UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                    FORM 10-Q

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

For the quarter ended     September 30, 1998    Commission File Number   0-8693

                              TRANSNET CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                      22-1892295
  (State or other jurisdiction of                       (I.R.S. Employer
  incorporation or organization)                       Identification No.)

            45 Columbia Road
         Somerville, New Jersey                           08876-3376
  (Address of principal executive offices)                 (Zip code)

Registrant's telephone number, including area code:           (908) 253-0500
                                                       ------------------------


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  and  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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of November 7, 1998: 5,216,804


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TRANSNET CORPORATION AND SUBSIDIARY
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INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998.
------------------------------------------------------------------------------





PART I:  FINANCIAL INFORMATION

Item 1.  Financial Statements

   Consolidated Balance Sheets as of September 30, 1998 [Unaudited]
   and June 30, 1998 [Audited]...................................... 1

   Consolidated Statements of Operations for the Three Months
   Ended September 30, 1998 and 1997 [Unaudited].................... 2

   Consolidated Statements of Cash Flows for the Three Months Ended
   September 30, 1998 and 1997 [Unaudited].......................... 3

   Notes to Consolidated Financial Statements [Unaudited]........... 4

Item 2.  Managements' Discussion and Analysis of the Financial
         Condition and Results of Operations........................ 5.....7

PART II: OTHER INFORMATION.......................................... 8

SIGNATURES.......................................................... 9





                    .   .   .   .   .   .   .   .   .   .   .


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TRANSNET CORPORATION AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------



                                                    September 30,   June 30,
                                                       1 9 9 8       1 9 9 8
                                                     [Unaudited]
Assets:
Current Assets:
  Cash and Cash Equivalents                          $4,552,278   $ 5,378,846
  Accounts Receivable - Net                           7,541,298     6,327,434
  Inventories - Net                                   1,109,880     1,407,682
  Mortgage Receivable - Related Party                   473,295       464,423
  Other Current Assets                                   96,958       136,621
  Deferred Tax Asset                                    177,200       177,200
                                                     ----------   -----------

  Total Current Assets                               13,950,909    13,892,206

Property and Equipment - Net                            558,377       613,704

Other Assets                                            880,462       890,608
                                                     ----------   -----------

  Total Assets                                       $15,389,748  $15,396,518
                                                     ===========  ===========

Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                   $  922,966   $   598,008
  Accrued Expenses                                      497,767       614,875
  Accrued Payroll                                       202,413       234,722
  Floor Plan Payable                                    390,155       776,901
  Deferred Income                                            --       100,649
  Income Taxes Payable                                  295,917       210,200
  Other Current Liabilities                              77,332       156,653
                                                     ----------   -----------

  Total Current Liabilities                           2,386,550     2,692,008
                                                     ----------   -----------

Deferred Tax Liability                                   80,700        80,700
                                                     ----------   -----------

Commitments and Contingencies                                --            --
                                                     ----------   -----------

Stockholders' Equity:
  Capital Stock - Common, $.01 Par Value, Authorized
   15,000,000 Shares; Issued 7,469,524 Shares in 199
   and 1997 [of which 2,252,720 are in Treasury]         74,695        74,695

  Paid-in Capital                                    10,686,745    10,686,745

  Retained Earnings                                   8,378,701     8,080,013
                                                     ----------   -----------

  Totals                                             19,140,141    18,841,453
  Less:  Treasury Stock - At Cost                    (6,217,643)   (6,217,643)
                                                     ----------   -----------

  Total Stockholders' Equity                         12,922,498    12,623,810
                                                     ----------   -----------

  Total Liabilities and Stockholders' Equity         $15,389,748  $15,396,518
                                                     ===========  ===========


See Notes to Consolidated Financial Statements.

                                         1

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TRANSNET CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------




                                                            Three months ended
                                                               September 30,
                                                            1 9 9 8     1 9 9 7
                                                            -------     -------

Revenue                                                  $12,919,438 $19,513,585

Cost of Revenue                                           10,747,858  17,574,117
                                                         ----------- -----------

  Gross Profit                                             2,171,580   1,939,468
                                                         ----------- -----------

Expenses:
  Selling, General and Administrative Expenses             1,811,735   1,674,272
  Bad Debt Expense                                             7,500       7,500
                                                         ----------- -----------

  Total Expenses                                           1,819,235   1,681,772
                                                         ----------- -----------

  Operating Income                                           352,345     257,696

Other Income [Expense]:
  Interest Income                                             86,343      43,710
                                                         ----------- -----------

  Income Before Provision for Income Taxes                   438,688     301,406

Provision for Income Tax                                     140,000       8,000
                                                         ----------- -----------

  Net Income                                             $   298,688 $   293,406
                                                         =========== ===========

  Income Per Common Share                                $      0.06 $      0.06
                                                         =========== ===========



See Notes to Consolidated Financial Statements.




                                         2

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TRANSNET CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
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                                                           Three months ended
                                                              September 30,
                                                           1 9 9 8     1 9 9 7
                                                           -------     -------
Operating Activities:
  Net Income                                            $   298,688 $   293,406
                                                        ----------- -----------
  Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
   Depreciation and Amortization                             71,661      77,580

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                   (906,813) (1,473,110)
     Inventory                                              297,802     266,912
     Other Current Assets                                    30,791      46,271
     Other Assets                                            (1,187)       (979)

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                  815,621   1,716,074
     Deferred Income                                       (100,649)    119,021
     Other Current Liabilities                                6,395     (54,776)
                                                        ----------- -----------

   Total Adjustments                                        213,621     696,993
                                                        ----------- -----------

  Net Cash - Operating Activities                           512,309     990,399
                                                        ----------- -----------

Investing Activities:
  Capital Expenditures                                       (5,000)         --
                                                        ----------- -----------

Financing Activities:
  Floor Plan Payable                                     (1,333,877) (2,188,556)
                                                        ----------- -----------

  Net [Decrease] in Cash and Cash Equivalents              (826,568) (1,198,157)

Cash and Cash Equivalents - Beginning of Periods          5,378,846   3,336,917
                                                        ----------- -----------

  Cash and Cash Equivalents - End of Periods            $ 4,552,278 $ 2,138,760
                                                        =========== ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                             $        -- $        --
   Income Taxes                                         $    80,883 $    18,000

Supplemental Disclosures of Non-Cash Investing Activities:
  During 1997, the Company  disposed of $138,126 of fully  depreciated  property
and equipment.



See Notes to Consolidated Financial Statements.

                                         3

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TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
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[1] Summary of Significant Accounting Policies

[A] Consolidation - The consolidated  financial  statements include the accounts
of  the  Corporation  and  its   wholly-owned   subsidiary,   Century   American
Corporation.  Intercompany  transactions  and accounts  have been  eliminated in
consolidation.

[B]  Inventory  -  Inventory  consists  of  finished  goods.  The  Corporation's
inventory is valued at the lower of cost  [determined on the average cost basis]
or market.

[C] Cash and Cash Equivalents - For the purposes of the statement of cash flows,
the  Corporation  considers  highly liquid debt  instruments,  purchased  with a
maturity of three months or less, to be cash equivalents.

[D]  Earnings  Per Share -  Earnings  per  common  share are based on  5,216,804
weighted shares outstanding for the period ended September 30, 1998 and 1997.

[2] Income Taxes

The  Corporation  has a  deferred  tax  asset of  $177,200  and a  deferred  tax
liability of $80,700 based on temporary timing differences  including  inventory
capitalization,  allowance  for  doubtful  accounts,  vacation  pay accruals and
depreciation.

[3] Reclassification

Certain items from prior year's financial  statements have been  reclassified to
conform to the current year's presentation.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments   consisting  only  of  normal  recurring
adjustments  necessary to present fairly the financial position,  the results of
operations and cash flows for the periods presented.

These  statements  should be read in conjunction with the summary of significant
accounting  policies and notes contained in the  Corporation's  annual report on
Form 10-K for the year ended June 30, 1998.







                .   .   .   .   .   .   .   .   .   .   .   .  .

                                        4

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Item 2:
TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------


Results of Operations

Revenues for the three  months  ended  September  30, 1998 were  $12,919,438  as
compared  with  $19,513,585  for the quarter ended  September 30, 1997.  For the
quarter ended September 30, 1998 the Corporation reported net income of $298,688
as compared  with net income of $293,406 for the  corresponding  period in 1997.
The  decrease  in  revenues  is  primarily  due to the loss in March 1998 of the
hardware sales contract with the  Corporation's  major  customer,  and is also a
result of  management's  shift in focus from low profit margin hardware sales to
sales of higher profit margin technical and training  services.  The loss of the
contract has not had any negative  impact to date on services or service related
revenues and has reduced the Corporation's  hardware-related expenses.  Revenues
attributable  to  service,   support  and  training   operations   increased  by
approximately  100%  compared to the same period in the prior year,  and profits
from these operations increased by over 200%. This increase more than offset the
effect of the decrease in revenues from hardware sales. Revenues for the quarter
ended September 30, 1998 include a significant and seasonal increase in the sale
of hardware and technical  support  services to state and local  government  and
educational institutions in the tri-state area.

Earnings  for the  quarter  ended  September  30, 1998 are  attributable  to the
significant  increase  in  service,   support  and  training   operations,   and
management's  concentration on sales of network and system integration  products
which  yield  higher  profit  margins,  as well as  continued  adherence  to and
implementation  of cost control  measures.  In addition to the technical service
sales referenced above for the quarter ended September 30, 1998, the increase in
revenues  from the  provision  of  service,  support,  outsourcing  and  network
integration is largely the result of the Corporation's  renewing and/or entering
into service contracts with a number of large corporate customers. Most of these
contracts are short-term,  usually twelve months or less, and contain provisions
which permit early termination. Although the contracts generally contain renewal
terms, there is no assurance that such renewals will occur.

The  computer  industry  continually  faces  a trend  of  decreasing  prices  of
computers  and  related  equipment.  Management  believes  that this  trend will
continue.  Industrywide,  the  result of price  erosion  has been  lower  profit
margins on hardware sales,  which require businesses to sell a greater volume of
equipment to maintain past earning levels. Another result of the price decreases
has  been   intensified   competition   within  the   industry,   including  the
consolidation  of businesses  through merger or acquisition  and the entrance of
manufacturers  into technical services  business.  Management  believes that the
adoption of policies by many larger  corporate  customers to limit the number of
vendors  permitted to provide goods and services for  specified  periods of time
has further increased price  competition.  To meet these competitive  challenges
and to maximize the  Corporation's  profit  margin,  management has modified its
marketing  strategy  and has enforced  expense  controls.  Management's  current
marketing strategy is designed to increase sales of lower revenue/higher  profit
margin products related to service,  technical support and training  operations.
Management's efforts include targeting commercial,  educational and governmental
customers which provide  marketplaces  for a wide range of products and services
at one  time,  a  cost-effective  approach  to  sales.  Management  believes  it
maximizes  profits through  concentration on sales of value-added  applications;
promotion of the Corporation's service and support operations;  and adherence to
cost-cutting  controls.  In  light  of  the  above,  management  emphasizes  and
continues the aggressive pursuit of an increased volume of technical service and
support programs and promotion of its training services.

Selling,  general and administrative  expenses increased to approximately 14% of
revenue for fiscal 1998 due to increased  salary and personnel  related expenses
resulting from the expansion of the Corporation's technical staff as well as the
decrease  in  revenues.   Selling,  general  and  administrative  expenses  were
approximately 9% of revenues for the same quarter in fiscal 1997.

Interest income  increased in the 1998 quarter as compared to 1997 primarily due
to a stronger  cash  position,  which allowed the  Corporation  to invest larger
amounts than in prior years.  Interest  expense  decreased in the quarter  ended
September  30, 1998  compared to the same period in the prior year,  also due to
the improved cash position which limited the amount of financing  extended under
the floor planning arrangements described below.


                                        5

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TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------


Liquidity and Capital Resources

There are no material commitments of the Corporation's capital resources.

The  Corporation  currently  finances a portion of its accounts  receivable  and
finances   purchases  of  portions  of  its  inventory  through   floor-planning
arrangements  under  which  such  inventory  secures  the  amount   outstanding.
Inventory  decreased in the quarter ended  September 30, 1998 as compared to the
corresponding period in 1997 in response to the lower level of hardware sales.

Accounts  receivable  decreased  for the  quarter  ended  September  30, 1998 as
compared to the same period in fiscal 1997 as a direct result of the decrease in
revenues.  Accounts  payable  decreased for the quarter ended September 30, 1998
compared  with the same  period in 1997 as a result of  management's  efforts to
shorten payable cycles and thereby avoid floor plan financing costs. Cash levels
increased  in the three  months  ended  September  30,  1998 as  compared to the
corresponding  period in 1997 due to  increased  sales of higher  profit  margin
services.

For the fiscal quarter ended  September 30, 1998, as in the fiscal quarter ended
September 30, 1997, the internal resources of the Corporation were sufficient to
enable the Corporation to meet its obligations.

In the first  quarter of fiscal 1998,  management  was apprised of an unasserted
possible claim or assessment involving the Corporation's  Pension Plan. The Plan
was adopted in 1981 as a defined  benefit  plan. In 1989,  various  actions were
taken by the  Corporation  to  terminate  the Plan,  to  convert it to a defined
contribution plan and to freeze benefit accruals. No filing for plan termination
was  made  with  the  Pension  Benefit   Guaranty   Corporation   (the  "PBGC").
Additionally,  a final  amended and restated  plan  document  incorporating  the
foregoing  amendments and other required amendments  including those required by
the Tax  Reform  Act of 1986 do not  appear to have been  properly  adopted.  In
addition, since 1989, it appears that certain operational violations occurred in
the  administration  of the Plan including the failure to obtain spousal consent
in certain instances where it was required.

The Corporation  currently  intends to (i) take corrective  action under the IRS
Walk-in  Closing  Agreement   Program  ("CAP"),   (ii)  apply  for  a  favorable
determination  letter with respect to the Plan from the IRS, and (iii) terminate
the Plan.  The CAP program  provides a correction  mechanism for  "non-amenders"
such as the  Corporation.  Under  CAP,  the  Corporation  will be  subject  to a
monetary sanction (which could range from $1,000 to approximately  $40,000).  In
addition,   the  Corporation   will  be  required  to  correct,   retroactively,
operational violations,  and to pay any resulting excise taxes and PBGC premiums
and penalties that may be due.  Special counsel has advised the Corporation that
although  it  believes  that  the  Corporation  will  incur  some  liability  in
connection  with  the  correction  of  such  operational  violations,  it is not
possible to estimate the  potential  amount of or the range of liability at this
time.  Management has been advised by counsel that the estimated liabilities are
significantly lower than originally anticipated.


                                        6

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TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



YEAR 2000

Many existing computer systems,  including certain of the Corporation's internal
systems,  use only the last two digits to identify years in the date field. As a
result, these computer systems do not properly recognize a year that begins with
"20" instead of the familiar "19," or may not function properly with years later
than 1999. If not  corrected,  many computer  applications  could fail or create
erroneous  results.  This is  generally  referred to as the "Year 2000" or "Y2K"
issue.  Computer  systems that are able to deal  correctly with dates after 1999
are referred to as "Year 2000 compliant."

With respect to the  Corporation's  internal  systems and  operations,  its main
internal computer system,  which processes  information to prepare  inventories,
purchase orders,  invoices and accounting  functions is Y2K compliant.  To date,
the  Corporation  has spent  approximately  $20,000  to bring its  systems  into
compliance,  and is currently preparing a program to determine whether to update
or replace  other  internal  computer  systems to ensure  compliance.  The costs
involved in such an update and/or replacement have not yet been estimated. As of
the filing of this report,  the Corporation has not prepared a contingency  plan
and will assess the need for such a plan when  sufficient  information  has been
provided by third parties with whom the Corporation has a material relationship.
The Corporation  learned from the product vendors and suppliers with whom it has
a  material  relationship  that  they  are Y2K  compliant.  The  Corporation  is
currently in the process of ascertaining whether its internal systems other than
its computer  systems,  and other  suppliers as well as major  customers are Y2K
compliant.  Because  of the  uncertainties  involved,  pending  receipt  of this
information, it is not possible to estimate the effect upon the Corporation, for
example,  the amount of lost revenues,  if its material  vendors,  suppliers and
customers were not Y2K compliant.

The matters  discussed  in  Management's  Discussion  and  Analysis and that are
forward-looking  statements are based on current  management  expectations  that
involve  risk and  uncertainties.  Potential  risks and  uncertainties  include,
without  limitation:  the impact of  economic  conditions  generally  and in the
industry for  microcomputer  products and  services;  dependence on key vendors;
continued  competitive  and pricing  pressures in the industry;  product  supply
shortages;  open-sourcing of products of vendors;  rapid product improvement and
technological  change,  short  product  life cycles and  resulting  obsolescence
risks; technological developments; capital and financing availability; and other
risks set forth herein.

                                        7

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TRANSNET CORPORATION AND SUBSIDIARY
PART II - OTHER INFORMATION
------------------------------------------------------------------------------



Item 6:  Exhibits and Reports on Form 8-K

       A. Exhibits - None required to be filed for Part II of this report.

       B. Reports on Form 8-K - None filed  during the  quarter for which this
          report is submitted.




                                        8

<PAGE>


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.

                                 TransNet Corporation


Date: November 16, 1998          By: /s/ Steven J. Wilk
                                    ---------------------------------
                                    Steven J. Wilk,
                                    President



Date: November 16, 1998          By: /s/ John J. Wilk
                                    ---------------------------------
                                    John J. Wilk,
                                    Principal Financial and Accounting Officer
                                    and Chairman of the Board of Directors


                                        9