UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              Washington, D.C. 20549

                                                     Form 10-Q

 (Mark One)

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

For the quarterly period ended September 30, 1998
                                                        OR

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

For the transition period from                                         to

Commission File Number 0-25372

                                COTELLIGENT, INC.
             (Exact name of registrant as specified in its charter)


             Delaware                                        94-3173918
 (State of other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                         Identification No.)

 101 California Street, Suite 2050
    San Francisco, California                                   94111
(Address of principal executive offices)                      (Zip Code)

                                 (415) 439-6400
              (Registrant's telephone number, including area code)

                             Cotelligent Group, Inc.

              (Former name, former address and former fiscal year,
                          if changed since last report)


     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 

At November 13, 1998 there were 13,770,351 shares of common stock outstanding.


<PAGE>


                                COTELLIGENT, INC.


                                      INDEX

                         Part I - Financial Information

<TABLE>
<CAPTION>
Item 1. Financial Statements                                                                              PAGE

<S>                                                                                                      <C>   
Cotelligent, Inc.
         Consolidated Balance Sheets at September 30, 1998 (Unaudited)and March 31, 1998                       3
         Consolidated Statements of Operations for the Three and Six Months Ended
            September 30, 1998 and 1997 (Unaudited)                                                            4
         Consolidated Statements of Cash Flows for the Six Months Ended
            September 30, 1998 and 1997 (Unaudited)                                                            5
         Notes to Consolidated Financial Statements                                                            6



Item 2. Management's Discussion and Analysis of
         Financial Condition and Results of Operations                                                         11


                           Part II - Other Information
Signatures                                                                                                     18

</TABLE>

<PAGE>


                                COTELLIGENT, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
<TABLE>
<CAPTION>


                                                                       September 30,          March 31,
                                                                            1998                1998
                                                                      -----------------    ----------------
                             ASSETS                                     (Unaudited)
<S>                                                                   <C>                 <C>    
Current assets:
   Cash and cash equivalents ...................................      $ 22,371            $     40,528
    Accounts receivable, including unbilled accounts
     of $5,535 and $10,120 and net of allowance for doubtful
     accounts of accounts of $1,682 and $2,123,respectively ....        60,216                  48,982
   Notes receivable from officers ..............................           244                     230
   Deferred tax asset...........................................            29                      --
   Prepaid expenses and other ..................................         3,225                   2,292
                                                                      --------                --------
     Total current assets ......................................        95,946                  92,032
Property and equipment, net ....................................         8,829                   7,568
Goodwill, net of accumulated amortization of $580 and $359,
       respectively ............................................        28,555                  18,106
Other assets ...................................................           820                     853
                                                                      ========                ========
     Total assets ..............................................      $124,291            $    118,559
                                                                      ========                ========

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Short-term debt .............................................      $    149             $      192
   Accounts payable ............................................         8,366                  4,344
   Accrued compensation and related payroll liabilities ........        15,528                 15,268
   Income taxes payable ........................................         3,056                  3,171
   Deferred tax liabilities ....................................            --                    508
   Other accrued liabilities ...................................         2,479                  4,525
                                                                      --------               --------
     Total current liabilities .................................        29,566                 28,003
                                                                      --------               --------
Long-term debt .................................................           220                    199
Other long-term liabilities ....................................            14                     18
                                                                      --------               --------
     Total liabilities .........................................        29,800                 28,220
                                                                      --------               --------
Stockholders' equity:
    Preferred Stock, $0.01 par value; 500,000 shares authorized,
    no shares issued or outstanding.............................           --                      --

Common Stock, $0.01 par value; 100,000,000 shares authorized,
    13,767,182 and 14,057,884 shares issued and outstanding,
    respectively................................................           137                    141
Additional paid-in capital......................................        77,131                 80,335
Retained earnings...............................................        17,223                  9,863
                                                                      --------               --------
       Total stockholders' equity...............................        94,491                 90,339
                                                                      --------               --------
       Total liabilities and stockholders' equity...............      $124,291               $118,559
                                                                      ========               ========


</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.




<PAGE>


                                COTELLIGENT, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                Three Months                        Six Months
                                                             Ended September 30,                Ended September 30,
                                                          1998               1997              1998              1997
                                                     ---------------     -------------    ---------------    -------------


<S>                                                  <C>                  <C>              <C>                <C>       
Revenues........................................     $     79,728         $    58,566      $   152,778        $  112,870
Cost of services................................           55,917              41,239          108,100            79,426
                                                     -------------        ------------     ------------       -----------
     Gross profit ..............................           23,811              17,327           44,678            33,444
Selling, general and administrative expenses...            17,632              13,872           33,062            26,834
                                                     -------------        -------------    -------------      -----------
     Operating income...........................            6,179               3,455           11,616             6,610
Other income (expense):
     Interest expense ..........................               (1)                (73)             (24)             (210)
     Interest income............................              287                   -              619                 -
     Other .....................................               (3)                  -               (3)                -
                                                     -------------        -------------     -------------     ------------
        Total other income (expense)............              283                 (73)             590              (210)
                                                     ---------------     -------------      -------------    -------------
Income before provision for income taxes.......             6,462               3,382           12,206              6,400
Provision for income taxes.....................             2,617               1,352            4,846              2,560
                                                     ---------------     ------------       -------------     ------------ 
                                                      $     3,845        $      2,030       $    7,360       $      3,840
                                                     ===============     =============    ===============    =============

Earnings per share - basic and diluted.........       $      0.27        $       0.18       $     0.52        $       0.34
                                                     ===============     =============    ===============    =============

Weighted average shares outstanding -
      Basic...................................          14,055,396          11,314,751         14,077,764       11,318,660
                                                     ===============     =============       ============    ==============
      Diluted.................................          14,166,025          11,436,630         14,255,913       11,402,052
                                                     ===============     =============       ============    ==============


</TABLE>

















        The accompanying notes are an integral part of these consolidated
                             financial statements.


<PAGE>


                                                 COTELLIGENT, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
                                                    (Unaudited)
<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                September 30,
                                                                     ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------

<S>                                                                  <C>                 <C> 
Cash flows from operating activities:
     Net income.................................................      $     7,360         $       3,840
     Adjustments to reconcile net income to net cash provided  
       by  operating activities:
       Depreciation and amortization............................            2,298                   597
       Provision for doubtful accounts..........................              155                   471
       Loss on sale of assets...................................               25                     -
       Deferred income taxes, net...............................             (532)                  216
       Changes in current assets and liabilities:
          Accounts receivable ..................................          (10,424)              (11,847)
          Prepaid expenses and other............................             (927)                 (569)
          Accounts payable and accrued expenses.................            1,227                 7,636
          Income taxes payable .................................             (127)                  364
          Other liabilities ....................................               (4)                    -
        Changes in other assets.................................               22                   363
                                                                     ----------------    ----------------
              Net cash provided by operating activities                      (875)                1,071
                                                                     ----------------    ----------------

Cash flows from investing activities:
     Proceeds on sale of assets.................................              140                     -
     Purchase of business, net of cash acquired.................          (10,847)               (4,468)
     Purchases of property and equipment........................           (3,319)               (1,169)
                                                                     ----------------    ----------------
             Net cash used in investing activities..............          (14,026)               (5,637)
                                                                     ----------------    ----------------
Cash flows from financing activities:
     Net borrowings (repayments) on short term debt.............              (23)                4,118
     Net proceeds from issuance of Common Stock.................            1,457                   576
     Purchase of Common Stock...................................           (4,690)                    -
                                                                     ----------------    ----------------
             Net cash provided by (used in) financing                      (3,256)                4,694
activities......                                                     ----------------    ----------------
     Net increase (decrease) in cash and cash equivalents.......          (18,157)                  128
     Cash and cash equivalents at beginning of period...........           40,528                 2,904
                                                                     ----------------    ----------------
     Cash and cash equivalents at end of period..........            $     22,371           $     3,032
                                                                     ================    ================
Supplemental disclosures of cash flow information:
     Interest paid..............................................     $         26           $       196
     Income taxes paid..........................................     $      3,008           $     2,823
                                                                     


</TABLE>







        The accompanying notes are an integral part of these consolidated
                             financial statements.


<PAGE>


                                COTELLIGENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)
                                   (Unaudited)


Note 1 - Business Organization and Basis of Presentation

     Cotelligent,  Inc.  ("Cotelligent" or the "Company") was formed in February
1993 to  operate  software  professional  services  businesses  specializing  in
providing information technology ("IT") consultants to businesses. Cotelligent's
consulting practices are:  Professional Services - including staff augmentation;
Technology  Solutions  - custom  application  development;  Alliance  Services -
national  partnerships  with many leading  application  and  operating  software
companies;  Network  Design and  Management - intranet and internet  application
design and development; and Training and Education

         During the years  ended March 31,  1998  ("fiscal  1998") and March 31,
1997  ("fiscal  1997") the Company  issued  4,976,826  shares of Common Stock to
acquire ten businesses accounted for under the pooling-of-interests  method (the
"Pooled Companies"). The consolidated financial statements have been restated in
accordance  with  generally  accepted  accounting   principles  to  present  the
financial data as if Cotelligent  and these companies had always been members of
the same operating group.

         In addition,  during  fiscal years 1997,  1998 and the six months ended
September 30, 1998, the Company  acquired seven  businesses  accounted for under
the purchase method (the "Purchased  Companies") for aggregate  consideration of
$30,390  (362,998  shares of Common  Stock issued at fair market value of $7,464
and  $22,926  of  cash).  The  consolidated  financial  statements  include  the
operating results of these companies subsequent to their respective  acquisition
dates.

         All  of  the  businesses   acquired  since  formation  have  operations
substantially the same as the Company.


Note 2 - Summary of Significant Accounting Policies

         Interim Financial Statement Presentation

         The  accompanying  interim  financial  statements  do not  include  all
disclosures  included in the financial  statements as included on  Cotelligent's
Annual Report on Form 10-K for the year ended March 31, 1998 ("Form 10-K"),  and
therefore  these  Financial  Statements  should be read in conjunction  with the
financial statements included on Form 10-K.

         In the opinion of management, the interim financial statements filed as
part of this Quarterly Report on Form 10-Q reflect all  adjustments,  consisting
only of normal  recurring  accruals,  necessary for a fair  presentation  of the
financial  position  and the  results  of  operations  and of cash flows for the
interim periods presented.

         Comprehensive Income

     Effective  April 1,  1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards  Board  (SFAS) No. 130,  Reporting  Comprehensive  Income.
Except for net  income,  the  Company  does not have any  transactions  or other
economic events that qualify as  comprehensive  income as defined under SFAS No.
130.

Recent Accounting Pronouncements

         In June 1997, the Financial  Accounting Standards Board issued SFAS No.
131, Disclosures About Segments of an Enterprise and Related  Information.  SFAS
No. 131  introduces a new model for segment  reporting,  called the  "management
approach".  The management  approach is based on the manner in which  management
organizes segments within a company for making operating decisions and assessing
performance.  The  management  approach  replaces  the  notion of  industry  and
geographic  segments.  This statement is effective for financial  statements for
periods  beginning  after  December 15, 1997.  The Company  operates  within one
business  segment  and  therefore  SFAS No. 131 does not  affect  the  Company's
current reporting.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative  Instruments and for Hedging Activities.  SFAS No. 133
requires  derivatives  to be recognized in balance  sheets at  fair-value.  This
statement is effective for financial statements for periods beginning after June
15,  1999.  The  Company  does not  believe  that  adoption of SFAS No. 133 will
materially affect the Company's financial statements.


                                COTELLIGENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)


Note 3 - Changes in Stockholders' Equity
<TABLE>
<CAPTION>

                                                              
                                     Common Stock             Additional                           Total  
                              ----------------------------      Paid-In        Retained         Stockholders'
                                Shares          Amount          Capital         Earnings           Equity
                              ------------      ----------    ------------    -------------    ---------------
<S>                             <C>              <C>           <C>             <C>              <C>          
Balance at March 31,1998.....   14,057,884       $    141      $   80,335      $   9,863        $      90,339
Repurchase of Common Stock...     (351,000)            (4)         (4,690)             -               (4,694)
Issuance of Common Stock.....       60,298              -           1,486              -                1,486    
Net income...................            -              -               -          7,360                7,360
                              ============      ==========    ============    =============    ===============
Balance at September 30,       13,767,182       $     137      $    77,131     $  17,223        $      94,491
                              ============      ==========    ============    =============    ===============

</TABLE>

          During  fiscal 1999,  Cotelligent  acquired  one company  (acquired on
     September 16, 1998)  accounted for under the purchase  method for aggregate
     consideration of $11,000 of cash and resulted in the recognition of $10,900
     of goodwill, which is being amortized over a 30 year period. The results of
     these  acquisitions  have been included in the  Company's  results from the
     acquisition  date.  The  allocation of the purchase price to the underlying
     net assets acquired is based upon  preliminary  estimates of the fair value
     of the net assets,  which may be revised at a later date. It is anticipated
     that any purchase price allocation adjustments will be made within one year
     from the date of the  acquisition.  Management  does not  believe  that the
     final  allocations of the purchase price will have a material effect on the
     Company's  financial  position  or  results  of  operations.  The  purchase
     agreement  provides  for  additional   consideration   based  on  financial
     performance  of  the  acquired  company   subsequent  to  the  acquisition.
     Potential  earn-out  payments  are due in  fiscal  year  1999  and  will be
     considered  additional  purchase  price in the period the  earn-out  period
     ends.  See Pro  Forma  Results  (Note  4) for  consolidated  statements  of
     operations of purchased companies.


Note 4 - Pro Forma Results ("Purchased Companies and Pooled Companies")

     In accordance with disclosure  requirements under the Accounting Principles
Board Statement No. 16, the following "Pro Forma Results  ("Purchased  Companies
and Pooled  Companies")  consolidated  statements  of  operations  for the three
months ended September 30, 1998 and 1997 give effect to the  acquisitions of the
Pooled Companies and Purchased  Companies as if these  acquisitions had occurred
on the first day of the periods presented. These Pro Forma results for Purchased
Companies and Pooled Companies  consolidated  statements reflect adjustments for
the acquisitions of the Pooled Companies including:  compensation  differentials
to former  owners and  employees,  termination  of  contributions  to retirement
plans, elimination of non-recurring transaction costs related to the acquisition
of  businesses  accounted for under the  pooling-of-interests  method and income
taxes as if the entities were combined and subject to the effective  federal and
state statutory rates throughout the periods discussed.  Additionally, these Pro
Forma for  Purchased  Companies  and  Pooled  Companies  consolidated  financial
statements  reflect  adjustments for interest expense on cash  consideration and
amortization of goodwill resulting from the Purchased  Companies for all periods
prior to their acquisition.


<PAGE>


                                COTELLIGENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                Three Months
                                                                                    Ended
                                                                                September 30,
                                                                   ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------
               <S>                                                   <C>                 <C>               
                Revenues.......................................      $       81,455       $     65,466
                Cost of services...............................              56,933             45,616
                                                                     ----------------    ----------------
                       Gross profit............................              24,522             19,850
                Selling, general and administrative expenses...              17,918             14,933
                                                                     ----------------    ----------------
                Operating income...............................               6,604              4,917
                Other income (expense).........................                (61)               (420)
                                                                     ----------------    ----------------
                Income before provision for income taxes.......               6,543              4,498
                Provision for income taxes ....................               2,650              1,844
                                                                     ----------------    ----------------
                Net income.....................................       $       3,893        $     2,654  
                                                                     ================    ================
                Earnings per share basic and diluted...........       $        0.27        $      0.23
                                                                     ================    ================
                Weighted average shares outstanding -
                     Basic.....................................           14,084,704         11,322,569
                                                                     ================    ================    
                     Diluted...................................           14,166,025         11,367,474
                                                                     ================    ================ 

</TABLE>


<TABLE>
<CAPTION>

                                                                                 Six Months
                                                                                    Ended
                                                                                September 30,
                                                                     ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------
               <S>                                                   <C>                 <C>               
                Revenues........................................     $      156,624       $     127,639
                Cost of services................................            110,356              89,454
                                                                     ----------------    ----------------
                       Gross profit.............................             46,268              38,185
                Selling, general and administrative expenses....             33,799              28,848
                                                                     ----------------    ----------------
                Operating income................................             12,469               9,337
                Other income (expense)..........................               (98)                (899)
                                                                     ----------------    ----------------
                Income before provision for income taxes........             12,371               8,439
                Provision for income taxes......................              5,010               3,459   
                                                                     ----------------    ----------------
                Net income......................................     $        7,361        $      4,979
                                                                     ================    ================
                Earnings per share basic and diluted............     $         0.52       $        0.45
                                                                     ================    ================
                Weighted average shares outstanding -
                     Basic......................................          14,107,764         11,345,629
                                                                     ================    ================
                     Diluted....................................          14,255,913         11,457,362
                                                                     ================    ================

</TABLE>



Note 5 - Pro Forma Results ("Pooled Companies")

         The following  "Pro Forma  Results  ("Pooled  Companies")  reflect only
adjustments related to businesses  accounted for under the  pooling-of-interests
method  including:  compensation  differentials  to former owners and employees,
termination of contributions to retirement  plans,  elimination of non-recurring
transaction  costs related to the acquisition of businesses  accounted for under
the  pooling-of-interests  method  and  income  taxes  as if the  entities  were
combined  and  subject  to the  effective  federal  and  state  statutory  rates
throughout  the  periods  discussed.  Since  there were no  pooling-of-interests
acquisitions  during the quarter  ended  September  30, 1998,  pro forma are not
presented for this period.
<PAGE>

                                COTELLIGENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                   Three Months              Six Months
                                                                                      Ended                    Ended
                                                                              September 30,1997           September 30, 1997
                                                                              --------------------        -------------------

<S>                                                                            <C>                         <C>          
Revenues............................................................           $         58,566            $     112,870
Cost of services....................................................                     41,239                   79,426
                                                                               -------------------         ----------------
     Gross profit...................................................                     17,327                   33,454
Selling, general and administrative expenses........................                     13,367                   25,895
                                                                               -------------------         ----------------
     Operating income...............................................                      3,960                    7,559
Other income (expense)..............................................                        (73)                    (210)
                                                                               -------------------         ----------------
Income before provision for income taxes ...........................                      3,887                     7,349
Provision for income taxes .........................................                      1,594                     3,013
                                                                               -------------------         ----------------
Net income..........................................................           $          2,293            $        4,336
                                                                               ===================         =================
Earnings per share - basic and diluted..............................           $           0.20            $         0.38
                                                                               ===================         =================
Weighted average shares outstanding -
        Basic.......................................................                 11,318,660                 11,231,384
                                                                               ===================         ==================
        Diluted.....................................................                 11,331,355                 11,315,699
                                                                               ===================         ==================

</TABLE>

       Note 6 - Earnings Per Share

     Earnings per share were as follows:
<TABLE>
<CAPTION>

                                                             For the Quarter Ended September 30, 1998
                                                       ------------------------------------------------------
                                                                                                Per Share
                                                            Income             Shares             Amount
                                                       -----------------    --------------      ------------
     <S>                                               <C>                  <C>                 <C>
      Basic earnings per share-
      Net income available to common stockholders       $       3,845         14,084,703         $     0.27
      Options issued to directors and employees...                                81,322
                                                                            --------------
      Diluted earnings per share-
      Income available to common stockholders
          plus assumed conversions................      $        3,845        14,166,025         $     0.27
                                                                            ==============
</TABLE>
<TABLE>
<CAPTION>

                                                             For the Quarter Ended September 30, 1997
                                                       ------------------------------------------------------
                                                                                                 Per Share
                                                            Income             Shares             Amount
                                                       -----------------    --------------      ------------
      <S>                                              <C>                  <C>                 <C> 
      Basic earnings per share-
      Net income available to common stockholders       $       2,030          11,314,751        $     0.18
      Options issued to directors and employees.....                              121,879
                                                                            --------------
      Diluted earnings per share-
      Income available to common stockholders
          plus assumed conversions..................    $       2,030          11,436,630        $     0.18
                                                                            ==============


</TABLE>

<PAGE>


                                COTELLIGENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)
<TABLE>
<CAPTION>


                                                            For the Six Months Ended September 30, 1998
                                                       ------------------------------------------------------
                                                                                                Per Share
                                                            Income             Shares             Amount
     <S>                                               <C>                  <C>                 <C>            
      Basic earnings per share-
      Net income available to common stockholders       $       7,360          14,077,764        $     0.27
      Options issued to directors and employees.....                              178,149
                                                                            --------------
      Diluted earnings per share-
      Income available to common stockholders
          plus assumed conversions..................    $       2,030          14,255,913        $     0.27
                                                                            ==============

</TABLE>
<TABLE>
<CAPTION>

                                                            For the Six Months Ended September 30, 1997
                                                       ------------------------------------------------------
                                                                                                 Per Share
                                                            Income             Shares             Amount
                                                       -----------------    --------------      ------------
     <S>                                               <C>                  <C>                 <C>
      Basic earnings per share-
      Net income available to common stockholders        $      2,030          11,318,660         $    0.18
      Options issued to directors and employees.....                               83,392
                                                                            --------------
      Diluted earnings per share-
      Income available to common stockholders
          plus assumed conversions...................    $      2,030          11,436,630         $    0.18
                                                                            ==============

</TABLE>

Note 7 - Capital Stock

         In September 1998, the Board of Directors  authorized the repurchase of
up to 2.0 million shares of Common Stock, or 14% of the then outstanding shares.
During September 1998, the Company  repurchased  351,000 shares for a total cost
of $4.7 million.

Note 8 - Subsequent Events

     The  Company  acquired  two  businesses  during  October  in line  with the
Companies IT consulting  practices  for a  combination  of Common Stock and cash
which will be accounted for under the purchase method.




<PAGE>




                                     ITEM 2



                Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

Overview

     Cotelligent,  Inc.  ("Cotelligent" or the "Company") was formed in February
1993 to  acquire,  own and operate  software  professional  services  businesses
specializing  in  providing  information  technology  ("IT")  consultants  on  a
contract  basis and  consulting  and  outsourcing  services to  businesses  with
complex IT operations.  Cotelligent's  consulting  practices  are:  Professional
Services  -  including  staff  augmentation;   Technology   Solutions  -  custom
application  development;  Alliance  Services - national  partnerships with many
leading  application  and  operating  software  companies;  Network  Design  and
Management - intranet  and  internet  application  design and  development;  and
Training and Education

                  During the year ended March 31, 1997 ("fiscal 1997") and March
31, 1998 ("fiscal 1998") the Company acquired ten businesses accounted for under
the pooling-of-interests method. The consolidated financial statements have been
restated in accordance with generally accepted accounting  principles to present
the financial data as if Cotelligent and these companies had always been members
of the same operating group.

                  In addition,  during  fiscal  1997,  1998 and six months ended
September 30, 1998, the Company  acquired seven  businesses  accounted for under
the purchase method. The consolidated financial statements include the operating
results of these companies subsequent to their respective acquisition dates.

         Comparisons  to Pro Forma results for the same period of the prior year
as  presented  on  Note  5 of  the  accompanying  financial  statements  include
adjustments related to businesses  accounted for under the  pooling-of-interests
method  including:  compensation  differentials  to former owners and employees,
termination of contributions to retirement  plans,  elimination of non-recurring
transaction  costs related to the acquisition of businesses  accounted for under
the  pooling-of-interests  method  and  income  taxes  as if the  entities  were
combined  and  subject  to the  effective  federal  and  state  statutory  rates
throughout the periods discussed.  Comparisons to Pro Forma results for the same
period of the prior year as  presented on Note 4 of the  accompanying  financial
statements  include the pooled companies referred to above, in addition to those
companies purchased during the periods presented.

         The Company derives substantially all of its revenues from professional
service  activities.  The majority of these  activities are provided under "time
and  expense"  billing  arrangements,  and  revenues  are  recorded  as  work is
performed.  Revenues are directly related to the total number of hours billed to
clients and the  associated  hourly  billing  rates.  Hourly  billing  rates are
established for each service  professional  and such rates are a function of the
professional's skills,  experience and the type of work performed. The Company's
principal  costs  are   professional   compensation   directly  related  to  the
performance  of services and related  expenses.  Gross profits  (revenues  after
professional  compensation  and related  expenses)  are  primarily a function of
hours billed to clients per professional employee or consultant,  hourly billing
rates of those employees or consultants and employee or consultant  compensation
relative to those  billing  rates.  Gross  profits can be adversely  impacted if
service activities cannot be billed, if the Company is not effective in managing
its service  activities,  if fixed-fee  engagements (which historically have not
constituted a significant  portion of total revenues) are not properly priced or
if there are high levels of unutilized  time (work  activities not chargeable to
clients or unrelated  to client  services)  of  full-time  service  professional
employees.   Operating   income  (gross   profit  less   selling,   general  and
administrative  expenses) can be adversely impacted by increased  administrative
staff  compensation  or expenses  related to growing and expanding the Company's
business,  which may be  incurred  before  revenues  or  economies  of scale are
generated from such investment.

         As part of its  strategic  plan,  the Company  intends to acquire other
software professional  services businesses.  Should the Company be successful in
acquiring such  businesses,  the period in which such acquisition is consummated
could be  adversely  impacted  by costs  associated  with such  acquisition.  In
addition, financial periods subsequent to the completion of an acquisition could
be adversely  impacted by costs and activities  associated with the assimilation
and integration of the acquired company.

         As a  professional  services  organization,  the  Company  responds  to
service demands from its clients.  Accordingly,  the Company has limited control
over the  timing  and  circumstances  under  which its  services  are  provided.
Therefore,  the Company can experience  volatility in its operating results from
quarter to quarter.  The operating  results for any quarter are not  necessarily
indicative of the results for any future period.

     The Company has conducted a comprehensive review of its computer systems to
identify  the  systems  that could be  affected by the "Year 2000" issue and has
concluded that the Year 2000 problem will not pose any  significant  operational
issues for the Company.  The Company does not expect the expenditures related to
the Year 2000  issue to have a  material  effect on its  financial  position  or
results of operations in any year. With respect to its customers, the Company is
in the process of  contacting  its major  customers  and  determining  that such
customers are Year 2000 compliant.  Additionally,  the Company is in the process
of contacting  its major service  vendors  regarding  Year 2000  compliance  and
anticipates  that this review will be completed  by March 31,  1998,  the end of
fiscal 1999.  If the Company's  suppliers and service  vendors are not Year 2000
compliant, the Company may have to arrange for alternative vendors

         Except for historical  information  contained  herein,  the information
contained  in this  report  includes  forward-looking  statements  that  involve
certain  risks  and  uncertainties  that  could  cause  actual  results  to vary
materially from such statements. All forward-looking statements included in this
report  are based  upon  information  available  to  Cotelligent  as of the date
thereof,  and  Cotelligent  assumes no  obligation  to update  any such  forward
looking  statement.  Please  refer to the  discussion  of risk factors and other
factors included in Cotelligent's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998 and other  filings  made with the  Securities  and Exchange
Commission.


<PAGE>


                       CONSOLIDATED RESULTS OF OPERATIONS



               Three Months Ended September 30, 1998 Compared to
                     Three Months Ended September 30, 1997

Revenues

         In the second quarter of fiscal 1999 revenues  increased $21.2 million,
or 36.1%,  to $79.0 million from $58.6  million in the second  quarter of fiscal
1998.  The  increase was  primarily  attributable  to a 23.9%  increase in total
client  service hours to 1,158,000  from 935,000 in the second  quarter of 1998,
and a 9.8% increase in the average  hourly billing rate to $67.70 from $61.68 in
the  comparable  quarter of 1998.  The increase in hourly  billing rate reflects
increased  demand for employees and  consultants  with higher skill levels and a
more favorable economic climate.

Gross Profit

         Gross profit increased $6.5 million,  or 37.4%, to $23.8 million in the
second  quarter  of 1999 from  $17.3  million  in the  second  quarter  of 1998,
primarily  due to an  increase in hours of service  provided  to clients.  Gross
margin as a percentage of revenues  increased to 29.9% in the second  quarter of
1999 from 29.6% in the second quarter of 1998 primarily due to change in the mix
of services.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased $3.8 million, or
27.1%,  to $17.6 million in the second quarter of 1999 from $13.9 million in the
second quarter of 1998. The increase was primarily due to increased compensation
to existing staff,  staff added to support growth and additional  locations,  as
well as  incremental  costs  of  Cotelligent's  corporate  activities.  Selling,
general and  administrative  expenses  decreased as a percentage  of revenues to
22.1% in the second  quarter  of 1999 from  23.7% in the second  quarter of 1998
because of increased  efficiencies  over a larger revenue base.  There can be no
assurance that such  efficiencies  can be sustained in the future as the Company
expands geographically and incurs expenses to acquire other companies.

Interest Income/Expense, Net

         Interest income was $0.3 million in the second quarter of 1999 compared
to  interest  expense,  net of  interest  income of $0.1  million  in the second
quarter of 1998.  Net interest  income was earned in the second  quarter of 1999
due to earnings  from  investment  of the  proceeds  from a  secondary  offering
completed in March of 1998.

Provision for Income Taxes

         Provision  for income taxes was $2.6  million in the second  quarter of
1999,  which reflects a provision on pre-tax income of 40.5%.  The provision for
income taxes was $1.4 million in the second  quarter of 1998 at a rate of 40.0%.
The increase in the effective  tax rate was  primarily due to increased  revenue
growth in states with higher tax rates.


<PAGE>



                       CONSOLIDATED RESULTS OF OPERATIONS



                Six Months Ended September 30, 1998 Compared to
                      Six Months Ended September 30, 1997

Revenues

         In the first half of fiscal 1999 revenues  increased $40.0 million,  or
35.4%,  to $152.8  million from $112.9 million in the first half of fiscal 1998.
The  increase was  primarily  attributable  to a 23.0%  increase in total client
service hours to 2,249,000  from 1,828,000 in the first half of 1998, and a 9.7%
increase  in the  average  hourly  billing  rate to  $66.75  from  $60.85 in the
comparable  period  of 1998.  The  increase  in  hourly  billing  rate  reflects
increased  demand for employees and  consultants  with higher skill levels and a
more favorable economic climate.

Gross Profit

         Gross profit increased $11.2 million, or 33.6%, to $44.7 million in the
first half of 1999 from $33.4  million in the first half of 1998,  primarily due
to an increase in hours of service  provided to clients and the inclusion of the
FY 1998 purchases.  Gross margin as a percentage of revenues  decreased to 29.2%
in the first half of 1999 from 29.6% in the first quarter of 1998  primarily due
to the inclusion of the FY 1998 Purchases with lower gross margins.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased $6.2 million, or
23.2%,  to $33.1  million in the first  half of 1999 from  $26.8  million in the
first half of 1998. The increase was primarily due to increased  compensation to
existing staff, staff added to support growth and additional locations,  as well
as incremental costs of Cotelligent's corporate activities. Selling, general and
administrative  expenses  decreased as a percentage  of revenues to 21.6% in the
first  half of 1999 from 23.8% in the first  half of 1998  because of  increased
efficiencies  over a larger  revenue base.  There can be no assurance  that such
efficiencies   can  be   sustained   in  the  future  as  the  Company   expands
geographically and incurs expense to acquire other companies.

Interest Income/Expense, Net

         Interest  income was $0.6 million in the first half of 1999 compared to
interest  expense,  net of interest expense of $0.2 million in the first half of
1998.  Net interest  income was earned in the first half of 1999 due to earnings
from investment of the proceeds from a secondary  offering completed in March of
1998.

Provision for Income Taxes

         Provision  for income taxes was $4.8 million in the first half of 1999,
which reflects a provision on pre-tax income of 39.8%.  The provision for income
taxes was $2.6  million  in the first  quarter  of 1998 at a rate of 40.0%.  The
decrease in the effective  tax rate was  primarily due to the  investment in tax
free  instruments  from the proceeds of the secondary  offering in tax preferred
instruments.




<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES



       The Company has financed its growth  principally  through cash flows from
operations,  periodic  borrowing under its credit  facilities and the use of the
net  proceeds  from its public  offerings.  On September  12, 1997,  the Company
entered into a four year $40 million  revolving  line of credit  facility  (the
"Credit  Line").  Interest  rate  options  include base  borrowings  at the lead
lender's  prime  rate and term  loans at LIBOR plus an  applicable  margin.  The
Company  believes the existing  sources of liquidity  and funds  generated  from
operations  will provide  adequate cash to fund its  anticipated  cash needs for
operations and acquisitions at least through the next year.

       The Company's primary sources of liquidity are cash balances,  the Credit
Line and the collection of its accounts  receivable.  Accounts  receivable  have
increased as the Company's  operations have grown. Total receivables were 63 and
72 days of revenue at September 30, 1998 and March 31, 1998,  respectively.  The
Company could draw upon available cash or existing credit  facilities to finance
its operations should the Company be unable to bill and collect for its services
on a timely basis.

       Cash used in  operating  activities  was $0.9  million for the six months
ended  September  30,  1998.  At  September  30, 1998 the Company had no balance
outstanding under the Credit Line.

       At  September  30, 1998,  the Company had $22.4  million in cash and cash
equivalents as compared to $40.5 million at March 31, 1998. The decrease in cash
and cash  equivalents  is related to the  purchase  of one  business  during the
period, in addition to funds used to repurchase the Cotelligent's  Common Stock.
At September 30, 1998, the Company had long-term  capital lease  obligations and
other notes outstanding in the amount of $0.4 million.  The current installments
of the long-term  capital lease obligations and other notes were $0.2 million at
September 30, 1998.






<PAGE>


                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

         The Company is, from time to time, a party to litigation arising in the
normal  course of its  business.  The  Company is not  presently  subject to any
material litigation.

Item 2.  Changes in Securities.

         None

Item 3.  Defaults Upon Senior Securities.

         None

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

      (a) The Company held its annual  meeting of  stockholders  on September 9,
1998.

      The  following  is a brief  description  of each matter  voted upon at the
annual meeting:

      1. Elections of three directors to serve for a three-year term expiring at
the annual meeting in 2001.

                                         For                 Authority Withheld

         Michael L. Evans             10,912,157                 741,704
         Jeffrey J. Bernardis         10,912,257                 741,604
         B. Tom Green                 10,912,157                 741,704

      2.  Approve the amendment of the Certificate of Incorporation to effect 
the change of the Company's name from Cotelligent Group, Inc. to 
Cotelligent,Inc.

                                        For               11,316,332
                                        Against               19,679
                                        Abstain              317,850

      3. Approve the adoption of the 1998 Long-Term Incentive Plan.

                                        For               7,833,645
                                        Against           2,738,195
                                        Abstain              33,773
                                        Broker
                                          Non-Vote        1,048,248

     4.  Approve  the  appointment  of  Arthur  Andersen,  LLP as the  Company's
         independent certified public accountants.

                                        For               11,260,235
                                        Against              367,288
                                        Abstain               26,338



Item 5.  Other Information.

              None.



<PAGE>


Item 6.  Exhibits and Reports on Form 8-K.

      (a)         Exhibits.

      (b)         Reports on Form 8-K.

                    The  following  report  on Form  8-K was  filed  during  the
                    quarter ended September 30, 1998.

                    Cotelligent,  Inc.  filed a copy of the press  release 
                    dated  September 3, 1998 announcing the Board of Directors
                    Authorization to repurchase up to two million
                    shares of common stock or 14% of outstanding shares.



<PAGE>    


                                                    SIGNATURES



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


                                                   COTELLIGENT, INC




Date: November 16, 1998                            /s/ Herbert D. Montgomery
                                                    Herbert D. Montgomery
                                                     Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer


<PAGE>