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 June 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 August 4, 1998.

Transitional Small Business Disclosure Format:

Yes                          No   X
    ---                          ---

<PAGE>

                         MICROFRAME, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                       FOR THE QUARTER ENDED JUNE 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 June 30, 1998
                        and March 31, 1998 (Unaudited)                                           3

                  Condensed Consolidated Statements of Operations for the three
                             months ended June 30, 1998 and June 30, 1997 (Unaudited)            4

                  Condensed Consolidated Statements of Cash Flows for the three
                             months ended June 30, 1998 and June 30, 1997 (Unaudited)            5

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

Item 2.           Management's Discussion and Analysis                                           8-9

PART II.          OTHER INFORMATION

Item 6.           Exhibits and reports on Form 8-K                                               10


SIGNATURES                                                                                       11
</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>

MicroFrame, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              June 30,                    March 31,
                                                                                1998                        1998
                                  ASSETS
<S>                                                                      <C>                      <C>
Current assets
     Cash and cash equivalents                                           $         447,186          $          507,726
     Accounts receivable, less allowance for doubtful                            
         accounts of $126,000 and $126,000, respectively                         3,578,280                   2,667,319
     Inventory, net                                                              1,887,644                   1,425,351
     Deferred tax asset                                                            371,822                     366,137
     Prepaid expenses and other current assets                                     186,172                     153,568
                                                                           ----------------            ----------------
          Total current assets                                                   6,471,104                   5,120,101
        
     Property and equipment, less accumulated depreciation                         
          of $568,687 and $971,903                                                 458,685                     421,701
     Capitalized software, less accumulated amortization                           
          of $1,106,354 and $1,054,827                                             433,682                     396,351
     Deferred tax assets, net                                                        2,745                     129,689
     Goodwill, less accumulated amortization of $28,605 and $26,130                 73,005                      75,480
     Security deposits                                                              39,348                      35,716
     Other assets                                                                  293,135
                                                                           ----------------            ----------------
          Total assets                                                   $       7,771,704          $        6,179,038
                                                                           ================            ================
         

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Bank borrowings                                                     $         600,000          $          300,000
     Current portion of long-term debt                                              18,817                      30,009
     Accounts payable                                                            1,066,763                     910,842
     Accrued payroll and related liabilities                                       225,541                     348,397
     Deferred income                                                               268,751                     181,573
     Other current liabilities                                                     452,673                     405,263
                                                                                                       ----------------
                                                                           ----------------
          Total current liabilities                                              2,632,545                   2,176,084
                                                                           ----------------            ----------------
         


Other liabilities                                                                   69,529                           0

Committments and contingencies

Stockholders' equity
     Common stock - par value $.001 per share; authorized 50,000,000 shares,
         issued 5,403,480 shares and outstanding 5,403,080 shares at
         June 30, 1998; issued 4,849,531 shares and outstanding 4,849,131            
         and subscribed 50,000 shares at March 31, 1998                              5,403                       4,899
     Preferred stock- par value $10 per share;        
         authorized 200,000 shares, none issued                                  
     Additional paid-in capital                                                  7,143,363                   6,345,613
     Stock subscription receivable                                                       0                    (104,000)
     Accumulated deficit                                                        (2,070,494)                 (2,231,638)
     Cumulative translation adjustment                                              (4,642)                     (7,920)
                                                                           ----------------            ----------------
                                                                                 5,073,630                   4,006,954
     
 Less - Treasury stock, 400 shares, at cost                                         (4,000)                     (4,000)
                                                                           ----------------            ----------------
     Total stockholders' equity                                                  5,069,630                   4,002,954
                                                                           ----------------            ----------------
         
     Total liabilities and stockholders' equity                          $       7,771,704          $        6,179,038
                                                                           ================            ================


</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
                                                                             June 30,
                                                                             --------
                                                                     1998                1997



<S>                                                           <C>                 <C>             
Net sales                                                     $      2,963,973    $      1,736,546

Cost of sales                                                        1,008,005             741,046
                                                                ---------------      -------------

Gross margin                                                         1,955,968             995,500

     Research and development expenses                                 412,967             286,552
     Selling, general and administrative expenses                    1,219,648             887,191
                                                                ---------------      -------------

Income (loss) from operations                                          323,353            (178,243)

Interest income                                                          2,336               5,645
Interest expense                                                        (8,969)             (1,424)
                                                                ---------------      -------------

Income (loss) before income tax provision(benefit)                     316,720            (174,022)
Income tax provision(benefit)                                          155,576             (20,221)
                                                                ---------------      --------------
Net income (loss)                                             $        161,144    $       (153,801)
                                                                ===============      ==============

Per share data
     Net income (loss) per share
Basic                                                         $          0.03     $          (0.03)
                                                                ---------------      --------------
Diluted                                                       $          0.02     $          (0.03)
                                                                ---------------      --------------



     Weighted average number of common shares
     outstanding basic                                              5,134,272            4,883,704
                                                                 -------------       --------------
     Weighted average number of common shares
     outstanding diluted                                            7,042,534            4,883,704
                                                                 -------------       --------------
</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>


                                                                                          Three Months Ended
                                                                                               June 30,
                                                                                               --------
                                                                                      1998                         1997
<S>                                                                    <C>                           <C>    
Cash flows from operating activities
Net income (loss)                                                         $            161,144        $           (153,801)
Adjustments to reconcile net income to net cash
  provided by operating activities
     Depreciation and amortization                                                     123,115                      94,738
     Provision for bad debts                                                                                         9,374
     Provision for inventory obsolescence                                                                           15,000
     Deferred tax provision                                                            121,259                     (20,221)
     (Increase) decrease in
           Accounts receivable                                                        (910,961)                    236,675
           Inventory                                                                  (462,293)                    (23,649)
           Prepaid expenses and other current assets                                   (32,604)                      2,939
           Security deposits                                                            (3,632)                      9,519
     Increase (decrease) in
           Accounts payable                                                            155,921                      30,246
           Accrued payroll and related liabilities                                    (122,856)                   (110,989)
           Deferred income                                                              87,178                     (22,538)
           Other current liabilities                                                    47,410                      52,605
           Other liabilities                                                            69,529
                                                                          ---------------------       ---------------------
           Net cash (used in) provided by operating activities                        (766,790)                    119,898
                                                                          ---------------------       ---------------------

Cash flows from investing activities
     Capital expenditures                                                             (102,819)                    (40,039)
     Capitalized software                                                              (88,858)                    (20,000)
     Other assets                                                                     (293,135)                          0
                                                                          --------------------        ---------------------
           Net cash used in investing activities                                      (484,812)                    (60,039)
                                                                          ---------------------       ---------------------

Cash flows from financing activities
     Proceeds of short-term borrowings                                                 300,000
     Repayments of debt                                                                (11,192)                    (10,258)
     Issuance of common stock                                                          902,254
                                                                          ---------------------       ---------------------
           Net cash provided by (used in) financing activities                       1,191,062                     (10,258)
                                                                          ---------------------       ---------------------

Net (decrease) increase in cash and cash equivalents                                   (60,540)                     49,601
Cash and cash equivalents - beginning of period                                        507,726                     539,214
                                                                          --------------------        ---------------------
Cash and cash equivalents - end of period                                 $            447,186        $            588,815
                                                                          =====================       =====================

</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
                                  JUNE 30, 1998
                                   (Unaudited)



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

The  condensed  consolidated  balance  sheets as of June 30,  1998 and March 31,
1998,  the condensed  consolidated  statements of operations for the three month
periods ended June 30, 1998 and 1997 and the condensed  consolidated  statements
of cash flows for the three 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
June 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.

<TABLE>
<CAPTION>

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

Inventory consists of the following:

                                                    June 30, 1998                    March 31, 1998
                                                    -------------                    --------------

<S>                                                <C>                                <C>        
         Raw materials                               $   814,193                        $ 1,003,132
         Work in process                               1,115,323                            525,918
         Finished goods                                  143,128                             81,301
                                                      ----------                         ----------
                                                       2,072,644                          1,610,351
             Less, allowance for obsolescence           (185,000)                          (185,000)
                                                       ---------                          ---------
                  Total                               $1,887,644                         $1,425,351
                                                      ==========                         ==========

</TABLE>


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  computaion  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>
                                             Three Months       Three Months
                                             Ended              Ended
                                             6/30/98            6/30/97
                                             ------------       -----------

Weighted Average # of Shares Outstanding     5,134,272          4,833,704
Incremental Shares for Common Equivalents    1,908,262          
                                             ---------          ---------
Diluted Shares Outstanding                   7,042,534          4,833,704

Note 4 - Recent Pronouncements:
------------------------------

In June  1997,  the  Financial  Accounting  Standards  Board  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  operaing  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.

                                        7

<PAGE>



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
 ---------------------


         Revenues  for the  quarter  ended  June 30,  1998  were  $2,963,973  as
compared with revenues of $1,736,546 for the same quarter of the previous fiscal
year,  or an  increase of  approximately  71 %. The  increase  in  revenues  was
primarily  the  result of  increased  business  activity  and as a result of the
continued  acceptance of its Sentinel product line as well interest in the other
member of the family of SNS products, the Manager 2000.


         The  Company's  cost of goods  sold  increased  from  $741,046  for the
quarter ended June 30, 1997 to $1,008,005 for the quarter ended June 30, 1998 as
a result of increased business  activity.  Cost of goods sold as a percentage of
sales  decreased from 42.7% for the previous  comparable  fiscal period to 34.0%
for this fiscal period, due to the increased volumes, manufacturing efficiencies
and higher margin software and services sales in the quarter.


         Research  and  development   expenses,   net  of  capitalized  software
development,  increased  from  $286,552  in the  quarter  ended June 30, 1997 to
$412,967 in the current  fiscal  quarter,  an increase of 44%.  This is a direct
reflection  of  the  Company's  continued  increased  activity  related  to  the
development of the Secure  Network  Systems/2000  set of products.  Research and
development  expenses as a  percentage  of revenues  decreased  from 17% to 14%.
Selling,  general and administrative  expenses increased  approximately 37% from
$887,191 for the prior year's  comparable  fiscal period to  $1,219,648  for the
fiscal period ended June 30, 1998.  This  increase  results  primarily  from the
Company's aggressive growth plan in the sales and marketing area.

         The Company had income from operations of $323,383 for the period ended
June 30,  1998,  compared to a loss from  operations  of  $178,243  for the same
period a year ago. Due to the reduction in interest costs to the Company and the
effects of the income tax benefit of $20,221,  the net loss for the period ended
June 30, 1997 was  $153,801  compared to net income of $161,144  for the quarter
ended June 30, 1998.

                                        8

<PAGE>

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

         During the first quarter of fiscal year 1999, the Company  recorded net
income of  approximately  $161,000.  Included in this net income  were  non-cash
charges of approximately $123,000 for depreciation and amortization and $121,000
of deferred  taxes.  As a result and in  conjunction  with the  following  items
discussed  below,  during  the  first  three  months of fiscal  year  1999,  the
Company's cash position remained relatively stable.

         The Company's  operations used $767,000 of cash,  primarily as a result
of an increase in accounts  receivable of $910,961 for sales that occurred later
in the quarter and an increase in  inventory  buildup of $462,293 as the Company
prepares to ship its backlog going into the second quarter These  increases were
offset by the payment of accrued  payroll and related  liabilities.  The Company
utilized  approximately  $200,000  of  cash  for  capital  and  software-related
expenditures  and an additional  $293,000 for one-time merger related costs that
have been  capitalized.  Proceeds from stock option and warrant  exercises  were
approximately  $900,000 and proceeds from borrowings under the company's line of
credit were $300,000.  The Company utilized approximately $10,000 of cash to pay
down its long-term debt in the first quarter.

         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  that was due to  expire  on July 31,  1998.  In July 1998 the bank
extended  this  line of  credit  for a period  of 60 days,  in  anticipation  of
renewal,  negotiations  of which are  progressing.  As of August  3,  1998,  the
Company has utilized $600,000 under 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 June 1997, the Financial Accounting Standards Board 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  operaing  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.

                                        9

<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:
                           -------------------

                           On May 19, 1998,  the Company filed a Current  Report
                           on Form 8-K, disclosing a press release in connection
                           with the execution of a letter of intent  relating to
                           the Company's proposed  acquisition of SolCom Systems
                           Limited.

                                       10

<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:  August 7, 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)



                                      -11-

<PAGE>


                                 EXHIBIT INDEX
                                 




Exhibit No.                          Description
----------                           -----------



27                                   Financial Data Schedule