<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q
                                        
                                        
                                        
 [X]  Quarterly Report pursuant to  Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended September 30, 1998 or

 [ ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

Commission File Number 000-21755


                              MASTECH CORPORATION
             (Exact name of registrant as specified in its charter)

             PENNSYLVANIA                          25-1802235          
             ------------                          ----------          
     (State or other jurisdiction               (I.R.S. Employer       
    of incorporation or organization)           Identification No.)      

            1004 McKee Road                              
          Oakdale, Pennsylvania                       15071
(Address of  principal executive offices)           (Zip Code)
 
      Registrant's telephone number, including area code:  (412) 787-2100


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, and (2) has been subject to such filing requirements
for the past 90 days.

                                Yes  X    No
                                    ---      ---
The number of shares of the registrant's Common Stock, par value $.01 per share,
outstanding as of September  30, 1998 was 49,041,861 shares.
<PAGE>
 
                              MASTECH CORPORATION
                         QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998
                                        
                               TABLE OF CONTENTS
                                        
<TABLE>
<CAPTION>
                                                                                                PAGE
                                                                                                ----
<S>          <C>                                                                                <C>
PART I.      FINANCIAL INFORMATION                                                                3
                                                                                                       
ITEM 1.      CONSOLIDATED FINANCIAL STATEMENTS:                                                        
                                                                                                       
             CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND NINE MONTH PERIODS                       
             ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997                                      3
                                                                                                
             CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997           4
                                                                                                
             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AS OF SEPTEMBER 30, 1998           
             AND DECEMBER 31, 1997                                                                5
                                                                                                
             CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED                    
             SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997                                            6
                                                                                                
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                           7
                                                                                                
             REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                            10
                                                                                                
ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS            
             OF OPERATIONS                                                                       11
                                                                                                
ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURE                                            
             ABOUT MARKET RISK SENSITIVE INSTRUMENTS                                             16
                                                                                                
PART II.     OTHER INFORMATION                                                                    
                                                                                                
ITEM 1.      LEGAL PROCEEDINGS                                                                   17
ITEM 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS                                           17
ITEM 3.      DEFAULTS UPON SENIOR SECURITIES                                                     17
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 17
ITEM 5.      OTHER INFORMATION                                                                   17
ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K                                                    18
                                                                                                
             SIGNATURES                                                                          19
                                                                                                
             EXHIBIT INDEX                                                                       20
</TABLE>

                                       2
<PAGE>
 
PART 1.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                              MASTECH CORPORATION
                        CONSOLIDATED INCOME STATEMENTS
                 (Dollars in Thousands Except Per Share Data)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                 Three Months Ended September 30,     Nine Months Ended September 30,
                                                 --------------------------------     -------------------------------
                                                      1998               1997              1998              1997
                                                      ----               ----              ----              ----
<S>                                                 <C>                 <C>              <C>               <C>
Revenues                                            $103,405            $64,209          $277,575          $168,453
Cost of revenues                                      68,756             44,472           185,878           118,858
                                                    --------            -------          --------          --------
Gross profit                                          34,649             19,737            91,697            49,595

Selling, general and administrative                   19,685             12,148            52,933            32,557
                                                    --------            -------          --------          --------
Income from operations                                14,964              7,589            38,764            17,038

Merger related expenses                                 -                  -                3,212              -
Other income                                            (735)              (114)           (2,138)             (881)
                                                    --------            -------          --------          --------
Income before income taxes                            15,699              7,703            37,690            17,919
Provision for income taxes                             5,495              3,148            14,789             7,354
                                                    --------            -------          --------          --------
Net income                                          $ 10,204            $ 4,555          $ 22,901          $ 10,565
                                                    ========            =======          ========          ========
Net income per common share, basic and diluted      $   0.20            $  0.10          $   0.46          $   0.23
                                                    ========            =======          ========          ========
</TABLE>

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

                                       3
<PAGE>
 
                              MASTECH CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                            (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                             September 30, 1998    December 31, 1997
                                                             ------------------    -----------------
                                                                (Unaudited)            (Audited)
<S>                                                          <C>                   <C>
                         ASSETS
Current assets:
  Cash and cash equivalents                                       $ 23,928              $ 82,924
  Investments                                                       58,500                  -
  Accounts receivable, net                                          70,971                60,366
  Unbilled receivables                                              11,751                 1,829
  Employee and related party advances                                3,206                 2,578
  Prepaid and other assets                                           2,730                 1,511
  Deferred income taxes                                              3,636                 2,154
                                                                  --------              --------
    Total current assets                                           174,722               151,362

  Net equipment and leasehold improvements                          14,340                 8,775
  Intangible assets, net                                             5,980                 1,923
                                                                  --------              --------
Total assets                                                      $195,042              $162,060
                                                                  ========              ========
     LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Revolving credit facilities                                     $   -                 $  6,905
  Accounts payable                                                   7,365                 5,319
  Accrued payroll and related costs                                 24,569                17,949
  Accrued income taxes                                               1,455                 2,005
  Other accrued liabilities                                         14,489                 8,256
                                                                  --------              --------
Total current liabilities                                           47,878                40,434

  Other long term liabilities                                          467                   490
  Deferred income taxes                                                884                 1,710

Shareholders' equity:

  Preferred stock, without par value: 20,000,000 shares
    authorized, 1 share and 0 shares of Series A Preferred
    Stock issued and outstanding, respectively                        -                     -
  Common stock, par value $0.01 per share:
    200,000,000 shares authorized, 49,041,861 and
    48,789,800 shares issued and outstanding, respectively             490                   252
  Additional paid-in capital                                       109,572               105,375
  Retained earnings                                                 36,637                14,722
  Deferred compensation                                               -                     (258)
  Net unrealized gain/(loss) on investments                            346                  -
  Currency translation adjustment                                   (1,232)                 (665)
                                                                  --------              --------
    Total shareholders' equity                                     145,813               119,426
                                                                  --------              --------
Total liabilities and shareholders' equity                        $195,042              $162,060
                                                                  ========              ========
</TABLE>

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

                                       4
<PAGE>
 
                              MASTECH CORPORATION
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            (Dollars in thousands)

<TABLE>
<CAPTION>
                                        Common Stock           Series A Preferred     Additional
                                     --------------------     --------------------     Paid-in      Retained 
                                     Shares     Par Value     Shares     Par Value     Capital      Earnings
                                     ------     ---------     ------     ---------    ---------     --------
<S>                                <C>          <C>           <C>        <C>          <C>           <C>
Balance, December 31, 1997         48,789,800     $252          -          $  -       $105,375      $14,722
                            
Net income                              -           -           -             -           -          22,901
Amortization of deferred    
  compensation                          -           -           -             -           -            -
Exercise of stock options,  
  includes effect of tax    
  benefit recognized                  252,061        1          -             -          3,935         -
Two-for-one stock split     
  effected in the form of a 
  stock dividend paid on    
  April 10, 1998                        -          237          -             -           -            (237)
Issuance of preferred stock             -           -           1             -           -            -
Non-cash merger costs                   -           -           -             -            262         -
Dividends-paid by Quantum               -           -           -             -           -            (749)
Net unrealized gain/(loss)  
  on investments                        -           -           -             -           -            -
Currency translation        
  adjustment                            -           -           -             -           -            -
                                   ----------     ----         --          ----       --------      -------
Balance, September 30, 1998 
  (Unaudited)                      49,041,861     $490          1           $ -       $109,572      $36,637
                                   ==========     ====         ==          ====       ========      =======
</TABLE>

<TABLE>
<CAPTION>
                                                      Net          Currency         Total
                                   Deferred       Unrealized     Translation     Shareholders'
                                 Compensation     Gain/(Loss)     Adjustment        Equity
                                 ------------     -----------    -----------     -------------
<S>                              <C>              <C>            <C>             <C>
Balance, December 31, 1997          $(258)           $  -          $  (665)        $119,426

Net income                             -                -             -              22,901
Amortization of deferred   
  compensation                        258               -             -                 258

Exercise of stock options, 
  includes effect of tax   
  benefit recognized                   -                -             -               3,936

Two-for-one stock split    
  effected in the form of a
  stock dividend paid on   
  April 10, 1998                       -                -             -                -
Issuance of preferred stock            -                -             -                -
Non-cash merger costs                  -                -             -                 262
Dividends-paid by Quantum              -                -             -                (749)
Net unrealized gain/(loss) 
  on investments                       -              346             -                 346
Currency translation       
  adjustment                           -                -             (567)            (567)
                                    ------           ----          -------         --------
Balance, September 30, 1998
  (Unaudited)                       $  -             $346          $(1,232)        $145,813
                                    ======           ====          =======         ========
</TABLE>

                                       5
<PAGE>
 
                              MASTECH CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Dollars in Thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                               Nine Months Ended September 30,
                                                               -------------------------------
                                                                  1998                 1997
                                                                  ----                 ----
<S>                                                             <C>                  <C>
CASH FLOW FROM OPERATIONS
Operations:
  Net income                                                    $ 22,901             $ 10,565
  Adjustments to reconcile net income to cash
    provided by operations:
      Depreciation and amortization                                2,390                1,073
      Allowance for uncollectible accounts                           326                  592
      Deferred income taxes, net                                  (1,448)                (943)
      Non-cash merger cost                                           262                 -
      Amortization of deferred compensation                          258                  389
      Amortization of bond premium                                   328                 -
    Working capital items:
      Accounts receivable and unbilled receivables               (20,853)             (24,780)
      Advances                                                      (628)                 668
      Prepaid and other assets                                    (2,125)                 (92)
      Accounts payable                                             2,046                  237
      Accrued and other current liabilities                       12,326                6,577
                                                                --------             --------
        Net cash flow from operations                             15,783               (5,714)
                                                                --------             --------
INVESTING ACTIVITIES:
  Acquisitions, net of cash acquired                              (4,154)                -
  Additions to equipment and leasehold improvements               (7,858)              (4,150)
  Purchase of investments                                        (72,693)                -
  Sale of investments                                             13,866                 -
  Unrealized gain on investments                                     346                 -
                                                                --------             --------
        Net cash flow from investing activities                  (70,493)              (4,150)
                                                                --------             --------
FINANCING ACTIVITIES:
  Net (payments)/borrowings under revolving credit facilities     (6,905)               1,849
  Proceeds from exercise of stock options                          3,935                   32
  Dividends paid                                                    (749)              (6,772)
                                                                --------             --------
        Net cash flow from financing activities                   (3,719)              (4,891)
                                                                --------             --------

Effect of currency translation on cash                              (567)                  (2)
                                                                --------             --------
Net change in cash and cash equivalents                          (58,996)             (14,757)
Cash and cash equivalents, beginning of period                    82,924               46,566
                                                                --------             --------
Cash and cash equivalents, end of period                        $ 23,928             $ 31,809
                                                                ========             ========

Supplemental disclosure:
      Cash payments for interest                                $    167             $    224
                                                                ========             ========
      Cash payments for taxes                                   $ 15,642             $  7,485
                                                                ========             ========
</TABLE>

                                       6
<PAGE>
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        



1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements included herein
have been prepared by Mastech Corporation (the "Company") in accordance with
generally accepted accounting principles for the interim financial information
and Article 10 of Regulation S-X under the Securities Exchange Act of 1934,
as amended. The consolidated financial statements as of and for the quarter
ended September 30, 1998 should be read in conjunction with the Company's
consolidated financial statements (and notes thereto) included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. Accordingly,
the accompanying consolidated financial statements do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company's management, all
adjustments considered necessary for a fair presentation of the accompanying
consolidated financial statements have been included, and all adjustments are of
a normal and recurring nature. Operating results for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.

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

2.  INVESTMENTS

The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company has determined that all of its
investments are to be classified as available-for-sale and recorded at fair
value.

3.    STOCK SPLIT

On March 17, 1998,  the Company's Board of Directors declared a two-for-one
stock split that was effected in the form of a stock dividend paid on April 10,
1998 to shareholders of record on March 27, 1998. All share and per share
amounts included in the Company's consolidated financial statements have been
retroactively restated to reflect the split for all periods presented.

4.  COMPREHENSIVE INCOME

During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"), which the Company adopted as of January 1, 1998. SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components. SFAS No. 130 requires companies to report all changes in equity
during a period, except those resulting from investment by owners and
distribution to owners, in a financial statement or footnote disclosure for the
period in which they are recognized. The Company has chosen to disclose
comprehensive income, which encompasses net income, foreign currency translation
adjustments and net unrealized gain (loss) on investments, in the following
table.

                                       7
<PAGE>
 
<TABLE>
<CAPTION>
                                   
                                                Three Months Ended September 30,    Nine Months Ended September 30,
                                                -------------------------------     ------------------------------
                                                    1998          1997                   1998           1997
                                                    ----          ----                   ----           ----
<S>                                              <C>            <C>                    <C>            <C>            
(dollars in thousands)                                                           
                                                                                 
Net income                                       $10,204        $4,555                 $22,901        $10,565
Other comprehensive gain (loss):                                                 
  Net unrealized gain (loss) on investment           346           -                       346            -
  Foreign currency translation adjustment            268           (73)                   (567)            (2) 
                                                 -------        ------                 -------         ------ 
Total comprehensive income                       $10,818        $4,482                 $22,680        $10,563
                                                 =======        ======                 =======        =======
</TABLE>

The adoption of SFAS No. 130 had no impact on the Company's net income or
shareholders' equity.

5.  RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS No. 131), which requires the use of
the "management approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within the
company for making operating decisions and assessing performance. Reportable
segments are based on products and services, geography, legal structure,
management structure or any other manner in which management segregates a
company. SFAS No. 131 is effective for financial statements issued for periods
beginning after December 15, 1997. The Company will adopt SFAS No. 131 as a part
of its December 31, 1998 year-end financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), which establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 is effective for periods after June 15, 1999. Management does not anticipate
that the adoption of this statement will have a significant effect on the
Company's financial position.

6.   ACQUISITIONS

QUANTUM

On June 1, 1998, the Company acquired all of the issued and outstanding capital
stock of Quantum Information Resources Limited, a Canadian corporation
("Quantum") pursuant to a business combination the terms of which were contained
in that certain Combination and Exchange Agreement dated June 1, 1998 (the
"Exchange Agreement"). Pursuant to the Exchange Agreement the shareholders of
Quantum received 1,623,000 exchangeable non-voting shares of Quantum which are
convertible into the same number of shares of the Company's common stock (the
"Exchangeable Shares") and PNC Bank, National Association received 1 share of
Series A Preferred Stock, as trustee for  the shareholders of Quantum, pursuant
to which such shareholders were granted the right to vote the Company common
stock underlying the Exchangeable Shares. Based on representations made by the
Quantum shareholders in the Exchange Agreement, the Company issued these
securities pursuant to the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act").

Quantum provides information technology services primarily in Canada and parts
of the United States. The business combination was accounted for as a pooling of
interests and, accordingly, the Company's consolidated financial statements have
been restated to include results for Quantum for all periods presented.

                                       8
<PAGE>
 
MC COMPUTER SERVICES

On July 1, 1998 the Company acquired privately-held MC Computer Services Pty
Limited, ("MCCS") a Canberra, Australia-based information technology services
provider. MCCS provides a wide range of high-level information technology
services such as applications development, consultant services, systems analysis
and design, and project management. The acquisition has been accounted for as a
purchase and management expects it to be accretive to future earnings. Operating
results have been included in the Company's consolidated  financial statements
since the date of acquisition, but pro forma  information has not been presented
because it is immaterial.

7.  ACQUISITION RELATED EXPENSES

In connection with the acquisition of Quantum, $3.2 million or $0.06 per share
of acquisition-related costs and expenses were incurred and have been charged to
expense in the second quarter of 1998.

8.  SUBSEQUENT EVENT

On October 28, 1998 the Company announced the acquisition of International MIS,
Inc. ("IMIS"), a business and information technology consulting firm based in
San Francisco, CA. IMIS provides the financial industry with high-level project
management and business analysis consulting services. The acquisition will be
accounted for as a purchase and management expects it to be accretive to future
earnings.

                                       9
<PAGE>
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Mastech Corporation:

We have reviewed the accompanying consolidated balance sheet of Mastech
Corporation (a Pennsylvania Corporation)  and subsidiaries as of September 30,
1998, and the related consolidated statements of income and shareholders' equity
for the three month and nine month periods ended September 30, 1998 and 1997,
and consolidated statements of cash flows for the nine month periods ended
September 30, 1998 and 1997. These consolidated financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements, referred to
above, for them to be in conformity with generally accepted accounting
principles.



                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania

October 22, 1998


                                        

                                       10
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this report. As
used herein, "Mastech" or the "Company" shall mean Mastech Corporation and each
of its consolidated subsidiaries.

OVERVIEW

Mastech Corporation was incorporated in Pennsylvania on November 12, 1996.
Mastech Systems Corporation, a Pennsylvania corporation through which the
business of the Company has been conducted since its inception in July 1986, is
an indirect, wholly owned subsidiary of the Company.

Mastech's revenues are derived from fees paid by clients for professional
services. Historically, a substantial majority of the Company's projects have
been client-managed. On client-managed projects, Mastech provides professional
services as a member of the project team on a time-and-materials basis. The
Company recognizes revenues on time-and-materials projects as the services are
performed. On Mastech-managed projects, Mastech assumes responsibility for
project management and bills the client on a time-and-materials or fixed-price
basis. Revenues on fixed-price contracts are recognized by the percentage of
completion method. Revenues from international operations do not include
revenues generated through offshore software development centers on U.S. client
engagements.

Mastech's most significant cost is its personnel expense, which consists
primarily of salaries and benefits of the Company's billable personnel. The
number of IT professionals assigned to projects may vary depending on the size
and duration of each engagement. Moreover, project terminations, completions and
scheduling delays may result in periods when personnel are not assigned to
active projects. Mastech manages its personnel costs by closely monitoring
client needs and basing personnel increases on specific project engagements.
While the number of IT professionals may be adjusted to reflect active projects,
the Company must maintain a sufficient number of professionals to respond to
demand for the Company's services on both existing projects and new engagements.

Mastech sells its services to large and medium-sized organizations. The
Company's sales force is organized to meet the needs of the marketplace through
four primary divisions: (i) the U.S. Client Services Division; (ii) the
Solutions Division; (iii) the Enterprise Package Solutions Division; and (iv)
the International Division.

The U.S. Client Services Division includes six geographic regions, each of which
is directed by a Regional Director. Each region includes multiple new business
development managers. These individuals use a proprietary database of several
thousand prospects to telemarket Mastech's services nationally. The Company
subsequently sends interested prospective clients a written proposal providing
information about the Company, its approach and methodology, schedules, team
members, pricing and terms.

The U.S. Client Services Division also focuses on developing national and global
relationships with major systems integrators such as EDS, IBM, KPMG Peat
Marwick, Ernst & Young and Oracle. Mastech assists these integrators in meeting
their customers' needs by providing specialized technical expertise and
complementary capabilities such as offshore development.

The Solutions Division is responsible for securing and managing Mastech-managed
engagements. This division has a dedicated sales and marketing team responsible
for generating and qualifying leads and developing detailed project estimates
and proposals. This team sells directly to large and medium-sized organizations
and also partners with large systems integrators.

The Enterprise Package Solutions Division manages engagements and provides IT
professionals trained in ERP implementation services. This division works
directly with end-user clients and also as partners with both the ERP software
vendors and systems integrators on teamed implementation efforts.

                                       11
<PAGE>
 
The International Division operates through offices in ten different countries.
Each office is supervised by a Country Manager and supported by dedicated sales
personnel that sell directly to new clients using an approach similar to the
Company's U.S. sales approach. Additionally, these offices focus on leveraging
Mastech's existing relationships with its U.S.-based multinational clients.


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO  THREE MONTHS ENDED SEPTEMBER 30, 1997

Revenues.   The Company's revenues increased 61%, or $39.2 million to $103.4
million for the third quarter of 1998 from $64.2 million for the third quarter
of 1997. Of this 61% growth in revenues, U.S. Client Services Division, 
Enterprise Package Solutions Division, and International Division contributed
24%, 19% and 18%, respectively. The increases in Enterprise Package Solutions
and U.S. Client Services Divisions can be attributed to additional services
provided to existing clients and continued market penetration. The increase in
the International Division is primarily the result of increased market
penetration primarily in Europe and Australia.


Gross Profit.  Gross profit consists of revenues less cost of revenues. Cost of
revenues consists primarily of salaries and employee benefits for billable IT
professionals and the associated travel and relocation costs of these
professionals, as well as the cost of the independent contractors used by the
Company. Gross profit increased 75.6% to $34.6 million for the third quarter of
1998 from $19.7 million for the third quarter of 1997. Gross profit as a
percentage of revenues for the current quarter of 33.5% increased when compared
with 30.7% for the third quarter in 1997. The primary reasons for the increase
in gross profits as a percentage of revenues were higher margins in the
Enterprise Package Solutions Division and U.S. Client Services Division.

Selling, General and Administrative Expenses.  Selling, general and
administrative expenses consist of costs associated with the Company's sales and
marketing efforts, executive management, finance and human resource functions,
facilities and telecommunication costs and other general overhead expenses.
Selling, general and administrative expenses increased 62%, or $7.5 million to
$19.7 million in the third quarter of 1998 from $12.1 million in the third
quarter of 1997. The increase in selling, general and administrative expenses
reflects the Company's continued investment in infrastructure and in the
initiatives required to implement the Company's marketing strategies. These
costs include the development of additional service offerings, the expansion of
its global recruiting capabilities, the opening of additional international
offices, the establishment of training centers and the continued expansion of
its offshore software development centers.

Interest and Other Income (Expense), Net.  Other income was $735,000 for the
third quarter of 1998 compared to $114,000 for the third quarter of 1997. This
increase in other income is the result of increased interest income from the
investment of the net proceeds from the Company's secondary offering of common
stock completed in December 1997.


RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997

Revenues.   The Company's revenues increased 65%, or $109.1 million to $277.6
million for the nine months ended September 30, 1998 from $168.5 million for the
nine months ended September 30, 1997. Of this 65% growth in revenues, U.S. 
Client Services Division, Enterprise Package Solutions Division and 
International Division contributed 20%, 18% and 17%, respectively. The increases
in Enterprise Package Solutions and U.S. Client Services Divisions can be 
attributed to additional services provided to existing clients and continued 
market penetration. The increase in the International Division is primarily the
result of increased market penetration primarily in Europe and Australia.

Gross Profit.  Gross profit consists of revenues less cost of revenues. Cost of
revenues consists primarily of salaries and employee benefits for billable IT
professionals and the associated travel and relocation costs of these
professionals, as well as the cost of the independent contractors used by the
Company. Gross profit increased 85% to $91.7 million for the nine months ended
September 30, 1998 compared with $49.6 million for the same period in 1997.
Gross profit as a percentage of revenues for the current nine-month period of
33% increased when compared with 29.4% for the same period in 1997.

                                       12
<PAGE>
 
The primary reasons for the increase in gross profits as a percentage of
revenues were higher margins in the Enterprise Package Solutions Division, U.S.
Client Services Division and Solutions Division.

Selling, General and Administrative Expenses.  Selling, general and
administrative expenses consist of costs associated with the Company's sales and
marketing efforts, executive management, finance and human resource functions,
facilities and telecommunication costs and other general overhead expenses.
Selling, general and administrative expenses increased 62.6%, or $20.4 million
to $52.9 million for the nine month period ended September 30, 1998 from $32.6
million for the prior year period. The increase in selling, general and
administrative expenses reflects the Company's continued investment in
infrastructure and in the initiatives required to implement the Company's
marketing strategies. These costs include the development of additional service
offerings, the expansion of its global recruiting capabilities, the opening of
additional international offices, the establishment of training centers and the
continued expansion of its offshore software development centers.

Interest and Other Income (Expense), Net.  Other income was $2.1 million for the
year to date period ended September 30, 1998 compared to $881,000 for the same
period in 1997. This increase in other income is the result of increased
interest income from the investment of the net proceeds from the Company's
secondary offering of common stock completed in December 1997.

LIQUIDITY AND CAPITAL RESOURCES

In December 1997, the Company completed  the registration of 3,000,000 pre-split
shares of the Company's common stock for sale to the public in an underwritten
offering. The net proceeds to the Company of the offering were $51.3 million
after deducting underwriting discounts, commissions and offering expenses paid
by the Company. In addition, the net proceeds to the Company, generated from its
initial public offering in December 1996, were approximately $45.6 million,
after deducting underwriting discounts and commissions and offering expenses
paid by the Company. The proceeds from both offerings have been used primarily
for working capital and other general purposes. The remaining proceeds have been
temporarily invested in short-term, investment grade, interest bearing
securities.

The Company has and will use these proceeds to develop new services, to expand
existing operations, including offshore software development operations, for
possible acquisitions of related businesses, and for general corporate purposes,
including working capital. Management currently anticipates that the proceeds
from these offerings together with the existing sources of liquidity and cash
generated from operations will be sufficient to satisfy its cash needs at least
through the next twelve months.

Historically, the Company has financed its working capital requirements through
internally generated funds and with the proceeds from the aforementioned
offerings. The Company's financial statements reflect cash flow provided by
operations of approximately $15.8 million for the nine months ended September
30, 1998, and cash flow used by operations of $5.7 million for the same period
in 1997.

For the nine months ended September 30, 1998, the Company recorded its net
purchase of investments of $58.5 million. These investments are classified as
available-for-sale and recorded at fair value.

Capital expenditures for the nine months ended September 30, 1998 and 1997 were
approximately $7.9 million and $4.2 million, respectively. During the nine-month
periods ended September 30, 1998 and 1997, the Company spent approximately $3.5
million and $2.5 million, respectively on computer and related equipment to
support its technical, consulting and administrative functions. The Company also
spent approximately $3.1 million and $1.3 million during the same periods in
1998 and 1997, respectively, in connection with the buildout and other
development of the infrastructure for its offshore software development and
training facilities in India. During the next twelve months, the Company expects
to incur approximately $2.0 million in remaining costs to license and implement
its new management information system. A portion of this cost will be expensed.

Effective May 30, 1997, the Company replaced an existing revolving credit
facility with a new $25.0 million revolving credit facility with PNC Bank,
National Association (the "Facility"). The Facility bears interest at a rate
equal to LIBOR

                                       13
<PAGE>
 
plus 1.0% or prime at the Company's option and borrowings are unsecured. The
Facility contains certain restrictive covenants and financial ratio requirements
which would limit distributions to shareholders and additional borrowings. There
were no borrowings outstanding against this facility as of September 30, 1998.

During the first quarter of 1998, Mascot Systems had aggregate borrowings of
approximately $1.7 million outstanding under revolving credit agreements with
ICICI Banking Corporation Limited and IndusInd Bank Limited, both of India.
Interest rates charged on these borrowings range from 18.75% to 19.25% per year.
These borrowings were repaid by the Company in May 1998.

The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling operating costs and, whenever possible, seeking to insure
that billing rates reflect increases in costs due to inflation.

The Company invoices its clients in the local currency of the country in which
the client is located. Gains and losses as a result of fluctuations in foreign
currency exchange rates have not had a significant impact on the results of
operations.

YEAR 2000

The Year 2000 ("Y2K") problem refers to problems which may occur because some
computer systems currently record years in a two digit format. These computer
systems may have difficulty recognizing or processing date information after
December 31, 1999. The Y2K problem may also occur with embedded chips. The
Company has been working to evaluate the potential effect of the Y2K problem on
the Company's operations.

Internal Systems

The Company developed a plan to evaluate its key internal computer systems. The
plan consisted of the following four phases: Inventory; Evaluation/Assessment of
Y2K Risk; Remediation and Testing. The Company has completed all phases of
evaluation for the internal financial and operational systems located at the
corporate headquarters of the Company. Based upon written documentation and
information available on vendor websites, certain testing procedures for
business critical hardware and software were developed and implemented by the
Company. An independent third party reviewed both vendor information, testing
results, and conducted other tests to validate work performed. As a result of
this, the Company does not believe that the internal computer systems at its
corporate headquarters will experience significant Y2K problems.

The Company is in various phases of evaluation with respect to other locations
of the Company in the United States and foreign sites. The Company expects that
it will complete the evaluation of all of its locations by January 31, 1999.

Cost of Year 2000 Compliance Efforts

The Company does not expect to incur substantial costs with respect to its Y2K
compliance efforts and the Company has not deferred other information technology
projects as a result of the Y2K problem. To date, the Company has incurred
expenses totaling approximately $69,000 and anticipates that its total expenses
will not exceed $175,000. These figures are primarily reflective of the costs
associated with the use of third parties to review and validate work performed
and the costs assessing Y2K problems relating to or arising with respect to
third parties. The cost estimates do not include the cost of internal efforts by
Company personnel. The Company has not separately accounted for these internal
costs.

Third Party Relationships

The Company has contacted its key vendors regarding their Y2K compliance
efforts. Although the Company has received some information from its vendors
regarding their Y2K compliance efforts, there can be no assurance that the
Company will not experience disruptions in its ability to conduct its business
because of Y2K problems experienced by the Company's vendors.

In addition, the Company has contacted its key customers regarding their Y2K 
compliance efforts. Although the Company has received some information from its 
customers regarding their Y2K compliance efforts, there can be no assurance that
such customers will not experience disruptions in their business which would 
result in material adverse affects to the Company. One example of a worst case 
scenario would be a failure in the accounting

                                       14
<PAGE>
 
systems of a significant number of the Company's key clients due to the Y2K
problem that resulted in a delay in the payment of invoices issued by the
Company for services and expenses.

Potential Liability to Third Parties

The Company has participated in Y2K remediation projects for some of its
customers. Although the Company has no reason to believe that any such work will
result in litigation against the Company, it is possible that the Company could
be materially adversely affected by litigation in connection with the Y2K
remediation services provided by the Company.

The Company's policy has been to attempt to include provisions in client
contracts that, among other things, disclaim implied warranties, limit the
duration of express warranties, limit the Company's liability to the amount of
fees paid by the client to the Company in connection with the project, and
disclaim any liability arising from third-party software that is implemented,
customized or installed by the Company. The Company also maintains insurance to
protect against potential liability in connection with Y2K remediation services
provided by the Company. There can be no assurance that the Company will be able
to obtain the desired contractual protections in agreements, or that any such
contractual provisions will prevent clients from asserting claims against the
Company with respect to the Y2K issue. There also can be no assurance that the
contractual protections, if any, obtained by the Company or the insurance
coverage will operate to protect the Company from, or adequately limit the
amount of, any liability arising from claims asserted against the Company.

Contingency Plan

The Company is developing a contingency plan to address various situations which
may result if the Company experiences Y2K problems. The plan will include
identification of major systems, dependencies on third parties and resources and
strategies necessary to restore operations or work around failures. It is
expected that the contingency plan will be completed by April 30, 1999. There
can be no assurance that the contingency plan developed by the Company will
adequately protect the Company from internal Y2K problems or prevent service
interruption or failures experienced by customers and suppliers from having a
material adverse effect on the Company.

Demand for Year 2000 Services

Many of the Company's clients need to repair or replace their legacy systems
because of Y2K issues. The Company believes this is favorably impacting the
demand for its services and products. The Company provides certain direct Y2K
services, the market for which the Company expects to diminish over time. The
Company also believes that as companies focus on Y2K issues, other less critical
projects may not be initiated or may be suspended. Because the Company provides
a broad range of information  technology services, the Company does not expect a
decrease in the overall demand for its services as the Y2K problem is addressed.
However, given the lack of precedent for an issue of this nature, the Company's
ability to accurately forecast the impact of the Y2K issue on its future
financial performance is limited.




CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such statements are qualified by important factors that could
cause actual results to differ materially from those in the forward-looking
statements including statements pertaining to future uses of the IPO proceeds,
the financing of the Company's working capital requirements, hedging of any
market risk sensitive instruments, the accretive effect on earnings of
acquisitions and the impact of the Year 2000 issue. Results actually achieved
thus may differ materially from expected results included in these statements.

                                       15
<PAGE>
 
In order to meet client demand for the Company's services, the Company expects
to continue to increase its professional staff and may open additional sales and
operations offices in North America and internationally. Although the Company's
plans to hire personnel and to possibly open additional offices are in response
to increased demand for the Company's services, a portion of these expenses
will be incurred in anticipation of increased demand. Operating results and
liquidity may be adversely affected if market demand and revenues do not
increase as anticipated. As the Company expands its international operations, a
number of factors, including market acceptance of the Company's services,
significant fluctuations in currency exchange rates, and changes in general
economic, political, and regulatory conditions, could adversely affect future
results and liquidity.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE
         ABOUT MARKET RISK SENSITIVE INSTRUMENTS

The Company currently does not invest excess funds in derivative financial
instruments or other market rate sensitive instruments for the purpose of
managing its foreign currency exchange rate risk.

                                       16
<PAGE>
 
PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
         None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

In December 1996, Mastech completed the initial public offering of its Common
Stock (Registration Number 33-14169). The net proceeds to the Company from the
sale of the 3,400,000 pre-split shares of Common Stock offered by the Company
(after deducting underwriting discounts, commissions and offering expenses paid
by the Company) were approximately $45.6 million. The Company submitted its
initial Form SR for filing with the Securities and Exchange Commission on March
20, 1997 reporting for the period from December 16, 1996 (the effective date of
the Company's registration statement for its initial public offering) through
March 16, 1997. The following table reflects, as of September 30, 1998, and for
each of the previous quarterly periods an estimate of the amount of net offering
proceeds used by the Company and the purpose for which they were used:

<TABLE>
<CAPTION>

                                                              (dollars in thousands)

                                 12/31/96   3/31/97   6/30/97   9/30/97   12/31/97   3/31/98   6/30/98   9/30/98    Total
                                 --------   -------   -------   -------   --------   -------   -------   -------   -------
<S>                              <C>        <C>      <C>       <C>        <C>        <C>       <C>       <C>       <C>
Tax payments                      $   -     $ 3,000   $ 1,900   $ 2,800   $ 3,100    $ 2,300   $  -      $  -      $13,100    
Other working capital items          820      2,180       950       -       3,900      1,200      -         -        9,050
                                  ------    -------   -------   -------   -------    -------   -------   -------   -------
Total working capital items          820      5,180     2,850     2,800     7,000      3,500      -         -       22,150        
                                  ======    =======   =======   =======   =======    =======   =======   =======   =======

S-corporation dividend                -         -        6,300      -          -         -         -         -        6,300
Subsidiary loans                      -         -          -       4,050       -        3,000      -         -        7,050
Acquisition of Asia Pacific                                                                                                   
    Computer consultants              -         -          -        -        3,000       -         -         -        3,000
                                  ------     -------   -------   -------   -------    -------   -------   -------   -------
                                  $  820     $ 5,180   $ 9,150   $ 6,850   $10,000    $ 6,500   $  -      $  -      $38,500    
                                  ======     =======   =======   =======   =======    =======   =======   =======   =======
</TABLE>

On June 1, 1998, the Company acquired all of the issued and outstanding capital
stock of Quantum Information Resources Limited, a Canadian corporation
("Quantum") pursuant to a business combination the terms of which were contained
in that certain Combination and Exchange Agreement dated June 1, 1998 (the
"Exchange Agreement"). Pursuant to the Exchange Agreement the shareholders of
Quantum received 1,623,000 exchangeable non-voting shares of Quantum which are
convertible into the same number of shares of Mastech common stock (the
"Exchangeable Shares") and PNC Bank, National Association received 1 share of
Series A Preferred Stock, as trustee for  the shareholders of Quantum, whereby
such shareholders were granted the right to vote the Company common stock
underlying the Exchangeable Shares. Based on representations made by the Quantum
shareholders in the Exchange Agreement, the Company issued the Exchangeable
Shares pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act").

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.

ITEM 5.  OTHER INFORMATION


Government Regulation of Immigration

The Company recruits its IT professionals on a global basis and, therefore, must
comply with the immigration laws in the countries in which it operates,
particularly the U.S. Over 90% of Mastech's IT professionals are citizens of
other countries,

                                       17
<PAGE>
 
with most of those in the U.S. working under H-1B temporary visas. On October
22, 1998, the "American Competitiveness and Workforce Improvement Act" was
signed into law. The H-1B annual quota for fiscal year 1999 was increased from
65,000 to 115,000. The quota for fiscal years 2000 and 2001 will be 115,000 and
107,500 respectively. If the Company is unable to obtain H-1B visas for its
employees in sufficient quantities or at a sufficient rate for a significant
period of time, the Company's business, operating results and financial
condition could be adversely affected.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
(a)      Exhibits:

         The following exhibits are being filed with this report:


Exhibit Number   Description                                               Page
--------------   -----------                                               ---- 
 
10.1             Amended and Restated 1996 Stock Incentive Plan             21
11.1             Statement regarding computation of per share earnings.     34
27               Financial Data Schedule                                    35


(b)       Reports on Form 8-K:
 
          The Company did not file any Current Report on Form 8-K during the
          quarter ended September 30, 1998.

                                       18
<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.

                                      MASTECH CORPORATION
                                          (REGISTRANT)


Dated:   November 16, 1998            /s/ Sunil Wadhwani
                                      Co-Chairman and Chief Executive Officer


Dated:   November 16, 1998            /s/ Jeffrey McCandless
                                      Vice President, Finance

                                       19
<PAGE>
 
                                 EXHIBIT INDEX


Exhibit Number     Description                                             Page
--------------     -----------                                             ---- 
 
10.1               Amended and Restated 1996 Stock Incentive Plan           21 
11.1               Statement regarding computation of per share earnings.   34
27                 Financial Data Schedule                                  35
 

                                       20