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


                                 FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                For The Fiscal Year Ended December 31, 1997

             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

               For the Transition Period From _____ to ____


                      Commission File Number 0-29048

                        ACCENT COLOR SCIENCES, INC.
          (Exact name of registrant as specified in its charter)
         Connecticut                         06-1380314
(State or other jurisdiction of           (I.R.S. Employer
incorporation or organization)          Identification No.)

     800 Connecticut Boulevard, East Hartford, Connecticut       06108
         (Address of principal executive office)  (Zip Code)
    Registrant's telephone number, including area code:  (860) 610-4000
     Securities registered pursuant to Section 12(b) of the Act:  None
 Securities registered pursuant to Section 12(g) of the Act:  Common Stock
Indicate  by  check mark whether the registrant (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the Securities Exchange  Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject  to
such filing requirements for the past 90 days. Yes /X/   No
Indicate by check mark if disclosure of delinquent filers pursuant to  Item
405  of  Regulation S-K is not contained herein, and will not be contained,
to  the  best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K  or  any
amendment to this Form 10-K. / /
 The aggregate market value of common stock held by non-affiliates of the
              registrant as of March 6, 1998 was $22,812,938.
  The number of shares outstanding of the registrant's common stock as of
                       March 6, 1998 was 11,989,855.
                    DOCUMENTS INCORPORATED BY REFERENCE
   Portions of the definitive Proxy Statement dated April 1, 1998 to be
                  delivered to shareholders in connection
    with the Annual Meeting of Shareholders to be held May 8, 1998 are
                 incorporated by reference into Part III.




                        ACCENT COLOR SCIENCES, INC.

                                 FORM 10-K
                   For The Year Ended December 31, 1997
                                   INDEX
Part I
Item 1.  Business                                                     1
Item 2.  Properties                                                   6
Item 3.  Legal Proceedings                                            6
Item 4.  Submission of Matters to a Vote of Security Holders          6
Part II
Item 5.  Market for Registrant's Common Stock and
         Related Stockholder Matters                                  7
Item 6.  Selected Financial Data                                      7
Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                          8
Item 8.  Financial Statements and Supplementary Data                 14
Item 9.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosures                     29
Part III
Item 10. Directors and Executive Officers of the Registrant          29
Item 11. Executive Compensation                                      29
Item 12. Security Ownership of Certain Beneficial Owners
         and Management                                              29
Item 13. Certain Relationships and Related Transactions              29
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
         on Form 8-K                                                 30
Signatures                                                           32

                                  PART I

Item 1.   Business

General
Accent  Color  Sciences,  Inc. ("Accent Color" or the  "Company")  designs,
manufactures and sells innovative, high-speed, spot color printing  systems
("Truecolor  Systems") for integration with digital, high-speed,  black-on-
white  printers and sells related consumables. Spot color printing involves
the  use  of  color  to  enhance  traditional black-on-white  documents  by
accenting  critical  information, such  as  a  balance  due  on  a  billing
statement,  or  by printing graphics, such as a company logo.  The  Company
believes its Truecolor Systems are the first, and only, printers capable of
cost-effectively printing or highlighting variable data (text  or  graphics
which  may  vary from page to page) in multiple standard and custom  colors
with the speed and functionality of existing high-speed (more than 80 pages
per  minute),  black-on-white printers. Truecolor Systems are  designed  to
address what the Company believes is a substantial, unfulfilled demand  for
spot  color  printing in the production printing and production  publishing
segments  of  the digital printing market. Accent Color's  strategy  is  to
rapidly penetrate these global markets through strategic relationships with
major  original  equipment manufacturers ("OEMs"). The  primary  OEMs  that
serve  these  markets  include International Business Machines  Corporation
("IBM"),   Oce  Printing  Systems  GmbH.  ("Oce")  and  Xerox   Corporation
("Xerox").

Truecolor  Systems  are designed to print spot color in  high-speed,  high-
volume  applications at a low incremental cost per page without diminishing
the speed or performance of the high-speed, black-on-white host printer  or
affecting  the  end user's existing operational methods. Truecolor  Systems
are  capable of printing up to 501 pages per minute, utilizing up to  eight
different colors, including custom colors, to print or highlight  fixed  or
variable  data.  Truecolor Systems combine the Company's proprietary  paper
handling  technology with patented ink jet technology  from  Spectra,  Inc.
("Spectra"). The Company holds an exclusive right to supply products  which
include  Spectra  ink jet printheads to print color on  the  black-on-white
output  from specified high-speed printers from Xerox, IBM, Oce and certain
other  parties  through the year 2002. In connection with its  arrangements
with  the  Company, IBM has adapted its existing high-speed, black-on-white
printers for integration with the Company's Truecolor Systems.

The  Company's primary channel to market for its Truecolor Systems are OEMs
of high-speed, black-on-white printers and the Company is presently focused
on  targeting  the  production  printing  segment  of  the  overall  market
opportunity. According to CAP Ventures, Inc. ("CAP Ventures"),  a  printing
industry market research firm, the 1996 year-end installed base of digital,
high-speed, black-on-white printers used in the production printing segment
of the digital printing market in the U.S. was approximately 15,200 and the
installed  base  of  these printers is projected to  grow  at  a  five-year
compounded  annual  growth  rate ("CAGR") of  approximately  6%  to  20,500
systems  by the year 2001. In addition, approximately 3,200 digital,  high-
speed,  black-on-white printers were sold into this market segment  in  the
U.S.  in 1996. Revenue from new system sales, supplies and service exceeded
$2.1  billion  in  1996  and is expected to grow at  a  five-year  CAGR  of
approximately 7% to $2.9 billion by the year 2000. This growth  is  further
driven by the number of pages printed per year, which is projected to  grow
at a five-year CAGR of approximately 7% by the year 2001.

To  facilitate access to its target markets, the Company has  entered  into
agreements with IBM and Groupe SET International ("Groupe SET"), a European
provider  of high-speed digital printing solutions headquartered in  Paris,
France.  It also has a relationship with Oce, which the Company expects  to
result  in  a  marketing agreement during 1998. IBM and SET are  marketing,
selling  and  servicing Truecolor Systems under their respective  corporate
logos  and  product identifications. Accent Color is taking an increasingly
active  role  in  the  general  marketing of  highlight  color  technology,
applications  and benefits. The Company intends to continue to  expand  and
develop its marketing and sales capability.

The  Company also sells consumables comprised of standard and custom  color
wax-based  inks,  as well as spare parts used with Truecolor  Systems.  The
Company expects that consumables will generate recurring revenue, which the
Company believes will increase as the installed base and usage of Truecolor
Systems  increase. According to Dataquest, continuous forms and  cut  sheet
high-speed, black-on-white printers servicing typical applications  in  the
production  printing  market  produce approximately  2.2  million  and  0.7
million pages per month respectively.

The  Company  was  incorporated in Connecticut in May 1993.  The  Company's
principal executive offices are located at 800 Connecticut Boulevard,  East
Hartford,  Connecticut 06108, and its telephone number is  (860)  610-4000.
The  Company's  World Wide Web site is located at www.accentcolor.com.  The
information  contained in the Company's World Wide Web site should  not  be
considered a part of this Form 10-K.

Products

ACS Truecolor System
The Company currently offers a continuous form version of Truecolor Systems
which is marketed under the corporate logos and product identifications  of
the  Company's  OEM  customers. The Company expects that Truecolor  Systems
will  be priced to the Company's OEM customers in the range of $100,000  to
$125,000,  depending  on  model,  options,  and  terms  and  conditions  of
purchase.

The version of the Truecolor System sold by IBM as the "IBMr InfoPrintT Hi-
Lite  Color  post  processor" attaches directly to the  IBM  3900  and  IBM
InfoPrint  4000  continuous  form  production  printing  systems.   It   is
configured to print at the same speed as the IBM production printing system
(up  to  501  pages  per  minute)  at 240 dots  per  inch  resolution.  The
continuous form version of the Truecolor System is designed to print up  to
5,600,000 pages per month.

<TABLE>
<CAPTION>
                         TRUECOLOR SYSTEM FEATURES
<S>                <C>
Host Printer       IBM 3900; IBM InfoPrint 4000; SET M3056SF
Paper Handling     Continuous form
Speed              Up to 501 pages per minute (2 up images)
Resolution         240 dots per inch
Ink Reservoirs     4 standard, 8 optional
Paper Width        6.5 to 18.0 inches
Paper Length       6.0 to 17.0 inches
Paper Weights      16 to 28 pound bond
Paper Type         Pre-printed  or  blank,  fanfold  or  roll-fed
                   forms, some labels
Maximum Usage      5.6 million pages per month

</TABLE>

Consumables and Spare Parts
The  Company's product offering includes consumables, such as standard  and
custom  color  wax-based  ink, and spare parts. Spot  color  printing  with
Truecolor Systems requires the consumption of significant quantities of wax-
based  ink and the replacement of certain parts that are subject to  normal
wear  and tear. The Company expects that sales of consumables will generate
recurring  revenue,  which  the  Company  believes  will  increase  as  the
installed base and usage of Truecolor Systems increases.

Consumables.  The wax-based ink used in the Truecolor Systems  is  sold  in
six  kilogram packages containing 60 individual wax-based ink blocks to the
Company's  OEM  customers. The Company purchases  its  wax-based  ink  from
Spectra.  As  long as the Company purchases its wax-based inks  exclusively
from  Spectra,  Spectra  is  prohibited, through  its  agreement  with  the
Company,  from  knowingly  supplying the  wax-based  ink  directly  to  the
Company's  OEM  customers. Similarly, IBM and SET are currently  prohibited
from  purchasing wax-based ink from sources other than the Company, subject
to certain conditions.

Spare Parts.  The Company expects that periodic preventive maintenance  and
repair will need to be performed on Truecolor Systems and will include  the
replacement  of  damaged or worn parts which are expected  to  be  supplied
exclusively  by  Accent Color to the OEM customer. These replacement  parts
are  produced  by subcontractors and suppliers according to  the  Company's
design specifications.


Product Development
The  Company considers the enhancement of its present products  to  be  its
research  and  development priority. Consequently,  the  Company  currently
devotes a significant portion of its resources to product development.  The
Company plans to commit substantial resources to enhance its technology  in
the  areas  of (i) wider ink jet printheads for greater color coverage  per
page,  (ii)  advanced  paper  handling functionality,  particularly  duplex
printing  (the ability to print on both sides of a page) and  (iii)  higher
resolution ink jet printing. The Company also plans to devote resources  to
assure the quality and performance of its Truecolor Systems.

Accent  Color  considers its on-going efforts in engineering, research  and
development  to  be a key component of its strategy. The  Company  believes
that  its future success will depend in part on its ability to continue  to
enhance  its  existing products and to develop new products. The  Company's
research  and development activities consist of both long-term  efforts  to
develop  and enhance products and services and short-term projects to  make
modifications to respond to the immediate needs of its OEM customers.

The Company's products are developed internally. The Company also purchases
technology, licenses intellectual property rights, and oversees third party
development  for  certain components of its products. Internal  development
enables Accent Color to maintain closer technical control over the products
and  gives  the  Company the freedom to designate which  modifications  and
enhancements  are  most important and when they should be implemented.  The
Company  has  created development processes for creating and enhancing  its
products.   Product  documentation  is  generally  created  internally   in
coordination with its OEM customers.

The  Company  expended approximately $3.1 million, $6.9  million  and  $8.8
million  on  engineering and research and development in  the  years  ended
December 31, 1995, 1996 and 1997, respectively. As the Company continues to
transition  toward  a  commercial  operation  with  increasing   focus   on
manufacturing  and  sales it anticipates it will  be  able  to  reduce  its
research and development spending. As of March 6, 1998, Accent Color had 36
employees engaged in engineering and research and development.

Manufacturing and Assembly
The  Company's  manufacturing strategy has been to design a  product  based
upon a relatively small number of discrete modules that can be subassembled
and  tested  by  other parties. Other than the patented ink jet  printheads
supplied  by  Spectra, the Company believes these modules  can  be  readily
procured  on competitive terms. Initially, a substantial amount of assembly
will  be done by the Company prior to the completion and implementation  of
subcontract agreements with those suppliers of the major modules  that  the
Company has determined are suitably qualified. The Company is currently  in
discussions with several such subcontract manufacturing companies to be the
primary manufacturers of the seven major modules of Truecolor Systems.  The
Company  believes  that  these companies have both  the  manufacturing  and
quality   assurance   capabilities  to  satisfy  the   Company's   supplier
qualification  process,  which  initially qualifies  and  monitors  ongoing
performance  to the Company's cost, quality and schedule requirements.  The
Company  intends to implement a formal quality control program  to  inspect
parts  received from subcontractors to determine whether they  comply  with
Company  specifications. The Company intends to monitor adherence to  these
procedures  through  site  visits  and direct  supervision.  The  Company's
strategy  is to subcontract the full assembly and final testing to  turnkey
manufacturers when the volume of shipments reaches the level where this  is
more cost effective.

The  Company  has  made product assurance and quality  a  priority  in  its
business  strategy. In pursuit of this goal, the Company intends  to  apply
for ISO 9001 registration. In preparation for this, the Company has adopted
a  formal  approach  to  documentation control, design,  manufacturing  and
business  process  definition and has implemented  an  integrated  business
system software package to manage key processes. Accent Color also subjects
the  component  modules  and each complete Truecolor  System  to  extensive
testing  during  the  assembly process. An important part  of  the  testing
involves extensive print quality tests in which the Company uses a  variety
of  paper  grades and test patterns designed to verify accuracy, color  and
other performance characteristics prior to shipment.

Marketing, Product Support, Sales and Training
Accent Color has initially adopted a third-party distribution strategy that
employs OEM customers to address the global market. Currently, two such OEM
customers purchase Truecolor Systems for integration with their high-speed,
black-on-white  printing  systems  and  expect  to  market  them  for  both
installed printers and new printers under their corporate logos and product
identifications.  The  goals  of these relationships  are  to  (i)  rapidly
penetrate  the market represented by both the existing installed  base  and
new sales of high-speed, black-on-white printers, (ii) substantially reduce
the  cost  and time required for the Company to develop a direct sales  and
service organization of its own, (iii) quickly gain credibility and  market
acceptance by meeting the technical requirements typically set by such  OEM
customers  and (iv) integrate the Company's Truecolor Systems with  certain
hardware  and  supporting  software marketed by these  OEM  customers.  The
Company  may  enter  into relationships with other OEM  customers  covering
additional segments of the digital, high-speed printing market. The Company
generally  expects  to  receive monthly or quarterly, non-binding,  rolling
forecasts  of  future orders for its products from its OEM  customers.  The
forecasts  will  usually cover the subsequent 12 months. The  Company  will
plan  its future activities, in part, on the basis of these forecasts.  OEM
customers  are  expected  to  place actual orders  by  submitting  purchase
orders, generally on a monthly basis, which cover product requirements from
four months from the date of the purchase order.

At the beginning of 1998, Accent Color realigned its resources to provide a
substantial  increase  in marketing focus and sales  support  for  its  OEM
customers.  This will include technical advice, as required, regarding  the
optimal use of Truecolor Systems in demanding applications, the preparation
and production of custom print samples and participation in the formulation
of  marketing  initiatives to position and promote Accent Color's  products
against  any  perceived  or emerging competitors. The  Company  expects  to
benefit  from  this  interaction in three significant ways,  (i)  by  being
directly  involved  in the sales process with end user customers,  (ii)  by
identifying market opportunities where there is a strong need for  document
enhancement  or  other  commercial benefit using the  spot  color  printing
capabilities of Truecolor Systems and (iii) by receiving timely feedback on
end  user  needs and desires which will drive product enhancement  and  new
product development.

The  OEM customers, including IBM and Groupe SET will also distribute  wax-
based inks provided by Accent Color through their existing supply channels.
Accent  Color  currently expects to provide sales support to meet  the  end
user  requests to create custom colors using the Company's wax-based  inks.
IBM  and  Groupe  SET will also distribute spare parts provided  by  Accent
Color  for  Truecolor Systems and will provide field service through  their
established  service organizations. This will provide end  users  with  the
first  three  levels of customer support coverage, consisting  of  on  site
field  service for installation and maintenance, central technical  support
at a national and international level and extensive stocking of spare parts
to  ensure  adequate  responsiveness. In exceptional circumstances,  Accent
Color's  technical support group will assist IBM and Groupe SET to  resolve
unusual  maintenance situations, should the need arise,  via  7-day/24-hour
telephone  coverage.  In addition, IBM and Groupe  SET  will  also  provide
training  for  their internal organizations and end users. To support  this
activity, Accent Color has undertaken training course development  and  has
provided   initial   training  classes  to  the  education   and   training
organizations of IBM and Groupe SET.

Customers
The  Company  has  entered into agreements with IBM  and  Groupe  SET.  The
Company also has a relationship with Oce. Under these arrangements, IBM and
Groupe SET intend to market, distribute and support Truecolor Systems under
their  respective brand names. These agreements are significant in  several
respects. First, according to CAP Ventures, IBM, along with Oce, is one  of
the  leading suppliers of  high-speed, black-on-white printers  and   IBM's
AFP/IPDS  architecture  is continuing to emerge  as  an  industry  standard
particularly  with  large  end user organizations.  Second,  the  Company's
products  are  designed to be fully integrated with  certain  hardware  and
supporting  software products marketed by IBM. Third, Accent Color  expects
that  market acceptance of its Truecolor Systems will be accelerated  since
sales  and  service  will  be  provided by the well-established  sales  and
service  organizations  of IBM and Groupe SET. Fourth,  the  Color  Enabler
Solution  technology, which the Company expects to be developed  under  the
SET  Agreements, will enable it to integrate Truecolor Systems more  easily
with printing systems from other manufacturers avoiding the need for costly
and time consuming product development to accomplish integration.
International Business Machines Corporation.  IBM's products  are  used  in
corporate data centers and other high-speed printing applications. In April
1996,  the  Company and IBM entered into a Product Purchase Agreement  (the
"IBM  Agreement").  This agreement is for a term of three  years  with  IBM
having the right to renew it for two additional one-year terms. The Company
has  been  informed  that  Truecolor Systems will be  IBM's  first  product
targeted at spot color applications in high-speed printing. The integration
of  color into IBM's AFP (Advanced Function Printing) protocol and the  use
of the Truecolor System as an integrated post-processing device attached to
the IBM 3900 and IBM InfoPrint 4000 high-speed, black-on-white printers are
expected to be marketed worldwide by IBM's international operations.
Under the IBM Agreement, IBM has committed to purchase consumables from the
Company  for  one year from the date of general availability  of  Truecolor
Systems  to IBM customers and, if certain conditions concerning competitive
pricing  are  met, thereafter as well. The IBM Agreement also requires  the
Company  to warrant its products against manufacturing defects for 90  days
after  initial  installation. Furthermore, under  the  IBM  Agreement,  the
Company has agreed to provide spare parts for its products to IBM at prices
which will yield a monthly parts cost per Truecolor System not to exceed  a
specified amount. If the Company is unable to perform its obligations under
the  agreement, after a cure period, the IBM Agreement affords IBM  certain
backup manufacturing rights, including the right to manufacture, or have  a
third  party  manufacture, the Company's Truecolor Systems. This  right  to
manufacture  is  limited  to  the specific  types  of  units  not  properly
delivered  and  may  be  terminated if the Company is  thereafter  able  to
deliver  the  units in question in compliance with the  terms  of  the  IBM
Agreement.

Groupe  SET  International.  In August 1997, the  Company  and  Groupe  SET
entered into two Product Development and Distribution Agreements (the  "SET
Agreements").  The  SET  Agreements  have  an  initial  term  extending  to
December,  2001.  Under  the first agreement, Groupe  SET  is  expected  to
market,  sell  and service Accent Color's Truecolor Systems with  the  SET-
M3056SF and other high speed black-on-white printing systems to target  the
high  speed  continuous forms printing segment of the  production  printing
market  for  applications such as billing statements, brochures and  direct
mail.  Under  the  second agreement, Groupe SET has  agreed  to  develop  a
version  of  its  "plug-and-play"  Color  Enabler  Solution  ("CES")   data
interpreter  and  print  controller technologies to  allow  Accent  Color's
Truecolor  Systems to interface to a wide variety of high speed  continuous
form  and  cut sheet black-on-white printers which are not highlight  color
enabled.   In  addition,  the  Color Lay Out  ("CLO")  software  option  is
expected  to enhance customer applications by providing up to 8  colors  of
highlight  color  capability  without modifying  the  existing  application
software.

Oce  Printing  Systems GmbH.  In 1996, Oce van der Grinten N.V.,  purchased
the   high-speed   printing   systems   business   from   Siemens   Nixdorf
Informationssysteme  AG. At that time, the Company had already  established
an  initial  relationship  with Siemens Nixdorf Printing  Systems  L.P.  to
provide  Truecolor Systems for Siemens' high-speed printing  products.  The
Company is currently discussing a proposal with Oce for the development and
production  of  Truecolor  Systems to be  integrated  with  Oce's  Printing
Systems using the CES technology to be developed under the SET Agreements.

Backlog
The  Company  measures  backlog  based on  purchase  orders  for  Truecolor
Systems,  consumables and spare parts that have not  yet  been  shipped.  A
substantial  amount  of the Company's backlog can be modified  or  canceled
prior  to  30 days before shipment without penalty, except for the recovery
of  the  Company's  actual costs. Accordingly, the  Company  believes  that
backlog  cannot  be considered a meaningful indicator of  future  financial
performance.  As  of  December 31, 1997, the Company's  total  backlog  was
approximately $2.4 million.

Competition
Although there are existing digital and offset color printing systems,  the
Company  believes  there  is no other product currently  marketed  that  is
capable of cost-effectively printing variable data in multiple standard  or
custom colors with the functionality of existing high-speed, black-on-white
printers.

Suppliers  to  the  market compete on the basis of  speed,  print  quality,
functionality,  reliability, cost per page and color variety.  The  Company
competes,  in  significant  part,  on the  basis  of  advanced  proprietary
technology  in  the  areas of paper handling, ink jet  color  printing  and
interface  software which allows the Company's products to  print  variable
data,  in  multiple standard or custom colors at high speeds.  Products  or
product improvements based on new technologies could be introduced by other
companies with little or no advance notice.

Competition in the markets for the Company's products is highly fragmented.
The  Xerox  4890  (a  similar product is also  marketed  by  Xerox  as  the
DocuPrint  390HC)  is a spot color printer which prints in  black  and  one
color  per  job  (out of a limited palette). It is capable of  printing  92
pages  per  minute  but does not offer custom colors. BESTE  Bunch  Systems
markets a color offset press used as a downstream add-on to Oce or IBM high-
speed,  black-on-white  printers. While it is capable  of  providing  color
logos,  it does not print variable data, requires a longer time to  set  up
and requires specialized skills. The use of this offset press also requires
additional processes of negative production and plate making. In  addition,
there  are production full process color digital printing systems available
which  operate at print speeds of up to 70 pages per minute, including  the
Xeikon  DCP-32  and the Xerox DocuColor 40. These systems  have  relatively
high  print  costs per page and operate at much lower speeds  than  typical
applications in the production printing market segment require, making them
impractical for high-speed print jobs.

Scitex Digital Printing offers a product based on liquid ink-jet technology
which  can print at high speed and in multiple colors. This system, though,
would require a potential user currently using electro-photographic systems
such as those from IBM, Xerox and Oce to completely change equipment and re-
train  operators to use a different process. The Company believes that  the
cost  and disruption of such an implementation would be prohibitive  except
in a few very large single applications.

In  addition  to  direct competition from other firms utilizing  high-speed
color  technologies, there exists potential direct competition  from  firms
improving technologies used in low-speed to medium-speed color printers and
indirect  competition from firms producing pre-printed forms. Manufacturers
of   high-speed,  black-on-white  printers  may  also,  in  time,   develop
comparable  or  more effective color capability within their  own  products
which may render the Company's products obsolete.

Intellectual Property
The  Company's ability to compete effectively will depend, in part, on  the
ability  of  the  Company  to  maintain  the  proprietary  nature  of   its
technology.  The Company relies, in part, on proprietary technology,  know-
how  and trade secrets related to certain aspects of its principal products
and operations. To protect its rights in these areas, the Company generally
requires  its OEM customers, its suppliers and its employees to enter  into
nondisclosure  agreements.  On  February 11,  1997,  the  U.S.  Patent  and
Trademark  Office  granted  a  patent with respect  to  an  initial  patent
application  relative  to  the mechanical design  of  the  Company's  paper
handling  and  color printing system, which form the core of the  Truecolor
Systems. In addition, the Company has filed applications for two additional
patents  relative to certain enhancements of Truecolor Systems. The Company
has  also  filed foreign patent applications seeking patent  protection  in
several foreign countries.

The  Company  has  an  exclusive  right to supply  products  which  include
Spectra's  ink  jet printheads to print color on the black-on-white  output
from  specified high-speed printers marketed by Xerox, IBM, Oce and certain
other  parties.  To the extent that wax-based inks and ink  jet  printheads
purchased  from Spectra are covered under patents or licenses, the  Company
relies  on  Spectra's rights under such patents and licenses and  Spectra's
willingness and ability to enforce its patents and maintain its licenses.

Employees
As  of  March  6,  1998, the Company employed 97 individuals,  of  whom  36
employees  were  engaged in engineering and research  and  development,  35
employees  in  manufacturing and operations, 10 employees in marketing  and
service  efforts,  and  16  employees were  working  in  an  administrative
capacity.  In  addition,  the  Company had also  retained  one  independent
contractor  working in an administrative capacity. The Company's  employees
are  not  represented  by  a collective bargaining  organization,  and  the
Company  has  never experienced a work stoppage. The Company believes  that
its relationship with its employees is good.

Item 2.  Properties
The  Company's facilities are located at 800 Connecticut Boulevard in  East
Hartford, Connecticut and presently consist of approximately 69,000  square
feet.  The  Company believes that these facilities will meet the  Company's
needs  for  at  least the next 12 months. The Company leases this  facility
under a lease that expires on December 31, 2000.

Item 3.  Legal Proceedings
The Company is not a party to any material legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders
No  matters were submitted to a vote of security holders during the  fourth
quarter of fiscal 1997.
                                  PART II

Item  5.   Market  for  Registrant's Common Stock and  Related  Stockholder
Matters
The  Company's Common Stock began trading publicly on the National tier  of
the  Nasdaq  Stock Market under the ticker symbol "ACLR"  on  December  18,
1996.  Prior to this date, there was no public market for the Common Stock.
The  table  below  sets forth the per share quarterly high  and  low  sales
prices  of the Common Stock since the Company's initial public offering  on
December 18, 1996, as reported on the Nasdaq Stock Market.

                                    COMMON STOCK INFORMATION
          Year Ended 12/31/97         High            Low
            First Quarter           $15 1/2           $4 7/8
            Second Quarter           $8 1/2           $3 7/8
            Third Quarter            $6 1/16          $3 3/8
            Fourth Quarter           $5 5/8           $2 1/4
          Year Ended 12/31/96
            Fourth Quarter           $9               $8 1/4

As  of March 6, 1998, there were approximately 2,566 stockholders of record
which includes those stockholders whose certificates were held by nominees.
The  Company has never declared or paid cash dividends on its Common Stock.
The  Company  currently  intends to retain any  earnings  for  use  in  its
business  and does not anticipate paying any cash dividends on  its  Common
Stock in the foreseeable future.

Item 6.  Selected Financial Data

<TABLE>
<CAPTION>

             For the                                                  For the
              period                                                   period
               from                                                     from
            inception                                                inception
             (May 21,                                                 (May 21,
              1993)                                                    1993)
             through                                                  through
          December 31,     For the year ended December 31,         December 31,
              1993       1994       1995       1996        1997       1997

<S>        <C>        <C>         <C>        <C>          <C>        <C>
Statement of
Operations Data:
Sales       $     -    $     -     $     -    $     -      $ 1,578    $  1,578
Costs and
expenses:
 Costs of
 production       -          -           -       1,272       7,397       8,669
 Research and
 development     19         805       3,051      6,932       8,786      19,593
 Marketing,
 general and
 administrative  26         336       1,003      4,394       4,439      10,198
 Related party
 administrative
 expense          -          -           80         25          -          105

                 45       1,142       4,134     12,623      20,622      38,565
Other (income)
expense:
 Interest
 expense          -          12          83        656        246          997
 Interest
 income           -          -           -        (113)      (599)        (712)

                  -          12          83        543       (353)         285
Net  loss  before
extraordinary
item            (45)     (1,154)     (4,217)   (13,166)   (18,691)     (37,272)

Extraordinary
item:
 Loss on early
 extinguishment of
 debt, net of income
 taxes of nil     -          -           -        (573)        -          (573)
Net loss    $   (45)   $(1,154)     $(4,217)  $(13,739)  $(18,691)    $(37,845)

Net  loss  (basic
and  diluted)
per common
share:      $ (.03)    $ (.66)      $ (2.33)  $ (3.57)   $ (1.77)

Weighted
average
common
Shares
outstanding 1,755,000  1,756,841    1,809,240  3,852,982  10,566,890

</TABLE>

<TABLE>
<CAPTION>
                                      December 31,
                       1993     1994      1995      1996      1997
Balance Sheet Data:
<S>                    <C>      <C>       <C>       <C>       <C>
Cash and cash
equivalents            $   -    $ 165     $   1     $20,289   $ 4,006
Working capital
(deficit)                (24)     (86)   (1,862)     18,189     4,836
Total assets               1      246       728      26,951    12,407
Short-term debt             -      -         50       1,000       -
Long-term debt,less
current portion             -      -      2,020       1,272       -
Total shareholders'
equity (deficit)         (24)     (57)   (3,164)     19,345     7,270

</TABLE>

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

Overview
Accent  Color  Sciences,  Inc.  ("Accent Color"  or  the  "Company")  is  a
development  stage company that designs, manufactures and sells innovative,
high-speed, spot color printing systems ("Truecolor Systems"). The  Company
was  formed  in  1993 initially to develop a high-speed, color  printer  to
attach  to  cut sheet, black-on-white production printers. Development  and
testing of a prototype began in January 1994 and was first announced at the
On-Demand Trade Show (a major printing industry trade show) in May 1994. In
November 1994, a "proof-of-concept" Truecolor System was shown at the Xplor
International Global Electronic Document Systems Conference ("Xplor")  (the
primary  production printing industry trade show). After Xplor in  November
1994,  International Business Machines Corporation ("IBM")  approached  the
Company  and requested that the Company develop a version of its  Truecolor
System  to work in conjunction with the IBM 3900 continuous form production
printing system.

During  1995,  the Company began negotiations with IBM and Siemens  Nixdorf
Printing  Systems  USA, Inc. (which was acquired by  an  affiliate  of  Oce
Printing  Systems GmbH ("Oce") in 1996) to enter into a formal  development
relationship.   During  the  same  period,  the  Company  accelerated   its
engineering  and  development activities as its  efforts  were  focused  on
designing   and  building  the  next  generation  prototypes   which   were
demonstrated at Xplor in November 1995.

During  1996,  the  Company was focused on refining  the  Truecolor  System
design  and preparing for the commencement of commercial production in  the
first  half of 1997. The Company entered into a Product Purchase  Agreement
with IBM in April 1996. In October 1996, the Company signed a memorandum of
understanding with Oce. At Xplor in October 1996, the Company  demonstrated
its  Truecolor  Systems,  as  well  as  certain  enhancements  planned  for
production in 1998.

On May 6, 1997, IBM announced the limited availability product introduction
phase  of  the  Company's continuous form version of the  Truecolor  System
designed for integration with IBM's 3900 production printing system,  which
IBM  will  market  as the IBM InfoPrint Hi-Lite Color post  processor.  The
product  was announced for general worldwide availability on September  15,
1997.

In   August  1997,  the  Company  signed  an  agreement  with  Groupe   SET
International  ("Groupe SET"), a European provider of  high  speed  digital
printing  solutions  headquartered in  Paris,  France.   Pursuant  to  this
agreement, Groupe SET will market, sell and service the Company's Truecolor
Systems  with the SET-M3056SF and other high speed black-on-white  printing
systems.  In addition, Groupe SET agreed to develop a version of its "plug-
and-play"  Color  Enabler Solution data interpreter  and  print  controller
technologies to allow the Company's Truecolor Systems to interface  with  a
wide  variety  of  high speed continuous form and cut sheet  black-on-white
printers that are not highlight color enabled.

Accent Color also sells related consumables and spare parts. Currently, the
only  consumables sold by the Company are wax-based inks, which it acquires
from  a  vendor. The sale of consumables is expected to generate  recurring
revenue  which  the  Company  believes will continue  to  increase  as  the
installed base and usage of Truecolor Systems increases.

During  the  first and second quarters of 1997, the Company's efforts  were
primarily  directed  at  designing, developing, testing  and  manufacturing
prototype and pre-production systems.  In the third and fourth quarters  of
1997,  the  Company's efforts were primarily directed toward the commercial
introduction of its Truecolor Systems.

Results of Operations
Comparison of Year Ended December 31, 1997 to Year Ended December 31, 1996

Total  Net  Sales.   Total net sales were $1,578,000  for  the  year  ended
December  31, 1997 compared to none for the year ended December  31,  1996.
Printer  sales  constituted 41.7% of total net sales  for  the  year  ended
December  31,  1997 while sales of consumables and spare parts  constituted
58.3%.

Printers.  Printer sales were $658,000 for the year ended December 31, 1997
compared  to  none for the year ended December 31, 1996.   Sales  for  1997
consisted  of three pre-production systems and two production  systems.   A
total  of  27  production  systems were shipped  during  1997,  which  were
recorded  as  deferred revenue in accordance with the  revenue  recognition
policy  of  the  Company.  As of December 31, 1997, the  Company's  backlog
consisted of 18 systems totaling $2,138,000.

Consumables and Spare Parts Sales.  Consumables and spare parts sales  were
$920,000 for the year ended December 31, 1997 compared to none for the year
ended  December  31, 1996.  These sales were primarily  attributed  to  the
shipment  of consumables in the second and third quarters of 1997  to  fill
the channels of an OEM customer.

Costs of Production.  Costs of production increased from $1,272,000 for the
year ended December 31, 1996 to $7,397,000 for the year ended December  31,
1997.   This  increase was attributed to three major factors:  (i)  ramp-up
manufacturing  expenses related to the Company's launch of  the  commercial
production of its Truecolor Systems, (ii) cost of goods sold related to the
sale  of  printers,  consumables and spare parts and  (iii)  a  charge  for
obsolete  inventory  due to the enhancement of the Company's  product  from
narrow  to  wide  printhead systems and a cancellation  charge  related  to
purchase   commitments  of  inventory  totaling  $1,250,000  and  $300,000,
respectively.

Research  and  Development  Expenses.  Research  and  development  expenses
increased  26.7% from $6,932,000 for the year ended December  31,  1996  to
$8,786,000  for  the  year  ended December 31,  1997.   This  increase  was
primarily  attributed to engineering and product ramp-up  costs  associated
with  the  development  of the wide ink jet printhead  in  addition  to  an
increase  in payroll costs for personnel retained to support such  efforts.
This increase was partially offset by a decrease in materials procured  for
research  and development as in 1997, the Company's efforts were  primarily
focused  on  production with a less significant emphasis  on  research  and
development.   During 1996, however, systems were built  for  research  and
development  purposes and the related components were utilized  for  design
improvements and testing.

Marketing,  General  and Administrative Expenses.  Marketing,  general  and
administrative  expenses  increased from  $4,393,000  for  the  year  ended
December 31, 1996 to $4,439,000 for the year ended December 31, 1997.  This
increase was primarily attributed to the hiring of additional marketing and
administrative  personnel, expenses associated with promotional  activities
and  costs  incurred  for professional services to  support  the  Company's
anticipated revenue growth and manufacturing activities.  This increase was
partially offset by expenses incurred in 1996 related to the recruiting  of
personnel,  system  documentation, regulatory testing,  deferred  financing
costs  and  the  Company's  relocation to a new facility,  which  were  not
incurred during the comparable time in 1997.

Interest  Expense  and Other (Income) Expense.  Interest expense  decreased
62.5%  from  $656,000 for the year ended December 31, 1996 to $246,000  for
the  year  ended December 31, 1997.  This decrease was primarily attributed
to  the  elimination of interest expense related to extinguished debentures
originally  issued  in  October  1995,  February  1996  and  October  1996.
Interest  income  increased by $486,000 from $113,000 for  the  year  ended
December  31, 1996 to $599,000 for the year ended December 31, 1997.   This
increase  in  interest income was attributed to a greater  amount  of  cash
available for investment in 1997 as compared to 1996, primarily due to  the
Company's initial public offering in December 1996.

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995

Total  Net  Sales.  The Company recognized no revenue for the  years  ended
December  31,  1996  and  1995.  During 1996, the  Company's  efforts  were
directed at designing, developing, testing and manufacturing prototype  and
pre-production systems.  During 1995, the Company's efforts  were  directed
at designing, developing, testing and manufacturing prototype systems only.

Costs  of  Production.  Costs of production of $1,272,000  incurred  during
1996  consist  of  the  start-up  manufacturing  expenses  related  to  the
Company's preparation for commercial production of its Truecolor Systems.

Research  and  Development  Expenses.  Research  and  development  expenses
primarily consist of the cost of personnel and equipment needed to  conduct
the  Company's  research  and development efforts, including  manufacturing
prototype  systems.  Research and development expenses increased 127%  from
$3,050,000 for the year ended December 31, 1995 to $6,932,000 for the  year
ended  December  31,  1996.   This increase  reflects  additional  expenses
associated  with  the development, manufacturing and testing  of  prototype
systems,  the increase in engineering and production personnel and upgrades
and  enhancements  for  pre-production systems.  Research  and  development
expenses were offset  by  $300,000  and  $614,000  in  1996  and   1995,
respectively, as a result of customer payments for prototype units.

Marketing,  General  and Administrative Expenses.  Marketing,  general  and
administrative  expenses primarily consist of (i)  the  marketing  cost  in
connection  with  product  promotional  activities  and  certain   indirect
marketing  activities in conjunction with the Company's OEM  customers  and
(ii)  general  and  administrative costs related to  the  salaries  of  the
Company's executive, administrative and financial personnel, and associated
costs.  Marketing, general and administrative expenses increased 338%  from
$1,003,000 for the year ended December 31, 1995 to $4,393,000 for the  year
ended  December  31, 1996.  This increase was primarily attributed  to  the
hiring  of  additional service, marketing and administrative  personnel  to
support   the   Company's  anticipated  revenue  growth  and  manufacturing
activities.

Related Party Administrative Expense.  Related party administrative expense
reflects  financial advisory fees paid to an investment banker  who  was  a
director  of  the  Company.   Total related  party  administrative  expense
recorded  by  the  Company  in  1996 and  1995  was  $25,000  and  $80,000,
respectively.

Interest Expense and Other (Income) Expense.  Interest expense increased by
$573,000 from $83,000 for the year ended December 31, 1995 to $656,000  for
the  year  ended December 31, 1996.  This increase was primarily attributed
to the increase in debt outstanding during 1996 as a result of the issuance
of debentures in October 1995, the issuance of debentures in February 1996,
the  issuance  of short term notes in October 1996 and borrowings  under  a
loan  from  Xerox  Corporation  beginning in  1996.   Interest  income  was
$113,000 for the year ended December 31, 1996 compared to none for the year
ended December 31, 1995.

Liquidity and Capital Resources
The  Company's need for funding has increased from period to period  as  it
has  continued its research and development activities for the  enhancement
of  Truecolor Systems, increased its capital expenditures on equipment  and
commenced  production  of  Truecolor Systems.  To  date,  the  Company  has
financed its operations through customer payments, borrowings and  sale  of
equity securities.

Through  December 31, 1997, the Company had received $5.1 million from  the
delivery   of   seven  prototype,  nine  pre-production  and   twenty-seven
production  systems  to  customers,  net  proceeds  of  $7.8  million  from
borrowings  and the sale of debt securities, net proceeds of  $2.5  million
from  the exercise of warrants and stock options and net proceeds of  $39.5
million  from  the sale of equity securities.  Of the net equity  proceeds,
$24.4  million  was  raised  in the Company's initial  public  offering  in
December  1996  and  the balance of $15.1 million was  raised  through  the
private placement of equity securities.

On  October  16,  1997, the Company completed a private placement  offering
("Unit Offering") of 437,913 units of its common stock at a price of $10.95
per  unit,  or  $3.65 per share.  Each unit consisted of  three  shares  of
common stock and a warrant exercisable into one share of common stock.  The
offering  resulted  in  net  proceeds of approximately  $4,486,000  to  the
Company.

As of December 31, 1997, the Company's primary source of liquidity was cash
and cash equivalents totaling $4.0 million.

Operating  activities consumed $18.9 million in cash in  1997  compared  to
$12.5  million  in  1996.  This increase was  primarily  attributed  to  an
increase  in  the  net loss of the Company, an increase in inventories  and
accounts  receivable, a decrease in customer advances and  deposits  and  a
decrease in accounts payable as the Company began to ship Truecolor Systems
and  reduced  its outstanding liabilities accordingly.  This was  partially
offset  by a decrease in prepaid expenses and other assets and an  increase
in deferred revenue and other long-term liabilities.

Capital  expenditures decreased 50% from $2.6 million for  the  year  ended
December  31,  1996 to $1.3 million for the year ended December  31,  1997.
This decrease was primarily attributed to the Company's relocation to a new
facility  in  May  1996.  Approximately $1.3 million was  incurred  by  the
Company  as a result of this relocation.  Capital expenditures during  1997
primarily  reflect  acquisitions  of equipment  to  support  the  Company's
anticipated  growth  in  revenue, manufacturing  activities  and  continued
engineering and development efforts.

Under  an agreement with Spectra, the Company was obligated to pay $250,000
per  calendar  quarter through 1997 in order to maintain certain  exclusive
rights.  As of December 31, 1997, the Company had fulfilled its obligations
related  to  such exclusivity rights.  Pursuant to the same agreement,  the
Company  must pay Spectra royalties and license fees upon achieving certain
volume  purchase  levels.   In  addition, the  Company  has  a  development
arrangement with Spectra that would require the Company to make  additional
payments to support developing a wider printhead manufacturing capability.

Based   on  the  current  operating  plan  of  the  Company,  the   primary
requirements for cash through 1998 will be directed toward an  increase  in
the  marketing  and  sales  efforts of the  Company,  the  optimization  of
manufacturing  and customer support resources to meet the  demands  of  the
market, the commercial production of the enhanced Truecolor System and  the
further  development and enhancement of the Company's products. As part  of
its  growth efforts during 1998, the Company currently expects (i) to  hire
approximately seven additional personnel within the areas of manufacturing,
sales  and  marketing, and customer service (ii) to acquire inventories  of
modules,  components and wax-based inks for Truecolor Systems and (iii)  to
invest  in  additional  printhead  manufacturing  capacity.  The  Company's
currently  planned  research  and development  activities  are  focused  on
developing wider ink jet printheads for greater color coverage per page and
higher resolution ink jet printing.

During  1997,  the Company continued to adjust its staffing levels  from  a
high  of 145 full-time, part-time and contract employees as of October  31,
1997  to  140  employees as of December 31, 1997.   In  January  1998,  the
Company  completed  a realignment of its staffing in an effort  to  further
optimize  its  resources  to  meet  the  challenges  and  demands  of   the
marketplace.  This realignment and other reductions decreased the Company's
staffing  to 98 full-time, part-time and contract employees as of March  6,
1998.

On  January  13,  1998,  the Company completed a private  equity  financing
providing  net  proceeds to the Company of $3.9 million.  Pursuant  to  the
financing,  the  Company  issued  4,500  shares  of  Series  B  Convertible
Preferred Stock at a price of $1,000 per share and warrants to purchase the
Company's  common stock.  The warrants issued are exercisable into  300,000
shares  of  common stock with an exercise price of $2.75 and an  expiration
date  of  January 9, 2008.  Additionally, warrants exercisable into 115,385
shares  of  common stock with an exercise price of $2.50 and an  expiration
date  of  January 9, 2003 were issued to the placement agent  for  services
provided.

Under  the  current operating plan, the Company believes that its  existing
cash resources and the funds raised through the private placement completed
in  January 1998 will be sufficient for the financing of its operations and
capital  expenditures  through at least the second quarter  of  1998.   The
Company is continuing to review various financing strategies, both debt and
equity,  that  would  allow it to continue to fund operations  and  planned
capital  expenditures  through the remainder of  1998.  In  the  event  the
Company is unsuccessful in achieving its anticipated increased sales volume
or  the  Company  fails to obtain additional financing, the  Company  would
expect  to  reduce  costs  and expenses through reduction  in  its  planned
expansion,  including  a  reduction in 1998  planned  inventory  increases,
capital  expenditures and other costs, sufficient to fund cash requirements
through the end of 1998.  The Company is a development stage company and it
is  expected that quarterly net losses will continue through at  least  the
third quarter of 1998.

Year 2000
The  Corporation continues to assess its exposure related to the impact  of
the  Year  2000 date issue.  The Year 2000 date issue arises from the  fact
that  many  computer programs use only two digits to identify a year  in  a
date  field.   The  Corporation's products and  key  financial  operational
systems  are being reviewed and, where required, plans have been  developed
to  ensure  that  the Company's products and computer systems  continue  to
function  properly.  Management does not expect these  costs  will  have  a
material adverse impact on the Corporation's financial position, results of
operations  or  cash  flows.  However, the Corporation could  be  adversely
impacted  by  the  Year 2000 date issue if suppliers, customers  and  other
businesses do not address this issue successfully.  Management continues to
assess these risks in order to reduce the impact on the Company.

Factors Affecting Future Results
The  foregoing Management's Discussion and Analysis and discussion  of  the
Company's business contains various statements which are forward looking in
nature.   Such  forward-looking statements are made pursuant to  the  "safe
harbor"  provisions of Section 21E of the Securities Exchange Act of  1934,
as amended, which were enacted as part of the Private Securities Litigation
Reform Act of 1995.

The  Company  cautions readers that the following important factors,  among
others,  in  some cases have affected and, in the future, could  materially
adversely  affect  the  Company's actual results and  cause  the  Company's
actual  results  to  differ materially from the results  expressed  in  any
forward-looking statements made by, or on behalf of, the Company.

Limited  Operating  History;  History  Of  Losses;  Uncertainty  Of  Future
Financial Results.  The Company was formed in May 1993 and is a development
stage company with a limited operating history. The Company incurred losses
in  each  year of existence and incurred a net loss of $18,691,000 for  the
year  ended December 31, 1997. As a result of these losses, as of  December
31,  1997,  the  Company had an accumulated deficit of $37,845,000.  It  is
expected that quarterly net losses will continue through at least the third
quarter  of  1998 and that the Company will incur a net loss for  1998.  In
order  to  support  the  anticipated growth of its  business,  the  Company
expects  to  expand its manufacturing capabilities, marketing and  customer
service  functions.  The  anticipated increase in the  Company's  operating
expenses  caused by this expansion could have a material adverse effect  on
the Company's operating results if revenue does not increase at an equal or
greater rate.

Uncertainty  Of  Market  Development  And  Acceptance  Of  Accent   Color's
Products.  The digital, high-speed printing market has traditionally relied
mainly on black-on-white print. There can be no assurance that a market for
high-speed,   variable  data  color  printing  will  develop   or   achieve
significant  growth.  The  failure of such market  to  develop  or  achieve
significant  growth would have a material adverse effect on  the  Company's
future results.

Dependence  On  A Limited Number Of Customers; Revenue Concentration.   The
Company anticipates that sales of its Truecolor Systems and consumables  to
a limited number of OEM customers will account for substantially all of the
Company's revenue. As of December 31, 1997, the Company had contracts  with
only  two customers, IBM and Groupe SET, and was discussing a proposal with
a  third customer, Oce. There can be no assurance that these customers will
purchase a significant volume of the Company's products.

Dependence   On  Third  Party  Marketing,  Distribution  And  Support.    A
significant  element  of  the  Company's  marketing  strategy  is  to  form
alliances  with  third parties for the marketing and  distribution  of  its
products.  To this end, the Company has entered into the IBM Agreement  and
the  SET  Agreements  for the marketing, distribution and  support  of  the
Company's products. There can be no assurance that (i) the Company will  be
successful  in maintaining such alliances or forming and maintaining  other
alliances,  (ii)  the  Company  will be able  to  satisfy  its  contractual
obligations  with  its OEM customers or (iii) the Company's  OEM  customers
will  devote  adequate  resources to market and  distribute  the  Company's
products successfully.

Dependence On Spectra.  The Company is dependent on Spectra, a wholly owned
subsidiary of Markem Corporation ("Markem"), as its sole source supplier of
ink jet printheads and the hot melt, wax-based inks included in and used by
Truecolor  Systems. Spectra has agreed to supply the Company with  ink  jet
printheads and wax-based inks under a supply agreement, subject to a number
of  conditions.  The Company's reliance on Spectra involves several  risks,
including  a  potential inability to obtain an adequate supply of  required
printheads  or  inks,  and reduced control over the  quality,  pricing  and
timing  of  delivery of these items. To date, Spectra has only  produced  a
limited  number  of  ink  jet  printheads. Accordingly,  there  can  be  no
assurance that Spectra will be able to provide a stable source of supply of
these  components. Spectra has granted the Company the exclusive  right  to
supply  products including Spectra printheads in the worldwide  market  for
printing  color  on  the  output from specified high-speed,  black-on-white
printers  from  Xerox, IBM, Oce and certain other parties through  December
31,  2002.  To maintain such exclusive rights, the Company is  required  to
purchase  a minimum number of ink jet printheads each year, to continue  to
purchase  its  wax-based ink requirements from Spectra and to make  certain
payments. There can be no assurance that the Company will be able  to  meet
the minimum purchase requirements or make these payments.

Dependence  On Major Subcontractors And Suppliers.  The Company  relies  on
subcontractors  and  suppliers  to  manufacture,  subassemble  and  perform
certain testing of some modules and parts of Truecolor Systems. The Company
currently  performs  the final assembly and testing  of  various  Truecolor
System  components and of each complete Truecolor System, and  the  Company
plans  to  eventually outsource the full assembly and testing of the  major
modules  of  the  Truecolor  Systems.  There  can  be  no  assurance   that
subcontractors  or  suppliers  will  meet  the  Company's  price,  quality,
quantity  and  delivery requirements or otherwise perform to the  Company's
expectations.

Development Risks. The Company is a development stage company. The  Company
has products in various stages of development, and minimal revenue has been
recognized  from  the sale of its products. The Company has  developed  and
plans  to  market  new  products and new applications  of  technology  and,
accordingly, is subject to risks associated with such ventures. The Company
has  delivered  prototype, pre-production and production Truecolor  Systems
and  is entering the pre-production phase for the enhanced version of these
systems.  The future results of the Company must be considered in light  of
the  expenses  and  delays frequently encountered in  connection  with  the
operation of a new business, the development and production of new products
and the development of practical production techniques for the products.

Limited  History  Of  Product Manufacturing.   To  date,  the  Company  has
manufactured   only  limited  quantities  of  Truecolor  Systems.   To   be
profitable,  the  Company's  products must be  manufactured  in  sufficient
quantities  and  at  acceptable  costs.  Future  production  in  sufficient
quantities may pose technical and financial challenges for the Company, and
no  assurance  can  be given that the Company will be able  to  reduce  its
current  product  costs to an acceptable level and  to  make  a  successful
transition to high-volume production.

Significant  Fluctuations In Quarterly Results.   The  Company's  quarterly
operating results are likely to vary significantly in the future based upon
a  number  of factors. Historically, there has existed seasonality  in  the
purchase  of major equipment such as the Company's Truecolor Systems,  with
many  companies  experiencing higher sales in the fourth calendar  quarter.
Furthermore, a significant portion of the Company's operating expenses  are
relatively fixed in the short term, and planned expenditures are  based  on
sales  forecasts.  Sales  forecasts by  the  Company's  OEM  customers  are
generally  not binding. If revenue levels are below expectations, operating
results may be disproportionately affected because only a small portion  of
the  Company's  expenses vary with revenue in the short term,  which  could
have a material adverse effect on the Company's future results.

Need  For  Additional Funding For Operating And Capital Requirements.   The
Company's currently anticipated levels of revenue and cash flow are subject
to  many  uncertainties  and  cannot be assured.   Further,  the  Company's
business  plan  may change, or unforeseen events may occur,  requiring  the
Company  to  raise additional funds.  The amount of funds required  by  the
Company will depend on many factors, including the extent and timing of the
sale  of  Truecolor  Systems,  the timing  and  cost  associated  with  the
expansion of the Company's manufacturing, sales and marketing and  customer
support capabilities and the Company's operating results.  There can be  no
assurance that, if and when needed, additional financing will be available,
or  available  on  acceptable terms.  The inability  to  obtain  additional
financing  or  generate sufficient cash from operations could  require  the
Company  to  reduce or eliminate expenditures for research and development,
production  or  marketing  of  its products, or  otherwise  to  curtail  or
discontinue its operations, which could have a material adverse  effect  on
the Company's business, financial condition and results of operations.

Product  Warranty; Limit On Prices For Spare Parts.  The  Company  warrants
its  Truecolor  Systems to be free of defects in workmanship and  materials
for 90 days from installation at the location of the end user. Furthermore,
under the IBM Agreement, the Company has agreed to provide spare parts  for
its  products at prices which will yield a monthly parts cost per Truecolor
System not to exceed a specified amount. There can be no assurance that the
Company  will  not  experience warranty claims or parts  failure  rates  in
excess  of  those  which it has assumed in pricing its products  and  spare
parts.  Any such excess warranty claims or spare parts failure rates  could
have  a  material  adverse  effect  on the  Company's  business,  financial
condition  or  results  of operations.  The Company currently  has  minimal
experience  with  the volume or nature of warranty claims relating  to  its
products.

Dependence On A Single Product Line.  The Company anticipates that it  will
derive  substantially  all of its revenue in the  foreseeable  future  from
sales  of  Truecolor Systems, related consumables and spare parts.  If  the
Company is unable to generate sufficient sales of Truecolor Systems due  to
market  conditions,  manufacturing difficulties  or  other  reasons  or  if
purchasers  of Truecolor Systems were to purchase wax-based  ink  or  spare
parts  from  suppliers other than the Company, there could  be  a  material
adverse effect of the Company's future results.

Rapid  Technological  Change Requires Ongoing Product Development  Efforts.
The high-speed printer industry is characterized by evolving technology and
changing market requirements. The Company's future success will depend on a
number  of  factors,  including its ability  to  continue  to  develop  and
manufacture  new  products and to enhance existing products.  Consequently,
the  Company  considers the enhancement of its products to be a development
priority.  Additionally, in a new and evolving market, customer preferences
can  change  rapidly  and new technology could render  existing  technology
obsolete.  Failure by the Company to respond adequately to changes  in  its
target  market,  to  develop or acquire new technology or  to  successfully
conform  to  market  preferences could have a material  adverse  effect  on
future results of the Company.

Limited  Protection  Of  Proprietary Technology And  Risks  Of  Third-Party
Claims.  The Company's ability to compete effectively will depend, in part,
on  the  ability of the Company to maintain the proprietary nature  of  its
technology.  The Company relies, in part, on proprietary technology,  know-
how  and trade secrets related to certain aspects of its principal products
and operations. To protect its rights in these areas, the Company generally
requires   its   OEM  customers,  suppliers,  employees   and   independent
contractors  to  enter  into  nondisclosure agreements.  In  addition,  the
Company  has  received a patent, and has filed additional U.S. and  foreign
patent  applications  to protect technology which the Company  believes  is
proprietary about its technology. There can be no assurance, however,  that
these   agreements,   arrangements  or  patents  will  provide   meaningful
protection  for the Company's trade secrets, know-how or other  proprietary
information.  A  failure of such protection could have a  material  adverse
effect on future results of the Company.

Competition.   The  Company  expects  to  encounter  varying   degrees   of
competition  in  the  markets in which it intends to compete.  Products  or
product improvements based on new technologies could be introduced by other
companies  with  little or no advance notice. Manufacturers of  high-speed,
black-on-white  printers  may also, in time,  develop  comparable  or  more
effective  color capability within their own products which may render  the
Company's  products obsolete. There can be no assurance  that  the  Company
will  be  able to compete against future competitors successfully  or  that
competitive pressures faced by the Company will not have a material adverse
effect upon its future results.

Risks  Associated  With International Operations.  The Company  intends  to
have its products marketed worldwide and therefore may enter into contracts
with foreign companies. International sales are subject to certain inherent
risks, including unexpected changes in regulatory requirements, tariffs and
other  trade barriers, fluctuations in exchange rates, government controls,
political instability and potential adverse tax consequences. There can  be
no  assurance that these factors will not have a material adverse effect on
the Company's future results.

Inflation
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial results to date.


Item 8.  Financial Statements and Supplementary Data
                     REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
  of Accent Color Sciences, Inc.

     In  our  opinion,  the  accompanying balance sheets  and  the  related
statements  of  operations, of cash flows and of changes  in  shareholders'
equity  (deficit) present fairly, in all material respects,  the  financial
position  of  Accent Color Sciences, Inc. (a development stage company)  at
December 31, 1997 and 1996, and the results of its operations and its  cash
flows  for  the years ended December 31, 1997, 1996 and 1995, and  for  the
period  from  inception  (May  21, 1993)  through  December  31,  1997,  in
conformity with generally accepted accounting principles.  These  financial
statements  are  the  responsibility  of  the  Company's  management;   our
responsibility is to express an opinion on these financial statements based
on  our  audits.  We conducted our audits of these statements in accordance
with  generally accepted auditing standards which require that we plan  and
perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
financial statements are free of material misstatement.  An audit  includes
examining, on a test basis, evidence supporting the amounts and disclosures
in  the financial statements, assessing the accounting principles used  and
significant  estimates  made  by management,  and  evaluating  the  overall
financial  statement presentation.  We believe that our  audits  provide  a
reasonable basis for the opinion expressed above.
     The  Company's  plans for funding future operations are  described  in
Note 1.



/s/ Price Waterhouse LLP
Hartford, Connecticut
March 12, 1998


<TABLE>
<CAPTION>
                                             December 31,
                                         1997           1996
<S>                                 <C>             <C>
Assets
Current assets:
     Cash and cash equivalents      $  4,005,563    $  20,288,535
     Accounts receivable                 439,934           13,669
     Due from officer (Note 11)                -           15,802
     Inventories (Notes 2 and 4)       4,611,216        3,362,252
     Prepaid expenses and other
     current assets                      323,306          511,633

          Total current assets         9,380,019       24,191,891

Fixed assets, net (Notes 2 and 3)      2,974,422        2,727,220
Other assets, net (Note 2)                52,698           32,354

          Total assets              $ 12,407,139    $  26,951,465

Liabilities and Shareholders' Equity
Current liabilities:
     Current maturities of long-term
     debt (Note 5)                  $          -    $   1,000,000
     Obligations under capital
     leases (Note 8)                      61,360           47,555
     Accounts payable                    859,693        1,935,108
     Accrued expenses                  1,041,383          683,198
     Customer advances and deposits       85,600        1,387,400
     (Note 2)
     Deferred revenue (Note 2)         2,496,000          950,000

          Total current liabilities    4,544,036        6,003,261

Obligations under capital leases          91,937          123,621
(Note 8)
Long-term debt, net of discount                -        1,271,638
(Note 5)
Other long-term liabilities              501,644          208,002
(Notes 7 and 8)

          Total non-current
          liabilities                    593,581        1,603,261

Commitments and contingencies (Notes
8 and 12)
Shareholders' equity (Note 6 and 13):
Preferred stock, no par value,
500,000 shares authorized,
0 shares issued and outstanding                -                -

Common stock, no par value,
25,000,000 shares authorized,
11,989,855 and 10,139,775
shares issued and outstanding         45,114,633       38,499,490

Deficit accumulated during the
development stage                   (37,845,111)     (19,154,547)

          Total shareholders' equity   7,269,522       19,344,943

          Total liabilities and
          shareholders' equity       $12,407,139      $26,951,465

</TABLE>

<TABLE>
<CAPTION>
                                                                For the period
                                                                from inception
                         For the year ended December 31,        (May 21, 1993)
                                                                    through
                         1997           1996           1995       December 31,
                                                                      1997
<S>                  <C>          <C>            <C>           <C>
Revenue              $  1,577,508   $        -    $        -    $  1,577,508
Costs and expenses:
  Costs of production   7,396,828    1,272,357             -       8,669,185
  Research and
  development           8,786,217    6,932,017     3,050,534      19,593,125
  Marketing, general
  and administrative    4,438,518    4,393,380     1,002,869      10,197,533
  Related party
  administrative
  Expense (Note 11)             -       25,000        80,260         105,260

                       20,621,563   12,622,754     4,133,663      38,565,103

Other (income) expense:
  Interest expense        245,550      655,730        83,292         996,380
  Interest income       (599,041)     (113,126)            -       (712,167)

                        (353,491)      542,604        83,292         284,213

Net loss before      (18,690,564)  (13,165,358)   (4,216,955)   (37,271,808)
extraordinary item

Extraordinary item:
  Loss on early
  extinguishment of debt,
  net of income taxes of
  nil                          -      (573,303)            -       (573,303)

Net loss            $(18,690,564) $(13,738,661)  $(4,216,955)  $(37,845,111)


Net loss (basic and
diluted) per common
share (Note 2):     $      (1.77) $      (3.57)  $     (2.33)

Weighted average common
shares Outstanding
(Note 2)               10,566,890     3,852,982     1,809,240


</TABLE>

<TABLE>
<CAPTION>
                                                             For the period
                                                             from inception
                        For the year ended December 31,      (May 21, 1993)
                                                                 through
                       1997           1996          1995     December 31, 1997
<S>                <C>            <C>            <C>            <C>
Cash flows from
operating activities:
 Net loss           $(18,690,564)  $(13,738,661) $(4,216,955)   $(37,845,111)
 Adjustments to
 reconcile net loss
 to net cash used in
 Operating activities:
   Depreciation and
   amortization        1,128,533        974,184      111,127       2,217,032
   Write-off of
   deferred
   offering costs              -              -       47,264          47,264
   Expense related
   to stock and
   options granted       345,230              -       18,400         363,630
   Debenture issued
   for services                -              -       50,000          50,000
   Loss on disposal of
   fixed assets           11,460         82,691        9,378         103,529
   Conversion of
   accrued interest
   to common stock             -        231,147            -         231,147
   Extraordinary loss
   on extinguishment
   of debt                     -        573,303            -         573,303
 Changes in assets and
 liabilities:
   Accounts receivable
   and amount due
   from officer        (410,463)       (29,471)            -        (439,934)
   Inventories       (1,248,964)    (3,362,252)            -      (4,611,216)
   Prepaid expenses
   and other assets     188,327       (502,776)      (3,731)        (323,306)
   Accounts payable and
   accrued expenses    (717,230)      1,366,969      793,990       1,723,555
   Due to officers            -        (20,711)      (2,357)               -
   Customer advances
   and deposits      (1,301,800)        837,400      550,000          85,600
   Deferred revenue   1,546,000         950,000            -       2,496,000
   Other long-term
   liabilities          293,642         133,091       74,911         501,644

 Net cash used
 in operating
 activities         (18,855,829)   (12,505,086)  (2,567,973)     (34,826,863)

Cash flows from
investing activities:
 Proceeds from sale
 of fixed assets              -          5,524            -            5,524
 Purchases of
 fixed assets        (1,256,244)    (2,611,891)   (525,718)       (4,422,248)
 Cost of patents        (21,666)       (28,534)     (1,207)          (54,766)

 Net cash used
 in investing
 activities          (1,277,910)    (2,634,901)   (526,925)       (4,471,490)

Cash flows from
financing activities:
 Payment of capital
 lease obligations      (69,146)       (71,953)          -          (141,099)
 Net proceeds from
 issuance of debentures       -       3,049,768  1,789,333          4,839,101
 Proceeds from issuance
 of warrants                  -         261,482     56,631            318,113
 Net proceeds from
 issuance of
 common stock         4,486,326      33,869,508          -         38,407,134
 Proceeds from
 exercise of options
 and warrants         1,783,587               -    694,960          2,478,547
 Net proceeds from
 issuance of
 preferred stock
 through offerings
 and conversion
 of debt                      -               -    340,060          1,430,634
 Increase (decrease)
 in notes payable             -        (50,000)     50,000                  -
 Increase in
 long-term debt               -       2,223,750          -          2,223,750
 Deferred offering
 costs                        -               -          -            (47,264)
 Repayment of
 debentures         (2,350,000)     (3,855,000)          -         (6,205,000)

 Net cash provided
 by financing
 activities           3,850,767     35,427,555   2,930,984         43,303,916

 Net increase
 (decrease) in
 cash and cash
 equivalents       (16,282,972)     20,287,568   (163,914)          4,005,563

Cash and cash
equivalents at
beginning of
period              20,288,535             967     164,881                  -

Cash and cash
equivalents at
end of period      $ 4,005,563    $ 20,288,535    $    967      $   4,005,563

Supplemental disclosure
  Cash paid for:
   Interest        $   167,188    $    246,509    $      -      $     413,697

Non-cash investing
activities (Note 8):
Capital lease obligations of
$51,268 were incurred
during the year ended
December 31, 1997,
reflecting new equipment
leases

</TABLE>


<TABLE>
<CAPTION>
                                                        Deficit
                                                        Accumulated
                                                        During the
                Common Stock       Preferred Stock      Development
              Shares     Amount    Shares    Amount        Stage       Total
<S>      <C>         <C>         <C>       <C>       <C>          <C>
Proceeds
from sale      3,900     $21,800        -    $     -     $     -    $ 21,800
Net loss           -           -        -          -     (45,398)    (45,398)

December
31, 1993       3,900      21,800        -          -     (45,398)    (23,598)

Stock
split      1,751,100           -        -          -           -           -
Conversion
of debentures      -           -   74,360    371,804           -     371,804
Proceeds
from sale          -           -  160,000    643,770           -     643,770
Conversion of
promissory
notes         42,000      50,000        -          -           -      50,000
Reclassification   -     (20,500)       -          -           -     (20,500)
Shares issued
for services       -           -   15,000     75,000           -      75,000
Net loss           -           -        -          -  (1,153,533) (1,153,533)

December 31,
1994       1,797,000      51,300  249,360  1,090,574  (1,198,931)    (57,057)
Proceeds
from sale          -           -   75,000    340,060           -     340,060
Exercise of
Warrants     297,840     694,960        -          -           -     694,960
Options
granted to
service
provider           -      18,400        -          -           -      18,400
Warrants
issued
with debt          -      56,631        -          -           -      56,631
Net loss           -           -        -          -  (4,216,955) (4,216,955)

December 31,
1995       2,094,840     821,291  324,360  1,430,634  (5,415,886) (3,163,961)

Warrants
issued
with debt          -     138,032        -          -           -      138,032
Proceeds
from sale  2,625,000   9,460,044        -          -           -    9,460,044
Warrants issued
with debt         -      123,450        -          -           -      123,450
Proceeds from
initial public
offering  3,450,000   24,409,464        -          -           -   24,409,464
Conversion of
Series III
debentures  607,626    2,116,575        -          -           -    2,116,575
Conversion of
Preferred
stock     1,362,309    1,430,634 (324,360) (1,430,634)         -            -
Net loss          -            -        -          - (13,738,661) (13,738,661)

December 31,
1996     10,139,775  $38,499,490        -  $       - $(19,154,547) $19,344,943

Exercise
of options   92,250      465,067        -          -           -       465,067
Exercise of
warrants    394,091    1,445,000        -          -           -     1,445,000
Shares issued in
connection with
the Xerox
agreement    50,000      218,750        -          -           -       218,750
Proceeds from
sale      1,313,739    4,486,326        -          -           -     4,486,326
Net loss          -            -        -          - (18,690,564)  (18,690,564)

December 31,
1997     11,989,855  $45,114,633        -    $     - $(37,845,111) $ 7,269,522

</TABLE>

1. Formation and Operations of the Company
Accent Color Sciences, Inc. (the "Company") was incorporated in Connecticut
in  May 1993.  The Company designs, manufactures and sells innovative high-
speed, color printers ("Truecolor Systems") to attach to high-speed, black-
on-white  printers.  The Company also sells related consumables  and  spare
parts.  The Company is considered a development stage company as defined in
Statement of Financial Accounting Standards No. 7.

Development and testing of a prototype began in January 1994, with a "proof-
of-concept"  system developed in November 1994.  During 1995,  the  Company
began negotiations with major original equipment manufacturers ("OEMs")  to
enter into formal development relationships.  At the same time, the Company
accelerated its engineering and development activities as its efforts  were
focused on designing and building the next generation prototypes that  were
completed  in  1995.   As of December 31, 1996, the Company  received  $1.5
million  for the delivery of seven prototype machines to various OEMs.   As
of  December  31,  1997, the entire $1.5 million has  been  offset  against
research and development expense.  During 1996, the Company was focused  on
refining the Truecolor System design and preparing for the commencement  of
commercial  production  in the first half of 1997.   During  1997,  an  OEM
announced  general worldwide availability of the Company's continuous  form
version  of  the  Truecolor  System designed  for  integration  with  their
production  printing  system  and  the  Company  launched  into  commercial
production.  In 1997, all sales were attributable to a single customer.

Management  believes that the existing cash on hand at December  31,  1997,
combined  with  proceeds  from  the  January  1998  financing  (Note   13),
additional anticipated financing and operating cash flows will be  adequate
to  fund  the Company's planned cash requirements through the end of  1998.
In  the  event  the  Company is unsuccessful in achieving  its  anticipated
increased sales volume or the Company fails to obtain additional financing,
the Company would expect to reduce costs and expenses through reduction  in
its  planned  expansion,  including a reduction in 1998  planned  inventory
increases,  capital expenditures and other costs, sufficient to  fund  cash
requirements through the end of 1998.

2. Summary of Significant Accounting Policies
Significant  accounting  policies followed  in  the  preparation  of  these
financial statements are as follows:

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

Revenue Recognition
Revenue   is  generally  recognized  upon  product  shipment  and  customer
acceptance.   The  Company has established warranty  policies  that,  under
specific  conditions,  enable customers to return  products.   The  Company
establishes liabilities for estimated returns and allowances at the time of
revenue  recognition.   Until  such time  that  the  Company  has  adequate
information  to  estimate future returns, revenue resulting from  Truecolor
Systems  is deferred until the end of the warranty period.  As of  December
31,  1997  and  1996, the Company had deferred revenue  of  $2,496,000  and
$950,000 related to Truecolor Systems shipped.

Cash and Cash Equivalents
Cash  and cash equivalents include cash on deposit with banks, as  well  as
short-term investments with original maturities of 90 days or less.

Inventories
Inventories are stated at the lower of cost or market.  Cost is  determined
by the first-in, first-out method.

Fixed Assets
Fixed  assets  are stated at cost and are depreciated over their  estimated
useful  lives  using the straight-line method.  The estimated useful  lives
are  between  three and five years.  Leasehold improvements  are  amortized
over the shorter of the term of the lease or the useful life of the asset.

Patent
Patent  costs  of  $53,875  and  $33,100 at December  31,  1997  and  1996,
respectively, are capitalized as incurred and are amortized,  once  issued,
using  the  straight-line method over the shorter  of  the  legal  term  or
estimated useful life.  Accumulated amortization was $1,177, $746 and  $338
at December 31, 1997, 1996 and 1995, respectively.

Income Taxes
The  Company uses the liability method of accounting for income  taxes,  as
set   forth  in  Statement  of  Financial  Accounting  Standards  No.  109,
"Accounting for Income Taxes."  Under this method, deferred tax assets  and
liabilities  are  recognized for the expected future  tax  consequences  of
temporary  differences between the carrying amounts and the  tax  basis  of
assets and liabilities.

Research and Development Expenditures
Research and development expenditures are charged to expense as incurred.

Customer Advances and Deposits
     Customer Advances Under Research and Development Agreements
Amounts  advanced pursuant to customer sponsored research  and  development
agreements  are  recognized as a liability until  certain  obligations  (as
defined  in  the agreements, including delivery and acceptance  of  certain
test  units)  under the agreements have been met. When the obligations  are
met,  the  amounts  are  offset against research and  development  expense.
Advances of $0 and $600,000 were deferred as of December 31, 1997 and 1996,
respectively. Amounts offset against research and development expense  were
$600,000,  $300,000, and $614,000 for the years ended  December  31,  1997,
1996 and 1995, respectively.
     Customer Deposits
Based  on sales contracts with certain customers, the Company was entitled,
for  a  limited  time, to a percentage of the sales price upon  receipt  of
certain  firm  purchase orders. Customer deposits of $85,600, and  $787,400
were deferred at December 31, 1997 and 1996, respectively.

Stock-Based Compensation
The  Company  applies  APB  Opinion  25  and  related  interpretations   in
accounting  for its Stock Incentive Plan.  Under APB 25, when the  exercise
price  of  employee stock options equals the market price of the underlying
stock  on  the  date  of  grant,  no compensation  expense  is  recognized.
Additional disclosures required under Financial Accounting Standard No. 123
"Accounting  for Stock-Based Compensation," are included in Note  7,  Stock
Incentive Plan.

Net Loss Per Common Share
In  the  fourth quarter of 1997, the Company adopted Statement of Financial
Accounting  Standards  No.  128, "Earnings  per  Share,"  for  all  periods
presented.  Basic earnings per share computations are determined  based  on
the  weighted average number of shares outstanding during the  period.  The
effect  of  the exercise and conversion of all securities, including  stock
options and warrants would be antidilutive and thus is not included in  the
diluted earnings per share calculation.

3.   Fixed Assets

<TABLE>
<CAPTION>
                                           December 31,
                                        1997         1996
     <S>                           <C>          <C>
     Equipment                     $1,564,611   $  717,819
     Computers                        902,662      790,791
     Furniture and fixtures           487,627      417,251
     Leasehold improvements           953,699      795,230
     Purchased software               369,606      319,381
     Capital leases - equipment       294,397      243,129

                                    4,572,602    3,283,601
     Less: accumulated
     depreciation and
     amortization                   1,598,180      556,381

                                   $2,974,422   $2,727,220
</TABLE>

Amortization expense for capital leases amounted to $77,250, $42,454 and $0
for  the  years  ended  December  31, 1997, 1996  and  1995,  respectively.
Depreciation expense was $971,601, $485,191 and $53,586 for the years ended
December 31, 1997, 1996 and 1995, respectively.

4. Inventories
Inventories consist of the following:

<TABLE>
<CAPTION>
                                                  December 31,
                                                1997         1996
  <S>                                        <C>         <C>
  Raw materials and components               $1,590,386  $2,242,756
  Work-in-process                               403,585     607,245
  Finished goods                              2,617,245     512,251

                                             $4,611,216  $3,362,252
</TABLE>

5. Debt
The following table summarizes the Company's current outstanding debt:

<TABLE>
<CAPTION>

                                                     December 31,
                          Stated
                         Interest   Maturity      1997       1996
                           Rate
  <S>                     <C>     <C>           <C>       <C>
  Long-term debt, net
  of unamortized
  discount of $0 and
  $78,362                 8.00%   1997 - 1998   $      -  $2,271,638

                                                       -   2,271,638

  Less: current portion                                -   1,000,000

                                                $      -  $1,271,638
</TABLE>


Convertible Subordinated Debentures
On  January  25,  1994,  the Company issued $200,030 of  8.00%  convertible
subordinated debentures (the "Series I Debentures").  On August  15,  1994,
the  Company  issued  an  additional  $160,000  of  the  8.00%  convertible
subordinated  debentures (the "Series II Debentures").   On  September  20,
1994,  all  of the debentures, including accrued interest of $11,774,  were
converted into 74,360 shares of the Company's Series A Preferred Stock at a
rate of $5.00 per share.

Notes Payable
The Company issued a $50,000 note payable in May 1995. The note was paid in
January 1996.  Interest on the note accrued at 10.00%.

Series III Debentures
On October 31, 1995, the Company completed an offering of 8.00% convertible
subordinated debentures (the "Series III Debentures") for net  proceeds  of
$1,668,443.  During 1995, the Company converted $50,000 of accounts payable
to  Series III Debentures.  The Series III Debentures were convertible into
common  stock  at  a rate of $3.67 per share.  The carrying  value  of  the
debentures,  plus  accrued  interest of $231,147,  converted  into  607,626
common  stock  shares upon the closing of the initial  public  offering  on
December 23, 1996.

At  the time of issuance, each holder of a Series III Debenture received  a
detachable warrant (the "Series III Warrants") to purchase common stock for
an  amount  of shares equal to the Series III Debentures' principal  amount
divided by the conversion rate. Series III Warrants issued were exercisable
into 544,554 common shares at an exercise price of $3.67 per share with  an
expiration date of August 15, 1997. The Series III Warrants were valued  at
$56,631, and accordingly this amount was allocated to common stock with  an
equivalent discount recorded on the Series III Debentures. The discount was
amortized  over the term of the debentures until its conversion  to  common
stock  on  December  23, 1996.  Amortization expense was  $0,  $30,226  and
$5,148  for the years ended December 31, 1997, 1996 and 1995, respectively.
The  unamortized  discount  remaining  at  conversion  was  included  as  a
reduction in the carrying value of the related common stock.

Related  deferred debt issuance costs of $278,157 were amortized using  the
effective  interest  method over the term of the  related  debt  until  its
conversion to common stock on December 23, 1996.  Amortization expense  was
$0,  $136,088 and $52,154 for the years ended December 31, 1997,  1996  and
1995,  respectively.   The  unamortized cost remaining  at  conversion  was
included as a reduction in the carrying value of the related common stock.

Series IV Debentures
During  February  1996,  the Company completed a private  placement  of  8%
subordinated  debentures (the "Series IV Debentures") for net  proceeds  of
$405,000, of which $240,000 were issued to a director of the Company.   The
Series  IV  Debentures were non-convertible. The Series IV Debentures  were
due  on August 31, 1996, and were repaid by the Company on August 29, 1996.
In  addition,  each  holder received detachable warrants  (the  "Series  IV
Warrants")  to  purchase common stock equal to the  Series  IV  Debentures'
principal  amount divided by $3.67.  The Series IV Warrants were valued  at
$0.11  per  warrant.  Accordingly, $11,782 was allocated to  common  stock,
with  an  equivalent  discount recorded on the Series IV  Debentures.   The
entire  discount was amortized in the year ended December  31,  1996.   The
Series  IV  Warrants issued are exercisable into 110,454 shares  of  common
stock  at an exercise price of $3.67 per share with an expiration  date  of
February 28, 2001.

Xerox Loan
In 1996, the Company and a customer finalized terms of a loan that provided
for  a  maximum  commitment of $3,000,000, at an annual  interest  rate  of
8.00%,  through  April 1, 1998.  As part of the inducement to  extend  such
commitment,  the Company agreed to issue detachable warrants. During  1996,
the  Company  received  $2,350,000 in loan proceeds and  issued  detachable
warrants  exercisable  into 375,000 shares of common  stock  at  $3.67  per
share.  A  warrant to purchase 125,000 shares was issued with an expiration
date  of  February  28, 1999 and a warrant to purchase 250,000  shares  was
issued with an expiration date of April 19, 1999. Accordingly, $126,250 was
allocated to common stock with an equivalent discount recorded on the note.
Amortization  expense  was $78,362, $47,888 and  $0  for  the  years  ended
December 31, 1997, 1996 and 1995, respectively.

The  Company paid its first principal installment of $500,000  on  July  1,
1997.   During September 1997, the Company concluded an agreement with  the
customer  that superceded the prior production and loan agreements.   Under
the  new agreement, the customer exercised the warrants to purchase 375,000
shares  of common stock.  The exercise proceeds of $1,375,000 were  applied
to reduce the outstanding debt and accrued interest.  The principal balance
remaining after this reduction was paid in full in three equal installments
prior to the end of 1997.

In  exchange for mutual releases from liability under the prior  production
agreement,  the  Company  issued  50,000 shares  of  common  stock  to  the
customer.   The  Company's product deposits from the customer  were  offset
against  the charge resulting from the issuance of 50,000 shares of  common
stock  and  inventories specific to the project, resulting in  no  material
impact to the Statement of Operations.

Private Financing
On  October  11,  1996,  the  Company completed a  private  financing  (the
"Interim  Financing") of discounted notes in an aggregate principal  amount
of $3,450,000 bearing interest at a rate of 8.70% per annum (excluding debt
discount).   This  financing resulted in net proceeds  to  the  Company  of
$2,780,000.   The  Interim Financing was repaid upon  the  closing  of  the
initial public offering on December 23, 1996.

At the time of issuance, holders of notes of the Interim Financing received
warrants  to purchase an aggregate of 45,000 shares of common stock  at  an
exercise  price of $8.00 per share with an expiration date of  October  11,
2001.  The  Interim  Financing  Warrants  were  valued  at  $123,450,   and
accordingly  this amount was allocated to common stock with  an  equivalent
discount recorded on the notes. The discount was amortized over the term of
the debentures until its extinguishment on December 23, 1996.  Amortization
of  the  original issue discount and the warrant valuation was $0, $159,107
and  $0 for the years ended December 31, 1997, 1996 and 1995, respectively.
The  unamortized  discount remaining at extinguishment is included  in  the
extraordinary loss due to early extinguishment of the debt.

Related deferred debt issuance costs of  $220,000 were capitalized and were
amortized  using the effective interest method over the term  of  the  debt
until  its  extinguishment on December 23, 1996.  Amortization expense  was
$0,  $61,040 and $0 for the years ended December 31, 1997, 1996  and  1995,
respectively.  The unamortized cost remaining at extinguishment is included
in the extraordinary loss due to early extinguishment of the debt.

6. Shareholders' Equity

Capital Stock Transactions
On  September  15,  1994, the following changes in  the  Company's  capital
structure occurred: (i) the Company's Board of Directors declared a 450-for-
1  split of the common stock, effective upon the amendment of the Company's
Certificate  of Incorporation, (ii) the authorized number of common  shares
was  increased to 1,000,000 and (iii) the par value of the common stock was
changed from $.01 to no par value.

In  January 1995, the Company's Board of Directors amended the articles  of
incorporation  to  increase  the authorized shares  of  common  stock  from
1,000,000  to 2,000,000. In April 1996, under the consent of the  Board  of
Directors,  the number of authorized shares of common stock  was  increased
from 2,000,000 shares to 25,000,000 shares.

On  October  8, 1996, as authorized by the Board of Directors, the  Company
split its common stock 3-for-1.

All shares and per share conversion amounts (unless otherwise indicated) in
the  accompanying financial statements have been restated  to  reflect  the
capital stock transactions described.

Common Stock
In  June 1996, pursuant to a private placement offering, the Company issued
2,625,000  shares  of  common  stock for $4.00  per  share.  This  offering
resulted  in  net  proceeds of $9,460,044 to the Company.   Stock  purchase
warrants  exercisable into 300,000 common shares with an exercise price  of
$4.00  and an expiration date of June 28, 2001 were issued to the placement
agent in connection with this offering.

On  December  23,  1996, the Company completed an initial  public  offering
pursuant  to which 3,450,000 common stock shares were issued at $8.00  each
resulting in net proceeds of $24,409,464 to the Company.

On  October  16,  1997, the Company completed a private placement  offering
("Unit Offering") of 437,913 units of its common stock at a price of $10.95
per  unit,  or  $3.65 per share.  Each unit consisted of  three  shares  of
common  stock  and  a warrant exercisable into one share of  common  stock.
The  Unit Offering resulted in net proceeds of approximately $4,486,000  to
the  Company.  The warrants were issued with an exercise price of $4.74 per
share  and an expiration date of October 16, 2002.  Additionally,  warrants
exercisable  into  102,500  shares  of common  stock  were  issued  to  the
placement  agents for services provided.  These warrants were granted  with
an  exercise price of $4.74 per share and an expiration date of October 16,
2002.

Series A Preferred Stock
From  a  class  of  preferred  stock with 500,000  authorized  shares,  the
Company's  Board of Directors designated a series consisting of 300,000  of
such  shares as Series A Preferred Stock. The Series A Preferred  Stock  is
nonredeemable, convertible and voting, with no par value. The holders shall
be entitled to receive noncumulative cash dividends when and as declared by
the  Board  of  Directors.  In the event of any  voluntary  or  involuntary
liquidation of the Company, the preferred shareholders shall be entitled to
all  unpaid dividends at the time of liquidation and $5.00 per share  as  a
liquidating  distribution  prior  to any liquidating  distribution  to  the
common shareholders.

In  1994,  pursuant to a private placement offering (the  "Preferred  Stock
Offering"), the Company issued 160,000 shares of Series A Preferred  Stock,
with  net  proceeds of $643,770.  In February 1995, the Board of  Directors
increased  the authorized shares of Series A Preferred Stock  from  300,000
shares  to 350,000 shares.  In 1995 the Company issued an additional 75,000
shares of Series A Preferred Stock, with net proceeds of $340,060. Series A
Preferred Stock purchase warrants exercisable into 23,500 preferred  shares
with  an exercise price of $5.50 and an expiration date of  September  2000
for  8,000  shares and February 22,  2001 for 15,500 shares were issued  to
the placement agent in connection with these Preferred Stock offerings.  In
September 1994, the Company issued to a third party vendor 15,000 shares of
Series  A Preferred Stock as partial payment for services rendered pursuant
to  a development agreement between the third party vendor and the Company.
The fair market value of the stock was recorded as $75,000.

Upon  effectiveness  of the registration statement filed  pursuant  to  the
initial  public offering of the Company on December 18, 1996,  the  324,360
outstanding shares of Series A Preferred Stock converted at a rate  of  4.2
common  shares  for one share of Series A Preferred Stock for  a  total  of
1,362,309  common  stock  shares.   Additionally,  outstanding   Series   A
Preferred Stock purchase warrants for 23,500 shares converted at a rate  of
4.2  common stock warrants for one Series A Preferred Stock warrant  for  a
total conversion to 98,700 common stock purchase warrants.

Series B Preferred Stock
In  December 1997, the Company's Board of Directors designated a series  of
4,500 shares of the Company's previously authorized preferred stock, no par
value  per  share,  to be designated as the Series B Convertible  Preferred
Stock.

Warrants
As  of December 31, 1997, the Company had outstanding common stock purchase
warrants  exercisable into an aggregate of 1,143,227  shares.  Such  shares
have been authorized and reserved.

The following summarizes the activity of outstanding warrants:
<TABLE>
<CAPTION>

                                  Shares under  Exercise price    Warrants
                                     warrant      (per share)    Exercisable
       <S>                       <C>           <C>               <C>
       Outstanding at
       December 31, 1994                 -       $         -             -

       Granted to employees        112,500              3.67
       Granted to Series III
       Debenture holders           544,554              3.67
       Exercised                  (297,840)             2.33

       Outstanding at
       December 31, 1995           359,214       $      3.67       359,214

       Granted to Series IV
       Debenture holders           110,454              3.67
       Granted to noteholder       375,000              3.67
       Granted to service
       providers                    13,635              3.67
       Granted to service
       providers                    15,000              3.67
       Granted to
       placement agent             300,000              4.00
       Conversion of preferred
       stock warrants               98,700              1.31
       Granted to former advisor
       in settlement                32,433              4.40
       Granted to former advisor
       in settlement                   554              8.80
       Granted to Interim
       Financing holders            45,000              7.40
       Warrants surrendered       (112,500)             3.67

       Outstanding at
       December 31, 1996         1,237,490     $1.31 - $8.80     1,237,490

       Anti-dilution
       adjustments
       pursuant to
       warrant agreements              673     $3.66 - $8.08
       Exercised                  (394,091)             3.67
       Expired                    (241,258)             3.67
       Granted in Unit Offering    540,413              4.74

       Outstanding at
       December 31, 1997         1,143,227     $1.31 - $8.08    1,143,227

</TABLE>


In  early December 1995, in order to raise cash for operations, the Company
reduced the exercise price of the Series III detachable warrants from $3.67
per  share to $2.33 per share (a revised fair market value as of such date)
for  a limited period of time (through December 15, 1995).  Warrant holders
exercised 297,840 shares of common stock for $694,960.

Pursuant   to  provisions  in  certain  warrant  agreements,  anti-dilution
adjustments  are  to  be made to the exercise price and/or  the  number  of
shares  purchasable  under  the warrant in certain  circumstances.   During
1997,  adjustments  were made in connection with the  Unit  Offering.   All
shares and per share conversion amounts are adjusted in the table above.

7. Stock Incentive Plan
In  January 1995, the Company's Board of Directors adopted and approved the
1995  Stock  Incentive  Plan  (the "Plan")  for  directors,  officers,  key
employees  and other persons.  The Plan permits the granting  of  incentive
stock  options, non-statutory stock options, stock appreciation rights  and
restricted  stock awards to purchase up to 300,000 shares of common  stock.
In  April  1996, the number of shares increased to 1,500,000. During  1997,
the  number  of  shares  increased  to 2,000,000,  subject  to  shareholder
approval.  Such shares have been authorized and reserved.

Initially,  options  vested 20% each year, so  that  the  options,  or  any
unexercised portion thereof, would be fully exercisable after a  period  of
five  years following the date of their grant. In April 1996, the  original
vesting  period  of  five years was modified to three  years  with  options
vesting  33%  each  year  following the date of their  grant.  All  options
previously   granted   are  subject  to  this  modification.   In   certain
circumstances,  at  the discretion of the Board of Directors,  options  are
granted  with a vesting schedule of other than three years.  Stock  options
under the Plan have terms ranging from five to ten years.

The 1995 Stock Incentive Plan activity is summarized as follows:

<TABLE>
<CAPTION>
                        For the year ended      For the year ended
                         December 31, 1997      December 31, 1996
                                   Weighted               Weighted
                                   Average                 Average
                         Shares    Exercise     Shares    Exercise
                                    Price                   Price
<S>                    <C>         <C>         <C>        <C>
Outstanding at
beginning of period    1,280,850   $  3.53       301,500  $   2.58

     Granted             302,675      6.44     1,016,850      3.80
     Exercised          (92,250)      3.67             -         -
     Canceled          (172,425)      6.12      (37,500)      3.20

Outstanding at period
end                    1,318,850      3.85     1,280,850      3.53

Options exercisable
at period end            629,960      3.44       439,000      3.41

Weighted average fair
value of options
granted during the
period                   $  5.20                 $  2.87

</TABLE>

The   following  summarizes  additional  information  about  stock  options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                          Options Outstanding               Options Exercisable

                              Weighted
                  Number      Average     Weighted        Number      Weighted
                Outstanding  Remaining    Average     Exercisable at  Average
                at December Contractual   Exercise     December 31,   Exercise
Exercise Prices  31, 1997       Life      Price           1997        Price
<C>          <C>             <C>         <C>          <C>            <C>
$1.19          154,500       6.17        $ 1.19       113,010        $ 1.19
 3.67          397,750       6.96          3.67       227,000          3.67
 4.00          550,150       7.29          4.00       269,950          4.00
 4.34 - 8.50   216,450       8.31          5.70        20,000          6.18

             1,318,850       7.23        $ 3.85       629,960        $ 3.44
</TABLE>

Had  compensation expense been recognized based on the fair  value  of  the
options  at  their  grant  dates,  as prescribed  in  Financial  Accounting
Standard  No. 123, the Company's net loss and net loss (basic and  diluted)
per share would have been as follows:

<TABLE>
<CAPTION>
                                        Year ended          Year ended
<S>                                  December 31, 1997   December 31, 1996
Net loss:                           <C>                    <C>
     As reported                    $ (18,690,564)         $ (13,738,661)
     Pro forma under FAS 123        $ (20,052,460)         $ (14,716,233)

Pro  forma net loss (basic  and
diluted) per share (unaudited):
     As reported                    $       (1.77)         $       (3.57)
     Pro forma under FAS 123        $       (1.90)         $       (3.82)

</TABLE>

The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes option pricing model with the following assumptions used
for  grants  during the applicable period: dividend yield of  0%  for  both
periods;  risk-free interest rates ranging from 5.97% to 6.73% for  options
granted  during  the  year ended December 31, 1997and 5.26%  to  6.96%  for
options   granted  during  the  year  ended  December  31,  1996;  expected
volatility factors of 87% for the year ended December 31, 1997 and  45%  to
50%  for  the  year  ended December 31, 1996; and an expected  option  term
ranging from 5 to 10 years for both periods.

Compensation  expense  of approximately $550,725  has  been  attributed  to
common stock options granted in August 1996. This compensation expense will
be  recognized  over the three year vesting period, of which  $174,420  and
$60,993  was  recognized  as of December 31, 1997 and  1996,  respectively.
Additionally, compensation expense of approximately $126,000 is included in
1997 for options whose vesting was accelerated in 1997.

8. Leases
Operating Leases
At  December 31, 1997, the Company was committed under operating leases for
equipment,  vehicles and facilities with initial terms  of  more  than  one
year.   The vehicle leases contain a fair value purchase option at the  end
of  the lease term. The facility lease agreement provides for escalation of
the  lease  payments over the term of the lease, however, rent  expense  is
recognized  using the straight-line method.  Accrued rent related  to  this
facility lease was $264,480 and $147,000 as of December 31, 1997 and  1996,
respectively.   Rent expense related to operating leases  was  $740,772  in
1997, $468,862 in 1996 and $108,800 in 1995.

Minimum lease payments under the noncancelable leases are as follows:

           1998                            $ 748,908
           1999                              815,928
           2000                              815,928
           2001                                    -
           2002                                    -

                Total minimum obligations $2,380,764

Capital Lease Obligations
The  Company is obligated under capital leases for certain office equipment
that  expire  on various dates through the year 2000. Future minimum  lease
payments under these leases are as follows:

           1998                           $    94,740
           1999                                84,914
           2000                                25,389
           2001                                     -
           2002                                     -

                Total minimum obligations     205,043
                Less:  amount  representing
                interest                       51,746

                Present  value  of  minimum
                lease payments                153,297
                Less: current portion          61,360

                                           $   91,937

9. Income Taxes
Deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                             December 31,
                                           1997         1996
           <S>                      <C>            <C>
           Gross deferred tax assets:
                Carryforwards:
                     Research tax
                     credits          $  447,000     $ 314,000
                  Net operating
                  losses              13,841,000     6,517,000
                Other assets           1,316,000     1,164,000

           Gross deferred tax assets  15,604,000     7,995,000

           Gross deferred tax
           liabilities                   (21,000)      (44,000)

           Valuation allowance       (15,583,000)  (7,951,000)

                                     $         -  $         -
</TABLE>

The  Company  has  provided a valuation allowance for the  full  amount  of
deferred  tax  assets  in  excess of deferred  tax  liabilities  since  the
realization of these future benefits cannot be reasonably assured as of the
end  of  each  related period. If the Company achieves  profitability,  the
deferred tax assets may be available to offset future income taxes.

At  December 31, 1997, the Company had approximately $34 million of federal
net  operating  loss carryforwards that expire in years 2008 through  2012,
approximately  $34  million of state net operating loss carryforwards  that
expire  in years 1998 through 2002 and research and development tax  credit
carryforwards of approximately $447,000 that expire in years  2009  through
2012.

As  defined  in the Internal Revenue Code, certain ownership changes  limit
the  annual  utilization  of  federal net operating  loss  and  tax  credit
carryforwards.   During  1996, the Company experienced  such  an  ownership
change  that  limits the amount of federal net operating loss carryforwards
and research tax credits that can be utilized in any one taxable year.   At
December  31,  1997 the approximate Section 382 annual limitation  is  $4.6
million  for  net  operating loss carryforwards and  research  tax  credits
incurred prior to the ownership change.

10. Disclosure about Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, amounts due from officer,
prepaid  expenses, current maturities of long-term debt, accounts  payable,
accrued  expenses,  customer  advances and deposits  and  deferred  revenue
approximates  fair  value  because  of  the  short-term  nature  of   those
instruments.

The  fair  value  of  long-term  debt is estimated  based  upon  management
estimates  and  current interest rates offered to the  Company  on  similar
debt.  The  estimated  fair  value  of the  Company's  debt  (see  Note  5)
approximates its carrying value as of December 31, 1996.

11. Related Party Transactions
In  connection with certain debt and equity offerings described in Notes  5
and    6,    the    Company   engaged   Knickerbocker   Securities,    Inc.
("Knickerbocker"), whose president is a shareholder and was a  director  of
the  Company during 1994 and a portion of 1995, as their investment banker.
Amounts  attributed  to debt and equity offerings  in  1996  and  1995  for
Knickerbocker's services were $150,000 and $214,126, respectively.

The  Company entered into an agreement with Knickerbocker on September  20,
1994,  in  which  Knickerbocker would advise the  Company  with  regard  to
financial  matters  and  methods  of  financing  for  a  three-year  period
commencing on January 1, 1996 for a fee of $1,000 per month. In March 1996,
the  Company  terminated this agreement as well as all previous  agreements
with Knickerbocker. Amounts expensed relating to the advisory agreement and
the termination of all existing agreements were $25,000 and $80,260 for the
year  ended December 31, 1996 and 1995, respectively. Additionally,  32,433
and  554  common stock purchase warrants were granted in 1996 as settlement
for  a  compensation claim.  These warrants expire on  June  27,  2001  and
October 10, 2001, respectively.

Amounts  recorded as "Due from officer" represent an advance for relocation
costs.

A  member  of  the  Company's Board of Directors  is  a  partner  with  the
Company's primary legal firm.

In  connection  with the Interim Financing (see Note 5), a director  and  a
director's  spouse  purchased  $250,000 and  $100,000  of  the  notes,  and
received 3,750 and 1,500 of the related warrants, respectively.

12. Commitments and Contingencies
On January 8, 1996, the Company signed a seven-year agreement with a vendor
for  the supply of inks and printheads.  The agreement provides the Company
with  worldwide  rights,  as  defined.  The Company  must  pay  the  vendor
royalties  and license fees upon achieving certain volume purchase  levels.
The  agreement also includes certain exclusivity features that benefit  the
Company.   To  maintain  the  exclusivity  rights,  quarterly  payments  of
$250,000  are required beginning January 1, 1996 and ending on  October  1,
1997, and the Company must purchase all ink and printhead requirements from
the  vendor and purchase specified minimum amounts each year.  The  Company
has  the option to terminate the exclusive rights leaving all other aspects
of  the  agreement  unchanged.  Currently, it is the  Company's  intent  to
maintain the rights.

Effective January 1994, the Company entered into employment agreements with
two  of its executive officers reflecting a five-year term and a three-year
term  with  an  automatic  three-year renewal period,  respectively.  These
agreements  are  subject to termination by either party,  and  provide  for
salary  continuation  and  benefits for a specified  period  under  certain
circumstances  including a change in control (as defined) of  the  Company.
As  of December 31, 1997, if all of the employees under contract were to be
terminated  by  the  Company  without cause  (as  defined),  the  Company's
liability would be approximately $470,000.

13. Significant Fourth Quarter Event
In  the  fourth  quarter of 1997, the Company took a  charge  for  obsolete
inventory  due to the enhancement of the Company's product from  narrow  to
wide  printhead  systems  and  a cancellation charge  related  to  purchase
commitments of inventory totaling $1,250,000 and $300,000, respectively.

14. Subsequent Events
On  January  13,  1998  the  Company completed a private  equity  financing
providing net proceeds to the Company of $3.9 million.   In connection with
the  financing,  the  Company issued 4,500 shares of Series  B  Convertible
Preferred Stock at a price of $1,000 per share and warrants to purchase the
Company's  common stock.  The warrants issued are exercisable into  300,000
shares  of  common stock with an exercise price of $2.75 and an  expiration
date  of  January 9, 2003.  Additionally, warrants exercisable into 115,385
shares  of  common stock with an exercise price of $2.50 and an  expiration
date  of  January 9, 2003 were issued to the placement agent  for  services
provided.  In connection with the sale of the units, the Company agreed  to
register  the  common stock issuable upon the conversion of  the  Series  B
Convertible Preferred Stock and the execution of the warrants.

The  Series B Convertible Preferred Stock ("Series B Stock"), no par  value
per share, is convertible into such number of shares of common stock as  is
determined by dividing the stated value ($1,000) of each share of Series  B
Stock  (as such value is increased by an annual premium of 6%) by the  then
current  conversion  price  of  the Series B Stock  (which  is  determined,
generally,  by reference to 85% of the average of the closing market  price
of  the  common stock during the five consecutive trading days  immediately
preceding  the  date of determination) subject to certain restrictions  and
adjustments.   The  Series  B Stock has voting rights  as  defined  in  the
Company's Certificate of Incorporation, bears no dividends and ranks  prior
to the Company's Common Stock and Series A Preferred Stock. In the event of
any  voluntary  or  involuntary liquidation of the Company,  the  Series  B
holders  shall be entitled to a liquidation preference equal to the  stated
value  of  the  stock plus the accrued premium through the  date  of  final
distribution.   Upon  occurrence of specific  events,  as  defined  in  the
agreement, the holder may redeem the Series B Stock for cash or  shares  at
the  option  of  the  Company.  The Company also  has  optional  redemption
rights.

The  Company  has  reserved 6,300,000 shares of common stock  for  issuance
pursuant  to the conversion of the Series B Stock.  This number  of  shares
represents  an estimate based on 200% of the number of common  shares  that
would  have been issuable upon conversion with an exercise price of  $1.875
per  share (4,800,000) and 1,500,000 shares issuable under the terms of the
Certificate of Designation in the event of certain failures by the  Company
to  comply  with various provisions thereof.  The actual number  of  shares
issuable  upon  conversion  could be materially  less  or  more  than  such
estimated  number  depending on factors that cannot  be  predicted  by  the
Company.  The number of shares issuable upon conversion is dependent on (a)
the market price of the common stock at the time of the conversion, (b) the
Company's  ability  to maintain its NASDAQ listing and  (c)  the  Company's
ability  to  obtain shareholder approval for the issuance of  common  stock
upon  the  conversion  of  Series B Stock and  the  related  warrants.   In
addition,  415,385  shares  of  common stock,  subject  to  adjustments  in
accordance  with  the  terms of each warrant, were  reserved  for  issuance
pursuant to the exercise of the warrants described above.

The  terms  of  conversion of the Series B Stock  issued  in  January  1998
afforded the holders a conversion price lower than the market price of  the
common  stock  at  the  time  of  issuance.   The  difference  between  the
conversion  price and market price will be treated as an imputed (non-cash)
dividend for purposes of calculating earnings per common share, although no
assets  of  the  Company  will  be  expended.   The  imputed  dividend   is
approximately $920,000 and will have the effect of increasing the 1998  net
loss  per  common  share.   The imputed dividend will  be  given  no  other
accounting  treatment in the 1998 financial statements of the  Company  and
beyond.

Depending  on the number of shares of Series B Stock converted into  common
shares  and the timing of such conversions, the transactions may result  in
further Section 382 annual limitations of net operating loss carryforwards.

Item  9.   Changes in and Disagreements with Accountants on Accounting  and
Financial Disclosures
None.
                                 PART III

Item 10.  Directors and Executive Officers of the Registrant
Information  with  respect  to Directors may be  found  under  the  caption
"Election  of Directors" on pages 2 and 3 of the Company's Proxy  Statement
dated April 1, 1998, for the Annual Meeting of Shareholders to be held  May
8, 1998 (the "Proxy Statement"). Such information is incorporated herein by
reference.

The executive officers of Accent Color as of March 6, 1998 were as follows:

  Name                  Age         Position with the Company
Richard J. Coburn        66        Chairman of the Board
Norman L. Milliard       55        President and Chief Executive Officer
Patrick J. Pedonti       46        Vice President, Treasurer and Chief
                                   Financial Officer
Martyn R. Jones          41        Vice President, Corporate Development
George T. Dolan          42        Vice President, Operations

Richard  J.  Coburn  has  been Chairman of the Board  since  May  1996  and
cofounded  the Company in May 1993. Mr. Coburn served as President  of  the
Company  from May 1993 until May 1996 and served as Chief Executive Officer
of the Company from May 1993 until August 1996.

Norman  L.  Milliard has been President of the Company since May 1996,  has
been  Chief  Executive Officer of the Company since  August  1996  and  was
elected  a  director of the Company in 1995. Mr. Milliard  served  as  Vice
President  of  the Company from January 1994 until May 1996.  Mr.  Milliard
joined the Company in January 1994.

Patrick  J. Pedonti has been Vice President and Chief Financial Officer  of
the Company since March 1997. Mr. Pedonti joined the Company in March 1997.

Martyn  R. Jones has been Vice President of the Company since May 1996.  He
served  as Director of Marketing from November 1995 to May 1996. Mr.  Jones
joined the Company in November 1995.

George T. Dolan has been Vice President of the Company since January  1998.
He  served  as Director of Operations from July 1996 to January  1998.   He
served  as Director of Materials and Quality from April 1996 to July  1996.
Mr. Dolan joined the Company in April 1996.

Item 11.  Executive Compensation
The  information  in  the  Proxy Statement set  forth  under  the  captions
"Executive  Compensation"  on  pages 7  through  10  and  "Compensation  of
Directors" on page 5 is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Principal Shareholders and Key
Personnel"  on  page  5  of the Proxy Statement is incorporated  herein  by
reference.

Item 13.  Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions" on page
11 of the Proxy Statement is incorporated herein by reference.



                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)  Financial Statements and Schedules
   The  financial  statements as set forth under Item 8 of this  report  on
   Form 10-K are incorporated herein by reference.
   Financial  statement schedules have been omitted since they  are  either
   not required, not applicable, or the information is otherwise included.

(b)  Reports on Form 8-K
   No  reports  on  Form 8-K were filed during the last quarter  of  fiscal
   1997.

(c)  Exhibit Listing
   Exhibit
    Number  Description
  3.1, 4.1  Restated  Certificate  of  Incorporation  of  the  Company,  as
            amended.(2)
  3.2, 4.2  Bylaws of the Company, as amended December 29, 1997.(2)
            10.1  Product  Development  and  Distribution  Agreement  dated
            February    16,   1996   between   the   Company   and    Xerox
            Corporation.(1)
            10.2  Letter  of Understanding dated July 2, 1996  between  the
            Company   and  Xerox  Corporation  supplementing  the   Product
            Development and Distribution Agreement.(1)
            10.3   Amendment   to  Product  Development  and   Distribution
            Agreement  between  the  Company and  Xerox  Corporation  dated
            February 29, 1996.(1)
            10.4  Loan  Agreement Promissory Note dated February  29,  1996
            between the Company and Xerox Corporation.(1)
            10.5  Product  Purchase Agreement dated April 16, 1996  between
            the     Company    and    International    Business    Machines
            Corporation.(1)
            10.6  Letter Agreement supplementing Product Purchase Agreement
            between   the  Company  and  International  Business   Machines
            Corporation dated February 23, 1996.(1)
            10.7  OEM  Supply Agreement dated January 8, 1996  between  the
            Company and Spectra, Inc.(1)
            10.8  Amendment  No. 1 to the OEM Supply Agreement  dated  July
            12, 1996 between the Company and Spectra, Inc.(1)
            10.9  Lease  Agreement  dated February  16,  1996  between  the
            Company John Hancock Mutual Life Insurance Company.(1)
            10.10      Memorandum of Understanding dated October  10,  1996
            between the Company and Oce van der Grinten, N.V.(1)
            10.11      Accent  Color  Sciences, Inc. 1995  Stock  Incentive
            Plan.(1)
            10.12      Employment Agreement dated December 14, 1993 between
            the Company and Norman L. Milliard.(1)
            10.13      Amendment No. 1 to Employment Agreement between  the
            Company and Norman L. Milliard dated as of January 1, 1995.(1)
            10.14      Employment Agreement dated December 14, 1993 between
            the Company and Richard J. Coburn.(1)
            10.15      Consulting Agreement dated August  2,  1994  between
            the Company and Peter Teufel.(1)
            10.16      Consulting Agreement dated May 3, 1996  between  the
            Company and Raymond N. Smith.(1)
            10.17      Consulting Agreement Dated August  2,  1994  between
            the Company and Klaus Werding.(1)
            10.18     Letter Agreement dated February 28, 1996 between  the
            Company and Pennsylvania Merchant Group Ltd.(1)
            10.19      Letter  Agreement  dated May  6,  1996  between  the
            Company and Pennsylvania Merchant Group Ltd.(1)
            10.20      Termination Agreement dated August 20, 1996  between
            the Company and Pennsylvania Merchant Group Ltd.(1)
            10.21      Termination Agreement dated March 29,  1996  between
            the Company and Knickerbocker Securities, Inc.(1)
            10.22      Form of nondisclosure agreement between the  Company
            and its employees.(1)
            10.23      Form  of Registration Rights Agreement  Relating  to
            sale of Preferred Stock of the Company.(1)
            10.24      Form  of Registration Rights Agreement  Relating  to
            sale of Series III Debentures of the Company.(1)
            10.25      Form  of registration Rights Agreement  Relating  to
            warrants  issued  in connection with Series III  Debentures  of
            the Company.(1)
            10.26      Form  of Registration Rights Agreement  Relating  to
            Warrants issued in connection with Series IV Debentures of  the
            Company.(1)
            10.27      Form  of Registration Rights Agreement  Relating  to
            sale of Common Stock of the Company.(1)
            10.28      Registration Rights Agreement Relating  to  Warrants
            issued by the Company to Xerox Corporation.(1)
      10.29 Form  of  Registration  Rights Agreement Relating  to  Warrants
            issued pursuant to sale of Interim Notes.(1)
      10.30 Form of Securities Purchase Agreement dated as of 1/09/98.(3)
      10.31 Certificate of Designations, Preferences and Rights  of  Series
            B Convertible Preferred Stock.(3)
      10.32 Form  of  Warrant  issued in connection with the  1998  Private
            Placement.(3)
      10.33 Form of Registration Rights Agreement dated as of 1/09/98.(3)
      23   Consent of Price Waterhouse LLP
            24    Power  of  Attorney pursuant to which  this  Registration
            Statement has been signed on behalf of certain Directors.
            27   Financial Data Schedule
________________
(1)  Incorporated by reference to Registration Statement 333-14043 on Form
     S-1.
(2)  Incorporated by reference to Registration Statement 333-43467 on Form
     S-3.
(3)  Incorporated by reference to Registration Statement 333-45321 on Form
     S-3.

Signatures
Pursuant  to  the  requirements of Section 13 or 15(d)  of  the  Securities
Exchange  Act  of 1934, the registrant has duly caused this  report  to  be
signed on its behalf by the undersigned, thereunto duly authorized, in  the
City of East Hartford, State of Connecticut, on March 26, 1998.

                                   ACCENT COLOR SCIENCES, INC.


                                   By   /s/ Norman L. Milliard
                                          Norman L. Milliard
                                   President and Chief Executive Officer

Pursuant  to the requirements of the Securities Exchange Act of 1934,  this
report  has  been  signed  below  by the following  persons  on  behalf  of
Registrant and in the capacities indicated on March 26, 1998.

     Signature                       Title                         Date

  /s/ Norman L. Milliard
      Norman L. Milliard      President and Chief Executive     March 26, 1998
                              Officer(Principal Executive Officer)


  /s/ Patrick J. Pedonti
      Patrick J. Pedonti      Vice President, Treasurer         March 26, 1998
                              and Chief Financial Officer
                             (Principal Financial and Accounting Officer)


              *
      Richard J. Coburn       Director                          March 26, 1998

              *
       Robert H. Steele       Director                          March 26, 1998

              *
       Richard Hodgson        Director                          March 26, 1998

              *
   Willard F. Pinney, Jr.     Director                          March 26, 1998

*By: Norman L. Milliard
     Norman L. Milliard
     Attorney-in-fact