================================================================================

                       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 SEPTEMBER 25, 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 (November 5, 1999).

                 Common stock, $.001 par value: 8,311,895 shares

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<PAGE>
                        MICROTEST, INC. AND SUBSIDIARIES

                                      INDEX

                                                                            Page
                                                                            ----

PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

             Consolidated Balance Sheets-
                September 25, 1999 and December 31, 1998                     3

             Consolidated Statements of Operations-
                Three Months and Nine Months Ended
                September 25, 1999 and September 26, 1998
                (as restated)                                                4

             Consolidated Statements of Cash Flows-
                Nine Months Ended September 25, 1999 and
                September 26, 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 6. Exhibits and Reports on Form 8-K                                 15


SIGNATURES                                                                    16

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

                                                     September 25,  December 31,
                                                         1999           1998
                                                        --------     --------
ASSETS                                                (unaudited)

CURRENT ASSETS:
  Cash and cash equivalents                             $  6,468     $  9,618
  Restricted investments                                     603        1,124
  Receivables:
    Trade accounts, net of allowances of $1,137
      and $2,029                                           8,660        8,171
    Income taxes                                           2,969        2,897
  Inventories                                              4,113        6,572
  Prepaid expenses                                           693        1,148
  Deferred income taxes                                    1,580        1,556
                                                        --------     --------
      Total current assets                                25,086       31,086
                                                        --------     --------

PROPERTY AND EQUIPMENT:                                   10,736       10,476
  Less accumulated depreciation                           (8,329)      (7,375)
                                                        --------     --------
      Net property and equipment                           2,407        3,101
                                                        --------     --------

OTHER ASSETS:
  Capitalized software, net                                1,457        1,894
  Deferred income taxes                                    1,519        1,519
  Other                                                    1,332        1,750
                                                        --------     --------
      Total other assets                                   4,308        5,163
                                                        --------     --------
                                                        $ 31,801     $ 39,350
                                                        ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                      $  1,939     $  4,152
  Accrued liabilities                                      2,606        2,922
  Accrued payroll and employee benefits                    1,159          860
  Accrued deferred compensation                              603        1,124
                                                        --------     --------
      Total current liablilities                           6,307        9,058
                                                        --------     --------

STOCKHOLDERS' EQUITY:
  Common stock, $.001 par value. Authorized
    15,000,000 shares; issued 8,311,895 shares
    as of September 25, 1999 and 8,253,585 as
    of December 31, 1998                                       8            8
  Additional paid-in capital                              33,042       32,916
  Accumulated deficit                                     (6,338)      (1,414)
  Less treasury stock, at cost, 232,520 shares            (1,218)      (1,218)
                                                        --------     --------
      Total stockholders' equity                          25,494       30,292
                                                        --------     --------
                                                        $ 31,801     $ 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            NINE MONTHS ENDED
                                                           ---------------------------   ---------------------------
                                                                         (as restated)                 (as restated)
                                                           September 25,  September 26,  September 25,  September 26,
                                                               1999           1998           1999           1998
                                                             --------       --------       --------       --------
                                                                   (unaudited)                   (unaudited)

<S>                                                          <C>            <C>            <C>            <C>
NET REVENUE                                                  $ 11,297       $ 10,111       $ 29,893       $ 30,572
COST OF REVENUE                                                 5,146          4,156         13,736         12,395
Special charge for write-down of
  discontinued product inventories                                 --             --            803             --
                                                             --------       --------       --------       --------
Gross profit                                                    6,151          5,955         15,354         18,177
                                                             --------       --------       --------       --------
OPERATING EXPENSES:
  Sales and marketing                                           2,985          2,571          9,233          8,928
  Research and development                                      1,726          1,800          5,506          5,467
  General and administrative                                    1,220          1,404          4,282          3,970
  Special charge (credit)                                        (230)            --          1,276             --
                                                             --------       --------       --------       --------
      Total operating expenses                                  5,701          5,775         20,297         18,365
                                                             --------       --------       --------       --------
INCOME (LOSS) FROM OPERATIONS                                     450            180         (4,943)          (188)
  Other income, net                                                73             81            136            258
                                                             --------       --------       --------       --------
INCOME (LOSS) BEFORE INCOME TAXES                                 523            261         (4,807)            70
INCOME TAXES (BENEFIT)                                             --            (72)            --           (111)
                                                             --------       --------       --------       --------
  Income (loss) before cumulative effect of a change
    in an accounting principle                                    523            333         (4,807)           181
CUMULATIVE EFFECT OF A CHANGE IN AN
  ACCOUNTING PRINCIPLE, NET OF RELATED TAXES                       --             --           (117)            --
                                                             --------       --------       --------       --------
NET INCOME (LOSS)                                            $    523       $    333       $ (4,924)      $    181
                                                             ========       ========       ========       ========

BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Income (loss) before change in an accounting principle       $    .06       $    .04       $   (.60)      $    .02
Cumulative effect of a change in an accounting principle           --             --           (.01)            --
                                                             --------       --------       --------       --------
Net income (loss)                                            $    .06       $    .04       $   (.61)      $    .02
                                                             ========       ========       ========       ========
Weighted average common and common
  equivalent shares outstanding                                 8,123          8,068          8,062          8,132
                                                             ========       ========       ========       ========
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                             ----------------------------
                                                             September 25,  September 26,
                                                                 1999           1998
                                                                -------       --------
CASH FLOW FROM OPERATING ACTIVITIES:                                 (unaudited)
<S>                                                              <C>               <C>
  Net income (loss)                                              (4,924)           181
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
  Depreciation and amortization                                   1,834            897
  Loss on disposition of equipment                                  142             --
  Change in accounts receivable allowances                         (892)          (428)
  Decrease in accounts receivable                                   403          3,365
  Increase in income tax receivable                                 (72)          (106)
  (Increase) decrease in inventories                              2,459           (206)
  (Increase) decrease in prepaid expenses and other assets          873           (134)
  Increase in deferred income taxes                                 (24)            --
  Decrease in accounts payable                                   (2,213)          (589)
  Decrease in accrued liabilities                                  (316)        (1,354)
  Increase in accrued payroll and employee benefits                 299            147
                                                                -------       --------
      Net cash provided by (used in) operating activities        (2,431)         1,773
                                                                -------       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                               (651)          (678)
  Capitalized software                                             (194)          (771)
                                                                -------       --------
      Net cash used in investing activities                        (845)        (1,449)
                                                                -------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from (purchase of) common and treasury stock             126           (897)
                                                                -------       --------
      Net cash provided by (used in) financing activities           126           (897)
                                                                -------       --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                        (3,150)          (573)

CASH AND CASH EQUIVALENTS, beginning of period                    9,618         11,547
                                                                -------       --------
CASH AND CASH EQUIVALENTS, end of period                        $ 6,468       $ 10,974
                                                                =======       ========
</TABLE>

   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 nine  months  ended
September 25, 1999 are not necessarily  indicative of the results to be expected
for the full year.

(2) INVENTORIES:

     Inventories consist of the following (in thousands):

                                                 September 25,  December 31,
                                                      1999          1998
                                                 -------------  ------------
                                                  (unaudited)

     Raw materials                                  $ 1,035        $ 1,946
     Work-in-process                                     81            100
     Finished goods                                   3,575          5,200
                                                    -------        -------
                                                      4,691          7,246
     Less allowance for inventory valuation            (578)          (674)
                                                    -------        -------
                                                    $ 4,113        $ 6,572
                                                    =======        =======

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

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

<TABLE>
<CAPTION>
                                               Three Months Ended            Nine Months Ended
                                          ----------------------------  ----------------------------
                                                         (as restated)                 (as restated)
                                          September 25,  September 26,  September 25,  September 26,
                                              1999           1998           1999           1998
                                          -------------  -------------  -------------  -------------
<S>                                          <C>            <C>            <C>             <C>
     Net income (loss)                       $  523         $  333         $(4,924)        $  181
                                             ======         ======         =======         ======
     Weighted average common shares
       outstanding                            8,078          8,068           8,062          8,132

     Dilutive effect of stock options            45             --              --             --
                                             ------         ------         -------         ------
     Weighted average common and common
       equivalent shares outstanding          8,123          8,068           8,062          8,132
                                             ======         ======         =======         ======
     Basic and diluted net income (loss)
       per share                             $  .06         $  .04         $  (.61)        $  .02
                                             ======         ======         =======         ======
</TABLE>

(4) SPECIAL CHARGE (CREDIT):

     During the  quarter  ended  September  25,  1999,  the  Company  recorded a
$230,000  special  credit  as part of its  exit  from  the  integrated  high-end
enterprise  systems  business.  The credit  relates to the sale of the Company's
active enterprise  maintenance  contracts and its enterprise  customer database.
For the nine months ended  September 25, 1999, the Company  recorded net special
charges  of $2.1  million  relating  to its  exit  from the  enterprise  systems
business and to restructure  its management  organization.  The pre-tax  special
charge  primarily  consists of $1.5 million 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).

     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.   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 the  Company's  NAS  product  line.  The NAS line  consists
primarily of thin server products marketed under the name Zerver.

                                       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  currently  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 third quarter
and nine months ended  September  25, 1999 and  September  26, 1998 is set forth
below:

                            Quarter Ended                Nine Months Ended
                     --------------------------    -----------------------------
                       NAS      NTM      Total       NAS        NTM       Total
                       ---      ---      -----       ---        ---       -----
Net revenue:   1999  $ 2,790  $ 8,507  $ 11,297    $ 9,908   $ 19,985   $ 29,893
               1998    3,063    7,048    10,111     10,295     20,277     30,572

Gross profit:  1999    1,472    4,679     6,151      4,188     11,166     15,354
               1998    2,060    3,895     5,955      6,350     11,827     18,177

<TABLE>
<CAPTION>
                                               Quarter Ended              Nine Months Ended
                                       ----------------------------  ----------------------------
                                                      (as restated)                 (as restated)
                                       September 25,  September 26,  September 25,  September 26,
                                           1999           1998            1999          1998
                                       -------------  -------------  -------------  -------------
<S>                                       <C>            <C>            <C>            <C>
Gross profit for reportable segments      $ 6,151        $ 5,955        $ 15,354       $ 18,177
Unallocated amounts:
Operating expenses                         (5,701)        (5,775)        (20,297)       (18,365)
Interest income, net                           73             81             136            258
                                          -------        -------        --------       --------
Income (loss) before taxes                $   523        $   261        $ (4,807)      $     70
                                          =======        =======        ========       ========
</TABLE>

(6) MAJOR CUSTOMERS:

     Major  customers  accounting  for more than 10% of total  revenues  for the
quarter and nine months ended  September 25, 1999 and  September  26, 1998,  are
summarized  below.  Percentage  of revenue  amount is not presented if less than
10%.

<TABLE>
<CAPTION>
                                      Quarter Ended                Nine Months Ended
                               ----------------------------   ----------------------------
                               September 25,  September 26,   September 25,  September 26,
Customer                           1999           1998            1999           1998
--------                       -------------  -------------   -------------  -------------
<S>                                <C>            <C>             <C>            <C>
Tech Data Corporation               --             --              --             11%
Anixter                             10%            12%             --             10%
Ingram Micro, Inc.                  --             13%             --             12%
Graybar Electric Company, Inc.      16%            --              13%            --
</TABLE>

                                       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 nine months ended September 25, 1999
and September 26, 1998, follows:

                                   Quarter Ended         Nine Months Ended
                               ---------------------   ---------------------
                                         (as restated)           (as restated)
                               Sept. 25,   Sept. 26,   Sept. 25,   Sept. 26,
                                  1999       1998        1999        1998
                                -------     -------     -------     -------
     Domestic                   $ 7,518     $ 7,182     $18,394     $21,094
     International                3,779       2,929      11,499       9,478
                                -------     -------     -------     -------

         Net revenues           $11,297     $10,111     $29,893     $30,572
                                =======     =======     =======     =======

(8) RESTATEMENT:

     The following  table presents the Company's  selected  unaudited  quarterly
operating results for the third quarter and nine months ended September 26, 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 intercompany account transactions.

                                Quarter Ended              Nine Months Ended
                          -------------------------   --------------------------
                          As Originally               As Originally
                             Reported   As Restated      Reported    As Restated
                          ------------- -----------   -------------  -----------
Net revenue                  $10,111      $10,111         $30,952      $30,572
Cost of revenue                4,090        4,156          12,316       12,395
Gross profit                   6,021        5,955          18,636       18,177
Total operating expenses       5,756        5,775          17,583       18,365
Net income                       393          333           1,107          181
Net income per common
  share - basic and
  diluted                    $   .05      $   .04         $   .14      $   .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

OVERVIEW

     The Company  develops and markets Network Test and Measurement  ("NTM") and
Network  Attached  Storage ("NAS")  products.  The NTM products perform critical
cabling  certification and network diagnostics.  The NAS line consists primarily
of thin server  products that allow the sharing of information  among local area
network users.

     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.

     The Company has made significant  changes to address the issues that led to
the need for the  restatement  of earnings.  The Company  revised its  strategic
direction and exited the integrated high-end CD-ROM enterprise systems business.
These efforts resulted in increased revenue and a return to profitability in the
third quarter of 1999,  despite the Company's exit from the  enterprise  systems
business.

RESULTS OF OPERATIONS

     REVENUE.  Net revenue for the Company's  third quarter ended  September 25,
1999 was $11.3 million, an increase of 12% from revenue of $10.1 million for the
corresponding quarter last year. Net revenue for the nine months ended September
25, 1999 was $29.9  million,  a decrease of 2% from revenue of $30.6 million for
the  corresponding  period last year.  The increase in net revenue for the third
quarter of 1999 over 1998 was  attributed  to the  increase in sales  across the
Company's  NTM and NAS  product  lines  worldwide.  Third  quarter  NAS  revenue
increased  significantly  over  the  1998  quarter,  but  the  increase  was not
sufficient to make up for the loss of revenue  resulting from the Company's exit
from the integrated  high-end CD-ROM  enterprise  systems and DiscPort/CD  tower
business.  The decrease in net revenue for the nine month period ended September
25,  1999 when  compared  to the  corresponding  period in 1998 was  primarily a
result of the Company's efforts to reduce distribution channel inventories.  NAS
DiscZerver revenue increased  significantly since its introduction in the second
quarter  of 1998,  but was not able to offset the  decline in revenue  caused by
decreased  distribution sales and the Company's exit from the enterprise systems
business.

     The Company  distributes  its products in both the U.S.  and  international
markets.  U.S. net revenue increased 4% to $7.5 million, or 67% of net revenues,
in the third quarter of 1999 from $7.2 million, or 71% of net revenues,  for the
same quarter last year. U.S. net revenue decreased 12% to $18.4 million,  or 62%
of net revenues, for the first nine months of 1999 from $21.0 million, or 69% of
net revenues, for the same period in 1998.

     The increase in U.S.  revenue for the third  quarter of 1999 was  primarily
attributable  to increased NTM and NAS product demand for the  OMNIScanner,  the
new OMNIFiber, and DiscZerver offset in part by the decline in revenue caused by
decreased  distribution  sales. The overall decrease in U.S. revenue in both the
aggregate  and as a  percentage  of total net  revenues for the nine month ended

                                       10
<PAGE>
September  25, 1999  resulted  from the decline in revenue  caused by  decreased
distribution sales and the Company's exit from the enterprise systems business.

     International  sales were $3.8  million,  or 34% of net  revenue,  and $2.9
million,  or 29% of net  revenue,  for the  third  quarters  of 1999  and  1998,
respectively. International sales were $11.5 million, or 38% of net revenue, and
$9.5 million, or 31% of net revenue, for the first nine months of 1999 and 1998,
respectively.  The  increase  in  international  sales  as a  percentage  of net
revenue,  as well as in aggregate dollars,  in the third quarter of 1999 and the
nine months  ended  September  25,  1999 over the same period in 1998,  resulted
primarily  from  increased  sales of the  OMNIScanner  and  DiscZerver  products
worldwide.

     GROSS PROFIT.  The Company's  gross profit was $6.2 million,  or 55% of net
revenue,  and $6.0 million, or 59% of net revenue,  for the third quarters ended
September 25, 1999 and September 26, 1998, respectively.  Gross profit was $15.4
million, or 52% of net revenue,  and $18.2 million,  or 60% of net revenue,  for
the nine months ended  September 25, 1999 and September 26, 1998,  respectively.
The  decrease  in the third  quarter and first nine  months  gross  margins as a
percentage  of net revenue  from 1998 to 1999 was  primarily  attributable  to a
decrease  in  high  margin  DiscPort  software  revenue,  and  increases  in the
amortization of capitalized  software,  volume  rebates,  and changes in product
mix. In addition,  gross margin for the nine month period in 1999 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 $3.0 million, or 26%
of net revenue,  and $2.6 million, or 26% of net revenue, for the third quarters
of 1999 and  1998,  respectively.  For the first  nine  months of 1999 and 1998,
sales and marketing expenses were $9.2 million, or 31% of net revenue,  and $8.9
million,  or 29%  of net  revenue,  respectively.  The  increase  in  sales  and
marketing  expenses  in absolute  dollars for the third  quarter of 1999 and the
first nine months of 1999 over the  corresponding  periods in 1998 is  primarily
due to increases in  commissions,  marketing  expenses and expenses  relating to
demo and evaluation units.

     RESEARCH AND  DEVELOPMENT.  Research  and  development  expenses  were $1.7
million, or 16% of net revenue, and $1.8 million, or 18% of net revenue, for the
third quarters of 1999 and 1998, respectively. For the first nine months of 1999
and 1998,  research and  development  expenses were $5.5 million,  or 18% of net
revenue.  Research and  development  expenses in absolute  dollars for the third
quarter and the first nine months of 1999 and 1998 remained  constant,  although
the  capitalization of software  development  costs decreased by $577,000.  This
decrease was a result of the Company's  completion of products under development
early in the third  quarter  of 1999.  The  Company  capitalized  these  product
development costs in accordance with Statement of Financial  Accounting Standard
No.  86.  In the third  quarter  of 1999 the  Company  changed  its  development
process,  and believes that new product  development  is  essentially  completed
concurrently with the establishment of technological  feasibility.  Accordingly,
no costs have been capitalized in the third quarter of 1999.

     GENERAL AND ADMINISTRATIVE.  General and administrative  expenses were $1.2
million, or 11% of net revenue, and $1.4 million, or 14% of net revenue, for the
third  quarters  of 1999  and  1998,  respectively.  For the nine  months  ended
September 25, 1999 general and administrative expenses were $4.3 million, or 14%
of net revenue,  compared  with $4.0  million,  or 13% of net  revenue,  for the
corresponding   period  in  the  prior  year.   The   decrease  in  general  and
administrative  expenses as a percentage of net revenue, as well as in aggregate
dollars,  for the third quarter of 1999 over the corresponding period in 1998 is
due  primarily to the  reduction in the  allowance  for doubtful  accounts.  The
increase  in general  and  administrative  expenses  for the nine  months  ended
September  25,  1999  compared  with  the  same  period  in the  prior  year  is

                                       11
<PAGE>
attributable  to  the  resolution  of  certain  sales  tax  related  issues  and
additional expenses for professional fees.

     SPECIAL CHARGE  (CREDIT).  During the quarter ended September 25, 1999, the
Company  recorded  a  $230,000  special  credit  as part of its  exit  from  the
integrated high-end enterprise systems business.  The credit relates to the sale
of the Company's  active  enterprise  maintenance  contracts and its  enterprise
customer  database.  For the nine months ended  September 25, 1999,  the Company
recorded  net  special  charges of $2.1  million  relating  to its exit from the
enterprise systems business and to restructure its management organization.  The
pre-tax special charge primarily  consists of $1.5 million 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.

     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."

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $6.5 million at September 25,
1999  compared to $9.6 million at December 31, 1998.  Working  capital was $18.8
million at September  25, 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 purchases of equipment  and funding of the net loss for the nine month
period.

     The Company funds its working capital  requirements  on a short-term  basis
primarily  through  existing cash balances and operating cash flows. 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.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     In  passing  the  Private  Securities  Litigation  Reform  Act of 1995 (the
"PSLRA"),   Congress  encouraged  public  companies  to  make   "forward-looking
statements"(1)  by creating a safe-harbor to protect  companies from  securities
law liability in connection with forward-looking statements. The Company intends
to qualify both its written and oral  forward-looking  statements for protection
under the PSLRA.

     To qualify oral forward-looking  statements for protection under the PSLRA,
a readily available written document must identify  important factors that could
cause  actual  results to differ  materially  from those in the  forward-looking
statements.  The Company  provides the following  information in connection with
its continuing effort to qualify forward-looking  statements for the safe harbor
protection of the PSLRA.

     Forward-looking  statements  express  expectations  of future  events.  All
forward-looking statements are inherently uncertain as they are based on various
expectations  and assumptions  concerning  future events and they are subject to
numerous  known and unknown  risks and  uncertainties  which could cause  actual
events or  results  to differ  materially  from  those  projected.  Due to these

--------
1  "Forward-looking  statements"  can be  identified  by use of  words  such  as
"expect," "believe," "estimate,"  "project,"  "forecast,"  "anticipate," "plan,"
and similar expressions.

                                       12
<PAGE>
inherent  uncertainties,  the  investment  community is urged not to place undue
reliance on forward-looking  statements.  In addition, the Company undertakes no
obligation to update or revise  forward-looking  statements  to reflect  changed
assumptions,  the occurrence of  unanticipated  events or changes to projections
over time.

     Important  factors  currently  known to management  that could cause actual
results to differ materially from those in forward-looking  statements  include,
but are not limited to, the following:  (1) changes in the Company's product and
customer  mix;  (2)   introduction  of  new  products  by  the  Company  or  its
competitors; (3) pricing pressures and economic conditions in the United States,
Europe and the Pacific Rim; (4) the economic condition of the computer industry;
(5) failure of the Company 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  advances,  satisfy diverse
and evolving customer requirements,  or otherwise achieve market acceptance; (6)
loss of or reduction in purchases by certain of the Company's  distributors  and
VARs; (7) any reduction in sales of the Company's OMNIScanner or Zerver products
from  which  the  Company  derives  substantially  all of its  revenue;  (8) the
inability of the Company to accurately monitor end user demand for its products;
(9)  unanticipated  product  returns  to the  extent  such  returns  exceed  the
Company's  reserves;  (10) the cost,  quality and  availability  of  third-party
components used in the Company's systems;  (11) the loss of any of the Company's
third-party  manufacturers or key suppliers; (12) any disruption or reduction in
the future supply of key  components  currently  obtained from limited  sources;
(13)  defects  in the  Company's  products  that could  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;  (14) inventory  writedowns,  product returns or price  protection
credits that exceed the Company's  estimates;  (15) the inability of the Company
to expand its international operations in a timely and cost effective manner, as
well as other risks in conducting  business  internationally;  (16)  recruiting,
hiring and  retaining  the  services of key  engineering,  sales and  marketing,
management and manufacturing  personnel;  (17) failure of the Company to protect
its  proprietary  information  and  technology;  and (18) the  inability  of the
Company or failure of the Company's  vendors to become year 2000 complaint.  Any
of the foregoing  events could have a material  adverse  affect on the Company's
business, financial condition, and results of operations.

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 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 has been completed.

     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

                                       13
<PAGE>
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 Website 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  existing  cash  balances and  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  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 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 reference
          Incorporation of the Company dated          to Exhibit 3.1 to Form S-1
          May 19, 1992                                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

27        Financial Data Schedule                     Filed herewith


     (b) Reports on Form 8-K

         None.

                                       15
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                    MICROTEST, INC.



November 5, 1999                    /s/ Vincent C. Hren
                                    --------------------------------------------
                                    Vincent C. Hren
                                    President and Chief Executive Officer




November 5, 1999                    /s/ Daniel J. Predovic
                                    --------------------------------------------
                                    Daniel J. Predovic
                                    Vice President, Chief Financial Officer,
                                      Secretary and Treasurer
                                    (Principal Financial and Accounting Officer)

                                       16