<PAGE>   1
================================================================================
                                  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, 1998
                                       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.)

      10375 RICHMOND AVENUE, SUITE 1620
             HOUSTON, TEXAS                             77042
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)        (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 361-2500

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

         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 preceeding 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 September 30, 1998, was 7,746,299. The number of
shares of Restricted Common Stock of the Registrant, par value $.001 per share,
outstanding at September 30, 1998, was 242,760.

*    The Registrant became subject to the reporting requirements of Section 13
     of the Securities Exchange Act of 1934 on April 16, 1998.

================================================================================


<PAGE>   2



ITEM 1.      FINANCIAL STATEMENTS

GENERAL INFORMATION - The December 31, 1997 financial statements of BrightStar
Information Technology Group, Inc. (the "Company" or "BrightStar") are the
historical financial statements of Brian R. Blackmarr and Associates, Inc.
("Blackmarr"), which became a wholly owned subsidiary of BrightStar in April
1998, and has been identified as the "accounting acquirer" for BrightStar's
financial reporting purposes in connection with the purchase acquisitions
described in Notes 1 and 2 to the following financial statements. The September
30, 1998 financial statements are the combined results of Brightstar after
giving effect to the acquisition of Founding Companies; prior to April 1998
financial information versus financial performance is for Blackmarr only.

         BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,     SEPTEMBER 30,
ASSETS                                                                                    1997             1998
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>         
CURRENT ASSETS:
  Cash and cash equivalents                                                           $      2,994     $  6,485,383
  Trade accounts receivable, net of allowance for doubtful accounts
    of $451,534 and $673,448, respectively                                               4,202,180       22,123,957
  Accounts receivable - employees                                                            3,355           67,109
  Income tax refund receivable                                                              37,515               --
  Unbilled revenue                                                                         652,711        2,646,347
  Deferred tax asset                                                                       161,564          161,564
  Prepaid expenses and other current assets                                                     --        1,624,857
                                                                                      ------------     ------------
      Total current assets                                                               5,060,319       33,109,217

PROPERTY AND EQUIPMENT - Net                                                               276,753        3,506,730
GOODWILL                                                                                        --       58,994,583
DEFERRED TAX ASSET                                                                          31,541               --
OTHER ASSETS                                                                                56,759        1,005,989
                                                                                      ------------     ------------

TOTAL                                                                                 $  5,425,372     $ 96,616,519
                                                                                      ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                    $    423,143     $  4,625,212
  Line of credit                                                                           847,764               --
  Current maturities of notes payable                                                      213,185          199,908
  Current maturities of capital lease obligations                                           64,322          416,154
  Accrued salaries and other accrued expenses                                            2,610,929        9,960,106
  Income taxes payable                                                                          --        1,314,191
  Deferred revenue                                                                         621,329        1,907,675
                                                                                      ------------     ------------

      Total current liabilities                                                          4,780,672       18,423,246

COMMITMENTS AND CONTINGENCIES

Long-term notes payable, net                                                                    --           61,414
Long-term capital leases, net                                                                   --          170,868
Long-term deferred taxes                                                                        --          697,683
Other non-current liabilities                                                                   --          125,157

STOCKHOLDERS' EQUITY:
  Common stock, no par value - 13,068 no par value shares issued and outstanding
    in 1997; and 7,955,952, .001 par value, shares issued and outstanding in 1998          318,068            7,956
    Stock warrants                                                                              --          450,000
    Additional paid-in capital                                                                  --       83,016,905
    Common stock payable                                                                        --        5,299,819
    Deferred compensation                                                                       --       (4,423,460)
    Retained earnings                                                                      326,632       (7,204,019)
    Cumulative translation adjustment                                                           --           (9,050)
                                                                                      ------------     ------------
      Total stockholders' equity                                                           644,700       77,138,151
                                                                                      ------------     ------------

TOTAL                                                                                 $  5,425,372     $ 96,616,519
                                                                                      ============     ============
</TABLE>



See notes to condensed consolidated financial statements.


                                      -2-

<PAGE>   3
         BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                     NINE MONTHS                       THREE MONTHS
                                                  ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                                               1997              1998              1997              1998
                                          ------------      ------------      ------------      ------------
<S>                                       <C>               <C>               <C>               <C>         
REVENUES                                  $ 10,091,242      $ 50,403,609      $  3,693,171      $ 26,737,895

COST OF REVENUES                             7,966,517        36,375,879         3,061,609        19,504,780
                                          ------------      ------------      ------------      ------------

      Gross profit                           2,124,725        14,027,730           631,562         7,233,115

OPERATING EXPENSES:
  Selling, general and administrative        1,209,862         9,933,840           708,460         5,336,979
  Stock compensation expense                   305,000         3,159,614                --         1,895,718
  In process research & development                 --         3,000,000                --                --
  Depreciation and amortization                109,868         1,079,832            42,901           643,597
                                          ------------      ------------      ------------      ------------

      Total operating expenses               1,624,730        17,173,286           751,361         7,876,294
                                          ------------      ------------      ------------      ------------

INCOME (LOSS) FROM OPERATIONS                  499,995        (3,145,556)         (119,799)         (643,179)

OTHER INCOME NET                                26,105           229,291             1,500            94,572

INTEREST EXPENSE                                76,193            68,467            25,531             6,726
                                          ------------      ------------      ------------      ------------


INCOME (LOSS) BEFORE INCOME TAXES              449,907        (2,984,732)         (143,830)         (555,333)

INCOME TAX EXPENSE (Benefit)                     6,466         1,255,896           (46,461)          563,427
                                          ------------      ------------      ------------      ------------

NET INCOME (LOSS)                         $    443,441      $ (4,240,628)     $    (97,369)     $ (1,118,760)
                                          ============      ============      ============      ============

Shares outstanding (Note 4):

             Basic                             933,086         5,552,696         1,012,306         8,442,305
                                          ============      ============      ============      ============
                             
             Diluted                           933,086         5,572,954         1,012,306         8,456,920
                                          ============      ============      ============      ============


Earnings (loss) per share (Note 4):

             Basic                        $       0.48      $      (0.76)     $      (0.10)     $      (0.13)
                                          ============      ============      ============      ============

             Diluted                      $       0.48      $      (0.76)     $      (0.10)     $      (0.13)
                                          ============      ============      ============      ============
</TABLE>




See notes to condensed consolidated financial statement


                                      -3-

<PAGE>   4



        BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                Three Months        Nine Months
                                                            ended September 30,  Ended September 30,
                                                                    1998              1998
                                                                ------------      ------------
<S>                                                             <C>               <C>        

OPERATING ACTIVITIES:
  Net loss                                                      (1,118,760)       (4,240,628)
  Adjustments to reconcile net  (loss) to net cash
    provided by (used in) operating activities:
  Cumulative translation adjustment                                   (6,423)           (9,050)
  Depreciation and amortization                                      643,597         1,079,832
  Additions (reductions) to allowance for doubtful accounts          245,699           446,546
  In process research and development expense                             --         3,000,000
  Compensation expense on issuance of common stock                 1,895,718         3,159,614
  Cash provided by (used in) operating working capital:
  Trade accounts receivable                                       (3,004,041)       (6,144,259)
  Accounts receivable - employee                                     (43,494)          (40,139)
  Income tax refund receivable                                            --            37,515
  Unbilled revenue                                                (1,258,454)          101,889
  Prepaid and other assets                                        (1,203,177)         (824,943)
  Accounts payable                                                  (383,984)          183,361
  Accrued salaries and other accrued expenses                        434,167        (5,311,504)
  Income taxes payable                                               242,293         1,279,101
                                                                ------------      ------------

      Net cash used in operating activities                       (3,556,859)       (7,282,665)
                                                                ------------      ------------

INVESTING ACTIVITIES:
   Cash paid to acquire founding companies                                --       (41,890,581)
   Cash paid for acquisitions                                     (1,157,183)       (1,157,183)
   Additions of property and equipment                              (468,176)         (709,874)
                                                                ------------      ------------

      Net cash used in financing activities                       (1,625,359)      (43,757,638)
                                                                ------------      ------------


FINANCING ACTIVITIES:
  Borrowings under (payments on) line of credit                            0          (175,000)
  Proceeds from (payments on) capital lease obligations              (82,535)         (181,545)
  Payments on short-term debt and notes payable                      133,670        (1,210,638)
  Net proceeds from issuance of common stock                              --        59,089,875
                                                                ------------      ------------

      Net cash provided by financing activities                       51,135        57,522,692
                                                                ------------      ------------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                     (5,131,083)        6,482,389

CASH AND CASH EQUIVALENTS:
  Beginning of period                                             11,616,466             2,994
                                                                ------------      ------------

  End of period                                                 $  6,485,383      $  6,485,383
                                                                ============      ============

SUPPLEMENTAL INFORMATION:

  Interest paid                                                 $     20,587      $     82,328
                                                                ============      ============

  Property and equipment financed through capital leases                  --      $    253,888
                                                                ============      ============
</TABLE>



See notes to condensed consolidated financial statements.



                                      -4-
<PAGE>   5

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION

      BrightStar Information Technology Group, Inc. (the "Company" or
      "BrightStar") was formed to create a international provider of information
      technology consulting services. BrightStar has conducted no operations
      prior to April 16, 1998, and acquired the Founding Companies concurrently
      with and as a condition to the closing of its initial public offering on
      April 16, 1998.

      Concurrent with and as a condition to the closing of the offering,
      BrightStar acquired all of the outstanding capital stock or substantially
      all the net assets of Brian R. Blackmarr and Associates, Inc.
      ("Blackmarr"), Integrated Controls, Inc., Mindworks Professionals
      Education Group, Inc., Software Innovators, Inc., Zelo Group, Inc.,
      Software Consulting Services America, LLC and SCS Unit Trust (the
      "Founding Companies"). The acquisitions will be accounted for using the
      purchase method of accounting, with Blackmarr being treated as the
      accounting acquirer, in accordance with Staff Accounting Bulletin No. 97
      ("SAB 97").

      The accompanying historical condensed consolidated financial statements
      include only the historical financial information for Blackmarr, the
      accounting acquirer, prior to the IPO, which elected to change its fiscal
      year-end from September 30 to December 31 and the "Founding Companies"
      from May 1, 1998 through September 30, 1998. These financial statements
      have not been audited. In the opinion of the Company's management, the
      financial statements reflect all adjustments necessary to present fairly
      the results of operations for the three and nine month periods ended
      September 30, 1998 and 1997, the Company's financial position at December
      31, 1997 and September 30, 1998, and the cash flows for the three and nine
      month periods ended September 30, 1998. These adjustments are of a normal
      recurring nature.

      Certain information and footnote disclosures normally included in
      financial statements prepared in accordance with generally accepted
      accounting principles have been omitted from the interim financial
      statements presented in the Quarterly Report on Form 10-Q. Therefore,
      these financial statements should be read in conjunction with the
      Company's registration statement on Form S-1.

      The operating results of the Company for the three and nine month period
      ended September 30, 1998, are not necessarily indicative of the results
      that may be expected for the Company for the entire year.

2.    ACQUISITION OF FOUNDING COMPANIES

      The following unaudited pro forma information gives effect to (i) the
      acquisitions (the "Acquisitions") by BrightStar of the outstanding capital
      stock or substantially all the net assets of the Founding Companies and
      (ii) a share exchange with BIT Investors, LLC ("BITI") and senior
      management of BrightStar for all outstanding common stock of BIT Group
      Services, Inc. ("BITG") and (iii) the closing of BrightStar's initial
      public offering and the application of the net proceeds therefrom. The
      unaudited pro forma information listed below gives effect to the
      acquisitions, the share exchange and the offering as if they had occurred
      on January 1, 1998, and the acquisitions completed during the quarter as
      if they had occurred at the beginning of the period presented.



                                      -5-
<PAGE>   6
      The Company believes the combination of the Founding Companies and other
      acquisitions will provide opportunities to improve operating margins and
      increase profitability, including the consolidation of certain duplicative
      administrative functions. The pro forma financial information herein
      reflects neither expected savings nor margin improvements but does reflect
      management's estimate of certain incremental corporate general and
      administrative costs.

      On August 31, 1998 the Company completed the acquisition of Total Business
      Quality Associates, Inc. (TBQ), a provider of SAP consulting and
      implementing services.

      Effective September 30, 1998 the Company completed the acquisition of
      Prosap Australia Pty. LTD (Prosap). Prosap is a SAP certified National
      Implementation Partner located in Sydney, Australia.

      During the quarter the Company entered into a joint venture with ST
      Computer Systems & Services Limited located in Singapore. The joint
      venture will provide consulting and implementation services to clients in
      that region.

      The pro forma adjustments are based on preliminary estimates, available
      information and certain assumptions that management deems appropriate, but
      which may be revised as additional information becomes available. The pro
      forma financial information does not purport to represent what the
      Company's results of operations would actually have been if such
      transactions had in fact occurred on the dates assumed and is not
      necessarily representative of the Company's financial position or results
      of operations for any future period. Since the acquired companies were not
      under common control or management, historical combined pro forma results
      may not be comparable to, or indicative of, future performance.

<TABLE>
<CAPTION>
                                                         THREE MONTH PERIOD
                                                      ENDED SEPTEMBER 30, 1998
                                                        (IN THOUSANDS, EXCEPT
        PRO FORMA                                             PER SHARE
        --------------------------------------------------------------------
        DATA)
<S>                                                            <C>    
        Revenues                                               $29,601
        Net income                                             $ 1,157
        Net income per share - diluted                         $  0.14
</TABLE>

      The computation of pro forma net income per share of common stock
      presented above is based on 8,456,320 fully diluted shares of common stock
      outstanding as of September 30, 1998.


                                      -6-
<PAGE>   7

         BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                 PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                       THREE MONTH PERIOD
                                       ENDED SEPTEMBER 30,
                                             1998
                                          -----------
<S>                                       <C>        
REVENUES                                  $29,601,320

COST OF REVENUES                           21,416,869

      Gross profit                          8,184,451

OPERATING EXPENSES:
  Selling, general and administrative       5,567,483
  Stock compensation expense                       --
  In process research & development                --
  Depreciation and amortization               707,227
                                          -----------
      Total operating expenses              6,274,710
                                          -----------

INCOME FROM OPERATIONS                      1,909,741

OTHER INCOME                                   81,647

INTEREST EXPENSE                                   --
                                          -----------

INCOME (LOSS) BEFORE INCOME TAXES           1,991,388

INCOME TAX EXPENSE                            834,585
                                          -----------

NET INCOME (LOSS)                         $ 1,156,803
                                          ===========

Shares outstanding:
         Basic                              8,442,035
         Diluted                            8,456,320
Earnings per share
         Basic                            $      0.14
         Diluted                          $      0.14
</TABLE>




                                      -7-
<PAGE>   8


3.    COMPREHENSIVE INCOME

      SFAS No. 130, "Reporting Comprehensive Income," became effective as of the
      first quarter of 1998. This statement requires companies to report and
      display comprehensive income and its components (revenues, expenses, gains
      and losses). Comprehensive income includes all changes in equity during a
      period except those resulting from investment by owners and distributions
      to owners. For the Company, comprehensive income was $(1,125,184) and
      $(4,249,879) for the three and nine months ended in 1998, respectively,
      due to the effect of the cumulative foreign currency translation
      adjustment, and is the same as net income reported in the 1997 periods.

4.    EARNINGS PER SHARE

      Earnings per share is based on the weighted average number of common stock
      and common stock equivalents outstanding during each period. The weighted
      average shares used to calculate earnings per share on the historical
      statement of operations has been determined by converting the number of
      outstanding shares of Blackmarr during the periods presented, based upon
      the ratio of 77 to 1, which was the ratio received as a result of the
      offering.

5.    CREDIT FACILITY

      In connection with Brightstar's initial public offering of common stock,
      Banque Paribas issued a commitment to provide a credit facility for
      Brightstar in April 1998. The commitment was renewed on August 14, 1998
      and remained effective through September 30, 1998. The Company has secured
      an interim credit facility from Banque Paribas (Paribas) in the amount of
      $10.0 million as Paribas continues its syndication efforts to deliver a
      $30.0 million facility. Upon successful completion of the Paribas
      syndication, a $30.0 million credit facility will be available to
      Brightstar. Under the terms of the Banque Paribas agreement, the Credit
      Facility will be available to support working capital needs, to issue
      letters of credit, to refinance Founding Company indebtedness, if
      necessary, and for general corporate purposes; and the Credit Facility
      will be secured by liens on substantially all of the Company's assets
      (including accounts receivable) and a pledge of the Company's equity
      interest in each of its subsidiaries. The Credit Facility will require the
      Company to 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. The
      Company anticipates that the Credit Facility will be available for
      advances and repayments through November 1999, subject to extension upon
      successful syndication of the Credit Facility, and that all outstanding
      principal and accrued and unpaid interest under the Credit Facility will
      be due on such date. The Credit Facility contains provisions requiring
      mandatory prepayment of outstanding borrowings from the issuance of debt
      or equity securities for cash, excluding certain equity issued in
      connection with future acquisitions, and cash realized in connection with
      permitted asset sales outside of the ordinary course of business.

6.    SUBSEQUENT EVENTS

      The Company is undertaking an effort to streamline its operations and more
      closely integrate its individual subsidiaries and business lines. As a
      result, the Company anticipates taking a one-time restructuring charge in
      the fourth quarter estimated to be between $2 million and $3 million. The
      Company believes these actions will provide for a more focused management
      structure and provide incremental operating efficiencies over the long
      term.


                                      -8-
<PAGE>   9



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


      INTRODUCTION - BrightStar was organized in July 1997 and completed its
      public offering April 16, 1998. BrightStar was formed to provide
      enterprise-wide business and technology solutions to Fortune 1000
      companies and other large organizations. BrightStar provides these
      services to a diverse client base including but not limited to retail,
      industrial, petrochemical, manufacturing and distribution.

      The Company's services and products include ERP software implementation,
      consulting, software application development, systems integration and
      outsourcing, training as well as upgrades and support related to software
      products. The services are generally performed at clients' locations and
      at the Company's facilities. In providing ERP implementation and other IT
      services, the Company may assume responsibility for project management and
      bill the client on a time and material or fixed fee basis.

      Revenue is recognized as services are rendered. 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 Companies' 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 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 primarily consists 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, (v) recruiting and
      training and (vi) other administrative expenditures.

      In July of 1996, the Securities and Exchange Commission (the "SEC") issued
      Staff Accounting Bulletin No. 97 ("SAB 97") relating to business
      combinations immediately prior to an initial public offering. SAB 97
      requires that these combinations be accounted for using the purchase
      method of accounting and requires that one of the companies be designated
      as the accounting acquirer. Accordingly, for financial statement purposes,
      BR Blackmarr and Associates, Inc. ("BRBA") has been designated as the
      acquiring company because its current shareholders, in the aggregate,
      acquired more common stock than the former shareholders of any of the
      other Founding Companies in conjunction with the acquisitions. The excess
      of the aggregate purchase price paid for the Founding Companies other that
      BRBA over the fair value of the net assets to be acquired by BrightStar is
      recorded as goodwill.


                                      -9-
<PAGE>   10


      RESULTS OF OPERATIONS

      Financial results for the quarter and nine months ended September 30, 1998
      contain the operations of the seven Founding Companies from the date of
      the IPO, and other acquisitions from their dates of acquisition. Financial
      results for the period and nine months ended September 30, 1997 contain
      only the operations of Blackmarr the accounting acquirer, for the period
      prior to the IPO. Consequently, the primary reason for variances between
      periods is the combined operations of the Founding Companies from their
      dates of acquisition.

      RESULTS OF OPERATIONS

      Specific events which occurred during 1998 are as follows:

      REVENUE - increased primarily due to new ERP contracts and additional
      custom application development projects. Revenues from Training and
      Education remained relatively constant during the period.

      COST OF REVENUES - increased in proportion to the additional ERP and
      custom application development revenue.

      SELLING, GENERAL AND ADMINISTRATIVE - remained relatively constant during
      the period. The Company has a sufficient amount of administrative
      personnel to support its current operations. The Company continues to
      invest in its infrastructure and internal reporting systems in order to
      support its growth .

      STOCK COMPENSATION EXPENSE - is a non-cash expense item related to the
      issuance of stock to certain Founders as a part of the IPO. This amount is
      being amortized over a 12 month period.

      IN PROCESS RESEARCH AND DEVELOPMENT - is a one-time non-cash expense
      related to the research and development costs attributable to the Founding
      companies at the time of the IPO.

      DEPRECIATION AND AMORTIZATION - remained relatively constant during the
      period.

      LIQUIDITY AND CAPITAL RESOURCES

      BrightStar is a company that conducts all of its operations through its
      subsidiaries. Accordingly, the Company's principal sources of liquidity
      are the cash flows of its subsidiaries, the cash available from the
      Credit Facility and the unallocated net proceeds from the Company's 
      public offering.

      As of September 30, 1998, and as a result of the successful completion of
      a public offering on April 16, 1998, BrightStar had $ 6.4 million in cash
      and cash equivalents and no borrowings outstanding from commercial lenders
      other than $.7 million of capital lease obligations. Subsequent to
      September 30, 1998 the Company was obligated to pay $4.1 million in cash
      and issued notes payable of approximately $4.7 million in connection with
      the acquisition of Prosap. 



                                      -10-

<PAGE>   11



      The Company expects to install or upgrade its accounting and management
      information systems and to install an internal network and communications
      system to facilitate exchange of information among the Founding Companies.
      Management presently anticipates that expenditures for these items will
      total approximately $500,000 over the next year; however, no assurance can
      be made with respect to the actual timing and amount of such expenditures.

      The Company is undertaking an effort to streamline its operations and more
      closely integrate its individual subsidiaries and business lines. As a
      result, the Company anticipates taking a one-time restructuring charge in
      the fourth quarter estimated to be between $2 million and $3 million. The
      Company believes these actions will provide for a more focused management
      structure and provide incremental operating efficiencies over the long
      term.

      The Company intends to continue to pursue acquisition opportunities. The
      timing, size or success of any acquisition effort and the associated
      potential capital commitments are unpredictable. The Company expects to
      fund future acquisitions through the issuance of additional equity, as
      well as through a combination of working capital, cash flow from
      operations and borrowings, including borrowings under the Credit Facility.

      The Company believes that cash flow from operations, borrowings under the
      Credit Facility and the unallocated net proceeds of the offering will be
      sufficient to fund its requirements for the foreseeable future.

      INFLATION - Due to the relatively low levels of inflation experienced in
      the last three years, inflation did not have a significant effect on the
      results of operations of any of the Founding Companies in those periods.

      YEAR 2000 COMPLIANCE - All of the Company's management information and
      other date-referenced systems, including computer software and hardware,
      are Year 2000 compliant. There are no internal matters, therefore, that
      will affect the Company's ability to process systems date-referenced
      information when the Year 2000 arrives. The Company does not know the
      extent to which the current preparedness of its external business
      associates could adversely affect the Company's business transactions.
      There can be no assurance that such business associates will be compliant.

      NEW ACCOUNTING STANDARDS - SFAS No. 131, "Disclosures About Segments of an
      Enterprise and Related Information," will become effective in 1998. This
      statement establishes standards for defining and reporting business
      segments. The Company is currently determining its reportable segments.
      The adoption of SFAS No. 131 will not affect the Company's consolidated
      financial position, results of operations or cash flows.

      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 certain important factors,
      especially the timing and magnitude of technological advances; the
      performance of recently acquired businesses; 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

                                      -11-

<PAGE>   12

      information technology and business processes; uncertainties surrounding
      budget reductions or changes in funding priorities or existing government
      programs and the cost of attracting and retaining highly skilled
      personnel.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      This item is not applicable to the Registrant.

PART II - OTHER INFORMATION


      None.


ITEM 1.      LEGAL PROCEEDINGS

      None.

ITEM 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS

      This item is not applicable to the Registrant.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

      None.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

      The sole stockholder of the Company held a special meeting on January 26,
      1998, to consider action with respect to an amendment to the certificate
      of incorporation of the Company, creating two million shares of a new
      class of capital stock designated as Restricted Common Stock. The sole
      stockholder of the Company held a special meeting on February 27, 1998, to
      approve and ratify the long-term incentive plan adopted by the Company's
      board of directors. Both actions were approved by the sole stockholder.

ITEM 5.      OTHER INFORMATION

      None.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

            27 Financial Data Schedule

      (b)   Reports on Form 8-K

            None.


                                      -12-

<PAGE>   13



                                   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 thereunto
duly authorized.


                                     BRIGHTSTAR INFORMATION
                                     TECHNOLOGY GROUP, INC.



                                     By:   /s/  MARSHALL G. WEBB
                                        ---------------------------------------
                                                Marshall G. Webb
                                            Chief Executive Officer

                                     By:   /s/  MICHAEL A. OBER
                                        ---------------------------------------
                                                Michael A. Ober
                                         President and Chief Operating Officer


                                     By:   /s/  DANIEL M. COFALL
                                        ---------------------------------------
                                                Daniel M. Cofall
                                            Chief Financial Officer

                                     By:   /s/  PATRICK R. QUINN
                                        ---------------------------------------
                                                Patrick R. Quinn
                                            Chief Accounting Officer



                                      -13-