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 December 31, 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)



             (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  February  8, 1999  there  were  14,561,119  shares of common  stock
outstanding.





<PAGE>


                                COTELLIGENT, INC.


                                      INDEX

                         Part I - Financial Information

<TABLE>
Item 1. Financial Statements                                                                              PAGE

<S>                                                                                                      <C>
Cotelligent, Inc.
         Consolidated Balance Sheets at December 31, 1998 (Unaudited) and March 31, 1998                    3
         Consolidated Statements of Operations for the Three and Nine Months Ended
            December 31, 1998 and 1997 (Unaudited)                                                          4
         Consolidated Statements of Cash Flows for the Nine Months Ended
            December 31, 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                                                                                                  17

</TABLE>

                                       2
<PAGE>




                                                 COTELLIGENT, INC.
                                            CONSOLIDATED BALANCE SHEETS
                                         (In thousands, except share data)


<TABLE>
<CAPTION>

                                                                         June 30,            March 31,
                                                                           1998                1998
                                                                      ----------------    ----------------
                             ASSETS
<S>                                                                   <C>                 <C>
Current assets:
   Cash and cash equivalents..................................         $        7,753        $     40,528
   Accounts receivable, including unbilled accounts
    of $5,281 and $10,120 and net of allowance for doubtful
    accounts of accounts of $2,162 and $2,123, respectively...                 57,524              48,982
   Notes receivable from officers.............................                    218                 230
   Deferred tax asset.........................................                    294                   -
   Prepaid expenses and other.................................                  3,812               2,292
                                                                      ----------------    ----------------
     Total current assets.....................................                 69,601              92,032
Property and equipment, net...................................                 10,063               7,568
Goodwill, net of accumulated amortization of $1,066 and $359,
       respectively...........................................                 79,937              18,106
Other assets..................................................                    503                 853
                                                                      ================    ================
     Total assets.............................................          $     160,104         $   118,559
                                                                      ================    ================

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Short-term debt............................................          $         138          $      192
   Accounts payable...........................................                  8,487               4,344
   Accrued compensation and related payroll liabilities.......                 15,747              15,268
   Income taxes payable.......................................                  3,417               3,171
   Deferred tax liabilities...................................                      -                 508
   Other accrued liabilities..................................                  4,614               4,52O
                                                                      ----------------    ----------------
     Total current liabilities................................                 32,403              28,003
Long-term debt................................................                 19,906                 199
Other long-term liabilities...................................                     10                  18
                                                                      ----------------    ----------------
     Total liabilities........................................                 52,319              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,
    14,226,284 and 14,057,884 shares issued and outstanding,
    respectively.............................................                     147                 141
Additional paid-in capital...................................                  86,467              80,335
Retained earnings............................................                  21,171               9,863
                                                                      ----------------    ----------------
    Total stockholders' equity...............................                 107,785              90,339
                                                                      ----------------    ----------------
    Total liabilities and stockholders'equity................         $       160,104      $      118,559
                                                                      ================    ================
</TABLE>





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




                                       3
<PAGE>




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


<TABLE>
<CAPTION>

                                                                Three Months                        Nine Months
                                                             Ended December 31,                 Ended December 31,
                                                          1998               1997              1998              1997
                                                     ---------------     -------------    ---------------    -------------


<S>                                                   <C>                 <C>              <C>                <C>       
Revenues........................................      $    83,849         $    63,111      $   236,627        $  175,981
Cost of services................................           59,530              44,730          167,630           124,156
                                                     ---------------      -------------    ---------------    -------------
     Gross profit ..............................           24,319              18,381           68,997            51,825
                                                     
Selling, general and administrative expenses....           17,602              14,759           50,664            41,593
                               
 Non-recurring transaction cost.................                -                 855                -               855
                                                     ---------------     -------------    ---------------    -------------
     Operating income...........................            6,717               2,767           18,333             9,377

Other income (expense):
     Interest expense ..........................             (139)               (172)            (142)             (370)
     Interest income............................               54                  18              674                38
     Other .....................................               (2)                 17              (28)              (16)
                                                      ---------------     -------------    ---------------    -------------
        Total other income (expense)............              (87)                (137)             504             (348)
                                                     ---------------     -------------    ---------------    -------------
Income before provision for income taxes........             6,630               2,630           18,837            9,029
Provision for income taxes......................             2,684               2,768            7,529            5,327
                                                     ---------------     --------------   ---------------    --------------
Net income......................................     $       3,946               (138)      $    11,308        $   3,702
                                                     ===============     =============    ===============    =============

Earnings per share -
      Basic.....................................     $        0.28        $     (0.01)      $       0.81      $      0.32
                                                     ===============     =============    ===============    =============
      Diluted...................................     $        0.28        $     (0.01)     $        0.80      $      0.32
                                                     ===============     =============    ===============    =============
Weighted average shares outstanding -
      Basic.....................................        14,055,396         11,584,353         14,003,972        11,399,141
                                                     ===============     =============    ===============    =============
      Diluted....................................       14,213,639         11,756,214         14,164,902        11,503,578
                                                     ===============     =============    ===============    =============
</TABLE>



















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


                                       4
<PAGE>




                                                 COTELLIGENT, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
                                                    (Unaudited)

<TABLE>
<CAPTION>

                                                                              Nine Months Ended
                                                                                December 31,
                                                                     ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------

<S>                                                                   <C>                 <C>
Cash flows from operating activities:
     Net income ....................................................    $    11,308           $  3,702
                                                                                          
     Adjustments  to  reconcile  net income to net cash  provided
       by  operating activities:
        Depreciation and amortization ..............................          2,556              1,542
        Provision for doubtful accounts ............................            729                823
        Loss on sale of assets ....................................              28                --
        Deferred income taxes, net .................................           (503)             (222)
        Changes in current assets and liabilities:
              Accounts receivable ..................................         (3,644)           (13,091)
              Prepaid expenses and other ...........................         (1,135)              (809)
              Accounts payable and accrued expenses ................         (1,657)             6,848
              Income taxes payable .................................            131              2,691
              Other liabilities.....................................           (778)               (11)
        Changes in other assets ....................................            231                105
                                                                        ------------        ------------
              Net cash provided by operating activities ............          7,266              1,578
                                                                        ------------        ------------
Cash flows from investing activities:
     Proceeds on sale of assets ...................................             206                 --
     Purchase of businesses, net of cash acquired .................         (45,217)            (7,325)
     Purchases of property and equipment ..........................          (4,047)            (2,194)
                                                                         ------------       ------------
             Net cash used in investing activities ................         (49,058)            (9,519)
                                                                         ------------       ------------
Cash flows from financing activities:
     Net borrowings (repayments) on short term debt ...............              --             (4,597)
     Net borrowings (repayments) on long-term debt ................          18,587             12,070
     Purchase of Common Stock .....................................         (11,320)                --
     Net proceeds from issuance of Common Stock ...................           1,750                 54
     Distributions from certain Pooled Companies, prior to
            acquisitions...........................................              --             (1,806)
                                                                          ----------         -----------
             Net cash provided by (used in) financing activities...           9,017               5,721
                                                                          ----------         -----------
     Net increase (decrease) in cash and cash equivalents .........         (32,775)             (2,220)
     Cash and cash equivalents at beginning of period .............          40,528               2,904
                                                                          ----------         -----------
     Cash and cash equivalents at end of period ...................       $   7,753          $      684
                                                                          ==========         ===========
Supplemental disclosures of cash flow information:
     Interest paid ................................................       $     132          $      585
     Income taxes paid ............................................       $   7,259          $    3,818
     Stock issued to acquire businesses............................       $  15,710          $    7,464
                                                                                           
</TABLE>

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


                                       5
<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  offers services in five consulting  practice  groups:  Professional
Services  -  including  staff  augmentation;   Technology   Solutions  -  custom
application  development;  Alliance  Services - national  partnerships with many
leading enterprise application software companies; Network Design and Management
- intranet and internet  application  design and  development;  and Training and
Education.

         During the year ended March 31, 1998 ("fiscal 1998") the Company issued
1,541,615 shares of Common Stock to acquire four businesses  accounted for under
the  pooling-of-interests  method (the "Pooled Companies").  For the nine months
ended  December  31,  1998 there were no  acquisitions  accounted  for under the
pooling-of-interest  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.

         During fiscal year 1998, the Company acquired four businesses accounted
for  under  the  purchase  method  (the  "Purchased  Companies")  for  aggregate
consideration  of $19,930  (362,998 shares of Common Stock issued at fair market
value of $7,464 and $11,926 of cash). In addition,  during the nine months ended
December 31, 1998, the Company acquired four businesses  accounted for under the
purchase method for aggregate consideration of $62,985 (875,724 shares of Common
Stock  issued  at fair  market  value  of  $15,710  and  $46,121  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  included  in  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 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.



                                       6
<PAGE>





                                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..      (835,600)            (8)        (11,312)              -             (11,320)
Issuance of Common Stock....     1,004,000             14          17,444               -              17,458
Net income..................             -              -               -          11,308              11,308
                              ============      ==========    ============    =============    ===============
Balance at June 30, 1998       14,226,284       $     147     $    86,467      $   21,171       $     107,785
                              ============      ==========    ============    =============    ===============

</TABLE>

Note 4: Business Combinations

         During fiscal 1999,  Cotelligent  acquired four businesses (acquired on
September 16, 1998,  October 29, 1998,  October 30, 1998 and November 30, 1998),
accounted for under the purchase method for aggregate  consideration,  including
acquisition  cost,  of $62,985  (875,724  shares  issued at fair market value of
$15,710 and $46,121 of cash).  The total  assets  related to these  acquisitions
were $9,769 and resulted in the  recognition  of $62,538 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 their respective  acquisition dates.
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  for one of the  businesses  provides  for
additional  consideration based on financial performance of the acquired company
subsequent to the  acquisition  and through March 1999.  The potential  earn-out
payment is due in fiscal year 2000 and will be  considered  additional  purchase
price in the period the earn-out period ends. See Pro Forma Results (Note 5) for
consolidated statements of operations of purchased companies.


Note 5 - 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 and
nine months ended December 31, 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
("Purchased  Companies and Pooled  Companies")  consolidated  statements reflect
adjustments for the acquisitions of the Pooled Companies and Purchased 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  Results 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  from the beginning of the
periods presented.


                                       7
<PAGE>




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


                                                                                Three Months
                                                                                    Ended
                                                                                December 31,
                                                                     ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------

<S>                                                                   <C>                <C>          
                Revenues.........................................     $      89,522        $      73,935
                Cost of services.................................            63,190               51,338
                                                                     ----------------    ----------------
                       Gross profit..............................            26,332               22,597
                Selling, general and administrative expenses.....            20,103               16,999
                                                                     ----------------    ----------------
                Operating income.................................             6,229                5,598
                Other income (expense)...........................              (455)              (1,257)
                                                                     ----------------    ----------------
                Income before provision for income taxes.........             5,774                4,341
                Provision for income taxes ......................             2,339                1,758
                                                                     ----------------    ----------------
                Net income.......................................     $       3,435       $        2,583
                                                                     ================    ================
                Earnings per share -
                     Basic.......................................     $        0.23       $         0.21
                                                                     ================    ================
                     Diluted.....................................     $        0.23       $         0.20
                                                                     ================    ================
                Weighted average shares outstanding -
                     Basic.......................................         14,931,120          12,494,717
                                                                     ================    ================
                     Diluted.....................................         15,089,363          12,646,663
                                                                     ================    ================

</TABLE>
<TABLE>
<CAPTION>



                                                                                 Nine Months
                                                                                    Ended
                                                                                December 31,
                                                                     ------------------------------------
                                                                          1998                1997
                                                                     ----------------    ----------------
<S>                                                                  <C>                <C>          
                Revenues.........................................     $      265,122      $     212,634
                Cost of services.................................            184,288            146,986
                                                                     ----------------    ----------------
                       Gross profit..............................             80,834             65,648
                Selling, general and administrative expenses.....             60,152             49,708
                                                                     ----------------    ----------------
                Operating income.................................             20,682             15,940
                Other income (expense)...........................             (2,013)            (3,584)
                                                                     ----------------    ----------------
                Income before provision for income taxes.........             18,669             12,356
                Provision for income taxes ......................              7,561              5,004
                                                                     ================    ================
                Net income.......................................     $       11,108      $       7,352
                                                                     ================    ================
                Earnings per share -
                     Basic.......................................     $         0.75      $        0.59
                                                                     ================    ================
                     Diluted.....................................     $         0.75      $        0.58
                                                                     ================    ================
                Weighted average shares outstanding -
                     Basic.......................................         14,735,500         12,494,717
                                                                     ================    ================
                     Diluted.....................................        14,896,431          12,624,663
                                                                     ================    ================
</TABLE>




Note 6 - 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 three and nine months ended December 31, 1998, Pro Forma
Results are not presented for this period.


                                       8
<PAGE>





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

<TABLE>
<CAPTION>

                                                   Three Months             Nine Months
                                                      Ended                    Ended
                                                 December 31,1997            December 31, 1997
                                               --------------------        ---------------------

<S>                                                <C>                          <C>      
Revenues .....................................     $    63,111                  $ 175,981
Cost of services .............................          44,723                    124,137
                                                   -----------                ------------
     Gross profit ............................          18,388                     51,844
Selling, general and administrative expenses..          13,732                     39,629
                                                  ------------                ------------
     Operating income ........................           4,656                     12,215
Other income (expense)........................            (137)                      (348)
                                                  ------------                ------------
Income before provision for income taxes .....           4,519                     11,867
Provision for income taxes ...................           1,853                      4,865
                                                  ------------                ------------
Net income ...................................    $      2,666                  $   7,002
                                                  ============                ============
Earnings per share - basic and diluted........    $       0.23                  $    0.61
                                                  ============                ============
Weighted average shares outstanding -
        Basic ................................      11,584,353                 11,399,141
                                                  ============                ============
        Diluted ..............................      11,756,214                 11,503,578
                                                  ============                ============
</TABLE>


       Note 7 - Earnings Per Share
<TABLE>
<CAPTION>

                                                              For the Three Months Ended December 31, 1998
                                                          ---------------------------------------------------
                                                                                                Per Share
                                                               Income             Shares           Amount
                                                          -----------------    --------------   -------------
<S>                                                       <C>                  <C>              <C> 
Basic earnings per share-
Net income available to common stockholders                $       3,946          14,055,396     $    0.28
Options issued to directors and employees..........                                  158,243
                                                                               --------------
Diluted earnings per share-
Income available to common stockholders
    plus assumed conversions.......................        $       3,946          14,213,639     $    0.28
                                                                               ==============


                                                              For the Three Months Ended December 31, 1997
                                                          ---------------------------------------------------
                                                                                                 Per Share
                                                               Income             Shares           Amount
                                                          -----------------    --------------    ------------
Basic earnings per share-
Net income available to common stockholders                $         (138)        11,584,353      $  (0.01)
Options issued to directors and employees..........                                  104,437
                                                                               --------------
Diluted earnings per share-
Income available to common stockholders
    plus assumed conversions.....................          $         (138)        11,756,214      $  (0.01)
                                                                               ==============
</TABLE>








                                       9
<PAGE>




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


                                                              For the Nine Months Ended December 31, 1998
                                                          ---------------------------------------------------
                                                                                                Per Share
                                                               Income             Shares           Amount
                                                          -----------------    --------------   -------------
<S>                                                       <C>                  <C>              <C> 
Basic earnings per share-
Net income available to common stockholders                $      11,307          14,003,972     $    0.81
Options issued to directors and employees..........                                  160,930
                                                                               --------------
Diluted earnings per share-
Income available to common stockholders
    plus assumed conversions.......................        $      11,307          14,164,902     $    0.80
                                                                               ==============


                                                              For the Nine Months Ended December 31, 1997
                                                          ---------------------------------------------------
                                                                                                 Per Share
                                                               Income             Shares           Amount
                                                          -----------------    --------------    ------------
Basic earnings per share-
Net income available to common stockholders                $        3,702         11,399,141      $   0.32 
Options issued to directors and employees..........                                  171,861
                                                                               --------------
Diluted earnings per share-
Income available to common stockholders
    plus assumed conversions.....................          $        3,702         11,503,578      $   0.32 
                                                                               ==============
</TABLE>


Note 8 - Capital Stock

         In March,  1998, the Company  completed a public offering of its common
stock  whereby  2,312,040 new shares were issued and net proceeds to the Company
were $52,359.

         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  the  three  and  nine  months  ended  December  31,  1998,  the  Company
repurchased  484,600  shares for a total cost of $6.6 million and 835,600 shares
for $11.3 million respectively.

Note 9 - Subsequent Events

        The Company  acquired one business during January 1999 for a combination
of Common Stock and cash. The acquired business is substantially the same as the
Company. This transaction will be accounted for under the purchase method.




                                       10
<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
to businesses  with complex IT operations.  Cotelligent  offers services in five
consulting   practice   groups,   Professional   Services  -   including   staff
augmentation;  Technology  Solutions custom  application  development;  Alliance
Services  -  national  partnerships  with many  leading  enterprise  application
software  companies;  Network  Design and  Management  - intranet  and  internet
application design and development; and Training and Education

                  During  the year  ended  March 31,  1998  ("fiscal  1998") the
Company  acquired four businesses  accounted for under the  pooling-of-interests
method.  For the nine months ended December 31, 1998 there were no  acquisitions
accounted for under the  pooling-of-interest  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.

                  During fiscal year 1998, the Company  acquired four businesses
accounted  for under the  purchase  method for shares of Common  Stock issued at
fair market value and cash. In addition,  during the nine months ended  December
31, 1998, the Company acquired four businesses  accounted for under the purchase
method for shares of Common  Stock  issued at fair  market  value and cash.  The
consolidated  financial  statements  include  the  operating  results  of  these
companies subsequent to their respective acquisition dates.

         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


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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 June 30,  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.


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                       CONSOLIDATED RESULTS OF OPERATIONS



                Three Months Ended December 31, 1998 Compared to
                      Three Months Ended December 31, 1997

Revenues

         In the three months ended December 31, 1998,  revenues  increased $20.7
million, or 32.9%, to $83.8 million from $63.1 million in the three months ended
December 31, 1997. The increase was primarily  attributable  to a 24.3% increase
in total  client  service  hours to  1,237,000  from 995,000 in the three months
ended  December 31, 1998, and a 7.1% increase in the average hourly billing rate
to $66.79 from $62.39 in the  comparable  period of the prior year. The increase
in client  service  hours  was due to  increased  demand  for  services  and the
inclusion  of the  Purchased  Companies.  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 $5.9 million,  or 32.1%, to $24.3 million in the
three  months  ended  December  31, 1998 from $18.4  million in the three months
ended  December  31,  1997,  primarily  due to an  increase  in hours of service
provided to clients and the inclusion of the Purchased  Companies.  Gross margin
as a percentage of revenues decreased to 29.0% in the third quarter of 1999 from
29.1% in the third quarter of 1998.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased $2.8 million, or
19.3%,  to $17.6 million in the three months ended  December 31, 1998 from $14.8
million in the three months ended  December 31, 1997. The increase was primarily
due to increased  compensation to existing staff,  staff added to support growth
and additional locations and the inclusion of the Purchased Companies.  Selling,
general and  administrative  expenses  decreased as a percentage  of revenues to
21.0% in the three months ended December 31, 1998 from 23.4% in the three months
ended December 31, 1997 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.

         Compared  to the pro forma  basis,  as  described  in footnote 6 of the
accompanying financial statements,  selling, general and administrative expenses
increased  $3.9  million,  or 28.2%,  to $17.6 million in fiscal 1999 from $13.7
million  in 1998.  The  increase  was  primarily  due to  increased  staff  from
Purchased  Companies and increased  compensation to existing  staff,  plus staff
added to support anticipated growth, additional occupancy costs and an increased
level of corporate  activities.  Selling,  general and  administrative  expenses
decreased as a percentage of revenues to 21.0% in fiscal 1999 from 21.8% in 1998
reflecting greater operating efficiencies and a larger revenue base. The Company
cannot be certain that such efficiencies can be sustained in the near term as it
integrates  the  acquired  entities,  expand  geographically  and acquire  other
companies.

Non-Recurring Transaction Costs

              Non-recurring  transaction costs include  expenditures  associated
with the acquisition of four companies acquired during the prior fiscal year and
accounted for under the pooling-of-interest method.  Accordingly,  these amounts
are expensed as incurred on an historical cost basis.

Interest Income/Expense, Net

         Interest  expense,  net of  interest  income was  $85,000 for the three
months ended  December 31, 1998  compared to interest  expense,  net of interest
income of $154,000  for the three months  ended  December 31, 1997.  The average
debt level was lower during the current fiscal year due to the proceeds from a
public offering completed in March of 1998.




                                       13
<PAGE>



Provision for Income Taxes

         Provision  for income taxes was $2.7 million for the three months ended
December 31, 1998,  which reflects a provision on pre-tax  income of 40.5%.  The
provision for income taxes was $2.8 million for the three months ended  December
31, 1997,  which  reflects a provision on pre-tax income of 105%. The higher tax
rate in the previous  fiscal year is due to termination of S Corporation  status
of  certain  acquisitions  accounted  for under the  pooling-of-interest  method
and/or the  requirement  to change from the cash basis to the  accrual  basis of
accounting for tax purposes at the date of acquisition and the non-deductibility
of certain non-recurring transaction costs.



                  Nine Months Ended December 31, 1998 Compared
                     to Nine Months Ended December 31, 1997

Revenues

         In the nine months ended December 31, 1998,  revenues  increased  $60.6
million,  or 34.4%,  to $236.6  million  from $176.0  million in the nine months
ended  December 31, 1997.  The increase was  primarily  attributable  to a 22.8%
increase in total client  service hours to 3,468,000 from 2,823,000 in the first
nine months of 1998,  and a 8.9% increase in the average  hourly billing rate to
$66.84 from $61.39 in the  comparable  period of the prior year. 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 $17.2 million, or 33.1%, to $69.0 million in the
first nine months of 1999 from $51.8  million in the nine months ended  December
31, 1998,  primarily due to an increase in hours of service  provided to clients
and the  inclusion of the Purchased  Companies.  Gross margin as a percentage of
revenues  decreased  to 29.2% in the nine months  ended  December  31, 1998 from
29.5% in the nine months ended  December 31, 1997 primarily due to the inclusion
of the Purchased Companies with lower gross margins.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased $9.1 million, or
21.8%,  to $50.7  million in the nine months ended  December 31, 1998 from $41.6
million in the nine months ended  December 31, 1998.  The increase was primarily
due to increased  compensation to existing staff,  staff added to support growth
and additional locations. Selling, general and administrative expenses decreased
as a percentage of revenues to 21.4% in the nine months ended  December 31, 1998
from 23.6% in the nine  months  ended  December  31, 1997  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.

                  Compared to the pro forma basis, as described in footnote 6 of
the  accompanying  financial  statements,  selling,  general and  administrative
expenses increased $11.1 million, or 27.8%, to $50.7 million in fiscal 1999 from
$39.6 million in 1998.  The increase was  primarily due to increased  staff from
Purchased  Companies and increased  compensation to existing  staff,  plus staff
added to support  anticipated  growth and additional  occupancy costs.  Selling,
general and  administrative  expenses  decreased as a percentage  of revenues to
21.4%  in  fiscal  1999  from  22.5%  in  1998  reflecting   greater   operating
efficiencies  and a larger revenue base. The Company cannot be certain that such
efficiencies  can be  sustained in the near term as it  integrates  the acquired
entities, expand geographically and acquire other companies


Non-Recurring Transaction Costs

              Non-recurring  transaction costs include  expenditures  associated
with the acquisition of four companies acquired during the prior fiscal year and
accounted for under the pooling-of-interest method.  Accordingly,  these amounts
are expensed as incurred on an historical cost basis.


                                       14
<PAGE>

Interest Income/Expense, Net

         Interest  income,  net of interest  expense was  $531,000  for the nine
months ended  December 31, 1998  compared to interest  expense,  net of interest
income of $332,000 in the nine months ended  December 31, 1997. The net interest
income  earned  in the  first  nine  months  of 1999  was due to  earnings  from
investment of the proceeds from a public offering completed in March of 1998.

Provision for Income Taxes

         Provision  for income  taxes was $7.5 million for the nine months ended
December 31, 1998,  which reflects a provision on pre-tax  income of 40.0%.  The
provision  for income taxes was $5.3 million for the nine months ended  December
31,  1997 at a rate of  59.0%.  The  decrease  in the  effective  tax  rate  was
primarily due to the investment in tax free  instruments  from the proceeds of a
public  offering,  completed in March of 1998, in tax preferred  instruments and
the termination of S Corporation  status of certain  acquisitions  accounted for
under the  pooling-of-interest  method and/or the requirement to change from the
cash basis to the accrual  basis of  accounting  for tax purposes at the date of
acquisition  and the  non-deductibility  of  certain  non-recurring  transaction
costs.




                                       15
<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 65 and
72 days of revenue at December  31, 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.

       Operating  activities  provided  $7.3  million for the nine months  ended
December 31, 1998. Cash provided in operating activities was primarily generated
from net income offset by increased working capital.

       During the nine months ended December 31, 1998, Cotelligent acquired four
companies  (acquired on September 16, 1998,  October 29, 1998,  October 30, 1998
and November 30,  1998),  for aggregate  consideration  and  associated  cost of
$62,985  (875,724  shares  issued at fair market value of $15,710 and $46,121 of
cash).  The Company  used its own cash and  borrowings  under the Credit Line to
finance the acquisitions.

       During the nine months ended December 31, 1998,  Cotelligent  repurchased
835,600 shares of Common Stock,  at a cost of $11.3 million,  on the open market
under the Stock Repurchase Program approved by the Board of Directors.






                                       16
<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: February 12, 1999                           /S/ Herbert D. Montgomery
                                                  -------------------------
                                                  Herbert D. Montgomery
                                                    Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer

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