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 March 31, 1998

Or

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

For the transition period from                        to
                             Commission file number 0-29120

                           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 May 1, 1998 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 March 31, 1998 (Unaudited) and 
December 31, 1997

Schedule of Portfolio Investments as of  March 31, 1998 (Unaudited)

Statements  of  Operations  for the Three Months ended March 31, 1998 and for 
the period from February 25, 1997 to March 31, 1997 (Unaudited)

Statements  of Changes in Net Assets for the Three  Months  ended  March 31, 
1998 and for the period  from  February  25, 1997 to March 31, 1997  (Unaudited)

Statements  of Cash Flows for the Three Months  ended March 31, 1998 and for the
 period from  February 25, 1997 to March 31, 1997 (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>
                                                                                     March 31, 1998       December 31,
                                                                                     (Unaudited)                   1997
ASSETS

Portfolio investments at fair value (cost $2,177,500 at
<S>      <C> <C>               <C> <C>                                              <C>                    <C>                 
   March 31, 1998 and December 31, 1997)                                            $      1,592,813       $          1,622,500
Cash and cash equivalents - unrestricted                                                   2,649,037                  2,651,802
Cash and cash equivalents - restricted                                                     2,790,218                  2,790,218
Accrued interest receivable                                                                   16,190                     18,644
Other assets                                                                                     242                        883
                                                                                    ----------------       --------------------
   Total assets                                                                            7,048,500                  7,084,047
                                                                                    ----------------       --------------------

LIABILITIES

Accounts payable - legal                                                                     146,199                     87,015
Accounts payable - other                                                                      49,650                     65,662
                                                                                    ----------------       --------------------
   Total liabilities                                                                         195,849                    152,677
                                                                                    ----------------       --------------------

NET ASSETS IN LIQUIDATION                                                           $      6,852,651       $          6,931,370
                                                                                    ================       ====================


Net assets per Unit of beneficial interest                                                  $  2.82                   $  2.86
                                                                                            =======                   =======

Number of Units of beneficial interest                                                     2,427,281                  2,427,281
                                                                                           =========                  =========
</TABLE>




See notes to financial statements.


<PAGE>


MICROCAP LIQUIDATING TRUST
(Successor to The MicroCap Fund, Inc.)
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited)
March 31, 1998

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

Publicly-Held Securities:

Unigene Laboratories, Inc.
Warrant to purchase 475,000 shares of Common Stock
<S>   <C>              <C> <C>                                                  <C>                 <C>                  <C>  
   at $1.375, expiring 7/7/00                                                   $           0       $      564,063       8.23%
                                                                                -------------       --------------     -------

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 Series A1 Preferred Stock                                           594,174              297,087
240,179 shares of Series B1 Preferred Stock                                         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      14.14%
                                                                                -------------       --------------    --------
Oh-La-La! Inc.
9% Convertible Senior Note                                                            140,000               34,800
9% Convertible Senior Note                                                            100,000               25,200
                                                                                -------------       --------------
                                                                                      240,000               60,000     .88%
                                                                                -------------       -----------------------

Total Portfolio Investments(A)                                                  $   2,177,500       $    1,592,813      23.25%
                                                                                =============       ==============    ========
</TABLE>


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

(A) All portfolio securities held at March 31, 1998 are 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               Period From
                                                                                   Ended March 31,       February 25, 1997
                                                                                        1998                to March 31, 1997
                                                                                 -------------------     --------------------
INVESTMENT INCOME AND EXPENSES

Income:
<S>                                                                               <C>                       <C>              
   Interest from U.S. Treasury Bills and repurchase agreements                    $        73,756           $          36,303
   Other interest income                                                                        -                       2,844
   Other income                                                                            11,815                           -
                                                                                  ---------------           -----------------
   Total investment income                                                                 85,571                      39,147
                                                                                  ---------------           -----------------

Expenses:
   Administrative expenses                                                                 18,058                      14,362
   Legal fees                                                                              73,711                     121,063
   Accounting fees                                                                         11,250                      14,000
   Trustee fees                                                                            25,500                       8,500
   Transfer agent and custodian fees                                                        5,428                       1,066
   Mailing and printing                                                                         -                           -
   Other operating expenses                                                                   656                           -
                                                                                  ---------------           -----------------
   Total expenses                                                                         134,603                     158,991
                                                                                  ---------------           -----------------

NET INVESTMENT LOSS                                                                       (49,032)                   (119,844)

   Change in net unrealized depreciation of investments                                   (29,687)                   (352,307)
                                                                                  ---------------           -----------------

NET DECREASE IN NET ASSETS IN LIQUIDATION                                         $       (78,719)          $        (472,151)
                                                                                  ===============           ================= 
</TABLE>


See notes to financial statements.



<PAGE>


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


<TABLE>
                                                                                      Three Months              Period From
                                                                                     Ended March 31,      February 25, 1997
                                                                                          1998               to March 31, 1997
                                                                                  -------------------     --------------------

<S>                                                                                 <C>                     <C>             
Net investment loss                                                                 $       (49,032)        $      (119,844)
Change in net unrealized depreciation of portfolio
   investments                                                                              (29,687)               (352,307)
                                                                                    ---------------         ---------------

Decrease in net assets in liquidation                                                       (78,719)               (472,151)

Net assets in liquidation at beginning of period                                          6,931,370               9,783,311
                                                                                    ---------------         ---------------

N  ET ASSETS IN LIQUIDATION AT END OF PERIOD                                        $     6,852,651         $     9,311,160
                                                                                    ===============         ===============


Net assets per unit                                                                      $     2.82               $    3.84
                                                                                         ==========               =========

Number of units of beneficial interest                                                    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>
                                                                                      Three Months             Period From
                                                                                     Ended March 31,     February 25, 1997
                                                                                          1998              to March 31, 1997
                                                                                 --------------------    --------------------

CASH FLOWS (USED FOR) PROVIDED FROM
   OPERATING ACTIVITIES

<S>                                                                               <C>                      <C>              
Net investment loss                                                               $        (49,032)        $       (119,844)
Adjustments to reconcile net investment loss to cash
   (used for) provided from operating activities:
Depreciation expense                                                                             -                      498
Increase in payables and other liabilities                                                  43,172                  119,513
Decrease in receivables and other assets                                                     3,095                   17,790
                                                                                  ----------------         ----------------
Cash flows (used for) provided from operating activities                                    (2,765)                  17,957
                                                                                  ----------------         ----------------


(Decrease) increase in cash and cash equivalents                                            (2,765)                  17,957
Cash and cash equivalents at beginning of period                                         5,442,020                7,571,246
                                                                                  ----------------         ----------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $      5,439,255         $      7,589,203
                                                                                  ================         ================
</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"),  a liquidating trust established
under the laws of the State of New York, 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, the Fund's termination date.

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 each  publicly-held
portfolio  security is adjusted to the closing  public  market price on the last
day of the  calendar  quarter  discounted  by a  factor  of 0% to 20% for  sales
restrictions,  if any. 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

Cash and  Cash  Equivalents  - The  Trust  invests  its  available  cash in U.S.
Treasury Bills and overnight repurchase agreements  collateralized by securities
issued by the U.S.  Government or its agencies.  Such investments 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 has  continued 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 a percentage of
any  proceeds  of sale or other  revenues  received  by the Fund or the Trust in
excess of the investment in the particular asset. Mr. Troubh was paid 5% of such
excess for amounts  received in 1996 and 1997 and will be paid 4% in 1998, 2% in
1999 and 0% thereafter.

4.     Litigation
The Trust is a creditor of PSSS, Inc., formerly 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 Trust 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 for PSSS.
Recovery  on account of the Trust's  claims as a creditor of PSSS is  contingent
upon a number of factors beyond the Trust's control.

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 or fraudulent  conveyances under the
Bankruptcy Code.  Holdings  maintains that a payment 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

<PAGE>


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

were due and owing. Holdings also maintains that such relationship had an impact
on the decision to pay these amounts.  Additionally,  Holdings  maintains that a
payment of  $145,728  made 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.  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. A limited trial based upon written submissions to
address the validity of Regency's  preference  claims was held in December  1997
and  resulted in a judgment  in favor of the Trust,  dismissing  the  preference
claims with prejudice.  It is expected that a trial on the fraudulent conveyance
claims will be held during 1998.

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 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.     Classification of Portfolio Investments

The Trust's investments were categorized as follows as of March 31, 1998:
<TABLE>
                                                                                                          Percentage of
Type of Investments                                        Cost                   Fair Value                  Net Assets*
-------------------                                   ---------------           ---------------               -----------
<S>                                                  <C>                         <C>                          <C>   
Preferred Stock                                      $      1,937,500            $      968,750               14.14%
Common Stock                                                        0                   564,063                8.23%
Debt Securities                                               240,000                    60,000              .88%
                                                     ----------------            --------------            ------
Total                                                $      2,177,500            $    1,592,813               23.25%
                                                     ================            ==============               ======

Country/Geographic Region
Western U.S.                                         $        240,000            $       60,000                 .88%
Eastern U.S.                                                1,937,500                 1,532,813               22.37%
                                                     ----------------            --------------               ------
Total                                                $      2,177,500            $    1,592,813               23.25%
                                                     ================            ==============               ======

Industry
Biotechnology                                        $              0            $      564,063                8.23%
Consumer Products                                           1,937,500                   968,750               14.14%
Food Services                                                 240,000                    60,000              .88%
                                                     ----------------            --------------           -------
Total                                                $      2,177,500            $    1,592,813               23.25%
                                                     ================            ==============               ======
</TABLE>

*    Represents fair value as a percentage of net assets.


<PAGE>


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

Liquidity and Capital Resources

As of March  31,  1998,  the  Trust  held  cash and  cash  equivalents  totaling
$5,439,255, 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 month period ended March 31, 1998,  totaled $73,756.  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 former directors
and officers of The MicroCap  Fund,  Inc. (the "Fund") 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.

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  remaining 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  upon the approval of its Plan of  Liquidation in July
1996.

Realized and Unrealized Gains and Losses from Portfolio Investments
For the three months ended March 31,  1998,  the Trust had a $29,687  unrealized
loss  resulting  from the  downward  revaluation  of its  investment  in Unigene
Laboratories,  Inc.,  due to the reduced  public market price of Unigene  common
stock at the end of the  period.  There were no  realized  gains or losses  from
portfolio investments during the three months ended March 31, 1998.

For the period from February 25, 1997 to March 31, 1997 (the "1997 Period"), the
Trust had a $352,307  unrealized loss from its remaining  portfolio  investments
resulting  from the net  downward  revaluation  of its  publicly-held  portfolio
investments,  primarily  due to the  reduced  public  market  price  of  Unigene
Laboratories, Inc. common stock at the end of the period. There were no realized
gains or losses from portfolio investments during the 1997 Period.

Investment Income and Expenses
For three months  ended March 31, 1998 and for the 1997 Period,  the Trust had a
net investment loss of $49,032 and $119,844,  respectively.  The decrease in net
investment  loss for the three months ended March 31, 1998  compared to the 1997
Period  primarily  was due to a $46,424  increase  in  investment  income  and a
$24,388  decrease in operating  expenses  for the 1998  period.  The increase in
investment  income  primarily  was due to an increase  in  interest  income from
short-term  investments  of $37,453  for the three  months  ended March 31, 1998
compared to the 1997 Period.  This increase reflects the longer full three month
period for 1998 compared to the shorter 1997 Period of slightly over one month.

The  decrease in  operating  expenses  for the three months ended March 31, 1998
compared to the 1997  Period  primarily  was due to a $47,352  decrease in legal
fees,  partially offset by a $22,964 increase in other operating expenses.  This
net  decrease  in legal  fees  primarily  is the  result of  reduced  litigation
expenses  and  restructuring  costs during the three months ended March 31, 1998
compared to the 1997 Period.  The increase in other operating  expenses reflects
the longer full three month period for 1998  compared to the shorter 1997 Period
of slightly over one month.

Net Assets in Liquidation
As of March 31, 1998, net assets in liquidation totaled  $6,852,651,  a decrease
of $78,719 from net assets in  liquidation  of  $6,931,370 at December 31, 1997.
This decrease was comprised of the $29,687 net  unrealized  loss from  portfolio
investments and the $49,032 net investment loss for the three months ended March
31, 1998. As of March 31, 1998, the net asset value per Unit was $2.82, compared
to $2.86 per Unit as of December 31, 1997.



<PAGE>


                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.

The Trust is a creditor of PSSS, Inc., formerly 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 Trust 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 for PSSS.
Recovery  on account of the Trust's  claims as a creditor of PSSS is  contingent
upon a number of factors beyond the Trust's control.

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 or fraudulent  conveyances under the
Bankruptcy Code.  Holdings  maintains that a payment 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.  Holdings also maintains that such relationship
had an  impact on the  decision  to pay these  amounts.  Additionally,  Holdings
maintains that a payment of $145,728 made 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.  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. A limited trial based upon written submissions to
address the validity of Regency's  preference  claims was held in December  1997
and  resulted in a judgment  in favor of the Trust,  dismissing  the  preference
claims with prejudice.  It is expected that a trial on the fraudulent conveyance
claims will be held during 1998.

Item 2.       Changes in Securities.

Not applicable.

Item 3.       Defaults Upon Senior Securities.

Not applicable.


<PAGE>



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:         May 15, 1998