<PAGE>   1

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K
(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 (NO FEE REQUIRED)
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
                                       OR
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                           COMMISSION FILE NO. 0-8358
                            MICRO GENERAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                         95-2621545
   (STATE OR OTHER JURISDICTION                            (I.R.S. EMPLOYER
 OF INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

<TABLE>
<S>                                            <C>                <C>
 2510 RED HILL AVENUE, SUITE 200                 92705                   (949) 622-4444
      SANTA ANA, CALIFORNIA                    (ZIP CODE)         (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                               INCLUDING AREA CODE)
</TABLE>

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                                       NAME OF EACH EXCHANGE
     TITLE OF EACH CLASS                                ON WHICH REGISTERED
   COMMON STOCK, $.05 PAR VALUE                       NASDAQ OTC BULLETIN BOARD

        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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ ]

        As of April 13, 1999, 7,596,000 shares of common stock ($.05 par value)
were outstanding, and the aggregate market value of the shares of the common
stock held by non-affiliates of the registrant was $3,396,000.


        LOCATION OF EXHIBIT INDEX: The index to exhibits is contained in Part IV
herein on page number 34.

        The information in Part III hereof is incorporated herein by reference
to the Registrant's Proxy Statement on Schedule 14A for the fiscal year ended
December 31, 1998, to be filed within 120 days after the close of the fiscal
year that is the subject of this Report.

================================================================================


<PAGE>   2

                                TABLE OF CONTENTS

                                    FORM 10-K

<TABLE>
<CAPTION>
                                                                                        PAGE NO.
                                                                                        --------
<S>                                                                                     <C>
PART I
         Item   1.  Business.............................................................   1
         Item   2.  Properties...........................................................   4
         Item   3.  Legal Proceedings....................................................   4
         Item   4.  Submission of Matters to a Vote of Security Holders..................   4

PART II
         Item   5.  Market for Registrant's Common Stock and Related
                        Stockholder Matters..............................................   5
         Item   6.  Selected Financial Data..............................................   6
         Item   7.  Management's Discussion and Analysis of Financial
                        Condition and Results of Operations..............................   7
         Item   7A. Quantitave and Qualitative Disclosure About Market Risk..............  10
         Item   8.  Financial Statements and Supplementary Data..........................  12
         Item   9.  Changes in and Disagreements with Accountants on
                        Accounting and Financial Disclosure..............................  33

PART III
         Item 10.   Directors and Executive Officers of the Registrant...................  33
         Item 11.   Executive Compensation...............................................  33
         Item 12.   Security Ownership of Certain Beneficial Owners and
                        Management.......................................................  33
         Item 13.   Certain Relationships and Related Transactions.......................  33

PART IV
         Item 14.   Exhibits, Financial Statement Schedules and Reports
                        on Form 8-K......................................................  33
</TABLE>



<PAGE>   3

                                     PART I

ITEM 1.  BUSINESS

      Historically, the operations of Micro General Corporation ("Micro General"
or "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.
Following the acquisition of ACS Systems, Inc. ("ACS"), which is described
below, the Company shifted its primary focus to information technology and
telecommunication services.

      On May 14, 1998, the Company and Fidelity National Financial, Inc.
("FNFI") completed the merger of Micro General with 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 common stock. The
transaction was appraised at $1.3 million. Following the merger of Micro General
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 has been acquired by FNFI as a majority-owned subsidiary
through a merger with ACS, with Micro General as the legal surviving entity and
ACS as the surviving entity for accounting purposes. At December 31, 1998, FNFI
owned 70.6% of the outstanding common stock of the Company.

      ACS was founded in 1985 as a software company specializing in products for
the real estate industry, in particular, escrow software. ACS was acquired by
FNFI in April 1994, and was subsequently merged with the Company as described
above. ACS, through its various divisions, is currently a full-service
enterprise solutions provider that offers total voice, data and systems
integration solutions for small and medium sized businesses, primarily in the
real estate sector. ACS offers a full range of information technology services,
including voice and data network design, implementation and management. ACS also
provides services in the areas of application development, real estate industry
applications, electronic commerce ("eCommerce"), Year 2000 remediation and
consulting services and telecommunications. ACS also offers certain of these
products and services to non-affiliated companies. During 1998, 1997, and 1996,
66%, 89% and 86%, respectively, of the revenue generated by ACS was derived from
multiple servicing arrangements with FNFI and its subsidiaries.

      In addition, as a result of the acquisition of LDExchange.com, Inc.
("LDExchange"), which closed on November 17, 1998, the Company has been able to
enter the international telecommunications market, which complements the range
of services offered by ACS. LDExchange is an emerging multinational carrier
focused primarily on the international long distance market. LDExchange offers
reliable, low cost switched voice services on a wholesale basis, primarily to
U.S. based long distance carriers. The LDExchange purchase price was $3.1
million, payable $1.1 million in cash and $2.0 million in Company common stock
(1,000,000 shares).

SERVICES

      The Company offers its customers a portfolio of related services within
the broad categories of systems and technology services, business process
management, electronic business and telecommunications. The Company provides its
clients with a wide range of value-added products and services within each of
the categories, and will continue to respond to market needs and opportunities.

ACS

      -     Systems and Technology Services 
            Encompasses systems development, integration, telephony solutions,
            including PBX, key systems and computer telephony integration, and
            management. Also included are desktop services, Year 2000
            remediation and consulting and enterprise software solutions.

      -     Business Process Management
            The Company may manage an entire business process within a client
            enterprise.



                                       1
<PAGE>   4

      -     Electronic Business
            Services offered include interactive marketing and payment services,
            Internet and online services, electronic commerce, electronic data
            interchange, and the design, development, implementation and
            operation of Internet websites, corporate intranets and extranets.

            As part of the Company's electronic business services, the Company
            has created RealEC, the largest real estate electronic commerce
            network in the nation. RealEC is a nationwide multi-vendor network
            that will provide real estate and lender customers the ability to
            select products and services necessary to close their transactions,
            while at the same time giving them access to over 6,000 issuing
            locations for title insurance across the United States.

            RealEC is a joint venture developed by the Company and Stewart
            Mortgage Information, a subsidiary of Stewart Information Services
            Corporation (NYSE:STC). The RealEC network integrates each company's
            existing systems to provide leading edge software, ultimately
            connecting all parties involved with real estate transactions.
            RealEC will interface with loan origination software systems,
            window-based ordering systems, third party networks, real estate
            office systems and the Internet. RealEC will also offer on-line
            access to documents related to real estate transactions and link
            with back-end title insurance and escrow production systems.

ACS AND LDEXCHANGE

      -     Telecommunications
            The Company offers a full range of telecommunication services,
            including digital subscriber lines, frame relay, domestic and
            international long distance.

ACQUISITIONS AND STRATEGIC ALLIANCES

      The Company has made certain acquisitions and entered into strategic
alliances in an effort to gain a competitive advantage or obtain a new or
expanded presence in targeted markets. The Company believes that the
consolidation and convergence of the computing and software, electronic commerce
and telecommunication industries will continue. Therefore, the Company expects
that its strategy to make acquisitions and/or to enter into strategic alliances
will continue in order for the Company to compete effectively.

REGULATION

      Various aspects of the Company's business are subject to Federal, state
and foreign regulation, noncompliance with which, depending on the nature of the
noncompliance, could result in the suspension or revocation of any license or
registration at issue, civil fines or criminal penalties. The Company has not
experienced material difficulties in complying with the various laws and
regulations affecting its business.

COMPETITION

      The Company experiences intense competition in the information technology
and telecommunications industries from large multi-national corporations, as
well as from niche-oriented or geographically focused providers. Technology,
telecommunications and their application within the business enterprise are in a
rapid and continuing state of change as new technologies, products and services
continue to be developed, introduced and implemented. The Company believes that
its ability to compete effectively will depend upon its ability to develop and
market products and services on a timely and cost effective basis that enable it
to meet the changing needs of its customers. Another key element to the
Company's competitiveness is its ability to finance and acquire the resources
necessary to offer such products and services.

SIGNIFICANCE OF FIDELITY NATIONAL FINANCIAL, INC.

      Approximately 66% of the Company's total revenue in 1998 was attributable
to FNFI and its affiliates. During 1997 and 1996, 89% and 86%, respectively, of
the Company's revenue was derived from multiple servicing arrangements with FNFI
and its subsidiaries. The Company, through ACS, provides substantially all of
the 



                                       2
<PAGE>   5

information technology and telecommunications services for FNFI and its
subsidiaries. The loss of FNFI as a customer of the Company would have a
material adverse effect on the Company. Information technology and
telecommunication services are provided pursuant to various agreements between
the Company and FNFI.

      The various service agreements between the Company and FNFI specify the
terms, conditions and scope of products and services to be provided by the
Company to FNFI. The length of the contracts are generally one to three years,
and are evaluated, modified and renewed on a regular basis. The Company believes
that the negotiated terms of its contracts with Fidelity National Financial,
Inc. are similar to third party rates and conditions; however, the relationship
between the Company and FNFI should not be considered arm's length.

      The Company relies on FNFI as the primary source of capital to fund its
operations in the form of revenues generated by the Company related to products
and services provided to FNFI and as a source of funds via available financing
arrangements.

EMPLOYEES

      As of March 31, 1999, the Company employed approximately 225 persons. The
Company believes that its relations with employees are generally good.

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.

      The Company has developed 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 into 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 July 1999. The status of the Y2K compliance
program is monitored by senior management of the Company and 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' 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 compliant, that the costs to 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 Company has not yet completed a contingency plan in the event that any
systems are not Y2K compliant, but will do so once the Phase III process of its
compliance program is begun. We expect this contingency plan to be complete by
July 1999.



                                       3
<PAGE>   6
      This entire section, "Year 2000 Issues", is hereby designated a "Year 2000
Readiness Disclosure", as defined in the Year 2000 Information and Readiness
Disclosure Act.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

      The Company wishes to caution readers that the forward-looking statements
contained in this Form 10-K under "Item 1. Business," "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-K involve known and unknown risks and uncertainties
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by any forward-looking statements made by or on behalf of
the Company. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is filing the following
cautionary statements identifying important factors that in some cases have
affected, and in the future could cause the Company's actual results to differ
materially from those expressed in any such forward-looking statements.

      The factors that could cause the Company's results to differ materially
include, but are not limited to, general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
adverse publicity; changes in business strategy or development plans; quality of
management; availability, terms, and deployment of capital; the results of
financing efforts; business abilities and judgment of personnel; availability of
qualified personnel; employee benefit costs and changes in, or the failure to
comply with government regulations.

ITEM 2.  PROPERTIES

      The Company's principal offices are located in Santa Ana, California, in
two facilities providing an aggregate of approximately 28,400 square feet of
office space, 22,000 square feet are leased through August 2000, with the
remaining 6,400 square feet leased through October 2007. The Santa Ana property
is sub-leased from Fidelity National Financial, Inc. The remaining office space
consists of approximately 7,100 square feet of office space located in Tustin,
California, is leased through December 2000; approximately 8,600 square feet of
office space located in Tustin, California, is leased through July 2000 and a
5,000 square foot research and development facility, located in Oxford,
Connecticut, is leased through March 2001. The Company also leases certain
smaller spaces and additional space as needed.

      The Company believes that the material terms of its leases are
commercially reasonable terms typically found in each of the respective areas in
which the Company leases space. The Company believes that its facilities are
adequate to support its current needs and that additional facilities will be
available at competitive rates as needed.

ITEM 3.  LEGAL PROCEEDINGS

      The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The Company did not submit any matters to a vote of security holders in
the fourth quarter of 1998.



                                       4
<PAGE>   7

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRINCIPAL MARKET AND PRICES

      On January 14, 1997, the Company elected to have its common stock delisted
from the NASDAQ SmallCap Market. The stock is now listed on the OTC Bulletin
Board. The following table sets forth the range of high and low closing bid
quotations per share of the Company's common stock for the fiscal quarters
indicated.

<TABLE>
<CAPTION>
                                                                       BID PRICE
                                                                     HIGH       LOW
<S>                                                              <C>          <C> 
      Year Ended December 31, 1998
         First Quarter                                           $  2.94      $ 1.63
         Second Quarter                                             6.06        2.50
         Third Quarter                                              5.75        3.50
         Fourth Quarter                                             5.00        2.50

         Year Ended December 31, 1997
         First Quarter                                           $  1.88      $ 1.13
         Second Quarter                                             1.38        1.00
         Third Quarter                                              1.50        1.13
         Fourth Quarter                                             3.00        1.38
</TABLE>

      On April 13, 1999, the last reported sale price of common stock was $4.69
per share. As of April 13, 1999, the Company had approximately 580 stockholders
of record.

DIVIDEND POLICY AND RESTRICTIONS ON DIVIDEND PAYMENTS

      The Company intends to continue its policy of retaining all earnings for
reinvestment in the business operations of the Company. Under Delaware law, the
Company's Board of Directors may declare and pay dividends on its outstanding
shares in cash or property only out of the unreserved and unrestricted earned
surplus. The Company has an accumulated deficiency of $6,150,353, as of December
31, 1998 and accordingly, Delaware law prohibits the Company from paying cash
dividends except to the extent that the Company has net profits in any fiscal
year or the preceding fiscal year. There were no accumulated dividends as of
December 31, 1998.



                                       5
<PAGE>   8

ITEM 6.  SELECTED FINANCIAL DATA

      The historical operating results data, per share data and balance sheet
data set forth below are derived from the historical financial statements of the
Company, certain of which have been restated to reflect the ACS Systems, Inc.
acquisition and the related reverse merger accounting treatment (See note 1 of
notes to consolidated financial statements). The balance sheet data includes the
accounts of ACS, the postage scale and meter division and LDExchange as of
December 31, 1998; and only the accounts of ACS as of December 31, 1997, 1996,
1995 and 1994. Operating results and per share data for the year ended December
31, 1998 include the results of operations for ACS for the year ended December
31, 1998, the results of operations for the postage scale and meter division for
the period May 14, 1998 through December 31, 1998 and the results of operations
for LDExchange for the period November 17, 1998 through December 31, 1998.
Operating results and per share data for the years ended December 31, 1997,
1996, 1995 and 1994, include only the results of operations of ACS for the years
then ended. Consolidated balance sheets at December 31, 1998 and 1997 and
consolidated statements of operations, stockholders' equity and cash flows 
for the years ended December 31, 1998, 1997 and 1996, together with
the related notes and the report of KPMG LLP, independent certified public
accountants, are included elsewhere herein and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                               --------------------------------------------------------------------------------
                                                   1998            1997             1996             1995             1994
                                               ------------     ------------     ------------     ------------     ------------
                                                                 (RESTATED)       (RESTATED)       (RESTATED)       (RESTATED)
<S>                                            <C>              <C>              <C>              <C>              <C>         
OPERATING RESULTS DATA:
  Hardware and software sales and
    maintenance revenues                       $ 16,248,425     $ 10,232,371     $  6,422,557     $  4,302,056     $    994,830
  Telecommunication service                       9,834,555          862,814               --               --               --
    revenues
  Service and license revenues                    7,933,084        2,728,449          449,043          301,043           69,555
                                               ------------     ------------     ------------     ------------     ------------
        Total revenues                           34,016,064       13,823,634        6,871,600        4,603,099        1,064,385
                                               ------------     ------------     ------------     ------------     ------------

  Hardware and software cost
    of sales                                     15,893,689        8,452,283        5,323,851        3,893,813          271,476
  Telecommunication service cost of sales         8,652,054          587,905               --               --               --

  Service and license cost of sales               3,421,741        1,279,557          525,253          272,476           18,851
                                               ------------     ------------     ------------     ------------     ------------
        Total cost of sales                      27,967,484       10,319,745        5,849,104        4,166,289          290,327
                                               ------------     ------------     ------------     ------------     ------------
        Gross profit                              6,048,580        3,503,889        1,022,496          436,810          774,058
OPERATING EXPENSES:
  Selling, general and
     administrative expenses                      9,142,574        2,984,812        1,513,319        1,041,572          704,508
  Amortization of cost in excess of
    net assets acquired and capitalized
    software development costs                    1,083,621          808,274          638,462               --               -- 
                                               ------------     ------------     ------------     ------------     ------------
        Total operating expenses                 10,226,195        3,793,086        2,151,781        1,041,572          704,508
                                               ------------     ------------     ------------     ------------     ------------
        Operating earnings (loss)                (4,177,615)        (289,197)      (1,129,285)        (604,762)          69,550
  Interest income (expense)                        (666,788)          15,130            6,675               --              (98)
                                               ------------     ------------     ------------     ------------     ------------
        Earnings (loss) before
          income taxes                           (4,844,403)        (274,067)      (1,122,610)        (604,762)          69,452
  Income tax expense (benefit)                        2,400          (64,126)        (417,747)              --               --
                                               ------------     ------------     ------------     ------------     ------------
        Net earnings (loss)                    $ (4,846,803)    $   (209,941)    $   (704,863)    $   (604,762)    $     69,452
                                               ============     ============     ============     ============     ============
PER SHARE DATA:
  Earnings (loss) per share - basic
     and diluted                               $       (.81)    $       (.05)    $       (.15)    $       (.13)    $        .02
  Number of shares used in per
     share computations - basic and diluted       5,954,000        4,597,000        4,597,000        4,597,000        4,597,000

  Dividends                                    $         --     $         --     $         --     $         --     $         --
BALANCE SHEET DATA:
  Cash and cash equivalents                    $    914,796          830,784     $         --     $    576,780     $    259,496
  Total assets                                   23,080,061        9,864,129        7,168,200        3,773,366        4,129,525
  Amounts and notes payable to affiliates        16,729,411        5,431,417        3,741,380               --               --
  Total liabilities                              22,495,473        7,732,738        4,828,868          777,433          711,542
  Stockholders' equity                              584,588        2,131,391        2,341,332        2,995,933        3,417,983
</TABLE>



                                       6
<PAGE>   9

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

      The following discussion is intended to provide information to facilitate
the understanding and assessment of significant changes and trends related to
the financial condition and results of operations of the Company. The discussion
and analysis below includes the results of operations of ACS Systems, Inc. for
each of the years ended December 31, 1998, 1997 and 1996, as the acquisition of
ACS Systems, Inc. has been accounted for as a reverse merger. The results of
operations for the year ended December 31, 1998 include the results of
operations of ACS for the year ended December 31, 1998, the results of
operations of the postage meter and scale division for the period from May 14,
1998 through December 31, 1998 and the results of operations of LDExchange for
the period November 17, 1998 through December 31, 1998. This discussion and
analysis should be read in conjunction with the Company's consolidated financial
statements and notes thereto appearing elsewhere HEREIN.

OVERVIEW

      During the years ended December 31, 1997 and 1996, the Company's
operations consisted of the operations of ACS Systems, Inc., formerly a
wholly-owned subsidiary FNFI. ACS was acquired by FNFI in April 1994, and was
subsequently merged with the Company as described above. During 1998, 1997 and
1996, 66%, 89% and 86%, respectively, of the revenue generated by ACS was
derived from multiple servicing arrangements with FNFI and its subsidiaries.

      ACS, through its various divisions, is a full-service enterprise solutions
provider that offers total voice, data and systems integration solutions for
small and medium sized businesses, primarily in the real estate sector. ACS
offers a full range of information technology services, including voice and data
network design, implementation and management. ACS also provides services in the
areas of application development, real estate industry applications, electronic
commerce ("eCommerce") and Year 2000 remediation and consulting services and
telecommunications.

      Following the reverse merger with Micro General Corporation in May 1998
and the acquisition of LDExchange in November 1998, the Company added a postage
meter and scale division and a multinational carrier focused primarily on the
international long distance market. The Company's primary focus is information
technology and telecommunication services. ACS remained the primary business
unit during 1998.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenue

      Revenues increased $20.2 million, or 146%, to $34.0 million in 1998 from
$13.8 million in 1997, primarily as a result of continued growth in products and
services provided to FNFI, including an increase in telecommunication services
provided by ACS, the acquisition of the postage scale and meter division and the
acquisition of LDExchange. See note 9. FNFI, as the result of favorable market
conditions, continued expansion and a commitment to implement state of the art
technology, increased the installation and upgrade of its various information
technology systems using ACS as its primary vendor during 1997 that continued
through 1998. See note 9 to the consolidated financial statements regarding
segment information. The increased utilization of ACS by FNFI led to an increase
in all forms of revenue. During 1997 and 1998, ACS was able to increase the
level of products and services provided to non-affiliates, introduced new
products and services and provided telecommunication services.

Gross Profit

      Gross profit increased $2.5 million, or 73%, to $6.0 million, representing
a gross profit margin of 18%, in 1998 from $3.5 million, a gross profit margin
of 25%, in 1997. The increase in absolute dollars is consistent with the
increase in revenues. Gross profit margin as a percentage has decreased in 1998
compared to 1997 primarily as a result of the addition of the new segments. See
Comparison of Years Ended December 31, 1997 and 1996. The postage meter and
scale division and LDExchange segments represent lower margin businesses than
the information technology and telecommunication businesses of ACS.




                                       7
<PAGE>   10

Expenses

      Generally, selling, general and administrative expenses ("S,G & A") trend
consistently with revenues. S,G & A expenses increased $6.2 million, or 206%, to
$9.1 million in 1998 from $3.0 million in 1997. The increase is primarily a
result of the growth of ACS, which occurred in response to the increased demand
for its products and services; the acquisition of the postage scale and meter
division and the acquisition of LDExchange. The expansion in the amount of
products and services provided to FNFI required additional personnel and S,G & A
in order to meet the demand and provide an adequate level of service and
support. As ACS began to offer additional information technology services and
telecommunication services, additional personnel were required and S,G & A
related to the new offerings was incurred. The acquisition of the postage scale
and meter division and the acquisition of LDExchange also resulted in the
addition of personnel and S,G & A related to the operation of these new
segments.

      The amortization of cost in excess of net assets acquired and capitalized
software development costs is a function of the characteristics of the
intangible assets recorded during a particular period and the estimated useful
life of the intangible assets. Fluctuations in the amortization of cost in
excess of net assets acquired and capitalized software result from the amount,
mix and characteristics of the intangible assets recorded as well as the
circumstances surrounding the Company's estimate of the appropriate useful life.

      Interest income (expense), net, is related to the use of the Company's
available working capital, which is in the form of available cash and lines of
credit. The year over year fluctuation in interest income (expense) can be
attributed to the increase in average borrowings outstanding during 1998
compared to prior years.

      Income tax expense (benefit) is recorded based on the amounts that the
Company estimates, based on the Company's taxation structure, will be due to
Federal and state taxation authorities. During 1997 and 1996, ACS was included
in the FNFI consolidated tax returns and income tax expense (benefit) was
calculated as such. During 1998, ACS was included in the Micro General
consolidated group, which pays only minimum taxes based on current operating
results due to the fact that Micro General has not historically generated
earnings.

COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996

Revenue

      Revenues increased $6.9 million, or 101%, to $13.8 million in 1997 from
$6.9 million in 1996, primarily as a result of the additional products and
services provided to FNFI. FNFI, as the result of favorable market conditions,
continued expansion and a commitment to implement state of the art technology,
increased the installation and upgrade of its various information technology
systems using ACS as its primary vendor. The increased utilization of ACS by
FNFI led to an increase in all forms of revenue. In addition, during 1997, ACS
was able to increase the level of products and services provided to
non-affiliates, introduced new products and services and began providing
telecommunication services.

Gross Profit

      Gross profit increased $2.5 million, or 243%, to $3.5 million,
representing a gross profit margin of 25%, in 1997 from $1.0 million, a gross
profit margin of 15%, in 1996. The increase in gross profit, both in dollars and
percentage, is consistent with the increase in revenues primarily as a function
of the negotiation of more favorable terms with FNFI, increased efficiencies and
economies of scale. The Company believes that the renegotiated terms are similar
to third party rates and conditions, however, the relationship between the
Company and FNFI should not be considered arm's length.

Expenses

      Generally, selling, general and administrative expenses trend consistently
with revenues. S,G & A increased $1.5 million, or 97%, to $3.0 million in 1997
from $1.5 million in 1996, primarily as a result of the growth of the Company
which occurred in response to the increased demand for its products and
services. The expansion in the amount of products and services provided to FNFI
required additional personnel and S,G & A in order to meet the demand and
provide an adequate level of service and support. In addition, as the Company
began to offer additional 



                                       8
<PAGE>   11

information technology services and telecommunication services additional
personnel were required and S,G & A related to the new offerings was incurred.

      The amortization of cost in excess of net assets acquired and capitalized
software development costs is a function of the characteristics of the
intangible assets recorded during a particular period and the estimated useful
life of the intangible assets. Fluctuations in the amortization of cost in
excess of net assets acquired and capitalized software result from the amount
mix and characteristics of the intangible assets recorded as well as the
circumstances surrounding the Company's estimate of the appropriate useful life.

      Interest income (expense), net, is related to the use of the Company's
available working capital, which is in the form of available cash and lines of
credit, and was comparable year over year.

      Income tax expense (benefit) is recorded based on the amounts that the
Company estimates, based on the Company's taxation structure, will be due to
federal and state taxation authorities. During 1997 and 1996, ACS was included
in the FNFI consolidated tax returns and income tax expense (benefit) was
calculated as such.

LIQUIDITY AND CAPITAL RESOURCES

      The Company's current cash requirements include debt service, personnel
and other operating expenses, capital expenditures and capital for acquisitions
and expansion. The Company believes that all anticipated cash requirements will
be met from internally generated funds, future lines of credit and additional
availability from lines of credit from affiliates. Internally generated funds
fluctuate in a pattern generally consistent with revenues. Since the Company has
repositioned itself as a result of the merger with ACS Systems, Inc. and the
acquisition of LDExchange, the revenue, and therefore, cash flow base has
stabilized, particularly as a result of the amount of revenues generated by
affiliates. The Company believes that as a result of its current revenue base
and the anticipated availability of funds in the form of additional lines of
credit from affiliates and non-affiliates, all cash requirements will be met for
at least the next twelve months.

      The Company relies on FNFI as the primary source of capital to fund its
operations in the form of revenues generated by the Company related to products
and services provided to FNFI and as a source of funds via available financing
arrangements.

      The Company has suffered losses and negative cash flows from operations
for each of the years in the three-year period ended December 31, 1998. In
addition, the Company has an accumulated deficiency and a significant amount of
outstanding debt as of December 31, 1998. As of March 31, 1999, FNFI has
represented that it has the ability and intent to provide the Company with the
cash necessary to continue as a going concern for a period of at least twelve
months following December 31, 1998.

      The Company must comply with certain affirmative and negative covenants
related to its outstanding debt and notes payable. The Company was in compliance
with or received waivers related to these covenants at December 31, 1998.

SEASONALITY AND INFLATION

      The effects of seasonality and inflation on consolidated operating results
have, historically, been insignificant.

RECENT DEVELOPMENTS

      The Company and FNFI completed the merger of Micro General Corporation
with ACS Systems, Inc., a wholly-owned subsidiary of FNFI on May 14, 1998. 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 treated as a reverse merger, i.e.,
Micro General Corporation has been acquired by Fidelity National Financial, Inc.
as a majority-owned subsidiary through a merger with and into ACS Systems, Inc.,
with Micro General Corporation as the surviving entity. As of December 31, 1998,
FNFI owned 70.6% of the outstanding common stock of the Company.



                                       9
<PAGE>   12

      On October 8, 1998, the Company in conjunction with FNFI, announced the
creation of RealEC, the largest real estate electronic commerce network in the
nation. RealEC is a nationwide multi-vendor network that will provide real
estate and lender customers the ability to select products and services
necessary to close their transactions, while at the same time giving them access
to over 6,000 issuing locations for title insurance across the United States.

      RealEC is a joint venture developed by the Company and Stewart Mortgage
Information, a subsidiary of Stewart Information Services Corporation
(NYSE:STC). The RealEC network integrate each company's existing systems to
provide leading edge software, ultimately connecting all parties involved the
real estate transactions. RealEC will interface with loan origination software
systems, window-based ordering systems, third party networks, real estate office
systems and the Internet. RealEC will also offer on-line access to documents
related to real estate transactions and link with back-end title insurance and
escrow production systems.

      The Company completed the acquisition of LDExchange on November 17, 1998.
As a result of the LDExchange acquisition the Company has been able to enter the
international telecommunications and Internet telephony markets, which
complements the range of services offered by ACS. LDExchange is an emerging
multinational carrier focused primarily on the international long distance
market. LDExchange offers reliable, low cost switched voice services on a
wholesale basis, primarily to U.S. based long distance carriers. The LDExchange
purchase price was $3.1 million, payable $1.1 million in cash and $2.0 million
in Company common stock (1,000,000 shares).

      On March 22, 1999, the Company announced the acquisition of 100% of the
outstanding common stock of Interactive Associates, Inc., a privately held
distributor of computer telephony hardware and services. The purchase price for
Interactive Associates, Inc. was 100,000 shares of Company common stock, subject
to certain conditions. The closing price of the Company common stock on March
22, 1999, according to the NASDAQ Bulletin Board was $3.88.

RECENT ACCOUNTING PRONOUNCEMENTS

      Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", was issued by the FASB in
March 1998. SOP 98-1 requires that certain costs related to the development or
purchase of internal use software be capitalized and amortized over the
estimated useful life of the software. The provisions of SOP 98-1 are effective
for fiscal years beginning after December 15, 1998. The Company does not expect
that the adoption of SOP 98-1 will have a material impact on its financial
position or results of operations.

      SOP 98-5, "Reporting on the Costs of Start-up Activities", was issued in
April 1998. SOP 98-5 provides guidance on the financial reporting of start-up
and organization costs and requires that these costs be expensed as incurred.
The provisions of SOP 98-5 are effective for fiscal years beginning after
December 15, 1998. The Company does not expect that the adoption of SOP 98-5
will have a material impact on its financial position or results of operations.

ITEM 7A. QUANTITAVE 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 year end 1998.

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.



                                       10
<PAGE>   13

      Caution should be used in evaluating the Company's overall market risk
from the information below, since actual results could differ materially because
the information was developed using estimates and assumptions as described
below. See note 7 of notes to consolidated financial statements.

      The fair value of the Company's notes payable approximate their carrying
value at December 31, 1998 as the interest rates paid approximate market value.

      The hypothetical effects of changes in market rates or prices on the fair
values of financial instruments would be an increase (decrease) of the fair
value approximately $750,000, if interest rates increased (decreased) 100 basis
points.



                                       11
<PAGE>   14

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          MICRO GENERAL CORPORATION AND SUBSIDIARIES

                                INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                            PAGE NO.
                                                                                            --------
<S>                                                                                         <C>
Independent Auditors' Report.............................................................     13

Consolidated Balance Sheets as of December 31, 1998 and 1997 (Restated)..................     14

Consolidated Statements of Operations for the years ended December 31, 1998,
      1997 (Restated) and 1996 (Restated)................................................     15

Consolidated Statements of Stockholders' Equity for the years
      ended December 31, 1998, 1997 (Restated) and 1996 (Restated).......................     16

Consolidated Statements of Cash Flows for the years ended December 31,
      1998, 1997 (Restated) and 1996 (Restated)..........................................     17

Notes to Consolidated Financial Statements...............................................     18

Schedule II - Valuation and Qualifying Accounts and Reserves.............................     
</TABLE>


All other schedules are omitted because the required information is not
applicable or the information is presented in the consolidated financial
statements or notes thereto.



                                       12
<PAGE>   15

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Micro General Corporation:


We have audited the consolidated financial statements of Micro General
Corporation and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in notes 1, 5, 6, 7 and 8 to the consolidated financial statements,
the Company's financial position, results of operations and cash flows are
materially affected by and are dependent on certain transactions and agreements
with Fidelity National Financial, Inc. (FNFI), the Company's majority owner, and
FNFI's subsidiaries.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micro General
Corporation and subsidiaries as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.








Los Angeles, California
March 31, 1999





                                       13
<PAGE>   16

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1998 and 1997



<TABLE>
<CAPTION>
                                     ASSETS                                 1998            1997
                                                                        ------------     ------------
                                                                                          (Restated)
<S>                                                                     <C>                   <C>    
Current assets:
    Cash and cash equivalents                                           $    914,796          830,784
    Trade accounts receivable, less allowance for doubtful accounts
       of $485,936 in 1998 and $321,844 in 1997                            1,835,968          183,340
    Trade accounts receivable due from affiliates                          4,350,790        4,234,765
    Inventories                                                              785,204          505,949
    Prepaid expenses and other assets                                        359,884          119,432
                                                                        ------------     ------------

              Total current assets                                         8,246,642        5,874,270

Notes receivable                                                              29,850           31,776
Property and equipment, net                                                3,321,005          704,504
Capitalized software development costs, less accumulated
    amortization of $2,794,275  in 1998 and $2,065,596 in 1997             1,505,719        2,170,072
Cost in excess of net assets acquired, less accumulated amortization
    of $872,996 in 1998 and $350,546 in 1997                               9,976,845        1,083,507
                                                                        ------------     ------------

                                                                        $ 23,080,061        9,864,129
                                                                        ============     ============

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued expenses                               $  4,916,314        1,243,975
    Income and other taxes payable                                           138,647               -- 
    Deferred tax liabilities                                                 361,726          361,726
    Deferred revenue                                                         349,375               -- 
    Amounts due to affiliates                                                     --          695,620
                                                                        ------------     ------------

              Total current liabilities                                    5,766,062        2,301,321

Amounts and notes payable to affiliates                                   16,729,411        5,431,417
                                                                        ------------     ------------

              Total liabilities                                           22,495,473        7,732,738
                                                                        ------------     ------------

Commitments and contingencies (note 5)

Subsequent events (note 12)

Stockholders' equity:
    Preferred stock, $.05 par value.  Authorized 1,000,000 shares;
       none issued and outstanding                                                --               -- 
    Common stock, $.05 par value.  Authorized 20,000,000 shares;
       issued and outstanding 7,546,666 and 6,546,666 shares
       at December 31, 1998 and 1997, respectively                           377,333          327,333
    Additional paid-in capital                                             6,357,608        3,107,608
    Accumulated deficiency                                                (6,150,353)      (1,303,550)
                                                                        ------------     ------------

              Total stockholders' equity                                     584,588        2,131,391
                                                                        ------------     ------------

                                                                        $ 23,080,061        9,864,129
                                                                        ============     ============
</TABLE>



See accompanying notes to consolidated financial statements.



                                       14
<PAGE>   17

                           MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations

                  Years ended December 31, 1998, 1997 and 1996



<TABLE>
<CAPTION>
                                                        1998             1997             1996
                                                    ------------     ------------     ------------
                                                                      (Restated)       (Restated)
<S>                                                 <C>              <C>              <C>      
Hardware and software sales and maintenance
    revenues                                        $ 16,248,425       10,232,371        6,422,557
Telecommunication service revenues                     9,834,555          862,814               -- 
Service and license revenues                           7,933,084        2,728,449          449,043
                                                    ------------     ------------     ------------

              Total revenues (note 6)                 34,016,064       13,823,634        6,871,600
                                                    ------------     ------------     ------------

Hardware, software and maintenance cost of
    sales                                             15,893,689        8,452,283        5,323,851
Telecommunication service cost of sales                8,652,054          587,905               -- 
Service and license cost of sales                      3,421,741        1,279,557          525,253
                                                    ------------     ------------     ------------

              Total cost of sales                     27,967,484       10,319,745        5,849,104
                                                    ------------     ------------     ------------

              Gross profit                             6,048,580        3,503,889        1,022,496
                                                    ------------     ------------     ------------

Operating expenses:
    Selling, general and administrative expenses       9,142,574        2,984,812        1,513,319
    Amortization of cost in excess of net assets
       acquired and capitalized software
       development costs                               1,083,621          808,274          638,462
                                                    ------------     ------------     ------------

              Total operating expenses                10,226,195        3,793,086        2,151,781
                                                    ------------     ------------     ------------

              Operating loss                          (4,177,615)        (289,197)      (1,129,285)

Interest income (expense), net                          (666,788)          15,130            6,675
                                                    ------------     ------------     ------------

              Loss before income taxes                (4,844,403)        (274,067)      (1,122,610)

Income tax expense (benefit)                               2,400          (64,126)        (417,747)
                                                    ------------     ------------     ------------

              Net loss                              $ (4,846,803)        (209,941)        (704,863)
                                                    ============     ============     ============

Loss per share - basic and diluted                  $       (.81)            (.05)            (.15)
                                                    ============     ============     ============

Number of shares used in per share
    computations - basic and diluted                   5,954,000        4,597,000        4,597,000
                                                    ============     ============     ============
</TABLE>



See accompanying notes to consolidated financial statements.



                                       15
<PAGE>   18

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1998, 1997 and 1996



<TABLE>
<CAPTION>
                                                                                               
                                           COMMON STOCK         ADDITIONAL                      TOTAL
                                    ------------------------     PAID-IN      ACCUMULATED    STOCKHOLDERS'   
                                      SHARES        AMOUNT       CAPITAL       DEFICIENCY       EQUITY
                                    ----------    ----------    ----------     ----------     ----------
<S>                                 <C>           <C>           <C>           <C>            <C>
Balance at December 31, 1995
    (Restated)                       6,546,666    $  327,333     3,107,608       (388,746)     3,046,195

Net loss                                    --            --            --       (704,863)      (704,863)
                                    ----------    ----------    ----------     ----------     ----------

Balance at December 31, 1996
    (Restated)                       6,546,666       327,333     3,107,608     (1,093,609)     2,341,332

Net loss                                    --            --            --       (209,941)      (209,941)
                                    ----------    ----------    ----------     ----------     ----------

Balance at December 31, 1997
    (Restated)                       6,546,666       327,333     3,107,608     (1,303,550)     2,131,391

Equity issued in connection
    with merger (note 1)                    --            --     1,300,000             --      1,300,000

Shares issued to acquire
    LDExchange.com, Inc.             1,000,000        50,000     1,950,000             --      2,000,000

Net loss                                    --            --            --     (4,846,803)    (4,846,803)
                                    ----------    ----------    ----------     ----------     ----------

Balance at December 31, 1998         7,546,666    $  377,333     6,357,608     (6,150,353)       584,588
                                    ==========    ==========    ==========     ==========     ==========
</TABLE>



See accompanying notes to consolidated financial statements.



                                       16


<PAGE>   19

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1998, 1997 and 1996



<TABLE>
<CAPTION>
                                                          1998            1997            1996
                                                       -----------     -----------     -----------
                                                                        (Restated)      (Restated)
<S>                                                    <C>             <C>             <C>
Cash flows from operating activities:
    Net loss                                           $(4,846,803)       (209,941)       (704,863)
    Adjustments to reconcile net loss to net cash
       used in operating activities:
         Depreciation and amortization                   1,423,959         812,262         642,057
         Changes in assets and liabilities:
            Trade accounts receivable                     (215,770)       (536,017)        307,204
            Inventories                                     90,745        (288,559)          2,326
            Prepaid expenses and other assets             (157,452)        (66,936)        (28,357)
            Accounts payable and accrued
              expenses                                     261,802         158,468         308,055
            Income and other tax payable                    85,739              --              -- 
            Deferred revenue                               329,789              --              -- 
            Amounts due from affiliates                   (116,025)        (81,872)     (1,683,748)
                                                       -----------     -----------     -----------

                 Net cash used in operating
                    activities                          (3,144,016)       (212,595)     (1,157,326)
                                                       -----------     -----------     -----------

Cash flows from investing activities:
    Acquisition of LDExchange.com, Inc.                    717,000              --              -- 
    Merger of Micro General and ACS                        403,175              --              -- 
    Purchase of property and equipment                  (2,768,119)       (702,404)             -- 
    Decrease (increase) in notes receivable                  1,926         (29,776)         (2,000)
    Capitalization of software development costs           (64,326)       (610,098)       (410,663)
                                                       -----------     -----------     -----------

                 Net cash used in investing
                    activities                          (1,710,344)     (1,342,278)       (412,663)
                                                       -----------     -----------     -----------

Cash flows from financing activities - net increase
    in borrowings from affiliates                        4,938,372       2,385,657         993,209
                                                       -----------     -----------     -----------

                 Net cash provided by financing
                    activities                           4,938,372       2,385,657         993,209
                                                       -----------     -----------     -----------

                 Net increase (decrease) in cash
                    and cash equivalents                    84,012         830,784        (576,780)

Cash and cash equivalents at beginning of year             830,784              --         576,780
                                                       -----------     -----------     -----------

Cash and cash equivalents at end of year               $   914,796         830,784              -- 
                                                       ===========     ===========     ===========
</TABLE>


See accompanying notes to consolidated financial statements.



                                       17
<PAGE>   20

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)


(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a)  DESCRIPTION OF BUSINESS

           Historically, the operations of Micro General Corporation ("Micro
           General") 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. Following the acquisition
           of ACS Systems, Inc. ("ACS"), which is described below, Micro General
           (together with ACS, the "Company") shifted its primary focus to
           information technology and telecommunication services.

           On May 14, 1998, the Company and Fidelity National Financial, Inc.
           ("FNFI") completed the merger of Micro General with 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 common stock. The transaction was appraised at $1.3
           million. Following the merger of Micro General and ACS, FNFI owned
           approximately 81.4% of the common stock of the Company on an
           undiluted basis. The transaction has been treated as a reverse
           merger, i.e., Micro General has been acquired by FNFI as a
           majority-owned subsidiary through a merger with ACS, with Micro
           General as the surviving legal entity and ACS as the surviving entity
           for accounting purposes. As a result, the consolidated financial
           statements of Micro General previously issued prior to the year ended
           December 31, 1998 have been restated to reflect only the balance
           sheets, operations and cash flows of ACS prior to the merger with
           Micro General and to reflect ACS as the acquiror for accounting
           purposes. The cost of $1.3 million was allocated to the fair value of
           the assets acquired and liabilities assumed relating to Micro
           General. The results of Micro General have been included in the
           Company's results of operations since the merger on May 14, 1998. At
           December 31, 1998, FNFI owned 70.6% of the outstanding common stock
           of the Company (see note 11).

           ACS was founded in 1985 as a software development company
           specializing in products for the real estate industry, in particular,
           escrow software. ACS was acquired by FNFI in April 1994, and was
           subsequently merged with the Company as described above. ACS is a
           full-service enterprise solutions provider that offers total voice,
           data and systems integration solutions for small and medium sized
           businesses, primarily in the real estate sector.

           The Company generated 66%, 89% and 86% of its revenue during the
           years ended December 31, 1998, 1997 and 1996, respectively, from
           multiple servicing arrangements with FNFI and its subsidiaries.

           In addition, as a result of the acquisition of LDExchange.com, Inc.
           ("LDExchange"), which closed on November 17, 1998, the Company has
           been able to enter the international telecommunications and Internet
           telephony markets, which complements the range of services offered by
           ACS. The LDExchange purchase price was $3.1 million, payable $1.1
           million in cash and $2.0 million in Company common stock (1,000,000
           shares). The acquisition was accounted for as a purchase and 



                                       18
                                                                      (Continue)
<PAGE>   21

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

           the results of operations of LDExchange have been included in the
           Company's results of operations since November 17, 1998. (see note
           11).

      (b)  CASH AND CASH EQUIVALENTS

           Cash and cash equivalents include cash on deposit with banks with
           original maturities of three months or less.

      (c)  ACCOUNTS RECEIVABLE

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

      (d)  INVENTORIES

           Inventories are stated at the lower of cost or market (net realizable
           value) under the first-in, first-out method of accounting for
           inventories.

      (e)  PROPERTY AND EQUIPMENT

           Property and equipment are stated at cost. Depreciation is provided
           on a straight-line basis over estimated useful lives which range from
           three to seven years. Amortization of leasehold improvements is
           charged to expense on a straight-line basis over the shorter of the
           estimated useful lives of the assets or the term of the underlying
           lease.

      (f)  CAPITALIZED SOFTWARE DEVELOPMENT COSTS

           Software development costs incurred after the establishment of
           technological feasibility are capitalized and later amortized using
           the greater of the straight-line method or based on the estimated
           revenue distribution over the remaining estimated economic life of
           the products. Such policy results in the Company amortizing its
           capitalized software development costs over an estimated economic
           life of three to seven years. During 1998 and 1997, the Company
           capitalized software development costs of $64,326 and $610,098,
           respectively. During 1998 and 1997, the Company amortized software
           development costs of $728,679 and $712,672, respectively. The Company
           periodically assesses the recoverability of the cost of its
           capitalized software development costs based on an analysis of the
           cash flows generated by the underlying assets. In the opinion of
           management, no impairment of capitalized software development costs
           has occurred at December 31, 1998.

      (g)  COST IN EXCESS OF NET ASSETS ACQUIRED

           Cost in excess of net assets acquired 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. Cost in excess of net assets
           acquired is amortized on a straight-line basis over 5 to 15 years.
           The Company periodically assesses the recoverability of its cost in
           excess of net assets acquired based on an analysis of the cash flows
           generated by the underlying assets. In the opinion of management, no
           impairment of cost in excess of net assets acquired has occurred at
           December 31, 1998 (see note 11).



                                       19
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<PAGE>   22

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      (h)  REVENUE RECOGNITION

           The Company has adopted the American Institute of Certified Public
           Accountants ("AICPA") Statement of Position ("SOP") 97-2, "Software
           Revenue Recognition," for the years ended December 31, 1998, 1997 and
           1996. Under SOP 97-2, if a software sales arrangement does not
           require significant modification or customization of the software,
           revenue from the sale of the software is recognized when evidence of
           an arrangement exists, the fee is fixed and determinable, the license
           agreement has been delivered and collection of any resulting
           receivable is probable.

           As a result of certain issues raised in applying SOP 97-2, in March
           1998, the AICPA issued an SOP which delayed for one year the
           effective date of certain provisions of SOP 97-2 with respect to what
           constitutes vendor-specific objective evidence of fair value of the
           delivered software element in certain multiple-element arrangements
           that include service elements entered into by entities that never
           sell the software elements separately. In December 1998, the AICPA
           issued SOP 98-9, which amends paragraphs of SOP 97-2 to require
           recognition of revenue using the residual method under certain
           circumstances, and is effective for fiscal years beginning after
           March 15, 1999. The Company does not expect the adoption of this SOP
           to have a material impact on the Company's consolidated financial
           statements.

           Revenue from the sales of hardware and other products is recognized
           when delivery has occurred, the fee is fixed and determinable and
           collection of any resulting receivable is probable. Revenue from
           maintenance, servicing and consulting is recognized as the related
           services are performed.

      (i)  INCOME TAXES

           The Company accounts for income taxes in accordance with Statement of
           Financial Accounting Standards No. ("Statement") 109, "Accounting for
           Income Taxes." Statement 109 provides that deferred tax assets and
           liabilities be recognized for temporary differences between the
           financial reporting basis and the tax basis of the Company's assets
           and liabilities and expected benefits of utilizing net operating loss
           and credit carryforwards. Deferred tax assets and liabilities are
           measured using enacted tax rates expected to apply to taxable income
           in the years in which those temporary differences are expected to be
           recovered or settled. The impact on deferred taxes of changes in tax
           rates and laws, if any, are applied to the years during which
           temporary differences are expected to be settled and reflected in the
           financial statements in the period enacted.

      (j)  MANAGEMENT ESTIMATES

           The preparation of these consolidated financial statements in
           conformity with generally accepted accounting principles requires
           management to make estimates and assumptions that affect the reported
           amounts of assets and liabilities and disclosure of contingent assets
           and liabilities at the date of the financial statements, and the
           reported amounts of revenues and expenses during the reporting
           period. Actual results could differ from those estimates.



                                       20
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<PAGE>   23

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      (k)  EARNINGS PER SHARE

           Basic earnings per share is based on the weighted-average number of
           shares outstanding and excludes any dilutive effects of options and
           convertible securities. Diluted earnings per share gives effect to
           assumed conversions of potentially dilutive securities. Shares used
           in the earnings per share calculations for 1998 are the
           weighted-average shares of Micro General outstanding during 1998,
           assuming the shares issued in connection with the merger of ACS and
           Micro General were outstanding since January 1, 1998. Shares used in
           the earnings per share calculations for 1997 and 1996 represent the
           shares issued to FNFI in connection with the merger of ACS and Micro
           General. All outstanding options and warrants (see notes 7 and 10)
           have been excluded from the calculations of diluted loss per share as
           their inclusion would be antidilutive.

      (l)  OTHER COMPREHENSIVE INCOME

           On January 1, 1998, the Company adopted Statement 130, "Reporting
           Comprehensive Income," which established new rules for the reporting
           and display of comprehensive income and its components. However, the
           adoption of Statement 130 had no impact on the Company's consolidated
           financial statements as comprehensive income is comprised only of net
           loss.



(2)   INVENTORIES
      A summary of inventories follows:

<TABLE>
<CAPTION>
                                                       1998                  1997
                                                     --------              --------
<S>                                                  <C>                    <C>    
           Computer equipment                        $482,106               403,519
           Telecommunications equipment               303,098               102,430
                                                     --------              --------

                                                     $785,204               505,949
                                                     ========              ========
</TABLE>



                                       21
                                                                      (Continue)
<PAGE>   24

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)



(3)   INCOME TAXES

      The income tax provision (benefit) for the years ended December 31,
      1998, 1997 and 1996 consists of the following:

<TABLE>
<CAPTION>
                                     1998                   1997                  1996
                                   --------               --------               --------
<S>                                <C>                    <C>                    <C>
           Current:
              Federal              $     --                (16,528)              (263,950)
              State                   2,400                 (2,833)               (77,326)
                                   --------               --------               --------

                                      2,400                (19,361)              (341,276)
                                   --------               --------               --------

           Deferred:
              Federal                    --                (33,740)               (59,144)
              State                      --                (11,025)               (17,327)
                                   --------               --------               --------

                                         --                (44,765)               (76,471)
                                   --------               --------               --------

                                   $  2,400                (64,126)              (417,747)
                                   ========               ========               ========
</TABLE>


      The provision for income taxes differed from the amounts computed by
      applying the U.S. Federal income tax rate of 34% to the loss before income
      taxes as a result of the following:

<TABLE>
<CAPTION>
                                                       1998                       1997                     1996
                                                    -----------               -----------               -----------
<S>                                                 <C>                       <C>                       <C>
           Computed "expected" tax
              benefit                               $(1,647,097)                  (93,183)                 (381,687)
           State taxes, net of Federal
              income tax benefit                        (62,681)                   (9,008)                  (61,524)
           Amortization of cost in
              excess of net assets                      177,633                    33,461                    33,459
              acquired
           Nondeductible expenses                        29,505                     4,604                    (7,995)
           Net operating loss utilized
              by affiliated group                       781,366                        --                        --
           Valuation allowance                          723,674                        --                        --
                                                    -----------               -----------               -----------

                                                    $     2,400                   (64,126)                 (417,747)
                                                    ===========               ===========               ===========
</TABLE>



                                       22
                                                                      (Continue)
<PAGE>   25

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)


      The deferred tax assets and liabilities at December 31, 1998 consist of
the following:

<TABLE>
<CAPTION>
                                                                DEFERRED TAX               DEFERRED TAX
                                                                   ASSETS                  LIABILITIES
                                                                 -----------               -----------
<S>                                                             <C>                        <C>
           Book over tax provision for bad debts                 $   193,570                        --
           Reserves and accruals not recognized for
              income tax purposes                                    218,218                        --
           Acquired assets adjustment to fair value                  919,402                        --
           Net operating loss carryover                            2,185,868                        --
           Other                                                       1,087                        --
           Accelerated depreciation                                       --                     2,482
           Acquired assets adjustment to fair value                       --                   365,149
                                                                 -----------               -----------

                                                                   3,518,145                   367,631
           Valuation allowance                                    (3,512,240)                       --
                                                                 -----------               -----------

                                                                 $     5,905                   367,631
                                                                 ===========               ===========
</TABLE>

      The deferred tax assets and liabilities at December 31, 1997 consist of
the following:

<TABLE>
<CAPTION>
                                                               DEFERRED TAX         DEFERRED TAX
                                                                  ASSETS             LIABILITIES
                                                                 --------              --------
<S>                                                              <C>                           
           Book over tax provision for bad debts                 $171,775                    --
           Acquired assets adjustment to fair value                    --               533,501
                                                                 --------              --------

                                                                 $171,775               533,501
                                                                 ========              ========
</TABLE>


      Statement 109 requires that deferred tax assets be reduced by a valuation
      allowance if it is more likely than not that some portion or all of the
      deferred tax assets will not be realized. The Company has established a
      valuation allowance of $2,636,964 principally associated with net
      operating loss carryforwards and other deferred tax assets recorded from
      acquisitions and an additional allowance of $875,276 to cover the majority
      of the other deferred tax assets. Any tax benefits subsequently recognized
      for deferred tax assets related to these acquisitions will be allocated to
      goodwill.

      ACS was included as an affiliate in the consolidated income tax returns of
      FNFI through mid-November 1998. Prior to May 1998, ACS paid taxes or
      received such tax benefits as it contributed to the consolidated tax
      position of FNFI. Micro General was included as an affiliate in the
      consolidated income tax returns of FNFI from May 14, 1998 through
      mid-November 1998. FNFI utilized approximately $2,298,000 of losses
      generated by the Company during this period for which Micro General will
      not be reimbursed by FNFI. The Company has available Federal and state net
      operating loss carryforwards of $6,125,199 expiring in years 2001 through
      2019, and $1,770,534 expiring in years 2000 through 2004, respectively.



                                       23
                                                                      (Continue)
<PAGE>   26

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

(4)   PROPERTY AND EQUIPMENT

      A summary of property and equipment follows:

<TABLE>
<CAPTION>
                                                                          1998                    1997
                                                                       ----------              ----------
<S>                                                                    <C>                        <C>    
           Telecommunications equipment                                $1,557,150                 695,620
           Computer equipment                                           1,158,642                  67,840
           Furniture and fixtures                                         605,864                  28,005
           Office equipment                                                59,571                  19,209
           Leasehold improvements                                         232,956                  14,390
                                                                       ----------              ----------

                                                                        3,614,183                 825,064
           Less accumulated depreciation and amortization                 293,178                 120,560
                                                                       ----------              ----------

                                                                       $3,321,005                 704,504
                                                                       ==========              ==========
</TABLE>


(5)   COMMITMENTS AND CONTINGENCIES

      (a)  LEASE COMMITMENTS

           The Company leases facilities and equipment under various operating
           leases. Future minimum noncancelable lease commitments, due primarily
           to affiliates, are as follows:

<TABLE>
<CAPTION>
           Year ending December 31:
<S>                                                         <C>       
             1999                                           $1,198,426
             2000                                              745,716
             2001                                              657,552
             2002                                              630,355
             2003                                              595,716
           Thereafter                                         2,190,883
                                                             ----------
           Total minimum lease payments                     $6,018,648
                                                            ==========
</TABLE>


           Rent expense was $913,059, $238,721 and $128,179 for the years ended
           December 31, 1998, 1997 and 1996, respectively. Included in rent
           expense for 1998, 1997 and 1996 was $721,515, $235,316 and $128,179,
           respectively, paid to affiliates.

      (b)  LITIGATION

           The Company is involved in various claims and legal actions arising
           in the ordinary course of business. In the opinion of the management,
           the ultimate disposition of these matters will not have a material
           adverse effect on the Company's consolidated financial position,
           results of operations or liquidity.



                                       24
                                                                      (Continue)
<PAGE>   27

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

(6)   RELATED PARTY TRANSACTIONS

      As described in note 1, the Company's primary source of revenue is fees
      resulting from sales and services to affiliated companies. Revenues
      generated from sales and services to affiliates for the years ended
      December 31, 1998, 1997 and 1996 were $22,480,042, $12,356,444 and
      $5,932,524, respectively.

      The amounts due to affiliates at December 31, 1997, classified as current
      liabilities, relate mainly to an arrangement with a subsidiary of FNFI,
      whereby the personnel costs of the Company were funded by this subsidiary
      of FNFI. The Company reimbursed FNFI from time to time as funds became
      available. No interest was charged to the Company in this arrangement. The
      Company utilizes funds available under the Convertible Note Purchase
      Agreement, described below, to currently fund its operations.

      In addition, the Company has long-term amounts and notes payable to
      affiliates amounting to $16,729,411 and $5,431,417 at December 31, 1998
      and 1997, respectively (see note 7).

      The Company also leases facilities from FNFI subsidiaries (see note 5).

(7)   NOTES PAYABLE

      On August 1, 1996, Micro General entered into a $3 million financing
      agreement which provided additional funding, primarily for the retirement
      of bank debt, operations and to fund Micro General's development of a
      series of high level security postage meters designed to comply with the
      new United States Postal Service proposed regulations. Two 9.5%, five-year
      convertible notes were issued, one in the amount of $1 million and one in
      the amount of $2 million, and are held respectively by Cal West Service
      Corporation ("Cal West"), a subsidiary of FNFI, which owned 38% of the
      outstanding Micro General common stock when the Cal West note was issued
      and Dito Caree L.P. Holding ("Dito Caree"), which owned 5% of the
      outstanding common stock of Micro General when the Dito Caree note was
      issued.

      Repayment of the notes was on an interest-only basis for the first two
      years, with principal and interest payments for the remaining three years
      of the term. The debt, secured by the assets of Micro General, is
      convertible into 1,344,438 shares of the Company's common stock at prices
      ranging from $2.00 to $2.50 per share. At December 31, 1998, there was
      $3,000,000 outstanding on these notes. The Company is subject to certain
      restrictive covenants, both financial and operational, related to these
      notes. As of December 31, 1998, the Company was not in compliance with
      certain of these covenants and obtained waivers for these covenants
      through December 31, 1999.

      On November 25, 1997, Micro General entered into a $600,000 financing
      agreement, which provided additional funding to be used by Micro General
      for operating cash flow purposes. Two 9.0% notes were issued in the amount
      of $200,000 and $400,000, held by Cal West and Dito Caree, respectively.
      Interest on the two notes is to be paid quarterly. The Company had the
      right to prepay all or a portion of the interest and principal due on the
      notes at any time prior to the original due date of May 31, 1998. The
      amount payable under the note payable to Dito Caree was refinanced in
      connection with the Convertible Note Purchase Agreement discussed below.



                                       25
                                                                      (Continue)
<PAGE>   28

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      In conjunction with these short-term notes, Micro General issued to the
      note holders, two detachable warrant certificates, one in the amount of
      50,000 shares to Cal West and one in the amount of 100,000 shares to Dito
      Caree, giving the note holders the right to purchase 150,000 shares of the
      Company's common stock at $1.50 per share. The warrants can be exercised
      at any time between November 25, 1997 and November 25, 2002. No warrants
      have been exercised by the holders. The outstanding amount on this note at
      December 31, 1998 was $200,000 and the Company was not in compliance with
      certain restrictive financial covenants related to this debt. The Company
      obtained waivers for these covenants through December 31, 1999, and the
      due date on the note was extended through 1999.

      Micro General entered into a third financing agreement to provide
      additional funding to be used by Micro General for operational cash flow
      purposes. On April 8, 1998, two 9.0% notes were issued, one in the amount
      of $250,000 and one in the amount of $500,000, held by Cal West Service
      Corporation and Dito Caree, respectively. Interest on the notes is to be
      paid quarterly. Micro General had the right to prepay all or a portion of
      the interest and principal due on the notes at any time prior to the due
      date of October 31, 1998. The amount payable under the note payable to
      Dito Caree was refinanced in connection with the Convertible Note Purchase
      Agreement discussed below.

      In conjunction with the notes, Micro General issued to the note holders,
      two detachable warrant certificates, one in the amount of 62,500 shares to
      Cal West and one in the amount of 125,000 shares to Dito Caree, giving the
      note holders the right to purchase 187,500 shares of the Company's common
      stock at $1.50 per share. The warrants can be exercised at any time
      between April 8, 1998 and April 8, 2003. No warrants have been exercised
      by the respective holders. The amount outstanding at December 31, 1998 was
      $250,000 and the Company was not in compliance with certain restrictive
      financial covenants related to this debt. The Company obtained waivers for
      these covenants through December 31, 1999, and the due date on the note
      was extended through 1999.

      On October 27, 1998, the Company entered into a $15 million Convertible
      Note Purchase Agreement with FNFI, which replaced a $5 million financing
      agreement between the Company and a subsidiary of FNFI dated May 14, 1998,
      entered into in connection with the merger with ACS. Two 10.0%, five-year
      convertible notes were issued, one in the amount of $14.1 million and one
      in the amount of $900,000, held by Cal West and Dito Caree, respectively.

      Interest on these notes is to be paid quarterly. The entire unpaid balance
      of the notes, including principal and accrued but unpaid interest, is due
      and payable on October 27, 2003. The note holders have the right to
      convert all or a portion of the principal to be repaid on the payment date
      into shares of the Company's common stock at the conversion price. The
      debt is secured by the assets of the Company and can be converted into
      3,133,333 shares of the Company's $.05 par value common stock at a price
      of $4.50 per share. The note holders retain the right to acquire shares
      until note maturity on October 27, 2003. At December 31, 1998, there was
      $13,279,411 outstanding on these notes. The Company is subject to
      certain restrictive covenants, both financial and operational, related to
      these notes. The Company was in compliance with these covenants as of
      December 31, 1998.



                                       26
                                                                      (Continue)
<PAGE>   29

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      The carrying value of notes payable to affiliates approximates fair value
      at December 31, 1998 due to the fact that the interest rates paid on the
      notes payable to affiliates approximate market rates.

      Principal maturities of the notes payable and long-term debt at December
      31, 1998 are as follows:

<TABLE>
<S>                          <C>        
           1999              $        --
           2000                3,450,000
           2001                       --
           2002                       --
           2003               13,279,411
                             -----------

                             $16,729,411
                             ===========
</TABLE>

(8)   LIQUIDITY AND GOING CONCERN

      The Company has suffered losses and negative cash flows from operations
      for each of the years in the three-year period ended December 31, 1998. In
      addition, the Company has an accumulated deficiency and a significant
      amount of outstanding debt as of December 31, 1998.

      As a result, substantial doubt exists about the Company's ability to
      continue as a going concern for a reasonable period of time following the
      December 31, 1998 balance sheet date. However, as of March 31, 1999, FNFI
      has represented that it has the ability and intent to provide the Company
      with cash necessary to continue as a going concern for a period of at
      least twelve months following December 31, 1998. Given this
      representation, management believes that the Company will be able to
      continue as a going concern for a reasonable period following December 31,
      1998. Management has plans to expand the Company's business relationships
      with unaffiliated third parties and take other measures to ultimately
      generate cash flows sufficient to support its operations.

(9)   SEGMENT INFORMATION

      The Company's consolidated financial statements as of and for the year
      ended December 31, 1998 include three reportable segments. Prior to 1998,
      the Company consisted only of ACS.

<TABLE>
<CAPTION>
                                                                            CORPORATE AND
                                                                            POSTAGE METER
                                                                               AND SCALE
                                          ACS             LDEXCHANGE           DIVISION            TOTAL
                                      ------------       ------------       ------------       ------------
<S>                                   <C>                <C>                <C>                <C>

           Total revenue              $ 25,938,067          7,203,340            874,657         34,016,064
                                      ============       ============       ============       ============

           Operating loss             $ (3,192,833)           (97,962)          (886,820)        (4,177,615)
           Interest expense, net          (398,375)             2,462           (270,875)          (666,788)
                                      ------------       ------------       ------------       ------------

                   Loss before
                    income taxes      $ (3,591,208)           (95,500)        (1,157,695)        (4,844,403)
                                      ============       ============       ============       ============
</TABLE>



                                       27
                                                                      (Continue)
<PAGE>   30

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

<TABLE>
<S>                                   <C>                <C>                <C>                <C>
           Assets                     $ 13,837,703          2,401,050          6,841,308         23,080,061
                                      ============       ============       ============       ============
</TABLE>

      The activities of the three reportable segments include the following:

      -    ACS: A computer hardware and software sales and support division and
           a telecommunication division, which provides comprehensive data
           network systems support, including selling computer hardware and
           software products and developing integrated title and escrow computer
           applications for the title and real estate related industries. Also
           provides telecommunications hardware and long-distance reselling,
           technical and consulting services, and internet access and services.
           All sales to affiliated companies are from this division (see note
           6).

      -    LDEXCHANGE: International telecommunication services which provides
           access to the international long-distance market for the rapidly
           growing wholesale telecommunication service sector. LDExchange had
           sales of $4,978,380 to one non-affiliated customer.

      -    MICRO GENERAL: Corporate and the postage meter and scale division,
           which develops, manufactures and markets computerized equipment for
           shipping, mailing and operations, with products ranging from low-cost
           mechanical and electronic postal scales for personal and office use,
           to complete systems for high-volume processing of parcels shipped by
           UPS and other carriers.

      The vast majority of expenditures for additions to long-lived assets, as
      well as depreciation and amortization, pertain to ACS.

      The accounting policies of the segments are the same as those described in
      the summary of significant accounting policies. There were no intersegment
      sales or transfers during the year ended December 31, 1998.

(10)  EMPLOYEE BENEFIT PLANS

      Employee benefits include an employee stock purchase plan, three stock
      option plans and a 401(k) plan.

      In 1998, the Company's Board of Directors approved the adoption of an
      Employee Stock Purchase Plan ("ESPP"). Under the terms of the ESPP, there
      are 800,000 shares of the Company's common stock available for purchase at
      current market prices by Company employees who meet certain vesting
      requirements. The authorized number of shares is subject to adjustment in
      the event of stock splits, stock dividends or certain other similar
      changes in the capital structure of the Company. Pursuant to the ESPP,
      Company employees may contribute an amount between 5% and 15% of their
      base salary and certain commissions. The Company contributes varying
      amounts as specified in the ESPP. There have been no stock purchases by
      the ESPP as of December 31, 1998.



                                       28
                                                                      (Continue)
<PAGE>   31

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      In 1987, stockholders also approved the adoption of a Stock Option Plan
      ("1987 Option Plan"). Under the terms of the 1987 Option Plan, the Company
      may grant stock options to certain key employees and nonemployee directors
      or officers. The number of shares issuable under the 1987 Option Plan is
      220,000 shares of common stock at not less than fair market value on the
      date of grant. All options granted become exercisable at the discretion of
      the Board of Directors and expire five years from the date of grant.
      Options that lapse or are canceled prior to exercise are added to the
      shares authorized for future grants. The 1987 Option Plan expired in 1991,
      but was renewed by stockholders in 1993. There were no remaining shares
      available for grant at December 31, 1998 under the 1987 Option Plan.

      In 1995, stockholders approved the adoption of the 1995 Stock Option Plan
      ("1995 Option Plan"). The number of shares reserved for issuance under the
      1995 Option Plan is 132,000 shares of common stock. All 132,000 shares
      were available for grant at December 31, 1998 under the 1995 Option Plan.

      During 1998, stockholders approved the adoption of the 1998 Stock
      Incentive Plan ("1998 Plan"). The 1998 Plan authorizes up to 1,500,000
      shares of common stock, plus an additional 300,000 shares of common stock
      on the date of each annual meeting of the stockholders of the Company, for
      issuance under the terms of the 1998 Plan. The authorized number of shares
      is subject to adjustment in the event of stock splits, stock dividends or
      certain other similar changes in the capital structure of the Company. The
      1998 Plan provides for grants of "incentive stock options" as defined in
      Section 422 of the Internal Revenue Code of 1986, as amended, nonqualified
      stock options and rights to purchase shares of common stock ("Purchase
      Rights"). Incentive stock options, nonqualified stock options and Purchase
      Rights may be granted to employees of the Company and its subsidiaries and
      affiliates. Nonqualified stock options and Purchase Rights may be granted
      to employees of the Company and its subsidiaries and affiliates,
      nonemployee directors and officers, consultants and other service
      providers.

      The Board of Directors, or a committee consisting of two or more members
      of the Board of Directors, will administer the 1998 Plan (the
      "Administrator"). The Administrator will have the full power and authority
      to interpret the 1998 Plan, select the recipients of options and Purchase
      Rights, determine and authorize the type, terms and conditions of,
      including vesting provisions, and the number of shares subject to, grants
      under the 1998 Plan, and adopt, amend and rescind rules relating to the
      1998 Plan. The term of options may not exceed 10 years from the date of
      grant (5 years in the case of a person who owns or is deemed to own more
      than 10% of the total combined voting power of all classes of stock of the
      Company). The option exercise price for each share granted pursuant to an
      incentive stock option may not be less than 100% of the fair market value
      of a share of common stock at the time such option is granted (110% of
      fair market value in the case of an incentive stock option granted to a
      person who owns more than 10% of the combined voting power of all classes
      of stock of the Company). There is no minimum purchase price for shares of
      common stock purchased pursuant to a Purchase Right, and any such purchase
      price shall be determined by the Administrator. The maximum number of
      shares for which options may be granted to any one person during any one
      calendar year under the 1998 Plan is 1,500,000 and in no event shall the
      aggregate number of shares subject to incentive stock options exceed
      1,500,000. The aggregate fair market value of the common stock (determined
      as of the date of grant) with respect to incentive stock options 



                                       29
                                                                      (Continue)
<PAGE>   32

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      granted under the 1998 Plan or any other stock option plan of the
      Company that become exercisable for the first time by any optionee during
      any calendar year may not exceed $100,000.

      Prior to 1998, the Company's stock option activity was immaterial. A
      summary of the Company's stock option activity and related information for
      the year ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
                                                                              WEIGHTED-
                                                                              AVERAGE
                                                               NUMBER OF      EXERCISE
                                                                 SHARES         PRICE
                                                                 ------         -----
<S>                                                            <C>           <C>
           Beginning outstanding at December 31, 1997             227,166       $1.93

           Granted                                              1,226,250        4.80

           Exercised                                                   --          --

           Canceled                                               (14,500)       1.86
                                                                ---------

           Stock options outstanding at December 31, 1998       1,438,916        4.35
                                                                =========       =====

           Stock options exercisable at December 31, 1998         985,750       $4.28
                                                                =========       =====
</TABLE>


      The weighted-average remaining contractual life of the options outstanding
      at December 31, 1998 is 9.01 years.

      The following table sets forth options outstanding and exercisable by
      price range at December 31, 1998:

<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
          -----------------------------------------------------------------   -----------------------------
                                                      WEIGHTED-
                                     NUMBER           AVERAGE       WEIGHTED-      NUMBER         WEIGHTED-
             RANGE OF              OUTSTANDING        REMAINING     AVERAGE      EXERCISABLE       AVERAGE  
             EXERCISE                AS OF           CONTRACTUAL    EXERCISE        AS OF          EXERCISE
              PRICES                12/31/98            LIFE         PRICE         12/31/98         PRICE
           -------------           -----------       -----------   ---------     -----------      -----------
<S>                                <C>                <C>          <C>           <C>              <C>     
           $1.25 - $3.50            242,666             5.18       $   2.13         186,992          $   2.10
           $4.75 - $4.75            200,000             9.61           4.75         200,000              4.75
           $4.81 - $4.81            996,250             9.82           4.81         598,758              4.81
                                  ---------                                       ---------

           $1.25 - $4.81          1,438,916             9.01           4.35         985,750              4.28
                                  =========            =====        =======       =========          ========
</TABLE>

      The Company has elected to follow Accounting Principles Board Opinion No.
      25, "Accounting for Stock Issued to Employees" ("Opinion 25"), and related
      Interpretations in accounting for its employee stock options. As discussed
      below, in management's opinion, the alternative fair value accounting
      provided for 



                                       30
                                                                      (Continue)
<PAGE>   33

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      under Statement 123, "Accounting for Stock Based Compensation," requires
      use of option valuation models that were not developed for use in valuing
      employee stock options. Under Opinion 25, because the exercise price of
      the Company's employee stock options equals the market price of the
      underlying stock on the date of the grant, no compensation expense is
      recognized.

      The Black-Scholes option valuation model was developed for use in
      estimating the fair value of traded options that do not have vesting
      restrictions and are fully transferable. In addition, option valuation
      models require the input of highly subjective assumptions including the
      expected stock price volatility. Because the Company's stock options have
      characteristics significantly different from those of traded options and
      because changes in the subjective input assumptions can materially affect
      the value of an estimate, in management's opinion, the existing models do
      not necessarily provide a reliable single measure of the fair value of its
      employee stock options.

      Pro forma information regarding net earnings and earnings per share is
      required by Statement 123, and has been determined as if the Company had
      accounted for its employee stock options under the fair value method of
      that statement. The fair value for these options was estimated at the date
      of grant using a Black-Scholes option-pricing model with the following
      weighted-average assumptions. The risk-free interest rate used in the
      calculation is the rate on the date the options were granted. The
      risk-free interest rate used for options granted during 1998 was 5.7%. A
      volatility factor for the expected market price of the common stock of 50%
      was used for options granted in 1998. No dividends are paid by the
      Company; as a result, its expected dividend yield is 0.0%. A
      weighted-average expected life of seven years was used in all years as the
      Company has little history of options being exercised.

      The impact of applying the provisions of Statement 123 on the consolidated
      results of operations is not material for the year ended December 31,
      1998.

      The Company also offers a 401(k) profit sharing plan, a qualified
      voluntary contributory savings plan, available to substantially all
      employees. Eligible employees may contribute up to 15% of their pretax
      annual compensation, up to the amount allowed pursuant to the Internal
      Revenue Code. The Company may elect to make matching contributions. The
      Company has historically not made matching contributions.

(11)  ACQUISITIONS

      As discussed in note 1, Micro General and ACS merged in May 1998 and
      LDExchange was acquired in November 1998.

      The assets acquired, including cost in excess of net assets acquired, and
      liabilities assumed in the Micro General/ACS merger were as follows:

<TABLE>
<S>                                                        <C>        
           Tangible assets acquired at fair value          $   305,000
           Cost in excess of net assets acquired             5,709,000
           Liabilities assumed at fair value                (4,717,000)
                                                           -----------
</TABLE>



                                       31
                                                                      (Continue)
<PAGE>   34

                            MICRO GENERAL CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

          As of December 31, 1998 and 1997 (Restated) and for the Years
          Ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

<TABLE>
<S>                                                        <C>        
                   Total purchase price                    $ 1,297,000
                                                           ===========
</TABLE>

      The assets acquired, including cost in excess of net assets acquired, and
      liabilities assumed in the LDExchange acquisition were as follows:

<TABLE>
<S>                                                        <C>        
           Tangible assets acquired at fair value          $ 1,592,000
           Cost in excess of net assets acquired             3,707,000
           Liabilities assumed at fair value                (2,199,000)
                                                           -----------

                   Total purchase price                    $ 3,100,000
                                                           ===========
</TABLE>


      Selected unaudited pro forma combined results of operations for the years
      ended December 31, 1998 and 1997, assuming the Micro General/ACS merger
      and LDExchange acquisitions occurred on January 1, 1998 and 1997,
      respectively, are presented as follows:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                       -----------------------------------
                                                          1998                     1997
                                                       ------------             ----------
<S>                                                    <C>                      <C>       
           Total revenue                               $ 60,565,000             17,049,000
           Net loss                                      (5,225,549)            (2,544,931)
           Loss per share - basic and diluted                  (.69)                  (.34)
</TABLE>


(12)  SUBSEQUENT EVENTS

      In March 1999, the Company acquired Interactive Associates, Inc., a
      privately held distributor of computer telephony hardware and services.
      This acquisition provides for the purchase of 100% of the common stock of
      Interactive Associates, Inc. in exchange for 100,000 shares of Micro
      General common stock, subject to certain conditions. The closing price of
      the Company common stock on March 22, 1999, according to the NASDAQ
      Bulletin Board, was $3.88. This acquisition will be accounted for using
      the purchase method.

      In March 1999, the postage meter and scale division ceased operations.





                                       32
<PAGE>   35

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      None.

                                    PART III

ITEM 10. THROUGH 13.

      Within 120 days after the close of its fiscal year, the Company intends to
file with the Securities and Exchange Commission a definitive proxy statement
pursuant to Regulation 14A of the Securities Exchange Act of 1934 as amended,
which will include the election of directors, the report of compensation
committee on annual compensation, certain relationships and related transactions
and other business.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)(1) FINANCIAL STATEMENTS. The following is a list of the Consolidated
Financial Statements of Micro General Corporation and its subsidiaries included
in Item 8 of Part II.

      Independent Auditors' Report.

      Consolidated Balance Sheets as of December 31, 1998 and 1997 (Restated).

      Consolidated Statements of Operations for the years ended December 31,
      1998, 1997 (Restated) and 1996 (Restated).

      Consolidated Statements of Stockholders' Equity for the years
      ended December 31, 1998, 1997 (Restated) and 1996 (Restated)

      Consolidated Statements of Cash Flows for the years ended December 31,
      1998, 1997 (Restated) and 1996 (Restated)

      Notes to Consolidated Financial Statements.

      (a)(2) FINANCIAL STATEMENT SCHEDULES. The following is a list of financial
statement schedules filed as part of this annual report on Form 10-K.

      Schedule II:  Valuation and Qualifying Accounts.

      All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
      (a)(3) The following exhibits are incorporated by reference or are set
forth on pages to this Form 10-K:

<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER                                 DESCRIPTION
         ------                                 -----------
<S>                     <C>

            3.1         Restated Articles of Incorporation of the Company,
                        incorporated by reference from the Company's Annual
                        Report on Form 10-K for the year ended December 25,
                        1988, as amended.

            3.11        Restated Articles of Incorporation of the Company -
                        Article Fourth of the Certificate of Incorporation,
                        incorporated by reference from the Company's Annual
                        Report on Form 10-K for the year ended December 31,
                        1996.
</TABLE>



                                       33
<PAGE>   36

<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER                                DESCRIPTION
         ------                                -----------
<S>                     <C>
            3.2         Bylaws of the Company, incorporated by reference from
                        the Company's Annual Report on Form 10-K for the year
                        ended December 25, 1988, as amended.

            10.1        Incentive Stock Option Plan and form of Incentive Stock
                        Option Agreement in use prior to 1987, incorporated by
                        reference to Exhibit 10.1 from the Company's Annual
                        Report on Form 10-K for the year 1984; Option Plan and
                        form of Incentive Stock Option Agreement in use
                        commencing in 1987, incorporated by reference to Exhibit
                        10 from the Company's Annual Report on Form 10-K for the
                        year ended December 28, 1986.

            10.1.1      1998 Stock Incentive Plan and 1998 Employee Stock
                        Purchase Plan, incorporated by reference from Form S-8,
                        registration number 333-64289.

            10.18       Convertible Note Purchase Agreement between Micro
                        General Corporation and Cal West Service Corporation
                        dated August 1, 1996, incorporated by reference from the
                        Company's Annual Report on Form 10-K for the year ended
                        December 31, 1996.

            10.19       Convertible Note Purchase Agreement between Micro
                        General Corporation and Dito Caree L.P. dated August 1,
                        1996, incorporated by reference from the Company's
                        Annual Report on Form 10-K for the year ended December
                        31, 1996.

            10.20       Loan Agreement and Agreement to issue Detachable
                        Warrants between Micro General Corporation and Cal West
                        Service Corporation and Dito Caree L.P. Holding dated
                        November 25, 1997, incorporated by reference from the
                        Company's Annual Report on Form 10-K for the year ended
                        December 31, 1997.

            10.22       Agreement and Plan of Reorganization dated as of May 14,
                        1998, among ACS Systems, Inc., Micro General
                        Corporation, ACS Merger, Inc. and Fidelity National
                        Financial, Inc., a Delaware corporation, incorporated by
                        reference from the Company's report on Form 8-K dated as
                        of May 14, 1998.

            10.22.1     Agreement of Merger dated May 14, 1998 by and among ACS
                        Systems, Inc., a California Corporation, a Delaware
                        corporation, Micro General Corporation, a Delaware
                        corporation and Fidelity National Financial, Inc., a
                        Delaware corporation, incorporated by reference from the
                        Company's report on Form 8-K dated as of May 14, 1998.

            10.23       Convertible Note Purchase Agreement between Micro
                        General Corporation and Cal West Service Corporation and
                        Dito Caree L.P. Holding dated October 27, 1998.

            10.24       Agreement and Plan of Reorganization dated November 17,
                        1998 by and among Micro General Corporation, a
                        California corporation, LDExchange.com, Inc. Joseph L.
                        Putegnant, III, Carolyn Hallinan and Europa
                        Telecommunications, incorporated by reference from the
                        Company's report on Form 8-K dated as of November 23,
                        1998.

            10.25       Inducement Agreement and Agreement to Transfer and
                        Reissue Detachable Warrants and Convertible Notes, by
                        and between John Snedegar, Cal West Service Corporation
                        and Micro General Corporation, dated March 30, 1999.

            21          List of Subsidiaries

            23.1        Consent of KPMG LLP

            27          Financial Data Schedule
</TABLE>

(b)    REPORTS ON FORM 8-K. The Company filed reports on Form 8-K during the
       fourth quarter of 1998 as follows:

       Current report on Form 8-K dated November 17, 1998, related to the
acquisition of LDExchange.com, Inc.



                                       34
<PAGE>   37

                                   SIGNATURES


    Pursuant to the requirements of Section 13 or 15(d) of the Securities 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,
                                            A DELAWARE CORPORATION


  Date:  April 14, 1999                     By: /s/ John Snedegar
        ---------------------                  ---------------------------------
                                               John Snedegar
                                               Chief Executive Officer
                                                President
                                                (Principal Executive Officer)


       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
               Signature                        Title                        Date
               ---------                        -----                        ----
<S>                                     <C>                               <C>
        /s/ Patrick F. Stone            Chairman of the Board             April 14, 1999
-----------------------------------
        Patrick F. Stone


        /s/ William P. Foley            Director                          April 14, 1999
-----------------------------------
        William P. Foley


        /s/ Carl A. Strunk              Director                          April 14, 1999
-----------------------------------
        Carl A. Strunk


        /s/ Richard H. Pickup           Director                          April 14, 1999
-----------------------------------
        Richard H. Pickup


                                        Director                          April __, 1999
-----------------------------------
        George E. Olenik


        /s/ John Snedegar               Director                          April 14, 1999
-----------------------------------
        John Snedegar


        /s/ David N. Kenneally          Chief Accounting Officer          April 14, 1999
-----------------------------------
        David N. Kenneally
</TABLE>


<PAGE>   38

                                                                     SCHEDULE II


                   MICRO GENERAL CORPORATION AND SUBSIDIARIES

                 Valuation and Qualifying Accounts and Reserves

                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                        ------------------------------------------------------------
                                                         Additions
                                        Balance at      Charged to       Amounts   
                                         Beginning       Costs and      Written-off    Balance at
Classification                           of Period       Expenses         Period         End of
                                        ------------    ------------    -----------   --------------
<S>                                   <C>            <C>             <C>            <C>          
Year ended December 31, 1998:
    Allowance for doubtful accounts   $   321,844    $     247,437   $    83,345    $     485,936

Year ended December 31, 1997:
    Allowance for doubtful accounts       314,419           63,683        56,258          321,844

Year ended December 31, 1996:
    Allowance for doubtful accounts       235,157          134,428        55,166          314,419
</TABLE>



<PAGE>   39

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
------                                 -----------
<S>         <C>

3.1         Restated Articles of Incorporation of the Company, incorporated by
            reference from the Company's Annual Report on Form 10-K for the year
            ended December 25, 1988, as amended.

3.11        Restated Articles of Incorporation of the Company - Article Fourth
            of the Certificate of Incorporation, incorporated by reference from
            the Company's Annual Report on Form 10-K for the year ended December
            31, 1996.

3.2         Bylaws of the Company, incorporated by reference from the Company's
            Annual Report on Form 10-K for the year ended December 25, 1988, as
            amended.

10.1        Incentive Stock Option Plan and form of Incentive Stock Option
            Agreement in use prior to 1987, incorporated by reference to Exhibit
            10.1 from the Company's Annual Report on Form 10-K for the year
            1984; Option Plan and form of Incentive Stock Option Agreement in
            use commencing in 1987, incorporated by reference to Exhibit 10 from
            the Company's Annual Report on Form 10-K for the year ended December
            28, 1986.

10.1.1      1998 Stock Incentive Plan and 1998 Employee Stock Purchase Plan,
            incorporated by reference from Form S-8, registration number
            333-64289.

10.18       Convertible Note Purchase Agreement between Micro
            General Corporation and Cal West Service Corporation
            dated August 1, 1996, incorporated by reference from the
            Company's Annual Report on Form 10-K for the year ended
            December 31, 1996.

10.19       Convertible Note Purchase Agreement between Micro General
            Corporation and Dito Caree L.P. dated August 1, 1996, incorporated
            by reference from the Company's Annual Report on Form 10-K for the
            year ended December 31, 1996.

10.20       Loan Agreement and Agreement to issue Detachable Warrants between
            Micro General Corporation and Cal West Service Corporation and Dito
            Caree L.P. Holding dated November 25, 1997, incorporated by
            reference from the Company's Annual Report on Form 10-K for the year
            ended December 31, 1997.

10.22       Agreement and Plan of Reorganization dated as of May 14, 1998, among
            ACS Systems, Inc., Micro General Corporation, ACS Merger, Inc. and
            Fidelity National Financial, Inc., a Delaware corporation,
            incorporated by reference from the Company's report on Form 8-K
            dated as of May 14, 1998.

10.22.1     Agreement of Merger dated May 14, 1998 by and among ACS Systems,
            Inc., a California Corporation, a Delaware corporation, Micro
            General Corporation, a Delaware corporation and Fidelity National
            Financial, Inc., a Delaware corporation, incorporated by reference
            from the Company's report on Form 8-K dated as of May 14, 1998.

10.23       Convertible Note Purchase Agreement between Micro General
            Corporation and Cal West Service Corporation and Dito Caree L.P.
            Holding dated October 27, 1998.

10.24       Agreement and Plan of Reorganization dated November 17, 1998 by and
            among Micro General Corporation, a California corporation,
            LDExchange.com, Inc. Joseph L. Putegnant, III, Carolyn Hallinan and
            Europa Telecommunications, incorporated by reference from the
            Company's report on Form 8-K dated as of November 23, 1998.

10.25       Inducement Agreement and Agreement to Transfer and Reissue
            Detachable Warrants and Convertible Notes, by and between John
            Snedegar, Cal West Service Corporation and Micro General
            Corporation, dated March 30, 1999.

21          List of Subsidiaries

23.1        Consent of KPMG LLP

27          Financial Data Schedule
</TABLE>