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 June 30, 1997

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 0-29120

                           MICROCAP LIQUIDATING TRUST
                     (Successor to The MicroCap Fund, Inc.)
===============================================================================
             (Exact Name of Registrant as Specified in its Charter)


New York                                                             13-7110611
===============================================================================
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)


c/o Raymond S. Troubh
Ten Rockefeller Plaza, Suite 712
New York, New York                                                     10020
===============================================================================
(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  issuer's  classes of
common stock as of the latest  practicable date. As of August 1, 1997 there were
2,427,281 units of beneficial interest outstanding.


<PAGE>


                           MICROCAP LIQUIDATING TRUST
                     (SUCCESSOR TO THE MICROCAP FUND, INC.)
                                      INDEX


PART I.       FINANCIAL INFORMATION

Item 1.       Financial Statements.

Statements of Net Assets in Liquidation as of June 30, 1997 (Unaudited) and 
February 24, 1997

Schedule of Portfolio Investments as of June 30, 1997 (Unaudited)

Statements  of  Operations  for the three months ended June 30, 1997 and for the
three months ended August 31, 1996 (Unaudited)

Statements  of  Operations  for the period from  February  25, 1997 to June 30,
 1997 and for the six months ended August 31, 1996 (Unaudited)

Statements  of Changes in Net Assets for the period from  February  25, 1997 to
 June 30, 1997 and for the six months ended August 31, 1996 (Unaudited)

Statements  of Cash Flows for period  from  February  25,  1997 to June 30,  
1997 and for the six months  ended  August 31,  1996 (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>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF NET ASSETS IN LIQUIDATION



<TABLE>

                                                                                       June 30, 1997     February 24, 1997
                                                                                       (Unaudited)            (Predecessor)
ASSETS

Portfolio investments at fair value (cost $2,224,750 at
<S>     <C> <C>               <C> <C>                                              <C>                       <C>              
   June 30, 1997 and February 24, 1997)                                            $      3,048,380          $       2,696,593
Cash and cash equivalents - unrestricted                                                  4,843,526                  4,781,028
Cash and cash equivalents - restricted                                                    2,790,218                  2,790,218
Accrued interest receivable                                                                  20,790                     25,959
Receivable from settlement agreement                                                        450,000                    650,000
Other assets                                                                                 11,995                     24,846
                                                                                   ----------------          -----------------
   Total assets                                                                          11,164,909                 10,968,644
                                                                                   ----------------          -----------------

LIABILITIES

Cash distribution payable                                                                 2,427,281                          -
Accounts payable - legal                                                                  1,006,060                  1,076,982
Accounts payable - other                                                                     68,357                    108,351
Covered call options written                                                                 37,500                          -
                                                                                   ----------------          -----------------
   Total liabilities                                                                      3,539,198                  1,185,333
                                                                                   ----------------          -----------------

NET ASSETS IN LIQUIDATION                                                          $      7,625,711          $       9,783,311
                                                                                   ================          =================
</TABLE>


See notes to financial statements.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
As of June 30, 1997
<TABLE>
                                                                                                                         % of
Issuer / Position                                                                   Cost              Fair Value       Net Assets(1)

Publicly-Held Securities:
Bennett Environmental Inc.
<C>                                                                              <C>                <C>                  <C>  
112,500 shares of Common Stock                                                   $     47,250       $       97,755       1.28%
                                                                                -------------       --------------    --------

Unigene Laboratories, Inc. (A)
Warrant to purchase 615,000 shares of Common Stock
   at $1.375, expiring 7/7/00                                                               0            1,921,875      25.20%
                                                                                -------------       --------------    --------

YES! Entertainment Corporation
Warrant to purchase 11,437 shares of Common Stock
   at $15.30 per share, expiring 7/16/98                                                    0                    0           0%
                                                                                -------------       --------------   ----------

Privately-Held Securities:
First Colony Acquisition Corp.
106,562 shares of Preferred Stock                                                     594,174              297,087
6% Convertible Promissory Note due 11/1/97                                          1,343,326              671,663
Warrant to purchase 7,560 shares of Common Stock
   at $5.00, expiring 1/24/00                                                               0                    0
                                                                                -------------       --------------
                                                                                    1,937,500              968,750      12.70%
                                                                                -------------       --------------    --------
Oh-La-La! Inc.
9% Convertible Senior Note                                                            140,000               34,800
9% Convertible Senior Note                                                            100,000               25,200
                                                                                -------------       --------------
                                                                                      240,000               60,000     .80%
                                                                                -------------       -----------------------

Total Portfolio Investments(B)                                                  $   2,224,750       $    3,048,380      39.98%
                                                                                =============       ==============    ========
</TABLE>



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

(A)  In June 1997,  the Trust sold a covered call option for  $37,500,  allowing
     for  the  purchase  of up to  307,500  common  stock  warrants  of  Unigene
     Laboratories,  Inc. at a purchase  price of $2.875 per warrant.  The option
     expired on July 30,  1997,  with  140,000  warrants  called in July 1997 at
     $2.875 per warrant, or $402,500.

(B) All portfolio securities held at June 30, 1997 were non-income producing.


     See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>

                                                                                                                Three Months
                                                                                         Three Months               Ended
                                                                                             Ended          August 31, 1996
                                                                                        June 30, 1997           (Predecessor)

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                  <C>                       <C>             
   Interest from short-term investments                                              $        95,851           $        142,057
   Interest and dividends from portfolio investments                                               -                     27,543
   Other interest income                                                                       6,021                          -
   Other income                                                                                1,196                          -
                                                                                     ---------------           ----------------
   Total                                                                                     103,068                    169,600
                                                                                     ---------------           ----------------

Expenses:
   Administrative fee                                                                         11,616                     29,033
   Legal fees                                                                                  3,024                    189,061
   Accounting fees                                                                            17,425                      7,955
   Trustee fees                                                                               25,500                          -
   Transfer agent and custodian fees                                                           5,672                      5,822
Mailing and printing                                                                           1,463                     19,516
   Other operating expenses                                                                      630                     28,334
   Salary expense                                                                                  -                     93,016
   Amortization of deferred organizational costs                                                   -                      9,843
   Directors' fees and expenses                                                                    -                     24,010
   Consulting fees                                                                                 -                    (39,946)
   Insurance expense                                                                               -                      8,680
                                                                                     ---------------           ----------------
   Total expenses                                                                             65,330                    375,324
                                                                                     ---------------           ----------------

Net investment income (loss)                                                                  37,738                   (205,724)
                                                                                     ---------------           ----------------

NET REALIZED AND UNREALIZED GAIN (LOSS)
   FROM PORTFOLIO INVESTMENTS

Net realized gain from portfolio investments                                                       -                  2,364,630
Change in net unrealized appreciation or depreciation of
   portfolio investments                                                                     704,094                 (3,449,058)
                                                                                     ---------------           ----------------
Net realized and unrealized gain (loss) from portfolio investments                           704,094                 (1,084,428)
                                                                                     ---------------           ----------------

NET INCREASE (DECREASE) IN NET ASSETS
   IN LIQUIDATION                                                                    $       741,832           $     (1,290,152)
                                                                                     ===============           ================ 
</TABLE>


See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>

                                                                                          Period From            Six Months
                                                                                         February 25,               Ended
                                                                                            1997 to         August 31, 1996
                                                                                         June 30, 1997        (Predecessor)

INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                                          <C>                <C>            
   Interest from short-term investments                                                      $      132,154     $       270,530
   Interest and dividends from portfolio investments                                                      -              84,041
   Other interest income                                                                              8,865                   -
   Other income                                                                                       1,196                   -
                                                                                             --------------     ---------------
   Total investment income                                                                          142,215             354,571
                                                                                             --------------     ---------------

Expenses:
   Administrative fee                                                                                25,978              81,997
   Legal fees                                                                                       124,087             769,605
   Accounting fees                                                                                   31,425              32,133
   Trustee fees                                                                                      34,000                   -
   Transfer agent and custodian fees                                                                  6,738               9,279
   Mailing and printing                                                                               1,463              44,360
   Other operating expenses                                                                             630              66,159
   Salary expense                                                                                         -             178,919
   Amortization of deferred organizational costs                                                          -              19,686
   Directors' fees and expenses                                                                           -              44,688
   Consulting fees                                                                                        -              85,094
   Insurance expense                                                                                      -              20,046
                                                                                             --------------     ---------------
   Total expenses                                                                                   224,321           1,351,966
                                                                                             --------------     ---------------

Net investment income (loss)                                                                        (82,106)           (997,395)
                                                                                             --------------     ---------------

NET REALIZED AND UNREALIZED GAIN FROM
   PORTFOLIO INVESTMENTS

Net realized gain (loss) from portfolio investments                                                       -           2,659,872
Change in net unrealized appreciation or depreciation of
   portfolio investments                                                                            351,787          (1,168,524)
                                                                                             --------------     ---------------
Net realized and unrealized gain from portfolio investments                                         351,787           1,491,348
                                                                                             --------------     ---------------

NET INCREASE IN NET ASSETS IN LIQUIDATION                                                    $      269,681     $       493,953
                                                                                             ==============     ===============
</TABLE>


See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

<TABLE>

                                                                                          Period From      Six Months
                                                                                         February 25,      Ended
                                                                                            1997 to            August 31, 1996
                                                                                         June 30, 1997     (Predecessor)

Change in net assets resulting from operations:

<S>                                                                                   <C>                    <C>              
Net investment income (loss)                                                          $       (82,106)       $       (997,395)
Net realized gain (loss) from portfolio investments                                                 -               2,659,872
Change in net unrealized appreciation or depreciation of
portfolio investments                                                                         351,787              (1,168,524)
                                                                                      ---------------        ----------------
Net increase in net assets resulting from operations                                          269,681                 493,953
                                                                                      ---------------        ----------------

Cash distributions paid or accrued                                                         (2,427,281)             (8,495,486)
                                                                                      ---------------        ----------------

Net decrease in net assets for the period                                                  (2,157,600)             (8,001,533)

Net assets in liquidation at beginning of period                                            9,783,311              17,235,158
                                                                                      ---------------        ----------------

NET ASSETS IN LIQUIDATION AT END OF PERIOD                                            $     7,625,711        $      9,233,625
                                                                                      ===============        ================

Net assets per unit                                                                         $   3.14                $   3.80
                                                                                            ========                ========

Number of units of beneficial interest or
   common equivalent shares                                                                 2,427,281               2,427,281
                                                                                        =============          ==============
</TABLE>



See notes to financial statements.



<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>

                                                                                       Period From             Six Months
                                                                                      February 25,                Ended
                                                                                         1997 to             August 31, 1996
                                                                                      June 30, 1997            (Predecessor)

CASH FLOWS PROVIDED FROM (USED FOR)
   OPERATING ACTIVITIES

<S>                                                                                 <C>                     <C>             
Net investment income (loss)                                                        $       (82,106)        $      (997,395)
Adjustments to reconcile net investment income (loss) to cash
   provided from (used for) operating activities:
Decrease in receivables and other assets                                                    216,185                 253,192
(Decrease) increase in payables                                                            (110,916)                285,828
Depreciation expense                                                                          1,835                   2,485
Consulting fees paid in-kind                                                                      -                 105,000
Amortization of deferred organizational costs                                                     -                  19,686
                                                                                    ---------------         ---------------
Cash flows provided from (used for) operating activities                                     24,998                (331,204)
                                                                                    ---------------         ---------------

CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES

Covered call options written                                                                 37,500                       -
Purchase of portfolio investments                                                                 -                 (51,411)
Net proceeds from the sale of portfolio investments                                               -               2,605,932
Repayment of notes                                                                                -               2,000,000
                                                                                    ---------------         ---------------
Cash flows provided from investing activities                                                37,500               4,554,521
                                                                                    ---------------         ---------------

CASH FLOWS USED FOR FINANCING ACTIVITIES

Cash distributions paid                                                                           -              (8,495,486)
                                                                                    ---------------         ---------------
Cash flows used for financing activities                                                          -              (8,495,486)
                                                                                    ---------------         ---------------

Increase (decrease) in cash and cash equivalents                                             62,498              (4,272,169)
Cash and cash equivalents at beginning of period                                          7,571,246               9,878,280
                                                                                    ---------------         ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $     7,633,744         $     5,606,111
                                                                                    ===============         ===============
</TABLE>


See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.     Organization and Purpose

The MicroCap  Liquidating Trust ("the Trust"),  is the successor to the MicroCap
Fund, Inc., formerly Commonwealth Associates Growth Fund, Inc. (the "Fund"). The
Fund,  which was a  Maryland  corporation  formed on  January  26,  1993,  was a
non-diversified,  closed-end  management  investment  company and  operated as a
business  development  company  under the  Investment  Company Act of 1940.  The
Fund's investment  objective was to achieve  long-term  capital  appreciation of
assets,  rather than current income,  by investing in debt and equity securities
of  emerging  and  established   companies  that  management   believed  offered
significant growth potential.

Pursuant to its Plan of Liquidation,  which was approved at a special meeting of
shareholders on July 23, 1996, the Fund  transferred all of its remaining assets
and its remaining fixed and contingent liabilities to the Trust, effective as of
the close of business on February 24, 1997.

Also  effective as of the close of business on February 24, 1997,  the 2,188,085
common  shares and 191,357  preferred  shares of the Fund,  outstanding  on such
date,  were  automatically  deemed to represent  2,427,281  units of  beneficial
interest  in the Trust  ("Units").  As a result,  on  February  24,  1997,  each
shareholder  of the Fund  received  one Unit of the Trust for each  share of the
Fund's common stock held on such date and 1.25 Units of the Trust for each share
of the Fund's preferred stock held on such date.

 2.   Significant Accounting Policies

Valuation of  Investments - Portfolio  investments  are carried at fair value as
determined quarterly by the Trustee. The fair value of the Trust's publicly-held
portfolio  securities is adjusted to the closing public market price on the last
day of the  fiscal  quarter  discounted  by a  factor  of 0% to  20%  for  sales
restrictions. Factors considered in the determination of an appropriate discount
include: underwriter lock-up, affiliate status by owning greater than 10% of the
outstanding shares of a portfolio security,  and other liquidity factors such as
the size of the Trust's  position in a given portfolio  company  compared to the
trading history of the public security.  Privately-held portfolio securities are
carried at cost until significant  developments  affecting the portfolio company
provide a basis for  change  in  valuation,  including  adjustments  to  reflect
meaningful third-party transactions in the private market.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Investment  Transactions  - Realized  gains and losses on  investments  sold are
computed on a specific  identification basis. The Trust records its transactions
on the accrual method.

Income Taxes - The Trust is a complete  pass-through  entity for federal  income
tax  purposes  and,  accordingly,  is not subject to income tax.  Instead,  each
beneficiary  of the Trust is required to take into account,  in accordance  with
such  beneficiary's  method of accounting,  such beneficiary's pro rata share of
the Trust's income, gain, loss,  deduction or expense,  regardless of the amount
or timing of distributions to beneficiaries.



<PAGE>


===============================================================================
MICROCAP LIQUIDATING TRUST
===============================================================================
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued



The  transfer  of net assets  from the Fund to the Trust is  considered  to be a
liquidating distribution of the Fund for federal income tax purposes. Therefore,
each holder of the common or preferred  stock of the Fund must recognize gain or
loss  equal to the  difference  between  the net fair  value of the  liquidating
distribution, of $4.03 per common equivalent share deemed received in respect of
such shares,  and the holder's  adjusted tax basis in such shares.  Such gain or
loss is a capital gain or loss if such shares were held as a capital asset,  and
such  capital  gain or loss is  long-term if such shares were held for more than
one year as of February  24, 1997,  the date the  liquidating  distribution  was
deemed to have been made.

Cash and  Cash  Equivalents  - The  Trust  invests  its  available  cash in U.S.
Treasury Bills or overnight repurchase  agreements  collateralized by securities
issued by the U.S.  Government or its  agencies.  Investments  in U.S.  Treasury
Bills and overnight repurchase  agreements are considered to be cash equivalents
for the statement of cash flows.

The  cash  and  cash  equivalents  of  the  Trust  include  restricted  cash  of
approximately  $2.8 million,  comprised of $2.4 million  relating to the Regency
Holdings (Cayman) Inc. litigation,  $250,000 relating to certain indemnification
agreements with Mr. Raymond S. Troubh,  the Trustee of the Trust, and certain of
the Fund's former directors and officers and $120,000  relating to the potential
reimbursement  of  out-of-pocket  expenses  of  a  shareholder  group  that  had
solicited  proxies in opposition to the Fund's Plan of Liquidation.  See Notes 4
and 5 below.

3.     Related Party Transactions
In July 1996, the Fund entered into an agreement with Raymond S. Troubh, whereby
Mr. Troubh provided  management services to the Fund in connection with its Plan
of  Liquidation  and will  continue to provide such services to the Trust during
its liquidation.  For services rendered under the agreement, Mr. Troubh receives
$8,500 per month,  plus 1% of the amount of each  distribution  (other  than the
initial distribution paid by the Fund on August 30, 1996), plus, at the time any
proceeds  of sale or other  revenues  are  received  by the Fund or the Trust in
excess of the investment in the particular  asset, Mr. Troubh will receive 5% of
such excess for amounts  received in 1996 or 1997, 4% of such excess for amounts
received in 1998, 2% in 1999 and 0% thereafter;  provided,  however,  that in no
event shall the total compensation paid to Mr. Troubh be less than $250,000. For
the period from  February 25, 1997 to June 30, 1997,  the Trustee  received fees
totaling $34,000.

4.     Litigation
On April 19, 1996, the Fund filed a complaint against Commonwealth Associates, a
registered  broker-dealer  and the  underwriter  of the  Fund's  initial  public
offering,   Michael  S.  Falk,  the  chief  executive  officer  of  Commonwealth
Associates,  a minority  shareholder  and  director of the Fund,  and Stephen J.
Warner,  a former  executive  officer of Commonwealth  Associates and the former
president of the Fund. The civil action, which was filed in federal court in the
Southern  District of New York,  alleged fraud,  breach of fiduciary  duties and
violations of the Investment Company Act of 1940. On December 24, 1996, the Fund
and the defendants agreed to a settlement of the complaint, whereby Commonwealth
Associates  will make  settlement  payments  to the Fund and the Trust  totaling
$1,150,000.  In connection  therewith,  the Fund  received  $500,000 in December
1996.  The  remaining  balance  of the  settlement  payments  is  being  paid in
installments  through December 15, 1997 and will earn interest at an annual rate
of 4.50%.  Commonwealth  Associates  has  delivered  securities  to the Trust as
collateral for the remaining payments. Such securities, which are held in escrow
by the Trust, had a fair value that exceeded the remaining  $450,000 balance due
from the settlement  agreement as of June 30, 1997.  Through August 1, 1997, the
Trust had received additional payments totaling $250,000.  Additionally, as part
of the settlement,  the Fund and the defendants  agreed to pursue claims against
former  counsel to the Fund.  The Trust  would be entitled to receive 50% of any
recovery from such claims,

<PAGE>


===============================================================================
MICROCAP LIQUIDATING TRUST
===============================================================================
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued

after the  reimbursement  to  Commonwealth  Associates of all costs and expenses
associated with pursuing the claims.

The Fund is a creditor of PSSS, Inc. f/k/a Oh-La-La! Inc. ("PSSS"), which is the
subject of  proceedings  under chapter 11 of the United States  Bankruptcy  Code
pending in San Francisco, California (the "Bankruptcy Case"). In connection with
the Bankruptcy Case, Oh-La-La!  International,  S.A.  ("International"),  one of
PSSS's  largest  shareholders,  has filed a  precautionary  proof of claim  (the
"Precautionary  Proof of Claim"), on behalf of International and other similarly
situated  shareholders of PSSS, against,  among others, the Trust, certain other
creditors of PSSS, and parties  involved in the intended  underwriting  for, and
conduct of, an initial  public  offering which PSSS had  anticipated  would have
occurred in or about 1994. The Precautionary  Proof of Claim alleges a claim for
damages as a result of, among other things,  (a) the failure to  effectuate  the
intended initial public offering, and (b) the Bankruptcy  Court-approved sale of
PSSS's assets, which was allegedly prejudicial to PSSS's shareholders.  PSSS and
International  have taken no other action  regarding this claim. The Fund denied
liability for the claims set forth in the Precautionary Proof of Claim. A global
settlement has been reached between and among PSSS, International, the Trust and
several  other  parties,  pursuant to which the Trust will have no liability for
the claims set forth in the Precautionary Proof of Claim (the "Settlement"). The
Settlement  has been  preliminarily  approved  by the  Bankruptcy  Court  and is
subject to final approval upon  confirmation of a plan of liquidation.  Recovery
on account of the Trust's  claims as a creditor of PSSS will be the subject of a
number of extraneous factors.

Regency  Holdings   (Cayman)  Inc.   ("Holdings")  and  Regency  Maritime  Corp.
("Maritime")  (collectively  "Regency")  along with other  related  entities are
debtors in a bankruptcy case pending in the United States  Bankruptcy  Court for
the Southern  District of New York, 95 B 45197 (TLB). In that  bankruptcy  case,
Regency  initiated an adversary  proceeding  against the Fund and certain  other
persons and entities to recover monies that it paid them on the ground that such
payments  constituted  voidable  preferences under the Bankruptcy Code.  Regency
maintains  that a payment  Regency made to the Fund between 90 days and one year
prior to the filing of Regency's bankruptcy petition in the amount of $1,940,000
to satisfy a bridge  loan the Fund made to  Regency,  is a  voidable  preference
because  Kamal  Mustafa,  the former  president  of the Fund,  was a director of
Regency  (and  therefore an insider) for a portion of the time that such amounts
were due and owing.  Regency also maintains that such relationship had an impact
on Regency's decision to pay these amounts. Additionally, Regency maintains that
a payment of  $145,728  made by Regency to the Fund to redeem  certain  warrants
issued  with  respect  to the loan  transaction  was made  within 90 days of the
filing of the bankruptcy petition and is therefore a voidable preference without
regard to whether Mustafa was an insider. In an amended complaint,  Regency also
asserted that the payments to the Fund constituted a fraudulent transfer, as the
payments  were in fact made by Maritime and not Holdings.  Regency  asserts that
Maritime had no obligation to make such payments and received no value for them.
The Fund has served an answer denying the  allegations of the amended  complaint
and is vigorously  contesting Regency's claims.  Pursuant to an order filed with
the Bankruptcy Court, the Trust has set aside  approximately  $2.4 million in an
interest-bearing  cash account pending resolution by the Bankruptcy Court of the
adversary proceeding.  Substantial discovery has been undertaken. At the present
time, a limited trial, in part based upon written  submissions,  is scheduled to
address the validity of Regency's preference claims.

5.     Other Information
On July 15, 1996,  the Fund entered into a settlement  agreement with a group of
shareholders of the Fund's common stock that had solicited proxies in opposition
to the  Fund's  Plan of  Liquidation  (the "13D  Group").  Under the  settlement
agreement,  the Fund and the 13D Group agreed that,  (i) certain  members of the
13D Group and affiliated  persons would cease to have business  dealings with or
receive compensation from the

<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued

Fund,  (ii) a 13D Group  member  would have the right to  receive  notice of and
attend all meetings of the Board of Directors and any committee meeting thereof,
and (iii) subject to the approval of the Securities and Exchange Commission (the
"SEC"), the Trust would reimburse the 13D Group for its reasonable out of pocket
expenses  up to  $120,000  in  connection  with  the  13D  Group's  efforts.  An
application  relating  to such  reimbursement  by the Trust to the 13D Group was
filed with the SEC on September 27, 1996.

Effective on August 1, 1996,  the Fund entered into  indemnification  agreements
with Mr. Raymond Troubh and certain of the Fund's former directors and officers.
Pursuant  to such  agreements,  the Fund  established  an  escrow  account  that
contains  approximately  $250,000  in cash or cash  equivalents  to provide  for
potential  legal fees and settlement  payments  relating to certain actions that
may arise against such individuals relating to activity involving the Fund.

6.     Cash Distribution
In May 1997, the Trust declared an interim liquidating  distribution  totaling 
$2,427,281,  or $1.00 per Unit. Such distribution was paid on July 15, 1997 to 
unit holders of record on June 30, 1997.



<PAGE>


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

Liquidity and Capital Resources

On June 30, 1997, the Trust had cash and cash equivalents  totaling  $7,633,744,
of which  $2,790,218 was restricted due to certain  contingencies,  as discussed
below.  The  Trust's  cash  balances  are  invested  in U.S.  Treasury  Bills or
overnight repurchase agreements  collateralized by securities issued by the U.S.
Government or its agencies.  Interest earned from such investments for the three
months ended June 30, 1997 and for the period from February 25, 1997 to June 30,
1997,  totaled  $95,851 and $132,154,  respectively . Interest  earned from such
cash  balances  in future  periods  is  subject to  fluctuations  in  short-term
interest rates and changes in the Trust's cash balances.

The restricted cash and cash equivalents  balance of approximately  $2.8 million
is comprised  of $2.4 million  relating to the Regency  Holdings  (Cayman)  Inc.
litigation,  $250,000  relating to certain  indemnification  agreements with Mr.
Raymond S. Troubh,  the Trustee of the Trust,  and certain of the Fund's  former
directors and officers and $120,000  relating to the potential  reimbursement of
out-of-pocket  expenses of a  shareholder  group that had  solicited  proxies in
opposition to the Fund's Plan of Liquidation.  See Notes 4 and 5 of the Notes to
Financial Statements.

In May 1997,  the Trust  declared an interim  liquidating  distribution  to unit
holders totaling  $2,427,281,  or $1.00 per Unit. Such  distribution was paid on
July 15,  1997 to unit  holders  of record  on June 30,  1997.  Additional  cash
distributions will be made to beneficiaries of the Trust as the remaining assets
are  liquidated  and  after the  payment  of and  reserve  for all  current  and
contingent liabilities.

Additionally,  on June 30,  1997,  the Trust had  accounts  payable  and accrued
liabilities  totaling  $1.1  million,  primarily  consisting  of legal  fees and
litigation expenses. The Fund previously submitted claims in connection with its
directors and officers liability  insurance policy, for the possible recovery of
approximately  $250,000 of certain  legal fees  relating to former  officers and
directors  of the Trust.  The recovery of these  amounts or any portion  thereof
remains uncertain.

Results of Operations

The Trust is  pursuing  the  orderly  liquidation  of its assets and  subsequent
distribution  to unit holders of the proceeds from such  liquidation,  including
the Trust's  existing  cash balances  after  payment of all current,  future and
contingent  liabilities.  Prior to the creation of the Trust, the Fund had begun
to pursue this  objective  with the approval of its Plan of  Liquidation in July
1996.  For the three months ended June 30, 1997 and for the period from February
25, 1997 to June 30, 1997 (the "1997 Period"),  the Trust had an increase in net
assets in liquidation of $741,832 and $269,681, respectively.

Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended June 30, 1997 and for the 1997 Period,  the Trust had
unrealized  gains from its  remaining  portfolio  investments  of  $704,094  and
$351,787,  respectively.  The Trust  had no  realized  gains or losses  from its
portfolio investments during the 1997 Period.

The $351,787  unrealized  gain for the 1997 Period  resulted from the net upward
revaluation of the Trust's publicly-held portfolio investments, primarily due to
the increased public market price of Unigene Laboratories,  Inc. common stock at
the end of the period.

For the three months ended August 31, 1996 (the  equivalent  prior year period),
the Fund had a net realized and unrealized  loss from its portfolio  investments
of  $1,084,428,  comprised of a  $2,364,630  net  realized  gain from  portfolio
investments  and  a  $3,449,058  decrease  in  net  unrealized  appreciation  of
investments for the three month period. For the six months ended August 31, 1996
(the "1996  Period"),  the Fund had a net realized and unrealized  gain from its
portfolio investments of $1,491,348, comprised of a $2,659,872 net realized gain
from  portfolio   investments  and  a  $1,168,524  decrease  in  net  unrealized
appreciation of investments.

The  $2,364,630  net  realized  gain for the three months ended August 31, 1996,
included the sale of the Fund's investment in Shells Seafood  Restaurants,  Inc.
for $2,700,000, which resulted in a realized gain of $2,110,000. Also during the
quarter, the Fund sold its remaining 60,000 Accumed  International,  Inc. common
stock warrants for $154,647, realizing a gain of $149,630. Additionally,  during
the period, the Fund completed the transfer of 60,000 Unigene Laboratories, Inc.
common  stock  warrants  to  certain  individuals  representing  the  payment of
consulting  fees incurred in connection  with the Fund's  investment in Unigene.
The transaction  resulted in the recognition of a $105,000  realized gain, which
has been equally  offset by $105,000 of consulting  fee expense  recorded by the
Fund over several fiscal quarters. During its fiscal quarter ended May 31, 1996,
the Fund had a net realized gain of $295,242, resulting from the sale of 190,000
Accumed common stock warrants and 12,500 shares of Accumed common stock.

For the three and six months ended  August 31, 1996,  the Fund had a decrease in
net  unrealized  appreciation  of  investments  of  $3,449,058  and  $1,168,524,
respectively. The $1,168,524 decrease in net unrealized appreciation for the six
months ended August 31, 1996, was comprised of a $1,381,261 net unrealized  gain
due to the upward  revaluation of certain portfolio  investments for the period,
primarily Shell's Seafood Restaurants, Inc., offset by a $2,549,785 reduction in
net unrealized appreciation due to the transfer from unrealized gain to realized
gain relating to the portfolio sales completed  during the period,  as discussed
above.

Investment Income and Expenses
For the three months ended June 30, 1997 and August 31, 1996,  the Trust had net
investment   income  of  $37,738  and  a  net   investment   loss  of  $205,724,
respectively. For the period from February 25, 1997 to June 30, 1997 and for the
six months ended August 31, 1996, the Trust had a net investment loss of $82,106
and $997,395, respectively.

The  decrease  in net  investment  loss  from  $997,395  for the 1996  Period as
compared to $82,106 for the 1997 Period  primarily  reflects the  termination of
the ongoing  operations of the Fund, the adoption of its Plan of Liquidation and
transfer of its remaining assets to the Trust, as discussed above.

Total investment income for the 1997 Period was $142,215 as compared to $354,571
for the 1996 Period.  The decrease in investment income primarily  resulted from
reduced interest income, which reflects the shorter 1997 Period, which consisted
of 133 days or less than 75% of the full six month period for 1996,  and reduced
cash  balances  held during the 1997 Period as compared to the 1996 Period.  The
Trust had no interest or dividend income from portfolio investments for the 1997
Period,  due to the  reduction in interest  earning  portfolio  securities  held
during the 1997  Period.  Interest  income is expected to continue to decline as
the Trust continues with the liquidation of its remaining assets.

The operating  expenses of the Trust during the 1997 Period consist primarily of
legal  and  accounting  fees,  Trustee  fees,  custodial  fees and  general  and
administrative expenses.  During the 1997 Period, such expenses were incurred in
connection with ongoing litigation and the continued  liquidation of the Trust's
remaining assets. Expenses incurred during the three and six months ended August
31,  1996  included  certain  ongoing  expenses  of the Fund,  which will not be
incurred by the Trust, including salary expense, amortization expense, directors
fees, insurance and other expenses.

Net Assets in Liquidation
As of June 30, 1997, net assets in liquidation totaled $7,625,711, a decrease of
$2,157,600  from net assets of $9,783,331 at February 24, 1997. This decrease is
the result of the $2,427,281  accrued cash  distribution  exceeding the $269,681
increase in net assets in liquidation for the 1997 Period. At June 30, 1997, the
net asset value per unit of beneficial interest was $3.14,  compared to $4.03 at
February 24, 1997.


<PAGE>


                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.

On April 19, 1996, the Fund filed a complaint against Commonwealth Associates, a
registered  broker-dealer  and the  underwriter  of the  Fund's  initial  public
offering,   Michael  S.  Falk,  the  chief  executive  officer  of  Commonwealth
Associates,  a minority  shareholder  and  director of the Fund,  and Stephen J.
Warner,  a former  executive  officer of Commonwealth  Associates and the former
president of the Fund. The civil action, which was filed in federal court in the
Southern  District of New York,  alleged fraud,  breach of fiduciary  duties and
violations of the Investment Company Act of 1940. On December 24, 1996, the Fund
and the defendants agreed to a settlement of the complaint, whereby Commonwealth
Associates  will make  settlement  payments  to the Fund and the Trust  totaling
$1,150,000.  In connection  therewith,  the Fund  received  $500,000 in December
1996.  The  remaining  balance  of the  settlement  payments  is  being  paid in
installments  through December 15, 1997 and will earn interest at an annual rate
of 4.50%.  Commonwealth  Associates  has  delivered  securities  to the Trust as
collateral for the remaining payments. Such securities, which are held in escrow
by the Trust, had a fair value that exceeded the remaining  $450,000 balance due
from the settlement  agreement as of June 30, 1997.  Through August 1, 1997, the
Trust had received additional payments totaling $250,000.  Additionally, as part
of the settlement,  the Fund and the defendants  agreed to pursue claims against
former  counsel to the Fund.  The Trust  would be entitled to receive 50% of any
recovery from such claims, after the reimbursement to Commonwealth Associates of
all costs and expenses associated with pursuing the claims.

The Fund is a creditor of PSSS, Inc. f/k/a Oh-La-La! Inc. ("PSSS"), which is the
subject of  proceedings  under chapter 11 of the United States  Bankruptcy  Code
pending in San Francisco, California (the "Bankruptcy Case"). In connection with
the Bankruptcy Case, Oh-La-La!  International,  S.A.  ("International"),  one of
PSSS's  largest  shareholders,  has filed a  precautionary  proof of claim  (the
"Precautionary  Proof of Claim"), on behalf of International and other similarly
situated  shareholders of PSSS, against,  among others, the Trust, certain other
creditors of PSSS, and parties  involved in the intended  underwriting  for, and
conduct of, an initial  public  offering which PSSS had  anticipated  would have
occurred in or about 1994. The Precautionary  Proof of Claim alleges a claim for
damages as a result of, among other things,  (a) the failure to  effectuate  the
intended initial public offering, and (b) the Bankruptcy  Court-approved sale of
PSSS's assets, which was allegedly prejudicial to PSSS's shareholders.  PSSS and
International  have taken no other action  regarding this claim. The Fund denied
liability for the claims set forth in the Precautionary Proof of Claim. A global
settlement has been reached between and among PSSS, International, the Trust and
several  other  parties,  pursuant to which the Trust will have no liability for
the claims set forth in the Precautionary Proof of Claim (the "Settlement"). The
Settlement  has been  preliminarily  approved  by the  Bankruptcy  Court  and is
subject to final approval upon  confirmation of a plan of liquidation.  Recovery
on account of the Trust's  claims as a creditor of PSSS will be the subject of a
number of extraneous factors.

Regency  Holdings   (Cayman)  Inc.   ("Holdings")  and  Regency  Maritime  Corp.
("Maritime")  (collectively  "Regency")  along with other  related  entities are
debtors in a bankruptcy case pending in the United States  Bankruptcy  Court for
the Southern  District of New York, 95 B 45197 (TLB). In that  bankruptcy  case,
Regency  initiated an adversary  proceeding  against the Fund and certain  other
persons and entities to recover monies that it paid them on the ground that such
payments  constituted  voidable  preferences under the Bankruptcy Code.  Regency
maintains  that a payment  Regency made to the Fund between 90 days and one year
prior to the filing of Regency's bankruptcy petition in the amount of $1,940,000
to satisfy a bridge  loan the Fund made to  Regency,  is a  voidable  preference
because  Kamal  Mustafa,  the former  president  of the Fund,  was a director of
Regency  (and  therefore an insider) for a portion of the time that such amounts
were due and owing.  Regency also maintains that such relationship had an impact
on Regency's decision to pay these amounts. Additionally, Regency maintains that
a payment of  $145,728  made by Regency to the Fund to redeem  certain  warrants
issued  with  respect  to the loan  transaction  was made  within 90 days of the
filing of the bankruptcy petition and is therefore a voidable preference without
regard to whether Mustafa was an insider. In an amended complaint,  Regency also
asserted that the payments to the Fund constituted a fraudulent transfer, as the
payments  were in fact made by Maritime and not Holdings.  Regency  asserts that
Maritime had no obligation to make such payments and received no value for them.
The Fund has served an answer denying the  allegations of the amended  complaint
and is vigorously  contesting Regency's claims.  Pursuant to an order filed with
the Bankruptcy Court, the Trust has set aside  approximately  $2.4 million in an
interest-bearing  cash account pending resolution by the Bankruptcy Court of the
adversary proceeding.  Substantial discovery has been undertaken. At the present
time, a limited trial, in part based upon written  submissions,  is scheduled to
address the validity of Regency's preference claims.

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 brought to a vote of security holders during the period covered by
this report.

Item 5.       Other Information.

Not applicable.

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.



              MICROCAP LIQUIDATING TRUST


              /s/    Raymond S. Troubh
              Raymond S. Troubh
              Trustee



Date:         August 14, 1997


<PAGE>