UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                 FORM 10-K
   (Mark One)

   (X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
   EXCHANGE ACT OF 1934
   For the fiscal year ended September 30, 1998
                                       or

   (  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934
   For the transition period from _________ to _____________

   Commission file number   0-26074

                              SPYGLASS, INC.
          (Exact Name of Registrant as Specified in its Charter)

   DELAWARE                                37-1258139
   (State or other jurisdiction of         (I.R.S. Employer
   incorporation or organization)          Identification No.)

    1240 E. Diehl Road, 4th Floor, Naperville, IL 60563 (630) 505-1010
      (Address of principal executive offices, zip code, registrant's
                  telephone number, including area code)

     Securities registered pursuant to Section 12(b) of the Act:  None

        Securities registered pursuant to Section 12(g)of the Act:
                       $0.01 par value Common Stock
                             (Title of Class)
                   Traded on the Nasdaq National Market

   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  ____

   Indicate by check mark if disclosure of delinquent filers pursuant to
   Item 405 of Regulation S-K is  not contained herein, and will not  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-K or any amendment to this Form 10-K.   __X____

   The aggregate market value of the Common Stock held by non-affiliates
   of the registrant on  October 30, 1998, based  upon the closing  sale
   price of the Common Stock on the Nasdaq National Market on that  date
   as  reported   in  The   Wall  Street   Journal,  was   approximately
   $182,285,831

   Registrant had 14,973,150  shares of Common  Stock outstanding as  of
   December 9, 1998.

   DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the registrant's 1998  Annual Report to Stockholders  for
   fiscal 1998 are incorporated by reference in Parts II and IV  hereof.
   The Annual Report shall  be deemed "filed"  with the Commission  only
   with respect to those portions specifically incorporated by reference
   herein.  Portions of the registrant's definitive Proxy Statement  for
   its Annual Meeting  of Stockholders for  fiscal 1998,  which will  be
   filed with the  Securities and  Exchange Commission  within 120  days
   after the  end of  the Company's  fiscal  year, are  incorporated  by
   reference into Part III hereof.
<PAGE>
   PART I
   Item 1.   Business

   General

   Spyglass, Inc.  ("Spyglass" or  the "Company")  was organized  as  an
   Illinois corporation in February 1990 and reincorporated in  Delaware
   in May 1995.  Spyglass entered the Internet market during fiscal 1994
   and, from fiscal  1994 through fiscal  1996, focused  its efforts  on
   developing, marketing  and distributing  Internet client  and  server
   technologies for  incorporation  into  a  variety  of  Internet-based
   software products and services.  Since  fiscal 1997, the Company  has
   been focusing on the development,  marketing and distribution of  its
   technologies and services to the non-PC Internet device  marketplace.
   In February 1998, Spyglass reorganized its business to integrate  its
   development, professional  services and  marketing resources.    This
   change has allowed Spyglass to target  its tailored solutions to  the
   needs of  the various  vertical sectors  within the  Internet  device
   market.

   Spyglass  provides  its  customers   with  expertise,  software   and
   professional services  that  enable  them to  rapidly  develop  cost-
   effective Internet-enabled devices.   Spyglass professional  services
   include custom engineering  for defining,  developing and  delivering
   complete, end-to-end project solutions.  Spyglass solutions have been
   integrated into a variety of products,  including but not limited  to
   televisions, office equipment,  television set-top boxes,  industrial
   controls, network  computers  and screen  and  cellular phones.    In
   addition, several  major  corporations  have  deployed  SurfWatch,  a
   leading  content  filtering  software  designed  to  block   unwanted
   material from the Internet.

   On  November  14,   1997,  the  Company   acquired  AllPen   Software
   ("AllPen").   AllPen,  located  in Los  Gatos,  California,  develops
   software  solutions  and   technologies  and  provides   professional
   services for the Internet device  marketplace.  These solutions  have
   been successfully applied  in television,  screenphone, handheld  PC,
   mobile and wireless products.  This transaction was effected  through
   the exchange of 639,246 shares of common stock of the Company for all
   of the issued and outstanding shares of AllPen.  This transaction was
   accounted for under  the pooling of  interests method of  accounting.
   Because the  effect  of  this transaction  on  prior  year  financial
   statements was considered immaterial, such financial statements  were
   not restated; instead,  the Company's equity  accounts were  adjusted
   for the effect of the pooling.

   In October  1998,  General  Instrument  Corporation  ("GI")  acquired
   700,000 shares of the Company's common stock for $7,392,000 and  also
   acquired warrants  to  purchase  an additional  700,000  shares.  The
   warrants have exercise prices ranging from $13.20 to $14.78 per share
   (subject  to  adjustment  in   certain  circumstances),  and   become
   exercisable on varying dates over a five-year period.  In  connection
   with this investment, the  Company and GI  entered into a  three-year
   agreement under  which the  Company will  develop and  integrate  new
   Internet cable services and technologies for  GI.  This work will  be
   performed through a newly-formed subsidiary of the Company, in  which
   GI will hold a 10% minority interest and which GI will have an option
   to purchase at fair market value under certain circumstances.
<PAGE>
   A central element of the Company's business strategy is its use of an
   Original Equipment Manufacturing ("OEM")  distribution network.   The
   Company chose this approach to enable  it to leverage the  marketing,
   distribution and development resources  of much larger  organizations
   that are strategically focused  on offering value-added products  and
   services that leverage the Internet. The Company intends to  continue
   to increase  the performance,  functionality and  flexibility of  its
   technology offerings and breadth of its services to meet the evolving
   needs of  Internet  users  and to  continue  to  invest  in  building
   customer awareness of  the Spyglass name  and the  range of  Internet
   solutions available from Spyglass.

   The  Company's  future  results  of   operations  will  be  largely
   dependent upon  a number  of  factors relating  to  development and
   acceptance of the Internet as a commercial market, particularly use
   of the Internet through  non-PC devices, and  the Company's ability
   to establish its solutions  as widely-accepted in the  market.  See
   the "Future  Operating Results"  section incorporated  by reference
   into Item 7 of this Annual Report on Form 10-K.

   The Internet

   The Internet is a  worldwide network that  links thousands of  public
   and private  computer  networks. The  Internet  began in  1969  as  a
   project of the Advanced Research Projects Agency ("ARPA") of the U.S.
   Department of Defense to connect different types of computers  across
   geographically disparate  areas. The  ARPA  network was  designed  to
   allow any  computer on  the network  to  communicate with  any  other
   computer on the network through an open communications protocol known
   as TCP/IP.

   The World Wide Web ("WWW") was introduced in 1992.  The WWW is  based
   on a  client/server system  in  which certain  computers  ("servers")
   store files  and  respond  to requests  issued  by  remote  computers
   ("clients"  )  to  download   the  files,  thus  allowing   multiple,
   geographically dispersed users to view and use the information stored
   on a single  server.  The  client must contain  software, known as  a
   browser, that can read Hyper Text   Markup Language (HTML)  documents
   and follow  their  hypertext links  to  retrieve and  display  linked
   documents from servers.

   In order  to  support the  continued  growth and  popularity  of  the
   Internet, certain "infrastructure" elements must expand to handle the
   resulting increases in  Internet demand and  traffic. These  elements
   include  widespread,  inexpensive  Internet  access,  either  through
   Internet access providers or  on-line services, and widely  available
   high-speed communications  channels  to  accommodate  the  increasing
   number and size of files available for downloading.

   Products and Technologies
   Spyglass products and technologies deliver the embedded Internet  and
   infrastructure solutions needed to effectively connect a wide variety
   of devices  to  the  Internet and  leverage  the  wealth  of  on-line
   information and  communication  options.  Spyglass  products  deliver
   benefits to  a  wide  range  of  groups  such  as  consumers,  device
   manufacturers,  content   providers,  internetworking   vendors   and
   Internet service providers (ISPs").
<PAGE>
   Spyglass' solutions provide  its partners  with a  complete array  of
   software and services necessary  to make devices  work with the  Web.
   Spyglass solutions enable Web connectivity from virtually any device,
   while providing  the  infrastructure solutions  needed  to  eliminate
   performance "bottlenecks" and  deliver value-added  services such  as
   content filtering and  conversion. And, critically  important to  the
   mass deployment of  these new  devices, these  solutions ensure  that
   these devices have access  to evolving Web  content without the  need
   for changes in  the original  Web content  or costly  changes to  the
   device's software.

   Spyglass Embedded Internet Technologies

   Spyglass Device Mosaic
   Spyglass  Device  Mosaic  is  the  embedded  industry's  first  full-
   featured, thin  browser.    Occupying less  than  1MB  of  code  when
   compiled specifically  for  devices,  it supports  the  key  Internet
   standards to  deliver  information  to  devices.    Moreover,  Device
   Mosaic's modular design  makes it scalable  across a  broad range  of
   devices.   Features can  be  added to  support  the latest  needs  of
   televisions and  set-top boxes  or a  stripped  down version  can  be
   embedded in  more  memory-constrained  screen  phones  and  hand-held
   devices. To  further reduce  memory  footprint, Device  Mosaic  comes
   bundled with its own graphics library, the Spyglass ThinGUI  Library,
   which enables rich  GUI (graphical user  interface) functionality  in
   less than 300KB of code.  Easily ported to a variety of popular real-
   time operating systems,  Device Mosaic  enables consumer  electronics
   manufacturers to add Web  functionality to products quickly,  cutting
   development costs and sharply reducing time to market.

   Spyglass Device Mail
   Spyglass  Device  Mail  is  an  embedded  email  technology  designed
   specifically  for   televisions,   cellular  phones,   and   handheld
   computers.  Specifically  designed  and  built  for  these  products,
   Spyglass Device Mail requires very little  memory and is designed  to
   run on the embedded or real-time operating systems that are  commonly
   used by  consumer  electronics and  office  equipment  manufacturers.
   Spyglass Device  Mail  supports  SMTP and  IMAP4  Internet  messaging
   standards, and optionally  supports POP3. Spyglass  Device Mail  will
   work with any  ISP, eliminating the  need for  a proprietary  dial-up
   network.

   Spyglass MicroServer
   Spyglass MicroServer  is a  small footprint  Web server  that can  be
   embedded in devices such  as copiers, printers, industrial  controls,
   and manufacturing equipment. It  delivers standards-based Web  server
   functionality in as little as 10KB  of random access memory  ("RAM").
   Application user interfaces for Spyglass MicroServer enabled  devices
   are authored in HTML and may be used with any commercial Web browser.
   Typical uses include providing operational or status information to a
   user, updating a device's internal  database, or initiating a  device
   action, such as running a diagnostic. Developed specifically for  the
   embedded systems market, Spyglass MicroServer has been ported to many
   of the leading real-time operating systems.

   Spyglass Mobile Forms Database
   Spyglass Mobile Forms Database  is a mobile  database and forms  data
   collection application for Windows CE handheld PCs (HPCs).   Spyglass
   Mobile Forms  Database  works  with the  latest  Windows  CE  devices
   including  the  Philips  Velo,  the  HP  320LX,  Casio's  Cassiopeia,
   Compaq's PC Companion,  LG's Phenom, and  NEC's MobilePro.   Spyglass
   Mobile Forms  Database  allows  users  to  create  powerful  handheld
   databases that precisely fit their mobile data collection needs.  The
   database exists on a handheld device for easy collection of important
   data while freeing users from their  desktop. Exchanging data with  a
   desktop is made easy with the import/export functionality.

   Spyglass Infrastructure Technologies

   Spyglass Prism
   Spyglass Prism is a  server-based content delivery platform  designed
   to optimize  the performance  of the  new generation  of  Web-enabled
   devices by dynamically  converting existing Web  content for  optimal
   delivery and display  on a wide  variety of  devices. Spyglass  Prism
   dynamically translates richly formatted  Web content such as  tables,
   JPEG images,  frames and  Java applets  into formats  that match  the
   relatively  limited  display  capabilities  of  non-PC  devices.  For
   example, with a  Personal Digital Assistant  ("PDA"), Spyglass  Prism
   converts memory and bandwidth intensive color images into a  simpler,
   grayscale format  and  resizes those  images  for the  PDA's  smaller
   display. These conversions of graphic-laden content can reduce access
   times by  as much  as 90%.    Performance is  further enhanced  by  a
   feature that stores  previously converted,  frequently requested  Web
   content. SurfWatch content  filtering can also  be added to  Spyglass
   Prism, allowing users to block access to objectionable Web content.

   Spyglass Remote Mosaic
   Spyglass Remote Mosaic  brings Web browsing  capabilities to  devices
   with extremely  limited computing,  RAM or  display capacity.    Such
   devices include PDAs, cellular phones, pagers, low-end set-top  boxes
   and traditional television sets.  By  splitting the browser into  two
   components -a lightweight viewer  which resides in  the device and  a
   proxy browser that resides  on a server  -Spyglass Remote Mosaic  can
   deliver Web-browsing functionality in as little as 50K of RAM on  the
   device. This unique design reduces the  amount of memory required  on
   the device, and
   simplifies upgrades  by  putting most  of  the functionality  on  the
   server.

   SurfWatch Technologies

   SurfWatch Client Products

   SurfWatch Client from Spyglass is an easy-to-use, effective software
   application for  screening  unwanted  material  from  the  Internet.
   SurfWatch Client  versions  include:  SurfWatch  for the  Macintosh,
   SurfWatch for Windows 95 and SurfWatch for Windows 98.
                 
   SurfWatch Client blocks access  to a comprehensive  list of sites  in
   any or all of five "core" categories pertaining to sexually  explicit
   material, violence, hate speech, drugs/alcohol/tobacco, and  gambling
   as well as allowing users to block all access to all chat.

   SurfWatch Server Products
   SurfWatch Server-based products plug into or act as an add-on to 
   Microsoft and Netscape proxy servers and the Check Point  FireWall-1.
   As described  in the  SurfWatch Client  Products section  above,  the
   filtering technology included in the SurfWatch Server-based  products
   blocks  the  same  unwanted,  inappropriate  material  on   computers
   connected  to   the   network   enabling   centralized   (easier)
   administration of the filtering solution throughout a school district
   or corporation.   SurfWatch Server-based products include:  SurfWatch
   Standard   Edition,   Surfwatch   Educational   Edition,    SurfWatch
   Professional  Edition,  SurfWatch  for  Check  Point  FireWall-1  and
   SurfWatch SDK.     All editions  includes the  ability to  administer
   different  levels  of   filtering  to  different   people  (so   that
   individuals or groups can have varied levels of Web access), and
   further allows customization based on the time of day or the day of
   the week.

   In additon to the above,  the SurfWatch Educational Edition  provides
   Secure Learning_ environments  (or "white lists").   These  inclusive
   lists of accessible Web content direct students to educational  sites
   while steering them  away from sexually  explicit materials,  violent
   content, hate  speech,  gambling  sites and  sites  promoting  drugs,
   alcohol or tobacco.  The SurfWatch Professional Edition and SurfWatch
   for Check Point FireWall-1 add productivity categories to the already
   existing sites that are blocked.   These categories include, but  are
   not limited to, entertainment, games, job search, sports and  travel.
   SurfWatch  SDK  enables  software   developers  to  embed   SurfWatch
   filtering  technology  into  their   own  hardware  and/or   software
   applications.

   Marketing, Sales, and Distribution

   The Company  distributes  its  technologies  through  a  distribution
   network  of  OEMs  that   includes  device  manufacturers,   platform
   developers, infrastructure hardware providers, service providers  and
   content developers that  incorporate Internet  technology into  their
   products and services.  Spyglass has adopted this distribution  model
   to increase  its presence  in the  marketplace, and  to leverage  the
   marketing, distribution and development  resources of its  customers.
   Certain products,  such  as the  SurfWatch  products, are  also  sold
   directly to  end users  via direct  sales and  telesales and  through
   value-added resellers ("VARs") and distributors.

   Since it shifted its direction to the non-PC marketplace, the Company
   has been focusing its  marketing efforts on  a variety of  companies,
   including but  not  limited  to real  time  operating  system  (RTOS)
   vendors,  consumer  and  industrial  device  manufacturers,  software
   developers, cable companies, Regional Bell Operating Companies (RBOC)
   and  Internet  Service  Providers  (ISP).    Efforts  include  direct
   marketing campaigns, advertising campaigns  and participating in  the
   engineering and trade conferences and shows focused on these  markets
   and industries.    In  addition,  the  Company  is  targeting  public
   relations efforts  at  analysts,  the trade  press  and  other  media
   relevant to the Internet device market.

   The Company's  license  arrangements  with  its  customers  typically
   provide  for  a   non-exclusive  license   to  incorporate   Spyglass
   technology into the customer's  products and services and  distribute
   the Spyglass  technology.    These  licenses  generally  provide  for
   royalties based on  the number  of copies  distributed and  generally
   include up-front minimum royalty commitments.

   The Company derived approximately 15% of its revenues for the  fiscal
   year ended September 30, 1998 from Motorola Corporation and 39.5%  of
   its revenues  for  the fiscal  year  ended September  30,  1997  from
   Microsoft Corporation.  As the  Internet device market develops,  the
   Company expects to continue  to derive a  significant portion of  its
   revenues from a relatively limited number of customers.

   As of December 10, 1998, the Company had 8 employees in marketing and
   15 in sales.  The Company currently operates sales offices located in
   Cambridge, Massachusetts,  San  Ramon,  California,  Morristown,  New
   Jersey, Marina  del Rey,  California, Berkshire,  United Kingdom  and
   Tokyo, Japan.

   Professional Services Organization
   The  Spyglass  Professional  Services  organization  provides  custom
   solutions  and  support  for  the  Company's  customers  through  its
   professional services  and customer  services groups.   These  custom
   solutions are essential to Spyglass' overall strategy.

   Professional Services Group
   The  Professional   Services   group  provides   strategic   Internet
   consulting, custom engineering, development, systems integration  and
   project management  services.    These services  are  provided  on  a
   project basis to  assist customers in  developing unique products  or
   services  utilizing  Spyglass  technologies  and  other  third  party
   technologies.   This group  consists of  senior consulting  managers,
   experienced  engineering   developers,   senior   technologists   and
   architects, technical writers and quality assurance specialists.

   Customer Services Group
   Most of the  Company's customers enter  into support agreements  with
   the Company for  annual fees  based upon  on the  number of  products
   licensed, platforms supported and copies distributed.  These  support
   agreements entitle  the  customer  to the  backup  technical  support
   described below as well as product updates and enhancements.

   The Company tracks all support requests through a series of  customer
   databases that maintain current status reports as well as  historical
   logs of customer interaction.  Support specialists diagnose and solve
   technical problems related  not only to  the Company's products,  but
   also to  other software  and technologies  with which  the  Company's
   products interact.  In  addition,  support  specialists  provide  the
   customer with direct  access to the  Company's development  engineers
   and  report  customer   and  end-user  feedback   to  the   Company's
   development staff. Other  types of support  provided to the  customer
   include technical reports, documentation, status reports for  product
   upgrades and updates,  and support during  Beta test and  pre-release
   cycles.

   As of December  10, 1998, the  Company employed 29  employees in  its
   Professional Services organization.

   Product Development
   An important factor in the Company's ability to deliver state-of-the-
   art solutions to its customers is the technology base the Company can
   leverage in the creation of  customized solutions for its  customers.
   The Company  has  a suite  of  embedded Internet  and  infrastructure
   solutions that it continues to develop in order to support the latest
   Internet technologies and  standards.  These  core technologies  form
   the basis for most of the Company's customer solutions.

   The Company's  primary development  efforts are  focused on  embedded
   Internet  technologies   for   HTML  rendering   and   browsing   and
   infrastructure  technologies   that  enhance   the  performance   and
   functionality of non-PC devices connected to the Internet.

   In order to respond to rapidly changing competitive and technological
   conditions, the Company  may seek to  enhance or  expand its  product
   offerings by  licensing one  or  more complementary  technologies  or
   products or acquiring one or more complementary companies.

   Because many  of the  significant  technologies incorporated  in  the
   Spyglass product  suite  are  implementations  of  Internet  standard
   protocols  which  are  constantly  evolving,  the  Company   actively
   participates in  a number  of Internet  standards-setting groups  and
   technical conferences.

   As of   December  10, 1998,  the Company's  research and  development
   staff,  which  is  responsible   for  product  development,   quality
   assurance,  technical   communication   and   product   coordination,
   consisted of 40 full-time employees.   From time to time the  Company
   employs   independent   contractors    for   software    development,
   documentation, artistic design and quality  reviews.  For the  fiscal
   years  ended  September  30,  1998,  1997  and  1996,  research   and
   development expenses  were  $9,173,000, $13,644,000  and  $6,801,000,
   respectively,  which  represented  45%,  64%  and  30%  of  revenues,
   respectively.

   Competition
   The market  for  Internet technologies  and  services  is extremely
   competitive, and competition is  likely to increase  in the future.
   The Company currently faces competition  from other Internet device
   technology vendors  and  service  providers  such  as  Oracle,  Sun
   Microsystems, Microsoft, on-line service companies, Internet access
   providers and  networking  software companies.    Additionally, the
   Company considers  a  significant  source  of  competition for  its
   Internet technologies and professional services  to be the prospect
   company's internal resources.

   Spyglass Device  Mosaic  competes  with  several  companies  who  are
   providing lightweight Web browsers  for the emerging Internet  device
   marketplace.   Spyglass  competes with  a  number of  small  start-up
   companies in specific vertical markets.  Spyglass also competes  with
   Microsoft's Pocket Internet Explorer  offering on WindowsCE,  Network
   Computer, Inc. (an Oracle subsidiary), Planet Web and JavaSoft, which
   is attempting to adapt the Java environment to embedded devices.  All
   of  these  companies  are  licensing  their  Web  browser  and  other
   solutions to OEMs.

   Spyglass  Device  Mail  competes  with  several  companies  who   are
   providing e-mail  packages with  their  browsers such  as  Microsoft,
   PowerTV, NCI and a variety of smaller companies.

   Spyglass MicroServer competes with other thin, embeddable Web  server
   technologies, including  those provided  by 3Soft,  Agranat,  emWare,
   Integrated Systems, Inc. and Wind River Systems. The embedded  server
   market is characterized by an abundance of small competitors and  two
   RTOS developers.  Many of the smaller competitors are offering  their
   products at extremely competitive prices in an attempt to establish a
   market position.   The RTOS developers  have the  advantage of  being
   able to  offer embedded  Web server  functionality along  with  their
   operating systems.  The barriers to entry for the embedded Web server
   market are very low, as the amount of software required for a  server
   is very small.

   Spyglass Mobile Forms Database competes  with other products such  as
   Symantic's ACT and Syware's Visual CE.

   At this  time,  the  Company believes  there  are  no  other  content
   conversion servers  that are  being offered  to the  OEM market  that
   directly compete with Spyglass Prism.

   Spyglass Remote  Mosaic faces  competition  primarily from  NCI's  (a
   division of Oracle) DTV Navigator.

   The Company also faces competition  for its SurfWatch Client  product
   from other  companies  who  have  filtering  products,  such  as  The
   Learning  Company's  Cyber  Patrol  and  NetNanny's  NetNanny.    The
   greatest competition is in the home market, due to the low barrier to
   entry.  The SurfWatch Server products face competition primarily from
   NetPartners' WebSENSE and The Learning Company's CyberPatrol.

   In its professional services offerings, Spyglass competes with  other
   technology consulting firms as  well as other technology  competitors
   and customers' in-house research and development staff.

   Competition among  the  current  and  future  suppliers  of  Internet
   software and services could result in significant price  competition.
   Moreover, many  of the  Company's current  and potential  competitors
   have significantly greater financial, technical, marketing and  other
   resources than  the  Company. There  can  be no  assurance  that  the
   Company will  be able  to compete  successfully against  current  and
   future sources of competition or that the competitive pressures faced
   by the Company will  not adversely affect  the Company's revenues  or
   gross margins.

   Proprietary Rights
   One of the Company's  products, Spyglass Device  Mosaic, is based  in
   part on technology  licensed to  the Company under an agreement  with
   the University of Illinois at Urbana-Champaign. This agreement grants
   the Company  the exclusive  (subject to  previously granted  licenses
   described  below)  worldwide   right  to   develop,  distribute   and
   sublicense commercial  derivative versions  of NCSA  Mosaic, the  Web
   browser that  was originally  developed at  the National  Center  for
   Supercomputing Applications on the University of Illinois campus. The
   University Agreement provides  for royalties based  on Spyglass'  net
   revenues from Device Mosaic.  This University Agreement is terminable
   in the event of a material  breach by the Company of its  obligations
   thereunder.   The  University informed  the  Company that,  prior  to
   appointing  the  Company  as  its  exclusive  licensing  agent,   the
   University granted certain rights with respect to NCSA Mosaic and the
   Mosaic trademark  to approximately  10 organizations,  some of  which
   have developed and market WWW browsers based on NCSA Mosaic.

   The University Agreement gives the Company the exclusive right  (with
   certain  limited  exceptions)  to  use  the  University's  trademarks
   "Mosaic" and "NCSA Mosaic" and its spinning globe logo in  connection
   with Spyglass Mosaic products on  a royalty-free basis (with  certain
   limited exceptions). In addition, the Company has the exclusive right
   (with certain limited  exceptions) to use  these marks in  connection
   with the sale of  other products for a  royalty payment based on  net
   revenues derived from  such products.   The University  has filed  an
   application to register the "NCSA Mosaic" and "Mosaic" trademarks  in
   the United States.

   Spyglass has registered the  name "SPYGLASS", the  red "S" logo,  the
   name "SURF-WATCH", and the tag line "MAKE THE NET WORK" in the United
   States.  Spyglass has also  received trademark registrations for  the
   name "SPYGLASS" in a number of  foreign jurisdictions.  Spyglass  has
   filed additional trademark applications in  the United States and  in
   foreign jurisdictions.

   Spyglass  relies   upon   patent,   copyright,   trade   secret   and
   confidentiality  agreements  and/or   license  agreements  with   its
   customers,  employees  and  other   third  parties  to  protect   its
   proprietary technology.    However, effective  intellectual  property
   protections may not be available in every country in which  Spyglass'
   products and services  are provided.   Spyglass has  been issued  and
   continues to seek patent protection from the United States Patent and
   Trademark Office for  its technologies.   The University of  Illinois
   does not have  patent protection  for NCSA  Mosaic. There  can be  no
   assurance that  the steps  taken by  Spyglass (or  the University  of
   Illinois) to protect their  respective proprietary technologies  will
   be adequate to prevent misappropriation thereof by a third party,  or
   that a third party will not be able to independently develop  similar
   technologies.   In addition,  there can  be no  assurance that  other
   parties  will  not  assert  technology  infringement  claims  against
   Spyglass.

   The  Company  licenses  technology  from  a  number  of  vendors  for
   incorporation into the Company's products.  Examples of such licensed
   technologies include security products, image conversion products and
   databases.  Specifically, the Company announced on September 13, 1995
   an agreement  with  RSA  Data Security,  Inc.  ("RSA")  allowing  the
   Company  to  bundle   RSA-security  products   with  its   technology
   offerings.   The agreement  allows Spyglass  to use  RSA's BSAFE  and
   TIPEM software  developer's kits  to  build security  into  Spyglass'
   technology offerings.   BSAFE  is a  well-known cryptographer's  tool
   kit, providing the means to add  multiple algorithms and modules  for
   encryption and authentication features to any application.

   On November 3, 1995, the Company  entered into an agreement with  the
   Java Products Group  of Sun Microsystems,  Inc. to  license the  JAVA
   programming language, the  HOT JAVA browser  and related  technology.
   Under the agreement, the Company is  granted the right to  distribute
   the JAVA Runtime interpreter, the HOT  JAVA browser and certain  JAVA
   classes and interfaces developed  by both Sun and  the Company.   The
   Company also  has the  right to  port so-called  "platform  dependent
   parts" to other platforms.

   Employees

   As of December 10, 1998, Spyglass employed 127 persons, including  23
   in sales  and  marketing,  40 in  research  and  development,  29  in
   professional services and 35 in finance and administrative functions.
   None of the Company's employees are represented by a labor union  and
   Spyglass considers its employee relations to be good.

   Item 2.   Properties

   The Company's executive offices  are located in Naperville,  Illinois
   (27,841 square feet) and are occupied  under a lease that expires  in
   December  1999.  The  Company   also  leases  facilities   Cambridge,
   Massachussets, Los Gatos, California and Los Altos, California.   The
   Company  leases sales offices  in San Ramon, California,  Morristown,
   New Jersey, Marina del Rey, California, Berkshire, United Kingdom and
   Tokyo, Japan.

   Item 3.   Legal Proceedings

   Unisys Corporation ("Unisys") has announced its intention to  require
   the payment  of  royalties  for the  use  of  compression  technology
   associated with the  Graphics Interchange Format  ("GIF"), a  popular
   file format  based  on  compression technology  patented  by  Unisys.
   Spyglass Device Mosaic has the ability to decompress files, including
   files stored in GIF.  The assertion of these patent rights by Unisys,
   if successful,  could  result  in additional  royalty  costs  to  the
   Company or prevent the Company's products from enabling users to view
   files compressed in GIF.

   Item 4.   Submission of Matters To A Vote of Security Holders

   No matters were submitted to a vote of the Company's security holders
   during the quarter ended September 30, 1998.

   Executive Officers of the Registrant

   Name                               Age       Position(s)with the
                                                Company

   Douglas P. Colbeth................ 43        President, Chief Executive
                                                Officer and Director
   Randall T. Littleson.............. 33        Vice President and General
                                                Manager
   Christian T. Nall................. 37        Vice President, Business
                                                Development
   Michael F. Tyrrell................ 39        Executive Vice President,
                                                Business Development
   Gary L. Vilchick.................. 44        Executive Vice President, 
                                                Finance, Administration and 
                                                Operations and Chief 
                                                Financial Officer

   Mr. Colbeth  has  been  President,  Chief  Executive  Officer  and  a
   director of the Company  since he joined the  Company in April  1991.
   Prior to  joining  the  Company, Mr.  Colbeth  spent  four  years  at
   Stellar/Stardent Computer  Corp.,  a  high-end  graphics  workstation
   supplier, in  various management  positions,  most recently  as  Vice
   President/General Manager  of its  AVS software  business unit.  From
   January 1979 until March  1987, Mr. Colbeth  was employed in  various
   sales  and   management  positions   at  Prime   Computer,  Inc.,   a
   minicomputer vendor.     Mr.  Colbeth  received his  B.S.  degree  in
   economics from  Siena  College in  1977  and has  completed  graduate
   studies in managerial economics at Rensselaer Polytechnic Institute.

   Mr. Littleson joined  the Company as  Director, Product Marketing  in
   June 1996 and was  promoted to Vice  President, Marketing in  October
   1996 and Vice President and General Manager in February 1998.   Prior
   to joining the  Company, Mr. Littleson  served in various  management
   positions  for  Seagate  Software  (formerly  Palindrome  Corp.),   a
   developer of data management software solutions, for six years and  a
   systems engineer for Novell  prior to that.   Mr. Littleson  received
   his B.S.  degree from  the University  of Michigan  in 1987  and  his
   M.B.A. from Keller Graduate School of Management in 1994.

   Mr. Nall joined the  Company in September  1995 as Director,  Western
   Operations and was promoted  to Vice President, Business  Development
   in January 1997.  Prior to joining the Company, Mr. Nall was District
   Manager, Midwest Region for Hitachi  Data Systems, a computer  system
   manufacturer, and Business Unit Executive, Silicon Valley for IBM for
   10 years prior  to that.  Mr. Nall received  his Bachelor of  Science
   degree from the University of California, Berkley in 1982.

   Mr. Tyrrell joined the Company in June 1990 as Vice President, Sales.
   Mr.  Tyrrell  has  served  as  Executive  Vice  President,   Business
   Development since  November 1995.  Prior to joining the Company,  Mr.
   Tyrrell spent three years as a  regional sales manager for  Multiflow
   Computer,  Inc.,  a  supercomputer   company.  Mr.  Tyrrell's   prior
   experience includes  five  years of  sales  and sales  management  at
   Celerity Computing and Prime Computer, Inc. Mr. Tyrrell received  his
   B.S. degree in  business administration  from the  University of  New
   Hampshire.

   Mr. Vilchick joined the  Company in December  1995 as Executive  Vice
   President, Finance, Administration and Operations and Chief Financial
   Officer.  Prior  to joining the  Company, Mr. Vilchick  was the  Vice
   President of Finance for Pitney  Bowes Logistics Systems, a  provider
   of technology for  supply chain management  solutions  for
   three years, and Controller for Pitney Bowes Management Services  for
   four years prior to that.   Mr. Vilchick received his B.S. degree  in
   accounting from the University  of Rhode Island.   Mr. Vilchick is  a
   Certified Public Accountant.

   PART II

   Item 5.   Market  for   Registrant's   Common  Equity   and   Related
   Stockholder Matters

   The Company had 625 shareholders of record as of December 9, 1998.

   The additional  information required  by  this Item  is  incorporated
   herein by reference  from the sections  entitled "Selected  Quarterly
   Data"  and  "Shares  Listed"  in  the  Company's  Annual  Report   to
   stockholders for  the  fiscal  year ended  September  30,  1998  (the
   "Annual Report").

   On November 14,  1997, the Company  issued 639,246  shares of  common
   stock in exchange for all of  the outstanding common stock of  AllPen
   Software.   No  underwriters were  engaged  in connection  with  such
   issuance.  The  shares issued in  this transaction  were offered  and
   sold in reliance upon the  exemption from registration under  Section
   4(2) of the Securities Act of 1933.

   Item 6.   Selected Financial Data

   The information  required  by this  Item  is incorporated  herein  by
   reference from the section entitled "Selected Financial Data" in  the
   Annual Report.

   Item 7.   Management's Discussion and Analysis of Financial Condition
        and Results of Operations

   The information  required  by this  Item  is incorporated  herein  by
   reference from  the  section entitled  "Management's  Discussion  and
   Analysis of Financial  Condition and  Results of  Operations" in  the
   Annual Report.

   Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

   The  Company   exports   products  to   diverse   geographic   areas.
   Substantially all  foreign sales,  however,  are transacted  in  U.S.
   dollars and  therefore  the Company  is  not exposed  to  significant
   foreign currency market risk.

   Item 8.   Financial Statements and Supplementary Data

   The information  required  by this  Item  is incorporated  herein  by
   reference from  the  financial  statements contained  in  the  Annual
   Report.

   Item 9.   Changes In and Disagreements with Accountants on Accounting
   and Financial Disclosure

   None.

   PART III

   Item 10.  Directors and Executive Officers of the Registrant

   The information required  by this  Item concerning  directors of  the
   Company is incorporated herein by reference from the section entitled
   "Election of Directors"  included in the  Company's definitive  Proxy
   Statement for the Annual Meeting of Stockholders for the fiscal  year
   ended September 30, 1998, which will be filed with the Securities and
   Exchange commission within 120 days of the Company's fiscal year  end
   (the "1998 Proxy Statement").  The information required by this  Item
   concerning executive officers of the Company is included in Part I of
   this  Annual  Report  on  Form  10-K  under  the  section   captioned
   "Executive Officers of the Registrant".  The information required  by
   this Item concerning compliance with Section 16(a) of the  Securities
   Exchange Act of 1934, as amended, is incorporated herein by reference
   from the section  entitled "Other  Matters--Section 16(a)  Beneficial
   Ownership Reporting Compliance" included in the 1998 Proxy Statement.

   Item 11.  Executive Compensation

   The information  required  by this  Item  is incorporated  herein  by
   reference  from  the  sections  entitled  "Election  of   Directors--
   Compensation  Committee   Interlocks  and   Insider   Participation",
   "Election  of  Directors--Compensation  of  Directors",    "Executive
   Compensation"  and  "Executive  Compensation--Employment  Agreements"
   included in the 1998 Proxy Statement.

   Item 12.  Security  Ownership  of   Certain  Beneficial  Owners   and
   Management

   The information  required  by this  Item  is incorporated  herein  by
   reference from the section  entitled "Beneficial Ownership of  Voting
   Stock" included in the 1998 Proxy Statement.

   Item 13.  Certain Relationships and Related Transactions

   The information required by this Item is not applicable.

   PART IV

   Item 14.  Exhibits, Financial  Statement  Schedules, and  Reports  on
   Form 8-K

   (a) The following financial information is incorporated by  reference
   into Part II hereof from the Annual Report

   1.   Financial Statements:

        Report of Independent Auditors

        Consolidated Balance Sheets at September 30,
            1998 and 1997

        Consolidated Statements of Operations for the three
         years ended September 30, 1998

         Consolidated Statements of Changes in Stockholders' Equity
         for the three years ended September 30, 1998

        Consolidated Statements of Cash Flows for the three years
              ended September 30, 1998

        Notes to the Consolidated Financial Statements

   2.   Financial Statement Schedules:

        Report of Independent Auditors on Financial Statement Schedule

        Schedule II - Valuation and Qualifying Accounts

        All other  schedules  have been  omitted  because they  are  not
   applicable, not required, or  the information required is included in
   the financial statements or notes thereto.

   3.   Exhibits

        The exhibits are  listed in the  accompanying Index to  Exhibits
   immediately following  the signature page.

   (b)  Reports on Form 8-K

        None.

   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
   Exchange Act of 1934, the registrant  has duly caused this report  to
   be signed on its behalf by the undersigned thereunto duly authorized.

                                           Spyglass, Inc.
                                           Registrant

   Date:   December 21, 1998               /s/ Gary L. Vilchick

                                           Gary L. Vilchick
                                           Executive Vice President,
                                           Finance, Administration and
                                           Operations and Chief
                                           Financial Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934,
   this report has been signed below as of December 21, 1998 by the
   following persons on behalf of the registrant and in the capacities
   indicated.

   Signature

   /s/ Douglas P. Colbeth
     Douglas P. Colbeth
     President, Chief Executive Officer and Director
     (Principal Executive Officer)

   /s/ Gary L. Vilchick
     Gary L. Vilchick
     Executive Vice President, Finance, Administration
     And Operations and Chief Financial Officer
     (Principal Financial and Accounting Officer)

   /s/ Tim Krauskopf
     Tim Krauskopf
     Director

   /s/ Brian J. Jackman
     Brian J. Jackman
     Director

   /s/ John Shackleton
     John Shackleton
     Director

   /s/ Charles T. Brumback
     Charles T. Brumback
     Director

                       REPORT OF INDEPENDENT AUDITORS
                      ON FINANCIAL STATEMENT SCHEDULE

   To the Board of Directors and Stockholders of Spyglass, Inc.

   We have audited  the consolidated financial  statements of  Spyglass,
   Inc. and subsidiaries as of September 30, 1998 and 1997, and for each
   of the two  years in the  period ended September  30, 1998, and  have
   issued our report thereon  dated October 19, 1998.   Our audits  also
   included the financial statement schedule listed in the Index at Item
   14(a).    This  schedule  is  the  responsibility  of  the  Company's
   management.  Our responsibility is to express an opinion based on our
   audits.    The  consolidated   financial  statements  and   financial
   statement schedule of Spyglass, Inc. and  subsidiaries as of and  for
   the year  ended September  30, 1996  were audited  by other  auditors
   whose report dated October 25, 1996 expressed an unqualified  opinion
   on those statements and schedule.

   In our opinion, the financial  statement schedule referred to  above,
   when considered in relation to  the basic financial statements  taken
   as a whole, present fairly in  all material respects the  information
   set forth therein.


   /s/ Ernst & Young LLP

   Ernst & Young LLP
   Chicago, Illinois
   October 19, 1998

                              SPYGLASS, INC.
                                SCHEDULE II

                     Valuation and Qualifying Accounts

                       Balance    Charged  Charged              Balance
                         at         to        to       (1)       at
   Description         beginning   costs    other   Deductions  end of
                       of period    and    accounts             period
                       period    expenses   
                                

   September 30, 1998
   Allowance for       $350,000   309,068  13,000     243,068  $429,000
   doubtful accounts                                      

   September 30, 1997
   Allowance for       $470,000 1,029,051      -   1,149,051  $350,000
   doubtful accounts       

   September 30, 1996
   Allowance for       $180,209   301,034      -      11,243  $470,000
   doubtful accounts      

   (1)- Bad debt write-offs



                             INDEX TO EXHIBITS


   Exhibit No.         Description


   3.1(1)             Amended and Restated Certificate of
                      Incorporation of the Registrant, as amended
                     
   3.2(2)              By-laws of the Registrant

   4.1(2)              Specimen certificate for shares of Common Stock

   10.1(2)             1991 Stock Option Plan *

   10.2                1995 Stock Incentive Plan, as amended *

   10.3(2)             1995 Director Stock Option Plan *

   10.4(2)             Employment and Confidentiality Agreement between
                       the Registrant and Douglas P. Colbeth dated April
                       1, 1991 *

   10.5(2)             Employment and Confidentiality Agreement between
                       the Registrant and Michael F. Tyrrell dated April
                       29, 1991 *

   10.6(7)             Senior Management Retention Agreement between the
                       Registrant and Doug Colbeth, dated November 1,
                       1996 *

   10.7(7)             Senior Management Retention Agreement between the
                       Registrant and Michael  Tyrrell, dated November
                       1, 1996 *<PAGE>
   10.8(7)             Senior Management Retention Agreement between the
                       Registrant and Gary Vilchick, dated November 1,
                       1996 *

   10.9(7)             Senior Management Retention Agreement between the
                       Registrant and Randall T. Littleson, dated
                       November 1, 1996 *

   10.10(3)            Standard form of Employment and
                       Confidentiality Agreement

   10.11(2)            NCSA Mosaic Software License Agreement
                       between the Registrant and the Board of
                       Trustees for the University of Illinois
                       dated May 10, 1994, as amended by amendment
                       No. 1 dated May 10, 1994, amendment No. 2
                       dated August 4, 1994 and amendment No. 3
                       dated March 21, 1995(5)

   10.12(3)            Amendment No. 4 to NCSA Mosaic Software
                       License Agreement between the
                       Registrant and the Board of Trustees
                       for the University of Illinois, dated
                       June 28, 1995. (5)

   10.13(2)            OEM/Source License Agreement , dated
                       December 12, 1994, between the
                       Registrant and Microsoft Corporation.

   10.14(4)            Amendment No. 1 to the OEM/Source
                       License Agreement between the
                       Registrant and Microsoft Corporation,
                       dated September 26, 1995. (5)

   10.15(4)            Technology Cooperation Agreement,
                       Including Amendment of OEM/Source
                       License Agreement between the
                       Registrant and Microsoft Corporation
                       dated December 6, 1995 (5)

   10.16 (7)           Amendment No. 1, dated September 30,
                       1996, to the Technology Cooperation
                       Agreement, Including Amendment of
                       OEM/Source License Agreement between
                       the Registrant and Microsoft
                       Corporation, dated December 6, 1995(5)

   10.17(8)            Amendment No. 2 to the Technology
                       Cooperation Agreement, Including
                       Amendment of OEM/Source License
                       Agreement between the Registrant and
                       Microsoft Corporation, dated January
                       21, 1997.

   10.18(3)            RSA Data Security, Inc.-BSAFE/TIPEM OEM
                       Master License Agreement dated August
                       8, 1995(5)

   10.19(6)            Sub-Lease Agreement between Rust
                       Environment & Infrastructure, Inc. and
                       the Registrant dated February 6, 1996

   10.20(9)            Office Lease Agreement between American
                       National Bank and Trust Company of<PAGE>
                       Chicago Trust No. 43194 and the
                       Registrant dated May 28, 1997

   10.21(6)            Standard Form of Invention and Non-
                       Disclosure Agreement

   10.22(6)            Standard Form of Non-Disclosure
                       Agreement

   10.23(10)           Source Code License and Distribution
                       Agreement between the Company and
                       Motorola, Inc. dated as of June 25,
                       1998(5)

   10.24+              Amendment 1 to the Source Code License
                       and Distribution Agreement between the
                       Company and Motorola, Inc. dated as of
                       June 25, 1998

   10.25+              Common Stock and Warrant Purchase
                       Agreement between the Company and
                       General Instrument Corporation dated
                       October 19, 1998

   10.26+              Digital Software Integration Center
                       Sourcing Agreement between the Company
                       and General Instrument Corporation
                       dated November 1, 1998

   10.27+              Operating Agreement between the Company
                       and General Instrument Corporation
                       dated October 19, 1998

   13.1                Portions of the Annual Report to
                       Stockholders for the fiscal year ended
                       September 30, 1998 (only those portions
                       specifically incorporated by reference
                       herein are filed herewith).

   21                  Subsidiaries of the Registrant

   23.1                Consent of Ernst & Young LLP

   23.2                Consent of PricewaterhouseCoopers LLP

   27                  Financial Data Schedule

   (1)  Incorporated herein by reference from the Company's Registration
   Statement on Form   S-8 (File No. 333-04357) filed on May 23, 1996.

   (2)  Incorporated herein by reference from the Company's Registration
   Statement on Form   S-1 (File No. 33-92174).

   (3)  Incorporated herein  by  reference  from  the  Company's  Annual
   Report on Form 10-K for the fiscal year ended September 30, 1995,  as
   amended by an Annual Report on Form 10-K/A filed on May 17, 1996.

   (4)  Incorporated herein by  reference from  the Company's  Quarterly
   Report on  Form 10-Q  for the  quarter ended  December 31,  1995,  as
   amended by a Quarterly Report  on Form  10-Q/A filed on May 17, 1996.

   (5)  Confidential treatment previously granted by the Securities  and
   Exchange Commission      as to  certain portions,  which are  omitted
   and filed separately with the Commission.

   (6)  Incorporated herein by  reference from  the Company's  Quarterly
     Report on Form 10-Q for the quarter ended March 31, 1996.
       
   (7)  Incorporated herein  by  reference  from  the  Company's  Annual
     Report on Form 10-K for the fiscal year ended September 30, 1996.
       
   (8)  Incorporated herein by  reference from  the Company's  Quarterly
     Report on Form 10-Q for the quarter ended December 31, 1996.

   (9)  Incorporated herein  by  reference  from  the  Company's  Annual
   Report on Form 10-K for  the fiscal year ended September 30, 1997.

   (10) Incorporated herein by  reference from  the Company's  Quarterly
   Report on Form 10-Q for the quarter ended June 30, 1998.



   +    Confidential treatment requested as  to certain portions,  which
        portions are omitted  and filed separately  with the  Securities
        and Exchange Commission.

   *    Management contract or compensatory plan or arrangement filed as
        an Exhibit to  this form pursuant  to Items 14(a)  and 14(c)  of
        Form 10-K.