SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                FORM 10-Q/A No. 1


(Mark One)
[X]   Quarterly report pursuant to Section 13 or 15 (d) of the Securities
      Exchange Act of 1934,

      For the quarterly period ended August 2, 1998 or

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      Commission file number 0-15995


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

        Delaware                                                 86-0321346
(State of incorporation)                                     (I. R. S. Employer
                                                             Identification No.)


   2400 South MicroAge Way, Tempe, AZ                              85282
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code: (602) 366-2000

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 and
(2) has been subject to such filing requirements for the past 90 days.

                                Yes [X] No [ ]

The number of shares of the registrant's Common Stock (par value $.01 per share)
outstanding at December 31, 1998 was 20,315,711.
<PAGE>
This Form 10Q/A No. 1 for MicroAge, Inc. (the "Company") is being filed pursuant
to Regulation  S-K Item  601(c)(2)(iii)  to amend the Form 10Q for the quarterly
period  ended  August 2, 1998 due to an  aquisition  in fiscal  1997  originally
accounted  for as a  pooling  of  interests  that has been  restated  under  the
purchase  method of accounting  (see Note A of Notes to  Consolidated  Financial
Statements (Unaudited) for additional information).

                                      INDEX

                                 MICROAGE, INC.

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited)

          Consolidated balance sheets -- August 2, 1998 and
          November 2, 1997.                                           2

          Consolidated statements of operations -- Quarters
          ended August 2, 1998 and August 3, 1997; 39 weeks
          ended August 2, 1998 and August 3, 1997.                    3

          Consolidated statements of cash flows -- 39 weeks
          ended August 2, 1998 and August 3, 1997.                    4

          Notes to consolidated financial statements.                 5

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.                        7

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                           12

SIGNATURES                                                           13
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

                                 MICROAGE, INC.
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        (in thousands, except share data)

                                     ASSETS
                                                      August 2,     November 2,
                                                        1998           1997
                                                     ----------      --------
Current assets:
  Cash and cash equivalents                          $   41,950      $ 22,279
  Accounts and notes receivable, net                    400,063       233,942
  Inventory, net                                        432,855       479,332
  Other                                                  12,295        11,356
                                                     ----------      --------
     Total current assets                               887,163       746,909

Property and equipment, net                              93,724        73,975
Intangible assets, net                                  119,300        85,903
Other                                                    18,686        12,609
                                                     ----------      --------
Total assets                                         $1,118,873      $919,396
                                                     ==========      ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                   $  793,691      $591,538
  Accrued liabilities                                    16,426        22,527
  Current portion of long-term obligations                3,140         2,744
  Other                                                   7,210         3,836
                                                     ----------      --------
     Total current liabilities                          820,467       620,645

Line of credit                                               --        30,650
Long-term obligations                                     5,751         4,537
Other long-term liabilities                               9,098         1,239

Stockholders' equity:
  Preferred stock, par value $1.00 per share;
    Shares authorized: 5,000,000
    Issued and outstanding: none                             --            --
  Common stock, par value $.01 per share;
    Shares authorized: 40,000,000
    Issued: August 2, 1998   - 20,004,336
            November 2, 1997 - 18,451,653                   200           184
  Additional paid-in capital                            203,586       170,829
  Retained earnings                                      79,937        92,129
  Treasury stock, at cost;
    Shares: August 2, 1998   - 16,378
            November 2, 1997 - 80,378                      (166)         (817)
                                                     ----------      --------
     Total stockholders' equity                         283,557       262,325
                                                     ----------      --------
     Total liabilities and stockholders' equity      $1,118,873      $919,396
                                                     ==========      ========

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

                                       2
<PAGE>
                                 MICROAGE, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                          Quarter ended          39 weeks ended
                                    -----------------------  -----------------------
                                     August 2,    August 3,   August 2,    August 3,
                                       1998         1997        1998         1997
                                    ----------   ----------  ----------   ----------
<S>                                 <C>          <C>         <C>          <C>
Revenue                             $1,441,246   $1,117,275  $3,947,207   $3,060,337

Cost of sales                        1,354,575    1,040,622   3,702,130    2,852,193
                                    ----------   ----------  ----------   ----------

Gross profit                            86,671       76,653     245,077      208,144

Operating and other expenses
  Operating expenses                    77,787       58,055     230,500      157,491
  Restructuring and other one-time
   charges                                  --           --       5,600           --
                                    ----------   ----------  ----------   ----------

    Total                               77,787       58,055     236,100      157,491
                                    ----------   ----------  ----------   ----------

Operating income                         8,884       18,598       8,977       50,653

Other expenses - net                     7,385        7,662      27,497       19,984
                                    ----------   ----------  ----------   ----------

Income (loss) before income taxes        1,499       10,936     (18,520)      30,669

Income tax provision (benefit)           1,473        4,583      (6,473)      12,870
                                    ----------   ----------  ----------   ----------

Net income (loss)                   $       26   $    6,353  $  (12,047)  $   17,799
                                    ==========   ==========  ==========   ==========
Net income (loss) per common and
 common equivalent share:
   Basic                            $     0.00   $     0.39  $    (0.61)  $     1.09
                                    ==========   ==========  ==========   ==========

   Diluted                          $     0.00   $     0.37  $    (0.61)  $     1.04
                                    ==========   ==========  ==========   ==========
Weighted average common and common
 equivalent shares outstanding:
   Basic                                19,859       16,489      19,633       16,378
                                    ==========   ==========  ==========   ==========

   Diluted                              20,305       17,266      19,633       17,161
                                    ==========   ==========  ==========   ==========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
                                 MICROAGE, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (in thousands)

                                                              39 weeks ended
                                                         -----------------------
                                                         August 2,     August 3,
                                                           1998          1997
                                                         ---------     --------
Cash flows from operating activities:
 Net income (loss)                                       $ (12,047)    $ 17,799
 Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
   Depreciation and amortization                            29,861       17,493
   Provision for losses on accounts and notes
    receivable                                              10,585        6,753
   Changes in assets and liabilities, net of
    business acquisitions:
     Accounts and notes receivable                        (149,524)      (2,218)
     Inventory                                              56,066      (95,045)
     Other current assets                                     (757)         256
     Other assets                                          (18,024)      (3,604)
     Accounts payable                                      167,758       62,677
     Accrued liabilities                                    (7,850)      (5,979)
     Other liabilities                                      10,602        6,344
                                                         ---------     --------
    Net cash provided by operating activities               86,670        4,476

Cash flows from investing activities:
 Purchases of property and equipment                       (36,820)     (19,409)
                                                         ---------     --------
    Net cash used in investing activities                  (36,820)     (19,409)

Cash flows from financing activities:
 Proceeds from issuance of stock - stock option and
   employee stock purchase plans                             3,424        4,020
 Net borrowings (payments) under line of credit            (30,650)      45,318
 Amounts received from ESOT                                     --          207
 Shareholder distributions - pooled companies                 (129)          --
 Net change in long-term obligations                        (2,824)      (4,972)
                                                         ---------     --------
    Net cash provided by (used in) financing activities    (30,179)      44,573
                                                         ---------     --------
Net increase in cash and cash equivalents                   19,671       29,640

Cash and cash equivalents at beginning of period            22,279       21,935
                                                         ---------     --------
Cash and cash equivalents at end of period               $  41,950     $ 51,575
                                                         =========     ========

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

                                       4
<PAGE>
                                 MICROAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited  consolidated financial statements of MicroAge,  Inc.
(the "Company") do not include all of the information and footnotes  required by
generally accepted accounting principles for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
accruals)  considered  necessary for a fair statement of results for the periods
have been included. Certain prior year amounts have been reclassified to conform
with current year financial statement presentation. Operating results for the 39
weeks ended August 2, 1998 are not  necessarily  indicative  of the results that
may be expected for the year ending  November 1, 1998. For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended November 2, 1997.

On November 14, 1997,  the Company issued shares of its common stock in exchange
for all of the outstanding  shares of a reseller.  The merger has been accounted
for as a pooling of  interests  and,  accordingly,  the  Company's  consolidated
financial  statements  have been restated to include the accounts and operations
of the acquired company for all periods presented.

In addition,  the Company's consolidated financial statements have been restated
for a fiscal 1997 acquisition.  This acquisition was originally accounted for on
a pooling of interests basis.  Information came to light indicating that actions
taken by the former  owners of the  acquired  business  rendered  the pooling of
interests accounting inappropriate. The Company has restated the fiscal 1997 and
1996 financial  statements to reflect such acquisition using the purchase method
of accounting.  The Company has also restated the previously issued consolidated
results for each of the first  three  fiscal  quarters  of 1998 to reflect  such
acquisition using the purchase method of accounting. The charge was $702,000 per
quarter of additional goodwill amortization shown as other expense in the income
statement.

The results of operations  previously  reported by the separate  enterprises and
the  combined  amounts  presented  in the  accompanying  consolidated  financial
statements are summarized below (in thousands).

    Quarter ended Aug. 3, 1997:                          Pooling
                                                       Converted to
                           MicroAge,Inc.  Acquired Co.   Purchase      Combined
                           -------------  ------------   --------      --------

     Revenue                 $1,147,632     $14,207      $(44,564)    $1,117,275
     Net income              $    6,484     $   122      $   (253)    $    6,353


     39 weeks ended Aug. 3, 1997:                        Pooling
                                                       Converted to
                           MicroAge,Inc.  Acquired Co.   Purchase      Combined
                           -------------  ------------   --------      --------

     Revenue                 $3,124,398     $35,968      $(100,029)   $3,060,337
     Net income              $   17,585     $   625      $    (411)   $   17,799

In addition,  certain amounts  receivable from vendors have been reclassified to
accounts payable to conform with industry practice

                                       5
<PAGE>
NOTE B - OTHER EXPENSES - NET

Other expenses - net consists of the following (in thousands):

                                  Quarters ended        39 weeks ended
                                ------------------    -------------------
                                Aug. 2,    Aug. 3,     Aug. 2,    Aug. 3,
                                 1998       1997        1998       1997
                                ------     ------     -------    -------
    Interest expense            $  457     $1,610     $ 3,791    $ 4,540
    Expenses from sales of
      accounts receivable        3,855      5,070      14,425     14,071
    Amortization expense         2,249        468       6,429      1,330
    Other                          824        514       2,852         43
                                ------     ------     -------    -------

                                $7,385     $7,662     $27,497    $19,984
                                ======     ======     =======    =======

NOTE C - RESTRUCTURING AND OTHER ONE-TIME CHARGES

In February 1998, the Company  initiated a plan to restructure  the Company into
two  independent  businesses  -  a  distribution  business  operated  through  a
wholly-owned   subsidiary,   Pinacor   Inc.,   and   an   integration   business
("Integration"). In connection with this plan, the Company recorded $5.6 million
of restructuring  and other one-time charges ($3.2 million,  or $0.16 per share,
after taxes) during the second quarter of fiscal 1998.

The  restructuring and other one-time charges included $3.6 million for employee
termination  benefits,  $1.1  million  for  the  closing  and  consolidation  of
redundant   locations,   and  $0.9  million  for  other  costs  related  to  the
restructuring,  primarily  one-time costs incurred in  establishing  Pinacor and
Integration  as  separate  businesses.  The  charges  associated  with  employee
termination  benefits consist  primarily of severance pay for  approximately 250
associates.  The  reductions  occurred in virtually all areas of the Company and
were completed by May 3, 1998. As of August 2, 1998, the remaining liability for
restructuring activities was not material.

                                       6
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Certain statements  contained in this Item may be  "forward-looking  statements"
within the  meaning of The  Private  Securities  Litigation  Reform Act of 1995.
These  forward-looking  statements  may include  projections  of revenue and net
income and issues that may affect revenue or net income;  projections of capital
expenditures;  plans for  future  operations;  financing  needs or plans;  plans
relating to the Company's products and services; and assumptions relating to the
foregoing.  Forward  looking  statements  are  inherently  subject  to risks and
uncertainties,  some of which cannot be predicted or  quantified.  Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking information. Some of the important factors
that could cause the Company's  actual results to differ  materially  from those
projected in forward-looking statements made by the Company include, but are not
limited to, the following:  intense competition;  narrow margins;  dependence on
supplier  incentive  funds;  product  supply  and  dependence  on  key  vendors;
potential  fluctuations  in  quarterly  results;  risks of declines in inventory
values;  no assurance of successful  acquisitions  or  investments;  the capital
intensive nature of the Company's business;  dependence on information  systems;
year  2000  issues;   dependence  on  independent   shipping  companies;   rapid
technological change; and possible volatility of stock price.  Reference is made
to Exhibit 99.1 of the Company's Report on Form 10-K for the year ended November
2,  1997  for  additional  discussion  of the  foregoing  factors.  The  Company
undertakes  no  obligations  to  publicly  update or revise any  forward-looking
statements, whether as a result of new information, future events or otherwise.

On November 14, 1997,  the Company issued shares of its common stock in exchange
for all of the outstanding  shares of a reseller  location.  The merger has been
accounted  for  as a  pooling  of  interests  and,  accordingly,  the  Company's
consolidated financial statements have been restated to include the accounts and
operations of the acquired  company for all periods  presented.  In addition,  a
1997  acquisition  originally  accounted  for as a pooling of interests has been
restated  under  the  purchase  method  of  accounting.  See  Note A of Notes to
Consolidated Financial Statements (Unaudited) for additional information.

In February 1998, the Company  initiated a plan to restructure  the Company into
two  independent  businesses  -  a  distribution  business  operated  through  a
wholly-owned  subsidiary,  Pinacor, Inc. ("Pinacor") and an integration business
("Integration").  These businesses now have separate  management teams,  operate
autonomously in their respective  marketplaces,  and contract with  headquarters
for a limited number of services, such as payroll processing,  employee benefits
and information services.  See "Restructuring and Other One-Time Charges" below.
In May 1998, the Company  announced  that it had retained an investment  banking
firm  to  help  explore  financial  options  for  Pinacor  designed  to  enhance
shareholder value.

                                       7
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth, for the indicated  periods,  data as percentages
of total revenue:
<TABLE>
<CAPTION>
                                                      Quarter ended
                            --------------------------------------------------------------
                              Aug. 2,      May 3,      Feb. 1,        Nov. 2,      Aug. 3,
                               1998         1998        1998           1997         1997
                            ----------   ----------   ----------    ----------   ----------
<S>                         <C>          <C>          <C>           <C>          <C>
Revenue (in thousands)      $1,441,246   $1,326,950   $1,179,011    $1,318,871   $1,117,275
Cost of sales                     94.0%        93.6%        93.7%         93.2%        93.1%
                            ----------   ----------   ----------    ----------   ----------
Gross profit                       6.0          6.4          6.3           6.8          6.9
Operating and other expenses
  Operating expenses               5.4          6.0          6.2           5.2          5.2
  Restructuring and other
  one-time charges                 0.0          0.4          0.0           0.0          0.0
                            ----------   ----------   ----------    ----------   ----------
Operating income                   0.6          0.0          0.1           1.6          1.7

Other expenses - net               0.5          0.7          0.9           0.6          0.7
                            ----------   ----------   ----------    ----------   ----------
Income (loss) before income
taxes                              0.1         (0.7)        (0.8)          1.0          1.0

Income tax provision
(benefit)                          0.1         (0.3)        (0.3)          0.4          0.4
                            ----------   ----------   ----------    ----------   ----------
Net income (loss)                  0.0%        (0.4)%       (0.5)%         0.6%         0.6%
                            ==========   ==========   ==========    ==========   ==========
</TABLE>

TOTAL REVENUE. Total revenue of $1.4 billion increased $324 million, or 29%, for
the quarter  ended  August 2, 1998 as compared  to the quarter  ended  August 3,
1997. This revenue increase included a $258 million, or 24%, increase in Pinacor
(distribution  business) revenue, a $48 million, or 12%, increase in Integration
revenue and a decrease in the elimination of intercompany  revenue. The increase
in revenue was  attributable  to sales to resellers  added since August 3, 1997,
increased  demand for the Company's  major  suppliers'  products,  the Company's
addition of new product offerings and the growth of the  microcomputer  products
industry.

Total revenue  increased $887 million,  or 29%, for the 39 weeks ended August 2,
1998 as compared to the 39 weeks ended  August 3, 1997.  This  revenue  increase
included a $680 million, or 23%, increase in Pinacor revenue and a $286 million,
or 27%  increase  in  Integration  revenue,  partially  offset by an increase in
intercompany eliminations.

GROSS PROFIT PERCENTAGE.  The Company's gross profit percentage was 6.0% for the
quarter ended August 2, 1998 and6.9% for the quarter  ended August 3, 1997.  The
gross  profit  percentage  was 6.2% for the 39 weeks  ended  August  2,  1998 as
compared to 6.8% for the 39 weeks ended August 3, 1997.

The decrease in the Company's  gross profit  percentage was due to lower margins
in Pinacor combined with the fact that Integration  revenues,  which have higher
gross margins, comprised a smaller percentage of total revenues. In Pinacor, the
Company's  distribution  business,  gross margins on sales to reseller customers
decreased  due  to  increased  competitive  pressures.  In  addition,   supplier
incentive  funds were lower as a  percentage  of total  Pinacor  revenue and net
freight  expense  increased  as a  percentage  of revenue.  The freight  expense
increase  as a  percentage  of revenue  was  primarily  due to a decrease in the
average selling price per pound of product shipped as well as an increase in the
cost per pound shipped. In Integration,  margins increased due to an increase in
service  revenue,  which has higher gross margins than product revenue  margins.

                                       8
<PAGE>
This increase was partially offset by lower margins on Integration product sales
to end-user customers due to competitive pricing pressures.

OPERATING EXPENSES. As a percentage of revenue, operating expenses were 5.4% for
the quarter  ended August 2, 1998  compared to 5.2% for the quarter ended August
3, 1997. Operating expenses increased $20 million to $78 million for the quarter
ended August 2, 1998, as compared to the quarter ended August 3, 1997. Operating
expenses increased from $157 million, or 5.1% of revenue, for the 39 weeks ended
August 3,  1997 to $231  million,  or 5.8% of  revenue,  for the 39 weeks  ended
August 2, 1998. The increase in operating expenses was primarily in Integration,
and was attributable to acquisitions of reseller locations (which generally have
higher gross margin and operating  expense  percentages than the Company's other
businesses), the costs associated with assimilating these acquisitions, start-up
costs of several new locations,  and the build-up of  infrastructure  associated
with Integration's increasing levels of service revenue.

RESTRUCTURING AND OTHER ONE-TIME  CHARGES.  In connection with the restructuring
plan discussed  above, the Company recorded a $5.6 million charge ($3.2 million,
or $0.16 per share,  after  taxes) for the second  quarter of fiscal  1998.  The
restructuring  and other  one-time  charges  included  $3.6 million for employee
termination  benefits,  $1.1  million  for  the  closing  and  consolidation  of
redundant   locations   and  $0.9  million  for  other  costs   related  to  the
restructuring,  primarily  one-time costs incurred in  establishing  Pinacor and
Integration  as  separate  businesses.  The  charges  associated  with  employee
termination  benefits consist  primarily of severance pay for  approximately 250
associates.  The  reductions  occurred in virtually all areas of the Company and
have been completed.

OTHER  EXPENSES - NET.  Other  expenses - net  decreased to $7.4 million for the
quarter  ended August 2, 1998 from $7.7 million for the quarter  ended August 3,
1997  primarily  due to lower  average  daily  borrowings  resulting  from lower
inventory   balances   during  the  quarter,   partially   offset  by  increased
amortization expense associated with goodwill from acquisitions.  Other expenses
- net  increased  to $27.5  million for the 39 weeks  ended  August 2, 1998 from
$20.0  million for the 39 weeks ended August 3, 1997.  This  increase was due to
higher average daily  borrowings,  primarily in the first two fiscal quarters of
fiscal 1998, to support higher inventory and accounts  receivable  levels and to
increased amortization expense associated with goodwill from acquisitions.

SUPPLIER INCENTIVE FUNDS

The key vendors of the Company  provide  various  incentives  for  promoting and
marketing their product offerings.  A large portion of the incentives are passed
on to the Company's customers.  However, a portion of the incentives  positively
impact the  Company's  income.  Beginning  in May 1998,  the major  manufactures
announced  and/or  instituted  changes in their  sales  incentive  programs  and
inventory management programs. Pursuant to these changes, the major manufactures
will (i) provide price  protection for periods  ranging from 2 to 4 weeks rather
than the unlimited protection previously  available,  (ii) allow product returns
on average of 2% to 3% of product sales per quarter, rather than the 5% of sales
per quarter previously available, and (iii) provide incentives based on sales of
the manufacturers'  products,  rather than on purchases of the products from the
manufacturers. Further changes in these incentives could have a material adverse
effect on the Company's operating results.

                                       9
<PAGE>
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company's  operating results may vary  significantly from quarter to quarter
depending  on certain  factors,  including,  but not limited to,  demand for the
Company's information  technology products and services,  the amount of supplier
incentive  funds  received by the Company,  the results of acquired  businesses,
product availability, competitive conditions, new product introductions, changes
in customer order patterns and general economic conditions.  In particular,  the
Company's  operating  results are sensitive to changes in the mix of product and
service  revenues,  product margins,  inventory  adjustments and interest rates.
Although the Company  attempts to control its expense  levels,  these levels are
based, in part, on anticipated revenues.  Therefore, the Company may not be able
to control spending in a timely manner to compensate for any unexpected  revenue
shortfall. As a result, quarterly period-to-period  comparisons of the Company's
financial  results are not necessarily  meaningful and should not be relied upon
as an  indication  of future  performance.  In addition,  although the Company's
financial performance has not exhibited significant seasonality in the past, the
Company and the computer industry in general tend to follow a sales pattern with
peaks  occurring  near the end of the calendar  year,  due  primarily to special
supplier promotions and year-end business purchases.

LIQUIDITY AND CAPITAL RESOURCES

The Company has  financed  its growth and cash needs to date  primarily  through
working capital financing facilities,  bank credit lines, common stock offerings
and cash generated from  operations.  The primary uses of cash have been to fund
increases in inventory and accounts  receivable  resulting from increased sales.
If the Company is successful in achieving  continued revenue growth, its working
capital requirements are likely to increase.

The  Company has  acquired or invested  in, and intends to acquire or invest in,
resellers to increase core service competencies, expand the Company's geographic
coverage in key market areas, and strengthen the Company's direct  relationships
with end-user customers. Acquisitions or investments may be made utilizing cash,
stock, or a combination of cash and stock.

Cash  provided by  operating  activities  was $87 million for the 39 weeks ended
August 2, 1998 as  compared  to cash used of $5 million  for the 39 weeks  ended
August 3, 1997.  The increase was  primarily due to a change in cash provided or
used by accounts receivable, inventory and accounts payable. During the 39 weeks
ended August 2, 1998,  $224  million was  provided by changes in  inventory  and
accounts  payable  compared  to $32  million  used by changes in  inventory  and
accounts  payable  during the 39 weeks ended August 3, 1997.  This was partially
offset by a change  in cash used by  accounts  receivable.  During  the 39 weeks
ended  August 2, 1998,  $150  million  of cash was used by  changes in  accounts
receivable compared to $2 million used during the 39 weeks ended August 3, 1997.

The number of days cost of sales in ending  inventory  decreased from 35 days at
November 2, 1997 to 29 days at August 2, 1998. The number of days' cost of sales
in ending accounts payable increased from 49 days at November 2, 1997 to 54 days
at August 2, 1998. The number of days' sales in ending  accounts  receivable was
25 days at August 2, 1998 compared to 16 days at November 2, 1997. This increase
in receivables  days  outstanding  was due to a decrease in accounts  receivable
sold to a finance  company.  The receivables  days adjusted for sold receivables
were 32 days at August 2, 1998 and 35 days at November 2, 1997.

Cash used in investing activities increased from $19 million during the 39 weeks
ended August 3, 1997 to $37 million during the 39 weeks ended August 2, 1998 due

                                       10
<PAGE>
to  increased  purchases  of property  and  equipment  as a result of  increased
spending for electronic  commerce  initiatives and capacity expansion in systems
and facilities.

Cash used in  financing  activities  was $30  million  during the 39 weeks ended
August 2, 1998  compared to cash  provided  of $45  million  during the 39 weeks
ended  August 2, 1997,  primarily  due to a change in net  borrowings  under the
Company's line of credit between the periods.

The  Company  maintains  three  financing  agreements  (the  "Agreements")  with
financing  facilities totaling $800 million.  The Agreements include an accounts
receivable facility (the "A/R Facility") and inventory financing facilities (the
"Inventory Facilities").

Under the A/R  Facility,  the  Company  has the right to sell  certain  accounts
receivable  from time to time, on a limited  recourse  basis, up to an aggregate
amount of $350 million sold at any given time. At August 2, 1998, the net amount
of sold accounts receivable was $112 million.

The Inventory  Facilities provide for borrowings up to $450 million.  Within the
Inventory  Facilities,  the  Company  has lines of credit  for the  purchase  of
inventory from selected product suppliers  ("Inventory Lines of Credit") of $300
million  and  a  line  of  credit  for  general  working  capital   requirements
("Supplemental Line of Credit") of $150 million. Payments for products purchased
under the Inventory  Lines of Credit vary depending  upon the product  supplier,
but  generally  are due  between  45 and 60 days  from the date of the  advance.
Amounts  borrowed under the Supplemental  Line of Credit may remain  outstanding
until the  expiration  date of the  Agreements  (August  2000).  No  interest or
finance  charges are payable on the  Inventory  Lines of Credit if payments  are
made when due. At August 2, 1998, the Company had $197 million outstanding under
the Inventory Lines of Credit  (included in accounts payable in the accompanying
Balance Sheets), and nothing outstanding under the Supplemental Line of Credit.

Of the $800 million of financing  capacity  represented by the Agreements,  $491
million was unused as of August 2, 1998.  Utilization  of the unused  portion is
dependent upon the Company's collateral availability at the time the funds would
be needed.  There can be no  assurance  that the Company  will be able to borrow
adequate amounts on terms acceptable to the Company.

Borrowings  under  the  Agreements  are  secured  by  substantially  all  of the
Company's  assets,  and the Agreements  contain certain  restrictive  covenants,
including  tangible  net worth  requirements  and ratios of debt to tangible net
worth and current assets to current liabilities.  At August 2, 1998, the Company
was in compliance with these covenants.

In addition to the financing  facilities  discussed above, the Company maintains
an accounts  receivable  purchase  agreement (the "Purchase  Agreement")  with a
commercial  credit  corporation  (the  "Buyer")  whereby  the  Buyer  agrees  to
purchase,  from time to time at its option, on a limited recourse basis, certain
accounts  receivable of the Company.  Under the terms of the Purchase Agreement,
no finance  charges are assessed if the accounts are settled  within forty days.
At August 2, 1998, the net amount of sold accounts receivable under the Purchase
Agreement was $25 million.

The Company also  maintains  trade credit  arrangements  with its  suppliers and
other creditors to finance  product  purchases.  A few major suppliers  maintain
security interests in their products sold to the Company.

The  unavailability of a significant  portion of, or the loss of, the Agreements
or trade  credit  from  suppliers  would have a material  adverse  effect on the
Company.

                                       11
<PAGE>
Although the Company has no material capital commitments, the Company expects to
make capital  expenditures of  approximately $5 to $10 million during the fourth
quarter of fiscal 1998.

INFLATION

The Company  believes that inflation has generally not had a material  impact on
its operations.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

       (a)  Exhibits

            11 - Calculation of Net Income (Loss) Per Common Share

            27 - Financial Data Schedule

       (b)  Report on Form 8-K

            During the  quarter  ended  August 2, 1998,  the
            Company did not file any Reports on Form 8-K.


                                       12
<PAGE>
                                   SIGNATURES


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


                                           MICROAGE, INC.
                                           (Registrant)



Date: January 28, 1999                  By: /s/ Jeffrey D. McKeever
                                           --------------------------------
                                           Jeffrey D. McKeever
                                           Chairman of the Board and
                                           Chief Executive Officer



Date: January 28, 1999                  By: /s/ James R. Daniel
                                           --------------------------------
                                           James R. Daniel
                                           Senior Vice President
                                           Chief Financial Officer and Treasurer


                                       13