<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549 - 0001

                                 ---------------

                                    Form 10-Q

(Mark One)

/X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                    FOR THE QUARTER ENDED JUNE 30, 2000

                                       Or

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 000-30271

                               PEC SOLUTIONS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                                54-1339972
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

  12750 FAIR LAKES CIRCLE, FAIRFAX, VA                               22033
(Address of principal executive offices)                           (Zip Code)

       Registrant's telephone number, including area code: (703) 679-4900

                                 ---------------

     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 the
filing requirements for the past 90 days. Yes [X] No [ ]

     As of August 4, 2000, 22,270,020 of the registrant's Common Stock, par
value $.01 per share, were outstanding.

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<PAGE>
                                       -1-

                               PEC SOLUTIONS, INC.
     QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                            PAGE
<S>                                                                                         <C>
    PART I. FINANCIAL INFORMATION
    Item 1. Unaudited Financial Statements:
    Unaudited Balance Sheets -- June 30, 2000 and December 31, 1999......................... 3
    Unaudited Statements of Income -- Three months ended June
           30, 2000 and 1999................................................................ 4
    Unaudited Statements of Income -- Six months ended June 30, 2000 and 1999............... 5
    Unaudited Statements of Cash Flows  -- Six months ended June 30, 2000
            and 1999........................................................................ 6
    Notes to Financial Statements........................................................... 7
    Item 2. Management's Discussion and Analysis of Financial Condition and Results of
         Operations......................................................................... 9
      Item 3. Qualitative and Quantitative Disclosure about Market Risk.................... 17
    PART II. OTHER INFORMATION
    Items 1 -- 6........................................................................... 18
    Signatures............................................................................. 20

</TABLE>

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<PAGE>
                                       -2-

                          PART I: FINANCIAL INFORMATION

Item 1: Unaudited Financial Statements

                               PEC SOLUTIONS, INC.
                            UNAUDITED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                          AS OF       AS OF
                                                         JUNE 30,    DEC. 31,
                                                          2000         1999
                                                        ----------  ----------
                                                              (UNAUDITED)

                                     ASSETS
<S>                                                       <C>       <C>
 Current assets:
      Cash and cash equivalents .......................   $30,774   $ 7,981
      Short-term investments ..........................     7,580      --
      Accounts receivable, net ........................    11,828    13,241
      Other current assets ............................     1,977       924
                                                          -------   -------
           Total current assets .......................    52,159    22,146
 Property and equipment, net ..........................     2,034     1,507
 Other assets .........................................     1,017       747
                                                          -------   -------
           Total assets ...............................   $55,210   $24,400
                                                          =======   =======

             LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
      Accounts payable and accrued expenses ...........   $ 2,250   $ 2,425
      Advanced  payments on contracts .................       955     1,473
      Dividends payable ...............................      --         413
      Retirement plan contribution payable ............       502      --
      Accrued payroll .................................     2,803     3,249
      Accrued vacation ................................     1,240       903
      Other current liabilities .......................       421       373
                                                          -------   -------
           Total current liabilities ..................     8,171     8,836
Long-term liabilities:
      Supplemental retirement program liability .......       391       281
      Deferred rent payable ...........................       215      --
                                                          =======   =======
           Total long-term liabilities ................       606       281
                                                          =======   =======
           Total liabilities ..........................     8,777     9,117
                                                          -------   -------

 Commitments and contingencies:

 Stockholders' equity
      Undesignated capital stock, 10,000,000 shares
            authorized ................................      --        --
      Common stock, $0.01 par value, 75,000,000 shares
           authorized, 22,252,620 and 17,706,372 shares
           issued and outstanding, respectively .......       223       177
      Additional paid-in capital ......................    28,548       601
      Retained earnings ...............................    17,662    14,505
                                                          -------   -------
          Total stockholders' equity ..................    46,433    15,283
                                                          -------   -------
          Total liabilities and stockholders' equity ..   $55,210   $24,400
                                                          =======   =======

</TABLE>

                       See notes to financial statements (unaudited).

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<PAGE>
                                      -3-

                               PEC SOLUTIONS, INC.
                         UNAUDITED STATEMENTS OF INCOME
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                              THREE MONTHS ENDED    SIX MONTHS ENDED
                                              ------------------    ----------------
                                                JUNE 30,  JUNE 30, JUNE 30,  JUNE 30,
                                                 2000      1999     2000       1999
<S>                                            <C>       <C>       <C>       <C>
Revenues ...................................   $16,614   $13,386   $32,196   $25,199
                                               -------   -------   -------   -------
Operating costs and expenses:
     Direct costs ..........................     9,027     7,462    17,930    14,451
     General and administrative expenses ...     4,640     3,143     8,581     6,038
     Sales and marketing expenses ..........       594       432     1,134       907
                                               -------   -------   -------   -------
          Total operating costs and expenses    14,261    11,037    27,645    21,396
                                               -------   -------   -------   -------
Operating income ...........................     2,353     2,349     4,551     3,804
Other income, net ..........................       473        31       588        78
                                               -------   -------   -------   -------
Income before income taxes .................     2,826     2,380     5,139     3,882
Provision for income taxes .................     1,082       905     1,982     1,475
                                               -------   -------   -------   -------
Net income .................................   $ 1,744   $ 1,475   $ 3,157   $ 2,407
                                               -------   -------   -------   -------
Earnings per share:
     Basic .................................   $  0.08   $  0.09   $  0.16   $  0.14
                                               -------   -------   -------   -------
     Diluted ...............................   $  0.07   $  0.07   $  0.14   $  0.12
                                               -------   -------   -------   -------
Weighted average shares used in
  computing earnings per share:

     Basic .................................    21,583    16,979    19,916    17,066
                                               -------   -------   -------   -------
     Diluted ...............................    24,879    19,907    23,346    19,901
                                               -------   -------   -------   -------

</TABLE>

               See notes to financial statements (unaudited).


<PAGE>
                                       -4-

                               PEC SOLUTIONS, INC.
                       UNAUDITED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                  SIX MONTHS ENDING
                                                                            -------------------------
                                                                                 JUNE 30,    JUNE 30,
                                                                                  2000        1999

<S>                                                                             <C>         <C>
        Cash flows from operating activities:
             Net income .....................................................   $  3,157    $  2,407
             Adjustments to reconcile net income to net cash provided by
                  operating activities:
                  Depreciation ..............................................        329         358
                  Deferred rent .............................................        215        --
             Changes in operating assets and liabilities:
                  Accounts receivable, net ..................................      1,413         164
                  Other current assets ......................................     (1,053)       (463)
                  Other assets ..............................................       (270)       (168)
                  Accounts payable and accrued expenses .....................       (175)       (210)
                  Advance payments on contracts .............................       (518)        125
                  Retirement plan contribution payable ......................        502        (899)
                  Accrued payroll ...........................................       (446)       (163)
                  Accrued vacation ..........................................        337         226
                  Other current liabilities .................................        532         113
                  Supplemental retirement program liability .................        110          81
                                                                                --------    --------
                      Net cash provided by operating activities .............      4,133       1,571
                                                                                --------    --------
        Cash flows from investing activities:
                  Purchases of property and equipment .......................       (856)       (351)
                  Proceeds from sale of  property and equipment .............       --             6
                  Purchases of short-term investments .......................     (7,580)       --
                                                                                --------    --------
                      Net cash used by investing activities .................     (8,436)       (345)
                                                                                --------    --------
        Cash flows from financing activities:
                  Dividends paid ............................................       (413)       (348)
                  Proceeds from issuance of common stock ....................     28,387          58
                  Repurchases of common stock ...............................       --        (1,262)
                  Common stock offering costs ...............................       (878)       --
                  Notes payable .............................................       --           398
                                                                                --------    --------
                        Net cash provided (used) by financing activities ....     27,096      (1,154)
                                                                                --------    --------
        Net increase in cash ................................................     22,793          72
        Cash and cash equivalents at beginning of period ....................      7,981       5,367
                                                                                --------    --------
        Cash and cash equivalents at end of period ..........................   $ 30,774    $  5,439
                                                                                ========    ========
        Income taxes paid ...................................................   $  2,227    $  1,794
                                                                                --------    --------
        Interest paid .......................................................   $   --      $     25
                                                                                --------    --------

</TABLE>

                 See notes to financial statements (unaudited).

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<PAGE>
                                      -5-

                               PEC SOLUTIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000
                                   (UNAUDITED)
              (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

1.   Financial Statements

     The accompanying unaudited financial statements have been prepared in
accordance with accounting standards generally accepted in the United States for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally in the United States have been omitted. In the opinion
of management, all adjustments, consisting of normally recurring accruals,
considered necessary for a fair presentation have been included. It is
suggested that these condensed financial statements be read in conjunction
with the Company's audited financial statements for the years ended December
31, 1998 and 1999 and for each of the three years in the period ended
December 31, 1999 included on Form S-1, as amended, as filed with the
Securities and Exchange Commission. The results of operations for the three
months and six months ended June 30, 2000, are not necessarily indicative of the
operating results to be expected for the full year.

2.   Initial Public Offering

     The Company completed an initial public offering of common stock during
April 2000. The Company sold 3,000,000 shares of common stock generating $25,605
in proceeds to the Company, net of offering expenses.

3.   Accounts Receivable

     Accounts receivable consist of the following as of:

<TABLE>
<CAPTION>

                                               JUNE 30,          DECEMBER 31,
                                                2000                 1999
                                             -----------          -----------
                                             (Dollars in thousands, unaudited)
<S>                                          <C>                  <C>
   Billed accounts receivable                $    11,153          $    11,854
   Unbilled accounts receivable                    1,436                2,225
   Progress payments                                (583)                (645)
                                             -----------          -----------
                                                  12,006               13,434
   Allowance for doubtful accounts                  (178)                (193)
                                             -----------          -----------
   Accounts receivable, net                  $    11,828          $    13,241
                                             ===========          ===========

</TABLE>

     Unbilled accounts receivable comprise recognized recoverable costs and
accrued profits on contracts for which billings had not been presented to
clients as of the Balance Sheet date. Management anticipates the collection of
these amounts within 90 days of the Balance Sheet date. Payments to the Company
on contracts with agencies and departments of the U.S. Government are subject to
adjustment upon audit by the U.S. Government. All years subsequent to 1995 are
subject to U.S. Government audit. Management believes the effect of audit
adjustments, if any, on periods not yet audited, will not have a material effect
on the financial statements.

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<PAGE>

                                       -6-


4.   Net Income Per Share

     Basic and diluted earnings per share for the three months and six months
ended June 30, 1999 and 2000 were determined as follows:

<TABLE>
<CAPTION>


                                 Three Months Ended June 30, 1999    Six Months Ended June 30, 1999
                                 --------------------------------    ------------------------------
                                 Net        Shares     Per Share      Net        Shares    Per Share
                               Income                                Income
                             ----------   ----------   ---------  ----------   ----------  ---------
<S>                          <C>          <C>          <C>        <C>          <C>          <C>
Basic EPS ................   $    1,475   16,978,573   $   0.09   $    2,407   17,066,086   $   0.14
Effect of dilutive options         --      2,928,399      (0.02)      --        2,834,880      (0.02)
                             ----------   ----------   --------   ----------   ----------   --------
Diluted EPS ..............   $    1,475   19,906,972   $   0.07   $    2,407   19,900,966   $   0.12
                             ==========   ==========   ========   ==========   ==========   ========

</TABLE>

<TABLE>
<CAPTION>

                                 Three Months Ended June 30, 2000    Six Months Ended June 30, 2000
                                 --------------------------------    ------------------------------
                                 Net        Shares     Per Share      Net        Shares    Per Share
                               Income                               Income
                             ----------   ----------   ---------  ----------   ----------  ---------
<S>                          <C>          <C>          <C>        <C>          <C>          <C>
Basic EPS ................   $    1,744   21,583,476   $   0.08   $    3,157   19,916,353   $   0.16
Effect of dilutive options         --      3,295,376      (0.01)        --      3,429,728      (0.02)
                             ----------   ----------   ---------  ----------   ----------  ---------
Diluted EPS ..............   $    1,744   24,878,852   $   0.07   $    3,157   23,346,081   $   0.14
                             ==========   ==========   ========   ==========   ==========   ========

</TABLE>

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<PAGE>
                                      -7-

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

Overview

     PEC Solutions is a professional services firm specializing in high-end
solutions that help government organizations capitalize on the Internet and
other advanced technologies. We migrate paper-intensive procedures to
web-enabled processes using eGovernment solutions that help our clients enhance
their productivity and improve the services they offer to the public. As a total
solutions provider, we address the full technology lifecycle, including
formulating technology strategies, creating business solutions, performing
long-term operational management and continuing enhancement of the solution.

     We derive substantially all of our revenues from fees for consulting
services. We generate these fees from contracts with various payment
arrangements, including time and materials contracts, fixed-price contracts and
cost-reimbursable contracts. During the three months and six months ended June
30, 2000, revenues from these contract types were approximately 67%, 21% and
12%, and 65%, 23% and 12%, respectively, of total revenues. We typically issue
invoices monthly to manage outstanding accounts receivable balances. We
recognize revenues on time and materials contracts as the services are provided.
We recognize revenues on fixed-price contracts using the percentage of
completion method as services are performed over the life of the contract, based
on the costs we incur in relation to the total estimated costs. We recognize and
make provisions for any anticipated contract losses at the time we know and can
estimate them. Fixed-price contracts are attractive to clients and, while
subject to increased risks, provide opportunities for increased margins. We
recognize revenues on cost-reimbursable contracts as services are provided.
These revenues are equal to the costs incurred in providing these services plus
a proportionate amount of the fee earned. We have historically recovered all of
our costs on cost-reimbursable contracts, which means we have lower risk and our
margins are lower on these contracts.

     Our historical revenue growth is attributable to various factors, including
an increase in the size and number of projects for existing and new clients.
Existing clients from the previous year generated approximately 93% and 95% of
our revenues in the three months and six months ended June 30, 2000,
respectively. As of June 30, 2000, we had 477 employees.

     In the three months and six months ended June 30, 2000, we derived
approximately 41% of our revenues through relationships with prime contractors,
who contract directly with the end-client and subcontract with us. In most of
these engagements, we retain full responsibility for the end-client relationship
and direct and manage the activities of our contract staff.

     Our most significant expense is direct costs, which consist primarily of
project personnel salaries and benefits, and direct expenses incurred to
complete projects. Our direct costs as a percentage of revenues are also related
to the utilization rate of our consulting employees. We manage utilization by
frequently monitoring project requirements and timetables. The number of
consulting employees assigned to a project will vary according to the size,
complexity, duration and demands of the project.

     General and administrative expenses consist primarily of costs associated
with our executive management, finance and administrative groups, human
resources, unassigned consulting employees, employee training, occupancy costs,
depreciation and amortization, travel, and all other branch and corporate costs.

     Sales and marketing expenses include the costs of sales and marketing
personnel and costs associated with marketing and bidding on future projects.

     Other income consists primarily of interest income earned on our cash, cash
equivalents and marketable securities.

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<PAGE>

                                      -8-


Results of Operations

     The following table sets forth certain financial data as a percentage of
revenues for the periods indicated.

<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED               SIX MONTHS ENDED
                                                        ---------------------------------------------------------------
                                                        JUNE 30, 2000   JUNE 30, 1999    JUNE 30, 2000    JUNE 30, 1999
                                                                             (Dollars in thousands)
<S>                                                        <C>              <C>            <C>
Statement of Income:
Revenues.............................................       $16,614          $13,386         $32,196         $25,199
Direct costs.........................................         9,027            7,462          17,930          14,451
                                                            -------          -------         -------         -------
Gross profit (a).....................................         7,587            5,924          14,266          10,748
                                                            -------          -------         -------         -------
Other operating costs and expenses:
General and administrative expenses..................         4,640            3,143           8,581           6,038
Sales and marketing expenses.........................           594              432           1,134             907
                                                            -------          -------         -------         -------
        Total other operating costs and expenses.....         5,234            3,575           9,715           6,945
                                                            -------          -------         -------         -------
Operating income.....................................         2,353            2,349           4,551           3,804
Other income, net....................................           473               31             588              78
                                                            -------          -------         -------         -------
Income before income taxes............................        2,826            2,380           5,139           3,882
Provision for income taxes............................        1,082              905           1,982           1,475
                                                            -------          -------         -------         -------
Net income............................................      $ 1,744          $ 1,475         $ 3,157         $ 2,407
                                                            =======          =======         =======         =======

As a Percentage of Revenues:

Revenues...............................................       100.0%           100.0%          100.0%          100.0%
Direct costs...........................................        54.3             55.7            55.7            57.3
                                                            -------          -------         -------         -------
Gross profit (a).......................................        45.7             44.3            44.3            42.7
                                                            -------          -------         -------         -------
Other operating costs and expenses:
     General and administrative expenses...............        27.9             23.5            26.7            24.0
     Sales and marketing expenses......................         3.6              3.2             3.5             3.6
                                                            -------          -------         -------         -------
         Total other operating costs and expenses......        31.5             26.7            30.2            27.6
                                                            -------          -------         -------         -------
Operating income.......................................        14.2             17.6            14.1            15.1
Other income, net......................................         2.8              0.2             1.8              .3
                                                            -------          -------         -------         -------
Income before income taxes.............................        17.0             17.8            15.9            15.4
Provision for income taxes.............................         6.5              6.8             6.1             5.8
                                                            -------          -------         -------         -------
Net income.............................................        10.5%            11.0%            9.8%            9.6%
                                                            =======          =======         =======         =======

</TABLE>

--------------------------

(a)  Gross profit represents revenues less direct costs, which consist primarily
     of project personnel salaries and benefits and direct expenses incurred to
     complete projects.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH
     THE THREE MONTHS ENDED JUNE 30, 1999

     REVENUES. For the three months ended June 30, 2000, the Company's total
revenues increased by 24.1%, or $3.2 million over the same period last year.
The increase in revenues primarily reflects an increase in the volume of
services to existing clients.


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<PAGE>

                                      -9-


     DIRECT COSTS.  For the three months ended June 30, 2000, direct costs
increased by 21.0%, or $1.6 million, over the same period last year.  The
increase was due primarily to an increase in project personnel to 408 as of
June 30, 2000 as compared to 358 as of June 30, 1999. Direct costs decreased
as a percentage of revenues for the period ended June 30, 2000, to 54.3% due
to normal fluctuations in labor and other direct costs.

     GROSS PROFIT. Gross profit increased by 28.1% to $7.6 million in the three
months ended June 30, 2000 from $5.9 million in the three months ended June 30,
1999. Gross profit as a percentage of revenues increased to 45.7% in the three
months ended June 30, 2000 from 44.3% in the three months ended June 30,1999, as
direct costs grew at a slower rate than revenues due to normal fluctuations in
labor and other direct costs.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 47.6% to $4.6 million in the three months ended June 30, 2000 from
$3.1 million in the three months ended June 30, 1999. Facility costs increased
in the current quarter due to the opening of the second phase of our new offices
in Fairfax, Virginia. Our total general and administrative headcount increased
to 69 employees as of June 30, 2000 compared to 42 employees as of June 30,
1999, consistent with the Company's plans.

     SALES AND MARKETING. Sales and marketing expenses increased 37.5% to $0.6
million in the three months ended June 30, 2000 from $0.4 million in the three
months ended June 30, 1999. This increase was due to an increase in our
marketing efforts.

     OPERATING INCOME. Operating income remained constant compared to the three
months ended June 30, 1999. This was due primarily to increased revenues and
increased costs during the period.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH
     THE SIX MONTHS ENDED JUNE 30, 1999

     REVENUES. For the six months ended June 30, 2000, the Company's total
revenues increased by 27.8%, or $7.0 million, over the same period last year.
The increase in revenues primarily reflects an increase in the volume of
services to existing clients.

     DIRECT COSTS. For the six months ended June 30, 2000, direct costs
increased by 24.1%,or $3.5 million, over the same period last year. The increase
was due primarily to an increase in project personnel to 408 as of June 30, 2000
as compared to 358 as of June 30, 1999. Direct costs decreased as a percentage
of revenues to 55.7% due to normal fluctuations in labor and other direct costs.


--------------------------------------------------------------------------------

<PAGE>

                                      -10-


     GROSS PROFIT. Gross profit increased by 32.7% to $14.3 million in the six
months ended June 30, 2000 from $10.7 million in the six months ended June 30,
1999. Gross profit as a percentage of revenues increased to 44.3% in the six
months ended June 30, 2000 from 42.7% in the six months ended June 30, 1999, as
direct costs grew at a slower rate than revenues due to normal fluctuations in
labor and other direct costs.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by 42.1% to $8.6 million in the six months ended June 30, 2000 from
$6.0 million in the six months ended June 30, 1999. Facility costs increased in
the six months ended June 30, 2000 due to the opening of both phases I & II of
our new offices in Fairfax, Virginia. Our total general and administrative
headcount increased to 69 employees as of June 30, 2000 compared to 42 employees
as of June 30, 1999, consistent with the Company's plans.

     SALES AND MARKETING. Sales and marketing expenses increased 25.0% to $1.1
million in the six months ended June 30, 2000 from $0.9 million for the six
months ended June 30, 1999. This increase was due to an increase in our
marketing efforts.

     OPERATING INCOME. Operating income increased 19.6% for the six months ended
June 30, 2000 compared to the six months ended June 30, 1999. This increase was
due primarily to increased revenues during the period.


     Our revenues and operating results may be subject to significant variation
from quarter to quarter depending on a number of factors, including the progress
of contracts, revenues earned on contracts, the number of billable days in a
quarter, the timing of the pass-through of other direct costs, the commencement
and completion of contracts during any particular quarter, the schedule of the
government agencies for awarding contracts, the term of each contract that we
have been awarded and general economic conditions. For example, revenues in the
first quarter of 1999 were lower than the fourth quarter of 1998 due to two
fewer billable days in the first quarter, and the inclusion in the fourth
quarter's revenues of a larger than usual amount of other direct costs to be
passed through to clients. Because a significant portion of our expenses, such
as personnel and facilities costs, are fixed in the short term, successful
contract performance and variation in the volume of activity as well as in the
number of contracts commenced or completed during any quarter may cause
significant variations in operating results from quarter to quarter.

     The federal government's fiscal year ends September 30. If a budget for the
next fiscal year has not been approved by that date, our clients may have to
suspend engagements that we are working on until a budget has been approved.
Such suspensions may cause us to realize lower revenues in the fourth quarter of
the year. Further, a change in Presidential administrations and in senior
government officials may negatively affect the rate at which the federal
government purchases technology.

     As a result of the factors above, period to period comparisons of our
revenues and operating results may not be meaningful. You should not rely on
these comparisons as indicators of future performance as no assurances can be
given that quarterly results will not fluctuate, causing a material adverse
effect on our operating results and financial condition.

     Liquidity and Capital Resources

     We have funded our operations since inception primarily through cash
generated from operations and the sale of common stock to employees. Net cash
provided by operating activities was $4.1 million for the six months ended June
30, 2000. Cash provided by operating activities was primarily from net income,
adjusted for working capital changes.

     Net cash used by investing activities was $8.4 million for the six months
ended June 30, 2000. During the six months ended June 30, 2000, we purchased
$0.9 million of property and equipment and $7.6 million of short-term
investments.


--------------------------------------------------------------------------------

<PAGE>

                                      -11-


     Net cash provided by financing activities was $27.1 million for the six
months ended June 30, 2000. During the six months ended June 30, 2000, we sold
$28.4 million of common stock. We incurred $0.9 million of costs associated with
the April 2000 offering of common stock in the six months ended June 30, 2000

     Although dividends have been paid in prior years, including $0.4 million in
six months ended June 30, 2000, which were accrued at December 31, 1999, we
expect to retain future earnings, if any, for use in the operation and expansion
of our business and do not anticipate paying any further cash dividends in the
foreseeable future. Under the terms of our stock option agreement and plan, we
have purchased shares of stock from employees upon their termination of
employment. We have terminated these terms and will no longer acquire shares
from terminating employees.

     We believe that our current cash position is adequate for our short-term
and long-term working capital and capital expenditure needs.


     We maintain a $2.7 million line of credit with Bank of America, which bears
interest at the bank's prime rate and expires on April 30, 2001. We expect to
renew our line of credit when it expires. As of June 30, 2000, we had no
borrowings outstanding under the line of credit. We did have outstanding $1.29
million in letters of credit in lieu of rent deposits.

     Under some of our fixed-price contracts, we receive advance payments for
work to be performed in future months. If we do not perform the work, the
unearned portion of these advances will be returned to our clients. By the end
of the second quarter of 2000, our accounts receivable turn over rate, net of
advance payments on contracts, was approximately five times a year. This rate
has improved over the last eight quarters, thus increasing our cash flow. At
this collection rate management believes cash generated through operations will
be sufficient to fund short and long-term cash needs.

Year 2000 Compliance

     Although we have not experienced any significant failures or problems in
connection with the Year 2000 date change in either our software or the systems
we have developed for our clients, our clients may still experience significant
problems that may require them to divert significant resources to remediation
instead of to new eGovernment solutions. This could delay our ability to
generate new business and additional revenues.

     Furthermore, undiscovered Year 2000 problems may also affect software or
code that we develop or third-party software products that are incorporated into
the information systems solutions we create for our clients. Our clients license
software directly from third parties, and we do not guarantee that the software
licensed from these suppliers is Year 2000 compliant. However, if we fail to
provide our clients Year 2000 compliant information systems solutions we could
suffer financial loss, harm to our reputation and liability to others and could
seriously harm our business, financial condition and operating results.

Recent Accounting Pronouncements

     Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101) was issued on December 3, 1999. SAB 101 provides guidance
on the recognition, presentation, and disclosure of revenue in financial
statements filed with the SEC. SAB 101, as amended, delays the implementation
date until no later than the fourth quarter of fiscal year 2000. The Company
does not believe that the implementation of SAB 101 will have any impact on its
operation results.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

     The matters discussed in this Form 10-Q include forward-looking statements
that involve risks or uncertainties. While forward-looking statements are
sometimes presented with numerical specificity, they are based on various
assumptions made by management regarding future circumstances over many of which
the Company has little or no control. Forward-looking statements may be
identified by words including "anticipate," "believe," "estimate," "expect" and
similar expressions. The Company cautions readers that forward-looking
statements, including without limitation, those relating


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                                      -12-


to the Company's future business prospects, revenues, working capital,
liquidity, and income, are subject to certain risks and uncertainties that would
cause actual results to differ materially from those indicated in the
Forward-Looking Statements. Factors that could cause actual results to differ
from Forward-Looking Statements include the concentration of the Company's
revenues from government clients, risks involved in contracting with the
government, difficulties the Company may have in attracting, retaining and
managing professional and administrative staff, fluctuations in quarterly
results, risks related to acquisitions, risks related to competition and the
Company's ability to continue to win and perform efficiently on contracts, and
other risks and factors identified from time to time in the Company's reports
filed with the SEC, including those identified under the section entitled "Risk
Factors" in the Conpany's Registration Statement on Form S-1 (SEC File No.
333-95331) which hereby is incorporated by reference. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

    None



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                                      -13-


                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     During the quarter ended June 30, 2000, we sold an aggregate of
65,700 shares of common stock at purchase prices ranging from $0.78 to
$1.68 per share, for an aggregate consideration of $80,133 upon exercise
of stock options granted under our stock option agreement and our
nonqualified stock option plan.  For the six months ended June 30, 2000, we sold
an aggregate of 1,541,248 shares of common stock at purchase prices ranging from
$0.78 to $3.05 per share, for an aggregate consideration of $1,880,559 upon
exercise of stock options granted under our stock option agreement and our
nonqualified stock option plan.

     In April 2000, we commenced and completed a firm commitment underwritten
initial public offering of 3,000,000 shares of our common stock at a price of
$9.50 per share. The shares were registered with the Securities and Exchange
Commission pursuant to a registration statement on Form S-1 (No. 333-95331),
which was declared effective on April 19, 2000. The public offering was
underwritten by a syndicate of underwriters led by Donaldson, Lufkin & Jenrette
Securities Corporation; Chase Securities Inc.; Legg Mason Wood Walker,
Incorporated; and DLJDIRECT Inc. as their representatives. After deducting
underwriting discounts and commissions of approximately $2 million and expenses
of approximately $0.9 million, we received net proceeds of $25.6 million.

     The primary purposes of this offering were to create a public market for
our common stock, to improve the incentive mechanism for our professionals
through stock options, to obtain additional equity capital and to facilitate
future access to public markets. We expect to use the net proceeds from this
offering for general corporate purposes, including working capital. Management
will have broad discretion in the allocation of the net proceeds. We may also
use a portion of the net proceeds to acquire businesses that are complementary
to ours. We have no current plans, agreements or commitments for, and are not
currently engaged in any negotiations with respect to, any such transaction.
Pending their use, the proceeds of this offering have been invested in
short-term, investment grade, interest-bearing securities.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

    None

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

    None

ITEM 5. OTHER INFORMATION

    None

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                                      -14-


ITEM 6 (A) EXHIBITS


     EXHIBIT
     NUMBER         EXHIBIT DESCRIPTION
     -------        -------------------

      3.1           Certificate of Incorporation

      3.2           By-Laws

     10.1           Office Lease Agreement between Building IV
                    Associates L.P. and the Registrant

     10.2           Amendment No. 1 to Office Lease Agreement between
                    Building IV Associates L.P. and the Registrant

     10.3           Office Lease Agreement between Building V
                    Associates L.P. and the Registrant

     10.4           Employment Agreement between the Registrant and
                    David C. Karlgaard, dated January 1, 2000

     10.5           Employment Agreement between the Registrant and
                    Paul G. Rice, dated January 1, 2000

     10.6           Employment Agreement between the Registrant and
                    Alan H. Harbitter, dated January 1, 2000

     10.7           Employment Agreement between the Registrant and
                    Stuart R. Lloyd, dated December 31, 1998

     10.8           2000 Stock Incentive Plan

     10.9           1995 Nonqualified Stock Option

     10.10          1987 Stock Option Agreement, as amended

     10.11          Nonqualified Executive Supplemental Retirement
                    Program Agreement dated December 1998

     10.12          2000 Employee Stock Option Plan

     10.13          Amended and Restated Loan Agreement between the
                    Registrant and NationsBank, N.A.

     27*            Financial Data Schedule


*   Filed herewith

All other exhibits incorporated herein by reference to the Company's
Registration Statement on Form S-1, No. 333-41517.

     (b) Reports on Form 8-K

     None.


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                                      -15-


                                   Signatures


     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.



                         BY:            /s/ STUART R. LLOYD
                            -----------------------------------------------
                                             Stuart R. Lloyd
                            CHIEF FINANCIAL OFFICER, SENIOR VICE PRESIDENT AND
                           DIRECTOR (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)



August 4, 2000

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