<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A

(Mark One)

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

                 For quarterly period ended: SEPTEMBER 30, 1998

                                       OR

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

              For the transition period from _________to_________.

                         Commission file number: 0-8358

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


             DELAWARE                                           95-2621545
             --------                                           ----------
  (State or other jurisdiction of                            (I.R.S. Employer
  Incorporation or organization)                          Identification Number)

2510 N. Redhill Avenue, Suite 230, Santa Ana, California                92705
--------------------------------------------------------                -----
        (Address of principal executive offices)                      (Zip Code)


                                 (949) 622-4444
                                 --------------
               Registrant's telephone number, including area code

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 periods 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 issuers classes of
Common Stock, as of the latest practicable date.

$.05 par value Common Stock 6,549,666 shares as of November 9, 1998.

Exhibit Index appears on page 11 of 11 sequentially numbered pages.

<PAGE>   2

                                  FORM 10-Q/A

                                QUARTERLY REPORT
                        QUARTER ENDED SEPTEMBER 30, 1998

                               TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

<TABLE>
<S>              <C>                                                     <C>
Item   1.        Condensed Consolidated Financial Statements.

       A.        Condensed Consolidated Balance Sheets as of September
                 30, 1998 and December 31, 1997.                          3

       B.        Condensed Consolidated Statements of Operations for
                 the three months ended September 30, 1998 and
                 September 30, 1997.                                      4

       C.        Condensed Consolidated Statements of Operations for
                 the nine months ended September 30, 1998 and
                 September 30, 1997.                                      5

       D.        Condensed Consolidated Statements of Cash Flows for
                 the nine months ended September 30, 1998 and
                 September 30, 1997.                                      6

       E.        Notes to Condensed Consolidated Financial Statements.    7

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


PART II.         OTHER INFORMATION

Items  1-3 & 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       11

Item   6.        Exhibits and Reports on Form 8-K.                       11
</TABLE>


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                          Date: March 13, 2000
   -----------------------------------
     Dale W. Christensen
     Chief Financial Officer
     (Principal Financial and Accounting Officer)



                                       2
<PAGE>   3

                            MICRO GENERAL CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,      DECEMBER 31,
                                                                         1998               1997
                                                                     -------------      ------------
                                                                      (Restated)        (Restated)
<S>                                                                  <C>                <C>
                                     ASSETS

Current assets:
     Cash                                                            $    896,762       $    830,784
     Accounts and notes receivable, less allowance for
       doubtful receivables and sales returns of $219,554
       at 9/30/98 and $321,844 at 12/31/97                                812,376            183,340
     Trade accounts receivable due from affiliates                             --          4,234,765
     Income taxes receivable                                               77,161                 --
     Inventories                                                        1,964,356            505,949
     Prepaid expenses and other assets                                    424,242            119,432
                                                                     ------------       ------------

                       Total current assets                             4,174,897          5,874,270
                                                                     ------------       ------------

Equipment and improvements, net                                         2,830,470            704,504
Other assets, net                                                                                 --
Notes receivable                                                               --             31,776
Capitalized software development costs, less accumulated
   amortization of $2,612,105 at 9/30/98 and $2,065,596
   at 12/31/97                                                          1,687,889          2,170,072
Intangibles, less accumulated amortization of $657,817
  at 9/30/98 and $350,546 at 12/31/97                                   6,886,653          1,083,507
                                                                     ------------       ------------

                                                                     $ 15,579,909       $  9,864,129
                                                                     ============       ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses                           $  1,651,747       $  1,243,975
     Deferred tax liability                                               524,097            361,726
     Deferred revenue                                                      12,303                 --
     Current portion of amounts and notes payable to affiliates         4,251,242            695,620
                                                                     ------------       ------------

          Total current liabilities                                     6,439,389          2,301,321

Amounts and notes payable to affiliates                                 7,009,211          5,431,417
                                                                     ------------       ------------

           Total Liabilities                                           13,448,600          7,732,738

Shareholders' equity:
     Preferred stock, $.05 par value; 1,000,000 shares
       authorized no shares issued and outstanding at
       9/30/98 and 12/31/97                                                    --                 --

     Common stock, $.05 par value; 10,000,000 shares
       authorized 6,546,666 shares issued and outstanding
       as of 9/30/98                                                      327,333            327,333
     Additional paid-in capital                                         4,407,608          3,107,608
     Accumulated deficit                                               (2,603,632)        (1,303,550)
                                                                     ------------       ------------
          Total stockholders' equity                                    2,131,309          2,131,391
                                                                     ------------       ------------
                                                                     $ 15,579,909       $  9,864,129
                                                                     ============       ============
</TABLE>

     The December 31, 1997 numbers were restated in the 1998 Form 10-K for the
     first time.


     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4

                            MICRO GENERAL CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTH PERIODS ENDED
                                                                        SEPTEMBER 30
                                                               -----------------------------
                                                                  1998               1997
                                                               -----------       -----------
                                                               (Restated)       (Restated)
<S>                                                            <C>               <C>
Revenues:
  Software sales and maintenance                               $   969,143       $   611,071
  Hardware                                                       2,958,470         2,193,458
  Service and license                                            1,989,946           806,987
  Telecommunication services                                       841,347           466,181
                                                               -----------       -----------

       Total revenues                                            6,758,906         4,077,697
                                                               -----------       -----------

Cost of sales:
  Software sales and maintenance                                   893,334           444,784
  Hardware                                                       2,212,416         1,595,292
  Service and license                                            1,009,006           587,115
  Telecommunication services                                       201,855           338,035
                                                               -----------       -----------

       Total cost of sales                                       4,316,611         2,965,226
                                                               -----------       -----------

       Gross profit                                              2,442,295         1,112,471
                                                               -----------       -----------

Operating expenses:
  Selling, general and administrative                            2,976,395           748,188
  Amortization of goodwill and software development costs          263,385           215,310
                                                               -----------       -----------

       Total operating expenses                                  3,239,780           963,498
                                                               -----------       -----------

       Operating income (loss)                                    (797,485)          148,973

Interest income (expense), net                                    (264,589)            3,498
                                                               -----------       -----------

       Earnings (loss) before income taxes                      (1,062,074)          152,471

Income taxes                                                            --            50,731
                                                               -----------       -----------
       Net earnings (loss)                                     $(1,062,074)      $   101,740
                                                               ===========       ===========


  Basic and diluted earnings (loss) per share                  $      (.16)      $       .02
                                                               ===========       ===========
  Number of shares used in per share
     computations - basic and diluted                            6,543,666         4,597,000
                                                               ===========       ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>   5

                            MICRO GENERAL CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  NINE MONTH PERIODS ENDED
                                                                        SEPTEMBER 30,
                                                               -------------------------------
                                                                   1998               1997
                                                               ------------       ------------
                                                                (Restated)         (Restated)
<S>                                                            <C>                <C>
Revenues:
  Software sales and maintenance                               $  2,905,310       $  1,785,018
  Hardware                                                        8,873,084          6,007,903
  Service and license                                             4,024,280          1,700,848
  Telecommunication services                                      1,700,353            466,181
                                                               ------------       ------------

       Total revenues                                            17,503,027          9,959,950
                                                               ------------       ------------

Cost of sales:
  Software sales and maintenance                                  2,416,561          1,340,782
  Hardware                                                        8,035,569          4,516,711
  Service and license                                             2,065,010          1,280,858
  Telecommunication services                                        566,572            352,049
                                                               ------------       ------------

       Total cost of sales                                       13,083,712          7,490,400
                                                               ------------       ------------

       Gross profit                                               4,419,315          2,469,550
                                                               ------------       ------------

Operating expenses:
  Selling, general and administrative                             4,825,067          1,907,840
  Amortization of goodwill and software development costs           626,604            578,323
                                                               ------------       ------------

       Total operating expenses                                   5,451,671          2,486,163
                                                               ------------       ------------

       Operating loss                                            (1,032,356)           (16,613)

Interest income (expense), net                                     (304,321)             8,902
                                                               ------------       ------------

       Loss before income taxes                                  (1,336,677)            (7,711)

Income tax (benefit)                                                (36,595)           (26,113)
                                                               ------------       ------------
       Net earnings (loss)                                     $ (1,300,082)      $     18,402
                                                               ============       ============


Earnings (loss)  per share
  Basic                                                        $       (.23)      $         --
                                                               ============       ============
  Diluted                                                      $       (.23)      $         --
                                                               ============       ============
Number of shares used in per share computations:
  Basic                                                           5,589,687          4,597,000
                                                               ============       ============
  Diluted                                                         5,589,687          4,597,000
                                                               ============       ============
</TABLE>

      See accompanying notes to condensed consolidated financial statements



                                       5
<PAGE>   6

                           MICRO GENERAL CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                               NINE MONTH PERIODS
                                                                                     ENDED
                                                                                  SEPTEMBER 30,
                                                                         -----------------------------
                                                                             1998              1997
                                                                         -----------       -----------
                                                                         (Restated)        (Restated)
<S>                                                                      <C>               <C>
Cash flows from operating activities:
   Net income (loss)                                                     $(1,300,082)      $    18,402
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Depreciation and amortization                                         1,114,107           578,323

   Change in assets and liabilities:
     Trade accounts receivable                                              (497,178)         (121,840)
     Inventories                                                          (1,088,407)         (250,341)
     Prepaid expenses and other assets                                      (304,810)          (40,059)
     Accounts payable and accrued expenses                                  (196,908)         (415,094)
     Income and other taxes payable                                           92,302                --
     Deferred revenue                                                         (7,283)               --
     Amounts due from affiliates                                                  --          (373,738)
                                                                         -----------       -----------
        Total adjustments                                                   (888,177)         (622,749)
                                                                         -----------       -----------

        Net cash provided by (used in) operating activities                2,188,259          (604,347)
                                                                         -----------       -----------

Cash flows used in investing activities:
     Additions to property and equipment                                  (2,386,292)           (3,179)
     Decrease (increase) in notes receivable                                  31,776           (35,312)
     Capitalization of software development costs                            (64,327)         (542,994)
     Merger of Micro General and ACS                                         403,175                --
                                                                         -----------       -----------
        Net cash used in investing activities                             (2,015,668)         (581,485)
                                                                         -----------       -----------

Cash flows from financing activities:
     Net increase in borrowing from affiliates                             4,269,905         1,741,369
                                                                         -----------       -----------
        Net cash provided by financing activities                          4,269,905         1,741,369
                                                                         -----------       -----------

Net increase in cash                                                          65,978           555,537

Cash - beginning of period                                                   830,784                --
                                                                         -----------       -----------
Cash - end of period                                                     $   896,762       $   555,537
                                                                         ===========       ===========


Supplemental disclosures of cash flow information:
  Cash paid during the period for:
        Interest                                                         $    47,500       $        --
                                                                         ===========       ===========
        Income taxes                                                     $        --       $        --
                                                                         ===========       ===========
Non-cash transactions:
  Merger of Mirco General Corporation and ACS                            $ 1,300,000       $        --
                                                                         ===========       ===========
</TABLE>

      See accompanying notes to condensed consolidated financial statements



                                       6
<PAGE>   7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF FINANCIAL STATEMENTS

   The financial information included in this report includes the accounts of
Micro General Corporation and its subsidiaries (collectively, the "Company") and
has been prepared in accordance with generally accepted accounting principles
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,
1997 and the Company's Current Report on Form 8-K dated July 27, 1998.

   The accompanying financial statements have been restated from those included
in the Company's original filing on Form 10-Q for the quarterly period ended
September 30, 1998. The restatement was the result of a correction of the
accounting method used to account for the merger of the Company and ACS. In the
original filing, the Company incorrectly accounted for the merger as an
acquisition of ACS, rather than a reverse merger (see note 2). Below are
selected summary restated results compared to amounts originally reported.

<TABLE>
<CAPTION>
                           3 months
                        as originally      3 months
                           reported       as restated
                        -------------     -----------
<S>                     <C>               <C>
Revenue                  $ 6,760,513      $ 6,758,906
Net Loss                    (966,107)      (1,062,074)
Loss per Share                 (0.15)           (0.16)
Total Assets              17,855,423       15,502,748
Shareholders' Equity       4,483,984        2,131,309
</TABLE>

<TABLE>
<CAPTION>
                           9 months
                        as originally      9 months
                           reported       as restated
                        -------------     -----------
<S>                     <C>               <C>
Revenue                  $12,167,006      $17,503,027
Net Loss                  (1,356,483)      (1,300,082)
Loss per Share                 (0.32)           (0.23)
Total Assets              17,855,423       15,502,748
Shareholders' Equity       4,483,984        2,131,309
</TABLE>

   DESCRIPTION OF BUSINESS

   Historically, the operations of the Company consisted of the design,
manufacture and sale of computerized parcel shipping systems, postal scales and
piece-count scales. These operations are currently performed through the
Company's postage meter and scale division.

NOTE 2. ACQUISITIONS

   On May 14, 1998, the Company and Fidelity National Financial, Inc. ("FNFI")
completed the merger of Micro General Corporation with ACS Systems, Inc.
("ACS"), a wholly-owned subsidiary of FNFI. As a result of the merger all of the
outstanding shares of ACS were exchanged for 4.6 million shares of Micro General
Corporation common stock. The transaction was valued at $1.3 million. Following
the merger of Micro General Corporation and ACS, FNFI owned approximately 81.4%
of the common stock of the Company on an undiluted basis. The transaction has
been accounted for as a reverse merger, i.e., Micro General Corporation has been
acquired by FNFI as a majority-owned subsidiary through a merger with ACS, with
Micro General Corporation as the legal surviving entity and ACS as the surviving
entity for accounting purposes. Therefore, the condensed consolidated financial
statements as of and for the quarter and nine-months ended September 30, 1998
have been restated to reflect the operations of ACS prior to the merger.


                                       7
<PAGE>   8
   ACS, a wholly-owned subsidiary of the Company, was founded in 1985 as an
escrow software development company. ACS was acquired by FNFI in April 1994 and
subsequently merged into the Company on May 14, 1998 for 4.6 million shares of
the Company's common stock. Approximately 86% of the revenue generated by ACS is
derived from multiple servicing arrangements with FNFI and its subsidiaries
whereby ACS provides comprehensive electronic data processing systems support,
including selling computer hardware and software products and developing
integrated title and escrow computer applications for FNFI's direct title
operations and agency network.

   In addition to these services, ACS provides products and services to FNFI and
unaffiliated customers, including telecommunications hardware and long distance
reselling, technical services, consulting services, Internet access and services
and computer hardware and systems software.

   Pro forma results assuming the merger between ACS and Micro General
Corporation had occurred on January 1, 1998, and January 1, 1997, are as
follows:

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                       -------------------------------
                                                       SEPTEMBER 30,     SEPTEMBER 30,
                                                           1998              1997
                                                       -------------     -------------
<S>                                                    <C>               <C>
Revenue                                                $ 18,658,821      $ 11,269,472
                                                       ============      ============
Net loss                                               $ (1,456,983)     $   (398,287)
                                                       ============      ============
Net loss per share - basic and diluted(1)              $       (.22)     $       (.09)
                                                       ============      ============
Weighted average shares outstanding - basic
  and diluted(1)                                          6,549,666         4,597,000
                                                       ============      ============
</TABLE>
----------
(1) Earnings per share on a diluted basis is anti-dilutive given that the
    Company had a net loss for the period presented; therefore basic and diluted
    shares and earnings per share are equal.

NOTE 3. RELATED PARTY TRANSACTIONS

   On May 14, 1998, in connection with the Company's acquisition of ACS, a $5.0
million line of credit facility was established between the Company and Fidelity
National Title Company, a subsidiary of FNFI. Under the terms of the agreement,
accrued interest shall be payable quarterly with any unpaid balance, including
principle and accrued interest, due and payable on May 14, 2000. Interest
accrues at a rate of 9% per annum.

   As described in Note 1, the primary source of revenue for both ACS and the
Company is fees resulting from sales and services to FNFI and subsidiaries, an
affiliate. Revenues generated from the sales and services to affiliates during
the three and nine-month periods ended September 30, 1998 were $4,711,000 and
$13,050,000, representing 71.6% and 74.6% of total revenue, respectively.

   Included in notes payable and long-term debt at September 30, 1998 is
$450,000 and $1,000,000, respectively, due to Cal West Service Corporation, a
subsidiary of FNFI. Also included in notes payable and long-term debt at
September 30, 1998 is $900,000 and $2,000,000, respectively, due to Dito Caree
L.P. Holding, an affiliate. The notes were in default, but waivers were obtained
through December 31, 1999 on all notes. Of these notes, $2,350,000 is classified
as current liabilities.

NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS

   In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement supercedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains
the requirement to report information about major customers. It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
SFAS 131 requires, among other items, that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
segment assets, information about the revenues derived from the enterprise's
products or services and major customers. SFAS 131 also requires that the
enterprise report descriptive information about the way that the operating
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. Management has not determined whether the adoption of SFAS 131
will have a material impact on the Company's financial reporting.

                                       8
<PAGE>   9
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 1923 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 and other
information disclosed in the Company's reports on Forms 10-Q, 10-K and filings
under the Securities Act of 1933, as amended.

   Results of Operations

   The following discussion and analysis reflects the results of operations for
the Company for the three and nine-month periods ended September 30, 1998 and
1997. As discussed in Note 2, the merger of the Company and ACS has been
accounted for as a reverse acquisition. Therefore, the 1997 financial statements
have been restated to reflect the operations of ACS prior to the merger. Also,
included in the nine-month period ended September 30, 1998 is three months and
47 days of operations of Micro General Corporation. Due to the merger with ACS,
results of operations may differ substantially when comparing 1998 periods with
1997 periods.

   The following table presents information regarding the components of revenues
and expenses for the Company on a historical basis by division:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                               ------------------------------------------------------------------
                                                                                    SEPTEMBER 30,
                                              SEPTEMBER 30, 1998                        1997
                               -----------------------------------------------      -------------
                                 POSTAL
                                DIVISION             ACS              TOTAL              ACS
                               -----------       -----------       -----------      -------------
<S>                            <C>               <C>               <C>              <C>
Revenues                       $   176,000       $ 6,583,000       $ 6,759,000       $ 4,078,000
Cost of sales                      205,000         4,112,000         4,317,000         2,965,000
                               -----------       -----------       -----------       -----------
    Gross profit (loss)        $   (29,000)        2,471,000         2,442,000         1,113,000
Operating expenses                 354,000         2,886,000         3,240,000           963,000
Interest expense (income), net      85,000           179,000           264,000            (3,000)
Income tax expense                      --                --                --            51,000
                               -----------       -----------       -----------       -----------
   Net loss                    $  (468,000)      $  (594,000)      $(1,062,000)      $   102,000
                               ===========       ===========       ===========       ===========
</TABLE>


<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED
                        ----------------------------------------------------------------------
                                                                                 SEPTEMBER 30,
                                        SEPTEMBER 30, 1998                            1997
                        --------------------------------------------------       -------------
                           POSTAL
                          DIVISION              ACS               TOTAL               ACS
                        ------------       ------------       ------------       ------------
<S>                     <C>                <C>                <C>                <C>
Revenues                $    275,000       $ 17,228,000       $ 17,503,000       $  9,960,000
Cost of sales                317,000         12,767,000         13,084,000          7,490,000
                        ------------       ------------       ------------       ------------
    Gross profit             (42,000)         4,461,000          4,419,000          2,470,000
Operating expenses           522,000          4,930,000          5,452,000          2,487,000
Interest expense
  (income), net              127,000            177,000            304,000             (9,000)
Income tax benefit                              (37,000)           (37,000)           (26,000)
                        ------------       ------------       ------------       ------------
    Net loss            $   (691,000)      $   (609,000)      $ (1,300,000)      $     18,000
                        ============       ============       ============       ============
</TABLE>

----------


(1) The ACS division is included in the Company's historical financial
    statements for three months and 47 days during the nine month period ended
    September 30,1998 and excluded entirely from 1997 results.

   The revenue for the quarter ended September 30, 1998 increased 66% to
$6,759,000 from $4,078,000 for the third quarter of 1997. Total revenue for the
nine-months ended September 30, 1998 increased 76% to $17,503,000 from
$9,960,000 for the comparable 1997 period. The ACS contribution for the three
and nine month periods ended September 30, 1998 was $6,583,000 or 97.4% and
$17,228,000 or 98.4% of the total revenue, respectively. ACS sales and services
to FNFI have grown substantially. In addition, the Company began offering
telecommunications services and have grown that business from nothing in 1997 to
$841,000 in the three-months ended September 30, 1998 (12.4% of total revenue),
and to $1,700,000 in the nine-months ended September 30, 1998 (9.7% of total
revenue). In addition sales growth has been across all product lines. In the
three-months ended June 30, 1998, software and maintenance revenue increased
59%, hardware revenue grew 35% and service and license revenue was up 147% as
compared to the same 1997 period for the nine months ended September 1998,
software and maintenance revenue increased 63%, hardware revenue grew 48% and
service and license revenue was up 137% when compared to the similar 1997
period. Postal product sales were consistent in the quarter over quarter
comparison.

   The revenue for the nine-months ended September 30, 1998 excluding ACS
contribution decreased by $131,000, or 9%, which reflects the increase in postal
product sales during the second quarter of 1998 offset by a decrease in service
and rate change revenues. Product sales increased by $94,000, or 19% while
service and rate change revenues decreased by $224,000, or 22%, comparing the
nine month periods of 1998 and 1997. The primary reason for the increase in
product sales is the dealer-based sales of the Shipper Link product and the
Company's Eagle Best Rate Shipper software for Windows and DOS. The decrease in
service and rate change revenue relates to the decline in Company's installed
product base as more scale-based systems are being replaced by free service
provider system and company-based systems.

   Cost of sales for the third quarter of 1998 increased 46% to $4,317,000 from
$2,965,000 in the 1997 third quarter. For the nine months ended September 30,
1998, cost of sales increased to $13,084,000, a 76% increase from $7,490,000 for
the comparable 1997 period. The increase in the 1998 cost of sales as compared
in the 1997 cost of sales is directly related to the growth in the Company's
revenues.



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   Operating expenses for the third quarter of 1998 increased to $3,240,000, an
increase of $2,276,000, or 236%, from $963,000 in the 1997 third quarter. For
the nine month period ended September 30, 1998, operating expenses were
$5,452,000, an increase of $2,966,000, or 119% over operating expenses of
$2,486,000 for the comparable 1997 period. The increase in 1998 operating
expenses as compared to 1997 operating expenses results from the significant
revenue growth in 1998 and the resulting increase in corporate infrastructure.
In addition, the Company began a sales and marketing effort in an attempt to
increase revenue from non-affiliated companies.

   Interest expense, net of interest income, incurred by the Company relates to
notes payable, long-term debt and a note to an affiliate. See Note 3. Interest
expense for the third quarter of 1998 increased to $265,000 from no interest
expense in the 1997 third quarter. For the nine-months ended September 30, 1998,
interest expense increased to $304,000 from no interest expense in the same 1997
period. The increase in interest expense for the three and nine-month periods
ended September 30, 1998 as compared to the same 1997 periods reflects the
increase in debt balances during 1998 which results from increases in borrowing
under the Company's credit facility (See Note 3), and also the inclusion of
Micro General Corporation that began to be reported under the reverse
acquisition accounting treatment as of May 14, 1998.

   Liquidity and Capital Resources

   The Company's cash requirements include debt service, operating expenses,
capital investments and potential acquisitions. The Company believes that all
anticipated cash requirements will be met from internally generated funds,
future lines of credit and through additional credit facilities with affiliates.
Cash used in operating activities exceeded cash provided by operating
activities by $2,188,000 for the nine-months ended September 30, 1998.
Management believes that short-term modifications of existing affiliates credit
facilities and potential future lines of credit will enable the Company to
expand its business relationships with unaffiliated third parties and expects
the Company to generate cash flows sufficient to support its future operations.

   New Accounting Pronouncements

   In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement supercedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains
the requirement to report information about major customers. It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
SFAS 131 requires, among other items, that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
segment assets, information about the revenues derived from the enterprise's
products or services and major customers. SFAS 131 also requires that the
enterprise report descriptive information about the way that the operating
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. Management has not determined whether the adoption of SFAS 131
will have a material impact on the Company's financial reporting.

Year 2000 Issues

   Information technology is an integral part of the Company's business. The
Company also recognizes the critical nature of and the technological challenges
associated with the Year 2000 issue. The Year 2000 issue ("Y2K") results from
computer programs and computer hardware that utilize only two digits to identify
a year in the date field, rather than four digits. If such programs or hardware
are not modified or upgraded information systems could fail, lock up, or in
general fail to perform according to normal expectations. The Company has
implemented a program and committed both personnel and other resources to
determine the extent of potential Y2K issues. Included within the scope of this
program are systems used in servicing customer obligations, information
technology products and services, telecommunications services, the postage meter
and scale division, financial management, human resources, payroll and
infrastructure. In addition to a review of internal systems, the Company has
initiated formal communications with third parties with which it does business
in order to determine whether or not they are Y2K compliant and the extent to
which the Company may be vulnerable to third parties' failure to become Y2K
compliant. The Company is in the process of identifying Y2K compliant issues in
its systems, equipment and processes. The Company is making changes to such
systems, updating or replacing such equipment, and modifying such processes to
make them Y2K compliant.

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   The Company is developing a four phase program to become Y2K compliant. Phase
I is, "Plan Preparation and Identification of the Problem." This is an ongoing
phase that will continue beyond the year 2000 itself. Phase II is, "Plan
Execution and Remediation." Phase III is, "Testing." Phase IV is, "Maintaining
Y2K Compliance." The Company anticipates that its systems processes will be
substantially Y2K compliant by third quarter 1999. The status of the Y2K
compliance program is monitored by senior management of the Company and by the
Audit Committee of the Company's Board of Directors. The costs of the Y2K
related efforts incurred to date have not been material, and the estimate of
remaining costs to be incurred is not considered to be material. Due to the
complexities of estimating the cost of modifying applications to become Y2K
compliant and the difficulties in assessing third parties', including various
local governments upon which the Company relies upon to provide title-related
data, ability to become Y2K compliant, estimates may be subject to change.

   Management of the Company believes that its electronic data processing and
information systems will be Y2K compliant; however, there can be no assurance
that all of the Company's systems will be Y2K complaint, that the costs will be
Y2K compliant will not exceed management's current expectations, or that the
failure of such systems to be Y2K compliant will not have a material adverse
effect on the Company's business. The Company believes that functions currently
performed with the assistance of electronic data processing equipment could be
performed manually or outsourced if certain systems were determined not to be
Y2K compliant on or after January 1, 2000.

   The entire section, "Year 2000 Issues", is hereby designated a "Year 2000
Readiness Disclosure", as defined in the Year 2000 Information and Readiness
Disclosure Act.

PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS

   On August 11, 1998, the Company held its Annual Meeting of Stockholders
pursuant to a Notice and Proxy Statement dated July 22, 1998. At the meeting,
stockholders elected William P. Foley II (4,802,504 for and 750 against),
Patrick F. Stone (4,802,754 for and 500 against) S. Bruce Crair, (4,803,004 for
and 250 against) George Olenik (4,803,004 for and 250 against) Richard Pickup
(4,803,004 for and 250 against) Thomas E. Pistilli (4,802,504 for and 750
against) and Carl A. Strunk (4,802,754 for and 500 against). The shareholders
approved the adoption of a 1998 Stock Option Plan in a vote of 4,802,064 for,
790 against and 400 abstaining. The shareholders ratified the adoption of the
1998 Employee Stock Purchase Plan by a vote of 4,802,064 for, 790 against and
400 abstaining.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   a. Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601
      of Regulation S-K):

      11. Computation of earnings (loss) per share is not provided as the
          calculation can be clearly determined from the material contained in
          Item 1 of Part I.

      27. Financial Data Schedule

   b. Current Reports on Form 8-K:

      Current Report on Form 8-K, dated July 27, 1998, relating to the merger of
      a wholly-owned subsidiary of Micro General Corporation into ACS Systems,
      Inc. on May 14, 1998.



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