SECURITES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                          ----------------------
                               FORM 10-KSB
             Annual Report Pursuant to Section 13 or 15(d) of
                   the Securities Exchange Act of 1934

For the fiscal year ended    April 30, 1998   Commission File No. 0-8512
                          ----------------------

                             MONARCH AVALON, INC.
               (Name of small business issuer in its charter)

           DELAWARE                410-254-9200           52-1073628
(State or other jurisdiction   (Issuer's telephone    (I.R.S. Employer
    of incorporation or         number, including    Identification No.)
       organization)               area code)

                 4517 Harford Road                       21214
                 Baltimore, Maryland                   (Zip code)
      (Address of principal executive offices)

      Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, $.25 par value
                        (Title of each class)



      Check whether the issuer (1) has filed all reports required to be filed by
Section  13  or  15(d) of the Securities Exchange Act of 1934  during  the  past
twelve  months (or for such shorter period that the registrant was  required  to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ]   No [   ]

      Check  if  disclosure  of delinquent filers in response  to  Item  405  of
Regulation  S-B  is  not  contained in this form,  and  no  disclosure  will  be
contained,  to  the best of the registrant's knowledge, in definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.   [ X ]

     The issuer's revenues for the fiscal year ended April 30, 1998 are
$8,231,000.

      As  of  July  15, 1998, the aggregate market value of the Issuer's  common
stock held by non-affiliates was $1,484,966.

      As of July 15, 1998, the number of shares outstanding of the Issuer's
common stock was 1,619,820.

                      -----------------------------

                  DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive proxy statement to be filed under Regulation 14A
for the annual meeting to be held October 1998 are incorporated by reference
into Part III.

     Transitional small business disclosure format (check one):
                    Yes [   ]        No [ X ]
<PAGE>
                                PART I

Item 1.   DESCRIPTION OF BUSINESS

(a) General Development of Business
Monarch  Avalon, Inc. (the "Company") was incorporated in Delaware  on  December
20,  1976  as a commercial printing company and as the successor to a  developer
and publisher of strategy board games that originally entered the games business
in  1958.   On December 14, 1993, the Company incorporated a subsidiary,  Girls'
Life,  Inc. in Maryland.  Girls' Life commenced substantial operations with  the
release of its initial bi-monthly publication in August 1994.

(b) Financial Information About Industry Segments
See  Note  G  "Segment  Information"  in the  Notes  to  Consolidated  Financial
Statements in Part II, Item 7 below.

(c) Narrative Description of Business
Principal Products
The  Company  operated in three business segments during  1998: games,  printing
and  publishing. All segments share certain facilities and operate under  common
management. The games segment develops, manufactures and markets a wide  variety
of  strategy,  sports and family-oriented board games, as  well  as  a  line  of
software games designed for use on microcomputers. The games segment contributed
$2,844,000  in net sales or approximately 35% of the Company's total revenue  in
1998.

Monarch Services, the printing segment, provides commercial printing and graphic
arts  services to a wide range of business customers and manufactures envelopes.
Monarch  Services also serves as the production facility for the games  segment,
producing printed materials and boxes for games. Monarch Services also  provides
printing  services to the publishing segment, producing promotional  and  direct
mail  literature  for  the  magazine.   Interdivision  sales  or  transfers  are
accounted for at prices comparable to unaffiliated customer sales. The  printing
segment  contributed  $2,587,000  in  net sales  or  approximately  31%  of  the
Company's total revenue in 1998.

Girls'  Life, Inc. publishes a magazine for young girls ages seven to  fourteen.
The  magazine,  Girls' Life, was launched in August 1994.  It  is  a  bi-monthly
publication but the magazine may eventually be published monthly.  In  September
1996  the  Company announced a joint venture with the Girl Scouts of the  U.S.A.
that  gave  the  Company direct access to the Girl Scouts' mailing  list,  which
includes  860,000  girls and 60,000 adult troop leaders. The publishing  segment
contributed $2,800,000 in net sales or approximately 34% of the Company's  total
revenue in 1998.

The Games Segment
Board Games
The  Company has a line of strategy, sports and family-oriented board games. The
Company's  predecessor first entered the games market in 1958 when it introduced
its first strategy game. Since that time, it has become a significant player  in
the  strategy  games  portion of the games market, which consists  primarily  of
teenagers  and  adults who are "game hobbyists". The games are  designed  to  be
challenging, and in many cases the typical playing time for a game is  three  to
six hours.
<PAGE>
Item 1.    BUSINESS - (Continued)

The  Company's sports and family-oriented board games are also designed for  use
by  the teenage and adult recreational market. The Company's predecessor entered
this  portion  of  the games market in the mid 1960's and expanded  through  the
acquisition  of the Sports Illustrated Games Division from Time, Inc.  in  1976,
through  agreements with independent games developers and through  the  internal
development of new games. The Company markets a variety of games including games
of mass-market appeal and wargame simulations.

Software Games
The  Company  also develops, produces and markets under the name  "Microcomputer
Games"  a  line  of software games which are designed for use on microcomputers.
The first games were introduced in June 1980. The line includes strategy, sports
and  family-oriented games; some are derivations of the Company's existing board
games  and  others  have been developed as unique computer  games  with  playing
characteristics that could not be achieved in board games. Computer games  sales
accounted for approximately 24% of total game sales for fiscal 1998.

Research and Product Development
Research  and  product development are essential aspects of the  Company's  game
business.  The Company regularly receives ideas for games from outside  creative
sources,  and  from time to time purchases rights to existing games  from  other
companies  in  the  games business. In most cases, the Company  enters  into  an
agreement  requiring it to make payments of royalties based on game  sales.  The
cost of research and development for fiscal 1998 was approximately $443,000  and
approximately  $394,000 for fiscal 1997. These costs were charged to  operations
as  incurred.  See  Statements  of Operations and "Management's  Discussion  and
Analysis or Plan of Operation" in Part II, Items 7 and 6, respectively, below.

Copyrights and Trademarks
The   Company's  games  and  magazine  are  generally  protected  by  registered
trademarks  and  copyrights in the United States and foreign  countries  to  the
extent  that  such protection is available. Such protection is  of  considerable
importance  in  the games business. The duration of the protection  provided  by
these rights is generally in excess of the economic life of any particular  game
or magazine issue.

Printing and Envelope Segment
Monarch Services offers a full line of printing and graphic arts services  to  a
wide range of customers in the industrial, financial and advertising fields. Its
services  include  offset and letterpress printing, design and idea  conception,
finished  art,  and  direct mailing. Monarch Services also manufactures  various
types and sizes of envelopes to customer order.

Monarch  Services is also the production arm for the games segment.  It  designs
the  graphics  for  and prints all of the Company's games, and manufactures  the
boxes  in  which  the  games are sold. Monarch Services also  provides  printing
services  to Girls' Life magazine. It designs and prints promotional and  direct
mail  literature  for  the  magazine.  During fiscal 1998  game  production  and
publishing  production  accounted for approximately  25%  of  Monarch  Services'
revenues  on an interdivision basis. The loss of game and publishing  production
would leave Monarch Services' with significant over capacity.
<PAGE>
Item 1.    BUSINESS - (Continued)

Publishing Segment
GIRLS' LIFE
Girls' Life is intended to be an intelligent, non-condescending and easily  read
magazine  targeted  to girls ages seven to fourteen. The philosophy  behind  the
graphic  representation and every article presented is that girls are important,
independent,  and intelligent people with opinions of their own. These  articles
seek  to  reinforce  that message and inspire confidence in a  girl's  thoughts,
opinions, and feelings. Editorial material is created by the magazine's staff as
well as through outside writers.

Marketing
The  Company's games are marketed in the United States and abroad. In the United
States,  board  games are primarily sold to toy jobbers, toy stores,  department
stores,  large retail chains and book stores. The Company's line  of  games  for
personal computers is sold primarily to software wholesalers and computer stores
which sell both hardware and software. Except for certain direct order sales  to
consumers,  all  United  States  sales are  made  through  sales  representative
organizations  which are paid on a commission basis. In fiscal  1998  and  1997,
games  sales to the Company's ten largest United States customers accounted  for
approximately 29% and 47%, respectively, of total game sales. Two  customers  of
computer  games accounted for approximately  7% and 5%,  respectively, of  total
net sales in 1998.

The  Company uses direct mail, trade and consumer publications, and trade  shows
to introduce and promote its games.

Printing and graphic arts services and envelopes are marketed primarily  in  the
Baltimore-Washington area through Company sales personnel who are compensated on
a salary and commission basis.

Girls' Life is sold by subscription and on the newsstand. Subscriptions are sold
by  direct-mail  solicitation,  insert  cards  and  other  traditional  sources.
Newsstand copies are distributed internationally by Warner Publisher Services.
<PAGE>
Item 1.     BUSINESS - (Continued)

Foreign Operations; Export Sales
Sales  of  games abroad are made to independent distributors located in  various
countries. Export sales were $303,000 for fiscal 1998, $466,000 for fiscal  1997
and  $561,000  for  fiscal  1996. The following table  shows  for  each  of  the
Company's last three fiscal years, export sales of its games and magazine to the
Company's four largest foreign markets.

                                      Sales (in dollars)
     Region                       1998          1997         1996
     --------------------------------------------------------------
     Japan                    $  10,800     $  10,100     $  21,900
     Canada                      70,000       143,000       102,300
     United Kingdom             106,700       106,400       222,000
     Australia                   40,600        68,200        55,100

Seasonality; Customer Financing Terms
The Company's games business is somewhat seasonal in nature because of increased
retail  game  sales  during the Christmas season. Sales are highest  during  the
periods  August through October when retailers purchase stock for  that  season,
and February through April when large customers take deliveries in order to take
advantage  of  discounts  and payment terms offered by the  Company  for  volume
purchases on an "early buy" basis. The early purchase program, which is a common
industry  practice, together with the need to maintain an inventory of  finished
games  in  order to satisfy reorder requests quickly, results in  a  substantial
working  capital  requirement. To date, the Company  has  met  this  requirement
through  the  internal  generation of funds. See  "Management's  Discussion  and
Analysis or Plan of Operation" Item 6,  below.

The Company's printing and publishing businesses are not seasonal in nature.

The  Company offers credit terms to its trade customers for the purchase of  its
products.  Payments are due from the Company's trade customers based upon  sales
and  purchase  arrangements which may vary depending upon the  identity  of  the
customer  and the nature of the product. In some instances, trade customers  may
receive  credit  for unsold merchandise, or may exchange unsold merchandise  for
new  products.  See  Note  C of Notes to Consolidated Financial  Statements  and
"Management's Discussion and Analysis or Plan of Operation" in Part II, Items  7
and  6,  respectively, below, for a description of the Company's  allowance  for
doubtful accounts and for sales returns.
<PAGE>
Item 1.    BUSINESS - (Continued)

Competition
There are a number of companies engaged in the sale of board and software games,
including a number which are significantly larger than the Company. While the
Company considers itself to be a player in the strategy games market, the
overall board game market, including sports and family games, is dominated by a
few large companies. The Company considers the primary competitive factors for
its line to be the challenge and play appeal of the computer and board games it
develops.
Competition  in the games business is principally based on product  quality  and
features, the compatibility of computer games with popular platforms, company or
product  line brand name recognition, access to distribution channels, marketing
effectiveness,  reliability  and  ease of  use,  price  and  technical  support.
Significant  financial resources also have become a competitive  factor  in  the
games  business, principally due to the substantial cost of product  development
and  marketing  that  is required to support best-selling titles.  In  addition,
competitors  with broad product lines and popular titles typically have  greater
leverage  with  distributors and other customers who may be willing  to  promote
titles with less consumer appeal in return for access to such competitor's  most
popular  titles. Retailers typically have a limited amount of shelf  space,  and
there  is intense competition among game producers for adequate levels of  shelf
space  and  promotional support from retailers. The Company  believes  that  its
pricing is generally competitive for the types of games that it sells.

Competition  in the printing business is largely based on price, quality,  range
of   services  offered,  distribution  capabilities,  ability  to  service   the
specialized  needs  of customers, availability of printing time  on  appropriate
equipment  and  use  of state-of-the-art technology.  The Company  competes  for
commercial business not only with large national printers, but also with smaller
regional printers.

Competition  in the magazine industry is intense with numerous other  publishers
and  retailers,  as well as other media, competing for readers  and  advertising
revenue.  The  Company  considers the primary  competitive  factors  to  be  the
underlying philosophy of Girls' Life and the market segment being served.

Raw Materials
The  principal raw materials used by the Company are finished paper,  paperboard
and  ink.  The  Company generally purchases its requirements for each  of  these
items  from  single  sources, but the Company believes there  are,  at  present,
numerous sources from which its requirements could be met. The price of paper is
a  significant  expense of the Company's publishing and printing businesses  and
began  to  rise around mid-year 1994 and continued to rise more dramatically  in
1995  and  early  1996.  In mid-1996 paper prices began to  fall.   Paper  price
increases may have an adverse effect on the Company's future results.

Employees
At  April  30, 1998, the Company employed approximately 100 full time personnel,
including 17 executive and administrative personnel, 12 research and development
personnel  and  71  production personnel. None of the  Company's  employees  are
represented by a union.
<PAGE>
Item 1.    BUSINESS - (Continued)

Item 2.  DESCRIPTION OF PROPERTY
The Company leases property at the following locations for the following
purposes:

1.  4517  Harford  Road, Baltimore, Maryland 21214. This property  contains  the
Company's offices as well as its printing plant. The property is leased  through
2006.

2.  6500  Quad  Avenue,  Baltimore, Maryland 21205.  This  property  contains  a
manufacturing and warehouse facility and the lease expires on May 14, 2000.

The  Company  leases  the Harford Road property from A. Eric  Dott  who  is  the
Chairman and a major stockholder of the Company. Although not negotiated at arms
length,  management believes the terms of the lease with Mr. Dott are comparable
to lease terms for like properties in the same geographic area.

See  "Certain Transactions" in the proxy statement of the Company for  the  1998
Annual  Meeting  of  Stockholders and Note F of Notes to Consolidated  Financial
Statements  included in Part II, Item 7, below.  Management  believes  that  the
Company's  leased  premises are generally adequate for  the  Company's  business
going forward.

Item 3. LEGAL PROCEEDINGS
Companies  in the game and publishing industries are, in the ordinary course  of
business, made the subject of actions alleging copyright infringement and  other
actions.  Such  actions  may  allege large  damages.  The  Company  has,  on  an
infrequent basis, had such claims made against it.

In  mid-July,  the Company settled the lawsuit, counterclaims and  other  claims
involving MicroProse, Inc., Spectrum Holobyte, Inc., MicroProse Software,  Inc.,
Hartland  Trefoil,  Ltd.  and Activision, Inc., that pertain  to  the  Company's
Civilization  products.  Pursuant to such settlement, the Company paid  $411,000
and assigned its rights in the Civilization products to MicroProse, Inc.

For  the  fiscal  year ending April 30, 1998, the Company accrued  $411,000  for
settlement fees relating to the lawsuit which was settled in July 1998.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
        NONE
<PAGE>
                                PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


Common Stock Market Prices and Dividends

The  Company's  common stock is traded on the Nasdaq SmallCap Market  under  the
symbol  MAHI.  The number of stockholders of record on July 15,  1998  was  601.
Because  the  Company  failed to comply with the market value  of  public  float
requirements for continued listing on the Nasdaq National Market, effective with
the  commencement  of trading on June 19, 1998, the Company's Common  Stock  was
voluntarily  delisted  from the Nasdaq National Market and  transferred  to  the
Nasdaq SmallCap Market.

High  and  low  closing sale prices for the last two years as  reported  on  the
Nasdaq National Market were:

                       Fiscal 1998                Fiscal 1997
Quarter                   Price                      Price
Ended                High        Low               High        Low
                     -------     -------        -------     -------
July 31              3           2-1/4          2-1/4       1-3/8
October 31           3-1/4       1-11/16        2-1/16      1-5/8
January 31           2-1/4       2              2-7/16      2
April 30             2-1/4       2-1/4          2-5/8       2-1/4

Such  prices  reflect inter-dealer prices, without retail mark-up, mark-down  or
commissions and may not represent actual transactions. The Company has not  paid
any  cash  dividends  since April 1987. Although the  board  of  directors  will
continue to review the Company's profitability with respect to the resumption of
dividends,  there can be no assurance as to the timing or amount of  any  future
dividends.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

CERTAIN CAUTIONARY INFORMATION

     In connection with the Private Securities Litigation Reform Act of 1995
(the "Litigation Reform Act"), the Company is hereby disclosing certain
cautionary information to be used in connection with written materials
(including this Annual Report on Form 10-KSB) and oral statements made by or on
behalf of its employees and representatives that may contain "forward-looking
statements" within the meaning of the Litigation Reform Act. Such statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The listener or reader is
cautioned that all forward-looking statements are necessarily speculative and
there are numerous risks and uncertainties that could cause actual events or
results to differ materially from those referred to in such forward-looking
statements. The discussion below highlights some of the more important risks
identified by management, but should not be assumed to be the only factors that
could affect future performance. The reader or listener is cautioned that the
Company does not have a policy of updating or revising forward-looking
statements and thus he or she should not assume that silence by management over
time means that actual events are bearing out as estimated in such forward-
looking statements.
<PAGE>
Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            (Continued)

OPERATING RESULTS.

      The Company has reported a net loss of $1.725 million or $1.06 per share
for fiscal 1998. There can be no assurance that the Company's business
strategies and tactics will be successful and that the Company will be
profitable in future periods.

CASH FLOWS/PURSUIT OF STRATEGIC ALTERNATIVES.

     The Company's cash and cash equivalents have declined by $393,000 during
fiscal 1998.  Furthermore, the Company paid $411,000 in mid-July to settle a
lawsuit and certain related claims pertaining to the Company's Civilization
products.  Management believes that existing cash and cash equivalents, together
with cash generated from operations and investing activities, will be sufficient
to meet the Company's liquidity and capital needs for the next 12 months.
Nevertheless, due to the Company's operating losses over the past three years
and its net losses for two of the past three years, which the Company attributes
primarily to its games business, the Company has determined to renew its efforts
to pursue strategic alternatives with respect to its games business, reduce
operations in the games business and to focus the Company's resources on the
printing business and the publishing business.  The Company intends to limit the
use of cash in the games business by reducing its research and development
efforts and may reduce its games business workforce.  Possible strategic
alternatives for the games business could include, among other things, a
possible business combination, disposition of assets or other similar
transactions.  No agreements have been reached as to any such alternatives, and
satisfactory arrangements are not assured.  There can be no assurance that the
Company will successfully implement a strategic alternative or that the Company
will have sufficient cash to meet its liquidity and capital needs for the
foreseeable future.  In the event the Company's cash resources are insufficient
to meet its liquidity and capital needs, the Company may be required to obtain
alternative financing or significantly curtail its operations.  There can be no
assurance that the Company will be successful in its pursuit of strategic
alternatives or in securing new financing, if necessary, or that the Company's
products will generate receivables and other assets sufficient to support an
adequate level of financing.  Any curtailment of the Company's operations could
have a material adverse effect on the Company.
<PAGE>
Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            (Continued)

FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY.

     The Company's operating results have varied significantly in the past and
are expected to vary significantly in the future as a result of the volatility
of the games industry and particularly the computer games market. This
variability is a result of factors such as: 1) volume of shipments of
significant new products, 2) the degree of market acceptance of the Company's
products, 3) the introduction of products competitive with those of the Company,
4) the timing and market acceptance of new product introductions, 5) the size
and growth rate of the consumer software and games market, 6) the seasonality of
sales, 7) development and promotional expenses relating to the introduction of
new products or new versions of existing products, 8) product returns and
markdowns, 9) changes in pricing policies by the Company and its competitors,
10) the accuracy of retailers' forecasts of consumer demand, 11) the timing of
orders from major customers, 12) order cancellations, 13) delays of shipment,
and 14) write-offs of advance royalty payments. Because a majority of the unit
sales for a  computer
game typically occurs in the first 90 to 180 days following the introduction of
the game, the revenue of the Company's games business may increase significantly
in a period in which a major game, especially computer game,  introduction
occurs and may decline in following periods or in periods in which there are no
major game introductions. Certain overhead and product development expenses are
fixed and do not vary directly in relation to revenue. Accordingly, to the
extent management's focus on strategic alternatives for the games business, its
commitment of resources to the printing business and publishing business, the
possible reduction of the games business workforce and the reduction of games
business research and development efforts limit the Company's ability to
introduce new games, the revenue of the games business could be materially and
adversely affected.

     The games business is highly seasonal. Typically, net revenue is highest
during the last calendar quarter (which includes the holiday buying season),
declines in the first calendar quarter, is lowest in the second and increases in
the third calendar quarter. This seasonal pattern is due primarily to the
increased demand for games during the year-end holiday buying season. The
Company's net revenue, however, is largely dependent on releases of new games
and, as such, may not necessarily reflect the seasonal patterns of the industry
as a whole. The Company expects that its net revenue and operating results will
continue to fluctuate significantly in the future.

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS; PRODUCT DELAYS.

      A significant portion of the revenue of the games division is generated by
products introduced during that fiscal year. The Company has depended on both
the timely introduction of successful new products or sequels to existing
products to replace declining revenue from older products and to provide
continued revenue from back-catalog products.  If for any reason revenue from
new products or other activities fails to replace declining revenue from
existing products, or if revenue from back-catalog titles declines
significantly, the  business, operating results and financial condition of the
games business may be materially and adversely affected. The Company expects
that its emphasis on pursuing strategic alternatives for the games business, the
possible reduction of the games business workforce and the reduction of games
business research and development efforts will limit the Company's introduction
of new games which could have a material adverse effect on the revenues of the
games business going forward.
<PAGE>
Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS
            (Continued)

UNCERTAINTY OF MARKET ACCEPTANCE; SHORT PRODUCT LIFE CYCLES.

     The market for games, especially computer games, has been characterized by
shifts in consumer preferences and short product life cycles. Consumer
preferences for games are difficult to predict and few games achieve sustained
market acceptance. There can be no assurance that new products introduced by the
Company will achieve any significant degree of market acceptance, that such
acceptance will be sustained for any significant period, or that product life
cycles will be sufficient to permit the Company to recoup development, marketing
and other associated costs. In addition, if market acceptance is not achieved,
the Company could be forced to accept substantial product returns to maintain
its relationships with retailers and its access to distribution channels.
Failure of new products to achieve or sustain market acceptance or product
returns in excess of the Company's expectations would have a material adverse
effect on the Company's games business and its operating results.

COMPETITION

     Each segment of the Company's business is intensely competitive and
populated by numerous competitors including large companies with substantially
greater financial, technical and marketing resources than those of the Company.
The board and computer game industries, including sports and family games, are
dominated by a few large companies.  Competition in the games business is
principally based on product quality and features, the compatibility of computer
games with popular platforms, company or product line brand name recognition,
access to distribution channels, marketing effectiveness, reliability and ease
of use, price and technical support. Significant financial resources also have
become a competitive factor in the games business, principally due to the
substantial cost of product development and marketing that is required to
support best-selling titles. In addition, competitors with broad product lines
and popular titles typically have greater leverage with distributors and other
customers who may be willing to promote titles with less consumer appeal in
return for access to such competitor's most popular titles. Retailers typically
have a limited amount of shelf space, and there is intense competition among
game producers for adequate levels of shelf space and promotional support from
retailers. As the number of games products increases, the competition for shelf
space has intensified, resulting in greater leverage for retailers and
distributors in negotiating terms of sale, including price discounts and product
return policies.  The Company expects that its emphasis on pursuing strategic
alternatives for the games business, the possible reduction of the games
business workforce and the reduction of games business research and development
efforts will limit the Company's ability to compete effectively in the games
business going forward.

     Competition in the printing business is largely based on price, quality,
range of services offered, distribution capabilities, ability to service the
specialized needs of customers, availability of printing time on appropriate
equipment and use of state-of-the-art technology. The Company competes for
commercial business not only with large national printers, but also with smaller
regional printers. The Company also believes that excess capacity in the
industry, especially during periods of economic downturn, may result in downward
pricing pressure and intensified competition in the printing industry. Given
these factors, there can be no assurance that the Company will be able to
continue to compete successfully against existing or new competitors, and the
failure to do so may have a material adverse effect on the results of the
printing business. See "Business--Competition."
<PAGE>
Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           (Continued)

TECHNOLOGICAL CHANGE

     Technology in the printing industry has evolved and continues to evolve. As
technology continues to evolve and as its customers' needs become more
specialized and sophisticated the Company will likely be required to invest
significant additional capital in new and improved technology in order to
maintain and enhance the quality and competitiveness of, and to expand, its
products and services. If the Company is unable to acquire new and improved
technology, facilities and equipment or to develop and introduce enhanced or new
products and services, the results of operations and cash flows of the Company's
printing business could be materially adversely affected.

LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION.

     The Company holds copyrights on its products, manuals, advertising and
other materials and maintains trademark rights in the names of products owned by
the Company. The Company regards its software as proprietary and relies
primarily on a combination of trademark, copyright and trade secret laws,
employee and third-party nondisclosure agreements, and other methods to protect
its proprietary rights. Unauthorized copying is common within the software
industry, and if a significant amount of unauthorized copying of the Company's
products were to occur, the Company's business, operating results and financial
condition could be adversely affected. There can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products. As is common in the games business,
from time to time the Company receives notices from third parties claiming
infringement of intellectual property rights of such parties. The Company
investigates these claims and responds as it deems appropriate. Any claims or
litigation, with or without merit, could be costly and could result in a
diversion of resources and  management's attention, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Adverse determinations in such claims or litigation could also have a
material adverse effect on the Company's business, operating results and
financial condition. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be a
persistent problem. Further, the Company enters into transactions in countries
where intellectual property laws are not well developed or are poorly enforced.
Legal protections of the Company's rights may be ineffective in such countries.
<PAGE>
Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           (Continued)

DEPENDENCE ON DISTRIBUTORS; RISK OF CUSTOMER BUSINESS FAILURE; PRODUCT RETURNS.

     Certain mass market retailers have established exclusive buying
relationships under which such retailers will buy games from only one
intermediary. In such instances, the price or other terms on which the Company
sells to such retailers may be adversely affected by the terms imposed by such
intermediary, or the Company may be unable to sell to such retailers on terms
which the Company deems acceptable. The loss of, or significant reduction in
sales attributable to, any of the Company's principal distributors or retailers
could materially adversely affect the Company's games business and its operating
results. Distributors and retailers in the games industry have from time to time
experienced significant fluctuations in their businesses and there have been a
number of business failures among these entities. The insolvency or business
failure of any significant distributor or retailer of the Company's products
could have a material adverse effect on the Company's games business and its
operating results. Sales are typically made on credit, with terms that vary
depending upon the customer and the nature of the product. The Company does not
hold collateral to secure payment owed or due. As a result of the foregoing, a
payment default by a significant customer could have a material adverse effect
on the Company's games business and its operating results. The Company also is
exposed to the risk of product returns from distributors and retailers. The
Company could be forced to accept substantial product returns to maintain its
relationships with retailers and its access to distribution channels. Excessive
product returns could have a material adverse effect on the Company's business,
operating results and financial condition.

RISK OF SOFTWARE DEFECTS.

     Software products such as those offered by the Company in connection with
it's computer games activities frequently contain errors or defects. Despite
extensive product testing, in the past the Company has released products with
defects and has discovered software errors in certain of its product offerings
after their introduction. In particular, the PC hardware environment is
characterized by a wide variety of non-standard peripherals (such as sound cards
and graphics cards) and configurations that make pre-release testing for
programming or compatibility errors very difficult, time-consuming and costly.
There can be no assurance that, despite testing by the Company, errors will not
be found in new products or releases after commencement of commercial shipments,
resulting in a loss of or delay in market acceptance, which could have a
material adverse effect on the Company's business, operating results and
financial condition.

EFFECT OF INCREASES IN PAPER AND POSTAGE COSTS

     The price of paper is a significant expense of the Company's publishing and
printing businesses and began to rise around mid-year 1994 and continued to rise
more dramatically in 1995 and early 1996. In mid-1996 paper prices began to
fall. Paper price increases may have an adverse effect on the Company's future
results. Postage for product and magazine distribution is also a significant
expense of the Company. The Company uses the U.S. Postal Service for
distribution of many of its products and magazine. Postage costs increase
periodically and can be expected to increase in the future. No assurances can be
given that the Company can pass such cost increases through to its customers.
<PAGE>
Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           (Continued)

LIMITED MARKET FOR PUBLISHING BUSINESS

     The Girls' Life magazine is targeted to girls ages seven to fourteen. Since
Girls' Life's target audience is limited by age and gender, Girls' Life, unlike
other magazines that appeal to broader age groups,  must replace a large portion
of its readership each year due to maturation of audience.  Accordingly, Girls'
Life's promotional expenses that are designed to replace and expand its
readership may be higher than other magazines with comparable circulation.
There can be no assurance that Girls' Life will be able to replace its existing
reader and expand its circulation going forward.  Any decrease in Girls' Life's
circulation, due to demographic or other factors, can be expected to have a
material adverse effect on the revenues of the Company's publishing business.

CONTROL BY PRINCIPAL STOCKHOLDERS

     A. Eric Dott and, his son, Jackson Y. Dott, the Company's Chairman and
President, respectively, beneficially own an aggregate of [42]% of the
outstanding voting securities of the Company.  Accordingly, these stockholders
have the ability, acting together, to exercise significant control over
fundamental corporate transactions requiring stockholder approval, including
without limitation the election of Directors, approval of merger transactions
involving the Company and sales of all or substantially all of the Company's
assets.

RESULTS OF OPERATIONS 1996 THROUGH 1998

Sales increased $367,000 or 5% in 1998 from 1997. The increase relates primarily
to  Girls' Life sales which increased $1,620,000 or 137% in 1998 from 1997 as  a
result  of increased promotions and direct mail advertising of the magazine  and
increased  revenue  from newsstand sales and advertising.  Computer  game  sales
decreased $1,085,000 or 61% in 1998 from 1997 as a result of fewer new  computer
game  releases and the return of computer games in fiscal 1998. Board game sales
decreased $21,000 or 1% in 1998 from 1997. Printing sales decreased $147,000  or
5%  from 1997 as a result of increased competition. The allowance for return  of
computer  games  during  fiscal  1998  was decreased  $150,000  to  account  for
estimates  of games returned or to be returned that relate to sales of  computer
games.

In  1997  sales  increased  $1,345,000 or 21% from 1996.  The  increase  related
primarily to game sales which increased $555,000 or 16% in 1997 from 1996 due to
new  computer games releases and Girls' Life sales which increased  $578,000  or
96%  in  1997 from 1996 due to increased subscriptions and advertising  revenue.
Computer  game  sales increased $790,000 or 79% in 1997 from 1996.   Board  game
sales  decreased  $235,000 or 11% in 1997 from 1996.  Printing  sales  increased
$212,000  or  8%  from  1996  related sales.  Girls' Life  sales  of  $1,180,000
accounted for 15% of total net sales for fiscal 1997. The allowance for doubtful
accounts  at  the  end  of  fiscal 1996 was increased  $50,000  to  account  for
estimates of uncollectible amounts related to the increased volume in  sales  of
the magazine.
<PAGE>
Item 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            (Continued)

Foreign  sales  decreased $163,000 or 35% and $95,000 or 17% in 1998  and  1997,
respectively. The decreases in foreign sales in 1998 and 1997 relates  primarily
to  lower  sales  by  dealers in Canada and the UK and the  lack  of  new  games
releases during both years.

Cost of goods sold as a percent of sales was 74% in 1998, 66% in 1997 and 72% in
1996. The increase in 1998 was primarily due to the decrease in game sales which
decreased  $1,106,000 or 28% in 1998 from 1997 amd discontinued board games  and
board  game  parts  valued  at $202,000 that were destroyed  during  the  fourth
quarter  of FY 1998.  Printing sales continued to carry low margins as a  result
of  competitive  market prices. Cost of goods sold as a  percent  of  sales  for
Girls' Life decreased to 72% in 1998 from 78% in 1997 due to increased sales  of
$1,620,000 in 1998.

Selling,  general and administrative expenses as a percentage of sales were  43%
in  1998,  30%  in  1997, and 32% in 1996. The increase in  1998  of  $1,177,000
primarily  relates to higher promotional and advertising expenses for publishing
and  computer  game sales, increased royalty payments in the games segment,  new
personnel  associated  with  computer  game  sales  and  publishing  and   legal
settlement fees of $411,000. In July 1998 the Company settled a lawsuit and  has
accrued the settlement costs of $411,000 at April 30, 1998. The increase in 1997
of  $261,000  was  principally  due  to the increase  in  selling,  general  and
administrative  expenses in royalty and advertising expenses in the  game  sales
segment  due to increased sales of computer games and increased promotional  and
advertising expenses for Girls' Life magazine.

Research  and  development expenses increased $49,000  in  1998,  and  increased
$27,000  in  1997.  The  increase in 1998 and 1997 is due  to  the  increase  in
research and development costs associated with the release of new computer games
during both years.

Other  income  decreased  $119,000 and increased  $186,000  in  1998  and  1997,
respectively.  The  1998  decrease  and 1997  increase  were  primarily  due  to
unrealized  gains attributed to marketable securities, a gain  on  the  sale  of
property and other miscellaneous items which occurred in 1997.

No  provision  (benefit) for current income taxes has been recorded  for  fiscal
years 1998, 1997 and 1996.
<PAGE>
Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           (Continued)

LIQUIDITY AND SOURCES OF CAPITAL
Cash  and cash equivalents decreased $393,000 in fiscal 1998 to $1,738,000,  and
increased  $165,000 in 1997. The decrease in 1998 resulted primarily  from  cash
used  by  operations of $415,000 and purchases of equipment  in  the  amount  of
$140,000,  net  of  the  proceeds  from the sale  of  marketable  securities  of
$175,000.  The increase in 1997 was principally the result  of cash provided  by
operations of $307,000 and other miscellaneous income items. The Company's  cash
and  cash equivalents are subject to variation based upon the timing of receipts
and  the  payment of payables.  During 1998 and 1997, the Company maintained  an
average  balance for certificates of deposit and treasury bills of approximately
$1,670,000 and $1,510,000, respectively.

The  Company  leases its office, warehouse, and manufacturing  facilities  under
noncancellable operating leases.  Annual commitments under these leases at April
30,   1998   are   as  follows:  1999  through  2000 - $327,000,  2001   through
2006 - $127,000.  Certain of these leases are with the Company's Chairman and  a
member of his family.

At April 30, 1998, the Company has no debt with third-party lenders.

During July 1998, cash and cash equivalents ranged from approximately $1.7
million to $1.3 million and was approximately $1 million at July 15, 1998 after
the payment of $411,000 to settle the Civilization lawsuit and related claims.
The Company's cash and cash equivalents are subject to variation based upon the
timing of receipts and the payment of payables.  Management believes that
existing cash and cash equivalents, together with cash generated from operations
and investing activities, will be sufficient to meet the Company's liquidity and
capital needs for the next 12 months. Nevertheless, due to the Company's
operating losses over the past three years and its net losses for two of the
past three years, which the Company attributes primarily to its games business,
the Company has determined to renew its efforts to pursue strategic alternatives
with respect to its games business, reduce operations in the games business and
to focus the Company's resources on the printing business and the publishing
business.  The Company intends to limit the use of cash in the games business by
reducing its research and development efforts and may reduce its games business
workforce.  Possible strategic alternatives for the games business could
include, among other things, a possible business combination, disposition of
assets or other similar transactions.  No agreements have been reached as to any
such alternatives, and satisfactory arrangements are not assured.  There can be
no assurance that the Company will successfully implement a strategic
alternative or that the Company will have sufficient cash to meet its liquidity
and capital needs for the foreseeable future.  In the event the Company's cash
resources are insufficient to meet its liquidity and capital needs, the Company
may be required to obtain alternative financing or significantly curtail its
operations.  There can be no assurance that the Company will be successful in
its pursuit of strategic alternatives or in securing new financing, if
necessary, or that the Company's products will generate receivables and other
assets sufficient to support an adequate level of financing.  Any curtailment of
the Company's operations could have a material adverse effect on the Company.
<PAGE>
Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           (Continued)

IMPACT OF INFLATION AND CHANGING PRICES
Due  to  the  highly competitive nature of the industry segments  in  which  the
Company operates, increased costs were unable to be fully passed on to customers
in the three year period ended April 30, 1998.

Charges  to depreciation represent the allocation of historical costs over  past
years, and are significantly less than if they were based on the consumption  of
current  cost  of  productive assets. Assets replaced in future  years  will  be
replaced at significantly higher costs but replacements are expected to  produce
economies in production.

YEAR 2000 DISCLOSURE:   The  Company  has  reviewed  existing  computer
programs, including  software  and  hardware, and plans to replace the existing
software and hardware by the end of 1998 at an estimated cost of $100,000.
Company management does not believe the change over to new software and hardware
will have a material effect on the Company's business, operations or financial
condition.
<PAGE>
<TABLE>
Item 7.     FINANCIAL STATEMENTS

Consolidated Statements of Financial Condition
<CAPTION>
------------------------------------------------------------------------
April 30,                                          1998           1997
------------------------------------------------------------------------
                                                     (000's Omitted)
<S>                                               <C>            <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents                      $1,738         $2,131
   Marketable securities, at fair value                0            148
   Accounts receivable, net                          973          1,213
   Inventories, less allowance for
       obsolescence (1998 and 1997
       - $350,000)
      Raw materials and component parts              694            752
      Work in progress                               174            112
      Finished goods                               1,100          1,206
                                                  ----------------------
                                                   1,968          2,070
Prepaid expenses                                      47            134
                                                  ----------------------
                   TOTAL CURRENT ASSETS             4,726          5,696


PROPERTY AND EQUIPMENT
   Machinery, equipment, furniture and
      fixtures                                     4,329          4,189
   Leasehold improvements                            305            305
   Accumulated depreciation                       (4,076)        (3,921)
                                                  ----------------------
                                                     558            573
                                                  ----------------------
INTANGIBLE ASSETS-NET                                 45             43
                                                  ----------------------
                                                  $5,329         $6,312
                                                  ======================


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                               $  352         $  459
   Accrued expenses                                  723            281
   Deferred subscription revenue                   1,024            617
                                                  ----------------------
                   TOTAL CURRENT LIABILITIES       2,099          1,357
                                                  ----------------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Preferred Stock-par value $.01 per share:
      Authorized 100,000 shares; no shares
      issued
   Common Stock-par value $.25 per share:
      Authorized - 3,000,000 shares; shares
      issued - 2,109,985: shares outstanding
      1,619,820 on April 30, 1998 and
      April 30, 1997                                 527            527
   Capital surplus                                 3,378          3,378
   Retained (deficit) earnings                      (553)         1,172
                                                  ----------------------
                                                   3,352          5,077
   Treasury stock at par - 490,165 shares on
      April 30, 1998 and April 30, 1997             (122)          (122)
                                                   ---------------------
                   TOTAL STOCKHOLDERS' EQUITY      3,230          4,955
                                                   ---------------------
                                                  $5,329         $6,312
                                                   ====================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7.     FINANCIAL STATEMENTS (Continued)

Consolidated Statements of Operations
<CAPTION>
---------------------------------------------------------------------------
Year Ended April 30,                     1998         1997         1996
---------------------------------------------------------------------------
                                  (000's Omitted, except share information)
<S>                                    <C>          <C>          <C>
Net Sales - games                      $2,844       $3,950       $3,395
    - printing and envelope
         manufacturing                  2,587        2,734        2,522
    - publishing                        2,800        1,180          602
                                   -------------------------------------
                                        8,231        7,864        6,519
                                   -------------------------------------

Cost of goods sold - games              1,628        1,768        1,669
    - printing and envelope
         manufacturing                  2,462        2,492        2,416
    - publishing                        2,016          920          616
                                   -------------------------------------
                                        6,106        5,180        4,701
                                   -------------------------------------

Gross profit                            2,125        2,684        1,818
                                   -------------------------------------
Selling, general and
   administrative expenses              3,502        2,325        2,064

Research and development                  443          394          367
                                   -------------------------------------
     Operating expenses                 3,945        2,719        2,431
                                   -------------------------------------
Loss from operations                   (1,820)         (35)        (613)
                                   -------------------------------------
Other:
   Investment income                        73          71           65
   Realized and unrealized gain (loss)
      on marketable securities              27          24          (37)
   Gain on sale of building                  0          67            0
   Other                                    (5)         52            0
                                   -------------------------------------
                                            95         214           28
                                   -------------------------------------
Income (loss) before income taxes       (1,725)        179         (585)
                                   -------------------------------------
Provision for income taxes                   0           0            0
                                   -------------------------------------
Net income (loss)                      $(1,725)        179       $ (585)
                                   -------------------------------------
Basic and diluted Income (loss)
     per share                         $ (1.06)     $  .11       $ (.36)
                                   =====================================
Weighted average number of
     shares outstanding              1,619,820   1,619,848    1,620,170
                                   =====================================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7.     FINANCIAL STATEMENTS (Continued)

Consolidated Statements of Changes in Stockholders' Equity
                   (000's omitted, except shares outstanding data)
<CAPTION>
                                                               Total
              Shares     Common Capital  Retained  Treasury Stockolders'
             Outstanding  Stock  Surplus  Earnings   Stock      Equity
             ----------  ------  -------  --------  --------  ----------
<S>             <C>        <C>     <C>      <C>       <C>      <C>
Balance
May 1, 1995     1,620,170  $ 527   $ 3,379  $ 1,578   $ (122)  $ 5,362

Net Loss-1996                                  (585)              (585)
              ----------------------------------------------------------
Balance
April 30, 1996  1,620,170    527     3,379      993     (122)    4,777

Purchase of
 Stock for
 Treasury            (350)              (1)                         (1)

Net Income-1997                                  179                179
              ----------------------------------------------------------
Balance
April 30, 1997 1,619,820     527     3,378     1,172    (122)     4,955

Net Loss-1998                                 (1,725)            (1,725)
              ----------------------------------------------------------
Balance
April 30, 1998 1,619,820   $ 527   $ 3,378   $  (553) $ (122)   $ 3,230
              ==========================================================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7.     FINANCIAL STATEMENTS (Continued)
<CAPTION>
Consolidated Statements of Cash Flows
------------------------------------------------------------------------
Year Ended April 30,                            1998     1997     1996
------------------------------------------------------------------------
                                                    (000's Omitted)
<S>                                          <C>        <C>      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income                           $(1,725)   $ 179    $( 585)
  Adjustments to reconcile net (loss)        --------------------------
    income to net cash (used in) provided
    by operating activities:
     Depreciation                                155      135       135
     Amortization                                 58       14        15
     Gain on disposal of property
        and equipment                              0    (  66)    (   9)
     Gain on sale of marketable
        securities                             (  27)       0         0
     (Decrease) increase in accounts
        receivable allowances                  ( 146)     157     ( 152)
     Inventory write-off                           0       90         0
     Unrealized (gain) loss on marketable          0    (  24)       37
        securities
   Changes in operating assets and liabilities:
     (Increase) decrease in operating assets:
        Accounts receivable, gross               386    ( 521)      647
        Inventories                               55    ( 219)      196
        Refundable income taxes                    0        0        60
        Prepaid expenses                          87    (  16)        9
     Increase (decrease) in operating
        liabilities:
        Accounts payable                       ( 107)     161     (  74)
        Accrued expenses                         442       53     ( 131)
        Deferred subscription revenue            407      364       101
                                               -------------------------
Total adjustments                              1,310      128       834
                                               -------------------------
   Total cash (used in) provided by
      operating activities                     ( 415)     307       249
                                               -------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment          ( 140)   ( 188)    (  16)
  Purchases of intangible assets               (  13)   (  32)    (   3)
  Cash proceeds from disposal of property
     and equipment                                 0       79       109
  Cash proceeds from the sale of marketable
     securities                                  175        0         0
                                              -------------------------
    Total cash provided by (used in)
       investing activities                       22    ( 141)       89
                                               -------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repurchase of stock for treasury                 0    (   1)        0
                                               -------------------------
    Total cash used in financing activities        0    (   1)        0
                                               -------------------------
NET (DECREASE) INCREASE IN CASH AND
    CASH EQUIVALENTS                           ( 393)     165       338
CASH AND CASH EQUIVALENTS
  BEGINNING OF YEAR                            2,131    1,966     1,628
                                               -------------------------
CASH AND CASH EQUIVALENTS
  END OF YEAR                                $ 1,738   $2,131    $1,966
                                               =========================
SUPPLEMENTAL DISCLOSURE OF NON-CASH
    ACTIVITIES
Write-off of marketable securities            $    0   $   18    $  102
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

The  consolidated financial statements of Monarch Avalon, Inc. and  its  wholly-
owned  Subsidiaries (collectively, "the Company"), include Monarch Avalon,  Inc.
and  its  wholly-owned  subsidiaries, Girls' Life, Inc.,  Creampuffs,  Inc.  and
Broken Windows, Inc.

Girls' Life, Inc. ("Girls' Life") was incorporated in December 1993 in the State
of  Maryland  and publishes a magazine for young girls ages seven  to  fourteen.
Substantial operations began in fiscal year 1995 with the release of its initial
bi-monthly  publication in August 1994. Magazines are sold across North  America
through  a  distributor and directly by Girls' Life through  one  and  two  year
subscriptions.

Creampuffs, Inc. was incorporated on March 12, 1997 in the State of Maryland  as
a  marketing  company  for others. This new subsidiary did  not  engage  in  any
operations in the years ending April 30, 1998 and 1997.

Broken  Windows, Inc. was incorporated on June 11, 1997 in the State of Maryland
as  a  retail  operation.  On November 26, 1997, Broken Windows, Inc.  opened  a
retail  store  in Maryland for the purpose of selling computer and  board  games
manufactured  by Monarch Avalon, Inc. and computer and board games  manufactured
by  other  companies.  Products associated with Girls' Life magazine  were  also
offered  for sale to the general public.  The retail store was closed on January
17, 1998.

Monarch  Avalon, Inc. ("Monarch") consists of two divisions, games and printing,
and  is incorporated in the State of Delaware. Monarch's game division develops,
manufactures  and  markets board and computer games. Games  are  sold  primarily
through  retail  distributors across North America with  some  export  sales  to
foreign  distributors  in  Japan,  Europe,  and  Australia.  Monarch's  printing
division  manufactures envelopes and provides printing and graphic arts services
to  various  commercial customers. Printing and envelope sales are predominantly
with  commercial  customers in various industries located  in  the  Mid-Atlantic
region of the United States.

All  material intercompany balances between Monarch Avalon, Inc. and Girls' Life
Inc.,  Creampuffs  Inc.  and  Broken  Windows,  Inc.  have  been  eliminated  in
consolidation.

NOTE B - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

REVENUE   RECOGNITION:   Girls'  Life  Inc.  recognizes   revenue   related   to
subscriptions  for  its magazine according to the ratio of magazines  issued  to
total  subscribed  issues.  Deferred  subscription  revenue  represents  amounts
collected for subscriptions of the magazine not yet issued.

Revenues  from  the sale of products by Monarch Avalon, Inc. are  recorded  upon
shipment to the customer. An accrual for customer returns, primarily related  to
computer  game sales, is recorded based upon current sales, the timing of  those
sales and historical experience.

Revenues  from  the sale of products by Broken Windows, Inc. are  recorded  upon
receipt by the retail customer as a charge or cash sale.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

USE  OF  ESTIMATES: The preparation of financial statements in  conformity  with
generally  accepted accounting principles requires management to make  estimates
and  assumptions that affect the reported amounts of assets and liabilities  and
disclosure  of  contingent assets and liabilities at the date of  the  financial
statements  and  the  reported  amounts of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

CASH EQUIVALENTS: For the purpose of reporting cash flows, the Company considers
all  highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.

ACCOUNTS  RECEIVABLE: Monarch's principal customers are distributors and  retail
stores  worldwide  (games) and commercial entities (printing).  Receivables  are
generally  due  within 30 days. However, the Company grants seasonal  and  other
payment  terms  to  certain of its customers.  Two customers of  computer  games
accounted  for  approximately 11% and 10%, respectively of total  net  sales  in
1997. No one customer accounted for over 10% of total net sales in 1998 or 1996.

Girls'  Life  sells  its  magazine through a distributor and  direct  individual
subscriptions. Receivables consist of advertising income and sales of  magazines
through the distributor for issues released prior to April 30.

INTANGIBLE  ASSETS:  Intangible  assets consist of  trademarks,  copyrights  and
goodwill and are amortized using the straight-line method over periods estimated
to  be  benefited.   At April 30, 1998 and 1997, intangible assets  are  net  of
accumulated amortization of $238,048 and $227,164 respectively.

INVENTORIES: The Company values inventories at the lower of cost (first
-in, first-out) or market.

PROPERTY  AND  EQUIPMENT:  Property  and  equipment  is  carried  at  cost   and
depreciation  is  computed  by the straight-line method  over  estimated  useful
lives.

FINANCIAL  INSTRUMENTS:  The current carrying value of accounts  receivable  and
current  liabilities is a reasonable estimate of their fair  value  due  to  the
short-term nature of such accounts.

MARKETABLE  SECURITIES:  The  Company accounts for  its  investments  in  equity
securities  under  the  accounting  and reporting  provisions  of  Statement  of
Financial  Accounting  Standards  No. 115 ("SFAS  No.  115").  The  Company  has
classified its investments as trading securities based on its intended  use.  As
such,  unrealized  holding  gains and losses are included  in  the  consolidated
statements of operations. During fiscal years 1997 and 1996, certain investments
with  no  market  value and a cost basis of approximately $18,000  and  $102,000
respectively  were  written  off. At April 30,  1997,  the  cost  of  marketable
securities  exceeded the market value by approximately $54,000.  The  marketable
securities were sold during fiscal year 1998.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

RESEARCH  AND DEVELOPMENT COSTS: Research and development costs are  charged  to
expense when incurred.

INCOME TAXES: The Company provides for income taxes using Statement of Financial
Accounting  Standards No. 109, "Accounting for Income Taxes," ("SFAS  No.  109")
which  requires  an  asset  and liability approach to financial  accounting  and
reporting for income taxes (see Note D). Under SFAS No. 109, deferred tax assets
and liabilities are provided for differences between the financial statement and
tax basis of assets and liabilities that will result in future taxable income or
deductible  amounts. The deferred tax assets and liabilities are measured  using
enacted  tax  laws and rates applicable to the periods in which the  differences
are expected to affect taxable income. Income tax expense is computed as the tax
payable or refundable for the period plus or minus the change during the  period
in deferred tax assets or liabilities.

EARNINGS  PER  SHARE: The Company has adopted Statement of Financial  Accounting
Standard No. 128 (SFAS 128), "Earnings Per Share" during the fiscal year  ending
April 30, 1998.  SFAS No. 128 establishes standards for computing and presenting
earnings per share.  Basic earnings per share are based on the weighted  average
number  of  shares  of  common  stock outstanding during  each  year.  Potential
dilutive  common  shares do not change basic earnings per  share  because  their
effect  would be antidilutive.  The implementation of SFAS No. 128 did not  have
an effect on the financial statements.

STOCK-BASED COMPENSATION ARRANGEMENTS:  The Company applies APB Opinion  No.  25
and   related   interpretations  in  accounting  for  stock  based  compensation
arrangements.   Accordingly,  no  compensation   has   been   recognized.    Had
compensation costs been determined based on fair value at the grant date forward
consistent  with  SFAS No. 123, "Accounting for Stock-Based  Compensation,"  the
Company's net income or loss would not have been affected on a pro forma  basis.
No  adjustment  to the Company's net income or loss is required  for  the  years
ended April 30, 1998, 1997 and 1996.

NEW  ACCOUNTING PRONOUNCEMENTS: The Company has adopted Statement  of  Financial
Accounting Standard No. 129 (SFAS 129), "Disclosure of Information about Capital
Structure"  for  the  fiscal year ending April 30, 1998.  SFAS  129  establishes
standards  for disclosing information about an entity's capital structure.   The
implementation  of  SFAS  129 did not have a material effect  on  the  financial
statements.

The  Company is required to adopt Statement of Financial Accounting Standard No.
130  (SFAS  130),  "Reporting Comprehensive Income" for the fiscal  year  ending
April 30, 1999.  SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components.  Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions  and
other  events and circumstances from nonowner sources.  It includes all  changes
in  equity during a period except those resulting from investments by owners and
distributions  to owners.  The implementation of SFAS No. 130 will  not  have  a
material effect on the financial statements.

The  Company is required to adopt Statement of Financial Accounting Standard No.
131  (SFAS  131),  "Disclosures  about Segments of  an  Enterprise  and  Related
Information"  for the fiscal year ending April 30, 1999.  SFAS  131  establishes
standards for the way that public business enterprises report information  about
operating segments.  The implementation of SFAS No. 131 will not have a material
effect on the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:

                                         1998           1997
                                         ----           ----
Accounts Receivable-games          $  513,348     $  885,682
                   -printing          398,943        353,125
                   -publishing        247,854        307,397
                                   -----------    -----------
Less:                               1,160,145      1,546,204
  Allowance for doubtful accounts    (142,491)      (138,628)
  Allowance for customer returns     ( 44,518)      (194,518)
                                   -----------    -----------
                                   $  973,136     $1,213,058
                                   ===========    ===========

NOTE D-INCOME TAXES

A  reconciliation  of the effective tax rate for income taxes in  the  financial
statements to the Federal statutory rates is as follows:

------------------------------------------------------------------------
Year Ended April 30,                          1998      1997      1996
------------------------------------------------------------------------

Federal income tax at statutory rate           (34)%     (34)%     (34)%
Net operating losses and other tax credits      33        33        33
Non-deductible items and other                   1         1         1
                                               -----     -----     -----
                                                 - %       - %       - %
                                               =====     =====     =====

The  components of the deferred income tax provision (benefit) before  reduction
for the valuation allowance are as follows:
------------------------------------------------------------------------
Year Ended April 30,                      1998         1997        1996
------------------------------------------------------------------------

Depreciation                         $   2,000    $   5,000   $( 71,000)
Uniform Capitaliation                   (2,000)    (  1,000)        ---
Allowances for accounts receivable      57,000     ( 61,000)     59,000
Amortization                             3,000     (  3,000)      1,000
Unrecognized benefit of change
  in bases of assets                    28,000       10,000      41,000
Net operating loss and other
  tax credit carryforward             (732,000)     172,000    (342,000)
                                     -----------  ----------  ----------
                                     $(644,000)   $ 122,000   $(312,000)
                                     ===========  ==========  ==========
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The  deferred  tax  assets  (liabilities) result from  the  following  temporary
differences:
------------------------------------------------------------------------
April 30,                                              1998        1997
------------------------------------------------------------------------

Current:
  Financial statement accruals, net              $   34,000   $  62,000
  Inventory reserves and uniform capitalization     153,000     151,000
  Allowances for accounts receivable                 73,000     130,000
                                                 ----------   ---------
                                                    260,000     343,000
Non-current:                                     ----------   ---------
  Depreciation                                      (18,000)    (16,000)
  Amortization                                       10,000      13,000
  Net operating loss and other tax
    credits-carryforwards                         1,015,000     283,000
                                                 ----------   ---------
                                                  1,007,000     280,000
                                                 ----------   ---------
Net deferred tax asset                            1,267,000     623,000
Valuation allowance                              (1,267,000)   (623,000)
                                                 ----------   ---------
                                                 $     ---    $     ---
                                                  ==========   =========

In  Fiscal  1998  and the five years prior to Fiscal 1997, the Company  incurred
book  and  tax losses. As such, management has concluded that it is more  likely
than not that the Company will not generate taxable income sufficient to realize
the  tax benefit associated with future temporary differences and operating loss
carryforwards prior to their expiration; therefore, the Company has  recorded  a
full  valuation reserve against the deferred tax asset. However, if  significant
improvements in operations occur and taxable income is realized in future years,
a reduction in the valuation reserve will be necessary.

For  tax  purposes the Company had available, at April 30, 1998,  net  operating
loss  carryforwards  for regular Federal income tax of approximately  $2,508,000
which will expire in the years 2010, 2011 and 2013.  There were no cash payments
for  income taxes in 1998, 1997 and 1996.  In 1996, the Company received  income
tax refunds of $60,000.

NOTE E - PROFIT-SHARING PLAN

Substantially  all  of the Company's employees participate in  a  profit-sharing
plan.  Contributions  are determined by the results of  operations  and  can  be
increased at the discretion of the Board. There were no contributions  in  1998,
1997 and 1996.

NOTE F - COMMITMENTS AND CONTINGENCIES

LEASES:  The  Company  leases  office, warehouse and  manufacturing  facilities.
Several  of  the  leases provide for renewal options ranging from  two  to  five
years.  The  Company  generally  must  pay for  property  taxes,  insurance  and
maintenance costs related to the properties. Total rental expense for 1998, 1997
and 1996 was approximately $317,000, $298,000, and $298,000, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The  future  annual  minimum  rental commitments for  non-cancellable  operating
leases as of April 30, 1998 are as follows:  1999 through 2000 - $327,000,  2001
through 2006 - $127,000.

Certain  facilities  are  leased annually for approximately  $127,000  from  the
Chairman of the Company and a member of his family.

LITIGATION:  In  July  1998 the Company settled a lawsuit and  has  accrued  the
settlement  costs  of $411,000 at April 30, 1998. The Company is  involved  from
time to time  in  legal actions  arising  in  its  normal  course of operations.

STOCK  OPTIONS: During 1992 the Company's Chairman was granted a ten year option
to purchase up to 300,000 shares of the Company's common stock at the greater of
the  book or market value of the stock as of the date of exercise.  Such  option
can only be exercised in the event of the following:

*  An  individual or entity acquires the Company's common stock to the    extent
in  which  they  have  greater  than twenty  percent  of  the  total  number  of
outstanding shares of the Company's common stock.

* An individual or entity makes a tender offer for thirty percent or more of the
Company's outstanding common stock.

*  An  individual  or  entity proposes the election of a director  or  slate  of
directors  opposed  to  any  directors or slate of  directors  proposed  by  the
management of the Company.

The Chairman may only exercise the option within sixty days following any of the
above events.

On  October 3, 1997, the stockholders approved the proposal to grant to each  of
the  Company's  President and two outside directors options to  purchase  40,000
unregistered  shares  of  the Company's common stock for  $2.00  per  share  and
approved  the proposal to grant to the Company's Chairman, options  to  purchase
80,000 unregistered shares of the Company's common stock for $2.00 per share,  a
price  approximating the fair value of these shares at the dates of  grant.  The
options terminate on September 30, 1998.

No options have been exercised or canceled during the year ended April 30, 1998.
Options outstanding total 500,000 shares.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE G - SEGMENT INFORMATION

The Company operates in three industry segments: Games, Printing and Publishing.
Operating profit (loss) represents net sales less all identifiable operating
expenses. General corporate expenses, income taxes and other income or expense
are excluded from segment operations.

                                                ($000 Omitted)
                                           1998      1997      1996
                                           ----      ----      ----

Net Sales
   -Games                                 $2,844    $3,950    $3,395
   -Printing                               2,587     2,734     2,522
   -Publishing                             2,800     1,180       602
                                          -------   -------   -------
     Total                                 8,231    $7,864    $6,519
                                          =======   =======   =======
   Operating (loss) Profit:
   -Games                                 (1,489)   $  364    $  369
   -Printing                              (  450)     (313)     (593)
   -Publishing                               262      (  9)     (226)
                                          -------   -------   -------
     Total                                (1,677)       42      (450)
   General Corporate Expenses, net          (143)     ( 77)     (163)
   Other Income, net                          95       214        28
                                          -------   -------   -------
Income (loss) before income taxes         (1,725)   $  179    $ (585)
                                          =======   =======   =======

                                                 ($000 Omitted)
                                            1998      1997      1996
                                            ----      ----      ----
Identifiable Assets:
   -Games                                 $2,204    $2,695    $2,357
   -Printing                               1,214     1,139     1,223
   -Publishing                               488       306       247
   General Corporate                       1,423     2,172     1,729
                                          -------   -------   -------
                                          $5,329    $6,312    $5,556
                                          =======   =======   =======
Depreciation and Amortization:
   -Games                                 $  102    $   49    $   50
   -Printing                                 111       100       100
                                          -------   -------   -------
                                          $  213    $  149    $  150
                                          =======   =======   =======
Capital Expenditures:
   -Games                                 $   65     $  103    $   11
   -Printing                                  88        117         8
   -Publishing                                 -         -         -
                                          -------   -------   -------
                                          $  153    $  220    $   19
                                          =======   =======   =======

Corporate  assets  consist  mainly  of cash  and  cash  equivalents,  marketable
securities and certain other assets.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The  Company sells its products in both the United States and foreign countries.
Export  sales  were  approximately $303,000, for 1998, $466,000  for  1997,  and
$561,000 for 1996.

Intersegment  sales or transfers were $851,000 for 1998, $869,000 for  1997  and
$737,000  for  1996.  These sales are not included in  the  sales  shown  above.
Intersegment  sales  are  accounted  for at prices  comparable  to  unaffiliated
customer  sales. All segments share certain facilities and operate under  common
management. These expenses are allocated ratably to each segment.

                         -----------------------

Consolidated Quarterly Results of Operations

A summary of the unaudited consolidated quarterly results of operations for the
years ended April 30, 1998 and 1997 is as follows.


                                          Fiscal 1998
                                      Three Months Ended
                         --------------------------------------------
                         July 31   October 31   January 31   April 30
                         -------   ----------   ----------   --------
                             (000 Omitted, except per share data)

Net Sales                 $1,628       $2,588       $1,748     $2,267
Gross Profit                 468        1,084           31        542
Net (Loss) Income           (256)           6         (686)      (789)
Net (Loss) Income
  per Common Share          (.16)         .00         (.42)      (.48)



                                          Fiscal 1997
                                      Three Months Ended
                         --------------------------------------------
                         July 31   October 31   January 31   April 30
                         -------   ----------   ----------   --------
                             (000 Omitted, except per share data)

Net Sales                 $1,177       $2,503       $2,315     $1,869
Gross Profit                 237          919        1,105        423
Net (Loss) Income           (177)         112          333       ( 89)
Net (Loss) Income
  per Common Share          (.11)         .07          .21       (.06)


In July 1998, the Company settled a lawsuit and has accrued the settlement cost
of $411,000 in the three months ended April 30, 1998.
<PAGE>
Independent Auditors' Report


To   the  Stockholders  and  Board  of  Directors,  Monarch  Avalon,  Inc.   and
Subsidiaries, Baltimore, Maryland

We  have audited the accompanying consolidated statements of financial condition
of  Monarch Avalon, Inc. and Subsidiaries as of April 30, 1998 and 1997, and the
related  consolidated statements of operations, changes in stockholders' equity,
and  cash flows for each of the three years in the period ended April 30,  1998.
These  financial statements are the responsibility of the Company's  management.
Our  responsibility is to express an opinion on these financial statements based
on our audits.

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

In  our  opinion, such consolidated financial statements present fairly, in  all
material   respects,  the  financial  position  of  Monarch  Avalon,  Inc.   and
Subsidiaries as of April 30, 1998 and 1997, and the results of their  operations
and  their cash flows for each of the three years in the period ended April  30,
1998, in conformity with generally accepted accounting principles.




/s/       Deloitte & Touche LLP
Deloitte & Touche LLP
Baltimore, Maryland
July 17, 1998
<PAGE>
Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE
          NONE
                                PART III

     Information required in Part III, Items 9-12 is incorporated by
     reference to the  Company's  proxy  statement  to  be filed  in
     connection with the 1998 Annual Meeting of Stockholders.


Item 9.   DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
          ACT

Item 10.  EXECUTIVE COMPENSATION

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K
          (a) Listing of Exhibits:
            3.(a) The Company's Restated Certificate of Incorporation
                  dated October 14, 1982 (incorporated by reference to
                  Exhibit 3(a) to the Company's Form 10-KSB for the
                  fiscal year ended April 30, 1995).

              (b) The Company's Restated and Amended Bylaws dated
                  August 17, 1981 (incorporated by reference to
                  Exhibit 3(b) to the Company's Form 10-KSB for
                  the fiscal year ended April 30,1995).

              (c) Amendment to the Company's Restated and Amended
                  Bylaws (incorporated by reference to Exhibit 3(c) to
                  the Company's 10-K for the year ended April 30, 1986).

              (d) Amendment to the Company's Restated and Amended
                  Bylaws (incorporated by reference to Exhibit 3(d) to
                  the Company's 10-K for the year ended April 30, 1990).

              (e) Amendment dated November 6, 1987 to the Company's
                  Restated Certificate of Incorporation (incorporated
                  by reference to Exhibit 3(d) to the Company's 10-Q
                  for the quarter ended October 31, 1987).

              (f) Amendment to the Company's by-laws dated August
                  1, 1996 (incorporated by reference to Exhibit 3(f)
                  to the Company's 10-QSB for the quarter ended
                  July 31, 1997).

          10. (a) Lease Agreement dated July 2, 1973 between the
                  Company as Lessee and A. Eric Dott and Esther J.
                  Dott as lessors (incorporated by reference to
                  Exhibit 10(a) to the Company's Form 10-KSB for
                  the fiscal year ended April 30, 1995).
<PAGE>
Item 13     EXHIBITS AND REPORTS ON FORM 8-K (Continued)

              (b) Lease renewal and Amendment of Lease Agreement
                  dated July 1, 1983 between the Company and A. Eric
                  Dott and Esther J. Dott, renewing and amending
                  terms of the Lease Agreement in Exhibit 10(a)
                  (incorporated by reference to Exhibit 10(b) to
                  the Company's Form 10-KSB for the fiscal year
                  ended April 30, 1995).

              (c) Option to Purchase Common Stock dated June 19,
                  1991 issued to A. Eric Dott, Chairman of the
                  Company (incorporated by reference to Exhibit
                  10(f) to the Company's 10-K for the year ended
                  April 30, 1992).

              (d) Option to Purchase Common Stock dated October
                  4, 1996 issued to Helen D. Bentley, David F.
                  Gonano and Jackson Y. Dott (incorporated by
                  reference 10(d) to the Company's 10-KSB for the
                  year ended April 30, 1997).

              (e) Option to Purchase Common Stock dated April
                  21, 1997 issued to A. Eric Dott, Chairman of
                  the Company (incorporated by reference to
                  Exhibit 10(e) to the Company's 10-KSB for the
                  year ended April 30, 1997).

           21.    Subsidiaries of the Registrant (incorporated
                  by reference to Exhibit 21 to the Company's
                  Form 10-QSB for the quarter ended October 31,
                  1997).

           27.    Financial Data Schedule.

              (b) The Company did not file any report on Form 8-K
                  during the fourth quarter of the year ended
                  April 30, 1998.
<PAGE>
                           S I G N A T U R E S

In  accordance with 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.




                                     MONARCH AVALON, INC.




                                     By:  /s/        A. Eric Dott
                                              --------------------------
                                                A. Eric Dott, Chairman
                                                      and Director





DATE: July 29, 1998
      -------------
<PAGE>
In  accordance  with the Securities Exchange Act of 1934, this report  has  been
signed  below by the following persons on behalf of the registrant  and  in  the
capacities and on the dates indicated.






Date   July 29, 1998                     /s/     Jackson Y. Dott
     ----------------                    -------------------------------
                                         Jackson Y. Dott, President
                                         (Principal Executive Officer),
                                            Treasurer and Director


Date   July 29, 1998                     /s/    David F. Gonano
     ----------------                    -------------------------------
                                         David F. Gonano, Director




Date   July 29, 1998                     /s/   Helen Delich Bentley
     ----------------                    -------------------------------
                                         Helen Delich Bentley, Director




Date   July 29, 1998                     /s/    Steven M. Szekely
     ----------------                    -------------------------------
                                         Steven M. Szekely, Executive
                                         Vice-President and Secretary



Date   July 29, 1998                     /s/    A. Eric Dott
     ----------------                    -------------------------------
                                         A. Eric Dott, Chairman and
                                            Director



Date   July 29, 1998                     /s/    Marshall Chadwell
     ----------------                    -------------------------------
                                         Marshall Chadwell, Controller
                                         (Principal Financial Officer),
                                          Principal Accounting Officer
<PAGE>
                                EXHIBIT INDEX

Exhibit Number
--------------

     27        -     Financial Data Schedule
<PAGE>