U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-QSB


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

For the quarterly period ended December 31, 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)

                                  301-689-0800
                           (Issuer's telephone number)

     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 each of the issuer's classes of common
equity as of December 31, 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 10-QSB
                                      Index


                                                                         Page
                                                                         ----
Part I       Financial Information

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 6.  Exhibits and Reports on Form 8-K                                14


Signatures                                                               15


<PAGE>

Part I   Financial Information
Item 1.  Financial Statements

                    Micro-Integration Corp. and Subsidiaries
                           Consolidated Balance Sheets


                                                     December 31     March 31
                                                        1998           1998
                                                     -----------    -----------
                                                     (unaudited)
ASSETS

Current Assets
   Cash                                             $   107,386    $   176,964
   Marketable securities, available-for-sale               --          100,000
   Receivables
       Trade, net of allowance for doubtful
          accounts $177,925 and $153,377              2,082,920      1,650,884
       Note                                              15,497         74,880
   Inventory                                            827,155        551,565
   Prepaid expense                                      135,710        101,571
                                                    -----------    -----------
       Total Current Assets                           3,168,668      2,655,864
                                                    -----------    -----------
Property, Plant, and Equipment
   Land                                                  92,962         92,962
   Buildings                                          1,474,333      1,461,357
   Equipment                                          1,640,663      1,418,918
   Automobiles                                          115,777         54,955
   Property held for sale, net                           61,197         76,848
                                                    -----------    -----------
                                                      3,384,932      3,105,040
   Less accumulated depreciation                     (1,614,749)    (1,209,082)
                                                    -----------    -----------
                                                      1,770,183      1,895,958

Cash Surrender Value of Life Insurance
   and Other Noncurrent Assets, Net                     286,951        254,704

Intangible Assets, Net                                  901,298        468,932
                                                    -----------    -----------
                                                    $ 6,127,100    $ 5,275,458
                                                    ===========    ===========


                                       2

<PAGE>

                    Micro-Integration Corp. and Subsidiaries
                           Consolidated Balance Sheets


                                                     December 31     March 31
                                                        1998           1998
                                                     -----------    -----------
                                                     (unaudited)
LIABILITIES AND SHAREHOLDER'S EQUITY

Current Liabilities
    Accounts payable                                 $ 1,129,989    $   818,121
    Accrued expenses                                     296,954        176,199
    Demand notes payable                                 576,500        372,542
    Current portion of long-term debt and
        capital lease obligations                        134,112        130,423
                                                     -----------    -----------
        Total Current Liabilities                      2,137,555      1,497,285
                                                     -----------    -----------
Long-Term Debt, Less Current Portion                   1,183,418      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 December 31, 1998 
        and March 31, 1998, respectively; 
        outstanding 2,881,525 and 2,517,811 
        as of December 31, 1998 
        and March 31, 1998, respectively                  30,311         26,673
    Additional capital                                 6,315,901      5,683,039
    Accumulated deficit                               (3,159,191)    (2,713,632)
                                                     -----------    -----------
                                                       3,187,021      2,996,080
    Less 149,538 shares held in treasury                 380,894        380,894
                                                     -----------    -----------
                                                       2,806,127      2,615,186
                                                     -----------    -----------
                                                     $ 6,127,100    $ 5,275,458
                                                     ===========    ===========

See Notes to Unaudited Condensed Consolidated Financial Statements.

                                       3

<PAGE>

                    Micro-Integration Corp. and Subsidiaries
                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                   Three months ended December 31   Nine months ended December 31
                                        1998           1997              1998           1997
                                   -------------  ---------------   --------------  -------------
                                             (unaudited)                    (unaudited)
<S>                                  <C>            <C>               <C>            <C>        
Revenues                             $ 3,434,414    $ 2,958,977       $ 9,596,045    $ 9,319,754

Cost of goods sold                     2,260,477      1,795,958         6,042,121      5,902,840
                                     -----------    -----------       -----------    -----------
      Gross Profit                     1,173,937      1,163,019         3,553,924      3,416,914

Operating Expenses                                                  
    Selling, general, and                                           
      administrative                   1,257,874      1,046,302         3,700,335      3,112,202
    Depreciation and                                                
      amortization expense                77,539         70,370           237,619        228,948
                                     -----------    -----------       -----------    -----------
                                       1,335,413      1,116,672         3,937,954      3,341,150

      Operating (Loss) Income           (161,476)        46,347          (384,030)        75,764

Other (Expense) Income                                              
    Interest expense                     (38,772)       (35,662)         (115,844)      (105,546)
    Gain on sale of residential                                     
      Internet business                     --           57,720              --          193,557
    Other income                          20,695         16,714            57,834         42,658
                                     -----------    -----------       -----------    -----------
                                         (18,077)        38,772           (58,010)       130,669
                                     -----------    -----------       -----------    -----------
      (Loss) Income before                                          
        Income Taxes                    (179,553)        85,119          (442,040)       206,433
      Income tax expense (benefit)         1,419           (623)            3,519          4,766
                                     -----------    -----------       -----------    -----------
        Net (Loss) Income            $  (180,972)   $    85,742       $  (445,559)   $   201,667
                                     ===========    ===========       ===========    ===========
Basic and Diluted (Loss)                                            
    Earnings per Common Share        $     (0.06)   $      0.03       $     (0.16)   $      0.08
                                     ===========    ===========       ===========    ===========
</TABLE>                                                         


See Notes to Unaudited Condensed Consolidated Financial Statements.

                                       4

<PAGE>

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


<TABLE>
<CAPTION>
                                                        Nine months ended December 31
                                                            1998             1997
                                                        -------------  --------------
                                                                (unaudited)
<S>                                                        <C>          <C>      
Cash Flows from Operating Activities
Net (loss) income                                          $(445,559)   $ 201,667
Adjustments to reconcile net (loss) income to
     net cash used in operating activities
     Depreciation and amortization                           237,619      228,948
     Gain on sale of fixed assets                             (1,541)      (1,086)
     Increase in cash surrender value of life insurance         --         (9,028)
     Other                                                    (6,264)      42,983
Change in operating assets and liabilities
     Accounts receivable                                     (21,668)     (18,064)
     Note receivable                                          59,383       70,000
     Inventory                                              (119,434)       6,803
     Prepaid expense                                           1,651      (13,835)
     Accounts payable                                        149,620     (191,941)
     Accrued expenses                                        (60,766)    (357,113)
     Income taxes payable                                     (1,450)       2,453
                                                           ---------    ---------
Net cash used in operating activities                       (208,409)     (38,213)

Cash Flows from Investing Activities
     Acquisition of property, plant, and equipment           (60,222)     (62,732)
     Decrease (increase) in other noncurrent assets           28,368      (59,109)
     Cash received in acquisition of subsidiaries              4,574          242
     Proceeds from sale of available-for-sale securities     100,000         --
     Proceeds from sale of fixed assets                       66,086        2,968
     Proceeds from sale of residential Internet business        --        263,120
                                                           ---------    ---------
Net cash provided by investing activities                    138,806      144,489

Cash Flows from Financing Activities
     Issuance of notes payable and long-term debt            147,131       29,159
     Repayments of notes payable, long-term debt, and
        capital lease obligations                           (147,106)    (207,025)
     Issuance of common stock                                   --             34
                                                           ---------    ---------
Net cash provided by (used in) financing activities               25     (177,832)

Decrease in cash                                             (69,578)     (71,556)
Cash at beginning of period                                  176,964      370,598
                                                           ---------    ---------
Cash at end of period                                      $ 107,386    $ 299,042
                                                           =========    =========

Due to the acquisitions of CompSource during the nine months ending December 31,
1998, and SuiteOne during the nine months ending December 31, 1997, the Company
had the following noncash investing and financing activities:

     Assets acquired, excluding cash                      $ (659,068)   $ (36,983)
     Liabilities assumed                                     573,272       39,280
     Goodwill recorded                                      (546,130)     (82,055)
     Common stock issued                                     636,500       80,000
                                                           ---------    ---------
     Cash acquired in acquisition                          $   4,574    $     242
                                                           =========    =========
</TABLE>


See Notes to Unaudited Condensed Consolidated Financial Statements.

                                       5

<PAGE>

                    Micro-Integration Corp. and Subsidiaries
         Notes to Unaudited Condensed Consolidated 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 nine months periods ended December 31, 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 separate 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 periods ended December 31, 1998 or 1997.

3.   Inventory

Inventory consisted of the following:


                                        December 31      March 31
                                           1998            1998
                                        -----------     -----------
              Parts                      $ 102,846       $ 156,412
              Finished goods               724,309         395,153
                                        ----------      ----------
                                         $ 827,155       $ 551,565
                                        ==========      ==========


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

                                       6

<PAGE>

4.   Earnings per Share

The following table sets forth the computation of basic and diluted (loss)
earnings per share:


<TABLE>
<CAPTION>
                                       Three months ended December 31    Nine months ended December 31
                                           1998             1997               1998            1997
                                       ------------      ------------    ------------      ------------
                                                (unaudited)                       (unaudited)         
<S>                                      <C>             <C>                 <C>            <C>      
Numerator used in basic and                                                                         
    diluted (loss) earnings per share:                                                              
      Net (loss) income                  $(180,972)       $  85,742       $ (445,559)      $  201,667 
                                         =========        =========       ==========       ========== 
Denominator:                                                                                          
    Weighted average number of                                                                        
      shares of common stock                                                                          
      outstanding during the period      2,881,525        2,505,288        2,874,318        2,496,814 
                                         =========        =========       ==========       ========== 
Basic and diluted (loss)                                                                              
    earnings per share                   $   (0.06)       $    0.03       $    (0.16)      $     0.08 
                                         =========        =========       ==========       ========== 
</TABLE>


                                       7

<PAGE>

Part I     Financial Information

Item 2.   Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations for the Nine Months Ended December 31, 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 Form 10-KSB for the fiscal year ended March 31, 1998, 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. The
absence in this quarterly report of a complete recitation of or update to all
risk factors identified in the Company's Form 10-KSB, however, 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 Form 10-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") company that develops Internet technology, and provides IT
services and products. The Company's Internet technology, being developed by its
newly formed Mint Internet division, relates to the Internet commerce web site
that will provide information and entertainment via the Internet. The Company's
IT services include Internet web site design, programming, and hosting, provided
by the Mint Internet division, along with IT consulting, network integration and
design services, accounting and distribution information systems and process
control information systems, provided by the Company's IT services division. The
Company's IT services division 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 its IT business, 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 $3.4 million for the quarter ended December 31,
1998, an increase of $400,000 or 16%, from $3.0 million for the quarter ended
December 31, 1997. Revenue from the IT business increased by $928,000 or 42% for
the quarter ended December 31, 1998, compared to the same quarter last year
while product and royalty revenue from the PC Connectivity business decreased
$431,000 or 58% for the same periods. IT service revenue accounted for $687,000
or 22% of the total IT revenue of $3.1 million for the quarter ended December
31, 1998, compared to $342,000 or 16% of the total IT revenue of $2.2 million
for the same period in 1997. Internet web site development and hosting revenue
decreased by $21,000 or 65% from $33,000 for the quarter ended December 31,
1997, to $12,000 in the quarter ended December 31, 1998. The Mint Internet
division

                                       8

<PAGE>

has not generated significant revenue and is not expected to generate
significant revenue in the current fiscal year, ending March 31, 1999.

For the nine months ended December 31, 1998, total revenue was $9.6 million, an
increase of $276,000, or 3%, from $9.3 million for the nine months ended
December 31, 1997. Revenue from the IT business increased by $1.6 million or 23%
for the nine months ended December 31, 1998, compared to the same period last
year, while product and royalty revenue from the PC Connectivity business
decreased $1.1 million or 48% for the same periods. For the nine months ended
December 31, 1998, IT service revenue accounted for $1.8 million or 22% of the
total IT revenue of $8.4 million compared to $855,000 or 13% of total IT revenue
of $6.8 million for the nine months ended December 31, 1997. Product and royalty
revenue from the PC Connectivity business decreased by $704,000 or 46% from $1.5
million for the nine months ended December 31, 1997, to $834,000 for the same
period in 1998. The sale of the residential Internet business in the quarter
ended September 30, 1997 resulted in a decline in Internet web site development
and hosting revenue of $235,000 or 85% from $276,000 for the nine months ended
December 31, 1997, to $41,000 for the same period in the current year. The
Company expects product and royalty revenues from the PC Connectivity business
to continue to decline.

Gross profit decreased to 34% for the quarter ended December 31, 1998, from 39%
in the same period in 1997. Gross profit from the IT business increased from 27%
for the quarter ended December 31, 1997, to 30% for the quarter ended December
31, 1998. This increase is a result of an increase in the percentage of IT
revenue derived from high-margin IT services versus revenue from lower margin IT
product sales. This increase was offset by the decline in gross profit
contributed by product and royalty revenue from the PC Connectivity business
which decreased by $317,000 or 59% from $540,000 for the quarter ended December
31, 1997, to $223,000 for the quarter ended December 31, 1998. Gross profit of
37% remained the same for the nine months ended December 31, 1998, and 1997.

Selling, general, and administrative (SG&A) expenses increased by $212,000 in
the quarter ended December 31, 1998, compared to the same period in 1997. As a
percentage of sales, SG&A expenses were 37% of total sales in the quarter ended
December 31, 1998, compared with 35% of total sales in the same quarter last
year. For the nine months ended December 31, 1998, SG&A expenses increased
$588,000 compared to the same period in 1997. As a percentage of sales, SG&A
expenses represented 39% of total sales for the nine months ended December 31,
1998, compared with 33% 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 and travel expenses. 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 $18,000 for the three months ended December
31, 1998, compared to net other income of $39,000 in the same quarter last year.
For the nine months ended December 31, 1998, the Company had net other expense
of $58,000 compared to a net other income of $131,000 in the same period last
year. Without the gain on sale of residential Internet business of $58,000 and
$194,000, the quarter and nine month periods ending December 31, 1997 had net
other expenses of $19,000 and $63,000, respectively.

For the nine months ended December 31, 1998, the Company recognized a corporate
tax expense of $4,000. At December 31, 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 December 31, 1998, the
Company had $107,000 in cash. During the nine month period ended December 31,
1998, cash provided by investing and financing activities of $139,000 was
exceeded by cash used in operating activities of $208,000, resulting in a
$69,000 decrease in cash.

                                       9

<PAGE>

The Company's working capital decreased slightly from $1.2 million at March 31,
1998 to $1.0 million at December 31, 1998.

At December 31, 1998, the Company had three 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 $84,000 as of December 31, 1998. A second
line, which is also payable on demand, has a $600,000 limit and had an
outstanding balance of $208,000 at December 31, 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 December 31, 1998, had an
outstanding balance of $285,000. 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 expects to incur significant expenses in order to develop,
commercialize and implement the technology and services being developed by the
Company's Mint Internet division. Until such time, if any, as these technologies
and services begin to generate significant revenue, the operations and expenses
of this division may have a material adverse effect on the Company's business,
financial condition and results of operations. The failure of these technologies
and services to be commercially viable in the marketplace for any reason could
have a material adverse effect on the Company's business, financial condition
and results of operations, as could any significant delay in the availability of
the technologies or services.

Since the Company recognizes IT 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 IT
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 materially affect the Company's operating results.
Termination or completion of engagements in the Company's IT services business
or failure to obtain additional engagements in its IT services business could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company believes that future operating results will also 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 technology or services, availability of skilled sales and technical
personnel, introduction or enhancement of technologies or services by the
Company or its competitors, market acceptance of new technology or service
offerings, technological changes, increased competition, litigation costs,
results of litigation, and general economic conditions.

Management of Acquired Businesses

The Company's 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.

                                       10

<PAGE>

Integration of Acquisitions

As part of its business strategy, the Company may seek out business combinations
with other IT or Internet companies. Such business combinations involve a number
of risks, including, without limitation, difficulty 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. To the extent
that any of the companies which we acquire fail, the Company could be required
to write-off the amount of the investment. 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, financial condition and results of operations 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 December 31, 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 ("Common
Stock"). As of December 31, 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 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.

                                       11

<PAGE>

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 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 reasonably likely worst case scenario would occur if all the Company's major
IT systems (sales orders, customer tracking, accounting) unexpectedly fail to
function properly after the millennium change. The Company believes that in this
event 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.

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<PAGE>

Risks Relating to Small Company 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 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.

As of December 31, 1998, the Company was in compliance with all of the continued
listing requirements except the net tangible asset requirement. No assurances
can be made that the Company will regain and maintain compliance with this or
any other of the Nasdaq listing requirements. If the Company's securities were
to be 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 could 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 asset 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.

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<PAGE>

Part II    Other Information

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 December 31, 1998.


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<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized:



Micro-Integration Corp.



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






Date                                     /s/  Terry D. Frost
     ----------                          -------------------------
                                         Terry D. Frost
                             Chief Financial Officer


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