SECURITIES AND EXCHANGE COMMISSION
                             27
             SECURITIES AND EXCHANGE COMMISSION
                    Washington, DC 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 December 31, 1998
                              
               Commission File Number: 1-13760
                              
                THE NETWORK CONNECTION, INC.
                              
                    1324 Union Hill Road
                  Alpharetta, Georgia 30201
                       (770-751-0889)
                              
    A Georgia Corporation IRS Employer ID No. 58-1712432
                              
 Securities registered pursuant to Section 12(b) of the Act:
                              
  Common Stock, $.001 par value per share Registered on The
                     Nasdaq Stock Market
                              
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(b) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.   Yes [X]  No [   ]


Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment of this Form 10-KSB.   [    ]


The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant,
based on the closing sale price of the Common Stock on March
31, 1999, in the over-the-counter market as reported by The
Nasdaq SmallCap Market tier of The Nasdaq Stock Market, was
approximately $10.0 million.  Shares of Common Stock held by
each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates.  This
determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of March 31, 1999, the registrant had outstanding
5,179,646 shares of its Common Stock.

             DOCUMENTS INCORPORATED BY REFERENCE

                            None
                            PART I


Item 1.   Business


General

      The  Company  designs,  manufactures  and  distributes
computer networking products and systems, including complete
video  and  data  entertainment systems, high  stream  count
videoservers  and  workstations, which  provide  users  with
video  on  demand applications and support and  full  motion
digital  video, imaging and other multimedia processes.  The
Company's  networking products are used in  connection  with
employee     training,     academic,     telecommunications,
entertainment  and  other industry  applications.  Video  on
demand permits new ways to employ video as an instructional,
entertaining   and  communications  medium   over   existing
computer networks. Each user is given the ability to call-up
video content as needed, without affecting any other network
participant's  requirements  on  the  system,  and   without
requiring  any  other system participant  simultaneously  to
view the same content.

      The  Company was originally incorporated  in  1986  to
distribute  computer  network  products  as  a  value  added
distributor ("VAD") of such products. Although its principal
business  continued  as a VAD, in 1987 the  Company  made  a
strategic  shift in its business operations by  moving  away
from the distribution of products manufactured by others and
to  seek  to  become principally a manufacturer of  its  own
superserver  and workstation products. This  shift  resulted
from   changing  trends  in  the  computer  industry,  which
included  increased profit margin pressures on VADs  due  to
the  perception  that VADs were offering simple  commodities
rather   than  value  added  products  for  sale  to   their
customers.

      The  Company's  products  are  sold  under  the  names
TRIUMPH,  Cheetah,  and related sub  product  names.   These
systems are based upon non-proprietary PC hardware standards
and  utilize  standard major components  and  subsystems  in
order  to provide flexibility and reliability. The Company's
products   are  designed  to  be  compatible  with  industry
standard network operating systems and new network operating
systems  as  they  become available. Product  design  allows
compatibility with most applications running in such network
environments, and enables the Company's systems  to  operate
efficiently  as  servers  and work stations  for  groups  of
interconnected PCs arranged in LANs, WANs, intranets and the
Internet.  The  Company currently distributes  its  products
worldwide  principally through its own internal sales  force
and strategic resellers.

The Network Connection Solution

     In 1987, the Company first introduced the initial entry
of   its  TRIUMPH  family  of  multimedia  information   and
entertainment  systems, which are designed  to  provide  the
compatibility,  performance,  availability  and  scalability
necessary for sophisticated interactive capable systems. The
Company  believes  that  its systems contain  the  following
features.

     *    Compatibility

     The TRIUMPH family is based upon hardware standards and
is  designed to be compatible with industry standard network
operating  systems,  such  as Windows  NT,  Novell  NetWare,
Microsoft LAN Manager, SCO UNIX, Banyan VINES and Linux, and
with new network operating systems as they become available.
In  addition,  the  Company's products are  designed  to  be
compatible with applications designed to run in such network
environments.   TRIUMPH  familty  systems  use   of   common
"interfaces"  (e.g., products utilized  to  increase  system
functionality  in  terms of system power and/or  special  or
additional  features  availability),  such  as   the   Small
Computer  System Interface ("SCSI"), and its  employment  of
Peripheral    Component    Interconnect    ("PCI"),     FCAL
(FiberChannel  Arbitrated Loop), Gigabit ethernet  and  Fast
ethernet,  also  enables the Company's products  to  connect
with  hardware produced by third-party vendors. The  TRIUMPH
systems also provide for ease of support of a wide range  of
network connectivity standards.

     *    Performance

       The  TRIUMPH  architecture  consists  of  independent
subsystems  interfaced by a high-speed  symmetric/asymmetric
multiprocessor   connected  system.  This  architecture   is
designed  to  reduce  the  I/O bottlenecks  and  performance
degradation  typically  associated with  PC-  based  servers
attempting  to  perform multiple tasks concurrently  with  a
single microprocessor. The TRIUMPH open systems architecture
and  critical  data flow design technology incorporates  the
fault  tolerance  and high throughput necessary  to  provide
simultaneous  services,  such as video-on-demand,  LAN-based
video  training, and database/file imaging and printing.  In
addition,  as  the TRIUMPH systems  provide video/multimedia
systems  encompassing voice or sound, pictorial and graphic,
live  or  recorded,  and  touch  technologies,  the  Company
believes  that  easy  access  to  information  in  a   "user
friendly"  environment is made available. In  this  respect,
the  TRIUMPH  architecture is designed to provide  abilities
and features not found in mainframes and minicomputers at  a
significantly lower cost.

     *    Availability

      The TRIUMPH architecture is designed to permit systems
to  be  configured to provide the high level of availability
required   for   business-critical   applications    through
reliability,  data  integrity and  recoverability  features.
Reliability  features available for certain  TRIUMPH  models
include  power  supply  and other key module  redundancy  to
promote   continued   system   operation,   cooling   system
redundancy  to  protect against premature component  failure
and  disk redundancy by providing an ability to replace hard
disks  during  system  operation without  interruption.  The
TRIUMPH  data integrity features minimize the potential  for
data  loss during system operation and, in addition  to  the
disk  backup  features described above, include data  parity
checking  to enhance data integrity. Recoverability features
facilitate  recovery when a stoppage does occur and  include
subsystems  which permit remote diagnostics  subsystems  for
TRIUMPH systems.

     *    Scalability

       The  TRIUMPH  systems  can  scale  from  just  a  few
interactive  users to hundreds or thousands  of  interactive
users  providing  an  array of interactive  services,  which
include internet, intranet, audio, audio/video, commerce and
transactional information systems.

     *    Upgradability

       The  TRIUMPH  systems  allow  for  upgrading  without
obsolescence  of  existing Triumph products.   Upgrades  may
include  architecture to allow increase  in  the  number  of
interactive  users,  concurrent  video  streams,  or   other
interactive applications.

Product Strategy


Technology and Product Strategy


     *    Support Popular Network Operating Systems

      .  The  Company intends to support additional  network
operating  systems if they augment the capabilities  of  the
Triumph  interactive  systems.  The  TRIUMPH  systems   open
architecture  and  compatibility  features  permit  ease  of
support  for  new  and  emerging  software  technologies  to
leverage  the time critical interactive data nature  of  the
systems.  As any new operating system or software technology
is  introduced, the Triumph architecture is readily  capable
to  incorporate such as it may relate to the benefit of  the
Triumph family of interactive systems.

       *      Develop   Higher  Performance  Systems   While
Maintaining Compatibility

      The  Company's principal technological challenge  with
respect  to  the  development  of  its  TRIUMPH  family   of
interactive  systems  is  to  simultaneously  deliver   high
performance and compatibility with existing PC hardware  and
software   standards.  The  Company  intends   to   continue
improving  the performance of its systems while  maintaining
compatibility  with  popular network operating  systems  and
hardware interfaces.

     *    Offer Broad Product Line

      The scalability of TRIUMPH systems is key to providing
a  diverse  range  of  services  for  the  educational,  and
transportation  related markets.  The  product  line,  while
broad   within  a  given  market  segment,  is  specifically
targeted  to provide an easily deliverable custom system  to
meet  the  needs of the given customer.  The flexibility  of
the  Triumph interactive systems allows for quick  and  easy
customization for any given customer within a target market.

     *    Packaging

      Sales  of  the Company's TRIUMPH systems are  made  as
complete integrated, yet customizable,  systems. The Company
sells  its  products as a complete solution to a  customer's
needs, rather than as only a "finger in the dike" or a niche
filler.  In 1995, the Company introduced, hardware, software
and   services  packaged  as  complete  value  added  system
solutions  for  the  travel  and  transportation  commercial
markets:    (i)   "AirView,"   an   in-flight    interactive
entertainment  and  cabin  management  system   mounted   in
individual  airline seats, (ii) "TrainView."  an  in-transit
interactive  entertainment  and  railcar  management  system
mounted in individual railcar seats, (iii) "InnView," an in-
room   interactive  entertainment  system  for   the   hotel
hospitality  market  and  (iv)  "CruiseView,"   an   in-room
interactive entertainment system for the cruise ship market.

Technology

      The  Company  believes that the  TRIUMPH  architecture
allows   its   products  to  provide  the  performance   and
availability  advantages of a mainframe without  sacrificing
compatibility with PC hardware and software standards.  This
architecture  consists of independent subsystems  interfaced
by  a  high-speed system bus. These subsystems include:  the
Company's  TRIUMPH RAID Accelerated Controller ("TRAC"),  an
intelligent  Input/Output Processor subsystem;  the  primary
CPU  subsystem; the systembus subsystem; and the main memory
subsystem. These subsystems operate independently  and  thus
reduce  the  I/O  bottlenecks  and  performance  degradation
typically associated with other approaches.

  Network Operating System Compatibility Features.   Network
operating  systems  are designed to work with  architectures
that incorporate industry standard connection features. When
a  server  design  features an architecture  that  does  not
incorporate such industry standards, the server manufacturer
must  modify the network operating systems utilized in order
for it to work with its nonstandard architecture. Generally,
the  time, expense and knowledge necessary to complete these
modifications limit the number of network operating  systems
supported  by  these proprietary servers and restrict  their
ability  to respond quickly to new NOS releases. The TRIUMPH
system  open architecture is compatible with the  basic  I/O
system that allows computer hardware to connect to a network
operating system. This enables the TRIUMPH system to support
any  network  operating systems with the  relatively  simple
addition  of  drivers  specific to  that  network  operating
system. The TRIUMPH system's are, therefore, compatible with
leading network operating systems such as Linux, Windows NT,
Novell  NetWare, Microsoft LAN Manager, SCO UNIX and  Banyan
VINES.  The  Company's  products are  also  designed  to  be
compatible with new network operating systems as they become
available.

  Application Compatibility Features.  The TRIUMPH  system's
open  architecture permits applications written for use with
the  network operating systems supported by the  Company  to
run  unmodified.  The  TRIUMPH systems,  therefore,  support
applications that require both network operating systems and
basic I/O system compatibility.

  Hardware  Interface  Protocols.   Each  TRIUMPH  subsystem
provides   hardware  compatibility  by  supporting  industry
standard  interfaces with simple software drivers. The  TRAC
subsystem offers SCSI, FCAL, IDE, and SAN compatibility, the
CPU  subsystem offers CISC/RISC compatibility  and  the  bus
subsystem   offers  PCI  compatibility.  SCSI   peripherals,
network  interface  cards or other  subsystems  designed  by
third parties that incorporate technological advances in any
of  these standards-based product areas may be added  easily
to TRIUMPH systems.

  Intelligent  I/0 Processor Subsystem.  The TRAC  subsystem
utilizes  an  asymmetric approach to  managing mass  storage
and  consequently  relieves the main CPU of  that  task  and
improves overall system performance. With the TRAC, data  is
accessed  from  the  disk  drives and  is  more  easily  and
economically (in terms of bandwidth usage) available to  the
CPU and main memory.  Multiple  TRACs can be configured in a
TRIUMPH  server system, allowing an almost unlimited  number
of  peripherals per system.

      The TRAC may also incorporate RAID technology based on
the  need  of the system design to help protect  the  system
from  data loss. This technology, which is commonly referred
to as data striping and disk mirroring, also improves system
performance by reducing data transfer and access times  from
disk drives.

  Central Processing Unit Subsystem.  The CPU subsystem runs
the  NOS and applications in client-server environments. The
CPU  offers CISC/RISC compatibility.  Each subsystem may  be
upgraded  with  a  CPU  that incorporates  a  microprocessor
operating at a higher clock speed.

  Availability Features.  The TRIUMPH system architecture is
designed  to permit systems to be configured to provide  the
high   level   of   availability   required   for   critical
applications   through  reliability,  data   integrity   and
recoverability features. Reliability features available  for
certain  TRIUMPH  models  offer  key  module  redundancy  to
promote continued system operation. The TRIUMPH systems data
integrity  features  minimize the potential  for  data  loss
during system operation.

Products

      The  current  TRIUMPHr product line consists  of:  the
Cheetah  Enterprise  Video File Server, the  M2r  Enterprise
File Server, the TNXr Large Workgroup File Server, the T4000
Small  Workgroup File Server, the T300 and  T5000  high  end
network work stations, and the TNX/C Video File Encoder.

     The following lists the basic features of each model in
the Company's current generation of TRIUMPH products:

VIDEO SERVERS

 CheetahO Enterprise Video File Server.  The CheetahO or M2V
has  the same capabilities as the M2r Enterprise File Server
(see  below),  except that it contains certain configuration
enhancements   that   allow  for  the   support   of   video
applications across entire networks. It is designed to serve
up to 300 simultaneous video users per single system and can
be  rack  mounted  to achieve up to 336  gigabytes  of  disk
storage.

  CheetahO  Large  Workgroup Video File Server.   The  video
capable  version  of  the TNX is very  similar  to  CheetahO
described  above,  but  with reduced  work  station  service
capacity and reduced disk storage capabilities.


FILE SERVERS

  M2r  Enterprise  File  Server.   The  Company's  top-level
non-video  file  server, it is designed to serve  over  1000
work  stations. The M2 may contain up to six CPUs and has  a
disk  storage capacity of up to 100 gigabytes.  This  system
contains  an enhanced cooling system and RAID 5 and multiple
power  supplies  for support of its large  disk  hard  drive
capacity.

  TNXr Large Workgroup File Server.  The Company's mid-level
file  server,  it is designed to serve between  40-100  work
stations. The TNX may contain up to 6 processors and  has  a
disk capacity of between 12-16 gigabytes. This system may or
may  not contain disk redundancy features depending upon the
needs of the particular customer.


WORK STATIONS

  T3000.  An entry level network work station, includes  the
capability  of providing normal office automation,  graphics
and word processing.

  T5000.  A high end, engineering work station, with  single
or  multiple processor configurations, designed for a  range
of  desktop applications; including - computer aided design,
graphics, mathematical applications and computer modeling.


OTHER PRODUCTS

  TNX-C Encoder.  The TNX-C is a real-time, networked Motion
Pictures Export Group (MPEG) encoder impression station.  It
converts  analog video data to digital files when  conjoined
with either of the Company's video file servers. All encoded
files   are  compressed  and  able  to  run  throughout   an
associated  network  at  30  frames  per  second  and   near
broadcast quality.

"TURN-KEY" PACKAGED SOLUTIONS

AirView.   An in-flight interactive entertainment and  cabin
management system mounted in individual airline seats.

TrainView.   An  in-transit  interactive  entertainment  and
railcar  management  system mounted  in  individual  railcar
seats.

InnView.    An in-room interactive entertainment system  for
the hotel hospitality market.

CruiseView   An in-room interactive entertainment system for
the cruise ship market.

These  systems  can  support live-feed,  closed-circuit  and
satellite  based digital television programs in addition  to
personal   interactive  entertainment  and  video/audio   on
demand,   shopping,  multi-player  games,  gambling,   shore
excursion/  event booking, karaoke and Internet  access  all
simultaneously, independently and with full user control via
a  wireless television remote control in each room or  touch
screen   display  at  each  seat.  In  addition,   attendant
interactive training can be provided at the same time.

Sales and Distribution

       The   Company  currently  distributes  its   products
principally through the efforts of its internal direct sales
force  and to a much lesser extent through independent sales
representatives. In the future the Company intends to  offer
its  products through an augmented internal sales force. The
Company also distributes its superserver products through  a
select  group of network-oriented resellers, including  VADs
and system integrators, OEMs and international distributors.
Currently,  the Company's principal means of conducting  its
sales   effort   internationally  is  through   trade   show
attendance, holding end-user seminars to demonstrate Company
products, internal and a limited amount of customer on  site
demonstrations  of  product  use  (solely  for   superserver
products),  print  advertising  in  trade  publications  and
telemarketing.  The  Company  plans  to  continue   and   to
accelerate these marketing efforts.

     The Company is also attempting to develop relationships
with software and other product vendor "partners" capable of
encouraging  their  customers  to  purchase  the   Company's
systems in conjunction with their own products on the  basis
that overall system or product performance will be enhanced.
The   Company   would   assist  these   partner-vendors   by
determining the configuration of the Company's products that
will   deliver   optimal   performance   along   with    the
partner-vendor's  products.  An  example  is  the  Company's
relationship with Tandberg Educational for the sale  of  the
Company's superserver products in conjunction with  Tandberg
products   for   use   in  educational  digital   multimedia
instruction applications.

      The  Company's  marketing  efforts  focus  on  holding
end-user  seminars  and  attending  trade  shows  (including
international trade shows) as the primary method  to  create
market awareness of the Company and its products.

       The  purchase  price  for  the  Company's  "turn-key"
packaged systems for the travel related entertainment market
is  relatively high depending upon various factors  such  as
the size and type of airplane, train, hotel or ship, and the
requested system features. The high system purchase price is
anticipated to result in a relatively extensive sales cycle,
which   will   include  the  evaluation  of  the   Company's
technology,   a   test  installation  of  the   system   and
negotiation of related agreements. The sales cycle  is  also
dependent  upon  a  number of factors beyond  the  Company's
control,  such  as  the  financial  condition,  safety   and
maintenance  concerns,  regulatory  issues  and   purchasing
patterns   of  particular  operators,  and  the   respective
industry  generally.  As  a  result,  this  can  result   in
extremely cyclical buying patterns for the Company's  travel
related    entertainment   products.   (see    "Management's
Discussion and Analysis of Financial Condition and Operating
Results")

Competition

      The  Company  faces substantial competition  from  the
manufacturers of several different types of products used as
network   servers.  The  Company  expects   competition   to
intensify  as  more firms enter the market and  compete  for
market share. In addition, companies currently in the server
market will continue to change product offerings in order to
capture  further market share. Many of these companies  have
substantially  greater  financial  resources,  research  and
development    staffs,    manufacturing,    marketing    and
distribution  facilities than the Company. The Company  also
expects  its  competitors  to  continue  to  improve   their
network-oriented distribution channels.

     With respect to base configuration TRIUMPH superservers
for simple LANs, the Company competes with manufacturers  of
high-end  PCs used as network servers. Competitors  offering
products  in  this  market  include  International  Business
Machines Corporation ("IBM"), Compaq Computer, Inc. and Dell
Corporation. One of the principal competitive factors in the
market for simple LANs is price, and the economies of  scale
available  to high-end PC manufacturers may permit  them  to
offer  their products at a lower price. The Company  expects
its  competitors  to  continue to improve  the  performance,
availability,  scalability  and  upgradability  features  of
their  products. The Company expects all of its  competitors
in  the  simple  LAN  market  to  improve  the  distribution
channels for their products used as servers.

       With   respect  to  more  fully  configured   TRIUMPH
superservers  for  larger and more  complex  LANs  and  more
sophisticated or business-critical applications, the Company
competes  indirectly with manufacturers  of  mainframes  and
minicomputers.  In  addition, certain manufacturers  promote
their mainframes and minicomputers as being appropriate  for
use  as  network servers. Competitors offering  products  in
this  market  include  IBM, Digital  Equipment  Corporation,
Hewlett-Packard  Corporation and UNYSIS,  Inc.  The  Company
believes  that  the  positive competitive  factors  in  this
market  include  the  Company's ability  to  provide  server
products with performance and availability characteristic of
mainframes  and  minicomputers, at a  significantly  reduced
cost,  as well as with the compatibility to support  current
and   future  networking  solutions  built  around  industry
standard  hardware  and  software. The  Company's  operating
results could, however, be adversely affected if one or more
of  these  competitors elects to compete  more  aggressively
with   respect  to  price  or  product  features  of   their
mainframes  or  minicomputers. The Company competes  in  the
market   for  complex  LANs  with  other  manufacturers   of
superservers, including Sun, Silicon Graphics and Ncube. The
Company  competes in the market for "turn-key"  systems  for
travel  related  entertainment with other  manufacturers  of
complete   systems,  including  Rockwell  Collins  Passenger
Systems,  BE  Aeorspace, Sony Transcom,  Matsushita,   Allin
Interactive,  Interactive  Flight  Technologies  and   Trans
Digital.  The  Company believes that it  competes  favorably
with  other  manufacturers  of superservers  and  "turn-key"
systems  with  respect  to  the compatibility,  performance,
availability,   scalability,  upgradability  and   technical
support   required   for  sophisticated  network   computing
available   with  the  Company's  products.   In   addition,
components  of  the  company's products are  smaller,  weigh
considerably less and consume much less power than those  of
several  competitors. Because these factors affect operating
costs  for  the operator, they may be critical  factors  for
customers.

      The  Company does not believe that its server products
will  compete in the near future with those manufactured  by
IBM, Compaq Computers, Inc. or the other "major players"  in
the  industry. The Company believes that the major  computer
manufacturers  will  generally seek to produce  and  service
higher production-lower margin commodity products, and  will
refrain   from  producing  lower  production-higher   margin
products (like the Company's video servers) until the market
for each related product and product series is perceived  to
be  large  enough  to  support the  sizable  investments  in
production  capability  and  advertising  that  the   "major
players"   must  make  prior  to  launching  new   products.
Nevertheless,  based upon the perceived size of  the  market
for   video   capable  network  equipment,   the   Company's
management recognizes that it will only be a matter of  time
before  the  "major  players" will start to  produce  higher
margin   network  equipment  products  which  will   compete
directly with those produced by the Company.

     There can be no assurance that alternative technologies
will not be developed in the future that will be capable  of
providing certain services now performed by network servers.
The  development of such technologies could reduce the  need
for  network  servers  and adversely  affect  the  Company's
operating results.

       As   many  of  the  Company's  competitors  are  more
established,  benefit  from greater market  recognition  and
have   greater  financial,  technological,  production   and
marketing  resources  than  the  Company,  establishing  and
maintaining the Company's competitive position will  require
continued   investment  by  the  Company  in  research   and
development  and  sales  and  marketing.  There  can  be  no
assurance that the Company will have sufficient resources to
make such investments or survive the sales cycle and support
the receivables collection cycle or that the Company will be
able  to  make  the  necessary  technological  advances.  In
addition,  if  more  manufacturers  of  PCs,  mainframes  or
minicomputers   were  to  develop  and  market   their   own
superserver  class  of  products,  the  Company's  operating
results could be adversely affected.

End Users

      The Company's products are sold to end users in a wide
range  of  industries.  Customers that  have  purchased  the
Company's  products are financial institutions, health  care
companies,               academic              institutions,
communications/broadcasting companies, governmental agencies
and    other    bureaucracies,   entertainment    providers,
transportation operators and end-users operating in  various
other industries.

      The  market  niches for the Company's  high-end,  high
performance, video capable products currently encompass, but
are not limited to, applications for education and corporate
skills  training, product training, hotel, train,  ship  and
airplane  video-on-demand  and retail  facility  information
kiosks.  Most sales efforts in 1998 were focused  on  larger
system  sales into niche markets of the Company's "turn-key"
packaged solutions, AirView, CruiseView and TrainView, which
have  longer  sales  cycles. Sales  of  such  products  will
contribute  to  sales  backlog  for  revenues  derived  from
multiple  roll-out  deliveries over 12  to  36  months.  The
Company    currently   has   agreements   (see    "AirView",
"CrusieView",  "TrainView" below) for and has  responded  to
major  requests  for  proposal for CruiseView,  AirView  and
TrainView  systems with some of the world's  largest  travel
and  transportation-related  companies.  There  can  be   no
assurance,  however,  that  the  Company  will  successfully
negotiate  definitive agreements for the purchase  of  these
systems.  Due to the fact that all of the markets  for  this
type  of  product  are in their infancy,  and  their  actual
aggregate  size  is  impossible to measure  accurately,  the
Company  is unable to determine the shares of these  markets
held  by its own products. Nevertheless, Management  of  the
Company  expects  the  video  server  market  to  experience
significant growth, with the growth to come principally from
the high-performance superserver segment of the market.

AirView

In  an  Agreement  dated as of June 19,  1997,  the  Company
entered  into  an AirView Purchase Agreement  (the  "AirView
Agreement") with Fairlines, a French corporation engaged  in
the  start-up  operation of a commercial  airline,  for  the
purchase  of  up to ten AirView systems for installation  on
ten  Fairlines  aircraft. The costs  of  purchase  from  the
Company include the cost of training Fairlines employees for
system  use,  and  the  cost of system  installation,  which
installation  is  provided by Hollingsead International  and
its  subsidiaries ("Hollingsead") on behalf of  the  Company
under a separate agreement with the Company  (see "PART I  -
Manufacturing").  Delivery of all AirView systems under  the
terms  of  the  agreement  was  originally  expected  to  be
completed  by  December 31, 1998. Due to Fairlines  repeated
delays in securing additional aircraft, it is unclear as  to
when,  if ever, any additional systems will be sold  to  and
installed by Fairlines. In March 1999, the Company filed  to
revoke the Supplemental Type Certificate (STC)  (see "PART I
-  Government Regulation") issued in connection with the two
Fairlines  aircraft on which AirView systems  are  installed
and  in operation due to Fairlines default in payment  under
terms  of the AirView Agreement. Revocation of the STC would
result  in  the  inability  for  Fairlines  to  operate  the
aircraft  commercially with the AirView system installed  on
the   aircraft.  The  Company  is  pursuing  its   remedies,
contractual  and  otherwise, in  respect  to  collection  of
amounts   due   and  damages  incurred  under  the   AirView
Agreement. (see "PART I - ITEM 3 - Legal Proceedings")

In  April  1998, the Boeing Company specified the  Company's
AirView Video/Audio on Demand server as part of the airplane
manufacturer's completion Request For Proposal (RFP) for the
new  B737-73Q  Business Jet.  In November 1998  the  Company
received an order from Raytheon Systems Company, a  unit  of
Raytheon Company, which was contracted by Boeing Company, to
equip  the Boeing Business Jet (BBJ) B737-73Q "Demonstrator"
aircraft  with  the  Company's  AirView  for  an  Integrated
Business and Entertainment System (IBES). Installation began
in  late  1998. There can be no assurance however, that  any
additional  orders  for the Company's AirView  system  other
than the Demonstrator will be received.

CruiseView

The  Company  entered into a CruiseView Purchase  Agreement,
dated  as of February 13, 1998 (the "Star Agreement"),  with
Continuous  Network  Advisors  ("CNA")  on  behalf  of  Star
Cruises  Management  Limited  ("Star"),  an  Isle   of   Man
corporation engaged in the operation of a commercial  cruise
line,   for   the   purchase  of  CruiseView   systems   for
installation on up to two Star cruise vessels. The costs  of
purchase from the Company include the cost of training  Star
employees   for   system  use  and  the   cost   of   system
installation.  Delivery and installation of  the  CruiseView
systems under the terms of the agreement for the first  ship
was  completed  and  began commercial operation  in  October
1998,  with  the  second  ship  originally  expected  to  be
completed by September 30, 1999. In March 1999, the  Company
filed  for arbitration to enforce its rights under the terms
of  the Star Agreement. The Company claims that Star and CNA
are  in  default under the payment obligations of  the  Star
Agreement  and  intends to aggressively  pursue  its  rights
under  the  terms of the Star Agreement through  arbitration
and  all  remedies  available,  including  repossession   of
inventory, contractual and otherwise. (see "PART I - ITEM  3
-  Legal  Proceedings") The Company increased its  provision
for  doubtful accounts by approximately $2.6 million in  the
fourth  fiscal  quarter of 1998 due to  the  uncertainty  of
recovery  of certain amounts due the Company under the  Star
Agreement.

In  September  1998,  the  Company entered  into  a  Turnkey
Agreement   (the   "Carnival   Agreement")   with   Carnival
Corporation    ("Carnival"),   a    Panamanian    registered
corporation, for the purchase, installation and  maintenance
of CruiseView on a minimum of one Carnival Cruse Lines ship,
and  an  unspecified maximum number of Carnival  Cruse  Line
ships. During the four-year period commencing on the date of
the  Carnival Agreement, Carnival has the right to designate
an   unspecified  number  of  additional   ships   for   the
installation  of  CruiseView by the Company.  The  cost  per
cabin for CruiseView purchase and  installation on each ship
is provided for in the Carnival Agreement, as is the minimum
software  license  and  installation  cost  per  ship,  with
additional per ship costs charged based upon the  number  of
actual  cabins  installed  and  operational.  The  cost   of
training  up to ten Carnival personnel per ship  for  system
operation is included in the contract cost for licensing and
installation  of  CruiseView, with the  cost  of  additional
training  and maintenance billed separately by the  Company.
The  Carnival Agreement initially called for delivery of the
CruiseView  system  for use aboard one  ship,  the  Carnival
Cruise  Lines  "M/S  Triumph" currently under  construction,
which  system  is expected to be installed in mid  1999.  In
December 1998, Carnival exercised its right and ordered  the
installation  of a CruiseView system on the Carnival  Cruise
Lines   "M/S   Sensation".  Delivery  and  installation   of
CruiseView for the Sensation began in December 1998  and  is
expected  to begin commercial operation in April  1999.  The
Company anticipates gross revenues of over $4.0 million from
the purchase, installation and maintenance of CruiseView  on
these  two  Carnival cruise ships. There can be no assurance
however,  that  Carnival will exercise its right  under  the
Carnival  agreement to order CruiseView for installation  on
any additional ships.

TrainView

In February 1999, the Company received an engineering design
order  from Alstom Transport Limited ("Alstom"), a  unit  of
ALSTOM  SA,  to  incorporate the design  of  TrainView,  the
Company's  advanced  Infoactive Business  and  Entertainment
System,  into Alstom's concept high speed train design.  The
TrainView  all-digital system proposed is an  adaptation  of
the   Company's  existing  system  currently  installed  for
various  in-flight  and  cruise  customers.  The  system  is
expected  to  deliver  personal  interactive  entertainment,
video/audio  on  demand,  E-Commerce  for  shopping,   event
booking, Internet and business services to the seat  through
the  Company's  TransPORTAL applications. There  can  be  no
assurance  however,  that Alstom will purchase  a  TrainView
system for installation on any train.

     
Customer Concentration

In  1998,  two customers accounted for an aggregate  of  96%
(76%  and 20%, respectively) of the Company's revenues.   In
1997,  three  customers accounted for an  aggregate  of  79%
(38%,  30% and 11%, respectively) of the Company's revenues.
Management  believes that the concentration of  credit  risk
with respect to trade accounts receivable is high due to the
limited number of customers requiring large shipments.

Customer Support

      The Company believes that customer service and support
is  a  significant competitive factor in the network  server
market  which  will  become increasingly important  as  LANs
become  more  complex  and  as  more  enterprises  implement
business-critical  applications  on  their   networks.   The
Company  supports its customers by providing  rapid  problem
resolution  both during and after the installation  process.
The  Company  maintains a small, in-house technical  support
organization   that  assists  customers  in  troubleshooting
problems  and  providing  replacement  parts.  The   Company
provides  a  toll-free hotline to help diagnose and  correct
system interruptions as they occur at customer sites and its
support staff is available seven days a week.

      The  Company  warrants all of its TRIUMPH superservers
against  defects in materials and workmanship for  one  year
(three  years  for disk drives). During the warranty  period
the  Company will repair or replace, within four  days,  any
TRIUMPH server component(s) which the Company identifies  as
containing defects which do not prevent the continued use of
the server. For defects that do prevent the continued use of
the  server, the Company will attempt to repair  or  replace
the  identified  defective component  within  24-hours.  The
Company's  product warranties do not materially differ  from
those generally available in the industry.

      To  date,  the Company has not experienced significant
claims  under such warranties, and its ability to  meet  the
full demands of having a significant number of units sold to
customers who require such service has not been tested.  The
Company also passes through to end users the warranties that
it  receives from vendors on any separate hardware, software
or  component  parts  that it sells  independently  of  full
systems.

Manufacturing

      The  Company currently manufactures all of its TRIUMPH
products  in  the  United  States at  its  Atlanta,  Georgia
metropolitan area facility.

      The  Company  obtains electronic  components  for  its
TRIUMPH   products   "off-the-shelf"  from   a   number   of
wholesalers  and performs at its own facility  the  assembly
and  test  of  the  printed circuit  boards  and  mechanical
components   incorporated  into  its  products.   The   only
significant  subcontracted manufacturing work performed  for
the  Company  is the manufacture of cabinets  for  its  file
servers. The Company has established a comprehensive testing
and qualification program with the goal of ensuring that all
subassemblies   meet   the  Company's   specifications   and
standards before final assembly and testing.

        Diagnostic    tests,   assembly,   burn-in,    final
configuration  and final quality assurance  tests  currently
are  completed at the Company's manufacturing facility.  The
Company   employs  statistical  process  controls   at   its
manufacturing  facility. The Company  has  also  implemented
quality  control policies that are reviewed and accepted  by
the  Company's  major customers. The Company  believes  that
this procedure helps ensure a high-quality product.

      The  Company has elected to assemble into its products
principally  off  the shelf component parts  available  from
multiple  sources. The Company believes that  this  practice
helps  to  ensure  better quality control  and  pricing,  by
allowing  the  Company to select the best  manufactured  and
best  performing components available on the market  (rather
than  a proprietary product that may fall behind the "curve"
in terms of either such characteristic) and to purchase such
components  from  marketplace sources that  offer  the  best
prices at the time that the particular components are needed
for  production (rather than to have prices dictated by  the
limited  sources  able to provide a proprietary  component).
The  Company  obtains component parts on  a  purchase  order
basis and does not have long-term contracts with any of  its
suppliers.   To  date,  the  Company  has  not   experienced
interruptions  in  the supply of such component  parts,  and
believes  that  numerous qualified suppliers are  available.
The  inability  of any of its current suppliers,  except  as
identified below, to provide component parts to the  Company
would   not   adversely  affect  the  Company's  operations.
Alternate sources could be readily established.


Intellectual Property

      The  Company  currently holds no patents,  but  has  a
patent  application  pending with  respect  to  its  AirView
products and technology. The Company currently holds federal
trademarks,  for  the marks "TNX", "TRIUMPH",  "THE  NETWORK
CONNECTION",  "M2", "M2V" and "T.R.A.C.", "CHEETAH",  "QUAD-
CHEETAH",   "CHEETAH   WORKGROUP",   "EDUVIEW",   "AIRVIEW",
"TRAINVIEW", "CRUISEVIEW" and "BATTLEVIEW" and has trademark
applications  pending  for the mark "INNVIEW".  The  Company
also  relies  on  a  combination of trade secret  and  other
intellectual property law, nondisclosure agreements with all
of its employees and other protective measures, to establish
and  protect  its  proprietary rights in its  products.  The
Company   believes  that  because  of  the  rapid  pace   of
technological  change  in  the  networking  industry,  legal
protection   of   its   proprietary  information   is   less
significant  to  the  Company's  competitive  position  than
factors  such  as  the  Company's strategy,  the  knowledge,
ability  and  experience  of the  Company's  personnel,  new
product  development, market recognition and ongoing product
maintenance and support. Without legal protection,  however,
it  may be possible for third parties to copy aspects of the
Company's  products  or technology  or  to  obtain  and  use
information  that  the Company regards  as  proprietary.  In
addition, the laws of some foreign countries do not  protect
proprietary  rights in products and technology to  the  same
extent  as  do  the laws of the United States. Although  the
Company  continues  to  implement  protective  measures  and
intends  to defend its proprietary rights vigorously,  there
can  be  no assurance that these efforts will be successful.
The  failure  or  inability of the  Company  to  effectively
protect  its proprietary information could have  an  adverse
effect on the Company's business.

      There can be no assurance that third parties will  not
assert intellectual property infringement claims against the
Company.  Although no claims or litigation  related  to  any
such matter are currently pending against the Company, there
can  be  no assurance that none will be initiated, that  the
Company would prevail in any such litigation seeking damages
or an injunction against the sale of the Company's products,
or  that  the Company would be able to obtain any  necessary
licenses on reasonable terms if at all.

Government Regulation

           The  installation  and  use  of  AirView  on  any
particular   aircraft  requires  prior   certification   and
approvals from the FAA and certification and approvals  from
aeronautical  agencies of foreign governments.  Because  the
installation   of   the  AirView  is  considered   a   major
modification to an aircraft, the Company must apply for  and
be granted an STC from the FAA. This is a multi-step process
involving required interim approvals. A separate STC will be
required with respect to each aircraft type on which AirView
will be installed. Once an STC is issued with respect to  an
aircraft  type, the unit may be installed on other  aircraft
of  the same type with the same configuration provided  each
installation  is performed in a manner as specified  by  the
aircraft specific STC. To date, the Company has obtained  an
STC for Fairlines MD-81 aircraft.

          Because the process of obtaining an STC is  highly
technical,  the  Company has entered  into  agreements  with
Hollingsead  and its subsidiary Elsinore Aerospace  Services
(collectively, "Hollingsead") to assist the Company  in  the
application   and   approval  process   (see   ITEM   1   --
"Manufacturing").   Hollingsead   is   an   FAA   designated
engineering   representative   experienced   in    in-flight
entertainment  systems  and has the  authority  to  approve,
subject  to  final  FAA  review,  certain  aspects  of   the
Company's STC applications.

Potential Change of Control Transaction

On February 4, 1999, the Company, entered into a non-binding
Letter of Intent with Interactive Flight Technologies, Inc.,
a  Delaware corporation ("IFT") regarding the acquisition by
the  Company of all or substantially all of the  assets  and
specified liabilities of IFT (the "Net Assets") relating  to
IFT's interactive entertainment business (the "Business") in
consideration  for the Company's issuance  to  IFT  of  that
number of shares of its Common Stock as would constitute 60%
of  the  Company's fully-diluted equity (the "Acquisition").
The  Net  Assets will include: $5 million in cash;  accounts
receivable  owing  to IFT from Swissair;  the  proceeds  and
other recoveries generated by certain litigation brought  by
IFT;  the  Swissair warranty contract; the Swissair customer
relationship; all IFT interactive entertainment intellectual
property, and other tangible assets related to the  Business
(including  but  not limited to customer  lists  and  files,
trade   secrets,   trademarks,  service  marks,   assignable
government permits and other rights under leases and  rights
under  specified contracts); inventory, furniture, fixtures,
computers  and  equipment related  to  the  Business;  other
infrastructure  (including  FAA  certified  repair  station)
relating  to  the Business; IFT's engineering and  technical
staff;  and  the benefit of all IFT research and development
efforts. The Acquisition will be effected in accordance with
a  definitive agreement (the "Agreement") to be subsequently
negotiated  and  signed  following  the  completion  of  due
diligence  investigations  by  the  Company  and  IFT.    In
addition   to   the  usual  and  customary  representations,
covenants and conditions contained in agreements of the type
used  to  consummate transactions like the Acquisition,  the
definitive  agreement  will  provide  that  closing  of  the
Acquisition  is subject (i) to approval by the  shareholders
of  the  Company, if required under the rules of The  Nasdaq
Stock  Market, and (ii) the receipt of a "fairness  opinion"
with  respect to the terms of the Acquisition to the  effect
that the Acquisition is fair from a financial point of view,
to  the Company shareholders.  Although the Letter of Intent
is  otherwise not binding, the Company has agreed to refrain
from entering into negotiations with any other party for the
sale  of all or substantially all of its assets, or for  the
sale  of  control of the Company, until May 15,  1999.   IFT
similarly  agreed  not  to enter into negotiations  for  the
acquisition of control of any other company engaged  in  the
interactive  entertainment  business  until  May  15,  1999.
There   is  no  guarantee  that  the  Acquisition  will   be
consummated on the terms set forth in the Letter of  Intent.
IFT developed interactive entertainment products for use  in
the  airline  and  travel industry, and it  has  ceased  all
research  and  development activities with respect  to  such
products  except  as required under contract.  It  currently
maintains  only  one  ongoing contract for  its  interactive
entertainment  products,  and is currently  engaged  in  the
redirection of its business activities into new markets. IFT
is  a  Nasdaq:  NMS registrant and trades under  the  ticker
symbol FLYT.

Research and Development

      The market for the Company's products is characterized
by   rapid   technological  change  and  evolving   industry
standards,  and  it is highly competitive  with  respect  to
timely  product  innovation. The  introduction  of  products
embodying  new technology and the emergence of new  industry
standards   can  render  existing  products   obsolete   and
unmarketable.  The Company believes that its future  success
will  depend  upon its ability to develop,  manufacture  and
market new products and enhancements to existing products on
a cost-effective and timely basis.

      If  the Company is unable, for technological or  other
reasons,  to develop products in a timely manner in response
to  changes  in  the  industry, or if  products  or  product
enhancements that the Company develops do not achieve market
acceptance,  the Company's business will be  materially  and
adversely  affected. The Company has in the past experienced
delays   in   introducing  certain  of  its   products   and
enhancements, and there can be no assurance that it will not
encounter technical or other difficulties that could in  the
future   delay   the  introduction  of   new   products   or
enhancements.  Such  delays  in  the  past  have   generally
resulted  from  the  Company's need to  obtain  a  requisite
component  from  a third-party vendor whose own  development
process has been delayed (e.g., 9 month delay in Microsoft's
development  in  1992 of Microsoft Windows NT,  the  primary
operating  software system used in the Company's superserver
products).

       The   Company  performs  all  of  its  research   and
development  activities at its headquarters  in  Alpharetta,
Georgia.  During  1998  and 1997, research  and  development
expenses  totaled  $397,196 and $277,527, respectively.  The
Company  intends  to  continue to  invest  in  research  and
development.

Employees

      As  of  April  15, 1999, the Company had 22  full-time
employees  and 2 part-time employees. None of the  employees
are  covered  by  a  collective bargaining  agreement.   The
Company's success depends to a significant extent  upon  the
performance  of  its  executive  officers  and   other   key
personnel.  The  Company considers its  relations  with  its
employees to be good.

Item 2.    Property

      The Company's primary operations are performed in  its
20,000 square foot, owned facilities located on two acres in
Alpharetta,  Georgia.  The  Company  is  indebted   to   two
institutional  lenders  as  of December  31,  1998,  in  the
aggregate  amount  of  $227,102 and $470,000,  respectively,
for  the purchase of this primary operating facility.  These
loans  are  secured by the purchased real  estate  and  bear
annual interest at the rate of such lender's prime rate plus
2% and 16%, respectively.

      The  Company  believes  that  its  current  facilities
described above are adequate for its immediate and near-term
needs  and  does  not  anticipate the need  for  significant
expansion in the near future.


Item 3.    Legal Proceedings

On December 1, 1998, Sigma Designs, Inc. ("Sigma"),  filed a
complaint against the Company in the United States  District
Court,  Northern District of California, San Jose  Division,
Civil  Action  File  No. 98-21149J(EAI) alleging  breach  of
contract  and  action  on account.  Sigma  claims  that  the
Company  failed to pay for goods shipped to the  Company  by
Sigma.  The  matter was settled by written  agreement  dated
January  22, 1999, contingent upon registration  of  Company
stock  issued  to  Sigma as a part of such  settlement,  and
payment by the Company of $50,000, in two installments,  the
latter  which was due on February 5, 1999. The Company  made
the   $50,000 settlement payments and is in the  process  of
filing  for  registration  of the  stock  issued  to  Sigma,
subject  to penalty payments for late filing. Management  of
the  Company expects to fully comply with the terms  of  the
settlement  agreement and expects that  the  claim  will  be
dismissed with prejudice.

Hollingsead filed a complaint against the Company on January
28,  1999, in the State Court of Forsyth County, State Court
of  Georgia,  Civil Action File No. 99sc0053,  alleging  the
Company  failed  to pay invoices submitted for  installation
and service of audio-visual systems in certain aircraft.  In
its complaint Hollingsead requests $357, 850 in damages plus
interest, costs, attorneys fees, and punitive damages of  no
less  than  $250,000.  The Company filed  an  answer  and  a
counterclaim on March 29, 1999 with the court alleging  that
any  amounts  allegedly owed Hollingsead should  be  set-off
and/or recouped against damages incurred by the Company as a
result   of   Hollingsead's  negligence  and/or  breach   of
contract.  The Company is seeking settlement of such  claims
with Hollingsead.

On  March 29, 1999, the Company filed for arbitration  under
the  rules of the United Nations Commission on International
Trade  Law and the Rules of Arbitration of the Kuala  Lumpur
Regional Centre for Arbitration, to enforce its rights under
the  terms of the Star Agreement with CNA and Star  for  the
delivery,  installation  and  maintenance  of  a  CruiseView
system  on  the  Star  cruise ship the  SuperStar  Leo.  The
CruiseView system on the SuperStar Leo was installed and has
been in commercial operation since October 1998. The Company
claims  that  Star and CNA are in default under the  payment
obligations   of   the  Star  Agreement   and   intends   to
aggressively pursue its remedies, including repossession  of
inventory, contractual and otherwise, to enforce its  rights
under the terms of the Star Agreement.

On March 29, 1999, the Company filed to revoke the Supplemental Type Certi
ficate  (STC) issued by the FAA and DGAC in connection  with
the  two  Fairlines  aircraft on which AirView  systems  are
installed  and  in  operation due to  Fairlines  default  in
payment under terms of the AirView Agreement. Revocation  of
the  STC  would  result in the inability  for  Fairlines  to
operate  the  aircraft commercially with the AirView  system
installed  on  the  aircraft. The Company  is  pursuing  its
remedies,   contractual  and  otherwise,   in   respect   to
collection  of  amounts due and damages incurred  under  the
AirView Agreement.

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

None
                           PART II


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

Market for Common Stock

The  Company's  common stock trades on The  Nasdaq  SmallCap
Market  tier  of  The Nasdaq Stock Market under  the  symbol
"TNCX."   The  following table sets forth the high  and  low
sale  prices for the Company's common stock for each quarter
of  fiscal  1997 and fiscal 1998 as reported by  The  Nasdaq
Stock Market:

                                   High    Low
          Fiscal 1997:
                    First Quarter       $12.375     $5.750
                    Second Quarter        12.000      6.000
                    Third Quarter         10.500      7.000
                    Fourth Quarter        10.375      5.750

          Fiscal 1998:
                    First Quarter       $ 7.125     $3.625
                    Second Quarter         5.688       3.188
                    Third Quarter          4.938      1.813
                    Fourth Quarter         4.125      2.000



Holders of Record

       At  March  12,  1999,  there  were  approximately  59
shareholders  of record of the Company's common  stock,  but
the  Company  believes that there are over 1,000  beneficial
shareholders, based upon broker requests for distribution of
annual meeting materials.

Dividends

     Other than prior to September 22, 1994 when the Company
made distributions to shareholders as an S Corporation,  the
Company has not declared or paid any cash dividends  on  its
Common Stock and does not intend to do so in the foreseeable
future.


Item  6.   Management's Discussion and Analysis of Financial
Condition and Results of Operations

     The following discussion and analysis should be read in
conjunction with the information set forth in the  Financial
Statements  and  notes thereto included  elsewhere  in  this
report.

Overview

The  Company  has  incurred net losses from  operations  for
several  years, has an accumulated deficit at  December  31,
1998,  and has used substantial cash in its operations which
raises  substantial  doubt about the  Company's  ability  to
continue  as  a going concern. The company has entered  into
negotiation with IFT in a change of control transaction that
is  expected to close by May 15, 1999.  The Company believes
the  IFT  transaction will generate sufficient cash to  fund
currently  anticipated future cash requirements  during  the
next  twelve  months.   If the proposed  change  of  control
should not be completed, the Company will require additional
cash  from  alternative external sources in  order  to  fund
currently    anticipated   cash   requirements,    including
performance   under   existing   contracts,   repayment   of
indebtedness   and  ongoing  payroll  expense.   If   future
financing is not available when needed, the Company will  be
forced  to curtail or discontinue operations. In such event,
the  stockholders  may  lose, or  experience  a  substantial
reduction in, the value of their investment in the  Company.
(see    "Liquidity    and   Capital    Resources;    Certain
Transactions")

In  1998,  two customers accounted for an aggregate  of  96%
(76%  and  20%,  respectively) of  the  Company's  revenues.
During  1997, three customers accounted for an aggregate  of
79%  (38%,  30%  and  11%, respectively)  of  the  Company's
revenues.  The Company's products are often used with  other
products  in  large  complex  projects  with  long  delivery
cycles.   The  Company  expects  to  experience  significant
fluctuations in its future quarterly operating results  that
may  be  caused  by  many factors, including  the  Company's
current  dependence  on and timing issues,  not  within  the
Company's  control, for large shipments to a limited  number
of  customers in the travel related entertainment market and
also,  customer  payment of invoices  and  customer  product
satisfaction  which  determines  when,  after  shipment  and
installation,  the product is accepted by the  customer  for
payment.   Accordingly,  quarterly  revenues  and  operating
results  will  be  difficult to forecast,  and  the  Company
believes  that period-to-period comparisons of its operating
results will not necessarily be meaningful and should not be
relied upon as an indication of future performance.

AirView

In  an  Agreement  dated as of June 19,  1997,  the  Company
entered  into  an AirView Purchase Agreement  (the  "AirView
Agreement") with Fairlines, a French corporation engaged  in
the  start-up  operation of a commercial  airline,  for  the
purchase  of  up to ten AirView systems for installation  on
ten  Fairlines  aircraft. The costs  of  purchase  from  the
Company include the cost of training Fairlines employees for
system  use,  and  the  cost of system  installation,  which
installation  is  provided by Hollingsead International  and
its  subsidiaries ("Hollingsead") on behalf of  the  Company
under a separate agreement with the Company  (see "PART I  -
Manufacturing").  Delivery of all AirView systems under  the
terms  of  the  agreement  was  originally  expected  to  be
completed  by  December 31, 1998. Due to Fairlines  repeated
delays in securing additional aircraft, it is unclear as  to
when,  if ever, any additional systems will be sold  to  and
installed by Fairlines. In March 1999, the Company filed  to
revoke the Supplemental Type Certificate (STC)  (see "PART I
-  Government Regulation") issued in connection with the two
Fairlines  aircraft on which AirView systems  are  installed
and  in operation due to Fairlines default in payment  under
terms  of the AirView Agreement. Revocation of the STC would
result  in  the  inability  for  Fairlines  to  operate  the
aircraft  commercially with the AirView system installed  on
the   aircraft.  The  Company  is  pursuing  its   remedies,
contractual  and  otherwise, in  respect  to  collection  of
amounts   due   and  damages  incurred  under  the   AirView
Agreement. (see "PART I - ITEM 3 - Legal Proceedings")

In  April  1998, the Boeing Company specified the  Company's
AirView Video/Audio on Demand server as part of the airplane
manufacturer's completion Request For Proposal (RFP) for the
new  B737-73Q  Business Jet.  In November 1998  the  Company
received an order from Raytheon Systems Company, a  unit  of
Raytheon Company, which was contracted by Boeing Company, to
equip  the Boeing Business Jet (BBJ) B737-73Q "Demonstrator"
aircraft  with  the  Company's  AirView  for  an  Integrated
Business and Entertainment System (IBES). Installation began
in  late  1998. There can be no assurance however, that  any
additional  orders  for the Company's AirView  system  other
than for the Demonstrator will be received.

CruiseView

The  Company  entered into a CruiseView Purchase  Agreement,
dated  as of February 13, 1998 (the "Star Agreement"),  with
Continuous  Network  Advisors  ("CNA")  on  behalf  of  Star
Cruises  Management  Limited  ("Star"),  an  Isle   of   Man
corporation engaged in the operation of a commercial  cruise
line,   for   the   purchase  of  CruiseView   systems   for
installation on up to two Star cruise vessels. The costs  of
purchase from the Company include the cost of training  Star
employees   for   system  use  and  the   cost   of   system
installation.  Delivery and installation of  the  CruiseView
systems under the terms of the agreement for the first  ship
was  completed  and  began commercial operation  in  October
1998,  with  the  second  ship  originally  expected  to  be
completed by September 30, 1999. In March 1999, the  Company
filed  for arbitration to enforce its rights under the terms
of  the Star Agreement. The Company claims that Star and CNA
are  in  default under the payment obligations of  the  Star
Agreement  and  intends to aggressively  pursue  its  rights
under  the  terms of the Star Agreement through  arbitration
and  all  remedies  available,  including  repossession   of
inventory, contractual and otherwise. (see "PART I - ITEM  3
-  Legal  Proceedings") The Company increased its  provision
for  doubtful accounts by approximately $2.6 million in  the
fourth  fiscal  quarter of 1998 due to  the  uncertainty  of
recovery  of certain amounts due the Company under the  Star
Agreement.

In  September  1998,  the  Company entered  into  a  Turnkey
Agreement   (the   "Carnival   Agreement")   with   Carnival
Corporation    ("Carnival"),   a    Panamanian    registered
corporation, for the purchase, installation and  maintenance
of CruiseView on a minimum of one Carnival Cruse Lines ship,
and  an  unspecified maximum number of Carnival  Cruse  Line
ships. During the four-year period commencing on the date of
the  Carnival Agreement, Carnival has the right to designate
an   unspecified  number  of  additional   ships   for   the
installation  of  CruiseView by the Company.  The  cost  per
cabin for CruiseView purchase and installation on each  ship
is provided for in the Carnival Agreement, as is the minimum
software  license  and  installation  cost  per  ship,  with
additional per ship costs charged based upon the  number  of
actual  cabins  installed  and  operational.  The  cost   of
training  up to ten Carnival personnel per ship  for  system
operation is included in the contract cost for licensing and
installation  of  CruiseView, with the  cost  of  additional
training  and maintenance billed separately by the  Company.
The  Carnival Agreement initially called for delivery of the
CruiseView  system  for use aboard one  ship,  the  Carnival
Cruise  Lines  "M/S  Triumph" currently under  construction,
which  system  is expected to be installed in mid  1999.  In
December 1998, Carnival exercised its right and ordered  the
installation  of a CruiseView system on the Carnival  Cruise
Lines   "M/S   Sensation".  Delivery  and  installation   of
CruiseView for the Sensation began in December 1998  and  is
expected  to begin commercial operation in April  1999.  The
Company anticipates gross revenues of over $4.0 million from
the purchase, installation and maintenance of CruiseView  on
these  two  Carnival cruise ships. There can be no assurance
however,  that  Carnival will exercise its right  under  the
Carnival  agreement to order CruiseView for installation  on
any additional ships.

TrainView

In February 1999, the Company received an engineering design
order  from Alstom Transport Limited ("Alstom"), a  unit  of
ALSTOM  SA,  to  incorporate the design  of  TrainView,  the
Company's  advanced  Infoactive Business  and  Entertainment
System,  into Alstom's concept high speed train design.  The
TrainView  all-digital system proposed is an  adaptation  of
the   Company's  existing  system  currently  installed  for
various  in-flight  and  cruise  customers.  The  system  is
expected  to  deliver  personal  interactive  entertainment,
video/audio  on  demand,  E-Commerce  for  shopping,   event
booking, Internet and business services to the seat  through
the  Company's  TransPORTAL applications. There  can  be  no
assurance  however,  that Alstom will purchase  a  TrainView
system for installation on any train.

Results of Operations

Revenues  decreased 36% to $5.0 million for the fiscal  year
ended  December  31, 1998 from $7.8 million for  the  fiscal
year  ended  December  31,  1997.  This  decrease  primarily
resulted  from  deliveries in 1997 of the  Company's  larger
AirView  systems  to Fairlines and shipments  on  the  South
Korean  Government High School Program, which did not  occur
in the 1998 period.

Gross profit as a percentage of revenues increased by 4%  to
40%  for the fiscal year ended December 31, 1998 as compared
to  36% for the 1997 year.  This increase was primarily  due
to  revenues  generated during the 1998 period  from  larger
system  sales  with higher margins and technology  licensing
fees  that were not realized in the same 1997 periods. Gross
margins  for  any  particular  period  are  not  necessarily
indicative  of  the  results that may occur  in  any  future
period due to factors including, but not limited to, changes
in   product  mix,  fluctuating  component  cost,   critical
component availability and industry competition.

Selling,   general  and  administrative  expenses  decreased
$638,710 (14%) for the fiscal year ended December 31,  1998,
as  compared to the same 1997 period. This decrease  related
to expenses which were incurred in the respective periods in
1997 and not in 1998, primarily for additional (i) marketing
expenses   (including  advertising,   trade   show,   public
relations, bidding and proposal and demonstration  expenses)
associated  with  the  introduction  of  new  products   for
Courseware  on  Demand,  and (ii) employment  of  sales  and
marketing  personnel and related payroll  and  non-recurring
legal and administrative expenses related to establishing  a
sales  office  in Singapore (which office was eliminated  in
December  1998).  The  Company  anticipates  that  it   will
continue  to  invest in its marketing and  sales  generation
strategy  (increasing advertising, trade show, demonstration
and  proposal  expenses and sales and  marketing  personnel,
with  related  payroll  costs)  to  increase  revenues   and
increase  net  income from operations in  the  future;  such
investment   may   adversely  affect  short-term   operating
performance.

Provision  for  doubtful accounts and inventory  reflect  an
increase  from fiscal 1997 of  $6.5 million for  the  fiscal
year  ended December 31, 1998; $2.4 million resulted from  a
writedown  of inventories and a reserve for the  uncertainty
and possible uncollectibility of outstanding receivables due
to  (i)  repeated program schedule delays by  Fairlines  and
(ii)  the  length  of  time  that  accounts  receivable  for
extended  programs  with  Fairlines  and  the  South  Korean
Government  High  School Program have been  past  due;  $1.0
million  resulted  from  a reserve taken  for  a  fixed  fee
arrangement  with  a major aeronautical electronics  company
negotiated in June 1998 with respect to the licensing of the
Company's  technology, the value of which  licensing  cannot
now be considered fixed and determinable due to a change  in
facts and circumstances; and $2.6 million for uncertainty in
collectibility of accounts receivable from the delivery  and
installation of a system under the Star Agreement.

Special  charges in the fourth fiscal quarter resulted  from
$595,263  for the impairment of other assets capitalized  in
1997   related  to  costs  for  obtaining  Federal  Aviation
Administration (FAA) certification for the Company's AirView
system  which  were  being amortized over  10  years.  These
assets   were   written  off  due  to  the  uncertainty   of
recoverability  resulting  from  the  termination   of   the
Fairlines Agreement and the absence of any additional orders
received  for  the  AirView system  for  use  in  commercial
aircraft requiring FAA certification.

Changes  in interest are attributable to changes in  average
outstanding  borrowings  during the  periods  presented  and
interest   income   on   restricted  cash   and   short-term
securities.

Liquidity and Capital Resources; Certain Transactions

The Company has entered into negotiation with IFT in a
change of control transaction that is expected to close by
May 15, 1999.  The Company believes the IFT transaction will
generate sufficient cash to fund currently anticipated
future cash requirements during the next twelve months.  If
the proposed change of control should not be completed, the
Company will require additional cash from alternative
external sources in order to fund currently anticipated cash
requirements, including performance under existing
contracts, repayment of indebtedness and ongoing payroll
expense. It is uncertain as to the Company's ability to
obtain additional capital.

At  December  31, 1998, the Company had working  capital  of
approximately  $1.4 million compared to $5.5 million  as  of
December  31, 1997. The Company's primary source of  funding
was principally due to the net proceeds from the issuance of
convertible  preferred stock of $3.3 million, proceeds  from
the  issuance of $2.2 million of debt and the sale of  short
term   investments  of  $557,725.  Cash  used  in  operating
activities  was  $5.6 million and the purchase  of  property
and  equipment  was $534,084.  The negative change  in  cash
from operating activities primarily resulted from a net loss
of  $9.6 million, a decrease in accounts payable and accrued
expenses of $1.2 million, and an increase of $3.1 million in
accounts  receivable, offset by a decrease in  inventory  of
$424,827  and  an increase in deferred revenue of  $521,232.
The  reduction in cash from operating activities was  offset
by  depreciation  and amortization of $1.0  million  and  an
increase in provision for doubtful accounts and inventory of
$6.5 million.

The  Company's primary source of funds at December 31,  1998
consisted of $1.1 million in cash and short term investments
and  funds available under a $1.0 million revolving line  of
credit. $1.0 million of cash represents two certificates  of
deposit which are restricted from use by the fact that  they
are  pledged as collateral for the availability of the  line
of credit. The line of credit was to expire in May 1999, and
bore  interest at an annual rate of 7.05%. At  December  31,
1998,  the Company had $669,000 borrowings outstanding under
the  line of credit. On January 27, 1999, the line of credit
was  terminated and the restricted cash was used  to  payoff
the borrowings of $1.0 million outstanding under the line of
credit.

Capital  expenditures  for  the  purchase  of  property  and
equipment  for the fiscal year ended December 31, 1998  were
$534,084, primarily for the purchase of additional equipment
and  software  in order to expand product demonstration  and
development  capabilities  for  CruiseView  and   TrainView.
During  1999, capital expenditures, if any,  are anticipated
to  be  funded  through existing working  capital  or  other
financing.

Real Estate Indebtedness

The  Company is indebted to an institutional lender,  as  of
December 31, 1998, in the aggregate amount of  $227,102, for
the  purchase of its primary operating facility.  This  loan
is  secured  by the purchased real estate and  the  personal
guarantees  of  Wilbur and Barbara Riner, and  bears  annual
interest at the rate of such lender's prime rate plus 2%.  A
default  by  the  Company in payment of this  mortgage  loan
could result in foreclosure against the property.

On  May 19, 1998, the Company entered into a promissory note
with an institutional lender in the amount of $470,000. This
note  is secured by the real estate of the Company. The note
is  due  and  payable on April 19, 2001 and bears  interest,
payable monthly, at an annual rate of 16%.

Redeemable Convertible Preferred Stock

On March 11, 1998, the Company raised gross proceeds of $2.2
million  in  a  private placement to a single  institutional
investor,  KA  Investments  LDC  (the  "KA"),  of  five-year
convertible  debt securities (the "Debentures") pursuant  to
the  terms  of  a Convertible Debenture Purchase  Agreement,
dated March 11, 1998, by and between the Company and the  KA
(the  "Debenture Purchase Agreement").  Each  Debenture  was
sold  for $50,000.00, accrued interest at a rate of  4%  per
annum, and was convertible at the option of the holder  into
shares  of  the Company's Common Stock at a price per  share
equal  to the lesser of (i) $8.02 or (ii) 80% of the average
closing  market price of the Company's Common  Stock  during
the  21  trading days prior to conversion, but in  no  event
less  than  $3.00 per share (as adjusted for stock  splits).
On  June  9,  1998, the KA and the Company  entered  into  a
Convertible   Preferred   Stock  Purchase   Agreement   (the
"Purchase Agreement A"), pursuant to which the KA agreed  to
exchange  all  of its Debentures for 220,000 shares  of  the
Company's  4%  Series  A Convertible  Preferred  Stock  (the
"Series  A  Preferred Stock"). The financial  terms  of  the
Series  A  Preferred Stock were identical to  the  financial
terms  of the Debentures for which they were exchanged.  The
Company was obligated to file and have declared effective by
the  Securities  and Exchange Commission (the "Commission"),
on  or prior to June 24, 1998, a registration statement with
respect  to  the  resale of the Common Stock  issuable  upon
conversion  of  the  Series A Preferred Stock.  The  Company
originally filed such Registration Statement on May 1, 1998,
and  such  Registration Statement was declared effective  by
the  Commission on June 8, 1998. As of  December  31,  1998,
holders  of  the  Company's Series  A  Preferred  Stock  had
exercised  their right and converted all 220,000  shares  of
the  Series  A  Preferred Stock into 746,653 shares  of  the
Company's Common Stock.

On June 29, 1998, the Company entered into a promissory note
(the "Investor Note") with an institutional investor in  the
amount  of $1,250,000. This note was unsecured and  was  due
and payable with accrued interest at an annual rate of 8% on
August 28, 1998. The Company, in its sole discretion,  could
elect  to  pay  this note on August 28, 1998, subject  to  a
payment  charge  of $87,500, or exchange  this  note  for  a
series   of   convertible  preferred  stock  or  convertible
debentures  of  the Company. Repayment of the Investor  Note
was orally extended and made payable on demand.

On  October  23, 1998, the Company elected to  exchange  the
Investor Note for 1,500 shares of the Company's Series B  8%
Convertible  Preferred  Stock  (the  "  Series  B  Preferred
Stock")  and  warrants to acquire 100,000 shares  of  Common
Stock  issued to the holder of the Series B Preferred  Stock
(the  "Warrants").  The $1,000 stated  value  per  share  of
Series B Preferred Stock is convertible at the option of the
holder  into  shares of Common Stock, at a price  per  share
equal  to  the  lesser of  $ 3.66 per share of Common  Stock
(the  "Closing Price") or 75% of the average of the  closing
bid  prices  as  reported  on  the  Nasdaq  SmallCap  Market
("Nasdaq")  for  the  lowest five of  the  20  trading  days
immediately  preceding the date of Series B Preferred  Stock
conversion   (the  "Average  Price").   The   Warrants   are
exercisable to acquire shares of Common Stock at a price per
share equal to $4.125.

The  shares of Series B Preferred Stock were issued pursuant
to  a Securities Purchase Agreement, dated as of October 23,
1998 (the "Purchase Agreement B"), entered into between  the
Company  and  a  single  institutional  investor  upon   the
exchange  of outstanding loan principal and accrued interest
pursuant  to the Investor Note, plus certain premiums,  owed
by  the  Company to that investor.  In connection with  such
exchange  of  indebtedness,  the  Company  also  issued  the
Warrant  to the same institutional investor. The Company  is
obligated  to  file  and  have  declared  effective  by  the
Commission,  a  registration statement with respect  to  the
resale  of the Common Stock issuable upon conversion of  the
Series  B  Preferred  Stock  pursuant  to  the  terms  of  a
Registration  Rights  Agreement  entered  into  between  the
Company  and the holder of the Series B Preferred Stock  and
the Warrants (the "Registration Agreement"). Pursuant to the
Registration Agreement, the Company is required to  use  its
best   efforts   to   maintain  a   continuously   effective
Registration  Statement, with respect to  the  Common  Stock
underlying  the  Series B Preferred Stock and  the  Warrants
until  the  earlier  of three years after  the  Registration
Statement  is declared effective or until such earlier  date
on  which  such  Common Stock may be sold pursuant  to  Rule
144(k)  under  the Securities Act of 1933, as  amended  (the
"Securities Act"). The Company will not receive any proceeds
from  the  resale by the holders of any of the Common  Stock
issuable  to  the holders upon conversion of  the  Series  B
Preferred  Stock. Pursuant to the terms of the  Registration
Agreement, the Registration Statement will cover up  to  20%
of  the number of shares of Common Stock outstanding on  the
issue  date  of  the  Series  B Preferred  Stock  under  the
Purchase Agreement B.  The terms of the Purchase Agreement B
require that the Company maintain a reserve of up to 20%  of
the  number  of  shares of Common Stock outstanding  on  the
issue  date  of  the  Series  B Preferred  Stock  under  the
Purchase Agreement B for issuance upon conversion.

Through  October  23,  2001,  the  Company  may  redeem  all
outstanding shares of the Series B Preferred Stock  at  135%
of  the  aggregate stated value ($1,000 per share)  thereof,
plus  accrued  and  unpaid dividends  on  such  shares  (the
"Redemption  Price"),  as long as the  then  Current  Market
Price  (as  defined)  of the Common Stock  at  the  time  of
optional   redemption  is  less  than   $3.66   per   share.
Furthermore,  all  shares of Series B Preferred  Stock  that
have not been converted to Common Stock prior to October 23,
2001 shall be converted to Common Stock on that date on  the
assumption  that  the  Common Stock  is  listed  on  Nasdaq.
Notwithstanding  such mandatory conversion, however,  absent
approval of the Purchase Agreement B by Company Stockholders
in  satisfaction  of  applicable Nasdaq rules,  rather  than
conversion of all then outstanding Series B Preferred  Stock
the  Company  shall  be  required to  make  cash  redemption
payments equal to the Redemption Price of such shares to the
extent that any common shares issuable upon conversion, when
aggregated with (i) all common shares previously  issued  on
Series  B Preferred Stock conversion, (ii) all common shares
issued as stock dividends on the Preferred Stock, and  (iii)
all  common  shares issuable on exercise  of  the  Warrants,
would  equal 20% or more of the number of outstanding shares
of Common Stock on October 23, 1998.

Indebtedness

On  August  12,  1998, the Company entered  into  promissory
notes  (collectively  "Series Notes") with  five  individual
investors  in the aggregate amount of $650,000.  The  Series
Notes  were unsecured and were due and payable with  accrued
interest  at an annual rate of 8% on October 14,  1998.  The
Company,  in its sole discretion, could elect to  pay  these
Series  Notes  on  October 12, 1998, subject  to  a  payment
charge equal to 7% of the principal amount, or exchange  the
Series Notes for a series of convertible preferred stock  or
convertible debentures of the Company. On October 12,  1998,
the  Company entered into new promissory notes (collectively
"Series  A Notes") in the aggregate amount of $704,082  with
the  holders of the Series Notes to replace and rollover the
Series  Notes. The Series A Notes are unsecured and are  due
and payable with accrued interest at an annual rate of 8% on
December 11, 1998. The Company, in its sole discretion,  may
elect  to  pay  these Series A Notes on December  11,  1998,
subject  to  a  payment charge equal to 7% of the  principal
amount,  or  exchange the Series A Notes  for  a  series  of
convertible preferred stock or convertible debentures of the
Company.  On December 11, 1998, the Company and the  holders
of  the  Series A Notes agreed to extend the  due  date  for
repayment of the Series A Notes until February 25, 1999.  On
February  25,  1999 the Series A Notes were orally  extended
and  made  payable on demand. The Company  is  currently  in
negotiation with the holders for the exchange of the  Series
E Notes into equity of the Company.

On  October  20,  1998, the Company entered into  promissory
notes  (collectively "Series D Notes") with three individual
investors in the aggregate amount of $350,000. The Series  D
Notes  were unsecured and were due and payable with  accrued
interest  at an annual rate of 8% on January 18,  1999.  The
Company,  in its sole discretion, could elect to  pay  these
Series  D  Notes on January 18, 1999, subject to  a  payment
charge equal to 5% of the principal amount, or exchange  the
Series  D Notes for a series of convertible preferred  stock
or  convertible  debentures of the Company. On  January  18,
1999,  the  Company and the holders of the  Series  D  Notes
agreed to extend the due date for repayment of the Series  D
Notes  until  April 15, 1999, subject to  a  payment  charge
equal to 5% of the principal amount plus an additional  2.5%
of the principal amount for each 30 day period after January
18, 1999 the Series D Notes are outstanding. The Company  is
currently  in negotiation with the holders for the  exchange
of the Series E Notes into equity of the Company.

From  November 17 to December 17, 1998, the Company  entered
into  promissory notes (collectively "Series E Notes")  with
five  individual  investors  in  the  aggregate  amount   of
$550,000. The Series E Notes were unsecured and were due and
payable  with accrued interest at an annual rate of 8%  from
January  18  to February 8, 1999. The Company, in  its  sole
discretion, could elect to pay these Series E Notes  on  the
due  date,  subject to a payment charge equal to 7%  of  the
principal  amount,  or exchange the Series  E  Notes  for  a
series   of   convertible  preferred  stock  or  convertible
debentures of the Company. On February 12, 1999, the Company
and  the holders of the Series E Notes agreed to extend  the
due date for repayment of the Series E Notes until March 15,
1999.  On  March  15, 1999 the Series E  Notes  were  orally
extended  and  made  payable  on  demand.  The  Company   is
currently  in negotiation with the holders for the  exchange
of the Series E Notes into equity of the Company.

On  January  25,  1999,  the Company  entered  into  a  loan
transaction with IFT, pursuant to (i) a promissory  note  in
the principal amount of $750,000, bearing a rate of interest
of  9.5% per annum, for a term ending on the earlier of  May
15,  1999,  or  the  closing date of  a  change  of  control
transaction between the Company and IFT and (ii) a  security
agreement  granting IFT a security interest in all  accounts
receivable of the Company.

Equity Sale

On  December 29, 1998, in consideration for $280,000 in cash
the  Company  sold  in  a  private  placement  to  a  single
institutional investor,  80,000 shares of its  Common  Stock
(the  "Initial  Shares") in association with  the  right  to
acquire  up to 80,000 additional Repricing Shares of  Common
Stock   without  the  payment  of  additional  consideration
(collectively,  the "Shares"), pursuant to the  terms  of  a
Common  Stock  Purchase Agreement, dated as of December  28,
1998,  by  and  between the Company and  the  Investor  (the
"Purchase  Agreement C").  Under the terms of  the  Purchase
Agreement  C, Repricing Shares are issuable to the  investor
in  the  event that on the 45th day (with respect to 25%  of
the  Initial Shares), the 90th day (with respect to  25%  of
the  Initial Shares) and the 135th day (with respect to  50%
of  the  Initial Shares) subsequent to the closing date  for
sale  of  the  Initial  Shares (with each  such  date  being
referred  to  as  a "Repricing Date"), the  average  of  the
lowest  twenty closing sale prices during each  such  45-day
period, respectively (each a "Discounted Share Price"), does
not  exceed  $4.22 per share (the "Multiple  Share  Price").
The  number  of  Repricing  Shares  to  be  issued  on  each
Repricing  date, subject to the maximum of 80,000  Repricing
Shares, equals the product of (i) the difference between the
Multiple  Share  Price  and  the relevant  Discounted  Share
Price,  and  (ii) a fraction equal to the number of  Initial
Shares subject to repricing (e.g., 25% of 80,000 shares,  or
20,000) divided by the relevant Discounted Share Price.  The
Company  intends  to  limit the number of  Repricing  Shares
which  will be issued by, from time to time, exercising  its
right  to  repurchase Repricing Shares  at  the  Call  Price
established in the Purchase Agreement C, which is a  minimum
of  $4.49 per share.  The Company is obligated to file  with
the  Securities  and  Exchange  Commission,  a  registration
statement  with  respect to the shares  issuable  under  the
Purchase Agreement C and to use its best efforts to keep the
registration statement effective for a period  of  five  (5)
years   after   the  registration  statement   is   declared
effective,  or  until  such earlier date  when  the  Offered
Shares  may  be  sold  pursuant to  Rule  144(k)  under  the
Securities  Act. At any time prior to sale by the  Investor,
the  Company  may  redeem  the  Shares  at  the  Call  Price
established in the Purchase Agreement C, which price is  the
greater of $4.49 per share, or 100% of the closing bid price
per share on the date of redemption minus $3.50.

Outlook: Issues and Risks


Potential Change of Control Transaction

On February 4, 1999, the Company, entered into a non-binding
Letter of Intent with Interactive Flight Technologies, Inc.,
a  Delaware corporation ("IFT") regarding the acquisition by
the  Company of all or substantially all of the  assets  and
specified liabilities of IFT (the "Net Assets") relating  to
IFT's interactive entertainment business (the "Business") in
consideration  for the Company's issuance  to  IFT  of  that
number of shares of its Common Stock as would constitute 60%
of  the  Company's fully-diluted equity (the "Acquisition").
The  Net  Assets will include: $5 million in cash;  accounts
receivable  owing  to IFT from Swissair;  the  proceeds  and
other recoveries generated by certain litigation brought  by
IFT;  the  Swissair warranty contract; the Swissair customer
relationship; all IFT interactive entertainment intellectual
property, and other tangible assets related to the  Business
(including  but  not limited to customer  lists  and  files,
trade   secrets,   trademarks,  service  marks,   assignable
government permits and other rights under leases and  rights
under  specified contracts); inventory, furniture, fixtures,
computers  and  equipment related  to  the  Business;  other
infrastructure  (including  FAA  certified  repair  station)
relating  to  the Business; IFT's engineering and  technical
staff;  and  the benefit of all IFT research and development
efforts. The Acquisition will be effected in accordance with
a  definitive agreement (the "Agreement") to be subsequently
negotiated  and  signed  following  the  completion  of  due
diligence  investigations  by  the  Company  and  IFT.    In
addition   to   the  usual  and  customary  representations,
covenants and conditions contained in agreements of the type
used  to  consummate transactions like the Acquisition,  the
definitive  agreement  will  provide  that  closing  of  the
Acquisition  is subject (i) to approval by the  shareholders
of  the  Company, if required under the rules of The  Nasdaq
Stock  Market, and (ii) the receipt of a "fairness  opinion"
with  respect to the terms of the Acquisition to the  effect
that the Acquisition is fair from a financial point of view,
to  the Company shareholders.  Although the Letter of Intent
is  otherwise not binding, the Company has agreed to refrain
from entering into negotiations with any other party for the
sale  of all or substantially all of its assets, or for  the
sale  of  control of the Company, until May 15,  1999.   IFT
similarly  agreed  not  to enter into negotiations  for  the
acquisition of control of any other company engaged  in  the
interactive  entertainment  business  until  May  15,  1999.
There   is  no  guarantee  that  the  Acquisition  will   be
consummated on the terms set forth in the Letter of  Intent.
IFT developed interactive entertainment products for use  in
the  airline  and  travel industry, and it  has  ceased  all
research  and  development activities with respect  to  such
products  except  as required under contract.  It  currently
maintains  only  one  ongoing contract for  its  interactive
entertainment  products,  and is currently  engaged  in  the
redirection of its business activities into new markets. IFT
is  a  Nasdaq:  NMS registrant and trades under  the  ticker
symbol FLYT.

The  Company  is  currently using  its  working  capital  to
finance   its  current  expenses,  including  installations,
equipment  purchases,  product  development,  inventory  and
other expenses associated with the delivery and installation
of  systems  for  Carnival.  Cash  liquidity  from  external
sources will be required to finance existing and anticipated
growth  in the Company's accounts receivable and inventories
resulting   from   performance  under  outstanding   orders,
including  ongoing  payroll expenses. The  Company  believes
that   its   working  capital  requirements  will   increase
throughout  1999  and  beyond,  particularly  as  its  focus
continues  on large, long-term projects. The Company  is  in
discussions  with commercial and private lenders  to  obtain
the  availability  of borrowings secured by  assets  of  the
Company  and with investors for equity financing to  prepare
for  future  operating  needs in  the  event  that  the  IFT
transaction  is  not  completed. (see "Potential  Change  of
Control  Transaction" above) Even if the IFT transaction  is
completed, maintaining an adequate level of working  capital
through the end of 1999, and thereafter, will depend in part
on  collection  of accounts receivable on  a  timely  basis,
successful  litigation  with  non-paying  customers  already
delinquent,  satisfactory settlements with  vendor-creditors
(including those already suing the Company) (see "PART  I  -
Item  3  - Legal Proceedings"), the success of the Company's
products  in the marketplace, the relative profitability  of
those products, continued availability of memory and storage
components at favorable pricing and the Company's ability to
control operating expenses. Following completion of the  IFT
transaction,   the  Company  may  still  seek   or   require
additional financing for growth opportunities, including any
expansion  that  the Company may undertake  internally,  for
strategic acquisitions or partnerships, or for expansion  of
additional sites or major long-term projects. There  can  be
no  assurance that the IFT transaction will be completed and
that  if  not  any  financing will  be  available  on  terms
acceptable to the Company, if at all. If future financing is
not  available when needed, the Company will  be  forced  to
curtail  or  discontinue  operations.  In  such  event,  the
stockholders may lose, or experience a substantial reduction
in, the value of their investment in the Company.

Forward Looking Statements

Except  for  historical  information contained  herein,  the
matters  discussed  in  this ITEM 6 and  elsewhere  in  this
annual  Report on Form 10KSB are forward-looking  statements
(within the meaning of Section 27 of the Securities  Act  of
1933,  as amended  (the "Securities Act") and Section 21  of
the  Securities  Exchange  Act  of  1934,  as  amended  (the
"Exchange  Act"))  that are subject  to  certain  risks  and
uncertainties  that  could cause actual  results  to  differ
materially  from  those  set forth in  such  forward-looking
statements.  Such risks and uncertainties include,  but  are
not limited to, the failure to execute definitive agreements
with additional customers on favorable terms or at all,  the
failure  of  the Company to receive sufficient financing  to
perform  under  any  new contracts or to perform  sufficient
research  and  development, the impact  of  competition  and
downward  pricing pressures, the effect of changing economic
conditions  and  conditions in the specific  industries  the
Company  has targeted, the impact of any changes in domestic
and   foreign  regulatory  environments  or  the   Company's
inability to obtain requisite government approvals, risks in
technology  development,  the  risks  involved  in  currency
fluctuations,  the  risks  of  not  being  able  to   obtain
additional future financing by sale of securities due to the
inability   to  maintain Nasdaq listing for  Company  Common
Stock,  and  the  other  risks  and  uncertainties  detailed
herein.




Risks Associated With Year 2000

The  commonly referred to Year 2000 ("Y2K") problem  results
from  the  fact  that  many existing computer  programs  and
systems use only two digits to identify the year in the date
field.  These  programs were designed and developed  without
considering   the  impact  of  a  change  in   the   century
designation.  If  not corrected, computer applications  that
use  a  two-digit  format  could fail  or  create  erroneous
results  in  any  computer calculation or  other  processing
involving  the  Year 2000 or a later date. The  Company  has
identified two main areas of Y2K risk:

     1.   Internal computer systems or embedded chips could be
       disrupted or fail, causing an interruption or decrease in
       productivity in the Company's operations and
     2.   Computer systems or embedded chips of third parties
       including (without limitation) financial institutions,
       suppliers, vendors, landlords, customers and  service
       providers and others ("Material Third Parties") could be
       disrupted or fail, causing an interruption or decrease in
       the Company's ability to continue operations.

The  Company  has  developed,  or  is  in  the  process   of
developing, detailed plans for implementation and testing of
any  necessary modifications to its key computer systems and
equipment  with  embedded chips to ensure  that  it  is  Y2K
compliant.  The Company estimates that its internal  systems
will  be  Y2K  ready  by  September 30,  1999.  The  Company
believes  that  with  these  detailed  plans  and  completed
modifications,  the  Y2K  issue will  not  pose  significant
operational  problems for it. However, if the  modifications
and  conversions  are  not made, or completed  in  a  timely
fashion,  the  Y2K  could  have a  material  impact  on  its
operations. The Company has performed an assessment  of  its
Triumph products for Y2K issues. The Triumph products use  a
four digit identifier and is, therefore, Y2K compliant.

The  Company's cost of addressing Y2K has been insignificant
to date. The financial impact of making any required systems
changes  or  other  remediation  efforts  cannot  be   known
precisely  at  this  time, but it  is  not  expected  to  be
material  to  the Company's financial position,  results  of
operations, or cash flows.

In  addition, the Company has identified and prioritized and
is  communicating with Material Third Parties  to  determine
their  Y2K  status  and any probable  impact  on  them.  The
Company  will  continue to track and evaluate its  long-term
relationships  with  Material Third  Parties  based  on  the
responses  it receives from such persons and on  information
learned from other sources. If any of the Company's Material
Third  Parties  are  not Y2K ready and  such  non-compliance
causes  a  material  disruption to any of  their  respective
businesses,  the  Company's  business  could  be  materially
adversely  affected. Disruptions could include, among  other
things: the failure of a Material Third Party's business;  a
financial  institution's  inability  to  take  and  transfer
funds; an interruption in delivery of supplies from vendors;
a loss of voice and data connections; a loss of power to the
Company's facilities; and other interruptions in the  normal
course of the Company's operations, the nature and extent of
which  the Company cannot foresee. The Company will continue
to  evaluate the nature of these risks, but at this time the
Company is unable to determine the probability that any such
risk  will  occur,  or if it does occur,  what  the  nature,
length  or  other effects, if any, that it may have  on  the
Company.  If a significant number of Material Third  Parties
experience  failures in their computer systems or operations
due  to  Y2K  non-compliance, it could affect the  Company's
ability  to  process  transactions or  otherwise  engage  in
similar  normal business activities. For example, while  the
Company  expects  its internal systems to be  Y2K  ready  in
September  1999,  the  Company and  its  customers  will  be
dependant  upon  the  Y2K readiness  of  many  providers  of
communications  services  and  in  turn,  those   providers'
vendors  and suppliers. If, for example, such providers  and
others are not Y2K ready, the Company and its customers  may
not  be  able  to  send  and  receive  data  and  electronic
transmissions, which would have a material adverse effect on
the  business and revenues of the Company and its customers.
While many of these risks are outside the Company's control,
the  Company  has instituted a program to identify  Material
Third Parties and to address any non-compliance issues.

While  the Company believes that it is adequately addressing
the  Y2K  issue,  there  can be no assurance  that  its  Y2K
analysis  will be completed on a timely basis, or  that  the
cost and liabilities associated with the Y2K issue will  not
materially   adversely   impact  its  business,   prospects,
revenues or financial position. The Company is uncertain  as
to  its most reasonably likely worst case Y2K scenario,  and
it  has  not  yet developed a contingency plan to  handle  a
worst   case  scenario.  The  Company  expects  to  have   a
contingency  plan to handle this situation by September  30,
1999.


Item 7.    Financial Statements and Supplementary Data


INDEX TO FINANCIAL STATEMENTS


                                                      Page

Report of Independent Accountants
27
Balance Sheet as of December 31, 1998
28
Statements of Operations for the years ended December 31,
1998 and 1997       30
Statements of Changes in Shareholders' Equity for the years
ended
   December 31, 1998 and 1997
31
Statements of Cash Flows for the years ended December 31,
1998 and 1997       32
Notes to Financial Statements
33

              Report of Independent Accountants
                              
To the Board of Directors and Shareholders of
The Network Connection, Inc.

In our opinion, the accompanying balance sheet and the
related statements of operations, of changes in
shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of The Network
Connection, Inc. at December 31, 1998, and the results of
its operations and its cash flows for each of the two years
in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.  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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for the
opinion expressed above.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note 1 to the financial statements, the
Company has incurred net losses from operations and has an
accumulated deficit that raises substantial doubt about its
ability to continue as a going concern. The financial
statements do not include any adjustments that might result
from the outcome of this uncertainty.



PricewaterhouseCoopers LLP

April 15, 1999
Atlanta, Georgia




THE NETWORK CONNECTION, INC.                              
BALANCE SHEET                                             
                                                          
                                                 December
                                                    31,
                                                   1998
                                                          
ASSETS                                                    
                                                          
Current assets:                                           
Restricted cash                                  $1,015,00
                                                         0
Short term investments                              80,834
   Accounts receivable, less                     1,874,779
     allowance of $2,792,000
Inventories:                                              
   Raw materials, less                           1,357,674
allowance of $262,000
   Work in process                               1,400,494
Prepaid expenses                                   245,360
                                                 ---------
                                                 ---------
Total current assets                             5,974,141
                                                          
Property and equipment:                                   
Land                                               150,000
   Building and improvements                       763,055
     Furniture, fixtures and                     2,602,303
                   equipment
Software                                            60,192
Vehicles                                           162,773
                                                 ---------
                                                 ---------
                                                 3,738,323
            Less accumulated                     (1,383,63
                depreciation                            5)
                                                 ---------
                                                 ---------
                                                 2,354,688
                                                          
Other assets, net                                   86,972
                                                 ---------
                                                 ---------
Total assets                                     $8,415,80
                                                         1
                                                 =========
                                                 =

      THE NETWORK                                          
 CONNECTION, INC.
BALANCE SHEET                                              
                                                  December
                                                    31,
                                                    1998
                                                           
  LIABILITIES AND                                          
    SHAREHOLDERS'
           EQUITY
                                                           
Current                                                    
liabilities:
 Accounts payable                                $2,924,132
      and accrued
         expenses
Payable to                                            74,429
shareholders
 Borrowings under                                   669,000
     bank line of
           credit
    Notes payable                                 1,604,082
Deferred revenues                                   521,332
  Current portion                                    36,974
of long-term debt
and capital lease
      obligations
                                                 ----------
                                                 ----------
Total current                                     5,829,949
liabilities
                                                           
  Long-term debt,                                   699,998
     less current
          portion
                                                 ----------
                                                 ----------
Total liabilities                                 6,529,947
                                                            
Commitments and
contingencies (Note 2)
                                                            
Redeemable convertible                                     
preferred stock, $.01 par
value, $1,000 stated value:
  Authorized, 1,500 shares;                                 
  Issued and outstanding,                          1,522,667
1,500
                                                           
Shareholders'                                              
equity:
 Preferred stock,                                          
  $.01 par value:
      Authorized,                                          
2,500,000 shares;
       Issued and                                          
outstanding, none
    Common stock,                                          
 $.001 par value:
      Authorized,                                          
       10,000,000
          shares;
       Issued and                                     5,070
     outstanding,
 5,069,646 shares
                                                           
 Additional paid-                                16,443,552
       in capital
Accumulated                                      (16,085,43
deficit                                                  5)
                                                 ----------
                                                 ----------
            Total                                   363,187
    shareholders'
           equity
                                                 ----------
                                                 ----------
Total liabilities                                $8,415,801
and shareholders'
           equity
                                                 ==========
                                                 ==

           THE NETWORK                                          
      CONNECTION, INC.
         STATEMENTS OF                                          
            OPERATIONS
   For the years ended                                          
          December 31,
                                                                 
                                              1998        1997
                                                                
Revenues                                   $5,003,290  $7,848,444
Cost of revenues                            3,005,151  5,044,258
                                           ---------- ----------
                                           ---------- ---------
Gross profit                                1,998,139  2,804,186
                                                                
  Selling, general and                      3,965,878  4,346,318
        administrative
Provision for doubtful                      6,464,064    258,270
accounts and inventory
               reserve
       Special charges                        595,263          0
          Research and                        397,196    277,527
           development
                                           ---------- ----------
                                           ---------- ---------
Operating loss                             (9,424,262  (2,077,929
                                                    )          )
Interest, net                               (209,036)     52,301
                                           ---------- ----------
                                           ----------  ---------
Net loss                                   (9,633,298  (2,025,628
                                                    )          )
Preferred stock                               574,951          0
dividends
                                           ----------  ----------
                                            ---------  ---------
Net loss to common                         ($10,208,2  ($2,025,62
shareholders                                      49)         8)
                                           ========== ==========
                                                   == =
Basic and Diluted Net                           ($2.31)   ($0.53)
loss per share
                                            ==========  ========
                                                     =  ==
                                                                
      Weighted average                      4,426,535  3,845,097
    shares outstanding
                                           ========== ==========
                                                   == =

       THE NETWORK                                                         
  CONNECTION, INC.
     STATEMENTS OF                                                      
        CHANGES IN
      SHAREHOLDERS
            EQUITY
                                                                   
                                    Common           Additional
 Accumulate  Total
                                           S                        d
                                           t
                                           o
                                           c
                                           k
                                   Shares   Amount       PIC     Deficit    
Equity
                                                                             
Balance at January          3,036,7   $3,037             $(4,426,50 $4,756,353
           1, 1997                      10             $9,179,8        9)
                                                             25
                                                                             
       Exercise of         1,065,392    1,065    5,276,76            5,277,828
       warrants to                                            3
    acquire common
             stock
   Stock option               50,291       50     165,801              165,851
plan
   Net Loss                                               (2,025,628 (2,025,628
                                                                    )    
                            _______ ________     ________ __________ ______
                               ___       __    __       __         __
        Balance at         4,152,3    4,152    14,622,3 (6,452,137  8,174,404
 December 31, 1997                      93                   89         )
                                                                           
   Common stock           80,000       80     213,350              213,430
sold
     Conversion of        746,653      747    1,984,57            1,985,322
preferred stock to                                            5
      common stock
   Stock option            90,600       91     198,189              198,280
plan
   Preferred stock                             (574,951            (574,951)
dividends                                                     )
   Net Loss                                            (9,633,298 (9,633,298
                                                                )          )
                         _______ ________     ________ __________ __________
                                      ___       __    __       __         __
        Balance at          5,069,6   $5,070    $16,443, ($16,085,4   $363,187
 December 31, 1998                      46               552          35)

                              
      THE NETWORK                                                  
 CONNECTION, INC.
STATEMENTS OF                                                      
CASH FLOWS
    For the years
   ended December
              31,
                                                         
                                                  1998       1997
Operating                                                          
activities
Net loss                                       ($9,633,2 ($2,025,62
                                                     98)         8)
   Adjustments to                                                  
    reconcile net
 loss to net cash
             used
in operating                                                       
activities:
     Depreciation                              1,030,265    334,029
 and amortization
    Provision for                              6,202,064          0
doubtful accounts
    Provision for                                262,000          0
        inventory
       Changes in                                                  
 operating assets
 and liabilities:
  Accounts                                     (3,140,34 (3,131,223
receivable                                            1)          )
  Inventories                                    424,827  (2,336,585
                                                                  )
     Prepaids and                                 11,328  (728,070)
     other assets
         Accounts                              (1,243,98  2,990,205
      payable and                                     5)
 accrued expenses
       Payable to                                  3,500      2,078
     shareholders
         Deferred                                521,332          0
         revenues
                                               --------- ----------
                                               --------- ---------
                                                       -
 Net cash used in                              (5,562,30 (4,895,194
        operating                                     8)          )
       activities
                                                                   
Investing                                                          
activities:
      Purchase of                              (534,084)  (417,291)
     property and
        equipment
Purchase of short-                                557,725  (142,846)
 term investments
                                               --------- ----------
                                               --------- ---------
                                                       -
   Net cash (used                                 23,641  (560,137)
  in) provided by
        investing
       activities
                                                                   
Financing                                                          
activities:
    Proceeds from                                143,000     30,000
     bank line of
           credit
    Proceeds from                              1,601,600          0
      issuance of
 promissory notes
    Proceeds from                                470,000     18,077
issuance of long-
        term debt
Net proceeds from                              3,344,749  5,443,679
issuance of stock
 Payment of long-                               (30,330)   (11,777)
    term debt and
    capital lease
      obligations
                                               --------- ----------
                                               --------- ---------
                                                       -
Net cash provided                              5,529,019  5,479,979
     by financing
       activities
                                               --------- ----------
                                               --------- ---------
                                                       -
Net change in                                    (9,648)     24,648
cash
          Cash at                              1,024,648  1,000,000
beginning of year
                                               --------- ----------
                                               --------- ---------
                                                       -
Cash at end of                                 $1,015,00 $1,024,648
year                                                   0
                                               ========= ==========
                                                      == =
     Supplemental                                                  
     Information:
    Conversion of                              3,450,000          0
          debt to
      convertible
  preferred stock
  Preferred stock                                574,951          0
        dividends

1.   Significant Accounting Policies

Description of Business

The   Network   Connection,   Inc.   (the   "Company")   was
incorporated  on  December 30, 1986.  The  Company  designs,
manufactures  and  distributes computer networking  products
for  use in employee training, academic, telecommunications,
entertainment   and   other  industry   applications.    The
Company's  products are based upon a proprietary  engineered
process utilizing non-proprietary personal computer hardware
standards  with  standard major components  and  subsystems.
The  Company's  products are designed to be compatible  with
industry-standard network operating systems.

Basis of Presentation - Going Concern

The   Company's  financial  statements  are  prepared  using
generally  accepted accounting principles  applicable  to  a
going  concern which contemplate the realization  of  assets
and  liquidation  of  liabilities in the  normal  course  of
business.   The  Company  has  incurred  net   losses   from
operations for several years, has an accumulated deficit  at
December  31,  1998, and has used substantial  cash  in  its
operations   which  raises  substantial  doubt   about   the
Company's ability to continue as a going concern. Management
believes  that  the  completion of  the  change  of  control
transaction  with  Interactive  Flight  Technologies,   Inc.
("IFT")  described  in  Note  9,  future  debt  and   equity
offerings  and successful commercialization of its  products
and services will generate the required capital necessary to
continue as a going concern.

Concentration of Credit Risk

The  Company's  principal financial instruments  subject  to
potential  credit  risk are cash and equivalents  and  trade
accounts  receivable.   The Company  invests  its  cash  and
credit  instruments with highly rated financial institutions
and  performs periodic evaluations of the relative  standing
of  these financial institutions.  Trade accounts receivable
are  generally unsecured; therefore, the Company is at  risk
to the extent such amounts become uncollectible.

In  1998,  two customers accounted for an aggregate  of  96%
(76%  and 20%, respectively) of the Company's revenues.   In
1997,  three  customers accounted for an  aggregate  of  79%
(38%,  30% and 11%, respectively) of the Company's revenues.
Management  believes that the concentration of  credit  risk
with respect to trade accounts receivable is high due to the
limited number of customers requiring large shipments.

Inventories

Inventories consist primarily of components purchased for
assembly into products and are stated at the lower of cost
or market using the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are recorded at cost.  Depreciation
and amortization are calculated using the straight-line
method over the estimated useful lives of the assets,
principally five years, except for buildings for which the
life is forty years.

Income Taxes

Under  the  Statement of Financial Accounting Standards  No.
109 (SFAS 109), "Accounting for Income Taxes", the liability
method  is used in accounting for income taxes.  Under  this
method,  deferred tax assets and liabilities are  determined
based  on  differences between financial reporting  and  tax
bases  of assets and liabilities and are measured using  the
enacted  tax rates and laws that will be in effect when  the
differences are expected to reverse.

The  Company provides a valuation allowance for deferred tax
assets  which are determined by management to be  below  the
threshold for realization established by SFAS 109.

Revenue Recognition

Revenues  are  recognized when the products are  shipped  or
installed  based upon the terms of the contract,  expiration
of rights of acceptance or return and determination that the
related  receivables are collectible. Revenues  pursuant  to
contracts that provide for revenue sharing with customers or
others  is  recognized as cash is received in the amount  of
the  Company's retained portion of the cash pursuant to  the
revenue sharing agreement.

The Company's products are often used with other products in
large  complex projects. As a result, the Company may  grant
extended  payment terms for certain sales of up to 180  days
based on the nature of the project.

Deferred Revenue

Deferred   revenue  represents  the  advance   billings   of
equipment  sales as allowed under purchase and  installation
contracts.

Other Assets

Costs  incurred  to  establish  and  defend  trademarks  and
patents are capitalized. Such costs are amortized using  the
straight-line method over 20 years.

Basic and Diluted Net Loss Per Common Share

Basic and Diluted net loss per common share have been
computed by dividing net loss by the weighted average number
of common shares outstanding during each period.

Management's 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  dates  of  the
financial  statements and the reported amounts  of  revenues
and  expenses during the reporting periods.  Actual  results
could differ from those estimates.

Advertising Costs

Costs  of  advertising  are  expensed  when  incurred.   The
Company  recognized  advertising expenses  of  approximately
$234,000 and $656,000 in 1998 and 1997, respectively.

2.   Commitments and Contingencies

The  Company  leases  certain equipment  and  office  space.
Property  and equipment includes $15,230 of equipment  under
capital  lease agreements at December 31, 1998.  Accumulated
amortization was $13,707 at December 31, 1998.  Amortization
of   leased   assets   is  included  in   depreciation   and
amortization  expense.   The  Company  also  leases  certain
equipment  under noncancelable operating leases that  expire
in various years through 2001.

Future  minimum lease payments required under capital  lease
obligations and noncancelable operating leases with  initial
or  remaining  terms of one year or more are  summarized  as
follows at December 31, 1998:

     Year ending December 31,           Capital
Operating

                    1999                  970
               15,288
                    2000                      0
               15,288
                    2001                           0
               7,644

     Total minimum lease payments                 $970
$38,220
     Less amounts representing interest
90
     Present value of minimum capital lease payments
880
     Less current portion                           880
     Long-term obligations under capital leases
$ 0

During 1998 and 1997, total rental expense for all operating
leases was approximately $33,574 and $36,000, respectively.

To  date, the Company has not experienced significant claims
under  product  warranties due to the pass  through  to  end
users  of  the  warranties that the  Company  receives  from
vendors.

On December 1, 1998, Sigma Designs, Inc. ("Sigma"), filed  a
complaint against the Company in the United States  District
Court,  Northern District of California, San Jose  Division,
Civil  Action  File  No. 98-21149J(EAI) alleging  breach  of
contract  and  action  on account.  Sigma  claims  that  the
Company  failed to pay for goods shipped to the  Company  by
Sigma.  The  matter was settled by written  agreement  dated
January  22, 1999, contingent upon registration  of  Company
stock  issued  to  Sigma as a part of such  settlement,  and
payment by the Company of $50,000, in two installments,  the
latter  which was due on February 5, 1999. The  Company  has
made  the  $50,000 settlement payments and is in the process
of  filing  for registration of the stock issued  to  Sigma.
Management of the Company expects to fully comply  with  the
terms  of  the  settlement agreement and the claim  will  be
dismissed with prejudice.

Hollingsead  International,  Inc.  ("Hollingsead")  filed  a
complaint  against the Company on January 28, 1999,  in  the
State Court of Forsyth County, State Court of Georgia, Civil
Action File No. 99sc0053, alleging the Company failed to pay
invoices  submitted for installation and service  of  audio-
visual   systems  in  certain  aircraft.  In  its  complaint
Hollingsead  requests  $357, 850 in damages  plus  interest,
costs, attorneys fees, and punitive damages of no less  than
$250,000.  The  Company filed an answer and  a  counterclaim
with  the court on March 29, 1999 alleging that any  amounts
allegedly owed Hollingsead should be set-off and/or recouped
against  damages  incurred by the Company  as  a  result  of
Hollingsead's  negligence and/or  breach  of  contract.  The
Company   is   seeking  settlement  of  such   claims   with
Hollingsead.

On  March 29, 1999, the Company filed for arbitration  under
the  rules of the United Nations Commission on International
Trade  Law and the Rules of Arbitration of the Kuala  Lumpur
Regional Centre for Arbitration, to enforce its rights under
the  terms of the Star Agreement with CNA and Star  for  the
delivery,  installation  and  maintenance  of  a  CruiseView
system  on  the  Star  cruise ship the  SuperStar  Leo.  The
CruiseView system on the SuperStar Leo was installed and has
been in commercial operation since October 1998. The Company
claims  that  Star and CNA are in default under the  payment
obligations of the Star Agreement and intend to aggressively
pursue  its  remedies, including repossession of  inventory,
contractual and otherwise, to enforce its rights  under  the
terms of the Star Agreement.

On March 29, 1999, the Company filed to revoke the Supplemental Type Certi
ficate  (STC) issued by the FAA and DGAC in connection  with
the  two  Fairlines  aircraft on which AirView  systems  are
installed  and  in  operation due to  Fairlines  default  in
payment under terms of the AirView Agreement. Revocation  of
the  STC  would  result in the inability  for  Fairlines  to
operate  the  aircraft commercially with the AirView  system
installed  on  the  aircraft. The Company  is  pursuing  its
remedies,   contractual  and  otherwise,   in   respect   to
collection  of  amounts due and damages incurred  under  the
AirView Agreement.


3.   Debt Obligations

Debt obligations consist of the following:
                                             1998
1997
Note payable due in varying installments through 2009,
interest at
  prime (7.5% at December 31, 1998) plus 2%, collateralized
by
  certain commercial property and personally guaranteed by
two
  shareholders                               $227,102
$238,767
Note payable due in varying installments through 2000,
interest
  at 6.9%, collateralized by a vehicle.
31,456        40,845
Note payable due and payable April 19, 2001, interest at 16%
  payable monthly, collateralized by certain commercial
property    470,000              0
Note payable due in varying installments through 2000,
interest at
  11.0%, collateralized by a vehicle.
7,444         12,458
                                          736,002   292,070
Less current portion                                  36,004
32,964
                                        $699,998  $259,106

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

     1999 36,004
     2000 31,072
     2001 486,457
     2002 18,848
     2003 22,050
     Thereafter                      141,571
                              $736,002

On  May  28,  1998, the Company entered into a $1.0  million
line  of  credit agreement with a bank. Outstanding advances
bear  interest at 7.05% per annum through the maturity  date
of  May  28, 1999.  Interest is payable monthly in  arrears,
commencing  January 1, 1998. As of December 31, 1998,  there
was  $669,000 advanced under this line of credit. This  line
of  credit is collateralized by two certificates of  deposit
in the total amount of $1.0 million and are presented in the
balance sheet as restricted cash.

On  August  12,  1998, the Company entered  into  promissory
notes  (collectively  "Series Notes") with  five  individual
investors  in the aggregate amount of $650,000.  The  Series
Notes  were unsecured and were due and payable with  accrued
interest  at an annual rate of 8% on October 14,  1998.  The
Company,  in its sole discretion, could elect to  pay  these
Series  Notes  on  October 12, 1998, subject  to  a  payment
charge equal to 7% of the principal amount, or exchange  the
Series Notes for a series of convertible preferred stock  or
convertible debentures of the Company. On October 12,  1998,
the  Company entered into new promissory notes (collectively
"Series  A Notes") in the aggregate amount of $704,082  with
the  holders of the Series Notes to replace and rollover the
Series  Notes. The Series A Notes are unsecured and are  due
and payable with accrued interest at an annual rate of 8% on
December 11, 1998. The Company, in its sole discretion,  may
elect  to  pay  these Series A Notes on December  11,  1998,
subject  to  a  payment charge equal to 7% of the  principal
amount,  or  exchange the Series A Notes  for  a  series  of
convertible preferred stock or convertible debentures of the
Company.  On December 11, 1998, the Company and the  holders
of  the  Series A Notes agreed to extend the  due  date  for
repayment of the Series A Notes until February 25, 1999.  On
February  25,  1999 the Series A Notes were orally  extended
and made payable on demand.

On  October  20,  1998, the Company entered into  promissory
notes  (collectively "Series D Notes") with three individual
investors in the aggregate amount of $350,000. The Series  D
Notes  were unsecured and were due and payable with  accrued
interest  at an annual rate of 8% on January 18,  1999.  The
Company,  in its sole discretion, could elect to  pay  these
Series  D  Notes on January 18, 1999, subject to  a  payment
charge equal to 5% of the principal amount, or exchange  the
Series  D Notes for a series of convertible preferred  stock
or  convertible  debentures of the Company. On  January  18,
1999,  the  Company and the holders of the  Series  D  Notes
agreed to extend the due date for repayment of the Series  D
Notes  until  April 15, 1999, subject to  a  payment  charge
equal to 5% of the principal amount plus an additional  2.5%
of the principal amount for each 30 day period after January
18, 1999 the Series D Notes are outstanding.

From  November 17 to December 17, 1998, the Company  entered
into  promissory notes (collectively "Series E Notes")  with
five  individual  investors  in  the  aggregate  amount   of
$550,000. The Series E Notes were unsecured and were due and
payable  with accrued interest at an annual rate of 8%  from
January  18  to February 8, 1999. The Company, in  its  sole
discretion, could elect to pay these Series E Notes  on  the
due  date,  subject to a payment charge equal to 7%  of  the
principal  amount,  or exchange the Series  E  Notes  for  a
series   of   convertible  preferred  stock  or  convertible
debentures of the Company. On February 12, 1999, the Company
and  the holders of the Series E Notes agreed to extend  the
due date for repayment of the Series E Notes until March 15,
1999.  On  March  15, 1999 the Series E  Notes  were  orally
extended and made payable on demand.

The  Company  paid  interest of approximately  $311,000  and
$62,000 during fiscal years 1998 and 1997, respectively.

4.   Common Stock, Preferred Stock  and Warrants

On March 11, 1998, the Company raised gross proceeds of $2.2
million  in  a  private placement to a single  institutional
investor,  KA  Investments  LDC  (the  "KA"),  of  five-year
convertible  debt securities (the "Debentures") pursuant  to
the  terms  of  a Convertible Debenture Purchase  Agreement,
dated March 11, 1998, by and between the Company and KA (the
"Debenture  Purchase Agreement").  Each Debenture  was  sold
for  $50,000.00, accrued interest at a rate of 4% per annum,
and  was convertible at the option of the holder into shares
of  the Company's Common Stock at a price per share equal to
the  lesser of (i) $8.02 or (ii) 80% of the average  closing
market  price  of the Company's Common Stock during  the  21
trading days prior to conversion, but in no event less  than
$3.00 per share (as adjusted for stock splits).  On June  9,
1998,   KA  and  the  Company  entered  into  a  Convertible
Preferred  Stock Purchase Agreement (the "Purchase Agreement
A"),  pursuant  to which KA agreed to exchange  all  of  its
Debentures for 220,000 shares of the Company's 4%  Series  A
Convertible   Preferred  Stock  (the  "Series  A   Preferred
Stock"). The financial terms of the Series A Preferred Stock
were identical to the financial terms of the Debentures  for
which they were exchanged. The Company was obligated to file
and  have  declared effective by the Securities and Exchange
Commission (the "Commission"), on or prior to June 24, 1998,
a  registration statement with respect to the resale of  the
Common  Stock  issuable  upon conversion  of  the  Series  A
Preferred   Stock.   The  Company  originally   filed   such
Registration Statement on May 1, 1998, and such Registration
Statement was declared effective by the Commission  on  June
8,  1998. As of  December 31, 1998, holders of the Company's
Series  A  Preferred  Stock had exercised  their  right  and
converted all 220,000 shares of the Series A Preferred Stock
into 746,653 shares of the Company's Common Stock.

On June 29, 1998, the Company entered into a promissory note
(the "Investor Note") with an institutional investor in  the
amount  of $1,250,000. This note was unsecured and  was  due
and payable with accrued interest at an annual rate of 8% on
August 28, 1998. The Company, in its sole discretion,  could
elect  to  pay  this note on August 28, 1998, subject  to  a
payment  charge  of $87,500, or exchange  this  note  for  a
series   of   convertible  preferred  stock  or  convertible
debentures  of  the Company. Repayment of the Investor  Note
was  orally extended and made payable on demand. On  October
23,  1998, the Company elected to exchange the Investor Note
for  1,500  shares of the Company's non-voting Series  B  8%
Convertible  Preferred  Stock  (the  "  Series  B  Preferred
Stock")  and  warrants to acquire 100,000 shares  of  Common
Stock  issued to the holder of the Series B Preferred  Stock
(the "Warrants") pursuant to a Securities Purchase Agreement
of  even  date  ("Purchase Agreement B"). The $1,000  stated
value  per  share of Series B Preferred Stock is convertible
at  the option of the holder into shares of Common Stock, at
a  price per share equal to the lesser of  $ 3.66 per  share
of  Common Stock (the "Closing Price") or 75% of the average
of the closing bid prices as reported on the Nasdaq SmallCap
Market ("Nasdaq") for the lowest five of the 20 trading days
immediately  preceding the date of Series B Preferred  Stock
conversion   (the  "Average  Price").   The   Warrants   are
exercisable to acquire shares of Common Stock at a price per
share equal to $4.125.

On  December 29, 1998, in consideration for $280,000 in cash
the  Company  sold  in  a  private  placement  to  a  single
institutional investor, (the "Investor"),  80,000 shares  of
its  Common Stock (the "Initial Shares") in association with
the  right  to  acquire  up to 80,000  additional  Repricing
Shares  of  Common Stock without the payment  of  additional
consideration (collectively, the "Shares"), pursuant to  the
terms  of  a  Common Stock Purchase Agreement, dated  as  of
December  28,  1998,  by and between  the  Company  and  the
Investor  (the "Purchase Agreement C").  Under the terms  of
the  Purchase Agreement C, Repricing Shares are issuable  to
the Investor in the event that on the 45th day (with respect
to 25% of the Initial Shares), the 90th day (with respect to
25%  of  the Initial Shares) and the 135th day (with respect
to 50% of the Initial Shares) subsequent to the closing date
for  sale  of the Initial Shares (with each such date  being
referred  to  as  a "Repricing Date"), the  average  of  the
lowest  twenty closing sale prices during each  such  45-day
period, respectively (each a "Discounted Share Price"), does
not  exceed  $4.22 per shares (the "Multiple Share  Price").
The  number  of  Repricing  Shares  to  be  issued  on  each
Repricing  date, subject to the maximum of 80,000  Repricing
Shares, equals the product of (i) the difference between the
Multiple  Share  Price  and  the relevant  Discounted  Share
Price,  and  (ii) a fraction equal to the number of  Initial
Shares subject to repricing (e.g., 25% of 80,000 shares,  or
20,000) divided by the relevant Discounted Share Price.  The
Company  intends  to  limit the number of  Repricing  Shares
which  will be issued by, from time to time, exercising  its
right  to  repurchase Repricing Shares  at  the  Call  Price
established in the Purchase Agreement C, which is a  minimum
of  $4.49  per  share.  At any time prior  to  sale  by  the
Investor,  the  Company may redeem the Shares  at  the  Call
Price  established in the Purchase Agreement C, which  price
is  the  greater of $4.49 per share, or 100% of the  closing
bid price per share on the date of redemption minus $3.50.

See also Note 2 and Note 9.

5.   Income Taxes

The  Company accounted for income taxes under the  liability
method  required by SFAS 109. Deferred income taxes  reflect
the net effect of temporary differences between the carrying
amounts  of  assets and liabilities for financial  reporting
purposes  and  the amounts used for income tax purposes.  At
December 31, 1998, the Company had a net deferred tax  asset
of  approximately $6,491,000 which was totally offset  by  a
valuation  allowance  because the assets  do  not  meet  the
criteria for recognition in SFAS 109. Significant components
of  the Company's deferred tax liabilities and assets as  of
December 31, 1998 and 1997 are as follows:
                              1998           1997
     Deferred tax liabilities:
        Tax over book depreciation      ($188,000)
($122,000)
        Tax over book amortization                    0
0
     Total deferred tax liabilities          ($188,000)
($122,000)

     Deferred tax assets:
         Bad debt reserve               $1,061,000
$  57,000
         Uniform capitalization                     81,000
10,000
         Book over tax amortization               195,000
9,000
         Charitable contributions
4,000                3,000
         Net operating loss               5,338,000
3,013,000
     Total deferred tax assets               $6,679,000
$3,092,000

     Net deferred tax assets             6,491,000
2,970,000
     Valuation allowance           (6,491,000)
(2,970,000)
     Net deferred taxes            $             0
$          0

The  valuation  allowance  for deferred  tax  assets  as  of
January 1, 1998 was approximately $2,970,000. The net change
in  the total valuation allowance for 1998 was approximately
$3,521,000.   This change resulted primarily from  increases
in  the  above described temporary differences  on  which  a
valuation allowance was provided.

The Company did not record any income tax expense or benefit
from  operations for the years ended December 31,  1998  and
1997,   respectively.   The  following  table   provides   a
reconciliation between the Federal income tax rate  and  the
Company's effective income tax rate:

                              1998 1997
     Statutory Federal income tax rate       34%  34%
     Disallowed meals and entertainment  (0)  (1)
     Increase in valuation allowance         (36) (51)
     Other, net                       2  18
     Effective tax rate                  0%   0%

At  December  31, 1998, the Company has net  operating  loss
(NOL) carryforwards of approximately $14,049,000.  The NOL's
expire, if not utilized, as follows:

     December 31, 2009   $   168,000
     December 31, 2010   $1,027,000
     December 31, 2011   $4,071,000
     December 31, 2012   $2,438,000
     December 31, 2018   $6,345,000

6.   Related Party Transactions

The   Company  was  owed  approximately  $68,000  from   two
shareholders/officers as of December 31, 1998.

On   September  1,  1994,  the  Company  entered  into  four
promissory  notes in the aggregate amount of       $69,  290
payable  to  certain shareholders/officers for  accrued  and
unpaid  salaries  owed through August 31, 1994.   Under  the
terms of the notes, outstanding amounts bear interest at  5%
per  annum, with payments of principal and accrued  interest
being  payable  to  the extent certain operating  cash  flow
requirements  are met. As of December 31, 1998,  $74,429  of
principal  and  accrued interest remained outstanding  under
these notes.

7.   401(k) Plan

During  1996, the Company established a defined contribution
plan  (the  401(k) Plan) pursuant to Section 401(k)  of  the
Internal  Revenue Code, whereby substantially all  employees
are  eligible  to  contribute up to  15%  of  their  pre-tax
earnings,  not to exceed amounts allowed under the  Internal
Revenue  Code.   The Company may make contributions  to  the
401(k) Plan at the discretion of the Board of Directors.  No
employer contributions have been made to the 401(k) Plan  by
the Company.

8.   Stock Options

Under  the  Company's 1994 Employee Stock Option  Plan  (the
"Plan"),  as amended, the Company has reserved an  aggregate
of  1,200,000 shares of Common Stock for issuance under  the
Plan.  Options granted under the Plan are for periods not to
exceed  ten  years.   Under  the Plan,  incentive  and  non-
qualified  stock options may be granted.  All option  grants
under  the  Plan  are  subject to the terms  and  conditions
established  by the Plan and the Stock Option  Committee  of
the  Board of Directors. Options must be granted at not less
than  100% of fair value for incentive options and not  less
than 85% of fair value of non-qualified options of the stock
as  of  the date of grant and generally are exerciseable  in
increments  of 25% each year subject to continued employment
with  the Company. Options generally expire five years  from
the   date   of   grant.  Options  canceled  represent   the
unexercised  options of former employees,  returned  to  the
option  pool in accordance with the terms of the  Plan  upon
departure  from  the Company.  The Board  of  Directors  may
terminate the Plan at any time at their discretion.   During
1998, options to purchase 355,000 shares were granted at per
share  price  of $2.00.  Options to purchase 652,478  shares
were  outstanding at December 31, 1998.  Options to purchase
265,578  shares under the Plan were exercisable at  December
31,  1998.  There  were 712,328 options  outstanding  as  of
December 31, 1997.

On  August  16,  1995, the Company adopted  the  1995  Stock
Option  Plan  For  Non-Employee  Directors  (the  "Directors
Plan") and reserved 100,000 shares of unissued common  stock
for  issuance to all non-employee directors of the  Company.
The  Directors Plan is administered by a committee appointed
by  the  Board of Directors consisting of directors who  are
not  eligible to participate in the Directors Plan. Pursuant
to  the  Directors Plan, directors who are not employees  of
the  Company receive for their services, on the  date  first
elected  as  a  member of the Board and on each  anniversary
thereafter,  if  they  continue to serve  on  the  Board  of
Directors, an automatically granted option to acquire  5,000
shares  of  the  Company's common stock at its  fair  market
value  on the date of grant; such options become exercisable
in two equal annual installments if the individual continues
at  that  time to serve as a director, and once  exercisable
remain  so until the fifth anniversary of the date of grant.
During  1998, options to purchase 10,000 shares were granted
at  per share prices ranging from $2.59 to $3.25. Options to
purchase  24,000  shares  under  the  Directors  Plan   were
outstanding at December 31, 1998. Options to purchase  9,000
shares under the Directors Plan were exercisable at December
31, 1998. There were 14,000 options to purchase shares under
the Directors Plan outstanding at December 31, 1997.
                                 Shares             Weighted
Average Exercise Share Price
Options   outstanding   at   579,869           7.67
December 31, 1996
Granted                      425,000           7.51
Canceled or expired        (208,300)           7.60
Exercised                   (50,291)           4.19
Options   outstanding   at   746,328           7.85
December 31, 1997
Granted                      365,000           2.03
Canceled or expired        (344,250)           8.73
Exercised                   (90,600)           2.00
Options   outstanding   at   676,478           5.00
December 31, 1998

The Company accounts for its employee stock option plans  in
accordance  with  the  provisions of  Accounting  Principles
Board  Opinion  No.  25.  In  October  1995,  the  Financial
Accounting  Standards Board issued Statements  of  Financial
Accounting  Standards No, 123, "Accounting for  Stock  Based
Compensation"  ("SFAS  123") which requires  that  companies
with   stock-based   compensation  plans  either   recognize
compensation  expense  based on new  fair  value  accounting
methods  or continue to apply existing accounting rules  and
disclose  pro  forma  net  income  and  earnings  per  share
assuming  the  fair  value method  had  been  applied.   The
Company elected to adopt the disclosure method of SFAS  123.
Had  compensation cost for the Company's option  plans  been
determined  based on the fair value at the grant  dates,  as
prescribed in SFAS 123, the Company's net loss and pro forma
net loss per share would have been as follows:

                         1998      1997
     Net loss: (millions)
          As reported         ($10.21)       ($2.03)
          Pro forma      ($10.64)       ($3.44)

     Net loss per share:
          As reported         ($2.31)        ($0.53)
          Pro forma      ($2.40)        ($0.89)

The  fair value was determined using the Black-Sholes option
pricing   model   incorporating  the  following   range   of
assumptions in the calculations:

                         1998      1997
     Expected life            5.0 years 9.8 years
     Interest rate at grant date        4.57%          6.19%
     Volatility at grant date      86%       78%
     Dividend yield           0%        0%

The following table summarizes information about all options
outstanding as of December 31, 1998:

Range of  Outstand  Outstand  Weighted   Exercise  Exercise
Exercise  ing       ing       Average    able      able
Prices    Shares    Weighted  Remainin   Shares    Weighted
                    Average   g   Years            Average
                    Share     In                   Share
                    Price     Contract             Price
                              ual Life
 $2.00 -    319,728     $2.09      4.61   131,478      $2.15
    3.25
  4.17 -     99,000      6.07      3.83    84,000       6.00
    6.75
  7.13 -    169,750      7.43      6.91    93,500       7.40
    8.00
  8.75 -     32,000      8.78      7.40    16,500       8.81
    9.82
 10.25 -     56,000     10.42      7.57    53,500      10.42
   13.26
 $2.00 -    676,478     $5.05      5.46   378,978      $5.76
   13.26

Because  additional stock options are expected to be granted
each   year,  the  above  pro  forma  disclosures  are   not
representative  of  pro forma effects on reported  financial
results for future years.

9.  Subsequent Events

On  January 22, 1999, in consideration for the settlement of
outstanding  litigation brought by Sigma  Designs,  Inc.,  a
vendor  to the Company (the "Sigma") and the mutual  release
of  claims, under the terms of the Settlement Agreement, the
Company agreed to pay $50,000 in cash to Sigma and to  issue
to  Sigma  110,000  Initial Shares  of  Common  Stock.   The
Company  also  issued to Sigma a warrant to  acquire  40,000
shares of Common Stock, exercisable at $3.44 per share.  The
Company  is  obligated  to  file  with  the  Securities  and
Exchange Commission, a Registration Statement and to use its
best  efforts  to keep the Registration Statement  effective
for  a  period  of  five  (5) years after  the  Registration
Statement is declared effective, or until such earlier  date
when  the Offered Shares may be sold pursuant to Rule 144(k)
under  the Securities Act. Under the terms of the Settlement
Agreement,  the Company may be required to pay an additional
cash amount to the holder of the Shares in the event that on
the  date of Registration (the "Repricing Date"), the market
price for the Initial Shares (the "Market Price") is not  at
least $319,850 (the "Repricing Price").

The  Company  is  currently using  its  working  capital  to
finance   its  current  expenses,  including  installations,
equipment  purchases,  product  development,  inventory  and
other expenses associated with the delivery and installation
of  current  systems. Cash liquidity from external  sources
will  be required to finance existing and anticipated growth
in   the   Company's  accounts  receivable  and  inventories
resulting   from   performance  under  outstanding   orders,
including  ongoing  payroll expenses. The  Company  believes
that   its   working  capital  requirements  will   increase
throughout  1999  and  beyond,  particularly  as  its  focus
continues  on large, long-term projects. The Company  is  in
discussions  with commercial and private lenders  to  obtain
the  availability  of borrowings secured by  assets  of  the
Company  and with investors for equity financing to  prepare
for  future  operating  needs in  the  event  that  the  IFT
transaction is not completed. Even if the IFT transaction is
completed, maintaining an adequate level of working  capital
through the end of 1999, and thereafter, will depend in part
on  collection  of accounts receivable on  a  timely  basis,
successful  litigation  with  non-paying  customers  already
delinquent,  satisfactory settlements with  vendor-creditors
(including those already suing the Company), the success  of
the  Company's  products  in the marketplace,  the  relative
profitability  of those products, continued availability  of
memory  and storage components at favorable pricing and  the
Company's  ability to control operating expenses.  Following
completion  of  the IFT transaction, the Company  may  still
seek    or   require   additional   financing   for   growth
opportunities, including any expansion that the Company  may
undertake   internally,   for  strategic   acquisitions   or
partnerships, or for expansion of additional sites or  major
long-term projects. There can be no assurance that  the  IFT
transaction will be completed and that if not any  financing
will be available on terms acceptable to the Company, if  at
all.  If future financing is not available when needed,  the
Company will be forced to curtail or discontinue operations.

On February 4, 1999, the Company, entered into a non-binding
Letter of Intent with Interactive Flight Technologies, Inc.,
a  Delaware corporation ("IFT") regarding the acquisition by
the  Company of all or substantially all of the  assets  and
specified liabilities of IFT (the "Net Assets") relating  to
IFT's interactive entertainment business (the "Business") in
consideration  for the Company's issuance  to  IFT  of  that
number of shares of its Common Stock as would constitute 60%
of  the  Company's fully-diluted equity (the "Acquisition").
The  Net  Assets will include: $5 million in cash;  accounts
receivable  owing  to IFT from Swissair;  the  proceeds  and
other recoveries generated by certain litigation brought  by
IFT;  the  Swissair warranty contract; the Swissair customer
relationship; all IFT interactive entertainment intellectual
property, and other tangible assets related to the  Business
(including  but  not limited to customer  lists  and  files,
trade   secrets,   trademarks,  service  marks,   assignable
government permits and other rights under leases and  rights
under  specified contracts); inventory, furniture, fixtures,
computers  and  equipment related  to  the  Business;  other
infrastructure  (including  FAA  certified  repair  station)
relating  to  the Business; IFT's engineering and  technical
staff;  and  the benefit of all IFT research and development
efforts. The Acquisition will be effected in accordance with
a  definitive agreement (the "Agreement") to be subsequently
negotiated  and  signed  following  the  completion  of  due
diligence  investigations  by  the  Company  and  IFT.    In
addition   to   the  usual  and  customary  representations,
covenants and conditions contained in agreements of the type
used  to  consummate transactions like the Acquisition,  the
definitive  agreement  will  provide  that  closing  of  the
Acquisition  is subject (i) to approval by the  shareholders
of  the  Company, if required under the rules of The  Nasdaq
Stock  Market, and (ii) the receipt of a "fairness  opinion"
with  respect to the terms of the Acquisition to the  effect
that the Acquisition is fair from a financial point of view,
to  the Company shareholders.  Although the Letter of Intent
is  otherwise not binding, the Company has agreed to refrain
from entering into negotiations with any other party for the
sale  of all or substantially all of its assets, or for  the
sale  of  control of the Company, until May 15,  1999.   IFT
similarly  agreed  not  to enter into negotiations  for  the
acquisition of control of any other company engaged  in  the
interactive  entertainment  business  until  May  15,  1999.
There   is  no  guarantee  that  the  Acquisition  will   be
consummated on the terms set forth in the Letter of  Intent.
IFT developed interactive entertainment products for use  in
the  airline  and  travel industry, and it  has  ceased  all
research  and  development activities with respect  to  such
products  except  as required under contract.  It  currently
maintains  only  one  ongoing contract for  its  interactive
entertainment  products,  and is currently  engaged  in  the
redirection of its business activities into new markets. IFT
is  a  Nasdaq:  NMS registrant and trades under  the  ticker
symbol FLYT.


The  Company also entered into a loan transaction with  IFT,
pursuant to (i) a promissory note in the principal amount of
$750,000, bearing a rate of interest of 9.5% per annum,  for
a term ending on the earlier of May 15, 1999, or the closing
date  of a change of control transaction between the Company
and  IFT  and  (ii)  a  security agreement  granting  IFT  a
security interest in all accounts receivable of the Company.



10. Fourth Quarter Adjustments

The  Company  increased its provision for doubtful  accounts
and  inventory reserve by approximately $3.6 million in  the
fourth  fiscal  quarter primarily due to the uncertainty  of
recovery  of  certain  amounts due from  Continuous  Network
Advisors  ("CNA")  related to the sale and  installation  of
CruiseView on a cruise ship for Star Cruises Management Ltd.
("Star").  In March 1999, the Company filed for  arbitration
to enforce its rights under the terms of the Star Agreement.
The  CruiseView system on the vessel was installed  and  has
been  in  commercial  operation  since  November  1998.  The
Company  claims that Star and CNA are in default  under  the
payment  obligations of the Star Agreement  and  intends  to
aggressively pursue its rights under the terms of  the  Star
Agreement  through  arbitration and all remedies  available,
including   repossession  of  inventory,   contractual   and
otherwise.

Special  charges in the fourth fiscal quarter resulted  from
$595,263  for the impairment of other assets capitalized  in
1997   related  to  costs  for  obtaining  Federal  Aviation
Administration (FAA) certification for the Company's AirView
system  which  were  being amortized over  10  years.  These
assets   were   written  off  due  to  the  uncertainty   of
recoverability  resulting  from  the  termination   of   the
Fairlines Agreement and the absence of any additional orders
received  for  the  AirView system  for  use  in  commercial
aircraft requiring FAA certification.

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

     None

                              
                          PART III
                              
Information with respect to Items 9, 10, 11 and 12 of Form
10-KSB is hereby incorporated by reference into this Part
III of Form 10-KSB from the Registrant's Definitive Proxy
Statement relating to the Registrant's 1998 Annual Meeting
of Stockholders to be filed by the Registrant with the
Securities and
Exchange Commission on or before April 30, 1999.

                              
Item 13.    Exhibits and Reports on Form 8-K


(a)  The following documents are filed as part of this
  report:

     Exhibit
Description_______________________________________________

     3.1  Amended and Restated Certificate of Incorporation
of Registrant (including all
          amendments thereto). (7)
     
     3.2  Amended and Restated By-laws of Registrant. (5)
     
     4.3  1994 Employee Stock Option Plan , including form of
          Stock Option Agreement. (1)
     
     10.1      Employment Agreement, dated October 31, 1998,
by and between the Registrant
          and Wilbur L. Riner.
     
     10.3      Employment Agreement, dated October 31, 1998,
by and between the Registrant
          and James E. Riner.
     
     10.5      Employment Agreement, dated October 31, 1998,
by and between the Registrant
          and Bryan R. Carr.
     
     10.10     Promissory Note, dated September 1, 1994,
made by the Company to the order of
          Wilbur Riner. (1)
     
     10.12      Promissory Note, dated September 1, 1994,
made by the Company to the order of
          James Riner. (1)
     
     10.18     Business Partner Agreement, dated February
24, 1995, by and between the Company
          and Conhan Co. Ltd. (South Korea distribution).
(3)
     
     10.19     1995 Stock Option Plan for Non-Employee
Directors. (4)
     
     10.22     Note and Security Agreement, dated May 26,
1995, by and between the Company
          and Wachovia Bank of Georgia N.A. (4)

     10.25     Securities Purchase Agreement dated as of October
          23, 1998, between the Shaar Fund Ltd. (the "Shaar") and the
          Registrant (7)

     10.26     Registration Rights Agreement dated as of October
          23, 1998, between Shaar and the Registrant (7)

     10.27     Warrant Agreement dated October 23, 1998, between
          Shaar and the Registrant (7)

     10.28     Securities Purchase Agreement dated as of December
          28, 1998, between Cache Capital and the Registrant

     10.29     Registration Rights Agreement dated as of December
          28, 1998, between Cache Capital and the Registrant

     10.30      Letter  of  Intent, dated as of February  4,
          1999,  among  The  Network  Connection,  Inc.  and
          Interactive Flight Technologies, Inc.
     

     27   Financial Data Schedule.

______________________

1.   Incorporated by reference, filed as an exhibit with the
  Company's Registration Statement on Form
     SB-2 on October 26, 1994. SEC File No. 33-85654.
2.   Incorporated by reference, filed as an exhibit with
  Amendment No. 1 to the Company's Registration
     Statement on Form SB-2 on March 24, 1994.
3.   Incorporated by reference, filed as an exhibit with
  Amendment No. 2 to the Company's Registration
     Statement on Form SB-2 on April 27, 1995.
4.   Incorporated by reference, filed as an exhibit with the
  Company's Annual Report on Form 10-KSB for the fiscal year
  ended December 31, 1995 on April 12, 1996.
5.    Incorporated by reference, filed as an exhibit with
  the Company's report on Form 8-K on June 21, 1996
6.   Incorporated by reference, filed as an exhibit with the
  Company's report on Form 8-K on March 17, 1998
7.   Incorporated by reference, filed as an exhibit with the
  Company's Quarterly Report on Form 10-QSB for the fiscal
  quarter ended September 30, 1998 on November 16, 1998.




(b)  Reports on form 8-K for the fourth quarter ended
  December 31, 1998:

     None
                         SIGNATURES



      Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused  this  report  to be signed  on  its  behalf  by  the
undersigned   hereto  duly  authorized,  in  the   city   of
Alpharetta, State of Georgia.


                              THE NETWORK CONNECTION, INC.




Dated:  April 15, 1999                  By: /s/ Wilbur R.
Riner___________________
                                   Wilbur L. Riner
                                   Chairman and Chief
Executive Officer


Pursuant to the requirements of 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.


Signature                Title
Date


/s/ Wilbur L. Riner________________     Chairman, Chief
Executive Officer        April 15, 1999
Wilbur L. Riner                    and Director


/s/ Bryan R. Carr_________________ Vice President - Finance,
Chief Financial     April 15, 1999
Bryan R. Carr                 and Principal Accounting
Officer and
                         Director

/s/ James E. Riner________________ Vice President -
Engineering, Secretary   April 15, 1999
James E. Riner                and Director


_____________________________ Director
April 15, 1999
Marc Doyle


_____________________________ Director
April 15, 1999
Arthur Bauer