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 December 31, 1997

                                       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 4,839,303 shares of Common Stock outstanding as of February 6, 1998.

Transitional Small Business Disclosure Format:

Yes [_]             No [X]



<PAGE>




                         MICROFRAME, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                     FOR THE QUARTER ENDED DECEMBER 31, 1997



PART I.   FINANCIAL INFORMATION                                             Page
-------   ---------------------                                             ----

Item 1.   Condensed Consolidated Financial Information                         2

          Condensed Consolidated Balance Sheets as of December 31,
               1997 and March 31, 1997 (Unaudited)                             3

          Condensed Consolidated Statements of Operations for the
               Three and Nine Months Ended December 31, 1997 
               and 1996 (Unaudited)                                            4

          Condensed Consolidated Statements of Cash Flows for the Nine
                   Months Ended December 31, 1997 and 1996 (Unaudited)         5

          Notes to Condensed Consolidated Financial Statements (Unaudited)   6-7

Item 2.   Management's Discussion and Analysis                              8-10

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                    11


SIGNATURES                                                                    12






<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, 1997.







                                        2

<PAGE>

MicroFrame, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                            December 31,      March 31,
                                                                                 1997           1997
                                                                             -----------    -----------
<S>                                                                          <C>            <C>        
                                     ASSETS
Current assets
   Cash and cash equivalents                                                 $   256,543    $   539,214
   Accounts receivable, less allowance for doubtful
      accounts of $55,626 and $100,000                                         2,853,633      1,898,810
   Inventory, net                                                              1,267,372      1,030,343
   Deferred tax asset                                                            499,427        314,242
   Prepaid expenses and other current assets                                     145,492        120,990
                                                                             -----------    -----------
      Total current assets                                                     5,022,467      3,903,599

   Property and equipment at cost, net of Accumulated Depreciation
      and Amortization of $902,222 and $738,635                                  305,753        343,123
   Capitalized software, less accumulated amortization
      of $955,233 and $812,257                                                   352,509        315,568
   Goodwill, less accumulated amortization of $24,293 and $16,230                 77,317         85,380
   Security deposits                                                              37,139         34,703
                                                                             -----------    -----------
      Total assets                                                           $ 5,795,185    $ 4,682,373
                                                                             ===========    ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Currnt Portion of Long-trem Debt                                          $    21,850    $    42,266
   Accounts payable                                                              981,954        361,537
   Accrued payroll and related liabilities                                       114,196        280,512
   Deferred income                                                               515,482        268,518
   Other current liabilities                                                     383,092        255,346
                                                                             -----------    -----------
      Total current liabilities                                                2,016,574      1,208,179
                                                                             -----------    -----------


Deferred tax liabilities                                                         205,852        173,077
Long-term debt                                                                    19,205         30,398

Committments and contingencies
Stockholders' equity
   Common stock - par value $.001 per share; authorized 50,000,000 shares,
      issued 4,839,703 shares and outstanding 4,839,303 shares at
      December 31, 1997; issued 4,839,203 shares and
      outstanding 4,838,803 shares at March 31, 1997                               4,839          4,839
   Preferred stock - par value $10 per share;
      authorized 200,000 shares, none issued
   Additional paid-in capital                                                  6,213,452      6,212,828
   Accumulated deficit                                                        (2,660,737)    (2,942,948)
                                                                             -----------    -----------
                                                                               3,557,554      3,274,719
   Less - Treasury stock, 400 shares, at cost                                     (4,000)        (4,000)
                                                                             -----------    -----------
      Total stockholders' equity                                               3,553,554      3,270,719
                                                                             -----------    -----------

      Total liabilities and stockholders' equity                             $ 5,795,185    $ 4,682,373
                                                                             ===========    ===========
</TABLE>

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


                                       3
<PAGE>

MicroFrame, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                             Three Months Ended            Nine Months Ended
                                                                December 31,                  December 31,
                                                             1997           1996           1997           1996
                                                         -----------    -----------    -----------    -----------
<S>                                                      <C>            <C>            <C>            <C>        
Gross Sales                                                3,029,164                     7,038,915
Less: Allowance for Doubtful Accounts                         22,373                        30,895
                                                         -----------    -----------    -----------    -----------
Net sales                                                $ 3,051,537    $ 1,826,698    $ 7,069,810    $ 5,264,210

Cost of sales                                              1,366,641        762,434      3,153,739      2,016,324
                                                         -----------    -----------    -----------    -----------

Gross Margin                                               1,684,896      1,064,264      3,916,071      3,247,886

   Research and development expenses                         254,796        236,701        722,144        664,711
   Selling, general and administrative expenses            1,213,739        781,852      3,075,161      2,464,871
                                                         -----------    -----------    -----------    -----------

Income from operations                                       216,361         45,711        118,766        118,304

Interest income                                                5,448          6,520         14,652         27,620
Interest expense                                                (980)        (1,881)        (3,617)       (22,749)
                                                         -----------    -----------    -----------    -----------

Income before income tax provision(benefit)                  220,829         50,350        129,801        123,175
Income tax provision (benefit)                              (144,690)                     (152,410)
                                                         -----------    -----------    -----------    -----------
Net income                                               $   365,519    $    50,350    $   282,211    $   123,175
                                                         ===========    ===========    ===========    ===========

Per share data

   Basic                                                 $      0.08    $      0.01    $      0.06    $      0.03
                                                         ===========    ===========    ===========    ===========
   Diluted                                               $      0.07    $      0.01    $      0.06    $      0.02
                                                         ===========    ===========    ===========    ===========

   Weighted average number of common shares outstandin     4,839,303      4,820,642      4,839,110      4,697,257
                                                         -----------    -----------    -----------    -----------
   Weighted average number of common shares outstandin     5,046,671      5,159,399      5,117,278      4,985,909
                                                         -----------    -----------    -----------    -----------
</TABLE>


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

                                       4


<PAGE>
MicroFrame, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(unaudited)

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                    December 31,
                                                                1997           1996
                                                            -----------    -----------
<S>                                                         <C>            <C>        
Cash flows from operating activities
Net income (loss)                                           $   282,211    $   123,175
Adjustments to reconcile net income to net cash
  provided by operating activities
   Depreciation and amortization                                314,626        272,273
   Provision for bad debts                                      (44,374)        49,751
   Provision for inventory obsolescence                               0         35,000
   Deferred tax provision                                      (152,410)
   (Increase) decrease in
      Accounts receivable                                      (910,449)       (41,410)
      Inventory                                                (237,029)        50,733
      Prepaid expenses and other current assets                 (24,502)       (36,826)
      Security deposits                                          (2,436)           873
   Increase (decrease) in
      Accounts payable                                          620,417       (203,223)
      Accrued payroll and related liabilities                  (166,316)       (79,565)
      Deferred income                                           246,964         (2,976)
      Other current liabilities                                 127,746        (87,683)
                                                            -----------    -----------
      Net cash provided by operating activities                  54,448         80,122
                                                            -----------    -----------

Cash flows from investing activities
   Capital expenditures                                        (126,217)      (104,560)
   Capitalized software                                        (179,917)      (167,558)
                                                            -----------    -----------
      Net cash used in investing activities                    (306,134)      (272,118)
                                                            -----------    -----------

Cash flows from financing activities
   Repayments of debt                                           (31,609)      (528,973)
   Issuance of common stock                                         624      1,329,923
                                                            -----------    -----------
      Net cash provided by (used in) financing activities       (30,985)       800,950
                                                            -----------    -----------

Net increase (decrease) in cash and cash equivalents           (282,671)       608,954
Cash and cash equivalents - beginning of period                 539,214         48,302
                                                            -----------    -----------
Cash and cash equivalents - end of period                   $   256,543    $   657,256
                                                            ===========    ===========
</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
                                DECEMBER 31, 1997
                                   (Unaudited)



Note 1 - Condensed Consolidated Financial Statements:
-----------------------------------------------------
         
The condensed  consolidated balance sheets as of December 31, 1997 and March 31,
1997, the condensed consolidated statements of operations for the three and nine
month  periods ended  December 31, 1997 and 1996 and the condensed  consolidated
statements  of cash  flows for the nine  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 December 31, 1997 and 1996 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, 1997.


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

Inventory consists of the following:

                                     December 31, 1997     March 31, 1997
                                        -----------         -----------
                                                          
Raw materials                           $   733,207         $   825,583
Work in process                             734,165             374,802
Finished goods                               29,958       
                                        -----------         -----------
                                          1,467,372           1,230,343
Less, allowance for obsolescence           (200,000)           (200,000)
                                        -----------         -----------
          Total                         $ 1,267,372         $ 1,030,343
                                        ===========         ===========
                                                     

Note 3 - Related Party Transactions:
------------------------------------

In August 1997,  the Company and one of its  officers  entered into an agreement
whereby a $20,000  advance  received by the officer was converted  into a demand
note payable bearing  interest at the prime rate plus 1%. The note may be repaid
from time to time  however  the entire  balance is due upon the  earlier of; the
officer's  cessation of employment or March 31, 1999. At December 31, 1997, this
amount is included in Prepaid expenses and other current assets.







                                        6

<PAGE>


                         MICROFRAME, INC. AND SUBSIDIARY
                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                   (Unaudited)


Note 4 - 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:

<TABLE>
<CAPTION>
                                            Three Months  Three Months Nine Months   Nine Months
                                            Ended         Ended        Ended         Ended
                                            12/31/97      12/31/96     12/31/97      12/31/96
                                           ----------    ----------   ----------    ----------
<S>                                         <C>           <C>          <C>           <C>      
Weighted Average # of Shares Outstanding    4,839,303     4,820,642    4,839,110     4,697,257
Incremental Shares for Common Equivalents     207,368       338,757      278,168       288,652
                                           ----------    ----------   ----------    ----------
Diluted Shares Outstanding                  5,046,671     5,159,399    5,117,278     4,985,909
</TABLE>


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

The Company is  required to adopt the  provisions  of the  Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 131,
"Segment  Reporting" ("SFAS 131"),  which is effective for financial  statements
for  annual  periods  ending  after  December  15,  1997.  SFAS 131  establishes
standards for the disclosure  requirements  relative to operating segments.  The
Company  is  evaluating  the  disclosure  requirements  of the  recently  issued
statement.





                                        7

<PAGE>



ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------------------------------------------------------------------

           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 and the costs associated with, a new family of products; 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
---------------------

           Revenues for the quarter ended  December 31, 1997 were  $3,051,537 as
compared with revenues of $1,826,698 for the same quarter of the previous fiscal
year,  or an increase of  approximately  67%. The increase was  primarily due to
increased  international  shipments of the Company's Sentinel 2000 product.  The
Company  continued  to see  interest  in the other  member of the  family of SNS
products, the Manager 2000.

           The Company's revenues were positively impacted by increased Domestic
sales and as a result of increased  shipments to the European market,  including
shipments  under  its  contract  with PTT  Holland.  Shipments  to  Europe  were
approximately  $800,000 for the three months ended December 31, 1997 compared to
$434,000 for the quarter ended  December 31, 1996.  The Company is  aggressively
pursuing customers in this market place.

           The  Company's  cost of goods sold  increased  from  $762,434 for the
quarter ended December 31, 1996 to $1,366,641 for the quarter ended December 31,
1997 as a result of increased  business.  Cost of goods sold as a percentage  of
sales  increased from 41% for the previous  comparable  fiscal period to 44% for
this fiscal  period,  due to the fact that the company is still  experiencing  a
shift from its mature  product lines to the newer  Sentinel  product  line.  The
Company  continues to focus on lowering the costs related to the newer  products
as they begin to mature and will eventually see the benefits from  manufacturing
efficiencies.

           Research  and  development  expenses,  net  of  capitalized  software
development,  remained  relatively constant with a slight increase from $236,701
in the quarter  ended  December  31,  1996 to  $254,796  in the  current  fiscal
quarter. Research and development expenses as a percentage of revenues decreased
from 12% to 8%,  primarily  due to  increased  revenues  in the  current  fiscal
period. Selling, general and administrative expenses increased approximately 55%
from $781,852 for the prior year's  comparable  fiscal period to $1,213,739  for
the fiscal  period ended  December 31, 1997,  however,  as a percentage of sales
decreased to  approximately  39% compared to 42% in the previous  quarter.  This
increase  represents lower general and administrative  costs offset by increases
in the Company's selling expenses  including an increase in the number of direct
sales people,  as we embark on an aggressive  growth plan. The Company has begun
to see increased revenues as a result of these increased selling expenses.

           The Company's  income from operations  increased 338% to $220,829 for
the three months ended December 31, 1997 compared to $50,350 for the same period
a year ago.  Due to increased  sales,  the  reduction  in interest  costs to the
Company  and the  benefit  for  income tax of  $144,690,  the net income for the
period ended December 31, 1997 increased 626% to $365,519 compared to net income
of $50,350  for the  quarter  ended  December  31,  1996.  At March 31, 1997 the
Company had provided a partial valuation allowance against its existing deferred
tax assets. At December 31, 1997 the Company has reversed approximately $204,000
of valuation  allowance relating to its net operating losses and it has recorded
a provision for other  operational  temporary  difference  items. The expiration
dates for its net operating losses range from the years 2001 through 2011.


                                        8

<PAGE>



First Nine Months of Fiscal 1998 Versus First Nine Months Fiscal 1997
---------------------------------------------------------------------

           Revenues for the nine months ended December 31, 1997 were  $7,069,810
as  compared  with  revenues  of  $5,264,210  for the  comparable  period of the
previous fiscal year, or an increase of  approximately  34%. This improvement is
due to the success of the Company's  new flagship  product,  the Sentinel  2000,
increased  shipments  into  the  European  market,  and the  expanding  domestic
customer base.

           The  Company's  revenues for the nine months ended  December 31, 1997
were  positively  impacted  by  increased  Domestic  sales  and as a  result  of
increased  shipments  to the  European  market,  including  shipments  under its
contract with PTT Holland. Shipments to Europe were approximately $1,800,000 for
the nine months ended December 31, 1997 compared to $802,000 for the nine months
ended December 31, 1996. The Company is aggressively  pursuing customers in this
market place.

           The  Company's  cost of goods sold  increased to  $3,153,739  for the
quarter ended  December 31, 1997  compared to  $2,016,324  for the quarter ended
December 31, 1996 as a result of increased  shipment levels.  Cost of goods sold
as a percentage of sales increased from 38% for the previous  comparable  fiscal
period to 44% for this  fiscal  period,  primarily  due to the  increased  sales
volume of the Company's newer product line. The Company expects to see increased
benefits 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 $664,711 in the nine months ended December 31, 1996
to $722,144 in the  current  fiscal  period,  an  increase of 8%.  Research  and
development  expenses  as  a  percentage  of  revenues  decrease  slightly  from
approximately 12% to 10%. Selling, general and administrative expenses increased
24% from $2,464,871 for the prior year's  comparable fiscal period to $3,075,161
for the nine months ended  December 31, 1996.  This  increase was  primarily the
result of added sales personnel in the second  quarter.  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.

           The Company's had income before taxes of $129,801 for the nine months
ended  December 31, 1997  compared to income of $123,175  during the nine months
ended December 31, 1996,  primarily due to increased  sales. The Company expects
that  benefits  will  continue to arise as a result of the increase in the sales
force as well as increased volumes and manufacturing efficiencies gained thereby
as the products  continue to mature.  The net income for the period was $282,211
compared  to net income of $123,175  for the same  period in 1996.  At March 31,
1997 the Company had provided a partial valuation allowance against its existing
deferred tax assets. At December 31, 1997 the Company has reversed approximately
$220,000 of valuation  allowance relating to its net operating losses and it has
recorded a provision  for other  operational  temporary  difference  items.  The
expiration  dates for its net operating losses range from the years 2001 through
2011.


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

           During  the first  nine  months  of fiscal  year  1998,  the  Company
recorded  net income of  approximately  $282,000.  Included  in this income were
non-cash charges of approximately $314,000 for depreciation and amortization. As
a result,  during  the first nine  months of fiscal  year  1998,  the  Company's
financial condition remained relatively stable.

             The Company's  operations provided  approximately  $54,500 of cash,
which  included a use of cash of  approximately  $55,000 to satisfy its New York
State tax settlement.  The Company also utilized  approximately $300,000 of cash
for capital and software-related expenditures and utilized approximately $30,000
of cash to pay down its long-term debt.

           On August 30,  1997,  the  Company's  line of credit  agreement  with
United National Bank of Bridgewater, New Jersey


                                        9

<PAGE>



expired.  In  November  1997 the  Company  successfully  negotiated  with United
National to provide the Company with a $1,000,000 line of credit, collateralized
by  accounts  receivable  of the  Company,  to finance  future  working  capital
requirements.
As of February 6, 1998, the Company has not utilized this line.

             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 fiscal 1998,  the Company is required to adopt the  provisions  of
the  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards  No.  131,  "Segment  Reporting"  ("SFAS  131"),  which is
effective for financial  statements for annual periods ending after December 15,
1997. SFAS 131 establishes standards for the disclosure requirements relative to
operating segments. The Company is evaluating the disclosure requirements of the
recently issued statement.






                                       10

<PAGE>



                           PART II. Other Information





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.










                                       11

<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.

Dated:  February 12, 1997



                                     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)













                                       12