SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the Quarterly Period Ended November 30, 1995

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 0-21160


                             THE MICROCAP FUND, INC.
================================================================================
             (Exact Name of Registrant as Specified in its Charter)


Maryland                                                              13-3698251
================================================================================
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


237 Park Avenue, 21st floor
New York, New York                                                         10017
================================================================================
(Address of Principal Executive Offices)                              (Zip Code)


Registrant's Telephone Number, Including Area Code:  (800) 888-6534


Not applicable
================================================================================
Former name, former address and former fiscal year, if changed since last report


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 the number of shares outstanding of each of the Registrant's classes of
common  stock as of the  latest  practicable  date.  2,119,814  shares of common
stock.


<PAGE>


                                      INDEX
                             THE MICROCAP FUND, INC.


PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements.

Statements of Assets and  Liabilities  as of November 30, 1995  (Unaudited)  and
February 28, 1995

Schedule of Portfolio Investments as of November 30, 1995 (Unaudited)

Statements of Operations  for the Three Months Ended  November 30, 1995 and 1994
(Unaudited)

Statements  of Operations  for the Nine Months Ended  November 30, 1995 and 1994
(Unaudited)

Statements of Changes in Net Assets for the Nine Months ended  November 30, 1995
and 1994 (Unaudited)

Statements  of Cash Flows for the Nine Months  ended  November 30, 1995 and 1994
(Unaudited)

Notes to Financial Statements (Unaudited)

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


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings.

Item 2.       Changes in Securities.

Item 3.       Defaults upon Senior Securities.

Item 4.       Submission of Matters to a Vote of Security Holders.

Item 5.       Other Information.

Item 6.       Exhibits and Reports on Form 8-K.



<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.       Financial Statements.

THE MICROCAP FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES

<TABLE>
                                                                                       November 30, 1995      February 28,
                                                                                          (Unaudited)                1995
ASSETS

Portfolio investments at fair value (cost $5,936,806 at
<S>         <C> <C>      <C>                    <C> <C>                                <C>                     <C>             
   November 30, 1995 and $8,335,962 at February 28, 1995)                              $      7,129,650        $      8,371,350
Cash and cash equivalents                                                                     9,238,487               9,033,750
Receivable from sale of securities                                                              305,538                       -
Receivable (net of unamortized discount of $1,000 at
   November 30, 1995 and $0 at February 28, 1995) - Note 2                                       39,000                 100,000
Accrued interest receivable                                                                     319,079                 422,938
Deferred organizational costs (net of accumulated amortization of
   $106,414 at November 30, 1995 and $76,885 at February 28, 1995)                               90,451                 119,980
Other assets                                                                                     60,949                   6,422
                                                                                       ----------------        ----------------
   Total assets                                                                              17,183,154              18,054,440
                                                                                       ----------------        ----------------

LIABILITIES

Deferred interest income                                                                              -                  53,350
Accounts payable and accrued expenses                                                           183,943                 141,965
Due to Administrator                                                                             34,047                 144,052
                                                                                       ----------------        ----------------
   Total liabilities                                                                            217,990                 339,367
                                                                                       ----------------        ----------------

NET ASSETS

Preferred Stock, par value $.01; 2,000,000 shares authorized;
   281,917 shares issued and outstanding - Note 4                                                 2,819                       -
Common Stock, par value $.01; 10,000,000 shares authorized; 2,370,823
   shares issued and 2,108,096 outstanding at November 30, 1995
   and 2,204,000 shares issued and outstanding at February 28, 1995                              23,708                  22,040
Additional paid-in-capital                                                                   19,536,706              19,541,193
Net unrealized appreciation of portfolio investments                                          1,192,844                  35,388
Accumulated net investment losses                                                              (100,138)                      -
Distribution in excess of net investment income                                                 (95,219)                (95,219)
Accumulated net realized loss from portfolio investments                                     (2,515,688)             (1,788,329)
                                                                                       ----------------        ----------------
   Sub-total                                                                                 18,045,032              17,715,073

Less Treasury Stock at cost (262,727 shares of common stock) - Note 3                        (1,079,868)                      -
                                                                                       ----------------        ----------------

Net Assets                                                                             $     16,965,164        $     17,715,073
                                                                                       ================        ================

Net assets per share of common stock                                                        $  7.06                    $  8.04
                                                                                            =======                    =======
Net assets per share of preferred stock                                                     $  7.41                           -
                                                                                            =======                    ========
</TABLE>

See notes to financial statements.


<PAGE>


THE MICROCAP FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
November 30, 1995


<TABLE>
                                                                                                                           % of
Issuer / Position                                                                   Cost              Fair Value       Net Assets(1)

Publicly-Held Securities:

Alamar Biosciences, Inc.(A)
Warrant to purchase 250,000 shares of Common Stock
<S>   <C>                       <C>   <C>                                       <C>                 <C>                  <C>  
   at $5.00 per share, expiring 10/14/97                                        $      20,906       $       25,000       0.15%
                                                                                -------------       --------------

Unigene Laboratories, Inc.(B)
Warrant to purchase 675,000 shares of Common Stock
   at $1.38, expiring 5/7/00                                                                0              168,750        .99%
                                                                                -------------       --------------

YES! Entertainment Corporation(C)
Warrant to purchase 11,438 shares of Common Stock
   at $15.30 per share, expiring 7/16/98                                                    0                    0           0%
                                                                                -------------       --------------


Privately-Held Securities:

Bennett Environmental Inc.(D)
Warrant to purchase 900,000 shares of Common Stock
   at $.79 per share, expiring 9/1/98                                                     900                  900
Bennett Environmental U.S., Inc.
8% Secured Promissory Note                                                          1,200,000              720,000
                                                                                -------------       --------------
                                                                                    1,200,900              720,900       4.25%
                                                                                -------------       --------------

First Colony Acquisition Corp.*(E)
106,563 shares of Preferred Stock                                                     594,174              594,174
6% Convertible Promissory Note due 11/30/97                                         1,343,326            1,343,326
Warrant to purchase 7,560 shares of Common Stock
   at $5.00, expiring 1/24/00                                                               0                    0
                                                                                -------------       --------------
                                                                                    1,937,500            1,937,500      11.42%
                                                                                -------------       --------------

International Communication Technologies, Inc.
9% Convertible Promissory Note due 6/30/96                                            150,000              150,000        .88%
                                                                                -------------       --------------

Oh-La-La! Inc.(F)
9% Convertible Senior Note                                                            140,000              140,000
9% Convertible Senior Note                                                            100,000              100,000
                                                                                -------------       --------------
                                                                                      240,000              240,000       1.41%
                                                                                -------------       --------------

Optiva Corporation
150,000 shares of Common Stock                                                        487,500              487,500       2.88%
                                                                                -------------       --------------
</TABLE>



<PAGE>


THE MICROCAP FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) - continued
November 30, 1995


<TABLE>
                                                                                                                           % of
Issuer / Position                                                                   Cost              Fair Value       Net Assets(1)

Shells Seafood Restaurants, Inc.*(G)
<C>                        <C>  <C>                                                 <C>                  <C>      
9% Senior Secured Note due 2/29/96                                                  1,310,000            1,310,000
Warrant to purchase 75,000 shares of Common Stock
   at $5 per share, expiring 12/31/99                                                       0                    0
300,000 shares of Common Stock                                                         90,000            1,590,000
Secured note at prime plus 2% due 2/29/96                                             500,000              500,000
Warrant to purchase 175,000 shares of Common Stock
   at $3.15 per share, expiring 12/31/99                                                    0                    0
                                                                                -------------       --------------
                                                                                    1,900,000            3,400,000      20.04%
                                                                                -------------       --------------      -----

Total Portfolio Investments(H)                                                  $   5,936,806       $    7,129,650      42.02%
                                                                                =============       ==============      ===== 
</TABLE>

* May be deemed an  "affiliated  person"  of the Fund as such term is defined in
  the Investment Company Act of 1940.

(1)  Represents fair value as a percentage of net assets.

(A)  In  October  1995,  the Fund  sold its  150,000  common  shares  of  Alamar
     Biosciences, Inc. for $159,375, realizing a loss of $128,081.

(B)  In November  1995,  the Fund sold its $2 million  promissory  note due from
     Unigene  Laboratories,  Inc.,  accrued  interest  thereon,  and warrants to
     purchase 225,000 common shares of Unigene for $2,221,330. The Fund received
     an additional 75,000 warrants to purchase common shares of Unigene at $1.38
     per share pursuant to a letter agreement, dated September 29, 1995.

(C)  In  September  1995,  the  Fund  sold  its  55,555  common  shares  of YES!
     Entertainment Corporation for $305,538, realizing a loss of $393,662.

(D)  Subsequent to the end of the quarter,  in December 1995, the Fund agreed to
     sell its $1.2  million  secured  promissory  note and  warrant to  purchase
     900,000 shares of common stock of Bennett  Environmental  U.S.,  Inc. (BEI)
     back to BEI for $820,000 plus 500,000  shares of BEI common stock.  Bennett
     also  agreed to  reimburse  the Fund for certain  legal  costs  incurred in
     connection with the agreement.

(E)  In September  1995,  the Fund made  follow-on  investments  in First Colony
     Acquisition  Corp.  totaling  $187,500.  The Fund's  purchase  included  an
     additional 10,313 shares of the company's preferred stock and an additional
     6% convertible  note in the amount of $129,999.  In addition,  the interest
     rate on the Fund's existing $1,213,327  convertible note was increased from
     4% to 6%.

(F)  During  fiscal  1995,  Oh-La-La!  Inc.  filed  for  Chapter  11  bankruptcy
     protection.  The assets of Oh-La-La!  are being  liquidated  through  court
     proceedings.  The Fund  currently  expects to receive  cash  and/or  equity
     securities of a public company at the conclusion of these proceedings.

(G)  During the quarter ended August 31, 1995, the Fund had agreed to extend the
     maturity  date  of its  $500,000  secured  note  due  from  Shells  Seafood
     Restaurants,   Inc.  to  February  29,  1996.  The  initial   consideration
     negotiated  for such  extension,  was the exchange of the Fund's warrant to
     purchase 10,000 shares of Shells  preferred stock at $25.00 per share for a
     warrant to  purchase  130,000  shares of Shells  common  stock at $3.15 per
     share.  During the quarter ended November 30, 1995, such  consideration was
     further negotiated,  whereby the consideration received by the Fund for the
     note extension was increased  from a warrant to purchase  130,000 shares of
     Shells  common  stock to a warrant  to  purchase  175,000  shares of Shells
     common stock at $3.15 per share.

(H)  In November  1995,  the Fund  received  $145,728 for the  redemption of its
     291,456 common stock warrants of Regency Holdings (Cayman) Inc.

See notes to financial statements.
<PAGE>


THE MICROCAP FUND, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended November 30,


<TABLE>
                                                                                                 1995                1994
                                                                                             -------------      ---------

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                          <C>                <C>            
   Interest from repurchase agreements                                                       $     108,455      $       120,250
   Interest and dividends from portfolio investments                                                47,315              135,648
                                                                                             -------------      ---------------
   Total investment income                                                                         155,770              255,898
                                                                                             -------------      ---------------

Expenses:
   Administrative fee                                                                               42,510               44,701
   Professional fees                                                                               205,875               99,852
   Salary expense                                                                                   58,832               33,978
   Amortization of deferred organizational costs                                                     9,843                9,843
   Transfer agent and custodian fees                                                                 6,589                4,731
   Directors' fees and expenses                                                                     10,000                3,894
   Other operating expenses                                                                         59,202               55,826
                                                                                             -------------      ---------------
   Total expenses                                                                                  392,851              252,825
                                                                                             -------------      ---------------

Net investment income (loss)                                                                      (237,081)               3,073
                                                                                             -------------      ---------------

NET REALIZED AND UNREALIZED LOSS FROM
   PORTFOLIO INVESTMENTS

Net realized gain (loss) from portfolio investments                                               (376,015)             258,400
Change in net unrealized appreciation or depreciation of
   portfolio investments                                                                           305,062           (1,025,976)
                                                                                             -------------      ---------------
Net realized and unrealized loss from portfolio investments                                        (70,953)            (767,576)
                                                                                             -------------      ---------------

NET DECREASE IN NET ASSETS RESULTING
   FROM OPERATIONS                                                                           $    (308,034)     $      (764,503)
                                                                                             =============      =============== 
</TABLE>


See notes to financial statements.



<PAGE>


THE MICROCAP FUND, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Nine Months Ended November 30,


<TABLE>
                                                                                                  1995                1994
                                                                                              -------------       --------

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                           <C>                 <C>          
   Interest from repurchase agreements                                                        $     309,403       $     240,341
   Interest and dividends from portfolio investments                                                338,723             535,747
                                                                                              -------------       -------------
   Total investment income                                                                          648,126             776,088
                                                                                              -------------       -------------

Expenses:
   Administrative fee                                                                               128,533             136,653
   Professional fees                                                                                292,788             183,569
   Salary expense                                                                                   161,277             105,620
   Amortization of deferred organizational costs                                                     29,529              29,529
   Transfer agent and custodian fees                                                                 17,967              10,797
   Directors' fees and expenses                                                                      22,952              18,963
   Other operating expenses                                                                          95,218              94,740
                                                                                              -------------       -------------
   Total expenses                                                                                   748,264             579,871
                                                                                              -------------       -------------

Net investment income (loss)                                                                       (100,138)            196,217
                                                                                              -------------       -------------

NET REALIZED AND UNREALIZED GAIN FROM
   PORTFOLIO INVESTMENTS

Net realized loss from portfolio investments                                                       (727,359)           (161,149)
Change in net unrealized appreciation of portfolio investments                                    1,157,456             669,307
                                                                                              -------------       -------------
Net realized and unrealized gain from portfolio investments                                         430,097             508,158
                                                                                              -------------       -------------

NET INCREASE IN NET ASSETS RESULTING
   FROM OPERATIONS                                                                            $     329,959       $     704,375
                                                                                              =============       =============
</TABLE>


See notes to financial statements.



<PAGE>


THE MICROCAP FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
For the Nine Months Ended November 30,


<TABLE>
                                                                                                1995                 1994
                                                                                          ----------------     ----------

Change in net assets resulting from operations:

<S>                                                                                       <C>                  <C>             
Net investment income (loss)                                                              $       (100,138)    $        196,217
Net realized loss from portfolio investments                                                      (727,359)            (161,149)
Change in net unrealized appreciation of portfolio investments                                   1,157,456              669,307
                                                                                          ----------------     ----------------
     Net increase in net assets resulting from operations                                          329,959              704,375
                                                                                          ----------------     ----------------

Decrease in net assets from distributions:

Distribution from net realized gains                                                                     -              (70,150)
Distribution from net investment income                                                                  -             (251,296)
Distribution in excess of net investment income                                                          -             (119,354)
                                                                                          ----------------     ----------------
Decrease in net assets from distributions                                                                -             (440,800)
                                                                                          ----------------     ----------------

Change in net assets from capital stock transactions:

Common Stock repurchased - Note 3                                                               (1,079,868)                   -
                                                                                          ----------------     ----------------

Total increase (decrease) in net assets for the period                                            (749,909)             263,575
Net assets at beginning of period                                                               17,715,073           17,548,222
                                                                                          ----------------     ----------------

NET ASSETS AT END OF PERIOD                                                               $     16,965,164     $     17,811,797
                                                                                          ================     ================
</TABLE>


See notes to financial statements.



<PAGE>


THE MICROCAP FUND, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended November 30,


<TABLE>
                                                                                                   1995              1994
                                                                                              --------------    ---------

CASH FLOWS PROVIDED FROM (USED FOR ) OPERATING
   ACTIVITIES

<S>                                                                                           <C>               <C>            
Net investment income (loss)                                                                  $     (100,138)   $       196,217
Adjustments to reconcile net investment income (loss) to cash
   provided from (used for) operating activities:
Amortization of discounted receivable                                                                 (3,000)           (43,547)
Amortization of deferred organizational costs                                                         29,529             29,529
Increase (decrease) in payables                                                                     (121,377)            86,440
(Increase) decrease in receivables and other assets                                                   49,332           (181,747)
                                                                                              --------------    ---------------
Cash flows provided from (used for) operating activities                                            (145,654)            86,892
                                                                                              --------------    ---------------

CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES

Purchase of portfolio investments                                                                 (3,937,500)        (3,843,773)
Net proceeds from the sale of portfolio investments                                                1,427,759          5,776,510
Repayment/sale of notes                                                                            3,940,000          2,720,000
Deposit released from escrow                                                                               -            255,000
                                                                                              --------------    ---------------
Cash flows provided from investing activities                                                      1,430,259          4,907,737
                                                                                              --------------    ---------------

CASH FLOWS USED FOR FINANCING ACTIVITIES

Common stock repurchased                                                                          (1,079,868)                 -
                                                                                              --------------    ---------------

Increase in cash and cash equivalents                                                                204,737          4,994,629
Cash and cash equivalents at beginning of period                                                   9,033,750          4,475,544
                                                                                              --------------    ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                    $    9,238,487    $     9,470,173
                                                                                              ==============    ===============
</TABLE>


See notes to financial statements.


<PAGE>


THE MICROCAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


1.     Organization and Purpose

The MicroCap Fund, Inc. (the "Fund"),  formerly known as Commonwealth Associates
Growth  Fund,  Inc.,  is a  non-diversified,  closed-end  management  investment
company operating as a business development company under the Investment Company
Act of 1940. The Fund was  incorporated  under the laws of the State of Maryland
on January 26, 1993. The Fund's investment  objective is to achieve intermediate
to  long-term  capital  appreciation  of assets by investing  in  securities  of
emerging and established  companies that management  believes offer  significant
growth potential.

Reference is made to the Fund's February 28, 1995 annual report included in Form
10-K as filed  with the  Securities  and  Exchange  Commission  for the Notes to
Financial Statements that remain unchanged.  The following notes are included as
a result of changes during the current quarter or year to date period.

2.     Receivables

In March  1995,  the Fund  received  the final  installment  payment of $100,000
relating to the $1 million receivable due from Computer Integration Corporation.
On March 24,  1995,  the Fund sold its  investment  in SR  Communications  Corp.
("SRC") for $200,000 in cash and a $40,000  promissory  note from SRC payable on
March 24, 1996.

3.     Common Stock Repurchase Program

In May 1995,  the Board of Director's  increased the amount  authorized  for the
repurchase of the Fund's common stock to an aggregate  amount of $2 million.  As
of November  30, 1995,  the Fund had  repurchased  262,727  shares of its common
stock for an aggregate cost of $1,079,868.

4.     Capital Stock Transactions

On March 20, 1995, the Fund paid a stock dividend to  shareholders  of record on
March  13,  1995 in  shares  of  preferred  stock  at the rate of .2  shares  of
preferred  stock  for  each  share  of  common  stock.  The  preferred  stock is
convertible  into shares of the Fund's  common stock at any time until  February
27, 1998. Each share of preferred  stock is convertible  into (i) 1.05 shares of
common stock from the date of issuance  through  February  28,  1996,  (ii) 1.25
shares of common  stock from March 1, 1996  through  February 28, 1997 and (iii)
1.33 shares of common  stock from March 1, 1997 through  February 27, 1998.  The
preferred stock will  automatically  convert into common stock on the earlier of
(i) a sale,  transfer or other  distribution  of the shares of common stock upon
which the dividend has been paid or (ii) February 27, 1998. The preferred  stock
is  non-transferable.  During the nine months ended  November 30, 1995,  158,883
shares of preferred stock were converted into 166,827 shares of common stock.

4.     Litigation

The  Fund  is a  respondent  in an  arbitration  claim  Warner  v.  Commonwealth
Associates  Growth  Fund,  Inc.  before  the  American  Arbitration  Association
commenced in December  1995 by Stephen J. Warner,  the former  President,  Chief
Executive Officer and Portfolio Manager of the Fund. The claim alleges breach of
contract  and  fraud  in  connection  with the  termination  of  employment  and
consulting agreements between him

<PAGE>


THE MICROCAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


and the Company and damages in the amount of $200,000,  plus  punitive  damages.
The Fund has answered,  moved to dismiss  portions of, and asserted  affirmative
defenses to, the Statement of Claim.  The Fund believes that the  allegations in
the Statement of Claim are without  merit and intends to defend the  arbitration
vigorously.

5.     Subsequent Events

On October 11, 1995, Commonwealth  Associates Asset Management,  Inc. terminated
the Administrative  Agreement with the Company effective December 10, 1995. From
such date to present, the Fund has been self administered.



<PAGE>


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

Results of Operations

Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended November 30, 1995 and 1994, the Fund had net realized
and  unrealized  losses from  portfolio  investments  of $70,953  and  $767,576,
respectively.  For the nine months ended November 30, 1995 and 1994 the Fund had
net realized and  unrealized  gains from  portfolio  investments of $430,097 and
$508,158, respectively.

Realized  Gains and Losses - For the three and nine months  ended  November  30,
1995,  the Fund  had a net  realized  loss  from its  portfolio  investments  of
$376,015 and $727,359, respectively.  During the three months ended November 30,
1995, the Fund sold 150,000 shares of Alamar  Biosciences,  Inc. common stock in
the public market for $159,375, realizing a loss of $128,081. In September 1995,
the Fund sold 55,555 shares of YES!  Entertainment  Corporation  common stock in
the public market for $305,538,  realizing a loss of $393,662.  Also, during the
quarter ended  November 30, 1995,  the Fund realized a gain of $145,728 from the
redemption of its Regency Holdings (Cayman),  Inc. warrants back to the company.
During the three months ended August 31, 1995,  there were no realized  gains or
losses from portfolio  investments.  During the three months ended May 31, 1995,
the Fund sold its 337,500  shares of  Silverado  Foods,  Inc.  common  stock for
$822,656,  realizing  a gain of  $672,656.  In March  1995,  the  Fund  sold its
investment in SR Communications Corp. ("SRC") for $200,000 in cash and a $40,000
promissory note (including  $4,000 of imputed  interest)  payable in March 1996.
This transaction resulted in a net realized loss of $14,000.  Also, in May 1995,
the Fund wrote-off its $60,000 investment in Radiator King  International,  Inc.
and its  $950,000  investment  in  Weir-Jones  Marketing,  Inc. due to continued
operating and financial difficulties of these companies.

For the  three and nine  months  ended  November  30,  1994,  the Fund had a net
realized gain of $258,400 and a net realized loss of $161,149 from its portfolio
investments,  respectively.  For the three months ended  November 30, 1994,  the
Fund had a  $258,400  realized  gain  from the sale of 47,852  common  shares of
Loronix  Information  Systems,  Inc.  During May and June 1994,  the Fund had an
additional  $18,990  gain  from the sale of  100,000  common  shares  of  Alamar
Biosciences,  Inc. These gains were offset by a $438,539  realized loss from the
sale of  marketable  securities  completed  in the first half of the Fund's 1994
fiscal year. In March 1994,  the Fund sold its  $1,500,000  investment in EMARC,
Inc. for $1,500,000, resulting in no gain or loss.

Unrealized  Gains and Losses - For the three and nine months ended  November 30,
1995,  the Fund had a net increase in unrealized  appreciation  of its portfolio
investments  totaling  $305,062 and  $1,157,456,  respectively.  The  $1,157,456
increase for the nine months ended  November 30, 1995  consisted of a $1,366,456
net  unrealized  gain due to the  upward  revaluation  of the  Fund's  portfolio
investments  offset by a $209,000 net transfer from  unrealized gain to realized
gain relating to the sale of the Fund's investments in Silverado Foods, Regency,
YES! Entertainment and Alamar, as discussed above. The $1,366,456 net unrealized
gain for the nine months ended November 30, 1995, includes the $1,500,000 upward
revaluation of the Fund's investment in Shells Seafood Restaurants,  Inc., which
is negotiating with investment bankers to underwrite an initial public offering.

For the three and nine months ended November 30, 1994, the Fund had a $1,025,976
net  decrease  and a $669,307 net  increase in  unrealized  appreciation  of its
portfolio  investments,  respectively.  The $669,307  increase to net unrealized
appreciation  includes an $831,256  unrealized  gain  reflecting  the net upward
revaluation of certain portfolio investments for the period, primarily Silverado
Foods,  which  completed  its  initial  public  offering  in August  1994.  This
unrealized  gain was offset by a $161,949 net transfer from  unrealized  gain to
realized gain relating to the portfolio  investments  and marketable  securities
sold during the nine month period, as discussed above.

Investment Income and Expenses
For the three  months  ended  November  30,  1995 and  1994,  the Fund had a net
investment loss of $237,081 and net investment  income of $3,073,  respectively.
For the  nine  months  ended  November  30,  1995 and  1994,  the Fund had a net
investment loss of $100,138 and net investment income of $196,217, respectively.
An increase in interest  earned from  repurchase  agreements for the nine months
ended  November  30, 1995 was more than  offset by a decrease  in  interest  and
dividend  income  earned from  portfolio  investments  for the nine months ended
November 30, 1995 compared to the same period in 1994.  Interest from repurchase
agreements was $309,403 and $240,341 for the nine months ended November 30, 1995
and  1994,  respectively.  This  increase  resulted  from an  increase  in funds
invested in repurchase  agreements and an increase in short-term  interest rates
during the nine months ended  November 30, 1995.  Interest and dividends  earned
from portfolio  investments for the nine months ended November 30, 1995 and 1994
was $338,723 and $535,747, respectively. This decrease primarily resulted from a
decrease in the income  producing  debt  securities  held by the Fund during the
1995 period  compared to the same  period in 1994 and the  write-off  during the
1995  period  of  accrued  interest  receivable  relating  to  the  Fund's  debt
investments  in  Weir-Jones  Marketing,   Inc.  totaling  $92,863,  and  Bennett
Environmental,  Inc. totaling $112,266.  Aggregate investment income declined by
$127,962 for the nine months ended November 30, 1995 coupled with an increase in
operating expenses of $168,393 compared to the same period in 1994. The increase
in operating  expenses primarily was attributable to an increase in professional
fees and salary expense for the nine months ended November 30, 1995, compared to
the same period in 1994.

Commonwealth  Associates  Asset  Management,   Inc.  (the  "Administrator")  was
responsible for providing, or arranging for the provision of, the administrative
services  necessary  for the  operation of the Fund.  As  compensation  for such
services, the Administrator received an administrative fee at the annual rate of
1% of the net assets of the Fund. Such fee was determined and payable quarterly.
For the three months ended  November 30, 1995 and 1994, the  administrative  fee
was $42,510 and $44,701,  respectively.  For the nine months ended  November 30,
1995 and 1994, the administrative  fee was $128,533 and $136,653,  respectively.
The Administrator terminated the Administrative Agreement effective December 10,
1995. The Fund has been self-administered since such termination.

Net Assets
At November  30,  1995,  the Fund's net assets were  $16,965,164,  a decrease of
$749,909  from net  assets of  $17,715,073  at  February  28,  1995.  Net assets
resulting  from  operations  for  the  nine  month  period  increased  $329,959,
comprised  of $100,138 of net  investment  loss and $430,097 of net realized and
unrealized gain from portfolio  investments.  This increase was more than offset
by a $1,079,868 decrease in net assets resulting from the repurchase by the Fund
of 262,727 shares of its common stock in the public market during the period.

At  November  30,  1995,  the net asset  value  per  share of  common  stock and
preferred stock was $7.06 and $7.41, respectively. At February 28, 1995, the net
asset value per share of common stock was $8.04.  There was no  preferred  stock
outstanding  on February 28,  1995.  The changes in net asset value per share of
common stock and preferred stock for the nine months ended November 30, 1995 are
discussed below.

On  March  20,  1995,  the  Fund  issued  a  20%  preferred  stock  dividend  to
shareholders  of record on March 13,  1995.  Based on the  Fund's  net assets of
$17,715,073  at  February  28,  1995,  such  dividend  resulted  in  an  initial
allocation  of net  assets  to  preferred  shareholders  of  approximately  $3.1
million,  or $6.97 per share of preferred stock. The allocation of net assets to
preferred shareholders, therefore, resulted in a dilution to common shareholders
of approximately $3.1 million, or $1.40 per share of common stock.  Furthermore,
during the nine months ended  November 30, 1995,  the Fund  repurchased  262,727
shares  of its  common  stock for  $1,079,868.  The  effect of such  repurchases
increased the net asset value per share of common stock and  preferred  stock by
$.28 and $.29, respectively.  The increase in net assets from operations for the
nine months ended  November 30, 1995 of $329,959  increased  the net asset value
per share of common and preferred stock by $.14 and $.15, respectively.

For the nine months ended  November 30, 1994, the Fund had a net increase in net
assets from operations of $704,375, or $.32 per share of common stock, comprised
of net investment  income of $196,217 and net realized and unrealized  gain from
portfolio  investments of $508,158.  At November 30, 1994, the Fund's net assets
were $17,811,797, or $8.08 per share of common stock.

Liquidity and Capital Resources

The Fund invests its available cash in repurchase  agreements  collateralized by
securities  issued by the U.S.  Government  or its  agencies.  Such  investments
provide the Fund with the liquidity necessary to purchase portfolio  investments
as opportunities for investment arise.

On November 30, 1995, the Fund had cash and cash equivalents totaling $9,238,487
available to fund operations and to purchase additional  portfolio  investments.
The available funds balance represents an increase of $204,737 from such balance
at February 28, 1995. For the three and nine months ended November 30, 1995, the
Fund earned $108,455 and $309,403 from such investments,  respectively. Interest
earned from these  investments in future periods is subject to  fluctuations  in
short-term interest rates and changes in funds available for investment.

During the nine months  ended  November 30, 1995,  the Fund used  $1,079,868  to
repurchase 262,727 shares of its common stock. Additionally,  during the period,
the Fund made new and follow-on  investments  totaling  $3,937,500  and received
$5,367,759 from the sale of certain  portfolio  investments and the repayment of
certain debt securities. Additionally, the Fund used $145,654 to fund operations
for the nine months ended November 30, 1995.
<PAGE>


                           PART II - OTHER INFORMATION


Item 1.       Legal Proceedings.

The Fund is not party to any material pending legal proceedings.

Item 2.       Changes in Securities.

Not applicable.

Item 3.       Defaults Upon Senior Securities.

Not applicable.

Item 4.       Submission of Matters to a Vote of Security Holders.

No matter was submitted to a vote of security  holders during the period covered
by this report.

Item 5.       Other Information.

On October 11, 1995, Commonwealth  Associates Asset Management,  Inc. terminated
the  Administrative  Agreement with the Fund effective  December 10, 1995.  From
such date to present, the Fund has been self-administered.

Item 6.       Exhibits and Reports on Form 8-K.

              (a)   Exhibits

                    (27)   Financial Data Schedule.

              (b)   Reports on Form 8-K

                    None.



<PAGE>


                                   SIGNATURES



Pursuant  to the  requirements  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.



              THE MICROCAP FUND, INC.


              /s/     Kamal Mustafa
              Kamal Mustafa
              President, Chief Executive Officer and Director
              (Principal Executive Officer)


              /s/     Mark T. Behrman
              Mark T. Behrman
              Chief Financial Officer and Treasurer
              (Principal Financial and Accounting Officer)



Date:         January 12, 1996