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 EXCHANGE ACT OF 1934
         For the quarterly period ended  MARCH 31, 1999
                                         --------------
                                   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   000-23967

                               ZMAX CORPORATION
   -------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

            DELAWARE                                     52-2040275
   -------------------------------------------------------------------------
  (State or other jurisdiction of          (IRS Employer Identification No.)
  incorporation or organization)

                   20251 CENTURY BLVD. GERMANTOWN, MD 20874
   -------------------------------------------------------------------------
     (Address of principal executive offices)                (Zip Code)

 Registrant's telephone number, including area code:  (301) 353-9500
                                                      --------------

   -------------------------------------------------------------------------
Former name,  former  address and former  fiscal year,  if changed  since last
report.


      Indicate  by check  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 [ ]

      APPLICABLE  ONLY TO  CORPORATE  ISSUERS:  Indicate  the number of shares
outstanding  of each of the  issuer's  classes of common  stock,  as of May 1,
1999; 12,949,913 shares of common stock, $.001 par value per share.


<PAGE>

                               ZMAX CORPORATION

                                     INDEX


                                                                      Page No.
                                                                      --------
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

Consolidated Balance Sheets - March 31, 1999
  (unaudited) and December 31, 1998                                       1

Consolidated Statements of Operations for the three
  months ended March 31, 1999 and 1998 (unaudited)                        2

Consolidated Statements of Cash Flows for the three
  months ended March 31, 1999 and 1998 (unaudited)                        3

Notes to Consolidated Financial Statements                                4

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                           9

Item 3.     Quantitative and Qualitative Disclosures About
            Market Risk                                                  13

PART II.    OTHER INFORMATION

Item 5.     Exhibits and Reports on Form 8-K                             14

SIGNATURES                                                               15


<PAGE>

                        PART 1. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

                       ZMAX CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               March 31,       December 31,
                                                                                 1998              1997
                                                                            -------------     -------------
                                                                             (Unaudited)
            ASSETS
<S>                                                                         <C>               <C>
Current assets:
  Cash and cash equivalents                                                 $  3,766,072      $  4,521,126
  Accounts receivable,
    net of allowance of $0 and $17,160, respectively                           3,268,204         2,545,659
  Prepaid expenses and other assets                                              253,213           127,952
                                                                            -------------     -------------

  Total current assets                                                         7,287,489         7,194,737

Property and equipment                                                           509,282           477,870
Intangible assets                                                              9,246,966         9,740,217
Other assets                                                                      80,274            33,538
                                                                            -------------     -------------

  Total assets                                                              $ 17,124,011      $ 17,446,362
                                                                            =============     =============

                  LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable and accrued expenses                                     $  1,533,274      $  1,596,074
  Current portion of capital lease obligation                                     30,951            35,519
                                                                            -------------     -------------

  Total current liabilities                                                    1,564,225         1,631,593

Long-term capital lease obligation, net of current portion                        30,743            34,716
                                                                            -------------     -------------
  Total liabilities                                                            1,594,968         1,666,309

Commitments and contingencies (Note 4)
Shareholders' equity
  Preferred stock, $0.001 par value, 10,000,000 shares authorized,
    none issued and outstanding                                                        -                 -
  Common stock, $0.001 par value, 50,000,000 shares authorized,
    13,117,214 and 13,117,214  shares issued and outstanding as of
    March 31, 1999 and December 31,  1998,  respectively,  167,301
    shares subject to cancellation agreements
    as of March 31, 1999 and December 31, 1998                                    13,117            13,117
  Additional paid-in capital                                                  41,763,101        41,763,101
  Accumulated deficit                                                        (26,247,175)      (25,996,165)
                                                                            -------------     -------------

  Total shareholders' equity                                                  15,529,043        15,780,053
                                                                            -------------     -------------
Total liabilities & shareholders' equity                                    $ 17,124,011      $ 17,446,362
                                                                            =============     =============
</TABLE>

     The accompanying notes are an integral part of these balance sheets.


                                      1

<PAGE>

                       ZMAX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                               ------------------------------
                                                                    1999             1998
                                                               -------------     -------------
                                                                         (unaudited)
<S>                                                            <C>               <C>
Revenues                                                       $  5,106,645      $  1,524,324

Operating expenses:
  Cost of revenues                                                2,442,571           466,808
  Research and development                                          167,916           127,687
  Sales and marketing                                               546,980           265,509
  General & administrative                                        1,825,574         1,057,105
  Depreciation & amortization                                       406,908           321,642
                                                               -------------     -------------
    Loss from operations                                           (283,304)         (714,427)

Other income (expenses):
  Interest income                                                    37,263            55,431
  Interest expense                                                   (2,110)           (6,855)
  Other                                                              (2,859)          (15,880)
                                                               -------------     -------------
Net loss                                                       $   (251,010)     $   (681,731)
                                                               =============     =============

Basic and diluted loss per share                               $      (0.02)     $      (0.08)
                                                               =============     =============

Basic and diluted weighted average shares outstanding            12,949,913         8,449,913
                                                               =============     =============
</TABLE>

       The accompanying notes are an integral part of these statements.


                                      2

<PAGE>

                       ZMAX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                               ------------------------------
                                                                    1999             1998
                                                               -------------     -------------
                                                                         (unaudited)
<S>                                                            <C>               <C>
Cash flows from operating activities:
  Net loss                                                     $   (251,010)     $   (681,731)
  Adjustments to reconcile net loss to cash
  used in operating activities
    Depreciation and amortization expense                           415,727           321,642
  Changes in assets and liabilities
    Accounts receivable                                            (722,545)         (340,052)
    Prepaid expenses and other assets                              (148,814)           19,947
    Accounts payable and accrued expenses                            41,204           158,032
    Customer deposits                                                     -           (18,490)
                                                               -------------     -------------

      Net cash used in operating activities                    $   (665,438)     $   (540,652)
                                                               -------------     -------------

  Cash flows from investing activities:
    Purchase of property and equipment                              (81,075)          (54,381)
                                                               -------------     -------------

      Net cash used in investing activities                    $    (81,075)     $    (54,381)
                                                               -------------     -------------

  Cash flows used in financing activities
    Payments on long-term obligations                                (8,541)         (265,348)
                                                               -------------     -------------

      Net cash used in financing activities                    $     (8,541)     $   (265,348)
                                                               -------------     -------------

  Net decrease in cash                                         $   (755,054)     $   (860,381)
                                                               -------------     -------------

  Cash, beginning of period                                    $  4,521,126      $  6,405,084
                                                               -------------     -------------

  Cash, end of period                                          $  3,766,072      $  5,544,703
                                                               =============     =============
</TABLE>

       The accompanying notes are an integral part of these statements.


                                      3

<PAGE>

                       ZMAX CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION, ORGANIZATION, AND NATURE OF OPERATIONS:

BASIS OF PRESENTATION

      The accompanying  unaudited  financial  statements have been prepared in
accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete  financial  statements.  In the opinion of management,
all  adjustments,  consisting  of  normal  recurring  adjustments,  considered
necessary  for  a  fair  presentation  have  been  included.  These  financial
statements should be read in conjunction with the financial statements of ZMAX
Corporation ("ZMAX" or the "Company"),  as of December 31, 1998, and the notes
thereto  included in the Annual Report on Form 10-K filed by the Company.  The
results of  operations  for the three  months  ended March 31,  1999,  are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.

NATURE OF OPERATIONS

      On November 6, 1996, ZMAX Corporation  ("ZMAX" or the "Company"),  which
was then a shell company  listed on the OTC Bulletin  Board,  acquired 100% of
the outstanding  common stock of Century Services,  Inc.  ("CSI"),  a Maryland
corporation.  CSI was a privately held company formed on December 13, 1995, to
perform  computer  re-engineering  with a focus on providing a solution to the
Year 2000 problem.

      For financial  reporting  purposes,  this  acquisition  was treated as a
recapitalization  of CSI with CSI as the  acquirer  (a  reverse  acquisition).
Accordingly,  the historical financial statements of ZMAX prior to November 6,
1996,  are  the  historical  financial  statements  of CSI.  The  accompanying
consolidated  financial  statements include all of the accounts of CSI and the
accounts of ZMAX since the  acquisition  on November 6, 1996.  On December 14,
1998,  ZMAX acquired  Eclipse  Information  Systems,  Inc. ("  Eclipse").  The
accompanying consolidated financial statements include the accounts of Eclipse
since the date of acquisition. All significant inter-company amounts have been
eliminated.

      During 1998, the Company's  revenue was derived primarily from Year 2000
services.  The Company also began  licensing a Year 2000  software tool during
1998; however, such licensing revenue was not significant in 1998. In December
1998, the Company expanded its operations  through the acquisition of Eclipse.
Eclipse  performs  management and  information  systems  consulting  services.
Eclipse also resells certain hardware and software  products to its customers.
While the Company's  revenue in 1998 was primarily  derived from its Year 2000
or  "millennium"  services  there can be no assurance that the Company will be
successful in  diversifying  through  acquisitions  and developing  additional
post-Year  2000  services.  Further,  the failure of the  Company's  Year 2000
methodolgy  and tools to function  properly or the  existence  of  significant
errors or problems  following  completion of millennium  conversions  or other
associated  Year  2000  work  performed  by  the  Company  could   necessitate


                                      4

<PAGE>

significant   expenditures   by  the  Company  to  remedy  the  problem.   The
consequences  of failures,  errors or problems could  materially and adversely
affect the Company's business, operating results and financial condition.

      The Company's operations are subject to certain risks and uncertainties,
including among others,  rapidly changing  technology,  uncertain  markets for
millennium services, current and potential competitors with greater financial,
technological,   production  and  marketing  resources,  reliance  on  certain
significant  customers,  the need to develop additional products and services,
limited protection of proprietary information,  the risk of third party claims
of infringement,  potential contract liability related to the Company's access
to key  aspects of  customers  computer  systems,  dependence  upon  strategic
alliances,  the need for  additional  technical  personnel,  dependence on key
management   personnel,   management   of   growth,   uncertainty   of  future
profitability and possible  fluctuations in financial results. The Company may
also require  additional capital that may not be available to it. In addition,
there are risks associated with the market activity in ZMAX common stock.

2.    SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

      Investments  with  original  maturities  of  three  months  or less  are
considered cash equivalents for the purpose of these financial statements.

REVENUE RECOGNITION

      Revenues on time-and-materials contracts are recognized based upon hours
incurred  at  contract  rates  plus  direct  costs.  Revenues  on  fixed-price
contracts are recognized on the percentage-of-completion method based on costs
incurred  in  relation  to  total  estimated  costs.  Anticipated  losses  are
recognized as soon as they become known.  Provisions  for estimated  losses on
uncompleted  contracts  are  made in the  period  in  which  such  losses  are
determined.

      Unbilled accounts receivable on  time-and-materials  contracts represent
costs incurred and gross profit recognized during the period presented but not
billed until the following period. Unbilled accounts receivable on fixed-price
contracts  consists  of  amounts  incurred  that  are not yet  billable  under
contract  terms.  At March 31,  1999,  unbilled  accounts  receivable  totaled
approximately $351,291.

      Revenue  from  the  sale of  perpetual  and term  software  licenses  is
recognized at the time of delivery and acceptance of software  products by the
customer,  provided that no  significant  vendor  obligations  remain and that
collection  is probable.  Maintenance  revenue that is bundled with an initial
license fee is deferred and recognized  ratably over the  maintenance  period.
Amounts  deferred for  maintenance  are based on the fair value of  equivalent
maintenance  services  sold  separately.  The American  Institute of Certified
Public  Accountants  issued  Statement  of  Position  97-2  "Software  Revenue
Recognition"  ("SOP  97-2"),  which  superceded  Statement  of  Position  91-1
"Software  Revenue  Recognition." SOP 97-2 provides  additional  guidance with
respect to multiple element  arrangements;  returns,  exchanges,  and platform
transfer   rights;   resellers;    services;   funded   software   development


                                      5

<PAGE>

arrangements;  and  contract  accounting.  The Company  recognizes  revenue in
accordance with SOP 97-2 and Statement of Position 98- 9, "Modification of SOP
97-2.  Software  Revenue  Recognition.  With Respect to Certain  Transitions".
Prior to 1998, the Company had no revenue from the license of software.

SIGNIFICANT CUSTOMERS

      For the three months ended March 31, 1999,  two  customers  individually
represented  16% and 10% of revenue.  For three  months  ended March 31, 1998,
three customers  individually  represented 27%, 24% and 21% of revenue. Due to
the  nature  of the  Company's  business  and the  relative  size  of  certain
contracts,  the loss of any single significant  customer could have a material
adverse effect on the Company's results of operations.

CONCENTRATIONS OF CREDIT RISK

      Financial  instruments  that  potentially  subject the Company to credit
risk consist of cash and cash  equivalents and accounts  receivable.  Accounts
receivable  includes  amounts due from relatively large companies in a variety
of  industries.  As of March 31, 1999, no customers  individually  represented
more than 10% of accounts receivable.

INCOME TAXES

      The Company  accounts for income taxes in accordance  with SFAS No. 109,
"Accounting  for Income  Taxes."  Under SFAS No. 109,  deferred tax assets and
liabilities  are  computed  based  on the  difference  between  the  financial
statement  and income tax bases of assets and  liabilities  using the  enacted
marginal tax rate.  SFAS No. 109  requires  that the net deferred tax asset be
reduced  by a  valuation  allowance  if,  based  on the  weight  of  available
evidence,  it is more  likely  than not that  some  portion  or all of the net
deferred tax asset will not be realized.

BASIC AND DILUTED NET LOSS PER SHARE

      Basic  income or loss per share  includes no dilution and is computed by
dividing net income or loss by the weighted  average  number of common  shares
outstanding  for the period.  Diluted  income or loss per share  includes  the
potential  dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. The treasury stock
effect of options and warrants to purchase  1,678,300 and 1,587,800  shares of
common stock  outstanding  at March 31, 1999 and 1998,  respectively,  has not
been  included  in the  calculation  of the net loss per share as such  effect
would be anti-dilutive.  Outstanding shares subject to cancellation agreements
have not been  included  in either  the  basic or  diluted  calculation.  As a
result,  the basic and diluted  loss per share for all periods  presented  are
identical. The calculation of the basic and diluted weighted average shares is
shown below:


                                      6

<PAGE>

                        ZMAX CORPORATION AND SUBSIDIARY

         CALCULATION OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          Three Months
                                                                        Ended March 31,
                                                               ------------------------------
                                                                    1999             1998
                                                               -------------     -------------
                                                                         (unaudited)
<S>                                                              <C>               <C>
WEIGHTED AVERAGE SHARE CALCULATIONS

Weighted average shares of common stock
        Outstanding                                              13,117,214         8,929,714

Less: Average number of cancelable shares
      common stock outstanding                                     (167,301)         (479,801)

Basic weighted average shares outstanding                        12,949,913         8,449,913

Treasury stock effect of options and warrants                             -                 -

Diluted weighted average shares outstanding:                     12,949,913         8,449,913
                                                               =============     =============
</TABLE>


NEW ACCOUNTING PRONOUNCEMENTS

      The Company has adopted SFAS No. 131,  "Disclosures about Segments of an
Enterprise and Related  Information."  SFAS No. 131 establishes  standards for
the way that public business  enterprises  report  information about operating
segments in annual  financial  statements and requires that those  enterprises
report  selected  information  about operating  segments in interim  financial
reports  issued to  shareholders.  It also  establishes  standards for related
disclosures about products and services, geographic areas and major customers.
The  adoption  of SFAS No. 131 has had no impact on the  Company's  results of
operations, financial position or cash flows.

      In March 1998, the AICPA issued  Statement of Position 98-1  "Accounting
for the Costs of Computer  Software  Developed or Obtained for Internal  Use",
("SOP 98-1").  SOP 98-1 requires the Company to capitalize  internal  computer
software costs once the  capitalization  criteria of the SOP are met. SOP 98-1
is effective  January 1, 1999, and is applied to all projects in progress upon
the initial  application  of the SOP.  The  adoption of SOP 98-1 has not had a
material impact on the Company's results of operations, financial position, or
cash flows.


                                      7

<PAGE>

3.    STOCK SUBJECT TO CANCELLATION

      In September 1995, ZMAX entered into stock cancellation  agreements with
certain  stockholders  that provided for the cancellation of 775,808 shares of
ZMAX common stock. In March 1997, 296,007 of these shares were returned to the
Company and  canceled.  An  additional  312,500  shares  were  returned to the
Company and canceled in December 1998. The remaining  167,301 were returned to
the Company and canceled in April 1999.

4.    COMMITMENTS AND CONTINGENCIES:

LITIGATION

      On April 17,  1997,  Alan L. Levine and Canadian  Petroleum  Corporation
filed suit in the Third  Judicial  district  Court of Salt Lake  County,  Utah
against the Company (f/k/a  Mediterranean Oil Corp., f/k/a Pandora,  Inc.) and
John Does.  The complaint  alleges  various common law claims arising from the
alleged untimely failure to remove legends  restricting the transferability of
shares of the  Company's  common  stock that had been issued by the Company in
payment of legal fees incurred.  The plaintiffs  have computed  damages in the
approximate  amount of $87,000.  The Company believes the complaint is without
legal  merit and  intends  to  vigorously  defend  itself.  In the  opinion of
management,  resolution of this matter will not have a material adverse effect
upon the financial position of future operating results of the Company.

      The  Company is  periodically  a party to disputes  arising  from normal
business activities. In the opinion of management, resolution of these matters
will not have a material adverse effect upon the financial  position or future
operating  results of the Company,  and adequate  provision  for any potential
losses has been made in the accompanying financial statements.


                                      8

<PAGE>

ITEM 2.

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

      The following  discussion  and analysis of the  financial  condition and
results of operations of the Company  should be read in  conjunction  with the
financial  statements  and the notes  thereto  which appear  elsewhere in this
quarterly  report and the  Company's  Annual  Report on Form 10-K for the year
ended December 31, 1998.

      The  information  set forth below  includes  forward-looking  statements
relating  to  projected  results  that may differ from  actual  results.  Some
factors that could cause results to differ  materially from those projected in
the forward-looking  statements are set forth below. Readers are cautioned not
to put undue reliance on forward-looking statements. The Company disclaims any
intent or  obligation to update  publicly  these  forward-looking  statements,
whether as a result of new information, future events or otherwise.

OVERVIEW

      ZMAX  Corporation  ("ZMAX"  or the "  Company")  focuses  on  acquiring,
building  and  operating  companies  in  the  information   technology  ("IT")
industry.  In 1996, the Company acquired all of the stock of Century Services,
Inc.  ("CSI").  In December  1998,  the Company  acquired  all of the stock of
Eclipse Information Systems, Inc. ("Eclipse").

      On December 14, 1998 ZMAX acquired all of the outstanding  capital stock
of Eclipse. The results of operations of Eclipse are included in the financial
statements of ZMAX from the date of acquisition. Eclipse markets IT consulting
services to a variety of commercial  companies  through a series of technology
practices  that  specialize in  delivering  solutions  focused in  distributed
client  server  environments.   Eclipse  provides  services  in  ERP  packaged
solutions,  internet & intranet  solutions,  network solutions,  client server
solutions, and AS/400 solutions.

      On November 6, 1996, ZMAX acquired all of the outstanding  stock of CSI.
Prior to this transaction, ZMAX had no operations and its activities consisted
of efforts to establish or acquire a new  business and to raise  capital.  CSI
was a privately held company formed on December 13, 1995 which  specializes in
assisting business  organizations and government agencies with what has become
popularly known as the "Year 2000" problem  ("Y2K").  For financial  reporting
purposes, the acquisition was treated as a recapitalization of CSI with CSI as
the acquirer (a reverse acquisition).

      CSI  markets  Y2K  services to a variety of  commercial  and  government
organizations.  The Company  believes  some demand for CSI's Y2K  services may
continue to exist  after the Year 2000,  although  this  demand will  diminish
significantly  over  time  and  will  eventually  disappear.   However,  CSI's
proprietary  computer  software  tools  may be  used  in  conversion  projects
unrelated to Y2K work. CSI plans to pursue business opportunities unrelated to
the Y2K problem in the information services market and to develop products and
services  to take  advantage  of  these  opportunities,  such as  migrating  a
client's software application from a mainframe to a client-server environment.


                                      9

<PAGE>

With the recent  acquisition  of  Eclipse,  the Company  believes  synergistic
benefits may be realized as the two organizations  further develop  additional
services and technologies together.

      Through  December  31,  1998,  the  Company's  revenues  were  generated
primarily from CSI's consulting and conversion fees and software sales related
to Y2K services.  With the acquisition of Eclipse and its plans to continue to
diversify,  the Company's  future  revenues will be less  concentrated  on Y2K
products.

      In the next 12 months,  the Company intends to integrate the services of
Eclipse's with that of CSI's and other potentially  synergistic  acquisitions.
Further,  the  Company  intends to expand the  services  of both  subsidiaries
through opening other offices in key geographic  markets. In the first quarter
the Company  opened new  offices in  Minneapolis  and  Detroit  and  performed
initial analysis on several other key cities. The Company also intends to make
additional  investments in the expansion and further development of additional
IT services and markets. In view of these investments the Company believes the
period-to-period  comparisons  of its  financial  results are not  necessarily
meaningful  and  should  not  be  relied  upon  as  an  indication  of  future
performance. Specifically, as the Company increases its investments in non-Y2K
services,  it will  incur  training,  salary  and  other  costs  prior  to the
recognition  of related  revenues.  In  addition,  a large  percentage  of the
Company's  revenues are expected to be derived from a relatively  small number
of large-scale,  comprehensive projects.  Consequently, the Company's revenues
and operating results may be subject to substantial  fluctuations in any given
year and from quarter to quarter.

RESULTS OF OPERATIONS

FOR THE QUARTER  ENDED MARCH 31, 1999  COMPARED TO THE QUARTER ENDED MARCH 31,
1998

      REVENUE.   Revenue  for  the  quarter   ended  March  31,   1999,   were
approximately $5,107,000, an increase of approximately $3,583,000 over revenue
of approximately $1,524,000 for the quarter ended March 31, 1998. The increase
in revenue  during the first  quarter of 1999 was a result of increased  sales
activity of Year 2000 services as compared to 1998, revenue generated from the
licensing of the Company's proprietrary software tool during the first quarter
of 1999,  and additional IT consulting  revenues  generated from the Company's
acquisition of Eclipse in December 1998. For the quarter ended March 31, 1999,
Year 2000  services  and IT  consulting  services  represented  42% and 58% of
revenues,  respectively  as  compared to 100% for Year 2000  services  for the
quarter ended March 31, 1998.

      GROSS  PROFIT.  Gross profit for the quarter  ended March 31, 1999,  was
approximately  $2,664,000,  or 52% of revenues,  an increase of  approximately
$1,607,000 over gross profit of approximately  $1,057,000, or 69% of revenues,
for the quarter  ended March 31,  1998.  The  increase in gross  profitability
during the quarter ended March 31, 1999,  was a result of increased  revenues;
however,  the decrease in gross profit as a percentage  of revenue is a result
of increased IT consulting  work  resulting from the Eclipse  acquisition.  IT
consulting typically has lower margins than Y2K services.


                                      10

<PAGE>

      RESEARCH  AND  DEVELOPMENT.  Research and  development  expenses for the
quarter ended March 31, 1999, were approximately  $168,000, or 3% of revenues.
Research and  development  expenses for the quarter ended March 31, 1998, were
approximately  $128,000,  or 8% of revenues.  The Company initiated efforts in
the fourth  quarter of 1998 to market a validation  and  verification  toolset
that the  Company  developed  using  aspects of the  Company's  VISION  2000TM
toolsuite. The Company continues to incur research and development expenses as
it modifies, enhances, and updates this tool.

      SALES AND MARKETING.  Sales and marketing expenses for the quarter ended
March 31, 1999, were approximately  $547,000,  or 11% of revenues, an increase
of approximately  $281,000,  from approximately  $266,000 of such expenses, or
17% of revenues,  for the quarter ended March 31, 1998.  The increase in sales
and   marketing   expenses  for  the  first  quarter  of  1999  was  primarily
attributable to the  acquisition of Eclipse,  commission  expenses  related to
increased sales revenue,  and further investments in marketing efforts related
to the Company's services.

      GENERAL AND ADMINISTRATIVE.  General and administrative expenses for the
quarter  ended  March  31,  1999,  were  approximately  $1,826,000,  or 36% of
revenues, an increase of approximately  $769,000, as compared to approximately
$1,057,000 of such expenses,  or 69% of revenues,  incurred by the Company for
the quarter ended March 31, 1998.  The increase in general and  administrative
expenses for the quarter ended 1999 was primarily  attributable to general and
administrative  expenses  associated with the on- going  operations of Eclipse
and the costs  associated  with the opening of the Minneapolis and Detroit new
offices.  The Company  anticipates  additional  investments will be made as it
expands  its  presence  throughout  the United  States  with new  offices  and
acquisitions.

      DEPRECIATION AND  AMORTIZATION.  Depreciation and amortization  expenses
for the quarter ended March 31, 1999,  was  approximately  $407,000,  or 8% of
revenues,  an increase of approximately  $85,000, as compared to approximately
$322,000 of such expenses, or 21% of revenues, incurred by the Company for the
quarter ended March 31, 1998. The increase in  depreciation  and  amortization
expenses  for the three  months ended 1999 was  primarily  attributable  to an
increase in depreciable assets and intangibles associated with the acquisition
of Eclipse.

      OTHER INCOME (EXPENSE).  Interest income for the quarter ended March 31,
1999,  was  approximately   $37,000,   or  1%  of  revenues,   a  decrease  of
approximately $18,000 as compared to approximately $55,000, or 4% of revenues,
for the quarter ended March 31, 1998. The decrease in interest  income for the
quarter ended March 31, 1999 was primarily  attributable  to lesser amounts of
cash available for investment during 1999.

      EBITDA (EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION)
As a result of the above,  the EBITDA for the quarter ended March 31, 1999 was
approximately $124,000. This represented an increase of approximately $517,000
as compared to negative  EBITDA of  approximately  $(393,000)  for the quarter
ending March 31, 1998.

      NET  INCOME  (LOSS).  As a  result  of the  above,  the net loss for the
quarter ended March 31, 1999, was approximately  $251,000,  or 5% of revenues,
an  increase  of  approximately  $431,000,  as  compared  to the  net  loss of


                                      11

<PAGE>

approximately  $682,000,  or 45% of revenues,  for the quarter ended March 31,
1998.

LIQUIDITY AND CAPITAL RESOURCES

      The Company  has,  since its  inception,  financed  its  operations  and
capital expenditures through the sale of stock, convertible notes, convertible
exchangeable  debentures and the proceeds from the exchange offer and exercise
of the warrants related to the convertible exchangeable debentures.  Cash used
in  operations  during the quarter  ended March 31,  1999,  was  approximately
$665,000,  as compared to  approximately  $541,000 for the quarter ended March
31, 1998. The increase in cash used in operations  during the first quarter of
1999 was  primarily a result of  increases in accounts  receivable  associated
with revenue growth in the first quarter of 1999  partially  offset by smaller
operating losses.

      Capital  expenditures were  approximately  $81,000 for the quarter ended
March 31, 1999, as compared to approximately  $54,000 during the quarter ended
March 31, 1998.  The increase in capital  expenditures  during 1998 is related
primarily  to the ongoing  purchase  requirements  of computer  equipment  for
Company personnel.

      As of March 31, 1999, the Company had working  capital of  approximately
$5,723,000.   The   Company's   primary   source  of  liquidity   consists  of
approximately  $3,766,000  in cash  and  cash  equivalents  and  approximately
$3,268,000 of accounts receivable.

      The market for the  Company's  products is expanding  and the  Company's
business  environment is characterized  by rapid  technological  changes.  The
Company   requires   substantial   working   capital  to  fund  its  business,
particularly  to finance  accounts  receivable,  sales and marketing  efforts,
research and development, and capital expenditures.  The Company currently has
no  commitments  for  capital  expenditures.   The  Company's  future  capital
requirements will depend on many factors including the rate of revenue growth,
if any, the timing and extent of spending to support research and development,
technological  changes and market  acceptance of the Company's  services.  The
Company  believes  that its current cash  position is  sufficient  to meet its
capital  expenditure  and  working  capital  requirements  for the near  term;
however, the growth and technological change make it difficult for the Company
to predict future liquidity requirements with certainty. Over the longer term,
the  Company  must  successfully  execute  its plans to  generate  significant
positive cash flows if it is to sustain adequate  liquidity  without impairing
growth or requiring  the infusion of additional  funds from external  sources.
Additionally, a major expansion, such as would occur with the acquisition of a
major new subsidiary, might also require external financing that could include
additional debt or equity  capital.  There can be no assurance that additional
financing, if required, will be available on acceptable terms, if at all.

OTHER

      Inflation has not had a significant effect on the Company's  operations,
as  increased  costs to the Company  have  generally  been offset by increased
prices of products and services sold.


                                      12

<PAGE>

      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.

      The Company is an information  technology ("IT") corporation which is in
the business of performing evaluation,  testing and re-engineering services in
providing  solutions  to the Year 2000  problem.  The Company  owns,  markets,
utilizes and licenses the use by others of its proprietary  Year 2000 software
re-engineering tools and methodologies. The Company's management believes that
its operating and  information  systems are Year 2000  compliant.  The Company
expects no material impact on its operating and  information  systems from the
Year 2000 issue.

      This  report  contains  forward-looking  statements  setting  forth  the
Company's   beliefs  or   expectations   relating  to  future   revenues   and
profitability. Actual results may differ materially from projected or expected
results due to changes in the demand for the Company's  products and services,
uncertainties relating to the results of operations,  the Company's ability to
implement its provider  deployment model, its lengthy sales cycle,  dependence
on its major customers,  risks associated with rapid technological  change and
the emerging services market, potential fluctuations in quarterly results, its
dependence on key employees  and other risks and  uncertainties  affecting the
technology industry generally.  The Company disclaims any intent or obligation
to up-date publicly these forward-looking  statements,  whether as a result of
new information, future events or otherwise.

      Most of the Company's current cost structure is fixed.  Expenses consist
primarily  of the  salaries  and  benefits  paid to the  Company's  technical,
marketing and administrative personnel. Amortization and depreciation expenses
relate to property,  equipment and intangible  assets. As a result of its plan
to expand its operations  through internal growth and acquisitions the Company
expects  these costs to increase in absolute  dollars,  while  decreasing as a
percentage of revenue.

      The Company's  profitability depends upon both the volume of service and
the Company's  ability to manage costs.  Because a significant  portion of the
Company's cost structure is fixed, the Company must  effectively  manage these
costs to achieve profitability. In addition, certain of the Company's projects
are priced on a fixed fee basis. The  profitability on an individual fixed fee
project  depends upon the completion of the project within the budgeted number
of staff hours and within the agreed upon time frame. To date, the Company has
been able to maintain its operating margins through  efficiencies  achieved by
the use of the Company's  proprietary  software tools, by completing fixed fee
projects within budget, and by effectively managing general overhead costs.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      NOT APPLICABLE


                                      13

<PAGE>

PART II.    OTHER INFORMATION

ITEM 5.     EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS

      The following exhibits are filed herewith:

            11 - Computation of Net Income (Loss) Per Share
            27 - Financial Data Schedule

(b)   REPORTS ON FORM 8-K

      On December 29, 1998,  the Company filed a Form 8-K with the  Securities
      and Exchange Commission  reporting its acquisition on December 14, 1998,
      of Eclipse Information Systems, Inc. On March 1, 1999, the Company filed
      an amendment  to that Form 8-K setting  forth  historical  and pro forma
      financial information relating to that acquisition.


                                      14

<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.


                               ZMAX Corporation


Date:  May 1, 1999               /s/MICHAEL C. HIGGINS
                                 ---------------------
                                 Michael C. Higgins
                                 President


                                 /s/JAMES T. MCCUBBIN
                                 --------------------
                                 James T. McCubbin
                                 Vice President - Principal Financial
                                   and Accounting Officer