UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549
                                     
                                     
                                 FORM 10-K
                                     
            /X/  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.  / /

 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.
                                     
                                     
                                     
                                     
                        ACCENT COLOR SCIENCES, INC.
                                     
                                 FORM 10-K
                   For The Year Ended December 31, 1998
                                   INDEX
Part I
Item 1.    Business                                                    1
Item 2.    Properties                                                  6
Item 3.    Legal Proceedings                                           6
Item 4.    Submission of Matters to a Vote of Security Holders         6

Part II
Item 5.    Market for Registrant's Common Stock and Related
           Stockholder Matters                                         7
Item 6.    Selected Financial Data                                     7
Item 7.    Management's  Discussion and Analysis of
           Financial  Condition and Results of Operations              9
Item 8.    Financial Statements and Supplementary Data                16
Item 9.    Changes  in  and Disagreements with Accountants
           on Accounting and Financial Disclosures                    32
                                       
Part III
Item 10.   Directors and Executive Officers of the Registrant         32
Item 11.   Executive Compensation                                     33
Item 12.   Security  Ownership of Certain Beneficial  
           Owners  and  Management                                    37
Item 13.   Certain Relationships and Related Transactions             38

Part IV
Item  14.  Exhibits, Financial Statement Schedules and 
           Reports  on  Form  8-K                                     39

Signatures                                                            41
                                    

                                 PART I

Item 1.   Business

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

Truecolor  Systems are designed to print spot color in high-speed,  high-
volume   applications  at  a  low  incremental  cost  per  page   without
diminishing  the  speed or performance of the high-speed,  black-on-white
host  printer  or affecting the end user's existing operational  methods.
Truecolor  Systems  are capable of printing up to 501 pages  per  minute,
utilizing up to eight different colors, including custom colors, to print
or  highlight  fixed  or  variable data. Truecolor  Systems  combine  the
Company's  proprietary paper handling technology with  patented  ink  jet
technology from Spectra, Inc. ("Spectra"). The Company holds an exclusive
right  to  supply  products which include Spectra ink jet  printheads  to
print  color  on  the  black-on-white output  from  specified  high-speed
printers from Xerox, IBM, Oce and certain other parties through the  year
2002,  however, the Company is currently not in compliance  with  certain
volume purchase requirements necessary to maintain such exclusivity.  The
Company  is in discussion with Spectra to establish a revised requirement
for  exclusivity, but can give no assurance that an agreement  preserving
exclusivity can be reached.  The Company's primary channel to market  for
its Truecolor Systems are OEMs of high-speed, black-on-white printers and
the  Company  is  presently focused on targeting the production  printing
segment  of  the overall market opportunity. According to  CAP  Ventures,
Inc. ("CAP Ventures"), a printing industry market research firm, the 1996
year-end  installed base of digital, high-speed, black-on-white  printers
used in the production printing segment of the digital printing market in
the  U.S.  was  approximately  15,200 and the  installed  base  of  these
printers  is  projected to grow at a five-year compounded  annual  growth
rate ("CAGR") of approximately 6% to 20,500 systems by the year 2001.  In
addition,   approximately   3,200  digital,  high-speed,   black-on-white
printers were sold into this market segment in the U.S. in 1996.  Revenue
from new system sales, supplies and service exceeded $2.1 billion in 1996
and  is expected to grow at a five-year CAGR of approximately 7% to  $2.9
billion by the year 2000. This growth is further driven by the number  of
pages printed per year, which is projected to grow at a five-year CAGR of
approximately 7% by the year 2001.

To  facilitate access to its target markets, the Company has entered into
agreements  with  IBM  and  Groupe SET International  ("Groupe  SET"),  a
European  provider of high-speed digital printing solutions headquartered
in Paris, France. IBM and Groupe SET are marketing, selling and servicing
Truecolor  Systems  under their respective corporate  logos  and  product
identifications. The Company also sells consumables comprised of standard
and  custom  color  wax-based inks, as well  as  spare  parts  used  with
Truecolor  Systems.  The Company expects that consumables  will  generate
recurring  revenue,  which  the Company believes  will  increase  as  the
installed  base  and  usage of Truecolor Systems increase.  According  to
Dataquest,  continuous  forms  and cut sheet  high-speed,  black-on-white
printers servicing typical applications in the production printing market
produce  approximately  2.2  million and 0.7  million  pages  per  month,
respectively.

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


Products


ACS Truecolor System
The  Company  currently  offers a continuous form  version  of  Truecolor
Systems   which  is  marketed  under  the  corporate  logos  and  product
identifications of the Company's OEM customers.  The selling price of the
Company's Truecolor Systems to its OEM customers ranges from $114,000  to
$130,000,  depending  on  model, options, and  terms  and  conditions  of
purchase.

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

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


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

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

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


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

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

The  Company's  products  are  developed  internally.  The  Company  also
purchases technology, licenses intellectual property rights, and oversees
third  party development for certain components of its products. Internal
development  enables  Accent Color to maintain closer  technical  control
over  the  products and gives the Company the freedom to designate  which
modifications and enhancements are most important and when they should be
implemented.  The Company has created development processes for  creating
and  enhancing  its products. Product documentation is generally  created
internally in coordination with its OEM customers.
The  Company expended approximately $6.9 million, $8.8 million  and  $4.2
million  on  engineering and research and development in the years  ended
December   31,  1996,  1997  and  1998,  respectively.  As  the   Company
transitions  toward  a  commercial operation  with  increasing  focus  on
manufacturing and sales it anticipates it will be able to further  reduce
its  research and development spending. As of March 5, 1999, Accent Color
had 25 employees engaged in engineering and research and development.

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

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

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

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

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

Customers
The  Company has entered into agreements with IBM and Groupe  SET.  Under
these  arrangements, IBM and Groupe SET intend to market, distribute  and
support  Truecolor  Systems  under their respective  brand  names.  These
agreements are significant in several respects. First, according  to  CAP
Ventures,  IBM is one of the leading suppliers of  high-speed,  black-on-
white  printers and  IBM's AFP/IPDS architecture is continuing to  emerge
as  an  industry standard particularly with large end user organizations.
Second,  the Company's products are designed to be fully integrated  with
certain hardware and supporting software products marketed by IBM. Third,
Accent Color expects that market acceptance of its Truecolor Systems will
be  accelerated  since sales and service will be provided  by  the  well-
established  sales  and  service organizations of  IBM  and  Groupe  SET.
Fourth,  the Color Enabler Solution technology, which the Company expects
to  be  developed  under the Groupe SET Agreements,  will  enable  it  to
integrate Truecolor Systems more easily with printing systems from  other
manufacturers  avoiding  the need for costly and time  consuming  product
development to accomplish integration.

International Business Machines Corporation.  IBM's products are used  in
corporate  data  centers and other high-speed printing  applications.  In
April 1996, the Company and IBM entered into a Product Purchase Agreement
(the  "IBM Agreement"). This agreement is for a term of three years  with
IBM  having the right to renew it for two additional one-year terms.   On
March 29, 1999, IBM renewed the Agreement for an additional one-year term.      
The Company has been informed that Truecolor Systems will  be IBM's first
product  targeted at spot color applications in high-speed printing.  The
integration of color into IBM's AFP (Advanced Function Printing) protocol
and  the  use  of  the Truecolor System as an integrated  post-processing
device attached to the IBM 3900 and IBM InfoPrint 4000 high-speed, black-
on-white  printers  are  expected  to  be  marketed  worldwide  by  IBM's
international operations.

Under  the IBM Agreement, IBM has committed to purchase consumables  from
the Company for one year from the date of general availability of the HC2
Model  of  Truecolor Systems, which was in March 1998, to  IBM  customers
and,  if  certain  conditions  concerning competitive  pricing  are  met,
thereafter  as  well.  The  IBM Agreement also requires  the  Company  to
warrant  its  products against manufacturing defects for  90  days  after
initial  installation. Furthermore, under the IBM Agreement, the  Company
has agreed to provide spare parts for its products to IBM at prices which
will  yield  a monthly parts cost per Truecolor System not  to  exceed  a
specified  amount.  If the Company is unable to perform  its  obligations
under  the agreement, after a cure period, the IBM Agreement affords  IBM
certain  backup manufacturing rights, including the right to manufacture,
or  have a third party manufacture, the Company's Truecolor Systems. This
right  to  manufacture  is limited to the specific  types  of  units  not
properly  delivered  and may be terminated if the Company  is  thereafter
able to deliver the units in question in compliance with the terms of the
IBM Agreement.

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

Backlog
The  Company  measures  backlog based on purchase  orders  for  Truecolor
Systems,  consumables and spare parts that have not yet been  shipped.  A
substantial  amount of the Company's backlog can be modified or  canceled
prior to 30 days before shipment without penalty, except for the recovery
of  the  Company's actual costs. Accordingly, the Company  believes  that
backlog  cannot be considered a meaningful indicator of future  financial
performance.  As  of December 31, 1998, the Company's total  backlog  was
approximately $4.8 million.

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

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

Competition  in  the  markets  for  the  Company's  products  is   highly
fragmented. The Xerox 4890 (a similar product is also marketed  by  Xerox
as  the  DocuPrint 390HC) is a spot color printer, which prints in  black
and  one  color  per job (out of a limited palette).  It  is  capable  of
printing  92  pages  per minute but does not offer custom  colors.  BESTE
Bunch Systems markets a color offset press used as a downstream add-on to
Oce  or  IBM high-speed, black-on-white printers. While it is capable  of
providing color logos, it does not print variable data, requires a longer
time  to  set up and requires specialized skills. The use of this  offset
press also requires additional processes of negative production and plate
making.  Oce  has introduced two products, the DC210 and the  DC155.  The
DC210  is  a web based, while the DC155 is a cut-sheet system.  Both  are
based on electrophotographic imaging.  However, both systems provide only
one  highlight  color  and have dramatically reduced  print  speeds  when
highlight  colors are used, thus rendering them less than ideal  for  the
market.  In  addition,  there are production full process  color  digital
printing  systems available which operate at print speeds of  up  to  100
pages per minute, including the Xeikon DCP-50 and the Xerox DocuColor 40.
These  systems have relatively high print costs per page and  operate  at
much  lower  speeds than typical applications in the production  printing
market  segment  require, making them impractical  for  high-speed  print
jobs.

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

Atlantic  Zeiser has demonstrated the use of a continuous type of  liquid
ink  jet technology, which may be attached to the output of a black  only
laser  devise. The system was demonstrated as a technology,  and  is  not
currently available for sale.

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

Intellectual Property
The Company's ability to compete effectively will depend, in part, on the
ability  of  the  Company  to  maintain the  proprietary  nature  of  its
technology. The Company relies, in part, on proprietary technology, know-
how  and  trade  secrets  related to certain  aspects  of  its  principal
products  and  operations.  To protect its rights  in  these  areas,  the
Company  generally  requires its OEM customers,  its  suppliers  and  its
employees  to enter into nondisclosure agreements. As of March  5,  1999,
the  Company  had  been  granted three patents by  the  U.S.  Patent  and
Trademark Office relative to the mechanical design of the Company's paper
handling  and color printing system, which form the core of the Truecolor
Systems.  In  addition,  the  Company  has  filed  applications  for  two
additional patents relative to certain enhancements of Truecolor  Systems
technology.  The  Company  has  also filed  foreign  patent  applications
seeking patent protection in several foreign countries.

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

Employees
As  of  March 5, 1999, the Company employed 66 individuals,  of  whom  25
employees  were  engaged in engineering and research and development,  23
employees  in manufacturing and operations, 9 employees in marketing  and
service  efforts, and 9 employees were working in general administration.
The  Company's  employees are not represented by a collective  bargaining
organization, and the Company has never experienced a work stoppage.  The
Company believes that its relationship with its employees is good.


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


Item 3.  Legal Proceedings

The Company is not a party to any material legal proceedings.


Item 4.  Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.


                                 PART II

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

The Company's Common Stock began trading publicly on the National tier of
the  Nasdaq  Stock Market under the ticker symbol "ACLR" on December  18,
1996.   Prior  to  this date, there was no public market for  the  Common
Stock.   The table below sets forth the per share quarterly high and  low
sales prices of the Common Stock for the two most recent fiscal years, as
reported on the Nasdaq Stock Market.

                                  COMMON STOCK INFORMATION
                                      High         Low
          Year Ended 12/31/98
          First Quarter              $3 3/8       $1 1/2          
          Second  Quarter            $3 3/8       $1              
          Third  Quarter             $1 13/16     $13/16
          Fourth Quarter             $1 5/32      $1/2              
          
          Year Ended 12/31/97         High         Low
          First Quarter              $15 1/2      $4 7/8
          Second Quarter             $8  1/2      $3 7/8
          Third Quarter              $6 1/16      $3 3/8
          Fourth Quarter             $5  5/8      $2 1/4
         

As  of  March  5,  1999, there were approximately 2,393  stockholders  of
record, which includes those stockholders whose certificates were held by
nominees.  The Company has never declared or paid cash dividends  on  its
Common  Stock.  The Company currently intends to retain any earnings  for
use in its business and does not anticipate paying any cash dividends  on
its Common Stock in the foreseeable future.

Effective March 17, 1999, the Company was delisted from the Nasdaq  Stock
Market as the Company was in violation of Nasdaq's minimum bid price  and
net  tangible asset level.  The Company's Common Stock is now trading  on
the OTC Bulletin Board under the same ticker symbol.


Item 6.  Selected Financial Data

<TABLE>
<CAPTION>
                                                                      
                                   For the year ended December 31,
                            1994      1995      1996      1997       1998
Statement of                                       
Operations Data:
<S>                      <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)   
                                                        
One-time non-cash                                       
imputed dividend                                       
on 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>
                                         December 31,

                           1994     1995     1996      1997     1998       
Balance Sheet Data:                                                        
Cash and cash            
  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 
Total   shareholders'           
  equity (deficit)          (57)  (3,164)    19,345    7,270     1,790  


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 recognized in 1998  (48)        (25)        (6,654,000)     
                                   -------     ------      -------------
  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 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) 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




                        ACCENT COLOR SCIENCES, INC.
                              BALANCE SHEETS
                                     
<TABLE>
<CAPTION>                                     
                                     
                                          December 31,
                                        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 and Shareholders'                    
Equity
Current liabilities:                             
     Obligations under capital                  
leases (Note 8)                     $   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 8)                         23,116       91,937
Long-term debt, net of discount     
(Note 5)                             2,235,593            -
Other long-term liabilities
(Notes 7 and 8)                        601,759      501,644
                            
                                                 
          Total non-current                      
              liabilities            2,860,468      593,581
                                                 
Commitments and contingencies                    
(Notes 8 and 12)
Shareholders' equity (Note 6,               
7 and 13):
     Preferred stock, no par value,              
      500,000 shares authorized,
      3,500 and 0 shares issued     
      and outstanding                3,049,691            -
     Common stock, no par value,                 
      35,000,000 and 25,000,000
      shares authorized,                       
      12,841,881 and 11,989,855
      shares issued and             46,355,604   45,114,633
      outstanding
     Accumulated deficit           (47,614,964) (37,845,111)              
                                                 
          Total shareholders'                    
           equity                    1,790,331    7,269,522
                                                 
          Total liabilities and                 
           shareholders' equity    $ 6,860,405 $ 12,407,139
</TABLE>

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

<TABLE>
<CAPTION>
                          ACCENT COLOR SCIENCES, INC.
                           STATEMENTS OF OPERATIONS                            
                                 
                                                    
                                    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 11)         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 preferred                                  
 stock (Note 6)                   (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.

<TABLE>
<CAPTION>
                           ACCENT COLOR SCIENCES, INC.
                            STATEMENTS OF CASH FLOWS
                                        
                           
                           
                                   For the year ended December 31,
<S>                                 1998           1997          1996
Cash flows from operating    <C>           <C>            <C>     
activities:
  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.     
                                                        
<TABLE>
<CAPTION>

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

                                                       
                                                       
                        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
 agreement
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
                                                               
Proceeds from 
 sale                       -           -      4,500    3,921,037              -          3,921,037
Exercise of  
 options               37,500      44,625          -            -              -             44,625
Conversion of                                                  
 Series B           
 Preferred     
 Stock                814,526     871,346     (1,000)    (871,346)             -                  -
Warrants issued   
 with debt                  -     325,000          -            -              -            325,000
Net loss                    -           -          -            -     (9,769,853)        (9,769,853)
                                                               
December 31, 1998  12,841,881 $46,355,604      3,500   $3,049,691   $(47,614,964)        $1,790,331

</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.

Series B 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.  The warrants issued are exercisable into
300,000 shares of common stock with an exercise price of $2.75 and an
expiration date of January 9, 2003.  Additionally, warrants exercisable
into 115,385 shares of common stock with an exercise price of $2.50 and an
expiration date of January 9, 2003 were issued to the placement agent for
services provided.  In connection with the sale of the units, the Company
agreed to register the common stock issuable upon the conversion of the
Series B 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 or shares at the option of the Company.  The Company also
has optional redemption rights.

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 will be
given no other accounting treatment in the 1998 financial statements of the
Company and beyond.

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. 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.

8. 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.

13. Subsequent Events (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.


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



                          PART III

Item 10.  Directors and Executive Officers of the Registrant
Directors and Officers

     Following is information concerning each Director and
Executive Officer of Accent Color Sciences as of March 5,
1999 including name, age, position with the Company and
business experience during the last five years:

    Joseph T. Brophy, age 65, became a director of the
Company in March 1998 upon his election by the Board of
Directors of the Company to fill a vacancy created by the
retirement of Raymond N. Smith, a co-founder and former
Chairman of the Board of Directors of the Company.  Mr.
Brophy retired as President of Travelers Insurance Company,
a subsidiary of The Travelers Corporation, in 1993.  Since
then, he has served as a consultant with Actuarial Sciences
Associates working with major companies such as AT&T,
Equifax and others in developing their business strategies
for health care.  With The Travelers, Mr. Brophy led a
restructuring resulting in record sales of $1.7 billion and
$100 million in profits in 1992.  His prior experience with
The Travelers included service as its Chief Information
Officer in charge of data processing operations.  Mr. Brophy
is a fellow of the Society of Actuaries, holds memberships
in the American Academy of Actuaries, New York Academy of
Sciences, Acoustical Society of America and American
Arbitration Association and has received awards including
the Distinguished Information Sciences Award from the Data
Processing Management Association in 1986 and the Award of
Achievement in Managing Information Technology from Carnegie
Mellon and American Management Systems in 1987.  Mr. Brophy
currently serves as a trustee of St. Joseph College and as a
director of the Connecticut Opera.  He has also served as a
director of LIMRA International, Inc., trustee of RPI-
Hartford Graduate Center, and director of the Connecticut
Academy for Education in Mathematics, Sciences and
Technology and the Greater Hartford Chamber of Commerce.  He
is currently an owner, director and co-founder of Solution
Point, an information company that provides decision support
tools, analysis and data for employers and health systems.
Mr. Brophy is a cum laude graduate of Fordham University,
from which he received a Bachelors of Science degree.  He
has also attended NYU Graduate School and completed the
Advance Management Program at the Sloane School, MIT.

    Charles E. Buchheit, age 58, has been President and
Chief Executive Officer of the Company since May 1998 and
became a director of the Company in March 1998 upon his
election by the Board of Directors of the Company to fill a
vacancy created by the resignation of Peter Teufel.  Mr.
Buchheit served as a Corporate Officer and Division
President at Moore Corporation from 1995 to 1997, where he
also served as a member of the Moore Executive Committee.
At Moore, Mr. Buchheit developed Integrated Customer
Solutions, a division which had the capability of managing
all forms of print.  Prior to that time, Mr. Buchheit was a
Corporate Officer and Vice President at Xerox Corporation
from 1989 to 1995.  At Xerox, he was responsible for
launching the multi-billion dollar Docutech program
worldwide.  From 1975 to 1989, he held several executive
positions at IBM Corporation, including Group Marketing
Executive, Director of Operations and Director of Product
Programs and Practices.  At IBM, Mr. Buchheit was
responsible for the worldwide marketing of mainframes,
system software, storage and printing devices.  He has
served on the Board of Directors for Infomart and NEPS, a
wholly owned subsidiary of Moore Corporation, and is
currently a member of the Board of Directors for Intercon
Associates, Incorporated.

    Richard J. Coburn, age 67, has been Chairman of the
Board since May 1996 and cofounded the Company in May 1993.
Mr. Coburn served as President of the Company from May 1993
until May 1996 and served as Chief Executive Officer of the
Company from May 1993 until August 1996.  From 1991 until
1993, Mr. Coburn worked as an independent consultant to
development stage companies.  Mr. Coburn was a co-founder of
KCR Technology, Inc., a manufacturer of high-speed, black-on-
white printers, and served in various roles, both consulting
and managerial, including President from 1977 to 1991.
Mr. Coburn was also the founder of Coburn Technology, Inc.,
a developer of a xerographic printer product for word
processing, the rights to which were sold to Wang
Laboratories, Inc., and served as its President from 1974 to
1977.  From 1968 to 1974, Mr. Coburn was president of Scan-
Optics, Inc., a manufacturer of data capture equipment, of
which he was a co-founder and currently serves as a
director.  Prior to 1968, Mr. Coburn had served in various
engineering management positions in aerospace over a 14-year
period.  Mr. Coburn received his degree in engineering from
Yale University.

    Richard Hodgson, age 82, became a director of the
Company in 1996 and is Chairman of the Audit Committee.
Since 1980, Mr. Hodgson has been a director of McCowan
Associates, Inc., an investment management firm, where he is
currently in charge of technology investment strategies.
Mr. Hodgson had previously been Corporate Senior Vice
President of ITT Company, a hotels, gaming, entertainment
and information publishing company, where he was worldwide
Product Group Manager for the Engineered Products Group.
Prior to joining ITT in 1968, Mr. Hodgson was President and
CEO of Fairchild Camera, where he initiated Fairchild's
entry into the semiconductor industry.  Mr. Hodgson is a co-
founder and a Director Emeritus of Intel Corporation, a
manufacturer of microprocessor, communications and
semiconductor products, and is also a director of IBIS
Technology Corp., I-Stat Corp., the Aegis Fund and
Continental Capital Corp.  Mr. Hodgson received his degree
in engineering from Stanford University and his MBA from
Harvard University.

    Norman L. Milliard, age 56, has been Vice Chairman and
Chief Technology Officer of the Company since May 1998.  Mr.
Millard served as President of the Company from May 1996
through May 1998 and served as Chief Executive Officer of
the Company from August 1996 through May 1998.  Mr. Millard
was elected a director of the Company in 1995.  Mr. Milliard
served as Vice President of the Company from January 1994
until May 1996.  From 1988 through 1993, Mr. Milliard served
as head of the Special Product Group at AEG Schneider
Automation, Inc. (formerly Modicon, Inc.), an industrial
automation company, and as the Director of Engineering and
Operations for KCR Technology, a manufacturer of high-speed,
black-on-white printers, from 1982 to 1988.  Mr. Milliard
founded two companies in the electronic music field and
holds a number of patents in both the printing and
electronic music fields.  Mr. Milliard received his degree
in physics, with honors, from The Citadel, the Military
College of South Carolina.

    Patrick J. Pedonti, age 47, has been Vice President,
Chief Financial Officer and Treasurer of the Company since
March 1997.  From 1994 through February 1997, Mr. Pedonti
served as Vice President and Chief Financial Officer of
Chemprene, Inc., a manufacturer of industrial products,
which was a privately held management led leveraged buy-out.
From 1991 to 1993, Mr. Pedonti was Vice President of Finance
at NovaSensor, a subsidiary of Lucas Industries, Inc.  He
also held a variety of senior level financial and
operational positions from 1985 to 1990 at Lucas Duralith
Corporation and its predecessor company, AMP Keyboard
Technologies, Inc.  He received his degree in accounting
from Merrimack College in Massachusetts.

    Willard F. Pinney, Jr., age 55, has been Secretary of
the Company since December 1993 and became a director of the
Company in 1996.  Mr. Pinney has been a partner since 1973
in the Connecticut law firm of Murtha, Cullina, Richter and
Pinney LLP, which serves as counsel to the Company.  He
received his degree in political science from Yale
University and his JD, with honors, from the University of
Michigan Law School.

    Robert H. Steele, age 60, became a director of the
Company in 1996 and is Chairman of the Executive
Compensation Committee.  Mr. Steele is currently Vice
Chairman of John Ryan Company, a banking services Company,
of which he previously served as Senior Vice President since
1992.  Mr. Steele has also been director of Merlin Retail
Banking center since 1992.  Mr. Steele was President of RHS
Consulting, Inc., a business consulting firm, in 1991.  From
1985 to 1990, Mr. Steele was Chairman and Chief Executive
Officer of Dollar Dry Dock Bank of New York.  Mr. Steele
also served as President and CEO of Norwich Savings Society.
Mr. Steele is a former U.S. Congressman from the State of
Connecticut and currently serves as a director of Moore
Medical Corp., a pharmaceutical distributor, Scan-Optics,
Inc., a manufacturer of data capture equipment, NLC
Insurance Companies and SmartServ Online, Inc., an online
information provider.  Mr. Steele received his undergraduate
degree from Amherst College and his Master's Degree from
Columbia University and holds an honorary Doctor of Laws
from Sacred Heart University.

Section 16(a) Beneficial Ownership Reporting Compliance

    Pursuant to a review of the Company's records, all
required filings under Section 16(a) of the Securities
Exchange Act were made in compliance with this section with
the exception of the following two delinquent filings.
George T. Dolan, whom as of December 31, 1998 was no longer
an employee of the Company, became Vice President of
Operations on January 19, 1998 and was required to file Form
3 by January 29, 1998, but instead filed this form on
February 13, 1998.  Joseph T. Brophy was required to file
Form 4 by June 10, 1998 for the purchase of 10,000 shares of
the Company's Common Stock on May 31, 1998, but instead
filed this form on September 1, 1998.


Item 11.  Executive Compensation

A.)  General.    The following tables provide certain
  information relating to the compensation of the Company's
  Chief Executive Officer and its other most highly
  compensated executive officers for the year ended December
  31, 1998.

B.)  Summary Compensation Table
     The following Summary Compensation Table sets forth
information concerning compensation for the Chief Executive
Officer and the Company's other most highly compensated
executive officers whose total salary and bonus for the year
ended December 31, 1998 exceeded $100,000 (the "Named
Executive Officers").

                                                   
<TABLE>
<CAPTION>
                                                                         Long-Term
                                                                        Compensation
                                                                          Awards
                                   Annual Compensation                  Securities
Name & Principal                                       Other Annual    Underlying
Position                  Year   Salary($)  Bonus($)  Compensation($) Options/SARs(#)
----------------          ----- ---------  ---------  --------------- ---------------
<S>                       <C>    <C>           <C>      <C>             <C>    
Charles E. Buchheit       1998   166,667       500       19,547 (1)      610,000 (2)(5)
 President and CEO                                     
                                                        
Richard J. Coburn         1998   120,000       500            -          120,000 (5)
 Chairman                 1997   121,923    24,663            -           10,000
                          1996   128,846         -            -           30,000             
                                                        
Norman L. Milliard         1998   181,344       500            -          220,000 (5)
 Vice Chairman and CTO    1997   161,077    46,480            -           15,000
                          1996   155,692         -       26,000 (3)       30,000
                                                        
Patrick J. Pedonti        1998   130,000       500       59,277 (4)      205,000 (5)
 Vice President and CFO   1997    99,038         -       36,256 (4)      150,000 (5)

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

(1)  Consists of various living expense reimbursements to
  Mr. Buchheit pursuant to his employment agreement with the
  Company.
(2)  Includes a common stock warrant to purchase 100,000
  shares of the Company's common stock, commencing on
  September 29, 1999, at an exercise price of $1.00 per share
  and expiring in 2003.
(3)  Reflects reimbursement of expenses of Mr. Milliard
  relating to his relocation to Connecticut consisting of rent
  expense in 1996 under an arrangement, which expired in
  February 1997.
(4)  Reflects various living and relocation expense
  reimbursements to Mr. Pedonti in connection with his
  relocation to Connecticut.
(5)  Includes the re-pricing of previously granted options.


C.)  Option Grants in the Last Fiscal Year
    The following table contains information concerning the
stock option grants made to each of the Named Executive
Officers in fiscal 1998.  No stock appreciation rights were
granted during such year.

<TABLE>
<CAPTION>
                                   Individual Grants
                         ----------------------------------------------
                                                                         Potential
                                                                         Realizable Value
                                                 Exercise                at Assumed
                          Number of   % of Total    or                   Annual Rates of
                          Securities Options/SARs  Base                  Stock Price
                          Underlying  Granted to   Price/                Appreciation for
                          Options/SAR Employees in  Share  Expiration    Option Term (2)
                            Grants(#)  Fiscal Yrs ($/Sh)(1)  Date       5%($)      10%($)
<S>                        <C>           <C>         <C>     <C>      <C>       <C>
Charles E. Buchheit          5,000       19.6%       2.19    3/23/03    3,022       6,677
                           250,000 (3)   9.79%       3.13    4/14/08  491,324   1,245,112
                           250,000 (3)   9.79%       1.00    4/14/08  148,234     370,767
                             5,000 (3)   19.6%       1.00    3/23/03    1,221       2,663
                                                                   
Richard J. Coburn           20,000         .8%       2.31    1/20/08   29,086      73,711
                            10,000 (3)     .4%       3.13    3/20/07   17,067      41,956
                            30,000 (3)   1.18%       3.13    4/09/06   44,669     106,949
                            30,000 (3)   1.18%       1.00    4/09/06   13,310      31,467
                            10,000 (3)    .39%       1.00    3/20/07    5,118      12,421
                            20,000 (3)    .78%       1.00    1/20/08   11,499      28,571
                                                                   
Norman L. Milliard          20,000        .78%       2.31    1/20/08   29,086      73,711
                            45,000 (3)   1.76%       3.13   10/09/00   18,147      37,627
                            13,947 (3)    .55%       3.13    3/20/07   23,804      58,517
                             1,053 (3)    .04%       3.13    3/20/07    1,797       4,418
                            30,000 (3)   1.18%       3.13    2/02/06   43,453     103,520
                            30,000 (3)   1.18%       1.00    2/02/06   12,930      30,417
                             1,053 (3)    .04%       1.00    3/20/07      539       1,308
                            13,947 (3)    .55%       1.00    3/20/07    7,138      17,323
                            20,000 (3)    .78%       1.00    1/20/08   11,499      28,571
                            45,000 (3)   1.76%       1.00   10/09/00    4,679       9,592
                                                                   
Patrick J. Pedonti           5,000        .20%       2.31    1/20/08    7,272      18,428
                            75,000 (3)   2.94%       3.13    3/20/07  128,005     314,673
                            45,000       1.76%        .91    9/21/08   25,647      64,995
                             5,000 (3)    .20%       1.00    1/20/08    2,875       7,143
                            75,000 (3)   2.94%       1.00    3/20/07   38,386      93,154
</TABLE>

(1) All options were granted at the fair market value on
    the date of grant as determined by the Board of
    Directors.
(2) The 5% and 10% assumed annual rates of compound stock
    price appreciation are mandated by rules of the
    Securities and Exchange Commission and do not reflect
    the Company's estimates or projections of future Common
    Stock prices.  There can be no assurance provided to
    any executive officer or any other holder of the
    Company's securities that the actual stock price
    appreciation over the term will be at the assumed 5% or
    10% levels or at any other defined level.  Unless the
    market price of the Common Stock appreciates over the
    option term, no value will be realized from the option
    grants made to the executive officers.
(3)  Reflects options that were re-priced during the year
    pursuant to a stock option re-pricing and a stock option
    modification occurring on April 14, 1998 and September 29,
    1998, respectively, as approved by the Board of Directors of
    the Company.



D.)  Aggregate Option Exercise in Last Fiscal Year and Option Values as of
December 31, 1998

    None of the Named Executive Officers exercised stock options during the
year ended December 31, 1998.  The following table provides information
regarding the number of shares underlying both exercisable and
unexercisable stock options as of December 31, 1998 and the values of
unexercised "in-the-money" options as of that date.  An option is "in-the-
money" if the per share fair market value of the underlying share exceeds
the options exercise price share.

<TABLE>
<CAPTION>                                                                     Value of
                                                   Number of               Unexercised Securities
                                                   Underlying                 In-the-Money
                                                  Unexercised                 Options/SARs at
                                               Options/SARs at                December 31,
                                              December 31, 1998                  1998 (1)
                            Number                                         
                              of                                           
                            Shares            
                           Acquired         
                              on     Value   Exercisable Unexercisable      Exercisable Unexercisable
                           Exercise Realized    (#)           (#)               ($)          ($)
<S>                            <C>     <C>  <C>              <C>                  <C>      <C>
Charles E. Buchheit            -       -        -            255,000              -        -
Richard J. Coburn              -       -        -             60,000              -        -
Norman L. Milliard             -       -     75,000          110,000              -        -
Patrick J. Pedonti             -       -        -            125,000              -        -

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

(1)  Based on the closing price at December 31, 1998 of $22/32.

E.)  Long-Term Incentive Plan Awards
  No long-term incentive plan awards were made to any of the Named
Executive Officers in the last fiscal year.

F.)  Defined Benefit or Actuarial Plan Disclosure
  Not applicable.

G.)  Compensation of Directors
   Directors of the Company who are not employees of the Company receive a
monthly retainer of $750 and a per meeting fee of $750 for each meeting of
the Board of Directors and any committee meetings attended in person by
such director.  The Company also reimburses directors for reasonable travel
expenses incurred in order to attend meetings.

   Under its 1995 Stock Incentive Plan, the Company has established a stock
incentive program for non-employee directors, whereby each newly elected
director receives an initial option to purchase 5,000 shares of Common
Stock and will receive an option to purchase an additional 5,000 shares of
Common Stock on the date of the annual meeting of the Board each year
through 2000 as long as the director remains in office.  These options are
exercisable at the fair market value of the shares on the date of grant.

   The Company, as permitted by Connecticut law, has purchased directors
and officers liability insurance policies covering all of the Company's
directors and officers on an annual basis and on a one time three-year
basis with respect to the Company's initial public offering.  The aggregate
premiums for these policies paid or accrued during 1998 was approximately
$72,833.

H.)  Employment Contracts and Termination of Employment and Change-in-
  Control Arrangements

    Charles E. Buchheit and Norman L. Milliard have entered into employment
agreements  with the Company.  Both agreements have a three-year  term  and
expire  on  April  14,  2001 and June 30, 2001,  respectively.   If  either
employment  agreement was terminated without "cause,"  as  defined  in  the
agreements,  Mr. Buchheit would be entitled to receive (i) his base  salary
for  the  longer of a two-year period commencing on the date of termination
or  the  balance  of  the three-year term, the employment  term;  (ii)  any
accrued vacation; (iii) payment of health benefits for the balance  of  the
employment  term;  and  (iv) immediate vesting in all outstanding  options.
Mr.  Milliard would be entitled to receive his base salary and  payment  of
health  benefits  for the balance of the three-year term.   Mr.  Buchheit's
current  base salary is $250,000 and Mr. Milliard's current base salary  is
$150,000.

    The  employment agreements restrict Mr. Buchheit and Mr. Milliard  from
directly or indirectly competing with the Company through the participation
in  the development or distribution of any product related to the Company's
product  or processes during the term of the agreement and for a period  of
one  year  after  if  they  voluntarily resign  from  the  Company  or  are
terminated for cause.  The Employment Agreements do not otherwise  restrict
Mr.  Buchheit  and Mr. Milliard from pursuing any other business  interests
that do not directly compete with the Company.

I.)  Report on Repricing of Options/SARs
   Not applicable.

J.)    Compensation  Committee  Interlocks  and  Insider  Participation  in
  Compensation Decisions

    Neither  of  the  Executive Compensation Committee members,  Robert  H.
Steele and Willard F. Pinney, Jr., nor any executive officer of the Company
served  during 1998 as a member of the Compensation Committee of any  other
company.   All members of the Executive Compensation Committee are  outside
directors, except that Willard F. Pinney, Jr., is Secretary of the  Company
and  a  partner of Murtha, Cullina, Richter and Pinney LLP, counsel to  the
Company.

K.)  Board Compensation Committee Report on Executive Compensation
   Not applicable.

L.)  Performance Graph
   Not applicable.



Item 12.  Security Ownership of Certain Beneficial Owners and Management

    The  following table sets forth certain information as of  February  1,
1999  regarding the beneficial ownership of the Company's Common  Stock  by
(i)  each  person (or group of affiliated persons) known by the Company  to
own  more than 5% of the outstanding shares of Common Stock, (ii)  each  of
the  directors and Named Executive Officers of the Company, and  (iii)  all
directors and executive officers of the Company as a group.
                                                            
                                                            
                                                            
                                              
                                           Number of   
                                             Shares      Percentage
Name and Address (1)                       Beneficially  of Common
                                             Owned       Stock
                                              (2)
Richard J. Coburn .....................    435,969        3.2%
Norman L. Milliard (3).................    190,500        1.4%
Willard F. Pinney, Jr. (4).............     49,799          *
Joseph T. Brophy ......................     40,649          *
Robert H. Steele (5)...................     36,618          *
Richard Hodgson (6)....................     28,750          *
Charles E. Buchheit....................     20,000          *
Patrick J. Pedonti.....................      2,500          *
All directors and officers of the         
Company as a group (8 persons) (7) ....    804,785        5.9%

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

* Less than 1%
(1) The address of all persons who are executive officers or directors of
    the Company is in care of the Company, 800 Connecticut Boulevard, East
    Hartford, Connecticut 06108.
(2) Unless otherwise noted, each person or group identified possesses sole
    voting and investment power with respect to such shares, subject to
    community property laws where applicable.  Shares not outstanding but
    deemed beneficially owned by virtue of the right of a person or group
    to acquire them within 60 days of February 1, 1999 ("currently
    exercisable options") are treated as outstanding only for purposes of
    determining the amount and percent owned by such person or group.
(3) Includes 75,000 shares of Common Stock subject to currently
    exercisable options granted pursuant to the 1995 Stock Incentive Plan.
(4)  Includes 30,000 shares of Common Stock subject to currently
    exercisable options granted to Murtha, Cullina, Richter and Pinney LLP,
    counsel to the Company, of which Mr. Pinney is a partner.
(5)  Includes 17,118 shares of Common Stock owned by Mr. Steele's spouse
    and 1,500 shares of Common Stock subject to currently exercisable warrants
    issued to Mr. Steele's spouse, all of which he disclaims beneficial
    ownership.
(6)  Includes 3,750 shares of Common Stock subject to currently exercisable
    warrants.
(7)  Includes 105,000 shares of Common Stock subject to currently
    exercisable options granted pursuant to the 1995 Stock Incentive Plan and
    5,250 shares of Common Stock subject to currently exercisable warrants.
     

Item 13.  Certain Relationships and Related Transactions

     Willard F. Pinney, Jr. is a partner of the law firm Murtha, Cullina,
Richter and Pinney LLP, which serves as legal counsel to the Company.
                                     
                                     
                                     
                                     
                                     
                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)  Financial Statements and Schedules
   The financial statements as set forth under Item 8 of this report on
   Form 10-K are incorporated herein by reference.
   Financial statement schedules have been omitted since they are either
   not required, not applicable, or the information is otherwise included.
   
(b)  Reports on Form 8-K
   No reports on Form 8-K were filed during the last quarter of fiscal
   1998.
   
(c)  Exhibit Listing
   Exhibit
    Number  Description
  3.1, 4.1    Restated Certificate of Incorporation of the
              Company, as amended.(2)
  3.2, 4.2    Bylaws of the Company, as amended December 29,
              1997.(2)
  10.1        Product Development and Distribution Agreement dated
              February 16, 1996 between the Company and Xerox
              Corporation.(1)
  10.2        Letter of Understanding dated July 2, 1996 between the
              Company and Xerox Corporation supplementing the Product
              Development and Distribution Agreement.(1)
  10.3        Amendment to Product Development and Distribution
              Agreement between the Company and Xerox Corporation dated
              February 29, 1996.(1)
  10.4        Loan Agreement Promissory Note dated February 29, 1996
              between the Company and Xerox Corporation.(1)
  10.5        Product Purchase Agreement dated April 16, 1996 between
              the Company and International Business Machines
              Corporation.(1)
  10.6        Letter Agreement supplementing Product Purchase Agreement
              between the Company and International Business Machines
              Corporation dated February 23, 1996.(1)
  10.7        OEM Supply Agreement dated January 8, 1996 between the
              Company and Spectra, Inc.(1)
  10.8        Amendment No. 1 to the OEM Supply Agreement dated July
              12, 1996 between the Company and Spectra, Inc.(1)
  10.9        Lease Agreement dated February 16, 1996 between the
              Company John Hancock Mutual Life Insurance Company.(1)
  10.10       Memorandum of Understanding dated October 10, 1996
              between the Company and Oce van der Grinten, N.V.(1)
  10.11       Accent Color Sciences, Inc. 1995 Stock Incentive
              Plan.(1)
  10.12       Employment Agreement dated December 14, 1993 between
              the Company and Norman L. Milliard.(1)
  10.13       Amendment No. 1 to Employment Agreement between the
              Company and Norman L. Milliard dated as of January 1, 1995.(1)
  10.14       Employment Agreement dated December 14, 1993 between
              the Company and Richard J. Coburn.(1)
  10.15       Consulting Agreement dated August 2, 1994 between
              the Company and Peter Teufel.(1)
  10.16       Consulting Agreement dated May 3, 1996 between the
              Company and Raymond N. Smith.(1)
  10.17       Consulting Agreement Dated August 2, 1994 between
              the Company and Klaus Werding.(1)
  10.18       Letter Agreement dated February 28, 1996 between the
              Company and Pennsylvania Merchant Group Ltd.(1)
  10.19       Letter Agreement dated May 6, 1996 between the
              Company and Pennsylvania Merchant Group Ltd.(1)
  10.20       Termination Agreement dated August 20, 1996 between
              the Company and Pennsylvania Merchant Group Ltd.(1)
  10.21       Termination Agreement dated March 29, 1996 between
              the Company and Knickerbocker Securities, Inc.(1)
  10.22       Form of nondisclosure agreement between the Company
              and its employees.(1)
  10.23       Form of Registration Rights Agreement Relating to
              sale of Preferred Stock of the Company.(1)
  10.24       Form of Registration Rights Agreement Relating to
              sale of Series III Debentures of the Company.(1)
  10.25       Form of registration Rights Agreement Relating to
              warrants issued in connection with Series III Debentures of
              the Company.(1)
  10.26       Form of Registration Rights Agreement Relating to
              Warrants issued in connection with Series IV Debentures of the
              Company.(1)
  10.27       Form  of Registration Rights Agreement  Relating  to
              sale of Common Stock of the Company.(1)
  10.28       Registration Rights Agreement Relating to Warrants
              issued by the Company to Xerox Corporation.(1)
  10.29       Form of Registration Rights Agreement Relating to Warrants
              issued pursuant to sale of Interim Notes.(1)
  10.30       Form of Securities Purchase Agreement dated as of 1/09/98.(3)
  10.31       Certificate of Designations, Preferences and Rights of Series
              B Convertible Preferred Stock.(3)
  10.32       Form of Warrant issued in connection with the 1998 Private
              Placement.(3)
  10.33       Form of Registration Rights Agreement dated as of 1/09/98.(3)
  10.34       Employment Agreement dated April 15, 1998 between Charles E.
              Buchheit and the Company.(4)
  10.35       Loan Agreement between the Company and International Business
              Machines Corporation.(5)
  10.36       Promissory Note between the Company and International Business
              Machines Corporation.(5)
  10.37       Security Agreement between the Company and International Business
              Machines Corporation.(5)
     23       Consent of Price Waterhouse LLP
     24       Power of Attorney pursuant to which this Registration
              Statement has been signed on behalf of certain Directors.
     27       Financial Data Schedule
________________
     (1)  Incorporated by reference to Registration Statement 333-14043 on Form
       S-1.
     (2)  Incorporated by reference to Registration Statement 333-43467 on Form
       S-3.
     (3)  Incorporated by reference to Registration Statement 333-45321 on Form
       S-3.
     (4)  Incorporated by reference to the Registrant's Quarterly Form 10-Q for
       the quarter ended June 30, 1998 (File No. 000-29048)
     (5)  Incorporated by reference to the Registrant's Quarterly Form 10-Q for
       the quarter ended September 30, 1998 (File No. 000-29048)
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of East Hartford, State of Connecticut, on March 30, 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 March 30, 1999.

     Signature                       Title                 Date

/s/ Charles E. Buchheit
------------------------
Charles E. Buchheit           President and Chief        March 30,1999
                               Executive Officer
                         (Principal Executive Officer)
                       
/s/ Patrick J. Pedonti
------------------------
Patrick J. Pedonti        Vice President, Treasurer and  March 30,1999
                              Chief Financial Officer
                    (Principal Financial and Accounting Officer)


----------*-------------
Joseph T. Brophy                     Director            March 30, 1999


----------*-------------    
Richard J. Coburn                    Director            March 30, 1999


----------*-------------   
Richard Hodgson                      Director            March 30, 1999


----------*-------------   
Norman L. Millard                    Director            March 30, 1999


----------*-------------   
Willard F. Pinney, Jr.               Director            March 30, 1999


----------*-------------    
Robert H. Steele                     Director            March 30, 1999



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