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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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FORM 10-Q



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

OR

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

For the Quarter Ended March 31, 2002

Commission File Number 0-8358

MICRO GENERAL CORPORATION(Exact name of registrant as specified in its charter)

|                                                                                                  |  |                                                   
|------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)                           |  | 95-2621545
(I.R.S. Employer
Identification Number)
|                                                                                                  |  |                                                   
|2510 N. Red Hill Avenue, Suite 230
Santa Ana, California
(Address of principal executive offices) |  | 92705
(Zip Code)                                  

(949) 622-4444
(Registrants Telephone Number, including Area Code)



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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 such
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.

$.05 par value Common Stock 15,810,203 shares as of May 6, 2002

Exhibit Index appears on page 13 of 13 sequentially numbered pages.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                           |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|SIGNATURES                   
|PART I: FINANCIAL INFORMATION
|                              | Item 1. Condensed Consolidated Financial Statements                                          
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                    
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS          
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements     
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|PART II: OTHER INFORMATION   
|                              | Item 4. Submission of Matters to Vote of Security Holders  None.                            
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     



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##### Table of Contents



FORM 10-Q

QUARTERLY REPORT

Quarter Ended March 31, 2002

TABLE OF CONTENTS

|                                                                                                                              |  |                                                                                                           |  |       
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | ------
|                                                                                                                              |  |                                                                                                           |  | Page  
|                                                                                                                              |  |                                                                                                           |  | Number
|                                                                                                                              |  |                                                                                                           |  |       
|                                                                                                                              |  | PART I: FINANCIAL INFORMATION                                                                             |  |       
|                                                                                                                              |  |                                                                                                           |  |       
|Item 1.                                                                                                                       |  | Condensed Consolidated Financial Statements                                                               |  |       
|                                                                                                                              |  |                                                                                                           |  |       
|A                                                                                                                             |  | Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001                          |  | 3     
|                                                                                                                              |  |                                                                                                           |  |       
|B                                                                                                                             |  | Condensed Consolidated Statements of Operations for the three-month periods ended
March 31, 2002 and 2001 |  | 4     
|                                                                                                                              |  |                                                                                                           |  |       
|C                                                                                                                             |  | Condensed Consolidated Statements of Stockholders Equity for
the three-month period ended March 31, 2002 |  | 5     
|                                                                                                                              |  |                                                                                                           |  |       
|D                                                                                                                             |  | Condensed Consolidated Statements of Cash Flows for the three-month periods ended
March 31, 2002 and 2001 |  | 6     
|                                                                                                                              |  |                                                                                                           |  |       
|E                                                                                                                             |  | Notes to Condensed Consolidated Financial Statements                                                      |  | 7     
|                                                                                                                              |  |                                                                                                           |  |       
|Item 2.                                                                                                                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 10    
|                                                                                                                              |  |                                                                                                           |  |       
|Item 3.                                                                                                                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                |  | 13    
|                                                                                                                              |  |                                                                                                           |  |       
|                                                                                                                              |  | PART II: OTHER INFORMATION                                                                                |  |       
|                                                                                                                              |  |                                                                                                           |  |       
|Items 1,
2, 3 and 5 of Part II have been omitted because they are not applicable with respect to
the current reporting period |  |                                                                                                          
|                                                                                                                              |  |                                                                                                           |  |       
|Item 4.                                                                                                                       |  | Submission of Matters to Vote of Security Holders                                                         |  | 13    
|                                                                                                                              |  |                                                                                                           |  |       
|Item 6.                                                                                                                       |  | Exhibits and Reports on Form 8-K                                                                          |  | 13    




SIGNATURES

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

MICRO GENERAL CORPORATION
(Registrant)

|    |  |                                                                                         |  |                   
|--- |  | --------------------------------------------------------------------------------------- |  | ------------------
|By: |  | /s/ Dale W. Christensen                                                                 |  |                   
|    |  |                                                                                         |  |                   
|    |  | Dale W. ChristensenChief Financial Officer
(Principal Financial and Accounting Officer) |  | Date:
May 15, 2002

2



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##### Table of Contents






PART I: FINANCIAL INFORMATION




Item 1.Condensed Consolidated Financial Statements

MICRO GENERAL CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |             |            | 
|------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ----------- | ---------- | ------------ | ---------- | ----------- | ---------- | 
|                                                                                                                   |                                                                                                                                                             |                                            |            | March 31,   |            | December 31,
|                                                                                                                   |                                                                                                                                                             |                                            |            | 2002        |            | 2001        
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |             
|ASSETS                                                                                                             |                                                                                                                                                             | (Unaudited)                                |            |             |            |             
|Current assets:                                                                                                    |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   | Cash and cash equivalents                                                                                                                                   |                                            | $          | 13,159,469  |            |              | $          | 10,902,386  |           
|                                                                                                                   | Trade accounts receivable, less allowance for doubtful accounts
of $527,765 in 2002 and $580,314 in 2001                                                    |                                            |            | 1,920,070   |            |              |            | 1,221,806   |           
|                                                                                                                   | Trade accounts receivable due from affiliates                                                                                                               |                                            |            | 17,195,696  |            |              |            | 14,511,887  |           
|                                                                                                                   | Inventories                                                                                                                                                 |                                            |            | 235,926     |            |              |            | 143,958     |           
|                                                                                                                   | Prepaid and other current assets                                                                                                                            |                                            |            | 2,261,571   |            |              |            | 2,093,112   |           
|                                                                                                                   | Income tax receivable                                                                                                                                       |                                            |            |            |            |              |            | 1,483,645   |           
|                                                                                                                   | Deferred tax assets                                                                                                                                         |                                            |            | 4,326,636   |            |              |            | 4,326,636   |           
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   |                                                                                                                                                             | Total current assets                       |            |             | 39,099,368 |              |            |             | 34,683,430 | 
|Property and equipment, net                                                                                        |                                                                                                                                                             |                                            | 28,407,660 |             |            |              | 28,382,040 |            
|Capitalized software development costs, less accumulated amortization of
$4,527,494 in 2002 and $4,403,899 in 2001 |                                                                                                                                                             |                                            | 2,232,959  |             |            |              | 2,356,554  |            
|Goodwill,
less accumulated amortization of $5,198,289 in both 2002 and 2001.                                       |                                                                                                                                                             |                                            | 10,068,200 |             |            |              | 9,979,350  |            
|Other intangible assets, less accumulated amortization of $108,732
in 2002 and $62,133 in 2001                     |                                                                                                                                                             |                                            | 823,268    |             |            |              | 869,867    |            
|Deferred tax assets                                                                                                |                                                                                                                                                             |                                            | 1,514,052  |             |            |              | 1,514,052  |            
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   |                                                                                                                                                             | Total assets                               |            | $           | 82,145,507 |              |            | $           | 77,785,293 | 
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                               |                                                                                                                                                             |                                            |            |             |            |              |            |            
|Current liabilities:                                                                                               |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   | Accounts payable and accrued expenses                                                                                                                       |                                            | $          | 8,069,837   |            |              | $          | 7,157,437   |           
|                                                                                                                   | Accrued compensation expenses                                                                                                                               |                                            |            | 2,581,544   |            |              |            | 2,201,850   |           
|                                                                                                                   | Accounts payable and accrued expenses  affiliates                                                                                                          |                                            |            | 498,496     |            |              |            | 607,700     |           
|                                                                                                                   | Income and other taxes payable                                                                                                                              |                                            |            | 171,992     |            |              |            | 197,092     |           
|                                                                                                                   | Deferred revenue                                                                                                                                            |                                            |            | 2,701,318   |            |              |            | 2,565,043   |           
|                                                                                                                   | Current portion of notes payable                                                                                                                            |                                            |            | 4,895,056   |            |              |            | 5,114,115   |           
|                                                                                                                   | Current portion of capital leases with affiliate                                                                                                            |                                            |            | 114,221     |            |              |            | 104,739     |           
|                                                                                                                   | Accrued liabilities for discontinued operations                                                                                                             |                                            |            | 1,369,685   |            |              |            | 1,971,141   |           
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   |                                                                                                                                                             | Total current liabilities                  |            |             | 20,402,149 |              |            |             | 19,919,117 | 
|Capital leases with affiliate                                                                                      |                                                                                                                                                             |                                            | 115,904    |             |            |              | 150,612    |            
|Deferred revenue                                                                                                   |                                                                                                                                                             |                                            | 3,406,618  |             |            |              | 3,574,639  |            
|Notes payable                                                                                                      |                                                                                                                                                             |                                            | 374,331    |             |            |              | 1,196,266  |            
|Amounts and notes payable to affiliates                                                                            |                                                                                                                                                             |                                            | 5,265,408  |             |            |              | 5,265,408  |            
|Accrued liabilities for discontinued operations                                                                    |                                                                                                                                                             |                                            | 734,448    |             |            |              | 839,440    |            
|Commitments and contingencies                                                                                      |                                                                                                                                                             |                                            |            |             |            |              |            |            
|Preferred stock of consolidated subsidiary, held by outside parties                                                |                                                                                                                                                             |                                            | 7,062,173  |             |            |              | 7,062,173  |            
|Stockholders equity:                                                                                              |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   | Preferred stock, $0.05 par value. Authorized 1,000,000 shares,
none issued and outstanding                                                                  |                                            |            |            |            |              |            |            |           
|                                                                                                                   | Common stock, $0.05 par value. Authorized 50,000,000 shares;
issued and outstanding 15,686,110 at March 31, 2002 and
15,499,139 shares at December 31, 2001 |                                            |            | 784,305     |            |              |            | 774,957     |           
|                                                                                                                   | Treasury
stock (18,782 shares at March 31, 2002 and 17,302 at
December 13, 2001)                                                                            |                                            |            | (197,507    | )          |              |            | (213,397    | )         
|                                                                                                                   | Additional paid-in capital                                                                                                                                  |                                            |            | 57,901,251  |            |              |            | 56,298,854  |           
|                                                                                                                   | Accumulated deficit                                                                                                                                         |                                            |            | (13,703,573 | )          |              |            | (17,082,776 | )         
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|Total stockholders equity                                                                                         |                                                                                                                                                             |                                            | 44,784,476 |             |            |              | 39,777,638 |            
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            
|                                                                                                                   |                                                                                                                                                             | Total liabilities and stockholders equity |            | $           | 82,145,507 |              |            | $           | 77,785,293 | 
|                                                                                                                   |                                                                                                                                                             |                                            |            |             |            |              |            |            

See Notes to Condensed Consolidated Financial Statements

3



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MICRO GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                   |                  |                                   |                                                   |           |                           |            |            |           |           |            | 
|------------------------------------------------------------------ | ---------------- | --------------------------------- | ------------------------------------------------- | --------- | ------------------------- | ---------- | ---------- | --------- | --------- | ---------- | 
|                                                                   |                  |                                   |                                                   |           | Three-Month Periods Ended
|                                                                   |                  |                                   |                                                   |           | March 31,                
|                                                                   |                  |                                   |                                                   |           |                          
|                                                                   |                  |                                   |                                                   |           | 2002                      |            | 2001      
|                                                                   |                  |                                   |                                                   |           |                           |            |           
|                                                                   |                  |                                   |                                                   |           | (Unaudited)              
|Revenues:                                                          |                  |                                   |                                                   |           |                           |            |            |          
|Management, support and consulting revenues  related parties      |                  | $                                 | 25,612,652                                        |           |                           | $          | 22,060,425 |          
|Management, support and consulting revenues  third parties        |                  |                                   | 521,031                                           |           |                           |            | 87,642     |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Total management, support and consulting revenues |           |                           | 26,133,683 |            |           |           | 22,148,067 | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Software, maintenance and other revenues  related parties         |                  |                                   | 5,849,723                                         |           |                           |            | 3,439,916  |          
|Software, maintenance and other revenues  third parties           |                  |                                   | 2,316,822                                         |           |                           |            | 857,394    |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Total software, maintenance and other revenues    |           |                           | 8,166,545  |            |           |           | 4,297,310  | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Total revenues                                    |           |                           | 34,300,228 |            |           |           | 26,445,377 | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Cost of sales:                                                     |                  |                                   |                                                   |           |                           |            |            |          
|Management, support and consulting cost of sales                   |                  |                                   | 14,833,449                                        |           |                           |            | 13,162,129 |          
|Software, maintenance and other cost of sales                      |                  |                                   | 4,927,817                                         |           |                           |            | 2,941,271  |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Total cost of sales                               |           |                           | 19,761,266 |            |           |           | 16,103,400 | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Gross profit                                      |           |                           | 14,538,962 |            |           |           | 10,341,977 | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Selling, general and administrative                                |                  |                                   | 8,953,903                                         |           |                           |            | 4,765,601  |          
|Amortization of goodwill                                           |                  |                                   |                                                  |           |                           |            | 316,901    |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   | Operating income |                                   |                                                   | 5,585,059 |                           |            |            | 5,259,475 |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Interest expense, net                                              |                  |                                   | 134,732                                           |           |                           |            | 214,116    |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Income
from continuing operations before income taxes              |                  |                                   | 5,450,327                                         |           |                           |            | 5,045,359  |          
|Income
taxes                                                       |                  |                                   | 2,071,124                                         |           |                           |            | 1,261,521  |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  | Income from continuing operations |                                                   |           | 3,379,203                 |            |            |           | 3,783,838 |           
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Loss from discontinued operations, net of tax of $472,088
for 2001 |                  |                                   |                                                  |           |                           |            | (975,996   | )        
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                   |                  |                                   | Net income                                        |           | $                         | 3,379,203  |            |           | $         | 2,807,842  | 
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|                                                                  
|Income from continuing operations per share  basic                |                  | $                                 | 0.22                                              |           |                           | $          | 0.26       |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Income from continuing operations per share  diluted              |                  | $                                 | 0.19                                              |           |                           | $          | 0.24       |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Net income per share  basic                                       |                  | $                                 | 0.22                                              |           |                           | $          | 0.19       |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Net income per share  diluted                                     |                  | $                                 | 0.19                                              |           |                           | $          | 0.17       |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Number of shares used in per share computations:                   |                  |                                   |                                                   |           |                           |            |            |          
|Basic                                                              |                  |                                   | 15,640,485                                        |           |                           |            | 14,605,088 |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          
|Diluted                                                            |                  |                                   | 17,863,313                                        |           |                           |            | 16,095,091 |          
|                                                                   |                  |                                   |                                                   |           |                           |            |            |          

See Notes to Condensed Consolidated Financial Statements

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##### Table of Contents






MICRO GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

For the Three-Month Period Ended March 31, 2002

|                                                              |  |              |            |            |  |          |         |             |  |               |            |        |  |       |          |   |  |   |             |   |  |   |            |  
|------------------------------------------------------------- |  | ------------ | ---------- | ---------- |  | -------- | ------- | ----------- |  | ------------- | ---------- | ------ |  | ----- | -------- | - |  | - | ----------- | - |  | - | ---------- | -
|                                                              |  | Common Stock |            | Additional |  |          |         |             |  |               |            |        |  | Total
|                                                              |  |              |            | Paid-in    |  | Treasury |         | Accumulated |  | Stockholders'
|                                                              |  | Shares       |            | Amount     |  | Capital  |         | Stock       |  | Deficiency    |            | Equity
|                                                              |  |              |            |            |  |          |         |             |  |               |            |       
|Balance at December 31, 2001                                  |  |              | 15,499,139 |            |  | $        | 774,957 |             |  | $             | 56,298,854 |        |  | $     | (213,397 | ) |  | $ | (17,082,776 | ) |  | $ | 39,777,638 |  
|Stock options exercised                                       |  |              | 186,971    |            |  |          | 9,348   |             |  |               | 992,791    |        |  |       |          |   |  |   | 1,002,139   |  
|Shares issued in connection with employee stock purchase plan |  |              |           |            |  |          |        |             |  |               | (623       | )      |  |       | 24,107   |   |  |   |            |   |  |   | 23,484     |  
|Tax benefit from exercise of stock options                    |  |              |           |            |  |          |        |             |  |               | 614,555    |        |  |       |         |   |  |   |            |   |  |   | 614,555    |  
|Purchase of treasury stock                                    |  |              |           |            |  |          |        |             |  |               |           |        |  |       | (178,565 | ) |  |   |            |   |  |   | (178,565   | )
|Treasury stock issued to employee
stock purchase plan         |  |              |           |            |  |          |        |             |  |               | (4,326     | )      |  |       | 170,348  |   |  |   |            |   |  |   | 166,022    |  
|Net Income                                                    |  |              |           |            |  |          |        |             |  |               |           |        |  |       |         |   |  |   | 3,379,203   |   |  |   | 3,379,203  |  
|                                                              |  |              |            |            |  |          |         |             |  |               |            |        |  |       |          |   |  |   |             |   |  |   |            |  
|Balance at March 31, 2002                                     |  |              | 15,686,110 |            |  | $        | 784,305 |             |  | $             | 57,901,251 |        |  | $     | (197,507 | ) |  | $ | (13,703,573 | ) |  | $ | 44,784,476 |  
|                                                              |  |              |            |            |  |          |         |             |  |               |            |        |  |       |          |   |  |   |             |   |  |   |            |  

See Notes to Condensed Consolidated Financial Statements

5



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##### Table of Contents



MICRO GENERAL CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |            |         |            |            |  
|------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------- | -------------------------------------------------------------------- | --------- | ------------------------- | ---------- | ---------- | ------- | ---------- | ---------- | -
|                                                  |                                                                                   |                                            |                                       |                                                                      |           | Three Month Periods Ended
|                                                  |                                                                                   |                                            |                                       |                                                                      |           | March 31,                
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                          
|                                                  |                                                                                   |                                            |                                       |                                                                      |           | 2002                      |            | 2001      
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  |                                                                                   |                                            |                                       |                                                                      |           | (Unaudited)              
|Cash flows from operating activities:             |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Income from continuing operations                                                 |                                            | $                                     | 3,379,203                                                            |           |                           | $          | 3,783,838  |        
|                                                  | Adjustments to reconcile net income to net cash provided by
operating activities: |                                            |                                       |                                                                      |           |                           |            |            |        
|                                                  |                                                                                   | Depreciation and amortization              |                                       |                                                                      | 1,727,352 |                           |            |            | 955,054 |           
|                                                  |                                                                                   | Loss on disposal of property and equipment |                                       |                                                                      |          |                           |            |            | 137,816 |           
|                                                  |                                                                                   | Tax expense against goodwill               |                                       |                                                                      |          |                           |            |            | 789,433 |           
|                                                  |                                                                                   | Changes in assets and liabilities:         |                                       |                                                                      |           |                           |            |            |         |           
|                                                  |                                                                                   |                                            | Trade accounts receivable             |                                                                      |           | (698,264                  | )          |            |         | (469,187   | )         
|                                                  |                                                                                   |                                            | Affiliates accounts receivable        |                                                                      |           | (2,683,809                | )          |            |         | (3,782,076 | )         
|                                                  |                                                                                   |                                            | Inventories                           |                                                                      |           | (91,968                   | )          |            |         | (45,000    | )         
|                                                  |                                                                                   |                                            | Prepaid
and other current assets      |                                                                      |           | (168,459                  | )          |            |         | 969,954    |           
|                                                  |                                                                                   |                                            | Accounts payable and accrued expenses |                                                                      |           | 982,890                   |            |            |         | (2,664,667 | )         
|                                                  |                                                                                   |                                            | Income and other taxes payable        |                                                                      |           | 2,073,100                 |            |            |         | 9,749      |           
|                                                  |                                                                                   |                                            | Deferred revenue                      |                                                                      |           | (31,746                   | )          |            |         | 1,306,604  |           
|                                                  |                                                                                   |                                            | Other current liabilities             |                                                                      |           | 200,000                   |            |            |         |           |           
|                                                  |                                                                                   |                                            | Other long term liabilities           |                                                                      |           |                          |            |            |         | (38,951    | )         
|                                                  |                                                                                   |                                           
|                                                  |                                                                                   |                                            | Advances
to discontinued operations   |                                                                      |           |                          |            |            |         | 354,510    |           
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  |                                                                                   |                                            |                                       | Net cash provided by operating activities from continuing operations |           |                           | 4,688,299  |            |         |            | 1,307,077  |  
|                                                  |                                                                                   |                                            |                                       | Net
cash provided by (used in) discontinued operations               |           |                           | (612,479   | )          |         |            | 699,612    |  
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                 
|Cash flows from investing activities:             |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Acquisition of RealEC Technologies, Inc                                           |                                            |                                       | (88,850                                                              | )         |                           |            |           |        
|                                                  | Purchase of property and equipment                                                |                                            |                                       | (1,582,778                                                           | )         |                           |            | (1,891,058 | )      
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  |                                                                                   |                                            |                                       | Net
cash used in investing activities                                |           |                           | (1,671,628 | )          |         |            | (1,891,058 | )
|                                                  |                                                                                   |                                            |                                       | Net
cash used in investing activities from discontinued operations   |           |                          |            |            |         | (241,649   | )         
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                 
|Cash flows from financing activities:             |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Repayment of capital lease obligations                                            |                                            |                                       | (25,226                                                              | )         |                           |            | (56,071    | )      
|                                                  | Purchase of treasury stock                                                        |                                            |                                       | (178,565                                                             | )         |                           |            |           |        
|                                                  | Shares issued under employee stock purchase plan from treasury stock              |                                            |                                       | 189,506                                                              |           |                           |            | 87,494     |        
|                                                  | Repayment of notes payable                                                        |                                            |                                       | (1,040,994                                                           | )         |                           |            | (980,828   | )      
|                                                  | Net borrowing (repayments) on line of credit                                      |                                            |                                       |                                                                     |           |                           |            | 1,000,000  |        
|                                                  | Exercise of stock options                                                         |                                            |                                       | 1,002,139                                                            |           |                           |            | 203,949    |        
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Net cash provided by (used in) financing activities                               |                                            |                                       | (53,140                                                              | )         |                           |            | 254,544    |        
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Net cash used in financing activities
from discontinued operations                |                                            |                                       | (93,969                                                              | )         |                           |            | (84,106    | )      
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Net increase in cash and cash equivalents                                         |                                            |                                       | 2,257,083                                                            |           |                           |            | 44,420     |        
|                                                  | Cash and cash equivalents at beginning of period                                  |                                            |                                       | 10,902,386                                                           |           |                           |            | 4,340,409  |        
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Cash and cash equivalents at end of period                                        |                                            | $                                     | 13,159,469                                                           |           |                           | $          | 4,384,829  |        
|                                                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|Supplemental Disclosure of cash flow information: |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|Cash paid during the period for:                  |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Interest                                                                          |                                            | $                                     | 132,369                                                              |           |                           | $          | 372,907    |        
|                                                  | Income taxes                                                                      |                                            |                                       |                                                                     |           |                           | $          | 26,818     |        
|Non-cash investing and financing activities:      |                                                                                   |                                            |                                       |                                                                      |           |                           |            |           
|                                                  | Note financing of hardware/software                                               |                                            |                                       |                                                                     |           |                           | $          | 2,886,985  |        

See Notes to Condensed Consolidated Financial Statements

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MICRO GENERAL CORPORATION & SUBSIDIARIES




Notes to Condensed Consolidated Financial Statements

(1) Basis of Financial Statements

The financial information included in this report includes the accounts of
Micro General Corporation and its subsidiaries (collectively, the
Company or Micro General)
and has been prepared in accordance with accounting
principles generally accepted in the United
States of America and the instructions to Form 10-Q and Article 10 of Regulation S-X.
All adjustments, consisting of normal recurring accruals considered necessary
for a fair presentation, have been included. This report should be read in
conjunction with the Companys Annual Report on Form 10-K for the year ended
December 31, 2001.

Certain reclassifications have been made in the 2001 condensed
consolidated financial statements to conform to classifications used in 2002.

Basic earnings per share are based on the weighted-average number of
shares outstanding and exclude any dilutive effects of options and convertible
securities. Diluted earnings per share gives effect to assumed conversions of
potentially dilutive securities.

(2) Description of Business

The Company provides production and workflow software systems to the title
and real estate industries, including managed application services, application
development and integration, network, data and infrastructure management and
information technology services. The Company is the successor of ACS Systems,
Inc. (ACS) formerly a wholly owned subsidiary of Fidelity National Financial,
Inc. (Fidelity National). In 1998, ACS was merged into the Company, resulting
in Fidelity National owning 81.4% of the common stock of the Company. As of
March 31, 2002, Fidelity National owns 60.9% of the Companys common stock.

The Company generated
92% and 96% of its revenue from continuing operations
during the quarters ended March 31, 2002 and 2001, respectively, from multiple
servicing arrangements with Fidelity National and its affiliates.

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On October 1, 1999, Micro General entered into an Intellectual Property
Transfer Agreement that provided the financing to launch escrow.com as a new
company. Under the agreement, the Company sold the escrow.com name and
trademark, the escrow.com internet URL, a license for the Micro General
proprietary escrow trust accounting software, the Companys computer services
provider business unit and approximately $535,000 of related computer
equipment. Under the terms of the Intellectual Property Transfer Agreement, the
Company received from escrow.com a $4.5 million note with a term of seven years
and an interest rate of three percent. Because of the start-up nature of
escrow.com, the Company has fully reserved the $4.5 million note receivable on
its consolidated balance sheet. The Company also received warrants giving the
Company the right to purchase 15.0 million shares of escrow.com common stock at
a price of $0.40 per share. The warrants, upon their exercise, would give the
Company substantial ownership in escrow.com. In April 2000, escrow.com
completed a private placement in which it raised gross proceeds of $30 million.
As an inducement to invest, the Company assigned to two of the investors
200,000 of its 15.0 million warrants in escrow.com. As a result of this
funding, escrow.com has 10,541,813 shares outstanding as of March 31, 2002.
Although escrow.com has raised additional capital, those funds are not being
used for repayment of the $4.5 million note receivable discussed above.
Therefore, the note will be fully reserved until such time that escrow.com has
sufficient funding in place to reasonably ensure payment of the note.

On April 10,
2002, a merger took place between escrow.com and iLumin
Corporation whereby escrow.coms shareholders received 42.5% of the fully
diluted post merger entity and iLumins shareholders retain the remaining 57.5%
of the fully diluted post merger entity.

Prior to the merger, the Company held 14,800,000 warrants to purchase
escrow.com common stock at $0.40 per share and a note for $4.5 million dollars.
The Company applied the $4.5 million note to the exercise of 11,250,000
warrants into escrow.com common stock. The Company forfeited its remaining
3,550,000 warrants. Escrow.com was recapitalized to convert all capital stock
into a single class of common stock immediately prior to the closing of the
transaction. As a result of the recapitalization and merger, the Company holds
35,468,642 shares of iLumin common stock. This represents a 12.29% ownership
interest in iLumin on a fully diluted basis and a 12.55% ownership interest in
iLumin on a shares outstanding basis. The fully diluted ownership does not
consider options, which are authorized for up to 10% of the fully diluted
capital stock. John Snedegar has resigned as Chairman and CEO of escrow.com.
Current management contracts with the Company have been cancelled. The Company
was granted two Ilumin board seat designations, which have been filled, by
Patrick F. Stone and William P. Foley, II.

On May 2, 2002, the Company announced that its Board of Directors has voted to
recommend to its stockholders the proposal made to Micro Generals shareholders
by Fidelity National Information Solutions (FNIS) to merge the two companies.
Pursuant to the proposal, FNIS plans to offer 0.696 shares in exchange for
each share of Micro General common stock for an offer price equivalent to
$16.65 per share, based on the closing prices of both companies
stocks on April 29, 2002,
the date of FNISs announcement. The consummation of this proposal would be
subject to approval of both Micro General and FNISs stockholders, SEC regulations and other
conditions customary for a transaction of this nature.

(3) Segment Information

The Companys Consolidated Financial Statements as of and for the quarter
ending March 31, 2002 include three reportable segments. For the quarter ended
March 31, 2001, the Company had only one segment after the reclassification of
the discontinued operations.

As of March 31, 2002:

|                                                             |  |               |            |         |  |        |            |       |  |   |            |   |  |   |            | 
|------------------------------------------------------------ |  | ------------- | ---------- | ------- |  | ------ | ---------- | ----- |  | - | ---------- | - |  | - | ---------- | 
|                                                             |  | Micro General |            | SoftPro |  | RealEC |            | Total
|                                                             |  |               |            |         |  |        |            |      
|Total revenues                                               |  | $             | 30,917,821 |         |  | $      | 2,214,933  |       |  | $ | 1,167,474  |   |  | $ | 34,300,228 | 
|Related party revenues                                       |  |               | 30,421,373 |         |  |        | 74,728     |       |  |   | 966,274    |   |  |   | 31,462,375 | 
|Operating income (loss)                                      |  |               | 5,574,901  |         |  |        | 589,114    |       |  |   | (578,956   | ) |  |   | 5,585,059  | 
|Interest (income) expense net                                |  |               | 125,309    |         |  |        | (3,559     | )     |  |   | 12,982     |   |  |   | 134,732    | 
|Income
(loss) from continuing operations before income taxes |  |               | 5,449,592  |         |  |        | 592,673    |       |  |   | (591,938   | ) |  |   | 5,450,327  | 
|Depreciation and amortization                                |  |               | 1,438,745  |         |  |        | 119,110    |       |  |   | 169,497    |   |  |   | 1,727,352  | 
|Total assets                                                 |  |               | 60,883,688 |         |  |        | 10,817,577 |       |  |   | 10,444,242 |   |  |   | 82,145,507 | 

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(4) Calculation of earnings per share

|                          |                                           |  |                           |            |      |  |   |            | 
|------------------------- | ----------------------------------------- |  | ------------------------- | ---------- | ---- |  | - | ---------- | 
|                          |                                           |  | Three-Month Periods Ended
|                          |                                           |  | March 31,                
|                          |                                           |  |                          
|                          |                                           |  | 2002                      |            | 2001
|                          |                                           |  |                           |            |     
|Basic earnings per share: |                                           |  |                           |            |      |  |   |           
|Numerator                 |                                           |  |                           |            |      |  |   |           
|                          | Net income                                |  | $                         | 3,379,203  |      |  | $ | 2,807,842  | 
|                          |                                           |  |                           |            |      |  |   |           
|Denominator               |                                           |  |                           |            |      |  |   |           
|                          | Weighted average shares outstanding       |  |                           | 15,640,485 |      |  |   | 13,277,353 | 
|                          | 10% stock dividend                        |  |                           |           |      |  |   | 1,327,735  | 
|                          |                                           |  |                           |            |      |  |   |           
|                          | Basic weighted average shares outstanding |  |                           | 15,640,485 |      |  |   | 14,605,088 | 
|                          |                                           |  |                           |            |      |  |   |           
|                          | Basic earnings per share:                 |  | $                         | 0.22       |      |  | $ | 0.19       | 
|                          |                                           |  |                           |            |      |  |   |           

|                                            |                                           |   |                           |            |      |   |            |            | 
|------------------------------------------- | ----------------------------------------- | - | ------------------------- | ---------- | ---- | - | ---------- | ---------- | 
|                                            |                                           |   | Three-Month Periods Ended
|                                            |                                           |   | March 31,                
|                                            |                                           |   |                          
|                                            |                                           |   | 2002                      |            | 2001
|                                            |                                           |   |                           |            |     
|Diluted earnings per share:                 |                                           |   |                           |            |      |   |            |           
|Numerator                                   |                                           |   |                           |            |      |   |            |           
|                                            | Net income                                |   | $                         | 3,379,203  |      |   | $          | 2,807,842  | 
|                                            |                                           |   |                           |            |      |   |            |           
|Denominator                                 |                                           |   |                           |            |      |   |            |           
|                                            | Basic weighted average shares outstanding |   |                           | 15,640,485 |      |   |            | 13,277,353 | 
|Incremental common shares attributable to:  |                                           |   |                           |            |      |   |            |           
|                                            | Outstanding warrants                      |   |                           | 408,362    |      |   |            | 300,849    | 
|                                            | Outstanding options                       |   |                           | 1,814,466  |      |   |            | 1,189,154  | 
|                                            | 10% stock dividend                        |   |                           |           |      |   |            | 1,327,735  | 
|                                            |                                           |   |                           |            |      |   |            |           
|Diluted weighted average shares outstanding |                                           |   | 17,863,313                |            |      |   | 16,095,091 |           
|                                            |                                           |   |                           |            |      |   |            |           
|Diluted earnings per share:                 |                                           | $ | 0.19                      |            |      | $ | 0.17       |           
|                                            |                                           |   |                           |            |      |   |            |           

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

Factors That May Affect Operating Results

The statements contained in this report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Companys expectations, hopes,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. It is important to note that the Companys actual
results could differ materially from those in such forward-looking statements.
The reader should consult the risk factors listed from time to time in the
Companys reports on Forms 10-Q, 10-K and filings under the Securities Act of
1933, as amended.

Results of Operations

Revenues.Revenues increased $7.9 million, or 30%, to $34.3 million in
the quarter ended March 31, 2002 from $26.4 million in the
quarter ended March
31, 2001. $1.8 million of this increase is attributable to expanded revenue in
management and support services for the Fidelity National business and Data
Center in Chicago, and increased revenues for the deployment and development
efforts related to NGS and related projects. Also contributing to
this increase were $2.2 million in revenue from SoftPro and $1.2 million in
revenue from RealEC Technologies, both acquisitions in the second half of 2001.
In addition, we received in the first quarter of 2002 $2.7 million in
management and support revenues from business with FNIS, a subsidiary of Fidelity National Financial.

Gross Profit.Gross profit increased $4.2 million, or 41%, to $14.5
million in the current quarter when compared to gross profit of $10.3 million
in the quarter ending March 31, 2001. Gross profit margin improved to 42% from
39% in the year earlier quarter. Contributing $2.3 million of gross profit
was SoftPro ($1.7 million) and RealEC Technologies ($.6 million). The
remaining $1.9 million of gross profit is primarily attributable to the
Companys movement away from cost-plus billing arrangements to
fixed and monthly
contract billing. Indirect selling, general and administrative costs
previously included in cost of
sales under cost plus billing arrangements are now in general and administrative expenses in 2002.

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Expenses.Selling, general and administrative expenses increased $4.2
million for the quarter, up from $4.8 million in 2001 to $9.0 million in 2002.
Contributing to this increase was $1.1 million of expenses from SoftPro and
$1.2 million of selling, general and administrative expenses from RealEC
Technologies. The remaining increase is associated with administrative costs
related to growth in the number of our employees to support our increased
revenues and the allocation of costs to general and administrative that were
tied to cost-plus billings in 2001. Total employee headcount at March 31, 2002
was 722, up from 436 at March 31, 2001.

Starting in 2002, the company no longer amortizes goodwill, following the
guidelines of the Statement of Financial Accounting Standards No. 142.
Therefore, amortization of goodwill was zero for the first quarter 2002 when
compared to $316,901 of goodwill amortization expense in the first quarter of
2001.

Interest income, net, is related to the use of our working capital, which
is in the form of available cash and lines of credit. The decrease in interest
expense to $0.1 million in the first quarter of 2002 from $0.2 million in 2001
can be attributed to lower interest rates in 2002, lower borrowing requirements
in 2002 and increased interest income due to the larger cash balances that we
had in 2001.

Income Taxes.Income tax expense is recorded based on the amounts that we
estimate will be due to federal and state taxation authorities based on our
taxation structure. In 2001, we recorded income taxes at a rate of 25.5%, which
was estimated based on the utilization of net operating loss carryforwards.
Starting in 2002, the Company, with very little remaining operating loss
carryforwards, is recording taxes at a rate of 38.0%.

CRITICAL ACCOUNTING POLICIES AND
ESTIMATES

The discussion and
analysis of our financial condition and results of Operations are
based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect our reported
assets, liabilities, revenues and expenses. On an on-going basis, we
evaluate our estimates, including those related to revenue
recognition, accounts receivable and intangible assets.

We base our estimates
on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. This forms the
basis of judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions
or conditions. We believe the following critical accounting policies
and the related Judgments and estimates affect the preparation of our
consolidated financial statements.

Accounts
Receivable

The carrying amounts
reported in the consolidated balance sheets for accounts receivable
approximate their fair value.

Capitalized
Software Development Costs

For the first
quarter, 2002, there were no additional capitalized software
development costs. The balance from December 31, 2001 for
capitalized software development costs consists of purchase price
allocated to purchased software of $2,471,918 related to the SoftPro
and RealEC acquisitions. Our capitalized software development costs
policy is to capitalize software development costs incurred after the
establishment of technological feasibility, which were capitalized
and later amortized using the greater of (1) the straight-line
method or (2) the ratio of current revenues to total estimated
revenues for that product. This policy results in our amortizing its
capitalized software development costs over an estimated economic
life of three to seven years. During the first quarter of 2002, we
amortized software development costs of $123,595 compared to $0.00
for the first quarter of 2001. We periodically assesses the
recoverability of the cost of its capitalized software development
costs based on an analysis of the undiscounted cash flows generated
by the underlying assets.

Goodwill

Goodwill is the
excess of the purchase price paid over the fair value of the net
assets of the acquired company at the date of acquisition. Goodwill
acquired prior to June 2001 was assessed for recoverability based on an analysis of the undiscounted cash flows
generated by the underlying assets through December 31, 2001. As
of 2002, the recoverability analysis is based on fair value as
required by SFAS 142. The SoftPro and RealEC
acquisitions have been accounted for under SFAS 141 and 142. In
the opinion of management, no impairment of cost in excess of net
assets acquired has occurred at March 31, 2002.

We have completed a
transitional goodwill impairment test and no goodwill impairment has
been recognized as a result of the implementation of SFAS 142.

Other
Intangible Assets

Other intangible
assets consist of the allocated value of customer lists purchased in
the SoftPro acquisition. We are amortizing the other intangible
assets over an estimated economic life of five years. We recorded
amortization expense in the amount of $46,599 during the first
quarter, 2002 compared to $0.0 in the first quarter, 2001.

Revenue
Recognition

Our revenues arise
from providing: management, support and consulting services and
software, maintenance and other services and products. Management
services are provided primarily for the Simon and Team systems.
Support consists of email, web hosting and other IT services.
Consulting revenues are derived primarily from services provided for
the NGS and other Fidelity and affiliate company projects.
Transaction fees are included in management, support and consulting
revenues.

Software revenues
consist of sales of packaged software products. Hardware and software
maintenance revenues are primarily annual contracts for the support
of the Simon, SoftPro and other systems. Hardware sales are related
to purchases of the Simon system and other ancillary hardware.

Revenues from
providing management support and consulting services are recognized
as services are performed.

Revenues from
software sales are recognized upon installation, provided that no
significant post-contract support obligations remain outstanding and
collection of the resulting receivable is deemed probable. Our sales
do not provide a specific right of return. At the time of sale, we
typically provide 90-270 day initial maintenance and support to the
customer. Costs relating to this initial support period, which
include primarily telephone support, are accrued for at the time of
sale. After the initial support period, customers may choose to
purchase ongoing maintenance contracts that include telephone, e-mail
and other methods of support and the right to receive upgrades.
Revenues from these maintenance contracts are deferred and recognized
ratably over the life of the contract, usually twelve months.

Revenues from
transaction fees are recognized as our electronic networks are
utilized by customers to access various websites and are recorded on
a per use basis. Revenues from these transactions are not significant
in fiscal years 2001, 2000 and 1999.

Revenues from the
sale of hardware and other products are recognized when delivery has
occurred, the fee is fixed and determinable and the collection of any
receivable is probable. Revenues from hardware and maintenance
contracts are deferred and recognized ratably over the life of the
contract.

Liquidity and Capital Resources

Our current cash requirements include capital expenditures, personnel and
other operating expenses, debt service and capital for acquisitions and
expansion. Internally generated funds fluctuate in a pattern generally
consistent with revenues. Our internal growth has historically been financed
approximately equally from cash flows from operations and lines of credit and
debt, primarily from Fidelity National. We base our decision on obtaining
financing through lines of credit and debt depending on available terms,
including interest rates.

The Company has available a $10 million revolving line of credit, $5
million of which is guaranteed by Fidelity National. The Company had available
$8.5 million for borrowings at March 31, 2002. The line of credit has an
interest rate calculated based on either Comericas prime rate or 1.4
percentage points over LIBOR. The line of credit expires on July 1, 2002.

At March 31, 2002, we had $13.2 million in cash and cash equivalents,
which is a $2.3 million increase from $10.9 million at December 31, 2001.
Working capital increased $3.9 million to $18.7 million at March 31, 2002, from
$14.8 million at December 31, 2001. These comparisons exclude the net assets
and liabilities of the discontinued operations for all periods. We rely on
positive cash flow from operations and on existing lines of credit to fund our
cash requirements. Should our operations not continue to generate positive cash
flow or we do not continue to have access to our lines of credit, we would need
to find alternative sources of cash in order to fund our operations. While
Fidelity National, our primary customer, is not obligated to use our services
we expect that they will continue to do so. As a result of our current revenue
base, improved profitability, increased margins, current cash balance and the
anticipated availability of funds in the form of existing lines of credit, we
believe all cash requirements will be met for at least the next twelve months.

In the first quarter of 2002, we generated $4.7 million in cash from
operating activities. This came primarily from operating income before
depreciation and amortization of $5.1 million. We used $1.7 million of cash in
investing activities, primarily for the purchase of $1.6 million of property
and equipment. In financing activities, the pay-down
of $1.0 million of in principal payments on the notes was offset by $1.0
million in stock issuances related to the exercise of stock options.

We have experienced positive cash flow from operations in the quarters
ended March 31, 2002 and March 31, 2001. Prior to 2000, we had historically
suffered losses and negative cash flows from operations, and had relied on
Fidelity National as the primary source of capital. Fidelity National remains
our largest customer and indirectly funds our operations through the profits
derived from the revenues related to the products and services provided to
Fidelity National. Fidelity National had also provided funds through financing
arrangements and is a guarantor of certain of our lending arrangements.

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The Company must comply with certain affirmative and negative covenants
related to its outstanding debt and notes payable. The Company was in
compliance with these covenants at March 31, 2002.

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Item 3.Quantitative and Qualitative Disclosure About Market Risk

The Companys consolidated balance sheets include liabilities whose fair
values are subject to market risks. The following sections address the
significant market risks associated with the Companys financial activities as
of March 31, 2002.

Market Risk Exposures

The following discussion about our market risk disclosures contains
forward-looking statements. Forward-looking statements are subject to risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements. We are exposed to market risk related to
changes in interest rates. We do not have derivative financial instruments for
hedging, speculative or trading purposes.

Interest Rate Risk

The Companys borrowings are subject to interest rate risk. Increases and
decreases in prevailing interest rates generally translate into decreases and
increases in fair values of those instruments. Additionally, fair values of
interest rate sensitive instruments may be affected by the creditworthiness of
the issuer, prepayment options, relative values of alternative investments, the
liquidity of the instrument and other general market conditions.

Caution should be used in evaluating the Companys overall market risk
from the information below. Actual results could differ materially because the
information was developed using estimates and assumptions as described below.

The fair value of the Companys notes payable approximate their carrying
value at March 31, 2002 as the interest rates paid approximate the market value
of borrowings of a similar nature.

The hypothetical effects of changes in market rates or prices on the fair
values of financial instruments, which relate to the Companys line of credit,
would be an increase (decrease) of the fair value approximately $15,000, if
interest rates increased (decreased) 100 basis points.







PART II: OTHER INFORMATION

Item 4.Submission of Matters to Vote of Security Holders

None




Item 6.Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits:
| | --- |  | ---------

None



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------

On January 16, 2002, the Company filed a Form
8-K regarding the discontinuation of LD Exchange.

On January 24, 2002, the Company filed a Form
8-K containing unaudited pro forma condensed consolidated financial
information of the Company giving effect to the disposition of
LDExchange.

On February 26, 2002, the Company filed a Form
8-K/A to amend the Form 8-K filed on December 19, 2001 regarding
the Company's purchase of all of the common stock of RealEC
Technologies and including financial statements of RealEC
Technologies.

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