================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                                   ----------

                                    FORM 10-Q

(MARK ONE)

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

     FOR THE QUARTERLY PERIOD ENDED JUNE 26, 1999

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 0 - 20666

                                 MICROTEST, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                                     86-0485884
-------------------------------             ------------------------------------
(State or other jurisdiction of             (IRS employer identification number)
        incorporation)

                             4747 NORTH 22ND STREET
                             PHOENIX, ARIZONA 85016
                                 (602) 952-6400
               ---------------------------------------------------
               (Address, including zip code, and telephone number,
                      including area code, of registrant's
                          principal executive offices)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such  reports),  and (2) has been subject to the
filing requirements for at least the past 90 days.

                               Yes [X]    No [ ]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date (August 6, 1999).

                 Common Stock, $.001 par value: 8,310,746 shares
================================================================================
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                                      INDEX

                                                                       Page
                                                                       ----
PART I. FINANCIAL INFORMATION

  Item 1. Financial Statements

          Consolidated Balance Sheets-
            June 26, 1999 and December 31, 1998                           3

          Consolidated Statements of Operations-
            Three Months and Six Months Ended
            June 26, 1999 and June 27, 1998 (as restated)                 4

          Consolidated Statements of Cash Flows-
            Three Months and Six Months Ended
            June 26, 1999 and June 27, 1998 (as restated)                 5

          Notes to Consolidated Financial Statements                    6-9

  Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of Operations             10-14

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings                                              15

  Item 4. Submission of Matters to a Vote by Security Holders            15

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

SIGNATURE                                                                17

                                       2
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                     June 26,       December 31,
ASSETS                                                 1999            1998
                                                     --------        --------
                                                    (unaudited)
CURRENT ASSETS:
  Cash and cash equivalents                          $  6,605        $  9,618
  Restricted investments                                  517           1,124
  Receivables:
    Trade accounts, net of allowances of $1,097
      and $2,029                                        6,851           8,171
    Income taxes                                        2,973           2,897
  Inventories                                           5,603           6,572
  Prepaid expenses                                        602           1,148
  Deferred income taxes                                 1,580           1,556
                                                     --------        --------
        Total current assets                           24,731          31,086
                                                     --------        --------
PROPERTY AND EQUIPMENT                                 10,565          10,476
  Less accumulated depreciation                        (7,970)         (7,375)
                                                     --------        --------
    Net property and equipment                          2,595           3,101
                                                     --------        --------
OTHER ASSETS:
  Capitalized software, net                             1,634           1,894
  Deferred income taxes                                 1,519           1,519
  Other                                                 1,405           1,750
                                                     --------        --------
        Total other assets                              4,558           5,163
                                                     --------        --------
                                                     $ 31,884        $ 39,350
                                                     ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                   $  2,167        $  4,152
  Accrued liabilities                                   3,572           2,922
  Accrued payroll and employee benefits                   703             860
  Accrued deferred compensation                           517           1,124
                                                     --------        --------
        Total current liabilities                       6,959           9,058
                                                     --------        --------
STOCKHOLDERS' EQUITY:
  Common stock, $.001 par value. Authorized
    15,000,000 shares; issued 8,289,136
    shares as of June 26, 1999 and 8,253,585
    as of December 31, 1998                                 8               8
  Additional paid-in capital                           32,999          32,916
  Accumulated deficit                                  (6,864)         (1,414)
  Less treasury stock, at cost, 232,520 shares         (1,218)         (1,218)
                                                     --------        --------
        Total stockholders' equity                     24,925          30,292
                                                     --------        --------
                                                     $ 31,884        $ 39,350
                                                     ========        ========

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

                                        3
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                   Three Months Ended          Six Months Ended
                                                 ----------------------     ----------------------
                                                            (as restated)             (as restated)
                                                 June 26,      June 27,     June 26,     June 27,
                                                   1999          1998         1999        1998
                                                 --------      --------     --------     --------
                                                      (unaudited)                (unaudited)
<S>                                              <C>           <C>          <C>           <C>
NET REVENUE                                       $ 9,595      $10,745      $18,596      $20,461
COST OF REVENUE                                     4,639        4,448        8,590        8,239
Special charge for write-down of
  discontinued product inventories                    803           --          803           --
                                                  -------      -------      -------      -------
    Gross profit                                    4,153        6,297        9,203       12,222
                                                  -------      -------      -------      -------
OPERATING EXPENSES:
  Sales and marketing                               3,071        3,269        6,248        6,357
  Research and development                          2,079        1,920        3,780        3,667
  General and administrative                        1,660        1,531        3,062        2,566
  Special charges                                     982           --        1,506           --
                                                  -------      -------      -------      -------
    Total operating expenses                        7,792        6,720       14,596       12,590
                                                  -------      -------      -------      -------
LOSS FROM OPERATIONS                               (3,639)        (423)      (5,393)        (368)

    Other income, net                                  --          102           63          178
                                                  -------      -------      -------      -------
LOSS BEFORE INCOME TAXES                           (3,639)        (321)      (5,330)        (190)
INCOME TAXES (BENEFIT)                                306          (79)          --          (38)
                                                  -------      -------      -------      -------
  Loss before cumulative effect of a change
    in an accounting principle                     (3,945)        (242)      (5,330)        (152)
CUMULATIVE EFFECT OF A CHANGE IN AN
  ACCOUNTING PRINCIPLE, NET OF RELATED TAXES           --           --         (117)          --
                                                  -------      -------      -------      -------
NET LOSS                                          $(3,945)     $  (242)     $(5,447)     $  (152)
                                                  =======      =======      =======      =======
BASIC AND DILUTED LOSS PER SHARE:
Loss before change in an accounting principle     $  (.49)     $  (.03)     $  (.68)     $  (.02)

Cumulative effect of a change in an accounting
  principle                                            --           --         (.01)          --
                                                  -------      -------      -------      -------
Net loss                                          $  (.49)     $  (.03)     $  (.69)     $  (.02)
                                                  =======      =======      =======      =======
Weighted average common shares outstanding          8,057        8,127        8,053        8,165
                                                  =======      =======      =======      =======
</TABLE>

                                        4
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                           Six Months Ended
                                                        ----------------------
                                                                   (as restated)
                                                        June 26,      June 27,
                                                          1999          1998
                                                        --------      --------
CASH FLOWS FROM OPERATING ACTIVITIES:                         (unaudited)
  Net loss                                              $ (5,447)     $   (152)
  Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities:
    Depreciation and amortization                          1,298           743
    Loss on disposition of equipment                         142            --
    Change in accounts receivable allowances                (932)         (105)
    Decrease in accounts receivable                        2,252         2,989
    (Increase) decrease in income taxes receivable           (76)           12
    Decrease in inventories                                  969           275
    Decrease in prepaid expenses and other assets            891           372
    Increase in deferred income taxes                        (24)           --
    Decrease in accounts payable                          (1,985)         (596)
    Increase (decrease) in accrued liabilities               650        (1,581)
    (Increase) decrease in accrued payroll and
      employee benefits                                     (157)          155
                                                        --------      --------
       Net cash provided by (used in) operating
        activities                                        (2,419)        2,112
                                                        --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                        (483)         (533)
  Capitalized software                                      (194)         (514)
                                                        --------      --------
       Net cash used in investing activities                (677)       (1,047)
                                                        --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from (purchase) sale of common and
    treasury stock                                            83          (546)
                                                        --------      --------
       Net cash provided by (used in) financing
         activities                                           83          (546)
                                                        --------      --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                        (3,013)          519

CASH AND CASH EQUIVALENTS, beginning of period             9,618        11,547
                                                        --------      --------
CASH AND CASH EQUIVALENTS, end of period                $  6,605      $ 12,066
                                                        ========      ========

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

                                        5
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1) BASIS OF PRESENTATION:

     The accompanying  consolidated financial statements include the accounts of
Microtest,  Inc.  (the  "Company")  and  its  wholly  owned  subsidiaries.   All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared  by the  Company.  The  financial  statements  have  been  prepared  in
accordance with generally accepted accounting principles,  pursuant to the rules
and  regulations of the Securities  and Exchange  Commission.  In the opinion of
management,  the accompanying financial statements include all adjustments (of a
normal  recurring  nature) which are necessary  for a fair  presentation  of the
results for the interim  periods  presented.  Certain  information  and footnote
disclosures  normally  included in financial  statements  have been condensed or
omitted  pursuant to such rules and  regulations.  Although the Company believes
that  the  disclosures  are  adequate  to make  the  information  presented  not
misleading,  it  is  suggested  that  these  financial  statements  be  read  in
conjunction  with the  consolidated  financial  statements and the notes thereto
included in the Company's 1998 Annual Report to Shareholders  and report on Form
10-K.  The results of operations  for the three months and six months ended June
26, 1999 are not  necessarily  indicative  of the results to be expected for the
full year.

(2) INVENTORIES:

     Inventories consist of the following (in thousands):

                                                         June 26,   December 31,
                                                          1999         1998
                                                         -------      -------
                                                       (unaudited)
     Raw materials                                       $ 1,314      $ 1,946
     Work-in-process                                         175          100
     Finished goods                                        5,172        5,200
                                                         -------      -------
                                                           6,661        7,246
     Less allowance for inventory valuation               (1,058)        (674)
                                                         -------      -------
                                                         $ 5,603      $ 6,572
                                                         =======      =======

                                        6
<PAGE>
(3) BASIC AND DILUTED LOSS PER SHARE:

     The  following  table sets forth the  computation  of basic and diluted net
loss per share:

                                    Three Months Ended       Six Months Ended
                                   -------------------     -------------------
                                            (as restated)          (as restated)
                                   June 26,    June 27,    June 26,   June 27,
                                    1999        1998        1999       1998
                                   -------     -------     -------    -------
Net loss                           $(3,945)    $  (242)    $(5,447)   $  (152)
                                   =======     =======     =======    =======

Weighted average common
  shares outstanding                 8,057       8,127       8,053      8,165

Dilutive effect of stock options        --          --          --         --
                                   -------     -------     -------    -------
Weighted average common and common
  equivalent shares outstanding      8,057       8,127       8,053      8,165
                                   =======     =======     =======    =======
Basic and diluted net loss
  per share                           (.49)       (.03)    $  (.69)   $  (.02)
                                   =======     =======     =======    =======

(4) SPECIAL CHARGE:

     During the quarter  ended June 26, 1999,  the Company  recognized a special
charge  of $1.8  million  related  to its plan to exit the  integrated  high-end
CD-ROM  enterprise  systems  business.  The  pre-tax  special  charge  primarily
consists of $982,000 in employee severance and benefits,  future lease payments,
the write-off of fixed assets and capitalized  software,  and an increase in the
allowance  for  evaluation  units.  The charge also  includes  $803,000  for the
write-down of discontinued  product  inventories that is included as a component
of cost of revenue.

(5) SEGMENTS:

     For organizational, marketing and financial reporting purposes, the Company
has  organized  into two  reportable  business  segments:  (1) Network  Test and
Measurement  ("NTM"  formerly  referred  to as NMP),  and (2)  Network  Attached
Storage  ("NAS"  formerly  referred to as NCP).  In  addition,  the NAS business
segment  develops and sells CD-ROM  networking  systems and service  maintenance
contracts in the United States and Germany.

     The NTM  business  segment  consists of  products  that are used by service
providers and system  integrators to perform critical cabling  certification and
network diagnostics.  The NTM line consists of cable certification tools such as
OMNIScanner,  PentaScanner,  CertiFiber, and network trouble shooting tools such
as MICROSCANNER and COMPAS.

     The NAS  business  segment  consists of products  that  address  challenges
associated   with  managing   network  devices  and  sharing  large  amounts  of
information within workgroups or enterprises. Network administrators, librarians
and  information  resource  professionals  in  organizations  such as law firms,
educational  institutions,  libraries  and research  facilities  are some of the
target  markets for  Microtest's  NAS line.  The NAS line consists  primarily of
Zerver and DiscPort products.

                                        7
<PAGE>
     In the second  quarter the Company  announced  the  discontinuation  of its
operations  in the  high-end  CD-ROM  enterprise  system  business.  Exiting the
enterprise business,  included as a part of the NAS business segment, allows the
Company to focus the Network  Attached  Storage  Division  exclusively  on entry
level NAS thin-server appliances for the workgroup and remote office market.

     The Company does not measure  assets or operating  expenses  separately for
the NTM and NAS business segments.

     Information  related to the operations of the Company in different business
segments for the second  quarter and six months ended June 26, 1999 and June 27,
1998 is set forth below.

                               Quarter Ended               Six Months Ended
                        ---------------------------   --------------------------
                          NAS       NTM      Total      NAS      NTM      Total
                        -------   -------   -------   -------  -------   -------
Net revenue:     1999   $ 3,612   $ 5,983   $ 9,595   $ 6,723  $11,873   $18,596
                 1998     3,322     7,423    10,745     7,232   13,229    20,461

Gross profit:    1999       959     3,194     4,153     2,714    6,489     9,203
                 1998     1,850     4,447     6,297     4,290    7,932    12,222


                                     Quarter Ended          Six Months Ended
                                  --------------------    --------------------
                                           (as restated)           (as restated)
                                  June 26,    June 27,     June 26,   June 27,
                                    1999        1998        1999        1998
                                  --------    --------    --------    --------
Gross profit for reportable
  segments                        $  4,153    $  6,297    $  9,203    $ 12,222
Unallocated amounts:
    Operating expenses              (7,792)     (6,720)    (14,596)    (12,590)
    Net interest income                 --         102          63         178
                                  --------    --------    --------    --------
Loss before taxes                 $ (3,639)   $   (321)   $ (5,330)   $   (190)
                                  ========    ========    ========    ========

(6) MAJOR CUSTOMERS:

     Major  customers  accounting  for more than 10% of total  revenues  for the
quarter and six months  ended June 26, 1999 and June 27,  1998,  are  summarized
below. Percentage of revenue amount is not presented if less than 10%.

                                          Quarter Ended       Six Months Ended
                                       -------------------   -------------------
                                       June 26,   June 27,   June 26,   June 27,
Customer                                 1999       1998       1999       1998
                                       --------   --------   --------   --------
Tech Data                                 --         12%        --         12%
Ingram Micro                              --         17%        --         11%
Graybar Electric Company, Inc.            11%        --         12%        --

                                        8
<PAGE>
(7) DOMESTIC AND INTERNATIONAL OPERATIONS:

     The Company markets its products  domestically and internationally  through
its own direct  sales  organization  and through a multiple  channel,  worldwide
distribution  network.  A summary of domestic and  international net revenues to
unaffiliated  customers  for the quarter and six months  ended June 26, 1999 and
June 27,  1998,  follows:

                                  Quarter Ended            Six Months Ended
                               --------------------      --------------------
                                         (as restated)             (as restated)
                               June 26,     June 27,     June 26,     June 27,
                                1999         1998         1999         1998
                               -------      -------      -------      -------
Domestic                       $ 5,984      $ 8,091      $10,877      $13,912
International                    3,611        2,654        7,719        6,549
                               -------      -------      -------      -------
  Net revenues                 $ 9,595      $10,745      $18,596      $20,461
                               =======      =======      =======      =======

(8) RESTATEMENT:

     The following  table presents the Company's  selected  unaudited  quarterly
operating  results for the second  quarter and six months ended June 27, 1998 as
originally reported, and as restated. The Company restated its quarterly results
for the first three  quarters of 1998 to correct  errors  identified  during the
1998 year-end  audit.  The errors were primarily  attributable to system changes
and turnover in the finance  department  that occurred  during the first half of
1998. The corrections  related primarily to various  adjustments  correcting the
provision for sales returns, correcting software capitalization and amortization
and inter-company account transactions.

                                  Quarter Ended            Six Months Ended
                              ----------------------     ---------------------
                            As Originally              As Originally
                              Reported    As restated    Reported    As restated
                              --------      --------     --------     --------
Net revenue                   $ 11,125      $ 10,745     $ 20,841     $ 20,461
Cost of revenue                  4,452         4,448        8,226        8,239
Gross profit                     6,673         6,297       12,615       12,222
Total operating expenses         6,059         6,720       11,827       12,590
Net income (loss)                  541          (242)         714         (152)
Net income per common
  share - basic and diluted   $    .07          (.03)         .09         (.02)

(9) COMMITMENTS AND CONTINGENCIES:

     The  Company  is  involved  in  certain  legal  matters  incidental  to its
business,  the outcome of which is currently unknown.  Management  believes that
the Company's liability,  if any, with respect to such matters,  will not have a
material  adverse  affect on the  Company's  financial  condition and results of
operations.

     On March 8, 1999,  a  purported  class  action  lawsuit  was filed  against
Microtest,  Inc. and certain former officers in the United States District Court
for the District of Arizona.  The suit claims that  Microtest  violated  Section
10(b) of the Securities Exchange Act of 1934 by making public misrepresentations
or failing to disclose material facts regarding its financial results.  The suit
was  filed as a class  action on behalf of all  purchasers  of  Microtest  stock
between  April 14,  1998 and March 2, 1999.  A similar  suit was filed  April 7,
1999.  Microtest  intends to  vigorously  defend  these  lawsuits.  The eventual
outcome of these claims cannot be predicted with any degree of legal certainty.

         The  Securities  and  Exchange  Commission  ("SEC")  is  engaged  in an
investigation  relating primarily to accounting matters of the Company.  The SEC
has not, to date,  asserted  any  specific  claims or remedy with respect to the
Company.

                                        9
<PAGE>
                        Microtest, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The Company restated its quarterly  results for the first three quarters of
1998 to correct errors  identified  during the 1998 year-end  audit.  The errors
were  primarily  attributable  to system  changes  and  turnover  in the finance
department that occurred during the first half of 1998. The corrections  related
primarily to various  adjustments  correcting  the provision for sales  returns,
correcting  software  capitalization  and amortization and intercompany  account
transactions.

     REVENUE.  Net revenue for the Company's  second quarter ended June 26, 1999
was $9.6  million,  a  decrease  of 11% from  revenue of $10.7  million  for the
corresponding  quarter last year.  Net revenue for the six months ended June 26,
1999 was $18.6  million,  a decrease of 9% from revenue of $20.5 million for the
corresponding  period last year.  The  decrease  for the  quarter was  primarily
because of product  shipments  originally  scheduled for the second quarter were
delayed at customer  request into early July.  The  decrease  year over year was
also  attributable  to  intensified  competition  and the Company's  decision to
withdraw from the low margin tower business.  The lower than anticipated revenue
from the new  DiscZerver  products  were  unable to offset the  decreased  tower
revenues.

     The Company  distributes  its products in both the U.S.  and  international
markets.  U.S. net revenues were $6.0 million, or 62% of net revenues,  and $8.1
million,  or 75% of net  revenues,  for the  second  quarters  of 1999 and 1998,
respectively.  U.S. net revenues were $10.9 million, or 58% of net revenue,  and
$13.9 million, or 68% of net revenue, for the six months ended June 26, 1999 and
June 27,  1998,  respectively.  The decrease in U.S. net revenue for the quarter
and six months ended June 26,  1999,was  primarily  attributable  to intensified
competition.

     International  sales were $3.6  million,  or 38% of net  revenue,  and $2.6
million,  or  25%  of  net  revenue,   for  the  second  quarters  of  1999  and
1998,respectively. International sales were $7.7 million, or 42% of net revenue,
and $6.5  million,  or 32% of net revenue,  for the first six months of 1999 and
1998, respectively. The increase in international sales in the second quarter of
1999 and six months ended June 26, 1999, resulted primarily from increased sales
in South America and Europe.

     GROSS PROFIT.  The Company's  gross profit was $4.2 million,  or 44% of net
revenue,  and $6.3 million, or 59% of net revenue, for the second quarters ended
June 26, 1999 and June 27, 1998, respectively. Gross profit was $9.2 million, or
49% of net revenue, and $12.2 million, or 60% of net revenue, for the six months
ended June 26, 1999 and June 27, 1998, respectively.  The decrease in the second
quarter and first six months gross  margins as a percentage  of net revenue from
1998 to 1999 was primarily  attributable  to a decrease in revenue and increases
in amortization of capitalized software,  volume rebates, changes in product mix
and returns,  and an  adjustment  in the cost of revenue  portion of the returns
reserve. In addition, gross margin was adversely affected by a special charge of
$803,000.  The special charge represents the write-down of discontinued  product
inventories  as a  result  of  the  Company's  exit  from  the  high-end  CD-ROM
enterprise business.

     SALES AND MARKETING. Sales and marketing expenses were $3.1 million, or 32%
of net revenue, and $3.3 million, or 30% of net revenue, for the second quarters
of 1999 and 1998, respectively. Sales and  marketing expenses were $6.2 million,

                                       10
<PAGE>
or 34% of net revenue,  and $6.4 million,  or 31% of net revenue,  for first six
months of 1999 and  1998,  respectively.  The  decrease  in sales and  marketing
expenses  in absolute  dollars for the second  quarter of 1999 and the first six
months  of 1999  over the  corresponding  periods  in 1998 is due  primarily  to
reduced cooperative advertising expenses. In addition, sales promotion expenses,
which were charged to sales and marketing  expense in the prior year,  have been
recorded as reduction of revenue in the current year.  The increase in sales and
marketing  expenses as a  percentage  of net revenue for the second  quarter and
first six  months of 1999 over the  corresponding  periods  in the prior year is
primarily due to an overall decrease in the Company's revenue.

     RESEARCH AND  DEVELOPMENT.  Research  and  development  expenses  were $2.1
million, or 22% of net revenue, and $1.9 million, or 18% of net revenue, for the
second  quarters  of 1999 and 1998,  respectively.  For the first six  months of
1999,  research  and  development  expenses  were  $3.8  million,  or 20% of net
revenue,  compared with $3.7 million, or 18% of net revenue, for the same period
of 1998.  The  increase  in research  and  development  expenses  for the second
quarter and six months ended June 26, 1999 compared with the same periods in the
prior  year,  is  primarily  attributable  to the  substantial  completion  of a
third-party   research  and  development  project  in  the  current  quarter  of
approximately  $300,000.  In addition,  capitalized  software for the six months
ended June 26, 1999 compared with the same period in the prior year decreased by
over $300,000 as a result of the completion of certain  research and development
projects.

     GENERAL AND ADMINISTRATIVE.  General and administrative  expenses were $1.7
million, or 17% of net revenue, and $1.5 million, or 14% of net revenue, for the
second  quarters of 1999 and 1998,  respectively.  For the six months ended June
26, 1999 general and  administrative  expenses were $3.1 million,  or 16% of net
revenue,   compared  with  $2.6  million,  or  13%  of  net  revenue,   for  the
corresponding   period  in  the  prior  year.   The   increase  in  general  and
administrative  expenses as a percentage of net revenue, as well as in aggregate
dollars, for the second quarter of 1999 over the corresponding period in 1998 is
due  primarily  to the  resolution  of certain  sales tax  related  issues.  The
increase in general and  administrative  expenses  for the six months ended June
26, 1999 compared with the same period in the prior year is also attributable to
additional expenses for professional fees.

     SPECIAL  CHARGE.  In the  second  quarter  of 1999 the  Company  recorded a
special charge under operating expenses for its plan to exit the high-end CD-ROM
enterprise  system  business.  This charge  represents  employee  severance  and
benefits,  future lease payments,  the write-off of fixed assets and capitalized
software and an increase in the Company's  allowance for evaluation  units.  The
charge also includes a write-down of discontinued  product  inventories that was
included as a  component  of cost of  revenue.  The  special  charge of $524,000
recorded in the first quarter of 1999, represents severance expenses recorded to
recognize the restructuring of the Company's management organization.

     CUMULATIVE  EFFECT  OF A CHANGE IN  ACCOUNTING  PRINCIPLE.  The  cumulative
effect of a change in  accounting  principle,  recorded in the first  quarter of
1999, reflects the write-off of international product translation costs that had
previously been capitalized. The write-off is in accordance with AICPA Statement
of Position 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES."

                                       11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $6.6 million at June 26, 1999
compared to $9.6 million at December 31, 1998. Working capital was $17.8 million
at June 26, 1999 compared to $22.0 million at December 31, 1998. The decrease in
cash  and cash  equivalents  and  working  capital  was  primarily  a result  of
reductions  in accounts  payable,  purchase of equipment and funding of the cash
used in operating activities.

     The Company funds its working capital  requirements  on a short-term  basis
primarily  through  existing  cash  balances.   The  Company  has  no  long-term
obligations  and  anticipates  that  existing  cash balances and cash flows from
operations will be adequate to meet the Company's cash requirements for at least
the next year.

RISK FACTORS

     The  market  for  the  Company's   products  is   characterized   by  rapid
technological  advances,  evolving  industry  standards in computer hardware and
software technology,  changes in customer  requirements and frequent new product
introductions and enhancements.  The Company's future success will depend on its
ability to  continue  to enhance  its  current  product  line and to continue to
develop and  introduce  new  products  that keep pace with  competitive  product
introductions  and  technological  developments,  satisfy  diverse and  evolving
customer  requirements or otherwise achieve market  acceptance.  There can be no
assurance  that the Company  will be  successful  in  continuing  to develop and
market,  in a  timely  and  cost  effective  manner,  new  products  or  product
enhancements  that  respond to  technological  advances  by others or that these
products will achieve market acceptance. In addition,  companies in the industry
have,  in the past,  experienced  delays in the  development,  introduction  and
marketing  of new and enhanced  products and there can be no assurance  that the
Company will not experience delays in the future.  Any failure by the Company to
anticipate  or  respond   adequately  to  changes  in  technology  and  customer
preferences,  or any significant delays in product  development or introduction,
would  have a  material  adverse  affect on the  Company's  business,  financial
condition and results of operations.

     Due to their complexity and sophistication,  the Company's  products,  from
time to time,  may contain  defects or "bugs" which can be difficult to correct.
Moreover,  as the Company  continues to develop and enhance its products,  there
can be no  assurance  that the  Company  will be able to  identify  and  correct
defects  in such a manner  that will  permit  the  timely  introduction  of such
products. Furthermore,  despite extensive testing, the Company has, from time to
time,  discovered  defects  only  after  its  products  have  been  commercially
released.  There can be no assurance that product  defects will not cause delays
in  product  introductions  and  shipments,  cause  loss of or  delays in market
acceptance,  result in increased costs,  require design  modifications or impair
customer  satisfaction.  Any such event could have a material  adverse affect on
the Company's business, financial condition and results of operations.

     Over  the  past  three  years,   CD-ROM  drive   technology   has  advanced
significantly.  In addition,  the pace of new drive introductions has increased.
As a result,  the  Company  may find  itself  holding an  inventory  of obsolete
drives. The Company's  contracts with its distributors allow for product returns
or price protection  credits,  based on current  inventory levels of current and
obsolete products under certain limited circumstances. The Company estimates and
accrues an allowance for such  occurrences,  but there can be no assurance  that
actual inventory  writedowns,  product returns or price protection  credits will
not exceed the Company's  estimates.  Any of the  foregoing  events could have a
material  adverse  affect on the  Company's  business,  financial  condition and
results of operations.

                                       12
<PAGE>
YEAR 2000 ISSUES

     Like many other  organizations,  the year 2000 computer issue creates risks
for the Company.  Many computer  systems were  originally  designed to recognize
calendar  years by their last two  digits.  Calculations  performed  using these
truncated  fields  would not work  properly  with dates during or after the year
2000.  To  address  these  year  2000  issues,   the  Company  has  initiated  a
comprehensive assessment and remediation program to resolve any year 2000 issues
with respect to its information  technology ("IT") systems,  its non-IT systems,
products  and  the  systems  of  third  parties  with  which  it has a  material
relationship.  The Company estimates that as of August 1, 1999, it has completed
approximately  99% of the effort it believes  necessary or prudent to adequately
address potential year 2000 issues they have identified.

     The IT systems  section of its year 2000 program  focuses on the  Company's
computer  hardware and software.  The Company has completed the assessment phase
of its program. The Company's current IT systems which were determined not to be
compliant  have  been  replaced  or  otherwise  corrected  for  compliance.  The
remediation  phase for IT systems is completed,  although some minor systems may
be converted later in 1999.

     The non-IT systems section  includes the hardware,  software and associated
embedded  computer  technologies  that are used to operate  Company  facilities,
equipment and other activities that are not related to IT systems. The Company's
building  management  has provided  the Company with a complete  list of vendors
indicating  compliance.  The  current  telephone  system is  compliant  and long
distance and local telephone service are compliant.

     The Company's current products and all planned future releases,  with minor
exceptions, are year 2000 compliant.  Registered customers have been notified of
non-compliant products and any available upgrade. This information has also been
made available on the Company's Web site since June 1998.

     The Company is  continuing  the process of  identifying,  prioritizing  and
communicating with critical  suppliers,  distributors and customers to determine
the extent to which the Company  may be  vulnerable  in the event those  parties
fail to properly  identify and remedy  their own year 2000  issues.  The Company
believes that non-compliant systems related to the Company's top suppliers would
present the greatest risk to the Company. Questionnaires have been sent to those
suppliers and they have stated that they are  compliant or expect  compliance by
the end of 1999.  The  Company  intends to monitor  the  progress  made by these
critical  third  parties and  formulate  appropriate  contingency  and  business
continuation plans as needed.

     The Company currently believes that the worst case scenario with respect to
the year 2000 issue is the failure of a supplier,  including utility  suppliers,
to become year 2000 compliant,  which could result in the temporary interruption
of  the  supply  of  necessary  products  or  services.  This  could  result  in
interruptions  in production for a period of time, which in turn could result in
potential  lost sales and profits.  In addition,  marketing  and  administrative
expense  could  increase  if  automated  functions  would  need to be  performed
manually.

     The  total  cost of the  Company's  year 2000  Plan is not  expected  to be
material to the  Company's  financial  condition.  The total cost of the Plan is
being funded through  operating  cash flows.  The Company  anticipates  that the
remaining  expenditures  to complete the Company's  year 2000 Plan are less than
$20,000.  None of the Company's other information  technology projects have been
delayed  or

                                       13
<PAGE>
deferred as a result of the implementation of the year 2000 Compliance Plan. The
Company does not expect that the  incremental  costs of this project will have a
material adverse affect on the Company's  consolidated  financial  statements or
results of operations in any future periods.

     The costs of the year  2000  project  and the  dates on which  the  Company
believes it will complete the year 2000  modifications  and testing are based on
management's best estimates.  These were derived utilizing numerous  assumptions
regarding  future  events,  including  the  continued  availability  of  certain
resources,  third-party modification plans and other factors. However, there can
be no guarantee  that these  estimates will be achieved and actual results could
differ  materially  from those currently  anticipated.  Examples of factors that
might  cause such  material  differences  include,  but are not  limited to, the
availability  and cost of personnel  trained in this area, the ability to locate
and correct all  relevant  computer  codes and embedded  technology  and similar
uncertainties.  In  addition,  there can be no  guarantee  that the  systems  or
products of other entities will be converted on a timely basis,  or that failure
to convert by another  company,  or a conversion that is  incompatible  with the
Company's systems, would not have a material adverse affect on the Company.

     The Company presently believes it has an effective Compliance Plan in place
to  anticipate  and  resolve  potential  year 2000  issues  in a timely  manner.
Concurrent  with the  remediation  of the  Company's  systems and  evaluation of
third-party  systems,  the Company  continues  to develop  contingency  plans to
mitigate  the  risks  that  could  occur  in  the  event  of  disruption  due to
non-compliant  systems.  Contingency  plans may include  looking for alternative
suppliers,  increasing  inventory levels or other actions deemed prudent.  It is
expected that assessment,  remediation and contingency  planning activities will
be on  going  throughout  1999  with  the goal of  appropriately  resolving  all
material  internal  systems and third-party  issues.  Estimated costs associated
with  developing  and  implementing   contingency  measures  are  not  currently
estimable.

                                       14
<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES
                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     From time to time the  Company is  involved  in various  legal  proceedings
incidental to its business.  Management  does not believe that any current legal
proceedings  will have a material  adverse affect on the financial  condition or
operating results of the Company, but there can be no assurances in this regard.
On March 8, 1999, a purported class action lawsuit was filed against  Microtest,
Inc. and certain  former  officers in the United States  District  Court for the
District of Arizona.  The suit claims that Microtest  violated  Section 10(b) of
the  Securities  Exchange  Act of 1934 by making  public  misrepresentations  or
failing to disclose material facts regarding its financial results. The suit was
filed as a class action on behalf of all  purchasers of Microtest  stock between
April  14,  1998 and March 2,  1999.  A similar  suit was filed  April 7,  1999.
Microtest intends to vigorously  defend these lawsuits.  The eventual outcome of
these claims cannot be predicted with any degree of legal certainty.

     The   Securities  and  Exchange   Commission   ("SEC")  is  engaged  in  an
investigation  relating primarily to accounting matters of the Company.  The SEC
has not, to date,  asserted  any  specific  claims or remedy with respect to the
Company.

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

     (a)  The Company's Annual Shareholders' Meeting was held on May 24, 1999.

     (b)  At the Annual Shareholders' Meeting, proposals were considered for (i)
          the  election  of Roger C.  Ferguson  and Vincent C. Hren as Class III
          Incumbent Directors to serve for three year terms and (ii) an increase
          in the  maximum  number  of  shares  of  the  Company's  common  stock
          available for sale under the Employee Stock Purchase Plan from 200,000
          shares to 400,000 shares.

          The  director-nominees  were elected and the increase to the amount of
          shares  available for sale under the Employee  Stock Purchase Plan was
          approved with the voting results as follows:

<TABLE>
<CAPTION>
Proposal                            Votes For   Votes Against   Votes Withheld   Abstained   Not Voted
--------                            ---------   -------------   --------------   ---------   ---------
<S>                                 <C>         <C>             <C>              <C>         <C>
Election of Roger C. Ferguson
as a Class III Incumbent Director   6,493,356       86,179            --              --      1,709,601

Election of Vincent C. Hren as
a Class III Incumbent Director      6,495,420       84,115            --              --      1,709,601

Approval of an increase to the
maximum number of shares
available under the
Employee Stock Purchase Plan        6,334,425      218,705            --           26,405     1,709,601
</TABLE>

                                       15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

Exhibit                                                Page or
Number   Description                                   Method of Filing
------   -----------                                   ----------------
3.1      Amended and Restated Certificate of           Incorporated by
         Incorporation of the Company dated            reference to Exhibit 3.1
         May 19, 1992                                  to Form S-1 Registration
                                                       Statement #33-52264
                                                       ("Form S-1 #33-52264")

3.2      Bylaws of the Company                         Incorporated by
                                                       reference to Exhibit
                                                       3.2 to Form S-1 #33-52264

10.18    Non-Qualified Stock Option Agreement with     Filed herewith
         Vincent C. Hren

27       Financial Data Schedule                       Filed herewith

99       Private Securities Litigation Reform Act      Filed herewith
         of 1995 Safe Harbor Compliance Statement
         for Forward-Looking Statements

     (b)  Reports on Form 8-K

          None.

                                       16
<PAGE>
                                    Signature

     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 hereunto duly authorized.

                                        MICROTEST, INC.


August 10, 1999                         /s/ Vincent C. Hren
                                        ----------------------------------------
                                        Vincent C. Hren
                                        President and Chief Executive Officer


August 10, 1999                         /s/ Daniel J. Predovic
                                        ----------------------------------------
                                        Daniel J. Predovic
                                        Vice President, Chief Financial
                                        Officer, Secretary and Treasurer
                                        (Principal Financial and Accounting
                                        Officer)

                                       17