<PAGE>
                           SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                      FORM 10-Q
(Mark One)

  (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
      SECURITIES AND EXCHANGE OF 1934

      For the quarter period ended September 30, 1998
                                OR

  ( ) 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     0-12595  

                             MicroENERGY, Inc.                             
           (Exact Name of Registrant as specified in its Charter)

       Delaware                                             36-3262274      
(State or other Jurisdiction of                        (I.R.S. Employer   
Incorporation or Organization                          Identification No.)

350 Randy Road, Carol Stream, IL                               60188       
 (Address of Executive Offices) (Zip Code)    

   Registrant's Telephone Number, including Area Code: (630) 653-5900

Indicated 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 report(s), and (2) has been subject to 
such filing requirements for the past 90 days.

                     Yes   X                  No       

Indicate the  number of shares outstanding of each of the Registrant's classes 
of common stock, as of the latest practicable date.

As of September 30, 1998 there were outstanding 1,966,064 shares of Common 
Stock, $.01 par value.



                                MICROENERGY, INC.


                                    INDEX


Part 1 - Financial Information

     Item 1 - Financial Statements

              Condensed Balance Sheets for September 30, 1998 
              (unaudited) and June 30, 1998 (audited).

              Condensed Statements of Operations (unaudited) for the
              quarters ending September 30, 1998 and September 30, 1997.

              Condensed Statements of Cash Flows (unaudited) for the 
              three months ending September 30, 1998 and September 30, 
              1997.

              Notes to Condensed Financial Statements (unaudited)

     Item 2 - Management's Discussion and Analysis of Financial Condition
              and Results of Operations.


     Item 3 - Quantitative and Qualitative Disclosures About Market Risk


<PAGE>
                               MICROENERGY, INC.
                           CONDENSED BALANCE SHEETS
                                                  1st Quarter
                                                    Ending     Year Ended
                                                    9/30/98      6/30/98 
ASSETS                                           (unaudited)     (audited) 
Current assets:
     Cash                                       $    7,491     $  134,303
     Accounts receivable                         1,245,040      1,610,145
  Inventories                                    2,019,137      2,073,735
  Other current assets                             (23,620)        22,735
    Total current assets                         3,248,048      3,840,918
Property and equipment                           4,752,882      4,732,401
Accumulated depreciation                        (3,527,867)    (3,455,867)
                                                 1,225,015      1,276,534
Other assets, net                                   38,935         32,513
                                               $ 4,511,998     $5,149,965
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Current portion of long-term obligations  $ 4,066,338      4,236,926
     Accounts payable                              437,995        467,444
     Accrued expenses                              523,605        295,274
       Total current liabilities                 5,027,938      4,999,644
Long-term obligations                               90,428         97,262
       Total liabilities                         5,118,366      5,096,906
Stockholders' equity:                
     8% cumulative Series A preferred stock,    
   $7.00 liquidation preference,4,000,000
   shares authorized, 494,500 issued             2,605,282      2,605,282  
   Common stock, $.01 par value - 4,000,000
      shares authorized; 1,966,064 shares
   issued in 1998 and 2,021,847 in 1997             19,661         19,661
     Additional paid-in capital                  4,642,842      4,642,842
     Accumulated deficit                        (7,311,140)    (7,311,140)
     Common stock purchase warrants,                    75             75
  Preferred stock warrants                         112,725        112,725     
Treasury stock, at cost 1,898 shares               (16,386)       (16,386)
  Current Year Earnings/(Loss)                    (659,427)           -- 
           Total stockholders' equity             (606,368)        53,059
                                                $4,511,998     $5,149,965
                                                  
                                                   
                             MICROENERGY,INC
                          STATEMENTS OF OPERATIONS

                                    Three Months        Three Months
                                          Ended            Ended
                                         9/30/98          9/30/97  
                                       (Unaudited)      Unaudited)

Sales                                   $2,076,254       $3,694,813     

Expenses:
     Facility, pre-production,
      and production                     1,901,761        2,876,360     
     Research and development              352,136          358,300     
     Selling,General and
   Administrative                          388,189          448,235

     Operating Income/(Loss)              (565,832)          11,918

  Interest expense, net                     93,595          109,541
     Net Income/(Loss)                 $  (659,427)       $ (97,623)
                                         ==========         =========     
For earnings per share calculation:
     Net Income/(Loss)                  $ (659,427)       $ (97,623)
     Preferred stock dividends             (69,230)         (69,230)

   Net Income/(Loss) available
     to common shareholders             $ (728,657)       $(166,853)  
                                         ==========        =========       
         
   
   Net Income/(loss) per share      $         (.37)       $    (.08)

Weighted average number
 of shares of common
 stock outstanding                        1,966,064       2,018,824          

 
<PAGE>
                                  MICROENERGY, INC.
                               STATEMENTS OF CASH FLOWS

                                         Three Months     Three Months
                                            Ending          Ending  
                                           9/30/98          9/30/97  
                                          (Unaudited)     (Unaudited)
Cash flows from operating
 activities:
     Net (losses) earnings              $   (659,427)     $ (97,623)          
Adjustments to reconcile net
      (losses) earnings to net cash
   provided by operations:
          Depreciation                        72,000        190,365

          Changes in assets and 
            liabilities:
               Accounts receivable           365,105        ( 42,638)
               Inventories                    54,598          41,201
               Other assets                   39,933          72,751
               Accounts payable              (29,449)       (476,702)     
               Accrued expenses              228,331        (  7,286)     
                                        
     Net cash provided (used) by
      operating activities                    71,091        (319,932)     
Cash flows (used in) provided by 
 investing activities:
     Additions to equipment                  (20,481)        (22,975)     
Cash flows provided by (used in)
 financing activities:                    
     Long-term debt, net of payments        (177,422)        231,339     
     Equity Transactions                           0          13,500     
Net cash provided by (used in)
 financing activities                       (177,422)        244,839
Net increase (decrease) in cash             (126,812)       ( 98,068)     
Cash at beginning of period                  134,303         110,086     
Cash at end of period                     $    7,491      $   12,018    

<PAGE>
                                 MICROENERGY, INC.
                       NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED FINANCIAL STATEMENTS

The condensed balance sheet as of September 30, 1998, the consolidated 
statement of income for the three month periods ending September 30, 1998 and 
September 30, 1997 and the condensed statement of cash flows for the three 
month period ending September 30, 1998 and September 30, 1997 have been 
prepared by the Company, without audit.  In the opinion of management, all 
adjustments (which include only normal recurring adjustments) necessary to 
present fairly the financial position, results of operations and changes in 
financial position at September 30, 1998 and for all periods presented have 
been made.

Certain information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles have been condensed or omitted.  It is suggested that these 
condensed statements be read in conjunction with the financial statements and 
notes thereto included in the Company's June 30, 1998 10K report.  The results 
of operations for the period ended September 30, 1998 are not necessarily 
indicative of the operating results for the full year.

<PAGE>
Part 1
Item 2
                               MICROENERGY, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Net sales for the three months ended September 30, 1998 were $2,076,254, 
representing a 44% decrease over the prior year period of $3,694,813. 
Approximately $1.0 million of the decrease was the result of a sales decline 
from one of the Company's major  customers.  The sales to this customer for 
the remainder of this fiscal year will be negligible. Approximately $450,000 
of the decline is related to the divestiture of the wholly owned subsidiary, 
Tru-Way.  The subsidiary was divested in the third fiscal quarter of the prior 
year.  The remaining decline of approximately $170,000 was due to decline in 
demand from the Company's customers.  A net loss of $659,427 was incurred for 
the current quarter as compared to the net loss of $97,623 in the prior year 
period.  The current year loss was a direct result of the lower revenues.

Manufacturing costs declined $974,599 or 34% from the prior year, as compared 
to the 44% decrease in revenues.  Research & Development declined slightly and 
Selling, General, & Administrative was reduced by $60,046 or 13%. During the 
quarter the Company instituted a cost reduction plan as a result of the lower 
revenue levels. The impact from this action will begin to be realized in the 
coming quarters, the impact in the current quarter was negligible.

Interest cost for the quarter was $93,595 as compared to $109,541 in the prior 
year period.  The major reason for the decline was the reduction of debt 
related to the divested subsidiary.




Liquidity and Capital Resources

The Company at September 30, 1998, had a working capital deficit of $1.8 
million as compared $1.2 million working capital deficit at the end of the 
fiscal year June 30, 1998. The working capital deficit is a result of the 
Company's term loans from its major lender, currently totaling approximately 
$3.9 million, which were reclassed to current liabilities during the fourth 
quarter of fiscal year 1997 due to covenant violations. The Company has come 
to an informal arrangement with its bank and expects to be afforded additional 
time to remedy its covenant violations.  The Company expects to formalize 
these plans in the next quarter.  At this time there are no additional funds 
available on the Company's revolving line of credit.

The Company's accounts receivable declined by $365,000 as a result of the 
lower sales volume, and inventories declined by 54,000, or 3% as compared to 
the fiscal year end. 

The Company is current with all of its debt obligations. In the current 
quarter, total debt was reduced by $177,000.  Management expects that if it is 
afforded time to remedy the violations of its bank loan covenants that its 
current cash and working capital position, combined with cash expected to be 
generated from operations will be sufficient to service the Company's debt and 
fund the Company for the coming fiscal year.


Forward Looking Statements; Potential Fluctuations in Operating Results

This report contains certain forward looking statements.  While these 
statements reflect the good faith judgement of the Company's management such 
statements can only be based on facts and factors currently known by the 
Company. Consequently, forward looking statements are inherently subject to 
risks and uncertainties and actual outcomes may differ materially.

The Company's revenues and operating results have varied significantly in the 
past and may do so in the future.  The Company expects that these fluctuations 
will continue, therefore, the Company believes that period-to-period 
comparisons of its financial results should not be relied on as an indication 
of future performance.


Item 3     Quantitative and Qualitative Disclosures About Risk

The Company does not invest in securities that are exposed to risk from 
changes in interest rates, currency valuations, or commodity prices.<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1933, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.



Date: November 10, 1998                 By(s)   Robert G. Gatza   
                                          Robert G. Gatza
                                          President and CEO



Date: November 10, 1998                 By(s)   Robert J. Fanella  
                                          Robert J. Fanella
                                          Chief Financial Officer
                                          and Treasurer


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