U.S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10-QSB


[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the quarterly period ended September 30, 1998


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

     For the transition period from _________________ to _____________

     Commission file number 0-23710


                             Micro-Integration Corp.
        (Exact name of small business issuer as specified in its charter)

            Delaware                                          06-1204847
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                          Identification Number)


        One Science Park
          Frostburg, MD                                          21532
(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number: 301-689-0800

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. 
Yes _X_  No ___

The number of shares  outstanding of the issuer's  classes of common stock as of
September 30, 1998:

Common Stock, $.01 Par Value --- 2,881,525 shares

Transitional Small Business Disclosure Format (check one): Yes ___ No _X_

<PAGE>


                    Micro-Integration Corp. and Subsidiaries
                                   Form 1O-QSB
                                      Index

Part I  Financial Information                                              Page
                                                                           ----

Item 1. Consolidated Balance Sheets                                            2
        Consolidated Statements of Operations                                  4
        Consolidated Statements of Cash Flows                                  5
        Notes to Unaudited Condensed Consolidated 
            Financial Statements                                               6

Item 2. Management's Discussion and Analysis of
            Results of Operations and Financial Condition                      8


Part II Other Information                                                     

Item 1. Legal Proceedings                                                     15
                                                                                
Item 2. Changes in Securities and Use of Proceeds                             15
                                                                                
Item 3. Defaults Upon Senior Securities                                       15
                                                                                
Item 4. Submission of Matters to a Vote of Security Holders                   16
                                                                                
Item 5. Other Information                                                     16
                                                                                
Item 6. Exhibits and Reports on Form 8-K                                      16
                                                                              

Signatures                                                                    17

<PAGE>


Part I Financial Information

Item 1. Financial Statements

                   Micro-Integration Corp. and Subsidiaries
                          Consolidated Balance Sheets

                                                     September 30     March 31
                                                         1998          1998
                                                     -----------    -----------
                                                     (unaudited)
ASSETS

Current Assets
     Cash                                            $   124,708    $   176,964
     Marketable securities, available-for-sale              --          100,000
     Receivables
        Trade, net of allowance for doubtful
            accounts $177,342 and $153,377             2,064,314      1,650,884
        Note                                              15,191         74,880
     Inventory                                           849,682        551,565
     Prepaid expense                                     150,341        101,571
                                                     -----------    -----------

        Total Current Assets                           3,204,236      2,655,864
                                                     -----------    -----------

Property, Plant, and Equipment
     Land                                                 92,962         92,962
     Buildings                                         1,474,333      1,461,357
     Equipment                                         1,633,103      1,418,918
     Automobiles                                          74,037         54,955
     Property held for sale, net                         100,287         76,848
                                                     -----------    -----------
                                                       3,374,722      3,105,040
     Less accumulated depreciation                    (1,553,007)    (1,209,082)
                                                     -----------    -----------
                                                       1,821,715      1,895,958

Cash Surrender Value of Life Insurance
     and Other Noncurrent Assets, Net                    301,304        254,704

Intangible Assets, Net                                   927,617        468,932
                                                     -----------    -----------

                                                     $ 6,254,872    $ 5,275,458
                                                     ===========    ===========


                                       2

<PAGE>


                   Micro-Integration Corp. and Subsidiaries
                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                         September 30      March 31
                                                             1998            1998
                                                          -----------    -----------
                                                          (unaudited)
<S>                                                       <C>            <C>        
LIABILITIES AND SHAREHOLDER'S EQUITY

Current Liabilities
      Accounts payable                                    $ 1,074,364    $   818,121
      Accrued expenses                                        332,041        176,199
      Demand notes payable                                    556,877        372,542
      Current portion of long-term debt and
          capital lease obligations                           104,993        130,423
                                                          -----------    -----------

          Total Current Liabilities                         2,068,275      1,497,285
                                                          -----------    -----------


Long-Term Debt, Less Current Portion                        1,199,498      1,162,987
Commitment and Contingencies                                     --             --

Shareholders' Equity
      Preferred stock - $.01 par value: authorized
          4,000,000 shares; none issued and outstanding          --             --
      Common stock - $.01 par value; authorized
          12,000,000 shares; issued 3,031,063 and
          2,667,349 as of September 30,
          1998 and March 31, 1998, respectively,
          outstanding 2,881,525 and
          2,517,811 as of September 30,
          1998 and March 31, 1998, respectively                30,311         26,673
      Additional capital                                    6,315,901      5,683,039
      Accumulated deficit                                  (2,978,219)    (2,713,632)
                                                          -----------    -----------

                                                            3,367,993      2,996,080
      Less 149,538 shares held in treasury                    380,894        380,894
                                                          -----------    -----------

                                                            2,987,099      2,615,186
                                                          -----------    -----------

                                                          $ 6,254,872    $ 5,275,458
                                                          ===========    ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       3

<PAGE>


                   Micro-Integration Corp. and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                     Three months ended September 30      Six months ended September 30
                                     -------------------------------      -----------------------------
                                         1998               1997             1998              1997
                                     ------------        -----------      -----------       -----------
                                               (unaudited)                        (unaudited)
<S>                                   <C>               <C>                 <C>               <C>      
Revenues                              $ 2,956,096       $ 3,001,896         6,161,631         6,360,777

Cost of goods sold                      1,748,500         1,863,245         3,781,644         4,106,882
                                      -----------       -----------       -----------       -----------

         Gross Profit                   1,207,596         1,138,651         2,379,987         2,253,895

Operating Expenses
     Selling, general, and
         administrative                 1,175,177         1,056,450         2,442,462         2,065,900
     Depreciation and
         amortization expense              82,692            78,277           160,079           158,578
                                      -----------       -----------       -----------       -----------
                                        1,257,869         1,134,727         2,602,541         2,224,478

         Operating (Loss) Income          (50,273)            3,924          (222,554)           29,417

Other (Expense) Income
     Interest expense                     (39,580)          (34,099)          (77,072)          (69,884)
     Gain on sale of residential
         Internet business                   --             135,837              --             135,837
     Other income                          15,955             6,790            37,139            25,944
                                      -----------       -----------       -----------       -----------
                                          (23,625)          108,528           (39,933)           91,897
                                      -----------       -----------       -----------       -----------

         (Loss) Income before
              Income Taxes                (73,898)          112,452          (262,487)          121,314

         Income tax expense                   224               161             2,100             5,389
                                      -----------       -----------       -----------       -----------

              Net (Loss) Income       $   (74,122)      $   112,291       $  (264,587)      $   115,925
                                      ===========       ===========       ===========       ===========

Basic and Diluted (Loss)
     Earnings per Common Share        $     (0.03)      $      0.05       $     (0.09)      $      0.05
                                      ===========       ===========       ===========       ===========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       4

<PAGE>


                   Micro-Integration Corp. and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                    Six months ended September 30
                                                                                    -----------------------------
                                                                                        1998            1997
                                                                                      ---------       ---------
                                                                                             (unaudited)
<S>                                                                                   <C>             <C>      
Cash Flows from Operating Activities
Net (loss) income                                                                     $(264,587)      $ 115,925
Adjustments to reconcile net (loss) income to
      net cash used in operating activities:
      Depreciation and amortization                                                     160,079         158,578
      Gain on sale of fixed assets                                                       (1,863)           --
      Increase in cash surrender value of life insurance                                   --           (11,978)
      Other                                                                              (6,262)          5,114
Change in operating assets and liabilities:
      Accounts receivable                                                                (3,062)       (176,584)
      Note receivable                                                                    59,689          55,240
      Inventory                                                                        (141,961)        (11,222)
      Prepaid expense                                                                   (12,980)         (8,758)
      Accounts payable                                                                   93,995         (77,607)
      Accrued expenses                                                                  (25,679)       (226,488)
      Income taxes payable                                                               (1,450)          3,319
                                                                                      ---------       ---------
Net cash used in operating activities                                                  (144,081)       (174,461)

Cash Flows from Investing Activities
      Acquisition of property, plant, and equipment                                     (10,923)        (23,671)
      Decrease (increase) in other noncurrent assets                                      3,208          (2,469)
      Cash received in acquisition of subsidiaries                                        4,574            --
      Proceeds from sale of available-for-sale securities                               100,000            --
      Proceeds from sale of fixed assets                                                 27,603            --
      Proceeds from sale of residential Internet business                                  --           205,400
                                                                                      ---------       ---------
Net cash provided by investing activities                                               124,462         179,260

Cash Flows from Financing Activities:
      Issuance of notes payable and long-term debt                                      111,034            --
      Repayments of notes payable, long-term debt, and
           capital lease obligations                                                   (143,671)       (155,935)
                                                                                      ---------       ---------
Net cash used in financing activities                                                   (32,637)       (155,935)

Decrease in cash                                                                        (52,256)       (151,136)
Cash at beginning of period                                                             176,964         370,598
                                                                                      ---------       ---------
Cash at end of period                                                                 $ 124,708       $ 219,462
                                                                                      =========       =========

Due to the  acquisition  of CompSource  during the quarter ending June 30, 1998,
the Company had the following noncash investing and financing activities:

      Assets acquired, excluding cash                                                 $(659,068)
      Liabilities assumed                                                               573,272
      Goodwill recorded                                                                (546,130)
      Common stock issued                                                               636,500
                                                                                      ---------
      Cash acquired in acquisition                                                    $   4,574
                                                                                      =========
</TABLE>

See Notes to Unaudited Condensed Consolidated Financial Statements.


                                       5

<PAGE>


                   Micro-Integration Corp. and Subsidiaries
               Notes to Unaudited Condensed Financial Statements


1.   Basis of Presentation

The    accompanying    unaudited    consolidated    financial    statements   of
Micro-Integration  Corp.  (the  "Company") have been prepared in accordance with
generally accepted accounting  principles for interim financial  information and
with  the  instructions  to  Form  10-QSB  and  article  10 of  Regulation  S-X.
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, necessary for a fair presentation have been included. The
results for the three and six months periods ended September 30, 1998, and 1997,
are not necessarily  indicative of financial  information for the full year. The
unaudited  condensed   consolidated  financial  statements  should  be  read  in
conjunction with the  consolidated  financial  statements and footnotes  thereto
included in the Company's annual report and Form 10-KSB for the year ended March
31, 1998.

For purposes of  comparability,  certain prior year amounts in the  consolidated
financial  statements have been reclassified to conform to the presentation used
for current period reporting.

2.   Marketable Securities

Available-for-sale  securities  are stated at fair  value,  with the  unrealized
gains and losses, net of tax, reported as a separated component of shareholders'
equity.   Realized  gains  and  losses  and  declines  in  value  judged  to  be
other-than-temporary on available-for-sale securities are included in investment
income.  The cost of  securities  sold is based on the  specific  identification
method.  Interest on securities  classified as available-for-sale is included in
investment income.  Available-for-sale  securities include  obligations of state
municipalities  and are stated at fair  market  value of  $100,000  at March 31,
1998.  THere were no unrealized  gains/losses  with respect to these  securities
during the period ended September 30, 1998 nor 1997.

3.   Inventory

Inventory consisted of the following:

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

     Parts                     $128,783          $156,412

     Finished goods             720,899           395,153
                               --------          --------

                               $849,682          $551,565
                               ========          ========


Inventory is stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.


                                       6

<PAGE>


                   Micro-Integration Corp. and Subsidiaries
               Notes to Unaudited Condensed Financial Statements


4.   Earnings per Share

<TABLE>
<CAPTION>
                                             Three months ended         Six months ended
                                                 September 30             September 30
                                           -----------------------  ------------------------
                                              1998         1997        1998          1997
                                           ----------   ----------  ----------    ----------
                                                  (unaudited)              (unaudited)
<S>                                        <C>          <C>         <C>           <C>       
     Numerator used in basic and
         diluted loss per share:
           Net (loss) income               $  (74,122)  $  112,291  $ (264,587)   $  115,925
                                           ==========   ==========  ==========    ==========


     Denominator:
         Weighted average number of
           shares of common stock
           outstanding during the period    2,873,475    2,493,170   2,870,674     2,492,558
                                           ==========   ==========  ==========    ==========


     Basic and diluted (loss)
         earnings per share                $    (0.03)  $     0.05  $    (0.09)   $     0.05
                                           ==========   ==========  ==========    ==========
</TABLE>


                                       7

<PAGE>


Part I Financial Information.

Item 2.  Management's Discussion and Analysis of Results of Operations and
         Financial Condition for the Six Months Ended September 30, 1998,
         and 1997

This quarterly report on Form 10-QSB contains forward-looking statements as that
term is defined in the Private  Securities  Litigation  Reform Act of 1996.  For
this  purpose,  any  statements  contained  herein  that are not  statements  of
historical  fact may be  deemed  to be  forward-looking  statements.  Statements
regarding the intent, belief or current expectations of the Company are intended
to be forward-looking  statements which may involve risk and uncertainty.  There
are a number of factors that could cause the Company's  actual results to differ
materially from those indicated by such forward-looking  statements,  including,
but not limited  to,  those  discussed  in "Part I -- Item 1 --  Description  of
Business -- Risk Factors" and "Part II -- Item 6 --  Management's Discussion and
Analysis of  Financial  Condition  and Results of  Operations"  contained in the
Company's  1997-1998  Form  10-KSB,  as filed with the  Securities  and Exchange
Commission  on June 29, 1998.  In  addition,  set forth below under the headings
"Results of Operations" and "Factors  Affecting  Operating Results" is a further
discussion  of certain of those  risks as they  relate to the period  covered by
this report,  the  Company's  near term outlook  with respect  thereto,  and the
forward-looking  statements  set forth  herein;  however,  the  absence  in this
quarterly  report of a  complete  recitation  of or  update to all risk  factors
identified in the Company's  1997-1998  Form l0-KSB should not be interpreted as
modifying or superseding  any such risk factors,  except to the extent set forth
below.  Investors  should review this quarterly  report in combination  with the
Company's  1997-1998 Form l0-KSB in order to have a more complete  understanding
of the principal risks associated with an investment in the Company's stock.

Overview

Micro-Integration  Corp.  ("MI" or the  "Company")  is primarily an  Information
Technology ("IT") Services company which provides both IT services and products.
The Company's IT services include IT consulting,  network integration and design
services,  accounting and  distribution  information  systems,  process  control
information systems, and Internet web site design, programming, and hosting. The
Company also sells computers,  software and  communications  products  purchased
from  others.  The Company  provides  Internet web  hosting,  training,  desktop
management,  help-desk,  and maintenance services that complement its consulting
and  computer  and  network  software  and  equipment  sales.  In addition to IT
services and products,  the Company designs,  manufactures,  and sells a line of
products  that  provides   communications  and  connectivity   between  personal
computers ("PCs") and IBM mainframe and midrange AS/400 computers.

Results of Operations

The Company's  total revenue was $3.0 million for the quarters  ended  September
30, 1998 and 1997.  IT  Services  revenue  increased  by $330,000 or 15% for the
quarter ended September 30, 1998 compared to the same quarter last year while PC
Connectivity  product and royalty revenue decreased $258,000 or 36% for the same
periods.  Internet  revenue  decreased by $117,000 or 92% from  $127,000 for the
quarter ended  September 30, 1997 to $10,000 in the quarter ended  September 30,
1998 due to the sale of the residential Internet business.


For the six months ended  September  30, 1998,  total  revenue was $6.2 million,
down 3% or  $199,000  from  the same  period  last  year.  IT  Services  revenue
increased by $704,000 or 15% while PC Connectivity product and royalty


                                       8

<PAGE>






revenue decreased $689,000 or 44%. The sale of the residential Internet business
in the  quarter  ended  September  30,  1997  resulted  in a decline of Internet
revenue of $214,000 or 88% from $243,000 for the six months ended  September 30,
1997 to  $29,000  for  the  same  period  in the  current  year.  The  Company's
subsidiaries accounted for 79% of the Company's total revenue for the six months
ended  September  30, 1998  compared  to 66% in the same  period last year.  The
Company  expects this trend to continue as PC  Connectivity  product and royalty
revenues continue to decline.

Gross profit  increased to 40.9% for the quarter ended  September 30, 1998, from
37.9% in the same period in 1997.  Gross  profit  increased to 38.6% for the six
months  ended  September  30. 1998,  from 35.4% in the same period in 1997.  The
major contributing  factor to the improvement in gross profit is the increase in
the  percentage  of IT Services  revenue  derived from  high-margin  IT services
versus  revenue  from lower  margin IT product  sales.  For the six month period
ended September 30, 1998, IT Services service revenue accounted for $1.1 million
or 22% of the total IT Services  revenue of $5.3 million compared to $467,000 or
10% of total IT  Services  revenue  of $4.6  million  for the six  months  ended
September 30, 1997.

Selling,  general,  and administrative  (SG&A) expenses increased by $119,000 in
the quarter ended September 30, 1998,  compared to the same period in 1997. As a
percentage  of sales,  SG&A  expenses  were 39.8% of total  sales in the quarter
ended September 30, 1998, compared with 35.2% of total sales in the same quarter
last year. For the six months ended September 30, 1998, SG&A expenses  increased
$377,000  compared to the same period in 1997.  As a percentage  of sales,  SG&A
expenses represented 39.6% of total sales for the six months ended September 30,
1998,  compared  with 32.5% for the same period last year.  The increase in SG&A
expenses is  primarily  due to increases  in  salaries,  benefits and  occupancy
expenses caused by the acquisition of CompSource,  Inc. on April 1, 1998,  along
with an increase in consulting expense.  This is partially offset by a reduction
in telephone  expenses  due to the sale of the  residential  Internet  business,
which  occurred in the quarter  ended  September  30,  1997,  and in  accounting
expenses.

The Company's net other expense was $24,000 for the three months ended September
30,  1998,  compared to net other  income of $109,000 in the same  quarter  last
year.  For the six months ended  September  30, 1998,  the Company had net other
expense of $40,000  compared to a net other income of $92,000 in the same period
last  year.  Without  the  gain on  sale of  residential  Internet  business  of
$136,000,  the quarter and six month period ending  September 30, 1997,  had net
other expenses of $27,000 and $44,000, respectively.

For the six months ended September 30, 1998, the Company  recognized a corporate
tax expense of $2,000.  At September  30, 1998,  the Company had a net operating
loss  carryforward of  approximately  $1.5 million  available for offset against
future operating profits.

Liquidity and Capital Resources

The Company  satisfies its cash  requirements  primarily  through cash flow from
operations,  bank borrowings,  and lease  financing.  At September 30, 1998, the
Company had $125,000 in cash.  During the six month period ended  September  30,
1998,  cash  provided by investing  activities  of $124,000 was exceeded by cash
used in operating and financing  activities of $176,000,  resulting in a $52,000
decrease in cash.

The Company's working capital decreased  slightly from $1.2 million at March 31,
1998 to $1.1 million at September 30, 1998.



At September 30, 1998,  the Company had four working  capital  credit lines with
U.S. banks.  One credit line,  which is payable on demand,  has a $100,000 limit
and had an  outstanding  balance of $100,000 as of September  30, 1998. A second
line,  which  is  also  payable  on  demand,  has a  $600,000  limit  and had an
outstanding balance of $228,000



                                       9
<PAGE>

at September  30, 1998.  The third line,  also payable on demand,  has a $50,000
limit and had an  outstanding  balance of $4,000 at September 30, 1998. The last
line is for  $300,000,  is renewable  annually,  and is limited to the lesser of
$300,000 or 70% of acceptable domestic accounts receivable. This line is secured
by  substantially  all of the Company's assets and as of September 30, 1998, had
an outstanding balance of $225,000. The Company expects that cash generated from
operations  and  borrowings  will  satisfy  its  operating  cash  needs  for the
foreseeable future.

Factors Affecting Operating Results

Potential Fluctuations in Operating Results

The  Company  believes  that  future  operating   results  will  be  subject  to
fluctuations due to a variety of factors, many of which are beyond the Company's
control.  Such  factors may  include,  but are not  limited  to,  demand for the
Company's  services,  availability  of skilled  sales and  technical  personnel,
introduction  or  enhancements  of services  by the Company or its  competitors,
market acceptance of new service offerings,  increased  competition,  litigation
costs, results of litigation, and general economic conditions.

Since the Company recognizes services revenue only when personnel are engaged on
client projects, the relative utilization of such personnel directly affects the
Company's operating results.  In addition,  a majority of the Company's services
operating expenses,  particularly personnel and related costs, are substantially
fixed  in  advance  of  any  particular  period.  As  a  result,  variations  in
utilization  of  personnel  may have  material  effects  on  operating  results.
Termination or completion of engagements in the Company's  services  business or
failure to obtain  additional  engagements in its services business could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

Uncertainty of Future Acquisitions

The Company evaluates  potential  acquisitions on an ongoing basis. No assurance
can be given as to the Company's  ability to compete  successfully for available
acquisition candidates, to complete future acquisitions, or the financial effect
on the  Company of any  acquired  businesses.  Acquisitions  by the  Company may
involve  significant  cash  expenditures  and may result in decreased  operating
income,  either of which could have a material  adverse  effect on the Company's
business,  financial condition, and results of operations.  The inability of the
Company to successfully  continue its acquisition strategy could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

Management of Acquired Businesses

The Company's recent  acquisitions have placed,  and are expected to continue to
place,  a significant  strain on its managerial and  operational  resources.  To
manage these acquired  businesses and others that may be acquired in the future,
the Company must continue to implement and improve its  operational,  management
and  financial  systems and to train and manage its employee  base.  The Company
expects  that its  operational,  management  and  financial  systems  will  face
additional strains as a result of possible acquisitions in the future.

Integration of Acquisitions

As part of its business  strategy,  the Company  expects to continue to seek out
business   combinations  with  other  IT  Services   companies.   Such  business
combinations  involve  a  number  of  risks,   including,   without  limitation,
difficulty



                                       10
<PAGE>

assimilating  the  operations and  personnel,  expenditure  of management  time,
expenses  associated with the transactions,  additional expenses associated with
amortization of acquired  intangible  assets, the implementation and maintenance
of  standards,   controls,   procedures,   and  policies,   the   impairment  of
relationships with employees and customers as a result of the integration of new
management personnel, and potential unknown liabilities associated with acquired
businesses.  There can be no assurance  that the Company will be  successful  in
addressing these risks or any other problems encountered in connection with such
business combinations.

Dependence on Key Personnel

The Company's  performance is substantially  dependent on the performance of its
senior  management and key sales and technical  personnel.  In  particular,  the
Company's  success depends  substantially on the continued efforts of its senior
management  team. The Company does not carry key person life insurance on any of
its  senior  management  personnel.  The  loss  of  the  services  of any of its
executive  officers or other key employees could have a material  adverse effect
on the business,  operating results, and financial condition of the Company. The
Company's  future success also depends on its continuing  ability to attract and
retain highly-qualified sales, technical, and managerial personnel.  Competition
for such  personnel  is intense and there can be no  assurance  that the Company
will be able to retain its key  managerial,  sales,  and technical  employees or
that it will be able to attract and retain  additional  highly-qualified  sales,
technical,  and managerial personnel in the future. The inability to attract and
retain the necessary  sales,  technical,  and managerial  personnel could have a
material adverse effect upon the Company's business,  financial  condition,  and
results of operation.

Concentration of Stock Ownership

As of September 30, 1998, the present  directors,  executive  officers,  greater
than  5%  stockholders,  and  their  respective  affiliates  beneficially  owned
approximately  55%  of the  outstanding  Common  Stock  of  the  Company.  As of
September  30,  1998,  John  A.  Parsons,   the  Company's   Chairman  and  CEO,
beneficially  owned  approximately  38% of the  outstanding  Common Stock of the
Company.  As a result of their  ownership,  the directors,  executive  officers,
greater than 5% stockholders,  and their respective affiliates  collectively are
able to control  all  matters  requiring  stockholder  approval,  including  the
election of directors and approval of significant corporate  transactions.  Such
concentration  of ownership may also have the effect of delaying or preventing a
change in control of the Company.

Volatility of Stock Price

The trading price of the Company's  Common Stock has been and may continue to be
subject to wide fluctuations in response to a number of events and factors, such
as quarterly variations in operating results, changes in financial estimates and
recommendations   by  securities   analysts,   the  operating  and  stock  price
performance  of  other  companies  that  investors  may deem  comparable  to the
Company,  and news  reports  relating  to trends in the  Company's  markets.  In
addition,  the stock market,  in general,  and the market prices for IT Services
companies,  in  particular,  have  experienced  volatility  that  often has been
unrelated to the operating performance of such companies. These broad market and
industry  fluctuations  may adversely  affect the trading price of the Company's
Common Stock, regardless of the Company's operating performance.

Ability to Obtain Financing

The Company uses  commercial  financing and bank  borrowings to supplement  cash
generated  from  operations in order to meet its operating  cash needs.  It also
uses 30-to-60 day commercial financing to finance goods sold to




                                       11
<PAGE>


others.  There can be no assurance  that the Company will continue to be able to
meet its operating cash needs through  commercial  financing and bank borrowings
or will be able to  continue  to finance  the  purchase  of goods sold to others
through commercial financing. There can be no assurance the Company could obtain
additional  cash through equity  financing or any other means.  Any inability to
satisfy the Company's  operating cash needs or inability to finance the purchase
of goods sold to others could have a material  adverse  affect on the  Company's
business, financial condition and results of operation.

Year 2000

The Company has assessed  the  potential  effects of the "Year 2000"  millennium
change on the Company's internal computer software applications and systems, the
Company's product and service offerings and the Company's business in general.

The Company believes the PC  Communications  products it has developed and sells
do not process dates and do not have any Year 2000 compliance issues.

The Company  believes,  based on  statements  from its  vendors,  that all other
products  the  Company  currently  sells  are Year 2000  compliant  and that the
Company's  vendors  either  have Year 2000  compliant  internal  systems or have
adequate plans to implement remediation by the end of 1999. However, the Company
can give no assurances  that the systems or products of other companies on which
the Company relies will be Year 2000 compliant or that the failure of such third
parties to achieve Year 2000  compliance  for such systems or products  will not
have a material adverse effect on the Company.

The Company  believes  that some of its  internal IT mission  critical  systems,
including  its  internal  and external  telecommunications  systems,  accounting
systems,  and customer  tracking  systems are not Year 2000  compliant,  and has
instituted  measures  to make them  compliant  or  replace  them with  compliant
systems.  The Company believes that the direct  remediation costs needed to make
all of its internal  applications  and systems Year 2000 compliant are less than
$20,000.  The Company does not account  separately for indirect costs associated
with Year 2000  issues,  such as the cost of  internal  staff time spent on Year
2000 issues,  but the Company  believes this cost is not  material.  The Company
believes all remediation  measures will be completely  implemented  prior to the
end of the first half of 1999.

The Company believes that even in the reasonably likely worst case scenario,  in
which all the  Company's  major IT systems  (sales  orders,  customer  tracking,
accounting)  unexpectedly fail to function properly after the millennium change,
there  would not be a  material  effect  on the  Company's  business,  financial
condition,  or results of operation  because the critical  tasks  handled by the
internal IT systems can be accomplished manually.

Delays in implementing remedial measures by the Company or its vendors,  failure
of any  new or  upgraded  system  to be Year  2000  compliant  despite  vendors'
assurances,  or a failure to fully  identify or remediate all Year 2000 problems
in the Company's  systems which are not being replaced or upgraded could have an
unexpected  material  adverse  effect  on  the  Company's  business,   financial
condition or results of operations.

The Company has published a "Year 2000  Readiness  Disclosure  Statement" on its
Year 2000 web site at http://www.miworld.com/y2kdisc.html.

Risks Relating to Low-Priced Stocks

The  Company's  continued  listing  on the Nasdaq  Small Cap  Market  ("SCM") is
contingent  upon the Company  meeting the  maintenance  requirements of the SCM.
Substantial changes in Nasdaq initial listing and maintenance


                                       12
<PAGE>

requirements  became  effective on February 23, 1998.  These changes  materially
enhance the  quantitative  threshold  criteria  necessary to qualify for initial
entry and  continued  listing on Nasdaq.  These changes  require that  companies
listed on the SCM maintain (i)  $2,000,000 in net tangible  assets (total assets
less total  liabilities and goodwill) or a market  capitalization of $35,000,000
or $500,000  in net income for two of the last three  years,  (ii) a  $1,000,000
market value for the public float, (iii) two  market-makers,  and (iv) a minimum
bid price of $1.00 per share.

On October  14,  1998,  the  Company  was  notified by Nasdaq that it was out of
compliance  with the  minimum  bid price  requirement,  and on October 20 it was
notified by Nasdaq  that it was out of  compliance  with the public  float value
requirement.  In both cases, the Company was given 90 days to regain compliance.
The Company may regain compliance with both requirements if its securities trade
at or above the  minimum bid price  requirement  of $1.00 per share for at least
ten  consecutive  trading days prior to January 14, 1999.  If, at that time, the
Company has not regained compliance, Nasdaq will delist the Company. The Company
may request a hearing prior to that time,  which will  generally  stay delisting
until  the  hearing  has been  completed.  No  assurances  can be made  that the
Company's stock will trade above $1.00 per share or that the Company will regain
and maintain compliance with the Nasdaq listing  requirements.  If the Company's
securities  are  delisted  from  Nasdaq,  trading,  if  any,  of  the  Company's
securities   would   thereafter   have  to  be  conducted   in  the   non-Nasdaq
over-the-counter market. In such event, an investor could find it more difficult
to dispose of or to obtain  accurate  quotations  as to the market value of, the
Company's  securities.  In addition, if the Common Stock were to become delisted
from trading on Nasdaq and the trading  price of the Common Stock were to remain
below  $5.00 per share,  trading in the  Company's  Common  Stock  would also be
subject to the  requirements of certain rules  promulgated  under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),  which require additional
disclosure by  broker-dealers  in connection  with any trades  involving a stock
defined as a penny stock.  Generally,  any non-Nasdaq equity security that has a
market price of less than $5.00 per share, is considered a penny stock,  subject
to certain  exceptions.  The additional  burdens imposed upon  broker-dealers by
such requirements could discourage broker-dealers from effecting transactions in
the Common Stock,  which could severely limit the market liquidity of the Common
Stock and the ability of  investors to trade the  Company's  Common  Stock.  See
"Possible  Effect  of  "Penny  Stock"  Rules  on  Liquidity  for  the  Company's
Securities" below.

Possible Effect of "Penny Stock" Rules on Liquidity for the Company's Securities

If the Company's  securities were not listed on a national  securities  exchange
nor listed on a qualified automated quotation system, they may become subject to
Rule 15g-9 under the Exchange Act. This Rule imposes  additional  sales practice
requirements on  broker-dealers  that sell such securities to persons other than
established customers and "accredited investors" (generally,  individuals with a
net worth in excess  of  $1,000,000  or annual  incomes  exceeding  $200,000  or
$300,000 together with their spouse). For transactions covered by Rule  15g-9, a
broker-dealer  must make a special  suitability  determination for the purchaser
and have received the purchaser's  written  consent to the transaction  prior to
sale.  Consequently,  such Rule may affect the ability of broker-dealers to sell
the Company's securities and may affect the ability of purchasers to sell any of
the Company's securities in the secondary market.

The  Securities  and  Exchange   Commission  (the   "Commission")   has  adopted
regulations  that define a "penny  stock" to be any equity  security  that has a
market  price  (as  therein  defined)  of less  than  $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.  For
any  transaction  involving a penny  stock,  unless  exempt,  the rules  require
delivery,  prior to any transaction in a penny stock,  of a disclosure  schedule
prepared by the  Commission  relating to the penny stock  market.  Disclosure is
also  required  to  be  made  about  sales  commissions   payable  to  both  the
broker-dealer and the registered  representative  and current quotations for the
securities.  Finally,  monthly  statements  are  required to be sent  disclosing
recent price information for the penny stock held in the account and information
on the  limited  market in penny  stocks.  The  foregoing  required  penny stock
restrictions  will not apply to the  Company's  securities  if the Company meets
certain minimum net tangible assets or average revenue criteria.  If applicable,
there  can be no  assurance  that the  Company's  securities  will  qualify  for
exemption from the penny stock  restrictions.  If the Company's  securities were
subject to the rules on penny  stocks,  the market  liquidity  for the Company's
securities could be materially adversely affected.




                                       13
<PAGE>



Part II Other Information


Item 1. Legal Proceedings


           None.



Item 2. Changes in Securities and Use of Proceeds

(c)  Micro-Integration  Corp. has made the following  unregistered  sales of the
     Company's Common Stock during the quarter ended September 30, 1998:

<TABLE>
<CAPTION>
  Transaction           Number of Shares           Name of Underwriter       Consideration         Persons or Class of Persons to
      Date              of Common Stock            or Placement Agent           Received            Whom the Securities Were Sold
-----------------   -------------------------    ------------------------   -----------------    -----------------------------------
<S>                          <C>                          <C>                      <C>                    <C>
    08/24/98                 13,714                       None                     (1)                    Douglas M. Gruver
</TABLE>


(1)  To satisfy  obligations of CompSource Inc., a Pennsylvania  corporation and
     wholly-owned  subsidiary  of the  Company  ("CompSource"),  pursuant to the
     Stock  Redemption   Agreement  dated  December  27,  1997  by  and  between
     CompSource and Douglas M. Gruver (the "Stock  Redemption  Agreement"),  the
     Company  issued 13,714 shares of the Company's  Common Stock to Mr. Gruver.
     Such shares were  additional  consideration  paid by the Company  under the
     Purchase Agreement by and among the Company,  Russell A. Hinnershitz and A.
     Scott Kauffman,  individuals,  and CompSource dated April 1, 1998,  whereby
     the Company agreed to assume certain  obligations of CompSource,  including
     obligations contained in the Stock Redemption Agreement.

For the above  transaction,  the Company claims the exemption from  registration
under Section 4(2) of the  Securities Act of 1933 (the  "Securities  Act") based
upon the following facts: (I) no general  solicitation or advertising  occurred,
(2) there was a limited  number of purchasers,  (3) purchasers  purchased with a
view toward  investment,  and (4) each  purchaser had access to  information  as
would be provided by a registration statement under the Securities Act.

(d)  The Company registered 1,000,000 shares of common stock, par value $.01 per
     share (the "Common  Stock"),  pursuant to a Registration  Statement on Form
     SB-2 (File No.  33-76752),  which was declared  effective by the Securities
     and Exchange  Commission on May 11, 1994.  The managing  underwriter of the
     offering was Ryan,  Hartley,  and Lee, Inc. and the aggregate  price of the
     offering,  including  shares  registered  for  selling  shareholders,   was
     $9,000,000.  The Company  registered  for its own account an  aggregate  of
     800,000 shares of Common Stock,  of which it sold 621,227 shares  resulting
     in  an  aggregate  gross  proceeds  of  the  offering  to  the  Company  of
     $4,659,203.  The Company also registered 200,000 shares of Common Stock for
     selling  shareholders,  155,230  shares  of  which  were  sold  by  selling
     shareholders for an aggregate gross proceeds to the selling shareholders of
     $1,164,225.  The offering  terminated  prior to the sale of all  securities
     registered.

     The Company's  reasonable estimate of the total expenses in connection with
     the  offering  was  $672,000  of  which  approximately  $280,000  were  for
     underwriting  discounts and commissions and approximately $392,000 were for
     expenses paid to persons  other than  directors or officers of the Company,
     persons  owning more than 10 percent of any class of equity  securities  of
     the Company, or affiliates of the Company.

     The Company's reasonable estimate of the net proceeds from the offering was
     $3,987,000.  As of September 30, 1998, the Company had expended all of such
     net  proceeds.  Of  the  net  proceeds,  the  Company  spent  approximately
     $1,000,000   for  new  product   launch  and  sale  force   expansion   and
     approximately  $500,000  for  restructuring   expenses.  The  Company  used
     approximately  $2,487,000 for working capital. Payment of net proceeds were
     made to persons  other than  directors or officers of the Company,  persons
     owning  more  than 10  percent  of any class of  equity  securities  of the
     Company, or affiliates of the Company. Prior to using the net proceeds, the
     Company  invested,  from time to time,  the  balance  of such net  proceeds
     primarily in investment grade marketable securities.

Item 3. Defaults Upon Senior Securities


           None.


                                       14
<PAGE>


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


The Company held its Annual Meeting of  Stockholders  (the "Annual  Meeting") on
July 28, 1998.  During the Annual  Meeting,  stockholders  elected the following
individuals  to serve as members of the Board of  Directors  with the  following
vote totals:


                                For               Against            Withheld
                          ----------------    ----------------     -------------

John A. Parsons               2,701,502               --                8,940
Wayne M. Lee                  2,708,902               --                1,540
Maxwell F. Eveleth, Jr.       2,708,902               --                1,540
W. Braun Jones, Jr.           2,708,802               --                1,640


During the Annual  Meeting,  the  stockholders  also  approved the amendment and
restatement of the 1994 Stock Plan of  Micro-Integration  Corp., with the result
of the voting as follows:

          For:                         2,148,118
          Against:                        25,330
          Withheld:                        1,350



Stockholders  also ratified the designation by the Board of Directors of Ernst &
Young LLP as the  independent  accountants  for the  Company for the fiscal year
ending March 31, 1999.  with the result of the voting as follows: 

          For:                         2,708,802
          Against:                         1,240
          Withheld:                          400


Item 5. Other Information


                          None.



Item 6. Exhibits and Reports on Form 8-K


     (a)  Exhibits

          27.1 Financial Data Schedule

     (b)  The  Company  did not file any  reports  on Form 8-K  during the three
          months ended September 1998.

                                       15
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  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  in the  city of  Frostburg,  state of
Maryland, on the 16th day of November, 1998:

Micro-Integration Corp.


By:       /s/       John A. Parsons
          ----------------------------------
                   John A. Parsons
          President, Chairman of the Board,
               Chief Executive Officer




By:       /s/        Terry D. Frost
          ----------------------------------
                    Terry D. Frost
               Chief Financial Officer





                                       16