SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-KSB/A
(Mark One)
[X]     AMENDMENT NO 1 TO THE ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
        THE SECURITIES EXCHANGE ACT OF 1934     [Fee Required]
[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE
        ACT OF 1934              [No Fee Required]

                     For Fiscal Year ended December 31, 1998

                         Commission file number 0-21738

                        ON-POINT TECHNOLOGY SYSTEMS, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

        NEVADA                                 33-0423037
      -----------                              ----------
    State of incorporation)       (I.R.S. Employer Identification)

    1370 W. San Marcos Blvd, Ste 100
    San Marcos, California                         92069
         ---------------------------------              -----
   (Address of registrant's executive offices)   (Zip Code)
    Former address:     8444 Miralani Drive
                        San Diego, CA  92126
    Registrant's telephone number, including area code     (760) 510-4900
    Former telephone number:                               (619) 621-5050
         Securities registered pursuant to Section 12 (b) of the Act:

          Title of each class               Name of each exchange on
                                             which registered
               None                                 None

         Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or if such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.     Yes[X] No[  ]

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

The Registrant's revenues for fiscal year ended December 31, 1998 were
$16,416,000

The aggregate market value of the registrant's common stock held by
nonaffiliates of the Registrant is $18,271,000 as of March 5, 1999.

The number of shares outstanding of the Registrant's common stock is 10,098,921
as of March 5, 1999.






<PAGE>

Amendment No. 1 to the December 31, 1998 Form 10-KSB includes Part III items 9
Through 12 not previously submitted.






<PAGE>
1.     DESCRIPTION OF BUSINESS

GENERAL     On-Point Technology Systems, Inc.,  (the "Company" or "On-Point"),
is headquartered in San Marcos, California and was incorporated in Nevada in
March of 1990.  On-Point designs, manufactures, sells, leases, and services
high-security automated point of sale transaction vending terminals for the
sale of instant-winner lottery tickets (the "Instant Ticket Retailer" or
"ITR?"), pull-tab lottery tickets (the "Pull-Tab Retailer" or "PTR?"),
prepaid phone cards and "smart cards" (the "Debit Card Retailer" or "DCR?")
and vending terminals that dispense high value products such as cell phones
and pagers. The Company's ITR and DCR terminals accept bills of various
denominations, provide a secure means of product distribution and include
software which automatically accounts for product sales and inventories.
The ITR terminals are sold or leased to state and provincial governments
in the United States and Canada and to other foreign governments and their
licensees.  The DCR terminals are sold or leased to commercial customers
and to governmental entities and their licensees.  The Company has also
developed a patented design for a high-security automated bill-payer terminal
(the "BillPayer?), which allows customers to pay utility and other similar
bills from remote locations.  The Company is in the process of evaluating its
strategic plans for the further development and introduction of the BillPayer.
In addition, the Company has introduced certain specially designed dispensing
Technology to South America, Asia, and Europe.

            During the last three years, the Company has undergone a process of
"right-sizing" and of redefining its strategic plans.  During 1996, The Board
of Directors appointed Frederick Sandvick, the current Chief Executive Officer
and Chairman of the Board of the Company, to oversee the development of the new
strategic plans.  Under his leadership, the Company underwent a right sizing
effort during 1996 and 1997 which reduced personnel and overhead costs and
reassigned duties to other personnel to achieve greater efficiencies.  The
Company's restructured operations enabled the Company to improve operating
margins and dramatically reduce general and administrative expenses.  As a
result, the Company successfully generated net income from its existing
products and services even in the face of lower revenues and increased
competitive pressures during those years.

            During 1998, management assessed that, notwithstanding its success
due to right-sizing, if the Company did not advance its current products
increasing competitive pressures and technological advancements would likely
bring lower margins in 1999 and beyond.  Based on this assessment, management
chose to begin investing a significantly larger amount of its resources in 1998
into the development of what management believes will be the next generation
lottery products.  Management focused on the Company's lottery products first
because they believed the lottery market to be the largest, most stable
industry to deploy its products.  Management believes that the overall market
for the Company's next generation products is in excess of $200 million per
year worldwide.  However, although management believes its next generation
products will be well positioned to take advantage of this large lottery
market, there can be no assurances as to the amount of revenues the Company's
next generation lottery products will generate.

          As a result of its increased development efforts for its next
generation lottery products, the Company's research and development costs
increased from approximately $.6 million in 1997 to $1.4 million in 1998.
Nevertheless, despite those increased development costs, as well as lower
revenues in 1998 due to contract delays, the Company's net income increased
by 9% in 1998 as a result of higher margins and operating efficiencies.


            A summary of the net income (loss) and research and development
costs of the Company for the last four years follows:

<TABLE>
<CAPTION>
                                                             Research and
             Year                Net Income               Development costs
                               (In Thousands)               (In Thousands)
            <S>                 <C>                            <C>
             1995                $(8,092)                         $447
             1996                   $135                          $253
             1997                 $1,572                          $582
             1998                 $1,711                        $1,405
</TABLE>

See Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") for a further description of the Company's results of
operations.

            The Company intends, as a result of its development efforts, to
introduce in 1999 its next generation lottery products.  Its principal
products will be:  (i) the Company's next generation automated self-service
 instant ticket lottery vending terminal ("PlayPoint"); and (ii) the
Company's first automated instant ticket lottery counter-top dispensing
terminal ("CounterPoint").  PlayPoint will provide advanced electronic,
software, communication and dispensing capabilities as well as new
ergonomically designed features to generate increased impulse purchasing.
Management believes PlayPoint will be far superior to the Company's existing
ITR terminal.



<PAGE>

            CounterPoint is designed to be the most flexible, automated
counter-top dispensing system available.  Although currently no lottery has
deployed any significant number of automated counter-top dispensing systems,
management believes that many of CounterPoint's proprietary features, which
were not previously available to lotteries, will enhance the Company's ability
to deploy this new product to lotteries worldwide.  However, although
management believes the lotteries can receive many new benefits from deploying
this product, there can be no assurances that any lottery will order this new
product.

            As a result of its focus on its development efforts in 1998 for
new products for the lottery market, the Company did not aggressively market
in 1998 its DCR or other non lottery products other than to existing customers.
During 1998, the Company continued to strategically provide DCR terminals to a
prepaid phone card company (the "DCR customer") under an exclusive arrangement
in order to assist Solutioneering, Inc. with the achievement of its growth
plans.  The Company believed the exclusive arrangement to be an effective means
of increasing its presence in the DCR marketplace.  As a result, the Company
has a significant long-term lease receivable from Solutioneering, Inc. which
is currently in dispute.  See "Marketing and Sales-DCR Terminals" and "Legal
Proceedings" herein for a further discussion concerning Solutioneering, Inc.
And the lease receivable.

            As previously described, during 1998, the Company's development
efforts focused primarily on its lottery market which necessitated, because of
resource constraints, reduced focus on its non lottery markets.  Once the
Company's next generation lottery products are introduced, which is anticipated
to occur in the summer of 1999, it is management's intent to reevaluate its
strategic plans for its DCR market as well as other non-lottery markets, such
as its BillPayer market.

INSTANT TICKET RETAILER     General  In March 1991, the Company received its
first contract to install up to 2,000 ITR terminals from the State of Virginia.
The Company has since signed contracts to provide terminals to numerous state
lottery customers including California, Missouri, Washington, Pennsylvania, New
York, Illinois, Connecticut, the Provinces of Ontario and Quebec, as well as
France and certain other foreign countries.  The French Lottery is the largest
instant ticket lottery in the world.  Pursuant to these contracts, from its
inception through December 31, 1998, the Company had sold or leased
approximately 14,000 ITR terminals, of which approximately 850 were sold or
leased during 1998.  The ITR terminals have been placed in supermarkets,
convenience stores, bowling alleys, restaurants with bars, and other locations.
The Company also may enter into service contracts in connection  with sales of
ITR terminals pursuant to which it receives monthly maintenance fees (see
"Customer service, Training and Product Repair" herein).

     The Industry     Lotteries are operated by state and foreign governmental
authorities and their licensees in over 155 jurisdictions.  Governments use 
lotteries primarily as a means of generating non-tax  revenues.  In the United
States, lottery revenues frequently are designated for particular purposes,
such as  education, economic development, conservation, transportation and
aid to the elderly.  Many states have  become increasingly dependent on
lotteries as a significant source of funding for these purposes.

             While the specific amounts vary substantially from state to state,
in general it is estimated from industry reports that about 50% of gross 
lottery revenues in the United States is returned to the public in the form of
prizes.  Approximately 33% is used to support specific public programs or is
contributed to the state's general fund.  Typically, 5% to 6% is reserved for
point-of-purchase commissions for the retailer, and the remainder is used to
fund lottery operations, including the cost of advertising and, depending upon
the state and the type of lottery, amounts paid to vendors such as On-Point.

             As of December 1998, lotteries were operated in 38 states, the
District of Columbia and five provinces of Canada.  Lotteries are also operated
in Europe, Asia, Central America and South America.  Government lotteries can
be categorized into three principal groups: the traditional draw-type games,
on-line games and "instant" ticket games.  Traditional lotteries, in which
drawings are held once a week, while popular abroad, are rare in the United
States.  On-line varieties generally refer to computerized games such as lotto
and daily pick 3/4/5/6 games, in which players make their own selections.
Alternatively, they involve low-stakes video gambling, such as poker,
blackjack, bingo and keno.  Instant ticket games consist of preprinted tickets
in which players scratch off a coating or pull off tabs to determine whether
they have purchased a winning ticket.

             On-line lotteries generate significantly more revenue than both
the draw-type and instant ticket games.  The Company estimates from industry
reports that on-line ticket sales account for approximately 60% of total U.S.
lottery sales and that scratch-off games (the type of instant winner game
predominantly used by state lotteries) hold an approximately 40% market share.
The instant ticket games' market share has increased over the past several
years as lottery organizations have realized that the more instant games being
sold at one time increases sales.  Some states currently offer up to 30
different games simultaneously.  Notwithstanding the current prevalence of
on-line games, the Company believes that instant ticket games continue to offer
a significant potential for market growth.  Of the states conducting instant
ticket lotteries, 29 currently use terminals to dispense instant tickets.
Traditionally, instant winner tickets had been manually dispensed by the
retailer.  This distribution method, in addition to being labor intensive,
requires the retailer to maintain rigorous inventory, accounting and security
controls, because the tickets are treated as cash equivalents.  The Company's
ITR terminals provide additional security and automate these procedures,
resulting in greater efficiencies and flexibility to offer multiple games
simultaneously.


<PAGE>

             Recent advances in print technology have improved the security
of Pull Tab tickets to the levels demanded by the lottery industry.  As a
result several U.S lottery jurisdictions have introduced Pull Tab ticket games.
The Company's PTR terminals and Versatile Ticket Retailer ("VTR?") terminals,
which dispense both instant tickets and pull tab tickets, bring the same
benefits of increased security, automated accounting and enhanced promotion at
the point of sales to Pull Tab tickets as the ITR terminals have provided to
instant tickets.  During 1998, the Company did not sell its PTR or VTR
terminals and, to date, this market has been limited.

     The ITR, PTR & VTR Lottery Terminals     In 1990 the Company introduced
the ITR-7000 terminal, which was replaced with the upgraded ITR-7500 in
August 1992.  This series of products has been installed at sites throughout
the United States.  In 1995 the Company introduced the esthetically updated
ITR-8500 terminal.  In 1996 the Company developed the first 12 bin ITR
terminal.  During 1996 the Company also developed the 8 bin slim-line terminal
(which dispenses 8 games in a terminal that requires half the retail space of
previous 8 bin models).  During 1997, as a result of the average mean time
to failure rate of the Company's dispenser being in excess of nine years,
the Company was able to initiate a program of retrofitting older terminals
to incorporate new technologies.  During 1998, the Company introduced its
ITR-8500SL terminal which can vend as many as 15 instant ticket games in a
smaller footprint than its previous 12-game model.

             The Company intends to replace all its existing models of ITR,
PTR and VTR terminals with the PlayPoint model in 1999.  Management believes
PlayPoint will be far superior to any existing model and, therefore, be the
preferred model of choice by the lotteries in the future.  PlayPoint will
provide advanced electronic, software, communication and dispensing
capabilities as well as new ergonomically designed features.  PlayPoint
will be capable of dispensing both instant tickets and pull tab tickets.
PlayPoint will also be capable of dispensing up to 20 instant ticket
games, another industry first for dispensing technology.

             The Company believes that the lottery terminals substantially
expand the market for retail sales of instant winner lottery tickets, in that
they are designed to streamline and enhance the operation and marketing of
instant winner tickets by providing greater opportunity for the impulse
purchase.  The lottery terminals are designed to provide secure, high
visibility points of presence at the point of sale while using a minimum of
floor space.  The terminals are available in several models which house four
to fifteen games.  The units are available in counter-top and stand alone models
(the latter incorporating a security storage cabinet).  All models accept bills
in $1, $5, $10, and $20 denominations and can be manufactured to accommodate
coins or foreign currency.  

             The customer inserts a bill in the terminal, receives credit, and
then selects from among any or all of the games offered by pressing the button
located immediately under the appropriate ticket display.  The terminals
generally dispense either a single ticket or a string of uncut tickets, which
move past a window, allowing the customer to view the purchase.  Based on its
knowledge and experience the Company believes that customers prefer to see the
actual tickets being dispensed.  The Company's patented Windows feature is
unique in this regard  among similar products available to lottery
jurisdictions.  The Company's lottery terminals incorporate other patented
features which in the Company's opinion enhance the likelihood of impulse
purchases of game tickets.

             Each lottery terminal includes a display, which shows
instructional and promotional information to the customer.  The terminal can
also be equipped with the  "Grabber", a multi-color LED sign, which is mounted
on top of the terminal and includes a built-in memory.  The Grabber provides the
ability to promote new games or winning jackpots at the point of sale.  A
customized message typically is input prior to installation of the terminals.
These messages can be changed on-site using a hand-held remote control or from
remote locations with the Company's optional Shadow communication program
described below.

DEBIT CARD RETAILER     General  In 1993 the Company recognized the potential
to utilize its lottery technology in the evolving prepaid phone card industry
and developed its DCR-2000 debit card vending machine.  Although prepaid phone
cards have only been available in the U.S. since early 1992, their use has been
growing at a steady pace.  In 1997,  the estimated size of the debit card
market had grown to over $2 billion, with projected growth to $10 billion by
the year 2000.  Prepaid phone cards are issued in various denominations by
telephone companies and may be dispensed from as many as four bins in the
Company's machines.  The Company expects that the principal markets for its
DCR terminals will be with telephone companies both domestically and in
Europe, Asia, and Latin America.  The Company has signed contracts to provide
DCR terminals to a number of customers.  Pursuant to these contracts, from
its inception through December 31, 1998, the Company had sold or leased
approximately 6000 DCR terminals, of which approximately 750 were sold or
leased during 1998.  To date, these terminals have been placed in many
different types of establishments where there is a market for prepaid phone
or debit cards.   The Company also enters into service contracts in connection
with sales of DCR terminals pursuant to which it receives maintenance fees per
month per machine (see "Customer Service, Training and Product Repair" herein)

     The Industry       Prepaid phone cards are sold by telephone companies
worldwide.  These cards contain a pre-programmed amount of credit and can be
inserted into certain pay telephones.  The customer can use all or a portion
of the credit on the card to make telephone calls.  These card-receptive pay
telephones do not hold cash, thus eliminating security or internal theft
concerns for the owners of the telephones.  The cards are either disposable or
reusable and are sold in varying denominations.  Since the service is prepaid,
telephone companies often offer discounted rates to card users.  Telephone
companies also derive revenue from the sale of advertising space on the cards
which defrays their cost of any discount given.  In the United States the
industry is still in the early growth stages and card reader telephones are
not in abundance.  Therefore, most of the prepaid calling cards in use in the
United States use an "800" number that is called for verification of the card
by entering a PIN number located on the card.


<PAGE>

             Prepaid telephone cards generally allow card purchasers to buy
blocks of calling time at a discount.  The cards are more convenient, and the
use of prepaid cards eliminates the need to maintain cash on hand to feed the
pay telephone when making a call.  Prepaid cards also reduce the risk of
credit card fraud or theft, since a theft of a prepaid phone card results only
in the loss of the face value of the card less any time already used.

             Recent studies indicate that in the United States only a small
percentage of the public have used or are aware of prepaid phone cards.
Therefore, distribution is essential to gaining public awareness.  Dispensing
machines are an important element of the distribution network, providing
visual recognition and 24-hour convenient access to the product.  An important
aspect of the vending machine is that its design must promote product awareness
to effectively sell cards, not merely dispense them.  In 1997 the Company
repackaged its DCR technology into a new cabinet styling.  In 1998 the Company
introduced new 3 and 8 bin terminals in response to the specific application
needs of our customers.

             In many foreign countries, especially those less developed than
the United States, the majority of residents do not own telephones and rely
on public pay telephones.  Management estimates that commercial and government
entities in over 100 countries now use or are in the process of evaluating the
purchase of telephones equipped to accept prepaid phone cards.  The Company
believes many of these entities are looking to dispensing machines capable of
handling prepaid phone cards to widen the acceptance and availability of the
prepaid phone cards.  The foreign market for prepaid phone card vending
machines is in its infancy, however, and there can be no assurances this
Company will be successful in developing this market.

             In addition to prepaid phone cards, there are many other debit
cards which can be dispensed using the DCR terminal, including bus and subway
passes.  Several countries have begun using a multi-purpose debit card to
provide easy access to pay telephones, gasoline pumps, subway passes, and bus
passes.  The Company is providing terminals to both Hong Kong and Brazil that
dispense such multi-purpose cards, or different types of cards or passes,
including "smart cards".

     The DCR Terminal     The Company believes that the DCR terminal
substantially expands the distribution potential of prepaid phone cards.
Similar to the lottery terminals, the DCR terminal is designed to provide high
security and high visibility using a minimum of floor or counter-top space
The terminals are available in several models, which house either one, two
or more bins and are able to accept various denominations of foreign and
domestic currency.  The terminals can be manufactured to accommodate coins
and to make change.  The customer inserts a bill or coin into the DCR terminal,
receives credit, and then selects the denomination of prepaid phone card or
other card/pass by pressing the button located immediately under the
appropriate card display.  The terminal dispenses a single card to the buyer.

             Each bin in a DCR terminal stores approximately 400 cards,
depending on the thickness of the cards, thus providing a maximum capacity of
about 1,600 cards in the Company's 4-bin terminal.  As with the ITR terminal,
the DCR machine includes a display which shows instructional and promotional
messages and can also be equipped with the "Grabber," a multi-color LED sign,
which is mounted on top of the terminal and includes a built in memory.
A customized message typically is input prior to installation of the terminals.
These messages can be changed on site using a hand-held remote control or
loaded from a remote site with the Company's optional "Shadow" communication
program described below.

             Management believes that the DCR market, much like the lottery
ITR market, has become extremely competitive.  In addition, technological
advances may modify the market over the next few years.  Management intends
on reevaluating in 1999 the potential of the DCR market and determine whether
new developments may be necessary to stay competitive and attain a continuing
market share.

ADDITIONAL PRODUCT FEATURES     The lottery and DCR terminals are designed
to satisfy the stringently high security demands of state lottery authorities
and commercial customers.  The terminals can be bolted to the floor, wall or
counter to prevent removal.   Each machine is equipped with an alarm which is
triggered unless the correct password is entered within a specified time
period of opening any of the terminal's doors.  The alarm will also sound if
power is interrupted or the terminal is tipped beyond a critical angle.
The terminal's doors are inset to prevent prying or tampering, and the display
windows are made from one-half inch thick lexan.  Every terminal has two
unique, serialized keys, one of which opens the bill acceptor door and the
other of which provides access to the terminal ticket or card dispensers,
electronics and base storage cabinet.

             Each terminal is controlled by a software system that provides
security and  tracks the accounting and inventory of each bin.  This software
enables the customer to generate a variety of reports.  Every report contains
the date and time, the customer number and terminal serial number, as well as
sales data for each ticket bin and a total for the entire terminal.  These
reports generally describe sales by day, week or month, the current inventory
of tickets, and an audit transaction report, which gives a breakdown of the
last three transactions, thus allowing a customer to determine whether reported
malfunctions in fact occurred.  Additional functions of the software are the
production of cash management and audit reports.


<PAGE>

             The Company produces a Network Monitoring and Reporting System
software package called "Shadow".  This optional software allows customers
to monitor sales and inventory remotely by means of a modem using
non-dedicated, regular telephone lines.  This feature permits a central
"PC" computer to collect all of the sales and inventory information from
any one locality with a single telephone call.  This software facilitates the
preparation of reports, which can be broken down by customer number, bin
number, location category (i.e., convenience stores, bars, nightclubs, etc.),
and geographic location.  In addition, informational and promotional messages
may be automatically downloaded to the optional Grabber display during
connection to the terminal.  Messages may be sent to a specific machine or
to an entire group of machines within a specific customer, region or state.
The Shadow software can be used to notify customers of the need to replenish
depleted ticket or card stocks, schedule maintenance and assist in trouble
shooting repairs.

             The Company also has a remote control unit that allows the
retailer to disable the terminal for any reason.  For example, if the retailer
sees that minors are attempting to purchase lottery tickets or that anyone is
attempting to vandalize the equipment, he can turn off the terminal at a
distance of up to one hundred feet.

             As described above, the Company continues to work on improving
its products and developing new features (see "Research and Development"
herein). 


LOTTERY AND DCR CONTRACTS     The Company generally conducts business
primarily under three types of contractual arrangements: (a) Sales Agreements,
(b) Standard Lease Agreements, and (c) Alternate Lease Agreements.

             Sales Agreements     Under the typical Sales Agreement,
the Company installs and maintains lottery and/or DCR terminals and 
provides ancillary support services to customers.  These contracts generally
provide for scaled payments, based upon the type of terminal purchased and the
total number of terminals sold under the agreement.  In addition, the Sales
Agreements typically provide for the payment of monthly service fees for
product repair, routine maintenance and customer service activities (based upon
the number of terminals installed).  In many cases the service portion of the
contract extends beyond the period provided by the contract for the sale of
terminals.

             Standard Lease Agreements     While the Standard Lease Agreements
are similar to the Sales Agreements with respect to the Company's installation,
maintenance and service obligations, they are distinguishable primarily by the
fact that the Company continues to own the terminals during the lease term and
that monthly lease payments are made, instead of payment in a lump sum.
The lease amount may or may not include the monthly maintenance fee.
Typically, the lessee is given the option to purchase the terminals at the end
of the lease term, either at a set amount or at fair market value at the time
of sale.

             Alternate Lease Agreements     In addition to the purchasing
and leasing programs described above, the Company offers a unique approach to
the installation, sale and marketing of lottery or DCR terminals.  This program
is a modified leasing arrangement.  In general, the program relieves the
customer from the day to day details associated with the marketing and sale of
instant tickets or prepaid phone cards from the Company's terminals.  Under
these lease agreements, the Company is entitled to a stated percentage of the
revenues generated from terminal sales or a minimum monthly payment, whichever
is greater.  Company personnel assume responsibility for servicing the
terminals, maintaining distribution and inventory records, providing repair and
preventative maintenance, collecting money and distributing the collected funds.


MARKETING AND SALES     The Company markets its products, both domestically
and internationally, primarily through an in-house marketing and sales staff.
The Company solicits interest in its terminals primarily at trade shows and
through direct contact with customers.  The initial marketing package consists
of product brochures and other supportive documentation, e.g., sales analysis
of other customer installations.  References from other customers using the
Company's terminals are routinely supplied, along with an offer to demonstrate
and test the terminals.  Where possible, print advertising is keyed to feature
articles in trade journals, particularly advertisements targeting the prepaid
phone card market.

             Lottery Terminals     Once a state lottery has accepted vending
as a distribution tool, the process is opened to competitive bidding.  In the
United States, lottery authorities commence the contract award process by
issuing a request for proposal, which constitutes an invitation for bids from
interested vendors.  The requests for proposal usually stipulate certain
requirements, such as product specifications, performance capabilities,
delivery and service requirements.  The requests also specify various
insurance, bonding, indemnification and liquidated damage provisions.  Each
vendor's reply is evaluated on the basis of various criteria, including bid
price, product quality, performance capability (measured in part by demonstrated
experience in performing comparable projects), security, integrity, and
experience.  In addition, state lottery authorities consider the applicant's
affirmative action policies and use of minority, handicapped, and women-owned
subcontractors and suppliers.  Lottery authorities also show a preference for
vendors that use in-state subcontractors and suppliers.  To assist it's
marketing to state lotteries, the Company has employed registered lobbyists and
paid consultants in certain states.  Although the Company believes there
remains a substantial market for lottery terminals, no assurances can be given
that lottery authorities will award new contracts or order additional terminals.


<PAGE>

             Due to the particularly sensitive nature and high profile of
gambling activities, state lottery authorities are directed by statute to act
in a manner which promotes and ensures the integrity, security, honesty and
fairness of their operations.  Thus, applicants typically must provide detailed
financial and historical information concerning their business operations and
principals, and certain employees must consent to background investigations

             DCR Terminals   Three distinct groups of potential customers
are primarily targeted by the Company for the sale or lease of DCR terminals:
major telephone companies, medium-sized telephone companies and long-distance
resellers.  To the Company's knowledge, the major telephone companies, AT&T,
MCI and Sprint, have not yet implemented any significant marketing plans
involving the use of vending terminals to distribute prepaid phone cards on
a large scale basis.  However, the medium-sized telephone groups have been
pursuing vending contracts for prepaid phone cards.  Similar to the sales
process with state lotteries, many of these companies seek requests for
proposals from vending companies and require testing prior to awarding
contracts.  The contract process permits more flexibility and creativity;
however, it requires greater marketing time and energy to win contracts.  Long
distance resellers, smaller telephone companies, and pay telephone route
operators are seeking vending contracts.  The Company intends to seek out
additional vertical distributorship and joint venture relationships to increase
its presence in the DCR market place; however, there can be no assurance that
the Company will be successful in developing  these relationships.

             As part of its effort to increase its presence in the DCR
marketplace, the Company entered into an agreement with the DCR customer
to provide, as amended, up to 2000 DCR terminals under long-term lease
arrangements.  Under the arrangement, the Company would be the DCR customer's
exclusive DCR provider.  Although the Company realized the DCR customer
was under capitalized, the Company believed the deployment of the DCR
terminals to retail locations under relatively long-term lease agreements with
the DCR Customer would create adequate underlying value to support repayment
of the Company's leases should the DCR Customer fail to pay.  As of December
31, 1998, the Company's carrying value for its lease obligations due from the
DCR customer was approximately $6.5 million.  During 1998, the DCR customer
was unsuccessful in raising the additional capital necessary to continue
paying its current lease obligations to the Company.  As result, the Company
is proceeding with legal action to recover all of the lease amounts owed to
the Company, approximately $9 million.  The Company believes the underlying
value of the DCR customer's retail base exceeds the amount owed to its secured
creditors and, therefore, the Company is prepared to acquire the DCR customer
should it seek protection from paying its obligations.  The Company believes
that right-sizing the DCR customer and reducing its costs can achieve adequate
cash flow to operate and expand the DCR customer's business.  However, there can
be no assurances that the Company can acquire the DCR customer or that cash
flows can be achieved to pay its creditors if acquired.  The DCR customer
continues to seek additional financing and to sell its business.  The failure
of the DCR customer to raise additional capital or sell its business to a
company able to fund the obligations, or the inability of On-Point to acquire
the DCR customer and generate sufficient cash flows from the business could
have a material adverse effect on the Company's financial results in 1999.

FOREIGN OPERATIONS     General   Internationally, lottery authorities and
foreign telephone companies do not typically use a formal bidding process,
but rather negotiate proposals with one or more potential vendors.  In 1998
the Company delivered terminals to various lotteries and telecommunication
service providers for market testing.  Nonetheless, the Company's foreign
operations are relatively small, and no assurance can be provided that a
meaningful international market for the Company's terminals will develop.

             Pursuant to an agreement with Vanguard Stratagies, Inc.("VSI"), the
Company agreed to form a subsidiary to transact all international business.  The
agreement provided that, upon the occurrence of certain events, including the
Company meeting certain pre tax income requirements, VSI and Mr. Robert L. Burr
would each have the right to acquire 40% of such subsidiary the Company had.
However, on March 19, 1998 the Company and VSI entered into an agreement whereby
the original agreement with VSI referred to above was terminated.  Pursuant to
the termination agreement, VSI and Mr. Burr have each been granted options
to purchase 50,000 shares of the Company's common stock at $2.88 per share.  The
options expire on December 31, 2002 and vest at the earlier of June 30, 2002
(subject to certain conditions) or March 31 following the fiscal year end
during which cumulative gross revenues for fiscal years beginning in 1998 from
Central and South America exceed $5,000,000.

             Brazil     In June 1995 the Company entered into a distributor
agreement with a Brazilian corporation, to distribute the Company's products
on an exclusive basis in Brazil.  The Company can terminate this agreement
at its option.

             Europe     In December 1997 the Company entered into a
distributor agreement with Editec, a French Corporation, to distribute
the Company's products on an exclusive basis throughout most of Western Europe.

             Mexico     The Company purchased a 50% interest in LEI Mexico,
S.A de CV., a Mexican corporation ("LEI Mexico"), for $500 thousand in October
1994 and subsequently wrote down the 50% interest to zero value in 1995.
The Company and LEI Mexico entered into an exclusive distributorship agreement
whereby the Company agreed to only sell machines in Mexico to or through LEI
Mexico and LEI Mexico agreed to use only the Company's equipment in its vending
operations.  The Company has now terminated its exclusivity with LEI Mexico
and is exploring various alternatives available in the pursuit of business
opportunities in the Mexican market.


<PAGE>


CUSTOMER DEPENDENCY     The Company's products are sold or leased to a limited
number of customers worldwide.  As a result, the Company has experienced
fluctuations in its financial results and capital expenditures because of the
timing of significant individual contract awards and customer orders as well
as associated product delivery schedules.  The Company's sales cycle can, at
times, be relatively long due to the lead time required for business
opportunities to result in signed sales or lease agreements. In 1998, revenues
from four customers individually exceeded 10% of total revenues and in total
comprised 64% of total revenues.  Revenues from three customers individually
exceeded 10% of total revenues in 1997 and in total comprised 57% of total
revenues in 1997.   

BACKLOG     The Company's backlog of orders at December 31, 1998 totaled
approximately 2,000 ITR terminals and 200 DCR terminals.  The rate at which
the Company receives orders from its customers is affected from time to time
by the nature of the Company's market.  State lottery authorities are
allocated budgets on an annual basis, and their desire and ability to order
products from vendors, including the Company, can be affected by the status
of the budgetary process at any given time.  For example, a lottery which
has not spent its budget as the end of a budgetary year approaches may be
encouraged to place orders with vendors, whereas a lottery which has exhausted
its budget may not be able to place orders until the beginning of a new
budgetary year.

MANUFACTURING AND SUPPLY     The Company's lottery and DCR terminals are
designed in a modular form to facilitate manufacturing  assembly and
serviceability.  The Company uses vendors to manufacture and supply some
components and sub-assemblies, including the bill acceptor and electronic
modules.  Final assembly and quality control of the terminals is performed by
Company personnel at its San Marcos facility.

CUSTOMER SERVICE, TRAINING AND PRODUCT REPAIR     The Company maintains service
facilities at its San Marcos, California headquarters and in the states of
Connecticut, Missouri, New York, Virginia and Washington.  These facilities,
and several smaller ones, oversee installations, coordinate repair, and
respond to service calls.  The Company maintains toll-free telephone lines
staffed by service personnel to assist retailers and, where possible, resolve
minor service problems over the telephone.  If the problem cannot be resolved
easily, a field technician is immediately paged and a service call scheduled.
Each agreement provides for a specified response or service time.  A function
of the field service operation is to provide installation and retailer
training on the operation and use of the machine. The Company generally provides
a warranty period of one year on its terminals and provides an option for an
extended warranty period if purchased by the customer.

             The modular designs of the terminals promote cost-effective,
timely repair.  All three of the major modular components (the currency
acceptor, ticket dispenser, and electronics module) are easily removed from
the terminal.  Service technicians are instructed to replace malfunctioning
components if they are unable to repair a machine within 30 minutes.  Any
replaced parts are sent to the service center, where they are examined and
repaired in-house or returned to the manufacturer.

             The Company has developed a computer program to identify
dispenser malfunctions from remote locations via the optional Shadow software.
This IBM-compatible program enables a customer to interrogate each ITR or DCR
terminal within a given district to identify problems as diverse as a blocked
or damaged sensor or an inoperable gate mechanism.  If a malfunction is
detected, a report is automatically generated, giving the machine location
and serial number, and identifying the type of problem.  Although this
technology is available from the Company, to date most customers have elected
not to purchase and install such technology.

             Company service technicians also perform routine preventative
maintenance of machines.  If required, by agreement, each terminal is subject
to on-site cleaning and diagnostic testing of key components.  In addition,
on-site modifications or upgrades may be performed.

             The Company's administrative staff closely monitor any problems
with terminals in the field.  Service reports are forwarded to engineering,
quality control and  production on a weekly and monthly basis.  The Field
Service Department is also responsible for pre-installation site surveys to
check for space, telephone service and power.

             Since its first contract with the Virginia State Lottery in
1991 the Company has provided services  to install, train, repair and perform
preventative maintenance of its products.  From 1991 to 1997, the service
function of the Company has expanded as new contracts have required..  The
Company currently provides ITR service in the states of: Connecticut, Delaware,
Missouri, New York, Virginia, and Washington.  Service revenues decreased in
1997 primarily due to the termination of a significant customer's Alternative
Lease Agreement with regard to DCR's, which involved a nationwide service
program.  Services revenues increased in 1998 primarily from increases in fees
from state lottery contracts.


<PAGE>


COMPETITION     The Company believes that it possesses a strong competitive
position in the sale of lottery terminals.  The Company has established a
reputation for providing quality terminals and service.  As a consequence,
the Company has been able to secure contracts in eleven states, in the
Provinces of Ontario and Quebec and in several other foreign countries,
including France, the largest instant ticket lottery in the world.  In
addition, the Company generally enjoys repeat or renewal orders from existing
customers and is conducting tests with overseas lottery organizations.  However,
as a result of the proposed merger with Interlott Technologies, Inc. ("ILI"), in
1995 the Company's marketing was impacted as the Company terminated bid
protests and no-bid other contracts due to a belief on the part of management
and the Board of Directors that the merger was going to be consummated and
a consequent desire not to hinder the merger process by competitive actions.
ILI has sold or leased machines in twenty two states, while the next largest
current competitor, International Products of America, has sold machines
pursuant to a contract with one state.  Nevertheless, a substantial risk of new
market entrants by domestic and foreign competitors exists.  While the Company
believes that it possesses a strong competitive position by virtue of
its proprietary position, installed base and reputation, there can be no
assurance that a better capitalized competitor will not successfully establish
itself in the market or develop a machine which renders the Company's
technology obsolete.  The instant ticket market may also face competition
from other types of lottery products.

             In the United States, the prepaid phone card and, more
generally, the debit card market is relatively new.  Consequently, it is
difficult to identify all the competitors in this market.  Nonetheless, the
Company believes it possesses a strong competitive position in the sale of
DCR terminals within the United States and overseas.  Currently, the Company
believes it has the largest installed base of DCR terminals in the market
place.  At present, the Company's principal competitors are Marketing &
Vending Concepts, ILI, VendTek and Opal.  There are a number of smaller
vending machine companies in the market which management believes currently
lack the product quality and reliability to significantly impact its sales
efforts.  There is also a substantial risk of additional market entry by
domestic and foreign competitors, especially if the United States customer's
response to the use of debit cards and pre-paid phone cards is favorable.
Internationally, the Company has sold its DCR terminals into Brazil and Hong
Kong.  While the Company believes that it possesses an advantage in obtaining
future customers by virtue of its proprietary position and installed base,
there can be no assurance that a better capitalized competitor will not
successfully establish itself in the market or develop a machine which renders
the Company's technology obsolete.  The prepaid phone card and debit card
market may also face competition from other types of products.

             Management believes the DCR market has become increasingly
competitive, significantly reducing margins.  In addition, technological
advances may modify the market over the next few years.  Management intends on
reevaluating in 1999 the potential of the DCR market and determine whether new
developments may be necessary to stay competitive and attain a continuing
market share.


RESEARCH AND DEVELOPMENT     Research and Development expenditures totaled
$1,405 thousand and $582 thousand in 1998 and 1997, respectively.  The 1998
expenditures were primarily directed towards the development of PlayPoint,
together with the associated development of the Company's first counter top
dispenser, CounterPoint.  PlayPoint will provide advanced electronic,
software, communication and dispensing capabilities.  The Company believes
that its recently developed dispensing system, which will be incorporated
into PlayPoint and CounterPoint, is the most advanced, space efficient and
cost effective dispenser of instant tickets in the world.  Patents have been
filed and/or received for PlayPoint's and CounterPoint's proprietary features.
In addition, the PlayPoint cabinet has been ergonomically designed to not only
generate increased impulse purchasing desires, but to fully comply with all
ADA established guidelines.

             None of the Company's research and developments costs were borne
directly by the Company's customers.  The Company's research and development
department designs hardware and software for new products, and maintains
hardware and software support for existing products.  Software is continually
enhanced to satisfy customer requests.  Many new features have evolved from
the sales process (e.g., access code requirements, security features such
as alarm and theft detection, report capabilities, and display features).
Once developed, these features generally are incorporated as standard items
in the product line.  Software upgrades have included diagnostics for field
service and memory management and configuration control.  Hardware
enhancements included features to provide local control, remote control
and speech functions, and memory upgrades for software and data storage.
Other hardware developments have focused on the physical size, look and
ergonomics of the machines, and conformance with the requirements of the
American Disabilities Act.


GOVERNMENT REGULATION     Lotteries are not permitted in the United States
unless expressly authorized by legislation in the subject jurisdiction.
Once authorized, the award of lottery contracts and ongoing state operations
are highly regulated.  State rules and regulations specify, among other
things, the qualifications of lottery directors, the prize structure, the
allocation of revenue, the types of games and amounts of wagers permitted,
the manner in which the lottery is marketed, and the procedures for
selecting vendors of equipment and services.


<PAGE>

             To ensure the integrity of the contract award and subsequent
contract performance, jurisdictions typically conduct background investigations
of, and require detailed disclosure on a continuous basis from, vendors and
their affiliates, subcontractors, officers, directors, and principal
shareholders (including 5% shareholders of publicly traded corporations).
Background investigations of vendors' employees are also generally conducted,
and most states reserve the right to require the removal of employees they
deem to be unsuitable or whose presence they believe may adversely affect the
operational security or integrity of the lottery.

             The Federal Gambling Devices Act of 1962 (the "Federal Act")
makes it unlawful for a person to manufacture, deliver or receive gaming
machines or similar devices across interstate lines unless that person has
first registered with the Attorney General of the United States.  The Company
has registered under the Federal Act and must renew its registration annually.
The Federal Act also imposes various record keeping and equipment identification
requirements.  Violation of the Federal Act may result in seizure or forfeiture
of equipment, as well as other penalties.  As of the date of this filing, the
Company believes that it is in substantial compliance with these provisions.

             The international jurisdictions in which the Company operates
or intends to market its products have similar legislation and regulations
governing lottery operations.   In addition, restrictions are often imposed
on foreign corporations seeking to do business in such jurisdictions.
Failure to comply with these provisions could result in contract cancellation
or the institution of legal proceedings.

             The Company has employed registered lobbyists and retained
paid consultants in certain states.   Failure to comply with state
regulatory provisions relating to the activities of the Company's advisors
could adversely affect the Company's ability to bid successfully upon lottery
contracts.

             It remains unclear what telecommunication regulations, if any,
relate to the sale of prepaid phone cards or to the dispensing of those cards
using vending machines.  There appears to be a strong movement towards
requiring certification as a reseller in states where entities sell prepaid
phone cards.  Vermont prohibits the sale of these cards from any venue.
In addition, some states subject DCR terminals and machines to use or
similar taxes.

EMPLOYEES     As of March 1, 1999, the Company had 106 full-time employees,
of whom 18 were in executive or administrative positions, 19 in quality control
and production, 3 in research and development, 59 in field service, 6 in the
warehouse and 1 in maintenance.  In addition, the Company employed 20 people
on a part-time basis in its field service department.  None of the Company's
employees are currently represented by a union, and the Company believes that
its relations with its employees are good.

FACILITIES     The Company occupies approximately 32,000 square feet of
space in San Marcos, California.  The premises include office, manufacturing
and warehouse space.  The Company currently pays monthly rent of $15,663 for
this space. This lease  terminates  January 31, 2009. The Company believes that
its facilities are adequate to meet its anticipated needs through the term
of the lease.


ITEM 2.     DESCRIPTION OF PROPERTIES

At March 1, 1999 the Company had the following properties under lease:

Office, manufacturing, R & D and warehouse space in San Marcos, California
at an annual rent of $187,956 through January 31, 2009.

Office, repair depot and warehouse space in Syracuse, New York on a
month-to-month basis at an annual rent of $13,200.

Office, repair depot and warehouse space in Arnold, Missouri at an annual
rent of $9,903 through October 2001.

Office, repair depot and warehouse space in Richmond, Virginia at an annual
rent of $24,373 through July 2002.

Office, repair depot and warehouse space in Olympia, Washington at an annual
rent of  $9,600 through June 1999.




<PAGE>

ITEM 3.     LEGAL PROCEEDING

             The Company is a party to legal proceedings in the ordinary course
of its business, the most significant of which are described below.

             On January 11, 1999, the Company filed an action against
Solutioneering, Inc. in Superior Court of California, County of San Diego.
A first amended complaint of said action was filed on February 9, 1999.
The action arises from the lease to Solutioneering, Inc. of 2,175 prepaid
phone card vending terminals under a March 1, 1995 Master Lease Agreement
and two amendments thereto (the "Agreement").  In the action, the Company
asserts that Solutioneering, Inc. has breached the Agreement and the Company
has claimed damages of approximately $9 million.  The Company's net balance
sheet carrying value of the Solutioneering Inc. leased machines at December 31,
1998, is approximately $6.5 million.  The Company believes the underlying
value of Solutioneering, Inc.'s retail base exceeds the amount owed to its
secured creditors and, therefore, the Company is prepared to acquire
Solutioneering, Inc. should it seek protection from paying its obligations.
The Company believes that right-sizing Solutioneering, Inc. and reducing its
costs can achieve adequate cash flow to operate and expand Solutioneering,
Inc.'s business.  However, there can be no assurances that the Company can
acquire Solutioneering, Inc. or that cash flows can be achieved to pay its
creditors if acquired.  Solutioneering, Inc. continues to seek additional
financing and to sell its business.  The failure of Solutioneering, Inc. to
raise additional capital or sell its business to a company able to fund the
obligations, or the inability of On-Point to acquire Solutioneering, Inc.
and generate sufficient cash flows from the business could have a material
adverse effect on the Company's financial results in 1999.

             On January 23, 1996, the Company's principal competitor, Interlott
Technologies, Inc. ("ILI"), filed a civil action against the Company in the
Common Pleas Court of Hamilton County, Ohio.  The action arose from an
agreement in principle between Interlott Technologies, Inc. and the Company
which was signed on March 23, 1995 regarding a proposed merger transaction.
The Company asserted a counterclaim against ILI seeking declaratory judgement
with regard to certain aspects of the agreement, seeking to recover the
Company's own costs and expenses, and seeking compensatory damages from ILI
for certain competition and torturous interference with business relations.
The parties reached a full and complete settlement of this action on March 4,
No liability was admitted by either party pursuant to the settlement
and the settlement had no material adverse effect on the Company's results
of operations.


ITEM 4.     SUBMISSION OF MATTERS TO A  VOTE OF STOCKHOLDERS

None.



PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     a)     The Company's common stock is traded in the over-the-counter
market (NASDAQ symbol:  ONPT).  The following table sets forth the high and
low bid prices for the Company's common stock, as reported on NASDAQ, for the
quarters presented.  The bid prices represent inter-dealer quotations, without
adjustments for retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.

<TABLE>
<CAPTION>
<S>               <C>         <C>                   <C>      <C>
                        Fiscal 1998                     Fiscal 1997
                    High        Low                   High        Low
                    ----        ---                   ----        ---
First Quarter      3 13/16     1 3/4                 2 1/32       5/8
Second Quarter     3           1 3/4                 3         1 3/16
Third Quarter      2 1/16      1 9/32                2 13/16    1 5/8
Fourth Quarter     2 9/16      1                     3 1/4      1 5/8

</TABLE>

     b)     The number of stockholders of record of the Company's common
stock, par value $.01 per share, as of March 5, 1999, was 289.  The
approximate number of beneficial shareholders is 2400.

     c)     The Company has never paid any cash dividends on its common
stock and does not anticipate that it will do so in the foreseeable future.
The future payment of dividends, if any, on the common stock is within the
discretion of the Board of Directors and will depend on the Company's
earnings, its capital requirements, financial condition and other relevant
factors.

             Following are unregistered sales of securities issued by the
Registrant during the last three years.  These securities were issued pursuant
to Section 4(2) of the Securities Act of 1933, as amended.  No placement agent
was engaged in connection with such issuances and no commissions or discounts
were paid to any person.


<PAGE>

             In January and July 1996, Vanguard Strategies, Inc. received
warrants to purchase 450,000 and 250,000 shares, respectively, of the
Company's Common Stock at $.60 and $.69, respectively, pursuant to a
consulting agreement entered into with the Company.  Mr. Sandvick, Chief
Executive Officer of the Company, is the President and principal shareholder
of Vanguard Strategies, Inc.  The warrants have a five year term and warrants
to purchase 200,000 shares became exercisable in January 1996 and warrants
to purchase 500,000 shares became exercisable in July 1996.

             In August 1996, Metal Masters, Inc. received warrants to purchase
165,000 shares of the Company's Common Stock at $.69 pursuant to a settlement
of a legal action.  The warrants became exercisable in August 1996 and 100,000
shares had a one year term and 65,000 shares had a two year term.  All of the
warrants have been exercised.

             In January 1997, Frederick Sandvick, Chief Executive Officer of
the Company, received a warrant to purchase 500,000 shares of the Company's
Common Stock at $.63 per share pursuant to his personal guaranty and indemnity
in connection with a $2,000,000 performance bond.  The warrant has a five year
term and became exercisable in January 1997.

             In January 1997, Vanguard Strategies, Inc. received a warrant to
purchase 250,000 shares of the Company's Common Stock at $.72 per share
pursuant to a consulting agreement entered into with the Company.  The
warrant has a five year term and became exercisable in January 1997. 

             In January 1997, S & H Systems, Inc. received a warrant to
purchase 4,000 shares of the Company's Common Stock at $1.00 per share
pursuant to a consulting agreement entered into with the Company.  The
warrant has a four year term and became exercisable in January 1997.


             In May 1997, GMB Capital Partners received a warrant to
purchase 45,000 shares of the Company's Common Stock at $2.52 per share
in consideration for facilitating financing for the Company.  The warrant
as a three year term and became exercisable in May 1997.

             In May 1997, Coast Business Credit received a warrant to purchase
50,000 shares of the Company's Common Stock at $2.00 per share pursuant to
a financing agreement entered into with the Company.  The warrant has a
three year term and became exercisable in May 1997.

             In May 1997, Capital Structures Corporation and Colliers
Iliff Thorn each received a warrant to purchase 25,000 shares of the
Company's Common Stock at $1.24 per share pursuant to a commission
settlement agreement entered into with the Company.  The warrants had
a one year term and have been exercised.

             In January 1998, Vanguard Strategies, Inc. and Mr. Robert L.
Burr, former Chairman of the Board and former President and Chief Executive
Officer, were each granted stock options for 50,000 shares of the Company's
Common Stock at $2.88 per share pursuant to an agreement to terminate their
respective rights in the Company's international operations.  The options
expire on December 31,2002 and vest the earlier of June 30, 2002 (subject to
certain conditions) or March 31 following the fiscal year  end during which
cumulative gross revenues for fiscal years beginning in 1998 from Central and
South America exceed $5,000,000.

             In April 1998, Darius Anderson and James Bouskos each received
an option to purchase 10,000 shares of the Company's Common Stock at $2.09
per share pursuant to their appointment as Advisory Directors.  The options
vest by April 1999 and expire in April 2001.

             In May 1998, Allan Halladay and Brian Roberts each received an
option to purchase 50,000 shares of the Company's Common Stock at $2.09 per
share pursuant to their assignment of certain intellectual property to the
Company.  The options vest the earlier of April 1, 2001 or upon the
satisfaction of certain performance conditions.  The options expire on
December 31, 2001.

             In July 1998, Coast Business Credit received a warrant to
purchase 10,000 shares of the Company's Common Stock at $1.63 per share pursuant
to an amendment to a financing agreement entered into with the Company.  The
warrant became exercisable in July 1998 and expires on May 5, 2000.

             In September 1998, Elizabeth Williams received an option to
purchase 5,000 shares of the Company's Common Stock at $1.66 per share pursuant
to a consulting agreement entered into with the Company.  The option vests
over 2 1/2 years and expires on September 30,2003.

             In October 1998, Robert Burr received an option to purchase
50,000 shares of the Company's Common Stock at $2.00 per share pursuant to
his consulting agreement with the Company.  The option vests on March 31,
2001, or earlier, if certain conditions are met.  The option expires on
September 30, 2001.


<PAGE>

ITEM 6.     MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

General     The Company's revenues through 1998 have been generated from
(i) sales of vending terminals (ii) leases of vending terminals (iii)
performance of service on vending terminals, and (iv) sales of associated
parts.

             The Company's products are sold or leased to a limited number
of customers worldwide. As a result, the Company has experienced fluctuations
in its financial results and capital expenditures because of the timing
of significant individual contract awards and customer orders as well as
associated product delivery schedules.  The Company's sales cycle can, at
times, be relatively long due to the lead time required for business
opportunities to result in signed sales or lease agreements.  Operating
results may be affected by such lead time as well as working capital
requirements associated with manufacturing vending terminals pursuant to
new orders, increased competition, and the extended time which may elapse
between the customer's firm order and the receipt of revenue from the sale
or lease of the applicable vending terminals.  In addition, there has been
an accelerating trend by customers to lease rather than purchase vending
terminal equipment.  Leasing vending terminals requires the Company to
invest capital or otherwise finance the manufacture of the vending terminals.
The Company has obtained the resources necessary to finance its expanding base
of leased terminals over the past two years through its line of credit, as well
as through its existing  cash flow and equity financing.

1998 COMPARED TO 1997     1998 revenues declined by approximately $1 million
or 6% from 1997, due to a lower number of vending terminal sales under sales
or sales-type lease arrangements.  This reduction occurred because of delays
in certain contract proposals.  In total, the Company installed or shipped
approximately 1600 units in 1998 versus approximately 2900 units in 1997,
a decrease of approximately 1300 units.  Partially offsetting this decline was
an approximate $700 thousand, or 15%, increase in service revenues.  Operating
lease revenue remained constant at a level of approximately $3.5 million.

             Cost of revenues, as a percentage of sales, improved by 2
percentage points from 72% in 1997 to 70% in 1998 due to slightly favorable
gross margins combined with favorable manufacturing variances.  Management
anticipates that margins will decrease in 1999 as a result of increased
competitive pressures on bid prices.  However, the Company anticipates
introducing its next generation lottery products in the summer of 1999 partly
in response to the competitive pressures on its existing products.

             Operating expenses, as a percentage of sales, increased by 6
percentage points, due primarily to the $823 thousand increase in research
and development as a result of increased new product development activities.
The Company anticipates continued increased development efforts until the
introduction of its next generation lottery products in 1999.  Thereafter,
the extent of its development efforts will depend on management's evaluation
of the positioning of its other products.

             As a result of the above factors, 1998 income from operations
of approximately $860 thousand represents a decline of $868 thousand from the
1997 operating income of approximately $1.7 million.

             Total other income and expense improved by $764 thousand in
1998 with:  interest income up $667 thousand due to greater amortization of
unearned income on sales type leases, lower interest expense by $181 thousand
due primarily to reduced borrowings, and lower "other" costs by $143 thousand
reflecting decreased losses on asset disposals.  It is anticipated interest
income will decrease in 1999 as a result of reduced amortization of unearned
income in sales type leases.

          As a net result of the above described factors, the Company generated
$1,711 thousand of net income in 1998, an increase of $139 thousand from 1997.


LIQUIDITY AND CAPITAL RESOURCES     In 1998 the Company generated approximately
$2.8 million of net cash from operating activities which, when combined with
the approximate $2.2 million of net cash provided by financing activities
and approximately $100 thousand reduction in cash and cash equivalents,
was used for investing activities.  In 1997 the Company generated
approximately $300 thousand of net cash from operating activities which,
when combined with the approximate $2.5 million of net cash provided by
financing activities and approximately $200 thousand reduction in cash
and cash equivalents, was used for investing activities.  The principal
investing activity in 1998 and 1997 was the net payment of costs associated
with the equipment underlying long term lease agreements, both sales type
and operating, which totaled approximately $4.9 million in 1998 and $2.9
million in 1997.  Working capital of approximately $4.1 million at December 31,
1998 represents an increase of approximately $1 million over the approximate
$3.1 million at December 31, 1997.

              The Company completed an equity financing and a debt financing
during the second quarter of 1997.  The equity financing was a private
placement of $800 thousand of equity Units.  The Units consisted of one share
of Common Stock of the Company per $0.75 of equity investment, one-half Class
A Warrants per $1.00 of equity investment and one Class B Warrant per $1.00
of equity investment.  Each Class A Warrant was exercisable to purchase one
share of Common Stock at a price of $1.25 per share for a period of one year
while each Class B Warrant is exercisable to purchase one share of Common
Stock at a price of $2.00 per share expiring March 18, 1999.  Net proceeds
to the Company from the private placement approximated $673 thousand in 1997.
The Company received $911 thousand in cash in 1998 from the exercise of
warrants from the private placement.  On May 5, 1997, the Company entered
into a Loan and Security Agreement for a revolving line of credit whereby
the Company could borrow up to $3 million.  Such agreement was amended on
July 7, 1998 to increase the borrowing limit to $5 million.  The loan bears
interest at prime plus 2%, which is reduced by .5% annually if the Company
meets certain performance benchmarks, matures on March 31, 2000 and is
secured by virtually all of the Company's assets.  At December 31, 1998,
the Company had borrowed approximately $3.9 million under this Agreement.


<PAGE>

             Management believes the Company has sufficient liquidity because
of its existing stream of contractual lease payments, its current working
capital, and its available borrowings under its $5 million debt financing
to maintain its current level of operations.  However, in order to
accommodate recent contract awards, totaling approximately $27 million,
together with other growth related opportunities in 1999 and beyond, the
Company plans to seek additional financing during 1999.

IMPACT OF INFLATION     Inflation has not had any significant effect on the
Company's operating costs.  However, the sales price, lease payment and
service fees contained in the Company's agreements with various states are
fixed and the Company will be unable to pass along any increases in
manufacturing and service costs during the term of these agreements.


SEASONALITY OF BUSINESS     The Company's operations may be affected by the
fiscal year ends of its state lottery customers, which generally occur on
June 30.  States which have a surplus of funds available prior to year-end
may accelerate their purchases of new equipment, while states which experience
a shortage of funds available may delay their purchases until the next fiscal
year.

YEAR 2000 COMPLIANCE   As is the case with most other companies using computers
in their operations, the Company is in the process of addressing the year
2000 problem.  In 1997 the Company set up a committee to review its computer
software and hardware, fax machines and telephones systems for year 2000
compliance.

             The Company's primary accounting and operational software
provider has received year 2000 certification from the Information Technology
Association of America.  During 1998 the Company tested its central network
system hardware and software as well as the hardware and software of each
of its computer workstations.  As a result, minor expenditures, under $25
thousand total cost, have been made to upgrade certain computer hardware,
PC software and fax equipment to make them year 2000 compliant.  The
Company believes that it is now year 2000 compliant with respect to its
existing computer hardware, software and fax equipment and, therefore,
believes that potential risks, including any potential third party risks,
relating to year 2000 issues to be minimal.  The Company's telephone system
was not year 2000 compliant at December 31, 1998 and was upgraded in March
1999 at a cost of $13 thousand.



ITEM 7.     CONSOLIDATED FINANCIAL STATEMENTS

             The Consolidated Financial Statements are filed as part of this
Annual Report on Form 10-KSB.





<PAGE>






                       INDEPENDENT AUDITORS' REPORT
                       ----------------------------




To the Board of Directors and Shareholders of On-Point Technology Systems,
Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of On-Point
Technology Systems, Inc. and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the two years in the period ended
December 31, 1998.  These financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of On-Point Technology Systems, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the two years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.






Deloitte & Touche LLP
San Diego, California
March 25, 1999








<PAGE>







<TABLE>
<CAPTION>
             On-Point Technology Systems, Inc. and Subsidiaries
                        Consolidated Balance Sheets



                                                                   December 31,
                                                              -----------------
Assets      Thousands of dollars, except share amounts         1998        1997
-------------------------------------------------------------------------------
<S>                                                         <C>         <C>
Current assets:
           Cash and cash equivalents                           $129        $273
                    Accounts receivable, net                  2,744       1,961
                    Inventories                               3,143       2,704
                    Net investment in sales-type leases       1,586       1,638
                    Other current assets                        122          88
-------------------------------------------------------------------------------
Total current assets                                          7,724       6,664
-------------------------------------------------------------------------------
Plant, property and equipment, net                              422         582
Net investment in sales-type leases                           8,911       5,364
Property held for operating leases, net                       2,013       2,657
Other assets                                                    502         768
-------------------------------------------------------------------------------
Total assets                                                $19,572     $16,035
===============================================================================
Liabilities and shareholders' equity
-------------------------------------------------------------------------------
Current liabilities:
                    Accounts payable                         $1,190      $1,118
                    Current portion of long term debt           104         277
           Accrued expenses                                   2,301       2,134
-------------------------------------------------------------------------------
Total current liabilities                                     3,595       3,529
-------------------------------------------------------------------------------
Other liabilities                                               100         757
-------------------------------------------------------------------------------
Long-term debt                                                3,872       2,371
-------------------------------------------------------------------------------
Shareholders' Equity:
  Preferred stock, no par value, 2,000,000 shares
     authorized, no shares issued or outstanding                  -           -
  Common stock, $.01 par value, 20,000,000 shares 
     authorized, 10,094,826 and 9,421,255 shares issued and
     outstanding, respectively                                  101          94
  Additional paid-in capital                                 30,939      30,030
  Accumulated deficit                                       (19,035)    (20,746)
--------------------------------------------------------------------------------
Total shareholders' equity                                   12,005        9,378
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity                  $19,572      $16,035
================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>





<PAGE>


<TABLE>
<CAPTION>
             On-Point Technology Systems, Inc. and Subsidiaries
                    Consolidated Statements of Operations


Years ended December 31,
Thousands of dollars/shares, except per share amounts                1998               1997
--------------------------------------------------------------------------------------------
<S>                                                              <C>                <C>
Revenues                                                          $16,416            $17,439
Cost of revenues                                                   11,538             12,566
--------------------------------------------------------------------------------------------
Gross profit                                                        4,878              4,873
--------------------------------------------------------------------------------------------
Operating expenses:          
              Selling, general and administrative                   2,613              2,563
              Research and development                              1,405                582
--------------------------------------------------------------------------------------------
Total operating expenses                                            4,018              3,145
--------------------------------------------------------------------------------------------
Income from operations                                                860              1,728
--------------------------------------------------------------------------------------------
Other income (expense):
              Interest income                                       1,125                458
              Interest expense                                       (237)              (418)
              Other                                                   (17)              (160)
--------------------------------------------------------------------------------------------
Total other income (expense)                                          871              (120)
--------------------------------------------------------------------------------------------
Income before provision for income taxes                            1,731              1,608
Provision for income taxes                                             20                 36
--------------------------------------------------------------------------------------------
Net income                                                         $1,711             $1,572
============================================================================================

Earnings per share:
     Basic:
               Earnings per share                                   $0.17              $0.17
============================================================================================
               Weighted average shares                              9,882              9,011
============================================================================================
     Diluted:
               Earnings per share                                   $0.15              $0.15
============================================================================================
               Weighted average shares                             11,672             10,839
============================================================================================
See accompanying notes to consolidated financial statements
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
             On-Point Technology Systems, Inc. and Subsidiaries
              Consolidated Statements of Shareholders' Equity




                                      Common Stock          Additional
                                      -----------              Paid-in           Accumulated 
 Thousands shares/dollars           Shares    Amount           Capital               Deficit         Total
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>           <C>                  <C>              <C>
Balance, January 1,1997              8,187       $82           $29,157              ($22,318)        6,921
-----------------------------------------------------------------------------------------------------------
 Warrants issued in compensation
       for services                    -          -                 75                     -            75
 Issuance of common stock, net of
       $116 issuance costs           1,067        11               673                     -           684
 Exercise of stock warrants            142         1               100                     -           101
 Exercise of stock options              25         -                25                     -            25
 Net income                  -                     -                 -                 1,572         1,572
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1997           9,421        94            30,030               (20,746)        9,378
-----------------------------------------------------------------------------------------------------------
 Exercise of stock warrants            669         7               904                     -           911
 Exercise of stock options               5         0                 5                     -             5
 Net income                              -         -                 -                 1,711         1,711
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 1998         10,095       $101           $30,939              ($19,035)      $12,005
==========================================================================================================


See accompanying notes to consolidated financial statements
</TABLE>






<PAGE>

<TABLE>
<CAPTION>

              On-Point Technology Systems, Inc. and Subsidiaries
                    Consolidated Statements of Cash Flows



                                                                                Years ended December 31,
                                                                                -------------------------
Thousands of dollars                                                            1998                1997
---------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
Cash flows from operating activities
              Net income                                                      $1,711              $1,572
              Adjustments to reconcile net income to net cash provided
                   by (used for) operating activities:
                   Depreciation and amortization                               1,376               1,489
                   Non-cash charges, primarily changes in reserves             1,135                 (45)
                   Changes in assets and liabilities:
                         Accounts receivable                                    (642)               (627)
                         Inventories                                            (439)               (247)
                         Accounts payable                                         72              (1,563)
                         Accrued expenses                                       (625)               (275)
                         Deferred income                                           -                (518)
                         Other                                                   165                 551
----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                      2,753                 337
----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
              Purchases of plant, property and equipment                        (283)               (176)
              Net investment in sales-type leases                             (4,636)             (1,607)
              Investment in property held for operating leases                  (303)             (1,305)
              Fixed asset disposals                                               81                  99
---------------------------------------------------------------------------------------------------------
Net cash used for investing activities:                                       (5,141)             (2,989)
----------------------------------------------------------------------------------------------------------
Cash flows from financing activities: 
              Proceeds from exercise of stock warrants and options               916                 810
              Proceeds from debt financing                                         -                 655
              Proceeds from line of credit, net                                1,605               2,267
              Repayment of notes payable                                        (277)             (1,311)
----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                      2,244               2,421
----------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents                                           (144)               (231)
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                                 273                 504
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                      $129                $273
=========================================================================================================
Supplemental cash flow information;          
              Cash paid during the period for interest                          $306                $281
              Cash paid during the period for income taxes                      $117                 $27
==========================================================================================================
See accompanying notes to consolidated financial statements
</TABLE>



<PAGE>



                ON-POINT TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
                --------------------------------------------------
               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               ----------------------------------------------------
                      YEARS ENDED DECEMBER 31, 1998 AND 1997
                      --------------------------------------

1.     Summary of Significant Accounting Policies 

              Organization  On-Point Technology Systems, Inc. and subsidiaries,
formerly Lottery Enterprises, Inc. (collectively, the "Company" or "On-Point")
designs, manufactures, and services vending terminals for the retail sale and
leasing of instant-winner lottery tickets (the "Instant Ticket Retailer" or
"ITR*") and for the retail sale and leasing of prepaid telephone calling cards
(the "Debit Card Retailer" or "DCR*").  The ITR terminals are sold or leased
to state and provincial governments in the United States and Canada and to
foreign governments and their licensees.  DCR terminals are generally sold
or leased to commercial customers.

             Liquidity The Company completed an equity financing and a debt
financing in 1997.  The equity financing was a private placement of $800
thousand of equity Units.  The Units consist of one share of Common stock of
the Company per $0.75 of equity investment, one-half Class A Warrant per $1.00
of equity investment and one Class B Warrant per $1.00 of equity investment.
Each Class A Warrant is exercisable to purchase one share of Common Stock at
a price of $1.25 per share for a period of one year while each Class B Warrant
was exercisable to purchase one share of Common Stock at a price of $2.00 per
share expiring March 18, 1999.  Net proceeds to the Company in 1997 from the
private placement approximated $673 thousand.  The Company received $911
thousand in cash in 1998 from the exercise of warrants from the private
placement.  On May 5, 1997, the Company entered into a Loan and Security
Agreement for a revolving line of credit whereby the Company could borrow up
to $3,000,000.  Such agreement was amended on July 7, 1998 to increase the
borrowing limit to $5,000,000.  The loan bears interest at Prime plus 2%
which is reduced by .5% annually if the Company meets certain performance
benchmarks, matures on March 31, 2000 and is secured by virtually all of the
Company's assets.  At December 31, 1998, the Company had borrowed approximately
$3.9 million under this Agreement.

             Management believes the Company has sufficient liquidity because
of its existing stream of contractual lease payments, its current working
capital, and its available borrowings under its $5 million debt financing
to maintain its current level of operations.  However, in order to accommodate
recent contract awards, totaling approximately $27 million, together with
other growth related opportunities in 1999 and beyond, the Company plans to
seek additional financing during 1999.

             Principles of Consolidation  The consolidated financial
statements include the accounts of the Company and all majority owned
subsidiaries after elimination of all significant inter-company balances
and transactions.  Investments of 50 percent or less in affiliated companies
are accounted for on the equity method.

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

Cash and Cash Equivalents Cash equivalents consist of highly
liquid investments purchased with original maturities of three months or
less and which are readily convertible into cash.

             Accounts Receivable Accounts receivable consists of amounts due
to the Company from its normal business activities.  The Company maintains an
allowance for doubtful accounts to reflect the expected uncollectibility of
accounts receivable based on collection history.  The Company's concentration
of credit risk related to accounts receivable balances is limited due to the
geographical diversity of customers making up the Company's customer base,
thus spreading the credit risk.  Bad debt expense was $(1) thousand and $62
thousand in 1998 and 1997, respectively.

             Included in accounts receivable are unbilled receivables
representing amounts billable in accordance with specific contract terms.
Substantially all unbilled receivables at December 31, 1998 are expected
to be collected within one year.

             Inventories  Inventories include the cost of material, direct
labor, manufacturing overhead, parts and supplies, and terminals assembled
or in the process of assembly.  Inventories are stated at the lower of cost,
on a first-in, first-out basis or market. 

             Property, Plant and Equipment Property, plant and equipment are
stated at cost.  Depreciation is provided using the straight-line method, over
estimated useful lives of 2 to 10 years.  Maintenance and repairs are expensed
as incurred. 

<PAGE>

             Revenue Recognition and Significant Customers Revenues from
terminal sales are recognized when terminals are shipped or installed in
accordance with the terms of specific contracts.

             Revenues from sales-type leases are recognized at the present
value of the future minimum payments for terminals, when such terminals are
shipped or installed.  The difference between the total future minimum
payments plus the residual value of the equipment and the present value of
such amounts is recorded as unearned income and amortized over the term of
the lease so as to produce a constant rate of return. Any unearned income
is recognized immediately upon the sale of the associated lease receivable.

             The Company also leases products under leases accounted for as
operating leases.  Terminals under operating leases are recorded net of
accumulated depreciation.  Assets under operating leases are depreciated to
their residual value over four years.  Income from operating leases is
recognized as rentals become receivable according to provisions of the leases.

             Revenues arising from the sale of service and maintenance
contracts are recognized ratably over the terms of the individual contracts.
Any estimated losses on such contracts are charged to operations when
identified. 

             The Company's 1998 revenues include ITR sales and service to
the state lottery of Virginia, to the state lottery of Illinois, to the
State Lottery of Washington and to a DCR customer, Solutioneering
Inc., a telecommunications industry company that markets prepaid phone cards.
Revenues from each of these customers individually exceeded 10% of total
revenues in 1998 and in total comprised 64% of total revenues in 1998.
Amounts receivable from these customers represented 73% of accounts
receivable as of December 31, 1998.  One DCR customer, Solutioneering
Inc., represents 59% of the net investment in sales-type leases at December 31,
1998.  The Company's 1997 revenues include ITR sales and service to the state
lottery of Virginia, to the state lottery of Illinois, and to a DCR customer,
Solutioneering.  Revenues from each of these customers individually
exceeded 10% of total revenues in 1997 and in total comprised 56% of total
revenues in 1997. Amounts receivable from these customers represented 44% of
accounts receivable as of December 31, 1997. 

             Research and Development   Research and development costs are
expensed as incurred.

             Income Taxes  Deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts at each
year-end.  If it is more likely than not that some portion or all of a
deferred income tax asset will not be realized, a valuation allowance is
recognized.

             Per Share Information  In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share" establishing standards
for computing and presenting Basic Earnings Per Share ("Basic EPS") and
Diluted Earnings Per Share ("Diluted EPS").  Basic EPS is computed on the
basis of the weighted average shares of common stock outstanding plus
contingently issuable shares.  Diluted EPS is computed on the basis of
weighted average shares outstanding plus contingently issuable shares
and the additional common shares that would have been outstanding if
dilutive potential common shares had been issued, using the treasury stock
method.

             Statement of Financial Accounting Standards No. 123  In October
1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based
Compensation."  SFAS No. 123 requires expanded disclosures for the stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded.  Companies are permitted, however, to continue to
apply APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
which recognizes compensation cost based on the intrinsic  value of equity
instrument awarded.  The Company elected to continue to apply APB Opinion No.
25 to its stock based compensation awards to employees and has disclosed
the  pro forma effect on net income and earnings per share.

             Fair Value of Financial Instruments and Concentration of Credit
Risk  The following disclosure of estimated fair value was determined  by
available market information and appropriate valuation methodologies;
however, considerable judgment is necessary to interpret market data and
develop the related estimates of fair value.  Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that could
be realized upon disposition of the financial instruments.  The use of
market assumptions and or estimation methodologies may have a material
effect on estimated fair value amounts.

             Cash and cash equivalents, accounts receivable, inventories,
investment in sales type leases, accounts payable and accrued expenses
carrying cost reasonably approximates their fair value because of the short
maturities of these investments.

             Other assets are carried at cost or net amortized cost, which,
in management's opinion, is less than fair value.

             The Company believes that the carrying amount of its outstanding
notes payable at December 31, 1998 and 1997 is a reasonable estimate of their
fair value.  This was determined based on a review of borrowing rates available
to the Company at December 31, 1998 and 1997 for loans with similar terms and
average maturities.


<PAGE>

             The Company periodically assesses its ability to recover the
carrying value of its long-lived assets.  If management concludes that the
carrying value will not be recovered, an impairment write down is recorded
to reduce the asset to its estimated fair value.


2.           Other Financial Data  Following are details concerning certain
balance sheet accounts as of December 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                                        1998            1997
                                                                        ----            ----
<S>                                                                  <C>             <C>
Accounts receivable:
Trade billed                                                          $2,605          $1,861
Trade unbilled                                                           291             394
                                                                      ------          ------
                                                                       2,896           2,255
Less allowance for doubtful accounts                                    (152)           (294)
                                                                      -------         -------
               Total                                                  $2,744          $1,961
                                                                     =======          ======

Inventories:  
Materials                                                             $2,299          $1,844
Work-in-process                                                          274             220
Finished goods                                                           570             640
                                                                      ------           ------
               Total                                                  $3,143          $2,704
                                                                      ======          ======
                
Property, plant and equipment:
Computers and equipment                                               $1,236          $1,162
Furniture and fixtures                                                   325             332
Tooling                                                                  248             324
Building and improvements                                                 51              37
                                                                      ------           ------
                                                                       1,860           1,855
Less accumulated depreciation                                         (1,438)         (1,273)
                                                                      -------         -------
               Total                                                    $422            $582
                                                                      ======           ======
Other assets:               
Patents                                                                 $715            $677
Software development costs                                               268             268
Deposits                                                                 134             628
Other                                                                    332             136
                                                                       ------          ------
                                                                       1,449           1,709
Less accumulated amortization                                           (947)           (941)
                                                                      =======          ======
               Total                                                    $502            $768
</TABLE>

3.           Notes Payable  Notes payable at December 31, 1998 and 1997
consists of notes aggregating $3,976,000 and $2,648,000, respectively.
The notes bear interest at rates ranging from 9% to 10%.  Included in
notes payable is a Loan and Security Agreement entered into by the
Company on May 5, 1997 for a revolving line of credit whereby the Company
could borrow up to $3,000,000.  Such agreement was amended on July 7, 1998
to increase the borrowing limit to $5,000,000.  The loan bears interest
at prime plus 2%, or 9.75% at December 31, 1998, which is reduced by .5%
annually if the Company meets certain performance benchmarks, matures
on March 31, 2000 and is secured by virtually all of the Company's assets.
At December 31, 1998, the Company had borrowed approximately $3.9 million
under this Agreement. 

<PAGE>

             Future principal payments on notes payable as of December 31,
1998, are as follows (in thousands):

<TABLE>
<CAPTION>
             Year ending December 31,

                 <S>                           <C>
                  1999                            $104
                  2000                           3,872
                                                 -----
                                                $3,976
                                                ======
</TABLE>


4.           Other Liabilities  Other liabilities at December 31, 1998 and
1997 included $100 thousand and $757 thousand, respectively, of various
accrued expenses payable at dates beyond December 31, 1999 and 1998,
respectively. 

5.           Operating Leases The Company leases certain of its vending
terminals to customers under agreements accounted for as operating leases.
The net investment in vending terminals held under operating leases at December
31, 1998 and 1997 consisted of approximately $5.3 million and $5.1 million,
respectively, less accumulated depreciation and reserves of  approximately
$3.3 million and $2.4 million at December 31, 1998 and 1997, respectively.

             Approximate future minimum lease payments receivable by the
Company under operating leases as of December 31, 1998, are as follows
(in thousands):

<TABLE>
<CAPTION>
             Year ending December 31,
                  <S>                           <C>
                   1999                          $1,803
                   2000                              54
                                                 ------
                                                 $1,857
                                                 ======
</TABLE>

6.           Sales-Type Leases  The Company leases certain of its vending
terminals under agreements accounted for as sales-type leases.  Included
in product sales are approximately $4 million and  $5 million of revenues
related to sales-type leases for the years ended December 31, 1998 and
1997, respectively.  These non-cancelable leases expire over the next
one to five years.

             The following lists the components of the net investment
in sales-type leases as of December 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
    <S>                                                 <C>             <C>
                                                             1998          1997
                                                             ----          ----
    Total minimum lease including service payments to
        be received                                       $13,308        $9,453
    Less amounts representing estimated executory
       costs, including profit                               (828)         (830)
                                                          --------       ------
    Net minimum lease payments receivable                  12,480         8,623
    Estimated unguaranteed residual value                   1,278         1,071
    Less unearned interest income                          (2,054)       (2,418)
    Less reserves for sales-type leases                    (1,207)         (274)
                                                           -------       -------
    Net investment in sales-type leases                  $10,497         $7,002
                                                          =======        =======
</TABLE>


<PAGE>


Future minimum lease including service payments due from customers
under sales-type leases as of December 31, 1998, are as follows (in thousands):

<TABLE>
<CAPTION>

                   Year ending December 31,

                  <S>                          <C>
                   1999                          $3,100
                   2000                           6,711
                   2001                           2,136
                   2002                           1,152
                   2003                             209
                                                -------
                                                $13,308
                                                =======
</TABLE>

             The amortization of unearned income for sales-type leases
amounted to approximately $1,029 thousand and $458 thousand for the years
ended December 31, 1998 and 1997, respectively, which is included in
interest income. 

7.           Income Taxes  Following is a reconciliation of the income
tax benefit expected (based on the statutory federal income tax rate)
to the actual income tax provision recorded (in thousands):

<TABLE>
<CAPTION>

                                                                           1998                 1997
                                                                          ------               ------
      <S>                                                               <C>                   <C>
      Tax benefit (expense) computed at the statutory federal
          rate of 34%                                                    $(589)                $(547)
      State income tax benefit, net of federal income tax effect          (103)                  (95)
      Expenses not deductible for income tax
          purposes                                                          (6)                   (9)
      Change in valuation allowance for
          deferred income tax assets                                       678                   615
                                                                          ------               ------
      Provision for income taxes                                          $(20)                 $(36)
                                                                                               ======
</TABLE>

Deferred income tax assets and the related valuation allowance as of December
31, 1998 and 1997, result from the following temporary differences:

<TABLE>
<CAPTION>

                                                       1998             1997
                                                      ------          ------
     <S>                                            <C>              <C>
     Net operating loss carryforwards                $3,157           $2,411
       Inventory and other reserves                   2,092            3,516
     Valuation allowance                             (5,249)          (5,927)
                                                                      ------
     Net deferred income tax assets                      $-               $-
                                                                      ======
</TABLE>


             Management believes future taxable income of the Company may
be adequate to utilize a portion of the Company's net operating loss
carryforwards and realize a portion of the related deferred income tax
asset.  However, due to significant losses for income tax reporting
purposes prior to 1998 as well as the other issues currently being
addressed by the Company, management has concluded that a valuation
allowance is needed to reduce the carrying value of deferred income
tax assets to zero.

             At December 31, 1998, the Company has $14.2 million of
operating loss carryforwards and net deferred income tax assets consisting
of current federal income tax loss carryforwards of approximately $9
million available to offset future federal taxable income which expire
during the years 2011 through 2018 and net deferred income tax assets
of approximately $5.2 million.

8.     Shareholders' Equity

             Preferred Stock  The Company is authorized to issue up to
two million shares of preferred stock without further shareholder approval;
the rights, preferences and privileges of which would be determined at the
time of issuance.

             Stock Option Plans  The Company has employee option plans
whereby options to purchase 1,972,500 shares of the Company's common
stock may be granted to certain employees, and an option plan for directors
under which options for 525,000 shares of the Company's common stock may be
issued to directors of the Company.

<PAGE>

             The Company has three fixed option plans which reserve shares
of common stock for issuance to executives, key employees and directors.
The Company has adopted the disclosure-only provisions of  SFAS No. 123,
"Accounting for Stock-Based Compensation."  Accordingly, no compensation
cost has been recognized for the stock option plans.  Had compensation for
the Company's three stock option plans been determined based on the fair
value at the grant date for awards in 1998 and 1997 consistent with the
provisions of SFAS No. 123, the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                 1998                              1997
                   Net         Per Share         Net             Per Share
                Earnings    Basic   Diluted      Earnings    Basic      Diluted
                -------     -----   -------      --------    -----      -------
<S>             <C>        <C>        <C>        <C>        <C>          <C>
As Reported      $1,711     $0.17      $0.15      $1,572     $0.17        $0.15
                 ======     =====      =====      ======     =====        =====
         
Pro Forma        $1,443     $0.15      $0.12      $1,321     $0.15        $0.12
                 ======     =====      =====      ======     =====        =====
</TABLE>

             In 1998 the fair value of options granted is estimated as
approximately $685 thousand on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used
for the grants; dividend yield of 0% forfeiture rate of 14%; expected
volatility of 51%; risk free interest rate of 4.65%; and expected lives
of 4.09 years.  In 1997 the fair value of options granted is estimated
s approximately $391 thousand on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used
for the grants; dividend yield of 0%; forfeiture rate of 26%; expected
volatility of 70%; risk free interest rate of 5.69%; and expected lives
of 1.77 years.  

             In October 1998, Robert Burr, a former Chairman of the Board,
President and CEO of the Company, received a three year option to purchase
50,000 shares of the Company's Common Stock at $2.00 per share pursuant to 
his consulting agreement with the Company.  The option vests on March 31, 2001,
or earlier, if certain conditions are met.  In September 1998, a consultant
received an option to purchase 5,000 shares of the Company' Common Stock at
$1.66 per share pursuant to a consulting agreement entered into with the
Company.  The option vests over 2 1/2 years.  In May 1998, two individuals,
one of which is an officer of the Company, each received an option to
purchase 50,000 shares of the Company's Common Stock at $2.09 per share
pursuant to their assignment of certain intellectual property to the Company.
 The options vest the earlier of April 1, 2001, or upon the satisfaction of
certain performance conditions.  In April 1998, two advisory board members of
the Company each received three year options to purchase 10,000 shares of the
Company's Common Stock at $2.09 per share pursuant to their appointment as
Advisory Directors.  The options vest by April 1999.  In January 1998,
Vanguard Strategies, Inc. and Mr. Robert L. Burr, were each granted five
year stock options for 50,000 shares of the Company's Common Stock at
$2.88 per share pursuant to an agreement to terminate their respective
rights in the Company's international operations.  The options vest at
the earlier of June 30, 2002 (subject to certain conditions) or March
31 following the fiscal year end during which cumulative gross revenues
for fiscal years beginning in 1998 from Central and South America exceed
$5,000,000.  In January 1997, three consultants were granted options to
purchase a total of 30,000 shares of the Company's common stock at $.90
per share.  25,000 shares vested in 1997 and the remaining 5,000 shares
vested in 1998.  In October 1994, pursuant to an agreement, an officer 
of the Company was granted an option to purchase 100,000 shares of the 
Company's common stock at $7.45 per share.  This option vested on the d
date of the grant.  The fair value of the options granted during 1998 and
1997 was not material.


<PAGE>

             Information regarding these option plans for 1998 and 1997
follows:

Options granted in 1996 included 870,000 shares issued at $.80 per share
to Frederick Sandvick, the Company's Chief Executive Officer and Chairman
of the Board of Directors, pursuant to a three year employment agreement.

<TABLE>
<CAPTION>
                                          1998                                  1997
                                            Weighted Average                       Weighted Average
                                Shares       Exercise Price          Shares         Exercise Price
                                ----------------------------         ------------------------------
<S>                            <C>              <C>                 <C>                <C>
Outstanding at January 1        1,280,380        $1.44               1,171,577          $2.21
Granted                           882,000         1.88                 367,080           1.13
Exercised                           5,085          .90                 (25,000)          1.00
Expired                            50,000         2.00                       0              -
Forfeited                          23,460         2.21                (233,277)          4.83 
                                 --------                            ----------
Outstanding at December 31      2,083,835         1.61               1,280,380           1.44
                                =========                            =========

Option price range, December 31         $.80 - $7.54                          $.80 - $7.54
Options available for grant, December 31  792,580                               1,372,120 
</TABLE>

             The following table summarizes information about fixed-price
stock options outstanding at December 31, 1998:

<TABLE>
<CAPTION>

         Shares              Options         Exercise                 Remaining
      Outstanding          Exercisable        Price                  Life (Years)
     ------------          -----------       ---------              -------------
     <S>                   <C>            <C>                          <C>
       80,000                65,000         .90 - 2.09                  0 - 2
      371,835               110,563         .90 - 2.88                  2 - 3
      662,000                     0        1.41 - 2.88                  4 - 5
      100,000               100,000            7.54                     5 - 6
      870,000               580,000             .80                       7

               Weighted Average                1.61                      5.2
</TABLE>


             Stock Warrants  In January 1997, the Chairman and Chief
Executive Officer of the Company, received a warrant to purchase 500,000
shares of the Company's Common Stock at $.63 per share pursuant to his
personal guaranty and indemnity in connection with a $2,000,000 performance
bond.  The warrant has a five year term and became exercisable in January
1997.  In January 1997, Vanguard Strategies, Inc. ("VSI") received a warrant
to purchase 250,000 shares of the Company's Common Stock at $.72 per share
pursuant to a consulting agreement entered into with the Company.  The warrant
has a five year term and became exercisable in January 1997.  In 1996, solely
as compensation and not with respect to any recapitalization, the Company
issued  warrants to purchase 865,000 shares of the Company's common stock
at prices ranging from $.60 - $.69  for terms of one to five years.  VSI
received 700,000 of these warrants pursuant to an agreement with the Company
under which VSI, as exclusive consultant, assisted the Company in negotiating
financing arrangements. The Company's Chief Executive Officer and Chairman of
the Board of Directors, is the president and principal stockholder of VSI.
The Company recognized $80 thousand of compensation expense related to the
1996 VSI warrants.

9.     Commitments and Contingencies

             Purchase and Lease Commitments  As of December 31, 1998 and
1997, the Company had no purchase commitments for production materials.
No purchases against such commitments were made in 1997 and $600 thousand
were made in 1997 (for purchase commitments at December 31, 1996).


<PAGE>

             The Company leases facilities under operating leases expiring
at various dates through January 2009.  Rent expense for such facilities
totaled $244 thousand and $264 thousand for the years ended December 31,
1998 and 1997, respectively.  Future minimum rentals under noncancelable
operating leases as of December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                  <S>                            <C>
                   1999                             $254
                   2000                              283
                   2001                              279
                   2002                              253
                   2003                              215
                   2004-2008                         211
                   2009                               18
                                                 -------
                                                  $2,357
                                                 =======
</TABLE>

             Legal Proceedings  The Company is a party to legal proceedings
in the ordinary course of its business, the most significant of which is
described below.

             On January 11, 1999, the Company filed an action against
Solutioneering, Inc. in Superior Court of California, County of
San Diego.  A first amended complaint of said action was filed on February
9, 1999.  The action arises from the lease to Solutioneering, Inc.
of 2,175 prepaid phone card vending terminals under a March 1, 1995 Master
Lease Agreement and two amendments thereto (the "Agreement").  In the
action, the Company asserts that Solutioneering, Inc. has breached
the Agreement and has claimed damages of approximately $9 million.  The
Company's net balance sheet carrying value of the Solutioneering, Inc.
leased machines at December 31, 1998, is approximately $6.5 million.
The Company believes the underlying value of Solutioneering, Inc. retail
base exceeds the amount owed to its secured creditors and, therefore, the
Company is prepared to acquire Solutioneering, Inc. should it seek
protection from paying its obligations.  The Company believes that 
right-sizing Solutioneering, Inc. and reducing its costs can achieve
adequate cash flow to operate and expand Solutioneering, Inc.'s business.
However, there can be no assurances that the Company can acquire
Solutioneering, Inc. or that cash flows can be achieved to pay its creditors
if acquired.  Solutioneering, Inc. continues to seek additional financing
and to sell its business.  The failure of Solutioneering, Inc. to raise
additional capital or sell its business to a company able to fund the
obligations, or the inability of On-Point to acquire Solutioneering, Inc.
and generate sufficient cash flows from the business could have a material
adverse effect on the Company's financial results in 1999.


10.          Subsequent Event  On January 23, 1996, the Company's principal
competitor, Interlott Technologies, Inc. ("ILI"), filed a civil action against
the Company in the Common Pleas Court of Hamilton County, Ohio.  The action
arose from an agreement in principle between Interlott Technologies, Inc.
and the Company which was signed on March 23, 1995 regarding a proposed
merger transaction.  The Company asserted a counterclaim against ILI seeking
declaratory judgement with regard to certain aspects of the agreement,
seeking to recover the Company's own costs and expenses, and seeking
compensatory damages from ILI for certain competition and torturous
interference with business relations.  The parties reached a full and
complete settlement of this action on March 4, 1999.  No liability was
admitted by either party pursuant to the settlement and the settlement
had no material adverse effect on the Company's results of operations.



ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE

          None


<PAGE>
PART III.

ITEM 9.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors

The names, ages and positions of the directors (1), executive officers and key
employees of the Company are as follows:

<TABLE>
<CAPTION>
Name                    Age    Position
----                    ---    ---------
<S>                    <C>    <C>
Frederick Sandvick      41     Chief Executive Officer and Chairman of the Board
John H. Olbrich(2)(3)   36     Director
Ed M. Bacani(2)(3)      60     Director
Kenneth Hoitt           51     Chief Financial Officer, Secretary and Treasurer
Brian J. Roberts        51     Senior Vice President

------------------------
</TABLE>

(1)Each director of the Company holds office until the next annual meeting of
shareholders and until a successor has been elected and qualified, or until his
earlier resignation or removal.
(2)Audit Committee Member.
(3)Compensation Committee Member.

     Frederick Sandvick has been the Chief Executive Officer and Chairman of the
Board of the Company since January 1996.  Mr. Sandvick is President and the
principal stockholder of Vanguard Strategies, Inc., a privately held strategic
planning company he founded in 1995.  From 1990 to 1995, Mr. Sandvick was
Executive Vice President and Chief Financial Officer of Jackpot Enterprises,
Inc., a company listed on the NYSE and engaged in the gaming/entertainment
industry.

     John H. Olbrich has been the owner and President of U.S. Mortgage Bankers
Corporation, a residential mortgage brokerage firm since 1991.  Mr. Olbrich has
been in the real estate mortgage business for approximately 12 years.  Mr.
Olbrich is Mr. Sandvick's half brother.  See "Certain Relationships and Related
Transactions", herein.

     Ed M. Bacani has been the owner of Bacani Accountancy, an accounting
and business consulting firm, since October 1995.  From 1989 to 1995, Mr. Bacani
was the managing partner of the San Diego office of J.H. Cohn & Co., a national
accounting firm.  Mr. Bacani is a certified public accountant.  Mr. Bacani was
appointed to the Board in April 1998.

     Kenneth Hoitt has been Chief Financial Officer of the Company since
February 1996.  From 1992 to February 1996 Mr. Hoitt was the owner of Planning
Strategies, a privately-held consulting firm which provided business planning
services.  From 1988 to 1992, Mr. Hoitt was Chief Financial Officer, Treasurer
and Corporate Secretary for International Lottery and Totalizator Systems, Inc.,
a manufacturer of computer - based ticket processing systems.

     Brian J. Roberts has been the Company's Senior Vice President since
July 1996.  From December 1994 to July 1996, Mr. Roberts was the Company's
Director of Marketing and Business Development.  From 1984 to 1994, Mr. Roberts
was a Vice President of International Lottery and Totalizator Systems, Inc.


<PAGE>
ITEM 10.     MANAGEMENT REMUNERATION AND TRANSACTIONS

Executive Compensation

     The following information relates to compensation of the Company's Chief
Executive Officer for the Company's fiscal years ended December 31, 1998, 1997
and 1996.  No other executive officer of the Company received total annual
salary and  bonuses in excess of $100,000 during those fiscal years.

     The Compensation Committee did not have a substantial role in setting
compensation in 1998, 1997 and 1996 because the Chief Executive Officer was
engaged pursuant to an employment agreement which fixed compensation.  The
role of the Compensation Committee and its policies will continue to increase
as employment agreements expire and compensation packages are negotiated with
key executives.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Annual Compensation                             Long-Term Compensation Awards
-------------------                             -----------------------------

Name and            Year   Salary($)  Bonus($)  Other Annual  Restricted    Securities   Long-Term
Principal                                       Compensation  Stock Awards  Underlying   Incentive    All Other
Position                                        ($)(1)        ($)           Options/     Plan         Compensation
                                                                             SARs (#)    Payouts($)   ($)(2)(3)
<S>                <C>    <C>        <C>        <C>           <C>           <C>          <C>           <C>
Frederick Sandvick  1998   255,000    85,550     0             0             290,000(3)   0             0
                    1997   141,000    0          7,243         0             0            0             0
                    1996   191,129    0          0             0             2,030,000(2) 0             0

-------------------
</TABLE>

(1)Reflects a car allowance to cover automobile expenses.
(2)Includes options to purchase 870,000 shares of common stock which vested
pursuant to Mr. Sandvick's employment agreement, warrants to purchase 500,000
shares of common stock in connection with a guarantee of a performance bond and
warrants to purchase 950,000 shares of common stock granted to Vanguard
Strategies, Inc. (see "Certain Relationships and Related Transactions" herein).
(3)Includes options to purchase 240,000 shares of common stock granted to Mr.
Sandvick and options to purchase 50,000 shares of common stock granted to
Vanguard Strategies, Inc (see "Certain Relationships and Related Transactions"
herein).


Employment Agreements

     Mr. Sandvick serves as Chairman of the Board and Chief Executive Officer
of the Company pursuant to a three year employment agreement commencing on
January 9, 1996.  The agreement has been extended for three additional years
and will terminate unless further extended or sooner terminated, on December
31, 2001.  The term of the agreement is automatically extended  annually for
an additional year unless notice is given by either party that such party does
not wish to extend the agreement term.  The agreement provides for an annual
base salary of $180,000 through June 30, 1996 with $30,000 annual increases
thereafter.  The agreement provides for an increase in the annual base salary
to at least $300,000 per year if the Company's pre tax income as defined, for
any calendar year equals or exceeds $2 million.  Mr. Sandvick is entitled to
an annual bonus equal to 5% of the first $10 million of the Company's pre tax
income and 7% of the Company's pre tax income in excess of $10 million.
 Pursuant to the agreement, on the commencement of employment  Mr. Sandvick
was granted a ten-year option to acquire 870,000 shares of the Company's
common stock at a price of $.80 per share, such price representing the greater
of (1) the closing price on the date of stock holder approval of the First
Amendment to the Company's 1994 Stock Option Plan or (2) the average of the
closing sales price for the 20 trading days preceding the effective date of
the agreement.  One-third of the shares subject to the option award became
exercisable on January 9, 1996 and one-third of the shares became exercisable
over the next two years in equal annual increments.  Mr. Sandvick is also
entitled to participate in other employee benefit plans and the Company is
obligated to reimburse Mr. Sandvick for, or pay directly, the costs of a
personal plan of disability providing for $15,000 per month disability
benefits.

<PAGE>
     The employment agreement with Mr. Sandvick also provides for severance
upon termination by the Company without cause or termination by Mr. Sandvick
for "good reason" in the amount equal to the base salary Mr. Sandvick would have
earned during the 36 month period commencing on the date of termination plus
three times Mr. Sandvick's average annual bonus received over the prior three
fiscal years.  Mr. Sandvick would also have the right to receive all other
benefits that would have been received under his employment arrangement for
that 36 month period.  Further, all shares underlying outstanding stock options
granted to Mr. Sandvick would become fully exercisable for a period of 18 months
after termination.  Mr. Sandvick shall have "good reason" to terminate his
employment if, among other events, (i) the Company fails to comply with any
material provision of the employment agreement;  (ii) the Company gives Mr.
Sandvick notice of nonrenewal; or (iii) for any reason within one year
following the occurrence of a change in control, as defined.  Change in control
occurs if (i) any person, excluding existing relationships, becomes the
beneficial owner of securities representing 20% or more of the combined voting
power of the Company's then outstanding voting securities;  (ii) a change occurs
in the majority of the Board of Directors;  (iii) the stockholders approve a
merger in which at least 51% of the Company's combined voting power is given
to a new entity not in the Company's control or the effect of such merger is
that any person acquires 20% or more of the combined voting power of the
Company.  On January 27, 1997, the Company hired Michael Wright to serve
as the Company's President.  Mr. Wright served as President from January
27 to December 25, 1997 during which time Mr. Sandvick's annual salary was
reduced by $84,000.


Option Grants in Fiscal 1998

The following table represents certain information regarding stock option
grants to each of the Named Executive Officers during the fiscal year ended
December 31, 1998.

<TABLE>


                                       Individual Grants
                                       -----------------

<CAPTION>

                    Number of               Percent of Total
                    Securities              Options Granted          Exercise of
                Underlying Options          To Employees in          Base Price        Expiration
Name                 Granted                  Fiscal Year             ($/Share)           Date
----                 --------                 -----------             --------            ----
<S>                  <C>                           <C>                   <C>             <C>
Frederick Sandvick    240,000                       43                   $1.41            09/30/03

</TABLE>

Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values

The following table presents certain information regarding stock option
exercises during fiscal 1998. 

<TABLE>
<CAPTION>

                      Shares                    Number of Securities Underlying        Value of Unexercised
                    Acquired on           Value          Unexercised                        In-The-Money
Name                Exercise (#)       Realized($)   Options/SARs at FY-End          (#)Options/SARs at FY-End($)
----         -----------        -----------        ----------------------          ----------------------------
                                                     Exercisable        Unexercisable    Exercisable      Unexercisable
<S>                   <C>                  <C>      <C>                <C>              <C>              <C>
Frederick Sandvick     0                    0        2,320,000(1)       290,000(2)       2,788,420        119,040

---------------------
</TABLE>

(1)Includes options to purchase 870,000 shares of common stock which vested
pursuant to Mr. Sandvick's employment agreement, warrants to purchase 500,000
shares of common stock in connection with a guarantee of a performance bond and
warrants to purchase 950,000 shares of common stock granted to Vanguard
Strategies, Inc. (see "Certain Relationships and Related Transactions" herein).
(2)Includes options to purchase 240,000 shares of common stock granted to Mr.
Sandvick and options to purchase 50,000 shares of common stock granted to
Vanguard Strategies, Inc. in 1998 (see "Certain Relationships and Related
Transactions" herein).


Compensation of Directors

     During 1998, 1997 and 1996 each outside director was automatically
Granted 10,000 shares of the Company's common stock pursuant to the July 26,
1996 Amendment to the 1994 Stock Option Plan for Directors which provided
a formula for granting options to outside directors.  In addition, each
outside director, other than Mr. John Robinson, received an additional grant
of 10,000 shares of the Company's common stock in lieu of cash compensation
for serving as a director pursuant to the August 28, 1997 Amendment to the 1994
Stock Option Plan for Directors which modifies the formula for granting options
to outside directors by providing for the grant of options in lieu of cash
compensation for serving as director.  Mr. Robinson was paid $2,500 in March
1998 for services as a Director during the period July 26, 1996 through August
27 1997 pursuant to the compensation arrangement in effect during that service
period.

<PAGE>
1993 Stock Option Plan

     On March 1, 1993, the Company adopted the 1993 Stock Option Plan (the
"Plan") under which 472,500 shares of common stock may be issued to officers
and other key employees who have substantial responsibility for the direction
and management of the Company.  Options issued under the Plan are either
incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or non-qualified stock options, as determined
in the discretion of the Compensation Committee of the Board of Directors of
the Company at the time the options are granted.  In addition, the Compensation
Committee, subject to the provisions of the Plan, has authority to determine
the employees to whom options will be granted, the time or times at which
options will issue, the exercise price of granted options and any conditions
for their exercise.  The Plan requires that the exercise price of stock options
be not less than the fair market value on the date of grant and that stock
options expire not later than ten years from the date of grant.  In addition,
the Plan provides that no incentive stock options may be granted to any
employee who owns more that 10% of the Company's voting securities unless the
exercise price is a least 110% of the fair market value of the underlying
common stock and the option expires on before five years from the date of
grant.  The Plan contains an anti-dilution provision whereby the shares
of common stock which underlie outstanding options are increased
proportionately in the event of a stock split or dividend.  As of December
31, 1998, 459,920 options have been granted under this Plan.


1994 Stock Option Plan

     On April 21, 1994, the Company adopted the 1994 Stock Option Plan
(the "Plan") under which 525,000 shares of common stock may be issued to
officers and other key employees who have substantial responsibility for the
direction and management of the Company.  On January 8, 1996 the plan was
amended to increase the shares available for issuance to 1,500,000.  Such
amendment was approved by the stockholders on July 26, 1996.  Options issued
under the Plan are either incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options, as determined in the discretion of the Compensation Committee of the
Board of Directors of the Company at the time the options are granted.
In addition, the Compensation Committee, subject to the provisions of the Plan,
has authority to determine the employees to whom options will be granted, the
time or times at which options will issue, the exercise price of granted
options and any conditions for their exercise.  The Plan requires that the
exercise price of stock options be not less than the fair market value on
the date of grant and that stock options expire not later than ten years from
the date of grant.  In addition, the Plan provides that no incentive stock
options may be granted to any employee who owns more than 10% of the Company's
voting securities unless the exercise price is at least 110% of the fair market
value of the underlying common stock and the option expires on or before five
years from the date of grant.  The Plan contains an anti-dilution provision
five years from the date of grant.  The Plan contains an anti-dilution
provision whereby the shares of common stock which underlie outstanding
options are increased proportionately in the event of a stock split or
dividend.  As of December 31, 1998, 1,165,000 options have been granted
under this plan.


1994 Stock Option Plan for Directors

     On April 21, 1994, the Company adopted the 1994 Stock Option Plan
for Directors (the "Directors' Plan") under which 525,000 shares of common
stock may be issued to Directors of the Company.  Options issued under the
Directors' Plan are non-qualified stock options.  The Board of Directors,
excluding outside Directors who are eligible for the Directors' Plan, subject
to the provisions of the Directors' Plan, has authority to determine the
outside Directors to whom Options will be granted, the time or times at which
options will issue, the exercise price of granted options and any conditions
for their exercise.  The Directors' Plan requires that the exercise price of
stock options be not less than the fair market value on the date of grant and
that stock options expire not later than ten years from the date of grant.
The Directors' Plan contains an anti-dilution provision whereby the shares
of common stock which underlie outstanding options are increased
proportionately in the event of a stock split or dividend.  As of December
31, 1998, 80,000 options have been granted under this plan.

Bonus Policy

     While the Company has no established policy, other than as provided in the
Chief Executive Officer's employment agreement, to award cash or stock bonuses
to its officers, it may elect to pay bonuses to reward the performance of its
officers.   The Company awarded cash bonuses of approximately $108 thousand and
$14 thousand in 1998 and 1997, respectively.   No cash bonuses were awarded in
1996.


<PAGE>

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of March 5, 1999, the shares of the
Company's Capital Stock beneficially owned by each 5% beneficial owner, by each
Director or nominee, by each named executive officer individually, and by all
Directors and executive officers as a group:


<TABLE>
<CAPTION>
                                     Number of
                                       Shares
Name and Address of                 Beneficially
Beneficial Owner                      Owned(1)                     Percentage of Class
----------------                      --------                     --------------------
<S>                                 <C>                                <C>
Robert and Catherine Burr(2)           784,662                           6.11
5168 Renaissance Dr.
San Diego, CA  92122

Frederick Sandvick(3)                2,600,000                          20.26
108 Ivy Street
San Diego, CA  92101
     
John H. Olbrich(4)                     241,667                           1.88
3256 Loma Vista Dr.
Jamul, CA 91935
     
Ed M. Bacani(5)                         12,000                            .09
8076 El Extenso Court
San Diego, CA  92119
     
All directors and executive 
officers as a group (5 persons)      3,791,165                          29.54

------------------------
</TABLE>

(1)Unless otherwise indicated, all shares are owned beneficially and of record.
(2)Of the shares of common stock reflected in the table above, 7,984 are
registered in Mr. Burr's name, and 35,556 are held as community property by
Mr. and Mrs. Burr.  The table includes 741,122 shares held by The Burr Family
Trust.  Mr. and Mrs. Burr, as trustees of the trust, exercise sole voting and
investment control over these 741,122 shares of common stock. 
(3)Of the shares of common stock reflected in the table above, 40,000 are
registered in Mr. Sandvick's name.  The table includes options to purchase
870,000 shares of common stock which vested pursuant to Mr. Sandvick's
employment agreement, warrants to purchase 500,000 shares of common stock in
connection with a guarantee of a performance bond and warrants to purchase
950,000 shares of common stock granted to Vanguard Strategies, Inc.  The table
also includes options to purchase 240,000 shares of common stock and options
to purchase 50,000 shares of common stock granted to Mr. Sandvick in 1998
(see "Certain Relationships and Related Transactions" herein).
(4)Of the shares of common stock reflected in the table above, 141,667 are
registered in Mr. Olbrich's name.  The table includes warrants to purchase
50,000 shares of common stock and options to purchase 50,000 shares of common
stock.
(5)The number includes 2,000 shares of common stock owned by Mrs. Bacani to
which Mr. Bacani disclaims any beneficial ownership and options to purchase
10,000 shares of common stock.



ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In April 1995, Mr. Robinson, who was then an outside Director of the
Company, loaned the Company $250,000 at an interest rate of 10% per annum
and secured by a certain lease agreement and related equipment.  The remaining
principal and interest on this loan totaling $118,745 was paid to Mr. Robinson
in May 1997.  Mr. Robinson received a warrant to purchase 25,000 shares of
the Company's common stock at $2.50 per share as additional consideration for
the loan.

     On January 8, 1996, the Company entered into an agreement with Vanguard
Strategies, Inc. ("VSI"), a private strategic planning company, in which VSI
would assist the Company as its exclusive consultant for at least 120 days in
negotiating debt and equity financing and in developing the Company's strategic
plans.  Mr. Sandvick is the president and principal stockholder of VSI.  In
January 1996 VSI assisted the Company in obtaining a $450,000 loan from U.S.
Mortgage Bankers Corp. ("USMBC").  The president of USMBC is Mr. Sandvick's half
brother.  As compensation for these services, VSI was granted warrants, subject
to the Company receiving financing of at least $1.5 million, to purchase up to
450,000 shares of common stock of the Company at a price of $.60 per share
exercisable for five years.  In July 1996, VSI was granted an additional warrant
to purchase 250,000 shares of the Company's common stock at a price of $.69
pursuant to the extension of the USMBC promissory note under this agreement.
In January 1997, VSI was granted an additional warrant to purchase 250,000
shares of the Company's common stock at a price of $.72 pursuant to the
extension of the USMBC promissory note under this agreement.



     In connection with the engagement of VSI (an unaffiliated third party prior
to entering into the agreement) to raise capital for the Company and pursue
other business restructuring alternatives and the continuing arrangements with
Mr. Burr, VSI and Mr. Burr were provided an option to purchase 80% (40% each)
of a subsidiary to be formed to carry on the Company's international operations.
The option was provided to VSI and Mr. Burr as an incentive for them to
aggressively pursue international sales.  However, on March 19, 1998 the Company
and VSI entered into an agreement whereby the original agreement with VSI
referred to above was terminated.  Pursuant to the termination agreement, VSI
and Mr. Burr were each granted options to purchase 50,000 shares of the
Company's common stock at $2.88 per share, the closing market price of the
Company's common stock on such date.  The options expire on December 31, 2002
and vest at the earlier on June 30, 2002 (subject to certain conditions) or
March 31 following the fiscal year end during which cumulative gross revenues
for fiscal years beginning in 1998 from Central and South America exceed
$5,000,000.


<PAGE>


ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A
a)   Exhibits
     --------
     Exhibit Numbers               Description of Documents
     ---------------               ------------------------
     3.1                 Amended and Restated Articles of Incorporation
                         of Registrant (B)
     3.1.1               Amended and Restated Articles of Incorporation
                         dated March 1, 1993 (D)
     3.1.2               Certificate of Amendment to Articles of
                         Incorporation dated August 6, 1996 (H)
     3.2                 Restated By-Laws of Registrant (C)
     3.2.1               Restated By-Laws dated March 1, 1993 and
                         Amendment thereto dated May 27, 1993 (D)
     3.3                 Certificate of corporate status dated August 3,
                         1993 (D)
     4.1                 Specimen Stock Certificate (C)
     4.2                 Form of Representative's Warrant (C)
     10.1                Employment Agreement dated July 1, 1991, between
                         Registrant and Robert L. Burr, and the January 11
                         and April 21, 1993, amendments thereto (A)
     10.2                Employment Agreement dated July 1, 1991, between
                         Registrant and John F. Winchester, and the April
                         21, 1993, amendment thereto (A)
     10.3                ITR Sale and Lease Agreement, dated as of January
                         12, 1993, between Registrant and the State of
                         Missouri (C)
     10.3.1              Amendment No.1 to ITR Sale and Lease Agreement
                         between Registrant and the State of Missouri (C)
     10.4                ITR Sales and Service Agreements dated March 21,
                         1991 between Registrant and the Commonwealth of
                         Virginia, as amended (C)
     10.5                ITR Sales Agreement dated August 13, 1992 
                         between Registrant and the California State
                         Lottery, as amended (A)
     10.5.1              Extension of ITR Sales Agreement between
                         Registrant and the California Lottery (C)
     10.6                ITR Sale and Lease Agreement, dated as of April
                         9, 1993, between Registrant and the State of
                         Washington (A)
     10.7                Form of Indemnification Agreement between
                         Registrant and its officers and directors (C)
     10.8               1993 Stock Option Plan (A)
     10.8.1              First Amendment to 1993 Stock Option Plan (C)
     10.9                Line of Credit Agreement between Registrant and
                         the Bank of America (A)
     10.10               Technology Transfer Agreement, dated as of 
                         April 9, 1993, between  Registrant and certain of
                         its shareholders (confidential treatment
                         requested as to certain portions) (B)


<PAGE>

     10.11               Agreement to Purchase and Sale of Assets, dated
                         February 9, 1993, between Registrant, CVS and 
                         Michael C. Brown (confidential treatment 
                         requested as  to certain portions) (B) 
     10.12               Documents relating to purchase of ITR terminals
                         by the Province of Ontario (B)
     10.13               Stock Option Agreement between Robert L. Burr and
                         the Trust, as amended (C)
     10.14               Lease with regard to 9190 Activity Road, San
                         Diego, CA premises (D)
     10.15               1993 Stock Option Plan (D)
     10.16               1994 Stock Option Plan (E)
     10.17               1994 Stock Option Plan for Directors (E)
     10.18               Agreement to acquire 50% of LEI Mexico (E)
     10.19               Agreement to sell machines to LEI Mexico (E)
     10.20               John Robinson Note (F)
     10.21               Employment agreement with Frederick Sandvick (G)
     10.22               Loan Agreement between Registrant and U.S.
                         Mortgage Bankers Corporation (I)
     10.23               Employment Agreement with Michael Wright (I)
     10.24               Loan and Security Agreement between Registrant
                         and Coast Business Credit (J)
     10.25               Termination of Agreement between Registrant and
                         Vanguard Strategies, Inc. (K)
     10.26               Amendment Number One to Loan and Security 
                         Agreement between Registrant and Coast Business
                         Credit (L)
     24.1                Power of attorney (reference is made to Page II-5
                         of the Registration Statement as originally
                         filed.) (A)

     (A)     Incorporated by reference to Registrant's Registration
             Statement on Form S-2 dated April 23,1993 (Registration No.
             33-61442)
     (B)     Incorporated by reference to Registrant's Amendment No. 1 to
             the Registration Statement on Form S 2 filed on June 1, 1993.
     (C)     Incorporated by reference to Registrant's Amendment No. 2 to
             the Registration Statement on Form S- 2 filed on June 21,
             1993.
     (D)     Incorporated by reference to Registrant's Annual Report 
             on Form 10-KSB for the year ended December 31, 1993.
     (E)     Incorporated by reference to Registrant's Annual Report on
             Form 10-KSB for the year ended December 31, 1994.
     (F)     Incorporated by reference to Registrant's Quarterly Report on
             Form 10-QSB for the quarter ended June 30, 1995.
     (G)     Incorporated by reference to Registrant's Quarterly Report on
             Form 10-QSB for the quarter ended March 31, 1996
     (H)     Incorporated by reference to Registrant's Quarterly Report on
             Form 10-QSB for the quarter ended September 30, 1996
     (I)     Incorporated by reference to Registrant's Annual Report on
             Form 10-KSB for the year ended December 31, 1996.
     (J)     Incorporated by reference to Registrant's Quarterly Report on
             Form 10-QSB for the quarter ended June 30, 1997.
     (K)     Incorporated by reference to Registrant's Annual Report on
             Form 10-KSB for the year ended  December 31, 1997.
     (L)     Incorporated by reference to Registrant's Quarterly Report on
             Form 10-QSB for the quarter ended June 30, 1998


     (b)     Reports on Form 8-K:  The Registrant did not file any
                     reports on Form 8-K during the last quarter for the
                     year for which this report is filed. 



<PAGE>


                                SIGNATURES

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

                                      ON-POINT TECHNOLOGY SYSTEMS, INC.


Dated:    March 30, 1999               By:  /s/Frederick Sandvick
                                       ------------------------------
                                             Frederick Sandvick
                                             Chief Executive Officer and
                                             Chairman of the Board of Directors

Dated:    March 30, 1999               By:  /s/Kenneth Hoitt
                                       ------------------------------
                                             Kenneth Hoitt 
                                             Chief Financial and
                                             Accounting 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 dates indicated.




Dated:    March 30, 1999               By:  /s/John H. Olbrich
                                       ------------------------------
                                               John H. Olbrich, Director


Dated:    March 30, 1999               By:  /s/Ed M. Bacani
                                       ------------------------------
                                               Ed M. Bacani, Director