<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                     ......................................


                                    FORM 10Q


                Quarterly Report Under Section 13 or 15(d) of the

                         Securities Exchange Act of 1934



For the Quarter Ended June 30, 1998                Commission file number 0-6355



                               COMNET CORPORATION



Incorporated in Delaware                                   IRS EI No. 52-0852578


             4200 Parliament Place, Suite 600, Lanham, MD 20706-1860

                        Telephone Number: (301) 918-0400



Indicate by check mark whether the registrant (1) has filed 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 such filing
requirements for the past 90 days.


            YES       X                        NO                      
                ------------                      ------------




                                               Shares Outstanding Effective
Class                                          August 4, 1998
----------------------------                   ---------------------------
Common Stock, $.50 par value                   3,295,501



<PAGE>   2


                               COMNET CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                    June 30,              March 31,
                                                                      1998                  1998
                                                                   (Unaudited)            (Audited)
                                                                   -----------            ---------
<S>                                                             <C>                    <C>
ASSETS
Current assets:
  Cash and cash equivalents                                     $       8,872          $      3,683
  Trade and installment accounts receivable, less
    allowance of $3,352 and $3,603                                     19,147                27,233
  Deferred income taxes                                                 3,478                 3,408
  Prepaid expenses and other current assets                             2,874                 3,086
                                                                 --------------         -------------

  Total current assets                                                 34,371                37,410

Installment accounts receivable, long-term                              3,812                 3,810
Property and equipment, net                                             3,344                 3,544
Computer software, net                                                 23,014                23,359
Other assets                                                            2,268                 2,507
                                                                 --------------         -------------

  Total assets                                                  $      66,809          $     70,630
                                                                 ==============         =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                      2,378                 2,099
  Current portion of long-term debt                                       197                   157
  Accrued expenses                                                      4,479                 6,279
  Accrued compensation                                                  3,450                 4,699
  Current deferred revenues                                            16,930                17,484
                                                                 --------------         -------------
  Total current liabilities                                            27,434                30,718

Long-term debt, net of current portion                                    275                   389
Deferred revenues, long-term                                            3,274                 3,653
Deferred income taxes, net                                              2,953                 3,029
Minority interest in net earnings of consolidated 
subsidiary                                                              5,692                 5,683
                                                                 --------------         -------------
  Total liabilities                                                    39,628                43,472

Commitments and contingent liabilities

Stockholders' equity:
6% cumulative convertible preferred stock, $0.25 par 
  value 148 shares issued and outstanding                               2,846                 2,846
Common stock, $0.50 par value 10,000 shares authorized; 
3,596 and 3,594 issued and outstanding                                  1,798                 1,797
Capital contributed in excess of par value                             17,785                17,763
Retained earnings                                                       6,517                 6,480
Accumulated other comprehensive income                                    250                   287
                                                                 --------------         -------------
                                                                       29,196                29,173
Less treasury stock at cost, 316 shares                                (2,015)               (2,015)
  Total stockholders' equity                                           27,181                27,158
                                                                 --------------       ---------------
Total liabilities and stockholders' equity                      $      66,809        $       70,630
                                                                 ==============       ===============
</TABLE>

See notes to consolidated financial statements.


                                       2
<PAGE>   3


                               COMNET CORPORATION
                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
                      (in thousands, except per share data)
                                    Unaudited

<TABLE>
<CAPTION>
                                                                 For the Three-Month Period
                                                                      Ended June 30,
                                                          --------------------------------------
                                                                   1998               1997
                                                                  (FY99)             (FY98)
                                                          --------------------------------------
<S>                                                         <C>                 <C>
Revenue:
  Software licenses and related revenue                     $      4,575        $     5,062
  Maintenance and service revenue                                  7,354              6,808
                                                             --------------      ---------------

    Total revenue                                                 11,929             11,870
                                                             --------------      ---------------

Costs and expenses:
  Software licenses expenses                                       2,060              2,000
  Maintenance and service expenses                                 2,833              3,330
  Research, development and indirect support                         571                647
  Selling and marketing                                            4,325              5,187
  General and administrative                                       1,671              1,806
  Provision for doubtful accounts                                    380                380
                                                             --------------      ---------------

   Total costs and expenses                                       11,840             13,350
                                                             --------------      ---------------

Operating income (loss)                                               89             (1,480)

Non-operating income (loss), net                                      56               (169)
                                                             --------------      ---------------

Earnings (loss) before provision for income
  taxes                                                              145             (1,649)

Provision (benefit) for income taxes                                  55               (534)

Minority interest                                                      9               (206)
                                                             --------------      ---------------

Net earnings (loss)                                                   81               (909)

Preferred stock dividend                                              44                 44
                                                             --------------      ---------------

Net earnings (loss) available to common 
  stockholders                                              $         37        $      (953)
                                                             ==============      ===============

Basic earnings (loss) per share of common stock             $       0.01        $     (0.29)
                                                             ==============      ===============
Diluted earnings (loss) per share of common
  stock                                                     $       0.01        $     (0.29)
                                                             ==============      ===============

Basic weighted average number of common shares 
  outstanding                                                      3,279              3,272
                                                             ==============      ===============

Diluted weighted average number of common and 
  common equivalent shares outstanding                             3,459              3,272
                                                             ==============      ===============
</TABLE>

See notes to consolidated financial statements.



                                       3
<PAGE>   4

                               COMNET CORPORATION
                             CONDENSED CONSOLIDATED
                    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (in thousands)
                                    Unaudited



<TABLE>
<CAPTION>
                                                                     Three-months Ended June 30,
                                                                   -------------------------------
                                                                       1998              1997
                                                                   ------------       ------------
<S>                                                               <C>                <C>
Net earnings (loss) available to common 
stockholders                                                      $       37         $     (953)
Other comprehensive income:
   Foreign currency translation adjustment                               (37)               (41)
                                                                   ------------       ------------

Comprehensive income (loss)                                       $        0         $     (994)
                                                                   ============       ============
</TABLE>

See notes to consolidated financial statements.







                                       4
<PAGE>   5




                               COMNET CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                    Unaudited

<TABLE>
<CAPTION>
                                                                                           For the Three-Month
                                                                                         Period Ended June 30,
                                                                                 -------------------------------------
                                                                                      1998                  1997
                                                                                     (FY99)                (FY98)
                                                                                 --------------         --------------
<S>                                                                             <C>                    <C>
Cash flows from operating activities:
Net earnings (loss)                                                             $        81            $      (909)
Adjustments to reconcile net earnings (loss) to net cash 
   provided by operating activities:
   Amortization expense                                                               1,981                  1,614
   Depreciation expense                                                                 305                    261
   Provision for doubtful accounts receivable                                           380                    380
   Deferred income taxes                                                               (146)                   550
   Minority interest in earnings (loss) of consolidated 
   subsidiary                                                                             9                   (206)
Change in assets and liabilities:
   Decrease in accounts receivable                                                    7,693                  5,488
   Decrease in prepaid expenses and other
     current assets                                                                     383                    328
   Decrease in other assets                                                             193                     64
   Increase in accounts payable                                                         281                    627
   Decrease in accrued expenses                                                      (2,924)                (4,189)
   Decrease in deferred revenues                                                     (1,230)                  (676)
                                                                                 --------------         --------------

  Net cash provided by operating activities                                           7,006                  3,332
                                                                                 --------------         --------------

Cash flows from investing activities:
  Purchase and development of computer software                                      (1,594)                (2,826)
  Purchase of equipment and improvements                                               (140)                  (191)
                                                                                 --------------         --------------

  Net cash used by investing activities                                              (1,734)                (3,017)
                                                                                 --------------         --------------

Cash flows from financing activities:
 Proceeds from short-term borrowings                                                    ---                  2,415
 Reduction of short-term borrowings                                                     ---                 (3,479)
 Proceeds from exercise of stock options                                                 23                      4
 Proceeds from debt                                                                     (74)                   199
 Payments of long-term debt                                                             ---                    (10)
 Dividends paid on preferred stock                                                      (44)                   (44)
                                                                                 --------------         --------------

 Net cash used in financing activities                                                  (95)                  (915)
                                                                                 --------------         --------------

Net decrease in cash and cash equivalents                                             5,177                   (600)

Effect of currency translation on cash                                                   12                    (37)

Cash and cash equivalents at beginning of period                                      3,683                  1,629
                                                                                 --------------         --------------

Cash and cash equivalents at end of period                                      $     8,872            $       992
                                                                                 ==============         ==============
</TABLE>

See notes to consolidated financial statements.



                                       5
<PAGE>   6


                               COMNET CORPORATION
                   Notes to Consolidated Financial Statements


1.    The financial statements for the three months ended June 30, 1998 and
1997, are unaudited. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Limited footnote
information is presented in accordance with quarterly reporting requirements.
The results of operations for the three months ended June 30, 1998, are not
necessarily indicative of the results for the year ending March 31, 1999. The
information contained in the audited financial statements and the notes thereto
for the year ended March 31, 1998, should be referred to in connection with the
unaudited interim financial information. Unless otherwise indicated in the
discussion in these statements, the term "Company" will refer to the operations
of COMNET and its subsidiaries.

2.    Research and development expense, before the capitalization of computer
software development costs, amounted to approximately $2.1 million and $3.3
million for the three months ended June 30, 1998 and 1997, respectively.

3.    Earnings per share

      The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 128, issued by the Financial Accounting Standards Board ("FASB") in
February 1997, requiring dual presentation of basic and diluted per share
earnings on the face of the income statement. Basic earnings per share is based
on the weighted average number of shares of common stock outstanding. On a
diluted basis, shares outstanding are adjusted for stock options for each year
presented. The adoption of SFAS No. 128 did not have a material effect on the
Company's financial statements. Prior years' presentations of earnings per share
have been restated to conform to the guidelines of SFAS No. 128.


Calculation of dilutive earnings per share (in thousands):
<TABLE>
<CAPTION>
Reconciliation of denominator                     Quarter Ended June 30,
-----------------------------                  ---------------------------
                                                  1998            1997
                                               -----------     -----------
<S>                                            <C>             <C>
Weighted shares outstanding - basic                  3,279          3,272
Effect of dilutive securities
Stock options                                          180            ---
                                               -----------     -----------
Adjusted denominator                                 3,459          3,272
                                               ============    ===========
</TABLE>


      There were additional potentially dilutive stock options of 44,000 in 1997
which were not included in the loss per share calculation due to their
anti-dilutive effect. There were additional potentially dilutive convertible
securities of 147,500 in 1998 and 1997 which were not included in the earnings
(loss) per share calculation due to their anti-dilutive effect.


                                       6
<PAGE>   7

During the quarter, the Company adopted FASB Statement No. 130, "Reporting
Comprehensive Income". Statement No. 130 requires the reporting of comprehensive
income in addition to net earnings. Comprehensive income is a more inclusive
financial reporting methodology that includes changes in the balances of items
that are reported directly as a separate component of Stockholders' Equity.

4. Recent Accounting Pronouncements

      During the quarter, the Company adopted FASB Statement No. 130,
"Reporting Comprehensive Income". Statement No. 130 requires the reporting of
comprehensive income in addition to net earnings. Comprehensive income is a more
inclusive financial reporting methodology that includes changes in the balances
of items that are reported directly as a separate component of Stockholders'
Equity.

      U.S. and international withholding taxes have not been provided on
undistributed earnings of foreign subsidiaries. The Company remits only those
earnings which are considered to be in excess of the reasonably anticipated
working capital needs of the foreign subsidiaries with the balance considered to
be permanently reinvested in the operations of such subsidiaries. It is
impractical to estimate the total tax liability, if any, until such distribution
is made.

The following are included as components of accumulated other comprehensive
income:

For the three months ended June 30, 1998
                                                 Foreign
                                                 Currency
                                               Translation
                                              (in thousands)
                                             ---------------
Beginning balance, April 1, 1998            $          287
Current-period change                                  (37)
                                             ---------------
Ending balance, June 30, 1998               $          250
                                             ===============

      In the first fiscal quarter of fiscal 1998, the Company adopted
Statements of Position ("SOP") 97-2, "Software Revenue Recognition," as amended
by SOP 98-4, which provide guidance on applying generally accepted accounting
principles in recognizing revenue on software. The adoption of the SOP's, may in
the future result in the deferral of software license revenues that would have
been recognized upon delivery of the related software under the preceding
accounting standard, SOP 91-1. The adoption of SOP 97-2 did not have a material
effect during the quarter and the Company does not expect there to be a material
impact on the Company's financial condition or results of operations in future
periods.

      The Financial Accounting Standards Board has issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which
became effective for reporting periods beginning after December 15, 1997.
Interim reporting is not required under SFAS No. 131 prior to adoption. SFAS No.
131 requires financial and descriptive information with respect to 'operating
segments' of an entity based on the way management disaggregates the entity for
making internal operating decisions. The Company will begin making the
disclosures required by SFAS No. 131 with financial statements for the period
ending March 31, 1999.

5.    Certain prior year amounts have been restated to conform with the current
year presentation.



                                       7
<PAGE>   8


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

RESULTS OF OPERATIONS

Any statements in this quarterly report on Form 10-Q concerning the Company's
business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; together with other statements that
are not historical facts, are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, changes in currency
exchange rates, changes and delays in new product introduction, customer
acceptance of new products, changes in government regulations, changes in
pricing or other actions by competitors and general economic conditions, as well
as other risks detailed in the Company's filings with the Securities and
Exchange Commission.

For the quarters ending June 30, 1998 and 1997 the Company had revenues of $11.9
million. Net earnings for the quarter ended June 30, 1998, was $81,000 or $0.01
diluted earnings per share compared with a net loss of $0.9 million or $(0.29)
diluted loss per share in the same quarter of fiscal 1998. The increase in
profitability is primarily due to lower royalty expense by reason of fewer sales
of third party products along with savings associated with the new licensing
arrangements for the WorldTrak and PC products which resulted in lower selling
and marketing and administrative costs.

Software license fees and related revenues of $4.6 million for the first fiscal
quarter decreased 10% over the prior year. As a percent of total revenue, first
quarter software license and related revenue was 38% in fiscal 1999 compared
with 43% in fiscal 1998. The decrease was due to lower license revenue from
Mailing Efficiency and Database Marketing products partially offset by higher
license revenues from our Electronic Document System products.

License fees from Electronic Document Systems increased 115% in the fiscal first
quarter. Sales of these products increased in both international and domestic
markets.

License fees from Database Marketing Products decreased by $1.0 million compared
to the same period in the prior year. The decrease was due to lower sales
throughout the product line.

Group 1's large systems Mailing Efficiency software license fees for the fiscal
first quarter decreased 16% over the same period the prior year. This decrease
was primarily due to lower sales of Open Systems products.

                                       8
<PAGE>   9

Maintenance and other revenue of $7.4 million for the quarter increased 8% over
the prior year. Maintenance and other revenue accounted for 62% of total revenue
for the quarter ended June 30, 1998 compared with 57% for the same period in the
prior year. Recognized maintenance fees were $5.6 million for the quarter ended
June 30, 1998, an increase of 9% over the comparable period the prior year.
Maintenance fees were up across all product lines. Professional and educational
service revenues of $1.7 million for the quarter ended June 30, 1998 were 5%
higher than the same period of the prior year primarily from higher fees
associated with Electronic Document systems.

During the quarter, total operating costs of $11.8 million amounted to 99% of
revenue compared with $13.3 million or 112% of revenue during the same period
the prior year. The decrease in operating costs is due to lower spending
associated with the WorldTrak and Micro Product distribution agreements, lower
royalty expense and other cost saving measures taken since the first fiscal
quarter of 1998.

Software license expense increased to $2.1 million for the three months ended
June 30, 1998, from $2.0 million the prior year period, representing 45% and 40%
of software license and related revenues, respectively. The increase in costs is
due to higher amortization expense offset by lower royalty costs associated with
lower sales of third party products. The increase in license expense as a
percentage of software license expense is primarily due to the decrease in
software license revenue discussed above.

Maintenance and service expense decreased to $2.8 million in the current quarter
from $3.3 million the comparable period in fiscal 1998, representing 39% and 49%
of maintenance and service revenue, respectively. The decrease in expense can be
primarily attributed to the new distribution agreement for the Micro products.

Included in maintenance and service expense above are professional and
educational service costs of $1.2 million which were 70% of professional service
and education revenue for the first quarter compared with $1.4 million and 87%
for the comparable period in the prior year. The decrease in expense as a
percent of revenue can be attributed to lower costs due to the WorldTrak
licensing arrangement and the completion of a low margin contract during fiscal
1998.

Costs of maintenance were $1.6 million for the first fiscal quarter of 1999
representing 29% of maintenance revenue. Costs of maintenance for the same
quarter in the prior year were $1.9 million or 37% of maintenance revenue. The
lower cost as a percentage of revenue reflects economies of scale achieved with
maintenance support costs spread over a larger revenue base along with savings
associated with the licensing agreements for the Micro and WorldTrak products.

Research, development and indirect support expenses (after capitalization of
certain development costs) totaled $0.6 million for the first fiscal quarter 


                                       9
<PAGE>   10

of 1999 and 1998. The company expects these costs to remain relatively close to
their current levels.

Selling and marketing expenses totaled $4.3 million or 36% of revenue in the
first quarter of fiscal 1999 and $5.2 million or 44% in the prior year same
period. The decrease in cost as a percent of revenue in the quarter versus the
prior year period was due to lower incentive compensation associated with the
lower license revenue as well as the Micro and WorldTrak licensing arrangements
and other cost saving measures implemented during fiscal 1998.

General and administrative expenses were $1.7 million or 14% of total revenue
compared with $1.8 million or 15% of revenue for the three months ended June 30,
1998 and 1997, respectively. The decrease in expense is primarily due to lower
costs associated with the new licensing agreements for the WorldTrak and Micro
products.

The provision for doubtful accounts was $0.4 million for the first fiscal
quarter of both 1999 and 1998, and represented 3% of revenue in both periods.

Net non-operating income was $56,000 for the period ended June 30, 1998 as
compared with net non-operating expense of $169,000 for the same period the
prior year. This increase represents lower interest expense due to no borrowings
under Group 1's line of credit in the current quarter versus the same quarter of
the prior year along with higher interest income from higher cash reserves
compared to the first quarter of fiscal 1998.

The Company's effective tax rate was 38% and (32%) for the three month period
ending June 30, 1998 and 1997, respectively. The current years rate is the net
effect of a 34% effective tax rate on foreign taxable income and a (32%)
effective rate on domestic taxable loss.


LIQUIDITY AND CAPITAL RESOURCES

      The Company's working capital was $6.9 million at June 30, 1998, as
compared with $6.7 million at March 31, 1998. The current ratio was 1.3 to 1 at
June 30, 1998 and 1.2 to 1 at March 31, 1998.

The Company provides for its cash requirements through cash funds generated from
operations. Additionally, the Company's Group 1 subsidiary maintains a two year
$10 million line of credit arrangement with Crestar Bank, expiring August 31,
1998. The line of credit bears interest at the bank's prime rate, or Libor plus
175 basis points at Group 1's option. The line of credit is collateralized by
trade accounts receivable and maintenance and renewal accounts receivable
(excluding installment accounts receivable) and among other things, requires
Group 1 to maintain an EBIT to interest ratio of at least 1.5 to 1 through March
31, 1998, and at least 2.0 to 1 thereafter. The arrangement also required Group
1 to maintain a total liabilities to EBITDA (earnings before interest, taxes,
depreciation and amortization) ratio of no 


                                       10
<PAGE>   11

more than 5.0 to 1 through March 31, 1998, and no more than 4.0 to 1 thereafter.
At June 30, 1998, and at March 31, 1998 there were no borrowings outstanding
under the line of credit.

For the three months ended June 30, 1998 net income of $81,000 plus non-cash
expenses of $2.5 million provided a total of $2.6 million cash from operating
activities. This amount was increased by cash provided by working capital items
totaling $4.4 million resulting in net cash provided by operating activities of
$7.0 million. The cash provided by working capital items includes a $7.7 million
decrease in accounts receivable, offset by a $1.2 million decrease in deferred
revenue, a $2.9 million decrease in accrued expenses and $0.9 million provided
by other working capital items. The decrease in accounts receivable is due to
increased cash collections along with lower sales as compared to the prior
quarter. Investment in purchased and developed software of $1.6 million, and
capital equipment of $0.1 million, resulted in $1.7 million used by investing
activities. $0.1 million was used in financing activities.

Group 1's practice of accepting license agreements under installment payment
arrangements substantially increases its working capital requirements.
Generally, these arrangements are for a period of one to three years after a
minimum down payment of 10% to 12% of the principal amount of the contract.
Installment receivables included in accounts receivable were $7.5 million and
$8.0 million at June 30, 1998 and March 31, 1998, respectively. The installment
receivable balance, in addition to Group 1's policy of offering competitive
trade terms for payment, make it difficult to portray accurately a relationship
between the outstanding accounts receivable balance and the current period
revenues.

Group 1 continually evaluates the credit and market risks associated with
outstanding receivables. In the course of this review, Group 1 considers many
factors specific to the individual client as well as the concentration of
receivables within industry groups. Group 1's installment receivables are
predominately with service bureau clients who provide computer services to the
direct marketing industry. Many of these clients have limited capital and
insufficient assets to secure their liability with the Company. The service
bureaus are highly dependent on Group 1's software and services to offer their
customers the economic benefits of postal discounts and mailing efficiency. To
qualify for the U.S. Postal Service and Canada Post Corporation postal
discounts, service bureaus require continuous regulatory product updates from
Group 1. The service bureau industry is also highly competitive and subject to
general economic cycles as they impact advertising and direct marketing
expenditures. Service bureau clients represent approximately $4.7 million, or
63% of the installment receivables at June 30, 1998. Group 1 is aware of no
current market risk associated with the installment receivables.

As of June 30, 1998, the Company's capital resource commitments consisted
primarily of non-cancelable operating lease commitments for office space and
equipment. The Company believes that its current debt service, minimum lease


                                       11
<PAGE>   12

obligations and other short-term liquidity needs can be met from cash flows from
operations and current credit facilities. The Company believes that its
long-term liquidity needs, principally for continuing investment in capitalized
software development costs, can be funded from operations and current credit
facilities.

OTHER MATTERS

The Year 2000 Issue

The year 2000 issue affects virtually all companies and organizations. Many
existing computer programs and digital systems used by, and sold by, Group 1
Software, use only two digits to identify a year in the data field. These
programs and systems were designed and developed without considering the impact
of the upcoming change in the century.

In 1997, we formed two special task forces:

      The first task force was established to identify and evaluate our internal
systems and applications that may be affected by the year 2000 issue; modify or
replace those systems and applications so they will work properly in the year
2000, and communicate with our suppliers to make sure they are prepared for the
year 2000.

      The second task force was established to evaluate the products sold by us,
to ensure they will function as designed after the Year 2000.

      We have identified and evaluated all of our systems and applications that
may be affected by the Year 2000 issue, and have developed plans to ready these
systems and applications for the century change. Modification and replacement
projects are currently under way. We plan to have our internal systems and
applications ready for the year 2000 by mid-1999 and to have all of the products
sold by us Year 2000 compliant by December 1998. We do not expect the costs to
address the year 2000 issue to be material.

Recent Accounting Pronouncements

      During the quarter, the Company adopted FASB Statement No. 130, "Reporting
Comprehensive Income". Statement No. 130 requires the reporting of comprehensive
income in addition to net earnings. Comprehensive income is a more inclusive
financial reporting methodology that includes changes in the balances of items
that are reported directly as a separate component of Stockholders' Equity.

      In the first fiscal quarter of fiscal 1998, the Company adopted Statements
of Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP
98-4, which provide guidance on applying generally accepted accounting
principles in recognizing revenue on software. The adoption of the SOP's, may in
the future result in the deferral of software license revenues 


                                       12
<PAGE>   13

that would have been recognized upon delivery of the related software under the
preceding accounting standard, SOP 91-1. The adoption of SOP 97-2 did not have a
material effect during the quarter and the Company does not expect there to be a
material impact on the Company's financial condition or results of operations in
future periods.

      The Financial Accounting Standards Board has issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which
became effective for reporting periods beginning after December 15, 1997.
Interim reporting is not required under SFAS No. 131 prior to adoption. SFAS No.
131 requires financial and descriptive information with respect to 'operating
segments' of an entity based on the way management disaggregates the entity for
making internal operating decisions. The Company will begin making the
disclosures required by SFAS No. 131 with financial statements for the period
ending March 31, 1999.





                                       13
<PAGE>   14



                            PART II OTHER INFORMATION



Item 1. Legal Proceedings

        NONE

Item 2. Changes in Securities

        NONE

Item 3. Defaults Upon Senior Securities

        NONE

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

        NONE

Item 5. Other Information

        NONE

Item 6. Exhibits and Reports on Form 8-K

        No filings on Form 8-K have been made during the quarter





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<PAGE>   15


SIGNATURES

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


                                          COMNET Corporation




Date: August 14, 1998
                                          /s/ Mark Funston
                                          Mark Funston
                                          Chief Financial Officer







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