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


                                FORM 10-K/A

        AMENDMENT NUMBER 1 TO THE ANNUAL REPORT PURSUANT TO SECTION
                                13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                For The Fiscal Year Ended December 31, 1998

             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.  /X/

 The aggregate market value of common stock held by non-affiliates of the
              registrant as of March 5, 1999 was $7,038,099.

  The number of shares outstanding of the registrant's common stock as of
                       March 5, 1999 was 13,942,721.

                    DOCUMENTS INCORPORATED BY REFERENCE
                                   None.

   The registrant is amending its Annual Report on Form 10-K to include
                      amendments to Items 6, 7 and 8.



                        ACCENT COLOR SCIENCES, INC.

                                FORM 10-K/A
                   For The Year Ended December 31, 1998
                                   INDEX

Part II
Item 6.   Selected Financial Data                                     3
Item 7.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations                        4
Item 8.   Financial Statements and Supplementary Data                11
Signatures                                                           28




Item 6.  Selected Financial Data

<TABLE>
<CAPTION>

                             For the year ended December 31,
                        1994      1995      1996      1997      1998
<S>
Statement of
Operations Data:
                   <C>         <C>        <C>       <C>       <C>
Sales              $      -    $     -    $     -   $ 1,578   $ 8,220
Costs and
expenses:
 Costs of
  production              -          -      1,272     7,397     9,836
 Research and
  development           805      3,051      6,932     8,786     4,249
 Marketing,
  general and
  administrative        336      1,003      4,394     4,439     3,822
 Related party
  administrative
  expense                 -         80         25         -         -
                     ------     ------     ------    ------    ------
                      1,142      4,134     12,623    20,622    17,907
Other(income)
expense:
 Interest expense        12         83        656       246       200
Interest income           -          -       (113)     (599)     (117)
                     ------     ------     ------    ------    ------
                         12         83        543      (353)       83
Net  loss  before    ------     ------     ------    ------    ------
 extraordinary item  (1,154)    (4,217)   (13,166)  (18,691)   (9,770)
                     ------     ------     ------    ------    ------
Extraordinary
item:
 Loss on early
 extinguishment of
 debt, net  of
 income taxes of nil      -          -      (573)         -         -
                     ------     ------     ------    ------    ------
Net loss             (1,154)    (4,217)  (13,739)   (18,691)   (9,770)
                     ------     ------     ------    ------    ------

Non-cash  imputed
dividend on
mandatorily
redeemable
convertible
preferred stock           -         -          -          -      (920)
                     ------     ------     ------    ------    ------
Net loss
applicable to
common stock       $ (1,154)  $(4,217)   $(13,739) $(18,691)  $(10,690)
                    =======    =======     ======    ======    =======
Net  loss  (basic
and  diluted) per
common share:      $  (.66)   $ (2.33)   $  (3.57) $  (1.77)  $   (.87)
Weighted  average  =======    =======     ======    ======    =======
common shares
outstanding      1,756,841  1,809,240   3,852,982  10,566,890 12,330,903
                 =========  =========   =========  ========== ==========
</TABLE>

<TABLE>
<CAPTION>
                                         December 31,

                           1994     1995     1996      1997      1998
<S>
Balance Sheet Data:
Cash and cash            <C>       <C>     <C>       <C>       <C>
 equivalents             $ 165     $  1    $ 20,289  $ 4,006   $ 1,048
Working capital
 (deficit)                 (86)  (1,862)     18,189    4,836     2,646
Total assets                246     728      26,951   12,407     6,860
Short-term debt               -      50       1,000        -         -
Long-term debt,  less
 current portion              -   2,020       1,272        -     2,236
Mandatorily
 redeemable
 convertible preferred
 stock                        -      -           -         -     3,097
Total   shareholders'
 equity (deficit)           (57)(3,164)     19,345     7,270    (1,307)

</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")  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,  model HC1 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.

On  March 27, 1998, the Company and IBM announced the availability of the
IBM  InfoPrint Hi-Lite Color post processor, Model HC2.  The  Model  HC2,
which incorporates Accent Color Sciences' spot color printing technology,
increases  color coverage capability by over 250% compared to  the  Model
HC1.  The  Model  HC2  supports configurations of most  models  of  IBM's
InfoPrint 4000 and 3900 continuous form high-speed printers.

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.

Results of Operations
Comparison  of  Year Ended December 31, 1998 to Year Ended  December  31,
1997

Total Net Sales.  The Company currently sells its Truecolor system with a
90-day  warranty, which starts when the printer is installed at the  end-
user  customer  site. Prior to the quarter ended December 31,  1998,  the
Company deferred revenue on printer shipments until the end of the 90-day
warranty period. During the quarter ended December 31, 1998, the Company,
in  accordance  with  its revenue recognition policy  on  printer  sales,
determined  that it had adequate warranty experience to begin recognizing
revenue  upon  shipment  of  printers to its primary  OEM  customer.  The
Company  will  continue to defer revenue on shipments to its  second  OEM
customer until systems are in production and are past the warranty period
or  until  the Company has adequate warranty history with that  customer.
As  of  December 31, 1998 and 1997, the Company had deferred  revenue  of
$595,000 and $2,496,000 related to Truecolor Systems shipped.  Total  net
sales  were  $8,220,000 for the year ended December 31, 1998 compared  to
$1,578,000 for the year ended December 31, 1997.  Of the sales recognized
in  1998,  $2,496,000 resulted from deferred revenue  recorded  in  1997.
Printer  sales  represented 81% of total net sales  for  the  year  ended
December  31, 1998 while sales of consumables and spare parts represented
19%.

Printers.  Printer sales were $6,654,000 for the year ended December  31,
1998  compared to $658,000 for the year ended December 31, 1997.  Of  the
sales  recognized  in  1998, $2,496,000 resulted  from  deferred  revenue
recorded  in  1997.  Sales for 1998 consisted of 48 new  systems  and  25
system  upgrades.   A  total of 27 systems and 23  system  upgrades  were
shipped during 1998, of which 5 systems shipped in 1998 were recorded  as
deferred  revenue.   Below is a summary of system  shipments  and  system
revenue for the year ended December 31, 1998:


                                       Units                Dollars
                                     New      System    New Systems &
                                 Systems    Upgrades         Upgrades

        Deferred revenue as of
        December 31, 1997             26           2       $ 2,496,000
           Plus: Shipments in 1998    27          23         4,753,000
           Less: Revenue             (48)        (25)       (6,654,000)
                 recognized in 1998
        Deferred revenue as of
        December 31, 1998              5           -       $   595,000


As of December 31, 1998, the Company's backlog consisted of 35 systems, 3
system upgrades and consumables totaling $4,838,000.

Consumables  and  Spare Parts Sales.  Consumables and spare  parts  sales
were $1,566,000 for the year ended December 31, 1998 compared to $920,000
for the year ended December 31, 1997.

Costs  of Production.  Costs of production increased from $7,397,000  for
the  year  ended  December  31, 1997 to $9,836,000  for  the  year  ended
December  31,  1998.  This increase was attributed to the cost  of  goods
sold  related to the increased sales of printers, consumables  and  spare
parts  totaling  $5,877,000 and was off-set by reduced overhead  spending
mainly  in  payroll related costs and reductions in charges for inventory
reserves totaling $1,142,000 and $1,814,000, respectively.

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
decreased  52% from $8,786,000 for the year ended December  31,  1997  to
$4,249,000  for the year ended December 31, 1998 as the Company  directed
its   efforts  toward  production  and  market  development   with   less
significant  emphasis  on  research  and  development.  The  decrease  in
research  and development was primarily attributed to four major factors:
(i)  a  reduction  in payroll and related costs due to the  reduction  in
personnel in 1998, (ii) a reduction in design and development costs  paid
to  Spectra associated with the development of ink jet printheads for the
enhanced  wide-head version of the Truecolor Model HC2 system, (iii)  the
Company's  completion of the payments, in 1997, to  Spectra  to  maintain
exclusivity rights, and (iv) a decrease in general design and development
costs.

Marketing,  General and Administrative Expenses.  Marketing, general  and
administrative  expenses decreased from $4,439,000  for  the  year  ended
December  31,  1997 to $3,822,000 for the year ended December  31,  1998.
This  decrease was primarily due to a reduction in payroll related  costs
as  a  result of the reduction in administrative personnel in 1998 and  a
reduction  in professional service costs. These items were offset  by  an
increase  in  marketing  and service expenses of approximately  $443,000,
which  included  increased marketing costs for travel and consultants  to
support  the increased sales and marketing efforts and a reclassification
of service related costs. Service costs, consisting primarily of customer
technical  support, were classified as costs of production  during  1997.
Beginning  in  1998, such costs are now classified as marketing,  general
and administrative.

Interest  Expense and Other (Income) Expense.  Interest expense decreased
18.7% from $246,000 for the year ended December 31, 1997 to $200,000  for
the  year ended December 31, 1998.  This decrease was due to the  Company
having an outstanding loan from Xerox for the full year 1997 compared  to
a  similar sized loan from IBM for only 7 months in 1998. Interest income
decreased  80.5% from $599,000 for the year ended December  31,  1997  to
$117,000 for the year ended December 31, 1998.  This decrease in interest
income  was  attributed  to  a  greater  amount  of  cash  available  for
investment in 1997 as compared to 1998.

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.


Liquidity and Capital Resources
The Company's need for funding has increased from period to period as  it
has  increased  its marketing, sales and service efforts,  continued  its
research  and  development  activities for the enhancement  of  Truecolor
systems  and  increased  production of Truecolor systems.  To  date,  the
Company has financed its operations through customer payments, borrowings
and the sale of equity securities.

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 Mandatorily
Redeemable 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.

On  July 21, 1998, the Company entered into a loan agreement with IBM  to
borrow  $2.5 million at a fixed interest rate of 10% per year.   Interest
payments are due quarterly beginning October 1, 1998.  The loan is due in
full  on  December 31, 2000 and is secured by the assets and intellectual
property  of  the  Company.  As part of the loan agreement,  the  Company
issued  a  warrant  to  IBM that provides the right to  purchase  500,000
shares of common stock at an exercise price of $2.50 per share, until the
warrant  expires on July 21, 2003.  The warrant was valued  at  $325,000,
which  was allocated to common stock with an equivalent discount  on  the
loan.   The  discount  is  being amortized over  the  life  of  the  loan
resulting in a non-cash charge to interest expense.  Amortization expense
was $60,593 for the year ended December 31, 1998.

Operating  activities consumed $9.2 million in cash in 1998  compared  to
$18.9  million  in  1997.  This decrease was primarily  attributed  to  a
decrease  in  the net loss of the Company and a decrease in  inventories.
This  was  partially  offset  by an increase in  accounts  receivable,  a
decrease in accrued expenses and a decrease in deferred revenues.

Capital  expenditures decreased 87% from $1.3 million for the year  ended
December  31,  1997  to $169,000 for the year ended  December  31,  1998.
Capital  expenditures  during 1998 primarily  reflected  acquisitions  of
equipment  to  support  the  Company's  manufacturing  activities.   This
decrease   was   primarily  attributed  to  lower  capital   expenditures
requirements  in  1998,  since in 1997, the  Company  had  completed  the
majority of equipment acquisitions to support its near-term manufacturing
needs. The Company had no significant capital expenditure commitments  at
December 31, 1998.

During  1998, the Company continued to adjust its staffing levels from  a
high  of  140 full-time, part-time and contract employees as of  December
31, 1997 to 67 employees as of December 31, 1998.  On March 11, 1999, the
Company  completed  a reduction of personnel to align its  expenses  with
current  sales  demand.  In connection with this reduction,  the  Company
eliminated  19  positions and recorded a charge of approximately  $61,000
for employee severance.  Of the total reduction, approximately 37% was in
the  area  of  operations, 53% in research and  development  and  10%  in
marketing, general and administrative.

As  of  December 31, 1998, the Company's primary source of liquidity  was
cash  and  cash equivalents totaling $1.0 million. Based on  the  current
operating plan of the Company, the primary requirements for cash  through
the  remainder  of 1999 will be to fund operating losses,  marketing  and
sales efforts, commercial production of the enhanced Truecolor System and
the  further  development and enhancement of the Company's products.  The
Company's  currently  planned  research and  development  activities  are
focused  on  value  engineering  to  improve  system  profit  margin  and
developing  higher resolution ink jet printing and other enhancements  to
the Truecolor Systems.

Based  on  its  current  operating plan,  the  Company  anticipates  that
additional  financing  will  be required to finance  its  operations  and
capital  expenditures  during  the second half  of  1999.  The  Company's
currently anticipated levels of revenue and cash flow are subject to many
uncertainties and cannot be assured. The amount of funds required by  the
Company  will depend on many factors, including the extent and timing  of
sales  of Truecolor Systems, product costs, engineering and customer  and
technical  support  requirements.  The  inability  to  obtain  additional
financing  and to 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. The Company expects that quarterly
net losses will continue through at least the fourth quarter of 1999.


Year 2000
Year  2000  Compliance. The information presented below related  to  year
2000  compliance contains forward-looking statements that are subject  to
risks   and  uncertainties.  The  Company's  actual  results  may  differ
significantly from the results discussed below and elsewhere in this Form
10-K regarding Year 2000 compliance.
Year  2000  Issue Defined. The Year 2000 ("Y2K") issue is the  result  of
certain   computer  hardware,  operating  system  software  and  software
application  programs having been developed using two digits rather  than
four  digits  to  define a year. For example the  clock  circuit  in  the
hardware  may be incapable of holding a date beyond the year  1999;  some
operating  systems recognize a date using "00" as the  year  1900  rather
than  2000  and  certain  applications may have limited  date  processing
capabilities. These problems could result in the failure of major systems
or miscalculations, which could have material impact on companies through
business  interruption or shutdown, financial loss, damage to reputation,
and legal liability to third parties.

State   of   Readiness.  The  Company's  Information  Technology   ("IT")
department  began  addressing the Y2K issue in 1996 as we  evaluated  the
purchase  of new software applications and hardware systems.  During  the
fourth  quarter  of 1996, IT researched methodologies to manage  the  Y2K
program  and  established a process that matched the resources  available
within  the  Company. The initial step in the process was to  organize  a
team  of  both  IT and non-IT employees and explain their  roles  in  the
process. The second step of the process was to establish an inventory  of
all  potential  areas  where the Y2K problem could exist.  The  inventory
included;  server  hardware  (BIOS),  server  operating  systems,  server
application  software, network device hardware and software, PC  hardware
(BIOS),  PC  operating  systems, PC application software,  phone  system,
security system, the Company's products (hardware BIOS and software), and
our  vendors. Each area listed in the inventory was assigned  to  a  team
member  to  evaluate  the  current  Y2K compliance  and  where  required,
recommend  a  solution correct a Y2K problem. A database was created  for
all  items to track the status to completion. All IT systems, except  the
phone  system,  have been updated to be Y2K complaint. The  phone  system
will  be updated in second quarter, 1999. During second quarter 1999,  we
will  test  the compliance of primary software applications in  our  test
environment  to  confirm that vendor statements are consistent  with  our
test results.

Accent Color Sciences Products. The Company designs and manufactures high-
speed  color  printing  systems for integration with  digital  high-speed
black  on  white printers. The Company has tested and confirmed that  the
printer's  BIOS are compliant where required. Software that  operates  on
the  printer has been tested and is confirmed to be Y2K compliant. Future
software releases will include as part of the software regression test  a
reconfirmation that the software remains Y2K compliant.

Third  Party Relationships. The Company's business operations are heavily
dependent on third party materials suppliers. The Company is working with
all key external partners to identify and to mitigate the potential risks
of  Y2K. The failure of external parties to resolve their own Y2K issues,
in  a  timely  manner, could result in a material financial risk  to  the
Company.  As  part  of the overall Y2K program, the Company  is  actively
communicating  with  third  parties through correspondence.  Because  the
Company's  Y2K  compliance is dependant on the timely Y2K  compliance  of
third parties, there can be no assurance that the Company's efforts alone
will resolve all Y2K issues.

Contingency  Plans. The Company has not conducted its assessment  of  the
reasonably likely worst case scenario of systems or product failures  and
their related consequences. It is expected that the planned testing of IT
systems  and the completed testing of the Company's product testing  will
greatly reduce the need for substantial contingency planning. Contingency
planning, if required, would begin in third quarter, 1999.

Costs  to  Address Year 2000 Issues. The Y2K costs incurred to date  have
not  been material. Most software applications, BIOS and operating system
upgrades  to Y2K compliance were incorporated into the Company's standard
licensing agreements. As part of the contingency planning effort we  will
examine additional potential Y2K costs, where applicable.



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.

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 cost associated  sales
and  marketing and customer technical support and the Company's operating
results.   There  can  be  no  assurance that,  when  needed,  additional
financing  will be available, or available on acceptable terms,  and  the
Company's  ability to raise additional funds has been adversely  impacted
by  the  March  17,  1999 delisting from the NASDAQ  Stock  Market.   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.

Limited  Operating  History;  History Of Losses;  Uncertainty  Of  Future
Financial  Results.  The Company was formed in May 1993 and  has  limited
operating  history. The Company incurred losses in each year of existence
and  incurred  a net loss of $10,690,000 for the year ended December  31,
1998.  As a result of these losses, as of December 31, 1998, the  Company
had  an accumulated deficit of $47,615,000. It is expected that quarterly
net  losses will continue through at least the fourth quarter of 1999 and
that the Company will incur a net loss for 1999.
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.  The  Company's  products  are  installed  in
extremely  demanding  environments and there  can  be  no  assurance  the
Company's  systems will operate successfully in combination  with  mature
black-on-white host systems.

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,  1998,  the  Company  had
contracts  with only two customers, IBM and Groupe SET. There can  be  no
assurance that these customers will purchase a significant volume of  the
Company's products.

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.

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.

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.

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.

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.

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), after the reclassification described in Note 7, present fairly,
in all material respects, the financial position of Accent Color Sciences,
Inc. at December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.  These
financial  statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based  on  our  audits.  We conducted our audits of these  statements  in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant  estimates  made by management, and  evaluating  the  overall
financial  statement presentation.  We believe that our audits provide  a
reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and
negative cash flows from operations that raise substantial doubt about the
Company's ability to continue as a going concern. The Company's plans in
regard to this matter are described in Note 1.  The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.



/s/  PricewaterhouseCoopers LLP

Hartford, Connecticut
March 9, 1999, except as to Note 7
which is as of September 14, 1999



                          ACCENT COLOR SCIENCES, INC.
                                BALANCE SHEETS

                                          December 31,
<TABLE>
<CAPTION>
                                        1998        1997
<S>                              <C>            <C>
Assets
Current assets:
      Cash and cash equivalents   $  1,048,425   $ 4,005,563
     Accounts receivable             1,321,782       439,934
     Inventories (Notes 2 and 4)     2,269,016     4,611,216
     Prepaid expenses and other
      current assets                   216,564       323,306
                                   -----------   -----------
          Total current assets       4,855,787     9,380,019

Fixed assets, net (Notes 2 and 3)    1,933,043     2,974,422
Other assets, net (Note 2)              71,575        52,698
                                   -----------   -----------
          Total assets             $ 6,860,405   $12,407,139
                                   ===========   ===========

Liabilities, Mandatorily Redeemable
Convertible Preferred Stock and
Shareholders' Equity (Deficit)
Current liabilities:
     Obligations under capital
      leases (Note 9)               $   64,014   $    61,360
     Accounts payable                  961,626       859,693
     Accrued expenses (Note 2)         588,966     1,041,383
     Customer advances and deposits
      (Note 2)                               -        85,600
     Deferred revenue (Note 2)         595,000     2,496,000
                                   -----------   -----------
       Total current liabilities     2,209,606     4,544,036

Obligations under capital leases
 (Note 9)                               23,116        91,937
Long-term debt, net of discount
 (Note 5)                            2,235,593             -
Other long-term liabilities (Notes
 8 and 9)                              601,759       501,644

       Total non-current
        liabilities                  2,860,468       593,581
                                   -----------   -----------
          Total liabilities          5,070,074     5,137,617
                                   -----------   -----------
Commitments and contingencies
(Notes 9 and 13)

Mandatorily redeemable convertible
 preferred stock, no par value,
 500,000 shares authorized,
 3500 and 0 issued and outstanding
 (Reclassified Note 7)               3,097,368             -
                                   -----------   -----------
Shareholders' equity (Notes 6 and 8):
Common stock, no par value,
 35,000,000 and 25,000,000
 shares authorized,
 12,841,881 and 11,989,855
 shares issued and outstanding      46,307,927    45,114,633
Accumulated deficit                (47,614,964)  (37,845,111)
                                   -----------   -----------
        Total shareholders'
         equity (deficit)           (1,307,037)    7,269,522
                                   -----------   -----------

        Total liabilities,
         mandatorily redeemable
         convertible preferred
         stock and shareholders'
         equity                   $  6,860,405  $ 12,407,139
                                   ===========   ===========
</TABLE>


  The accompanying notes are an integral part of these financial statements.



                        ACCENT COLOR SCIENCES, INC.
                         STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>


                                    For the year ended December 31,

                                   1998          1997           1996
                                  ------        ------         ------
<S>                            <C>            <C>           <C>
Revenue (Note 2)               $ 8,219,586    $ 1,577,508    $        -
                                ----------     ----------    ----------
Costs and expenses:
    Costs of production          9,836,379      7,396,828     1,272,357
    Research and development     4,248,779      8,786,217     6,932,017
    Marketing, general and
     administrative (Note 12)    3,822,113      4,438,518     4,418,380
                                ----------     ----------    ----------
                                17,907,271     20,621,563    12,622,754
                                ----------     ----------    ----------
Other (income) expense:
     Interest expense              199,572        245,550       655,730
     Interest income              (117,404)      (599,041)     (113,126)
                                ----------     ----------    ----------
                                    82,168       (353,491)      542,604
                                ----------     ----------    ----------

Net loss before extraordinary
 item                           (9,769,853)   (18,690,564)  (13,165,358)

Extraordinary item:
  Loss on early
  extinguishment of debt,
  net of income taxes of
  nil                                    -              -      (573,303)
                                ----------     ----------    ----------
Net loss                        (9,769,853)   (18,690,564)  (13,738,661)
                                ----------     ----------    ----------
Imputed dividend on mandatorily
redeemable convertible preferred
stock (Note 7)                    (920,000)             -             -
                                ----------     ----------    ----------
Net loss applicable to common
 stock                        $(10,689,853)  $(18,690,564) $(13,738,661)
                               ===========    ===========   ===========
Net loss (basic and diluted) per
 common share (Note 2):       $       (.87)  $      (1.77) $      (3.57)
                               ===========    ===========   ===========

Weighted average common shares
  Outstanding (Note 2)          12,330,903     10,566,890     3,852,982
                               ===========    ===========   ===========
</TABLE>


 The accompanying notes are an integral part of these financial statements.


                          ACCENT COLOR SCIENCES, INC.
                           STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                   For the year ended December 31,
<S>                               1998            1997           1996
Cash flows from operating        ------          ------         ------
activities:                 <C>             <C>             <C>
 Net loss                   $ (9,769,853)   $ (18,690,564)  $ (13,738,661)

 Adjustments to reconcile
 net loss to net cash used in
 Operating activities:
   Depreciation and
    amortization               1,208,368        1,128,533         974,184
   Expense related to
    stock and options
    granted                       13,054          345,230               -
   Loss on disposal of
    fixed assets                   4,552           11,460          82,691
   Conversion of accrued
    interest to common stock           -                -         231,147
   Extraordinary loss on
    extinguishment of debt             -                -         573,303
Changes in assets and
liabilities:
   Accounts receivable          (881,848)        (410,463)        (29,471)
   Inventories                 2,342,200       (1,248,964)     (3,362,252)
   Prepaid expenses and
    other assets                 106,742          188,327        (523,487)
   Accounts payable and
    accrued expenses            (350,484)        (717,230)      1,366,969
   Customer advances and
    deposits                     (85,600)      (1,301,800)        837,400
   Deferred revenue           (1,901,000)       1,546,000         950,000
   Other long-term
    liabilities                   87,061          293,642         133,091
                             -----------      -----------     -----------
Net cash used in
operating activities          (9,226,808)     (18,855,829)    (12,505,086)
                             -----------      -----------     -----------
Cash flows from investing
activities:
  Proceeds from sale of fixed
   assets                         58,475                -           5,524
  Purchases of fixed assets     (168,776)      (1,256,244)     (2,611,891)
  Cost of patents                (19,524)         (21,666)        (28,534)
                             -----------      -----------     -----------
Net cash used in
investing activities            (129,825)      (1,277,910)     (2,634,901)
                             -----------      -----------     -----------

Cash flows from financing
activities:
  Payment of capital lease
   obligations                   (66,167)        (69,146)         (71,953)
  Net proceeds from issuance
   of debentures                       -               -        3,049,768
  Proceeds from issuance of
   warrants                      325,000               -          261,482
  Net proceeds from issuance
   of common stock                     -       4,486,326       33,869,508
  Proceeds from exercise of
   options and warrants           44,625       1,783,587                -
  Net proceeds from issuance
   of preferred stock          3,921,037               -                -
  Payment of notes payable             -               -          (50,000)
  Proceeds from long-term
   debt                        2,175,000               -        2,223,750
  Repayment of debentures              -      (2,350,000)      (3,855,000)
                             -----------      -----------     -----------
Net cash provided by
financing activities           6,399,495       3,850,767       35,427,555
                             -----------      -----------     -----------
Net increase
(decrease) in cash and cash
equivalents                   (2,957,138)    (16,282,972)      20,287,568

Cash and cash
equivalents at beginning of
period                         4,005,563      20,288,535              967
                             -----------     -----------      -----------
Cash and cash equivalents
at end of period            $  1,048,425    $  4,005,563     $ 20,288,535
                             ===========     ===========      ===========

Supplemental disclosure
  Cash paid for:
      Interest              $     75,089    $    167,188     $    246,509
                             ===========     ===========      ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                        ACCENT COLOR SCIENCES, INC.
          STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                     Common Stock           Preferred Stock        Accumulated
                   Shares       Amount      Shares    Amount         Deficit          Total
<S>               <C>         <C>           <C>       <C>          <C>             <C>
December 31, 1995 2,094,840   $  821,291    324,360   $1,430,634   $(5,415,886)    $(3,163,961)

Warrants issued
 with debt                -      261,482          -            -             -         261,482
Proceeds from
 sale            2,625,000     9,460,044          -            -             -       9,460,044
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

Exercise of
 options            37,500        44,625          -            -             -          44,625
Proceed from sale
 of warrants             -       810,000          -            -             -         810,000
Imputed dividend on
 mandatorily redeemable
 convertible preferred
 stock                   -      (920,000)         -            -             -        (920,000)
Conversion of
 mandatorily
 redeemable
 convertible
 preferred stock   814,526       933,669          -            -             -         933,669
Warrants issued
 with debt               -       325,000          -            -             -         325,000
Net loss                 -             -          -            -    (9,769,853)     (9,769,853)
                ----------    ----------  ---------   ----------   -----------      ----------
December 31,
 1998           12,841,881   $46,307,927          -   $        -  $(47,614,964)    $(1,307,037)
                ==========    ==========  =========   ==========   ===========      ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.


                          ACCENT COLOR SCIENCES, INC.
                         NOTES TO FINANCIAL STATEMENTS

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.

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, which
by the end of 1997, had been fully 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.  During the first quarter of 1998, the
Company introduced to the market a new enhanced version of its product, the
wide-head Truecolor System, which it shipped throughout the year.  For the
year  ended  December  31, 1998, $8,121,938 or 99% of  total  sales  were
attributed to the Company's primary OEM customer.

Through 1997, the Company was considered to be a development stage company
as  defined  in Statement of Financial Accounting Standards No.  7.   The
Company is no longer considered to be a development stage enterprise as its
planned  principal  operations,  which  generated  significant  revenues,
commenced in 1998.

Based  on  its  current  operating plan,  the  Company  anticipates  that
additional financing will be required to finance its operations and capital
expenditures  during  the  second half of 1999. The  Company's  currently
anticipated  levels  of  revenue  and  cash  flow  are  subject  to  many
uncertainties and cannot be assured. The amount of funds required by  the
Company  will depend on many factors, including the extent and timing  of
sales  of Truecolor Systems, product costs, engineering and customer  and
technical  support  requirements.  The  inability  to  obtain  additional
financing and to 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. The Company expects that quarterly net losses
will continue through at least the fourth quarter of 1999.

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.  The Company  has
established  warranty  policies that, under specific  conditions,  enable
customers to return products.  The Company provides reserves for potential
returns  and  allowances  and  warranty costs  at  the  time  of  revenue
recognition.  Until the Company had adequate information and experience to
estimate  potential  returns,  allowances  and  warranty  costs,  revenue
resulting from Truecolor Systems was deferred until the end of the warranty
period.  During the fourth quarter of 1998, the Company determined that it
had  adequate  warranty information and experience to  begin  recognizing
revenue  upon  the shipment of systems to its primary OEM customer.   The
Company  will  continue to defer revenue on shipments to its  second  OEM
customer until systems are in production and are past the warranty period
or until the Company has adequate warranty history with that product.  As
of December 31, 1998 and 1997, the Company had deferred revenue of $595,000
and  $2,496,000  related  to  Truecolor Systems  shipped.   In  addition,
estimated  warranty  costs of $344,206 and $83,000 were  accrued  by  the
Company as of December 31, 1998 and 1997, respectively.  Warranty expense
was $180,251, $164,000 and $0 for the years ended December 31, 1998, 1997
and 1996, respectively.

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  $73,399 and $53,875 at December  31,  1998  and  1997,
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 $1,823, $1,177  and
$746 at December 31, 1998, 1997 and 1996, 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.
There were no deferred advances as of December 31, 1998 and 1997.  Amounts
offset  against  research and development expense were $0,  $600,000  and
$300,000  for  the  years  ended  December  31,  1998,  1997  and   1996,
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 $0 and $85,600  were
deferred at December 31, 1998 and 1997, 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
                                          December 31,
                                        1998       1997


     Equipment                       1,643,851  1,564,611
     Computers                         838,367    902,662
     Furniture and fixtures            487,627    487,627
     Leasehold improvements            950,755    953,699
     Purchased software                369,252    369,606
     Capital leases - equipment        294,397    294,397
      Construction in process           29,317          -
                                    ----------  ---------
                                     4,613,566  4,572,602
     Less:accumulated depreciation
     and amortization                2,680,523  1,598,180
                                    ----------  ---------
                                     1,933,043  2,974,422
                                    ==========  =========

Amortization  expense for capital leases amounted to $78,887,  $77,250  and
$42,454 for the years ended December 31, 1998, 1997 and 1996, respectively.
Depreciation  expense was $1,068,241, $971,601 and $485,191 for  the  years
ended December 31, 1998, 1997 and 1996, respectively.

4. Inventories
Inventories consist of the following:
                                               December 31,
                                              1998      1997

  Raw materials and components           $ 1,185,529 $ 1,590,386
  Work-in-process                            299,271     403,585
  Finished goods                             784,216   2,617,245
                                           ---------   ---------
                                         $ 2,269,016 $ 4,611,216
                                           =========   =========

5.   Debt

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

                         Stated                            December 31,
                         Intere     Maturity             1998         1997
                           st
                          Rate

  Long-term debt, net
  of unamortized
  discount of $264,407  10.00%   December 31, 2000   $ 2,235,593  $        -

  Less: current portion                                        -           -
                                                     -----------  -----------
                                                     $ 2,235,593  $        -
                                                     ===========  ===========

IBM Loan Agreement
On  July  21,  1998,  the  Company  entered  into  a  loan  agreement  with
International Business Machines Corporation ("IBM") to borrow $2.5  million
at  a  fixed  interest  rate of 10% per year.  Interest  payments  are  due
quarterly  beginning October 1, 1998.  The loan is due in full on  December
31,  2000  and  is secured by the assets and intellectual property  of  the
Company.   As part of the loan agreement, the Company issued a  warrant  to
IBM  that provides the right to purchase 500,000 shares of common stock  at
an exercise price of $2.50 per share, until the warrant expires on July 21,
2003.   The  fair  value of the warrant using an option pricing  model  was
determined  to  be $325,000, which was allocated to common  stock  with  an
equivalent discount on the loan.  The discount is being amortized over  the
life  of  the  loan  resulting in a non-cash charge  to  interest  expense.
Amortization expense was $60,593 for the year ended December 31, 1998.

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,  $0  and
$159,107   for  the  years  ended  December  31,  1998,  1997   and   1996,
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,  $0  and $61,040 for the years ended December 31, 1998, 1997 and  1996,
respectively.  The unamortized cost remaining at extinguishment is included
in the extraordinary loss due to early extinguishment of the debt.

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  $0, $78,362 and $47,888  for  the  years  ended
December 31, 1998, 1997 and 1996, 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.
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.

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, $0, and  $30,226
for  the  years ended December 31, 1998, 1997 and 1996, 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,  $0, and $136,088 for the years ended December 31, 1998, 1997 and 1996,
respectively.  The unamortized cost remaining at conversion was included as
a reduction in the carrying value of the related common stock.

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.

Warrants
As  of December 31, 1998, the Company had outstanding common stock purchase
warrants  exercisable into an aggregate of 2,227,607  shares.  Such  shares
have been authorized and reserved.

The following summarizes the activity of outstanding warrants:
                                                 Exercise
                                         Shares    price
                                         under    (per          Warrants
                                        warrant    share)      Exercisable

  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                      98,700       1.31
      preferred stock warrants
    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

    Anti-dilution
     adjustments pursuant to
     warrant agreements                68,995    $3.41 - $7.04
    Granted in preferred
     stock offering                   300,000       2.75
    Granted  to  advisors
     in preferred stock offering      115,385       2.50
    Granted  pursuant  to
     IBM loan agreement               500,000       2.50
    Granted to an employee            100,000       1.00
                                   ------------
 Outstanding at December 31, 1998   2,227,607    $1.00 - $7.04  2,227,607
                                   ============


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
1998,  adjustments  were made for certain warrants in connection  with  the
preferred stock offering, the IBM loan agreement and warrants granted to an
employee.  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.   Mandatorily Redeemable Convertible 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  ("Series  B  Stock").  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 Stock at a price of $1,000 per share and warrants to  purchase
the  Company's  common  stock with net proceeds of $3,921,037.  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.  The deemed fair
market value of these warrants has been reflected as an increase to common
shareholders' equity and a reduction of mandatorily redeemable convertible
preferred stock.  In connection with the sale of the units, the  Company
agreed  to  register the common stock issuable upon the conversion  of  the
Series B Stock and the execution of the warrants.

The 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 senior 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. In certain, but not all, redemption events, the Company has
the unilateral right to pre-empt the right of holders of the Series B Stock
from  demanding  cash redemption of their shares by paying to  them  within
five  days  of the specific event, as liquidated damages, 25% of  the  face
amount of the Series B Stock then outstanding.  Such liquidated damages can
be  paid in cash or shares at the Company's election.  Management does  not
consider  any of the events that would trigger mandatory redemption  to  be
probable  events,  has  determined  a  reasonable  estimate  of  when   the
circumstances  that  would  result  in  the  shares  becoming   mandatorily
redeemable  cannot  be made, and therefore at December 31,  1998  does  not
accrue for accretion.

The  Company  initially  reserved 6,300,000  shares  of  common  stock  for
issuance pursuant to the conversion of the Series B Stock.  This number  of
shares represented 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) plus 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, including  maintaining
its  common stock listing on the NASDAQ Stock Market.  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.

On August 10, 1998, pursuant to the terms of the Certificate of Designation
and approval by the Board of Directors, the Company increased the number of
reserved  shares  of common stock for issuance upon the conversion  of  the
Series  B  Stock by 2,567,652 shares.  This was done because  the  reserved
amount  had  fallen  below 135% of the number of  shares  of  common  stock
issuable upon conversion of the then outstanding shares of Series B  Stock.
As  of  December  31,  1998, there were 8,053,126 shares  of  common  stock
reserved  for  issuance pursuant to the conversion of the  remaining  3,500
shares  of  Series  B Stock issued and outstanding.  The actual  number  of
shares issuable upon conversion could be materially less or more than  this
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  and  (b)  the
Company's ability to maintain its NASDAQ listing.  As of December 31, 1998,
1,000  shares of Series B Stock had been converted into 814,526  shares  of
common  stock at an average conversion price of $1.15 per share  (See  Note
13).

The  terms  of  conversion of the Series B Stock  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  was  treated  as  an  imputed (non-cash) dividend  for  purposes  of
calculating  net loss per common share, although no assets of  the  Company
were expended.  The imputed dividend is approximately $920,000 and has  the
effect  of  increasing the net loss per common share by $.07 per share  for
the  twelve months ended December 31, 1998.  The imputed dividend has been
recorded as a reduction to common shareholders' equity.

In  the  course of a review of a Securities Act filing, the  staff  of  the
Securities  and  Exchange  Commission ("the Commission")  raised  an  issue
regarding  the  classification  of  the  Company's  mandatorily  redeemable
convertible  preferred stock.  Due to certain of the  mandatory  redemption
features mentioned above, the carrying value of the preferred shares, which
were previously presented as a component of Shareholders' equity (deficit),
has  been reclassified as temporary equity, outside of shareholders' equity
(deficit) at December 31, 1998.  The reclassification of the 1998 financial
statements  for the matter described above had no effect on  the  Company's
net  loss,  total  assets or total liabilities.  The  Company's  redeemable
equity  and total shareholders' equity (deficit) at December 31,  1998,  as
previously reported and reclassified, are as follows:




                                                            December 31, 1998

    Redeemable equity - previously reported..........         $         -
    Adjustment related to the presentation of the mandatorily
     redeemable convertible preferred shares as redeemable...   3,097,368
                                                                ---------
     As restated......................                        $ 3,097,368
                                                                =========

     Shareholders'equity (deficit) - previously reported..... $ 1,790,331
     Adjustment related to the presentation of the mandatorily
      redeemable convertible preferred shares as redeemable... (3,097,368)
                                                                ---------
     As restated......................                        $(1,307,037)
                                                                =========


8. 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. In May  1997,
the  number  of  shares  increased to 2,000,000.   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:

                        For the year ended      For the year ended
                         December 31, 1998      December 31, 1997
                                   Weighted               Weighted
                                   Average                 Average
                         Shares    Exercise     Shares    Exercise
                                    Price                   Price

Outstanding at         1,318,850   $ 3.85      1,280,850   $ 3.53
beginning of period

     Granted           2,870,450     2.03        302,675     6.44
     Exercised           (37,500)    1.19        (92,250)    3.67
     Canceled         (2,470,325)    3.56       (172,425)    6.12
                     -------------             ----------
Outstanding at
period end             1,681,475     1.23      1,318,850     3.85
                     =============             ==========

Options exercisable
at period end            314,000     2.26        629,960     3.44
                     =============             ==========

Weighted average fair
value of options
granted during the
period               $      1.61               $    5.20
                     =============             ==========

By  action  of  the Board of Directors on April 14, 1998, the  Company  re-
priced  all  options outstanding under its 1995 Stock Incentive Plan  which
had  a  current  exercise price exceeding $3.125 to an  exercise  price  of
$3.125  per  share,  the fair market value as of that  date.   A  total  of
1,137,200  options  were re-priced, which resulted in a  reduction  of  the
weighted  average exercise price of all options outstanding from $3.85  per
share at December 31, 1997 to $2.93 per share after the re-pricing.

On  September 21, 1998, in an effort to retain key personnel, the Board  of
Directors approved a modification of the outstanding options under the 1995
Stock  Option  Plan for all active employees and directors of the  Company.
Each  option holder could elect to continue to hold their existing  options
or  could  have the Company re-price their options to an exercise price  of
$1.00  per share, the fair market value of the common stock as of September
29,  1998  (the  election date).  If the employees elected  to  have  their
options re-priced, the vesting period for such options was extended for one
year.   A  total of 1,066,625 options were modified, which further  reduced
the weighted average exercise price of all options outstanding to $1.26 per
share  after  the  re-pricing.   No  compensation  expense  was  recognized
pursuant  to  this modification because the exercise price of the  modified
stock  option equaled the market price of the common stock on the  date  of
the re-pricing.

The   following  summarizes  additional  information  about  stock  options
outstanding at December 31, 1998:

                        Options Outstanding            Options Exercisable
                  Number                               Number
                Outstanding    Weighted   Weighted    Exercisable  Weighted
                    at      Average       Average        at        Average
Exercise         December    Remaining    Exercise     December    Exercise
 Prices          31, 1998   Contractual    Price      31, 1998      Price
                               Life

$      .91         260,150    9.34         $    .91     20,000     $   .91
      1.00       1,114,825    7.15             1.00          -           -
 1.19-2.31         127,750    5.23             1.28    117,000        1.19
      3.13         178,750    4.78             3.13    177,000        3.13
                ----------                            --------
                 1,681,475    7.09         $   1.23    314,000     $  2.26
                ==========                            ========


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:

                                   Year ended       Year ended
                                  December 31,     December 31,
                                      1998             1997
Net loss:
     As reported                 $ (10,689,853)   $ (18,690,564)
     Pro forma under FAS 123     $ (12,470,414)   $ (20,052,460)

Pro forma net loss (basic and
diluted) per share (unaudited):
     As reported                 $        (.87)   $       (1.77)
     Pro forma under FAS 123     $       (1.01)   $       (1.90)

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 4.24% to 5.74% for  options
granted  during  the year ended December 31, 1998 and 5.97%  to  6.73%  for
options   granted  during  the  year  ended  December  31,  1997;  expected
volatility factors of 90% for the year ended December 31, 1998 and 87%  for
the  year ended December 31, 1997; and an expected option term ranging from
2  to  10 years for the year ended December 31, 1998 and 5 to 10 years  for
the year ended December 31, 1997.

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  $118,671  and
$174,420  was  recognized as of December 31, 1998 and  1997,  respectively.
Additionally, compensation expense of approximately $126,000 is included in
1997 for options whose vesting was accelerated in 1997.



9. Leases

Operating Leases

At  December 31, 1998, the Company was committed under operating leases for
equipment  and  facilities with initial terms of more than one  year.   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
$232,870 and $264,480 as of December 31, 1998 and 1997, respectively.  Rent
expense related to operating leases was $729,573 in 1998, $740,772 in  1997
and $468,862 in 1996.

Minimum lease payments under the noncancelable leases are as follows:

           1999                           $  844,023
           2000                              832,642
           2001                                  780
           2002                                  195
           2003                                    -
                                         -----------
            Total minimum obligations    $ 1,677,640
                                         ===========

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:

           1999                          $   84,914
           2000                              25,388
           2001                                   -
           2002                                   -
           2003                                   -
                                         ----------
            Total minimum obligations    $  110,302
            Less: amount representing
              interest                       23,172
                                         ----------
            Present value of minimum
              lease payments                 87,130
            Less: current portion            64,014
                                         ----------
                                          $  23,116
                                         ==========

9. Income Taxes

Deferred tax assets and liabilities are as follows:
                                           December 31,
                                      1998             1997

           Gross deferred tax
           assets:
             Carryforwards:
               Research tax credits  $  1,484,206  $   447,000
               Net operating losses    17,666,564   13,841,000
             Other assets               1,114,064    1,316,000
                                     ------------  -----------
           Gross deferred tax
           assets                      20,264,834   15,604,000
                                     ------------  -----------
           Gross deferred tax
           liabilities                    (28,868)     (21,000)

           Valuation allowance        (20,235,966) (15,583,000)
                                     ------------  -----------
                                     $          -  $         -
                                     ============  ============

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, 1998, the Company had approximately $43 million of federal
net operating loss carryforwards that expire in years 2008 through 2013,
approximately $43 million of state net operating loss carryforwards that
expire in years 1999 through 2003 and research and development tax credit
carryforwards of approximately $1.5 million that expire in years 2009
through 2013.

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, 1998 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.  Depending on the number of shares
of Series B Stock converted into common shares and the timing of such
conversions (Note 6), the transactions may result in further Section 382
annual limitations of net operating loss carryforwards.

10. Disclosure about Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, prepaid expenses,
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, 1998.

11. Related Party Transactions
The Company entered into an agreement with Knickerbocker Securities Inc.
("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.  The total amount
expensed relating to the advisory agreement and the termination of all
existing agreements was $105,260 of which $25,000 was incurred in 1996.
Additionally, 32,987 common stock purchase warrants were granted in 1996 as
settlement for a compensation claim.  Of the total warrants, 32,433 expire
on June 27, 2001 and 554 October 10, 2001.

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 were 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
is currently not in compliance with such specified minimum volume amounts
necessary to maintain exclusivity and is in discussion with Spectra to
establish a revised requirement for exclusivity, however, Management
believes there is no material adverse financial impact for the Company.
The Company has the option to terminate the exclusive rights leaving all
other aspects of the agreement unchanged.  It is the Company's intent to
maintain such rights.

As  of  December 31, 1998, there were two employment agreements outstanding
for certain executive officers of the Company, each reflecting a three-year
term.   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, 1998, if such employees under contract were to
be  terminated  by  the Company without cause (as defined),  the  Company's
liability would be approximately $873,000.


14.  Subsequent  Events  and  Reclassification  of  Mandatorily  Redeemable
     Convertible Preferred Stock at Interim Reporting Dates (Unaudited)

On  March 11, 1999, the Company completed a reduction of personnel to align
its expenses with current sales demand.  In connection with this reduction,
the  Company eliminated 19 positions and recorded a charge of approximately
$61,000 for employee severance.  Of the total reduction, approximately  37%
was  in the area of operations, 53% in research and development and 10%  in
marketing, general and administrative.

The  Company's  common  stock was delisted from  the  NASDAQ  Stock  Market
effective  March  17,  1999  as the Company was in  violation  of  NASDAQ's
minimum bid price and net tangible asset level.  Consequently, each  holder
of  the  Company's  Series B Convertible Preferred  Stock  has  the  right,
beginning  March 31, 1999, to require the Company to redeem  such  holder's
shares of Series B Preferred Stock at a redemption price, in cash or stock,
specified  in the Company's Certificate of Incorporation.  The  Company  is
not  aware  that  any such holder intends to require such  redemption,  but
cannot  predict  what each holder may elect to require.   In  the  event  a
holder of Series B Preferred Stock were to demand redemption at a time when
the  Company's  resources are insufficient to redeem such holder's  shares,
the  rights  of such holder would include the right to receive interest  at
the  annual  rate of 24% on the defaulted payment amount.  The Company  has
the  right to preempt the right of holders of Series B Preferred Stock from
demanding  redemption  of their shares by paying  to  them,  as  liquidated
damages,  on  or  before  April 6, 1999, 25% of  the  face  amount  of  all
outstanding  shares of Series B Preferred Stock in cash  or  in  shares  of
common  stock  valued  at 50% of the average closing price  of  such  stock
during  the five trading days ended March 30, 1999.  As of March 17,  1999,
such  liquidated  damages would amount to $713,750  in  cash  or  3,772,463
shares of common stock.

On April 6, 1999, the Company elected to forgo its right to prevent demand
redemption on its outstanding shares of Series B Preferred Stock which
resulted in an additional $1,176,154 being accreted to Redeemable Preferred
Stock to reflect the increase in redemption value from April 6, 1999 to
June 30, 1999 in accordance with the redemption price specified in the
Company's Certificate of Incorporation.  Such accretion was charged against
common stock and also increased the net loss applicable to common
shareholders.  As of June 30, 1999, there were 7,402,874 shares of common
stock reserved for issuance pursuant to the conversion of the remaining
2,028 shares of Redeemable Preferred Stock issued and outstanding.  The
features and rights of the Redeemable Preferred Stock remain the same with
the exception that the remaining holders may demand redemption of their
outstanding shares at any point in time.

In  the  course of a review of a Securities Act filing, the  staff  of  the
Securities  and  Exchange  Commission ("the Commission")  raised  an  issue
regarding  the  classification  of  the  Company's  mandatorily  redeemable
convertible preferred stock.

Due  to  certain mandatory redemption features, the carrying value  of  the
preferred  shares,  which  were previously  presented  as  a  component  of
shareholders' equity (deficit), has been reclassified as temporary  equity,
outside of shareholders' equity (deficit) for 1998.

The reclassification of the preferred shares for the matter described above
had no effect on the Company's net loss, total assets or total liabilities.
The Company's redeemable equity and total shareholders' equity (deficit) at
the  interim reporting dates, as previously reported and reclassified,  are
as follows:
                                                       1998
                                         --------------------------------
                                         September 31   June 30  March 31

 Redeemable equity-previously reported  $        -   $        -  $        -
 Adjustment related to the presentation
  of the mandatorily redeemable
  convertible preferred shares
  as redeemable                          3,377,466    3,657,565   4,031,038
                                        ----------   ----------  ----------
 As restated                            $3,377,466   $3,657,495  $4,031,038
                                        ==========   ==========  ==========
 Shareholders' equity (deficit)-
  previously   reported                 $3,502,208   $5,205,209  $8,159,813
 Adjustment related to the
  presentation of the mandatorily
  redeemable convertible preferred
  shares as redeemable                  (3,377,466)  (3,657,565) (4,031,038)
                                        ----------   ----------  ----------
 As restated                            $  124,742   $1,547,644  $4,128,775
                                        ==========   ==========  ==========


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 September 17, 1999.

                                   ACCENT COLOR SCIENCES, INC.


                                   By   /s/ Charles E. Buchheit
                                      ---------------------------
                                          Charles E. Buchheit
                                    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 September 17, 1999.

     Signature                       Title                 Date

/s/ Charles E. Buchheit
------------------------
Charles E. Buchheit           President and Chief        September 17, 1999
                               Executive Officer
                         (Principal Executive Officer)

/s/ Tracy L. Hubert
------------------------
Tracy L. Hubert          Acting Chief Financial Officer  September 17, 1999
                    (Principal Financial and Accounting Officer)


----------*-------------
Joseph T. Brophy                     Director            September 17, 1999


----------*-------------
Richard J. Coburn                    Director            September 17, 1999


----------*-------------
Richard Hodgson                      Director            September 17, 1999


----------*-------------
Norman L. Millard                    Director            September 17, 1999


----------*-------------
Willard F. Pinney, Jr.               Director            September 17, 1999


----------*-------------
Robert H. Steele                     Director            September 17, 1999



*By: Charles E. Buchheit
      Charles E. Buchheit
      Attorney-in-fact