has indicated  that it will
consider  alternative  measures,  which the Company presently is evaluating,  to
correct these  deficiencies  and allow for such a closing  agreement.  While the
Company  believes  that the IRS  should  agree to such a closing  agreement,  no
assurance can be given that the IRS will do so and, absent extraordinary relief,
any  failure to do so could  result in the  recognition  of this tax  liability.
Should such a closing agreement be obtained, in certain circumstances,  a future
acquirer  of the  Company  may also be  required  to agree to a similar  closing
agreement in order to avoid the same tax liability,  to the extent it is able to
do so. This could have a material  adverse  effect on our future ability to sell
SPC.  The report of our auditors  covering  the  December 31, 1998  consolidated
financial  statements  contains a paragraph  emphasizing these dual consolidated
losses.

Year 2000 Compliance Issues 

     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 one year,  computer
systems and software  used by many  companies  may need to be upgraded to comply
with such "Year 2000" requirements. We are in the process of conducting a review
of issues  related  to our Year 2000  compliance.  This  review is  intended  to
determine  the  effect  of the turn of the  century  on the  operability  of our
products,  internal and external information  technology ("IT") systems,  non-IT
systems we utilize to conduct  our  business  and other  internal  and  external
processes which may impact our operations.  In connection with this  evaluation,
we also intend to review our vendors and suppliers for Year 2000  compliance and
to effect changes where necessary.

     This review  process is being  conducted in three  phases.  The first phase
encompasses   a  review  of  all  of  our   products,   internal   and  external
systems/processes and vendors and suppliers for Year 2000 compliance. The second
phase is expected to correct all items identified as non-compliant and essential
to our  operations.  The third phase is  contemplated  to be a second  review to
ensure year 2000 compliance and interoperability of all systems/processes.

     We are conducting our review with our current resources and believe that we
have sufficient  resources to complete the review process in a timely manner. We
have not determined, at this time, what total costs we will incur to conduct the
review process and to implement any necessary corrections.  We identified one IT
system which we

                                      -29-

<PAGE>

believe  will  need  to  be   replaced.   The  Company  has  expended a total of
approximately  $50,000 in its year 2000  compliance  review  and  implementation
efforts  through March 31, 1999,  and  anticipates  additional  expenditures  of
approximately $25,000 to complete such review and implementation efforts.

     We produce computer application  software. We have determined that products
that we have developed within the last several years are Year 2000 compliant. We
are currently reviewing products sold by the Company prior to 1994 for Year 2000
compliance. We currently believe that we have no liability concerning any of our
products with respect to Year 2000 requirements.

     We do not know, at this time, of any of our products, processes or systems,
which, if found to be non-Year 2000 compliant, would have any significant impact
on the Company.  We are developing a contingency  plan to address any failure of
our products, vendors or IT systems to be Year 2000 compliant.

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 at December 31, 1998 . . . . . . . . . . . . . . . . . . . .   F-4
Statements of Operations for the years ended December 31, 1998 and 1997. .   F-5
Statements of Stockholders' Equity for the years ended December 31, 1998
 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   F-6
Statements of Cash Flows for the years ended December 31, 1998 and 1997. .   F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . .   F-8
----------
* Page F-1 follows page 47 to this Annual Report on Form 10-KSB.


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

               Not applicable.

                                      -30-

<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>                                                   <C>
Mark E. Leininger      48   President, Chief Operating Officer and Director       1996
Marc E. Jaffe, Esq.    47   Chairman of the Board of Directors and Secretary      1995
Norman W. Alexander    69   Director                                              1996
Neil M. Kaufman, Esq.  38   Director                                              1996
Martin F. Schacker     41   Director                                              1997

</TABLE>

     Set forth below is a brief  description  of the background of the executive
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.

     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, from time to time, has acted as
the Company's agent in the acquisition of certain electronic  publishing rights.
From November  1997 until the present  time,  Mr. Jaffe has been Chairman of the
Board of Ice Capital  Corporation,  an investment banking company.  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.

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

     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 a member of Kaufman & Moomjian,  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.

                                      -31-

<PAGE>

     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. ("MS Farrell"), a Wall Street investment banking and
brokerage firm which serves as one of the Company's investment bankers and acted
as the  representative  of the underwriters of the Company's 1995 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.  Marc E. Jaffe currently is
the sole member 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 2001 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 three, are eligible to participate in
the Company's  Outside  Director and Advisor Stock Option Plan (the  "OD&ASOP").
During 1998, the Board of Directors met thirteen times. 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, Marc
E. Jaffe and Neil M. Kaufman,  met three times during 1998. 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.

     The Compensation Committee, which currently consists of Norman W. Alexander
and Neil M. Kaufman,  held one meeting during 1998. 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 during and with respect to the
1998 Fiscal  Year,  except that Kevin D.  Sullivan  was two days  delinquent  in
filing his Initial Statement of Beneficial Ownership of Securities on Form 3.


Item 10.  Executive Compensation.

     The  following  table sets forth,  for the three years ended  December  31,
1998, the cash and other  compensation  paid to all  individuals  serving as the
Company's Chief Executive  Officer (or acting in a similar  capacity) during the
1998 Fiscal Year and two other  individuals who served as executive  officers of
the Company during 1998 whose total  compensation,  for services rendered to the
Company  during the 1998 Fiscal  Year,  was  $100,000  or more  (each,  a "Named
Executive Officer").

                                      -32-

<PAGE>

<TABLE>
<CAPTION>

                                                                                   Long-Term
                                                                                  Compensation
                                                       Annual Compensation           Awards
                                             --------------------------------     ------------
                                                                                   Securities          All
                                                                 Other Annual      Underlying         Other
Name and Principal Position       Year       Salary     Bonus   Compensation (1)     Options      Compensation
---------------------------       ----       ------     -----   ----------------   ------------   ------------
<S>                               <C>     <C>        <C>               <C>        <C>       <C>    <C>       <C>
Mark E. Leininger,                1998    $ 145,000         --         --         210,000   (2)         --
 President and Chief              1997      145,000  $ 39,737          --         100,000   (3)         --
 Operating Officer,               1996       81,000    35,000          --          75,000               --

Kevin D. Sullivan (4)             1998    $  90,000  $ 24,868          --          16,666               --
 Vice President - Finance,
 Chief Financial Officer
 and Treasurer

Robert Gordon (5)                 1998    $ 106,875  $ 12,782          --              --          $  6,565  (6)
 Vice President -                 1997       75,100    28,521          --          49,097   (7)         --
 Marketing and Sales              1996       26,809    35,085          --          25,270   (8)         --
----------
<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)  Does  not  include  options  to  purchase  102,188  shares of Common  Stock
     repriced  under the Company's  1998  repricing  program.  See "Repricing of
     Options"   below   and   "Item   12.    Certain  Relationships  and Related
     Transactions."
(3)  Does not include  options   to   purchase  181,666  shares of  Common Stock
     repriced and reduced to options to  purchase 136,250 shares of Common Stock
     under  the 1997  Repricing  Program.  See  "Repricing of Options" below and
     "Item 12. Certain  Relationships  and  Related   Transactions."
(4)  Mr.  Sullivan's employment  by  the Company was terminated in January 1999.
(5)  Mr. Gordon's  employment by the Company was terminated in October 1998.
(6)  Represents   accrued  vacation  time  paid  in  cash  upon  termination  of
     employment.
(7)  Does not include options to purchase 42,345 shares of Common Stock repriced
     under the Company's  1998  repricing  program.  See  "Repricing of Options"
     below.
(8)  Does not include options to purchase 71,624 shares of Common Stock repriced
     and reduced to options to repurchase 53,718 shares under the Company's 1997
     Repricing Program. See "Repricing of Options" below.
</FN>
</TABLE>

Stock Option Grants in 1998

     The following table sets forth the (a) number of shares underlying  options
granted  to each  Named  Executive  Officer  during the 1998  Fiscal  Year,  (b)
percentage  that the grant  represents of the total number of options granted to
all Company  employees during the 1998 Fiscal Year, (c) per share exercise price
of each option and (d) expiration date of each option.
<TABLE>
<CAPTION>

                                Number of Shares            Percentage of Total
                               Underlying Options           Options Granted to       Exercise           Expiration
Name                          Granted During 1998           Employees in 1998         Price                Date
----                          -------------------           -------------------      --------           ----------
<S>                              <C>      <C>                     <C>                <C>                <C>
Mark E. Leininger. . . . .         3,750  (1)                      0.5               $ 1.375             7/16/08
Mark E. Leininger. . . . .         1,875  (1)                      0.3                 1.375             7/16/08
Mark E. Leininger. . . . .        13,125  (1)                      1.8                 1.375             7/16/08
Mark E. Leininger. . . . .        27,188  (1)                      3.7                 1.375             7/16/08
Mark E. Leininger. . . . .        56,250  (1)                      7.6                 1.375             7/16/08
Mark E. Leininger. . . . .       200,000                          27.0                  .78125          11/12/08
Mark E. Leininger. . . . .        10,000                           1.3                  .78125          11/12/08
Kevin D. Sullivan. . . . .        12,500  (1)                      1.7                 1.375             7/16/08
----------

                                      -33-

<PAGE>

<FN>
     (1)  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 the
1998 Fiscal Year 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,  1998,
separately  identified between those exercisable and those not exercisable as of
such date, and (iv) the aggregate  value of  in-the-money,  unexercised  options
held on December 31, 1998,  separately  identified between those exercisable and
those not exercisable.

<TABLE>
<CAPTION>
                                                                            Number of                    Value of Unexercised
                                                                        Unexercised Options              In-the-Money Options
                                                                       at December 31, 1998              at December 31, 1998
                                                                  ------------------------------    --------------------------------
                                   Shares
                                  Acquired          Value
Name                             on Exercise      Realized        Exercisable      Unexercisable    Exercisable      Unexercisable
----                             -----------      --------        -----------      -------------    -----------      -------------
<S>                                  <C>             <C>            <C>               <C>           <C>                <C>
Mark E. Leininger . . . . . .        -0-             -0-            180,415           165,835       $ 38,542           $ 27,083
Kevin D. Sullivan . . . . . .        -0-             -0-              4,166            12,500            -0-                -0-

</TABLE>

Employment Agreements

     The Company 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 fourth quarter of 1996. This
bonus has not been paid.

     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 1998, the Company paid Mr. Jaffe $30,000 under this
arrangement  and,  pursuant to a letter  agreement,  dated  December  17,  1998,
between the  Company and Mr.  Jaffe,  the Company  agreed to issue to Mr.  Jaffe
30,000  shares of Common  Stock in  satisfaction  of  $22,500  of the  Company's
obligations under such January 28, 1998 compensation arrangement. On January 13,
1999,  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 for the 1999 calendar year at the rate of $5,000 per
month.

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.

                                      -34-

<PAGE>

     The  1994  Incentive  Plan,  which  is  administered  by  the  Compensation
Committee of the Board of Directors  (presently comprised of Norman W. Alexander
and  Neil M.  Kaufman),  currently  authorizes  the  issuance  of a  maximum  of
1,333,333  shares of Common Stock  (giving  effect to the Reverse  Stock Split),
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  1,666
(giving  effect to the Reverse Stock Split) shares of Common Stock upon exercise
of options  granted under the 1994  Incentive  Plan,  and, as of March 26, 1999,
options to purchase an aggregate  1,325,867  shares of are outstanding and 5,800
shares remain  available for issuance  under the 1994  Incentive  Plan. The 1994
Incentive Plan expires in December 2003.

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 to serve 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  three,  are eligible to participate in the Director and Advisor Plan.
Currently,  up to 166,666  shares  (giving effect to the Reverse Stock Split) 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,  upon first  becoming a director of the  Company,  receives  options to
purchase 8,333 (giving effect to the Reverse Stock Split) 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 3,333 (giving effect to the
Reverse  Stock  Split)  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
Non-Employee  Director become  exercisable  over a period of two years,  and are
subject to  forfeiture  under  certain  conditions.  The  Company  has issued an
aggregate  6,556  shares  (giving  effect to the Reverse  Stock Split) of Common
Stock upon exercise of options granted under the Director and Advisor Plan, and,
as of March 26, 1999,  options to purchase an aggregate  123,439  shares (giving
effect to the  Reverse  Stock  Split) are  outstanding  and  options to purchase
36,672  shares  remain  available for grant under the Director and Advisor Plan.
The Director and Advisor Plan expires in December 2005.

SPC 1989 Stock Plan

     In connection with the Merger, 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
89,350 shares (giving effect to the Reverse Stock Split) 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

                                      -35-

<PAGE>

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 4,616 shares
(giving effect to the Reverse Stock Split) of Common Stock have been issued upon
exercise of options  granted under the SPC 1989 Plan, and, as of March 26, 1999,
options to purchase an aggregate  80,435 shares are outstanding and 4,299 shares
remain  available for issuance  under the SPC 1989 Plan.  The SPC 1989 Plan will
terminate in October 1999.

SPC 1991 Stock Option Plan

     In connection with the Merger, 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 142,960 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
355 shares of Common  Stock have been  issued upon  exercise of options  granted
under the SPC 1991 Plan,  and, as of March 26, 1999,  the Company has options to
purchase an aggregate  142,605 shares of Common Stock  outstanding and no shares
remain  available for issuance  under the SPC 1991 Plan.  The SPC 1991 Plan will
terminate in October 2001.

Repricing of Options

     On August 29,  1997,  the Board of Directors  approved  the 1997  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 $3.75
per share  (giving  effect to the Reverse Stock Split) 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.

     Effective July 17, 1998, the Company adopted a repricing program (the "1998
Repricing  Program")  pursuant to which (a) the Company offered to each optionee
(each,  an "Eligible  Optionee")  granted one or more  options  under any of the
Plans who,  as of July 17,  1998,  was either an  employee  or a director of the
Company,  the right to exchange  each  outstanding  option  (each,  an "Eligible
Option")  granted to such Eligible  Optionee  under the Company's 1994 Long Term
Incentive Plan (the "1994 Plan"),  Outside Director and Advisor Option Plan (the
"OD&ASOP"),  Software  Publishing  Corporation  1989  Stock  Plan (the "SPC 1989
Plan") and Software Publishing Corporation 1991 Stock Option Plan (the "SPC 1991
Plan" and,  collectively with the 1994 Plan, OD&ASOP, SPC 1989 Plan and SPC 1991
Plan, the "Company Stock Plans"), for the issuance of two options (collectively,
the "Repriced Options"),  the first such option (the "New Option") entitling the
Eligible  Optionee  to  purchase up to 75% of the number of shares of the common

                                      -36-

<PAGE>

stock, par value $.001 per share (the "Common Stock"), of the Company, that were
issuable under the Eligible Option so exchanged,  at an exercise price per share
equal to $1.375,  the closing per share price on July 17,  1998,  as reported by
The Nasdaq Stock  Market,  Inc.,  and the second such option (the  "Non-Repriced
Option") entitling such Eligible Optionee to purchase up to 25% of the number of
shares  of  Common  Stock  that  were  issuable  under  the  Eligible  Option so
exchanged,  at an exercise price per share equal to the exercise price per share
under the Eligible  Option so  exchanged.  To the extent the Eligible  Option so
exchanged was exercisable as of July 17, 1998, the Non-Repriced  Option shall be
exercisable  and,  where the  number of shares  exercisable  under the  Eligible
Option so exchanged as of July 17, 1998  exceeded the number of shares  issuable
under the Non-Repriced Option, any such options shall be immediately exercisable
under the New Option.  Further,  to the extent the Eligible  Option so exchanged
was not  exercisable  as of July 17, 1998, the  Non-Repriced  Option shall first
become  exercisable  in  accordance  with the  earliest  dates  set forth in the
Eligible Option so exchanged for the exercisability of shares issuable under the
Eligible Option so exchanged,  and the shares of Common Stock issuable under the
New Option shall become exercisable (i) on July 17, 1999, with respect to 25% of
the total number of shares of Common Stock issuable  under the New Option,  (ii)
on July 17,  2000,  with  respect to an  additional  25% of the total  number of
shares of Common Stock  issuable  under the New Option,  (iii) on July 17, 2001,
with respect to an additional  25% of the total number of shares of Common Stock
issuable  under the New Option,  and (iv) on July 17, 2002,  with respect to the
final 25% of the total number of shares of Common Stock  issuable  under the New
Option. In addition,  each New Option shall have a term expiring at the close of
business  on July 16, 2008 and shall be deemed  granted  under such of the Plans
under which the  Eligible  Option was  originally  granted and the  Non-Repriced
Option shall be deemed  granted under such of the Plans under which the Eligible
Option was originally  granted.  Except as otherwise noted, each of the Repriced
Options shall otherwise be identical to the Eligible Option so exchanged.

     The creation of the 1997 Repricing  Program and 1998 Repricing  Program was
approved primarily because of the importance to the Company of having meaningful
equity  incentives in the hands of key officers,  directors and  employees.  The
Board and Compensation  Committee  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 were not exercisable  under the 1997 Repricing
Program was viewed as a means of retaining the services of valued  employees for
a longer period of time.  The Board and Committee  decided to include  directors
and officers in the 1997 Repricing Program and 1998 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
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.

                                      -37-

<PAGE>

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 26,  1999,  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>
Regency Investment Partners . . . . . .       500,000    (4)                 8.7
Shelly and Elliot Loewenstern . . . . .       332,499    (5)                 6.2
Howard Milstein . . . . . . . . . . . .       296,333    (6)                 5.6
Martin F. Schacker. . . . . . . . . . .       256,432    (7)                 4.8
Mark E. Leininger . . . . . . . . . . .       210,414    (8)                 3.8
Marc E. Jaffe . . . . . . . . . . . . .       191,803    (9)                 3.6
Norman W. Alexander . . . . . . . . . .        87,079    (10)                1.6
Neil M. Kaufman . . . . . . . . . . . .        61,458    (11)                1.2

All officers and directors as
 a group (5 persons). . . . .                 807,185    (12)               13.8
----------
*    Less than 1.0%.

<FN>
(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
     determined   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 60 days from the
     date on which beneficial ownership is to be determined have been exercised.

(4)  Represents  500,000  shares of Common   Stock  issuable   upon exercise  of
     warrants  held  by  Regency  Investment  Partners   ("Regency")  which  are
     exercisable  within the next 60 days.  Does not include  100,000  shares of
     Common Stock  issuable  upon exercise of warrants held by Regency which are
     not exercisable within the next 60 days.

(5)  Represents  (a) 228,333  shares of Common Stock owned of record   by    The
     Whitehaven  Group,  LLC  ("Whitehaven"),  which  is  owned  by Mr.  and Ms.
     Loewenstern  as joint tenants by the entirety,  (b) 83,333 shares of Common
     Stock  issuable  upon  exercise of warrants  owned of record by  Whitehaven
     which is  exercisable  within  the next 60 days and (c)  20,833  shares  of
     Common Stock owned by The Loewenstern  Family  Partnership,  L.P., of which
     Mr. Loewenstern is the general partner.

(6)  Represents   (a)   288,333 shares of Common Stock registered in the name of
     Howard Milstein ("H. Milstein") and (b) 8,000 shares registered in the name
     of Ronald L. Altman  ("Altman").  Does not  include an option (the  "Altman
     Option") to purchase  32,033  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,  Altman,  Michael
     Jesselson   ("Jesselson")   and  Edward   Milstein  ("E.   Milstein"   and,
     collectively  with  H.

                                      -38-

<PAGE>

     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   296,333  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."

(7)  Represents  (a)  27,294   shares  (subject  to  adjustment) of Common Stock
     issuable  upon  exercise  of  warrants  owned  by Mr.  Schacker  which  are
     exercisable  within  the  next 60  days,  (b)  14,443  shares  (subject  to
     adjustment)  of Common Stock  issuable upon exercise of options  granted to
     Mr. Schacker under the Company Stock Plans which are exercisable within the
     next 60 days,  (c)  5,100  shares  of  Common  Stock  owned of record by MS
     Farrell, of which Mr. Schacker is Chairman of the Board and the controlling
     person,  (d) 20,809 shares of Common Stock owned of record by M.S.  Farrell
     Holdings,  Inc. ("MSF Holdings"),  of which Mr. Schacker is Chairman of the
     Board and the  controlling  person,  (e)  23,414  shares  of  Common  Stock
     issuable upon exercise of  Underwriter's  Purchase Options ("UPOs") granted
     to   MS   Farrell   in   connection  with the Company's 1995 initial public
     offering, (f)   63,872   shares   (subject  to  adjustment) of Common Stock
     issuable  upon  exercise  of  warrants  owned  by  MSF  Holdings  which are
     exercisable  within  the  next  60  days,  and  (g)  101,500  shares   (the
     "Associated  Shares") of Common Stock owned of record by Associated Candy &
     Nut   Corp.  ("Associated"),  of which  Mr.  Schacker  is a  director.  Mr.
     Schacker   disclaims  beneficial ownership of the Associated  Shares.  Does
     not  include (a) 28,889 shares of Common Stock  issuable  upon  exercise of
     options  granted  to  Mr.  Schacker under the Company Stock Plans which are
     not  exercisable  within the next 60 days or (b) 106,008 shares (subject to
     adjustment)  of  Common  Stock  issuable upon exercise of UPOs and warrants
     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
     c/o  MS  Farrell,  67 Wall Street, New York, New York 10005.

(8)  Represents  (a)  3,333  shares  of  Common Stock held by Mr.  Leininger and
     his spouse as joint tenants and (b) 207,081 shares of Common Stock issuable
     upon exercise of options  granted to Mr.  Leininger under the Company Stock
     Plans  which are  exercisable  within  the next 60 days.  Does not  include
     219,169 shares of Common Stock issuable upon exercise of options granted to
     Mr.  Leininger  under the Company  Stock  Plans  which are not  exercisable
     within the next 60 days.

(9)  Includes  138,470  shares of  Common  Stock  issuable  upon   exercise   of
     options  granted to Mr.  Jaffe  under the  Company  Stock  Plans  which are
     exercisable  within the next 60 days.  Does not  include  99,029  shares of
     Common Stock  issuable upon exercise of options  granted to Mr. Jaffe under
     the Company Stock Plans which are not exercisable  within the next 60 days.
     The address  for Mr. Jaffe  is c/o Electronic  Licensing  Organization, 386
     Park Avenue South, Suite 1900, New York, New York 10016.

(10) Includes  (a)   8,333  shares of  Common  Stock  owned  of  record  by  Mr.
     Alexander's  spouse and (b) 47,776  shares of Common  Stock  issuable  upon
     exercise  of  options  granted     Mr.  Alexander  under the Company  Stock
     Plans which are  exercisable  within  the next  60 days.  Does not  include
     84,307 shares of Common Stock  issuable  upon  exercise of options  granted
     to Mr. Alexander  under the Company Stock Plans which are not  exercisable

                                      -39-

<PAGE>

     within the next 60 days. The address for Mr. Alexander is Burnside,  Church
     Walk, Marholm, Peterborough, PE 67H2 England.

(11) Includes  42,220  shares of   Common   Stock   issuable   upon  exercise of
     options  granted to Mr.  Kaufman  under the  Company  Stock Plans which are
     exercisable  within the next 60 days.  Does not include options to purchase
     62,780  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  c/o  Kaufman  & Moomjian, LLC, 50  Charles  Lindbergh
     Boulevard, Suite 206, Mitchel Field, New York 11553.

(12) Includes   an   aggregate  564,570  shares of Common   Stock  issuable upon
     exercise of the options and  warrants  discussed  in notes (7) through (11)
     above which are exercisable within the next 60 days.
</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 100,784
shares  (giving  effect to the  Reverse  Stock  Split) of Common  Stock which MS
Farrell  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.  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 81,300 shares  (giving  effect to the
Reverse  Stock  Split) 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.  A
$100,000  loan from MS Farrell to the  Company  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  380,800  shares  (giving effect to the Reverse Stock Split) 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 UPOs to purchase  34,433 shares  (giving effect to the Reverse Stock
Split) of Common Stock at $18.45 per share  (giving  effect to the Reverse Stock
Split) 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 166,666 shares (giving effect to the Reverse Stock Split)
of Common Stock  exercisable  at $20.625 per share (giving effect to the Reverse
Stock Split) for a six-year  period and extended the expiration date of the UPOs
to August 22, 2002. In March 1997, the Company  exercised its right to terminate
the Company's  investment  banking  obligations to MS Farrell and, in connection
therewith,  issued an aggregate of 23,809 shares  (giving  effect to the Reverse
Stock Split) 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  Associated.  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

                                      -40-

<PAGE>

Company,  is  a  stockholder  of Associated.  This  loan  was  represented by  a
promissory note (the "Associated  Note"),  bearing interest at 14% per annum and
secured by the assets of Associated.  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  "Associated  Warrant") to purchase 100,000
shares of the  common  stock of  Associated  at an  exercise  price of $1.00 per
share,  exercisable  for a six year  period,  the  Company  agreed to extend the
maturity of the Associated  Note and the Company  further agreed to exchange the
Associated 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 33,333
shares (giving effect to the Reverse Stock Split).

     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 20,000 to 113,333 shares
(giving effect to the Reverse Stock Split), the number of shares of Common Stock
that may be purchased  upon  exercise of the UPOs was reduced by 5,165 to 29,268
shares  (giving  effect to the Reverse Stock Split),  the exercise price of both
the MS Farrell Warrants and Underwriters'  Purchase Options was reduced to $6.00
per share (giving  effect to the Reverse Stock Split) and MS Farrell  waived all
anti-dilutive  rights under the UPOs and MS Farrell  Warrants in connection with
the Company's  October 1997 sale of 320,666 shares (giving effect to the Reverse
Stock Split) 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 28, 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 UPOs was reduced to the lesser of:  $3.81  (giving
effect to the  Reverse  Stock  Split) 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  $3.18  (giving  effect to the
Reverse Stock Split);  and the  expiration  date of the MS Farrell  Warrants and
UPOs was  extended  to August  20,  2002.  Giving  effect  to the  anti-dilutive
provisions  of the MS Farrell  Warrants,  the MS Farrell  Warrants  entitle  the
holders  thereof to purchase an aggregate  of 191,321  shares of Common Stock at
$2.1384 per share.

     In connection with the Company's  private  placement (the "May 1998 Private
Placement")  consummated  in May 1998, MS Farrell was paid a fee of $11,700 with
respect to the sale of an aggregate 129,999 shares (giving effect to the Reverse
Stock Split) of Common Stock to two individuals.

     The following  directors and executive  officers purchased shares of Common
Stock in the May 1998 Private Placement, each at $1.20 per share.

<TABLE>
<CAPTION>

          Name                                    Number of Shares
          ----                                    ----------------
          <S>                                          <C>  
          Norman W. Alexander (1). . . . .              8,333
          Marc E. Jaffe. . . . . . . . . .             23,333
          Mark E. Leininger (2). . . . . .              3,333
----------
<FN>
(1)  Mr. Alexander's spouse also purchased 8,333 shares of Common Stock in the May 1998 Private Placement.
(2)  Purchased with spouse as joint tenants.
</FN>
</TABLE>

     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
partner in Moritt Hock during 1997. Mr. Kaufman currently is a

                                      -41-

<PAGE>

member  of  Kaufman  &  Moomjian,  LLC,  counsel  to the Company  (together with
its  predecessors,  "K & M").  During 1997, the Company  incurred  approximately
$55,000 in legal fees to K & M. During 1998, the Company incurred  approximately
$390,000 in legal fees to K & M. In May 1998, K & M was issued  11,904 shares of
Common Stock in partial  satisfaction of outstanding  legal fees equal in amount
to the market value of such shares,  and these shares have been  assigned to Mr.
Kaufman.  In 1997 and 1998, Moritt Hock and K & M acted as counsel to MS Farrell
in  connection  with  four  private   placement   transactions,   two  of  which
transactions  involved  Innapharma,  Inc.  ("Innapharma"),   and  certain  other
matters, and also acted as counsel to Associated. Martin F. Schacker, a director
of the  Company,  is  Chairman  of the Board of MS  Farrell  and a  director  of
Innapharma and Associated; and MS Farrell may also be considered an affiliate of
Innapharma and Associated.

     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 1998, the Company paid Mr. Jaffe $30,000 under this
arrangement  and,  pursuant to a letter  agreement,  dated  December  17,  1998,
between the  Company and Mr.  Jaffe,  the Company  agreed to issue to Mr.  Jaffe
30,000  shares of Common  Stock in  satisfaction  of  $22,500  of the  Company's
obligations under such January 28, 1998 compensation arrangement. On January 13,
1999,  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 for the 1999 calendar year at the rate of $5,000 per
month.

     With respect to  compensation  paid to Mark E. Leininger in his capacity as
an employee of the Company,  see "Item 10. Executive  Compensation."  On January
13, 1999,  the  Compensation  Committee of the Board of Directors of the Company
fixed the 1999 base salary of Mr. Leininger at $162,500.

     In connection  with the 1997 Repricing  Program,  options held by directors
and  executive  officers  granted under the Company Stock Plans were repriced as
follows:
<TABLE>
<CAPTION>

                                         Prior Option (1)                   Repriced Option (2)
                                 -------------------------------            -------------------
                                      Shares        Per Share                     Shares
                                    Underlying      Exercise                     Underlying          Exercise
Optionee                             Option           Price                      Option (1)            Date
--------                             ------           -----                      ----------            ----
<S>                                 <C>            <C>                             <C>               <C>
Norman W. Alexander . . . .           8,333        $ 15.09                          6,250            12/19/06
Norman W. Alexander . . . .           3,333           6.0375                        2,500             7/31/07
Marc E. Jaffe . . . . . . .           1,666           7.50                          1,250            10/31/04
Marc E. Jaffe . . . . . . .           8,333           8.25                          6,250              8/2/05
Marc E. Jaffe . . . . . . .           3,333          17.625                         2,500             7/31/06
Marc E. Jaffe . . . . . . .           3,333           6.0375                        2,500             7/31/07
Neil M. Kaufman . . . . . .           8,333           8.25                          6,250             4/24/06
Neil M. Kaufman . . . . . .           8,333          15.09                          6,250            12/19/06
Neil M. Kaufman . . . . . .           8,333           6.0375                        2,500             7/31/07
Mark E. Leininger . . . . .           6,666          11.25                          5,000             7/20/05
Mark E. Leininger . . . . .           3,333          12.75                          2,500             2/19/06
Mark E. Leininger . . . . .          23,333           8.25                         17,500             4/24/06
Mark E. Leininger . . . . .          48,333          22.68                         36,250             9/28/06
Mark E. Leininger . . . . .         100,000          10.29                         75,000              2/4/07
---------
<FN>
     (1)  Gives effect to the Reverse Stock Split
     (2)  The exercise price of all options were repriced to $3.75 per share (giving effect to the Reverse Stock Split).
</FN>
</TABLE>

     In connection with the 1998 Repricing  Program,  the following options held
by directors and executive  officers  granted under the Company Stock Plans were
repriced each to an exercise  price of $1.375 per share with a termination  date
of July 16, 2008:

                                      -42-

<PAGE>
<TABLE>
<CAPTION>

                               Shares Underlying          Original            Original
Optionee                        Original Option         Exercise Price    Termination Date
--------                        ---------------         --------------    ----------------
<S>                                <C>                     <C>               <C>   <C>
Norman W. Alexander . . . .         4,688                  $ 3.75            12/19/06
Norman W. Alexander . . . .         1,875                    3.75             7/31/07
Norman W. Alexander . . . .        25,000                    3.1875          12/15/07
Marc E. Jaffe . . . . . . .           938                    3.75            10/31/04
Marc E. Jaffe . . . . . . .         4,688                    3.75              8/2/05
Marc E. Jaffe . . . . . . .         1,875                    3.75             7/31/06
Marc E. Jaffe . . . . . . .         1,875                    3.75             7/31/07
Mark E. Jaffe . . . . . . .        25,000                    3.1875          12/15/07
Marc E. Jaffe . . . . . . .        16,250                    2.8125           1/27/08
Neil M. Kaufman . . . . . .         4,688                    3.75             4/24/06
Neil M. Kaufman . . . . . .         4,688                    3.75            12/19/06
Neil M. Kaufman . . . . . .         1,875                    3.75             7/31/07
Mark E. Leininger . . . . .         3,750                    3.75             7/20/05
Mark E. Leininger . . . . .         1,875                    3.75             2/19/06
Mark E. Leininger . . . . .        13,125                    3.75             4/24/06
Mark E. Leininger . . . . .        27,188                    3.75             9/28/06
Mark E. Leininger . . . . .        56,250                    3.75              2/4/07
Martin F. Schacker. . . . .         6,249                    2.859375        12/28/07
Martin F. Schacker. . . . .        18,750                    2.8125           1/27/08

</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:

Exhibit
Number    Description of Exhibit
-------   ----------------------

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 Current  Report  on  Form  10-QSB  (Date of  Report: January
          11, 1999) (Commission File Number: 1-14076), filed with the Commission
          on January 20,  1999.)
3.2       By-laws of the  Company,  as  amended.  (Incorporated  by reference to
          Exhibit   3.3   to   the   Company's  Annual   Report  on  Form 10-KSB
          (Commission File Number: 1-14076), for the year   ended   December 31,
          1997, filed with the Commission on April 16, 1998.)
4.1       Specimen  Common  Stock Certificate.  (Incorporated  by  reference  to
          Exhibit   4.1   to   the   Company's Annual  Report   on   Form 10-KSB
          (Commission File Number:  1-14076),  for the year ended  December  31,
          1997,  filed with the  Commission  on April 16, 1998.)
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  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.)
10.4      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.)
10.5      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

                                      -43-

<PAGE>

          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.)
10.6      Settlement and  General Release  Agreement, dated as 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.)
10.7      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.)
10.8      Form  of  Underwriters' Purchase Option (Specimen). (Incorporated   by
          reference   to  Exhibit  10.18 to the  Company's Annual Report on Form
          10-KSB, for  the  year   ended   December  31,  1997,  filed  with the
          Commission  on April 16, 1998.)
10.9      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.)
10.10     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.)
10.11     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.)
10.12     Financial Advisory  Agreement,  dated as of November 20, 1997, between
          the Company and M.S. Farrell & Co., Inc. (Incorporated by reference to
          Exhibit   10.47   to   the  Company's  Annual  Report  on Form  10-KSB
          (Commission  File Number:  1-14076),  for the year ended  December 31,
          1997,  filed with the Commission on April 16, 1998.)
10.13     Amendment   to the Financial  Advisory Agreement,  dated as of January
          28,   1998,  between   the  Company and  M.S.  Farrell  &  Co.,   Inc.
          (Incorporated by reference to Exhibit  10.48  to  the Company's Annual
          Report on Form 10-KSB (Commission File Number:  1-14076), for the year
          ended December 31, 1997, filed with the Commission on April 16, 1998.)
10.14     Letter   Agreement,  dated   April 28,  1998,  between the Company and
          M.S. Farrell & Co., Inc. (Incorporated  by  reference to Exhibit 10.59
          to the Company's  Quarterly   Report    on  Form   10-QSB  (Commission
          File   Number: 1-14076),  for  the  quarter  ended   March  31,  1998,
          filed   with   the Commission on May 13, 1998.)
10.15     Form  of  Warrant Certificate  issued  to  M.S. Farrell Holdings, Inc.
          ("Holdings"), as assignee  of  M.S.  Farrell & Co., Inc., and  certain
          other   persons,   as  assignees  of   Holdings.  (Incorporated     by
          reference  to Exhibit   10.62   to  the  Company's  Quarterly   Report
          on  Form   10-QSB (Commission File  Number:  1-14076), for the quarter
          ended June 30, 1998, filed with the Commission on August 14, 1998.)
10.16     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.)
10.17     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.)
10.18     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.)

                                      -44-

<PAGE>

10.19     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.)
10.20     Settlement  and  Release  Agreement,  dated  December 19,  1997, among
          the   Company,    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.)
10.21     Settlement  Agreement, dated May  22, 1998, among the Company, Neil M.
          Kaufman, Esq., Mark E. Leininger and Barry Cinnamon and Lori Cinnamon.
10.22     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.)
10.23     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. (Incorporated
          by  reference to   Exhibit   10.49   to   the  Company's Annual Report
          on Form 10-KSB (Commission File Number:  1-14076), for the  year ended
          December 31, 1997, filed with the Commission on April 16, 1998.)
10.24     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.
          (Incorporated   by   reference  to   Exhibit  10.50   to the Company's
          Annual Report on Form 10-KSB     (Commission  File  Number:  1-14076),
          for   the   year     ended   December  31,  1997,  filed   with    the
          Commission  on April 16,  1998.)
10.25     Rights  Agreement,  dated as of March 31,  1998,  between  the Company
          and  American  Stock  Transfer  &  Trust  Company.  (Incorporated   by
          reference to Exhibit  10.51 to the Company's  Annual  Report  on  Form
          10-KSB (Commission File Number:  1-14076), for the year ended December
          31, 1997,  filed with the  Commission  on April 16, 1998.)
10.26     Warrant,   dated   April   7,   1998,   registered in the name of Boru
          Enterprises, Inc., with respect   to 50,000  shares  of  Common  Stock
          (before   giving effect   to  the   Company's  one-for-three   reverse
          stock  split  made   effective  May  27,  1998).    (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 March
          31, 1998, filed with the Commission on May 13, 1998.)
10.27     Warrant,  dated  April  7, 1998,  registered  in  the   name   of Boru
          Enterprises,  Inc.,   with  respect  to  50,000 shares of Common Stock
          (before giving effect  to  the  Company's  one-for-three reverse stock
          split  made  effective May 27,1998).  (Incorporated  by  reference  to
          Exhibit  10.54  to  the  Company's  Quarterly  Report  on  Form 10-QSB
          (Commission File Number: 1-14076), for  the  quarter  ended  March 31,
          1998,  filed with the Commission on May 13, 1998.)
10.28     Form  of  Subscription  Agreement, dated April 28,  1998, between  the
          Company and The Whitehaven  Group,  LLC.  (Incorporated  by  reference
          to Exhibit 10.55 to the Company's Quarterly Report on Form 10-QSB
          (Commission File Number:   1-14076), for the quarter  ended  March 31,
          1998,  filed with the  Commission  on May 13,  1998.)
10.29     Warrant,  dated   April   28,   1998,   registered  in the name of The
          Whitehaven Group,  LLC,  with  respect  to  550,000   shares of Common
          Stock  (before giving effect to the Company's  one-for-three   reverse
          stock  split   made  effective  May  27,  1998).     (Incorporated  by
          reference to Exhibit  10.56 to the  Company's Quarterly Report on Form
          10-QSB (Commission File Number: 1-14076),  for the quarter ended March
          31, 1998, filed with the Commission on May 13, 1998.)
10.30     Warrant,   dated   April  28,  1998,  registered   in  the name of The
          Whitehaven Group,  LLC, with respect to 250,000 shares of Common Stock
          (before giving effect  to  the Company's  one-for-three  reverse stock
          split made  effective May 27,  1998).  (Incorporated  by  reference to
          Exhibit  10.57  to  the Company's  Quarterly  Report  on  Form  10-QSB
          (Commission  File  Number:  1-14076),  for the quarter ended March 31,
          1998, filed with the Commission on May 13,  1998.)
10.31     Form  of  Subscription  Agreement,  each  executed  between  April 29,
          and  May 6, 1998,   between the Company and each of the April/May 1998
          Investors. (Incorporated  by  reference  to  Exhibit   10.58  to   the
          Company's  Quarterly Report on Form 10-QSB  (Commission  File  Number:
          1-14076), for  the  quarter  ended  March 31, 1998, filed   with   the
          Commission on May 13, 1998.)

                                      -45-

<PAGE>

10.32     Warrant, dated  as  of   July   3, 1998, registered in the name of The
          Whitehaven  Group,   LLC,  with  respect to  183,333  shares of Common
          Stock. (Incorporated  by reference  to  Exhibit 10.60 to the Company's
          Quarterly Report on  Form  10-QSB  (Commission File  Number: 1-14076),
          for the quarter  ended  June 30,  1998,  filed with the  Commission on
          August 14, 1998.)
10.33     Warrant,  dated   as   of   July  3,  1998, registered in the  name of
          The   Whitehaven   Group, LLC, with respect to 83,333 shares of Common
          Stock. (Incorporated  by reference to Exhibit  10.61 to the  Company's
          Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
          the quarter ended June 30, 1998,  filed with the Commission on August
          14, 1998.)
10.34     Form of Subscription  Agreement utilized in the December 1998  Private
          Placement.  (Incorporated  by reference  to Exhibit 10.1 to the
          Company's Current  Report  on Form  10-QSB  (Date of Report:  December
          15,  1998)(Commission File Number: 1-14076), filed with the Commission
          on December 16,  1998.)
10.35     Stock Exchange Agreement, dated December 15, 1998, between the Company
          and  Seafish Partners.  (Incorporated  by reference to Exhibit 10.2 to
          the  Company's    Current   Report  on  Form  10-QSB  (Date of Report:
          December 15, 1998) (Commission File Number:  1-14076),  filed with the
          Commission  on December  16,  1998.)
10.36     Letter  Agreement,   dated  January  4,  1999, between the Company and
          Seafish Partners. (Incorporated by  reference  to Exhibit  10.3 to the
          Company's Current  Report on Form 10-QSB (Date of  Report: January 11,
          1999)   (Commission File  Number: 1-14076), filed with the  Commission
          on January 20, 1999.)
10.37     Form  of  Subscription Agreement  utilized  in the Common Stock Sales.
          (Incorporated    by    reference   to Exhibit  10.3 to  the  Company's
          Current Report on Form 10-QSB   (Date of Report:  December  15,  1998)
          (Commission File   Number: 1-14076),   filed  with  the  Commission on
          December  16, 1998.)
10.38     Consulting  Agreement between the Company  and  Target  Capital  Corp.
          (Incorporated   by  reference to Exhibit 10.1 to the Company's Current
          Report on Form 10-QSB   (Date of Report: January 11, 1999) (Commission
          File Number: 1-14076), filed with the Commission on January 20, 1999.)
10.39     Consulting   Agreement  between  the  Company and Michel    Ladovitch.
          (Incorporated   by  reference to Exhibit 10.2 to the Company's Current
          Report  on   Form   10-QSB    (Date  of  Report:  January   11,  1999)
          (Commission   File Number:  1-14076), filed   with  the Commission  on
          January 20, 1999.)
10.40     Warrant Certificate, with   respect to 520,000 shares of Common Stock,
          registered in the name  of  Target  Capital  Corp.   (Incorporated  by
          reference to  Exhibit  10.5  to the Company's Current   Report on Form
          10-QSB (Date of Report: January 11, 1999)  (Commission    File Number:
          1-14076),  filed with the Commission on  January 20, 1999.)
10.41     Warrant Certificate, with  respect to 120,000  shares of Common Stock,
          registered   in   the   name   of     United   Krasna   Organizations.
          (Incorporated   by    reference  to  Exhibit  10.6  to  the  Company's
          Current Report on Form  10-QSB   (Date  of Report:   January 11, 1999)
          (Commission  File  Number:   1-14076),  filed with the  Commission  on
          January 20, 1999.)
10.42     Warrant   Certificate,  with   respect   to  260,000  shares of Common
          Stock, registered  in  the name of Seafish  Partners.    (Incorporated
          by   reference  to Exhibit  10.8 to the Company's  Current   Report on
          Form  10-QSB   (Date of Report:    January  11, 1999) (Commission File
          Number:  1-14076), filed   with the Commission on  January 20,  1999.)
10.43     Warrant Certificate, with respect to 600,000 shares of  Common  Stock,
          registered  in the name of  Regency  Investment Partners.
10.44     Letter  Agreement,  dated December 17, 1998,  between the Company Marc
          E. Jaffe.      (Incorporated  by   reference to   Exhibit 10.4  to the
          Company's Current   Report   on   Form   10-QSB       (Date of Report:
          January 11, 1999) (Commission  File Number:  1-14076),  filed with the
          Commission on January 20,  1999.)
10.45     Advice   of   Borrowing  Terms,  dated    December   29, 1998, between
          Serif (Europe)  Limited   and   National  Westminster   Bank PLC,  and
          Mortgage Debenture,  dated October 9,  1989, between   Serif  (Europe)
          Limited  and National Westminster Bank PLC.
21        Subsidiaries of the Company.
23.1      Consent of Richard A. Eisner & Company,  LLP.
23.2      Consent of Ernst & Young.
24        Powers of Attorney (set forth on the signature  page of this Annual
          Report on Form 10-KSB).
27        Financial Data Schedule.

                                      -46-

<PAGE>

(b) Reports on Form 8-K.

      On December 16, 1998, the Company filed a Current Report on Form 8-K (Date
of Report: December 15, 1997) with the Commission,  as an Item 5 disclosure,  to
demonstrate the Company's  compliance with the  requirements of a Nasdaq Listing
Qualification Panel, and reporting the consummation of the December 1998 Private
Placement, X- Ceed Stock Purchase and Common Stock Sale Transaction.

      On January 20, 1999,  the Company filed a Current Report on Form 8-K (Date
of  Report:  January  11,  1999)  with the  Commission  reporting,  as an Item 5
disclosure,  that  (a) the  Company  had  been  advised  that a  Nasdaq  Listing
Qualification  Panel had  determined  that the  Company  had  complied  with the
Panel's requirements for the continued listing of the Common Stock on The Nasdaq
SmallCap  Market,  (b) the Company had exchanged the then outstanding 930 shares
of Class A  Preferred  Stock for 930 shares of Class C  Preferred  Stock and the
Seafish  Warrants,  (c) the Company had issued  30,000 shares of Common Stock to
Marc E. Jaffe, (d) that the Company had retained Target Capital Corporation as a
consultant (e) the Company had retained Michel Ladovitch as a consultant and (e)
Kevin D. Sullivan's employment with the Company had been terminated.

                                      -47-

<PAGE>

                          Index to Financial Statements

Independent Auditors' Reports. . . . . . . . . . . . . . . . .              F-2
Consolidated Balance Sheet at December 31, 1998. . . . . . . .              F-4
Consolidated Statements of Operations for the years ended 
     December 31, 1998 and 1997. . . . . . . . . . . . . . . .              F-5
Consolidated Statements of Stockholders' Equity for the years 
     ended December 31, 1998 and 1997. . . . . . . . . . . . .              F-6
Consolidated Statements of Cash Flows for the years ended 
     December 31, 1998 and 1997. . . . . . . . . . . . . . . .              F-7
Notes to Consolidated Financial Statements . . . . . . . . . .              F-8

                                      F-1
<PAGE>


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  as of December 31, 1998, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the two years 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  reflect total assets and net sales  constituting  33.7% and 50.9% of
the related  consolidated  totals for 1998 and net sales  constituting 42.4% for
1997.  Those  financial  statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for Serif (Europe) Limited, is based solely on the reports of the other
auditors.

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

In our opinion,  based on our audits and the reports 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, 1998, and the  consolidated  results of
their  operations  and their  consolidated  cash flows for each of the two years
then ended in conformity with generally accepted accounting principles.

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
                                               Richard A. Eisner & Company, LLP
New York, New York
April 8, 1999

   
                                   F-2
<PAGE>


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Serif (Europe) Limited

We have audited the balance sheets of Serif (Europe)  Limited as of December 31,
1998 and  1997,  and the  related  statements  of  operations,  cash  flows  and
shareholders'  equity for each of the two years in the period ended December 31,
1998.  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 United  Kingdom  auditing  standards
which do not differ in any  significant  respect  from 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 audits provide 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, 1998 and 1997, and the results of its operations and its cash flows
for each of the two  years  in the period ended December 31, 1998, in conformity
with United Kingdom generally accepted accounting principles.

United Kingdom  accounting  principles  vary in certain  material  respects from
accounting  principles  generally accepted in the United States. The application
of  the  latter  would  not  have  materially   affected  the  determination  of
shareholders' equity and financial position as of December 31, 1998 and 1997 and
the determination of net profit for the two years ended December 31, 1998.

                                                             /s/ Ernst & Young
                                                                 Ernst & Young


Nottingham, England
April 1, 1999

                                      F-3

<PAGE>


        Software Publishing Corporation Holdings, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                     ASSETS

<S>                                                               <C>         
Current assets:
    Cash and cash equivalents. . . . . . . . . . . .              $  2,377,648
    Marketable securities. . . . . . . . . . . . . .                 1,020,000
    Accounts receivable, less allowances of $859,441                 1,787,551
    Inventories. . . . . . . . . . . . . . . . . . .                   706,704
    Prepaid expenses and other current assets. . . .                   684,268
                                                                  -------------
              Total current assets . . . . . . . . .                 6,576,171

Property and equipment, net. . . . . . . . . . . . .                   445,447
Acquired software, net of accumulated amortization 
  of $4,762,583. . . . . . . . . . . . . . . . . . .                 2,144,417
Goodwill, net of accumulated amortization of 
  $181,120 . . . . . . . . . . . . . . . . . . . . .                   193,611
Restricted cash. . . . . . . . . . . . . . . . . . .                   200,000
Other assets . . . . . . . . . . . . . . . . . . . .                   753,050
                                                                  -------------
              Total assets . . . . . . . . . . . . .              $ 10,312,696
                                                                  =============
</TABLE>

<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                               <C>
Current liabilities:
    Accounts payable . . . . . . . . . . . . . . . .              $  3,484,275
    Accrued liabilities. . . . . . . . . . . . . . .                 2,461,780
    Short term debt and current portion of long-term 
     debt. . . . . . . . . . . . . . . . . . . . . .                   195,044
                                                                  -------------
              Total current liabilities. . . . . . .                 6,141,099

Long-term debt, less current maturities. . . . . . .                    99,554
                                                                  -------------
              Total liabilities. . . . . . . . . . .                 6,240,653
                                                                  -------------

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

Stockholders' equity:
   Serial  Preferred  Stock,  authorized  1,939,480
   shares,  par value $.001 per share
     Class A 14% Cumulative  Non-Convertible
     Redeemable  Preferred Stock, 1,500 shares
     authorized, 930 shares issued and outstanding 
     (at liquidation preference) . . . . . . . . . .                   930,000
   Class B Voting Preferred Stock, Series A, 60,520
    shares authorized, none issued and outstanding .                        --
   Junior Participating Preferred Stock, Series A,
     100,000 shares authorized, none issued and 
     outstanding . . . . . . . . . . . . . . . . . .                        --
   Common stock, par value $.001 per share,
     authorized 30,000,000 shares; issued and
     outstanding 5,083,653 shares. . . . . . . . . .                     5,084
   Additional paid-in capital. . . . . . . . . . . .                45,385,487
   Accumulated deficit . . . . . . . . . . . . . . .               (42,238,133)
                                                                  -------------
                                                                     4,082,438
   Less: Treasury stock (3,095 shares, at December
     31, 1998), at cost. . . . . . . . . . . . . . .                   (10,395)
                                                                  -------------
              Total stockholders' equity . . . . . .                 4,072,043
                                                                  -------------
              Total liabilities and stockholders'
                equity . . . . . . . . . . . . . . .              $ 10,312,696           
                                                                  =============
</TABLE>

           See report of independent auditors and accompanying notes.

                                      F-4

<PAGE>


        Software Publishing Corporation Holdings, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                   ____________________________________________
                                                        1998                         1997
                                                        ----                         ----
<S>                                                <C>                          <C>          
Net sales . . . . . . . . . . . . . . . .          $  18,271,733                $  17,156,865
Cost of goods sold. . . . . . . . . . . .              4,348,002                    4,155,749
                                                  ---------------               --------------
          Gross profit. . . . . . . . . .             13,923,731                   13,001,116
Selling, general and administrative 
  expenses. . . . . . . . . . . . . . . .            (12,842,199)                 (16,747,963)
Product development . . . . . . . . . . .             (1,266,163)                  (3,227,215)
Amortization of goodwill and purchased 
  technology. . . . . . . . . . . . . . .             (2,377,282)                  (2,566,422)
Restructuring expenses. . . . . . . . . .                     --                     (375,902)
Other income, net . . . . . . . . . . . .                184,739                      195,655
                                                   --------------               --------------
          Loss before income taxes. . . .          $  (2,377,174)                  (9,720,731)

Income taxes. . . . . . . . . . . . . . .                (29,541)                     (47,035)
                                                   --------------               --------------

          Net loss. . . . . . . . . . . .             (2,406,715)   $              (9,767,766)
                                                   ==============               ==============

Loss per common share:
     Net loss per common share - basic
       and diluted. . . . . . . . . . . .          $        (.65)       $               (3.57)
     Weighted average number of common
       shares outstanding - basic and
       diluted. . . . . . . . . . . . . .              3,676,820                    2,734,355
</TABLE>


           See report of independent auditors and accompanying notes.







                                      F-5

<PAGE>

         Software Publishing Corporation Holdings, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              Class A                Class B           Common Stock
                                          Preferred Stock        Preferred Stock     ($.001 Par Value)
                                          ---------------        ---------------     -----------------
                                         Number                  Number              Number
                                          of                      of                  of
                                         Shares                  Shares              Shares
                                         Issued      Amount      Issued    Amount    Issued       Amount
                                         ------      ------      ------    ------    ------       ------
<S>                                     <C>         <C>          <C>       <C>      <C>          <C>    
Balance at December 31, 1996. . . . . .                          60,520    $  61    2,620,081    $ 2,620
Issuance of common stock in payment of
  liabilities for services in connection
  with business combinations. . . . . .                                                37,090         37
Issuance of common stock in payment of
  liabilities for services. . . . . . .                                                   825          1
Issuance of common stock in connection
  with cancellation of agreement for
  services . . . . . . . . . . . . . .                                                 23,809         24
Issuance of common stock upon exercise
  of options . . . . . . . . . . . . .                                                  1,666          2
Sale of common stock - net . . . . . .                                                320,333        320
Retirement of Class B Preferred Stock.                          (60,520)   $ (61)
Net Loss . . . . . . . . . . . . . . .
                                        -------    --------     --------   ------   ----------   --------
Balance at December 31, 1997 . . . . .        0    $      0           0        0    3,003,804    $ 3,004


Issuance of common stock in payment of
  previously established liabilities .                                                 58,585         59
Issuance of common stock and warrants
  in payment of liabilities for services
  rendered . . . . . . . . . . . . . .                                                143,333        143
Issuance of warrants for services
  rendered . . . . . . . . . . . . . .
Acquisition of treasury shares . . . .
Adjustment of common stock to reflect
  payment of fractional shares in cash
  in connection with reverse stock
  split. . . . . . . . . . . . . . . .                                                    (37)         0
Sale of common stock - net . . . . . .                                              1,877,968      1,878
Issuance of Class A Preferred Stock. .      930    930,000
Net loss . . . . . . . . . . . . . . .
                                        -------    --------     --------   ------   ----------   --------
Balance at December 31, 1998 . . . . .      930  $ 930,000            0    $  0     5,083,653    $ 5,084
                                       ========    ========     ========   ======   ==========   ========
</TABLE>


<TABLE>
<CAPTION>
                                          Treasury Stock
                                              at Cost
                                          --------------
                                         Number                  Additional                             Total
                                           of                     Paid-in          Accumulated      Stockholders'
                                         Shares      Amount       Capital            Deficit            Equity
                                         ------      ------       -------            -------            ------
<S>                                     <C>          <C>        <C>                <C>              <C>         
Balance at December 31, 1996. . . . . .                         $ 41,736,677       $ (30,063,652)   $ 11,675,706
Issuance of common stock in payment of
  liabilities for services in connection
  with business combinations. . . . . .                                  (37)                                 --
Issuance of common stock in payment of
  liabilities for services. . . . . . .                               14,999                              15,000
Issuance of common stock in connection
  with cancellation of agreement for
  services . . . . . . . . . . . . . .                               249,976                             250,000
Issuance of common stock upon exercise
  of options . . . . . . . . . . . . .                                 9,998                              10,000
Sale of common stock - net . . . . . .                               960,146                             960,466
Retirement of Class B Preferred Stock.                                    61                                  --
Net Loss . . . . . . . . . . . . . . .                                                (9,767,766)     (9,767,766)
                                        -------    --------     -------------      --------------    ------------
Balance at December 31, 1997 . . . . .                          $ 42,971,820   0   $ (39,831,418)    $ 3,143,406


Issuance of common stock in payment of
  previously established liabilities .                               117,107                             117,166
Issuance of common stock and warrants
  in payment of liabilities for services
  rendered . . . . . . . . . . . . . .                               186,607                             186,750
Issuance of warrants for services
  rendered . . . . . . . . . . . . . .                               701,206                             701,206
Acquisition of treasury shares . . . .   3,095     (10,395)                                              (10,395)
Adjustment of common stock to reflect
  payment of fractional shares in cash
  in connection with reverse stock
  split. . . . . . . . . . . . . . . .                                                                         0
Sale of common stock - net . . . . . .                             1,408,747                           1,410,625
Issuance of Class A Preferred Stock. .                                                                   930,000
Net loss . . . . . . . . . . . . . . .                                               (2,406,715)      (2,406,715)
                                        -------    --------     -------------      -------------     ------------
Balance at December 31, 1998 . . . . .   3,095     $(10,395)    $ 45,385,487       $(42,238,133)     $ 4,072,043
                                        =======    ========     =============      =============    =============
</TABLE>


                     See report of independent auditors and accompanying notes.

                                      F-6
<PAGE>


        Software Publishing Corporation Holdings, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                      _______________________________
                                                            1998             1997
                                                            ____             ____
Operating activities:
<S>                                                   <C>               <C>          
Net income (loss) . . . . . . . . . . . .             $ (2,406,715)     $ (9,767,766)
Adjustments to reconcile net loss to net cash 
 used in operating activities:
  Depreciation and amortization . . . . .                2,570,924         6,358,731
  Provision for doubtful accounts . . . .                  665,000           171,000
  Unrealized holding gain on marketable
    securities. . . . . . . . . . . . . .                  (90,000)               --
  Gains on sale of fixed assets . . . . .                   (9,409)               --
  Sale of marketable securities . . . . .                  173,600         6,154,580
  Changes in assets and liabilities:
    Accounts receivable . . . . . . . . .               (1,128,449)          496,688
    Inventories . . . . . . . . . . . . .                 (139,368)          146,251
    Prepaid expenses and other current
     assets . . . . . . . . . . . . . . .                 (354,677)          (93,742)
    Other assets. . . . . . . . . . . . .                   (3,778)           59,938
    Accounts payable. . . . . . . . . . .                  586,243          (493,863)
    Accrued liabilities . . . . . . . . .               (1,359,937)       (5,808,791)
                                                      -------------     -------------
      Net cash used in operating
       activities . . . . . . . . . . . .               (1,496,566)       (2,776,974)
                                                      -------------     -------------

Investing activities:
Purchase of property and equipment . . .                  (103,415)         (266,275)
Restricted cash draw downs . . . . . . .                   100,000         1,350,000
Proceeds from sales of property and
  equipment. . . . . . . . . . . . . . .                    58,480                --
                                                      -------------     -------------
     Net cash provided by investing
      activities . . . . . . . . . . . .                    55,065         1,083,725
                                                      -------------     -------------

Financing activities:
Proceeds from sale of common stock - net                 1,410,625           970,466
Payment of long-term debt. . . . . . . .                  (167,834)       (1,523,918)
Purchase of treasury stock . . . . . . .                   (10,395)               --
                                                      -------------     -------------
     Net cash provided by (used in
      financing activities . . . . . . .                 1,232,396          (553,452)
                                                      -------------     -------------

(Decrease) in cash and cash equivalents.                  (209,105)       (2,246,701)
Cash and cash equivalents at beginning
  of year. . . . . . . . . . . . . . . .                 2,586,753         4,833,454
                                                      -------------     -------------
Cash and cash equivalents at end of year              $  2,377,648      $  2,586,753
                                                      =============     =============

Supplemental disclosure of noncash financing and investing activities:
Issuance of Class A Preferred Stock
  for marketable securities . . . . . .               $    930,000                --
Issuance of common stock for previously
  established liabilities . . . . . . .                    117,166      $    265,000
Issuance of common stock in payment of
  liabilities for services rendered . .                    186,750                --
Issuance of warrants to purchase common
  stock for services rendered . . . . .                    701,206                --

Supplemental  disclosures  of cash flow  information:
Cash paid during the year for:
  Interest paid . . . . . . . . . . . .               $    107,704      $     60,328 
  Income taxes. . . . . . . . . . . . .                     55,564             1,974 

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

                                      F-7
<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


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 other visual  communications  business  and  productivity  computer
software  products  to  corporate  customers,  consumers,  retail and  wholesale
customers and original  equipment  manufacturers  primarily in the United States
and Europe.

Reverse Stock Split

     The Company effected a one-for-three  (1:3) reverse stock split,  effective
as of the close of business on May 27, 1998. All share and per share amounts for
all years presented have been adjusted to reflect such reverse stock split.

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   enterprises   are  included  in  the  Company's
consolidated   financial   statements   for  the  period   subsequent  to  their
acquisition.

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
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.

                                      F-8

<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


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 developed products 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 over 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 the fair  value 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  (see note 2) was  reduced  during  1997 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  and purchase  price  allocations.  Actual results could
differ from these estimates.

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

                                      F-9
<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

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, 1998
was fully reserved since  management does not believe it is more likely than not
that the tax benefit will ultimately 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.  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  the  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 and warrants did not
have an effect on the  computation of diluted  earnings (loss) per share in 1998
and 1997 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: (a) trading, (b)  available-for-sale
and (c) held-to-maturity, with trading and available-for-sale securities carried
at market value and  held-to-maturity  securities 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 short- and long-term debt  approximate  their carrying
values  because  of  short-term  maturities  or  because  their  interest  rates
approximate current market rates.

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   $5,736,000  and  $6,978,000  in  1998  and  1997,
respectively.

Recently Issued Accounting Pronouncements

     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 adoption of
SFAS No. 130 had no impact on the Company's  consolidated  financial  statements
since the Company's only component of comprehensive income is net income (loss).

     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-10

<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

information  about  operating   segments  in  financial   statements.   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
adoption of SFAS No. 131 had no significant impact on the Company's consolidated
financial statements since the Company has only one operating segment.


     2.   Business Combinations and Acquisitions

     In July 1996, the Company  acquired  Serif Inc. and Serif (Europe)  Limited
(collectively,  the "Serif companies").  The aggregate purchase price, including
all direct costs,  was  approximately  $4,200,000 and was  principally  financed
through the issuance of 333,333 shares of the Company's  common stock.  The cost
of  the   acquisition   exceeded  the  fair  value  of  Serif's  net  assets  by
approximately $400,000, which was recorded as goodwill.

     In December  1996, the Company  acquired  Software  Publishing  Corporation
("SPC").  The  aggregate  purchase  price,   including  all  direct  costs,  was
approximately  $30,000,000 and was principally  financed through the issuance of
1,125,305  shares of the  Company's  common stock.  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.


     3.   Marketable Securities

     Marketable  securities  at fair market  value  consist of the  following at
December 31, 1998:
<TABLE>


           <S>                                              <C>
           Common stock of X-Ceed, Inc. . . . . . . . . .   $  1,020,000
                                                            ------------
                                                            $  1,020,000
                                                            ============
</TABLE>

     Unrealized  holding  gains on  these  securities  amounted  to  $90,000 at
December 31, 1998, which amount has been included in other income for 1998.


4.   Property and Equipment

     Property and equipment consists of the following as of December 31, 1998:

<TABLE>
           <S>                                              <C>
           Office furniture and equipment . . . . . . . .   $    908,402
           Leasehold improvements . . . . . . . . . . . .        195,030
                                                            ------------
                                                               1,103,432
           Less accumulated depreciation. . . . . . . . .       (657,985)
                                                            ------------
           Total. . . . . . . . . . . . . . . . . . . . .   $    445,447
                                                            ============
</TABLE>

                                      F-11

<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

5.   Debt

     Debt consists of the following at December 31, 1998:

<TABLE>

          <S>                                                       <C>
          Notes payable - landlord payable in monthly
            installments of $1,402 through March 2002
            and bearing interest at 10% per annum . . . . . .  .    $    46,528
          Bank loans payable in monthly  installments
            of $4,100 through July 2000 and bearing
            interest at 9.5% per annum . . . . . . . . . . . . .         23,347
          Capital lease obligation payable in quarterly
            installments of $6,300 through June 2002
            and bearing interest at 10.25% per annum . . . . . .         75,922
          Litigation settlement, payable in monthly
            installments of $10,000 through May 1999
            and bearing interest at 7% per annum . . . . . . . .         45,000
          Directors and officers insurance premium
            financing, payable in monthly installments
            of $11,909 through September 1999 and
            bearing interest at 7.75% per annum. . . . . . . . .        103,801
                                                                    ------------
                                                                        294,598
          Less current maturities. . . . . . . . . . . . . . . .       (195,044)
                                                                    ------------
                                                                    $    99,554
                                                                    ============
</TABLE>

     Maturities of long-term debt as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                   Year Ending
                   December 31,                  Amount
                    <S>                         <C>
                    1999 . . . . .              195,044
                    2000 . . . . .               44,417
                    2001 . . . . .               37,746
                    2002 . . . . .               17,391
                                               --------
                    Total. . . . .             $294,598
                                               ========
</TABLE>

     The Company's United Kingdom  subsidiary has a letter of credit facility of
approximately $400,000,  collateralized by substantially all of the subsidiary's
assets. No amounts were drawn upon at December 31, 1998.


     6.   Accrued Liabilities

     Accrued liabilities at December 31, 1998 consist of the following:

<TABLE>

          <S>                                            <C>
          Accrued legal costs. . . . . . . . . . . .     $  154,297
          Accrued royalties. . . . . . . . . . . . .        138,628
          Valued added and other taxes payable . . .        915,794
          Other accruals . . . . . . . . . . . . . .      1,253,061
                                                         ----------
                                                         $2,461,780
                                                         ==========
</TABLE>

                                      F-12

<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


7.   Stockholders' Equity

     In 1996,  the Company  granted  warrants,  exercisable at $20.625 per share
until August 22, 2002, to purchase  166,666 shares of the Company's common stock
and agreed to issue 23,809 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 23,809 shares
of common stock were issued in 1997 in satisfaction of the related  liability of
$250,000 recorded in 1996.

     In 1997, the Company  issued an aggregate  37,090 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  capital in
1996 and  issued  825  shares of its  common  stock for  payment  of  $15,000 in
consulting  fees which was accrued as a  liability  in 1996.  Also in 1997,  the
Company received  proceeds of $10,000 for the issuance of 1,666 shares of common
stock for the exercise of certain stock options and the Company  consummated the
sale of an aggregate  320,333  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  32,033 shares of common stock, at
an exercise price of $3.8268 per share, to a financial advisor.

     In 1998,  the Company  issued an aggregate of 58,585 shares of common stock
in payment of previously  established  liabilities incurred in 1996 and 1997 for
the acquisition of certain software, goods and legal and consulting services.

     In 1998,  the Company issued an aggregate of 143,333 shares of common stock
and warrants to purchase  33,332 shares of common stock,  exercisable at various
prices ranging from $1.50 to $3.83 (subject to adjustment) per share, in payment
for services rendered in 1998 by consultants and the Chairman of the Board.

     In 1998, the Company  retained an investment  banking firm and  consultants
and, in connection therewith,  issued warrants,  valued at $701,206, to purchase
1,390,000  shares  of common  stock.  The  related  deferred  charges  are being
amortized over periods of one to five years.

     In 1998, the Company acquired an aggregate 3,095 shares of common stock, of
which  1,237  shares  were  held by a former  employee  of one of the  Company's
subsidiaries and 1,858 shares were held by a trust for the benefit of certain of
the  employees of such  subsidiary.  The Company is holding such 3,095 shares in
its treasury.

     On May 26,  1998,  the  stockholders  of the  Company  granted the Board of
Directors  of the  Company  authority  to amend  the  Company's  Certificate  of
Incorporation to authorize either a one-for-two  (1:2),  one-for-three  (1:3) or
one- for-five  (1:5) reverse  stock split of the common  stock.  Following  such
stockholder action, the Company's Board of Directors  authorized a one-for-three
(1:3) reverse  stock split of the common  stock.  The reverse stock split became
effective as of the close of business on May 27, 1998.

     In 1998, the Company sold an aggregate of 1,877,968  shares of common stock
to a number of investors  (including  directors,  officers and  employees of the
Company and their affiliates) for net proceeds of $1,410,625.

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.  There  were  930  shares  of  Class  A  Cumulative Non-

                                      F-13
<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

Convertible  Redeemable  Preferred  Stock,  Series A (the  "Class A Preferred
Stock") issued and outstanding at December 31, 1998.

     In 1998, the Company  authorized  1,500 shares of Class A Preferred  Stock.
Under the Company's  Certificate of  Designations,  holders of shares of Class A
Preferred  Stock are entitled to (a) cumulative  dividends of $140 per share per
annum,  payable  semi-annually on June 30 and December 31 of each calendar year,
commencing on June 30, 1999,  (b) a  liquidation  preference of $1,000 per share
and (c) the right to elect one  director in the event the  Corporation  fails to
tender in full three consecutive semi-annual dividend payments. In addition, the
Company has the right to redeem the Class A Preferred  Stock,  in part or whole,
at any time,  upon  payment of $1,300 per share of Class A Preferred  Stock plus
any accrued and unpaid  dividends  on the Class A Preferred  Stock so  redeemed.
Subsequent  to December 31, 1998,  the holder of the 930  outstanding  shares of
Class A  Preferred  Stock  exchanged  such  shares  for 930  shares  of  Class C
Cumulative  Non-Convertible  Redeemable  Preferred Stock,  Series A and received
warrants to purchase  260,000  shares of common stock,  at an exercise  price of
$1.0625 per share (see note 15).  Dividends  accrued on Class A Preferred  Stock
through December 31, 1998 amounted to approximately $6,000.

     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  were
retired and canceled during 1997.

     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.  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 consisted 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).


                                      F-14

<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


9.   Income Taxes

     At December  31,  1998,  the  Company  has  available  net  operating  loss
carryforwards  of  approximately  $84,000,000  that expire in years 2002 through
2018, 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, 1998, are as follows:

<TABLE>
          <S>                                                       <C>
          Current:
           Reserve for accounts receivable, inventory and other. .  $   688,000
          Non-current:
           Depreciation. . . . . . . . . . . . . . . . . . . . . .    1,721,000
           General business credit carryforwards . . . . . . . . .    1,527,000
           Net operating loss carryforwards. . . . . . . . . . . .   33,649,000
                                                                    ------------
          Total deferred tax assets. . . . . . . . . . . . . . . .   37,585,000
           Valuation allowance for deferred tax assets . . . . . .  (37,585,000)
                                                                    ------------
          Net deferred tax assets. . . . . . . . . . . . . . . . .  $         0
                                                                    ============
</TABLE>

    The decrease in the valuation  allowance  during the year ended December 31,
 1998 in the amount of $191,000 was due principally to a partial  utilization of
 the net operating loss carryover.

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

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                -------------------------------
                                                     1998              1997
                                                     ----              ----
           <S>                                  <C>               <C>
           United States. . . . . . . . .       $ (3,071,051)     $ (9,871,203)
           Foreign. . . . . . . . . . . .            693,877           150,472
                                                -------------     -------------
                                                $ (2,377,174)     $ (9,720,731)
                                                =============     =============
</TABLE>

    The  provision  for income  taxes of $29,541  for 1998 and  $47,035 for 1997
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,
                                                -------------------------------
                                                    1998              1997
                                                    ----              ----
           <S>                                  <C>               <C>
           Tax (benefit) at United States
            federal statutory rates . . .       $   (808,000)     $ (3,305,000)
           Permanent differences. . . . .            999,000         2,325,000
           Change in valuation allowance.           (191,000)          980,000
           Foreign and state income taxes             29,541            47,205
                                                -------------     -------------
                                                $     29,541      $     47,205
                                                =============     =============
</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,

                                      F-15

<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


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 through December 31, 1996 and losses  subsequent to 1996
can be fully utilized until they are 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 (the "IRS")  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  would avoid SPC's
being required to recognize a tax of  approximately  $8 million on approximately
$24.5 million of SPC's previous dual consolidated  losses. The IRS has, to date,
refused to grant the Company's  application for such a closing agreement because
of alleged deficiencies in SPC's  pre-acquisition dual loss certifications.  The
IRS has indicated that it will consider alternative measures,  which the Company
is presently  evaluating,  to correct  these  deficiencies  and allow for such a
closing agreement.  While the Company believes that the IRS should agree to such
a closing  agreement,  no  assurance  can be given  that the IRS will do so and,
absent  extraordinary  relief,  any  failure  to  do  so  could  result  in  the
recognition of this tax liability.


    10. Stock Option Plans

    The Company has four stock options plans: the 1994 Long-Term  Incentive Plan
(the "1994 Incentive  Plan"),  Outside  Directors and Advisors Stock Option Plan
(the "Company  Directors  Plan") and the Software  Publishing  Corporation  1989
Stock Option Plan and  Software  Publishing  Corporation  1991 Stock Option Plan
(collectively,  the "SPC Stock 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.  Under APB 25, if
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).  The  maximum  number of  shares of common  stock
subject  to  the  1994  Incentive  Plan  is  1,333,333.  The  options  currently
outstanding vest over a period of up to five years and expire after 10 years.

     The  Company  Directors  Plan - In  August  1995,  the  Company's  Board of
Directors and stockholders  approved the Company 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

                                      F-16

<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


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 the
Company  Directors Plan is 166,666.  The options vest over a period of two years
and expire after 10 years.

    The SPC Plans - Options under the SPC Stock Plans may be granted for periods
of up to ten years,  for the 1989 plan, 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. The maximum number of shares of common stock subject to
the SPC Stock Plans is 232,310.

    In addition to the plans 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
                                               ----           ----              -----        ----           -----
<S>                                        <C>              <C>                <C>          <C>             <C>     
Outstanding at January 1, 1997 . . .         487,182        123,445            217,120      50,000          $ 11.97 
 Granted . . . . . . . . . . . . . .       1,170,906         16,666             18,333          --             6.18 
 Exercised . . . . . . . . . . . . .          (1,666)            --                 --          --             6.00 
 Forfeited . . . . . . . . . . . . .        (416,333)        (8,333)          (162,996)         --            10.29 
 Repriced - granted. . . . . . . . .         245,575         40,000              1,624          --             3.75 
 Repriced - forfeited. . . . . . . .        (327,433)       (53,333)            (2,165)         --             8.88 
                                           ----------       --------          ---------     ------          --------
Outstanding at December 31, 1997 . .       1,158,231        118,445             71,916      50,000          $  6.87 
                                           ----------       --------          ---------     ------          --------

 Granted . . . . . . . . . . . . . .         495,001         49,998                 --          --          $  0.95 
 Forfeited . . . . . . . . . . . . .        (511,535)       (12,781)           (63,876)    (33,334)           (7.26)
 Repriced - granted. . . . . . . . .         430,723         34,377                 --          --             1.38 
 Repriced - forfeited. . . . . . . .        (430,723)       (34,377)                --          --            (4.01)
                                           ----------       --------          ---------     ------          --------
Outstanding at December 31, 1998 . .       1,141,697        155,662              8,040      16,666          $  2.43 
                                           ==========       ========          =========     ======          ========

Exercisable at December 31, 1998 . .         459,929        130,592              8,040      16,666          $  3.72 
                                           ==========       ========          =========     ======          ========

Exercisable at December 31, 1997 . .         102,811         92,580             47,610      50,000          $ 11.52
                                           ==========       ========          =========     ======          ========

</TABLE>

    As of December 31, 1998,  1,719,117  shares of common stock are reserved for
issuance under the plans described above.

    On May 27, 1998, the Company  effected a one-for-three  reverse stock split.
All option  balances and  activities  have been adjusted to reflect this reverse
stock split.

                                      F-17

<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

    In August 1997, 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 $3.75 per
share of common stock which was the fair value as of the effective  date of this
repricing  program,  provided  that the  option  holder  surrender  25% of their
options.

    Effective July 1998,  the Company  adopted a repricing  program  pursuant to
which (a) the Company offered to each optionee  (each,  an "Eligible  Optionee")
granted one or more options under any of the Company's  various stock plans who,
as of July 17, 1998,  was either an employee or a director of the  Company,  the
right to exchange each outstanding  option (each, an "Eligible  Option") granted
to such Eligible Optionee under the Company's various stock option plans for the
issuance of two options (collectively,  the "Repriced Options"),  the first such
option (the "New Option")  entitling the Eligible Optionee to purchase up to 75%
of the number of shares of common  stock that were  issuable  under the Eligible
Option so exchanged, at an exercise price per share equal to $1.375, the closing
per share price on the effective date of the repricing  program,  and the second
such option (the  "Non-Repriced  Option")  entitling  such Eligible  Optionee to
purchase  up to 25% of the number of shares of common  stock that were  issuable
under the Eligible Option so exchanged,  at an exercise price per share equal to
the exercise  price per share under the  Eligible  Option so  exchanged.  To the
extent the Eligible Option so exchanged was exercisable, the Non-Repriced Option
shall be  exercisable  and,  where the  number of shares  exercisable  under the
Eligible  Option so exchanged  exceeded the number of shares  issuable under the
Non-Repriced Option, any such options shall be immediately exercisable under the
New Option.  Further,  to the extent the Eligible  Option so  exchanged  was not
exercisable,   the  Non-Repriced   Option  shall  first  become  exercisable  in
accordance with the earliest dates set forth in the Eligible Option so exchanged
for  the  exercisability  of  shares  issuable  under  the  Eligible  Option  so
exchanged,  and the shares of common stock  issuable  under the New Option shall
become exercisable over the next four years. In addition,  each New Option shall
have a term expiring ten years from the effective date of the repricing  program
and shall be deemed  granted  under such of the Plans under  which the  Eligible
Option  was  originally  granted  and the  Non-Repriced  Option  shall be deemed
granted under such of the Plans under which the Eligible  Option was  originally
granted. Except as otherwise noted, each of the Repriced Options shall otherwise
be identical to the Eligible Option so exchanged.

    The weighted  average  fair value of options  granted was $.60 and $4.71 for
1998 and 1997, respectively.




                                      F-18
<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


    At  December  31,  1998,  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
     ------------                 -------        --------      --------------       -----------           -----------
     Prices ranging from:
      <S>                         <C>            <C>               <C>                <C>                  <C>
      $0.656 - $1.99 . .          975,927        $  1.06           9.67               317,425              $  .93
      $2.00 - $3.99. . .          184,660           3.52           7.81               165,438                3.53
      $4.00 - $5.99. . .              499           4.78           8.76                   249                5.06
      $6.00 - $7.99. . .           61,413           6.61           6.41                50,250                6.50
      $8.00 - $ 9.99 . .               --             --             --                    --                  --
      $10.00 - $11.99. .           54,779          11.17           7.09                45,411               11.20
      $12.00 - $13.99. .           16,373          13.36           6.83                16,373               13.36
      $14.00 - $15.99. .               --             --             --                    --                  --
      $16.00 - $17.99. .           28,331          17.63           7.58                19,998               17.63
      $18.00 - $21.99. .               --             --             --                    --                  --
      $22.00 - $23.99. .               83          23.25           7.70                    83               23.25
</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
1998 and 1997, respectively:  weighted-average risk-free interest rates of 5.21%
for 1998 and 6.25% for 1997;  no dividends;  volatility  factors of the expected
market price of the  Company's  common stock of .7 for 1998 and 1.2046 for 1997;
and a  weighted-average  expected life of the options of five years for 1998 and
5.1 years for 1997.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options granted in 1998, 1997 and 1996 is amortized to expense over the options'
vesting period. The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                                    1998           1997
                                                                    ----           ----
           <S>                                                   <C>             <C>
           Pro forma net loss. . . . . . . . . . . . . . . . . . $(3,083,875)    $(11,204,354)
           Pro forma net loss per share - basic and diluted. . . $      (.84)           (1.37)
</TABLE>

     The pro forma disclosures presented above for 1998 and 1997,  respectively,
reflect  compensation  expense only for options  granted in 1998, 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-19
<PAGE>
         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998


     11.  Commitments and Contingencies

Leases

     The Company  leases  various  office space under  non-cancelable  operating
leases.  In addition  to the fixed  rentals,  certain of the leases  require the
Company  to pay  additional  amounts  based on  specified  costs  related to the
property.  Certain of the leases  have  renewal  options  for periods of up to 2
years. Rental expense was approximately  $158,000 and $540,000 in 1998 and 1997,
respectively.  Restricted  cash of  $200,000 at  December  31,  1998  represents
collateral  for a letter  of  credit  of like  amount  which  serves  as a lease
security deposit for premises in California  previously  occupied by the Company
and now sub-leased.

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

                    <S>                      <C>
                    1999 . . . . .           $  244,000
                    2000 . . . . .              136,000
                    2001 . . . . .              272,000
                    2002 . . . . .               51,000
                                             ----------
                    Total. . . . .           $  703,000
                                             ==========
</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  296,333
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  recission 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.

    In May 1998, the action  commenced by the Company's  former  Chairman of the
Board, President and Chief Executive Officer and his wife, also a former officer
and  director  of  the  Company,  was  settled  at a  cost  to  the  Company  of
approximately $200,000, which amount had been accrued at December 31,1997.

    In the fourth  quarter of 1998, an action was commenced  against the Company
in  California  in which  plaintiff  is  seeking  $300,000  in  damages  for the
Company's  alleged  violation of a lease for office  space  located in San Jose,
California.  This is the  location  at  which  SPC had its  principal  place  of
business and at which the Company had its principal executive offices during the
period of January  1997  through  January  1998.  The  Company no longer has any
offices at this location.  The Company  believes that plaintiffs  claims in this
action are without merit and intends to

                                      F-20

<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

vigorously  defend  itself  in  this  action. The Company has filed an answer in
this action denying the plaintiffs'  allegations and this action is currently in
the discovery stage.

    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 and Domestic Operations

    The Company conducts its business within the computer software industry.

    Foreign and  domestic  operations  as of December  31, 1998 and for the year
then ended are as follows:

<TABLE>
<CAPTION>
                                        United
                                        States         Europe         Eliminations        Consolidated
                                        ------         ------         ------------        ------------

<S>                                   <C>            <C>               <C>                <C>
Net sales . . . . . . . . . . . . .   $ 8,431,271    $ 9,840,462                --        $ 18,271,733
(Loss) income before income taxes .    (3,071,051)       693,877                --          (2,377,174)
Depreciation and amortization . . .     2,462,708        108,216                --           2,570,924
Income tax expense. . . . . . . . .            --         29,541                --              29,541
Interest expense. . . . . . . . . .        24,084         43,341                --              67,425
Interest income . . . . . . . . . .        60,148         86,359                --             146,507

Identifiable assets as of 
  December 31, 1998 . . . . . . . .   $ 6,780,412    $ 4,789,456       $(1,257,172)       $ 10,312,696
                                      ===========    ===========       ============       ============
</TABLE>


    Foreign and domestic 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)
Depreciation and amortization . .        6,305,216         53,515               --           6,358,731
Income tax expense. . . . . . . .            2,789         44,246               --              47,035
Interest expense. . . . . . . . .            9,865         15,980               --              25,845
Interest income . . . . . . . . .           38,088         27,860               --              65,948

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  $448,000 in 1998 and
$600,000  in 1997 to a law firm in which a director of the Company was a member,
of which approximately  $278,000 is included in accounts payable at December 31,
1998.

                                      F-21

<PAGE>

         Software Publishing Corporatin Holdings, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               December 31, 1998

     14.  Customer Concentration and Credit Risk

     The Company had one customer which  accounted for  approximately  12.7% and
12.9%  of net  revenues  for  the  years  ended  December  31,  1998  and  1997,
respectively.  This same customer accounted for approximately  36.0% and 4.0% of
net outstanding accounts receivable at December 31, 1998 and 1997, respectively.
The Company  considers  several of its customers to be significant.  The loss of
any of such  customers,  a significant  decrease in product  shipments to one or
more of them or an  inability  to collect  receivables  from one or more of them
could adversely affect the Company's  business,  operating results and financial
condition.

     15.  Subsequent Events

     In January 1999, the holder of all 930 shares of the Class A 14% Cumulative
Non-Convertible Redeemable Preferred Stock of the Company exchanged such Class A
Preferred  Stock  shares for (i) the  issuance  of 930 shares of the Class C 11%
Cumulative  Non-Convertible  Redeemable Preferred Stock of the Company, (ii) the
issuance of warrants to purchase  260,000 shares of Common Stock, at an exercise
price of $1.0625  per share,  exercisable  immediately  and  expiring in January
2006, (iii) a payment of $7,134  representing all accrued dividends on the Class
A Shares  through  the  effective  date of such  exchange.  The  Certificate  of
Designations  with respect to the Class C Preferred Stock  authorizes a class of
1,000 shares of Class C Preferred Stock.  Holders of shares of Class C Preferred
Stock will be entitled to (a) cumulative  dividends of $110 per share per annum,
payable  semi-annually  on  June  30 and  December  31 of  each  calendar  year,
commencing on June 30, 1999,  (b) a  liquidation  preference of $1,000 per share
and (c) the right to elect one  director in the event the  Corporation  fails to
tender in full three consecutive semi-annual dividend payments. In addition, the
Company has the right to redeem the Class C Preferred  Stock,  in part or whole,
at any time, upon payment of $1,000 per share of Class C Preferred Stock.

                                      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.

Dated: April 14, 1999                    SOFTWARE PUBLISHING CORPORATION
                                             HOLDINGS, INC.


                                        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 14, 1999 by
the following persons in the capacities  indicated.  Each person whose signature
appears below  constitutes  and appoints Mark E.  Leininger,  with full power of
substitution,  his/her true and lawful  attorney-in-fact and agent to do any and
all acts and things in his/her name and on his/her behalf in his/her  capacities
indicated  below which he 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  attorney-in-fact  and agent, 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 attorney-in-fact and agent, or his substitute or substitutes,  may lawfully
do or cause to be done by virtue thereof.


     /s/ Mark E. Leininger       President, Chief Operating Officer and Director
------------------------------    (Principal Executive and Financial Officer)
      Mark E. Leininger


     /s/ Marc E. Jaffe           Chairman of the Board, Secretary and Director
------------------------------
      Marc E. Jaffe


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


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


                                   Director
------------------------------
     Martin F. Schacker

                                      -70-

<PAGE>


          SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

                    ANNUAL REPORT ON FORM 10-K
               Fiscal Year Ended December 31, 1998

                          EXHIBIT INDEX


Exhibit
Number    Description of Exhibit
-------   ----------------------

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 Current  Report  on  Form  10-QSB  (Date of  Report: January
          11, 1999) (Commission File Number: 1-14076), filed with the Commission
          on January 20,  1999.)
3.2       By-laws of the  Company,  as  amended.  (Incorporated  by reference to
          Exhibit   3.3   to   the   Company's  Annual   Report  on  Form 10-KSB
          (Commission File Number: 1-14076), for the year   ended   December 31,
          1997, filed with the Commission on April 16, 1998.)
4.1       Specimen  Common  Stock Certificate.  (Incorporated  by  reference  to
          Exhibit   4.1   to   the   Company's Annual  Report   on   Form 10-KSB
          (Commission File Number:  1-14076),  for the year ended  December  31,
          1997,  filed with the  Commission  on April 16, 1998.)
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  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.)
10.4      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.)
10.5      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.)
10.6      Settlement and  General Release  Agreement, dated as 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.)
10.7      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.)
10.8      Form  of  Underwriters' Purchase Option (Specimen). (Incorporated   by
          reference   to  Exhibit  10.18 to the  Company's Annual Report on Form
          10-KSB, for  the  year   ended   December  31,  1997,  filed  with the
          Commission  on April 16, 1998.)
10.9      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.)
10.10     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.)

                                      -71-

<PAGE>

10.11     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.)
10.12     Financial Advisory  Agreement,  dated as of November 20, 1997, between
          the Company and M.S. Farrell & Co., Inc. (Incorporated by reference to
          Exhibit   10.47   to   the  Company's  Annual  Report  on Form  10-KSB
          (Commission  File Number:  1-14076),  for the year ended  December 31,
          1997,  filed with the Commission on April 16, 1998.)
10.13     Amendment   to the Financial  Advisory Agreement,  dated as of January
          28,   1998,  between   the  Company and  M.S.  Farrell  &  Co.,   Inc.
          (Incorporated by reference to Exhibit  10.48  to  the Company's Annual
          Report on Form 10-KSB (Commission File Number:  1-14076), for the year
          ended December 31, 1997, filed with the Commission on April 16, 1998.)
10.14     Letter   Agreement,  dated   April 28,  1998,  between the Company and
          M.S. Farrell & Co., Inc. (Incorporated  by  reference to Exhibit 10.59
          to the Company's  Quarterly   Report    on  Form   10-QSB  (Commission
          File   Number: 1-14076),  for  the  quarter  ended   March  31,  1998,
          filed   with   the Commission on May 13, 1998.)
10.15     Form  of  Warrant Certificate  issued  to  M.S. Farrell Holdings, Inc.
          ("Holdings"), as assignee  of  M.S.  Farrell & Co., Inc., and  certain
          other   persons,   as  assignees  of   Holdings.  (Incorporated     by
          reference  to Exhibit   10.62   to  the  Company's  Quarterly   Report
          on  Form   10-QSB (Commission File  Number:  1-14076), for the quarter
          ended June 30, 1998, filed with the Commission on August 14, 1998.)
10.16     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.)
10.17     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.)
10.18     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.)
10.19     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.)
10.20     Settlement  and  Release  Agreement,  dated  December 19,  1997, among
          the   Company,    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.)
10.21     Settlement  Agreement, dated May  22, 1998, among the Company, Neil M.
          Kaufman, Esq., Mark E. Leininger and Barry Cinnamon and Lori Cinnamon.
10.22     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.)
10.23     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. (Incorporated
          by  reference to   Exhibit   10.49   to   the  Company's Annual Report
          on Form 10-KSB (Commission File Number:  1-14076), for the  year ended
          December 31, 1997, filed with the Commission on April 16, 1998.)
10.24     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.
          (Incorporated   by   reference  to   Exhibit  10.50   to the Company's
          Annual Report on Form 10-KSB     (Commission  File  Number:  1-14076),
          for   the   year     ended   December  31,  1997,  filed   with    the
          Commission  on April 16,  1998.)

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10.25     Rights  Agreement,  dated as of March 31,  1998,  between  the Company
          and  American  Stock  Transfer  &  Trust  Company.  (Incorporated   by
          reference to Exhibit  10.51 to the Company's  Annual  Report  on  Form
          10-KSB (Commission File Number:  1-14076), for the year ended December
          31, 1997,  filed with the  Commission  on April 16, 1998.)
10.26     Warrant,   dated   April   7,   1998,   registered in the name of Boru
          Enterprises, Inc., with respect   to 50,000  shares  of  Common  Stock
          (before   giving effect   to  the   Company's  one-for-three   reverse
          stock  split  made   effective  May  27,  1998).    (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 March
          31, 1998, filed with the Commission on May 13, 1998.)
10.27     Warrant,  dated  April  7, 1998,  registered  in  the   name   of Boru
          Enterprises,  Inc.,   with  respect  to  50,000 shares of Common Stock
          (before giving effect  to  the  Company's  one-for-three reverse stock
          split  made  effective May 27,1998).  (Incorporated  by  reference  to
          Exhibit  10.54  to  the  Company's  Quarterly  Report  on  Form 10-QSB
          (Commission File Number: 1-14076), for  the  quarter  ended  March 31,
          1998,  filed with the Commission on May 13, 1998.)
10.28     Form  of  Subscription  Agreement, dated April 28,  1998, between  the
          Company and The Whitehaven  Group,  LLC.  (Incorporated  by  reference
          to Exhibit 10.55 to the Company's Quarterly Report on Form 10-QSB
          (Commission File Number:   1-14076), for the quarter  ended  March 31,
          1998,  filed with the  Commission  on May 13,  1998.)
10.29     Warrant,  dated   April   28,   1998,   registered  in the name of The
          Whitehaven Group,  LLC,  with  respect  to  550,000   shares of Common
          Stock  (before giving effect to the Company's  one-for-three   reverse
          stock  split   made  effective  May  27,  1998).     (Incorporated  by
          reference to Exhibit  10.56 to the  Company's Quarterly Report on Form
          10-QSB (Commission File Number: 1-14076),  for the quarter ended March
          31, 1998, filed with the Commission on May 13, 1998.)
10.30     Warrant,   dated   April  28,  1998,  registered   in  the name of The
          Whitehaven Group,  LLC, with respect to 250,000 shares of Common Stock
          (before giving effect  to  the Company's  one-for-three  reverse stock
          split made  effective May 27,  1998).  (Incorporated  by  reference to
          Exhibit  10.57  to  the Company's  Quarterly  Report  on  Form  10-QSB
          (Commission  File  Number:  1-14076),  for the quarter ended March 31,
          1998, filed with the Commission on May 13,  1998.)
10.31     Form  of  Subscription  Agreement,  each  executed  between  April 29,
          and  May 6, 1998,   between the Company and each of the April/May 1998
          Investors. (Incorporated  by  reference  to  Exhibit   10.58  to   the
          Company's  Quarterly Report on Form 10-QSB  (Commission  File  Number:
          1-14076), for  the  quarter  ended  March 31, 1998, filed   with   the
          Commission on May 13, 1998.)
10.32     Warrant, dated  as  of   July   3, 1998, registered in the name of The
          Whitehaven  Group,   LLC,  with  respect to  183,333  shares of Common
          Stock. (Incorporated  by reference  to  Exhibit 10.60 to the Company's
          Quarterly Report on  Form  10-QSB  (Commission File  Number: 1-14076),
          for the quarter  ended  June 30,  1998,  filed with the  Commission on
          August 14, 1998.)
10.33     Warrant,  dated   as   of   July  3,  1998, registered in the  name of
          The   Whitehaven   Group, LLC, with respect to 83,333 shares of Common
          Stock. (Incorporated  by reference to Exhibit  10.61 to the  Company's
          Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
          the quarter ended June 30, 1998,  filed with the Commission on August
          14, 1998.)
10.34     Form of Subscription  Agreement utilized in the December 1998  Private
          Placement.  (Incorporated  by reference  to Exhibit 10.1 to the
          Company's Current  Report  on Form  10-QSB  (Date of Report:  December
          15,  1998)(Commission File Number: 1-14076), filed with the Commission
          on December 16,  1998.)
10.35     Stock Exchange Agreement, dated December 15, 1998, between the Company
          and  Seafish Partners.  (Incorporated  by reference to Exhibit 10.2 to
          the  Company's    Current   Report  on  Form  10-QSB  (Date of Report:
          December 15, 1998) (Commission File Number:  1-14076),  filed with the
          Commission  on December  16,  1998.)
10.36     Letter  Agreement,   dated  January  4,  1999, between the Company and
          Seafish Partners. (Incorporated by  reference  to Exhibit  10.3 to the
          Company's Current  Report on Form 10-QSB (Date of  Report: January 11,
          1999)   (Commission File  Number: 1-14076), filed with the  Commission
          on January 20, 1999.)
10.37     Form  of  Subscription Agreement  utilized  in the Common Stock Sales.
          (Incorporated    by    reference   to Exhibit  10.3 to  the  Company's
          Current Report on Form 10-QSB   (Date of Report:  December  15,  1998)
          (Commission File   Number: 1-14076),   filed  with  the  Commission on
          December  16, 1998.)

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<PAGE>

10.38     Consulting  Agreement between the Company  and  Target  Capital  Corp.
          (Incorporated   by  reference to Exhibit 10.1 to the Company's Current
          Report on Form 10-QSB   (Date of Report: January 11, 1999) (Commission
          File Number: 1-14076), filed with the Commission on January 20, 1999.)
10.39     Consulting   Agreement  between  the  Company and Michel    Ladovitch.
          (Incorporated   by  reference to Exhibit 10.2 to the Company's Current
          Report  on   Form   10-QSB    (Date  of  Report:  January   11,  1999)
          (Commission   File Number:  1-14076), filed   with  the Commission  on
          January 20, 1999.)
10.40     Warrant Certificate, with   respect to 520,000 shares of Common Stock,
          registered in the name  of  Target  Capital  Corp.   (Incorporated  by
          reference to  Exhibit  10.5  to the Company's Current   Report on Form
          10-QSB (Date of Report: January 11, 1999)  (Commission    File Number:
          1-14076),  filed with the Commission on  January 20, 1999.)
10.41     Warrant Certificate, with  respect to 120,000  shares of Common Stock,
          registered   in   the   name   of     United   Krasna   Organizations.
          (Incorporated   by    reference  to  Exhibit  10.6  to  the  Company's
          Current Report on Form  10-QSB   (Date  of Report:   January 11, 1999)
          (Commission  File  Number:   1-14076),  filed with the  Commission  on
          January 20, 1999.)
10.42     Warrant   Certificate,  with   respect   to  260,000  shares of Common
          Stock, registered  in  the name of Seafish  Partners.    (Incorporated
          by   reference  to Exhibit  10.8 to the Company's  Current   Report on
          Form  10-QSB   (Date of Report:    January  11, 1999) (Commission File
          Number:  1-14076), filed   with the Commission on  January 20,  1999.)
10.43     Warrant Certificate, with respect to 600,000 shares of  Common  Stock,
          registered  in the name of  Regency  Investment Partners.
10.44     Letter  Agreement,  dated December 17, 1998,  between the Company Marc
          E. Jaffe.      (Incorporated  by   reference to   Exhibit 10.4  to the
          Company's Current   Report   on   Form   10-QSB       (Date of Report:
          January 11, 1999) (Commission  File Number:  1-14076),  filed with the
          Commission on January 20,  1999.)
10.45     Advice   of   Borrowing  Terms,  dated    December   29, 1998, between
          Serif (Europe)  Limited   and   National  Westminster   Bank PLC,  and
          Mortgage Debenture,  dated October 9,  1989, between   Serif  (Europe)
          Limited  and National Westminster Bank PLC.
21        Subsidiaries of the Company.
23.1      Consent of Richard A. Eisner & Company,  LLP.
23.2      Consent of Ernst & Young.
24        Powers of Attorney (set forth on the signature  page of this Annual
          Report on Form 10-KSB).
27        Financial Data Schedule.

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