<PAGE>   1
                                                                    EXHIBIT 13.1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION

GENERAL

BTG, Inc. ("BTG" or the "Company") is an information systems and services
company providing complete solutions to a broad range of the complex systems
and product needs of the United States Government and its agencies and
departments (the "Government") and other commercial and state and local
government customers. The Company provides systems development, integration,
engineering and network design, implementation and security expertise services
(the "Systems Business"). In addition, during fiscal 1998 and prior years, the
Company was significantly involved in the reselling of computer hardware and
software (the "Product Reselling Business").

    During fiscal 1998, the Company's revenues were derived from both contract
activities and product sales. Contract revenue is typically less seasonal than
product sales but fluctuates month-to-month based on contract delivery
schedules. Contract revenue is characterized by lower direct costs than product
sales, yet generally requires a higher relative level of infrastructure
support.  Year-to-year increases in contract revenue have generally resulted
from increases in volume, driven by additional work requirements under
Government contracts, rather than price increases, which are generally limited
to escalation factors of 3% to 4% on direct labor costs. Product sales tend to
be seasonal, with the Company's second and third fiscal quarters typically
accounting for the greatest proportion of revenues each year. Product sales are
characterized by higher direct costs than contract revenue; however, indirect
expenses associated with product sales are generally lower in comparison.
Higher volumes as opposed to price increases have generally driven year-to-year
increases in product sales. The Company's operating performance is affected by
both the number and type of contracts held, the timing of the installation or
delivery of the Company's services and products, and the relative margins of
the services performed or products sold. In general, the Company recognizes its
highest margins on its most specialized systems engineering and software
development projects and lower margins on sales of commercial-off-the-shelf
products, whose sales tend to have lower services components and a more
competitive after-contract award environment.

    In recent years, the Company identified what it believed to be a dramatic
change in the federal product reselling market. The Government's product
purchasing strategy shifted its focus to contract vehicles such as General
Services Administration ("GSA") Schedules, which heavily weigh lowest price as
opposed to best value. As profit margins in the Product Reselling Business
began to shrink during fiscal 1998, it became increasingly clear to the Company
that only the largest product resellers could generate the volume of sales
required to compensate for the decreasing product margins. Accordingly, on
February 12, 1998, BTG completed the sale to Government Technology Services,
Inc. ("GTSI") of (i) certain of the assets, principally inventory and property
and equipment, and (ii) certain of the existing contracts and outstanding
customer orders of BTG's Product Reselling Business (the "GTSI Transaction").
In addition, GTSI hired a significant number of the individuals previously
employed by BTG in the Product Reselling Business. As consideration for the
sale, BTG initially received $8 million in cash and 15,375 shares of a new
series of preferred stock of GTSI, designated Series C 8% cumulative redeemable
convertible preferred stock. Ten percent of the purchase price was placed in
escrow for a one-year period to serve as security for the Company's
indemnification for potential obligations under the acquisition agreement.
Pursuant to the acquisition agreement, the preferred stock received by the
Company converted into 3,000,000 shares of GTSI common stock upon approval by
the GTSI shareholders on May 12, 1998. This investment represents a 30.8%
ownership interest in GTSI.  Management of the Company believes that BTG's
relationship with GTSI will offer significant benefits to both its customers
and shareholders as the combined reselling operations of GTSI and BTG's Product
Reselling Business produce the high-volume, low per-unit cost essential in the
product reselling market. In addition, BTG believes it can continue to offer
high-quality, end-to-end solutions by combining its systems integration and
engineering services with GTSI's product fulfillment capabilities. The Company
anticipates a significant decrease in the revenues derived from future product
sales as a result of the GTSI Transaction.

    In June 1997, the Company acquired, for $10 million in cash, all of the
outstanding capital stock of Nations, Inc. ("Nations"), a systems engineering
and software development company headquartered in Tinton Falls, New Jersey. The
acquisition has been accounted for using the purchase method of accounting, and
accordingly, the results of operations of Nations have been included in the
Company's consolidated statement of operations since the date of acquisition,
June 12, 1997. The excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired of approximately $6.9
million has been recorded as goodwill and is being amortized on a straight-line
basis over the expected period of benefit, 30 years. In connection with the
acquisition, the Company also entered into both non-compete and employment
agreements with several members of Nations' senior management. During fiscal
1998, the Company integrated the operations of Nations with those of its
Systems Engineering business unit.

    In August 1996, the Company formed Community Networks, Inc. ("CNI") to be a
total solutions provider to broadband network owners entering the Internet
access market. CNI's offerings were designed to allow network operators to sell
enhanced Internet services to residential consumers and businesses. CNI
provided households with data-over-cable, high-speed Internet access via local
cable television plants, focused on mid-sized and independent cable operators.
During fiscal 1998, it became evident to the Company that the subscriber base
was not growing as rapidly as was initially anticipated. As a result, the
Company made a decision to discontinue the operations of CNI rather than
continue its investment in this new venture. Accordingly, the operating results
of CNI have been segregated from BTG's continuing operations and reported as a
separate line item on the consolidated statement of operations. Prior year
reported results have been reclassified in order to provide for consistent
presentation.
<PAGE>   2
RESULTS OF OPERATIONS

The following table presents for the periods indicated: (i) the percentage of
revenues represented by certain income and expense items and (ii) the
percentage period-to-period increase (decrease) in such items:

<TABLE>
<CAPTION>
                                                         Percentage of Revenues                          Period-to-Period
                                                       Fiscal Year Ended March 31,               Increase (Decrease) of Dollars
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     1998                  1997
                                                                                                compared with          compared with
                                                  1998              1997             1996           1997                   1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>              <C>             <C>                   <C>
Revenues:                                                                                                              
   Contract revenue                               29.9%            27.4%            31.4%            60.4%                63.7%
   Product sales                                  70.1             72.6             68.6             42.3                 98.0
   Total revenues                                100.0            100.0            100.0             47.3                 87.3
Direct costs:                                                                                                          
   Contract costs                                                                                                      
   (as a % of contract revenue)                   69.6             60.7             53.1             84.1                 87.0
   Cost of product sales                                                                                               
   (as a % of product sales)                      93.0             87.8             87.4             50.7                 99.0
   Total direct costs                                                                                                  
   (as a % of total revenues)                     86.0             80.4             76.6             57.6                 96.4
Indirect, general and                                                                                                  
   administrative expenses                        14.9             15.9             19.1             38.8                 55.3
Amortization and other                                                                                                 
   operating costs, net                            0.6              0.5              0.7             82.0                 20.1
Restructuring charge                               6.5               --               --              (A)                   --
Operating income (loss)                           (8.1)             3.3              3.5           (458.9)                76.6
Interest expense                                  (1.4)            (1.5)            (1.4)            38.3                100.6
Equity in earnings of affiliate                    0.1              0.5              0.4            (68.8)               138.3
Gain on sale of investments                        3.4              0.1               --              (B)                 (A)
Merger-related costs                              (0.4)              --               --              (A)                   --
Income (loss) from continuing                                                                                          
   operations before income taxes                                                                                      
   and extraordinary items                        (6.4)             2.3              2.5           (514.3)                73.1
Provision (benefit) for income taxes              (1.4)             1.0              1.1           (304.4)                79.3
Income (loss) from continuing                                                                                          
   operations                                     (5.0)             1.2              1.4           (686.9)                68.4
Loss from discontinued operations                 (0.7)            (0.2)              --            490.6                  (A)
Net income (loss) before                                                                                               
   extraordinary items                            (5.7)             1.1              1.4           (880.7)                44.6
Extraordinary loss                                (0.3)              --               --              (A)                   --
Net income (loss)                                 (6.0)             1.1              1.4           (924.7)                44.6

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      (A) There was no expense for this item in the prior year.
      (B) The year-to-year increase is in excess of 1000%.





                                                                              15
<PAGE>   3
FISCAL 1998 COMPARED WITH FISCAL 1997

Revenues for fiscal 1998 increased by $189.0 million, or 47.3%, from fiscal
1997. Of this increase, $66.3 million was attributable to contract revenue and
$122.7 million was attributable to product sales. The increase in contract
revenue was primarily due to $38.1 million of revenue recognized under
contracts acquired in connection with the acquisition of Nations and an
increase of $4.4 million in revenue recognized under the Company's Integration
for Command, Control, Communications, Computers and Intelligence ("IC4I")
contract. The remaining increase in contract revenue during fiscal 1998
resulted from a variety of federal and commercial contracts involving both
systems engineering and integration work. The increase in product sales was
primarily driven by shipments made under two new Government contracts: the U.S.
Army PC-2 ("PC-2") contract, which was awarded to the Company in October 1996
and first generated revenue in June 1997, and a U.S. Department of State
("State Department") contract, which was awarded to the Company in April 1997.
In addition, the Company experienced an increase in sales under GSA Schedule
contracts, either directly from the Company's GSA Schedule contracts or from
sales to other prime contractors with GSA Schedule contracts, and under the
Company's TDA-2 contract with the U.S. Department of Treasury. The overall
increase in product sales was offset, in part, by a reduction in orders
fulfilled under both the Systems Acquisition Support Services ("SASS") and
Tennessee Valley Authority ("TVA") contracts. In fiscal 1998, approximately 93%
of the Company's revenues were derived from contracts or subcontracts with and
product sales to the Government, as compared with 89% for fiscal 1997. As a
result of the GTSI Transaction, the Company anticipates a significant reduction
in future revenues derived from product sales.

    Direct costs, expressed as a percentage of total revenues, increased from
80.4% in fiscal 1997 to 86.0% in fiscal 1998. Contract costs include labor
costs, subcontractor costs, material costs and other costs directly related to
contract revenue. Contract costs as a percentage of contract revenue increased
from 60.7% in fiscal 1997 to 69.6% in fiscal 1998, primarily as a result of
increased revenues generated from the IC4I contract; from contracts acquired in
connection with the acquisition of Nations; and from an increase in revenues
generated from systems integration and networking contracts. The IC4I contract,
the contracts acquired through the acquisition of Nations, and the Company's
systems integration and networking contracts require higher levels of
materials, subcontractor involvement and/or other direct costs than does BTG's
historical contract base, which has a more labor-intensive, higher gross margin
profile. Cost of product sales as a percentage of product sales increased from
87.8% in fiscal 1997 to 93.0% in fiscal 1998. This increase was due in large
part to both competitive market pressures in the product reselling environment
and to the startup costs associated with several large IDIQ (indefinite
delivery--indefinite quantity) Government contracts for which shipments began
during fiscal 1998. During fiscal 1998, the Company shipped a significant
number of products under the PC-2 and State Department contracts, which both
provided for extended warranty coverage. The estimated costs of this extended
warranty coverage have been included in cost of product sales during fiscal
1998.

    Indirect, general and administrative expenses include the costs of indirect
labor, fringe benefits, overhead, sales and administration, bid and proposal,
and research and development. Indirect, general and administrative expenses for
fiscal 1998 increased by $24.6 million, or 38.8%, from fiscal 1997. This
increase resulted primarily from an increase in the overall volume of business
as compared to the prior year. Expressed as a percentage of total revenues,
indirect, general and administrative expenses decreased in fiscal 1998 to
14.9%, from 15.9% in fiscal 1997.

    Amortization and other operating costs, which include the amortization of
goodwill and other intangible assets as well as other operating expenses that
are nonreimbursable under Government contracts, increased by $1.6 million, or
82.0%, in fiscal 1998 as compared with the previous year. This increase was
primarily attributable to the amortization of goodwill associated with the
acquisition of Nations, financial advisory fees incurred during the period, and
certain financial statement reserves recorded in connection with outstanding
tax audits.

    Restructuring charges totaling $38.5 million were incurred during fiscal
1998 primarily as the result of the Company's divestiture of its Product
Reselling Business. In fiscal 1998, the Company's Board of Directors approved a
restructuring plan designed to refocus the Company on its core business and
historical strengths in order to improve operating results. The total
restructuring charges recorded in fiscal 1998 included $13.7 million associated
with the write-down of goodwill recorded in connection with the past
acquisition of certain product reselling companies, $9.9 million associated
with the loss recorded on the sale and disposal of certain assets related to
the GTSI Transaction, $5.8 million in estimated reserves for certain prepaid
software licenses initially purchased for resale by the Product Reselling
Business, and $3.5 million in estimated reserves for future facility and
equipment lease commitments of the Product Reselling Business.

    Interest expense for fiscal 1998 increased by $2.3 million, or 38.3%, from
fiscal 1997. This increase was due principally to the significant growth in
revenue in fiscal 1998 as compared with the prior year, which resulted in
higher receivable and inventory balances, thereby resulting in a higher level
of interest expense related to the financing of these operating assets. The
Company maintains a revolving line of credit facility (the "Credit Facility")
to fund its working capital needs. See "Liquidity and Capital Resources--Credit
Facility." In addition, higher interest costs were incurred in fiscal 1998 due
to interest paid on borrowings related to the Company's acquisition of Nations
in June 1997. As a percentage of total revenues, interest expense decreased in
fiscal 1998 to 1.4% from 1.5% in fiscal 1997.

    Equity in the earnings of unconsolidated affiliates was $589,000 in fiscal
1998, a decrease of $1.3 million from the prior year.  This income resulted
from the Company's interest in an unincorporated joint venture entity, which
was formed for the purpose of performing under a specific Government contract.
Decreased income from this source was attributable to the lower demand for
products under the associated contract, which ended on April 30, 1998. The
Company does not anticipate





16
<PAGE>   4
significant income from this source in fiscal 1999.

    The Company recorded a gain on the sale of investments in fiscal 1998 of
$20.2 million as a result of the sale of its ownership interests in the
WheelGroup Corporation. See "Liquidity and Capital Resources."

    Merger-related costs of $2.5 million were incurred by the Company during
fiscal 1998. These costs were primarily attributable to the termination of the
Company's planned acquisition of Micros-To-Mainframes, Inc. ("M-T-M"). On
August 29, 1997, the Company entered into an Agreement and Plan of Merger (the
"Agreement") with M-T-M under which BTG agreed to acquire all of the
outstanding common stock of M-T-M for cash and common stock consideration
valued at approximately $25.0 million. On February 13, 1998, the Agreement, as
subsequently amended, was terminated. Pursuant to the Agreement, BTG paid M-T-M
a $500,000 termination fee. In addition, the Company paid M-T-M $1.25 million
for additional out-of-pocket expenses, and in exchange for a release from
future liability that may arise as a result of the termination of the
Agreement.

    Income tax expense, as a percentage of income before income taxes, was
45.1% during fiscal 1997; however, due to the pre-tax loss experienced by the
Company during fiscal 1998, there was an income tax benefit, which, as a
percentage of the loss before income taxes, was 22.3%. The effective income tax
rate for fiscal 1998 was significantly and adversely affected by the write-down
of goodwill recorded in connection with the Company's divestiture of its
Product Reselling Business. The costs associated with such write-downs are not
deductible for income tax return purposes.

    The Company recorded losses of $4.2 million and $703,000, net of income
taxes, in fiscal 1998 and 1997, respectively, from the discontinuance of the
operations of CNI. The Company formed CNI in August 1996 to be a total
solutions provider to broadband network owners entering the Internet access
market. CNI's offerings were designed to allow network operators to sell
enhanced Internet services to residential consumers and businesses. CNI's
market was data-over-cable, high-speed Internet access via cable television
plants, focused on households serviced by mid-sized and independent cable
operators. During fiscal 1998, it became evident to the Company that the
subscriber base was not growing as rapidly as was initially anticipated. As a
result, the Company made a decision to discontinue the operations of CNI rather
than continue its investment in this venture.

    In fiscal 1998, the Company recorded an extraordinary loss of $1.9 million,
net of income taxes, from the early extinguishment of outstanding notes
payable. See "Liquidity and Capital Resources."

FISCAL 1997 COMPARED WITH FISCAL 1996

Revenues for fiscal 1997 increased by $186.3 million, or 87.3%, from fiscal
1996. Of this increase, $42.6 million was attributable to contract revenue and
$143.7 million was attributable to product sales. The increase in contract
revenue was primarily due to an increase of $13.8 million under contracts
acquired in connection with the acquisition of Concept Automation, Inc. of
America ("CAI"), an increase of $17.7 million of revenue recognized under the
Company's IC4I contract, and a net increase from a variety of other contracts.
The increase in product sales was primarily due to an increase of $50.4 million
of revenue generated under a variety of sales vehicles acquired in connection
with the acquisition of CAI and an increase of $95.3 million of revenue
resulting from sales under the Company's electronic computer store contract
with the National Institutes of Health. These increases were offset by a
decrease of $28.7 million in sales from purchase contracts under the Basic
Ordering Agreement with the North Atlantic Treaty Organization. In fiscal 1997,
approximately 89.0% of the Company's revenues were derived from contracts or
subcontracts with and product sales to the Government, as compared with 90.0%
for fiscal 1996.

    Direct costs, expressed as a percentage of total revenues, increased from
76.6% in fiscal 1996 to 80.4% in fiscal 1997, reflecting the increased
proportion of total revenues derived from product sales, which typically have
higher direct costs than do revenues generated from service contracts. Contract
costs as a percentage of contract revenue increased from 53.1% in fiscal 1996
to 60.7% in fiscal 1997, primarily as a result of revenues generated from the
IC4I contract and from contracts acquired in connection with the acquisition of
CAI, both of which require higher levels of material purchases and/or
subcontractor involvement than does BTG's historical contract base, which has a
more labor-intensive, higher gross margin profile. As a percentage of product
revenues, cost of product sales in fiscal 1997 was relatively unchanged from
fiscal 1996.

    Indirect, general and administrative expenses for fiscal 1997 increased by
$22.6 million, or 55.3%, from fiscal 1996. This increase resulted primarily
from an increase in the overall volume of business as compared with fiscal
1996, as well as from indirect expenses incurred by CAI, of which only a
portion were included in the Company's consolidated fiscal 1996 results.   In
addition, the Company incurred certain costs during fiscal 1997 that were
directly related to certain extraordinary events occurring during its fourth
quarter such as the Company's consolidation of its Washington, D.C. area
offices, the alignment of certain employee benefits between the plans of
acquired companies and BTG, and the write-off of a significant receivable
resulting from the bankruptcy of a commercial customer. Expressed as a
percentage of total revenues, indirect, general and administrative expenses
decreased in fiscal 1997 to 15.9%, from 19.1% in fiscal 1996, principally
reflective of the increased proportion of total revenues derived from product
sales, which typically have lower indirect, general and administrative expenses
than do revenues generated from service contracts. In addition, certain
non-recurring costs recognized in fiscal 1996 resulting from compensation paid
to a number of employees who could not be charged as direct labor costs to
federal contracts affected by the Government shutdown contributed to the
decreased percentage of indirect, general and administrative expenses compared
with total revenues.

    Amortization and other operating costs increased by $321,000 in fiscal 1997
as compared with the previous year. This increase was attributable to increased
amortization expense





                                                                              17
<PAGE>   5
of approximately $389,000 associated with the goodwill and other intangible
assets arising from the acquisition of CAI in October 1995, offset by a net
reduction of $68,000 in other operating costs.

    Interest expense for fiscal 1997 increased by $3.1 million, or 100.6%, from
fiscal 1996. This increase was due, in part, to interest paid on borrowings
related to the Company's acquisition of CAI, as well as to the significant
growth in revenues in fiscal 1997 that generated an increase in the level of
outstanding receivables and in the amount of inventory held by the Company,
thereby resulting in a higher level of interest expense related to the
financing of these operating assets. The Company maintains a revolving line of
credit facility (the "Credit Facility") to fund its working capital needs. See
"Liquidity and Capital Resources--Credit Facility." In addition, higher
interest costs were incurred during fiscal 1997 as a result of the issuance of
subordinated notes payable (the "Subordinated Notes") by the Company in
February 1996. These notes, which were retired and replaced by $15.0 million in
new promissory notes in February 1998, accrued interest at a stated annual rate
of 12.875% and have an effective annual rate of 14.2%. See "Liquidity and
Capital Resources--Subordinated Notes." In December 1996, the Company sold
2,190,000 shares of its common stock in a public offering, at $16.25 per share,
for total proceeds of $33.1 million, net of issuance costs. The proceeds from
this offering were received at the latter part of the Company's third quarter
and were used to reduce borrowings outstanding under the Credit Facility.

    Equity in the earnings of unconsolidated affiliates increased by $1.1
million, or 138.3%, in fiscal 1997 as compared with fiscal 1996. This income is
derived from the Company's 49.0% interest in an unconsolidated joint venture.
The joint venture entity, which is with an unrelated company, was created for
the purpose of performing under a specific contract. BTG's interest was
acquired by the Company in connection with its acquisition of CAI. The
significant increase in this income during fiscal 1997 as compared with the
prior year is a result of both the higher volume of product sales recognized by
the joint venture in fiscal 1997 and the fact that product sales from the joint
venture only generated income for the Company for the portion of fiscal 1996
coincident with the acquisition of CAI.

    The Company's effective tax rate for fiscal 1997 was 46.1% compared to
43.6% in fiscal 1996. This increase was principally due to the additional
goodwill and intangible asset amortization expense recorded in fiscal 1997,
which is not deductible for income tax purposes, and an increase in certain
other non-deductible costs offset, in part, by a reduction in the deferred tax
asset valuation allowance.

INFLATION

Approximately 25.9% and 31.6% of the Company's contract revenue for fiscal 1998
and fiscal 1997, respectively, were under cost-reimbursement type contracts,
under which inflationary increases are borne by the customer. Although the
Company performs on several multi-year, fixed-price and time-and-materials
contracts, under which it bears the risk of inflationary pressures on its
costs, to date it has not been materially adversely affected by inflation. In
addition, the Company's product sales generally have not been affected by
inflation.

LIQUIDITY AND CAPITAL RESOURCES

The Company incurred a net loss of $35.2 million in fiscal 1998 and used cash
in operating activities of $32.1 million. Principally as a result of the
Company's significant growth in fiscal 1998, the net use of cash in operating
activities was primarily reflective of increases in receivables and inventory
of approximately $30.0 million and $20.4 million, respectively. These increases
were offset by certain restructuring charges, amounting to $38.3 million,
associated with the Company's divestiture of its Product Reselling Business and
an increase in accounts payable of approximately $40.5 million. In addition,
the Company recorded a gain of $20.2 million from the sale of its investment in
WheelGroup. Net cash of $27.6 million and $5.2 million was used by operating
activities during fiscal 1997 and fiscal 1996, respectively.

    Cash flow related to investing activities during fiscal 1998 resulted in a
net use of cash of approximately $5.7 million and primarily resulted from the
Company's acquisition of Nations in June 1997, offset by $7.2 million in
proceeds received in connection with the GTSI Transaction.

    In May 1996, the Company entered into an agreement with WheelGroup under
which it (i) purchased 214,042 shares of the outstanding common stock of
WheelGroup for $200,000; (ii) purchased a convertible note receivable from
WheelGroup for $300,000; and (iii) committed to the purchase of certain
distribution rights and consulting services from WheelGroup for approximately
$1.0 million, payable in various installments over fiscal years 1997 and 1998.
As the result of a significant investment in WheelGroup by a venture capital
fund, BTG was given the option, in March 1997, to purchase an additional 28,146
shares of WheelGroup for $9.87 per share. As a result, $277,799 of amounts
previously paid to WheelGroup under the distribution rights and consulting
services agreement were used to purchase the additional 28,146 shares.

    In March 1998, pursuant to a merger agreement entered into by WheelGroup
and Cisco Systems, Inc. ("Cisco"), a publicly traded technology company, BTG's
ownership interest in WheelGroup was converted into approximately 326,000
common shares of Cisco. The shares of Cisco initially received by BTG were
unregistered; however, in accordance with the merger agreement, the shares were
registered shortly after the merger was consummated. Of the Cisco shares
received by BTG, approximately 50,000 are required to remain in escrow for a
one-year period. In connection with the sale of its WheelGroup interests, the
Company recorded a gain in fiscal 1998 of approximately $20.2 million
calculated using the fair market value of Cisco common stock on the date of
closing of the merger. In April 1998, the Company sold approximately 276,000 of
its Cisco shares for $18.9 million and used the proceeds from this sale to
retire outstanding term promissory notes and reduce outstanding borrowings
under the Credit Facility.

    In fiscal 1997 and fiscal 1996, approximately $5.3 million and $15.2
million, respectively, were used in investing activities.  The cash used in
investing activities during these fiscal years





18
<PAGE>   6
was principally due to purchases of property and equipment, investment in
product development costs, and the acquisition of CAI in fiscal 1996.

    During fiscal 1998, approximately $37.8 million was provided from financing
activities primarily as a result of $38.3 million in net advances under the
Credit Facility, $15.0 million in new promissory term notes, and $1.2 million
in proceeds from the issuance of common stock under certain employee benefit
plans. These financing sources were offset by $16.4 million in payments under
both outstanding debt and capital lease arrangements. The $15.0 million in new
promissory term notes was used to retire outstanding subordinated notes
payable. Subsequent to March 31, 1998, the promissory term notes were retired
with proceeds from the sale of investments. During fiscal 1997, $32.9 million
was provided from financing activities primarily as a result of $33.1 million
in net proceeds received from a follow-on public common stock offering. During
fiscal 1996, $19.1 million was provided from financing activities primarily as
the result of $15.0 million in proceeds received from the issuance of
subordinated notes and increased borrowings of $7.0 million under the Company's
Credit Facility. In fiscal 1996, these funds were used to finance the cash
portion of the Company's acquisition of CAI and to fund the Company's
significant business growth.

    At March 31, 1998, working capital was approximately $43.8 million compared
with working capital of $83.6 million at March 31, 1997. This decrease is
attributable to several factors, including the classification of a significant
portion of the Credit Facility as a current liability and the current nature of
the outstanding promissory term notes payable, which were paid during April
1998.  Outstanding borrowings under the Company's Credit Facility have
traditionally been classified as noncurrent liabilities in the Company's
consolidated balance sheets since the Company's anticipated borrowing base,
which is principally dependent on outstanding receivable levels, was expected
to be equal to or greater than outstanding Credit Facility borrowings at the
balance sheet date.  With the GTSI Transaction and the Company's divestiture of
the Product Reselling Business, the Company anticipates requiring a lower level
of Credit Facility borrowings during the next accounting period than has been
needed during fiscal 1998. Accordingly, a portion of the Credit Facility at
March 31, 1998, was classified as a current liability.

    At March 31, 1998, outstanding borrowings under the Credit Facility were in
excess of amounts available pursuant to the prescribed borrowing base formula
by approximately $15.1 million, and the Company obtained overadvance funding
authorization from the lending institutions to cover such excess borrowings.
Management believes that the overadvance funding became necessary principally
as a result of the Company's divestiture of its Product Reselling Business
during the fourth quarter of fiscal 1998.  This transaction resulted in the
sale of a significant amount of the operating assets of the product reselling
division and for which the Company received a significant amount of its
consideration in the form of common stock. Although this adversely affected the
Company's cash flows in the short term, management believes that, with the
subsequent collection of the outstanding receivables of the product reselling
division, the Company should no longer require overadvance funding at the
beginning of its second quarter in fiscal 1999. Accordingly, the Company
believes that funds available under its Credit Facility, including the
overadvance funding levels approved by the lending institutions, will be
sufficient to fund the Company's cash requirements for at least the next 12
months.

CREDIT FACILITY. The Credit Facility is a secured revolving credit facility
consisting of two revolving promissory notes provided to the Company and its
subsidiaries by NationsBank, N.A. ("NationsBank") and Fleet Capital Corporation
in the principal amount of up to $85.0 million. In connection with the
divestiture of the Company's Product Reselling Business, the Credit Facility
was amended in February 1998 to reduce the ceiling for available borrowings to
$75.0 million from July 1, 1998, through September 30, 1998, and $60.0 million
from August 1, 1998, through the date of maturity, August 31, 1999. The
principal amount outstanding under the Credit Facility may not exceed the
lesser of (i) $85.0 million or (ii) a defined borrowing base, which is a
variable amount calculated by aggregating a specified set of the Company's
accounts receivable and unbilled costs. If for any quarter during the term of
the Credit Facility, the average daily outstanding principal balance under the
Credit Facility is less than 50.0% of the commitment amount ($85.0 million
unless otherwise reduced), the Company must pay a commitment fee at the rate of
three-eighths of one percent per annum on the difference between the commitment
amount and the daily outstanding principal balance under the Credit Facility
during such quarter. Interest on revolving loan advances made under the Credit
Facility is, at the option of the Company, either (i) the NationsBank prime
rate or (ii) LIBOR plus a percentage ranging from 1.25% to 2.0% depending on
the Company's leverage ratio.  However, during the period the Company is
utilizing the overadvance funding authorization, the NationsBank prime rate
must be used to calculate interest.

    The Credit Facility is secured by substantially all assets of the Company
and includes certain financial and other covenants restricting, among other
things, changes in capital structure, mergers, acquisitions, sales of assets,
changes of operations, purchases and redemptions of stock, additional
indebtedness, payment of dividends and other payments to shareholders,
investments, capital expenditures, a net loss by the Company for any fiscal
quarter and certain other matters without the approval of the lenders. At March
31, 1998, the Company was not in compliance with some of the covenants under
the Credit Facility and has obtained a waiver of such non-compliance from the
lenders.

SUBORDINATED NOTES. On February 16, 1996, the Company entered into a Note and
Warrant Purchase Agreement (the "Nomura Agreement") with Nomura Holding
America, Inc. ("Nomura") under which the Company issued $15.0 million of
subordinated notes (the "Notes"). The Notes, which bear interest at 12.875% per
annum, are due in February 2001. In connection with the issuance of the Notes,
the Company also issued common stock purchase warrants (the "Warrants") to the
holder of the Notes, entitling such holder to purchase up to





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317,478 shares of common stock at $9.50 per share and to certain registration
rights with respect to such shares. The Warrants are exercisable at any time
through February 16, 2003. Both the number of shares obtainable from exercise
of the Warrants and the exercise price per share are subject to adjustment
based on certain anti-dilution provisions included in the Nomura Agreement.
During fiscal 1998, the exercise price per share of the Warrants was adjusted
to $8.33 pursuant to the Nomura Agreement. In February 1998, the Company repaid
the Notes with proceeds received from two new promissory term notes entered
into with the Credit Facility lending institutions. These new notes were repaid
in April 1998 with the proceeds received from the Company's sale of certain of
its investments.

YEAR 2000 COMPLIANCE

The Company is currently in the process of reviewing its computer systems and
operations to determine the extent to which its systems will be vulnerable to
potential errors and failures as a result of the "Year 2000" problem. The Year
2000 problem is the result of prior computer programs being written using two
digits, rather than four digits, to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could result in major
system failures or miscalculations.

    Based on the Company's preliminary assessment of potential Year 2000
issues, an initial corrective action plan has been developed that includes
reprogramming affected software where appropriate and feasible, obtaining
vendor-provided software upgrades when available, and completely replacing
affected systems where necessary. The financial system currently utilized by
the Company is not Year 2000 compliant, and the Company is currently evaluating
the appropriate corrective action that should be taken. Such corrective action
will likely result in either vendor-provided software upgrades or a completely
new system. In recent months, the Company has been involved in evaluating
potential replacement systems and is currently involved in negotiating the
terms for such a system. Initial estimates indicate a cost to the Company
between $2.0 and $3.0 million for a replacement system. The Company believes
that the majority of such costs would be capitalized in its financial records
and depreciated over a useful life estimated at between five and 10 years.

    The Company currently expects that identified Year 2000 affected systems
will be corrected by the end of fiscal 1999, although there can be no absolute
assurance that the Company has identified all Year 2000 affected systems or
that its corrective action plan will be timely and successful. The Company
believes that its Year 2000 corrective action plan and any residual Year 2000
problems will not materially affect its results of operations or its financial
condition. In addition, the Company has not received any indication to date
that the effect of Year 2000 issues on its customers and suppliers will have a
material adverse effect on the Company.

MARKET INFORMATION

The Company's common stock trades on the Nasdaq stock market's national market
under the symbol "BTGI." The stock has been publicly traded since December
1994. The high and low sale prices per share of common stock for each quarter
of fiscal 1998 and fiscal 1997 are as follows:

<TABLE>
<CAPTION>
Quarter Ended                High              Low
-------------------------------------------------------
<S>                      <C>              <C>
June 30, 1997            $ 20.000         $  8.500
September 30, 1997       $ 16.000         $  9.750
December 31, 1997        $ 14.750         $  8.375
March 31, 1998           $ 11.000         $  7.938

June 30, 1996            $ 15.250         $  9.250
September 30, 1996       $ 15.750         $ 11.500
December 31, 1996        $ 27.250         $ 14.000
March 31, 1997           $ 27.375         $ 17.500
</TABLE>

    The Company has never paid cash dividends and is currently prohibited from
doing so under its Credit Facility. It is the present policy of the Company to
retain earnings to finance the growth and development of its business and,
therefore, the Company does not anticipate paying cash dividends on its common
stock in the foreseeable future.





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