SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D.C.  20549



                                  FORM 10-Q



                 Quarterly Report Under Section 13 or 15(d)
                   of the Securities Exchange Act of 1934



For Quarter Ended September 30, 1998           Commission File Number 0-13318



                           STAR TECHNOLOGIES, INC.
           (Exact name of registrant as specified in its charter)


            Delaware                                            93-0794452
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification No.)


                           1151-A Seven Locks Road
                          Potomac, Maryland  20854
                  (Address of principal executive offices)
                                 (Zip Code)


                               (301) 315-0240
            (Registrant's telephone number, including area code)


                                515 Shaw Road
                          Sterling, Virginia  20166
            (Former name, former address and former fiscal year,
                        if changed since last report)


  Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act 
of 1934 during the preceding 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     


21,560,384 shares of Common Stock were outstanding as of September 30, 1998.


<PAGE>
PART I.  FINANCIAL INFORMATION

     Item 1.  Financial Statements
<TABLE>
                  STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (Unaudited)
                    (In thousands, except per share data)
<CAPTION>
                                                    Three Months Ended  Nine Months Ended 
                                                       September 30,       September 30,  
                                                      1998      1997      1998      1997 

Revenue
  <S>                                               <C>       <C>       <C>       <C> 
  Products                                          $   837   $   160   $ 1,703   $   205
  Services                                              836       279     2,654       512
                                                    -------   -------   -------   -------
                                                      1,673       439     4,357       717
                                                    -------   -------   -------   -------

Cost of revenue
  Products                                              302        28       503       191
  Services                                              608        96     1,895       391
                                                    -------   -------   -------   -------
                                                        910       124     2,398       582
                                                    -------   -------   -------   -------
Gross margin                                            763       315     1,959       135
                                                    -------   -------   -------   -------
Operating expenses
  Research and development                              182       203       589       667
  Selling, general and administrative                 1,136       794     3,575     1,839
                                                    -------   -------   -------   -------
    Total operating expenses                          1,318       997     4,164     2,506
                                                    -------   -------   -------   -------

Operating loss                                         (555)     (682)   (2,205)   (2,371)

Interest income (expense), net                          (19)       69       (28)      212
Other income, net                                        13       489        15       637
                                                    -------   -------   -------   -------
Net income (loss) before provision for income taxes    (561)     (124)   (2,218)   (1,522)

Provision for income taxes                                -         -         -         -
                                                    -------   -------   -------   -------
Net loss                                            $  (561)  $  (124)  $(2,218)  $(1,522)
                                                    =======   =======   =======   =======

Net loss                                            $  (561)  $  (124)  $(2,218)  $(1,522)
Preferred stock dividend requirement                    (50)      (50)     (150)     (150)
                                                    -------   -------   -------   -------
  Net loss applicable to common shares              $  (611)  $  (174)  $(2,368)  $(1,672)
                                                    =======   =======   =======   =======

Earnings (loss) per share
  Basic                                             $  (.03)  $  (.01)  $  (.11)  $  (.08)
  Diluted                                           $  (.03)  $  (.01)  $  (.11)  $  (.08)
        
Weighted average common shares outstanding
  Basic                                              21,559    20,850    21,457    20,247
  Diluted                                            23,640    22,931    23,538    22,328
</TABLE>
                See accompanying notes to consolidated financial statements.
                                            -1-
<PAGE>
<TABLE>
                          STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                        (Unaudited)
                             (In thousands, except share data)
<CAPTION>
                                                               Sept. 30,    December 31,
Assets                                                           1998           1997    
Current assets
  <S>                                                          <C>            <C>     
  Cash                                                         $     28       $    95
  Short-term investments                                            302         1,117
  Accounts receivable, net                                        1,091           630
  Other current assets, net                                         349           318
                                                               --------      --------
    Total current assets                                          1,770         2,160

Property and equipment, net                                         745           775
Goodwill and other intangible assets, net of
    accumulated amortization of $394 and $135                     2,415         2,673
Other assets                                                         54            55
                                                               --------      --------

    Total assets                                               $  4,984      $  5,663
                                                               ========      ========
Liabilities and Stockholders' Equity
Current liabilities
  Accounts payable                                             $  1,684      $    665
  Notes payable and capital lease obligations                       807             -
  Accrued payroll and related benefits                              150           105
  Deferred revenue                                                  260           451
  Other accrued liabilities                                         250           367
                                                               --------      --------
    Total current liabilities                                     3,151         1,588

Capital lease obligations, net of current portion                    22             -
                                                               --------      --------
    Total liabilities                                             3,173         1,588
                                                               --------      --------

Commitments and contingencies                                         -             -

Stockholders' equity
  Preferred stock; $.01 par value; 1,000,000 shares authorized
    Series A convertible; 500,000 shares designated; 13,200 
      shares issued and outstanding; aggregate liquidation 
      preference of $475                                              1             1
    Series B convertible; 120,117 shares designated; 11,917
      shares issued and outstanding; aggregate liquidation
      preference of $1,192                                            1             1
    Series C convertible; 80,079 shares designated; 7,945
      shares issued and outstanding; aggregate liquidation
      preference of $795                                              1             1
  Common stock; $.01 par value; 60,000,000 shares authorized;
    21,655,575 and 21,351,575 shares issued; 21,560,384 and
    21,256,384 shares outstanding                                   217           214
  Additional paid-in capital                                     61,447        61,357
  Accumulated other comprehensive income (loss)                    (273)         (134)
  Treasury stock, at cost; 95,191 shares                           (209)         (209)
  Retained deficit                                              (59,374)      (57,156)
                                                               --------      --------
    Total stockholders' equity                                    1,811         4,075
                                                               --------      --------
    Total liabilities and stockholders' equity                 $  4,984      $  5,663
                                                               ========      ========
</TABLE>
                See accompanying notes to consolidated financial statements.
                                            -2-
<PAGE>
<TABLE>
 
                         STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                       (In thousands)
<CAPTION>

                                                                    Nine Months Ended 
                                                                      September 30,   
  
                                                                   1998             1997 

Cash flows from (used for) operating activities
  <S>                                                            <C>              <C>
  Net loss                                                       $(2,218)         $(1,522)

Adjustments to reconcile net income (loss) to net cash
  from (used for) operating activities
    Depreciation and amortization                                    544              184
    Gain on sale of MIMS technology                                    -             (489)
    (Gain) loss on sale of property and equipment                    (11)             116
    Increase in accounts receivable                                 (461)             (89)
    (Increase) decrease in other current assets                      (31)             207
    Increase in accounts payable                                   1,019               11
    Decrease in deferred revenue                                    (191)            (144)
    Decrease in accrued liabilities                                  (22)            (533)
                                                                 -------          -------
Net cash from (used for) operating activities                     (1,371)          (2,259)
                                                                 -------          -------
Cash flows from (used for) investing activities
    Proceeds from sale of property and equipment                      94               12
    Capital expenditures                                            (275)             (40)
    Other investing activities                                         -              109
    Purchase of Intrafed technology                                    -           (2,147)
                                                                 -------          -------
Net cash used for investing activities                              (181)          (2,066)
                                                                 
Cash flows from (used for) financing activities
    Proceeds from notes payable                                      767                -
    Proceeds from stock option exercises                              42                4
                                                                 -------          -------
Net cash from financing activities                                   809                4
                                                                 -------          -------
Net decrease in cash and equivalents                                (743)          (4,321)

Cash and equivalents, beginning of period                            771            6,330
                                                                 -------          -------
Cash and equivalents, end of period                              $    28          $ 2,009
                                                                 =======          =======


</TABLE>





                See accompanying notes to consolidated financial statements.
                                            -3-
<PAGE>
                  STAR TECHNOLOGIES, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    During 1997, Star Technologies, Inc. ("Star" or the "Company") completed 
a transition from providing performance-enhancing computing products and 
solutions principally for the medical imaging market to providing imaging 
solutions for the broader document imaging market.  In July 1997, the Company 
sold its medical imaging archival technology and, through a newly-created 
operating subsidiary, PowerScan, Inc. ("PowerScan"), acquired document 
imaging and processing technology as its entry into this broader market.  
Additionally, in October 1997, the Company acquired Curran Data Technologies, 
Inc. ("CDT"), a provider of data entry imaging services.  With these two 
acquisitions, Star is a provider of integrated products and services for 
commercial and government users involved in data capture, image capture and 
document imaging.  These two acquisitions are part of the Company's long-term 
growth plan to build market presence in the document imaging market through 
strategic acquisitions and alliances.  

NOTE 1 - Financial Information

    The interim consolidated financial statements presented herein are 
unaudited.  They reflect all adjustments that, in the opinion of management, 
are necessary to fairly present the Company's financial position and results 
of operations for the interim periods presented.  All such adjustments are of 
a normal, recurring nature.  The results of operations for the three- and 
nine-month periods ended September 30, 1998 are not necessarily indicative of 
the results to be expected for the entire fiscal year.

    The interim consolidated financial information should be read in 
conjunction with the Company's Transition Report on Form 10-K, Commission 
file number 0-13318, for the Transition Period from April 1, 1997 to December 
31, 1997.

    Certain 1997 amounts have been reclassified for comparative purposes.


NOTE 2 - Accounting Policies

Revenue recognition

    On January 1, 1998, the Company adopted Statement of Position 97-2, 
"Software Revenue Recognition" ("SOP 97-2") which superseded Statement of 
Position 91-1, "Software Revenue Recognition."  SOP 97-2 focuses on when and 
in what amounts revenue should be recognized for licensing, selling, leasing 
or otherwise marketing computer software.  The adoption of SOP 97-2 did not 
have a material impact on the Company's revenue recognition policies.

    Revenue from the sale of commercial, off-the-shelf software is recognized 
when the following four criteria are met:  (1) the sale is in writing, (2) 
the software has been shipped, (3) the fee is fixed or determinable and (4) 
collectibility is probable.  Customized software revenue is recognized when 
the software is accepted by the customer.
                                     -4-
<PAGE>
    Maintenance revenue, which includes unspecified when-and-if deliverable 
software upgrades, user documentation and technical support for software 
products, is deferred and recognized on a straight-line basis over the term 
of the maintenance agreement, generally one year.  Revenue from services 
including data entry, integration, installation and system training is 
recognized when the services are performed.  Amounts received but not earned 
are deferred.

Net income (loss) per share

    Basic and diluted net income (loss) per share were computed in accordance 
with Statement of Financial Accounting Standards No.128, "Earnings Per 
Share."  The differences between basic weighted average common shares 
outstanding and diluted weighted average common shares outstanding are as 
follows (in thousands):
<TABLE>
<CAPTION>
                                                  Three Months Ended  Nine Months Ended
                                                     September 30,      September 30,  
                                                   1998       1997     1998      1997 

     <S>                                          <C>        <C>      <C>       <C>
     Basic weighted average common shares         21,559     20,850   21,457    20,247

     Convertible preferred stock                   2,081      2,081    2,081     2,081
                                                  ------    -------   ------    ------
     Diluted weighted average common shares       23,640     22,931   23,538    22,328
                                                  ======    =======   ======    ======
</TABLE>
     All outstanding stock options and warrants are anti-dilutive and are 
therefore, excluded from the computations of basic and diluted net income 
(loss) per share.


NOTE 3 - Cash and Equivalents and Short-Term Investments

     Cash and equivalents include cash and short-term investments in 
commercial paper.  Short-term investments in commercial paper, which are held 
to maturity (less than three months from the date of purchase), are carried 
at cost which approximates their market value.  These investments totaled $0 
and $676,000 at September 30, 1998 and December 31, 1997, respectively.

     At September 30, 1998 and December 31, 1997, other short-term 
investments include 92,800 shares of common stock of Lumisys, Inc. 
("Lumisys") acquired from the sale of the Company's medical imaging archival 
technology in July 1997.  The Company does not actively seek to trade this 
investment for purposes of maximizing trading gains and classifies it as 
"available for sale."  Accordingly, the temporary excess (deficiency) of 
market value over (under) the underlying cost is reported as an unrealized 
gain (loss) as a separate component of stockholders' equity.


NOTE 4 - Accounts Receivable

     Accounts receivable are shown net of an allowance for doubtful accounts 
of $13,000 and $22,000 at September 30, 1998 and December 31, 1997, 
respectively.

                                     -5-
<PAGE>
NOTE 5 - Comprehensive Income (Loss)

     In June 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income."  
The new disclosure requirements with respect to comprehensive income (loss) 
are as follows (in thousands):
<TABLE>
<CAPTION>
                                               Three Months Ended    Nine Months Ended
                                                 September 30,         September 30,  
                                                 1998     1997         1998      1997 
     Comprehensive income (loss):

     <S>     <C>  <S>                           <C>      <C>         <C>        <C>
     Net loss, as reported                      $(561)   $(124)      $(2,218)   $(1,522)

     Unrealized gain (loss) on investment         (46)      38          (139)        38
                                                -----    -----       -------    -------
       Total comprehensive income (loss)        $(607)   $ (86)      $(2,357)   $(1,484)
                                                =====    =====       =======    =======

</TABLE>
NOTE 6 - Notes Payable

     In September 1998, the Company entered into a subordinated note 
agreement with a Director.  The note is secured by certain assets of the 
Company, carries interest at 12% per annum, is due in February 1999 and 
totalled $125,000 at September 30, 1998.  The Director has the option to 
convert the note into shares of the Company's common stock if the note goes 
into default.

     In April 1998, the Company entered into a one-year $750,000 working 
capital line of credit with a financial institution.  The line of credit is 
secured by the Company's accounts receivable, inventory and other assets and 
allows borrowings of up to 80% of the eligible accounts receivable balance.  
The line of credit carries an interest rate of prime plus 3% as well as a 
service fee ranging from .75% to 1.5% of the amount borrowed.  At September 
30, 1998, the Company had borrowed $284,000 under this line of credit and had 
$263,000 available for future borrowings.  Additional available credit under 
this facility will depend on the Company generating additional revenue.

     Also in April 1998, the Company entered into a one-year $300,000 line of 
credit with a bank.  The line of credit is secured by the Company's 
short-term investment in Lumisys common stock, carries interest at prime plus 
one percent and allows borrowings of up to 70% of the Lumisys stock's market 
value.  At September 30, 1998, the Company had borrowed all that was 
currently available under this line of credit.  Such borrowings totalled 
$243,000 at September 30, 1998.

     The Company has a secured promissory note with a vendor in the amount of 
$115,000 at September 30, 1998.  The note bears interest of 9.5% per annum 
through September 1998, and 12% thereafter.  The Company is currently in 
default with respect to its payment obligations under this note.  The Company 
is working with the creditor to restructure the timing of remaining payments 
thereunder (see Note 7).
                                     -6-
<PAGE>

NOTE 7 - Liquidity

     The Company's net losses from operations and acquisitions to date have 
consumed substantial amounts of cash.  Through the nine months ended 
September 30, 1998, the Company has used cash from operations of 
approximately $1.4 million.  The continuing operation of the Company's 
business, and the continued development and commercialization of its 
technology, products and services, will require the availability of 
additional funds for the foreseeable future.  The Company's ability to obtain 
cash adequate to fund its needs depends generally on the results of its 
operations and the availability of financing.  Without continued increases in 
revenues or obtaining additional financing, the Company may be required to 
make additional reductions in operating expenses, which may have a material 
adverse effect on the Company.  If the Company has insufficient funds for its 
needs, the Company may not be able to raise additional funds on favorable 
terms, if at all, or may not be able to do so on a timely basis.  Failure to 
obtain additional funds when needed could materially adversely affect the 
Company.

     The Company is currently in default with respect to its payment 
obligations under a secured promissory note on which payment in the 
approximate principal amount of $115,000 remains payable.  Such default has 
resulted in the creditor having the right to accelerate the balance due under 
the note and exercise other rights available under the law, including 
foreclosing on the computer equipment serving as collateral for such note.  
The Company is working with the creditor to waive any current defaults and to 
restructure the timing of remaining payments thereunder.  There can be no 
assurances that such creditor will agree to waive all existing defaults and 
extend the timing of remaining payments due under the note.  The existence of 
such default may also activate cross-default provisions under the Company's 
bank line of credit.

     In addition, the Company is delinquent in its payments due certain 
vendors to the Company.  The Company has extended payment terms with certain 
vendors and continues to seek to extend payment terms from additional 
vendors.  If unsuccessful, such parties may take actions against the Company, 
including the termination of their relationship with the Company or the 
initiation of collection proceedings.

     In view of the Company's additional liquidity requirements, the Company 
is also continuing to seek to sell additional equity or convertible debt 
securities or pursue debt financing arrangements.  To date, the Company has 
no commitments, agreements or understandings with respect to additional 
financing and there can be no assurance that the Company will be able to 
consummate any such transaction or raise adequate funds from such transaction 
to meet the Company's cash needs.  As a result of the delisting of the 
Company's common stock from the Nasdaq SmallCap Market in June 1998, 
investors may suffer a loss of liquidity in the shares of such stock and the 
Company may have difficulty raising funds in the capital markets.  Further, 
the sale of additional equity or convertible debt securities could result in 
dilution to the Company's stockholders.

                                     -7-
<PAGE>
     Item 2. Management's Discussion and Analysis of Results of
             Operations and Financial Condition

     The following information should be read in conjunction with the 
consolidated financial statements and the notes thereto and in conjunction 
with Management's Discussion and Analysis of Financial Condition and Results 
of Operations in the Company's Form 10-K for the Transition Period from April 
1, 1997 through December 31, 1997.  This Quarterly Report, and in particular 
Management's Discussion and Analysis of Financial Condition and Results of 
Operations, contain forward-looking statements (as defined in Section 21E of 
the Securities Exchange Act of 1934, as amended) which reflect management's 
current views with respect to certain future events and financial 
performance.  Actual future results and trends may differ materially 
depending upon a variety of factors, including, among others, risk of 
technological change and uncertainty of product development, risks associated 
with acquisitions, the potential inability to finance future capital needs, 
operating losses, competition, probable fluctuations in operating results, 
reliance on key personnel, the risk of business interruptions, potential 
inability to protect proprietary rights and the risk of defects, as discussed 
under the heading "Risk Factors" in the Company's Form 10-K for the 
Transition Period from April 1, 1997 through December 31, 1997.

Corporate Repositioning

     During 1997, Star Technologies, Inc. ("Star" or the "Company") completed 
a transition from providing performance-enhancing computing products and 
solutions principally for the medical imaging market to providing imaging 
solutions for the broader document imaging market.  In July 1997, the Company 
sold its medical imaging archival technology, and through a newly-created 
operating subsidiary, PowerScan, Inc. ("PowerScan"), acquired document 
imaging and processing technology as its entry into this broader market.  
Additionally, in October 1997, the Company acquired Curran Data Technologies, 
Inc. ("CDT"), a provider of data entry imaging services.  With these two 
acquisitions, Star is a provider of integrated products and services for 
commercial and government users involved in data capture, image capture and 
document imaging.  These two acquisitions are part of the Company's long-term 
growth plan to build market presence in the document imaging market through 
strategic acquisitions and alliances.  

Results of Operations

     Results of operations for the three and nine months ended September 30, 
1998 are not directly comparable to the results of operations for the same 
prior-year period due to the repositioning of the Company's line of business 
from the medical imaging market to the document imaging market.

Revenue

     Total revenue for the three months ended September 30, 1998 increased to 
$1,673,000, from $439,000 for the same period a year ago.  Total revenue for 
the nine months ended September 30, 1998 increased to $4,357,000, from 
$717,000 for the same period a year ago.
                                     -8-
<PAGE>
     Product revenue was $837,000 and $160,000 for the three months ended 
September 30, 1998 and 1997, respectively, representing 50% and 36% of total 
revenue for such periods.  Product revenue was $1,703,000 and $205,000 for 
the nine months ended September 30, 1998 and 1997, respectively, representing 
39% and 29% of total revenue for such periods.  Product revenue consists of 
revenue from the sale of PowerScan and StageWorks software as well as 
computer hardware and scanning equipment.

     Service revenue was $836,000 and $279,000 for the three months ended 
September 30, 1998 and 1997, respectively, representing 50% and 64% of total 
revenue for such periods.  Service revenue was $2,654,000 and $512,000 for 
the nine months ended September 30, 1998 and 1997, respectively, representing 
61% and 71% of total revenue for such periods.  Service revenue consists of 
revenue from data entry and imaging services, maintenance, integration, 
installation, and systems training provided to the Company's customers.

     In the first nine months of 1998, the Company broadened its distribution 
strategy for its imaging software by expanding its presence within the 
channels and building strategic relationships with leading developers of 
workflow and document processing products.  In this regard, the Company's 
PowerScan subsidiary continued to add to its growing list of Value Added 
Resellers ("VAR"), distributors and integrators that market the PowerScan and 
StageWorks software.  In January 1998, the Company entered into a software 
purchase agreement with BancTec, Inc. for BancTec to purchase PowerScan and 
StageWorks software products and integrate them into a new microfilm-based 
digital capture product.  BancTec has advised the Company that delivery under 
this agreement is now expected to commence in the first quarter of 1999.  
There can be no assurance that these arrangements or agreements will result 
in substantial sales.

Cost of Revenue

     Cost of product revenue was $302,000 and $28,000 for the three months 
ended September 30, 1998 and 1997, respectively representing 36% and 18% of 
total product revenue in the respective periods.  Cost of product revenue was 
$503,000 and $191,000 for the nine months ended September 30, 1998 and 1997, 
respectively, representing 30% and 93% of total product revenue in the 
respective periods.  Cost of product revenue primarily includes costs 
associated with the purchase of hardware products and scanning equipment for 
resale.  The cost of product revenue as a percentage of product revenue 
varies from period to period depending on the ratio of software revenue, 
which has a significantly lower cost than hardware revenue.

     Cost of service revenue was $608,000 and $96,000 for the three months 
ended September 30, 1998 and 1997, respectively, representing 73% and 34% of 
total service revenue in the respective periods.  Cost of service revenue was 
$1,895,000 and $391,000 for the nine months ended September 30, 1998 and 
1997, respectively, representing 71% and 76% of total service revenue in the 
respective periods.  The increase in the dollar amount of cost of service 
revenue is primarily attributable to an increase in compensation and related 
benefits, non-employee labor costs and third party maintenance contracts.
                                     -9-
<PAGE>
Research and Development

     Research and development ("R&D") expense consists primarily of:  
compensation and related benefits; the use of independent contractors for 
development projects; and an allocated portion of general overhead costs, 
including occupancy.  At September 30, 1998, the research and development 
staff consisted of 10 employees and contractors.  The majority of product R&D 
expense for the current quarter and nine months relates to on-going product 
enhancements.  R&D expense was $182,000 and $203,000 for the three-month 
period ended September 30, 1998 and 1997, respectively, representing 11% and 
46% of total revenue in the respective periods.  R&D expense was $589,000 and 
$667,000 for the nine-month period ended September 30, 1998 and 1997, 
respectively, representing 14% and 93% of total revenue in the respective 
periods.  The decrease in the dollar amount of R&D expense for the three- and 
nine-month periods ended September 30, 1998 compared to the same period of 
the prior year is primarily attributable to the Company's sale in July 1997 
of its medical imaging technology, offset in part by R&D expense associated 
with the Company's document imaging software, acquired in July 1997.  The 
decrease as a percentage of total revenue is due to the Company's corporate 
repositioning and the resultant increased revenue.  The Company believes that 
R&D expenditures, including compensation of technical personnel, are 
essential to maintaining its competitive position and expects these costs to 
increase and continue to constitute a significant percentage of revenue.

Selling, General and Administrative

     Selling, general and administrative ("SG&A") expense consists primarily 
of:  compensation and related benefits and reimbursable travel and living 
expenses related to the Company's sales, marketing and administrative 
personnel; advertising and marketing expenses, including trade shows and 
similar type sales and marketing expenses; and general corporate expenses, 
including occupancy costs.  SG&A expense for the three months ended September 
30, 1998 was $1,136,000, compared to $794,000 for the same period a year ago.  
SG&A expense for the nine months ended September 30, 1998 was $3.6 million, 
compared to $1.8 million for the same period a year ago.  The increase in the 
dollar amount of SG&A expense is primarily due to the additional SG&A expense 
associated with the Company's new PowerScan and CDT subsidiaries, offset in 
part by the elimination of certain costs associated with the Company's former 
medical imaging business.

Interest and Other Income

     During the three and nine months ended September 30, 1998, the Company 
incurred $19,000 and $28,000, respectively, of net interest expense.  During 
the three and nine months ended September 30, 1997, the Company earned 
$69,000 and $212,000, respectively, of net interest income.

     Other income for the three and nine months ended September 30, 1998 was 
$13,000 and $15,000, respectively.  For the three and nine months ended 
September 30, 1997, other income totalled $489,000 and $637,000 and included 
the gain on the sale of the Company's medical imaging archival technology in 
July 1997.
                                    -10-
<PAGE>
Net Loss

     The net loss for the three months ended September 30, 1998 was $561,000 
($.03 per share) compared with a net loss of $124,000 ($.01 per share) for 
the same period of the prior year.  The net loss for the nine months ended 
September 30, 1998 was $2.2 million ($.11 per share) compared with a net loss 
of $1.5 million ($.08 per share) for the same period of the prior year.  The 
net loss is due primarily to the corporate repositioning of the Company, and 
the associated integration of the document imaging operations acquired as a 
result of the two acquisitions discussed above.  In spite of the net loss, 
management continues to believe that the document imaging market is a 
significant market.  Management believes it has made investments in the 
talent and technology necessary to establish the Company in this marketplace.  
However, there can be no assurance that the Company will be able to achieve 
consistent profitability on a quarterly or annual basis or that it will be 
able to sustain or increase its revenue growth in future periods.  Based upon 
the expenses associated with current and planned staffing levels, 
profitability is dependent upon increasing revenues.

Liquidity and Capital Resources

     At September 30, 1998, the Company had $28,000 of cash and equivalents 
and $263,000 borrowing availability under its credit facilities discussed 
below.  The Company had a net cash outflow from operating activities of $1.4 
million for the nine months ended September 30, 1998.

     In September 1998, the Company entered into a subordinated note 
agreement with a Director.  The note is secured by certain assets of the 
Company, carries interest at 12% per annum, is due in February 1999 and 
totalled $125,000 at September 30, 1998.  The Director has the option to 
convert the note into shares of the Company's common stock if the note goes 
into default.

     In April 1998, the Company entered into a one-year $750,000 working 
capital line of credit with a financial institution.  The line of credit is 
secured by the Company's accounts receivable, inventory and other assets and 
allows borrowings of up to 80% of the eligible accounts receivable balance.  
The line of credit carries an interest rate of prime plus 3% as well as a 
service fee ranging from .75% to 1.5% of the amount borrowed.  At September 
30, 1998, the Company had borrowed $284,000 under this line of credit and had 
$263,000 available for future borrowings.  Additional available credit under 
this facility will depend on the Company generating additional revenue.

     Also in April 1998, the Company entered into a one-year $300,000 line of 
credit with a bank.  The line of credit is secured by the Company's 
short-term investment in Lumisys common stock, carries interest at prime plus 
one percent and allows borrowings of up to 70% of the Lumisys stock's market 
value.  At September 30, 1998, the Company had borrowed all that was 
currently available under this line of credit.  Such borrowings totalled 
$243,000 at September 30, 1998.
                                    -11-
<PAGE>
     The Company has a secured promissory note with a vendor in the amount of 
$115,000 at September 30, 1998.  The note bears interest of 9.5% per annum 
through September 1998, and 12% thereafter.  The Company is currently in 
default with respect to its payment obligations under this note.  Such 
default has resulted in the creditor having the right to accelerate the 
balance due under the note and exercise other rights available under the law, 
including foreclosing on the computer equipment serving as collateral for 
such note.  The Company is working with the creditor to waive any current 
defaults and to restructure the timing of remaining payments thereunder.  
There can be no assurances that such creditor will agree to waive all 
existing defaults and extend the timing of remaining payments due under the 
note.  The existence of such default may also activate cross-default 
provisions under the Company's working capital line of credit and its bank 
line of credit.

     In addition, the Company is delinquent in its payments due certain 
vendors to the Company.  The Company has extended payment terms with certain 
vendors and continues to seek to extend payment terms from additional 
vendors.  If unsuccessful, such parties may take actions against the Company, 
including the termination of their relationship with the Company or the 
initiation of collection proceedings.

     The Company's net losses from operations and acquisitions to date have 
consumed substantial amounts of cash.  The continuing operation of the 
Company's business, and the continued development and commercialization of 
its technology, products and services, will require the availability of 
additional funds for the foreseeable future.  The Company's ability to obtain 
cash adequate to fund its needs depends generally on the results of its 
operations and the availability of financing.  Without continued increases in 
revenues or obtaining additional financing, the Company may be required to 
make additional reductions in operating expenses, which may have a material 
adverse effect on the Company.  If the Company has insufficient funds for its 
needs, the Company may not be able to raise additional funds on favorable 
terms, if at all, or may not be able to do so on a timely basis.  Failure to 
obtain additional funds when needed could materially adversely affect the 
Company.

     In view of the Company's additional liquidity requirements, the Company 
is also continuing to seek to sell additional equity or convertible debt 
securities or pursue debt financing arrangements.  To date, the Company has 
no commitments, agreements or understandings with respect to additional 
financing and there can be no assurance that the Company will be able to 
consummate any such transaction or raise adequate funds from such transaction 
to meet the Company's cash needs.  As a result of the delisting of the 
Company's common stock from the Nasdaq SmallCap Market in June 1998, 
investors may suffer a loss of liquidity in the shares of such stock and the 
Company may have difficulty raising funds in the capital markets.  Further, 
the sale of additional equity or convertible debt securities could result in 
dilution to the Company's stockholders.

     The Series B and Series C Senior Preferred Stock (the "Preferred Stock") 
currently accrue dividends at a rate of 10% per annum.  To the extent 
declared, such dividends would be payable quarterly in the amount of $50,000 
in cash.  Unpaid cumulative dividends in arrears on Preferred Stock total 
$425,000 as of September 30, 1998.
                                    -12-

<PAGE>
Year 2000 Disclosure

     The Company's software products are Year 2000 compliant as long as the 
operating system on which they are used is Year 2000 compliant.  The Company 
has made reasonable effort to ensure that the third-party software sold with 
its products is Year 2000 compliant.  Based upon its efforts, the Company is 
confident that its use of third-party software will have no effect on its 
software products' ability to meet Year 2000 requirements.  

     With respect to its internal computer systems, the Company's Year 2000 
corrective actions include reprogramming impacted software when appropriate 
and feasible, obtaining vendor-provided software upgrades when available and 
completely replacing impacted systems when necessary.  The Company expects to 
implement successfully the systems and programming changes necessary to 
address Year 2000 issues with respect to its internal systems and does not 
believe that the cost of such action will have a material adverse effect on 
its financial condition or results of operations.  Although the Company is 
not aware of any material operational issue or costs associated with 
preparing its internal systems for the Year 2000, the failure of the Company 
or its distributors, resellers, suppliers, manufacturers and customers to 
complete the conversions or upgrades necessary to fully address the Year 2000 
issues in a timely manner could have a material adverse effect on the 
Company's business, results of operations, cash flows and financial condition.

Effect of New Accounting Standards

     In June 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 131 ("FAS No. 131"), "Disclosure about 
Segments of an Enterprise and Related Information".  FAS No. 131 requires the 
Company to present certain information about operating segments and related 
information, including geographic and major customer data, in its annual 
financial statements and in condensed financial statements for interim 
periods.  The Company is required to adopt the provisions of this Statement 
during the fourth quarter of fiscal year 1998.  The effect of adoption of 
this statement will be limited to the form and content of the Company's 
disclosures and will not impact the Company's results of operations, cash 
flow or financial position.

                                    -13-
<PAGE>
PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings

     The Company is from time to time a party to litigation arising in the 
normal course of its business.  Such claims, even if lacking merit, could 
result in the expenditure of significant financial and managerial resources.  
Management believes that no currently pending or threatened actions will have 
a material and adverse effect on the financial condition or results of 
operations of the Company.



                                    -14-

<PAGE>
     Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits.

         The exhibits filed herewith or incorporated by reference are set 
         forth on the Exhibit Index immediately preceding the exhibits.

     (b) Reports on Form 8-K.

         On August 17, 1998, the Company filed with the Commission a Current 
         Report on Form 8-K, dated August 17, 1998, regarding the delisting 
         of the Company's common stock from the Nasdaq SmallCap Market.







                                    -15-
<PAGE>
                                 SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                                 STAR TECHNOLOGIES, INC.


Dated:  November 16, 1998        /s/ Brenda A. Potosnak                
                                 Brenda A. Potosnak
                                 Vice President of Finance and
                                 Administration, Secretary, Treasurer
                                 and Chief Financial Officer







                                    -16-

<PAGE>

                                     EXHIBIT INDEX

    Exhibit
      No.  

      3.1*       Restated Certificate of Incorporation of the Company, as 
                 amended, incorporated by reference from the Company's Annual 
                 Report on Form 10-K for the fiscal year ended March 31, 1988 
                 (Registration No. 0-13318) filed with the Commission on June 
                 29, 1988.

      3.2*       Certificate of Designation, Preferences and Rights of Series 
                 B Senior Preferred Stock and Series C Senior Preferred Stock 
                 ("Certificate of Designation"), incorporated by reference 
                 from the exhibit filing to the Company's Annual Report on 
                 Form 10-K for the fiscal year ended March 31, 1990 
                 (Registration No. 0-13318) filed with the Commission on June 
                 29, 1990.

      3.3*       Certificate of Amendment of Restated Certificate of 
                 Incorporation of the Company, dated August 29, 1994, 
                 incorporated by reference from the Company's Annual Report 
                 on Form 10-K for the fiscal year ended March 31, 1995 
                 (Registration No. 0-13318) filed with the Commission on June 
                 29, 1995.

      3.4*       Certificate of Amendment of Restated Certificate of 
                 Incorporation of the Company, dated August 23, 1996, 
                 incorporated by reference from the exhibit filing to the 
                 Company's Quarterly Report on Form 10-Q for the Quarter 
                 ended September 30, 1996 (Registration No. 0-13318) filed 
                 with the Commission on November 14, 1996.

      3.5*       By-Laws of the Company, as amended and restated on February 
                 24, 1994, and as further amended on August 22, 1996, 
                 incorporated by reference from the exhibit filing to the 
                 Company's Quarterly Report on Form 10-Q for the Quarter 
                 ended September 30, 1996 (Registration No. 0-13318) filed 
                 with the Commission on November 14, 1996.

      11         Statement Regarding Computation of Per Share Earnings.

      27         Financial Data Schedule.













*Incorporated by reference.

                                    -17-