SECURITIES AND EXCHANGE COMMISSION                       
                              WASHINGTON, DC 20949

                                   FORM 10-QSB

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                          OF THE SECURITIES ACT OF 1934

                      For the Quarter Ended August 31, 1998

                         Commission File Number 0-22382

                             SECTOR COMMUNICATIONS, INC.                        
                 (Name of small business issuer in its charter)

         Nevada                                                       56-1051491
(State or other jurisdiction of                                    (IRS Employer
Incorporation or organization)                               Identification No.)


                7601 Lewinsville Road, Suite 250, McLean VA 22102
                     Address of principal executive offices

                                            (703) 761-1500    
Issuer's Telephone Number

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  report),  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes [x] No [ ]

As of August 31, 1998, there were 1,211,998  shares of the  Registrant's  Common
Stock outstanding.

                           SECTOR COMMUNICATIONS, INC.
                              REPORT ON FORM 10-QSB
                                TABLE OF CONTENTS


PART I ------      FINANCIAL INFORMATION

         Item 1.  Financial Statements

         Consolidated balance sheet -
                  August 31, 1998 (unaudited) and February 28, 1998            2

         Consolidated statement of operations -
                  Three and six-month periods (unaudited) ended
                  August 31, 1998 and 1997                                     4

         Consolidated statement of cash flows -
                  Three and six-month periods (unaudited) ended
                  August 31, 1998 and 1997                                     5

Notes to Consolidated financial statements (unaudited)                         7

         Item 2.  Management's Discussion and Analysis                        12

PART II -----      OTHER INFORMATION

         Item 1.  Legal Proceedings                                           16
         Item 6.  Exhibits and Reports on Form 8-K                            16

         Signatures                                                           16


<PAGE>


                           SECTOR COMMUNICATIONS, INC.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>


                                                                                   August 31,                    February 28,
                                                                                       1998                           1998
              
                                                                                 (Unaudited)
       ASSETS
CURRENT ASSETS

<S>                                                                                     <C>                      <C>    

   Cash and Cash Equivalents ...................................................        $   195,307              $   128,911
   Accounts Receivable, net of provision for doubtful
     accounts of $11,326 and $38,097 ...........................................            299,251                  501,010
   Notes Receivable ............................................................             37,500                  125,000
   Prepaid Expenses ............................................................             61,001                   45,646

     Total Current Assets ......................................................            593,059                  800,567


PROPERTY AND EQUIPMENT .........................................................          2,232,795                2,211,317
   Accumulated Depreciation ....................................................         (1,642,586)              (1,476,444)

   Net Book Value ..............................................................            590,209                  734,873


OTHER ASSETS
   Intangible Assets, net ......................................................          4,780,091                4,974,345
   Deposits ....................................................................             42,482                   42,482
   Other Assets ................................................................             49,700
                                                                                        -----------              -----------

     Total Other Assets ........................................................          4,872,273                5,016,827

     TOTAL ASSETS ..............................................................        $ 6,055,541              $ 6,552,267
                                                                                        ===========              ===========



</TABLE>











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

                                                       - 2 -




<PAGE>


                           SECTOR COMMUNICATIONS, INC.
                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                                          August 31,
February 28,
                                                                                                                                1998
                                                                                                                                1998
                                                                                        (Unaudited)
       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> ...................................................................................................           <C>            <C>

     Accounts Payable and Accrued Expenses ............................................................  $  1,506,232  $  1,689,711 
                                                                                                                            
   Debentures Payable, net of discount of $181,000 ....................................................       319,000           
                                                                                                                         
   Deferred Revenue ...................................................................................       219,487       298,419 
                                                                                                                              
   Due to Related Parties .............................................................................       267,524       235,785 
                                                                                                          ------------  ------------
                                                                                                                                    
     Total Current Liabilities ........................................................................     2,312,243     2,223,915 
                                                                                                                            
                                                                                                                                    
Rent Deposit ..........................................................................................        12,248        12,248 
                                                                                                         ------------   ------------
                                                                                                                                    
     TOTAL LIABILITIES ................................................................................     2,324,491     2,236,163 
                                                                                                                            
                                                                                                         ------------   ------------
Commitments and Contingencies .........................................................................          --           --    
                                                                                                                                 
                                                                                                                                    
STOCKHOLDERS' EQUITY                                                                                                               
   Preferred Stock, $.001 par value; 5,000,000 shares                                                                              
     authorized, no shares issued and outstanding .....................................................          --           --    
                                                                                                                                 
   Preferred Stock, Series A $.001 per share, no shares                                                                          
     issued and outstanding ...........................................................................          --           -- 
                                                                                                                                 
   Common Stock, $.001 par value; 40,000,000 shares                                                                             
     authorized, 1,211,645 and 917,952 shares                                                                                     
     issued and outstanding (See Note 10) .............................................................         1,211           918 
                                                                                                                                  
   Additional Paid-in Capital .........................................................................    14,023,429    13,729,709
                                                                                                                           
   Retained Deficit ...................................................................................   (10,272,442)   (9,244,613)
                                                                                                                           
   Cumulative Foreign Currency Translation Adjustment .................................................       (21,148)     (169,910)
                                                                                                         ------------   -----------
                                                                                                                 
                                                                                                          
                                                                                                                                   
     Total Stockholders' Equity .......................................................................     3,731,050     4,316,104
                                                                                                         ------------   -----------
                                                                                                                                   
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................................  $  6,055,541    $6,552,267 
                                                                                                         ============   ============
                                                                                                                            
                                                                                                                       
</TABLE>









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

                                                       - 3 -


<PAGE>

<TABLE>
<CAPTION>

                           SECTOR COMMUNICATIONS, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)




                                              Three Months Ended            Six Months Ended
                                              August 31,    August 31,    August 31,    August 31,                           
                                                  1998          1997          1998          1997                            
                                           -----------   -----------   -----------    -----------                                  
<S> ...................................  <C>           <C>           <C>           <C>

REVENUE
   Telecommunication Revenue ..........  $   157,352   $   195,542   $   361,328      $   446,226
   Software Sales and Maintenance .....       89,162       288,432       195,570          661,143
                                          -----------   -----------   ----------
                                             246,514       483,974       556,898        1,107,369
                                                                                                   

COST OF SALES .........................      128,807       250,966       267,646          622,354
                                          -----------   -----------   -----------      -----------

GROSS PROFIT ..........................      117,707       233,008       289,252          485,015
                                          -----------   -----------   -----------      -----------

OPERATING EXPENSES
   Gold Exploration Costs .............          691        27,219         3,353          57,083
                                                                                                      
   Software Development Costs .........       78,136       177,748       206,532         415,667
                                                                                                     
   Sales, General and Administrative ..      372,201       803,198     1,005,983       1,569,984
                                         -----------   -----------   -----------       -----------
                                                                                                   
     Total Operating Expenses .........      451,028     1,008,165     1,215,868       2,042,734
                                         -----------   -----------   -----------       -----------
                                                                                                   

Loss From Operations ..................     (333,321)     (775,157)     (926,616)     (1,557,719)
                                         -----------   -----------   -----------       -----------
                                                                                                  

OTHER INCOME (EXPENSE)
   Interest Income ....................     ( 81,462)         (612)     (107,287)     (    1,224)
                                                                                             
   Other Income (Expense) .............        2,411     (   5,113)        6,074          20,122
                                                                                                      
   Foreign Exchange Gain (Loss) .......            -    (   13,896)          -        (    3,622)   
                                         -----------   -----------   -----------       -----------
                                                                                             
                                                                                                

     Total Other Income (Expense) .....   (   79,051)    (  19,621)     (101,213)         15,276
                                         -----------   -----------   -----------       -----------
                                                                                                      

Loss Before Provision for Income Taxes      (412,372)     (794,778)   (1,027,829)      (1,542,443)
                                                                                                  

Provision for Income Taxes ............         --            --            --   
                                         -----------   -----------   -----------       -----------
                                                                                                 

Net Loss ..............................  $  (412,372)  $  (794,778)  $(1,027,829)     $(1,542,443)
                                         ===========   ===========   ===========       ===========

Loss Per Share .....................      $(    0.34)   $(    0.88)  $     (0.90)     $     (1.71)
                                         ===========   ===========   ===========       ===========
                                                                                                 
                                                                                                 

Weighted Average Number of Shares
   Outstanding ........................    1,211,645       907,092     1,143,146          902,527
                                                                                                     

</TABLE>








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

                                                       - 4 -


<PAGE>

<TABLE>
<CAPTION>

                           SECTOR COMMUNICATIONS, INC .....
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                       FOR THE SIX MONTHS ENDED AUGUST 31,


<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                         1998              1997 
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Loss ....................................... $(1,027,829)     $(1,542,443)
   Adjustments to Reconcile Net Loss to Net Cash
    Provided By Operating Activities:
     Depreciation and Amortization ................     392,660          408,437   
                                                                                
     Amortization of Discount and Insurance Costs .      94,300             --   
                                                                                
     Change in Assets and Liabilities                                        
       (Increase) Decrease in Assets                                         
         Accounts Receivable ......................     201,759          267,063   
                                                                                
         Repayment of Related Party Receivable ....        --             32,198   
                                                              
         Prepaid Expenses and Deposits ............     (15,355)          23,288      
                                                                                
         Receivable on Sale of Securities .........        --            971,000   
                                                                                
       (Decrease) Increase in Liabilities                                    
         Accounts Payable .........................    (183,479)          12,961
                                                                                
         Related Party Payable ....................      31,739           (4,202)  
                                                                   
         Deferred Revenue .........................    ( 78,932)       (174,055)      
                                                    -----------      -----------   
                                                                     
                                                                        
Net Cash Provided (Used) By Operating Activities ..    (585,137)          (5,753)      
                                                    -----------      -----------     
                                                                               
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:                                 
   Purchase of Fixed Assets .......................     (21,478)         (34,889)     
                                                                               
   Decrease in Marketable Securities ..............        --             21,762   
                                                                                
   Notes and Loans Receivable .....................      87,500           56,798   
                                                                                
Net Cash Provided by Investing Activities .........      66,022           43,671
                                                                          
                                                                                
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:                                        
   Sale of Debentures .............................     430,000            -
                                                                                
                                                                             
Effect of Exchange Rate Changes on Cash ...........     155,511          (35,619)  
                                                                               
                                                                             
Net Increase in Cash ..............................      66,396            2,299   
                                                                                
                                                                  
CASH - ............................................     128,911           80,096
                                                    -----------      -----------           
                                                                             
CASH - AUGUST 31, ................................. $   195,307      $    82,395
                                                    ===========      ===========           
                                                                  

SUPPLEMENTAL CASH FLOWS INFORMATION:
   Cash Paid For:
     Interest   $ .................................        --     $      --
                                                    ===========   ===========
     Taxes ........................................ $      --     $      --
                                                    ===========   ===========

</TABLE>

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

                                                       - 5 -


<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                       FOR THE SIX MONTHS ENDED AUGUST 31,



           SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCIAL ACTIVITIES:

                          Period Ended August 31, 1998:

       Common stock totalling 25,306 shares was issued to retire a debt of
                                    $39,013.

     Common stock totalling 75,000 shares was issued in connection with the
                 preferred stock conversion described in Note 7.

     Common stock totalling 60,000 shares was issued in connection with the
   placement of the convertible debentures described in Note 8. A discount of
                   $255,000 has been ascribed to these shares.

                         Period Ended August 31, 1997:

 Common stock totalling 1,000,000 shares was issued in connection with a Februar
y 28, 1997 debt reduction
                                   agreement.

























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

                                      - 6 -



                                     <PAGE>


                           SECTOR COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 AUGUST 31, 1998


               NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                            a) Basis of Presentation
           The accompanying financial statements have been prepared in
            accordance with generally accepted accounting principles
           for interim financial information and with the instructions
           to Form 10-QSB. Accordingly, they do not include all of the
            information and footnotes required by generally accepted
           accounting principles for complete financial statements. In
           the opinion of management, all adjustments (consisting only
           of normal recurring adjustments) considered necessary for a
                  fair presentation have been included.Certain
             reclassifications have been made to the prior period to
                  conform to the current period's presentation.

            For further information refer to the financial statements
           and footnotes included in the Registrant's Annual Report on
               form 10-KSB for the period ended February 28, 1998.

            The results of operations for any interim period are not
            necessarily indicative of the results to be expected for
                 the full fiscal year ending February 28, 1999.

            The unaudited consolidated balance sheet as of August 31,
           1998 and the consolidated statements of operations and cash
           flows for the three and six month periods ended August 31,
             1998 and 1997 are those of Sector Communications, Inc.
                ("Sector") and its subsidiaries (collectively the
              "Company"). All significant intercompany accounts and
                       transactions have been eliminated.

            The accompanying consolidated financial statements as of
           August 31, 1998 and for the three and six months then ended
              include the accounts of Sector and its subsidiaries.
                        Such subsidiaries are as follows:

                     Global Communications, Inc. 100% owned
                          HIS Technologies AG 60% owned
                         Mountain Software AG 100% owned

                                b) Loss Per Share
            Loss per share is based on the weighted average number of
              shares of common stock outstanding during the period.

                         c) Foreign Currency Translation
                In accordance with the provisions of Statement of
           Accounting Standard No. 52, "Foreign Currency Translations"
           ("SFAS No. 52") the assets and liabilities of the Company's
               subsidiaries located outside the United States are
           generally translated at the rates of exchange in effect at
             the balance sheet date. Gains and losses resulting from
            foreign currency transactions are recognized currently in
            income and those resulting from translation of financial
             statements, with the exception of entities operating in
           highly inflationary economies, as Global does in Bulgaria,
            are accumulated in a separate component of stockholders'
              equity. In highly inflationary economies, SFAS No. 52
              requires that the use of historical exchange rates to
            translate nonmonetary items and current exchange rates to
              translate monetary items. The effect of exchange rate
                        changes is reflected in net loss.

                                      - 7 -


                                     <PAGE>


                           SECTOR COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 AUGUST 31, 1998



NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                         May 31,   February 28,
                                           1998        1998 
Fiber Network                           $ 157,837      $ 157,837
Equipment                               1,916,192      1,916,192
Furniture and Fixtures                     68,698         47,220
Vehicles and Other                           90,068    90,068
                                        ------------- ------------
                                        2,232,795          2,211,317
Less: Accumulated Depreciation          (1,642,586)    (1,476,444)
                                          ----------- -----------
                                        $ 590,209      $ 734,873
                                        ========== ============

Depreciation expense for the six month periods ended August
31, 1998 and 1997 was $164,795 and $210,116, respectively,
and for the three month periods ended August 31, 1998 and
1997 was $81,567 and $103,829, respectively.

NOTE 3 - INTANGIBLE ASSETS

Intangible assets at August 31, 1998 are as follows:

Intangible assets related to the acquisition
of Histech $ 4,286,922

Intangible assets related to the acquisition
of Mountain 595,959

Intellectual property and distribution rights
acquired by Histech prior to its acquisition
by Sector, net of foreign currency
exchange fluctuations. 771,590
5,654,471
Amortization of intangible assets and intellectual
property and distribution rights 874,380

Total $ 4,780,091
===========

           The intangible asset recorded for intellectual property and
             distribution rights was acquired by Histech based on an
            agreement, as amended, dated May 1, 1996, between Histech
                              and HIS Software AG.

            The excess purchase price over the fair value of the net
            assets acquired of Histech and Mountain will be amortized
            on a straight-line basis over twenty years. Costs related
               to the acquisition of the intellectual property and
           distribution rights purchase by Histech are amortized over
                    the estimated useful life of five years.


                                      - 8 -


                                     <PAGE>


                           SECTOR COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 AUGUST 31, 1998


                                NOTE 4 - WARRANTS

           At August 31, 1998, the Company has reserved 36,000 shares
              of common stock for issuance upon the exercise of the
             currently outstanding warrants. The exercise prices and
                expiration dates of the warrants are as follows:

                      Number   Exercise   Date       Date of
                     of Shares Price     Exercisable Expiration
                  ----------- ---------- ----------- ----------
                        2,000 $112.50    2/28/97      6/30/00
                        2,000 150.00     7/20/97       6/30/00
                        2,000 200.00     7/20/98       6/30/00
                        5,000 39.50      2/28/97       7/18/99
                       25,000 39.50      2/28/97       7/18/99
                  -----------
                       36,000

                           NOTE 5 - STOCK OPTION PLANS

           At August 31, 1998, the Company has options outstanding for
           the purchase of 26,200 shares under the 1994 Stock Plan, at
            exercise prices ranging from $18.75 to $81.25 per share.
           21,200 options are exercisable as of August 31, 1998. There
              were no option transactions during the period March 1
                            through August 31, 1998.

                        NOTE 6 - SECTOR COMMUNICATIONS AG

           Sector Communications AG was dissolved in July of 1997. At
             the time of its dissolution it had no operating budget,
            revenues nor employees. The Company acquired 100% of the
              outstanding capital stock of Sector Communications AG
           ("Sector AG") on July 31, 1996, from Murray Services, Ltd.
           ("Murray") for the purpose of holding the equity interests
               acquired by the Company in Switzerland, namely HIS
           Technologies AG and Mountain Software AG. At the time that
                Sector AG was acquired it had neither assets nor
            liabilities. Equity interests in HIS Technologies AG and
              Mountain Software AG are now held directly by Sector.

                          NOTE 7 - STOCKHOLDERS' EQUITY

                                 Preferred Stock
               The Company has authorized an issue of Series A 8%
           Cumulative Convertible Preferred Stock. The preferred stock
           may be converted into Common Stock at the lesser of (i) 75%
              of the five-day average closing bid price immediately
           preceding the conversion date or (ii) the closing bid price
               on the date of purchase of the preferred stock (the
               "Closing Date"). Up to and including the 100th day
             following the Closing Date, the Company shall have the
            right to redeem any or all of the shares for 125% of the
                     purchase price, plus accrued dividends.

                                      - 9 -


                                     <PAGE>


                           SECTOR COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 AUGUST 31, 1998



                    NOTE 7 - STOCKHOLDERS' EQUITY (continued)

                                  Common Stock
                      Fiscal Year 1998 Reverse Stock Split

            On July 22, 1997, the Board of the Company authorized an
           amendment to the Company's Amended and Restated Articles of
              Incorporation approving a reverse stock split of the
           outstanding shares of the Common Stock on the basis of one
               new share of the Common Stock for each 40 shares of
           outstanding Common Stock. The Amendment was approved at the
            Annual Meeting of Stockholders held on October 21, 1997.
             Such action did not change the par value of the Common
           Stock of $.001 per share of the number of authorized shares
                        of the Common Stock from 50,000.

           On November 18, 1997, the Board authorized a reverse stock
              split of the Common Stock of one share for every 1.25
            outstanding shares. The par value of the Common Stock did
           not change, but the number of authorized shares was reduced
              from 50,000,000 to 40,000,000. The two reverse stock
           splits, which had the combined effect of a 1 for 50 reverse
             stock split, as well as the reduction of the authorized
           shares, became effective with the filing of an amendment in
                           Nevada on December 2, 1997.

                         Recent Issuance of Common Stock
            On January 5, 1998, FT Trading, based in London, England,
                purchased 250 shares of the Company's Series A 8%
           Convertible Preferred Stock, $.001 par value (the "Series A
            Preferred"), for $250,000 in a private placement pursuant
              to Regulation S under the Securities Act of 1933, as
            amended (the "Securities Act"). Concerned that the holder
              of the shares of the Series A Preferred may have been
            selling shares of the Common Stock, thereby lowering the
            market price of the Common Stock, on March 18, 1998, the
            Company gave the holder notice of its intention to redeem
            on April 2, 1998 all 250 shares of the Series A Preferred
           for $312,500, which action terminated the holder's right to
            convert. In Lieu of the redemption, Firstimpex, based in
           Geneva, Switzerland, purchased the 250 shares of the Series
           A Preferred from FT Trading for the redemption price on the
           condition that the Company restore the conversion right and
             issue to Firstimpex 75,000 shares of the Common Stock,
           which issuance was effected on April 5, 1998 simultaneously
            with the restoration of the conversion right. On the same
              day, Firstimpex converted 165 shares of the Series A
           Preferred into 73,333 shares of the Common Stock based on a
              conversion price of $2.25 per share. On May 13, 1998,
           Firstimpex converted the remaining 85 shares of the Series
           A Preferred into 60,044 shares of Common Stock based on the
            alternative conversion price of $1.415625 per share which
            represented the average of the closing bid prices during
              the five trading days preceding the conversion date.

            In connection with the sale of its 6% Convertible Notes,
             the Company issued 30,000 shares of its Common Stock to
                           each of the two purchasers.

           The Company issued 25,306 shares of Common Stock to retire
             debt owed to a related party in the amount of $39,013.

                                     - 10 -


                                     <PAGE>


                           SECTOR COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 AUGUST 31, 1998



                           NOTE 8 - DEBENTURES PAYABLE

            On April 15, 1998, the Company sold $500,000 in principal
           amount of its 6% Convertible Promissory Notes due July 30,
              1999 (the "Notes") pursuant to Regulation S under the
            Securities Act for net proceeds of $430,000. In addition,
               the two purchasers, Amex Corp. Limited and Danvers
           Investment Corp., each a British Virgin Island corporation,
              with an address in Zurich, Switzerland, each received
                       30,000 shares of the Common Stock.

            Effective May 26, 1998, each holder has the full right to
           convert its Note in the principal amount of $250,000, plus
           accrued interest (at the rate of 6% per annum), in whole or
            in part, into shares of the Common Stock at a conversion
            price equal to the lesser of (1) $2.98 (which was 80% of
             the closing bid prices of the Common Stock on April 15,
            1998) or (2) 80% of the average closing bid prices of the
               Common Stock for the five trading days immediately
                         preceding the conversion date.

                     NOTE 9 - COMMITMENTS AND CONTINGENCIES

            Currently the Company does not meet certain of the Nasdaq
            maintenance requirements. If the Common Stock is delisted
            from the Nasdaq Smallcap Market because of the Company's
           inability to meet the Nasdaq maintenance requirements, its
              price quotations would either be reported in the OTC
            Bulletin Board or in the pink sheets. In addition, if the
              bid price continues to be below $5.00 per share, the
                security would then become subject to Rule 15g-9
             promulgated under the exchange Act, which Rule imposes
           additional sales practices requirements on a broker-dealer
           which sells Rule 15g-9 securities to persons other than the
             broker-dealer's established customers and institutional
              accredited investors (as such term is defined in Rule
                        501(a) under the Securities Act).














                                     - 11 -


                  Item 2. Management's Discussion and Analysis

                             Results of Operations

        The following is management's discussion and analysis of certain
  significant factors which have affected the financial position and operating
  results of Sector Communications, Inc. (the "Company") and its subsidiaries
during the three and six months ended August 31, 1998 as compared with the three
                     and six months ended August 31, 1997.

                           Telecommunication Revenue

     Global Communications Group, Inc. (Global"), the Company's subsidiary,
derives all of its telecommunications revenue from Global's Bulgarian subsidiary
 (1) providing direct-dial services for international long distance calls to a
select group of hotels in the cities of Sofia and Plovdiv in Bulgaria; (2) from
 the integration, installation and maintenance of customer-owned digital phone
  systems; and (3) from usage-based percentages of company-owned digital phone
      system through shared revenue agreements with some of its customers.

     Telecommunication revenue decreased by $38,190 or 20% from $ 195,542 in
  the three months ended August 31, 1997 to $157,352 in the three months ended
  August 31, 1998. Telecommunication revenue decreased by $84,898 or 19% from
 $446,226 in the six months ended August 31, 1997 to $361,328 in the six months
ended August 31, 1998. These decreases were due to a cross-the-board decrease in
  the use of hotel phones in Bulgaria by international travelers for purposes
  other than faxing. Management believes that such travelers are increasingly
 using cellular or mobile telephones instead to make their calls. In the event
that this is a local trend, management is looking to offset this loss of revenue
    by the Bulgarian subsidiary exploring Internet and Intranet usage of its
installed system. Assuming that this is a trend, there can be no assurance that
                  these offsetting efforts will be successful.

                     Software Sales and Maintenance Revenue

   Software sales and maintenance revenue from HIS Technologies AG ("Histech")
decreased by $199,270 or 69% from $288,432 in the three months ended August 31,
 1997 to $89,162 in the three months ended August 31, 1998. Software sales and
 maintenance revenue from Histech decreased by $495,573 or 75% from $661,143 in
the six months ended August 31, 1997 to $195,570 in the six months ended August
                                   31, 1998.


                                      -12-
                                 Cost of Sales

     Costs of sales decreased by $122,159 or 49% from $ 250,966 in the three
 months ended August 31, 1997 to $128,807 in the three months ended August 31,
1998. Cost of sales decreased by $354,708 or 57% from $622,354 in the six months
 ended August 31, 1997 to $267,646 in the six months ended August 31, 1998. The
   decreases were due to the decrease in the revenues of the Company and its
                                 subsidiaries.

                           Software Development Costs

      Histech's software development costs decreased by $99,612 or 56% from
 $177,748 in three months ended August 31, 1997 to $78,136 in the three months
    ended August 31, 1998. Histech's software development costs decreased by
    $209,135 or 50% from $415,667 in the six months ended August 31, 1997 to
 $206,532 in the six months ended August 31, 1998. These decreases were due to
 the unavailability of funds to finance the Company's research and development
                                  operations.

      Management believes that a significant level of software development
 costs will be required by Histech to remain competitive and expects such costs
will increase in the future if the funding for such increased costs is available
         to the Company, as to which funding there can be no assurance.

                  Selling, General and Administrative Expense

      This expense decreased by $430,997 or 54% from $ 803,198 in the three
 months ended August 31, 1997 to $372,201 in the three months ended August 31,
 1998. The selling, general and administrative expense decrease by $564,001 or
36% from $1,569,984 in the six months ended August 31, 1997 to $1,005,983 in the
    six months ended August 31, 1998. These decreases were due to the lower
                                   revenues.

                                    Net Loss

      The net loss decreased by $382,406 or 48% from $ 794,778 in the three
 months ended August 31, 1997 to $412,372 in the three months ended August 31,
   1998 as a result of the reasons described above. The net loss decreased by
   $514,614 or 33% from $1,542,443 in the six months ended August 31, 1997 to
  $1,027,829 in the six months ended August 31, 1998 for the reasons described
                                     above.



                                      -13-
                        Liquidity and Capital Resources

       The Company is experiencing negative cash flow from operations. The
   funding of future operations will require further infusions of capital or
                        seeking new sources of revenue.

      If additional funds are raised by the Company through the issuance of
  equity securities, or securities convertible into or exercisable for equity
  securities, the percentage ownership of the then current stockholders of the
  Company will be reduced. The Company may issue preferred stock with rights,
   preferences or privileges senior to those of the Common Stock. Although as
 indicated below the Company is attempting to implementing a plan to revitalize
 the Company, there can be no assurance that the Company will be successful in
  its efforts to obtain adequate capital nor if any such additional capital is
 made available to the Company that it will be on terms and conditions that are
       not extremely dilutive to the present holders of the Common Stock.
Discontinuance of the listing of the Common Stock on the Nasdaq SmallCap Market
because of the Company's failure to meet the Nasdaq maintenance requirements may
  adversely impact the Company's ability to obtain future financing. A hearing
 before a Nasdaq panel on continued listing is scheduled for October 22, 1998.

                       The plan encompasses the following:

 1. A one-year bridge loan of $500,000 from a German investment bank to enable
 the Company to continue to meet certain obligations while the rest of the plan
 is being implemented. The lender will receive, as additional consideration, a
two-year warrant to purchase 100,000 shares of the Company's Common Stock, $.001
 par value ("the Common Stock"), at $1.00 par share. The Lender may, in lieu of
receiving interest (at the rate of 12% per annum) at the maturity date, receive
  a warrant to purchase 25,000 shares of the Common Stock at $1.00 per share.

2. The Company and Shilaat Corp., a New York corporation ("Shilaat"), will enter
    into an agreement pursuant to which the Company would acquire all of the
 outstanding shares of capital stock of Shilaat in exchange for $2,800,000 and
6,000,000 shares of the Common Stock. Shilaat is privately owned by Isaac Nussen
and George Weisz and its principal asset is the shares of Jarnow Corporation, a
New York corporation which is engaged in the wholesale jewelry manufacturing and
sales business. Shilaat will have the right to designate a majority of the Board
                                 of Directors.



                                      -14-
 3. The Company will sell, pursuant to Regulation D under the Securities Act of
1933, as amended, not less than 250,000 nor more than 300,000 shares of Series B
    Convertible Preferred Stock (the "Series B Shares") at $20 per share or
  aggregate gross proceeds of $5,000,000 to $6,000,000. The Series B Preferred
   Shares will be convertible into shares of the Common Stock at a conversion
 prices equal to the lesser of (a) 100% of the average of the closing bid price
of the Common Stock during the five trading days preceding the closing date for
 the sale of the Series B Shares and (b) 80% of the average of the closing bid
   prices for the five trading days preceding the date of conversion, but in
   neither (a) nor (b) may the conversion price be below $1.00 per share. The
  Company has been advised that this offering can be closed promptly upon (x)
     execution of the definitive agreement with Shilaat, (y) filing of the
    Certificate of Designations with respect to the Series B Shares and (z)
      execution of the related documentation with respect to the offering.

     4. The Company will sell to a designee of Windsor Capital Fund IV the
  outstanding shares of Global in consideration of (a) the surrender of 50,000
shares of the Common Stock, (b) the transfer of 10% of the outstanding shares of
Histech, thereby increasing the Company's ownership of Histech from 60% to 70%,
   and (c) a royalty of 3% of Global's revenues up to a maximum of $500,000.

5. Stockholders' approval through a consent solicitation of (a) the issuance of
the shares of the Common Stock to Shilaat or its shareholders, (b) the issuance
of the shares of the Common Stock upon the conversion of the Series B Shares and
                            (c) the sale of Global.

       There can be no assurance that the plan will be implemented and, if
 implemented, implemented as described above and when such implementation will
                                     occur.

                           Forward Looking Statements

      This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risk and
 views with respect to future events and financial performance. Actual results
 could differ materially from those projected in the forward-looking statements
 as a result of the Company's ability to obtain adequate additional financing,
 the Company's ability to implement the plan described above, the uncertainties
    of new product development and introduction, sales, growth, competitive
  pressures, uncertainties connected to the Bulgarian economy, and other risks
   listed from time to time in the Company's periodic reports filed with the
Securities Exchange Commission, including, but not limited to, its Annual Report
  on Form 10-KSB for the fiscal year ended February 28, 1998 (Forward-Looking
                              Statements section).

                                      -15-


                                     PART II
                                OTHER INFORMATION

                           Item 1. Legal Proceedings

       Reference is made to Item 3 of the Company's Annual Report on Form
10-KSB for the fiscal year ended February 28, 1998 (the "Annual Report"). There
were no material developments during the quarter ended August 31, 1998 relating
                to the litigation reported in the Annual Report.

                    Item 6. Exhibits and Reports on Form 8-K

                                  (a) Exhibits

                                      None

                             (b) Reports on Form 8-K

                                      None
                                   SIGNATURES

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


                           SECTOR COMMUNICATIONS, INC.
                                  (Registrant)


                  Date: October 20, 1998 By: Andreas O. Tobler
                       -----------------------------------
                      President and Chief Executive Officer