<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q




[x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
         OF 1934

         For the quarterly period ended September 30, 1998

                                       OR

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

         For the transition period from _____to_____


Commission file number  0-6234   


                                ACMAT CORPORATION
--------------------------------------------------------------------------------

  Connecticut                                           06-0682460     
------------------------                    ------------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)


              233 Main Street, New Britain, Connecticut 06050-2350
--------------------------------------------------------------------------------
                    (Address of principal executive offices)
                                                           
                                                            
Registrant's telephone number including area code:           (860) 229-9000 
                                                             -------------- 


                                      NONE
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


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 filing requirements
for 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.


                                                           Shares outstanding
Title of Class                                             at October 31, 1998
--------------                                             -------------------
   Common Stock                                               592,088
   Class A Stock                                            2,440,809
                                             
<PAGE>   2
                               TABLE OF CONTENTS



Part I    FINANCIAL INFORMATION                                         PAGE

  Item 1. Financial Statements
          Consolidated Balance Sheets                                     3
          Consolidated Statements of Earnings                             4
          Consolidated Statements of Stockholders' Equity                 5
          Consolidated Statements of Cash Flows                           6
          Notes to Consolidated Financial Statements                      7

  Item 2. Management's Discussion and Analysis of
          Financial Condition and Results of Operations                   9

Part II   OTHER INFORMATION

  Item 6. Exhibits and Reports on Form 8-K                               14

  Signatures                                                             15



                                       2
<PAGE>   3
Part I Financial Information
Item 1 Financial Statements


                       ACMAT CORPORATION AND SUBSIDIARIES
                              Financial Statements
                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                September 30, 1998  December 31, 1997
                                                                                  ------------       ------------
Assets

<S>                                                                             <C>                  <C> 
Investments:
  Fixed maturities-available for sale, at market (Cost of $91,665,191 in 1998
    and $101,523,931 in 1997)                                                     $ 92,618,719        101,852,980
  Equity securities, at market value (Cost $1,005,262 in 1998 and $983,074 in
    1997)                                                                            1,005,569          1,010,927
  Short-term investments, at cost which approximates market                         22,145,541         32,422,313
                                                                                  ------------       ------------
    Total investments                                                              115,769,829        135,286,220
Cash                                                                                 7,334,572          2,095,449
Accrued interest receivable                                                          1,135,730          1,458,164
Reinsurance recoverable                                                              2,227,958          3,478,121
Receivables, net                                                                     5,479,886          7,118,527
Income tax receivable                                                                   83,479            564,829
Prepaid expenses                                                                       296,498            204,642
Deferred income taxes                                                                1,916,571          1,940,936
Limited partnership investment                                                         871,346          2,052,475
Property & equipment, net                                                           12,805,894         13,179,337
Deferred policy acquisition costs                                                    1,908,507          2,078,405
Other assets                                                                         8,891,422          3,529,634
Intangibles, net                                                                     2,977,034          3,222,023
                                                                                  ------------       ------------
                                                                                  $161,698,726        176,208,762
                                                                                  ============       ============

Liabilities & Stockholders' Equity

Notes payable to banks                                                            $  5,000,000          5,000,000
Accounts payable                                                                     3,843,929          3,188,554
Reserves for losses and loss adjustment expenses                                    43,459,391         48,900,713
Unearned premiums                                                                    8,390,108          9,804,159
Collateral held                                                                     17,593,768         20,275,702
Current income taxes                                                                   125,227                 --
Accrued liabilities                                                                  2,683,674          1,249,168
Long-term debt                                                                      43,457,854         48,212,727
                                                                                  ------------       ------------
    Total liabilities                                                              124,553,951        136,631,023

Stockholders' Equity:
  Common Stock (No Par Value; 3,500,000 Shares Authorized; 592,088 and
    596,857 Shares Issued and Outstanding)                                             592,088            596,857
  Class A Stock (No Par Value; 10,000,000 Shares Authorized; 2,442,809 and
    2,712,174 Shares Issued and Outstanding)                                         2,442,809          2,712,174
  Retained earnings                                                                 33,480,347         36,033,153
  Accumulated Other Comprehensive Income                                               629,531            235,555
                                                                                  ------------       ------------
  Total stockholders' equity                                                        37,144,775         39,577,739
                                                                                  ------------       ------------
                                                                                  $161,698,726        176,208,762
                                                                                  ============       ============
</TABLE>


See Notes to Consolidated Financial Statements.


                                       3
<PAGE>   4
                       ACMAT CORPORATION AND SUBSIDIARIES
                       Consolidated Statements of Earnings


<TABLE>
<CAPTION>
                                                           Three months ended,                  Nine months ended
                                                             September 30,                        September 30,

                                                        1998              1997              1998                1997
                                                        ----              ----              ----                ----


<S>                                                <C>                 <C>                <C>               <C>       
Earned premiums                                    $ 2,769,212          3,036,664          8,556,887         12,147,078
Contract revenues                                    4,056,318          2,754,689          9,145,702          6,346,204
Investment income, net                               1,355,145          1,455,160          4,776,450          4,995,394
Net realized capital gains (losses)                    157,495             (1,042)           262,065             39,910
Other income (expense)                                (833,595)           811,392           (870,674)         1,434,151
                                                   -----------        -----------        -----------       -------------
                                                     7,504,575          8,056,863         21,870,430         24,962,737
                                                   -----------        -----------        -----------       -------------


Losses and loss adjustment expenses                    538,416            911,000          1,703,531          3,644,124
Amortization of policy acquisition costs               514,717            559,125          1,480,412          2,328,005
Cost of contract revenues                            3,927,494          2,601,277          8,944,716          5,898,330
Selling, general and administrative expenses         1,323,965          1,370,509          3,943,131          4,226,393
Interest expense                                     1,105,766          1,216,514          3,551,749          3,902,170
                                                   -----------        -----------        -----------       -------------
                                                     7,410,358          6,658,425         19,623,539         19,999,022
                                                   -----------        -----------        -----------       -------------


Earnings before income taxes                            94,217          1,398,438          2,246,891          4,963,715

Income taxes
      Federal                                           22,679            375,367            544,573          1,347,003
      State                                              5,000             10,000             12,000             45,000
                                                   -----------        -----------        -----------       -------------
                                                        27,679            385,367            556,573          1,392,003
                                                   -----------        -----------        -----------       -------------

Net earnings                                       $    66,538          1,013,071          1,690,318          3,571,712
                                                   ===========        ===========        ===========       ============



Basic earnings per share                           $       .02                .30                .52               1.02

Diluted earnings per share                         $       .02                .27                .51                .88
</TABLE>



See Notes to Consolidated Financial Statements.




                                       4
<PAGE>   5
                       ACMAT CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY




<TABLE>
<CAPTION>
                                                                                                        Accumulated   
                                              Common         Class A      Additional                      other            Total
                                             stock par       stock par    paid-in        Retained      comprehensive   stockholders'
                                               value          value       capital        earnings         income          equity
                                                                                                         
                                            ------------   ------------  ------------   ------------   ------------    ------------

<S>                                         <C>            <C>           <C>            <C>            <C>             <C>  
Balance as of December 31, 1996             $    600,257   $  3,488,860  $  8,407,877   $ 36,894,494   $    310,916    $ 49,702,404
   Acquisition and retirement of 2,100
      Shares of Common Stock                      (2,100)            --       (41,396)            --             --         (43,496)
   Acquisition and retirement of
      1,305,586 Shares of Class A Stock               --     (1,305,586)  (13,065,231)    (5,074,318)            --     (19,445,135)
   Issuance of 450,000 Shares
      of Class A Stock                                --        450,000     4,050,000             --             --       4,500,000
   Issuance of 106,000 shares of Class A
      Stock pursuant to stock options                 --        106,000       648,750             --             --         754,750
   Net Unrealized losses on Debt
      and Equity Securities, net of taxes             --             --            --             --        (49,111)        (49,111)
   Net Earnings                                       --             --            --      3,571,712             --       3,571,712
                                            ------------   ------------  ------------   ------------   ------------    ------------
Balance as of September 30, 1997            $    598,157   $  2,739,274  $       ----   $ 35,391,888   $    261,805    $ 38,991,124
                                            ============   ============  ============   ============   ============    ============


Balance as of December 31, 1997             $    596,857   $  2,712,174  $          -   $ 36,033,153   $    235,555    $ 39,577,739
   Acquisition and Retirement of 4,769
      Shares of Common Stock                      (4,769)            --                      (93,697)            --         (98,466)
   Acquisition and Retirement of 340,365
      Shares of Class A Stock                         --       (340,365)     (650,000)    (4,149,427)            --      (5,139,792)
   Issuance of 71,000 Shares of Class A
      Stock pursuant to stock  option                 --         71,000       650,000             --             --         721,000
   Net Unrealized Losses on Debt and
       Equity Securities, net of tax                  --             --            --             --        393,976         393,976
   Net Earnings                                       --             --            --      1,690,318             --       1,690,318
                                            ------------   ------------  ------------   ------------   ------------    ------------
Balance as of September 30, 1998            $    592,088   $  2,442,809  $        ---   $ 33,480,347   $    629,531    $ 37,144,775
                                            ============   ============  ============   ============   ============    ============
</TABLE>




See Notes to Consolidated Financial Statements.



                                       5
<PAGE>   6
                       ACMAT CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                  Nine Months Ended September 30, 1998 and 1997


<TABLE>
<CAPTION>
                                                                             1998               1997
                                                                         ------------        ------------
<S>                                                                      <C>                 <C>  
Cash flows from operating activities:
     Net earnings                                                        $  1,690,318           3,571,712
     Adjustments to reconcile net earnings to net cash provided by
        operating activities:
        Depreciation and amortization                                       1,060,009           1,151,371
        Net realized capital gains                                           (262,065)            (39,910)
        Limited partnership investment adjustment                           1,181,129            (967,025)
        Changes in:
            Accrued interest receivable                                       322,434            (154,048)
            Reinsurance recoverable                                         1,250,163             362,725
            Receivables, net                                                1,638,641           1,104,245
            Deferred policy acquisition costs                                 169,898             421,064
            Prepaid expenses and other assets                                 952,343             429,020
            Accounts payable and accrued liabilities                        2,089,881             940,547
            Reserves for losses and loss adjustment expenses               (5,441,322)          1,164,072
            Income taxes, net                                                 622,978            (381,476)
            Unearned premiums                                              (1,414,051)         (1,574,202)
                                                                         ------------        ------------
                 Net cash provided by operating activities                  3,860,356           6,028,095
                                                                         ------------        ------------

Cash flows from investing activities:
     Proceeds from investments sold or matured:
        Fixed maturities-sold                                              40,068,436          19,840,821
        Fixed maturities-matured                                           32,178,943          28,822,511
        Equity securities                                                   1,022,466                  --
        Short-term investments                                             57,922,542         124,276,204
     Purchases of:
        Fixed maturities                                                  (62,538,545)        (75,521,830)
        Equity securities                                                  (1,000,000)           (750,000)
        Short-term investments                                            (47,645,770)        (88,880,831)
     Collateral held                                                       (2,681,934)         (2,077,931)
     Capital expenditures                                                     (19,632)           (125,135)
     Other                                                                 (6,460,608)                 --
                                                                         ------------        ------------
            Net cash provided by investing activities                      10,845,898           5,583,809
                                                                         ------------        ------------

Cash flows from financing activities:
     Borrowings under line of credit                                        5,000,000           3,000,000
     Payments under line of credit                                         (5,000,000)        (13,200,000)
     Payments on long-term debt                                            (4,754,873)         (2,877,658)
     Issuance of long-term debt                                                    --           8,500,000
     Issuance of Class A Stock                                                526,000             754,750
     Payments for acquisition & retirement of stock                        (5,238,258)         (7,488,631)
                                                                         ------------        ------------
            Net cash used for financing activities                         (9,467,131)        (11,311,539)
                                                                         ------------        ------------

Net increase in cash                                                        5,239,123             300,365

Cash at beginning of period                                                 2,095,449           2,187,227
                                                                         ------------        ------------

Cash at end of period                                                    $  7,334,572           2,487,592
                                                                         ============        ============
</TABLE>


See Notes to Consolidated Financial Statements.



                                       6

<PAGE>   7
                       ACMAT CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

(1) Financial Statements

The consolidated financial statements include the accounts of ACMAT Corporation
("ACMAT" or the "Company") and its subsidiaries. The consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and are unaudited.

The interim financial information contained in this report has been prepared
from the books and records of the Company and its subsidiaries and reflects, in
the opinion of the management of the Company, all adjustments (consisting of
normal and recurring accruals) necessary to fairly present results of operations
for the periods indicated. All significant intercompany accounts and
transactions have been eliminated in consolidation.

These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1997.

(2) Earnings Per Share

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings per Share, on December 31, 1997. SFAS No. 128 supersedes APB
Opinion No. 15, Earnings per Share, and replaces primary earnings per share and
fully diluted earnings per share with basic earnings per share and diluted
earnings per share, respectively. The Company has restated earnings per share
for all prior periods presented to comply with the provisions of SFAS No. 128.

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share ("EPS") computations for the nine-month
periods ended September 30, 1998 and 1997. The convertible note at September 30,
1998 was antidilutive and as a result is not included in the 1998 calculation.

<TABLE>
<CAPTION>
                                                                                Average
                                                                                Shares                     Per-Share
                                                     Earnings                   Outstanding                Amount
                                                     --------                   -----------                ------
<S>                                                  <C>                        <C>                        <C>  
1998:
Basic EPS:
         Earnings available to stockholders          $1,690,318                 3,251,748                   $.52

         Effect of Dilutive Securities:
           Stock options                             $        -                    85,674

Diluted EPS:
         Earnings available to stockholders          $1,690,318                 3,337,422                   $.51
                                                     ==========                 =========                  =====

1997:
Basic EPS:
         Earnings available to stockholders          $3,571,712                 3,485,190                  $1.02

         Effect of Dilutive Securities:
         Stock options                                        -                   121,733
         Convertible Senior Notes                    $   29,903                    57,692
         Convertible Note                            $  939,263                 1,500,000
                                                     ----------                 ---------

Diluted EPS:
         Earnings available to stockholders          $4,455,490                 5,164,615                   $.88
                                                     ==========                 =========                  =====
</TABLE>



(3) Supplemental Cash Flow Information

Income taxes received during the nine months ended September 30, 1998 was
$66,406 and income taxes paid during the nine months ended September 30, 1997
was $1,773,479. Interest paid for the nine months ended September 30, 1998 and
1997 was $3,363,155 and $3,190,792 respectively.

On February 5, 1997 the Company issued 450,000 shares of Class A Stock at $10
per share pursuant to the conversion options of the Convertible Senior Notes to
AIG Life Insurance Company and American International Life Assurance Company of
New York. The issuance of stock pursuant to the conversion option of the
Convertible Senior notes is a non-cash transaction that is not reflected in the
Consolidated Statement of Cash Flows.


                                       7
<PAGE>   8
(4) Stock Transaction

On February 5, 1997, ACMAT Corporation purchased 1,099,996 shares of Class A
Stock which AIG Life Insurance Company (366,663 shares) and American
International Life Assurance Company of New York, (733,333) had acquired over
the last three years through conversion options. The shares were purchased at an
average price of $14.70 per share for a total purchase price of $16,174,942. The
purchase price of $16,174,942 consisted of $4,174,942 in cash and promissory
notes totaling $12,000,000. The promissory notes are with AIG Life Insurance
Company and American International Life Assurance Company of New York and are
payable over eight years with annual payments of $1,500,000 which commenced
January 31, 1998, with interest at prime rate (8-1/2%). The interest rate is
equal to the prime rate, however, it shall not exceed 9-1/4% and it shall not be
less than 7-1/4%. The purchase of stock with the $12,000,000 promissory notes is
a non-cash transaction that is not reflected in the Consolidated Statement of
Cash Flows.

(5) Comprehensive Income

The Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income" as of January 1, 1998. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components (such as
changes in net unrealized investment gains and losses). Comprehensive income
includes net income and any changes in equity from non-owner sources that bypass
the income statement. The purpose of reporting comprehensive income is to report
a measure of all changes in equity of an enterprise that result from recognized
transactions and other economic events of the period other than transactions
with owners in their capacity as owners. Application of SFAS No. 130 will not
impact amounts previously reported for net income or affect the comparability of
previously issued financial statements.

The following table summarizes comprehensive income for the nine months ended
September 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                              1998             1997
                                                                                              ----             ----

<S>                                                                                       <C>               <C>        
Net income                                                                                $ 1,690,318       $ 3,571,712
Other comprehensive income, net of tax
   Unrealized gains (losses) on investments:
   Unrealized holding gain (loss) arising during period net of income tax expense of
      $292,059 for 1998 and income tax benefit of $11,730 in 1997                             566,939           (22,770)
   Less reclassification adjustment for gains included in net income net of income 
      tax expense of $89,102 and $13,569 for 1998 and 1997, respectively                      172,963            26,341
                                                                                          -----------       -----------
   Other comprehensive income                                                                 393,976           (49,111)
                                                                                          -----------       -----------

Comprehensive income                                                                      $ 2,084,294       $ 3,522,601
                                                                                          ===========       ===========
</TABLE>


(6) Future Accounting Standards

In June 1997, FASB issued SFAS No. 131, "Financial Reporting for Segments of a
Business Enterprise". SFAS No. 131 was developed jointly by the FASB and the
Accounting Standards Board of the Canadian Institute of Charted Accountants in
response to request from financial statement users for additional and better
segment information. This statement is effective for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated, unless it is impracticable to do so. The
Company does not anticipate that SFAS No. 131 will significantly impact the
composition of its current operating segments which are consistent with the
management approach. The Company anticipates that the current insurance segment
will be further disclosed as two segments as a result of SFAS No. 131.

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was
issued in June 1998 and establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999, earlier application is
encouraged, but it is permitted only as of the beginning of any fiscal quarter
that begins after issuance of this statement. This Statement should not be
applied retroactively to financial statements of prior periods. The adoption of
this statement is not expected to have a material effect on the Company's
results of operations or financial condition.



                                        8
<PAGE>   9
                                ACMAT CORPORATION


Item 2:  Management's Discussion and Analysis of 
         Financial Conditions and Results of Operations

RESULTS OF OPERATIONS:

Overview

Net earnings were $66,538 for the three months ended September 30, 1998 compared
with $1,013,071 for the same period a year ago. Net earnings for the nine months
ended September 30, 1998 were $1,690,318 compared with $3,571,712 for the nine
months ended September 30, 1997. The decrease in net earnings for the three and
nine month periods is primarily the result of a decrease in the carrying value
of the Company's stake in a limited partnership that invests in small cap common
stock equities. The decrease in earnings for the three and nine-month periods
also reflects a decrease in earned premiums and investment income offset in part
by an increase in realized capital gains.

Earned Premiums

Net written premiums were $2,500,314 for the three months ended September 30,
1998 compared with $3,362,906 for the three months ended September 30, 1997. Net
written premiums for the nine months ended September 30, 1998 were $7,375,213
compared with $10,659,520 for the nine months ended September 30, 1997. Premiums
earned for the three months ended September 30, 1998 were $2,769,212 as compared
with $3,036,664 for the three months ended September 30, 1997. Premiums earned
for the nine months ended September 30, 1998 were $8,556,887 as compared with
$12,147,078 for the nine months ended September 30, 1997. The decrease in net
written premiums and earned premiums for the three and nine month periods ended
September 30, 1998 compared with the same periods in 1997 is primarily due to a
continuing soft insurance market place and the Company's strategy to avoid
current unfavorable pricing in the Company's casualty operations. Variances in
net written premiums have historically occurred due to the fluctuations in size,
number and timing of bonds and policies bound by the Company. The Company will
maintain its existing pricing strategy and high level of service.

Contract Revenues

Contract revenues were $4,056,318 for the three-month period ended September 30,
1998 compared with $2,754,689 for the same period in 1997. Contract revenues
were $9,145,702 for the nine-month period ended September 30, 1998 compared with
$6,346,204 for the same period in 1997. Construction revenue is difficult to
predict and depends greatly on the successful securement of contracts bid. The
Company's construction backlog was approximately $8,700,000 at September 30,
1998 compared to $8,100,000 a year ago.

Investment Income, Net

Net investment income was $1,355,145 for the three-month period ended September
30, 1998 compared with $1,455,160 for the same period in 1997, representing
effective yields of 4.42% and 4.29%, respectively. Net investment income was
$4,776,450 for the nine-month period ended September 30, 1998 compared with
$4,995,394 for the same period in 1997, representing effective yields of 4.89%
and 4.80%, respectively. The decrease in investment income for 1998 over 1997
was due substantially to a decrease in invested assets. Invested assets,
including cash, were $123,104,401 and $137,381,669 at September 30, 1998 and
December 31, 1997, respectively. The decrease in invested assets is attributable
to net cash flow used to repay debt, repurchase stock, return collateral and pay
claims offset by net cash flow generated from written premiums and the
reinvestment of investment income.

Net Realized Capital Gains

Realized capital gains were $157,495 for the three-month period ended September
30, 1998 compared with realized capital losses of $1,042 for the same period in
1997. Realized capital gains in the nine-month period ended September 30, 1998
were $262,065 compared with realized capital gains of $39,910 for the same
period in 1997.

Other Income

Other income (expense) was ($833,595) for the three-month period ended September
30, 1998 compared to $811,392 for the same period in 1997. Other income
(expense) was ($870,674) for the nine-month period ended September 30, 1998
compared to $1,434,151 for the same period in 1997. The fluctuations in other
income (expense) reflects a loss of approximately $995,000 from the limited
partnership that invests in small cap common stock equities in the third quarter
of 1998 and a loss of approximately $1,180,000 for the nine-month period ended
September 30, 1998.

The limited partnership investment is carried on the equity method of accounting
in which the Company's share of net income or loss is recognized as income or
loss in the Company's income statement. The investment in the limited
partnership invests primarily in small capitalization stocks carried at fair
value. The earnings from the limited partnership investment fluctuate as those
stocks are traded on the national market exchanges.



                                       9
<PAGE>   10
Cost of Contract Revenues

Cost of contract revenues were $3,927,494 for the three-month period ended
September 30, 1998 compared with $2,601,277 for the same period a year ago. Cost
of contract revenues were $8,944,716 for the nine-month period ended September
30, 1998 compared with $5,898,330 for the same period in 1997. Costs of contract
revenues vary from period to period as a function of contract revenues (See
Contract Revenues).

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses were $538,416 for the three-month period
ended September 30, 1998 compared with $911,000 for the same period in 1997.
Losses and loss adjustment expenses were $1,703,531 for the nine months ended
September 30, 1998 compared with $3,644,124 for the nine months ended September
30, 1997. The decrease in losses and loss adjustment expenses for the three and
nine months ended September 30, 1998 are attributable to lower earned premiums
from 1997 to 1998. Losses and loss adjustment expense reserves represent
management's estimate of the ultimate cost of unpaid losses incurred for these
periods relative to premiums earned.

Amortization of policy acquisition costs

Amortization of policy acquisition costs was $514,717 for the three-month period
ended September 30, 1998 as compared with $559,125 for the same period in 1997.
For the nine months ended September 30, 1998, amortization of policy acquisition
cost was $1,480,412 compared with $2,328,005 for the same period a year ago.
Policy acquisition costs, primarily commissions, are deferred and amortized over
the policy term. The Company's acquisition expense ratio increased to 51.3% in
1998 from 47.8% in 1997 due primarily to a decrease in earned premiums.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,323,965 for the three-month
period ended September 30, 1998 compared with $1,370,509 for the same period in
1997. Selling, general and administrative expenses were $3,943,131 for the
nine-month period ended September 30, 1998 compared with $4,226,393 for the same
period in 1997. The decrease in the selling, general and administrative expenses
for the three and nine-month periods ended September 30, 1998 are due primarily
to a decrease in bad debt expense.

Interest Expense

Interest expense decreased to $1,105,766 for the three-month period ended
September 30, 1998 compared with $1,216,514 for the same period in 1997.
Interest expense decreased to $3,551,749 for the nine-month period ended
September 30, 1998 compared with $3,902,170 for the same period in 1997. The
decrease in interest expense is due to a decrease in long-term debt.

Income Taxes

Income tax expense was $27,679 for the three-month period ended September 30,
1998 compared with $385,367 for the same period in 1997, representing effective
tax rates of 29.3% and 27.6%, respectively. Income tax expense was $556,573 for
the nine-month period ended September 30, 1998 compared with $1,392,003 for the
same period in 1997, representing effective tax rates of 25.2% and 28.0%,
respectively. The effective tax rate fluctuates according to the mix of
tax-exempt and taxable securities held by the Company.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

Reserves for losses and loss adjustment expenses are established with respect to
both reported and incurred but not reported claims for insured risks. The amount
of loss reserves for reported claims is primarily based upon a case-by-case
evaluation of the type of risk involved, knowledge of the circumstances
surrounding each claim and the policy provisions relating to the type of claim.
As part of the reserving process, historical data is reviewed and consideration
is given to the anticipated impact of various factors such as legal developments
and economic conditions, including the effects of inflation. Reserves are
monitored and evaluated periodically using current information on reported
claims.

Management believes that the reserves for losses and loss adjustment expenses at
September 30, 1998 are adequate to cover the unpaid portion of the ultimate net
cost of losses and loss adjustment expenses, including losses incurred but not
reported. Reserves for losses and loss adjustment expenses are estimates at any
given point in time of what the Company may have to pay ultimately on incurred
losses, including related settlement costs, based on facts and circumstances
then known. The Company also reviews its claims reporting patterns, past loss
experience, risk factors and current trends and considers their effect in the
determination of estimates of incurred but not reported 



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<PAGE>   11
reserves. Ultimate losses and loss adjustment expenses are affected by many
factors which are difficult to predict, such as claim severity and frequency,
inflation levels and unexpected and unfavorable judicial rulings. Reserves for
surety claims also consider the amount of collateral held as well as the
financial strength of the principal and its indemnitors.

The Company's insurance subsidiaries' loss ratio under generally accepted
accounting principles ("GAAP") were 19.9% and 30.0% for the nine-month periods
ended September 30, 1998 and 1997, respectively. These loss ratios are below
industry averages and are believed to be the result of conservative
underwriting. There can be no assurance that such loss ratios can continue. The
Company's insurance subsidiaries' expense ratios under GAAP were 51.3% and 47.8%
for the nine-month period ended September 30, 1998 and 1997, respectively. The
Company's insurance subsidiaries' combined ratios under GAAP were 71.2% and
77.8% for the nine-month periods ended September 30, 1998 and 1997,
respectively.

LIQUIDITY AND CAPITAL RESOURCES:

The Company generates sufficient funds from its operations and maintains a
relatively high degree of liquidity in its investment portfolio. The primary
source of funds to meet the demands of claim settlements and operating expenses
are premium collections, investment earnings and maturing investments. As of
September 30, 1998, the Company had no material commitments for capital
expenditures and, in the opinion of management of the Company, the Company
currently has adequate sources of liquidity to fund its operations over the next
year.

ACMAT, exclusive of its subsidiaries, has incurred negative cash flows from
operating activities primarily because of interest expense related to notes
payable and long-term debt incurred by ACMAT to acquire and capitalize its
insurance subsidiaries and to repurchase Company stock. ACMAT has also incurred
negative working capital as a result of holding short-term debt related to its
operation.

ACMAT's principal sources of funds are dividends from its wholly-owned
subsidiaries, intercompany and short-term borrowings, insurance underwriting
fees from its subsidiaries, construction contracting operations and rental
income. Management believes that these sources of funds are adequate to service
its indebtedness. ACMAT has recently utilized short-term borrowings to
repurchase its stock. ACMAT has also relied on dividends from its insurance
subsidiaries to repay debt.

The Company realized cash flow from operations of $3,860,356 for the nine-month
period ended September 30, 1998, compared to $6,028,095 for the same period in
1997. Net cash flows provided by operations were derived principally from
premium collections.

Purchases of investments are made based upon excess cash available after the
payment of losses and loss adjustment expenses and other operating and
non-operating expenses. The Company's short term investment strategy coincides
with the relatively short maturity of its liabilities which are comprised
primarily of reserves for losses covered by claims-made insurance policies,
reserves related to surety bonds and collateral held for surety obligations.

Net cash provided by investing activities in 1998 amounted to $10,845,898
compared to $5,583,809 for the same period in 1997.

The terms of the Company's note agreements contain limitations on payment of
cash dividends, re-acquisition of shares, borrowings and investments and require
maintenance of specified ratios and minimum net worth levels, including cross
default provisions. The payment of future cash dividends and the re-acquisition
of shares are restricted each to amounts of an Available Fund. The Available
Fund is a cumulative fund which is increased each year by 20% of the
Consolidated Net Earnings (as defined). The Company is in compliance with all
covenants at September 30, 1998, except for the ratio of Earnings Before Income
Taxes, Depreciation and Amortization to Fixed Charges. The Company has applied
for and expects to receive a waiver for this covenant.

The Company maintains a short-term unsecured bank credit line totaling $10.0
million to fund interim cash requirements. There was $5,000,000 outstanding
under this line of credit at September 30, 1998.

During the nine-month period ended September 30, 1998, the Company purchased, in
the open market and in privately negotiated transactions, 4,769 shares of its
Common Stock at an average price of $20.65. The Company also purchased, in open
market and privately negotiated transactions, 340,365 shares of its Class A
Stock at an average price of $15.10 per share.

The Company's principal source of cash for repayment of long-term debt is
dividends from its two insurance subsidiaries. Under applicable insurance
regulations, ACMAT's insurance subsidiaries are restricted as to the amount of
dividends they may pay to their respective holding company, without the prior
approval of their domestic state insurance department. The amount of dividends
ACMAT's insurance subsidiaries may pay without prior insurance department
approval, is limited to approximately $10,032,000 in 1998.


                                       11
<PAGE>   12
YEAR 2000 ISSUE

There has been significant public discussion in recent years of the "Year 2000" 
issue, which relates to the potential inability of computer programs and 
systems to adequately store and process data after December 31, 1999, due to 
the inability of such programs and systems to identify correct dates subsequent 
to December 31, 1999.

In 1997, the Company began to address the Year 2000 issue. The Company's 
financial and operational computer and software systems are approximately 60% 
compliant, with all systems expected to be compliant and tested by June 30, 
1999. The total cost of the project is estimated to be less than $100,000 and 
is being funded through operating cash flows. Management believes that these 
systems will be suitable for continued use into and beyond the year 2000. If 
for any reason these systems are not suitable for such use, the Year 2000 
problem could have a material adverse impact on the Company's ability to meet 
financial and reporting requirements and to support its insurance operations.

The Company's Year 2000 review includes an assessment of "embedded chip" 
systems associated with its end-user computing hardware and software (including 
personal computers, spreadsheets, word processing and other personal and work 
group applications), its corporate facilities (such as security systems, 
elevators and climate control systems) and its office equipment (including 
telephones, fax machines and similar equipment). The Company is continuing to 
identify potential problems associated with its embedded chip systems and to 
develop corrective plans to avoid or mitigate such potential problems. Where 
appropriate, the Company intends to upgrade or replace non-compliant embedded 
chip systems to avoid potential Year 2000 problems. The Company anticipates 
that the deployment of corrected systems for its "embedded chip" technology 
will be completed during the second quarter of 1999.

The Company has initiated discussions with certain suppliers, business 
partners, customers and other parties to determine the extent to which the 
Company may be vulnerable to the failure of these parties to address and 
correct their own Year 2000 problems. However, there can be no guarantee that 
the systems of other companies that support the Company's operations will be 
timely converted or that a failure by these companies to correct their Year 
2000 problems will not have a material adverse effect on the Company.

The Company's Year 2000 Review is intended to reduce significantly the level of
uncertainty associated with the Year 2000 issue. As part of this review, the
Company plans to develop contingency plans to address and mitigate the potential
impact of problems that might surface with the approach of the millennium. In
light of the current stage of the Company's review of its core financial and
operational systems and its "embedded chip" technology, the Company is
developing contingency plans that focus on the potential interruption of support
services provided to the Company by business affiliates or public authorities
due to problems these parties may experience in connection with the Year 2000
issue. The Company intends to explore these and other "worst case" scenarios in
the coming months to anticipate and limit, wherever possible, the potential
impact of any such scenario on the Company's insurance operations or financial
condition. These plans will include identifying alternate suppliers and vendors,
conducting staff training and developing alternative communication plans.

The Company is currently assessing what changes may be appropriate in insurance
coverages it currently markets in light of the Year 2000 issue. In this
connection, management is considering possible modifications and/or exclusions
to policy forms that could be implemented in connection with future insurance
policies that will extend coverage beyond December 31, 1999. In the past,
judicial interpretations have expanded the coverage of insurance policies,
including those regarding pollution and other environmental exposures, beyond
the scope anticipated by insurers. The Company will continue to review its
reserves in light of evolving developments relating to the Year 2000 issue.

The dates on which the Company believes that the various components of its Year
2000 review will be completed are based on management's best estimates, which,
in turn, are based upon numerous assumptions regarding future events, including
the continued availability of certain resources, third-party compliance plans
and other factors. As a result, there can be no guarantee that the Company's
schedule of completion dates will be realized or that there will not be
increased costs associated with the implementation of the Year 2000 review. Due
to the general uncertainty inherent in the Year 2000 problems, resulting in part
from the uncertainty of the Year 2000 readiness of third-parties, the Company
cannot assure its ability to timely and cost-effectively resolve problems
associated with the Year 2000 issue that may effect its operations and business
or expose it to third-party liability.

REGULATORY ENVIRONMENT

Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify Companies that
require further regulatory action. The ratio for each of the Company's insurance
subsidiaries as of September 30, 1998 was significantly above the level which
might require regulatory action.



                                       12
<PAGE>   13
Part II - Other Information


Item - Exhibits and Reports on Form 8-K

  a.  Exhibits -
         27. Financial Data Schedule

  b.  Report on Form 8-K - None


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                                   SIGNATURES


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


                                 ACMAT CORPORATION


Date:  November 13, 1998           /s/ Henry W. Nozko, Sr.  
                                 ----------------------------------------------
                                 Henry W. Nozko, Sr., President and Chairman



Date:  November 13, 1998           /s/ Henry W. Nozko, Jr.                     
                                 ----------------------------------------------
                                 Henry W. Nozko, Jr., Executive Vice President
                                 Chief Operating Officer, and Treasurer




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