<PAGE>


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

                                    FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

                        COMMISSION FILE NUMBER: 000-23889

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


                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

           DELAWARE                                            76-0553110
(STATE OF OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

           4900 HOPYARD ROAD, SUITE 200, PLEASANTON, CALIFORNIA 94588
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (925) 251-0000

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

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].

    The number of shares of Common Stock of the Registrant, par value $.001 per
share, outstanding at November 13, 2001 was 13,519,288.


<PAGE>





                          ITEM 1. FINANCIAL STATEMENTS

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                         ($000'S, EXCEPT PER SHARE DATA)


<Table>
<Caption>

                                                       SEPTEMBER 30,   DECEMBER 31,
                                                           2001            2000
                                                       ------------    ------------
<S>                                                    <C>             <C>
 ASSETS
 CURRENT ASSETS:
   Cash                                                $        275    $         --
   Trade accounts receivable, net
     of allowance for doubtful accounts
     of $270 and $320                                         2,711           6,249
   Unbilled revenue                                              12              --
   Income tax receivable, restated                              514             514
   Prepaid expenses and other                                   448             365
   Net assets of discontinued operations                         --             336
                                                       ------------    ------------
      Total current assets                                    3,960           7,464

PROPERTY AND EQUIPMENT                                        5,292           5,281
   Less - accumulated depreciation                           (4,100)         (3,123)
                                                       ------------    ------------
   Property and equipment, net                                1,192           2,158

GOODWILL                                                     14,224          14,224
   Less - accumulated amortization                           (2,488)         (2,224)
                                                       ------------    ------------
   Goodwill, net                                             11,736          12,000

OTHER                                                            45              46
                                                       ------------    ------------

TOTAL ASSETS                                           $     16,933    $     21,668
                                                       ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Line of credit                                      $        731    $      3,597
   Accounts payable                                           1,703           2,195
   Acquisition payable                                          500           1,693
   Restructuring reserve                                        774             853
   Accrued salaries and other expenses                        1,576           2,520
   Payable to stockholders                                      900             900
   Deferred revenue                                             160             324
                                                       ------------    ------------
      Total current liabilities                               6,344          12,082

NOTES PAYABLE, NET                                            1,093              --
OTHER LIABILITIES                                                19              19
COMMITMENTS AND CONTINGENCIES                                    --              --
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 35,000,000
  shares authorized; 13,519,288 and 11,545,057
  shares issued and outstanding                                  14              12
   Additional paid-in capital                                99,630          98,244
   Common stock warrants                                        100             100
   Common stock receivable                                     (118)             --
   Accumulated other comprehensive income (loss)               (118)           (118)
   Retained earnings (deficit), restated                    (90,031)        (88,671)
                                                       ------------    ------------
      Total stockholders' equity                              9,477           9,567
                                                       ------------    ------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $     16,933    $     21,668
                                                       ============    ============
</Table>


See notes to condensed consolidated financial statements.




                                       2
<PAGE>




                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         ($000'S, EXCEPT PER SHARE DATA)

<Table>
<Caption>

                                                          THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                     ------------------------------    ------------------------------
                                                     SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                                          2001             2000             2001            2000
                                                     -------------    -------------    -------------    -------------

<S>                                                  <C>              <C>              <C>              <C>
REVENUE                                              $       4,036    $      13,923    $      16,086    $      51,624

COST OF REVENUE                                              2,979            9,269           11,117           35,013
                                                     -------------    -------------    -------------    -------------
GROSS PROFIT                                                 1,057            4,654            4,969           16,611

OPERATING EXPENSES:
  Selling, general and administrative expenses               1,454            7,694            4,581           22,756
  Restructuring charge                                         334               --              334            2,525
  Write down of goodwill                                        --           24,793               --           24,793
  Goodwill amortization                                         88              381              264            1,137
  Depreciation and amortization                                314              467              977            1,404
                                                     -------------    -------------    -------------    -------------
      Total operating expenses                               2,190           33,335            6,156           52,615

LOSS FROM OPERATIONS                                        (1,133)         (28,681)          (1,187)         (36,004)

OTHER INCOME (EXPENSE)                                          --               --               --               (4)

INTEREST EXPENSE, net                                          (62)            (151)            (190)            (419)
                                                     -------------    -------------    -------------    -------------
LOSS BEFORE INCOME TAXES                                    (1,195)         (28,832)          (1,377)         (36,427)

INCOME TAX PROVISION, restated                                  --            4,311               --            1,660
                                                     -------------    -------------    -------------    -------------

LOSS FROM CONTINUING OPERATIONS                             (1,195)         (33,143)          (1,377)         (38,087)


DISCONTINUED OPERATIONS:
   Gain (loss) on disposal of
   discontinued operations, net of tax                          --             (960)              17           (1,183)
                                                     -------------    -------------    -------------    -------------


NET LOSS, restated                                   $      (1,195)   $     (34,103)   $      (1,360)   $     (39,270)
                                                     =============    =============    =============    =============

NET LOSS PER SHARE: BASIC AND
DILUTED, restated
  Continuing operations                              $       (0.09)   $       (3.30)   $       (0.10)   $       (3.96)
  Discontinued operations                                       --            (0.10)              --            (0.12)
                                                     -------------    -------------    -------------    -------------
    Net loss per share                               $       (0.09)   $       (3.40)   $       (0.10)   $       (4.08)
                                                     =============    =============    =============    =============

AVERAGE SHARES OUTSTANDING: BASIC AND
DILUTED                                                 13,519,288       10,053,209       13,225,179        9,619,823
                                                     =============    =============    =============    =============
</Table>



See notes to condensed consolidated financial statements.






                                       3
<PAGE>




    BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($000'S)

<Table>
<Caption>

                                                                   NINE MONTHS ENDED
                                                             ------------------------------
                                                             SEPTEMBER 30,    SEPTEMBER 30,
                                                                 2001             2000
                                                             -------------    -------------
          OPERATING ACTIVITIES:
<S>                                                          <C>              <C>
   Net loss, restated                                        $      (1,360)   $     (39,270)
   Adjustments to reconcile net loss to net
       cash provided by (used in) operating activities:
   Loss from discontinued operations                                    --            1,183
   Noncash gains on settlement of liabilities                         (383)              --
   Depreciation and amortization                                     1,252            2,541
   Write down of goodwill                                               --           24,793
   Change in allowance for doubtful accounts                           (50)          (1,260)
   Compensation expense on issuance of common stock                     74               --
   Deferred taxes                                                       --            1,712
   Cash provided by (used in) operating activities:
       Trade accounts receivable                                     3,588            8,027
       Unbilled revenue                                                (12)           1,317
       Prepaid expenses and other                                      (83)             201
       Accounts payable                                               (583)          (1,096)
       Restructuring reserve                                            (6)               7
       Accrued salaries and other expenses                            (298)          (2,899)
       Income taxes receivable, restated                                --              287
       Deferred revenue                                               (164)              74
       Discontinued operations                                         336               --
                                                             -------------    -------------
       Net cash provided by (used in) operating activities           2,311           (4,383)


INVESTING ACTIVITIES:
   Payments for acquisitions                                           (61)              --
   Proceeds from sale of subsidiary
       and realization of net assets retained                           --            1,967
   Additions of property and equipment, net of
       disposals                                                       (11)          (1,406)
                                                             -------------    -------------
       Net cash used in investing activities                           (72)             561

FINANCING ACTIVITIES:
   Net proceeds from issuance of common stock                           --            7,175
   Net proceeds from issuance of convertible notes                   1,000               --
   Costs associated with issuance of convertible notes                 (55)              --
   Costs associated with common stock transactions                     (43)            (160)
   Repayments on line of credit                                     (2,866)          (3,781)
                                                             -------------    -------------
       Net cash provided by (used in) financing activities          (1,964)           3,234

NET INCREASE (DECREASE) IN CASH                                        275             (588)

CASH:
   Beginning of period                                                  --              973
                                                             -------------    -------------
   End of period                                             $         275    $         385
                                                             =============    =============

SUPPLEMENTAL DISCLOSURE:
   Noncash issuance of common stock in satisfaction
   of severance obligations                                  $         162    $          --
                                                             =============    =============
   Noncash issuance of common stock at fair value
   in connection with prior acquisition                      $          --    $       2,500
                                                             =============    =============
   Noncash settlement in connection with
   prior acquisition                                         $         893    $       1,578
                                                             =============    =============
   Noncash settlement in connection with
   litigation between the Company and various
   other entities                                            $         118    $          --
                                                             =============    =============
   Noncash settlement in satisfaction of our
   obligations under various rights agreements               $          44    $          --
                                                             =============    =============
   Noncash settlement of liabilities with notes payable      $         278    $          --
                                                             =============    =============
   Noncash issuance of common stock warrants associated
   with notes payable                                        $         140    $          --
                                                             =============    =============
</Table>



See notes to condensed consolidated financial statements.






                                       4
<PAGE>




                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

    The accompanying unaudited condensed consolidated financial statements have
    been prepared in accordance with accounting principles generally accepted in
    the United States of America ("U.S. GAAP") for interim financial information
    and the instructions to Form 10-Q and Article 10 of Regulation S-X.
    Accordingly, they do not include all of the information and footnotes
    required by U.S. GAAP for complete financial statements. In the opinion of
    management, all adjustments considered necessary for a fair presentation
    have been included in the financial statements. Operating results for the
    three and nine month periods ended September 30, 2001, are not necessarily
    indicative of the results that may be expected for the year ending December
    31, 2001. The balance sheet at December 31, 2000, has been derived from the
    audited financial statements at that date but does not include all of the
    information and footnotes required by U.S. GAAP for complete financial
    statements. For additional information, refer to the financial statements
    and footnotes thereto included in the Company's annual report on Form 10-K
    for the year ended December 31, 2000.

    The preparation of the condensed financial statements in conformity with
    U.S. GAAP requires management to make estimates and assumptions that affect
    the reported amounts of assets and liabilities and disclosures of contingent
    assets and liabilities at the date of the condensed financial statements and
    the reported amounts of revenues and expenses during the reporting period.
    Actual results could differ from these estimates.

    Basic income (loss) per share is based upon weighted average number of
    common shares outstanding during the period. Diluted income (loss) per share
    is computed using the weighted average number of common shares and
    potentially dilutive securities outstanding during the period. Potentially
    dilutive securities include incremental common shares issuable upon the
    exercise of stock options, warrants and conversion of notes payable.
    Potentially dilutive securities are excluded from the computation if their
    effect is anti-dilutive. Potentially dilutive securities excluded because of
    their anti-dilutive effect are approximately 8.3 million shares and 2.1
    million shares at September 30, 2001 and September 30, 2000, respectively.

2.  LIQUIDITY

    The Company's liabilities as of September 30, 2001, reflect approximately
    $3.4 million of past-due liabilities, including the requirement to make
    payments amounting to $0.5 million related to the PROSAP acquisition, as
    well as payments to certain stockholders, related to a registration rights
    agreement, of approximately $0.9 million. Due to our current and foreseeable
    liquidity issues, we may be unable to make any of these payments in cash.

    The Company relies primarily on the timeliness and amount of accounts
    receivable collections to fund cash disbursements. As a result of prior
    losses and prior negative cash flows, the Company has experienced a
    significant decline in available liquidity, which has had an adverse impact
    on the ability of the Company to meet its immediate and future obligations
    and to continue as a going concern. The Company has improved its liquidity
    by securing private placement financing and restructuring its credit
    facility with Comerica Bank, which matured on March 31, 2001. Comerica Bank
    provided the Company with interim financing in the form of a $3.0 million
    Demand Note. The Demand Note carries interest of Comerica's prime rate plus
    4%. Available borrowings are being reduced by 2% of eligible accounts
    receivable each month. On July 26, 2001, the Demand Note was converted to a
    term note having a six month maturity until January 26, 2002 (the "Term
    Note"). The Term Note carries the same credit availability, interest rate
    and accounts receivable eligibility as the Demand Note.

    On July 26, 2001, the Company completed a private placement through the
    issuance of approximately $1.1 million of convertible notes to a group of
    primarily individual investors, including members of BrightStar senior
    management. The notes are secured on a junior basis by substantially all of
    the assets of the Company and its operating subsidiaries, and are
    convertible into common stock, at the option of the investors, at a fixed
    price of $0.23 per share, subject to anti-dilution provisions. In addition,
    the investors received approximately 718,000





                                       5
<PAGE>


    warrants, exercisable at $0.50 per share. The notes are mandatorily
    convertible, at the Company's option, into common stock at $0.23 per share,
    subject to anti-dilution provisions, upon the occurrence of; (i) the market
    price of the Company's common stock, determined on a moving average basis
    equals or exceeds $0.50; and (ii) the investor may lawfully sell immediately
    all of the common stock issuable upon conversion and the common stock
    issuable upon exercise of Warrants held by the investor, either under a
    registration statement, or, if after 2 years from the issuance date of the
    note, under Rule 144; and (iii) at least $2.3 million of past due payables
    have been restructured. The notes are entitled to simple interest calculated
    at a rate per annum equal to 8%. Interest may be paid at the option of the
    Company by issuing additional convertible debt with the same terms as above.
    In addition, 70,000 warrants were issued to the placement agent for the
    transaction at an exercise price of $1.00 per share. Warrants issued to
    investors were valued at $140,000 under the provisions of APB No.14 and EITF
    00-27, and will be amortized as additional interest expense over the term of
    the debt or until exercised. Amortization expense for the quarter ended
    September 30, 2001 amounted to $8,000. BrightStar was obligated to file for
    registration of the common stock underlying the convertible notes and
    warrants within 90 days after the private placement closing, which the
    Company fulfilled by filing a registration statement on Form S-3 with the
    SEC on October 23, 2001.

    Under present circumstances, the Company believes it has sufficient cash
    resources to meet its operating requirements at least through the end of
    2001. Beyond the year 2001, the Company believes that the planned results
    from operations when combined with proceeds from additional structured
    financing, if obtained, the restructuring of its past-due liabilities or
    continued forbearance of its creditors, and replacement of its Comerica
    credit facility, would be adequate to fund its operations. However, there
    can be no assurance that the Company's efforts to increase revenue and
    reduce operating costs will result in operating profits or positive cash
    flows from operations, that the Company's collection efforts with respect to
    its accounts receivable will be successful , that the Company will be able
    to obtain, on terms acceptable to the Company or at all, that the Company's
    creditors will continue to forbear or will accept restructuring of the
    amounts owed to them, or that the Comerica Bank credit facility can be
    replaced on a timely basis or at all.

3. RESTRUCTURING

    Remaining amounts recorded as accrued restructuring costs at September 30,
    2001, relate to ongoing severance and lease obligations, which have extended
    payment terms. The Company incurred approximately $334,000 of additional
    restructuring costs, (consisting of approximately $238,000 relating to
    employee costs and $96,000 relating to equipment expenses), in the third
    quarter of 2001 as a result of actions taken by the Company to reduce its
    expense base in response to the general reduction in business levels as well
    as the specific loss of a major customer that filed for bankruptcy.
    Reductions for the year relate to settlements of various severance
    agreements, of approximately $206,000, office space, of approximately
    $169,000 and miscellaneous other items, of approximately $38,000.

<Table>

<S>                                                           <C>
                  Balance as of December 31,2000              $ 853,000
                  Additions                                     334,000
                  Reductions                                   (413,000)
                                                              ---------
                  Balance as of September 30, 2001            $ 774,000
                                                              =========
</Table>

    It should be noted that the Company also expects to incur additional
    restructuring costs in the fourth quarter related to a further down-sizing
    of the Company's operations and infrastructure to match what is considered
    to be the Company's core level of revenue.

4.  CREDIT FACILITIES

    Our operating line of credit facility with Comerica Bank matured on March
    31, 2001. After that date, Comerica Bank provided the Company with
    short-term interim financing in the form of a $3.0 million Demand Note,
    secured by liens on substantially all of the assets of the Company and its
    operating subsidiaries. The Demand



                                       6
<PAGE>


    Note carries interest of Comerica's prime rate plus 4%. Available borrowings
    will be reduced monthly by 2% of eligible accounts receivable. The Demand
    Note originally provided that payment could be demanded by Comerica Bank at
    any time. However, on July 26, 2001, the Demand Note was converted to a term
    note having a six month maturity until January 26, 2002.

5.  INCOME TAXES

    As a result of continued losses, the Company has recorded a valuation
    allowance to offset all of its net deferred tax assets recorded at September
    30, 2001. The valuation allowance relates to deferred tax assets established
    for net operating loss carryforwards generated through September 30, 2001
    and other temporary differences. The Company does not expect to recognize
    tax benefits on prior or future losses or other temporary differences until
    such time that it is more likely than not that tax benefits will be realized
    by the Company. As a result of a $514,000 understatement of income tax
    refunds receivable, identified upon the completion of the 2000 income tax
    returns, the Company has restated its September 30, 2000 and December 31,
    2000 condensed consolidated financial statements. The adjustment increases
    income tax refunds receivable and reduces income tax expense and retained
    deficit at those dates. The receivable results from the Company's ability to
    carry back net operating losses to years where income taxes were paid, and
    receipt of the tax refunds is expected by December 31, 2001. The adjustment
    is immaterial to the December 31, 2000 consolidated financial statements,
    included in the Company's annual report on Form 10-K for 2000, and the
    restated balances will be reflected in the 2000 financial statements upon
    the filing of the Company's Form 10-K for 2001.

6.  LITIGATION

    As of June 30, 2001, the Company had accrued approximately $600,000
    relating to litigation exposure. During the third quarter of 2001, the
    Company was able to relieve approximately $200,000 in litigation exposure by
    negotiating settlements with the respective parties. As a result of these
    settlements, the Company incurred an obligation of approximately $125,000,
    which will be paid by the Company in the form of long-term notes due and
    payable on January 2, 2005. The difference between the amount accrued and
    the amount settled, approximately $75,000, was recorded as a gain on
    settlements in the third quarter. The Company currently has accrued $400,000
    relating to its remaining litigation exposure. The Company is a defendant in
    a lawsuit brought by the prior owners of Integrated Systems Consulting LLC
    ("ISC"), alleging violations of federal and state securities laws, fraud,
    negligent misrepresentation, breach of contract, breach of good faith and
    fair dealing and unjust enrichment related to purchase consideration
    surrounding the Company's acquisition of ISC in 1999. The plaintiffs are
    seeking compensatory damages in excess of $2 million, court costs,
    attorney's fees and punitive damages. The Company denies any wrongdoing and
    intends to vigorously defend the case. The Company has accrued an amount,
    which represents estimated defense costs to be paid by the Company, subject
    to the deductible amount under its directors and officers insurance policy.
    While any litigation contains an element of uncertainty, the Company
    believes, based upon its assessment of the claims and negotiation to settle
    with the plaintiffs, that the liability recorded as of September 30, 2001,
    combined with coverage under the Company's errors and omissions and
    directors and officer's insurance policies, is adequate to cover the
    estimated exposure. In addition, two legal claims have been filed recently
    against the Company and a subsidiary of the Company for facility rents and
    related costs associated with excess office space vacated by the Company. An
    estimate of these liabilities is included in the Company's consolidated
    balance sheet.

    As a result of a previous settlement, Unaxis Trading was issued 255,000
    shares of our common stock on February 15, 2001. Pursuant to the settlement
    agreement, if, prior to a sale of these shares by Unaxis, the Company has
    not exercised its right, between January 1, 2002 and February 1, 2002, to
    call the shares for $1.60 per share, Unaxis may exercise its right to put
    the shares to the Company for a price of $2.00 per share during the 15 day
    period commencing on February 1, 2002. Unaxis has recently agreed to return
    the 255,000 shares of common stock to us in return for a $120,000 cash
    payment. In partial funding of this settlement, the Company has incurred an
    obligation to pay $50,000 via a long-term note, due and payable on January
    3, 2005. During the third quarter, the amount recorded on the books, of
    approximately $118,000, was reclassified from common stock and additional
    paid in capital and was recorded as common stock receivable in anticipation
    of the completion of this agreement.



                                       7
<PAGE>

    In addition to the litigation noted above, the Company is from time to time
    involved in litigation incidental to its business. The Company believes that
    the results of such litigation, in addition to amounts discussed above, will
    not have a materially adverse effect on the Company's financial condition.

7.  RECENT ACCOUNTING PRONOUNCEMENTS

    On July 20, 2001 the Financial Accounting Standards Board (FASB) issued
    Statement of Financial Accounting Standards (SFAS) No. 141, Business
    Combinations, and SFAS No. 142, Goodwill and Intangible Assets. SFAS No. 141
    is effective for all business combinations completed after June 30, 2001.
    SFAS No. 142 is effective for fiscal years beginning after December 15,
    2001: however, certain provisions of this Statement apply to goodwill and
    other intangible assets acquired between July 1, 2001 and the effective date
    of SFAS No. 142. Major provisions of these statements and their effective
    dates for the Company are as follows:

       -    All business combinations initiated after June 30, 2001 must use the
            purchase method of accounting. The pooling of interest method of
            accounting is prohibited except for transactions initiated before
            July 1, 2001.

       -    Goodwill, as well as intangible assets with indefinite lives,
            acquired after June 30, 2001 will not be amortized. Effective
            January 1, 2002, all previously recognized goodwill and intangible
            assets with indefinite lives will no longer be subject to
            amortization.

       -    Effective January 1, 2002, goodwill and intangible assets with
            indefinite lives will be tested for impairment annually and whenever
            there is an impairment indicator.

    The Company will continue to amortize goodwill recognized prior to July 1,
    2001, under its current method until January 1, 2002, at which time annual
    and quarterly goodwill amortization of approximately $350,000 and $87,500,
    respectively, will no longer be recognized. By December 31, 2002 the Company
    will have completed a transitional fair value based impairment test of
    goodwill as of January 1, 2002.

    In applying the current accounting principles related to goodwill, the
    Company has considered if there has been any current impairment of goodwill
    as of September 30, 2001. We performed our analysis of future cash flows
    based on the benefits of cost reductions recently implemented and future
    projected revenue levels assuming various levels of growth, including a 10%
    per year revenue-growth case. Based on this analysis we believe that the
    current value of goodwill is recoverable, and therefore no impairment has
    incurred and no adjustment is necessary.

8.  SIGNIFICANT CUSTOMERS

    For the third quarter of 2001, the Company had three unrelated customers
    that accounted for approximately 25%, 14% and 12%, respectively, of total
    revenue. Also, for the nine months ended September 30, 2001, the same three
    unrelated customers accounted for approximately 23%, 12% and 10%,
    respectively, of total revenue. These three customers also accounted for
    approximately 14%, 12% and 6%, respectively, of the total outstanding
    accounts receivable balance as of September 30, 2001.

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS

    BrightStar is an information technology company that emphasizes Application
    Team Outsourcing services for Global 2000, mid-market and public sector
    clients, including packaged and custom application management, custom
    application development, integration of comprehensive enterprise and
    e-business solutions and staff augmentation. Application Team Outsourcing
    services generally generate recurring revenues based on long-term contracts
    for application support or development projects or from sustainable client
    relationships. Originally centered on Enterprise Resource Planning (ERP)
    solutions, the Company also implements and manages Customer Relationship
    Management (CRM), E-commerce and corporate portal solutions.

    We call our business strategy "Application Team Outsourcing," because we
    team with our clients' organizations to deliver the required application
    outsourcing solution. Application Team Outsourcing enables BrightStar to
    leverage its excellent reputation for rapid-hiring and client satisfaction
    to provide agile units of highly skilled




                                       8
<PAGE>


    applications engineers in an outsourcing environment. We focus on
    redirecting a client's current information technology ("IT") budget from a
    fixed expense, to a flexible budget, by utilizing BrightStar's ability to
    expand and contract resources both in numbers and skill sets. In doing so,
    we strive to become part of the "fabric" of our clients' organizations,
    thereby generating ongoing business from satisfied clients.

    We have approximately 100 employees and full-time contractors in client
    locations around the United States and in the Company's offices located in
    Pleasanton, California, Dallas, Texas, Lafayette, Louisiana, Little Rock,
    Arkansas and Quincy, Massachusetts. The Company has made a decision to close
    its current Dallas and Lafayette facilities (retaining a small cadre of
    consultants in both locations) during the fourth quarter of 2001 in order to
    reduce its overhead and operating costs. Concurrent with the office
    closings, the Company will also de-emphasize its e-commerce and custom
    applications development practices due to the current softness in those
    markets.

    The Company provides services to its customers for fees that are based on
    time and material or fixed fee contracts. Accordingly, revenue is recognized
    as consulting services are performed. Unbilled revenue is recorded for
    contract services provided for which a billing has not been rendered.
    Deferred revenue represents the excess of amounts billed over the contract
    amount earned.

    The timing of revenue is difficult to forecast because the Company's sales
    cycle for certain of its services can be relatively long and is subject to a
    number of uncertainties, including clients' budgetary constraints, the
    timing of clients' budget cycles, clients' internal approval processes and
    general economic conditions. In addition, as is customary in the industry,
    the Company's engagements, generally, are terminable without a client
    penalty. The Company's revenue and results of operations may fluctuate
    significantly from quarter to quarter or year to year because of a number of
    factors, including, but not limited to, the effect of changes in estimates
    to complete fixed fee contracts; the rate of hiring and the productivity of
    revenue generating personnel; the availability of qualified IT
    professionals; the significance of client engagements commenced and
    completed during a quarter; the number of business days in the quarter;
    changes in the relative mix of the Company's services; changes in the
    pricing of the Company's services; the timing and the rate of entrance into
    new geographic or IT specialty markets; departures or temporary absences of
    key revenue-generating personnel; the structure and timing of acquisitions;
    changes in the demand for IT services; and general economic factors.

    Cost of revenue consists primarily of salaries (including non-billable and
    training time) and benefits for consultants. The Company generally strives
    to maintain its gross profit margins by offsetting increases in salaries and
    benefits with increases in billing rates.

    Selling, general and administrative expenses primarily consist of costs
    associated with (i) corporate overhead, (ii) sales and account management,
    (iii) telecommunications, (iv) human resources, and (v) recruiting.

    RESULTS OF OPERATIONS

    Revenue for the third quarter and the nine months ended September 30, 2001
    decreased from $13.9 million to $4.0 million and from $51.6 million to $16.1
    million or 71.3% and 68.8%, respectively, compared to the third quarter and
    the nine months ended September 30, 2000 as a result of a continued
    reduction in the demand for ERP and e-commerce project consulting services
    and the sale of our Australian subsidiary in December 2000. In 2000 our
    Australian subsidiary accounted for $4.1 and $14.7 million in revenue for
    the three and the nine months ended September 30, respectively.

    Gross profit as a percentage of revenue for the third quarter and the nine
    months ended September 30, of 2001 decreased from 33.4% to 25.7% and
    decreased from 32.2% to 30.8%, respectively, compared to the third quarter
    and the nine months ended September 30, 2000. This decrease is a result of
    nonbillable resources that were retained to support certain fixed-price
    customer contracts that eventually were terminated or not renewed, including
    one customer that filed for bankruptcy.

    The Company's year-over-year reductions in selling, general and
    administrative expenses are the result of the execution of the turnaround
    plan, which included reductions in office space, sales personnel and related
    costs, management overhead and discretionary expenses.


                                       9
<PAGE>

    Goodwill is the cost of acquired businesses in excess of amounts assigned to
    identifiable assets acquired less liabilities assumed. Goodwill recorded in
    conjunction with the founding companies originally combined to form
    BrightStar and all subsequent acquisitions is being amortized over 40 years
    on a straight-line basis. The realizability and period of benefit of
    goodwill is evaluated periodically to assess recoverability, and, if
    warranted, impairment or adjustments to the period benefited are recognized.
    As a result of its evaluation of market conditions, the Company reduced the
    carrying value of its remaining goodwill to $12 million at December 31,
    2000.

    LIQUIDITY AND CAPITAL RESOURCES

    The Company's liabilities as of September 30, 2001, reflect approximately
    $3.4 million of past-due liabilities, including the requirement to make
    payments amounting to $0.5 million related to the PROSAP acquisition, as
    well as payments to certain stockholders, related to a registration rights
    agreement, of approximately $0.9 million. Due to our current and foreseeable
    liquidity issues, we may be unable to make any of these payments in cash.

    The Company relies primarily on the timeliness and amount of accounts
    receivable collections to fund cash disbursements. As a result of prior
    losses and prior negative cash flows, the Company has experienced a
    significant decline in available liquidity, which has had an adverse impact
    on the ability of the Company to meet its immediate and future obligations
    and to continue as a going concern. The Company has improved its liquidity
    by securing private placement financing and restructuring its credit
    facility with Comerica Bank, which matured on March 31, 2001. Comerica Bank
    provided the Company with interim financing in the form of a $3.0 million
    Demand Note. The Demand Note carries interest of Comerica's prime rate plus
    4%. Available borrowings are being reduced by 2% of eligible accounts
    receivable each month. On July 26, 2001, the Demand Note was converted to a
    term note having a six month maturity until January 26, 2002 (the "Term
    Note"). The Term Note carries the same credit availability, interest rate
    and accounts receivable eligibility as the Demand Note.

    On July 26, 2001 the Company completed a private placement through the
    issuance of approximately $1.1 million of convertible notes to a group of
    primarily individual investors, including members of BrightStar senior
    management. The notes are secured on a junior basis by substantially all of
    the assets of the Company and its operating subsidiaries, and are
    convertible into common stock, at the option of the investors, at a fixed
    price of $0.23 per share, subject to anti-dilution provisions. In addition,
    the investors received approximately 718,000 warrants, exercisable at $0.50
    per share. The notes are mandatorily convertible, at the Company's option,
    into common stock at $0.23 per share, subject to anti-dilution provisions,
    upon the occurrence of; (i) the market price of the Company's common stock,
    determined on a moving average basis, equals or exceeds $0.50; and (ii) the
    investor may lawfully sell immediately all of the common stock issuable upon
    conversion and the common stock issuable upon exercise of Warrants held by
    the investor, either under a registration statement, or, if after 2 years
    from the issuance date of the note, under Rule 144; and (iii) at least $2.3
    million of past due payables have been restructured. The notes are entitled
    to simple interest calculated at a rate per annum equal to 8%. Interest may
    be paid at the option of the Company by issuing additional convertible debt
    with the same terms as above. In addition, 70,000 warrants were issued to
    the placement agent for the transaction at an exercise price of $1.00 per
    share. Warrants issued to investors were valued at $140,000 under the
    provisions of APB No. 14 and EITF 00-27, and will be amortized as additional
    interest expense over the term of the debt or until exercised. Amortization
    expense for the quarter ended September 30, 2001 amounted to $8,000.
    BrightStar was obligated to file for registration of the common stock
    underlying the convertible notes and warrants within 90 days after the
    private placement closing, which the Company fulfilled by filing a
    registration statement on Form S-3 with the SEC on October 23, 2001.
     .

    Under present circumstances, the Company believes it has sufficient cash
    resources to meet its operating requirements at least through the end of
    2001. Beyond the year 2001, the Company believes that the planned results
    from operations when combined with proceeds from additional structured
    financing, if obtained, the restructuring of its past-due liabilities or
    continued forbearance of its creditors, and replacement of its Comerica
    credit facility, would be adequate to fund its operations. However, there
    can be no assurance that the Company's efforts to increase revenue and
    reduce operating costs will result in operating profits or positive cash
    flows from




                                       10
<PAGE>


    operations, that the Company's collection efforts with respect to its
    accounts receivable will be successful , that the Company will be able to
    obtain, on terms acceptable to the Company or at all, that the Company's
    creditors will continue to forbear or will accept restructuring of the
    amounts owed to them, or that the Comerica Bank credit facility can be
    replaced on a timely basis or at all.

    FORWARD-LOOKING INFORMATION - Management's Discussion and Analysis of
    Financial Condition and Results of Operations ("MD&A") includes
    "forward-looking statements" within the meaning of Section 27A of the
    Securities Act of 1933 and Section 21E of the Securities Exchange Act of
    1934. All statements, other than statements of historical facts, included in
    this MD&A regarding the Company's financial position, business strategy and
    plans and objectives of management of the Company for future operations are
    forward-looking statements. These forward-looking statements rely on a
    number of assumptions concerning future events and are subject to a number
    of uncertainties and other factors, many of which are outside of the
    Company's control, that could cause actual results to materially differ from
    such statements. While the Company believes that the assumptions concerning
    future events are reasonable, it cautions that there are inherent
    difficulties in predicting important factors, especially the timing and
    magnitude of technological advances; the prospects for future acquisitions;
    the possibility that a current customer could be acquired or otherwise be
    affected by a future event that would diminish their information technology
    requirements; the competition in the information technology industry and the
    impact of such competition on pricing, revenues and margins; the degree to
    which business entities continue to outsource information technology and
    business processes; uncertainties surrounding budget reductions or changes
    in funding priorities of existing government programs and the cost of
    attracting and retaining highly skilled personnel.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company's demand note from Comerica Bank bears interest at variable
    rates; therefore, the Company's results of operations would be affected by
    interest rate changes. An immediate 10 percent change in interest rates
    would not have a material effect on the Company's results of operations over
    the next fiscal year.

                           PART II - OTHER INFORMATION

ITEM 1. Legal proceedings

    Information related to Item 1 is disclosed in Part I Item I (Note 6 to the
    Condensed Consolidated Financial Statements) and is by the reference
    incorporated herein.

ITEM 2. Changes in Securities and Use of Proceeds

    None

ITEM 3. Defaults upon Senior Securities

    The credit facility with Comerica Bank was secured by liens on substantially
    all of the Company's assets (including accounts receivable) and a pledge of
    all outstanding capital stock of the Company's domestic operating
    subsidiaries. The credit facility also required that the Company comply with
    various loan covenants, including (i) maintenance of certain financial
    ratios, (ii) restrictions on additional indebtedness and (iii) restrictions
    on liens, guarantees and payments of dividends. As of, and during the three
    months ended March 31 and June 30, 2001 and the year ended December 31,
    2000, the Company was not in compliance with certain financial covenants.
    Comerica Bank has agreed to waive the defaults for all three periods. During
    the third quarter of 2001, the financial covenants were adjusted to include
    only the requirement to maintain a certain level of effective net worth,
    which enabled the Company to be in compliance as of September 30, 2001.

ITEM 4. Submission of matters to a vote of Stockholders

    None



                                       11
<PAGE>

ITEM 6. Exhibits and reports on Form 8-K

(a) Exhibits

    None

(b) Reports on Form 8-K

    The Company filed a current report on Form 8-K on August 2, 2001, which
    announced the $1.1 million private placement and extension of the bank
    credit facility.



                                   SIGNATURES


    Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned there
unto duly authorized.

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

Date: November 13, 2001.             BY: /s/ Joseph A. Wagda
                                        ----------------------------------------
                                          Joseph A. Wagda, Chairman and Chief
                                             Executive Officer

                                     BY: /s/ Ken Czaja
                                        ----------------------------------------
                                          Kenneth A. Czaja, Vice President -
                                             Finance and Chief Financial Officer



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