DC01/0058526v2

                               UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                           Washington, DC  20549
                                     
                                 FORM 10-K
                                     
X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                ACT OF 1934
                  For the fiscal year ended June 30, 1997
                                    OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                           EXCHANGE ACT OF 1934
                      Commission file number 0-21059

                           ACE*COMM CORPORATION
          (Exact name of registrant as specified in its charter)
                                     
                Maryland                         52-1283030
     (State or other jurisdiction of       (I.R.S. Employer I.D.
     incorporation or organization)                 No.)
         704 Quince Orchard Road                      
      Gaithersburg, Maryland 20878                 20878
(Address of principal executive offices)         (Zip Code)

    Registrant's telephone number, including area code:  (301) 721-3000
                                     
     Securities registered pursuant to Section 12(b) of the Act: NONE
                                     
        Securities registered pursuant to Section 12(g) of the Act:
                                     
                               Common Stock
                              $.01 par value
                             (Title of class)

      Indicate  by  check mark whether the registrant  (1)  has  filed  all
reports  required  to  be filed by Section 13 or 15(d)  of  the  Securities
Exchange  Act  of 1934 during the preceding 12 months (or for such  shorter
period that the registrant was required to file such reports), and (2)  has
been subject to such filing requirement for the past 90 days.
YES  X         NO

      Indicate by check mark if disclosure of delinquent filers pursuant to
Item  405  of  Regulation  S-K is not contained herein,  and  will  not  be
contained,  to the best of registrant's knowledge, in definitive  proxy  or
information statements incorporated by reference in Part III of  this  Form
10-K or any amendment to this Form 10-K.

      As  of  September 26, 1997, the aggregate market value of the  voting
stock  held by non-affiliates of the registrant (i.e. persons who  are  not
directors,  officers or affiliated therewith) was approximately $96,621,981
[       ]  million (4,656,481([              ] shares of Common Stock at  a
closing  price  on  the NASDAQ National Market of $20.75[       ]  on  such
date).  Outstanding as of September 26, 1997 were 8,641,505 shares.

                    DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement for its annual
meeting to be held on November 19, 1997 are incorporated by reference in
Part III.
                  Exhibit Index located at page  [     ].
<PAGE>
                      ACE*COMM CORPORATION
                                
                        TABLE OF CONTENTS
                                                       PAGE
                             PART I
Item 1.        BUSINESS                                  3

Item 2.        PROPERTIES                                    14

Item 3.        LEGAL PROCEEDINGS                             14

Item 4.        SUBMISSION OF MATTERS TO A VOTE OF
               SECURITY HOLDERS                              14

Item 4A.       EXECUTIVE OFFICERS OF THE REGISTRANT          15
                                
                             PART II
Item 5.         MARKET FOR REGISTRANT'S COMMON EQUITY AND
      RELATED
                STOCKHOLDER MATTERS                      16

Item 6.        SELECTED FINANCIAL DATA                       17

Item 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS
19

Item 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   29

Item 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                ON ACCOUNTING AND FINANCIAL DISCLOSURE        47

                            PART III
Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
48

Item 11.  EXECUTIVE COMPENSATION                             48

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT                                48

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
48
                                
                             PART IV
Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
           REPORTS ON FORM 8-K                           49
<PAGE>
                             PART I

ITEM 1.  BUSINESS

Background and Overview

     ACE*COMM is a Maryland corporation incorporated in 1983.
The Company develops, markets and services Operations Support
System ("OSS") hardware and software solutions for networks
deployed by telecommunications service providers, such as post,
telephone and telegraph companies ("PTTs"), incumbent or
competitive local exchange carriers, national or international
long distance carriers and other public or private carriers.  The
Company also sells solutions for service and network management
to large enterprises operating internal data and voice networks.
The Company's products perform such functions as billing data
collection, billing, network surveillance, alarm processing and
network traffic management for some of the largest carriers and
enterprises in the world.

     The Company develops close, long-term relationships with
many of its customers, from the early stage of project
development through product installation and upgrading, to
implement solutions that can operate on a stand-alone basis and
be tailored to a customer's specific network.  The Company has
developed, and continuously refines, its base of hardware and
software products, which can be tailored to meet the current and
evolving requirements of its customers.  The Company works
closely with customers after initial implementation, to enable
customers to include new features, expand into additional markets
or operate with new network technologies and protocols.  In
addition, the Company provides ongoing support, maintenance and
training related to the customer's system.

Strategy

     The Company's objective is to be the market leader in the
markets in which it participates by providing advanced technology
products to a range of customers, including existing carriers,
new and emerging carriers, and large enterprises both directly
and through its strategic alliances.  Using its technological
leadership the Company creates products that perform real-time
data collection, subscriber data warehousing and network data
management in support of communications networks.  Maintaining
high quality is an additional important feature of the strategy,
including the registration of its processes and procedures under
the international quality standard ISO 9001.

Markets

     In the past the Company's products have been sold primarily
in two markets, the carrier network market and the enterprise
network market.  Carriers comprise companies such as the regional
Bell operating companies ("RBOCs"), PTTs, large independent phone
companies and large wireless companies.  Enterprise network
customers comprise such companies as the Fortune 1000 businesses,
government agencies, colleges, armed forces installations, and
large medical complexes.

<PAGE>
     Over the past year new markets have developed for the
Company's products in the area of new and emerging carriers.
These markets include new wireless carriers, long distance
carriers, and competitive local exchange carriers (CLECs).  Based
on the Company's knowledge and experience gained from
successfully marketing its products to the existing carrier
network and enterprise network markets, it is enhancing some of
its products and developing new products to compete in the new
and emerging carrier market.

Products, Services and Distribution

     Traditional Carrier Network Products

     The Company's traditional carrier network products have been
installed in over 800 end user sites in 37 countries.  The
Company's traditional carrier network product customers accounted
for approximately 65.3% of the Company's total revenue in fiscal
1997.  The Company's traditional carrier network product
customers in fiscal 1997 which contributed 10% or more of the
Company's revenue from such customers were  Telefonos de Mexico,
S.A. de C.V. ("TELMEX") and Samsung Electronics, which
contributed 26.1% and 15.8%, respectively, of revenue from such
customers and 17.1% and 10.3%, respectively, of total Company
revenue.

     The Company's traditional carrier network products consist
of software and hardware which is connected to existing network
infrastructures.  These products meet the requirements of the
existing voice and data wireline businesses and the growing
markets of cable television, the Internet and wireless
businesses.  The automation of data collection and distribution
from remote switches enables carriers to operate larger,
increasingly complex systems with more customer features, more
reliably, more cost effectively and with fewer personnel.  The
Company's traditional carrier network products are designed to
facilitate more accurate and more frequent billing, thereby
reducing billing lag time and accounts receivable.  They also
support carriers' ability to track calling patterns, manage
fraud, perform fault management, improve network performance, and
verify that calls are not needlessly routed through inefficient
or expensive paths. These products enable a carrier to increase
the size of its system and provide its end users with better
service, in remote and international locations.  Following are
descriptions of the Company's principal traditional carrier
network products:

     Data Collection

DCMS - DCMS, Distributed Call Measurement SystemO, is a hardware
     and software based microprocessor controlled product which
     collects call record data from telephone switches and
     electronically transmits them to a central location, where
     the data can be processed for such purposes as billing,
     traffic analysis and fraud management.  The DCMS eliminates
     magnetic tape storage units and manual data collection,
     reduces processing costs, and increases the accuracy of
     billing data which, in turn, increases revenue.  The most
     recent version of DCMS, NEDSO, Network Element Data Server,
     can provide the data on a real-time basis.  The Company also
     offers the DCMS*PLUSO, a version of DCMS which is based on a
     new technology platform and is targeted at carriers in third
     world and
     <PAGE>
     Billing Reports and Access to Customer Data

emerging countries.  These products can be adapted to support
virtually all wireline and wireless telephone switches.

     UPS-32 - UPS-32, Universal Polling System-32O, is a mini-
computer, server or PC-based product, programmed to control the
collection and transmission of call detail records transmitted by
multiple DCMS units and similar equipment of other vendors.  UPS-
32 collects call data from dispersed switch sites, processes and
formats the data on a customer-defined schedule, and distributes
the data to the customer's billing center.  The most recent
version of UPS-32, CANSO, Central Access Network Server, collects
and distributes data in real-time.

     TREX*COMMO - TREX*COMM is a software-based product designed
for local exchange carriers who use network switches to provide
customer premises voice and data communication services for
business customers, under a service concept called CENTREX.
TREX*COMM automates the transfer of CENTREX call usage data from
remote switch sites to customers' equipment and sorts records by
customer codes, group codes, or other identifying data fields.
Using standard modem protocols, customers can dial the TREX*COMM
system to retrieve their data. Running on UNIX platforms and used
in conjunction with a data collection product, such as the DCMS,
TREX*COMM makes network information available to CENTREX
subscribers to enable them to manage and control data.

     Surveillance and Alarm (traffic reporting)

     UTS-32 - UTS-32, Universal Traffic System-32O, uses
information gathered by DCMS products or other providers' data
collection products to provide reports on system traffic and
usage on a periodic basis. UTS-32 produces hourly group traffic
reports, multi-day study reports, multi-day load balancing
reports, multi-day group traffic analyses, weekly historical
usage reports, yearly trunk forecasting reports, and other
engineering information used to monitor and maximize the
efficiency of the system and enable the carrier to minimize down-
time.

     N*VISIONO  - N*VISION, a successor to the Company's RTMS,
Real Time Management System, a system originally developed for
Teleglobe, monitors network data in real-time and provides, from
a single data base, information for billing, fraud detection,
subscriber management and network management. The heart of
N*VISION is a 600 gigabyte data warehouse.  N*VISION uses NEDS to
capture call records in real-time from remote switches. N*VISION
processing software presents the data for analysis within seconds
of call completion.

     ANMS - ANMS, AMAT Network Management SystemO, monitors the
elements of a billing network. ANMS is a mini-computer based
product that collects and reports on alarms sent by DCMSs, UPS-
32s and other network elements in the billing system to assure
that no billing data is lost. In addition, ANMS serves as a user
interface and collects system logs from the network elements. The
Company presently is adding standard network management protocols
to ANMS.
     
<PAGE>
     Enterprise Network Management Products

     The Company's enterprise network management products have
been installed in over 120 end user sites in 10 countries.  Such
products accounted for approximately 24.4% of the Company's total
revenue in fiscal 1997.  The Company's enterprise network
management product customers in fiscal 1997 which contributed 10%
or more of the Company's revenue from such customers were ANSTEC
and GTE Government Systems, which contributed 28.2% and 18.7%,
respectively, of revenue from such customers and 6.9% and 4.6%,
respectively, of total Company revenue.

     The Company's enterprise network management products meet
the requirements of network managers of large, growing and
increasingly complex integrated voice and data networks.  These
products are designed to enable the managers to operate their
networks more effectively, to more accurately control costs, to
minimize network down time, and to implement other network
management features as their requirements grow and change.
Following are descriptions of the Company's principal enterprise
network management products.

     NetPlus Voice and Data Network Management System- The
NetPlus family of network management products consists of five
systems designed to automate network operations and management
functions.  These systems employ a client server architecture and
common database that permit them to operate either independently
or as an integrated whole.  NetPlus products are scaleable,
providing flexibility to accommodate a broad range of network
sizes and multiple locations.  The Company typically provides
NetPlus products as fully integrated hardware and software
configurations.  These products are intended to manage private
voice and data networks for 1,000 to 50,000 users.  These
products allow a network to automate tasks such as alarm
processing, connectivity tracking, automatic cable and channel
assignment, creation of subscriber and circuit records, inventory
control, traffic surveillance and management, work order and
trouble ticket processing, directory assistance and subscriber
billing.
     
     WinSNMP - A set of SNMP utilities developed by the Company
that are sold to telecom equipment manufacturers.  This product
is a highly integrated SNMP applications set that enables end-
users on Microsoft Windows platforms to execute SNMP operations
against their network devices, servers and managed desktops.  The
set includes end-user kits for users, experts and the enterprise.

     New and Emerging Carrier Products

     The Company's new and emerging carrier network products have
been installed in over seven new and emerging carriers in the
U.S. in fiscal 1997.  These customers accounted in the aggregate
for approximately 10.3% of the Company's total revenue in fiscal
1997.

     In addition to marketing the products developed for the
traditional carriers, the Company is developing new products for
this market.  The Company has enhanced its NetPlus product to
provide an integrated suite of applications for new and emerging
carriers.  This new market segment requires
<PAGE>
     modular, scalable applications that can be implemented in a
few months.  The Company's products provide most of the features
necessary for billing, customer care and OSSs.  In addition to
the NetPlus products the Company has developed the following
products for the new and emerging carrier markets:
     
     PRO*VISION - PRO*VISION is an integrated suite of
applications that addresses the billing, customer care and OSS
requirements of new and emerging carriers.  Its flow-through
subscriber service creation design permits carriers to meet the
multi-service based operational support and network management
requirements mandated in the market.  This product is a multi-
service (voice, data, cable, long distance, etc.) management
offering that performs advanced, integrated customer management,
operations support and network maintenance to automate the
carrier-wide functions of a multi-service carrier.  The product
consists of three major subsystems which employ a client server
architecture and common database that permit them to operate
independently or as an integrated product.
     
     The Company employs a documented Quality Management Program
to monitor the quality of its products and detect errors and has
an internal Quality Management Committee to set quality
objectives for the Company and a Quality Assurance Department to
implement and monitor compliance with the applicable procedures.
The Company has experienced no product returns in the past
11 years as a result of undetected errors.  Where undetected
errors occur, the Company may incur additional costs and delays
in order to remedy the errors.

Sales and Marketing

     The Company sells products through direct sales and through
the Company's strategic alliance partners.  See "Strategic
Alliances and Other Customers."  In fiscal 1997, sales to
strategic alliance partners and through the direct sales force
comprised approximately 57.2% and 42.8% of revenue, respectively.
At present, the Company is increasing its sales efforts through
more aggressive sales and marketing strategies.  The Company is
hiring additional experienced, direct sales representatives and
increasing the number of strategic alliances by adding non-
exclusive third party distribution channels and alliances with
new carriers, communications equipment manufacturers, computer
equipment manufacturers, software developers and telecom
consultants, to market the Company's products.

     The sales process for new contracts generally requires a
significant investment of time and money and takes from several
months to several years.  This process involves senior
executives, sales representatives and support personnel and
typically requires presentations, demonstrations, field trials,
and lengthy negotiations.  The Company spends a significant
amount of time consulting with strategic partners and end users
to adapt its products to meet end user requirements.  Through
ongoing sales, maintenance, training and systems analysis, the
Company maintains contact with its partners and end users to
determine their evolving requirements for updates and
enhancements.  Through these processes, the Company gains
valuable industry expertise, as well as the ability to identify
emerging industry applications and new sales opportunities.

<PAGE>
Customer Support

     The Company believes that a high level of engineering and
development services and customer support is critical to the
Company's continuing success in developing relationships with its
strategic partners and end users. To augment its sales efforts,
the Company offers product-related engineering and development
services, requirements analysis, project management, system
design, tailoring and installation, training, ongoing support and
upgrades.  The Company offers technical customer support 24 hours
per day, seven days per week.  Support is provided via telephone,
remote login, e-mail and, if necessary, on-site assistance.  In
addition, the Company has established a World Wide Web site on
the Internet which keeps customers informed of product
developments.  International customers are supported directly by
the Company or by local representatives that have been trained by
the Company.  These representatives do not represent the Company
exclusively.  The Company also conducts training classes for its
strategic partners and other customers.
     
Strategic Alliances and Other Customers
     
     In order to develop, market and distribute its products
effectively, the Company has established strategic alliances with
several large organizations:  telecom equipment manufacturers,
computer equipment manufacturers, and telecom systems integrators
(the "strategic alliance partners" or "partners") to which the
Company sells products for use by them or their customers.  The
Company's strategic alliances apply to its traditional carrier
network products, new and emerging carriers, and its enterprise
network management products.  Each alliance is designed to do one
or more of the following: develop products designed to meet the
needs of the partner or its customers, establish a joint
marketing relationship to include Company products in systems
sold by the partner, and create a reseller channel for the
Company's products.

     A strategic alliance typically involves a formal agreement
between the Company and the strategic alliance partner, pursuant
to which the parties agree to develop and sell products to the
partner for use by the partner, or by its customers who are in
such cases the end users of the Company's products. Each
agreement specifies the terms of the alliance, which may include
parameters for product development and product specifications,
product pricing, the terms of intellectual property ownership,
and the responsibilities of each partner for system integration,
proposal drafting, sales and marketing.  Once the products are
developed, the strategic alliance partner will issue specific
orders to the Company from time to time to purchase products,
subject to the terms of the overall agreement.  The products are
purchased and paid for by the partner either for its own use or
for resale to its customers directly or as part of a larger
system installation.  Sales to a strategic alliance partner may
vary from period to period, depending on the timing of orders,
which in turn may depend on a number of factors, including the
completion of the Company's product development, the partner's
marketing and sales efforts to its customers, the timing of
orders from the partner's customers, and various internal
financial, strategic and other factors specific to a partner or
any of its customers. Accordingly, sales to a partner in one
period are not necessarily predictive of sales to the partner in
future periods.
     <PAGE>
     The following is a list of the Company's most significant
strategic alliances in fiscal 1997:

Traditional Carrier Network Products

AT&T World Services, Inc. ("AT&T World Services") - selected the
DCMS and UPS-32 as operating components of its billing analysis
systems for international toll gateways, to be sold to customers
worldwide.  These systems are used to collect data for traffic
analysis and billing.

Cincinnati Bell Information Systems, Inc. ("CBIS") - CBIS is the
largest cellular billing service provider in the world. The
Company and CBIS developed a customized version of the DCMS which
contains information management software designed to meet the
needs of cellular service providers.

Guangzhou Riccson Computing Co. Ltd. - is installing the
Company's DCMS products as part of its own billing system, in the
People's Republic of China.

IBM - is marketing the Company's NEDS and CANS products as part
of its own billing system.

International Computers Limited - is installing the Company's
NEDS and CANS products along with its own billing system for
Vodafone Limited in the United Kingdom and the national cellular
carrier in Indonesia.

Lucent Technologies, Inc. (formerly AT&T Network Systems) -
developed an OEM version of the DCMS to be used in combination
with Lucent's BILLDATS (corresponding to the Company's UPS-
32/CANS product) collection software with the Company. Lucent has
deployed BILLDATS systems incorporating the Company's products in
various domestic and international teleprocessing projects.

Newbridge Networks and Siemens - contracted with the Company to
develop usage sensitive billing software for Frame Relay and ATM
products which will be offered as part of their network and
service management products.

Samsung Electronics Company, Limited, LG Information and
Communications, Limited and ILGIN Corporation - formed a
consortium ("Korean Consortium") to provide a billing data
collection system for Korea Telecom, the national carrier for the
Republic of South Korea. The consortium has purchased significant
quantities of the Company's products for installation in the
Korea Telecom network.

Stratus - sells the Company's N*VISION, UPS-32, and CANS products
with its computer platforms.

Tandem - is marketing the Company's UPS-32 and CANS products as
components of its hardware products.

Teleglobe Canada, Inc. - Teleglobe is the government chartered
international long distance provider for Canada. Teleglobe has
developed with the Company a data collection network, data
warehouse and operator display system to capture and monitor
international traffic and usage data and provide information for
fraud detection and other OSS functions on a real-time basis.
The result of
<PAGE>
this cooperative development project was the Company's N*VISION
product, which is being marketed to other carriers worldwide.

Enterprise Network Management Products

ANSTEC, Inc. - teamed with the Company and was selected, through
a competitive procurement process, to install the Company's
NetPlus products at 107 U.S. Air Force bases and 50 other U.S.
government installations throughout the world.

Amerind, Inc. - installed a version of the Company's NetPlus
products as a part of the U.S. Army's automated directory
attendance system at installations throughout the United States.

AT&T Corporation, Federal Systems Division - provides telephone
systems for the Executive Branch of the U.S. Government.

GTE Government Systems - provides telephone systems at military
facilities throughout the world.  The Company, as a subcontractor
to GTE Government Systems for network management products,
installs and supports NetPlus products at 40 of these military
facilities.

ISI Infortext - worked with the Company to develop a Windows NT
Version of NetPlus and is selling the Company's NetPlus products
in the U.S. to enterprise customers.

Tubedale Communications Ltd. - integrates the Company's NetPlus
products into its Telemasys system to be marketed in Europe,
Africa and the Middle East.

New and Emerging Carrier Products

Eagle Telecommunications Management Inc. - sells the Company's
PRO*VISION products as part of its central office switch
products, internationally to new and emerging carriers.

GeoPhone LLC - sells the Company's NetPlus products as part of
its satellite communications products internationally.

Stratus - sells the Company's PRO*VISION product as part of its
client server system.

  The following is a list of some of the Company's other most
significant customers in fiscal 1997 that have installed the
Company's products within their organizations:

  ALLTEL - is using the Company's UPS-32 product to provide
  billing data collection services to its customers.

  Citizens Utilities - purchased DCMS systems for installation
  in its telephone operating units.

  GTE Telops (a division of GTE Telephone Company) - purchased
  DCMS systems for installation on certain switch types
  throughout its network.
<PAGE>

  Telefonos de Mexico, S.A. de C.V. - TELMEX, the national and
  local long distance carrier of Mexico, selected the Company to
  upgrade data collection throughout its switch network system.

  WinStar Telecommunications- using the Company's PRO*VISION
  billing application for call record collection and mediation
  to support its retail billing application.

     As more ATM and Frame Relay switches are incorporated into
carrier and enterprise networks, it will become increasingly
important for network managers to be able to bill customers based
on actual usage. Pursuant to an agreement with Newbridge, the
Company has developed a billing component for advanced data
switches, which provides access providers with flexible options
for billing users of data network services. The Company received
an up-front payment for the development work and will receive on-
going fees with respect to sales of the software by Newbridge to
its customers. For fiscal 1997, revenues from this agreement have
not been material. The Company anticipates similar opportunities
to develop other network edge technologies for equipment and
service providers in the growing market for data services.

     The Company plans to continue to develop and expand its
strategic alliances with established, well-recognized industry
leaders, as it believes that these alliances enable the Company
to increase sales most cost-effectively and successfully position
it to increase market penetration of its products.

Backlog

     The Company tracks two types of backlog: "order backlog,"
which represents signed purchase orders, and "contract backlog,"
which represents signed project contracts that become order
backlog upon the signing of specific purchase orders. Order
backlog was approximately as follows: $3.6 million, $10.4 million
and $7.0 million at June 30, 1995, 1996 and 1997, respectively.
Contract backlog was approximately: $1.0 million, $37.2 million
and $45.8 million at June 30, 1995, 1996 and 1997, respectively.

     The Company's contracts are large and technically
complicated and require a significant commitment of management
and financial resources from the Company's customers. The
development of a contract typically is a lengthy process because
it must address a customer's specific technical requirements and
often requires internal approvals that require substantial lead
time. Accordingly, the Company may experience significant
variations in revenue from quarter to quarter, reflecting delays
in contract signing or contract order deliveries. No assurance
can be given that current backlog will necessarily lead to
revenue in any future period.

Competition

     Competition in the market for the Company's products is
driven by rapidly changing technologies, evolving industry
standards, frequent new product introductions and enhancements
and rapid changes in customer
<PAGE>
requirements. To maintain and improve its competitive position,
the Company must continue to develop and introduce, on a timely
and cost-effective basis, new products and product features that
keep pace with technological developments and emerging industry
standards and address the increasingly sophisticated needs of its
customers.

     The Company expects the continued growth of the traditional
carrier market, new emerging carrier market, and the large
enterprise network management market to encourage new competitors
to enter the markets in the future. The Company believes that the
principal competitive factors in these markets include
specialized project management capabilities and technical
expertise, compliance with industry quality standards and
protocols, customer support, product features such as
adaptability, scaleability and flexibility, ability to integrate
with other products, functionality and ease of use, product
reputation, responsiveness to customer needs, and timeliness of
implementation. In the future, the Company will be required to
respond promptly and effectively to the challenges of
technological change and its competitors' innovations.

     In the traditional carrier network products market, the
Company's current and prospective competitors include (i) large
carriers which internally develop full system products for
themselves, tailored to their particular specifications, (ii)
companies, such as Axiom, Inc., Comptel, CGI, Inc. ("CGI"), and
IDT - Alston that can supply individual billing data collection
components, and (iii) vendors that supply product components,
including Hewlett-Packard Company ("HP"), IBM Corporation
("IBM"), Moscom Corporation ("Moscom"), Objective System
Integrators, Inc. ("OSI") and CGI.

     In the new and emerging carrier market, the Company's
current and prospective competitors include (i) telecom equipment
manufacturers that provide network products such as Lucent and
Ericsson, (ii) companies that provide software applications for
carriers, such as Stonehouse & Company ("Stonehouse"), Metasolv,
(iii) vendors that supply product components such as  HP and IBM,
(iv) companies that provide billing and customer care
applications such as Kenan Systems, Scopus, and Clarify, and (v)
companies that develop custom solutions like AMS, Perot Systems
and CSC.
     
     In the enterprise network management products market, the
Company's current and prospective competitors include
(i) companies that provide products for telephony networks, such
as Telco Research Corporation, Complimentary Solutions, Inc.,
Stonehouse, Switchview, Inc., Moscom and OSI and (ii) companies
that provide products for data networks, such as Remedy
Corporation, Net Manage, Inc., Computer Associates International,
Inc., FTP Software, Inc., Castle Rock Computing, HP, IBM and Sun
Microsystems, Inc.

     The Company believes that its ability to compete in its
markets depends in part on a number of competitive factors
outside its control, including the ability of others to develop
technology that is competitive with the Company's products, the
price at which competitors offer comparable products and
services, the extent of competitors' responsiveness to customer
needs and the ability of the Company's competitors to hire,
retain and motivate key personnel.
<PAGE>
     The Company competes with a number of companies that have
substantially greater financial, technical, sales, marketing and
other resources, as well as greater name recognition. As a
result, the Company's competitors may be able to adapt more
quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and
sale of their products than can the Company. There can be no
assurance that the Company's current or potential competitors
will not develop products comparable or superior to those
developed by the Company or adapt more quickly than the Company
to new technologies, evolving industry trends or changing
customer requirements.

Research and Product Development

     The Company's research and development efforts are focused
on developing new products to meet the growing needs of
traditional carriers, new emerging carriers, and enterprises and
on improving existing products by incorporating new features and
technologies.  The Company believes that the timely development
of new products and enhancements is essential to its maintaining
its competitive position in the marketplace.  In its research and
development efforts the Company works closely with customers, end
users and leading technology vendors, often in cooperative
product development and enhancement initiatives.  The Company
continually reviews opportunities to license technologies from
third parties when appropriate based on timing and cost
considerations.  The Company believes that this approach
facilitates and accelerates the development of new and enhanced
products.

     The Company's efforts are influenced significantly by
industry developments and by customer and end user requirements.
New features may be tailored initially for delivery to a single
customer and subsequently incorporated into future versions of
the product which are available to all customers.

     During the fiscal years 1995, 1996 and 1997, product
research and development expenses were  $1.0 million,
$1.0 million and $1.5 million, respectively.

Proprietary Rights and Licenses
     
     The Company does not currently hold any patents and relies
on a combination of statutory and/or common law, copyright,
trademark, contract and trade secret laws to maintain its
proprietary rights to its products.  The Company believes that,
because of, among other things, the rapid pace of technological
change in the telecommunication and software industries, patent
protection for its products is a less significant factor in the
Company's success than the knowledge, ability and experience of
the Company's employees, the frequency of product enhancements
and the timeliness and quality of support services provided by
the Company.

     The Company generally enters into confidentiality agreements
with its employees, consultants, customers and potential
customers and limits access to, and distribution of, its
proprietary information.  Use of the Company's software products
is usually restricted to specified locations and is subject to
terms and conditions prohibiting unauthorized reproduction or
transfer of
<PAGE>
the software products.  The Company also seeks to protect its
software, including the source code, as a trade secret and as a
copyrighted work.

Employees

     At June 30, 1997, the Company employed a total of 195
employees, including 40 involved in manufacturing and quality
assurance, 54 in research and development, 27 in sales and
marketing, 28 in professional services and 46 in administration
and finance. None of the Company's employees is represented by a
labor union. The Company has experienced no work stoppages and
believes that its employee relations are good.




ITEM 2.   PROPERTIES

     The Company leases space at four office locations:
Gaithersburg, Maryland; Montreal, Canada; Flemington, New Jersey;
and Orlando, Florida.  The Company believes that its facilities
are adequate for its current needs and that suitable additional
space will be available as required.  The Gaithersburg offices
are the Company's corporate headquarters and are used for product
assembly, software and engineering development and support. The
following sets forth information concerning the Company's
Gaithersburg facilities:

Location           Squar  Lease          Annual Rent
                   e      Expiration
                   Foota
                   ge
Gaithersburg,       37,87  November 30,   $615,000
Maryland           4      2003           (subject to
                                         annual
                                         increases of
                                         approximatel
                                         y $20,000
                                         each year)
     

ITEM 3.   LEGAL PROCEEDINGS

     The Company is not a party to any material legal
proceedings.



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company did not submit any matter to a vote of its
security holders during the fourth quarter of fiscal 1997.

<PAGE>
ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth the names, ages and positions
of the current executive officers of the Registrant as of June
30, 1997.

Name                         Ag  Position
                             e
George T. Jimenez             61  President, Chief Executive Officer
                                 and Chairman of the Board
S. Joseph Dorr                50  Vice President - Network
                                 Management Division
Dr. Thomas V. Russotto        52  Vice President - Carrier Networks
                                 Division
Jeffrey S. Simpson            42  Vice President - Finance
James M. Moore                55  Vice President - Marketing
Loretta L. Rivers             40  Secretary
                                  
                                  
     George T. Jimenez is the Chief Executive Officer of the
Company and has served as President, Treasurer and a Director of
the Company since its inception in 1983. From 1980 to 1983,
Mr. Jimenez served as the President of the Company's predecessor.

     S. Joseph Dorr has been Vice President - Network Management
Division since 1988 and a Vice President of the Company since
1983. From 1983 to 1989, he served as Corporate Secretary of the
Company. From 1980 to 1983, he served as Director of the
Commercial Systems Division of the Company's predecessor.

     Dr. Thomas V. Russotto has been Vice President - Carrier
Networks Division since 1988 and a Vice President of the Company
since 1985. From 1983 to 1985, he served as Director of Product
Development at the Company.

     Jeffrey S. Simpson has been Vice President - Finance of the
Company since July 1996 and a financial consultant to the Company
since March 1996. From 1988 to January 1996, Mr. Simpson served
in various positions with The Compucare Company, a software
development company, including Director of Finance from March
1990 to May 1993, Chief Financial Officer from May 1993 to August
1995 and Vice President, Finance, from September 1995 to January
1996. From 1985 to 1988, Mr. Simpson served as a Manager of
Financial Planning and Analysis with U.S. Sprint.

     James M. Moore has been Vice President - Marketing of the
Company since May 1996. From March 1994 to May 1996, Mr. Moore
served as Vice President, Business Market of NYNEX, a
telecommunications company, and from May 1992 to March 1994 he
served as Managing Director, Business Market of NYNEX. From
March 1989 to May 1992, Mr. Moore served as Managing Director,
Marketing of New England Telephone Company.

     Loretta L. Rivers has been Corporate Secretary and
Administrative Supervisor of the Company since 1989 and has
served in various capacities with the Company since its inception
in 1983.

<PAGE>
     The term of each executive officer will expire at the next
annual meeting of the Board of Directors which is scheduled to be
held November 19, 1997.
                                
                             PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK
          HOLDER MATTERS

Common Stock Prices

     The following table sets forth for the periods indicated the
highest and lowest bid prices for the shares of common stock
reported on the Nasdaq National Market.

                         Price Range of Shares
                         High      Low
Year Ended June 30, 1997:

1st Quarter (since August 13) 13.88          7.00
2nd Quarter                   16.00          9.75
3rd Quarter                   18.00          8.25
4th Quarter                   23.13          7.63

Common Stockholders

     As of September 26, 1997, 8,641,505 shares were held of
record by 43 shareholders.

Dividends

     The Company has never declared or paid cash dividends on the
Common Stock. The Company currently intends to retain earnings,
if any, to finance the growth and development of its business and
does not anticipate paying cash dividends in the foreseeable
future. The terms of the Company's bank credit facilities
prohibit the payment of cash dividends. The future payment of
cash dividends, if any, is also within the discretion of the
Board of Directors and will depend on the future earnings,
capital requirements, financial condition and future prospects of
the Company and such other factors as the Board of Directors may
deem relevant.

Use of Proceeds from Initial Public Offering
                                
     The Company filed a registration statement on Form S-1,
Registration No. 333-06731, which became effective August 12,
1996 (the "Offering") registering 2,500,000 shares of Common
Stock, $.01 par value per share ("shares").  The Company
previously reported Use of Proceeds from the Offering on Forms
SR.  As a result of a change in the applicable disclosure rules,
the Company is hereby updating the disclosure previously made on
such Forms.  Item 11 of the Form SR filed for the period ended
May 10, 1997 hereby is amended and restated as follows as of June
30, 1997:

Construction of plant,     
building and facilities    $         0
Purchase and installation  
of machinery and equipment 2,390,229
Purchase of real estate               0
Acquisition of other       
business(es)               0
Repayment of indebtedness  
                           4,446,563
Working capital            
                           4,457,464

Temporary investment:
US Treasury Money Fund              4,695,353

Other purposes:
Redemption of Preferred Stock        308,000
Directors & Officers Insurance       155,750




ITEM 6.   SELECTED FINANCIAL DATA

     The selected financial data presented below for each of the
Company's fiscal years in the five-year period ended June 30,
1997 and as of June 30, 1997, 1996, 1995, 1994, and 1993 are
derived from the audited financial statements of the Company.
<PAGE>
<TABLE>
<CAPTION>

                                                             
                                Fiscal Year Ended June 30,
                       1993      1994      1995      1996     1997
                          (in thousands, except per share data)
<S>                   <C>       <C>       <C>       <C>      <C>
Statement of                                                 
Operations Data
Revenue-products,                                            
software licenses     $         $         $         $19,9    $
and services          11,137    14,523    12,415    83       33,684
Costs and Operating                                          
expenses:                                                    
   Cost of products,                                         
     software                                                
licenses              5,870     7,675     6,579     10,83    17,627
     and services     4,065     5,473     6,049     6        10,992
   Selling, general                                 6,751    
and                   780       573       1,045              1,472
     administrative                                 957
   Research and
development
Income (loss) from                                           
operations            422       802       (1,258    1,439    3,593
                                          )
Interest expense                                             
(income), net         53        156       335       379      (191)
Income (loss) before                                         
income                                                       
  taxes and           369       646       (1,593    1,060    3,784
extraordinary                             )
  item
Income taxes          151       -         -         -        1,160
Income (loss) before                                         
extraordinary item    218       646       (1,593    1,060    2,624
                                          )
Extraordinary item -                                         
tax benefit of net                                           
operating loss        151       -         -         -        -
carryforwards
Net income (loss)     $         $         $(1,59    $1,06    $
                      369       646       3)        0        2,624
Pro forma net income                                         
per share                                           $        $ 0.32
                                                    0.18
Number of shares                                             
used in computing                                            
pro forma net income                                5,894    8,152
per share
</TABLE>

<TABLE>
<CAPTION>
                                                             
                                         June 30,
                       1993      1994      1995      1996     1997
                                      (in thousands)
<S>                   <C>       <C>       <C>       <C>      <C>
Balance Sheet Data:                                          
Cash and cash         $    62   $         $  190    $        $
equivalents                     147                 369      7,920
Working capital       519       590       (1,374    1,897    17,835
(deficit)                                 )
Total assets          6,582     7,407     8,293     14,29    33,518
                                                    8
Total liabilities     4,763     4,943     7,414     12,18    11,809
                                                    7
Mandatorily                                                  
redeemable preferred  1,842     1,982     2,122     2,262    -
stock
Stockholders'                                                
(deficit) equity      (23)      483       (1,242    (150)    21,709
                                          )
</TABLE>

<PAGE>
     The Company paid no dividend on its capital stock during any
of the periods reported above.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Overview

     The Company sells products to carriers and enterprises, both
through direct channels and through strategic alliance partners,
for delivery to end users in the United States and
internationally.  Since June 1994, the Company, consistent with
its strategic emphasis, has derived most of its revenue from
sales of its carrier network products to traditional carriers.
The Company expects such sales to increase as a percentage of its
revenue for at least the next several years.  The balance of the
Company's revenue is derived from the sale of products and
software licenses to new and emerging carriers and to enterprise
customers, including agencies of the U.S. Government.
     
     The Company's products typically are sold pursuant to
contracts having an aggregate value of several hundred thousand
to several million dollars.  Contracts for the Company's
traditional carrier network products typically require the
delivery of products, including hardware and licensed software,
along with installation, training and post contract support
services.  Contracts for new and emerging carriers and enterprise
networks typically require the Company to license, in perpetuity,
software applications and provide hardware and services that
include installation, training and post contract support.
Software, hardware and services sold pursuant to new and emerging
carrier and enterprise network contracts are separately priced.
At the expiration of the post contract support period, customers
are offered the opportunity to purchase additional support
services.
     
     The Company derives revenues from software license fees,
hardware sales, and product related services.  Revenue from
hardware sales is recognized upon delivery while revenue from
product related services is recognized as the services are
rendered.  The Company's software licenses to end users generally
provide for an initial license fee to use the product in
perpetuity.  Under certain contracts, the Company licenses the
source code of its software to resellers for subsequent
modification and resale.  Revenue from software licenses is
recognized after the software has been delivered, all significant
uncertainties regarding acceptance have expired and all
significant obligations have been fulfilled.  Costs relating to
insignificant obligations are accrued.  Revenue from contracts
with payment terms in excess of one year is recognized to the
extent of payments that are probable and due within one year.
Revenue related to obligations to provide post contract customer
support without charge is unbundled from the license and
recognized ratably over the term of the agreement.  Revenue from
maintenance services is recognized ratably over the term of the
related agreement.  For contracts involving significant
production, modification or customization of hardware and
software, revenue is recognized using the percentage of
completion method, based on performance milestones specified in
the contract, which fairly reflect progress toward contract
completion.
     
     The Company sells its products either as components in the
products or systems developed and marketed by its strategic
partners or directly to end users.  The Company typically
experiences higher margins in connection with its direct sales
contracts, offset in part by relatively higher sales and
marketing expenses.
     <PAGE>
     The Company tracks two types of backlog:  "order backlog,"
which represents signed purchase orders, and "contract backlog",
which represents signed project contracts that become order
backlog upon the signing of specific purchase orders.  Order
backlog was $7.0 million at June 30, 1997, compared to $10.4
million at June 30, 1996.
     
     The Company's revenue typically is concentrated among
certain customers, the largest of which in fiscal 1997 consisted
of TELMEX, Samsung Electronics, LG Information & Communications,
Ltd. and ANSTEC, Inc.   These customers represented approximately
17.1%,  10.3%, 7.4% and 6.9%, respectively, of total revenue for
the year ended June 30, 1997.
     
     Substantially all of the Company's revenue is derived from
dollar-denominated sales and, although the Company in its most
recent fiscal year had significant sales to Mexico and the
Republic of South Korea, the Company does not have significant
foreign operations.  Prior to fiscal 1997, the Company's sales
had been principally to its strategic alliance partners in the
United States or to end users in foreign countries.  During
fiscal 1997, the Company also sold its products and software
licenses to foreign strategic partners, the sales to which
represent 32.4%  of annual revenues.  The Company's customers
continue to pay for products in U.S. dollars. All products are
shipped from the United States pursuant to terms of orders issued
by customers.
     
     The Company has experienced more favorable cash collection
cycles for its international sales than its domestic sales.  For
fiscal 1997, the accounts receivable turnover rates (annual
sales/average of year end accounts receivable) were 2.27 for
sales to U.S. customers and 3.19 for sales to foreign customers,
and the accounts receivable turnover rates in days were 161 for
U.S. sales and 114 for sales to foreign customers.  Though the
Company has not historically experienced the greater risk that is
generally associated with cash cycles for sales to international
customers, the Company believes that past experience is not
necessarily indicative of future results and that as its sales
directly to foreign customers increase it may experience greater
delays in collections.
     
     As a result of the size of most of its contracts and orders,
the significant length of sales cycles and the complexities which
arise from time to time in completing any given contract or
order, the Company typically experiences fluctuations in
quarterly and year-to-year results.  Marketing in foreign
countries, particularly in Asia and other emerging markets,
frequently requires extensive field testing and may result in
delays in the timing and closing of sales by the Company's
strategic alliance partners, which in turn may delay orders of
the Company's products.  The Company has experienced significant
delays in timing of revenue related to sales to end users in
overseas markets.
     
     During fiscal 1997, the Company reclassified expenses for
services provided by certain strategic alliance partners in
connection with the installation and integration of the Company's
products.  As a result, certain fiscal 1996 amounts have been
reclassified from selling, general and administrative expense to
cost of products, software licenses and services, to conform with
fiscal 1997 financial statement presentation.
     
     The Company's cost of products, software licenses and
services consists of the cost of product engineering and
production, cost of customer support personnel, license fees paid
to third-party software vendors, amortization of capitalized
software development costs, the cost of hardware purchased by the
<PAGE>
     Company for incorporation into its products and expenses for
services provided by certain alliance partners in connection with
the installation and integration of the Company's products.
     
     Selling, general and administrative expenses consist of
costs to support the Company's sales and administrative
functions.  Included within these costs are salaries, bonuses,
sales commission, rent, insurance, depreciation and non-product
amortization expenses.  Also included are costs associated with
the Company's participation in trade shows and industry
conferences, and related travel and other promotional costs.
     
     Research and development expenses consist of personnel costs
related to the design and development of the Company's products.
These costs are expensed as incurred.  However, computer software
development costs incurred after the technological feasibility of
a product is established and until the product is available for
release to customers are capitalized.  Capitalized software and
purchased technology costs are amortized on a product by product
basis based on the greater of the ratio of current sales to
estimated total future sales or a straight-line basis over the
remaining estimated economic life of the product (no greater than
three years) including the current year.
     
Results Of Operations

     The following table sets forth, for the periods indicated,
certain items on the Company's statement of operations as a
percentage of revenue:

                                    Fiscal Year Ended June
                                              30,
                                    1995     1996     1997
                                                           
Revenue- products, software          100%      100%     100%
licenses and services
Costs and operating expenses:                              
  Cost of products, software                               
licenses                             53.0     54.2     52.3
  and services__..
  Selling, general and               48.7     33.8     32.6
administrative
  Research and development            8.4      4.8      4.4
__________
                                                           
(Loss) income from operations       (10.1)      7.2%    10.7%
___                                %
                                
Years Ended June 30, 1996 and 1997

          Revenue.  Total revenue increased 68.6% from $20.0
million in fiscal 1996 to $33.7 million in fiscal 1997.  The
increase in revenue is attributable to increased sales volume of
the Company's products and software licenses.  Revenue from
traditional carrier network products increased 63.8%,
representing 65.3% of total revenues, which growth resulted from
increases in sales to foreign strategic alliance partners that
include the Korea Consortium and International Computers Limited.
Revenue from enterprise network products increased 28.8%,
representing 24.4% of total revenues , which growth resulted
primarily from increases in sales of software licenses to ISI
Infortext, Tubedale Communications and International Logistics
Systems, Inc.  Revenue from new and emerging carriers, such as
WinStar Telecommunications and SpectraNet International,
represents 10.3% of fiscal 1997 revenues, up from 0.9% in fiscal
1996.
     
     Cost of Products, Software Licenses and Services.  Cost of
products, software licenses and services increased 62.7% from
$10.8 million in fiscal
<PAGE>
     1996 to $17.6 million in fiscal 1997 and decreased as a
percentage of revenue from 54.2% to 52.3%, respectively.  The
increase in costs is attributable to increased hardware cost and
increased labor expense associated with the increased annual
sales volume and to increased expenses for services provided by
certain alliance partners.  Gross margins were 45.8% and 47.7%
for fiscal years 1996 and 1997, respectively.  The improvement in
gross margin was primarily the result of an increase in software
license revenue as a percentage of total revenues in fiscal 1997.
     
     Selling, General and Administrative.  Selling, general and
administrative expenses increased 62.8% from $6.8 million in
fiscal 1996 to $11.0 million in fiscal 1997.  These expenses
represented 33.8% and 32.6% of total revenue in fiscal 1996 and
fiscal 1997, respectively.  The increased expenses are
attributable to costs associated with increased infrastructure
required to support the Company's growth, costs associated with
increased sales and marketing efforts that include the cost of an
expanded sales force, and to increased rent incurred in
conjunction with the Company's relocation to a larger facility.
The Company anticipates that the continued expansion of its sales
efforts, both domestically and internationally, will increase its
sales and marketing expense and may have an adverse effect on the
Company's earnings.
     
     Research and Development.  Research and development expense
increased 53.8% from approximately $1.0  million in fiscal 1996
to $1.5 million in fiscal 1997.  The increase is attributable to
the addition of software development engineers and technical
consultants required to support the Company's continued product
development activities.  As a percentage of revenue, research and
development expense decreased from 4.8% in fiscal 1996 to 4.4% in
fiscal 1997.  The Company plans to spend significant resources on
research and development in future periods in order to enhance
its technology, which may have an adverse effect on the Company's
earnings.
     
     Provision for Income Taxes.  The Company recorded a tax
provision of approximately $1.2 million in fiscal 1997,
representing an effective tax rate of 30.6%.  This rate was lower
than the expected statutory income tax rate primarily due to a
decrease in the valuation allowance.  This provision represents
an increase of approximately $1.2 million over fiscal 1996 when
no provision was recorded, the result of the provision being
offset by a similar decrease in the valuation allowance.
     
Years Ended June 30, 1995 and 1996

     Revenue.  Revenue increased 61.0%, from $12.4 million in
fiscal 1995 to $20.0 million in fiscal 1996.  The increase is
attributable to increased sales volume of the Company's
traditional carrier network products to Teleglobe and TELMEX and
delivery of enterprise network products to the U.S. Government
pursuant to the Company's contract with ANSTEC.
     
     Cost of Products, Software Licenses and Services.  Cost of
products, software licenses and services increased 64.7% from
$6.6 million in fiscal 1995 to $10.8 million is fiscal 1996.
The increase is attributable  to increased purchases of hardware
related to DCMS units for the TELMEX contract which were
subsequently incorporated into shipped products.  Gross margins
were 47.0% and 45.8%  for fiscal 1995 and 1996, respectively.
The decline in gross margins was caused primarily by costs for
services provided by certain alliance parties for which no
similar expenses existed in fiscal 1995.
     
<PAGE>
     Selling, General and Administrative.  Selling, general and
administrative expenses increased 11.6% from $6.0 million in
fiscal 1995 to $6.8 million in fiscal 1996.  These expenses
represented 48.7% and 33.8% of total revenue in fiscal 1995 and
fiscal 1996, respectively.  The increase in these expenses is
attributed to costs associated with the Company's continued
expansion of marketing programs.  The Company expects these
expenses to increase in future periods as a result of its efforts
to position itself to penetrate international markets for
traditional carrier network products, its plans to expand sales
of enterprise network products in the United States and the
hiring of additional management personnel.
     
     Research and Development.  Research and development expense
decreased 8.4% from approximately $1.01 million in fiscal 1995 to
approximately $1.0 million in fiscal 1996, primarily as a result
of completion of work on software development related to the
technology platform for the Teleglobe contract.  As a percentage
of revenue. Research and development expense decreased from 8.4%
in fiscal 1995 to 4.8% in fiscal 1996 primarily as a result of
the increase in period to period revenues.  The Company plans to
spend significant resources on research and development in future
periods in order to enhance its technology.
     
     Provision for Income Taxes.  No income tax benefit or
provision was recorded for the fiscal years ended June 30, 1995
and 1996, respectively, since any benefit or provision was offset
by a similar increase or decrease in the valuation allowance.  As
of June 30, 1995 and 1996, a valuation allowance was recorded for
the full value of the net deferred tax assets, as the Company's
results can vary based upon type, timing and quantity of product
shipped and, consequently, it was management's judgment that it
was more likely than not that the net deferred tax asset would
not be realized.

Selected Quarterly Information

     The following tables present certain unaudited statement of
operations data for each quarter of fiscal 1996 and fiscal 1997.
These data have been derived from the Company's unaudited
financial statements and have been prepared on the same basis as
the Company's audited financial statements which appear in this
Annual Report on Form 10-K.  In the opinion of the Company's
management, these data include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair
presentation of such data.  Such quarterly results are not
necessarily indicative of future results of operations.  This
information  is qualified by reference to, and should be read in
conjunction with, the Company's financial statements and notes
thereto included elsewhere in this Annual Report on Form 10-K.
<PAGE>
<TABLE>
<CAPTION>

                            Fis                                        
                            cal
                            Thr
                             ee
                            Mon
                            ths
                            End
                             ed
                           F                            F                 
                           i                            i
                           s                            s
                           c                            c
                           a                            a
                           l                            l
                           1                            1
                           9                            9
                           9                            9
                           6                            7
                  Sept.    Dec. March   June Sept.  Dec.  March   June
                    30,     31,    31    30,   30,   31,    31,    30,
                  1995    1995   1996           1996   1996  1997           
                                      1996                        1997
                                     (in                                  
                                   thous
                                   ands)
                                                                           
 <S>               <C>    <C>      <C>    <C>     <C>     <C>    <C>     <C>     
Statement of                                                               
Operations Data:
Revenue-                                                                   
products,         $3,43  $4,772  $4,9 $6,872  $6,2   $7,2   $8,2    $11,
software licenses     3            06           64    57     09     953
and services
Costs and                                                                  
operating
expenses:
  Cost of                                                                 
products,         1,736   2,738  2,53                      3,95        
  software                          3  3,829  3,13   3,48      1    7,05
licenses and                                     8     0              7
         services
  Selling,                                                                
general and       1,362   1,608  1,43                      2,80        
   administrative                   9  2,342  2,13   2,51      6    3,54
                                                 5     1              0
  Research and       132     235   264    326   398   468    300     306   
  development
Income from          203     191   670    375   593   798   1,15    1,05   
operations                                                    2       0
Interest expense     104      97    84     94    53   (92)   (85)    (67)   
(income), net
Income before         99      94   586    281   540   890   1,23    1,11   
income taxes                                                  7       7
Income taxes           -       -     -      -     -   266    470     424   
Net income           $99     $94  $586   $281  $540   $624   $767    $693   
</TABLE>
<PAGE>
<TABLE>

<S>                <C>    <C>   <C>     <C>      <C>    <C>    <C>     <C>   
As a Percentage                                                        
of Revenues:
Revenue-                                                                
products,          100%  100%  100%     100%  100%  100%   100%   100%
software licenses
and services
Costs and                                                                    
operating
expenses:
   Cost of                                                             
products,            51    57    52             50    48     48     59
   software                               56
licenses and
         services
   Selling,                                                            
general and          39    34    29             34    35     34     30
   administrative                         34
   Research and       4     5     5        5     6     6      4      2 
   development
Income from           6     4    14        5    10    11     14      9 
operations
Interest expense      3     2     2        1     1   (1)    (1)      - 
(income), net
Income before         3     2    12        4     9    12     15      9 
income taxes
Income taxes          -     -     -        -     -     3      6      3 
Net income           3%    2%   12%       4%    9%    9%     9%     6% 

</TABLE>
     The Company's quarterly operating results have in the past
and will in the future vary significantly as a result of the
timing of contract execution, orders for products, and delivery
of significant product orders.  Large orders typically are
preceded by long sales cycles and, accordingly, the timing of
such an order has been and will continue to be difficult to
predict.  The failure to obtain one or more large orders, for any
reason, could have a material adverse effect on the Company's
results of operations and financial condition.  The Company's
results also vary based on the type and quantity of products
shipped, the timing of product shipments, the relative revenue
mix in a given period and the resulting margins.  The variations
may be material.

     The timing of large orders depends on a variety of factors
affecting the capital spending decisions of the Company's
customers, which, in turn, can affect the Company's quarterly
operating results.  These factors include changes in governmental
regulation, changes in the customers' competitive environment,
pricing policies by the Company or its competitors, personnel
changes, demand for the Company's products, the number, timing
and significance of new product and product enhancement
announcements by the Company and its competitors, the ability of
the Company to develop, introduce and market new and enhanced
versions of its products on a timely basis, and the mix of direct
and indirect sales and general economic factors.

     The Company's sales cycle, from initial contact to contract
execution, orders for products and delivery of product, also
varies substantially from customer to customer and from project
to project.  The purchase of traditional carrier network
products, new and emerging carrier network products and
enterprise network management products generally involves a
significant commitment of customer capital and management time.
The sales cycle associated with the purchase of the Company's
products is subject to a number of additional significant risks,
including customers' budgetary constraints and internal
acceptance reviews, over which the Company has little or no
control.
<PAGE>
     The Company's expense levels are based, in party, on its
expectations as to future revenue levels.  If revenue levels are
below expectations, operating results are likely to be materially
adversely affected.

     Based upon all of the foregoing, the Company believes that
quarterly revenue and operating results are likely to vary
significantly in the future and that period-to-period comparisons
of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.
Further, it is likely that in some future quarter the Company's
revenue or operating results will be below the expectations of
public market analysts and investors.  In such event, the price
of the Common Stock could be materially adversely affected.

Liquidity and Capital Resources

     Cash and cash equivalents increased $7.6 million from
$369,000 at June 30, 1996 to $7.9 million at June 30, 1997.  The
increase in cash is attributable to funds generated from the
Company's initial public offering of common stock, which raised
net proceeds of $16 million.  Cash and cash equivalents increased
$179,000 from $190,000 at June 30, 1995 to $369,000 at June 30,
1996.  This increase is due primarily to a combination of cash
provided by operations and financing activities offset, in part,
by investment in property and capitalized software development
costs.  The increase in cash and cash equivalents of  $147,000
during the year ended June 30, 1995 is primarily attributable to
increased borrowings.
     
     Net cash (used for) provided by operating activities for the
year ended June 30, 1997, 1996, and 1995 was ($1.9 million), $0.7
million, and ($1.2 million), respectively.  The increase in net
cash used for operating activities from fiscal 1996 to fiscal
1997 primarily reflects a significant increase in accounts
receivable and inventories of $7.5 million and $1.0 million,
respectively, which reflect the increase in the Company's sales
volume, and a decrease in deferred revenues of $1.4 million,
partially offset by net income of $2.6 million and increases in
accrued expenses and deferred income taxes of $2.8 million and
$1.2 million, respectively.  The increase in net cash provided by
operating activities from fiscal year 1995 to 1996 is due
primarily to the Company's return to profitability with net
income of $1.0 million in fiscal 1996, as compared to a net loss
of $1.6 million in fiscal 1995, and an increase in accounts
payable, accrued expenses and deferred revenue of $1.9 million,
$0.7 million and $0.9 million, respectively, offset in part by an
increase in accounts receivable and inventories of $3.9 million
and $0.9 million, respectively.
     
     Net cash used for investing activities  of $3.8 million,
$1.3 million and $1.0 million in fiscal 1997, 1996 and 1995,
respectively, reflect purchases of property and equipment and the
capitalization of software development costs.  Purchases of
property and equipment, consisting primarily of computers and
office equipment, were $2.4 million, $0.4 million and $0.5
million in fiscal 1997, 1996, and 1995, respectively.
Capitalized software development costs were $1.4 million, $0.9
million, and $0.5 million in fiscal 1997, 1996, 1995,
respectively.  The Company expects it will continue to make
investments in both capitalized software development and in fixed
assets for infrastructure to support anticipated business growth.
     
     Net cash provided by financing activities for the fiscal
year ended June 30, 1997, was $13.2 million.  During fiscal 1997,
the Company received net proceeds of $16 million from the initial
public offering of its common stock.
<PAGE>
In addition, the Company received proceeds of $2.1 million from
the exercise of common stock options.  The Company used these
proceeds to reduce bank and other debt obligations by $4.8
million, to pay the withholding tax obligations of $0.9 million
associated with the exercise of employee stock options which were
paid for by the employees with the surrender of previously owned
shares and to redeem $0.3 million in outstanding preferred stock.
During the fourth quarter, the Company entered into an agreement
with its bank to finance $1,000,000 in capital equipment
purchases.  Also during fiscal 1997, the Company entered into a
capital lease obligation for an office telephone system.  At June
30, 1997, capitalized lease obligations were $0.2 million.   Net
cash provided by financing activities for fiscal 1996 of $0.8
million is primarily attributable to an  increase in borrowings
of  $1.4 million, offset by debt payments of approximately $0.7
million.  Net cash provided by financing activities for fiscal
1995 also reflects increased borrowings of $2.6 million offset,
in part, by $0.4 in debt repayments.
     
     With the exception of the capital lease referred to above,
all of the Company's borrowings are from Crestar Bank of
Maryland.  The Company has two lines of credit with Crestar
totaling $3.5 million under which no amounts were outstanding at
June 30, 1997.  These lines of credit, in the principal amount of
$2.5 million and a $1.0 million, respectively, each expires on
November 30, 1997.  Borrowings under these facilities bear
interest payable monthly, at 0.5% over the bank's prime rate and
are secured by accounts receivable, inventory and specific
equipment.  In addition, the Company has two term note facilities
pursuant to which the Company has made borrowings in the
aggregate principal amount as of June 30, 1997 of approximately
$0.3 million and $1.0 million, respectively, which are due in
varying monthly installments through June 2000 and June 2001,
respectively, bear interest at 1.0% over the bank's prime rate
and at the bank's prime rate, respectively, and are secured by
accounts receivable, inventory and specific equipment and by the
Company's general assets, respectively.  These loan arrangements
require the Company to comply with certain financial covenants.
     
     The Company believes that existing cash balances, cash flows
from operations and available bank lines, when renewed as
anticipated, will be sufficient to support the Company's working
capital requirement for at least the next 12 months.  Thereafter,
if cash generated from operations is insufficient to satisfy the
Company's working capital requirements, the Company may be
required to raise additional funds.  No assurance can be given
that additional financing will be available or that, if
available, such financing will be obtainable on terms favorable
to the Company or its stockholders.  In the event that adequate
funds are not available, the Company's business may be adversely
affected.
     
Factors Affecting Future Operating Results

     ACE*COMM provides products to a technology driven industry
sector.  Therefore, ACE*COMM's success is dependent in part upon
factors beyond its control.  This report contains forward-looking
statements relating to the prospective operating results of the
Company.  The following are factors which could affect ACE*COMM's
future operating results.  These factors are intended to serve as
a cautionary statement to statements that may be made, either
verbally or in writing, including those in any other forward-
looking statements made by or on behalf of, the Company:
     
     To date, a significant portion of the Company's revenue has
been derived from substantial  orders placed by large
organizations.  The Company expects that in the future it will
continue to be dependent upon a limited number of
<PAGE>
customers in any given period for a significant portion of its
revenue.  The Company's future success may depend upon the
continued demand by such customer for its products and services.
The Company's results of operations and financial condition could
be materially adversely affected by the failure of anticipated
orders to materialize and by deferrals or cancellation of orders.
     
     Sales to traditional carriers have provided and are expected
to continue to provide a majority of revenue.  The Company's
business is dependent upon the continued growth of the
telecommunications industry, in the United States and
internationally, on the continued convergence of voice and data
networks and on the evolution and widespread adoption of emerging
network technologies.  Any decline in the growth of the industry,
the failure of these markets to converge or the failure of these
network technologies to evolve or achieve widespread market
acceptance could have a material adverse effect on the Company.
     
     A key element of the Company's business strategy is to
develop strategic alliances with leading companies that provide
telecommunications services or that manufacture and market
network equipment in order to expand the Company's distribution
channels and enter new markets.  There can be no assurance that
the Company will be able to continue to increase the number of,
or to expand, these types of relationships, in order to market
its products effectively, particularly internationally.
     
     The Company has expanded its operations rapidly, which has
placed significant demands on the Company's administrative,
operational and financial personnel and systems.  Additional
expansion by the Company may further strain the Company's
management, financial and other resources.  There can be no
assurance that the Company's systems, procedures, controls and
existing space will be adequate to support expansion of the
Company's operations.  If the Company is unable to respond to and
manage changing business conditions, the quality of its products
and services and its results of operations could be materially
adversely affected.
     
     The new and emerging carrier market in the United States and
overseas  represents a source of growing demand for the Company's
products, software licenses and services.  In that this market
segment is relatively new and in that many of these organizations
are in the early stages of their development, financial resources
may be limited and may adversely affect their ability to pay for
the Company's products, software licenses and services.
     
Recent Accounting Pronouncements
     
     In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"). This statement establishes
standards for computing and presenting earnings per share ("EPS")
and making them comparable to international standards.  It
replaces the presentation of primary EPS with a presentation of
basic EPS, and requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with
complex capital structures.  Basic EPS excludes dilution and is
computed by dividing income available to common shareholders by
the weighted-average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the
entity.  SFAS 128 requires restatement of all prior period
earnings per share data
<PAGE>
presented, and is effective for financial statements issued for
periods ending after December 15, 1997, including interim
periods.  Earlier application is not permitted.

     The Company will adopt this statement during the second
quarter of fiscal 1998, as required.  Accordingly, all prior
period EPS data will be restated.  To illustrate the effect of
adoption, the Company has elected to disclose pro forma basic and
diluted EPS amounts computed using SFAS 128, as permitted by the
standard.  The pro forma basic and diluted EPS for each of the
two years in the period ended June 30, 1997 are set forth below:

                          Fiscal Year Ended
                              June 30,
                                     1996
                         1997
                                   
Pro forma basic earnings  $0.34      $0.20
per share
Pro forma diluted         $0.32      $0.18
earnings per share
                                   

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                  INDEX TO FINANCIAL STATEMENTS

Financial Statements:
Page

Report of Independent Accountants  _________________________
30

Balance Sheets at June 30, 1997 and 1996_______________________
31
                                                                 
Statements of Operations for the years ended June 30, 1997, 1996
     and 1995_..____________..___________________
32
                                                                 
Statements of Stockholders' Equity (Deficit) for the years
     ended June 30, 1997, 1996 and 1995________.._____________
33
                                                                 
Statements of Cash Flows for the years ended June 30, 1997, 1996
and 1995_..____...___
34
                                                                 
Notes to the Financial Statements__________________...._______..
36



Financial Statement Schedules:

All Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or
notes thereto.
<PAGE>
                REPORT OF INDEPENDENT ACCOUNTANTS
                                

To the Board of Directors and Stockholders of
   ACE*COMM Corporation

In   our   opinion,  the  financial  statements  listed  in   the
accompanying index present fairly, in all material respects,  the
financial position of ACE*COMM Corporation at June 30,  1997  and
1996,  and  the results of its operations and its cash flows  for
each  of  the three years in the period ended June 30,  1997,  in
conformity with generally accepted accounting principles.   These
financial  statements  are the responsibility  of  the  Company's
management; our responsibility is to express an opinion on  these
financial  statements  based on our  audits.   We  conducted  our
audits  of these statements in accordance with generally accepted
auditing  standards which require that we plan  and  perform  the
audit  to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit  includes
examining,  on a test basis, evidence supporting the amounts  and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating  the  overall  financial statement  presentation.   We
believe  that  our  audits  provide a reasonable  basis  for  the
opinion expressed above.


PRICE WATERHOUSE LLP



Washington, D.C.
September 29, 1997
<PAGE>
             ACE*COMM CORPORATION - BALANCE SHEETS
                                                  June 30,
                                                1997     1996
                             ASSETS
Current assets:
 Cash and cash equivalents               $  7,919,631$   369,206
 Accounts receivable, less allowance for doubtful
   accounts of $10,000                     16,119,862   8,643,871
 Inventories                                          2,814,221
1,836,317
 Prepaid expenses and other               1,011,193     283,813

        Total current assets              27,864,90711,133,207

Property and equipment, net                 3,469,997 1,305,844
Capitalized software development costs, net 2,076,665 1,393,067
Other                                                      assets
106,258       466,268

       Total assets                      $33,517,827 $14,298,386

      LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
               AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Borrowings                                          $      527,
359    $  2,097,178
 Accounts payable                           2,734,791 3,122,212
 Accrued contract costs                     3,550,589   386,543
 Accrued expenses                             183,969   527,991
 Accrued compensation                       2,128,759 1,133,072
    Officer    loan                                             -
78,572
 Deferred income taxes                        395,173  -
 Deferred revenue                            509,700  1,890,103

                            Total  current  liabilities10,030,340
       9,235,671

Noncurrent borrowings                      1,013,214  2,951,541
Deferred income taxes                         765,000        -

                                     Total  liabilities11,808,554
       12,187,212

Mandatorily redeemable Class C Preferred Stock, $5.14 par
  value,  340,211  shares authorized, issued and  outstanding   -
2,261,627

Commitments and contingencies

Stockholders' equity (deficit):
 Class B Preferred Stock, $1.00 par value, 1,000 shares
   authorized, issued and outstanding      -             1,000
 Common stock, $.01 par value, 45,000,000 shares authorized,
   8,550,582  and 3,590,451 shares issued and outstanding  85,506
 35,905
 Additional paid-in capital                19,530,035   343,124
 Retained earnings (accumulated deficit)   2,093,732    (530,482)

        Total  stockholders' equity (deficit)21,709,273    (150,4
53)

       Total liabilities, mandatorily redeemable
          preferred stock and stockholders' equity $33,517,827  $
14,298,386

The accompanying notes are an integral part of these financial  s
tatements.
<PAGE>
                      ACE*COMM CORPORATION
                    STATEMENTS OF OPERATIONS


                                        Years ended June 30,
                                       1997     1996     1995


Revenues -  Products, software licenses
   and  services                   $33,683,793$19,983,182$12,415,
331

Costs and operating expenses:
 Cost  of  products, software licenses and services17,626,48610,8
 36,490 6,579,504
 Selling, general and administrative10,992,3566,750,5336,048,700
 Research  and  development         1,471,731     956,950    1,04
 4,968

    Total costs and operating expenses30,090,57318,543,973  13,67
3,172

Income (loss) from operations      3,593,2201,439,209(1,257,841)

Interest income                      347,207 -        -
Interest  expense                   (156,040)  (379,553)    (334,
805)


Income (loss) before income taxes  3,784,3871,059,656(1,592,646)

Income taxes                                  1,160,173         -
-

Net  income  (loss)              $  2,624,214 $ 1,059,656$(1,592,
646)

Pro forma net income per share     $       0.32$         0.18

Shares used in computing pro forma net
 income per share                  8,152,1665,893,818
















 The accompanying notes are an integral part of these financial
                           statements.


<PAGE>
<TABLE>
<CAPTION>
                                        ACE*COMM CORPORATION
                            STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)

                                                                           Retained
                       Preferred Stock Common Stock  Additional  Stock     Earnings
                         Class B                      Paid-inSubscriptions(Accumulat
ed
                      Shares Par Value SharesPar ValueCapital  Receivable    Deficit)   Total
<S>                    <C>      <C>     <C>     <C>    <C>       <C>         <C>       <C>
Balance, June 30, 19941,000   $1,0003,261,245$32,612$    446,789         $
-                $   2,508$  482,909
Accretion of preferred stock dividends -       -       -        -        (139,894)    -     -
(139,894)
Exercise of common stock options-      -      36,000      360   12,980     (5,900)    -      7,440
Net loss for the year
 ended June 30, 1995    -       -             -          -              -            -     (1,592,646)
(1,592,646)

Balance, June 30, 19951,000    1,0003,297,245 32,972  319,875  (5,900) (1,590,138)(1,242,191)
Accretion of preferred stock dividends -       -       -        -        (139,894)    -     -
(139,894)
Exercise of common stock options-      -     293,206    2,933  163,143   (117,232)    -     48,844
Payment of stock subscriptions receivable-     -       -        -           -        123,132-
123,132
Net income for the year
 ended June 30, 1996    -        -             -          -             -            -     1,059,656
1,059,656

Balance, June 30, 19961,000    1,0003,590,451 35,905  343,124   -        (530,482) (150,453)
Accretion of preferred stock dividends -       -       -        -         (17,487)    -     -
(17,487)
Conversion of preferred stock, Class C -       -    1,530,950   15,310   2,263,804    -     -
2,279,114
Redemption of preferred stock, Class B(1,000)(1,000)   -        -        (307,000)    -     -
(308,000)
Issuance of common stock pursuant to
 initial public offering-      -    2,645,000 26,45016,083,653  -           -     16,110,103
Exercise of common stock options-      -     838,460    8,3852,060,162      -         -     2,068,547
Repurchase and retirement of common stock-     -     (54,279)    (544)   (896,221)    -     -
(896,765)
Net income for the year
 ended June 30, 1997    -        -             -          -             -               -     2,62
4,214           2,624,214

Balance, June 30, 1997    -    $    -    8,550,582$85,506$19,530,035$       -     $ 2,093,732$21,709,273
</TABLE>


   The accompanying notes are an integral part of these financial statements.


<PAGE>
                      ACE*COMM CORPORATION
                    STATEMENTS OF CASH FLOWS

                                         Years ended June 30,
                                          1997    1996    1995
Cash flows from operating activities:
Net income (loss)                                             $
2,624,214$ 1,059,656               $(1,592,646)
Adjustments to reconcile net income (loss)
 to net cash provided by (used for) operating activities:
   Depreciation                         448,228 279,773 243,245
   Amortization of capitalized software 687,180 542,240 418,373
Changes in operating assets and liabilities
  Accounts receivable              (7,475,991)(3,941,131)(338,
074)
  Inventories                        (977,904)(871,816)(165,704)
  Other assets                       (367,370)(490,446)(6,108)
  Accounts payable                   (387,421)1,876,455(169,129)
  Accrued expenses                   2,820,024 623,629 190,254
  Accrued compensation                 995,687 702,476(51,324)
  Deferred income taxes              1,160,173  -       -
  Deferred revenue                 (1,380,403)  893,026    311
,777
Net cash (used for) provided by operating
  activities                                  (1,853,583)  673
,862 (1,159,336)

Cash flows from investing activities:
Purchases of property and equipment (2,390,229)(416,969)(522,076)
Additions to capitalized software development costs(1,370,778)
(927,397)                             (473,158)

Net cash used for investing activities(3,761,007)(1,344,366)
(995,234)

Cash flows from financing activities:
Net (decrease) increase in line of credit(4,446,563)1,174,8131,
465,000
Other borrowings                      1,000,000 185,5391,144,376
Payments on debt                      (341,729)(682,521)(419,653)
Principal payments under capital lease obligation(20,578)-
-
Net proceeds from common stock issued16,110,103  -       -
Exercise of common stock options      2,068,547  48,844   7,440
Payment of stock subscriptions receivable               -
123,132                                  -
Repurchase and retirement of common stock(896,765)-      -
Redemption of preferred stock         (308,000)         -
-

Net cash provided by financing activities13,165,015   849,8072,
197,163

Net increase in cash and cash equivalents7,550,425179,30342,593
Cash and cash equivalents at beginning of year    369,206   189
,903     147,310
Cash and cash equivalents at end of year$ 7,919,631$   369,206$
189,903

Supplemental disclosures of cash flow information:
Cash paid during the year for interest$    163,527$  375,052$
329,048

Supplemental schedule of non cash financing activities:
Accretion of preferred stock dividends$       17,487$  139,894$
139,894
Purchase of equipment under capital lease$     222,152
<PAGE>
Conversion of Class C preferred stock$ 2,279,114

Exercise of common stock options               $      1,575$
90

Notes received for exercise of common stock options    $  117,232
$       5,900

 The accompanying notes are an integral part of these financial
                           statements.
<PAGE>
                      ACE*COMM CORPORATION
                  NOTES TO FINANCIAL STATEMENTS
                                
NOTE 1 -  ORGANIZATION

Organization

ACE*COMM  Corporation  ("ACE*COMM" or  the  "Company")  develops,
markets  and services operations support systems ("OSS") products
for  networks  deployed by telecommunications service  providers,
such  as  telephone  companies, other public carriers  and  large
enterprises operating data and voice networks using intranets and
the  Internet.  The Company's products perform such functions  as
billing  data collection, network surveillance, alarm  processing
and  network  management  for some of the  largest  carriers  and
enterprises in the world.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

The  preparation  of  financial  statements  in  conformity  with
generally  accepted accounting principles requires management  to
make  estimates and assumptions that affect the amounts  reported
in  the  financial statements.  Actual results could differ  from
those estimates.

Revenue recognition

The Company derives revenues from software license fees, hardware
sales, and product related services.  Revenue from hardware sales
is  recognized  upon delivery while revenue from product  related
services  is  recognized  as  the  services  are  rendered.   The
Company's software licenses to end users generally provide for an
initial  license  fee  to use the product in  perpetuity.   Under
certain  contracts, the Company licenses the source code  of  its
software  to  resellers for subsequent modification  and  resale.
Revenue  from software licenses is recognized after the  software
has  been  delivered,  all  significant  uncertainties  regarding
acceptance have expired and all significant obligations have been
fulfilled.   Costs  relating  to  insignificant  obligations  are
accrued.  Revenue from contracts with payment terms in excess  of
one  year  is  recognized  to the extent  of  payments  that  are
probable and due within one year.  Revenue related to obligations
to  provide  post  contract customer support  without  charge  is
unbundled from the license and recognized ratably over  the  term
of   the   agreement.   Revenue  from  maintenance  services   is
recognized  ratably over the term of the related agreement.   For
contracts  involving  significant  production,  modification   or
customization  of  hardware and software, revenue  is  recognized
using  the  percentage of completion method, based on performance
milestones  specified  in  the  contract,  which  fairly  reflect
progress toward contract completion.

Significant customers

The  Company extends credit to its customers in the normal course
of   business.   During  fiscal  1997,  two  customers   in   the
telecommunication  industry  represented  approximately  27%   of
revenues.  During fiscal 1996 and fiscal 1995, three customers in
the  same  industry  represented approximately  51%  and  59%  of
revenues,   respectively.   Sales  to  end  users  and  strategic
alliance partners in Canada comprised approximately 4%,  11%  and
16%   of   total  revenues  for  fiscal  1997,  1996  and   1995,
respectively.  Sales to end users in Mexico comprised 19% and 29%
of the Company's revenues for fiscal 1997 and 1996, respectively.
Sales  to strategic alliance partners in Korea comprised  24%  of
the Company's revenues for fiscal 1997.
<PAGE>
Cash equivalents

The  Company considers all investments with an original  maturity
of  three  months or less on their acquisition date  to  be  cash
equivalents.

Inventories

Inventories, which consist principally of purchased materials  to
be  used in the production of finished goods, are stated  at  the
lower  of  cost,  determined  on the first-in,  first-out  (FIFO)
method, or market.

Property and equipment

Property  and  equipment are recorded at cost.   Depreciation  is
calculated  using  the straight-line method  over  the  estimated
useful  lives of the related equipment, fixtures and vehicles  of
seven years.  Leasehold improvements are amortized on a straight-
line  method  over  the  shorter of the  improvements'  estimated
useful lives or related remaining lease terms.

Capitalized software development costs

The  Company owns certain proprietary rights to computer software
systems  that  the Company has either developed or purchased  and
licensed  to  customers.   Purchased computer  software  and  the
related copyrights are capitalized at their costs.

Research   and  development  costs  are  expensed  as   incurred.
However,  computer  software  development  costs  incurred  after
technological feasibility of a product is established through the
time  when the product is available for release to customers  are
capitalized.  Capitalized software and purchased technology costs
are  amortized on a product by product basis based on the greater
of  the ratio of current sales to estimated total future sales or
a  straight-line basis over the remaining estimated economic life
of  the  product  (no  greater than three years),  including  the
current year.  The Company periodically evaluates its capitalized
software  costs  for  recoverability against  anticipated  future
revenues,  and  writes  down or writes off  capitalized  software
costs if recoverability is in question.

Pro forma net income per share

Historical net income per share is not considered relevant as  it
would differ materially from pro forma net income per share given
the  change in the capital structure of the Company.   Except  as
noted below, pro forma net income per share is computed using the
weighted  average  number  of shares of  Common  Stock,  assuming
conversion of Class C Preferred Stock, and dilutive Common  Stock
equivalent  shares  from  Common  Stock  options.   Common  Stock
equivalent shares are calculated using the treasury stock method.
Pursuant  to Securities and Exchange Commission Staff  Accounting
Bulletin No. 83, Common Stock and Common Stock equivalent  shares
issued  by the Company at prices below the public offering  price
during  the twelve month period prior to the offering date (using
the  treasury stock method and an offering price of $7 per share)
have been included in the calculation as if they were outstanding
for all periods regardless of whether they are dilutive.

Income taxes

Deferred income taxes are recognized for the expected future  tax
consequences   of  temporary  differences  by  applying   enacted
statutory   tax  rates  to  differences  between  the   financial
statement  carrying amounts and the tax basis of existing  assets
and liabilities.

<PAGE>
Fair value of financial instruments

The  carrying  amounts  of  cash and cash  equivalents,  accounts
receivable,  accounts  payable, and accrued expenses  approximate
fair value because of the short maturity of these items.

The  carrying  amounts of debt issued pursuant to  the  Company's
bank  credit  agreements  approximate  fair  value  because   the
interest  rates on these instruments change with market  interest
rates.

The  Company believes that it is not practical to estimate a fair
market  value different from the Class C Preferred Stock carrying
value of $2,261,627 at June 30, 1996 as the security has numerous
unique  features  including  voting,  redemption  and  conversion
rights and is not traded on an open market.

Reclassification

Certain 1996 amounts have been reclassified to conform with  1997
financial statement presentation.

NOTE 3 - ACCOUNTS RECEIVABLE

Accounts  receivable  net of allowance for doubtful  accounts  of
$10,000 consist of the following:

                                                June 30,
                                            1997        1996
          
          Billed                       $12,980,371 $7,270,545
          Unbilled                       3,139,491 1,373,326
                                       $16,119,862 $8,643,871

Unbilled  receivables  include costs and  estimated  earnings  on
contracts  in progress and software license fees which have  been
recognized as revenue but not yet billed to customers  under  the
provisions  of  specific contracts.  Substantially  all  unbilled
receivables  are expected to be billed and collected  within  one
year.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:
                                                June 30,
                                            1997        1996

Computer equipment                     $ 3,593,665 $1,931,382
Furniture and fixtures                     907,930    279,841
Vehicles                                    42,384     42,384
Leasehold improvements                     106,761     19,654
                                        4,650,740  2,273,261
Less  accumulated  depreciation and  amortization(1,180,743)   (9
67,417)
                                      $ 3,469,997 $1,305,844


Depreciation  expense  of  property  and  equipment  amounted  to
$448,228,   $279,773  and  $243,245  in  1997,  1996  and   1995,
respectively.   At  June  30, 1997, furniture  and  fixtures  and
accumulated  depreciation  include a  capitalized  lease  in  the
amount of $222,000 and $13,000, respectively.

<PAGE>
NOTE 5 - CAPITALIZED SOFTWARE DEVELOPMENT COSTS

                                                June 30,
                                            1997        1996
     
Capitalized software development costs$ 5,938,595     $ 4,567,817
Less accumulated amortization          (3,861,930)     (3,174
,750)

                                     $ 2,076,665 $ 1,393,067

Amortization  expense  of  capitalized  software         $687,180
$542,240
amounted to and $418,373 in 1997, 1996 and 1995,
respectively.

NOTE 6 - BORROWINGS

The Company's borrowings consist of the following:
                                          June 30,
                                       1997       1996
Installment  note  payable,  due  in  
monthly installments                  
of  $20,833  through July  1,  2001,  
bearing interest at                   $1,000,000$    -
the  bank's prime rate (8.5% at June
30, 1997),
collateralized by general assets  of
the Company.
                                      
Installment  notes, due  in  varying  
monthly installments                  
through  June 2000, bearing interest  
at the bank's prime                         338,998    550,073
rate  (8.5%  at June 30, 1997)  plus
1%, collateralized
by  accounts  receivable,  inventory
and specific equipment.
                                      
Capital lease obligation for the use  
of an office                          
telephone  system,  principal   plus        201,575     -
interest (10.03%),
due   in  monthly  installments   of
$4,723 through
November 2001.

Bank line of credit, credit limit  up      
to $2,500,000,                             
due   November   30,  1997,   bearing      
interest at the                                -          1,775,000
bank's prime rate (8.25% at June  30,
1996)
plus 0.5%, collateralized by accounts
receivable,
inventory and specific equipment.
                                           
Bank line of credit, credit limit  up      
to $1,000,000,                             
due August 31, 1996, bearing interest      
at the bank's                                    -     1,000
prime  rate (8.25% at June 30,  1996)      ,000
plus
1.25%,  collateralized  by  inventory
and accounts
receivable.
                                           
Bank line of credit, credit limit  up      
to $1,000,000                              
due   November   30,  1997,   bearing      
interest at the                                -    921,563
bank's prime rate (8.25% at June  30,
1996)
plus 0.5%, collateralized by accounts
receivable,
 inventory and specific equipment.
<PAGE>
                                                   June 30,
                                              1997       1996

Bank line of credit, credit limit  up      
to $750,000                                
due August 20, 1996, bearing interest      
at the bank's                              $         -    $   75
prime  rate (8.25% at June 30,  1996)      0,000
plus 0.5%,
collateralized      by       accounts
receivable, inventory
and specific equipment.
                                           
Unsecured   note  payable   for   the      
purchase of technology                     
and product rights, principal due  in                          -
quarterly  installments  of   $10,417      52,083
plus  interest  at 8%  through  April      
1997.
Total borrowings                          1,540,57     1,540,5735,048,719
                                           
Less current portion                           (527,359)(2,097,1
                                           78)
                                           
Noncurrent portion                         $1,013,214$2,951,541
                                           

Annual maturities of noncurrent borrowings are as follows:

       1999                           $   366,663
       2000                               319,374
       2001                               304,146
       2002                                23,031
               Total                   $1,013,214

On June 30, 1997, the Company entered into a new installment note
arrangement  with  its bank. At June 30, 1997,  the  Company  has
borrowed  $1,000,000  under  this arrangement  which  is  due  in
monthly  installments of $20,833 through July 1, 2001.  The  loan
bears  interest  at  the bank's prime rate,  is  secured  by  the
general  assets  of  the Company and contains  certain  financial
covenants.

At  June  30, 1997, the Company has two separate lines of  credit
for  $2,500,000  and  $1,000,000, with its  bank  which  are  due
November  30,  1997.  The lines bear interest at  0.5%  over  the
bank's  prime  rate.   These  credit facilities  are  secured  by
accounts receivable, inventory and specific equipment and contain
certain financial covenants.

On  November  27,  1996,  the Company entered  into  a  five-year
noncancelable  lease  agreement  for  equipment  which  has  been
accounted for as a capital lease.

NOTE 7 - TRANSACTIONS WITH RELATED PARTIES

In  connection with the purchase of certain assets by the Company
at  its inception, the Company's president loaned $150,000 to the
Company  to assist in financing the acquisition.  The outstanding
loan  balance totaled $0 and $78,572 at June 30, 1997  and  1996,
respectively.

<PAGE>
NOTE 8 -  RETIREMENT PLAN

The  Company  has  a  401(k) plan, under which  to  be  eligible,
employees  must have completed six months of service  and  be  at
least  21  years  of  age and be credited  with  1,000  hours  of
service.  Contributions made by the Company during 1997, 1996 and
1995 were approximately $103,000, $97,000 and $0, respectively.

NOTE 9 - INCOME TAXES

Deferred tax assets (liabilities) are comprised of the following:

                                         June 30,
                                 1997      1996      1995
   Tax assets:
     Costs   capitalized   to  inventory$   244,892$     252,705$
134,572
     Accruals not deducted for tax172,058   88,356    55,368
     Net operating loss carryforwards4,189,835939,9171,203,675
     Tax credit carryforwards   316,126    291,738   251,283
     Copyright and patents       21,286     21,323    23,857
     Other                     -              4,017        3,963
      Gross deferred tax assets4,944,1971,598,056 1,672,718
   
   Tax liabilities:
     Income on contracts    (1,224,401)  (475,918) (333,297)
     Software costs deducted for tax(809,898)(616,076)(393,137)
     Depreciation             (257,983)  (229,312) (163,829)
     Other                      (3,261)         -       (3,900)
      Gross    deferred   tax   liabilities(2,295,543)(1,321,306)
(894,163)
     
     Net deferred tax asset   2,648,654   276,750    778,555

   Valuation allowance      (3,808,827) (276,750)   (778,555)
   
   Net deferred tax liability$(1,160,173)$       -      $       -



     Current   deferred  tax  liability$     (395,173)$         -
$      -
   Noncurrent   deferred   tax   liability    (765,000)         -
-

    Net  deferred  tax  liability      $(1,160,173)  $          -
$        -

<PAGE>
The components of the provision for income taxes are as follows:

                                   Years ended June 30,
                                 1997      1996      1995
   Current:
     Federal             $       -     $       -     $      -
     State                       -          -           -
   Total current                 -          -           -

   Deferred:
     Federal                  1,011,851     -         -
     State                      148,322     -           -
   Total deferred             1,160,173     -           -

      Total                                  $1,160,173$        -
$     -

The Company records a valuation allowance for deferred tax assets
when it is management's judgment that it is more likely than  not
that  all  or  a  portion of a deferred tax  asset  will  not  be
realized.  In 1997, the provision for income taxes included a net
increase in the valuation allowance of $3,532,077.  This increase
primarily  relates to additional income tax net operating  losses
generated  from  the deduction created by the  exercise  of  non-
qualified  stock  options.   This  income  tax  benefit  will  be
reflected  in  additional paid-in capital when actually  realized
for  tax  purposes.  In 1996, the provision for income taxes  was
comprised of a Federal and state provision of $457,000, which was
offset  by  a  reduction in the valuation allowance of  the  same
amount.   In addition, the Company recorded a foreign tax  credit
of  $44,000  which increased the valuation allowance. The  change
during  1995  in the valuation allowance was largely attributable
to the increase in net operating losses.

At  June  30,  1997,  the Company has available  research  credit
carryforwards of approximately $252,000, which are  available  to
offset  future income tax and expire in years through  2007.   In
addition,  the  Company  has available a foreign  tax  credit  of
$61,000 that expires in 2001.  The Company also has net operating
loss  carryforwards  for  income tax  purposes  of  approximately
$9,766,000 million which expire in years through 2010.  Ownership
changes,  as defined in the Internal Revenue Code, may limit  the
amount  of net operating loss carryforwards that can be  utilized
annually to offset future taxable income or tax liability.

The  total  income tax provision (benefit) for each  year  varied
from  the amount computed by applying the statutory U.S.  Federal
income tax rates to income before income taxes as follows:

                                    Years Ended June 30,
                                  1997     1996     1995

Income  tax  provision/(benefit) at statutory  rate$1,286,692   $
360,283                       $(541,500)
State  income  taxes  net  of Federal  benefit  178,245    48,956
(79,632)
Nondeductible expenses            69,629   23,503   30,555
Other                                        (97,643)      24,574
12,433
Change in valuation allowance  (276,750)(457,316) 578,144
   Actual provision          $1,160,173$      -      $     -


<PAGE>
NOTE 10 - MANDATORILY REDEEMABLE PREFERRED STOCK

On  October 31, 1991, in connection with an investment agreement,
the  Company  sold 340,211 shares of Class C Preferred  Stock  at
$5.14  per  share.  The Class C Preferred stock consists  of  two
series.   Series 1 stock (211,727 shares) provides voting  rights
equal  to the same number of shares of Common Stock and Series  2
stock  (128,484 shares) provides no voting rights but, if elected
by a majority of the holders of the Class C Preferred Stock, will
become voting shares on a one-to-one basis.

Each  share  of  Class C Preferred Stock may  be  converted  into
Common Stock at any time by the holder.  Additionally, the shares
will  be  converted  automatically upon an  underwritten,  public
offering  of  the Common Stock.  The number of shares  of  Common
Stock into which the Class C Preferred Stock can be converted  is
determined by a conversion price, as defined under the agreement.
At  June 30, 1996, the conversion price is $1.14 per share and if
converted, the shares would be exchanged on a 4.5 to 1 basis.  No
dividends are payable with respect to any converted shares.   The
Company  has  reserved 1,530,950 shares of Common Stock  for  the
purpose of conversion.

Any shares not converted by designated dates will be redeemed  by
the  Company as follows: one third of the shares on September 15,
1995, one-half of the remaining shares on September 15, 1996, and
all  the  remaining shares on September 15, 1997.  The redemption
price is equal to $5.14 per share plus accrued dividends.  In the
case  of  redemption, the holders are entitled to receive accrued
dividends,  at a semi-annual rate of four percent, from  November
1,  1992.  The Company also has the right to force redemption, if
certain  triggering events occur, at a price of $5.14  per  share
plus  accrued dividends from November 1, 1992, calculated  at  an
annual rate of twelve percent.

Activity with respect to Class C Preferred Stock is as follows:

       Balance, June 30, 1994          $ 1,981,839
       Accretion of dividends              139,894

       Balance, June 30, 1995            2,121,733
       Accretion of dividends              139,894

       Balance, June 30, 1996            2,261,627
       Accretion of dividends               17,487
       Conversion upon initial public offering(2,279,114)

       Balance, June 30, 1997             $     -

NOTE 11 - STOCKHOLDERS' EQUITY

Preferred Stock

In   July   1996,  the  Board  authorized  5,000,000  shares   of
undesignated Preferred Stock.  At June 30, 1997, no  shares  were
issued or outstanding.
<PAGE>
Stock Options

Prior  to the establishment of the Company's formal option  plan,
the  Company granted options to various employees for performance
and  hiring  incentives.  Under this plan, 909,000  options  were
granted and 886,500 were exercised or expired prior to 1994  with
an  option  price  of  $.17 - $.62.  During 1995,  the  remaining
22,400 shares were exercised at a price of $.17.  The Company  no
longer issues options under this plan.

The  Company  has  reserved 2,200,000 shares of Common  Stock  in
connection  with  a  Board of Directors approved  plan  to  grant
nonqualified  stock  options to officers and  key  employees  and
200,000 shares of Common Stock in connection with a plan to grant
nonqualified   stock   options  to  the   Company's   nonemployee
directors.   The  exercise  price  on  all  options  granted   is
equivalent to the fair market value of the Company's Common Stock
on  the  date of grant.  The terms of options, including  vesting
and  exerciseability are determined by the Compensation Committee
of  the  Board  of Directors.  All options granted to  date  vest
either  immediately or over a period of one to eight  years  from
the  date  of  grant, subject to accelerated vesting  in  certain
events  such as a change of control, and expire upon the  earlier
of the employee's termination or 10 years from the date of grant.
Certain   options  granted  in  1997  are  further   subject   to
accelerated vesting within one year from the date of grant  based
on  achievement  of  certain  pre-determined  performance  goals.
Vested  options become exerciseable immediately upon  vesting  or
within  three  years  from the date of grant.   The  Company  had
260,231   options   outstanding  subject   to   performance-based
accelerated  vesting arrangements at June 30, 1997.  Options  for
directors vest 4,500 shares each year from the date of grant  and
expire  the  earlier  of  5  years  from  date  of  grant,  after
resignation  or immediately upon removal for cause.  The  Company
had  exercisable options of 593,697, 938,711 and 1,187,407 as  of
June  30,  1997, 1996 and 1995, respectively.  The  stock  option
plan  also  provides for the issuance of restricted stock,  stock
appreciation rights and phantom stock options.  As  of  June  30,
1997,  1996  and  1995, no restricted stock,  stock  appreciation
rights or phantom stock options had been granted.  As of June 30,
1997, options available for granting were 266,656.

Information relating to all the plans is summarized as follows:

                                      Shares   Price

Options outstanding, June 30, 1994  1,144,693$   17 - .83
Granted                               107,199  .64 - .83
Exercised                                       (36,000)    .17 -
 .83
Expired                              (14,985)  .41 - .83

Options outstanding, June 30, 1995  1,200,907  .41 - .83
Granted                               173,503 .64 - 7.00
Exercised                                      (293,206)    .30 -
 .83
Expired                               (7,493)  .62 - .83

Options outstanding, June 30, 1996  1,073,711 .41 - 7.00
Granted                             758,177  7.00 - 14.75
Exercised                                    (838,460)      .30 -
14.75
Expired                               (5,250)        12.00

Options outstanding, June 30, 1997    988,178$  .30 - 14.75

Financial Accounting Standards No. 123
<PAGE>
Effective  June  30,  1997,  the  Company  adopted  Statement  of
Financial  Accounting Standards No. 123, "Accounting  for  Stock-
Based  Compensation"  ("SFAS  123").   In  accordance  with   the
standard,  the  Company  has  elected  to  continue  to   measure
compensation  expense  for  its  stock  option  plans  using  the
intrinsic value method prescribed by Accounting Principles  Board
Opinion No. 25, "Accounting for Stock Issued to Employees."

The  following  table summarizes information about stock  options
outstanding at June 30, 1997.

                                Options               Outstanding
Options Exercisable

                       Weighted-
                        Average
               Number  Remaining  Weighted-    Number  Weighted-
  Range of  OutstandingContractual Average  Exercisable Average
Exercise  Pricesat 6/30/97       Life       Exercise Priceat  6/3
0/97Exercise Price

                     $.30 to .83  330,236           1.6 years$.53
330,236               $.53                           $7.00397,777
4.1                $7.00 258,277      $7.00
                   $11.88 to 14.75260,165           9.6    $12.00
5,184             $14.75
                         988,178                       593,697

The  fair value of each option grant is estimated on the date  of
grant   using  the  Black-Scholes  model.   The  weighted-average
assumptions included in the Company's fair value calculations are
as follows:
                                         1997        1996
Expected life (years)                   3-8           3
Risk-free interest rate                  6%     5-6%
Volatility                                        77%  0%
Dividend yield                           0%        0%

The  weighted  average fair value of stock options granted  under
the  employee  stock  option  plans  during  1997  and  1996  was
$1,248,250 and $34,422, respectively.  Had the Company determined
compensation costs for these plans in accordance with  SFAS  123,
the Company's net income would have been $1,211,596 (or $0.15 per
share) in 1997 and $1,004,136 (or $0.17 per share) in 1996.   The
SFAS  123 method of accounting does not apply to options  granted
prior  to  January  1, 1995 and, accordingly, the  resulting  pro
forma  compensation cost may not be representative of that to  be
expected in the future.

NOTE 12 - INITIAL PUBLIC OFFERING

On  August  13,  1996, in connection with the  Company's  initial
public  offering, 2,875,000 shares of Common Stock, 2,645,000  of
which  were offered by the Company, were sold at $7.00 per share.
The net proceeds raised by the Company totaled $16,110,103.

The   Mandatorily   Redeemable  Class  C  Preferred   Stock   was
automatically converted on a one to one basis into  Common  Stock
upon the completion of the Company's initial public offering.  No
dividends were payable with respect to the converted shares.

On  August  28, 1996, the Company redeemed the Class B  Preferred
Stock  for  $308,000 in accordance with its terms  that  required
redemption  upon  transfer  of substantially  all  assets  or  of
majority control of the Company.
<PAGE>
NOTE 13 - CONTINGENCIES

As  collateral for performance on a long-term contract and  to  a
ceding  insurer, the Company entered into a bond on November  28,
1995 under which the Company is contingently liable in the amount
of $1,175,000.  This bond is in force until November 28, 1998.

At  June  30, 1997, the Company had a $500,000 letter  of  credit
arrangement  with a financial institution, which  guarantees  the
Company's performance to its landlord.

NOTE 14 - EFFECT OF NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued
Statement  of  Financial Accounting Standards No. 128,  "Earnings
per  Share"  ("SFAS 128").  This statement establishes  standards
for  computing  and  presenting earnings per  share,  simplifying
previous  standards for computing earnings per share ("EPS")  and
making  them comparable to international standards.  It  replaces
the presentation of primary EPS with a presentation of basic EPS,
and  requires dual presentation of basic and diluted EPS  on  the
face  of  the  income  statement for all  entities  with  complex
capital  structures.  Basic EPS excludes dilution and is computed
by  dividing  income  available to  common  shareholders  by  the
weighted-average  number  of common shares  outstanding  for  the
period.   Diluted EPS reflects the potential dilution that  could
occur if securities or other contracts to issue common stock were
exercised  or  converted into common stock  or  resulted  in  the
issuance of common stock that then shared in the earnings of  the
entity.  SFAS  128  requires  restatement  of  all  prior  period
earnings per share data presented, and is effective for financial
statements  issued  for periods ending after December  15,  1997,
including interim periods.  Earlier application is not permitted.

The  Company will adopt this statement during the second  quarter
of 1998, as required. Accordingly, all prior period EPS data will
be  restated.  To illustrate the effect of adoption, the  Company
has  elected to disclose pro forma basic and diluted EPS  amounts
computed using SFAS 128, as permitted by the standard.   The  pro
forma  basic  and diluted EPS for each of the two  years  in  the
period ended June 30, 1997 are set forth below:

                          Year Ended June 30,
                             1997      1996

 Pro forma basic earnings per share    $0.34      $0.20
 Pro forma diluted earnings per share$0.32        $0.18


NOTE 15 - COMMITMENTS

The  Company  leases  certain office space  under  non-cancelable
operating leases.  Lease terms range from two to seven years  and
include  renewal  options  for  additional  periods.   Management
expects  that  in the normal course of business, leases  will  be
renewed or replaced by other leases.

The Company is committed for the payment of minimum rentals under
operating  lease  agreements through  fiscal  year  2004  in  the
following amounts:

<PAGE>
     Year ending June 30,           Amount

          1998                  $   731,000
          1999                      745,000
          2000                      732,000
          2001                      693,000
          2002                      714,000
          Thereafter              1,046,000

                                 $4,661,000

The  total  rental expense under operating leases  was  $727,965,
$330,499 and $259,466 for the years ended June 30, 1997, 1996 and
1995, respectively.

ITEM 9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS   ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

          Not applicable.


     <PAGE>
                            PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


          The information called for by Item 10 is incorporated
     by reference to Proxy Statement for the 1997 Annual Meeting
     of Stockholders, to be filed pursuant to Regulation 14A not
     later than 120 days after the end of the fiscal year covered
     by this report.

ITEM 11.  EXECUTIVE COMPENSATION


          The information called for by Item 11 is incorporated
     by reference to Proxy Statement for the 1997 Annual Meeting
     of Stockholders, to be filed pursuant to Regulation 14A not
     later than 120 days after the end of the fiscal year covered
     by this report.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

          The information called for by Item 12 is incorporated
     by reference to Proxy Statement for the 1997 Annual Meeting
     of Stockholders, to be filed pursuant to Regulation 14A not
     later than 120 days after the end of the fiscal year covered
     by this report.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


          The information called for by Item 13 is incorporated
     by reference to Proxy Statement for the 1997 Annual Meeting
     of Stockholders, to be filed pursuant to Regulation 14A not
     later than 120 days after the end of the fiscal year covered
     by this report.

<PAGE>
                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, and REPORTS
     on FORM 8-K

     (a)  The information called for by Item 14 is included under
     Part III, Item 8 hereof.

           The following documents are filed as part of this
     report:


Exhibits

3.2*   Articles of Amendment and Restatement dated November 18,
       1991.
3.3*   Articles of Amendment dated August 6, 1996.
3.5*   Form of Articles of Amendment and Restatement of the
       Company.
3.6*   By-laws of the Company as amended to date.
4.1*   Form of Specimen of Common Stock Certificate.
10.1*  Supplier Agreement dated December 16, 1992 between the
       Registrant and AT&T World Services, Inc.
10.2*  Marketing Agreement dated June 18, 1990 between the
       Registrant and AT&T World Services, Inc.
10.3*  Subcontract Agreement dated February 24, 1994 between
       Registrant and AT&T Corporation, Government Integrated
       Solutions.
10.4   Authorized Distributor Agreement dated July 23, 1991
       between the Registrant and AmerInd, Inc.
10.5*  Supply Contract dated August 17, 1994 between the
       Registrant and Teleglobe Canada, Inc.
10.6*  License Agreement dated August 1, 1995 between the
       Registrant and Teleglobe Canada, Inc.
10.7*  Subcontract No. 95-1350-01 dated November 8, 1995 between
       the Registrant and ANSTEC, Inc.
10.8*  Agreement of Subcontract dated April 24, 1994 between the
       Registrant and the Communications Systems Division of GTE
       Government Systems Corporation.
10.9*  Agreement to Purchase Hardware, Render Services and
       License and Sublicense the Use of Software dated
       October 11, 1995 between the Registrant and Telefonos de
       Mexico, S.A. de C.V.
10.11* Amended and Restated Omnibus Stock Plan.
10.12  Form of Term Loan Note entered into Between the Company
       and two Officers in Fiscal 1997
10.13  Form of Non-Qualified Stock Option Grant Agreement
       (certain executive officers - fiscal 1997)
10.14  Form of Non-Qualified Stock Option Grant Agreement
       (certain executive officers - fiscal 1997)
10.15  Executive Bonus Plan
10.16  Lease Between Principal Mutual Life Insurance Company and
       the Company as Tenant dated August 6, 1996
11.1   Computation of Pro Forma Net Income Per Share
24     Consent of Price Waterhouse LLP
27     Financial Data Schedule



*    Incorporated by reference to the identically numbered
     exhibit filed as an exhibit to the Registrant's Registration
     Statement on Form S-1 No. 333-06731.

<PAGE>
(b)  No reports on Form 8-K have been filed during the fourth
quarter of fiscal 1997.

<PAGE>
SIGNATURES

     Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                              ACE*COMM CORPORATION

                              By:  /s/ George T. Jimenez
                                     George T. Jimenez
                                     Chief Executive Officer

                              Date:  September 30, 1997

     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
  
    Name                 Title                     Date
    /s/ George T.        President, Chief ExecutiveSeptember 30, 1997
    Jimenez              Officer
    (George T. Jimenez)  and Chairman of the Board
                         (Principal Executive Officer)
    
    /s/ Jeffrey S.       Vice President - Finance  September 30, 1997
    Simpson              (Principal Financial Officer
    (Jeffrey S.          and
    Simpson)             Principal Accounting Officer)
    
    
    /s/ Gilbert A.       Director                  September 30, 1997
    Wetzel
    (Gilbert A. Wetzel)
    
    
    /s/ Paul G. Casner,  Director                  September 30, 1997
    Jr.
    (Paul G. Casner,
    Jr.)
    
    
    /s/ Gary P. Golding  Director                  September 30, 1997
    (Gary P. Golding)
    
                                                   
<PAGE>
EXHIBIT INDEX

3.2*   Articles of Amendment and Restatement dated November 18,
       1991.
3.3*   Articles of Amendment dated August 6, 1996.
3.5*   Form of Articles of Amendment and Restatement of the
       Company.
3.6*   By-laws of the Company as amended to date.
4.1*   Form of Specimen of Common Stock Certificate.
10.1*  Supplier Agreement dated December 16, 1992 between the
       Registrant and AT&T World Services, Inc.
10.2*  Marketing Agreement dated June 18, 1990 between the
       Registrant and AT&T World Services, Inc.
10.3*  Subcontract Agreement dated February 24, 1994 between
       Registrant and AT&T Corporation, Government Integrated
       Solutions.
10.4   Authorized Distributor Agreement dated July 23, 1991
       between the Registrant and AmerInd, Inc.
10.5*  Supply Contract dated August 17, 1994 between the
       Registrant and Teleglobe Canada, Inc.
10.6*  License Agreement dated August 1, 1995 between the
       Registrant and Teleglobe Canada, Inc.
10.7*  Subcontract No. 95-1350-01 dated November 8, 1995 between
       the Registrant and ANSTEC, Inc.
10.8*  Agreement of Subcontract dated April 24, 1994 between the
       Registrant and the Communications Systems Division of GTE
       Government Systems Corporation.
10.9*  Agreement to Purchase Hardware, Render Services and
       License and Sublicense the Use of Software dated
       October 11, 1995 between the Registrant and Telefonos de
       Mexico, S.A. de C.V.
10.11* Amended and Restated Omnibus Stock Plan.
10.12  Form of Term Loan Note entered into Between the Company
       and two Officers in Fiscal 1997
10.13  Form of Non-Qualified Stock Option Grant Agreement
       (certain executive officers - fiscal 1997)
10.14  Form of Non-Qualified Stock Option Grant Agreement
       (certain executive officers - fiscal 1997)
10.15  Executive Bonus Plan
10.16  Lease Between Principal Mutual Life Insurance Company and
       the Company as Tenant dated August 6, 1996
11.1   Computation of Pro Forma Net Income Per Share
24     Consent of Price Waterhouse LLP
27     Financial Data Schedule


___________

*    Incorporated by reference to the identically numbered
     exhibit filed as an exhibit to the Registrant's Registration
     Statement on Form S-1 No. 333-06731.