U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

 /_X_/   QUARTERLY REPORT  UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE
         ACT OF 1934

         For the quarterly period ended September 30, 1998

                                                                 OR
 
/___/    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from ____________ to ____________

                          Commission File No.: 0-13117

                                MICROFRAME, INC.
                                ---------------
              (Exact Name of Small Business Issuer in Its Charter)


          New Jersey                                  22-2413505
          ----------                                  ----------
   (State or Other Jurisdiction of          (IRS Employer Identification Number)
   Incorporation or Organization)

                   21 Meridian Road, Edison, New Jersey 08820
                   ------------------------------------------
                    (Address of Principal Executive Offices)

                                 (732) 494-4440
                                 --------------
                (Issuer's telephone number, including area code)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 
    ---                         ---

There were 5,403,480 shares of Common Stock outstanding as of November 10, 1998.

Transitional Small Business Disclosure Format:

Yes                          No  X 
    ---                         ---
<PAGE>

                         MICROFRAME, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998


<TABLE>
<CAPTION>

PART I.           FINANCIAL INFORMATION                                                        Page
                                                                                               ----

<S>         <C>                                                                       <C>           
Item 1.           Condensed Consolidated Financial Information                                   2

                  Condensed Consolidated Balance Sheets as of September 30, 1998
                  and March 31, 1998 (Unaudited)                                                 3

                  Condensed Consolidated Statements of Operations for the Three and Six
                  Months Ended September 30, 1998 and 1997 (Unaudited)                           4

                  Condensed Consolidated Statements of Cash Flows for the Six
                  Months Ended September 30, 1998 and 1997 (Unaudited)                           5

                  Notes to Condensed Consolidated Financial Statements (Unaudited)               6-8

Item 2.           Management's Discussion and Analysis                                           8-11

PART II.          OTHER INFORMATION

Item 4.           Submissions of Matters to a Vote of Security Holders                           12

Item 5.           Other Information                                                              12

Item 6.           Exhibits and Reports on Form 8-K                                               12


SIGNATURES                                                                                       14

</TABLE>

<PAGE>


                          PART I. Financial Information
                       



Item 1.  Condensed Consolidated Financial Information.
         --------------------------------------------

         The condensed  consolidated  financial  statements included herein have
been  prepared  by the  registrant  without  audit  pursuant  to the  rules  and
regulations of the Securities and Exchange  Commission.  Although the registrant
believes that the disclosures are adequate to make the information presented not
misleading,  certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations.  It is suggested that these condensed financial  statements be read
in  conjunction  with the audited  financial  statements  and the notes  thereto
included  in the  registrant's  Annual  Report on Form 10-KSB for the year ended
March 31, 1998.


                                       2



<PAGE>
<TABLE>
<CAPTION>



MicroFrame, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
-------------------------------------------------------------------------------------------------------------------------
(unaudited)
                                                                            September 30,                   March 31,
                                  ASSETS                                         1998                         1998


<S>                                                                    <C>                             <C>              
 Current assets
     Cash and cash equivalents                                         $              268,710          $         507,726
     Accounts receivable, less allowance for doubtful
         accounts of $122,000 and $126,000, respectively                            3,553,863                  2,667,319
     Inventory, net                                                                 1,776,074                  1,425,351
     Deferred tax asset                                                               391,166                    366,137
     Prepaid expenses and other current assets                                        412,593                    153,568
                                                                         ---------------------           ----------------
         Total current assets                                                       6,402,406                  5,120,101

     Property and equipment, less accumulated depreciation
         of $584,260 and $971,903                                                     629,747                    421,701
     Capitalized software, less accumulated amortization
         of $1,175,299 and $1,054,827                                                 573,763                    396,351
     Deferred tax assets, net                                                              -                     129,689     
     Goodwill, less accumulated amortization of $31,080 and $26,130                    70,530                     75,480
     Security deposits                                                                 39,496                     35,716
     Other assets                                                                     732,600
                                                                         ---------------------           ---------------
         Total assets                                                  $            8,448,542          $       6,179,038
                                                                         =====================           ===============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Bank borrowings                                                   $              900,000          $         300,000
     Current portion of long-term debt                                                     -                      30,009     
     Accounts payable                                                               1,247,402                    910,842
     Accrued payroll and related liabilities                                          371,698                    348,397
     Deferred income                                                                  328,777                    181,573
     Other current liabilities                                                        433,989                    405,263
                                                                         ---------------------           ---------------
         Total current liabilities                                                  3,281,866                  2,176,084
                                                                         ---------------------           ---------------

Deferred tax liabilities, net                                                          23,242                          -
Committments and contingencies                                                                            


Stockholders' equity
     Common stock - par value  $.001 per share;  authorized  50,000,000  shares,
         issued 5,537,480  shares and outstanding  5,475,449 shares at September
         30, 1998; issued 4,849,531 shares and outstanding 4,849,131
         and subscribed 50,000 shares at March 31, 1998                                 5,537                      4,899
     Preferred stock - par value $10 per share;
         authorized 200,000 shares, none issued                                                           
     Additional paid-in capital                                                     7,324,828                  6,345,613
     Stock subscription receivable                                                                              (104,000)
     Accumulated deficit                                                           (1,982,053)                (2,231,638)
     Accumulated Comprehensive income                                                   2,321                     (7,920)
                                                                         ---------------------           ----------------
                                                                                    5,350,633                  4,006,954
     Less - Treasury stock, 62,031 shares at September 30, 1998
         and 400 at March 31, 1998, at cost                                          (207,199)                    (4,000)
                                                                         ---------------------           ----------------
         Total stockholders' equity                                                 5,143,434                  4,002,954
                                                                         ---------------------           ----------------

         Total liabilities and stockholders' equity                    $            8,448,542          $       6,179,038
                                                                         =====================           ================
</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements

                                       3


<PAGE>
<TABLE>
<CAPTION>

MicroFrame, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
------------------------------------------------------------------------------------------------------------------------------------
(unaudited)

                                                              Three Months Ended                       Six Months Ended
                                                                 September 30,                         September 30,
                                                            ------------------------               --------------------------
                                                               1998             1997                 1998               1997



<S>                                                       <C>             <C>                  <C>               <C>          
Gross Sales                                               $   3,213,930   $   2,281,727        $   6,177,903     $   4,018,273

Cost of sales                                                 1,056,431       1,046,052            2,064,436         1,787,098
                                                            ------------    -------------------  ------------      ------------

Gross margin                                                  2,157,499       1,235,675            4,113,467         2,231,175

     Research and development expenses                          640,140         180,796            1,053,107           467,348
     Selling, general and administrative expenses             1,417,461         966,731            2,637,109         1,853,922
                                                            ------------    -------------------  ------------      ------------

Income (loss) from operations                                    99,898          88,148              423,251           (90,095)

Interest income                                                   2,869           3,559                5,205             9,204
Interest expense                                                (21,311)         (1,213)             (30,280)           (2,637)
                                                            ------------    -------------------  ------------      ------------

Income (loss) before income tax provision (benefit)              81,456          90,494              398,176           (83,528)
Income tax provision (benefit)                                   (6,985)         12,501              148,591            (7,720)
                                                            ------------    -------------------  ------------      ------------
Net income (loss)                                         $      88,441   $      77,993        $     249,585    $      (75,808)
                                                            ============    ===================  ============      ============

Per share data
     Net income (loss) per share
Basic                                                     $        0.02   $        0.02        $        0.05    $        (0.02)
                                                            ------------    ------------         ------------      ------------
Diluted                                                   $        0.01   $        0.02        $        0.04    $        (0.02)
                                                            ------------    ------------         ------------      ------------



     Weighted average number of common shares
                            outstanding basic                 5,425,588       4,839,703            5,394,872         4,839,703
                                                            ------------    ------------         ------------      ------------
     
     Weighted average number of common shares
                          outstanding diluted                 6,465,558       4,883,704            6,595,893         4,839,703
                                                            ------------    ------------         ------------      ------------
     

</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements


                                       4

<PAGE>

<TABLE>
<CAPTION>

MicroFrame, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
---------------------------------------------------------------------------------------------------------------------------
(unaudited)

                                                                                              Six Months Ended
                                                                                                September 30,
                                                                                              -----------------
                                                                                      1998                        1997

<S>                                                                       <C>                          <C>                
Cash flows from operating activities
Net income (loss)                                                         $            249,585         $           (75,808)
Adjustments to reconcile net income to net cash
  provided by operating activities
      Depreciation and amortization                                                    314,579                     202,469
      Provision for bad debts                                                           (3,987)             
      Deferred tax provision                                                           127,902                      (7,720)
      (Increase) decrease in
           Accounts receivable                                                        (882,557)                     (4,321)
           Inventory                                                                  (350,723)                    (56,287)
           Prepaid expenses and other current assets                                  (259,025)                    (80,703)
           Security deposits                                                            (3,780)                     (2,037)
      Increase (decrease) in
           Accounts payable                                                            336,560                     228,413
           Accrued payroll and related liabilities                                      23,301                     (78,055)
           Deferred income                                                             147,204                     (51,242)
           Other current liabilities                                                    28,726                     (44,670)
                                                                              -----------------           -----------------
           Net cash (used in) provided by operating activities                        (272,215)                      30,039
                                                                              -----------------           -----------------

Cash flows from investing activities
      Capital expenditures                                                            (408,562)                    (72,769)
      Capitalized software                                                            (297,884)                    (89,907)
      Other assets                                                                    (732,600)
                                                                              -----------------           -----------------
           Net cash used in investing activities                                    (1,439,046)                   (162,676)
                                                                              -----------------           -----------------

Cash flows from financing activities
      Proceeds of short-term borrowings                                                600,000             
      Repayments of debt                                                               (30,009)                    (20,816)
      Issuance of common stock                                                         902,254                         624
                                                                              -----------------           -----------------
           Net cash provided by (used in) financing activities                       1,472,245                     (20,192)
                                                                              -----------------           -----------------

Net (decrease) increase in cash and cash equivalents                                  (239,016)                   (152,829)
Cash and cash equivalents - beginning of period                                        507,726                     539,214
                                                                              -----------------          ------------------
                                                                              
Cash and cash equivalents - end of period                                     $        268,710           $         386,385
                                                                              =================          ==================


</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements

                                       5

<PAGE>
                         MICROFRAME, INC. AND SUBSIDIARY
                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                   (Unaudited)



Note 1 - Condensed Consolidated Financial Statements:
         -------------------------------------------

The condensed consolidated balance sheets as of September 30, 1998 and March 31,
1998, the condensed consolidated  statements of operations for the three and six
month periods ended  September 30, 1998 and 1997 and the condensed  consolidated
statements of cash flows for the six month periods then ended have been prepared
by the Company  without  audit.  In the opinion of management,  all  adjustments
(which  include  only  normal  recurring  adjustments)  necessary  for the  fair
presentation of the Company's financial position, results of operations and cash
flows at September 30, 1998 and 1997 have been made.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  It is suggested that these condensed  financial
statements be read in  conjunction  with the audited  financial  statements  and
notes  thereto  included in the annual  report on Form 10-KSB for the year ended
March 31, 1998.


Note 2 - Inventory:
------------------

Inventory consists of the following:

                                            September 30, 1998   March 31, 1998
                                            ------------------   --------------

      Raw materials                           $1,072,918          $ 1,003,132
      Work in process                            815,263              525,918
      Finished goods                              72,893               81,301
                                             --------------       --------------
                                               1,961,074            1,610,351
          Less, allowance for obsolescence      (185,000)            (185,000)
                                             --------------       --------------
                Total                         $1,776,074          $ 1,425,351
                                             ==============       ==============


Note 3 - Earnings Per Share:
---------------------------

The Company has adopted the  provisions  of the Financial  Accounting  Standards
Board's  Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
Share"  ("SFAS 128") in the quarter ended  December 31, 1997.  All prior periods
presented have been restated to account for this change.

The  computation  of Basic  Earnings Per Share is based on the weighted  average
number of common shares  outstanding for the period.  Diluted Earnings Per Share
is based on the weighted  average  number of common shares  outstanding  for the
period  plus the  dilutive  effect of common  stock  equivalents,  comprised  of
outstanding stock options and warrants.

The following is a reconciliation  of the denominator used in the calculation of
basic and diluted earnings per share:


                                       6
<PAGE>

<TABLE>
<CAPTION>

                                            Three Months      Three Months     Six Months        Six Months
                                            Ended             Ended            Ended             Ended
                                            9/30/98           9/30/97          9/30/98           9/30/97
                                            ------------      -----------      ----------        ----------

<S>                                      <C>               <C>               <C>              <C>      
Weighted Average # of Shares Outstanding    5,425,588         4,839,703         5,394,872        4,839,703
Incremental Shares for Common Equivalents   1,039,970            44,001         1,201,021                       
                                            ---------         ---------         ---------        ---------
Diluted Shares Outstanding                  6,465,558         4,883,704         6,595,893        4,839,703
</TABLE>

Note 4 - Comprehensive Income;
-----------------------------

The Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
130, "Reporting Comprehensive Income".

The  following  table  reflects  the  reconciliation  between net income per the
financial statements and comprehensive income:
<TABLE>
<CAPTION>
                                                    Six months                Six Months
                                                    ended 9/30/98             ended 9/30/97
                                                    -------------             -------------
<S>                                                 <C>                      <C>       
Net income (loss)                                     $249,585                 $ (75,808)
Effect of foreign currency translation                  10,241                        - 
                                                      --------                 ---------
Comprehensive income                                  $239,344                 $ (75,808)
                                                      ========                 =========

</TABLE>

Note 5 - Recent Pronouncements:
------------------------------


In June 1997, the Financial  Accounting  Standards Board (FASB) issued SFAS 131,
"Disclosure  about  Segments of an  Enterprise  and Related  Information"  which
becomes effective for financial  statements for periods beginning after December
31, 1997. This Statement  establishes standards for the way that public business
enterprises  report  information  about operating  segments in annual  financial
reports and requires that those  enterprises  report selected  information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and major  customers.  The adoption of this  standard is not
expected to have a material impact on the Company's financial statements.

In February 1998,  the FASB issued SFAS No. 132,  "Employers'  Disclosure  about
Pensions  and  Other  Postretirement   Benefits."  Among  other  provisions,  it
standardizes   certain   disclosure   requirements   for   pension   and   other
postretirement  benefits,  requires  additional  information  on  changes in the
benefit obligations and fair values of plan assets, and eliminates certain other
disclosures. The standard is effective for fiscal years beginning after December
15, 1997.  Since the standard  applies only to the  presentation  of pension and
other postretirement benefit information and MicroFrame does not currently offer
such plans,  the statement does not have any impact on  MicroFrame's  results of
operations, financial position or cash flows.

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed  or  Obtained  for  Internal  Use." Among  other  provisions,  the SOP
requires that  entities  capitalize  certain  internal-use  software  costs once
certain  criteria are met. The SOP is effective  for  financial  statements  for
fiscal  years  beginning  after  December 15, 1998,  through  early  adoption is
encouraged.  Management  is  currently  assessing  the  impact  on  MicroFrame's
consolidated financial statements.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  Among other provisions,  it requires that
entities  recognize  all  derivatives  as either  assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
Gains and losses resulting from changes in the fair values of those 


                                       7
<PAGE>

derivatives  would be accounted for depending on the use of the  derivative  and
whether it qualifies for hedge accounting. This standard is effective for fiscal
years beginning after June 15, 1999,  though earlier  adoption is encouraged and
retroactive  application is prohibited.  Management does not expect the adoption
of  this  standard  to  have  a  material  impact  on  MicroFrame's  results  of
operations, financial position or cash flows.

Item 2.  Management's Discussion and Analysis
         ------------------------------------

         A number of  statements  contained  in this report are  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that involve  risks and  uncertainties  that could cause actual  results to
differ materially from those expressed or implied in the applicable  statements.
These  risks and  uncertainties  include,  but are not  limited  to,  the recent
introduction of, and the costs  associated with, a new product line;  dependence
on the acceptance of this new family of products; risks related to technological
factors;  potential manufacturing  difficulties;  dependence on third parties; a
limited customer base; and liability risks.


Results of Operations
----------------------
Three Months ended  September  30, 1998 verses Three Months ended  September 30,
-------------------------------------------------------------------------------
1997
----

         Revenues for the quarter ended  September  30, 1998 were  $3,213,930 as
compared with revenues of $2,281,727  for the quarter ended  September 30, 1997,
or an increase of approximately 41%. The increase was primarily due to increased
shipments of the  Company's  Sentinel  2000 product line as well as software and
development  sales in the  Business  Oriented  Network  Management  Market.  The
Company  continued  to see  interest  in  other  members  of the  family  of SNS
products,  including the Manager 2000 and Segasys 2000.  The Company's  revenues
continued  to be  positively  impacted  as a  result  of  shipments  to both the
European  and US  markets,  including  shipments  under its  contracts  with PTT
Holland, MCI, AT&T and Lucent.

         The Company's  cost of goods sold  increased  from  $1,046,052  for the
quarter ended  September 30, 1997 to $1,056,431 for the quarter ended  September
30, 1998.  The Company's  cost of goods sold as a percentage of sales  decreased
from 46% for the  previous  comparable  fiscal  period  to 33% for  this  fiscal
period.  This is due to the fact that the Company continues to focus on lowering
the costs  related to the  manufacture  of products  and has seen an increase in
software related sales that generates a higher margin.

         Research  and  development   expenses,   net  of  capitalized  software
development,  increased to $640,140 from $180,796 in the quarter ended September
30, 1997 as a result of the Company's hiring of additional engineering staff and
technology agreements with Solcom Systems, Ltd. ("Solcom").  As a result of this
increase in personnel and the  outsourcing of certain  research and  development
activities  to Solcom,  research and  development  expenses as a  percentage  of
revenues increased from 8% to 20%. Selling,  general and administrative expenses
increased  approximately  47% from  $966,731  for the  prior  year's  comparable
quarter to  $1,417,461  for the quarter ended  September  30, 1998.  The primary
reason for this increase is increases in the number of direct sales  people,  as
the Company  embarks on an  aggressive  growth  plan.  The  Company  hired three
additional  salespeople  since the  corresponding  quarter in 1997.  The Company
anticipates  continued  increases  in  revenues  as a result of these  increased
selling expenses.

         The Company's  income from operations  increased 13% to $99,898 for the
three months ended  September 30, 1998 compared to $88,148 for the same period a
year ago. Due primarily to increased  sales, the net income for the period ended
September 30, 1998 increased approximately 13% to $88,441 compared to net income
of $77,993 for the quarter ended September 30, 1997.

                                       8
<PAGE>

First Six Months of Fiscal 1999 Versus First Six Months Fiscal 1998
-------------------------------------------------------------------

         Revenues for the six months ended September 30, 1998 were $6,177,903 as
compared with revenues of $4,018,273 for the  comparable  period of the previous
fiscal year, or an increase of approximately 54%. This improvement is due to the
success of the Company's Sentinel 2000 family of products,  continued  shipments
into the European market, sales of Segasys 2000 and increased software sales and
continued  shipments into the expanding  domestic  market for Business  Oriented
Network  Management.  The Company's  revenues for the six months ended September
30, 1998  continued  to be  positively  impacted as a result of shipments to the
European market,  including shipments under its contract with PTT Holland and in
the US market  shipments to MCI,  AT&T and Lucent.  The Company is continuing to
aggressively pursue customers in the global market place.

         The Company's  cost of goods sold  increased to $2,064,436  for the six
months ended  September 30, 1998 compared to $1,787,098 for the six months ended
September 30, 1997 as a result of increased shipment levels.  Cost of goods sold
as a percentage of sales decreased from 44% for the previous  comparable  fiscal
period  to 33% for  this  fiscal  period.  This is  primarily  a  result  of the
increased  sales  volume of the  Company's  product  lines and the fact that the
Company  continues to focus on lowering the costs related to the  manufacture of
products and has increased software related sales that generate a higher margin.
The Company expects continued manufacturing  efficiencies as the products mature
and by continuing to improve purchasing and materials management systems.

         Research  and  development   expenses,   net  of  capitalized  software
development,  increased from 467,348 in the six months ended  September 30, 1997
to  $1,053,107  during the six month ended  September  30, 1998,  an increase of
125%, primarily as a result of the increase in development and engineering staff
under the Company's growth plan and payments to Solcom under certain  technology
agreements.  Research  and  development  expenses  as a  percentage  of revenues
increased  to 17%  compared to  approximately  12% in the prior  year.  Selling,
general and administrative  expenses increased 42% from $1,853,922 for the prior
year's comparable fiscal period to $2,637,109 for the six months ended September
30, 1998.  This  increase  was  primarily  the result of added sales  personnel.
However  as a  percentage  of  revenues,  selling,  general  and  administrative
expenses  decreased  from 46% for the  previous  period  to 43% for the  current
fiscal period.

         Due to the factors  outlined  above,  the Company had income before net
interest  expense and taxes of $423,251 for the six months ended  September  30,
1998  compared to a loss of $90,095  during the six months ended  September  30,
1997. The Company expects continued positive effects as a result of the increase
in the sales force and a resulting  increase in sales volumes and  manufacturing
efficiencies  gained thereby as its products continue to mature.  The net income
for the  period was  $249,585  compared  to a net loss of  $75,808  for the same
period in 1997.


Financial Condition and Capital Resources
-----------------------------------------

         During the first six months of fiscal year 1999,  the Company  recorded
net income of approximately $250,000.  Included in this net income were non-cash
charges of approximately $315,000 for depreciation and amortization and $128,000
of deferred taxes.

         The Company's  operations used $272,000 of cash,  primarily as a result
of an increase in accounts  receivable of $883,000 for sales that occurred later
in the quarter and an increase in  inventory  buildup of $351,000 as the Company
prepares to ship its backlog going into the third quarter.  These increases were
offset by increases in cash due to higher accounts payable,  accrued payroll and
benefit liabilities and deferred income.

         The Company utilized  approximately  $1.4 million of cash for investing
activities  during  the six month  period.  The bulk of this use of cash was for
increased  capital  spending on plant and  equipment  and  capitalized  software
projects 

                                       9

<PAGE>

as well as for  merger  related  costs  associated  with the  Company's  planned
acquisition of Solcom, which is expected to close early in 1999.

         Financing  activities  provided  approximately  $1.5  million  of  cash
primarily  from stock  option  and  warrant  exercises  ($900,000)  and  amounts
borrowed under the Company's line of credit  ($600,000) to finance the Company's
working  capital needs and its growth plans.  The Company also paid down $30,000
of debt in the six months ended September 30, 1998.

         In October  1998,  the  Company  successfully  negotiated  with  United
National to provide the Company with a $2,000,000  line of credit and a $500,000
term loan,  collateralized  by accounts  receivable  of the Company,  to finance
future working capital requirements.

         Based on its current cash and working capital position,  as well as its
available  line of credit,  the Company  believes  that it will have  sufficient
capital to meet its operational needs over the next twelve months.

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
SFAS 131,  "Disclosure about Segments of an Enterprise and Related  Information"
which becomes  effective for financial  statements for periods  beginning  after
December 31, 1997. This Statement  establishes standards for the way that public
business  enterprises  report  information  about  operating  segments in annual
financial   reports  and  requires  that  those   enterprises   report  selected
information  about  operating  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services,  geographic  areas, and major customers.  The adoption of
this  standard  is not  expected  to have a  material  impact  on the  Company's
financial statements.

         In February 1998, the FASB issued SFAS No. 132, "Employers'  Disclosure
about Pensions and Other  Postretirement  Benefits." Among other provisions,  it
standardizes   certain   disclosure   requirements   for   pension   and   other
postretirement  benefits,  requires  additional  information  on  changes in the
benefit obligations and fair values of plan assets, and eliminates certain other
disclosures. The standard is effective for fiscal years beginning after December
15, 1997.  Since the standard  applies only to the  presentation  of pension and
other  postretirement  benefit  information,  it will not have any impact on the
Company's results of operations, financial position or cash flows.

         In March 1998, the American  Institute of Certified Public  Accountants
issued  Statement of Position (SOP) 98-1,  "Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use." Among other  provisions,  the
SOP requires that entities capitalize certain  internal-use  software costs once
certain  criteria are met. The SOP is effective  for  financial  statements  for
fiscal  years  beginning  after  December 15,  1998,  though  early  adoption is
encouraged.  Management  is  currently  assessing  the  impact  on  MicroFrame's
consolidated financial statements.

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
Instruments and Hedging  Activities."  Among other provisions,  it requires that
entities  recognize  all  derivatives  as either  assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
Gains and losses resulting from changes in the fair values of those  derivatives
would be accounted  for  depending on the use of the  derivative  and whether it
qualifies  for hedge  accounting.  This  standard is effective  for fiscal years
beginning  after June 15,  1999,  though  earlier  adoption  is  encouraged  and
retroactive  application is prohibited.  Management does not expect the adoption
of  this  standard  to  have  a  material  impact  on  MicroFrame's  results  of
operations, financial position or cash flows.


Year 2000 Disclosures
---------------------

Background.  Some computers,  software,  and other equipment include programming
code in which calendar year data is abbreviated to only two digits.  As a result
of this design decision,  some of these systems could fail to operate or fail to

                                       10
<PAGE>

produce correct  results if "00" is interpreted to mean 1900,  rather than 2000.
These problems are widely  expected to increase in frequency and severity as the
year 2000  approaches,  and are commonly  referred to as the "Millennium Bug" or
"Year 2000 Problem."

Assessment.  The Company is in the process of modifying software components that
it uses so that such software will properly  recognize dates beyond December 31,
1999 ("Year 2000  Compliance").  The Company  expects to complete  the  internal
review  of  its  Year  2000  Compliance  status  shortly.   The  cost  for  such
modifications and replacements is not currently expected to be material.  If the
Company is not successful in  implementing  the necessary Year 2000 changes,  it
expects to then develop  contingency  plans to address any matters not corrected
in a timely manner.  The Company has initiated  formal  communications  with its
significant  vendors and certain of its  customers to determine  the extent that
Year 2000  Compliance  issues of such  parties  may affect the  Company.  To the
extent that  responses to such  communications  with the  Company's  vendors are
unsatisfactory,  the Company  expects to take steps to ensure that its  vendors'
products  have  demonstrated  Year 2000  Compliance.  The Company  has  recently
compiled  information  concerning  the Year 2000  Compliance  of  certain of its
significant customers' systems and expects to contact other customers. There can
be no guarantee that the systems of the Company's  vendors and customers will be
timely  converted or that such  conversion will be compatible with the Company's
systems without a material adverse effect on the Company's  business,  financial
condition or results of operation.


                                       11

<PAGE>

PART II.  Other Information




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

                  The annual meeting of  shareholders of the Company was held on
                  September 15, 1998. At such meeting the shareholders  approved
                  the following matters:

                  Proposal 1. Election of the following individuals as directors
                  of the Company for a term of one year,  that  constitutes  the
                  entire Board of Directors of the Company:

                  Stephen M. Deixler,  Stephen B. Gray,  Michael  Radomsky,  and
                  Alexander Stark 

                  Proposal 2. Ratification of the Board of Directors'  selection
                  of  PricewaterhouseCoopers  LLP as the  Company's  independent
                  accountants for the fiscal year ending March 31, 1999

                  Set forth  below  are the votes  for,  withheld,  against  and
                  abstaining from each of the proposals listed above:


<TABLE>
<CAPTION>

            Proposal                    For                 Withheld         Against         Abstain
            --------                    ---                 --------         -------         -------

<S>                                 <C>                  <C>               <C>             <C>
1.       Stephen M. Deixler            3,453,894            10,960
         Stephen B. Gray               3,459,894             4,500
         Michael Radomsky              3,460,894             3,960
         Alexander Stark               3,453,894            10,960

2.       PricewaterhouseCoopers LLP    3,421,479                              40,050            3,325
</TABLE>

Item 5.           Other Information
                  -----------------

                  On September  15,  1997,  at the Board of  Directors'  meeting
                  following the Annual  Meeting of  Shareholders,  the Company's
                  current   officers  were   re-elected  for  a  one  year  term
                  commencing  as of such date.  In addition,  Stephen M. Deixler
                  and  Alexander   Stark  were  re-elected  as  members  of  the
                  Company's  Strategic  Steering  and Mergers  and  Acquisitions
                  Committee,    Compensation/Stock   Option   Committee,   Audit
                  Committee  and  Nominating  Committee  for  a  one  year  term
                  commencing as of such date.


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


                  (a)      Exhibits:

                           27.      Financial Data Schedule


                  (b)      Reports on Form 8-K:

              No Reports on Form 8-K were filed during the quarter


                                       12
<PAGE>


                                   SIGNATURES
                                   -----------

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:  November 13, 1998



                                           MICROFRAME, INC.



                                           /s/ Stephen B. Gray
                                           -------------------------------------
                                           Stephen B. Gray, President, Chief 
                                           Executive Officer and Chief Operating
                                           Officer


                                            /s/ John F. McTigue
                                           -------------------------------------
                                            John F. McTigue, Chief Financial
                                            Officer  and Treasurer (Principal 
                                            Financial Officer)


                                       14