SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
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                                    FORM 10-K

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

                 For the Fiscal Year Ended              Commission File Number.
                     December 31, 1999                                 0-29292

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                               HAGLER BAILLY, INC.
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             (Exact name of Registrant as specified in its charter)

                         Delaware                                    54-1759180
               (State or other jurisdiction                    (I.R.S. Employer
             of incorporation or organization)               Identification No.)

   1530 Wilson Boulevard, Suite 400, Arlington, Virginia
                                                                         22209
         (Address of principal executive offices)                   (zip code)

                                 (703) 351-0300
              (Registrant's telephone number, including area code:)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of Class)

      Indicate by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                                                Yes No

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

         As of March 1,  2000,  17,927,812  shares  of the  Registrant's  common
stock, par value $0.01 per share, were  outstanding.  The aggregate market value
of the voting stock held by non-affiliates*  of the Registrant,  (based upon the
closing price of such shares on the Nasdaq National Market on March 1, 2000) was
approximately $40,830,202.

         The Registrant's Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held May 11, 2000 is  incorporated by reference into Part III of
this Annual Report on Form 10-K.

* For the purposes of this  calculation,  the registrant is not including  stock
held by executive  officers,  directors and beneficial  owners of more than five
percent (5%) of the registrant's outstanding common stock.


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<PAGE>


i

                      HAGLER BAILLY, INC. AND SUBSIDIARIES
                             FORM 10-K ANNUAL REPORT
                        FOR YEAR ENDED DECEMBER 31, 1999

                                TABLE OF CONTENTS



 PART I.......................................................................1

   ITEM 1 -BUSINESS...........................................................1
   ITEM 2 -PROPERTIES........................................................21
   ITEM 3 -LEGAL PROCEEDINGS.................................................21
   ITEM 4 -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............21
PART II......................................................................22

     ITEM 5 -MARKET FOR THE  REGISTRANT'S  COMMON STOCK AND RELATED  STOCKHOLDER
MATTERS......................................................................22
   ITEM 6 -- SELECTED FINANCIAL DATA.........................................22
     ITEM 7  -MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS........................................................25
   Item 7A -Quantitative and Qualitative Disclosures about Market Risk.......35
   ITEM 8 -CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA...........36
     ITEM 9 -CHANGES IN AND  DISAGREEMENT  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
FINANCIAL DISCUSSIONS........................................................36

PART III.....................................................................37

   ITEM 10 -DIRECTORS AND EXECUTIVE OFFICERS OF HAGLER BAILLY................37
   ITEM 11 -EXECUTIVE COMPENSATION...........................................37
   ITEM 12 -SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...37
   ITEM 13 -CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................38
PART IV......................................................................38

   ITEM 14 -EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K...........38

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................39




<PAGE>



38


1

         Except for any historical  information  contained  herein,  the matters
discussed  in this Annual  Report on Form 10-K of Hagler  Bailly,  Inc.  and its
subsidiaries   ("Hagler  Bailly"  or  the  "Company")  contain   forward-looking
statements.  For this  purpose,  any  statements  contained  herein that are not
statements  of historical  fact,  are intended,  and are hereby  identified  as,
"forward-looking  statements"  for the  purpose of the safe  harbor  provided by
Section 21E of the  Securities  Exchange  Act of 1934,  as amended by Public Law
104-67.  Without limiting the foregoing,  the words  "anticipates,"  "believes,"
"estimates,"  "expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. The important factors discussed below in
this  Item 1  under  the  caption  "Risk  Factors",  as well  as  other  factors
identified in the Company's filings with the Securities and Exchange  Commission
("SEC") and those  presented  elsewhere by management  from time to time,  could
cause   actual   results  to  differ   materially   from  those   indicated   by
forward-looking statements made herein.

         The Company is subject to the reporting  requirements of the Securities
Exchange Act of 1934 and files periodic  reports,  including  Current Reports on
Form 8-K,  Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy
Statements with the SEC.

         The public may read and copy  materials  filed by the Company  with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, NW,  Washington,  DC
20549.  The  public  may  obtain  information  on the  operation  of the  Public
Reference  Room by  calling  the SEC at  1-800-SEC-0300.  The SEC  maintains  an
Internet site that contains reports,  proxy and information statements and other
information  regarding companies that file electronically  (such as the Company)
with the SEC. The SEC's internet address is http://www.sec.gov.
The Company's Internet address is http://www.haglerbailly.com.

PART I


ITEM 1 - BUSINESS

Introductory Note

           On February  8, 1999,  the Company  acquired  all of the  outstanding
stock of Lacuna Consulting Limited ("Lacuna"), a United Kingdom corporation,  in
exchange for 65,000 shares of the Company's  common stock.  The  acquisition was
accounted for as a purchase.  Accordingly, the consolidated financial statements
reflect the results of operations of Lacuna since the date of acquisition.

          On March 22, 1999,  the Company  announced that its Board of Directors
authorized  the  repurchase of up to 1,500,000  shares of the  Company's  common
stock  from  time  to  time  in  the  open  market  or in  privately  negotiated
transactions. As of December 31, 1999, the Company had reacquired 559,700 shares
of its stock at a total net cost of approximately $4.1 million.

         On April 30, 1999, the Company acquired all of the outstanding stock of
Washington  International Energy Group, Ltd. ("WIEG"), a Washington,  D.C.-based
worldwide  provider  of energy  and  environmental  policy  consulting  research
services,  in exchange  for 144,210  shares of the  Company's  common  stock and
approximately  $850,000 in cash.  The Company has the right to  repurchase up to
26,210 of these  shares at $ 0.01 cents per share if the price of the  Company's
stock meets  certain price  targets  during the three year period  following the
acquisition.  The transaction was accounted for as a purchase.  Accordingly, the
consolidated  financial  statements  reflect the results of  operations  of WIEG
since the date of acquisition.

          On June 1, 1999, the Company received the remaining  minority interest
of its joint  venture  Hagler  Bailly Risk  Advisors,  LLC, a limited  liability
company located in Houston, Texas, from Objective Resources Group Risk Advisors,
LLC bringing the Company's ownership to 100%.

         On August 12, 1999, the Company  acquired all of the outstanding  stock
of GKMG, Inc. ("GMKG"), a Washington, D.C.-based consulting firm specializing in
the economic,  strategic,  financial,  and  regulatory  analysis of the aviation
industry,  in exchange for 1,420,000 shares of the Company's common stock. Under
the terms of the Share  Exchange  Agreement by and among the  Company,  GKMG and
former shareholders of GKMG, the Company is obligated to issue additional shares
of its common stock to the former  shareholders of GKMG with a fair market value
(as  defined  in the Share  Exchange  Agreement)  up to $15  million  if certain
earnings targets for GKMG are met for the periods July 1, 1999-June 30, 2000 and
July 1, 2000-June 30, 2001. In addition, the Company is obligated to issue up to
192,857 additional shares of its common stock to the former shareholders of GKMG
if certain stock price  performance  contingencies  are not met. The transaction
was  accounted  for  as a  purchase.  Accordingly,  the  consolidated  financial
statements  reflect  the  results  of  operations  of  GKMG  since  the  date of
acquisition.

      On September 27, 1999,  the Company  announced that its Board of Directors
retained  Banc of America  Securities,  LLC to assist the  Company in  exploring
strategic and financial  alternatives to maximize  shareholder value,  including
the potential sale or merger of the Company.

         On December  31, 1999,  the Company sold the assets of its  whollyowned
subsidiary Izsak,  Grapin et Associes  ("IGA").  As a result of the transaction,
the Company sold assets for approximately  $0.6 million,  resulting in a loss of
approximately $68,000.

         In December 1999, the Company  announced a repositioning  plan in which
the  Company  would  focus  on  its  core  consulting  business  and  streamline
operations to achieve manageable growth levels and enhance  shareholder value in
the future.





<PAGE>


General

     The  predecessor  of the Company  was  founded in 1980 as Hagler,  Bailly &
Company,  Inc.  In July 1984,  RCG  International,  Inc.  ("RCG"),  an  indirect
subsidiary of Reliance Group Holdings,  Inc., acquired the Company,  and in 1987
was renamed  RCG/Hagler  Bailly,  Inc. In May 1995, the management of RCG/Hagler
Bailly,  Inc. completed the purchase of RCG/Hagler Bailly, Inc. from RCG and the
successor to RCG/Hagler  Bailly,  Inc.  became a wholly owned  subsidiary of the
Company. In July 1997, the Company completed its initial public offering.

      Over the past 20 years, the Company has developed expertise in management,
economic and operations consulting to clients in the energy,  network (including
electric,  gas and  water  utilities),  transportation,  and  telecommunications
industries,  commercial  litigation  and the  environment.  By  maintaining  its
industry  focus,  the  Company  has  established  itself  as one of the  premier
consulting firms in these fields.



Business Model

         The Company's business strategy is to combine proprietary knowledge and
methods with industry  expertise  and  functional  consulting  skills to develop
customized  solutions for its clients'  complex  business  problems,  then offer
resources such as information  technologies  needed to implement and sustain the
solutions, thereby creating tangible long-term value for the client.

     To better serve the varying needs of its clients,  the Company provides its
services  through the following  subsidiaries,  PHB Hagler  Bailly,  Inc.  ("PHB
Hagler Bailly"),  GKMG, Hagler Bailly Services, Inc. ("Hagler Bailly Services"),
Hagler Bailly Risk  Advisors,  Inc.  ("HBRA"),  and its joint venture Cap Gemini
Hagler Bailly, LLC ("Cap Gemini Hagler Bailly").

         Through  PHB  Hagler  Bailly,  the  Company  provides  commercial  rate
consulting  services in the areas of strategic advice and analysis to commercial
sector clients  (including  businesses and  governments) in developed  countries
helping   clients   solve   issues   involving    energy,    telecommunications,
transportation,  water resources, the environment, litigation and other matters.
Referred  to  as  the  commercial   segment,   PHB  Hagler  Bailly's  consulting
professionals  have  first-hand  experience in developing  sound  strategies and
applying business principles that focus on issues and increase enterprise value.
PHB Hagler  Bailly  has been at the  forefront  of  assessing  market  strength,
providing asset valuations and performance measurements,  analyzing competition,
measuring risks, and improving financial and operating performance.

         Through GKMG, the Company provides  management and economic  consulting
to the  aviation  industry  on how to  compete in the  deregulated,  competitive
transportation environment.

         Through Hagler Bailly Services,  the Company  provides  government rate
consulting  services  in  the  areas  of  advisory  and  technical  services  to
government   sector  clients   worldwide  in  energy,   transportation,   water,
telecommunications,  and the environment. Referred to as the government segment,
Hagler  Bailly  Services,  in  addition to U.S.  federal and state  governments,
advises multilateral and bilateral donor and financial  organizations as well as
foreign  governments,  and selected commercial clients in emerging or developing
markets.  Hagler  Bailly  Services'  consulting  experts  provide  public policy
assistance  by advising  governments  and business  leaders on the  evolution of
specific  policies in each country and creating a global view of policy reforms.
Hagler  Bailly  Services  has been at the  forefront  of  developing  policy and
pricing frameworks,  formulating  national and provincial strategy and planning,
drafting laws and regulations,  managing the transition to competitive  markets,
promoting  investment and business  creation,  evaluating  assets, and promoting
sustainable development.

         Through HBRA,  the Company  provides  enterprise  risk  management  for
energy companies.

         Through  its joint  venture  Cap  Gemini  Hagler  Bailly,  the  Company
provides   information   technology  (IT)  consulting  services  and  customized
solutions  to  electricity,  gas and water  companies  in the United  States and
Canada.

Service Offerings

         The Company's services are provided through specialized  practices that
are designed to work together to provide clients with the full range of services
and  capabilities of the Company.  From an operational  standpoint,  the Company
regularly  reviews and, as appropriate,  restructures  these practices and their
services to address the changing business problems,  strategic  alternatives and
policy issues facing its clients.

PHB Hagler Bailly

Energy  Industry  Management  and  Economic  Consulting.  The  Company  provides
management and economic consulting to clients in the energy industry through the
following practices:

|X|        Corporate  Strategy - helps  clients  reposition  and reinvent  their
           business in a rapidly changing  environment to significantly  enhance
           enterprise value.

|X|        Asset  Management - helps  clients  optimize  existing  portfolios of
           assets and evaluate purchases of new assets by providing economic and
           financial  analysis.  These  services  include  analysis  and  advice
           regarding portfolio  management,  performance  improvement  involving
           benchmarking to assess best practices and relative  performance,  and
           revenue  enhancement  involving  analysis of service  line and market
           reach extension, bid support systems, market entry strategy and sales
           tactics.

|X|        Retail  Energy and  eCommerce - helps  clients  launch new, or expand
           existing, retail businesses in response to the retail utility sector,
           which is evolving to encompass all utility  content  flows.  Services
           include  retail  access  &   implementation,   retail   strategy  and
           marketing,  utility  customer  care  strategy &  implementation,  and
           energy  acquisition  strategy  involving  the  negotiation  of energy
           supply contracts.

|X|        Integration   of  Mergers  &  Acquisitions  -  helps  clients  better
           understand and manage the process by which  decisions are made and by
           which  mergers and  acquisition  are  integrated.  Services  include:
           developing  acquisition  strategy,  supporting management through the
           merger   completion,   and   incorporating   change   management  and
           information  technology  to achieve  the  expected  results  from the
           merger.

|X|        Competition,  Markets and  Regulation - provides  industry  economics
           involving:  the  analysis of the economic  ramifications  of industry
           restructuring;  market power and merger  assistance to investor-owned
           utilities in federal and state regulatory  proceedings  involving the
           proposed business  combinations;  restructuring and market design and
           analysis;   and  the  analysis  of  the  impact  of  traditional  and
           pro-competitive regulatory policy.

|X|        Fuels - The Company's fuel practice  generates current and historical
           information on the fuels  consumed by generators and their  operating
           characteristics.  This information is used to model power markets and
           to assist  generators and fuels  producers in litigation and contract
           matters, and asset owners in their strategic planning activities.

Environmental  Litigation and Management Consulting Services.  The Company helps
domestic  and  international  clients  manage  environmental  issues and prevent
environmental problems through the following practices:

|X|        Insurance  Recovery - helps clients  pursue and evaluate  recovery of
           past and future costs through environmental insurance claims, assists
           with settlement negotiations as a strategic advisor or as a member of
           the negotiation  team, and provides services related to litigation or
           expert testimony or both.

|X|        Environmental  Management - helps  clients  identify  their  existing
           systems that may be creating a business risk,  either by exposing the
           company  to   potential   violations   or  by  creating   unnecessary
           liabilities.  The Company  then designs  specific  measures to reduce
           these risks through improved management systems.

|X|        Cost  Recovery  -  provides   expert  analysis  and  opinion  on  the
           consistency of incurred costs with the  requirements  of the National
           Oil and Hazardous Substances  Pollution  Contingency Plan pursuant to
           the Comprehensive Environmental Response,  Compensation and Liability
           Act  ("CERCLA")  actions and actions  pursuant  to  equivalent  state
           statutes, government agencies or private parties.

|X|        Compliance - provides  economic  analysis and  litigation  support to
           clients  and their  counsel in  environmental  noncompliance  penalty
           cases.

|X|        General  Environmental  Litigation  - provides  damage  testimony  in
           contract disputes on a variety of environmental  issues including the
           retention of environmental liabilities,  natural resource damages and
           property damage rebuttals in toxic tort suits.

General  Industries  Litigation  Consulting.  The Company  assists law firms and
corporate  counsel  with  litigation,  mediation  and  arbitration  matters from
liability  and  causation  issues to  determination  of damages and  prejudgment
interests,   litigation  strategy  and  settlement  negotiations,  and  provides
economic and business  analysis  and expert  testimony on liability  and damages
issues. In addition,  the Company helps clients develop  litigation  strategies,
identify  and select  potential  witnesses,  conduct  discovery,  and design and
manage  technical  research  as well as assists  counsel in  reconstructing  and
critiquing  the  work  of  opposing  experts,  preparing  materials  for  use in
depositions and cross-examination of those experts.

Telecommunications  Consulting. The Company provides a comprehensive approach to
competitive pressures,  rapid technological change and unpredictable  regulatory
developments in the telecommunications industry to clients through the following
practices:

|X|   Market Research and Analysis - provides research on customer issues.

|X| Market  Strategy - provides advice on market strategy and the development of
processes and products to support growth strategies.

     |X| Litigation Support - provides economic and business evidence and expert
testimony in both commercial disputes and regulatory proceedings.

|X|        Asset Valuation - analyzes the financial and operational  performance
           of clients using proprietary performance measurement and modeling and
           provides benchmarking of operational performance to industry leaders.

|X|        Restructuring,   Mergers  and  Diversification  -  provides  economic
           analysis of the potential  competitive impact of proposed mergers and
           advice  on deal  structures  and  assists  in  identifying  strategic
           partners and post-merger integration.

|X|   eCommerce - provides analysis of eCommerce markets.



GKMG

Aviation  Industry  Management  and Economic  Consulting.  Through the Company's
wholly owned subsidiary,  GKMG, Hagler Bailly provides the following services to
clients in the aviation industry through the following practices:

|X|        Airport Services - provides strategic  planning and forecasting,  air
           service  marketing,   aeropolitical   strategies,   airline  business
           relations and negotiations,  cargo development and marketing, airport
           finance  development  plans  and  financing  strategies  and  airport
           privatization  involving  providing  turnkey  services to governments
           desiring to privatize airports and airport facilities.

|X|        Airline  Services  -  provides  strategic,  technical,  and  analytic
           services to airlines  including:  alliance planning;  negotiation and
           implementation;  economic and financial  feasibility studies;  market
           analysis and hub  analysis;  strategic  and  aeropolitical  planning;
           compliance  with economic,  safety and security  requirements;  labor
           strategies;  and airline fleet planning,  aircraft  acquisition,  and
           leasing strategies.

|X| Vendor Services - supports the business strategies of vendors to the airline
and airport markets.



Hagler Bailly Services

     Government  Energy  Consulting  Practice.  The Company supports  government
clients in emerging market economies through the following practices:

|X|        Energy Sector Reform - assists in the  reformation of national energy
           policy to promote competition and foreign  investment,  and encourage
           privatization.  Expert  services  include  drafting  and  passage  of
           revised  energy  legislation,  establishment  of  independent  energy
           regulatory  agencies,   assistance  with  licenses  and  tariffs  and
           development of wholesale markets and their rules.

|X|        Energy  Efficiency  - works on energy  efficiency  issues in emerging
           market  countries.  Global  climate  change  is a key  area of  focus
           wherein the Company's  experts conduct energy  efficiency  audits and
           energy  management  programs in industrial  enterprises  and district
           heating systems.

|X|        Engineering - conducts  specific  engineering  projects in support of
           the two  primary  functional  areas of energy  efficiency  and energy
           sector reform.

Government Water and Environmental  Consulting.  The Company provides management
and analytical  consulting to government clients in the water industries and the
environment through the following practices:

|X|        Water Sector Strategy,  Management and Operations - provides business
           process  improvement,  change  management,  cost,  rate and financial
           analyses,   asset  management,   revenue  enhancement  and  financial
           planning,  process  benchmarking,  performance  measurement  systems,
           regionalization of service and outsourcing and privatization support.

|X|        Clean   Technology  and   Environmental   Sustainability  -  provides
           technical and engineering services supporting clean technology, water
           and energy use efficiency and pollution prevention.

|X| Policy and Applied Economics - provides policy and applied economic
analysis in support of national and local environmental sustainability programs.

|X| Water  Resources  Systems  Management - provides  integrated,  comprehensive
water resources management services to clients worldwide.

Government Transportation  Consulting.  The Company provides clients with market
and  operations  strategy in finance,  economics,  and  competitive  positioning
through the following practices:

|X|        Intelligent  Transportation  Systems (ITS) and  Technology - provides
           innovative  solutions to transportation  and technology needs through
           program  management,   partnership  building,   market  analysis  and
           business planning.

|X|        Planning   and   Economics   -   assists   in   linking   multi-modal
           transportation  investment plans, project capitalization and economic
           development  to help  government  and  commercial  clients  implement
           better decisions.

|X|        Infrastructure  Finance and Strategy - applies cutting-edge  analysis
           and  institutional  know-how to help  clients  develop and  implement
           infrastructure  finance  strategies  at both the  program and project
           levels.

|X|        Policy  and  Strategy  -  provides   policy  analysis  and  strategic
           solutions that enable  decision-makers  to address emerging issues in
           transportation policy.


HBRA

Supply,  Logistics,  Trading  and Risk  Management.  Through  its  wholly  owned
subsidiary HBRA, the Company  provides  clients with enterprise,  revenue stream
and supply  portfolio  risk  management  services to energy  companies and major
energy consumers.  These services cover the full value chain of risk management,
from corporate  governance  and policies and  procedures to analytics,  business
processes,  system  selection and  integration,  and to strategy  simulation and
trader training.


Cap Gemini Hagler Bailly

Information  Technology (IT) Implementation  Services.  Though its joint venture
Cap Gemini Hagler Bailly, the Company provides IT implementation  services.  Cap
Gemini Hagler Bailly's personnel work closely with other Company  consultants to
design  and  implement  technology  solutions  for  electricity,  gas and  water
industries  clients,  particularly  in  connection  with  customer  relationship
management ("CRM"),  solutions,  e-business,  merger and acquisition integration
activities, and enterprise risk management platforms.

Information Resources. The Company has assembled and integrated detailed network
industry  experience  with  systems and  resources  that allow it to package and
deliver  information  and  insights  in a variety  of forms.  These  include:  a
benchmarking   program  of  utility   operations   and   management   practices;
proprietary,  comprehensive  statistical databases;  and state-of-the-art market
research capabilities.

Competitive Conditions

         The market for consulting  services in energy,  network  industries and
the environment is intensely competitive, highly fragmented and subject to rapid
change.  The market  includes a large number of  participants  from a variety of
consulting  market  segments,  both in the United  States and abroad,  including
general  management  consulting  firms,  the consulting  practices of accounting
firms,  consulting  engineering firms, technical and economic advisory firms and
market  research  firms.  Many  information   technology-consulting  firms  also
maintain  significant energy,  network industry and environmental  practices and
others may enter the field in the future.  Many of these  companies are national
and  international  in  scope  and may have  greater  financial,  technical  and
marketing resources than the Company.

         Hagler Bailly  believes  that it is in a strong  position to compete in
this market. The Company believes that several factors  distinguish it from many
of its current and potential competitors in the consulting industry.

|X|        Industry Focus.  Since its inception,  the Company has maintained its
           focus on providing a broad array of consulting services to clients in
           the energy and network  industries  and the  environment.  This focus
           differentiates the Company from general  management  consulting firms
           that serve a full range of  industries  and firms with limited  skill
           sets and capabilities.  The Company believes that the insights gained
           by working  worldwide  allow it to customize  leading-edge-consulting
           concepts and tools to specific  situations and thus provide  tangible
           value, rather than just theories, to its clients.

|X|        Full Service Capabilities.  The Company's strategy is to partner with
           its clients in  conceptualizing  and  implementing  solutions,  which
           significantly increase enterprise value, by building a broad range of
           consulting  platforms  enabling it to meet its clients' needs.  These
           include  strategy,  asset  management,  marketing and sales,  product
           development, energy supply, logistics and risk management, operations
           management,  information  systems and technology,  economic analysis,
           environmental management and commercial litigation.

     |X| Worldwide Presence and Reputation. The Company currently has a total of
18 principal  offices,  10 of which are outside the  continental  United States:
Argentina (Buenos Aires),  Australia  (Melbourne and Sydney),  Canada (Toronto),
China (Beijing),  France (Paris), Indonesia (Jakarta), New Zealand (Wellington),
and the United Kingdom  (London and Rugby).  The Company has employees from over
30  nations  giving it  powerful  insights  into  various  cultures  and ways of
conducting  business.  The  Company's  international  business  mix  and  office
locations  reflect a conscious  blend of business in  developed  and  developing
economies.  In addition  to its  presence  in the  developed  markets of Western
Europe,  Australia  and New Zealand,  the Company is  positioned  to support the
development  and growth of modern  network  industries  in the rapidly  evolving
economies of the Asia/Pacific region.

|X|        Longstanding  Relationships  with Substantial  Clients. A substantial
           share of the Company's  business has  historically  been derived from
           additional sales to existing customers. In 1999, the Company received
           additional  business  from  approximately  50% of the clients who had
           engaged the firm in the prior year. During 1999, approximately 72% of
           the Company's  revenue was from clients  served in the prior year. In
           addition to continuity, the Company's client relationships are marked
           by the client size and importance in respective markets.

|X|        Government  Sector  Insight.  The Company has worked with a number of
           government sector  organizations,  including the United States Agency
           for International Development ("USAID"), the Environmental Protection
           Agency,  the  European  Union,  the U.K.  Knowlton  Fund,  the  Asian
           Development   Bank,   the  European  Bank  for   Reconstruction   and
           Development,  and the  World  Bank for many  years.  This  gives  the
           Company  a  special   perspective   on  the   energy,   utility   and
           environmental  industries  and enhances the Company's  reputation and
           ability to compete successfully for consulting business.

     |X|   Proprietary   Knowledge  and  Methods.   The  Company  has  developed
proprietary  information  bases,  analytical tools and methods providing it with
distinct   competitive   advantages.   Examples  include:  (i)  Operating  Plant
Experience Code (OPEC), an analytical  database of nuclear power experience that
captures the causes and effects of outages and  deratings at U.S.  nuclear power
plants;  (ii) Competitive  analysis  screening Model (CASm), a proprietary model
used to evaluate  market power  issues in electric  generation;  (iii)  Strategy
Enablers Protocol (SEP), a proprietary  method that offers a highly  disciplined
executive   level  process  to  identify  new  avenues  of  growth;   (iv)  TB&A
Benchmarking,  a  leading  source  of  information  on  utility  operations  and
management  practices  in  distribution,   transmission,  customer  service  and
marketing;  and (v) Field Data, a set of linked  databases  which provides up to
date  information on current and historical  fuel prices,  emission  allowances,
power plant  characteristics and fuel prediction statistics that are used in the
Company's power modeling efforts and in its economic analysis.

|X|        Experienced  Team  of  Management  and  Consultants.   The  Company's
           management and senior  consultants have a wide range of expertise and
           experience in the network  industries,  litigation and  environmental
           consulting  sectors.  In addition,  many of the senior management and
           consultants have worked  extensively  with one another.  Management's
           average tenure with the Company is approximately 13 years.

|X|        Established  Global   Visibility.   The  Company's  staff  frequently
           publishes  articles and is invited to present at industry  gatherings
           and conferences.  The staff is also active in several industry groups
           and  professional   associations   including   elected  or  appointed
           positions.



Marketing and Sales

         The Company  markets its services from its  headquarters  in Arlington,
Virginia and through each of its  subsidiaries.  The Company employs a number of
business  development and marketing  strategies to communicate  with prospective
and current  clients,  including,  but not limited  to,  on-site  presentations;
industry  seminars  featuring  presentations  by the  Company's  management  and
consultants;  speeches;  articles in  industry,  business,  economic,  legal and
scientific journals; and through other publications and press releases regarding
the  energy,   network   industries  and  the   environment  and  the  Company's
methodologies.  A  significant  portion of the new  business  arises  from prior
client  engagements.   The  Company  often  leverages  client  relationships  by
cross-selling its services. Clients often expand the scope of engagements during
delivery to include follow-on complementary activities.

         Also, the Company's on-site presence affords it opportunities to become
aware of,  and to help  define,  additional  project  opportunities  as they are
identified  by the  client.  Strong  client  relationships  arising  out of many
engagements   often  facilitate  the  Company's  ability  to  market  additional
capabilities to its clients in the future.

         In  the  commercial  sector,  client  acquisition   techniques  include
referrals   and  focused   presentations   to  boards  of  directors  and  chief
decision-makers  of  prospective  clients.   Presentations  generally  focus  on
opportunities  in the market segments most relevant to the prospective  clients,
examples of the Company's  previous work in related industries and the Company's
international capabilities.

         In the government sector,  contracts are awarded primarily on the basis
of competitive  solicitation.  The Company has developed strong  capabilities to
prepare  proposals  that  respond  to complex  requests  and often  require  the
integration  and  coordination  of the  services of several  subcontractors  and
independent consultants. The Company has also developed a detailed understanding
of government  and other  institutional  procurement  regulations  in the United
States  and  abroad.  In  addition,  in order to  obtain  government  contracts,
consultants must adhere to stringent cost,  accounting and regulatory  controls.
In order to comply with such  requirements,  the Company holds training seminars
to  ensure  compliance  with  applicable  government   regulations  and  uses  a
sophisticated  computer-based accounting system that allows it to track costs in
adherence to  government  standards.  The Company also meets  government  sector
clients'  cost  guidelines  through   competitive   pricing  and  internal  cost
structures.


Human Resources

         As of December  31,  1999,  the  Company's  personnel  consisted of 776
full-time  employees,   including  481  full-time   consultants  with  extensive
expertise in a variety of disciplines,  including business,  economics,  finance
and accounting, decision theory, statistics, operations research and marketing.

         Approximately   two-thirds  of  the  full-time  consulting  staff  have
advanced degrees.  The Company  integrates the diverse academic  backgrounds and
corporate   and   government   sector   experience  of  its   consultants   into
multidisciplinary  teams  with  solid  analytical  skills  and  broad  practical
experience.  The Company's management and practice leaders average over 20 years
of experience.

            The Company  supplements its consultants on certain engagements with
independent  contractors  and senior  advisors.  The Company  believes  that its
practice of retaining independent contractors on a per-engagement basis provides
it with  greater  flexibility  in tailoring  professional  personnel to meet the
needs of its clients.


Risk Factors

|X|        Attraction,    Retention   and   Management   of   Professional   and
           Administrative Staff. The Company's business involves the delivery of
           professional  services and is labor  intensive.  The Company's future
           performance  depends  in large  part  upon its  ability  to  attract,
           develop,  motivate and retain highly  skilled  consultants,  research
           associates   and   administrative    staff,    particularly    senior
           professionals with business development skills.

           In  connection  with  its  recruiting  efforts,   the  Company  seeks
           employees from top graduate  schools with prior  relevant  consulting
           experience and strong project management, analytic and communications
           skills in competitive and regulated industries, especially those with
           meaningful   international   experience.   The  Company   also  hires
           professionals  with senior  executive  experience  directly  from the
           industry.

           Qualified  consultants are in great demand,  and there is significant
           competition for employees with these skills from other consulting and
           investment banking firms,  research firms,  energy companies and many
           other  related   enterprises.   Although  the  Company  attracts  and
           motivates  its  professional  and  administrative  staff by  offering
           competitive  packages of base and incentive cash compensation,  stock
           options,  bonuses and attractive benefits,  many competing firms have
           greater financial  resources than the Company,  which they may use to
           attract and compensate qualified personnel. There can be no assurance
           that  the  Company  will be able to  attract  and  retain  sufficient
           numbers of highly skilled  consultants in the future. The loss of the
           services of a significant number of consultants,  research associates
           or  administrative  personnel could have a material adverse effect on
           the Company's  business,  operating results and financial  condition,
           including its ability to secure and complete engagements.

     |X| Concentration of Revenues. Over half of the revenues of the Company are
derived from commercial and government  clients involved in the energy,  network
industries and environment.  As a result of this focus, the Company's  business,
financial  condition  and  results  of  operations  are  influenced  by  factors
affecting  these markets,  including,  but not limited to,  changing  political,
economic and regulatory influences that may affect the procurement practices and
operations. In particular,  many electric and gas utilities are consolidating to
create larger  organizations or strategic  alliances.  These  consolidations and
alliances will reduce the number of potential  customers for the Company and may
also  create  conflicts  of  interest  between  clients.   In  addition,   these
consolidations  and  alliances may result in the  acquisition  of certain of the
Company's  key  clients,  and such  clients  may scale back or  terminate  their
relationship with the Company following their acquisition.  Similarly,  cutbacks
in the network industries and/or environmental  budgets of the United States and
other  governments  could result in the scale back or termination of some of the
Company's government sector contracts. USAID is the Company's largest government
sector client and accounts for  approximately  56% of that segment's  sales. The
impact of these  developments  is difficult to predict and could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     |X| Ability to Sustain and Manage Growth. The Company has experienced rapid
growth in  recent  years.  The  Company  completed  five  acquisitions  in 1998,
including the acquisition of Putnam, Hayes and Bartlett,  Inc. ("PHB") and three
acquisitions in 1999. The Company  believes that sustaining such growth places a
strain on  operational,  human and financial  resources.  In order to manage its
growth,  the Company must continue to improve its  operating and  administrative
systems  and to  attract  and  retain  qualified  management  and  professional,
scientific  and  technical-operating  personnel.  Foreign  operations  also  may
involve the additional  risks of  assimilating  differences in foreign  business
practices,  hiring and retaining  qualified  personnel,  and overcoming language
barriers.  Failure  to manage  such  growth  effectively  could  have a material
adverse effect on the Company's business.

     |X| Risks  Related to Possible  Acquisitions.  An element of the  Company's
strategy is to expand its operations  through the  acquisition of  complementary
businesses. There can be no assurance that the Company will be able to identify,
acquire,  profitably  manage or successfully  integrate any acquired  businesses
into the Company without  substantial  expenses,  delays or other operational or
financial  problems.  Moreover,  competitors of the Company are also  soliciting
acquisition  candidates,  which  could  result  in an  increase  in the price of
acquisition  targets  and a  decrease  in the  number  of  attractive  companies
available for acquisition. Further, acquisitions may involve a number of special
risks,  including  diversion of  management's  attention,  failure to retain key
acquired  personnel,   increased  costs  to  improve  managerial,   operational,
financial and  administrative  systems,  unanticipated  events or circumstances,
legal  liabilities,  increased  interest  expense and  amortization  of acquired
intangible  assets,  some or all of which could have a materially adverse impact
on the Company's  business,  operating results and financial  condition.  Client
satisfaction  or  performance  problems at a single  acquired  firm could have a
materially  adverse  impact on the  reputation  of the  Company  as a whole.  In
addition,  there can be no assurance  that  acquired  businesses,  if any,  will
achieve anticipated revenues and earnings.  The failure of the Company to manage
its acquisition  strategy  successfully  could have a material adverse effect on
the Company's business, operating results and financial condition.

     |X| Dependence on Key Clients. The Company derives a significant portion of
its revenues from a relatively limited number of clients. For example,  revenues
from the Company's ten most significant clients accounted for approximately 31%,
39% and 35% of its total revenues in 1999, 1998 and 1997, respectively. USAID is
the Company's largest client,  accounting for approximately  18%, 22% and 20% of
Hagler  Bailly's total revenues in 1999,  1998 and 1997,  respectively.  Clients
typically  retain  the  Company as needed on an  engagement  basis  rather  than
pursuant  to  long-term  contracts,  and  a  client  can  usually  terminate  an
engagement at any time without a significant penalty.  Moreover, there can be no
assurance  that the  Company's  existing  clients will continue to engage it for
additional  assignments  or do so at the same  revenue  levels.  The loss of any
significant  client  could  have a  material  adverse  effect  on the  Company's
business,  results of operations and financial condition. In addition, the level
of the  Company's  consulting  services  required  by an  individual  client can
diminish over the life of its relationship with the Company, and there can be no
assurance that the Company will be successful in establishing relationships with
new clients as this occurs.

|X|        Professional  and Other  Liability.  The Company's  services  involve
           risks of professional and other liability.  If the Company were found
           to have been  negligent or to have  breached its  obligations  to its
           clients,  it could be  exposed  to  significant  liabilities  and its
           reputation  could be adversely  affected.  In connection with many of
           its government sector  engagements,  the Company employs the services
           of local staff and uses consultants who are independent  contractors.
           Negligent or illegal acts, or ethical violations by these independent
           contractors could adversely affect the Company.

     |X|  Government  Sector  Market  and  Contracting  Risks.  A portion of the
Company's  revenues  were  derived  from  contracts  or  subcontracts  with U.S.
government  sector clients.  Providing  consulting  services to U.S.  government
sector  clients is subject to detailed  regulatory  requirements  and government
policies as well as to funding priorities. Contracts with U.S. government sector
clients may be  conditioned  upon the continuing  availability  of public funds,
which in turn depends upon lengthy and complex budgetary procedures,  and may be
subject  to  certain  pricing  constraints.  Moreover,  U.S.  government  sector
contracts may generally be terminated  for a variety of factors,  including when
it is in the  best  interests  of the  respective  government.  There  can be no
assurance that these factors or others unique to contracting  with  governmental
entities  will not have a material  adverse  effect on the  Company's  business,
results of operations and financial condition.

|X|        Intense  Competition.  The  market  for  consulting  services  in the
           energy,   network  and  the   environment   industries  is  intensely
           competitive,  highly fragmented and subject to rapid change, and such
           competition  is  likely  to  increase  in  the  future.  Many  of the
           Company's  competitors have greater personnel,  financial,  technical
           and marketing  resources than the Company.  The Company also competes
           with  its  clients'  internal  resources,   particularly  where  such
           resources  represent  a fixed  cost to the  client.  This  source  of
           competition may heighten as consolidation of electric and gas utility
           and other energy  industry  companies  creates larger  organizations.
           There can be no  assurance  that the Company  will be able to compete
           successfully   with  its  existing   competitors   or  with  any  new
           competitors.

     |X| Risk of International Operations. The Company operates either permanent
or project  offices in a number of foreign  countries.  The  Company  expects to
continue to expand its international operations and offices primarily in Western
Europe  and  in  the  Asia-Pacific  region.   Expansion  requires   considerable
management  and  financial  resources  and may  negatively  impact the Company's
near-term  results of  operations.  The Company's  international  operations are
subject to  numerous  potential  challenges  and  risks,  including  war,  civil
disturbances,  other political and economic conditions in various  jurisdictions
such as tariffs and other trade barriers,  longer accounts receivable collection
cycles, fluctuations in currency and potentially adverse tax consequences. There
can be no  assurance  that such  international  factors will not have a material
adverse  effect on the Company's  business,  results of operations and financial
condition.

|X| Dependence on Key Employees.  The Company's business consists primarily
of the delivery of professional services and, accordingly, its future success is
highly dependent upon the efforts,  abilities,  business generation capabilities
and  project  execution  of its  consultants.  The  Company's  success  is  also
dependent upon the  managerial,  operational  and  administrative  skills of its
officers.  The loss of the  services  of any  consultant  or the  failure of the
Company's  consultants  to generate  business or  otherwise  perform at or above
historical  levels  could  have a  material  adverse  effect  on  the  Company's
business,  financial  condition and results of operations.  The Company does not
have  employment or  non-competition  agreements with many of its consultants or
officers;  accordingly,  such individuals may terminate their  relationship with
the Company at will and without notice and immediately begin to compete with the
Company.

|X|        Concentration  of Ownership.  As of December 31, 1999,  the directors
           and senior management of the Company beneficially owned approximately
           36% of the Company's outstanding shares of common stock. As a result,
           these  stockholders will have substantial  influence over the outcome
           of matters  requiring a stockholder  vote,  including the election of
           the members of the Board of Directors.  Such control could  adversely
           affect the market  price of the  Company's  common  stock or delay or
           prevent a change of control of the  Company  at a price  which  might
           represent a premium over the market price of its common stock.

|X|        Need to Develop New  Offerings.  The  Company's  future  success will
           depend in significant part on its ability to successfully develop and
           introduce  new service  offerings  and improved  versions of existing
           service offerings. There can be no assurance that the Company will be
           successful in developing, introducing on a timely basis and marketing
           such  service  offerings,  or  that  any  service  offerings  will be
           accepted  in the  market.  Moreover,  services  offered by others may
           render the Company's services non-competitive or obsolete.

     |X| Project Risks. Many of the Company's engagements involve projects which
are critical to the operations of its clients' businesses. The Company's failure
or inability to meet a client's  expectations in the performance of its services
could  result in the  incurrence  by the Company of a  financial  loss and could
damage the Company's  reputation and adversely affect its ability to attract new
business. In addition, an unanticipated difficulty in completing a project could
have an adverse effect on the Company's business and results of operations. Fees
for  the  Company's  engagements  can be  based  on the  project  schedule,  the
Company's staffing requirements, the level of customer involvement and the scope
of the project as agreed upon with the customer at the project's inception.  The
Company  generally seeks to obtain an adjustment in its fees in the event of any
significant  change in any of the assumptions  upon which the original  estimate
was  based.  However,  there  can be no  assurance  that  the  Company  will  be
successful in obtaining any such adjustment in the future.

     |X|  Intellectual  Property  Rights.  The Company's  performance is in part
dependent upon its internal  information and communication  systems,  databases,
tools,  and the methods and  procedures  that it has developed  specifically  to
serve its clients.  The Company  relies on a combination  of  nondisclosure  and
other contractual arrangements and copyright, trademark and trade secret laws to
protect its proprietary  systems,  information  and procedures.  There can be no
assurance that the steps taken by the Company to protect its proprietary  rights
will be adequate to prevent  misappropriation of such rights or that the Company
will be able to detect  unauthorized use and take  appropriate  steps to enforce
its proprietary rights. The Company believes that its systems and procedures and
other proprietary rights do not infringe upon the rights of third parties. There
can be no assurance,  however,  that third parties will not assert  infringement
claims  against  the  Company  in the  future or that any such  claims  will not
require  the  Company to enter into  costly  litigation  or  materially  adverse
settlements to litigation, regardless of the merits of such claims.

|X|        Government  Regulation  of  Immigration.  Certain  of  the  Company's
           employees  are foreign  nationals  working in the United States under
           U.S. work authorizations.  Congress and administrative  agencies with
           jurisdiction  over immigration  matters have  periodically  expressed
           concerns  over the levels of legal and illegal  immigration  into the
           U.S.  These  concerns  have often  resulted in proposed  legislation,
           rules and  regulations  aimed at reducing  the number of work permits
           that may be issued. Any changes in such laws making it more difficult
           to hire  foreign  nationals or limiting the ability of the Company to
           retain  foreign   employees   could  require  the  Company  to  incur
           additional unexpected labor costs and expenses.

     |X|  Fluctuations  of Operating  Results.  The Company's  future  operating
results will continue to be subject to quarterly  fluctuations based upon a wide
variety of factors,  including the number and significance of client engagements
commenced and completed during a quarter,  delays incurred in connection with an
engagement,  the  number of  business  days in a  quarter,  employee  hiring and
utilization  rates,  the  ability of clients to  terminate  engagements  without
penalties, the size and scope of engagements, the nature of the fee arrangement,
the seasonality of the spending cycle of government  sector clients  (especially
that of the U.S.  government),  the  timing of new  office  openings,  return on
investment  capital,  and the general  economy,  such as  recessionary  periods,
political  instability,  changes in trade policies,  fluctuations in interest or
currency exchange rates and other competitive factors.  Seasonality also affects
the Company's  operating results,  particularly in the third and fourth quarters
of  each  fiscal  year.  In  addition,  the  Company's  operating  expenses  are
increasing  as the  Company  continues  to expand  its  operations,  and  future
operating  results  will be  adversely  affected  if  revenues  do not  increase
accordingly.  Additionally,  the Company plans to continue to evaluate and, when
appropriate,  make  acquisitions of  complementary  businesses.  As part of this
process the Company will continue to evaluate the changing  value of its assets,
and when necessary,  make adjustments thereto.  While the Company cannot predict
what  effect  these  various  factors  may have on its  financial  results,  the
aggregate  effect  of these  and  other  factors  could  result  in  significant
volatility in the Company's future performance and stock price.

|X|        Fluctuations  in the General  Economy.  The general level of economic
           activity  significantly affects demand for the Company's professional
           services.  When economic activity slows,  clients may delay or cancel
           plans that involve the hiring of  consultants.  The Company is unable
           to predict the level of economic activity at any particular time, and
           fluctuations  in the  general  economy  could  adversely  affect  the
           Company's business, operating results and financial condition.

|X|        Employment   Liability   Risks.   The  Company,   as  a  provider  of
           professional   services,   employs  and  places  individuals  in  the
           workplace  of  other  businesses.  Inherent  risks  of such  activity
           include  possible  claims of errors and  omissions,  misuse of client
           proprietary  information,  misappropriation of funds,  discrimination
           and harassment,  theft of client property, other criminal activity or
           torts and other  claims.  Although  historically  the Company has not
           experienced  any  material  claims  of these  types,  there can be no
           assurance  that the Company  will not  experience  such claims in the
           future.

     |X| Certain  Anti-takeover  Effects.  The  Company's  Amended and  Restated
Certificate of Incorporation,  By-laws, and the Delaware General Corporation Law
include  provisions  that may be deemed to have  anti-takeover  effects  and may
delay,  defer or prevent a takeover attempt that stockholders  might consider in
their best  interests.  These include a Board of Directors which is divided into
three classes, each of which is elected to serve staggered three-year terms, and
by-law  provisions  under which only the  President,  a majority of the Board of
Directors or stockholders owning at least 50% of the Company's capital stock may
call meetings of the  stockholders.  Also, the Board of Directors of the Company
is  authorized  to  issue up to  5,000,000  shares  of  preferred  stock  and to
determine the price, rights,  preferences and privileges of such shares, without
any further  stockholder  action. The existence of this "blank-check"  preferred
stock could render more  difficult or discourage an attempt to obtain control of
the Company by means of a tender  offer,  merger,  proxy  contest or  otherwise.
Furthermore,  the Company is subject to the anti-takeover  provisions of Section
203 of the Delaware  General  Corporation Law that prohibits  Hagler Bailly from
engaging in a "business combination" with an "interested stockholder" unless the
business  combination is approved in a prescribed manner. These provisions could
also have the  effect of  delaying  or  preventing  a change of  control  of the
Company, which could adversely affect the market price of the common stock.

     |X|  Fluctuations in Stock Price.  The market price of the Company's common
stock  may  fluctuate  substantially  due to a  variety  of  factors,  including
quarterly  fluctuations in results of operations,  announcements or terminations
of new services, offices, contracts,  acquisitions or strategic alliances by the
Company or its competitors,  as well as changes in the market  conditions in the
energy, network and environmental  industries,  changes in earnings estimates by
analysts, changes in accounting principles,  sales of the Company's common stock
by existing holders,  loss of key personnel,  a relatively small float of shares
that  are  freely  tradable  without   restriction  or  registration  under  the
Securities Act of 1933 and other factors. The stock market has from time to time
experienced  extreme  price  and  volume  fluctuations  that  have  particularly
affected the market price for many companies and which,  on occasion,  have been
unrelated to operating performance.  To the extent the Company's performance may
not meet  expectations  published by external  sources,  public  reaction  could
result in a sudden and  significantly  adverse impact on the market price of the
Company's  securities,  particularly on a short-term  basis.  In addition,  such
stock price  volatility  may provoke the  initiation of  securities  litigation,
which may divert substantial management resources and may have an adverse effect
on the  management  of business  operations.  Any of these  results could have a
material  adverse  effect  on the  Company's  business,  operating  results  and
financial condition.



<PAGE>


Executive Officers

     The Company's  Executive Officers and their respective ages,  positions and
biographical information as of March 1, 2000 is as follows:


Name                      Title                                              Age
----                      -----                                              ---
Henri-Claude A. Bailly    Chairman of the Board, Hagler Bailly, Inc., Cap
                          Gemini Hagler Bailly LLC and Hagler Bailly Risk
                          Advisors, Inc.......................................53
Geoffrey W. Bobsin        Senior Vice President and Chief Financial Officer,
                          Hagler Bailly, Inc..................................44
William E. Dickenson      President and Chief Executive Officer, Hagler Bailly,
                          Inc.................................................51
Roger W. Gale             President and Chief Executive Officer, PHB Hagler
                          Bailly, Inc.........................................53
Howard W. Pifer III       Chairman of the Board , PHB Hagler Bailly, Inc......57
Kenneth I. Rubin          President and Chief Executive Officer, Hagler Bailly
                          Services, Inc.......................................47
Stephen V. R. Whitman     Senior Vice President and General Counsel, Hagler
                          Bailly, Inc.........................................53

Henri-Claude  A. Bailly - is chairman of Hagler  Bailly's Board of Directors and
chairman of the Board of  Directors  of Cap Gemini  Hagler  Bailly and HBRA.  He
served as the Company's  president and chief executive officer from its founding
in 1980 until  April 1999.  From 1984 to 1995,  Mr.  Bailly was  employed by RCG
International,  the consulting arm of Reliance  Group  Holdings,  in a series of
management  positions  culminating in senior vice president of RCG International
and  chairman of the board and chief  executive  officer of  RCG/Hagler  Bailly,
Inc., a predecessor to the Company.  Mr. Bailly serves on the board of directors
of the  United  States  Energy  Association,  the  Alliance  to Save  Energy and
Adsavers.com and is a member of the National Coal Council.

Geoffrey  W.  Bobsin  - is  senior  vice  president,  chief  financial  officer,
treasurer and secretary of the Company.  Prior to joining the Company, he served
as president and chief executive officer of Environmental  Products  Corporation
from 1995 to 1999, as the executive vice president and chief  financial  officer
from 1984 to 1995,  and as the  controller  from 1982 to 1984.  Prior to joining
Environmental  Products  Corporation,  he  served as audit  supervisor  at Grant
Thornton  and  Company  from  1978 to 1982.  Mr.  Bobsin is a  Certified  Public
Accountant  and  a  member  of  the  American   Institute  of  Certified  Public
Accountants.

William E. Dickenson - is president and chief executive  officer of the Company.
He served as president  and chief  executive  officer of PHB Hagler  Bailly from
March 1999 to February 2000. He served as president and chief executive  officer
of PHB from 1992 to August 1998, and was the managing  director  responsible for
its litigation  support  practice from 1983 through 1992. From 1978 to 1983, Mr.
Dickenson  managed major  antitrust  litigation  and  consulting  assignments at
Dickenson, O'Brien & Associates, which he founded and served as president. Prior
to  forming  Dickenson,  O'Brien &  Associates,  he was  employed  at  Cambridge
Research  Institute and served in a variety of positions at the Tennessee Valley
Authority.

Roger W. Gale - is president and chief  executive  officer of PHB Hagler Bailly.
He was  president  and  founder of the WIEG until  April 30,  1999 when the firm
merged  with and into PHB  Hagler  Bailly.  Dr.  Gale  leads a number  of client
engagements with North American and international  energy companies  focusing on
strategic  decision-making,  convergence,  and culture change.  In addition,  he
manages the firm's annual Energy Industry Outlook,  an analysis of the advent of
competition in the electric  industry.  From 1987 to 1988, Dr. Gale was Director
of the  Office  of  External  Affairs  for the U.S.  Federal  Energy  Regulatory
Commission. From 1984 to 1987, he served as Director of the Office of Policy and
Outreach,   Office  of  Civilian  Radioactive  Waste  Management,  at  the  U.S.
Department of Energy.

Howard W. Pifer III - is chairman of PHB Hagler  Bailly's Board of Directors and
was chairman of Hagler  Bailly's  Board of Directors  from August 1998 to August
1999. He served as chairman of the Board of Directors of PHB from 1991 to August
1998, having  previously served as PHB's president and chief executive  officer.
Prior to founding PHB in 1976,  Dr.  Pifer was a member of the Harvard  Business
School faculty, where he taught courses in managerial economics, finance, public
policy and  strategic  planning.  From 1973 to 1976,  Dr.  Pifer  served as vice
president of the Energy & Environment Group at Temple, Barker & Sloane, Inc.

     Kenneth  I.  Rubin - is  president  and chief  executive  officer of Hagler
Bailly  Services.  He joined  the firm in 1997 as a result  of  Hagler  Bailly's
acquisition of Apogee Research, Inc. ("Apogee"), a consulting firm he co-founded
in 1986 and where he served as president and chief executive  officer.  While at
the  U.S.   Congressional   Budget   Office  from   1980-1986,   Dr.  Rubin  had
responsibility for budget,  finance, and policy research supporting authorizing,
appropriations,  and budget committees with jurisdiction over all U.S. water and
environmental   infrastructure   agencies  including  the  U.S.  Army  Corps  of
Engineers,  the Environmental  Protection Agency, and the Bureau of Reclamation.
Dr. Rubin  previously  directed a  multi-million  technical  assistance  program
supporting state water management agencies at the U.S. Water Resources Council.
Stephen V. R. Whitman - is senior vice  president and general  counsel of Hagler
Bailly.  Prior to joining the firm in July 1997,  he spent four years in his own
private practice and previously was associated with the law firms of Kelley Drye
& Warren and White & Case,  and served as attorney  advisor (and regional  legal
advisor in Lima, Peru) for USAID.






<PAGE>



ITEM 2 - PROPERTIES

         The Company's headquarters is currently located in approximately 58,402
square feet of leased office space in Arlington,  Virginia.  The Company  leases
office space as listed  below.  The Company  believes  that its  facilities  are
suitable for its current needs and that  additional  facilities can be leased to
meet future needs.

         The Company maintains principal offices in the following locations:
<TABLE>
<S>                                                             <C>
                    United States                                                International
------------------------------------------------------       -------------------------------------------------------
Arlington, VA                                                Beijing, People's Republic of China
Boulder, CO                                                  Buenos Aires, Argentina
Cambridge, MA                                                Jakarta, Indonesia
Houston, TX                                                  London, England
Los Angeles, CA                                              Melbourne, Australia
New York, NY                                                 Paris, France
Palo Alto, CA                                                Rugby, England
Washington, DC                                               Sydney, Australia
                                                             Toronto, Canada
                                                             Wellington, New Zealand
</TABLE>

         Each  principal  office  represents  a  permanent   location  servicing
multiple  clients that is run by a member of Hagler Bailly's senior  management.
In addition,  from time to time the Company leases a project office to enable it
to service a specific  international  project involving a particular  individual
client, in which case the office is paid for directly by the client.  All of the
Company's  principal and project offices are electronically  linked together and
have access to all of the Company's capabilities and core consulting tools.


ITEM 3 - LEGAL PROCEEDINGS

         The  Company  and its  subsidiaries  are from time to time  parties  to
litigation  arising in the ordinary course of business.  Neither the Company nor
any of its  subsidiaries is a party to any pending  material  litigation nor are
any of them aware of any  pending  or  threatened  litigation  that would have a
material adverse effect on the Company or its business.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.




<PAGE>


PART II


     ITEM 5 - MARKET FOR THE REGISTRANT'S  COMMON STOCK AND RELATED  STOCKHOLDER
MATTERS

         The  Company's  common stock was first offered to the public on July 3,
1997,  and since that time has been traded on the Nasdaq  National  Market under
the symbol "HBIX." The following table sets forth the range of reported high and
low  closing  sales  price  for the  Company's  common  stock,  for the  periods
indicated, as reported by the Nasdaq National Market.
<TABLE>
<S>                                                                                  <C>                   <C>

1999                                                                                High                 Low
January - March                                                                          $22.313              $6.250
April - June                                                                             $10.375              $5.625
July - September                                                                         $10.375              $6.563
October - December                                                                        $7.750              $4.469
--------------------------------------------------------------------------------------------------------------------
1998                                                                                High                 Low
January - March                                                                          $25.000             $18.625
April - June                                                                             $30.000             $22.500
July - September                                                                         $30.250             $16.750
October - December                                                                       $24.000             $13.563
--------------------------------------------------------------------------------------------------------------------
1997                                                                                High                 Low
January - March                                                                              N/A                 N/A
April - June                                                                                 N/A                 N/A
July 3 - September                                                                       $25.250             $17.000
October - December                                                                       $26.375             $18.250
</TABLE>
         The Company  had 244 holders of record of its common  stock at March 1,
2000, and approximately  1,000 beneficial  owners.  The Company has never paid a
cash  dividend on its common stock and does not expect to pay a cash dividend on
its common stock in the foreseeable future.


<PAGE>





ITEM 6 -- SELECTED FINANCIAL DATA


         The following selected  consolidated  financial data for the year ended
December 31, 1995,  combine the financial data of RCG/Hagler  Bailly,  Inc. (the
"Predecessor"),  a wholly-owned  subsidiary of RCG International  Inc. which was
acquired on May 25, 1995, by the management of RCG/Hagler  Bailly,  Inc. and the
consolidated  financial  data of the Company  from May 26, 1995 to December  31,
1995 derived from the  consolidated  financial  statements  of the Company.  The
selected  consolidated  financial  data as of December 31, 1995, is derived from
the consolidated  financial statements of the Company. The selected consolidated
financial data as of and for the years ended December 31, 1996,  1997,  1998 and
1999 have been derived from the audited consolidated financial statements of the
Company.  The Company's prior years have been restated to include the historical
financial information of Apogee Research, Inc. ("Apogee "), TB&A Group, Inc. and
its wholly owned subsidiary Theodore,  Barry & Associates (collectively "TB&A"),
IGA and  Putnam  Hayes  &  Bartlett,  Inc.  ("PHB  ") as a  result  of  business
combinations accounted for as poolings of interests.

         The  results  of  operations  for  prior  periods  are not  necessarily
indicative of the results that may be expected for future years. The information
set forth below should be read in  conjunction  with the Company's  consolidated
financial  statements  and  the  notes  thereto,  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Annual Report on Form 10-K.



<PAGE>
<TABLE>
<S>                                              <C>             <C>            <C>          <C>           <C>


    ---------------------------------------------- ----------------------------------------------------------------------
                                                                         Years ended December 31,
    ---------------------------------------------- ----------------------------------------------------------------------
                                                       1995 (1) (2)    1996 (2)      1997 (2)         1998        1999 (2)
    ---------------------------------------------- ----------------------------------------------------------------------
    STATEMENT OF OPERATIONS DATA:                                  (In thousands, except per share data)
    ---------------------------------------------- ----------------------------------------------------------------------
    Revenues                                          $ 120,566     $ 143,141      $ 160,615     $ 177,462     $ 181,981
    Cost of services                                     94,163       110,500        120,585       126,204       147,294
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
    Gross profit                                         26,403        32,641         40,030        51,258        34,687

    Liquidation of subsidiary (4)                             -           662            328             -             -
    Merger related and other nonrecurring costs (5)           -             -          1,235         8,275           292
    Asset impairment (8)                                      -             -              -         1,107         4,591
    Selling, general and administrative expenses         21,810        26,047         26,868        25,112        40,440
    Stock and stock option compensation (3)                   -         6,172          9,965         2,595             -
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
    Income/(loss) from operations                         4,593         (240)          1,634        14,169      (10,636)

    Other income (expense), net (7)                       (799)         (853)          (400)           269          (73)
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
    Income/(loss) before equity investment in
        joint venture, income tax expense and
        extraordinary gain                                3,794       (1,093)          1,234        14,438      (10,709)

    Income tax expense (benefit)                          1,907         1,786          5,460         7,275       (1,212)
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
    Income/(loss) before equity investment in
        joint venture and extraordinary gain              1,887       (2,879)        (4,226)         7,163       (9,497)


    (Loss) from equity investment in joint
        venture                                               -             -              -          (463)         (427)
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------

    Income (loss)  before extraordinary gain              1,887       (2,879)        (4,226)         6,700       (9,924)


    Extraordinary gain (6)                                1,055           145          2,336             -             -
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------

    Net income (loss)                                    $2,942       $(2,734)      $(1,890)        $6,700      $(9,924)
                                                    ===========  =============   ============= ============ ============

    Net income (loss) per share
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
       Basic

         Net (loss) income before extraordinary
       gain                                                   *       $(0.25)        $(0.32)         $0.42       $(0.58)
         Extraordinary gain                                   *       $ 0.01         $ 0.17              -             -
         Net (loss) income                                    *       $(0.24)        $(0.14)         $0.42       $(0.58)
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
       Dilutive

         Net (loss) income before extraordinary
       gain                                                   *       $(0.25)        $(0.32)         $0.40       $(0.58)
         Extraordinary gain                                   *       $ 0.01         $ 0.17              -             -
         Net (loss) income                                    *       $(0.24)        $(0.14)         $0.40       $(0.58)
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------
    Weighted average shares outstanding
       Basic                                                  *        11,321         13,361        15,992        17,059
       Dilutive                                               *        11,321         13,361        16,772        17,059
    ---------------------------------------------- ------------- ------------- -------------- ------------- -------------


     *     Due to the  acquisition  on May 25, 1995,  and the related  change in
           capital structure,  earnings per share information for this period is
           not meaningful and, accordingly, is not presented.
</TABLE>


<PAGE>



<TABLE>
<S>                                          <C>               <C>           <C>              <C>               <C>

                                                                            DECEMBER 31,
                                                  1995             1996            1997             1998             1999
BALANCE SHEET DATA                                                         (In Thousands)
-----------------------------------------      ----------      ----------       ----------       ----------       ---------
Cash and cash equivalents                         $ 1,753         $ 3,218          $ 5,261         $ 16,165         $ 9,656
Working capital                                     5,054           7,382           34,122           54,294          44,354
Total assets                                       52,703          55,872           84,657          101,422         116,209
Total debt                                         20,606          16,790            2,752            1,026             666
Total stockholders' equity                          3,772           9,958           48,849           73,599          72,292
</TABLE>
(1)  The  operating  data for the  year-ended  December  31,  1995  reflect  the
     combined  results of operations of the Predecessor  from January 1, 1995 to
     May 24, 1995,  the Company from May 25, 1995 to December 31, 1995,  and the
     annual results of Apogee, TB&A, IGA and PHB.
(2)  The  statements of operations  data for the years ended  December 31, 1995,
     1996 and 1997 include performance incentive compensation paid to PHB senior
     staff members in excess of a standard bonus set for their  respective staff
     levels. The excess performance incentive  compensation was included in cost
     of services and selling,  general and  administrative  expenses was $6,260,
     $9,588 and $7,294 for the years ended  December  31,  1995,  1996 and 1997,
     respectively.  In  addition,  the year ended  December  31,  1996  includes
     approximately  $500 of cost  of  services,  representing  that  portion  of
     officer  compensation  that exceeded the compensation  that would have been
     paid had the  compensation  plan adopted in January 1997 been in effect for
     all of 1996;  and the year ended  December  31,  1999  includes  $10,868 in
     bonuses paid to key staff. In 1997 the Board adopted a resolution  limiting
     the amount that may be set aside for bonuses to forty  percent (40%) of net
     income before bonuses and taxes. In approving bonuses for 1999 the Board of
     Directors made an exception to this limitation.
(3)  In  connection  with an  amendment  to the  Hagler  Bailly,  Inc.  Employee
     Incentive and  Non-Qualified  Stock Option and  Restricted  Stock Plan (the
     "Stock  Option  Plan") and a  reclassification  of its common  stock,  each
     effective December 31, 1996, Hagler Bailly incurred non-recurring, non-cash
     charges to  operations  amounting to  approximately  $4,600 for options and
     approximately $1,600 for stock in 1996. In connection with a stock bonus to
     an  employee,  the  Company  incurred  a  non-cash  compensation  charge to
     operations  in the first quarter of 1997 of $65. PHB common stock issued or
     subject to issuance under  subscriptions  receivable entered into within 12
     months  preceding  the  closing of the merger  were  presumed  to have been
     issued in contemplation of the proposed  transaction and were accounted for
     at their fair market value at date of issuance. Accordingly, PHB recognized
     a non-recurring,  non-cash, non-tax deductible compensation charges for the
     years ended December 31, 1997 and 1998 of approximately  $9,900 and $2,600,
     respectively,  representing the difference between the fair market and book
     value of shares of common stock then issuable.
(4)  On December 31, 1996,  PHB  liquidated  its wholly owned  subsidiary in the
     U.K. Of PHB's loss of $662 in 1996,  $549  represented  cumulative  foreign
     currency translation losses that had previously been recorded as a separate
     component of the PHB's shareholders'  equity. In 1997, $328 was recorded as
     management's  estimate of the uncollectable net proceeds resulting from the
     liquidation.
(5)  For the year ended December 31, 1997,  1998 and 1999, the Company  recorded
     merger  related and other  nonrecurring  costs of $1,235,  $8,275 and $292,
     respectively,  as a result of business  combinations and related costs (see
     note 17 to the 1999 financial statements).
(6)  For the years ended December 31, 1995, 1996 and 1997, the Company  recorded
     extraordinary gains of $1,055, $145 and $2,336,  respectively,  as a result
     of extinguishment of debt at beneficial terms by TB&A.
(7)  Other income  (expenses),  net includes interest income,  interest expense,
     minority  interest,  other income,  and other  expenses.  (8) For the years
     ended  December 31, 1998 and 1999, the Company  recorded  asset  impairment
     expenses  of $1,107 and  $4,591,  respectively.  In 1998,  the  expense was
     recorded  as a result of  certain  software  development  costs  which were
     impaired  due  to  the  duplication  of  technologies  resulting  from  the
     Company's  business  combinations and its joint venture with Cap Gemini. In
     1999,  the expense was recorded as a result of the  impairment  of goodwill
     associated  with certain  subsidiaries  (see note 18 to the 1999  financial
     statements).





<PAGE>



ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS


Overview

     The  predecessor  of the Company  was  founded in February  1980 as Hagler,
Bailly & Company, Inc. In July 1984, it was acquired by RCG International,  Inc.
("RCG") an indirect subsidiary of Reliance Group Holdings,  Inc. and in 1987 was
renamed  RCG/Hagler  Bailly,  Inc. In May 1995,  the  management  of  RCG/Hagler
Bailly,  Inc.  completed the purchase of RCG/Hagler  Bailly,  Inc. from RCG (the
"Management  Buy-Out"),  and the successor to RCG/Hagler  Bailly,  Inc. became a
wholly-owned  subsidiary of the Company.  In July 1997, the Company completed an
initial public offering (the "IPO").

         Hagler Bailly, together with its wholly owned subsidiaries,  PHB Hagler
Bailly,  Hagler Bailly  Services and its other domestic and foreign wholly owned
subsidiaries,  is a  leading  worldwide  provider  of  strategy,  economics  and
operations  consulting  services  to clients in energy and  network  industries,
including  electric  power,  natural gas and water  utilities,  fuel  providers,
aviation  transportation,  telecommunications,  commercial  litigation  and  the
environment.

         The  Company's  revenues  consist of  commercial  consulting  revenues,
government  consulting  revenues  and  other  revenues.   Commercial  consulting
revenues represent  revenues billed at commercial rates for professional  staff,
subcontractors and independent  consultants,  and client reimbursable  expenses.
Commercial  revenues  are  associated  with the  Company's  primary  business of
providing  strategic advice and analysis to businesses in developed countries on
issues  involving   energy,   transportation,   telecommunications,   commercial
litigation,  the environment and other matters.  Government  consulting revenues
represent   revenues  billed  at  government  rates  for   professional   staff,
subcontractors and independent  consultants,  and client reimbursable  expenses.
Government  revenues  are  associated  with  providing  advisory  and  technical
services  to  government  sector  clients  worldwide  in the energy and  network
industries, particularly in water and transportation, and the environment. Other
revenues  include  those derived from  information-based  products and services,
financial advisory services, and publication of newsletters,  reference manuals,
and data series for the energy and transportation  industries services.  Revenue
from commercial  consulting is typically  characterized  by higher gross margins
than government  consulting,  yet generally  requires a higher relative level of
infrastructure  support.  Consequently,  the Company's operating  performance is
affected by its  commercial  consulting / government  consulting  business  mix.
Through  strategic  acquisitions and internal growth,  the Company has increased
its  commercial  consulting  client  base,  and will  continue  to  pursue  such
opportunities in the future.

         The Company  derives  substantially  all of its revenues  from fees for
professional  services.  Clients are typically  invoiced on a monthly basis. The
majority of revenues are billed at standard daily rates,  standard hourly rates,
or  cost-plus  fixed-fees.  Revenues  from  standard  daily rate  contracts  are
recognized at amounts  represented by the agreed-upon  billing amounts and costs
are recognized as incurred.  Revenues from standard hourly rate  engagements are
recognized as hours are recorded and costs are  recognized as they are incurred.
Revenue from cost-plus  fixed-fee  contracts is recognized as costs are incurred
on the  basis of  direct  costs  plus  allowable  indirect  costs and a pro rata
portion  of  estimated  fee.  The  remainder  of the  revenues  are  billed on a
fixed-bid basis and by lump sum fee  arrangements.  Revenues from fixed-bid type
contracts are  recognized on the  percentage-of-completion  method of accounting
with costs and  estimated  profits  included in contract  revenues  based on the
relationship that contract costs incurred bear to management's estimate of total
contract  costs.  Losses,  if any,  are accrued  when they become  known and the
amount of the loss is reasonably  determinable.  The Company's most  significant
expenses are project personnel costs,  which consist of consultant  salaries and
benefits  (including  bonuses),  and  travel-related  direct  project  expenses.
Project personnel are typically full-time professionals employed by the Company,
although the Company often  supplements its  professional  project staff through
the use of subcontractors and independent consultants. The Company believes that
retaining  subcontractors and independent  consultants on a per-engagement basis
provides it with greater flexibility and reduced risk in adjusting  professional
staff levels in response to changes in demand for its services.


Stock Based Compensation Charges

         The Company  recognized a non-recurring,  non-cash charge to operations
of  approximately  $10.0  million  in the year  ended  December  31,  1997,  and
approximately  $2.6 million in the year ended  December 31, 1998.  These charges
are required under generally accepted accounting principles for stock issued, or
obligated  to be issued,  during the twelve  months  preceding  the closing of a
pending   merger  based  on  the   presumption   that  such  issuances  were  in
contemplation  of the merger.  Substantially  all of these costs were related to
the PHB merger and  represent  the  difference  between the fair market and book
value of PHB common stock  issuable under  subscriptions  within one year of the
merger's close.

Recent Mergers and Events

      On December 1, 1997, the Company  completed the merger of Apogee,  whereby
Apogee  became  a  wholly-owned  subsidiary  of  Hagler  Bailly.  Apogee  was  a
consulting  firm  specializing  in  the  economic  and  financial   analysis  of
infrastructure,  including all aspects of  transportation  and environment.  The
Company  issued  409,985  shares of its common  stock in exchange for all of the
common stock of Apogee.  The business  combination is accounted for as a pooling
of interests. Accordingly, the Company's financial statements have been restated
to reflect the merger for all periods presented.

      On January 28, 1998, the Company purchased the remaining minority interest
of its consolidated  subsidiary,  PT Hagler Bailly, a consulting firm located in
Jakarta,  Indonesia,  for $200,000  whereby PT Hagler Bailly became an indirect,
wholly-owned  subsidiary of the Company.  Total consideration of the acquisition
was  $200,000 in cash.  The  acquisition  was  accounted  for using the purchase
method.

      On February 23, 1998,  the Company  completed the merger of TB&A,  whereby
TB&A became a  wholly-owned  subsidiary  of the  Company.  TB&A is a  management
consulting firm to electric,  gas and telecommunication  companies.  The Company
issued  454,994  shares of its common  stock,  in exchange for all of the common
stock of TB&A.  The  business  combination  is  accounted  for as a  pooling  of
interests. Accordingly, the Company's financial statements have been restated to
reflect the merger for all periods presented.

      On March 10, 1998, the Company  purchased the remaining  minority interest
of Hagler Bailly Indonesia, Inc., which holds all of the outstanding stock of PT
Hagler  Bailly,  whereby  Hagler  Bailly  Indonesia,  Inc.  became  an  indirect
wholly-owned  subsidiary of the Company.  Total consideration of the acquisition
was $240,000 in cash. The acquisition was accounted for as a purchase.

      On April 28, 1998,  the Company  completed  the  acquisition  of Estudio Q
Ingenieros  Asociados  S.R.L.,  an Argentinean  company  ("Estudio Q"),  whereby
Estudio Q became a wholly-owned  subsidiary of the Company.  Total consideration
for the acquisition was approximately  $2.4 million in the form of $800,000 cash
and an aggregate of 64,306 shares of the Company's common stock. The acquisition
was accounted for using the purchase method.

      On June 16,  1998,  the Company and Cap Gemini S.A.  and its wholly  owned
subsidiary, Cap Gemini America, Inc., entered into an exclusive joint venture to
deliver  information  technology  consulting services and solutions to electric,
gas and water  utilities,  and service  providers  in the U.S.  and Canada.  The
Company  expects the joint venture,  Cap Gemini Hagler Bailly,  L.L.C.,  to turn
profitable  sometime late in the fiscal year ending December 31, 2000. The joint
venture is owned  equally by the  Company  and Cap Gemini  America  and each has
invested capital in the venture and transferred key senior  professionals to it.
Concurrently  with the  creation  of the joint  venture,  Cap  Gemini  purchased
470,975 newly issued shares of the Company's  stock at the current  market price
for total consideration, after commissions and fees, of $11.8 million.

      On June 30, 1998,  the Company  completed  the merger of IGA,  whereby IGA
became a  wholly-owned  subsidiary of the Company.  The Company  issued  183,550
shares of its common  stock in  exchange  for all the common  stock of IGA.  The
business  combination was accounted for as a pooling of interests.  Accordingly,
the Company's  financial  statements were restated to reflect the merger for all
periods presented.

      On August 28, 1998, the Company  completed the merger of PHB,  whereby PHB
became a wholly-owned  subsidiary of the Company.  Until the merger, PHB was the
largest privately owned independent  economic and management  consulting firm in
the United States.  The Company issued  6,548,953  shares of its common stock in
exchange  for all of the  common  stock of PHB.  The  business  combination  was
accounted for as a pooling of interests.  Accordingly,  the Company's  financial
statements were restated to reflect the merger for all periods presented.

      On  September  30, 1998,  the Company  sold  certain  assets of its public
sector environmental consulting operations. As a result of the transaction,  the
Company  sold assets for  approximately  $2.9  million,  resulting  in a gain of
approximately $282,000.

      On November 17, 1998,  the Company  completed the  acquisition  of certain
assets  and the  assumption  of certain  liabilities  of The  Fieldston  Company
("TFC")  and  all of the  outstanding  stock  of  Fieldston  Publications,  Inc.
("FPI").  Total  consideration of the acquisition was approximately $2.3 million
in cash and 232,558 shares of Hagler Bailly common stock.  The  acquisition  was
accounted for using the purchase method.

         In December 1998, the Company made the decision to cease  operations in
its  financial  advisory  services  business,  HB Capital,  Inc.,  resulting  in
expenses of approximately $1.8 million.

         On February 8, 1999, the Company acquired all of the outstanding  stock
of Lacuna  Consulting  Limited  ("Lacuna"),  a United  Kingdom  corporation,  in
exchange for 65,000 shares of the Company's  common stock.  The  acquisition was
accounted for as a purchase.  Accordingly, the consolidated financial statements
reflect the results of operations of Lacuna since the date of acquisition.

         On March 22, 1999,  the Company  announced  that its Board of Directors
authorized  the  repurchase of up to 1,500,000  shares of the  Company's  common
stock  from  time  to  time  in  the  open  market  or in  privately  negotiated
transactions. As of December 31, 1999, the Company had reacquired 559,700 shares
of its stock at a total net cost of approximately $4.1 million.

         On April 30, 1999, the Company acquired all of the outstanding stock of
Washington  International Energy Group, Ltd. ("WIEG"), a Washington,  D.C.-based
worldwide  provider  of energy  and  environmental  policy  consulting  research
services,  in exchange  for 144,210  shares of the  Company's  common  stock and
approximately  $850,000 in cash.  The Company has the right to  repurchase up to
26,210 of these  shares  at $ .01 cents per share if the price of the  Company's
stock meets  certain price  targets  during the three year period  following the
acquisition.  The transaction was accounted for as a purchase.  Accordingly, the
consolidated  financial  statements  reflect the results of  operations  of WIEG
since the date of acquisition.

         On June 1, 1999, the Company received the remaining  minority  interest
of its joint  venture  Hagler  Bailly Risk  Advisors,  LLC, a limited  liability
company located in Houston, Texas, from Objective Resources Group Risk Advisors,
LLC bringing the Company's ownership to 100%.

         On August 12, 1999, the Company  acquired all of the outstanding  stock
of GKMG, a  Washington,  D.C.-based  consulting  firm which  provides  economic,
strategic,  financial,  and  regulatory  analysis to the aviation  industry,  in
exchange for 1,420,000 shares of the Company's common stock.  Under the terms of
the  Share  Exchange  Agreement  by and  among  the  Company,  GKMG  and  former
shareholders of GKMG, the Company is obligated to issue additional shares of its
common  stock to the former  shareholders  of GKMG with a fair market  value (as
defined in the Share Exchange  Agreement) up to $15 million if certain  earnings
targets for GKMG are met for the periods July 1,  1999-June 30, 2000 and July 1,
2000-June 30, 2001. In addition, the Company is obligated to issue up to 192,857
additional  shares of its  common  stock to the former  shareholders  of GKMG if
certain stock price  performance  contingencies are not met. The transaction was
accounted for as a purchase.  Accordingly, the consolidated financial statements
reflect the results of operations of GKMG since the date of acquisition.

         On  September  27,  1999,  the  Company  announced  that  its  Board of
Directors  retained  Banc of America  Securities,  LLC to assist the  Company in
exploring  strategic and financial  alternatives to maximize  shareholder value,
including the potential sale or merger of the Company.

         On  December  31,  1999,  the Company  sold the assets of  wholly owned
subsidiary IGA. The Company  disposed of this subsidiary due to its inability to
successfully  integrate  IGA's  operations  into the  Company's  other  European
operations.  As a  result  of the  transaction,  the  Company  sold  assets  for
approximately $0.6 million,  resulting in a loss of approximately  $68,000. As a
result of this  transaction the Company received a $550,000 note receivable from
the buyers of IGA. The note bears no interest and is secured by 99,516 shares of
the Company's common stock owned by IGA.



<PAGE>


Results of Operations

         The following  table presents for the periods  indicated the percentage
of revenues represented by certain income and expense items:
<TABLE>
<S>                                                   <C>                   <C>                 <C>


                                                                 For the years ended December 31,
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
                                                              1997             1998                 1999
                                                              ----             ----                 ----
          Revenues:
            Commercial revenues                               63.6%            65.2%                68.0%
            Government revenues                               35.3             33.7                 31.2
            Other revenues                                     1.1              1.1                  0.8
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
              Total revenues                                 100.0            100.0                100.0

          Cost of services                                    75.1             71.1                 80.9

          Merger related and other nonrecurring
              costs                                            0.8              4.7                  0.2
          Asset impairment                                       -              0.6                  2.5
          Liquidation of subsidiary                            0.2               -                    -
          Selling, general, and administrative
             expenses                                         16.7             14.2                 22.2
          Stock and stock option compensation
             subscriptions for common stock                    6.2              1.5                   -
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
          Income from operations                               1.0              7.9                 (5.8)

            Interest income                                    0.8              0.2                  0.1
            Interest expense                                  (0.8)            (0.2)                (0.1)
            Other income (expense), net                       (0.2)             0.2                  0.0
            Minority interest                                     -             0.0                  0.0
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
          Income (loss) before income tax
            expense, equity investment in joint
            venture and extraordinary gain                     0.8              8.1                 (5.8)

          Income tax expense (benefit)                         3.4              4.1                 (0.7)
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
          (Loss) income before equity investment in
          joint venture and extraordinary gain                (2.6)             4.0                 (5.1)

           (Loss) from equity investment in joint
             venture                                              -            (0.3)                (0.3)
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
          Net income (loss) before
             extraordinary gain                               (2.6)             3.7                 (5.4)

          Extraordinary gain                                   1.4                 -                  -
          ------------------------------------------- ---------------- -- ---------------- --- ---------------
          Net income                                          (1.2)%            3.7%                (5.4)%
          ====================================================================================================
</TABLE>


<PAGE>


1999 Compared to 1998

         Revenues  for the year  ended  December  31,  1999,  increased  by $4.5
million,  or 2.5%, to $182.0  million from the year ended December 31, 1998. For
the year  ended  December  31,  1999,  revenues  from the  Company's  commercial
consulting  operating segment increased $8.0 million, or 6.9%, to $123.8 million
from the year ended  December  31,  1998.  This  increase  was  attributable  to
approximately $12.7 million of revenues from acquired  companies.  The increases
resulting from acquisitions was partially offset by the core commercial business
which experienced a decrease in revenues of approximately $4.7 million primarily
due to a reduction  in staff and the number of overall  contracts.  For the year
ended  December 31, 1999,  revenues  from the  Company's  government  consulting
operating  segment  decreased  approximately  $2.9  million,  or 4.8%,  to $56.7
million from the year ended  December 31,  1998.  Excluding  the $5.6 million in
1998 revenues  resulting from certain assets of the Company's  government sector
consulting  practice  which  was sold in  September  1998,  the  segment's  core
government  consulting business increased $2.7 million,  primarily the result of
increased pass-thru equipment sales and a stronger international presence. Other
revenues  for the year ended  December 31, 1999 were $1.4  million.  In the year
ended  December 31, 1999,  approximately  68.0% of the  Company's  revenues were
derived from commercial  consulting revenues, as compared with 65.2% in the year
ended December 31, 1998.

         Cost of services for the year ended  December  31,  1999,  increased by
$21.1  million,  or 16.7%,  to $147.3  million from the year ended  December 31,
1998. Cost of services as a percentage of revenue  increased from 71.1 % for the
year ended  December  31, 1998,  to 80.9% for the year ended  December 31, 1999,
primarily  due to an increase in bonuses paid to key  consulting  employees as a
result of the repositioning plan, an increase in compensation paid to consulting
staff,  an increase in reserves due to issues related to the  integration of its
acquired  subsidiaries  and high pass-thru costs associated with the increase in
volume equipment sales, on which gross margins of typically 1% to 2% are earned.

           Selling,  general and  administrative  expenses ("SG&A") for the year
ended December 31, 1999,  increased by approximately $15.3 million, or 61.0%, to
$40.4 million from the year ended  December 31, 1998.  Expressed as a percentage
of total  revenues,  SG&A  expenses  increased  from  14.2%  for the year  ended
December 31, 1998, to 22.2% for the year ended December 31, 1999.  This increase
is  primarily  reflective  of an  increase  in  bonuses  paid  to key  employees
resulting from the repositioning plan and increased business  development costs,
as well as costs related to the  centralization of certain operating systems and
administrative functions.

         Merger related and other nonrecurring costs for the year ended December
31,  1999,  decreased  by  $8.0  million  to $0.3  million  as  compared  to the
comparable  period of the prior year.  The decrease in merger  related and other
nonrecurring costs in 1999 was primarily the result of a decrease in the size
and number of acquisitions in 1999.

         Asset  impairment  costs for the year ended December 31, 1999 increased
by $3.5  million to $4.6  million as  compared to the  comparable  period of the
prior year. Asset impairment  expenses in 1999 were the result of the impairment
of intangible assets  associated with certain  subsidiaries for which management
has determined  realizable  value of the related goodwill to be in excess of the
future cash flows from operations.  Asset  impairment  expenses in 1998 were the
result  of  impaired  software  development  costs  due  to the  duplication  of
technologies  resulting from the Company's  business  combinations and its joint
venture with Cap Gemini.

         There was no stock and stock  option  compensation  for the year  ended
December 31, 1999. Stock and stock option compensation in 1998 was substantially
all related to PHB and included non-cash,  non-tax deductible compensation based
on the  difference  between the fair market and book values of PHB common  stock
issuable under subscriptions within one year of the companies' merger.

         Other  income  (expenses),   net  includes  interest  income,  interest
expense,  minority  interest,  and  other  income  and  expenses.  Other  income
(expenses),  net decreased by approximately $342,000 from income of $269,000 for
the year ended  December  31,  1998 to  expense  of  $73,000  for the year ended
December  31,  1999.  The  primary  reason  for  this  decrease  was the loss of
approximately  $68,000  from the sale of IGA in December  1999 while the Company
had a gain of  approximately  $282,000  from the sale of  certain  assets of the
Company's government sector consulting practice in 1998.

         Loss from the Company's  joint  venture,  Cap Gemini Hagler Bailly LLC,
for the fiscal year ending December 31, 1999 decreased by approximately  $36,000
from a loss of $463,000 in 1998 to a loss of $427,000 in 1999. Cap Gemini Hagler
Bailly  LLC,  began  operations  in the fourth  quarter  1998 and was created to
deliver  information  technology  consulting services and solutions to electric,
gas and water utilities and service providers in the U.S. and Canada. Margins on
the joint venture  improved  significantly  over the last six months of 1999 and
the Company expects the joint venture to generate positive earnings for the year
ending December 31, 2000.

         The Company  recorded an income tax benefit of $1.2 million,  resulting
in an effective income tax benefit rate of 11.3% for the year ended December 31,
1999 as compared to a provision of $7.3 million  resulting in an effective  rate
of 50.4% in the prior period.  The  effective  income tax rates in 1998 and 1999
differed from the provisional  rates primarily due to the  non-deductibility  of
amortization of goodwill,  certain  non-deductible merger related costs, and the
non-deductibility  of the compensation  charge in connection with  subscriptions
for the issuance of common stock.

     Net income for the year ended December 31, 1999 decreased by  approximately
$16.6  million,  to a net  loss of $9.9  million,  as a  result  of the  reasons
discussed above.

1998 Compared to 1997

           Revenues  for the year ended  December 31,  1998,  increased by $16.8
million,  or 10.5%,  to $177.5  million  from the year ended  December 31, 1997.
Revenues from the Company's  commercial  consulting  operating segment increased
$13.7 million,  or 13.4%, to $115.8 million.  This increase was primarily driven
by the Company's focus on the growth of private-sector  engagements resulting in
an  increase  of $6.5  million,  an  increase  internationally  of $6.5  million
resulting primarily from growth in Hagler Bailly France and IGA and $0.7 million
through the  purchase  of  Fieldston  Consulting.  Revenues  from the  Company's
government consulting operating segment increased approximately $2.9 million, or
5.1%, to $59.6 million.  This increase was primarily  attributable  to increased
capacity  and  capabilities  through the  purchase of Estudio Q, an  Argentinean
company,  and growth in PT Hagler Bailly  Indonesia and Hagler Bailly  Pakistan.
Other  revenues for the year ended  December 31, 1998 were $2.1 million.  In the
year ended December 31, 1998, approximately 65.2% of the Company's revenues were
derived from commercial  consulting revenues, as compared with 63.6% in the year
ended December 31, 1997.

         Cost of services for the year ended  December  31,  1998,  increased by
$5.6 million,  or 4.7%, to $126.2 million from the year ended December 31, 1997.
Cost of services as a percentage of revenue  decreased  from 75.1 % for the year
ended  December  31,  1997,  to 71.1%  for the year  ended  December  31,  1998,
primarily  the result of a reduction  in cash  compensation  resulting  from the
integration of the Company's and merged firms' operations, particularly PHB.

         Selling,  general and  administrative  expenses  ("SG&A")  for the year
ended December 31, 1998,  decreased by approximately  $1.8 million,  or 6.5%, to
$25.1 million from the year ended  December 31, 1997.  Expressed as a percentage
of total  revenues,  SG&A  expenses  decreased  from  16.7%  for the year  ended
December 31, 1997, to 14.2% for the year ended December 31, 1998.  This decrease
is primarily  reflective of a reduction in cash compensation  resulting from the
integration of the Company's and merged firms' operations, particularly PHB.

         In the year ended December 31, 1998,  there were no expenses related to
the liquidation of a subsidiary,  compared to approximately $328,000 in expenses
related to the liquidation of a subsidiary in the year ended December 31, 1997.

         Merger related and other nonrecurring costs for the year ended December
31,  1998,  increased  by  $7.0  million  to $8.3  million  as  compared  to the
comparable period of the prior year. The majority of the merger related costs in
the year ended  December 31, 1998,  were  associated  with the merger of PHB and
exiting from the Company's financial advisory services business,  as well as the
business combinations with TB&A, IGA, Apogee, FPI, TFC and Estudio Q.

         Asset  impairment  costs for the year ended December 31, 1998 were $1.1
million.  Asset impairment expenses in 1998 were the result of impaired software
development  costs due to the  duplication  of  technologies  resulting from the
Company's  business  combinations  and its joint venture with Cap Gemini.  There
were no asset impairment costs in the year ended December 31, 1997.

         Stock and stock  option  compensation  for the year ended  December 31,
1998,  decreased by $7.4 million from the year ended  December 31, 1997, to $2.6
million.  Substantially  all of these costs in both  periods  related to PHB and
include  non-cash,  non-tax  deductible  compensation  based  on the  difference
between  the fair  market and book  values of PHB common  stock  issuable  under
subscriptions within one year of the companies' merger.

         Other  income  (expenses),   net  includes  interest  income,  interest
expense,  minority  interest,  and  other  income  and  expenses.  Other  income
(expenses), net increased by approximately $669,000 to income of $269,000 in the
year ended December 31, 1998.  The primary  reasons for this increase was a gain
of  approximately  $282,000  from the sale of  certain  assets of the  Company's
environmental  consulting  business,  as well as a decrease in interest  expense
from the year ended  December 31, 1997,  due to the use of IPO proceeds to repay
the Company's outstanding debt.

         Loss from joint  venture for the fiscal year ending  December 31, 1998,
was  approximately  ($460,000),  or (0.2%)  expressed as a  percentage  of total
revenues.  The joint  venture,  Cap Gemini  Hagler  Bailly  LLC,  was created to
deliver  information  technology  consulting services and solutions to electric,
gas and water utilities and service providers in the U.S. and Canada.

         The Company's  effective tax rate for the year ended December 31, 1998,
was 50.4%. The 1998 provision for tax is higher than the provisional tax rate of
39.7% as a result of the  non-deductibility  for tax  reporting  purposes of the
compensation  charge in connection with subscriptions for the issuance of common
stock, and certain non-deductible merger related costs.

     Net income before extraordinary gains for the year ended December 31, 1998,
increased by  approximately  $10.9  million,  to $6.7 million,  as a result of a
combination of reasons discussed above.

         For the year ended  December  31,  1998,  there  were no  extraordinary
gains,  compared to approximately  $2.3 million in  extraordinary  gains, net of
income tax expense, for the year ended December 31, 1997. The gains in 1997 were
the result of extinguishment of debt at beneficial terms to the Company.

     Net income for the year ended December 31, 1998 increased by  approximately
$8.6 million, to $6.7 million, as a result of the reasons discussed above.


Liquidity and Capital Resources

          As  of  December  31,  1999,  working  capital  was $44.4  million as
compared to $54.3  million at December 31, 1998.  The decrease was primarily due
to an increase in accrued  compensation  related to the Company's  repositioning
plan,  as well  as the  use of  cash  associated  with  the  Company's  treasury
repurchase program and the acquisition of property, plant and equipment.

         Cash provided from operating activities was approximately $3.3 million,
primarily  the result of the principal  element of the  company's  repositioning
plan which  resulted in a $10.2 million  increase in accrued  compensation.  Net
cash was also  provided  by  approximately  $5.8  million  of  depreciation  and
amortization and approximately $8.4 million in other operating activities. These
increases in cash were  partially  offset by an $8.4  million  decrease in taxes
payable,  a net loss of approximately  $9.9 million for the year and an increase
of approximately $2.8 million in accounts receivable.

         Investment  activities used $5.5 million during the year ended December
31, 1999. The Company used  approximately $4.1 million in the purchase of office
and computer equipment, leasehold improvements, and other resources necessary to
improve operating  efficiencies of the Company, $0.7 million for the purchase of
acquired companies and $0.7 million to fund additional capital in the Cap Gemini
Hagler Bailly LLC joint venture.

         Financing  activities used $4.3 million for the year ended December 31,
1999. The Company used approximately $4.1 million in funds for the repurchase of
559,700 shares of the Company's  common stock.  Under the stock buyback  program
established by the Board of the Directors,  as of December 31, 1999, the Company
is authorized to repurchase  940,300  additional  shares of the Company's common
stock.  Additionally,  approximately  $0.3  million  was  used  to pay  down  an
outstanding loan related to the acquisition of TFC in 1998.

         The  Company's  primary  source of liquidity for the past 12 months was
cash generated from operations,  periodically supplemented by borrowings under a
revolving  credit  facility with Bank of America  (formerly  NationsBank.).  The
maximum  available  balance  under the line of credit is $50.0  million based on
certain  financial  formulas.  Based on these  formulas  the  current  available
balance  at  December  31,  1999 was  $12.2  million,  due to  charges  from the
repositioning plan announced in December 1999. The Company was in non-compliance
with certain  covenants that were  subsequently  waived by Bank of America.  The
company is currently  re-negotiating  the terms of the credit facility to better
meet its future business needs.  Based on the Company's  current  projected cash
flow and the availability of financing, including borrowings under the Company's
credit facility,  management of the Company believes it will be able to meet its
anticipated  cash  requirements  for the next 12 months and for the  foreseeable
future.


Year 2000

         The Company  experienced no significant system or application  problems
resulting  from the Year 2000  roll-over  or from the Year 2000  "leap  year" on
February 29, 2000.  The Company will continue to maintain Year 2000  contingency
plans with regard to its computer programs and systems and those of its clients,
suppliers and vendors.

         The Company incurred  approximately  $0.3 million in 1999  implementing
the Year 2000 readiness plan.



Item 7A - Quantitative and Qualitative Disclosures about Market Risk

         The following  discussion  about the Company's  market risk disclosures
involves forward-looking statements. Actual results could differ materially. The
Company is exposed to market  risk from  changes in  interest  rates and foreign
exchange rates.  Adverse  changes in either  interest rates or foreign  exchange
rates can have a material effect on the Company's operations.

         Interest  Rate Risk:  The  Company  is subject to risk from  changes in
interest rates. The Company utilizes U.S. dollar denominated  borrowings to fund
its operational  needs, and as of December 31, 1999, had total  outstanding debt
of approximately  $666,666.  A hypothetical 10% adverse change in interest rates
on the Company's total  outstanding  debt as of December 31, 1999 would not have
been material. Interest rates may move in the Company's favor. While the Company
does not expect to incur material losses as a result of this interest rate risk,
there can be no assurance that losses will not result.

         Foreign  Currency  Exchange  Risk:  The Company is subject to risk from
changes  in  foreign  exchange  rates for its  subsidiaries  which use a foreign
currency as their functional currency and are translated into U.S. dollars. Such
changes could result in cumulative translation gains or losses that are included
in shareholders' equity.

         In the  year  ended  December  31,  1999,  approximately  14.1%  of the
Company's  total  revenues  were derived from  operations  in foreign  countries
including Argentina,  Armenia, Australia, Canada, China, France, Ireland, India,
Indonesia, New Zealand,  Pakistan,  Russia and the United Kingdom. Exchange rate
fluctuations  between  the U.S.  dollar and the  currencies  of these  countries
result in positive or negative  fluctuations in the amounts  relating to foreign
operations reported in the Company's consolidated financial statements.  None of
the components of the Company's financial statements were materially affected by
exchange rate fluctuations in the years ended December 31, 1997, 1998, or 1999.

         The  potential  loss   resulting   from  a  hypothetical   uniform  10%
strengthening in the value of the U.S. dollar relative to the foreign currencies
in which some of the Company's  sales are  denominated  would have resulted in a
increase in earnings of approximately  $47,000. The potential impact of the same
hypothetical  uniform  change on the Company's cash flows would have resulted in
an increase in cash flows of approximately  $158,000.  This calculation  assumes
that each exchange rate would change in the same direction  relative to the U.S.
dollar. Foreign exchange rates may move not in the Company's favor.
         The  sensitivity of earnings and cash flows to fluctuations in exchange
rates is periodically assessed by management by applying an appropriate range of
potential rate fluctuations to the Company's assets, liabilities,  and projected
results of operations denominated in foreign currency. Historically, the Company
has not used foreign currency options and forward contracts to hedge against the
earnings  effects of such  fluctuations.  While the  Company  does not expect to
incur  material  losses  as a result  of this  currency  risk,  there  can be no
assurance that losses will not result.



ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

         The Consolidated  Financial  Statements of Hagler Bailly are annexed to
the report as pages FS-1 through FS-28. An index to the Financial  Statements is
set forth on page 40.


ITEM 9 -  CHANGES  IN  AND  DISAGREEMENT  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
     FINANCIAL DISCUSSIONS


         Not applicable.


PART III

         The  information  required by Items 10 through 13 of this Part III will
be provided in the  definitive  proxy  statement for the  Company's  1999 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 no later than April 30, 1999, and is incorporated herein by
reference to the extent provided below.


ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF HAGLER BAILLY

         Certain  information  regarding  executive  officers  of the Company is
included  in Item 1 of Part I of this 1999  Annual  Report on Form  10-K.  Other
information in response to this item is  incorporated  by reference  herein from
the  sections of the Proxy  Statement  captioned  "ELECTION  OF  DIRECTORS"  and
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."


ITEM 11 - EXECUTIVE COMPENSATION

           Information  in response to this item is  incorporated  by  reference
herein   from  the   section  of  the  Proxy   Statement   captioned   "DIRECTOR
COMPENSATION",  "COMPENSATION  COMMITTEE  REPORT ON  COMPENSATION  OF  EXECUTIVE
OFFICERS OF THE COMPANY",  "COMPENSATION  INTERLOCKS AND INSIDER PARTICIPATION",
"EXECUTIVE  COMPENSATION  SUMMARY  TABLE",  "STOCK  OPTION  GRANTS DURING 1999",
"STOCK  OPTION  EXERCISES  AND  VALUES  IN  1999",  "EMPLOYMENT   ARRANGEMENTS",
"COMPARISON OF FIVE-YEAR TOTAL RETURNS" AND "PERFORMANCE GRAPH".


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information  in  response  to this item is  incorporated  by  reference
herein from the section of the Proxy Statement  captioned "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS".





<PAGE>



ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information  in  response  to this item is  incorporated  by  reference
herein from the section of the Proxy Statement captioned "CERTAIN  RELATIONSHIPS
AND RELATED TRANSACTIONS".


PART IV


ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

         The consolidated  financial statements filed as part of this report are
listed in the  accompanying  Index to  Consolidated  Financial  Statements.  The
exhibits  filed as part of this  report are listed in the  accompanying  Exhibit
Index, which follows the signature pages to this report.



<PAGE>


39

                               HAGLER BAILLY, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


   Report of Independent Auditors........................................   FS-1

   Consolidated Balance Sheets at December 31, 1998
   and 1999..............................................................   FS-2

   Consolidated Statements of Operations for the years
   ended December 31, 1997, 1998 and 1999................................   FS-3

   Consolidated Statements of Stockholders' Equity
   for the years ended December 31, 1997, 1998 and 1999..................   FS-4

   Consolidated  Statements of Cash Flows for the years ended December 31, 1997,
   1998 and 1999..........................................................  FS-5

   Notes to Consolidated Financial Statements.............................  FS-6



<PAGE>


FS-3

                                                 Report of Independent Auditors


Board of Directors and Stockholders
Hagler Bailly, Inc.


We have audited the accompanying  consolidated  balance sheets of Hagler Bailly,
Inc. as of December 31, 1998 and 1999, and the related  consolidated  statements
of operations,  stockholders' equity, and cash flows for each of the three years
in the period ended  December  31,  1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of Hagler Bailly,
Inc. at December 31, 1998 and 1999,  and the consolidated results of its
operations  and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.



                                                       /s/ Ernst & Young LLP

March 24, 2000
McLean, Virginia






<PAGE>

<TABLE>
<S>                                                                        <C>                 <C>

                                                          HAGLER BAILLY, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                            (in thousands)
                                                                                       December 31,
                                                                                  1998               1999
                                                                           ------------------- ------------------
Assets
Current assets:
   Cash and cash equivalents                                                      $  16,165            $  9,656
   Accounts receivable, net of allowance for doubtful accounts of $3,888
     and $5,604 as of December 31, 1998 and 1999, respectively                       59,092              63,034
   Current portion of notes receivable                                                  382                  80
   Prepaid expenses                                                                   2,620               2,173
   Prepaid taxes                                                                          -               5,915
   Deferred income taxes                                                                  -               1,701
   Other current assets                                                                 304                 960
                                                                           ------------------- ------------------
                                                                           ------------------- ------------------
Total current assets                                                                 78,563              83,519
Property and equipment, net                                                           6,463               8,271
Software development costs, net                                                         898                   -
Intangible assets, net                                                               14,208              22,449
Other assets                                                                          1,290               1,475
Note receivable, net of current portion                                                   -                 495
                                                                           ------------------- ------------------
Total assets                                                                       $101,422            $116,209
                                                                           =================== ==================

Liabilities and stockholders' equity Current liabilities:
   Accounts payable and accrued expenses                                           $  8,476           $  13,948
   Accrued compensation and benefits                                                  8,713              19,072
   Billings in excess of cost                                                         2,288               5,812
   Current portion of long-term debt                                                    345                 333
   Income taxes payable                                                               2,547                   -
   Deferred income taxes                                                              1,900                   -
                                                                           ------------------- ------------------
Total current liabilities                                                            24,269              39,165
Long-term debt, net of current portion                                                  681                 333
Minority interest                                                                       177                   8
Deferred income taxes payable                                                           927               2,383
Deferred rent and other deferred liabilities                                          1,769               2,028
                                                                           ------------------- ------------------

Total liabilities                                                                    27,823              43,917

Stockholders' equity
Common stock:
     Par value $.01, 50,000 shares authorized, 16,483 and 17,911  issued
       and outstanding at December 31, 1998 and 1999, respectively                      165                 179
     Additional capital                                                              72,322              80,996
     Retained earnings (deficit)                                                      1,206              (8,718)
     Foreign currency translation                                                       (94)               (165)
                                                                           ------------------- ------------------
Total stockholders' equity                                                           73,599              72,292
                                                                           ------------------- ------------------

Total liabilities and stockholders' equity                                        $ 101,422           $ 116,209
                                                                           =================== ==================

See accompanying consolidated notes.
</TABLE>

<PAGE>
<TABLE>

                                                          HAGLER BAILLY, INC.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (in thousands, except per share data)

                                                                       For the years ended December 31,
<S>                                                              <C>                 <C>                 <C>
                                                                 1997                1998                1999
                                                          ------------------- -------------------  ------------------
Revenues:
   Commercial revenues                                          $ 102,097             $ 115,772            $ 123,798
   Government revenues                                             56,766                59,638               56,750
   Other revenues                                                   1,752                 2,052                1,433
                                                          ------------------- -------------------  ------------------
Total revenues                                                    160,615               177,462              181,981
Cost of services                                                  120,585               126,204              147,294
                                                          ------------------- -------------------  ------------------

Gross profit                                                       40,030                51,258               34,687
Merger related and other nonrecurring costs                         1,235                 8,275                  292
Asset impairment costs                                                  -                 1,107                4,591
Liquidation of subsidiary                                             328                     -                    -
Selling, general and administrative expenses                       26,868                25,112               40,440
Stock and stock option compensation                                 9,965                 2,595                    -
                                                          ------------------- -------------------  ------------------

Income (loss) from operations                                       1,634                14,169              (10,636)
Other income (expense)
  Interest income                                                   1,192                   349                  127
  Interest expense                                                 (1,301)                 (410)                (173)
  Other (expense) income, net                                        (291)                  411                  (18)
  Minority interest                                                     -                   (81)                  (9)
                                                          ------------------- -------------------  ------------------
Income (loss) before income tax expense, equity
     investment in joint venture and extraordinary gain             1,234                14,438              (10,709)
Income tax expense (benefit)                                        5,460                 7,275               (1,212)
                                                          ------------------- -------------------  ------------------

(Loss) income before equity investment in joint venture
     and extraordinary gain                                        (4,226)                7,163               (9,497)
Loss from equity investment in joint venture                            -                  (463)                (427)
                                                          ------------------- -------------------  ------------------

(Loss) income before extraordinary gain                            (4,226)                6,700               (9,924)
Extraordinary gain                                                  2,336                     -                    -
                                                          ------------------- -------------------  ------------------

Net (loss)  income                                               $ (1,890)             $  6,700            $  (9,924)
                                                          =================== ===================  ==================

Net (loss) income per share:
   Basic
     Net (loss) income per share before extraordinary gain        $  (0.32)            $  0.42             $  (0.58)
     Net income per share extraordinary gain                      $   0.17                -                    -
     Net (loss) income  per share                                 $  (0.14)            $  0.42             $  (0.58)
   Diluted
     Net (loss) income per share before extraordinary gain        $  (0.32)            $  0.40             $  (0.58)
     Net income per share extraordinary gain                      $   0.17                -                    -
     Net (loss) income per share                                  $  (0.14)            $  0.40             $  (0.58)
Weighted average shares outstanding:
   Basic                                                          13,361              15,992               17,059

                                                          =================== ===================  ==================
   Diluted                                                        13,361              16,772               17,059
                                                          =================== ===================  ==================

See accompanying consolidated notes.
</TABLE>

<PAGE>

<TABLE>
                                                          HAGLER BAILLY, INC
                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                            (in thousands)
FS-4

                                                                                     Retained           Other             Total
                                        Common                      Additional       Earnings       Comprehensive     Stockholders'
                                        Shares        Amount           Capital          (Deficit)          Income           Equity
<S>                                     <C>          <C>             <C>             <C>                   <C>            <C>
Balance, December 31, 1996              11,620      $   116         $  12,882       $  (3,038)            $  (3)         $  9,957
  Issuance of common stock - IPO         2,500           25            30,240                -                 -           30,265
  Issuance of common stock - other         995           10               698                -                 -              708
  Repurchase of common stock              (126)          (1)              (81)               -                 -             (82)
  Dividends paid - IGA                       -            -                 -            (233)                 -            (233)
  Compensatory stock & options               -            -             9,965                -                 -            9,965
  Exercise of stock options                485            5               133                                                 138
  Foreign currency translation              -             -                 -                -                21               21
  Net loss                                  -             -                 -          (1,890)                 -          (1,890)
                                     -----------------------------------------------   -------  -----------------------   -------
   Comprehensive income                                                                                                    (1,869)
                                                                                                                           -------
Balance, December 31, 1997               15,474          155            53,837          (5,161)                18           48,849
  Sale of common stock - Cap Gemini         471            5            11,828                -                 -           11,833
  Shares issued for acquisitions            297            3             4,120                -                 -            4,123
  Compensatory stock & options                -            -             2,595                -                 -            2,595
  Issuance of common stock - other          193            2               544                -                 -              546
  Purchase of common stock - dissenting
     shareholder                            (51)          (1)             (967)               -                 -            (968)
  Dividends paid - IGA                        -            -                 -            (333)                 -            (333)
  Exercise of stock options                  99            1               365                -                 -              366
  Foreign currency translation                -            -                 -                -             (112)            (112)
  Net income                                  -            -                 -            6,700                 -            6,700
                                    ---------------------------------------------------  ------  --------------------------  -----
    Comprehensive income                                                                                                     6,588
                                                                                                                           -------
Balance, December 31, 1998               16,483          165            72,322            1,206               (94)          73,599
  Shares issued for acquisitions          1,629           16            12,643                -                 -           12,659
  Stock repurchase plan                    (560)          (6)           (4,103)               -                 -          (4,109)
  Exercise of stock options                 359            4               134                -                 -              138
  Foreign currency translation                -            -                 -                -               (71)             (71)
  Net loss                                    -            -                 -           (9,924)                -           (9,924)
                                    --------------------------------------------------   -------  -----------------------   -------
    Comprehensive income                                                                                                    (9,995)
                                                                                                                            -------
Balance, December 31, 1999               17,911         $179           $80,996           $8,718            $(165)           $72,292
                                         ======         ====           =======           ======             =====           =======
See accompanying consolidated notes.
</TABLE>

<PAGE>

<TABLE>
                                                          HAGLER BAILLY, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                            (in thousands)

FS-30

                                                                                For the years ended December 31,
<S>                                                                          <C>                   <C>                  <C>
                                                                             1997                  1998                 1999
                                                                  ------------------------------------------------------------
Operating activities
Net (loss) income                                                          $(1,890)             $6,700             $(9,924)
Adjustments to reconcile net (loss) income  to net cash
   provided by (used in) operating activities
     Depreciation and amortization                                           2,908               4,320               5,772
     Provision for accounts receivable allowance                               972                  15               1,716
     Extraordinary gain                                                     (2,336)                  -                   -
     Gain on sale of government sector assets                                    -                (282)                  -
     Provision for deferred income taxes                                      (383)              1,530              (2,509)
     Stock and stock option compensation                                     9,965               2,595                   -
     Impairment of loan receivable                                               -               1,000                   -
     Minority interest                                                           -                 177                (169)
     Asset impairment                                                            -               1,107               4,591
     Loss on equity investment in joint venture                                  -                 463                 427
     Loss on liquidation of subsidiary                                         328                   -                   -
     Changes in operating assets and liabilities:
       Accounts receivable                                                 (17,115)             (9,401)             (2,837)
       Note Receivable                                                           -                   -                (193)
       Prepaid expenses                                                       (328)             (1,118)               (286)
       Deferred compensation                                                 1,050              (3,566)                  -
       Deferred rent and other deferred liabilities                             82                 182                 258
       Other current assets                                                 (1,411)              1,553                (240)
       Other assets                                                           (519)                470                (609)
       Accounts payable and accrued expenses                                 1,741                (106)              2,273
       Accrued compensation and benefits                                       670              (5,362)             10,174
       Income taxes payable                                                  1,908                 595              (8,409)
       Billings in excess of cost                                             (409)             (1,213)              3,306
                                                                  ------------------------------------------------------------

Net cash (used in) provided by operating activities                         (4,767)               (341)              3,341
                                                                  ------------------------------------------------------------
Investing activities
Proceeds from sale of government sector assets                                   -               2,855                   -
Sale of subsidiary                                                               -                   -                 (27)
Amount paid in connection with liquidation of subsidiary                     1,684                   -                   -
Purchase of minority interest in consulting business                          (531)                  -                   -
Investment in note receivable                                               (1,000)                  -                   -
(Purchase) sale of investments                                              (6,551)              6,551                   -
Purchase of acquired companies, net of cash received                             -              (3,336)               (697)
Expenditures for software development                                       (2,512)                  -                   -
Equity investment in joint venture                                               -                (500)               (709)
Acquisition of property and equipment                                       (3,209)             (3,988)             (4,098)
                                                                  ------------------------------------------------------------
Net cash (used in)  provided by investing activities                       (12,119)              1,582              (5,531)
                                                                  ------------------------------------------------------------
Financing activities
Sale of common stock                                                        31,111                 912                 138
Sale of common stock - Cap Gemini                                                -              11,833                   -
Repurchase of common stock                                                     (82)               (968)             (4,109)
Net payments on bank line of credit                                         (2,500)             (1,500)                  -
Dividends paid                                                                (233)               (333)                  -
Proceeds from long-term financing                                                -                   -                   -
Principal payments on long-term debt                                        (9,368)               (281)               (348)
                                                                  ------------------------------------------------------------
Net cash provided by (used in) financing activities                         18,928               9,663              (4,319)
                                                                  ------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                         2,042              10,904              (6,509)
Cash and cash equivalents, beginning of year                                 3,219               5,261              16,165
                                                                  ============================================================
Cash and cash equivalents, end of year                                      $5,261             $16,165              $9,656
                                                                  ============================================================
See accompanying consolidated notes.
</TABLE>
<PAGE>


                               HAGLER BAILLY, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (in thousands except share and per share data)


1.    Organization

         Hagler Bailly,  Inc.  ("Hagler Bailly" or the "Company") is a worldwide
provider of management  consulting and other advisory services to the commercial
and  government  sectors.  The Company  operates  in  principally  two  business
segments: Commercial Consulting and Government Consulting. Commercial Consulting
consists  primarily of providing  strategic advice and analysis to businesses in
developed    countries    on   issues    involving    energy,    transportation,
telecommunications,  the environment,  litigation and other matters.  Government
Consulting  consists  primarily of providing  advisory and technical services to
government sector clients worldwide in the energy and network industries (mainly
in water and transportation)  and the environment.  The Company is headquartered
in Arlington,  Virginia and has offices in the United States,  Asia, Europe, and
Latin America.

         On July 3, 1997, the Company  consummated an initial public offering of
2,500,000  shares at an offering price of $14 per share. The offering netted the
Company $30,300 used to pay off debt then outstanding,  fund  acquisitions,  and
provide working capital needs.

2.    Summary of Significant Accounting Policies

     Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.

         In 1997, the Company acquired a 7.8% minority  ownership  interest in a
consulting  business  in  the  United  Kingdom  for  cash  of  $531.  Due to the
uncertainty of recovery,  the Company established a valuation allowance for this
investment.  During  1998 and  1999,  the  Company  provided  services  to,  and
purchased  consulting  services from, this consulting business of $288 and $362,
$2 and $77, respectively. At December 31, 1998 and 1999, the accounts receivable
from this consulting business amounted to $543 and $617, respectively.



<PAGE>


Foreign Currency Translation

         The assets and liabilities of the Company's  foreign  subsidiaries  are
translated  into U.S.  dollars using  exchange rates at the balance sheet dates.
Income  and  expense  items are  translated  at average  exchange  rates for the
respective  periods.  The effect of translating these amounts at different rates
is included as a component  of  comprehensive  income in  shareholders'  equity.
Transaction  gains and losses are charged to  operations  in the period in which
they occur. Transaction (loss) gains in 1997, 1998, and 1999 amounted to ($373),
$420, and $7, respectively.

Use of Estimates

         The preparation of consolidated financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in the consolidated  financial
statements and  accompanying  notes,  in  particular,  estimates of revenues and
contract costs used in the earnings  recognition  process.  Actual results could
differ from those estimates.

Cash and Cash Equivalents

         Cash equivalents are short-term, highly liquid investments,  which have
an original maturity when acquired of three months or less. At December 31, 1998
and 1999,  respectively,  cash  equivalents  include  $6,810 and $3,040 in money
market funds.

Property and Equipment

      Property and equipment are recorded at original cost and depreciated using
a combination of  straight-line  and  accelerated  methods over their  estimated
useful lives of three to ten years.  Leasehold improvements are recorded at cost
and amortized  over the shorter of their useful lives or the term of the related
leases by use of the straight-line method.

Revenue Recognition

         Consulting  revenue  represents revenue generated by professional staff
of the Company,  and also  includes  subcontractor  revenue that is  principally
related to services provided by subcontractors and independent consultants which
are billed by the Company to its clients.  Other revenue  includes those derived
from information-based  products and services,  financial advisory services, and
publication services.

         Revenue from cost-plus  fixed-fee  contracts is recognized as costs are
incurred on the basis of direct costs plus  allowable  indirect  costs and a pro
rata portion of estimated fee.

         Revenue  from   fixed-bid   type   contracts  is   recognized   on  the
percentage-of-completion  method of accounting with costs and estimated  profits
included in revenue based on the relationship  that contract costs incurred bear
to management's  estimate of total contract costs.  Losses,  if any, are accrued
when they become known and the amount of the loss is reasonably determinable.

         Revenue from time and  materials  contracts is recognized in the period
the work is performed.  Estimated  losses,  if any, are provided for at the time
such losses become known.

         Revenue from  standard  daily rate  contracts is  recognized at amounts
represented  by the  agreed-upon  billing  amounts and costs are  recognized  as
incurred.  Estimated  losses,  if any,  are provided for at the time such losses
become known.

         Amounts  billed  or  received  in  excess  of  revenue   recognized  in
accordance  with the  Company's  revenue  recognition  policy are  classified as
billings in excess of cost in the accompanying balance sheets.

      Income Taxes

         The Company  provides for income taxes in accordance with the liability
method.  Under this method,  deferred tax assets and  liabilities are determined
based on temporary  differences  between  financial  and tax bases of assets and
liabilities  and are measured  using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

      Fair Value of Financial Instruments

         The Company  considers the recorded  value of its financial  assets and
liabilities,  which  consist  primarily of cash and cash  equivalents,  accounts
receivable,  accounts payable,  and accrued compensation to approximate the fair
value of the respective assets and liabilities at December 31, 1998 and 1999.

      Intangibles

         The purchase price of  acquisitions is allocated to the assets acquired
and the  liabilities  assumed based upon their fair values as of the acquisition
date. The excess of the purchase price over the fair value of assets acquired in
the  purchase is recorded  as  intangible  assets,  including  goodwill,  and is
amortized  over 5 to 20 years on a  straight-line  basis.  Intangible  assets at
December  31, 1998 and 1999 are net of  accumulated  amortization  of $2,441 and
$3,456,  respectively.  Amortization  expense for the years ended  December  31,
1997, 1998 and 1999, was $736, $688 and $1,550, respectively.



<PAGE>


Statement of Financial Accounting Standards No. 121


         The Company  assesses the  impairment  of long-lived  assets  including
intangible assets in accordance with Statement of Financial Accounting Standards
No. 121,  Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121"). SFAS 121 requires impairment losses to be
recognized for long-lived  assets when  indicators of impairment are present and
the  undiscounted  cash flows are not sufficient to recover the assets' carrying
amount.  Intangibles  are also  evaluated for  recoverability  by estimating the
projected  undiscounted cash flows,  excluding interest, of the related business
activities. The impairment loss of these assets, including goodwill, is measured
by comparing the carrying  amount of the asset to its fair value with any excess
of carrying  value over fair value  written  off.  Fair value is based on market
prices where  available,  an estimate of market value,  or determined by various
valuation techniques including discounted cash flow.

         Based on an evaluation of its intangible  assets and in connection with
the Company's regular forecasting processes,  the Company determined that $4,591
of goodwill associated with Estudio Q Ingenieros  Asociados S.R.L ("Estudio Q"),
PT Hagler  Bailly and  Fieldston  Publications,  Inc.  ("FPI") were  permanently
impaired.  The  write-offs  are  classified  as  asset  impairment  costs in the
consolidated statements of operations (see Note 18).

      Merger Related and other Nonrecurring Costs

         For the years ended  December 31, 1997,  1998 and 1999,  merger related
and  other  nonrecurring  costs  were  approximately  $1,235,  $8,275  and  $292
respectively.  Costs of effecting mergers accounted for as poolings of interests
and subsequently  integrating the operations of the various  companies merged in
either pooling or purchase transactions are recorded as merger related and other
nonrecurring costs when incurred. These costs consist primarily of direct merger
costs such as investment banking,  legal, accounting and filing fees, as well as
related  costs  incurred to realign  corporate,  administrative,  and  personnel
functions,  implement  efficiencies  with  regard  to  information  systems  and
offices,  change the corporate  identity for the acquired  companies,  and other
expenses incurred to integrate operations.









     Stock Repurchase Plan

         The Company is authorized to repurchase up to 1.5 million shares of the
Company's  common  stock  in  the  open  market  or in a  previously  negotiated
transaction. As of December 31, 1999, the Company had repurchased 559,700 shares
for approximately $4,100 in cash.

     Reclassification

         Certain  amounts in the prior period's  financial  statements have been
reclassified to conform to the 1999 presentation.

3.    Business Combinations and Joint Ventures

         On December 1, 1997, the Company exchanged 409,985 shares of its common
stock in exchange for all of the  outstanding  common  stock of Apogee  Research
Inc.  ("Apogee").  The business  combination  was  accounted for as a pooling of
interests.  Accordingly,  the  consolidated  financial  statements  include  the
accounts of the Company, its subsidiaries and Apogee for all periods presented.

         On January 28,  1998,  the Company  purchased  the  remaining  minority
interest of PT Hagler Bailly,  a consulting firm located in Jakarta,  Indonesia,
bringing the  Company's  ownership to 100 percent.  Total  consideration  of the
acquisition was $200 in cash. Accordingly, the consolidated financial statements
reflect  the  results  of  operations  of PT  Hagler  Bailly  since  the date of
acquisition.  As a result of the transaction, the Company recorded intangible
assets of approximately $200.

         On February 23, 1998,  the Company  issued 454,994 shares of its common
stock in exchange for all the stock of TB&A Group ("TB&A").  The transaction was
accounted for as a pooling of interests. Accordingly, the consolidated financial
statements  include the accounts of the Company,  its  subsidiaries and TB&A for
all  periods  presented.  TB&A had  revenue  and net  income of $2,491 and $534,
respectively, for the period from January 1, 1998, to the date of combination.

         On March  10,  1998,  the  Company  purchased  the  remaining  minority
interest of Hagler Bailly Indonesia,  Inc., and consolidated the subsidiary with
PT Hagler Bailly.  Total  consideration of the acquisition was $240 in cash. The
acquisition  was  accounted  for  as  a  purchase.  The  consolidated  financial
statements have reflected the results of operations of Hagler Bailly  Indonesia,
Inc.,  since its  inception.  As a result of the transaction, the Company
recorded intangible assets of approximately $240.

          On April 30, 1998, the Company completed the acquisition of Estudio Q,
an Argentinean company,  whereby Estudio Q became a wholly-owned subsidiary
of the Company.  Total  consideration for the acquisition was approximately
$2,400 in the form of $800 cash and an aggregate of 64,306 shares of Hagler
Bailly common stock.  The  acquisition was accounted for using the purchase
method.  Accordingly,  the consolidated  financial  statements  reflect the
results of operations of Estudio Q since the date of acquisition.  As a result
of the transaction, the Company recorded intangible assets of approximately
$2,700.

         On June 16, 1998,  the Company and Cap Gemini S.A. and its wholly owned
subsidiary, Cap Gemini America, Inc., entered into an exclusive joint venture to
deliver  information  technology  consulting services and solutions to electric,
gas and water  utilities,  and service  providers  in the U.S.  and Canada.  The
Company has fulfilled  it's  commitment  to provide  $1,000 cash under the joint
venture  agreements of which  approximately  $500 cash and approximately $200 in
software development costs were provided during the year ended December 31, 1998
and another $710 in cash was provided  during the year ended  December 31, 1999.
The  Company   accounts  for  its  investment   under  the  equity  method  and,
accordingly,  recognized a loss on equity  investment of $427 for the year ended
December 31, 1999.

         On June 30, 1998, the Company issued 183,550 shares of its common stock
in  exchange  for all of the stock of Izsak,  Grapin et  Associes  ("IGA").  The
transaction  was  accounted  for as a pooling  of  interests.  Accordingly,  the
consolidated  financial  statements  include the  accounts of the  Company,  its
subsidiaries and IGA for all periods  presented.  IGA had revenue and net income
of $2,342 and $333,  respectively,  for the period from January 1, 1998,  to the
date of  combination.  On December  31, 1999 the Company  sold IGA to its former
owners (see Note 15.)

         On August 28, 1998, the Company issued  6,548,953  shares of its common
stock  in  exchange  for all of the  stock of  Putnam,  Hayes &  Bartlett,  Inc.
("PHB").   The  transaction  was  accounted  for  as  a  pooling  of  interests.
Accordingly,  the consolidated  financial statements include the accounts of the
Company, its subsidiaries and PHB for all periods presented. PHB had revenue and
net income of $44,903 and $1,869,  respectively,  for the period from January 1,
1998, to the date of combination.

         On November 17, 1998, the Company  completed the acquisition of certain
of the assets and the  liabilities  of TFC and the stock of FPI,  which became a
wholly-owned  subsidiary of the Company.  Total consideration of the acquisition
was approximately  $1,300 in cash, 232,558 shares of Hagler Bailly common stock,
and a note payable of $1,000.  The  acquisition was accounted for as a purchase.
Accordingly,  the  consolidated  financial  statements  reflect  the  results of
operations of TFC since the date of acquisition.  As a result of the transaction
the Company recorded intangible assets of approximately $5,215.

         On February 8, 1999, the Company acquired all of the outstanding  stock
of Lacuna  Consulting  Limited  ("Lacuna"),  a United  Kingdom  corporation,  in
exchange for 65,000 shares of the Company's  common stock.  The  acquisition was
accounted for as a purchase.  Accordingly, the consolidated financial statements
reflect the results of operations of Lacuna since the date of acquisition.  As a
result of the transaction, the Company recorded intangible assets of
approximately $1,402.

         On April 30, 1999, the Company acquired all of the outstanding stock of
Washington  International Energy Group, Ltd. ("WIEG"), a Washington,  D.C.-based
worldwide  provider  of energy  and  environmental  policy  consulting  research
services,  in exchange  for 144,210  shares of the  Company's  common  stock and
approximately $850 in cash. The Company has the right to repurchase up to 26,210
of these  shares at $ .01 cents  per share if the price of the  Company's  stock
meets  certain  price  targets  during  the  three  year  period  following  the
acquisition.  The transaction was accounted for as a purchase.  Accordingly, the
consolidated  financial  statements  reflect the results of  operations  of WIEG
since  the date of  acquisition.  As a result of the transaction, the Company
recorded intangible assets of approximately $1,574.

     On June 1,  1999,  the  Company  received  the remaining  minority interest
of its joint venture,  Hagler Bailly Risk Advisors, LLC, a limited  liability
company  located in Houston,  Texas,  from  Objective Resources Group Ris
Advisors, LLC bringing the Company's ownership to 100%.

         On August 12, 1999, the Company  acquired all of the outstanding  stock
of GKMG, Inc. ("GMKG"), a Washington, D.C.-based consulting firm specializing in
the economic,  strategic,  financial,  and  regulatory  analysis of the aviation
industry,  in exchange for 1,420,000 shares of the Company's common stock. Under
the terms of the Share  Exchange  Agreement by and among the  Company,  GKMG and
former shareholders of GKMG, the Company is obligated to issue additional shares
of its common stock to the former  shareholders of GKMG with a fair market value
(as  defined  in the Share  Exchange  Agreement)  up to $15  million  if certain
earnings targets for GKMG are met for the periods July 1, 1999-June 30, 2000 and
July 1, 2000-June 30, 2001. In addition, the Company is obligated to issue up to
192,857 additional shares of its common stock to the former shareholders of GKMG
if certain stock price  performance  contingencies  are not met. The transaction
was  accounted  for  as a  purchase.  Accordingly,  the  consolidated  financial
statements  reflect  the  results  of  operations  of  GKMG  since  the  date of
acquisition.  As a result of the transaction, the Company recorded intangible
assets of approximately $11,042.



<PAGE>


          Pro forma unaudited  operating  information  reflecting the results of
     business combinations accounted for as purchases as if these companies were
     acquired on the first date of the respective periods were as follows:


<TABLE>
                                 Hagler Bailly               Estudio
                                      (1)        Fieldston      Q        WIEG          GKMG        Lacuna     Adj.(2)   Consolidated
                                 --------------- ----------- --------- ----------- ----------- ------------ ---------- -------------
<S>                              <C>             <C>          <C>       <C>        <C>           <C>       <C>            <C>
Year ended December 31, 1997
  Revenues                         $160,615        $ 4,352     $1,685   $ 2 ,487    $8,978        $   -      $   -         $ 178,117

  Net (loss) income                 (1,890)            451        310       (35)       258            -       (1,067)        (1,973)
  Dilutive   weighted   average
shares                               13,361                                                                                   15,261
  Dilutive earnings per share        (0.14)                                                                                   (0.13)


Year ended December 31, 1998
  Revenues                         $174,588        $ 5,562     $2,707    $ 1,682    $9,964       $1,027        $   -        $195,530
  Net income (loss)                   6,560          1,153        240       (89)        121         148         (984)          7,149
  Dilutive   weighted   average
shares                               16,690                                                                                   18,590
  Dilutive earnings per share          0.39                                                                                     0.38


Year ended December 31, 1999
  Revenues                         $172,744      -               $  -     $2,366   $11,412       $2,318      $   -          $188,840
  Net (loss) income                (10,195)                                  529        771       (472)        (773)        (10,140)
  Dilutive   weighted   average
shares                               16,367                                                                                   17,970
  Dilutive earnings per share        (0.62)                                                                                   (0.56)

(1)  Hagler Bailly  balance  excludes  1997,  1998 and 1999 results of purchased
     companies.
(2)   Amortization of estimated goodwill.
</TABLE>




<PAGE>
4.

Earnings Per Share

     In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings  per Share"  ("Statement  No.  128").  Statement  No. 128 replaced the
calculation  of  primary  and fully  diluted  earnings  per share with basic and
diluted earnings per share.  Unlike primary  earnings per share,  basic earnings
per share  excludes any dilutive  effects of options,  warrants and  convertible
securities.  Diluted  earnings  per  share  is very  similar  to the  previously
reported  fully diluted  earnings per share.  All earnings per share amounts for
all periods have been presented,  and where appropriate,  restated to conform to
the Statement No. 128 requirements.

         The  following  table sets forth the  computation  of basic and diluted
earnings per share:
<TABLE>
                                                                  For the years ended December 31,
<S>                                                          <C>               <C>                <C>
                                                             1997              1998               1999
                                                        ---------------- -----------------  -----------------
      Net (loss) income before extraordinary gain          $  (4,226)           $   6,700          $ (9,924)
      Extraordinary gain                                        2,336                   -                  -


                                                        ---------------- -----------------  -----------------
      Net (loss) income                                    $  (1,890)            $  6,700          $ (9,924)
                                                        ================ =================  =================
     Weighted average shares of common stock
        outstanding during the period                        13,361,000        15,992,000         17,059,000

      Effect of dilutive securities:
        Stock options                                                 -           780,000                  -
                                                        ---------------- -----------------  -----------------

      Weighted average shares of common
        stock and dilutive securities                        13,361,000        16,772,000         17,059,000
                                                        ================ =================  =================

      Basic earnings per share
        Net (loss) income before extraordinary gain          $  (0.32)           $   0.42          $  (0.58)
        Extraordinary gain                                   $   0.17            $     -           $     -
        Net (loss) income                                    $  (0.14)           $   0.42          $  (0.58)

      Dilutive earnings per share
        Net (loss) income before extraordinary gain          $  (0.32)           $   0.40          $  (0.58)
        Extraordinary gain                                   $   0.17            $     -           $     -
        Net (loss) income                                    $  (0.14)           $   0.40          $  (0.58)


</TABLE>

<PAGE>

5.
Accounts Receivable

         As of December 31 the components of accounts receivable are:
<TABLE>
<S>                                                                             <C>                   <C>
                                                                                1998                  1999
                                                                    ------------------------------------------
         Billed amounts                                                      $38,914                $42,010
         Unbilled amounts currently billable                                  23,305                 25,604
         Retention not currently billable and other                              761                  1,024
         Allowance for possible losses                                        (3,888)                (5,604)
                                                                    ------------------------------------------
         Total                                                               $59,092                $63,034
                                                                    ==========================================

         The  activity  in the  allowance  for  possible  losses for years ended
December 31 is as follows:

                                                                                 1998                  1999
                                                                    ------------------------------------------
         Balance at beginning of year                                        $3,873                 $3,888
         Provision for losses charged to expense                              1,135                  6,520
         Charge-offs, net of recoveries                                      (1,120)                (4,804)
                                                                    ------------------------------------------
         Balance at end of year                                              $3,888                 $5,604
                                                                    ==========================================

</TABLE>
         All billed and unbilled receivable amounts are expected to be collected
during the next fiscal year.

6.    Property and Equipment
<TABLE>
         Components of property and equipment at December 31 are as follows:

<S>                                                                          <C>                 <C>
                                                                             1998                1999
                                                                       --------------------------------------
        Office equipment and furniture                                       $17,100             $17,544
        Leasehold improvements                                                 3,189               4,702
                                                                       --------------------------------------
                                                                              20,289              22,246
        Accumulated depreciation and amortization                            (13,826)            (13,975)
                                                                       --------------------------------------
                                                                              $6,463              $8,271
                                                                       ======================================

</TABLE>
         Depreciation and amortization expense on property and equipment for the
years ended December 31, 1997, 1998 and 1999, was approximately  $2,123,  $3,121
and $3,688  respectively.  Costs of repairs  and  maintenance  of  property  and
equipment are charged to expense as incurred.

7.

<PAGE>


Software Development Costs

         At   December   31,  1998  and  1999  the  Company  had  $898  and  $0,
respectively,  of capitalized software  development costs.  Amortization expense
for the years ended December 31, 1997, 1998 and 1999 was approximately $49, $511
and $898,  respectively.  The Company  accounts for these  development  costs in
accordance with FASB 86,  "Accounting  for the Costs of Computer  Software to Be
Sold, Leased, or Otherwise Marketed."

         Capitalized  software  development  costs are amortized on a product by
product  basis  starting  when the product is available  for general  release to
customers.  Amortization is calculated using the  straight-line  method over the
remaining  estimated  economic  life of the  product.  The Company  periodically
evaluates the net realizable value of all unamortized  capitalized costs. During
1998,  management  determined that certain software development costs were fully
impaired due to the  duplication  of  technologies  resulting from the Company's
1998 mergers and the Cap Gemini Hagler Bailly L.L.C. joint venture.  As a result
of these  impairments,  the  Company  expensed  approximately  $1,107  which are
classified as asset impairment costs on the statement of operations.


8.     Notes Receivable

         During 1997, the Company loaned $1,000 to another company in accordance
with a  bridge  loan  agreement.  The  loan  was due in six  equal  installments
beginning June 1, 1998. The loan accrued  interest at 15% and was secured by all
of the  assets of the  borrower.  The loan  agreement  allowed  the  Company  to
purchase an ownership interest of this company as defined in the loan agreement.
During 1998, the borrower defaulted on its obligation under the note and at that
time  management  determined that the loan was  uncollectable  and wrote off the
entire amount of the original loan as other nonrecurring costs.

         On December 31, 1999, the Company sold its IGA  subsidiary  back to its
former  owners for $550  payable in three equal  annual  installments  beginning
January 1,  2001.The  note bears no interest and is secured by 99,516  shares of
the Company's stock owned by two former shareholders ofIGA.


9.    Bank Line of Credit

         On  November  20,  1998,  the  Company  entered  into a line of  credit
arrangement  with a bank enabling the Company to borrow up to $50,000 subject to
certain restrictions.  The Company paid all outstanding balances on its previous
lines of credit,  which were terminated upon  commencement of the new agreement.
Under the terms of the new agreement,  interest is payable at the greater of the
bank's  base  rate  or the  Federal  Funds  effective  rate  plus  0.5%,  or the
applicable  London   Inter-Bank   Offered  Rate  ("LIBOR")  plus  an  additional
percentage ranging from 0.8% to 1.75% depending on certain financial ratios. The
agreement also requires a commitment fee of 0.19% plus an additional  percentage
ranging from 0.01% to 0.06% depending on certain financial ratios,  based on the
average  daily  amount of the  unborrowed  portion  of the  commitment,  payable
quarterly in arrears.  The line of credit  matures on November  20, 2001.  As of
December 31, 1999, the Company had $0.8 million in letters of credit outstanding
and no  borrowings  outstanding  under the  facilities.  Based on the  financial
formulas  mentioned  above,  the  available  balance under the line of credit at
December 31, 1999 was $12.2 million. As of December 31, 1999, the Company was in
non-compliance with certain covenants that were subsequently waived by the bank.


10.    Notes Payable

         The Company has a note payable, related to an acquisition of certain of
the assets and liabilities of TFC. Principal balances under the note were $1,000
and $666 as of  December  31,  1998 and  1999,  respectively.  The note  accrues
interest at LIBOR rate plus 1.5%.

         For the year ended December 31, 1997, the Company settled several notes
payable with favorable terms to the Company, resulting in extraordinary gains of
approximately $2,336.


11.   Income Taxes

         Prior to the IPO of the Company's  common stock in 1997 the Company had
historically filed its consolidated federal income tax return on the cash basis,
whereby for tax purposes, revenue was recognized when received and expenses were
recognized when paid. In addition, prior to its merger with the Company, PHB had
also filed its consolidated  federal income tax return on the cash basis.  Under
this basis,  the timing of certain  transactions,  primarily the  collections of
accounts  receivable and the payments of accounts  payable and accrued  expenses
were  applied  to  different  periods  for  financial  statement  and income tax
reporting  purposes.  Deferred  federal and state income taxes were provided for
these  temporary  differences.  Upon  consummation  of the IPO of the  Company's
Common  Stock  during  1997,  the Company was  required to change to the accrual
method for income tax reporting.



<PAGE>


         Components of income tax expense (benefit) consisted of the following:
<TABLE>
                                                                      For the years ended December 31,

 <S>                                                              <C>                <C>               <C>
                                                                 1997               1998              1999
                                                             ----------------    -------------    ----------------
     Current:
       Federal                                                        $4,483        $4,113              $(157)


       State                                                           1,098           726                 213
       Foreign                                                           215           879               1,241
                                                            ----------------    -------------    ----------------
                                                                       5,796         5,718               1,297

      Deferred                                                         (336)         1,557             (2,509)
                                                            ----------------    -------------    ----------------

     Income tax expense (benefit)                                     $5,460        $7,275            $(1,212)
                                                            ================    =============    ================

</TABLE>
         The Company  paid income  taxes of $3,117,  $4,995,  and $5,820  during
1997, 1998 and 1999, respectively.

         Income tax expense  varies  from the amount  computed  using  statutory
rates as follows:
<TABLE>
                                                                   For the years ended December 31,

<S>                                                         <C>                <C>                 <C>
                                                            1997               1998                1999
                                                        --------------    ----------------    ----------------

   Tax computed at the Federal statutory rate                     $428            $4,909             $(3,783)
   State income taxes, net of Federal income tax
       benefit                                                      35               722                (276)
   Non-deductible charge for stock option
        compensation                                             4,000             1,012                   -

   Other allowances                                                754                 -                   -
   Non-deductible charge for goodwill
         amortization/asset impairment                               -                 -               1,795
   Losses recorded on the equity method                              -                 -                 231
   Foreign tax credit                                                -                 -                (192)
   Foreign tax in excess of U.S. statutory rate                      -                 -                 539
   Non-deductible charge for merger related costs                    -               876                  62
   Other                                                           243              (244)                412
                                                        --------------    ----------------    ----------------

   Income tax expense                                         $5,460              $7,275             $(1,212)
                                                        ==============    ================    ================

</TABLE>
<PAGE>


         The components of temporary differences are as follows:
<TABLE>
                                                                                 December 31,
<S>                                                                       <C>                  <C>
                                                                          1998                 1999
                                                                     -----------------    ------------------
      Current deferred tax (liabilities) assets:
         Accounts receivable                                              $(2,116)             $(1,559)
         Bad debt                                                               -                1,860
         Accrued vacation                                                       -                1,229
         Other                                                                216                  171
                                                                    -----------------    ------------------
      Total current deferred tax (liabilities) assets                      (1,900)               1,701
      Non-current deferred tax assets:
         Merger related costs                                                 448                  206
         Provisions for losses                                                954                    -
         Accrued compensation and benefits                                  1,427                    -
         Deferred compensation                                              1,237                  727
         Stock options                                                          -                 (359)
         Deferred rent                                                        454                  498
         Property, equipment and leasehold improvements                       555                  935
         Net operating loss carryforwards                                      20                    -
         Cash to accrual adjustment                                        (5,941)              (4,004)
         Other                                                                (81)                (386)
                                                                    -----------------    ------------------
      Total non-current deferred tax liabilities                             (927)              (2,383)
                                                                    -----------------    ------------------
      Net deferred tax liabilities                                     $   (2,827)            $   (682)
                                                                    =================    ==================
</TABLE>

12.   Stockholders' Equity

         The  issuance  and  repurchase  of common  stock  for the  years  ended
December  31,  1997 and 1998 is  primarily  the  result of  equity  transactions
entered into by PHB and TB&A.  These  transactions  were made under  established
company  plans  and in a  manner  consistent  with  historic  patterns  of stock
issuance or repurchase.

         In  connection  with  the  merger  with  the  Company,  PHB  recognized
non-cash,  non-tax deductible  compensation charges for the years ended December
31, 1997 and 1998, of $9,885 and $2,595, respectively. These amounts reflect the
difference  between the fair value and the book value of shares of common  stock
issuable within one year of the merger's close.

         Options granted after 1996 vest over periods  ranging from  immediately
to four  years.  The  majority of grants  vest in equal  installments  over four
years, commencing one year from date of grant. All such options expire ten years
from  date of  grant.  Options  issued  prior to 1996  generally  vest 50% after
eighteen  months and fully  after an  additional  year.  The  majority  of these
options also expire ten years from date of grant.

         In August of 1998, the Company's  shareholders approved an amendment to
the Stock Option Plan that  increased the total number of shares of common stock
reserved  for  issuance  from  3,200,000  to  5,000,000.  At  December  31, 1999
1,035,058 shares of common stock were available for grant under the Stock Option
Plan.

         The Company  accounts for stock options  issued to employees  under APB
25, while provided  supplemental  pro-forma disclosure under SFAS 123. Pro forma
information  regarding net income (loss) and per share data required by SFAS No.
123, has been  determined  as if the Company had accounted for its stock options
under the fair value method therein. The fair value for options granted from May
25,  1997 to July 9,  1997 was  estimated  at the date of grant  using a minimal
valuation  method with the  following  weighted-average  assumptions:  risk free
interest rate of 5.25%,  no expected  dividends and an average  expected life of
the options of four years.

         For  options  issued  from  July  9,  1997 to  December  31,  1999,  in
accordance  with SFAS 123,  the fair  value was  estimated  at the date of grant
using a Black-Scholes  option pricing model with the following  weighted-average
assumptions for 1997 and 1998: risk-free interest rate of 5.25%; no dividends; a
volatility  factor of the expected market price of the Company's common stock of
 .40 and a  weighted-average  expected life of the options of approximately  five
years in 1997 and four years in 1998.  Options  issued  from  January 1, 1999 to
December  31, 1999 were  valued  using a risk-free  interest  rate of 6.44%;  no
dividends;  a stock  price  volatility  factor  of .848  and a  weighted-average
expected life of the options of four years.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating  the fair value of traded  options that have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.


         For purposes of the pro forma  disclosure,  the estimated fair value of
the options is amortized to expense over the options' vesting period.

         The Company's pro forma information follows:
<TABLE>
                                                               For the years ended December 31,
<S>                                                 <C>                      <C>                      <C>
                                                    1997                     1998                     1999
                                            ---------------------    ---------------------    ---------------------
      Net (loss) income                            $  (1,890)                 $ 6,700                $ (9,924)
      FAS 123 expense, net of tax                        217                    1,045                    5,974
                                            ---------------------    ---------------------    ---------------------
      Pro forma net (loss) income                  $ (2,107)                  $ 5,655               $ (15,898)
                                            =====================    =====================    =====================
      Pro forma (loss) earnings per share:
             Basic                                 $  (0.16)                  $  0.35                 $ (0.93)
             Diluted                               $  (0.16)                  $  0.34                 $ (0.93)
The following summarizes option activity:

                                                                                Weighted Average
                                                               Options          Exercise Price
                                                            ---------------    --------------------

    Outstanding at December 31, 1996                             936,943                   $0.22

    1997
    Granted                                                      677,135                    8.34
    Exercised                                                   (484,701)                   0.20
    Canceled                                                     (15,000)                  10.00
                                                            ---------------
    Outstanding at December 31, 1997                           1,114,377                    5.21

    1998
    Granted                                                    1,149,760                   20.32
    Exercised                                                    (99,380)                   3.49
    Canceled                                                    (126,046)                  12.60
                                                            ---------------
    Outstanding at December 31, 1998                           2,038,711                   13.44

    1999
    Granted                                                    1,686,202                    9.24
    Exercised                                                   (374,420)                   0.35
    Canceled                                                    (370,718)                  12.88
                                                            ---------------
    Outstanding at December 31, 1999                           2,979,775                   12.80
                                                            ===============

    Exercisable at December 31, 1999                             975,817                  $11.62
                                                            ===============
</TABLE>


     The grant date  weighted  average  fair  value of options  granted in 1997,
1998, and 1999 was $1.98, $20.32 and $6.02, respectively.

         At December 31,  1999,  the price range of options  outstanding  are as
follows:
<TABLE>
                                                                                 Weighted
                                                                                 Average
                                                            Options              Exercise
                                                          Outstanding           Price Per          Average Remaining
                                                                                  Share            Contractual Life
                                                       ------------------- -- --------------- -- --------------------
<S>                                                       <C>                    <C>               <C>
     $1.00 - $9.99                                            1,559,123              $6.61             8.54
     $10.00 - $19.99                                            651,378              16.74             8.81
     $20.00 - $29.99                                            760,274              21.93             8.45
     $30.00 & Over                                                9,000              30.00             8.37
                                                       -------------------
        Total                                                 2,979,775              12.80             8.57
                                                       ===================


</TABLE>

<PAGE>




13.   Operating Leases

         The Company  leases office space and equipment  located  throughout the
United States and worldwide.  Substantially  all office space leases provide for
the  Company to pay a pro rata  share of annual  increases  above a stated  base
amount of the  landlords'  related  real estate  taxes and  operating  expenses.
Management expects that in the normal course of business,  operating leases will
be renewed or replaced by other operating leases.

         The  following  is a schedule  of the annual  minimum  rental  payments
required   under  the   operating   leases  that  have   initial  or   remaining
non-cancellable lease terms in excess of one year as of December 31, 1999:

            Years ended December 31,
                       2000                                         $   9,998
                       2001                                             9,488
                       2002                                             6,605
                       2003                                             5,779
                       2004                                             5,758
                Thereafter                                             19,243
                                                             -----------------
                Total minimum rental payments                       $   56,871
                                                             =================
     Total rental expense for the years ended December 31, 1997,  1998 and 1999,
was approximately, $7,468, $8,451 and $9,885 respectively.


14.   Retirement Plan

           The Company maintains tax-deferred savings plans under Section 401(k)
of the  Internal  Revenue Code to provide  retirement  benefits for all eligible
employees  (the  "Plan").  The  Plan  was  amended  in 1999 to  consolidate  the
retirement plans of the  subsidiaries  which the Company merged with or acquired
over the past two years.  Employees may  voluntarily  contribute a percentage of
their  annual  compensation  to the Plan,  subject to Internal  Revenue  Service
limitations.   The  Company  may,  but  has  no  obligation  to,  make  matching
contributions.  In addition,  the Company may, but has no obligation  to, make a
discretionary   contribution  to  the  Plan.  Discretionary   contributions  are
allocated to  participants'  accounts in  proportion to their  compensation  and
employment  classification.   Rights  to  benefits  provided  by  the  Company's
discretionary  contributions  vest as  follows:  20% after two years,  40% after
three years, 60% after four years, 80% after five years and 100% after six years
of service. Participants are fully vested in their voluntary contributions.

     The  Company's  expenses  related to its  discretionary  matching and other
contributions under all plans for 1997, 1998 and 1999 were approximately $2,628,
$925 and $3,289, respectively.

15.   Divestitures / Sale of Assets

           On September 30, 1998,  the Company sold certain  assets of a portion
of its  government  sector  consulting  practice  due to  conflicts  of interest
resulting  from  the  Company's  business  combinations.  As  a  result  of  the
transaction,  the Company sold assets for  approximately  $2,855  resulting in a
gain of approximately $282 which was included in other income.

         In December 1998, the Company made the decision to cease  operations in
its  financial  advisory  services  business,  HB Capital,  Inc.,  resulting  in
expenses of approximately  $1.8 million.  In December 1999, the Company sold the
assets  of HB  Securities,  a  wholly  owned  subsidiary  of HB  Capital,  Inc.,
resulting in a gain of approximately $26, which was included in other income.

On December 31, 1999,  the Company  sold the assets of  wholly-owned  subsidiary
IGA.  The  Company   disposed  of  this  subsidiary  due  to  its  inability  to
successfully  integrate  IGA's  operations  into the  Company's  other  European
operations.  As a  result  of the  transaction,  the  Company  sold  assets  for
approximately $0.6 million,  resulting in a loss of approximately  $68,000. As a
result of this  transaction the Company received a $550,000 note receivable from
the buyers of IGA. The note bears no interest and is secured by 99,516 shares of
the Company's common stock owned by IGA. 16. Commitments and Contingencies

Cost Subject to Audit

         Under its United States government contracts, the Company is subject to
audit by the  Defense  Contract  Audit  Agency,  whose  audits  could  result in
adjustments of amounts previously billed.  Management  believes that the results
of such future audits will not have a material  adverse  effect on the Company's
financial position or results of operations.

Financial Instruments and Risk Management

         The Company  operates  around the world  principally  in United  States
currency.  The Company may reduce any  periodic  exposures  to  fluctuations  in
foreign exchange rates by creating  offsetting  ("hedge")  positions through the
use of derivative  financial  instruments.  The Company  currently  does not use
derivative financial instruments for trading or speculative purposes, nor is the
Company a party to leverage  derivatives.  The Company  regularly  monitors  any
foreign currency exposures and ensures that hedge contract amounts do not exceed
the amounts of the underlying exposures. The Company had no open hedge positions
at December 31, 1998 or 1999.

         Financial   instruments  that   potentially   subject  the  Company  to
significant  concentrations of credit risk consist  principally of cash and cash
equivalents and trade accounts receivable.

         The Company  maintains cash and cash equivalents with various financial
institutions.  These  financial  institutions  are  located  in  many  different
countries  throughout the world,  and the Company's  policy is designed to limit
exposure with any one institution.  As part of its cash management process,  the
Company performs  periodic  evaluations of the relative credit standing of these
financial institutions.

         At December 31, 1998 and 1999, cash of  approximately  $4,087 and $633,
respectively, was located in foreign bank accounts.

Major Customers


         At December  31, 1998 and 1999,  included  in accounts  receivable  was
$13,855  and  $10,203,  respectively,  due from  agencies  of the United  States
government.  Credit risk with respect to the remaining trade accounts receivable
is  generally  diversified  due to the large number of entities  comprising  the
Company's  customer base and their dispersion  across  different  industries and
countries.
The Company  performs  ongoing  credit  evaluations  of its customers  financial
condition.

         The Company generates revenues from contracts with government  agencies
and private companies within the United States and worldwide.  During 1997, 1998
and 1999, the Company  recognized  approximately  $32,000,  $39,000 and $32,000,
respectively,  of its revenue from the United  States  Agency for  International
Development  ("USAID"),  a U.S. government agency.  Revenues earned from foreign
customers, both commercial and governmental, were approximately $14,000, $19,000
and $26,000 for the years ended December 31 1997, 1998 and 1999, respectively.

Commitments

         Certain  officers and  directors of the Company have  agreements  which
provide for severance and other benefits upon the occurrence of certain  events,
including termination upon change of control, as defined in the agreements.

         On September 27, 1999, the Company retained Bank of America  Securities
LLC to assist in exploring  strategic  and  financial  alternatives  to maximize
shareholder value, including the potential sale or merger of the Company.  The
sale or merger of the Company could potentially lead to the payment of benefits
under the agreements as discussed above.



17.

<PAGE>


Merger Related and Other Nonrecurring Costs

         Merger related and other nonrecurring costs were recorded in connection
with the  business  combinations  during  1997,  1998 and  1999.  The  following
represents a detail of merger related and other nonrecurring costs:

<TABLE>

                                                                          For the years ended December 31,
<S>                                                                     <C>               <C>             <C>
                                                                        1997              1998            1999

Merger related costs                                                      $ 1,235         $ 6,495          $ 292

Impairment of investments and related infrastructure
related to termination of financial advisory services
operations                                                                      -           1,780              -
                                                                 ------------------- --------------- ----------------

Total                                                                     $ 1,235         $ 8,275          $ 292
                                                                 =================== =============== ================
</TABLE>

        Merger  related  costs  consist   primarily  of  direct  costs  such  as
investment banking, legal, accounting,  and filing fees related to the Company's
mergers accounted for as poolings of interests,  as well as consolidation  costs
from the closing of  duplicate  locations,  realigning  regional  and  corporate
functions,  and reducing  personnel  related to mergers  accounted for as either
poolings or  purchases.  At December 31,  1998,  the  accompanying  consolidated
balance sheet  included  accrued  merger  related  costs of $546,  classified as
accrued expenses,  consisting of involuntary  employee termination costs of $171
and facility related expenses of $375.

        During the fourth quarter of 1998,  management  determined  that certain
investments  held by the Company and the related  infrastructure  which  managed
such investments,  were impaired due to events related to the Company's mergers.
Accordingly,  management  decided to cease operations of its financial  advisory
services  operations and determined that certain investments were fully impaired
and  recognized a loss of $1,780,  which included the write off of a $1,000 note
receivable.  At December  31, 1998,  the balance  sheet  included  $616 of these
impairment costs classified as accrued expenses, consisting of legal expenses of
$140,  involuntary  employee  termination  costs of $170, lease  termination and
other facility costs of $200,  and other general  accrued  expenses of $106. The
Company had no accrued merger or merger related costs at December 31, 1999.



<PAGE>




18.   Asset Impairment

         The Company  assesses the  impairment  of long-lived  assets  including
intangible assets in accordance with Statement of Financial Accounting Standards
No. 121.

         During 1998 management  evaluated  certain software  development  costs
under  FAS 121  and  determined  that  these  assets  were  impaired  due to the
duplication of technologies  resulting from the Company's business  combinations
and its joint venture with Cap Gemini. Management determined that as a result of
these  transactions  certain  capitalized  software  balances would not generate
future cash flows.  Consequently,  management  determined  that the value of the
related  assets had been  impaired as the software  would not be utilized by the
Company and has  recorded a write off of  approximately  $1,107,  classified  as
asset impairment costs on the statement of operations.

         During  1999   management   evaluated  the  net  realizable   value  of
intangibles  related to certain 1998 acquisitions.  Impairment  evaluations were
performed  due  to the  poor  performance  of  these  entities  as  compared  to
management's  original expectations and the possibility of future disposition of
these  subsidiaries.  As a  result  of this  analysis,  the  Company  wrote  off
approximately  $4,591 of goodwill which  represented  the excess of the carrying
value of these assets as compared to the  projected  cash flows of the assets as
determined in accordance with SFAS 121.

19.    Repositioning plan

         In December 1999, the Board of Directors approved  management's plan to
undertake a repositioning  of the firm to focus on its core consulting  business
and market position in order to maximize future shareholder value.

         The  primary  component  of  the  Company's  repositioning  plan  is  a
supplemental  bonus which consists of $10,868 of additional  incentives  paid to
the  Company's  key staff.  In 1999 the  consulting  business  experienced  high
turnover.  The  Company's  management  believes the  additional  incentives  are
essential to retain and motivate staff.  At December 31, 1999, the  accompanying
consolidated  balance  sheet  includes  $7,310 of accrued  bonus,  classified as
accrued compensation.

         In addition,  as part of the Company's  repositioning plan,  management
has and continues to evaluate strategic  opportunities for the Company (see Note
16) including the possible disposition of non-performing  subsidiaries (see Note
18.)

20.   Segment Information

         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  ("FAS  131").  FAS 131  supercedes  FAS 14
Financial  Reporting  for  Segments  of a  Business  Enterprise,  replacing  the
industry  segment  approach  with  the  management   approach,   which  requires
segmentation based upon the Company's internal organizational  structure that is
used by management for making operating  decisions and assessing  performance as
the source of the Company's reportable segments.

         The Company  began  organizing,  reporting and managing its business as
two segments in 1999.  Accordingly,  the Company adopted FAS 131 in 1999 and all
prior  periods  have been  presented  to  conform  to the  requirements  of this
statement.  The segments, which are based on differences in its client base, are
Commercial Consulting and Government Consulting.  Commercial Consulting consists
primarily of providing  strategic advice and analysis to businesses in developed
countries on issues involving energy,  transportation,  telecommunications,  the
environment,  litigation  and  other  matters.  Government  Consulting  consists
primarily of providing  advisory and  technical  services to  government  sector
clients  worldwide  in the energy and  network  industries  (mainly in water and
transportation) and the environment.

         The Company has  subsidiaries  in 11 countries  outside  North  America
which,  in aggregate,  represent 12.7% of the Company's  consolidated  revenues.
There is no single foreign  country that exceeds 10% of  consolidated  revenues.
USAID revenues represent 56% of the Government  Consulting segments consolidated
revenues  and 17.5% of the  Company's  consolidated  revenues.  The loss of this
client could have a material adverse effect on the Company's business, financial
condition and results of operations.



<PAGE>


         The following table presents  revenue and income (loss) from operations
data by segment:
<TABLE>
                                                           For the years ended December 31,
<S>                                               <C>                    <C>                   <C>
                                                  1997                   1998                  1999
             Segment Information
    -------------------------------------- -------------------- -- ----------------- -- --------------------
    Revenues
        Commercial consulting                         $102,097             $115,772                $123,798
        Government consulting                           56,766               59,638                  56,750
        Other                                            1,752                2,052                   1,433
                                           --------------------    -----------------    --------------------
    Total                                             $160,615             $177,462                $181,981
                                           ====================    =================    ====================

    Income (loss) from operations
        Commercial consulting                         $      *              $28,684                 $2,820
        Government consulting                                *                2,493                 (5,117)
                                                       -------             --------                --------
        Segment Total                                   13,162               31,177                 (2,297)
       Merger related and other
         non recurring costs                           (1,235)              (8,275)                   (292)
       Asset impairment costs                                               (1,107)                 (4,591)
       Stock and stock option compensation             (9,965)              (2,595)                       -
       Liquidation of subsidiary                         (328)                    -                       -
       Other                                                 -              (5,031)                 (3,456)
                                           --------------------    -----------------    --------------------
    Total                                               $1,634              $14,169               $(10,636)
                                           ====================    =================    ====================
</TABLE>

          * It was not practicable to present certain 1997 results to conform to
     the current presentation. Accordingly, they have not been
presented.

<PAGE>



         The table below presents  information by geographic area.  Revenues are
attributed  to the  countries  based on the  location of the  subsidiary.  North
America  includes the United  States and Canada and  International  includes all
else.
<TABLE>
                        For the years ended December 31,
<S>                                               <C>                    <C>                   <C>
                 Geographic                       1997                   1998                  1999
             Segment Information
    -------------------------------------- -------------------- -- ----------------- -- --------------------
    Revenues
        North America                                 $151,646             $159,536                $158,889
        International                                    8,969               17,926                  23,092
                                           --------------------    -----------------    --------------------
    Total                                             $160,615             $177,462                $181,981
                                           ====================    =================    ====================
</TABLE>








<PAGE>





                                                              SIGNATURES



         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
and  Exchange  Act of 1934,  the  Registrant  has duly  caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            William E. Dickenson
                                            President and Chief Executive
                                            Officer, Director



Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Geoffrey W. Bobsin
                                            Senior Vice President, Chief
                                            Financial Officer, Treasurer
                                            and Secretary

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Henri-Claude A. Bailly
                                            Director

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            R. Gene Brown
                                            Director
Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Jasjeet S. Cheema
                                            Director

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Robert W. Fri
                                            Director

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Richard H. O'Toole
                                            Director

Dated: March 26, 2000                       By:
                                            ------------------------------------
                                            Howard W. Pifer III
                                            Director

Dated: March 26, 1999                       By:
                                            ------------------------------------
                                            Fred M. Schriever
                                            Director

Dated: March 26, 1999                       By:
                                            ------------------------------------
                                            Alain M. Streicher
                                            Director



<PAGE>

EXHIBIT LIST



Exhibit No.                                          Description

2.1  Sale  Agreement  between  RCG   International,   Inc.,  and  Hagler  Bailly
     Consulting, Inc. (1)

2.2  Agreement  and  Plan of  Merger  by and  among  Hagler  Bailly,  Inc.,  PHB
     Acquisition  Corp. and Putnam,  Hayes and Bartlett,  Inc., dated as of June
     11, 1998. (5)

2.3  Share  Exchange  Agreement  dated as of August 12, 1999 by and among Hagler
     Bailly, Inc., GKMG, Inc. and certain former shareholders of GKMG, Inc. (11)

3.1      By-Laws of the Company, as amended. (6)

3.2      Amended Restated Certificate of Incorporation of the Company. (7)

4        Specimen Stock Certificates. (1)

4.1  Registration Rights Agreement dated November 18, 1997 by and between Hagler
     Bailly, Inc. and Richard R. Mudge, acting as Stockholders'  Representative.
     (3)

4.2  Form of Escrow Agreement by and among the Company,  PHB Acquisition  Corp.,
     William E. Dickenson as Stockholders'  Representative and State Street Bank
     and Trust Company, as Escrow Agent. (5)

4.3  Registration Rights Agreement dated February 23, 1998 by and between Hagler
     Bailly,    Inc.   and   Michael   J.   Beck,    acting   as   Stockholders'
     Representative.(9)

4.4  Registration Rights Agreement dated November 17, 1998 by and between Hagler
     Bailly, Inc. and the stockholders of Fieldston  Publications,  Inc. and The
     Fieldston Company. (9)

4.5  Registration  Rights  Agreement  dated as of August 12, 1999 by and between
     Hagler  Bailly,   Inc.  and  James  F.  Miller,   acting  as  Stockholders'
     Representative. (11)

10.2 Form of Non-Compete,  Confidentiality  and  Registration  Rights  Agreement
     between the Company and each stockholder. (1)

10.3 Lease by and between Wilson Boulevard Venture and RCG/Hagler  Bailly,  Inc.
     dated October 25, 1991. (1)

10.4 First  Amendment  to Lease by and  between  Wilson  Boulevard  Venture  and
     RCG/Hagler Bailly, Inc., dated February 26, 1993. (1)

10.5 Second  Amendment  to Lease by and  between  Wilson  Boulevard  Venture and
     RCG/Hagler Bailly, Inc., dated December 12, 1994. (1)

10.6 Lease by and between  Bresta  Futura V.B.V.  and Hagler Bailly  Consulting,
     Inc. dated May 8, 1996. (1)

10.7 Lease by and between L.C.  Fulenwider,  Inc., and RCG/Hagler  Bailly,  Inc.
     dated December 14, 1994. (1)

10.8 Lease by and between  University  of Research  Park  Facilities  Corp.  and
     RCG/Hagler Bailly, Inc., dated April 1, 1995. (1)

10.9 Credit  Agreement by and between Hagler Bailly  Consulting,  Inc. and State
     Street Bank and Trust Company, dated May 17, 1995. (1)

10.10Amendment to Credit  Agreement  by and between  Hagler  Bailly  Consulting,
     Inc. and State Street Bank and Trust Company, dated as of June 20,1996. (1)

10.11Extension  Agreement  by and between  Hagler  Bailly  Consulting,  Inc. and
     State Street Bank and Trust Company, dated as of August 1, 1996. (1)

10.12Amendment to Credit  Agreement  by and between  Hagler  Bailly  Consulting,
     Inc.  and State  Street Bank and Trust  Company,  dated as of November  12,
     1996. (1)

10.13Term Note by and between Hagler Bailly  Consulting,  Inc., and State Street
     Bank and Trust Company, dated May 26, 1995. (1)

10.14Revolving  Credit Note by and between  Hagler Bailly  Consulting,  Inc. and
     State Street Bank and Trust Company dated May 26, 1995. (1)

10.15Amendment to Credit  Agreement  by and between  Hagler  Bailly  Consulting,
     Inc.,  and State Street Bank and Trust  Company,  dated as of June 12,1997.
     (1)

10.16Credit  Agreement  by and among  Hagler  Bailly  Consulting,  Inc.,  Hagler
     Bailly Services,  Inc. and State Street Bank and Trust Company, dated as of
     September 30, 1997. (2)

10.17Promissory  Note by  Hagler  Bailly  Consulting,  Inc.  and  Hagler  Bailly
     Services,  Inc. to State Street Bank and Trust Company, dated September 30,
     1997. (2)

10.18Security Agreement by and between Hagler Bailly Consulting,  Inc. and State
     Street Bank and Trust Company, dated as of September 30, 1997. (2)

10.19Security  Agreement by and between Hagler Bailly  Services,  Inc. and State
     Street Bank and Trust Company, dated as of September 30, 1997. (2)

10.20Guaranties by Hagler  Bailly,  Inc. to State Street Bank and Trust Company,
     dated September 30, 1997. (2)

10.21Guaranties  by HB  Capital,  Inc. to State  Street Bank and Trust  Company,
     dated September 30, 1997. (2)

10.22Subordination  Agreement and Negative Pledge/Sale  Agreement by and between
     Hagler  Bailly,  Inc.  and State  Street Bank and Trust  Company for Hagler
     Bailly Consulting, Inc., dated September 30, 1997. (2)

10.23Subordination  Agreement and Negative Pledge/Sale  Agreement by and between
     Hagler  Bailly,  Inc.  and State  Street Bank and Trust  Company for Hagler
     Bailly Services, Inc., dated September 30, 1997. (2)

10.24Guaranty of Monetary  Obligations to Bresta Futura V.B.V. by Hagler Bailly,
     Inc., dated July 23, 1997. (2)

10.25Amendment to Credit  Agreement  by and between  Hagler  Bailly  Consulting,
     Inc. and State Street Bank and Trust Company dated May 18, 1998. (6)

10.26Sublease  Agreement by and between  Coopers and Lybrand  L.L.P.  and Hagler
     Bailly, Inc. dated December 5, 1997. (6)

10.27Employment  Agreement between the Company and Henri-Claude A. Bailly, dated
     August 27, 1998. (7)

10.28Employment  Agreement  between the Company and William E. Dickenson,  dated
     August 27, 1998. (7)

10.29Employment  Agreement  between the  Company and Howard W. Pifer III,  dated
     June 10, 1998. (7)

10.30Amended  and  Restated   Hagler  Bailly,   Inc.   Employee   Incentive  and
     Non-Qualified Stock Option and Restricted Stock Plan. (10)

10.31Credit  Agreement by and between Hagler  Bailly,  Inc. and The Lenders From
     Time to Time a Party  thereto,  as Lenders  and  NationsBank,  N.A.,  dated
     November 20, 1998. (8)

10.32Revolving Note by and between Hagler Bailly,  Inc. and  NationsBank,  N.A.,
     dated November 20, 1998. (8)

10.33Swing Line Note by and between Hagler Bailly,  Inc. and NationsBank,  N.A.,
     dated November 20, 1998. (8)

10.34    Subsidiary Guarantee by and among Hagler Bailly Services,  Inc., Hagler
         Bailly Consulting,  Inc., HB Capital,  Inc., Putnam,  Hayes & Bartlett,
         Inc.,  TB&A Group,  Inc.,  Theodore  Barry & Associates,  Private Label
         Energy Services,  Inc., Fieldston  Publications,  Inc. and NationsBank,
         N.A., dated November 20, 1998. (8)

10.35Form  of  Security  Agreement  by  and  between  Hagler  Bailly,  Inc.  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.36Security  Agreement  by and between  Hagler  Bailly  Consulting,  Inc.  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.37Security  Agreement  by  and  between  Hagler  Bailly  Services,  Inc.  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.38Security Agreement by and between HB Capital,  Inc. and Nations Bank, N.A.,
     dated November 20, 1998. (8)

10.39Security  Agreement  by and  between  Putnam,  Hayes & Bartlett,  Inc.  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.40Security  Agreement by and between TB&A Group, Inc. and Nations Bank, N.A.,
     dated November 20, 1998. (8)

10.41Security   Agreement  by  and  between  Theodore  Barry  &  Associates  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.42Security Agreement by and between PHB Hagler Bailly,  Inc. and NationsBank,
     N.A., dated February 22, 1999. (8)

10.43Security  Agreement by and between Private Label Energy Services,  Inc. and
     NationsBank, N.A., dated November 20, 1998. (8)

10.44Security  Agreement  by  and  between  Fieldston  Publications,   Inc.  and
     NationsBank, N.A., dated November 20, 1998. (8)

10.45Lease by and between One Memorial  Drive  Limited  Partnership  and Putnam,
     Hayes & Bartlett, Inc. dated January 1, 1998. (8)

10.46Lease by and between  George H.  Beuchert,  Jr.,  Trustee,  Thomas J. Egan,
     Trustee,  Oliver T. Carr, Jr., Trustee,  William Joseph H. Smith,  Trustee,
     and the Kiplinger Washington Editors, Inc., Trustee, acting collectively as
     trustee  on  behalf of the  beneficial  owner,  The  Greystone  Square  127
     Associates, and Putnam, Hayes & Bartlett, Inc. dated March 31, 1997. (8)

10.47    First  Amendment to Lease by and between  Greystone  Square 127 Limited
         Liability  Company,  as  successor  in  interest  collectively  to  The
         Greystone Square 127 Associates,  and George H. Beuchert, Jr., Trustee,
         and The Kiplinger  Washington  Editors,  Inc.,  Trustee,  the owners of
         record who held legal  title to the  Building  as trustees on behalf of
         the Greystone Square 127 Associates,  the former  beneficial  owners of
         the Building,  and Putnam,  Hayes & Bartlett,  Inc.  dated February 10,
         1998. (8)

10.48Employment agreement between Hagler Bailly Consulting,  Inc. and Jasjeet S.
     Cheema dated February 2, 1998. (9)

10.49    First amendment to revolving  credit  agreement  between Hagler Bailly,
         Inc, the lenders  from time to time a party  thereto,  as lenders,  and
         NationsBank, N.A., dated as of March 22, 1999. (9)

10.50Lease by and between  TrizecHahn,  1550 Wilson Blvd.  Management and Hagler
     Bailly Services, Inc. dated August 29, 1999. (12)

10.51    Second amendment to revolving  credit agreement  between Hagler Bailly,
         Inc.,  the lenders from time to time a party thereto,  as lenders,  and
         NationsBank, N.A., dated as of August 11, 1999. (12)

10.52 Security Agreement by and between GKMG, Inc. and NationsBank,  N.A., dated
August 11, 1999.

10.53Security  Agreement  by and between  GKMG  Consulting  Services,  Inc.  and
     NationsBank, N.A., dated August 11, 1999. (12)

10.54Employment  Agreement  between Putnam,  Hayes & Bartlett,  Inc. and John C.
     Butler, dated August 28, 1999.

10.55Employment Agreement between Putnam, Hayes & Bartlett,  Inc. and William H.
     Hieronymus, dated August 28, 1999.

10.56Employment Agreement between Putnam,  Hayes & Bartlett,  Inc. and Walter H.
     A. Vandaele, dated August 28, 1999.

21       Subsidiaries of the Registrant

23       Consent of Independent Auditors dated March 29, 2000

24       Powers of Attorney (included on Signature Pages) (1)

27.1     Financial Data Schedule

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

(1)  Included in the Company's  Registration Statement on Form S-1 filed on July
     1, 1997 (No. 333-22207) and incorporated herein by reference thereto.

(2)  Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended  September  30,  1997,  filed on November  14, 1997 and  incorporated
     herein by reference thereto.

(3)  Included in the Company's  Current Report on Form 8-K filed on December 16,
     1997 and incorporated herein by reference thereto.

(4)  Included  in the  Company's  Annual  Report on Form 10-K for the year ended
     December  31,  1997,  filed on March 31,  1998 and  incorporated  herein by
     reference thereto.

(5)  Included  in  the  Company's   Proxy   Statement  for  Special  Meeting  of
     Stockholders dated July 24, 1998 on Form DEFS 14A and
         incorporated herein by reference thereto.

(6)  Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended June 30, 1998,  filed on August 14, 1998 and  incorporated  herein by
     reference thereto.

(7)  Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended  September  30,  1998,  filed on November  13, 1998 and  incorporated
     herein by reference thereto.

(8)  Included  in the  Company's  Annual  Report on Form 10-K for the year ended
     December  31,  1998,  filed on March 31,  1998 and  incorporated  herein by
     reference thereto.

(9)  Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended March 31, 1999, and incorporated herein by reference thereto.

(10) Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended June 30, 1999, and incorporated herein by reference thereto.

(11) Included in the  Company's  Current  Report on Form 8-K filed on August 26,
     1999 and incorporated herein by reference thereto.

(12) Included  in the  Company's  Quarterly  Report on Form 10-Q for the quarter
     ended September 30, 1999.