BRIGHTSTAR INFORMATION TECHNOLOGY GROUP INC, S-1/A, 2000-12-18

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP INC
S-1/A, 2000-12-18
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 2000
REGISTRATION NO. 333-42282
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

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<TABLE>

<S> <C> <C>
DELAWARE 7373 76-0553110
(State or Other Jurisdiction of (Primary standard industrial (I.R.S. Employer
Incorporation or Organization) classification code number) Identification Number)
</TABLE>

4900 HOPYARD DRIVE, SUITE 200
PLEASANTON, CALIFORNIA 94588
(925) 251-0000
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)

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JOSEPH A. WAGDA
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4900 HOPYARD DRIVE, SUITE 200
PLEASANTON, CALIFORNIA 94588
(925) 251-0000
FAX: (925) 251-0001
(Name, Address Including Zip Code, and Telephone Number Including Area Code,
of Agent for Service)

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COPIES TO:
RICHARD S. GREY, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
OLD FEDERAL RESERVE BANK BUILDING
400 SANSOME STREET
SAN FRANCISCO, CA 94111

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
At such time or times after the effective date of this registration statement
as the selling stockholders shall determine.

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If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the securities act, please check the following box and list
the securities act registration statement number of the earlier effective
registration statement for the same offering. [ ] _______________

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the securities act, check the following box and list the securities act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
AMOUNT PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PRICE PER SHARE(2) OFFERING PRICE (2) FEE(3)
--------------------------------------------- ------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Common stock, $.001 par value 3,085,853 $3.75 $11,571,948.00 $3,054.99
=================================================================================================================================
</TABLE>

(1) Shares of common stock that may be offered pursuant to this
Registration Statement consist of 709,555 shares previously issued in a private
placement, 668,468 shares previously issued in connection with a purchase of
assets, 137,830 shares issuable upon exercise of options, 45,000 shares issuable
upon exercise of fixed warrants and 1,525,000 issued upon exercise of fixed and
adjustable warrants.

(2) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the high and low sale prices of the
common stock as reported on The Nasdaq National Market on July 21, 2000 pursuant
to Rule 457(c).

(3) $3,678.96 previously submitted.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

<PAGE> 2

THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED DECEMBER 18, 2000

PRELIMINARY PROSPECTUS

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

3,085,853 SHARES

COMMON STOCK

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGE 2 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

----------

The selling stockholders identified in this prospectus are offering up
to 3,085,853 of our common stock. Our common stock is quoted on the Nasdaq
National Market under the symbol of "BTSR." On September 15, 2000, the last sale
price of our common stock on the Nasdaq National Market was $3.00 per share.

We will not receive any of the proceeds from the sale of shares by the
selling stockholders, and we are not offering any shares for sale under this
prospectus. See "Selling Stockholders" and "Plan of Distribution" for a
description of sales of the shares by the selling stockholders.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is _____________, 2000

<PAGE> 3

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and our consolidated financial statements and the notes to those
statements appearing elsewhere in this prospectus.

OUR COMPANY

We are an e-business solutions and application service provider to
Global 2000 companies and public sector organizations. Our rapidly deployed
solutions for e-commerce, supply chain management, customer relationship
management, enterprise resource planning, corporate portal and application
outsourcing help companies transform themselves into successful e-businesses and
achieve a competitive advantage by delivering superior service to their
customers while improving operational efficiencies. We have approximately 180
employees in offices throughout the United States.

Our e-commerce practice leverages our extensive experience in
implementing enterprise applications to help companies develop, rapidly deploy,
and support business-to-business and business-to-consumer commerce sites, as
well as traditional Internet information publishing sites, that are tightly
integrated with existing information systems. Our partnerships with BroadVision,
Microsoft and other technology companies, combined with our expertise in
enterprise application integration, Web site design and Internet information
security issues enable us to put in place comprehensive e-commerce solutions
tailored to the specific needs of our clients.

RECENT DEVELOPMENTS

On June 20, 2000, we announced that revenue and earnings for the second
quarter and the remainder of the calendar year would be lower than expected and
that we are realigning our operations to improve operating margins by reducing
expenses associated with underutilized office space and personnel.

As a result of our realignment of operations, we recorded a
restructuring charge of $2.5 million in the second quarter ending June 30, 2000.
Of the total charge, approximately $1.0 million was reserved for ongoing lease
obligations for facilities that were closed and $0.5 million was recorded to
write-down related fixed assets. The remainder of the restructuring charge
relates to the severance of approximately 90 employees, or 15% of our workforce.

We attributed the lower than expected revenues to the continued decline
in the enterprise resource planning market and slower-than-expected adoption of
our remaining service offerings.

There can be no assurance that our actions will improve profit margins,
or that our business focus will result in sustained or improved revenue and
earnings levels.

On September 8, 2000, we entered into an asset purchase agreement with
Integrated Control Systems, Inc., a Delaware corporation, and Integrated
Controls, Inc., a Louisiana corporation and our wholly-owned subsidiary
("ICON"). Pursuant to the asset purchase agreement, we sold to Integrated
Control Systems substantially all of the assets, except for accounts receivable,
and transferred certain liabilities of ICON's business of systems integration
for the energy industry, which ICON ran through its controls division. The
aggregate purchase price was $2.1 million subject to certain adjustments. The
Company recorded a third quarter charge of $1.0 million as a result of the sale.

<PAGE> 4

Michael Ober resigned as our Chief Executive Officer effective October
2, 2000. Joseph A. Wagda, a director of BrightStar since April 2000, became
interim Chief Executive Officer effective October 2, 2000. Donald W. Rowley
resigned as our Chief Financial Officer effective November 30, 2000. David L.
Christeson, Controller, since April 1999, became Vice President of Finance and
Administration effective December 1, 2000.

On October 19, 2000, we agreed in principle to a settlement with the
prior owners of Cogent Technologies, LLC ("Cogent") relating to claims by them
for (1) the unpaid balance of the purchase price for our purchase of the
business of Cogent from them in June 1999; and (2) breach of employment
agreements with us. Pursuant to the proposed settlement, in exchange for a
mutual release from the agreement by which we acquired Cogent and employment
agreements, they will receive 1,000,000 shares of our common stock, up to
$75,000 in legal fee reimbursement and monthly compensation due under the terms
of their employment agreements until June 30, 2001.

On December 13, 2000, we completed the sale of our Australian
subsidiary, BrightStar Information Technology Group Ltd., for A$10.0 million
(US $5.5 million). Of the total purchase price, A$2.5 million (US $1.4 million
was paid upon closing, with the remainder due upon completion of a contingent
earnout for the twelve month period ended December 31, 2001. We will record
a loss of US $1.1 million related to the fourth quarter sale.

Our revenue and earnings for the fourth quarter of this year and the
first quarter of 2001 will be lower than expected. We are continuing to realign
our operations to improve operating margins by reducing expenses associated with
underutilized office space and personnel.

OUR OFFICES

Our principal executive offices are located at 4900 Hopyard Road, Suite
200, Pleasanton, California 94588.

THE OFFERING

Common stock offered by the
selling stockholders................... 3,085,853 shares

Common stock to be outstanding
after the offering(1).................. 11,545,057 shares

Use of proceeds........................ We will not receive any proceeds
from sales of common stock by the
selling stockholders. See "Use of
Proceeds."

Nasdaq National Market symbol.......... BTSR

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(1) Based on the number of shares outstanding on September 30, 2000.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This prospectus may contain forward-looking statements based on our
current expectations, assumptions, estimates and projections about us and our
industry. Forward-looking statements relate to future events or to our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "could," "believes," "estimates," "predicts," "potential" or
similar expressions. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of factors more
fully described in the "Risk Factors" section and elsewhere in this prospectus.

Although we believe that the expectations reflected in any
forward-looking statements are reasonable, we cannot guarantee future events or
results. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this prospectus. Except as required by law, we undertake no obligation to
update any forward-looking statement, even if new information becomes available
or other events occur.

<PAGE> 5

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together
with other information contained in this prospectus, before you decide whether
to buy our common stock. If any of the events described in the following risks
actually occurs, the market price of our common stock could decline, and you may
lose all or part of the money you paid to buy our common stock.

OUR FAILURE TO MATERIALLY IMPROVE OUR LIQUIDITY IN THE VERY NEAR FUTURE WOULD
SUBSTANTIALLY HARM OUR OPERATIONS AND MAY RENDER US UNABLE TO CONTINUE AS A
GOING CONCERN.

As a result of our need for additional capital, we have engaged Cherry
Tree & Co. as our financial adviser to assist us in considering our strategic
alternatives. Transactions that we may consider include an investment in our
company by another company, a merger, a sale of the company or a sale of a
portion of our operations. There is no assurance that any such transaction could
be carried out before we become unable to continue as a going concern.

OUR LIMITED OPERATING HISTORY, INCLUDING THE UNCERTAINTY OF OUR FUTURE
PERFORMANCE AND ABILITY TO MAINTAIN OR IMPROVE OUR FINANCIAL AND OPERATING
SYSTEMS, MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS.

Our company was organized in July 1997 and we completed our initial
public offering in April 1998. Our limited operating history, which includes the
roll-up of multiple businesses and related financial and operating systems,
makes it difficult to evaluate our business. The uncertainty of our future
performance and ability to maintain or improve our financial and operating
systems, procedures and controls increase the risk that the value of our common
stock may decline.

OUR INCREMENTAL REVENUE WILL DECLINE IF WE ARE UNABLE TO MAINTAIN OR IMPROVE OUR
PROFITABILITY BY INCREASING NET SALES, EXPANDING THE RANGE OF OUR SERVICES, OR
ENTERING NEW MARKETS.

There can be no assurance that we will be able to maintain or improve
the profitability and expand the net sales of our business and any subsequently
acquired businesses. Various factors, including demand for e-commerce services
and our ability to expand the range of our services and to successfully enter
new markets, may affect our ability to maintain or increase the net sales of our
business or any subsequently acquired businesses. Many of these factors are
beyond the control of our company. In addition, in order to effectively manage
growth we must expand and improve our operational, financial and other internal
systems and attract, train, motivate and retain qualified employees. In many
cases, we may be required to fund substantial expenditures related to growth and
client acquisition initiatives in advance of potential revenue streams generated
from such initiatives. Expenditures related to our growth and client acquisition
initiatives may negatively affect our operating results, and we may not realize
any incremental revenue from our growth and client acquisition efforts.

FAILURE OF OUR MANAGEMENT TO SUCCESSFULLY MANAGE INTERNAL GROWTH COULD
NEGATIVELY IMPACT OUR ABILITY TO MAINTAIN OR INCREASE OUR REVENUES.

If our management does not effectively handle internal growth or our
new employees do not achieve anticipated performance levels, we may fail to
maintain or increase our revenues. In addition, our failure to successfully
integrate the founding companies and any subsequently acquired companies may
negatively impact our revenues and profitability.

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<PAGE> 6

IF WE ARE UNABLE TO ATTRACT, TRAIN AND RETAIN HIGHLY QUALIFIED PERSONNEL, THE
QUALITY OF OUR SERVICES MAY DECLINE AND WE MAY NOT SUCCESSFULLY EXECUTE OUR
INTERNAL GROWTH STRATEGIES.

Our success depends in large part upon our ability to attract, train,
motivate and retain highly skilled and experienced technical employees.
Qualified technical employees are in great demand and are likely to remain a
limited resource for the foreseeable future. Other providers of technical
staffing services, systems integrators, providers of outsourcing services,
computer consulting firms and temporary personnel agencies provide intense
competition for IT professionals with the skills and experience required to
perform the services offered by our company. Competition for these professionals
has increased in recent years, and we expect such competition will continue to
increase in the foreseeable future. There can be no assurance that we will be
able to attract and retain sufficient numbers of highly skilled technical
employees in the future. The loss of technical personnel or our inability to
hire or retain sufficient technical personnel could impair our ability to secure
and complete client engagements and could harm our business.

THE UNPREDICTABILITY OF OUR QUARTERLY OPERATING RESULTS MAY CAUSE THE PRICE OF
OUR COMMON STOCK TO DECLINE.

Our revenue and results of operations will fluctuate significantly from
quarter to quarter, or year to year, because of a number of factors which may
lead to reduced prices for our common stock, including but not limited to:

o the rate of hiring and the productivity of
revenue-generating personnel;

o the availability of qualified e-commerce professionals;

o the significance of client engagements commenced and
completed during a quarter;

o the ability to complete fixed fee engagements in a timely
and profitable manner;

o the decision of our clients to retain us for expanded or
ongoing services;

o the number of business days in a quarter;

o changes in the relative mix of our services;

o changes in the pricing of our services;

o the timing and rate of entrance into new geographic or
e-commerce markets;

o departures or temporary absences of key revenue-generating
personnel;

o the structure and timing of acquisitions;

o changes in the demand for IT services; and

o general economic factors.

The timing of revenue is difficult to forecast because our sales cycle
for some of our 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, our engagements
generally are terminable without client penalty. An unanticipated termination of
a major project could result in a higher than expected number of unassigned
persons or higher severance expenses as a result of the termination of the
under-utilized employees. Due to all of the foregoing factors, we believe
period-to-period comparisons of our revenue and operating results should not be
relied on as indicators of future performance, and the results of any quarterly
period may not be indicative of results to be expected for a full year.

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<PAGE> 7

ANY ACQUISITIONS WE MAKE COULD RESULT IN DIFFICULTIES IN SUCCESSFULLY MANAGING
OUR BUSINESS AND CONSEQUENTLY HARM OUR FINANCIAL CONDITION.

As an integral part of our business strategy, we will seek to expand by
acquiring additional e-commerce businesses. We cannot accurately predict the
timing, size and success of our acquisition efforts and the associated capital
commitments. We expect to face competition for acquisition candidates, which may
limit the number of acquisition opportunities available to us and may lead to
higher acquisition prices. There can be no assurance that we will be able to
identify, acquire or profitably manage additional businesses or successfully
integrate acquired businesses, if any, into our company without substantial
costs, delays or other operational or financial difficulties. In addition,
acquisitions involve a number of other risks, including:

o failure of the acquired businesses to achieve expected
results;

o diversion of management's attention and resources to
acquisitions;

o failure to retain key customers or personnel of the acquired
businesses; and

o risks associated with unanticipated events, liabilities or
contingencies.

Client dissatisfaction or performance problems at a single acquired
firm could negatively affect the reputation of our company. Acquisitions
accounted for as purchases may result in substantial annual noncash amortization
charges for goodwill and other intangible assets in our statements of
operations. The inability to acquire complementary e-commerce service businesses
on reasonable terms or successfully integrate and manage acquired companies, or
the occurrence of performance problems at acquired companies could result in
dilution, unfavorable accounting charges and difficulties in successfully
managing our business.

OUR INABILITY TO OBTAIN CAPITAL, USE INTERNALLY GENERATED CASH OR DEBT, OR USE
SHARES OF OUR COMMON STOCK TO FINANCE FUTURE ACQUISITIONS COULD IMPAIR THE
GROWTH AND EXPANSION OF OUR BUSINESS.

Reliance on internally generated cash or debt to complete acquisitions
could substantially limit our operational and financial flexibility. The extent
to which we will be able or willing to use shares of our common stock to
consummate acquisitions will depend on our market value from time to time and
the willingness of potential sellers to accept it as full or partial payment.
Using shares of our common stock for this purpose may result in significant
dilution to then existing stockholders. To the extent that we are unable to use
our common stock to make future acquisitions, our ability to grow through
acquisitions may be limited by the extent to which we are able to raise capital
for this purpose through debt or additional equity financings. No assurance can
be given that we will be able to obtain the necessary capital to finance a
successful acquisition program or our other cash needs. If we are unable to
obtain additional capital on acceptable terms, we may be required to reduce the
scope of expansion. In addition to requiring funding for acquisitions, we may
need additional funds to implement our internal growth and operating strategies
or to finance other aspects of our operations. Our failure to (i) obtain
additional capital on acceptable terms, (ii) to use internally generated cash or
debt to complete acquisitions because it significantly limits our operational or
financial flexibility, or (iii) to use shares of our common stock to make future
acquisitions may hinder our ability to actively pursue our acquisition program.

BECAUSE THE E-COMMERCE SERVICE MARKET IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS
TO ENTRY, WE MAY LOSE MARKET SHARE TO LARGER COMPANIES THAT ARE BETTER EQUIPPED
TO WEATHER A DETERIORATION IN MARKET CONDITIONS DUE TO INCREASED COMPETITION.

The market for e-commerce services is highly competitive and
fragmented, is subject to rapid change and has low barriers to entry. We compete
for potential clients with systems consulting and implementation firms,
multinational accounting firms, software application firms, service groups of
computer equipment companies, facilities management companies, general
management consulting firms, programming companies and technical personnel and
data processing outsourcing companies. Many of these competitors have
significantly greater financial, technical and marketing resources and greater
name recognition than our company. In addition, we compete with our clients'
internal management information systems departments. We believe the principal
competitive factors in the e-commerce services industry include:

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o responsiveness to client needs;

o availability of technical personnel;

o speed of applications development;

o quality of service;

o price;

o project management capabilities;

o technical expertise; and

o ability to provide a wide variety of e-commerce services.

We believe that our ability to compete also depends in part on a number of
factors outside of our control, including:

o the ability of our competitors to hire, retain and motivate
qualified technical personnel;

o the ownership by competitors of software used by potential
clients;

o the development of software that would reduce or eliminate
the need for certain of our services;

o the price at which others offer comparable services; and

o the extent of our competitors' responsiveness to client
needs.

We expect that competition in the e-commerce services industry could
increase in the future, partly due to low barriers to entry. Increased
competition could result in price reductions, reduced margins or loss of market
share for us and greater competition for qualified technical personnel. There
can be no assurance that we will be able to compete successfully against current
and future competitors. If we are unable to compete effectively, or if
competition among e-commerce services companies results in a deterioration of
market conditions for e-commerce services companies, we could lose market share
to our competitors.

IF OUR RELATIONSHIP WITH SAP DETERIORATES OR IS DISCONTINUED, WE MAY LOSE A
SUBSTANTIAL PORTION OF OUR CLIENT AND SUBCONTRACTING REVENUE.

Our company has a significant relationship with SAP AG from which we
derive substantial client and subcontracting revenues and business referrals. We
are authorized to implement and service SAP's technology under terms of our SAP
Implementation Partner Agreement with SAP. We subcontract projects from SAP;
however, SAP is not obligated to refer business to or subcontract our company.
Deterioration or discontinuation of this relationship, or termination of our
status as an SAP implementation partner, could harm our revenue growth.

OUR FAILURE TO MEET CLIENT'S EXPECTATIONS IN THE PERFORMANCE OF OUR SERVICES,
AND THE RISKS AND LIABILITIES ASSOCIATED WITH PLACING OUR EMPLOYEES AND
CONSULTANTS IN THE WORKPLACES OF OTHERS COULD GIVE RISE TO NUMEROUS CLAIMS
AGAINST US.

Many of our engagements involve projects that are critical to the
operations of our clients' businesses and provide benefits that may be difficult
to quantify. Our failure or inability to meet a client's expectations in the
performance of our services could result in a material adverse change to the
client's operations and therefore could give rise to claims against us or damage
our reputation. In addition, we are exposed to various risks and liabilities
associated with placing our employees and consultants in the workplaces of
others, including possible claims of errors and omissions, misuse of client
proprietary information, misappropriation of funds, discrimination and
harassment, theft of client property, other criminal activity or torts and other
claims. Our company has experienced a number of claims of these types and there
can be no assurance that we will not experience such claims in the future.

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In addition, a percentage of our projects are billed on a fixed-fee
basis. As a result of competitive factors or other reasons, we could increase
the number and size of projects billed on a fixed-fee basis. Our failure to
estimate accurately the resources and related expenses required for a fixed-fee
project or failure to complete contractual obligations in a manner consistent
with the project plan upon which a fixed-fee contract is based could give rise
to additional claims.

OUR FAILURE TO KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES IN THE E-COMMERCE
INDUSTRY OR NEW INDUSTRY STANDARDS MAY RENDER OUR TECHNOLOGIES OBSOLETE.

Our success will depend in part on our ability to enhance our existing
products and services, to develop and introduce new products and services and to
train our consultants in order to keep pace with continuing changes in
e-commerce, evolving industry standards and changing client preferences. There
can be no assurance that we will be successful in addressing these issues or
that, even if these issues are addressed, we will be successful in the
marketplace. In addition, products or technologies developed by others may
render our services noncompetitive or obsolete. Our failure to address these
issues successfully could cause our revenues to decrease and impede our growth.

OUR FAILURE TO RETAIN ANY OF OUR KEY MANAGEMENT PERSONNEL, TO HIRE COMPARABLE
REPLACEMENTS OR TO ENFORCE NON-COMPETE AGREEMENTS AGAINST FORMER MANAGEMENT
MEMBERS COULD HARM THE IMPLEMENTATION OF OUR GROWTH STRATEGIES.

Our success will depend on the continuing efforts of our executive
officers and the senior management of our founding companies, and will likely
depend on the senior management of any significant businesses we acquire in the
future. Each of our employment agreements with our senior management and other
key personnel provides that the employee will not compete with us during the
term of the agreement and following the termination of the agreement for a
specified term (ranging from one to three years) in a specified geographical
area. In most states, however, a covenant not to compete will be enforced only
to the extent it is necessary to protect a legitimate business interest of the
party seeking enforcement, does not unreasonably restrain the party against whom
enforcement is sought and is not contrary to the public interest. This
determination is made based on all the facts and circumstances of the specific
case at the time enforcement is sought. Thus, there can be no assurance that a
court will enforce such a covenant in a given situation. Failure to retain any
of our key management personnel and to attract and retain qualified replacements
could harm the implementation of our growth strategies.

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<PAGE> 10

OUR CERTIFICATE OF INCORPORATION AND DELAWARE LAW CONTAIN ANTI-TAKEOVER
PROVISIONS THAT COULD DETER TAKEOVER ATTEMPTS, EVEN IF A TRANSACTION WOULD BE
BENEFICIAL TO OUR STOCKHOLDERS.

Our certificate of incorporation, as amended, and provisions of
Delaware law could make it difficult for a third party to acquire us, even
though an acquisition might be beneficial to our stockholders. Our certificate
of incorporation authorizes our board of directors to issue, without stockholder
approval, one or more series of preferred stock having such preferences, powers
and relative, participating, optional and other rights (including preferences
over the common stock with respect to dividends, distributions and voting
rights) as our board of directors may determine. The issuance of this
"blank-check" preferred stock could render more difficult or discourage an
attempt to obtain control of our company by means of a tender offer, merger,
proxy contest or otherwise. In addition, our certificate of incorporation
contains a prohibition of stockholder action without a meeting by less than
unanimous written consent. This provision may also have the effect of inhibiting
or delaying a change in control of our company. See "Description of Capital
Stock."

WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS ON OUR COMMON STOCK IN THE
FORESEEABLE FUTURE.

We intend to retain earnings, if any, to finance the expansion of our
business and for general corporate purposes, including future acquisitions, and
we do not anticipate paying any cash dividends on our common stock for the
foreseeable future. In addition, we expect that any credit facility obtained by
us will contain restrictions on the ability of our company to pay dividends
without the consent of the lender.

USE OF PROCEEDS

We will not receive any proceeds from the sale of common stock by the
selling stockholders under this registration statement.

DIVIDEND POLICY

We have never declared nor paid cash dividends on our common stock. Our
credit facility contains restrictions on our ability to pay cash dividends. We
currently intend to retain future earnings, if any, to fund the development and
growth of its business and do not anticipate paying any cash dividends in the
foreseeable future.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the
symbol "BTSR". The following table sets forth for the quarterly periods
indicated the range of high and low sales prices for our common stock since our
initial public offering effective as of April 17, 1998.

<TABLE>
<CAPTION>
1998 1999 2000
--------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter ...... $11.00 $ 3.69 12.94 5.63
Second Quarter ..... $20.75 $10.00 $ 5.84 $ 3.12 9.00 2.56
Third Quarter ...... $14.25 $ 5.50 $ 5.00 $ 2.87 4.125 1.875
Fourth Quarter ..... $10.50 $ 5.00 $10.50 $ 3.00
</TABLE>

As of July 21, 2000, there were 140 stockholders of record of our
common stock.

8
<PAGE> 11

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for us is derived
from our financial statements and related notes thereto. The following selected
consolidated financial data should be read in connection with and is qualified
in its entirety by our financial statements and related notes thereto and other
financial information included elsewhere in this Form S-1.

We were organized in July 1997 and completed our initial public
offering April 16, 1998. Concurrent with our initial public offering, we
acquired (a) the outstanding capital stock of Brian R. Blackmarr and Associates,
Inc., or "Blackmarr", Integrated Controls, Inc., or "ICON", Mindworks
Professionals Education Group, Inc., Software Innovators, Inc., or "SII", Zelo
Group, Inc. and (b) substantially all the net assets of Software Consulting
Services America, LLC, or "SCS America" and SCS Unit Trust, or "SCS Australia"
and together with Blackmarr, ICON, Mindworks, SII, Zelo, SCS America and SCS
Australia , representing our "founding companies" and (c) executed a share
exchange with BIT Investors, LLC, or "BITI" and our senior management for all
outstanding common stock of BIT Group Services, Inc., or "BITG". The
acquisitions were accounted for using the purchase method of accounting, with
Blackmarr being reflected as the "accounting acquirer."

The following tables present selected historical data for Blackmarr,
the accounting acquirer, for the years 1995 through 1997. The 1998 data
presented in the following table for us is comprised of (i) the results of
operation of Blackmarr for the year ended December 31, 1998, (ii) the results of
operations of the founding companies for the periods subsequent to their
acquisitions and (iii) the results of the operations of companies acquired by us
after our initial public offering.

The Blackmarr results have been derived from (i) the audited financial
statements of Blackmarr for the years ended and as of September 30, 1995, 1996
and 1997 and the year ended December 31, 1998.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
-------------------------------------- --------------------------
HISTORICAL OPERATIONS DATA: 1995 1996 1997 1998 1999
--------------------------- ------ ------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $7,043 $ 9,227 $ 12,190 $ 63,584 $ 103,449
Cost of revenue..................... 5,592 7,659 10,063 45,409 76,476
Selling, general and
administrative expenses......... 1,413 1,555 1,668 15,445 26,797
Stock compensation expense.......... -- -- 305 6,766 468
In process research & development... -- -- -- 3,000 --
Restructure charge.................. -- -- -- 7,614 --
Depreciation and amortization....... 78 101 135 1,652 3,056
------ ------- -------- ---------- ----------

Income (loss) from continuing
operations...................... (40) (88) 19 (16,302) (3,348)
Other income, net................... 186 124 33 158 (15)
Interest expense.................... (66) (67) (96) (66) (518)
Income tax provision (benefit)...... 40 -- 6 612 (1,313)
Income (loss) on discontinued
operations...................... -- -- -- 278 (7,447)
------ ------- -------- ---------- ----------
Net income (loss).......... $ 40 $ (31) $ (50) $ (16,544) $ (10,015)
====== ======= ======== ========== ==========
Average common shares:
Basic and diluted............... -- -- -- 6,275,031 8,642,034
</TABLE>

9
<PAGE> 12

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------- ------------- ------------- -------------
HISTORICAL OPERATIONS DATA: 2000 1999 2000 1999
--------------------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue............................. $ 13,923 $ 26,830 $ 51,624 $ 81,841
Cost of revenue..................... 9,269 20,072 35,013 60,604
Selling, general and
administrative expenses......... 7,694 5,674 22,756 18,034
Stock compensation expense.......... -- 468
Restructure charge.................. -- -- 2,525
Write down of goodwill.............. 24,793 -- 24,793 --
Depreciation and amortization....... 848 796 2,541 2,182
---------- ---------- ---------- ----------

Income (loss) from continuing
operations...................... (28,081) 288 (36,004) 553
Other income, net................... -- 1 (4) (31)
Interest expense.................... (151) (234) (419) (312)
Income tax provision (benefit)...... 4,825 (433) 2,174 125
Income (loss) on discontinued
operations...................... (960) -- (1,183) 125
---------- ---------- ---------- ----------
Net income (loss).......... $ (34,617) $ 365 $ (39,784) $ 111
========== ========== ========== ==========
Average common shares:
Basic and diluted............... 10,053,209 8,642,034 9,619,823 8,755,448
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------- -------------
HISTORICAL OPERATIONS DATA: 1995 1996 1997 1998 1999 2000
------------------------------------ ------- ------- ------- ------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Working capital..................... $ 284 $ 233 $ 337 $14,348 $10,409 $ (5,699)
Total assets........................ 1,609 1,926 3,501 92,401 85,008 46,332
Borrowings under line of
credit.............................. -- -- -- -- 8,579 4,798
Stockholders' equity................ 396 423 682 70,074 60,451 22,441
</TABLE>

10
<PAGE> 13

SELECTED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in connection with our
Consolidated Financial Statements and related notes thereto and other financial
information included elsewhere in this prospectus. In addition to historical
information, the following discussion and other parts of this prospectus contain
forward-looking information that involves risks and uncertainties.

ACQUISITIONS

Concurrent with and as a condition to the closing of our initial public
offering in April 1998, we acquired all of the outstanding capital stock or
substantially all the net assets of Blackmarr, ICON, Mindworks, SII, Zelo, SCS
America, SCS Australia, together representing our founding companies. The
acquisitions have been accounted for using the purchase method of accounting
with Blackmarr being treated as the accounting acquirer, in accordance with
Staff Accounting Bulletin No. 97.

On June 30, 1998, we completed the acquisition of Cogent Technologies,
LLC, a provider of PeopleSoft and Platinum consulting and implementation
services.

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

Effective September 30, 1998, we completed the acquisition of PROSAP
Australia Pty. LTD, a SAP certified National Implementation Partner located in
Sydney, Australia.

On May 28, 1999, we completed the acquisition of Integrated Services
Consulting LLP, a provider of SAP consulting services.

INTRODUCTION - BrightStar Information Technology Group, Inc.
("BrightStar" or the "Company") is a leading e-business solutions and
application service provider (ASP) to Global 2000 companies and public sector
organizations. BrightStar's rapidly deployed solutions for e-commerce, supply
chain management (SCM), customer relationship management (CRM), enterprise
resource planning (ERP), corporate portal and application outsourcing help
companies transform themselves into successful e-businesses and achieve a
competitive advantage by delivering superior service to their customers while
improving operational efficiencies.

Services are generally performed at clients' locations and also at the
Company's facilities. 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 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.

2000 QUARTERLY RESULTS OF OPERATIONS

Revenue for the third quarter of 2000 decreased $12.9 million or 48.1%
from the third quarter of 1999. Revenue for the nine months ended September 30,
2000 decreased $30.2 million or 36.9% compared to the nine months ended
September 30, 1999. The decrease in revenue for the three and nine month periods
is a result of the Company's efforts to reorganize its service offerings
consistent with its focus on becoming an e-business and application service
provider, transition of, and turnover within its sales force in the fourth
quarter of 1999 and continuing through the third quarter of 2000 and the ongoing
effect of reduced demand for IT services in the ERP segment of the Company's
business. Due to the completion of several large engagements during the second
quarter and early in the third quarter, a substantial reduction in revenue,
compared to the third quarter of 2000, is expected through the fourth quarter of
2000 and first quarter 2001.

Gross profit as a percentage of revenue for the three months ended
September 30, 2000 and 1999, was 33.4% and 25.2%, respectively. Gross profit for
the nine months ended September 30, 2000 and 1999, was 32.2% and 25.9%,
respectively. The improvement in gross profit percentage resulted from the 1999
completion of two fixed fee on price engagements which had an adverse effect on
margins in 1999, combined with improved utilization of revenue generating
personnel and slightly higher average billing rates in 2000.

The increase in selling, general and administrative expenses reflect
the Company's ongoing investment in building its internal infrastructure and
field sales force, which continued through September 2000. During the first nine
months of 2000, the Company has continued to incur substantial expense
associated with higher than normal turnover in its field sales force and
administrative and support staffs. Also, during the second and third quarters of
2000, the Company recorded $0.7 million and $0.5 million of bad debt expense
associated primarily with two major clients. Additionally, during the third
quarter the Company recorded $1.7 million of charges for severance and expected
legal settlements with clients.

During the second quarter, the Company recorded a restructuring charge
of $2.5 million associated with the realignment of its business. The
restructuring included the closing of both sales and operations facilities and
the termination of approximately 90 employees or 15% of the Company's workforce.
The restructuring effort is expected to continue to increase utilization and
operating margins in the second half of 2000.

Stock compensation is a non-cash expense item related to the issuance
of stock to certain Founders as a part of the Company's IPO in 1998. This amount
was amortized over a period of 12 months through April 1999.

Goodwill amortization relates to goodwill acquired in conjunction with
the IPO and subsequent acquisitions.

As a result of continued losses, the Company has recorded a valuation
allowance to offset all of its deferred tax assets recorded at September 30,
2000. The valuation allowance relates to deferred tax assets established for net
operating loss carryforwards generated through September 30, 2000 and other
temporary differences. The Company does not expect to record tax benefits on
prior or future losses or other temporary differences until such time that it
can be estimated that tax benefits may be realized by the Company.

11
<PAGE> 14

1999 AND 1998 ANNUAL RESULTS OF OPERATIONS

We reported net losses of $1.16 and $2.64 per basic and diluted share
for the years ended December 31, 1999 and 1998. The results of operations for
1999 and 1998 reflect the impact of the following items:

DISCONTINUED OPERATIONS

During the fourth quarter of 1999, we recorded losses related to the
discontinuance of our Training, Controls, and Infrastructure Support businesses.
The loss on discontinued operations of $7.4 million includes; 1) $5.8 million
(including $0.7 million of taxes) recorded to writedown our net investment in
our Controls business and to record $0.8 million of estimated operating losses
to be incurred after the decision to dispose of the business; 2) $1.0 million
(including $0.1 million of taxes) recorded upon the sale of the Mindworks
division of our training business; and 3) $0.6 million (net of $0.3 million of
tax benefits) of operating losses from discontinued operations incurred during
1999. We recorded no gain or loss on the discontinuance of our Texas Training
business or our Infrastructure Support business. We have made necessary
reclassifications to properly reflect the discontinued operations in our 1999
and 1998 consolidated financial statements.

RESTRUCTURING CHARGE

During the fourth quarter of 1998, we completed a review of each of our
businesses and the services they provide. At the completion of this review we
developed and our board approved a reorganization plan with strategic actions
to:

o Consolidate the sales, finance, and administrative functions
at the BrightStar level forming a consolidated sales force and
consolidated finance group; and

o Realign the operations of each of the individual wholly owned
subsidiaries into operating divisions consistent with our
lines of businesses.

The reorganization plan included relocating our corporate offices from
Houston, Texas to Pleasanton, California, eliminating certain positions and
personnel, closing certain businesses and writing-off related assets, and
terminating and consolidating leased facilities. In the fourth quarter of 1998,
we recorded a $7.6 million charge for these restructuring actions.

12
<PAGE> 15

We completed the objectives of our plan of restructuring in 1999.
Remaining amounts recorded as accrued restructuring costs at December 31, 1999
relate to ongoing severance and lease obligations which have extended payment
terms.

The categories of the 1998 restructuring charge and the subsequent
utilization are summarized below:

<TABLE>
<CAPTION>
AMOUNTS CHARGED TO AMOUNTS TO BE PAID
EARNINGS IN 1998 BEYOND 1999
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Workforce severance ..................... $ 4,960 $ 1,209
Asset impairment ........................ 1,171 --
Lease and other contract obligations .... 1,483 552
------------------ ------------------
$ 7,614 $ 1,761
================== ==================
</TABLE>

STOCK COMPENSATION EXPENSE

In connection with the offering and acquisition of our founding
companies, certain directors and members of management received 648,126 shares
of common stock. These shares, valued at $11.70, were recorded as deferred
compensation and were charged to stock compensation expense over a one-year
period based upon the terms of a stock repurchase agreement between us and
related stockholders. Total stock compensation expense recorded during 1999 and
1998 in connection with the above was $468,000 and $6.8 million. At December 31,
1998, certain members of management were terminated in connection with the
restructuring plan described above. As a result, the remaining deferred
compensation totaling $2.1 million, attributable to the shares held by these
terminated employees, was charged to expense and is included in the 1998
restructuring charge.

REVENUE

We provide services to our customers for fees that are based on time
and materials 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 contract costs and expenses
incurred.

The timing of revenue is difficult to forecast because our sales cycle
for certain of our services can be relatively long and is subject to a number of
uncertainties, including customers' budgetary constraints, the timing of
customers' budget cycles, customers' internal approval processes and general
economic conditions. In addition, as is customary in the industry, our
engagements, generally, are terminable without a customer penalty. Our 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 customer
engagements commenced and completed during a quarter; the number of business
days in the quarter; changes in the relative mix of our services; changes in the
pricing of our 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.

Revenue increased $39.9 million or 63% for the year ended December 31,
1999 compared to 1998 as a result of (i) a full years operations of our founding
companies acquired on April 16, 1998 at the time of the initial public offering,
(ii) four additional companies acquired subsequent to the initial public
offering and (iii) new customer contracts for implementation of ERP systems and
development of e-commerce applications. The increase in revenues attributed to
factors described above was partially offset by a reduced revenue stream from
all existing businesses during the second half of 1999 attributable to executing
our plan for reorganizing and the impact of reduced demand for services offered
by us due to the Year 2000. We expect to continue to generate lower revenues
through the first half of 2000.

13
<PAGE> 16

Revenue increased, for the twelve months ended December 31, 1998,
compared to the prior periods primarily as a result of (i) the acquisition of
our founding companies on April 16, 1998 at the time of the initial public
offering, (ii) the acquisition of three additional companies subsequent to the
initial public offering and (iii) new customer contracts for implementation of
ERP systems and development of custom applications.

COST OF REVENUE

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

Cost of revenue increased, for the twelve months ended December 31,
1999 and 1998 compared to the respective prior periods due to an increase in
variable costs associated with the increased revenue described above.

Cost of revenue for 1999 reflects costs associated with two fixed fee
contracts in Dallas, Texas which exceeded related revenues by $3.2 million in
1999 ($1.6 million in the fourth quarter of 1999) compared to gross margins
recorded on the same contracts in 1998.

OPERATING EXPENSES

Selling, general and administrative expenses increased $11.4 million or
74% in 1999 compared to 1998 as a result of personnel added to support the
increased volume of business described in the revenue discussion above.

Selling, general and administrative expenses increased, for the twelve
months ended December 31, 1998 compared to the prior periods due primarily to
additional support personnel added through our acquisitions.

MARKET RISK

Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in market
prices and rates.

We are exposed to market risk because of changes in foreign currency
exchange rates as measured against the U.S. dollar and currencies of our former
subsidiaries in Australia.

Our long-term debt bears interest at variable rates; therefore, our
results of operations would only be affected by interest rate changes to the
long-term debt outstanding. An immediate 10 percent change in interest rates
would not have a material effect on our results of operations over the next
fiscal year.

14
<PAGE> 17

LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of 2000, the Company repaid $4.4 million of
amounts due under its Credit Facility, financed $2.4 million of additional
working capital requirements and $0.4 million of equipment additions using
proceeds from the issuance of stock. Borrowings outstanding under the Company's
credit facility with Comerica Bank amounted to $4.5 million at September 30,
2000 and $3.8 million at November 14, 2000. As a result of the sale of our
Australian Subsidiary, the Company no longer maintains an Australian credit
facility.

On March 10, 2000, pursuant to an agreement with Strong River
Investments, Inc. and Montrose Investments Ltd. (collectively the "Purchasers"),
the Company sold to the Purchasers 709,555 shares of the Company's common stock
for $7.5 million or $10.57 per share. Net proceeds to the Company amounted to
$7.2 million after related issuance costs.

The Company is required to make payments in 2000 amounting to $0.5
million related to the PROSAP acquisition. In addition, the Company expects to
make payments of up to $0.2 million and issue additional shares of the Company's
common stock to the prior owners of Cogent. Additionally, the Company may be
required to make payments to certain stockholders, subject to a registration
rights agreement, of approximately $0.9 million.

The Company relies primarily on the timeliness and amount of accounts
receivable collections to fund cash disbursements. As a result of continued
losses and negative cash flows, the Company has experienced a significant
decline in available liquidity, which could have an adverse impact on the
ability of the Company in the near term to meet its obligations and to continue
as a going concern. The Company intends to improve its liquidity by securing
financing in addition to its current credit facility with Comerica Bank.

The Company believes that it is taking the actions necessary to restore
cash flows from operations by the second quarter of 2001, which, combined with
proceeds from the sale of its Australian subsidiary and financing in addition to
its current credit facility will be adequate to fund its operations over the
next year. There can be no assurance that the Company's efforts to 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 sufficient to fund cash disbursements, or that the Company
will be able to secure additional financing, or assurance as to the cost or
other terms, or dilutive effect of any additional financing which may be
available.

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 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.

<PAGE> 18

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 our founding companies in those periods.

UNCERTAINTIES

NATURE OF PROJECTS

Many of our projects are billed on a fixed fee basis. Our failure to
estimate accurately the resources and related expenses required for a fixed fee
project or failure to complete contractual obligations in a manner consistent
with the project plan upon which the fixed fee contract is based could have a
material adverse effect on the us.

Many of our engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. Our failure or inability to meet a client's expectations in the
performance of our services could result in a material adverse change to the
client's operations and therefore could give rise to claims against us or damage
our reputation. In addition, we are exposed to various risks and liabilities
associated with placing its employees and consultants in the workplaces of
others, including possible claims of errors and omissions, misuse of client
proprietary information, misappropriation of funds, discrimination and
harassment, theft of client property, other criminal activity or torts and other
claims. Although we have not experienced any material claims of these types,
there can be no assurance that we will not experience such claims in the future.
If claims are successfully brought against us as a result of our performance on
a project, or if our reputation is damaged, there could be a material adverse
effect on us. Additionally, we could continue to experience adverse effects
resulting from the integration of acquired companies.

REORGANIZATION

We have undergone significant managerial and operational change in
connection with our corporate reorganization. Although we believe the
reorganization will provide long-term benefits, there can be no assurance that
these efforts will be successful. In addition, although we believe we have
recognized substantially all of the costs of the reorganization, additional
costs may be incurred as the reorganization proceeds.

REORGANIZATION'S EFFECT ON SALES

We began to execute our plan for reorganizing our company on January 1,
1999. As part of our plan, the individual sales groups from our subsidiaries
were combined into a consolidated sales group. Prior to January 1, 1999 most of
these salespeople sold only a subset of our service offerings and in many cases
only a single service. We have undertaken a training program to train these
salespeople to sell all of the our service offerings. However, there can be no
assurance that these salespeople have the expertise and ability to successfully
sell the entire portfolio of our services. Any disruption to our sales group
caused by the reorganization could disrupt our ability to generate revenues and
could have a material adverse effect on us.

RECENT DEVELOPMENTS

16
<PAGE> 19

We attributed the lower than expected revenues to the continued decline
in the enterprise resource planning market and slower-than-expected adoption of
our remaining service offerings.

Our operations require material amounts of additional capital in the
immediate future. Although we are attempting to reduce operating losses (and
generate operating profits) through cost reductions, cash generated by
operations and available credit facilities will not be sufficient in the near
term to meet our cash needs. While we have entered into a letter of intent to
sell our Australian subsidiary, BrightStar Information Technology Group Ltd., in
a transaction that upon closing could result in substantial cash proceeds, there
can be no assurance that the sale will close under the terms set forth in the
letter of intent, and the timing of a closing is uncertain. We are attempting to
arrange additional financing, but there is no certainty that additional
financing will be available. If the sale of our Australian subsidiary and the
realization of a significant amount of cash proceeds are substantially delayed
or do not occur, and if we are unable to arrange additional financing, our
operations will likely be substantially harmed and we may be unable to continue
as a going concern.

On December 13, 2000, we completed the sale of our Australian
subsidiary, BrightStar Information Technology Group Ltd., for A$10.0 million
(US $5.5 million) of the total purchase price, A$2.5 million (US $1.4 million)
was paid upon closing with the remainder due upon completion of a contingent
earnout for the twelve month period ended December 31, 2001. We will record
a loss of US $1.1 million related to the fourth quarter sale.

Michael Ober resigned as our Chief Executive Officer effective October
2, 2000. Joseph A. Wagda, a director of BrightStar since April 2000, became
interim Chief Executive Officer effective October 2, 2000. Donald W. Rowley
resigned as our Chief Financial Officer effective November 30, 2000. David L.
Christeson, our Controller since April 1999, became Vice President of Finance
and Administration, effective December 1, 2000.

On October 19, 2000, we agreed in principle to a settlement with the
prior owners of Cogent Technologies, LLC ("Cogent") relating to claims by them
for (1) the unpaid balance of the purchase price for our purchase of the
business of Cogent from them in June 1999; and (2) breach of employment
agreements with us. Pursuant to the proposed settlement, in exchange for a
mutual release from the agreement by which we required Cogent and employment
agreements, they will receive 1,000,000 shares of our common stock, up to
$75,000 in legal fee reimbursement and monthly compensation due under the terms
of their employment agreements until June 30, 2001.

17
<PAGE> 20

DECREASE IN THE MARKET FOR SERVICES DUE TO THE YEAR 2000

The purchasing patterns of clients were affected by Year 2000 issues as
companies expended significant resources to correct their current systems for
Year 2000 compliance. These expenditures resulted in reduced funds available to
purchase services offered by us, which had an adverse effect on us in the second
half of 1999 and have continued through the first half of 2000.

18
<PAGE> 21

UNAUDITED QUARTERLY DATA

<TABLE>
<CAPTION>
2000 1999
-------------------------------- --------------------------------------------
THIRD(d) SECOND(c) FIRST FOURTH THIRD SECOND FIRST
---------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue ............................ $ 13,923 $ 18,096 $ 19,605 $ 21,608 $ 26,830 $ 29,511 $ 25,500
Gross profit ....................... 4,654 5,604 6,353 5,736 6,758 8,715 5,764
Income (loss) from
continuing operations .......... (28,681) (4,271) (673) (2,653) 488 429 (832)
Income (loss) from
discontinued operations ........ (28,681) (223) -- (7,473) (123) (93) 242
Net income (loss) .................. (34,617) (4,494) (673) (10,126) 365 336 (590)

Per share basis: basic and
diluted Continuing
operations ..................... $ (3.34) $ (0.46) $ (0.08) $ (0.31) $ 0.05 $ 0.05 $ (0.10)
Discontinued operations ............ (0.10) (0.02) -- (0.86) (0.01) (0.01) 0.03
-------- -------- -------- -------- -------- -------- --------
$ (3.44) $ (0.48) $ (0.08) $ (1.17) $ 0.04 $ 0.04 $ (0.07)
======== ======== ======== ======== ======== ======== ========

<CAPTION>
1998
--------------------------------------------
FOURTH(a) THIRD SECOND(b) FIRST
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ............................ $ 24,524 $ 20,965 $ 14,009 $ 4,086
Gross profit ....................... 4,828 6,547 5,386 1,414
Income (loss) from
continuing operations .......... (12,212) (1,315) (3,417) 122
Income (loss) from
discontinued operations ........ (91) 196 16 157
Net income (loss) .................. (12,303) (1,119) (3,401) 279

Per share basis: basic and
diluted Continuing
operations ..................... $ (1.95) $ (0.15) $ (0.47) $ 0.12
Discontinued operations ............ (0.01) 0.02 -- 0.16
-------- -------- -------- --------
$ (1.96) $ (0.13) $ (0.47) $ 0.28
======== ======== ======== ========
</TABLE>

(a) Included in the fourth quarter 1998 is a restructuring charge of $7,614.

(b) Included in the second quarter 1998 is the initial public offering
concurrent with the acquisitions of our founding companies.

(d) Included in the third quarter of 2000 is a charge for the writedown of
goodwill of $24.8 million and a charge to establish a valuation allowance
to offset the Company's deferred tax assets of $4.8 million.

<PAGE> 22

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in market
prices and rates. We are exposed to market risk because of changes in foreign
currency exchange rates as measured against the U.S. dollar and currencies of
our former subsidiaries in Australia.

BUSINESS

SUMMARY

We are an e-business solutions and application service provider (ASP)
to Global 2000 companies and public sector organizations. Our rapidly deployed
solutions for e-commerce, supply chain management (SCM), customer relationship
management (CRM), enterprise resource planning (ERP), corporate portal and
application outsourcing help companies transform themselves into successful
e-businesses and achieve a competitive advantage by delivering superior service
to their customers while improving operational efficiencies. We have
approximately 185 employees in offices throughout North America.

INDUSTRY BACKGROUND

We operate in Information Services Business segment which includes the
fast growing Internet Services category. An independent research organization
(IDC Corp.) estimates that the global market for Internet services will grow
from $7.8 billion in 1998 to $78 billion in 2003 and spending for ASP services
will reach $7.7 billion in 2004.

Among the leading factors driving the growth in the Internet Services
market is the transition to packaged software solutions, the emergence of new
technologies and the increased bandwidth and usability of the Internet through
the Web. These new technologies enable the creation and utilization of more
functional and flexible applications that can increase productivity, reduce
costs and improve customer service.

Managing the transition to a new generation of e-business applications
is placing a severe burden on many corporate IT departments. Many organizations
do not have the expertise to implement the new technologies and they are
reluctant or unable to expand their IT departments and re-deploy their in-house
personnel. Consequently, many organizations are outsourcing the design,
implementation and hosting of their new applications to acquire the necessary
expertise and accelerate deployment.

PRODUCTS AND SERVICES

Our Customer Relationship Management (CRM) practice assists companies
in attaining competitive advantage by improving their visibility into all the
varied contacts made with their customers. To accomplish this, we implement from
Siebel Systems, applications enabling organizations to optimize their resources
and offer superior service to their customers through the integrated management
of traditional, as well as Web-based, channels for sales, marketing, and
customer service.

20
<PAGE> 23

For Enterprise Resource Planning (ERP), we implement SAP, PeopleSoft
and J.D. Edwards applications, covering a complete range of business processes,
from manufacturing and finance to human resources, procurement and supply chain
planning. Our ERP solutions are tailored to fit the specific needs of individual
organizations, helping them to automate business processes across the enterprise
through the creation of a single data environment that spans departments and job
functions.

Our Supply Chain Management (SCM) practice utilizes applications from
i2 Technologies, Netscape and other software vendors to automate and optimize
the numerous interactions, such as forecasting, procurement, manufacturing,
distribution and delivery that take place between an enterprise and the members
of its trading communities. This not only increases opportunities for conducting
business through a myriad of affinity relationships but also extends the cost
savings and operational efficiencies of business-to-business commerce to all
members of a company's supply chain.

To help companies provide universal access to their information
resources, our Corporate Portal practice implements Actuate Software's
market-leading enterprise web-based report server and provides the necessary
enterprise application integration required to provide employees with
personalized, secure, Web-based access to the knowledge and information systems
necessary to make faster, more informed decisions.

In addition to providing the expertise and experience required to
implement e-business solutions, we offer a comprehensive suite of application
outsourcing services, from remote production support to hosting and application
management. Outsourcing lets companies focus on their core business objectives
and gives them a viable alternative to building the infrastructure and trying to
hire and retain all of the skilled professionals required to implement and
maintain the sophisticated applications that they've come to rely on to run
their operations.

To provide our services, we recruit and employ project managers,
skilled senior-level consultants, engineers and other technical personnel with
both business as well as technical expertise. We believe this combination of
business and technical expertise, the breadth and depth of our solution
offerings and our ability to deliver these solutions in both the traditional
consulting and implementation model as well as the emerging ASP model are
sources of differentiation for us in the Internet Services Market and critical
factors in our success.

CUSTOMERS AND MARKETS

Our marketing efforts focus on mid to large companies, as well as,
emerging companies in the Internet marketplace, who have a need for rapid
deployment of e-business applications as well as a wide range of other
technology consulting services. We serve customers in the public sector and in a
broad range of industries, including communications, consumer products, energy,
financial services, healthcare, industrial, insurance, media, professional
services, retail and technology. Many of these relationships have existed over
several years and involved numerous projects.

21
<PAGE> 24

Revenues from foreign operations amounted to $34.2 million,
representing approximately 33% of the consolidated total of $103.4 million for
the year ended December 31, 1999. For the first nine months of 2000, revenues
from foreign operations amounted to $14.4 million or 28% of the consolidated
total of $51.6 million.

CONSULTING

Our success depends in large part upon our ability to attract, train,
motivate and retain highly skilled technical employees. Qualified technical
employees are in great demand and are likely to remain a limited resource for
the foreseeable future. We dedicate significant resources to recruiting
professionals with both IT and internet consulting and industry experience. None
of our employees are subject to a collective bargaining arrangement. We consider
our relationships with our employees to be good.

COMPETITION

Market share in the IT industry was initially concentrated among large
computer manufacturers but the industry has become increasingly competitive and
fragmented. IT services are provided by numerous firms including multinational
accounting firms, systems consulting and implementation firms, software
application vendors, general management consulting firms and data processing
outsourcing companies.

OTHER INFORMATION

We began operations as a global provider of strategic information
technology business solutions through seven subsidiary companies. Our management
has reorganized our company by integrating the operations of our subsidiaries
into a single operating entity. This new structure has been in place since
January 1, 1999. This is the latest step in our evolution to streamline
operations, increase leverage of sales staff, and improve focus on targeted
market opportunities. The new organization provides for a consolidated finance
group, a consolidated sales organization, and the six operating divisions
discussed previously.

PROPERTY

Our principal executive offices are located at 4900 Hopyard Road, Suite 200,
Pleasanton, California 94588. Our lease on these premises covers approximately
5,600 square feet and expires December 31, 2003.

We also operate through leased facilities in:

U.S. Leased Facilities

- Dallas, TX
- Irvine, CA
- Lafayette, LA
- Little Rock, AR
- Boston, MA
- Chicago, IL
- Seattle, WA

A substantial part of our services are performed on-site at customer
locations. Additional space may be required if our business expands, and we
believe that we will be able to obtain suitable space as needed.

22
<PAGE> 25

LEGAL PROCEEDINGS

The Company has accrued $1.2 million to settle legal claims related primarily to
three separate lawsuits brought against the Company for damages related to
software development and implementation services provided by the Company. The
aggregate amount of the claims filed against the Company is $7.2 million. While
any litigation contains an element of uncertainty, the Company believes, based
upon its assessment of the claims and negotiations to settle with the
plaintiffs, that the liability recorded as of September 30, 2000, combined with
possible coverage under the Company's errors and omissions insurance policy, is
adequate to cover the estimated exposure.

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.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the executive
officers and directors of BrightStar.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---------------- ---- -------------------------------------- --------
<S> <C> <C> <C>
George M. Siegel................... 62 Chairman of the Board of BrightStar 1997

Jennifer T. Barrett................ 50 Group Leader, Data Products Division, 1998
Acxiom Corporation

Joseph A. Wagda.................... 57 Chief Executive Officer of Brightstar 2000
and President of Altamont Capital
Management

David L. Christeson................ 36 Vice President of Finance and
Administration and Secretary
of BrightStar

W. Barry Zwahlen................... 55 Managing Partner of Information 2000
Management Associates
</TABLE>

George M. Siegel has served as Chairman of the Board of Directors of
BrightStar since its inception. Mr. Siegel co-founded Mindworks, a business
acquired by BrightStar in 1998. In 1990, he founded Dynamex Inc. (formerly
Parcelway Courier Systems, Inc.), a messenger and delivery service company and
served as its President and Chief Executive Officer until 1995.

Jennifer T. Barrett became a director of BrightStar at the closing of
our initial public offering in 1998. She has served since 1974 in various
capacities with Acxiom Corporation, a leading data processing and related
computer-based services and software products company. She is currently a Group
Leader in the Data Products Division. Ms. Barrett serves on the Board's Audit
and Compensation Committee.

Joseph A. Wagda became interim Chief Executive Officer effective
October 2, 2000 and has been a director of BrightStar since April 2000.
President of Altamont Capital Management, Inc., and a practicing attorney, Mr.
Wagda's business emphasizes special situation consulting and investing,
including involvement in distressed investments and venture capital
opportunities. Mr. Wagda also is a director of Abraxas Petroleum Corporation, an
independent oil and gas company with operations in Texas and Canada. Previously,
Mr. Wagda was President and CEO of American Heritage Group, a modular
homebuilder, and Senior Managing Director and co-founder of the Price Waterhouse
corporate finance practice. He also served with the finance staff of Chevron
Corporation and in the general counsel's office at Ford Motor Company.

David L. Christeson became Vice President of Finance and Administration
effective December 1, 2000. Mr. Christeson joined BrightStar in April 1999 when
he was appointed our Controller and Assistant Secretary. From 1994 to 1997, Mr.
Christeson held senior financial positions at Norand Corporation and APAC
Teleservices, Inc. both high tech publicly held companies. From 1987 to 1994 Mr.
Christeson worked in the Audit Practice of Deloitte and Touche, LLP.

<PAGE> 26

W. Barry Zwahlen has been a director with BrightStar since July 2000.
Mr. Zwahlen presently is the Managing Partner of Information Management
Associates, a retained executive search firm, which he founded in 1986. Mr.
Zwahlen focuses his practice on the recruitment of CIO and CTO candidates for
high technology clients and the recruitment of executive level Information
Technology consultants for Systems Integration Professional Services firms.

COMMITTEES OF THE BOARD

The Audit Committee is comprised of Ms. Barrett and Mr. Zwahlen. Both
members are non-employee directors. Pursuant to the Audit Committee Charter, the
Committee addresses on a regular basis matters that include, among other things,
(1) making recommendations to the Board of Directors regarding the appointment
of independent auditors, (2) reviewing with our financial management the plans
for, and results of, the independent audit engagement, (3) reviewing the
adequacy of our system of internal accounting controls, (4) monitoring our
internal audit program to assure that areas of potential risk are adequately
covered, and (5) reviewing legal and regulatory matters that may have a material
effect on our financial statements.

The Compensation Committee is comprised of Ms. Barrett and Mr. Zwahlen,
both of whom are non-employee directors. The Committee's primary functions are
to determine remuneration policies applicable to our executive officers and to
determine the bases of the compensation of the Chief Executive Officer,
including the factors and criteria on which such compensation is to be based.
The Committee also administers our 2000 and 1997 Long-Term Incentive Plans.

The Nominating Committee is comprised of Mr. Siegel, Ms. Barrett and
Mr. Wagda and will seek and consider qualified candidates to serve on the Board.
The Nominating Committee will consider nominees recommended in writing by our
stockholders. Such recommendations should be submitted to the Committee at our
principal executive office.

COMPENSATION OF DIRECTORS

Directors receive a quarterly retainer of $4,000 and a fee for each
Board or committee meeting of $1,000, $500 for each committee meeting held the
same day as a Board meeting. We reimburse directors for their reasonable
out-of-pocket expenses with respect to board meetings and other BrightStar
business.

Directors who are not officers of BrightStar participate in the 1997
and 2000 Plans. Under the 1997 and 2000 Plans, options to purchase 5,000 shares
of our common stock are automatically granted to each non-employee director on
the date such director is for the first time elected or appointed to the Board
of Directors. Thereafter, each such director is automatically granted options to
purchase 10,000 shares on the date of each annual stockholders meeting, provided
that such automatic option grants are made only if the director was on the Board
of Directors for the entire fiscal year then ending (including the last business
day of the fiscal year) and was not an employee of BrightStar or any affiliate
for any part of the fiscal year then ending. The exercise price for all
non-employee director options granted under the 1997 and 2000 Plans is 100% of
the fair market value of the shares on the grant date. All such options are
immediately exercisable and expire no later than ten years after the date of
grant, unless sooner exercised or canceled due to termination of service or
death.

EXECUTIVE COMPENSATION

The following table contains information concerning compensation earned
by Messrs. Siegel, Ober and Rowley, all named executive officers of BrightStar
for 1999. In addition the table includes the compensation of Mr. Daniel Arra,
and Thomas O'Gorman, Vice Presidents.

24
<PAGE> 27

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
BASE CASH
SALARY BONUS COMPENSATION
------ ----- ------------
<S> <C> <C> <C> <C>
George M. Siegel....................... 1999 $ 109,500 -- $ 109,500
1998 -- -- --
Michael A. Ober........................ 1999 300,000 -- 300,000
1998 183,917 $ 70,000 253,917
Donald W. Rowley....................... 1999 222,534 -- 222,534
1998 -- -- --
Daniel Arra............................ 1999 180,335 136,819 317,154
1998 120,000 234,295 354,295
Thomas O'Gorman........................ 1999 226,000 47,500 273,500
1998 173,917 80,000 253,917
</TABLE>

STOCK OPTIONS

The following table contains information concerning the grant of stock
options to each of our named executive officers during 1999 under our 1997 Plan.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE POTENTIAL REALIZABLE
OPTIONS EMPLOYEES IN PRICE EXPIRATION VALUE FOR
NAME GRANTED FISCAL YEAR ($/SH)(2) DATE OPTION TERM(1)
---- ---------- ------------- ------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
George M. Siegel............ -- -- -- -- --
Michael A. Ober............. 60,000 * 6.00 6/09 $ 279,000
175,000 12.2% 7.50 12/09 1,230,250
Donald W. Rowley............ 40,000 * 6.00 6/09 186,000
125,000 8.7 7.50 12/09 878,750
Daniel Arra................. 30,000 * 6.00 6/09 139,500
125,000 8.7 7.50 12/09 878,750
Thomas O'Gorman............. 30,000 * 6.00 6/09 139,500
125,000 8.7 7.50 12/09 878,750
</TABLE>

----------

(1) Based on Black-Scholes model and assumes a risk free interest rate of
5.86%, price volatility of 110% and a dividend yield of 0%.

* Less than 1%.

(2) Effective July 1, 2000, options were repriced for all employees. For
executive officers named above, 80% of each named officers options
were repriced at $6.00 per share and 20% were repriced at $3.00.

AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES

The following table sets forth information for each of our named
executive officers with respect to options to purchase our Common stock held as
of December 31, 1999.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT 12/31/99(#)(1) AT 12/31/99($)(2)
ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------- ------------ ------------------------- -------------------------
Name
<S> <C> <C> <C> <C>
George M. Siegel.......... -- -- 74,900/0 -
Michael A. Ober........... -- -- 2,500/240,000 -
Donald W. Rowley.......... -- -- 0/165,000 -
Daniel Arra............... -- -- 1,000/157,000 -
Thomas O'Gorman........... -- -- 1,000/157,000 -
</TABLE>

25
<PAGE> 28

-----------

(1) No stock appreciation rights (SARs) were outstanding during 1999.

(2) The fair market value of the our common stock at the close of business
on December 31, 1999 was $8.25 per share.

EMPLOYMENT AGREEMENTS

Mr. Ober entered into an Executive Employment Agreement in connection
with our initial public offering. The following summary of his Executive
Employment Agreement does not purport to be complete and is qualified by
reference to it, of which a copy has been filed with the Securities and Exchange
Commission. Mr. Ober's Executive Employment Agreement provides for an annual
base salary in an amount not less than the initial specified amount and entitles
him to participate in all of the employee benefit plans sponsored by BrightStar.
Mr. Ober's base salary was increased to $300,000, and a bonus of up to $200,000
if BrightStar achieves certain revenue and profitability milestones, at the time
of his election as our President. Mr. Ober's agreement has an initial three-year
term and continues thereafter on a year-to-year basis on the same terms and
conditions existing at the time of renewal, subject to the right of BrightStar
or Mr. Ober to terminate Mr. Ober's employment at any time. If Mr. Ober's
employment is terminated by BrightStar without cause (as defined) during the
initial three-year term, then Mr. Ober will be entitled to (i) receive his
current base salary for the period ending the later of (a) the end of the
initial three-year term of the agreement or (b) 12 months after termination of
employment, (ii) any other earned and unpaid compensation, vacation time accrued
prior to termination and an amount equal to the amount of any earned bonuses and
commissions payable to Mr. Ober with respect to the 12 calendar months preceding
termination ("Severance Payments"), and (iii) continued participation in
BrightStar's employee benefit plans (other than the granting of new awards under
the 1997 Plan, 2000 Plan, or any other performance-based plan) for a period of
12 months following the date of termination. If Mr. Ober is terminated without
cause during any one-year extension of the initial term of the Agreement, then
Mr. Ober shall continue to receive Severance Payments for a period of 12 months
after termination of such employment and shall continue to participate for such
period in BrightStar's employee benefit plans (other than granting of new awards
under the 1997 and 2000 Plans, or any other performance-based plan). If a change
of control of BrightStar occurs, and the terms of the employment agreement are
not adopted, Mr. Ober will be entitled to receive an amount equal to 36 months
of his then-current base salary under the agreement, payable on a monthly basis.
Under the Executive Employment Agreements, a "change of control" is defined as
(A) the sale of substantially all assets of BrightStar or (B) a merger,
consolidation, liquidation or reorganization of BrightStar in which BrightStar
or an affiliate of BrightStar is not the surviving entity, or which results, in
any event, in a change of control of BrightStar. Mr. Ober's Executive Employment
Agreement contains covenants limiting competition with BrightStar during the
term of the Executive Employment Agreement and for an additional period to be
the longer of four years from inception of the agreement, or one year after
termination of employment for cause. Mr. Ober resigned effective October 2,
2000. The provisions of his severance agreement are currently being negotiated.

Mr. Christeson and BrightStar entered into an employment agreement in
April 1999. The agreement provides for a base salary of $165,000, and a bonus of
up to 30% of his base salary, if certain individual and company objectives are
met. The agreement is terminable at will, but if Mr. Christeson's employment is
terminated without cause, he is entitled to six months of additional base
salary, or 18 months if such termination occurs following a change of
control.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Notwithstanding any statement to the contrary in any of our previous or
future filings with the SEC, this Report shall not be incorporated by reference
into any such filings.

26
<PAGE> 29

Compensation Philosophy. In developing our executive compensation
policies, the Compensation Committee has two principal objectives: (1)
attracting, rewarding and retaining officers who possess outstanding talent, and
(2) motivating officers to achieve BrightStar performance consistent with
shareholder objectives. Accordingly, the Committee adopted the following
policies:

o BrightStar will pay compensation that is competitive with the
practices of other leading technology companies in the same or
similar businesses;

o A significant portion of the officers' compensation will
depend upon the achievement of challenging performance goals
for BrightStar and our various business units and officers;
and

o BrightStar will align the interests of its officers with those
of our stockholders -- therefore, stock options will
constitute a significant portion of compensation.

Total Annual Compensation. Each officer's target total annual
compensation (that is, salary plus bonus) is determined after reviewing
independent survey data on the compensation paid to officers at a group of
approximately 20 companies in the high technology industry. These companies
strenuously compete with BrightStar for executive talent and/or have revenues
comparable to our revenues. Our goal is to set total target annual compensation
at a level that is near the median level for the officers at the surveyed
companies.

Bonuses. The actual bonus (that is, the percentage of the target bonus)
that any officer (other than the Named Executive Officers) actually receives
depends on the achievement of our business unit objectives and financial
performance goals. Typical business unit objectives include both financial and
operating goals including, for example, increased profitability, customer
satisfaction, and controlling profit and gross margin.

For each year, the performance goals are set in light of general
business conditions and our strategies for the year. For 1999, the Committee
directed our management to determine the performance targets for the officers
other than Named Executive Officers, using a philosophy approved by the
Committee. The Committee developed and approved the specific performance targets
for the Named Executive Officers, as described in the following paragraph.

Stock Options. The Committee strongly believes that stock options
motivate the officers to maximize stockholder value and to remain with
BrightStar despite a very competitive marketplace. All BrightStar stock options
have a per share exercise price equal to the fair market value of our stock on
the grant date. The number of options granted to each officer and each option's
vesting schedule are determined based on the officer's position at BrightStar,
his or her individual performance, the number of options the executive already
holds and other factors, including an estimate of the potential value of the
options.

In fiscal 1999, the Committee made these determinations for the Named
Executive Officers and other senior officers. For all other grants, the Chief
Executive Officer (that is, Mr. Ober) made these determinations, in consultation
with our Human Resources organization.

Compensation of Chief Executive Officer. The Committee believes the
Chief Executive Officer's compensation should be tied directly to the
performance of BrightStar and in line with stockholder objectives. Consequently,
Mr. Ober's percentage of bonus to base salary is the highest of any officer.

Tax Deductibility of Executive Compensation. Under section 162(m) of
the Internal Revenue Code BrightStar generally receives a federal income tax
deduction for compensation paid to any of its Named Executive Officers only if
the compensation is less than $1 million during any fiscal year or is
"performance-based" under section 162(m). Both our 1997 Equity Incentive Plan
and the Bonus Plan permit the Committee to pay compensation that is
"performance-based" and thus fully tax-deductible by BrightStar. The Committee
currently intends to continue seeking a tax deduction for all of our executive
compensation, to the extent consistent with the best interests of BrightStar.

27
<PAGE> 30

Audit Committee. The Audit Committee is comprised of Ms. Barrett and
Mr. Zwahlen. Both members are non-employee directors. Pursuant to the Audit
Committee Charter, the Committee addresses on a regular basis matters that
include, among other things, (1) making recommendations to the Board of
Directors regarding the appointment of independent auditors, (2) reviewing with
our financial management the plans for, and results of, the independent audit
engagement, (3) reviewing the adequacy of the our system of internal accounting
controls, (4) monitoring our internal audit program to assure that areas of
potential risk are adequately covered, and (5) reviewing legal and regulatory
matters that may have a material effect on our financial statements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table contains certain information regarding beneficial
ownership of our common stock as of December 31, 1999 by (i) persons known to us
to be the beneficial owner of more than 5% of our common stock, and their
respective addresses (ii) each of our current directors, (iii) the Chief
Executive Officer and each of our two other executive officers, and (iv) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
NUMBER(1) PERCENT
----------- --------
<S> <C> <C>
5% BENEFICIAL OWNERS:
Lord Abbett & Co........................... 712,549 8.25%
767 Fifth Avenue
New York, New York 10153
Brian R. Blackmarr......................... 790,030 9.14%
4433 Belclaire
Dallas, Texas 75205
Camelot Management Corp.(2)................ 571,313 6.61%
10 Glenville Street
Greenwich, Connecticut 06831-3638
NON-EMPLOYEE DIRECTORS:(3)
Jennifer T. Barrett...................... 10,000 --*
David A. Reamer(4)....................... 11,000 --*
Brian R. Blackmarr(5).................... 790,030 9.14%
Joseph A. Wagda(6)....................... -- --
EXECUTIVE OFFICERS:
George M. Siegel......................... 167,870 1.94%
Michael A. Ober(7)....................... 110,410 1.32%
Donald W. Rowley......................... 13,500 --*
All directors and executive officers as a
group (7 persons).......................... 1,102,810(8) 12.76%
</TABLE>

----------

* Less than 1%

(1) Represents shares held directly and with sole voting and investment
power, except as noted, or with voting and investment power shared
with a spouse.

(2) Camelot Management Corp. reports that it shares voting and dispositive
power with respect to the shares it beneficially owns.

(3) As to each non-employee director, except Mr. Blackmarr, includes
immediately exercisable options to purchase 10,000 shares of common
stock.

(4) Mr. Reamer resigned from the Board of Directors on January 19, 2000.

(5) Mr. Blackmarr has not been renominated to serve as a member of the
Board of Directors.

(6) Mr. Wagda became a Chief Executive Officer and a director after
December 31, 1999, but is included in the table for informational
purposes.

(7) Mr. Ober resigned effective October 2, 2000.

(8) Includes options to purchase 20,000 shares of common stock immediately
exercisable by non-employee directors.

28
<PAGE> 31

CERTAIN TRANSACTIONS

ACQUISITIONS OF THE FOUNDING COMPANIES

Concurrently with the closing of our initial public offering, we
acquired all of the issued and outstanding capital stock or substantially all of
the assets of the founding companies, at which time, each founding company
became a wholly owned subsidiary of BrightStar. The aggregate consideration
BrightStar paid to acquire the founding companies (before the post-closing
adjustments) consisted of (i) approximately $31.6 million in cash, (ii)
2,435,721 shares of common stock and (iii) approximately $7.7 million of
indebtedness of the founding companies to be assumed by BrightStar. In
connection with the acquisitions, we made arrangements to release various
individuals from such indebtedness. In addition, the purchase price for each of
SCS Australia was subject to increase by a post-closing adjustment, which, for
SCS Australia, ultimately amounted to 200,000 shares of common stock based on
actual fiscal 1998 revenues exceeding a certain threshold. The consideration
paid in the acquisitions was determined by arm's-length negotiations between the
BrightStar and the respective founding companies.

In addition to being conditioned upon the closing of our initial public
offering, the closing of each acquisition was subject to certain other customary
conditions including, among others: the continuing accuracy of the
representations and warranties made by the parties thereto, the performance of
their respective covenants included in the agreements relating to the
acquisitions; and the nonexistence of a material adverse change in the results
of operations, financial condition or business of each founding company prior to
the closing date.

The following table sets forth the consideration to be paid in cash and
shares of common stock and debt assumed.

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK DEBT ASSUMED
---- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Blackmarr(1) $ 3,290 1,012,306 $ 1,125
ICON 6,224 319,197 1,925
Mindworks 445 80,894 509
SCS America 11,000 384,615 565
SCS Australia(2) 9,815 452,976 2,440
SII(3) 450 185,633 568
Zelo 375 100 523
------- -------- -------
Totals $31,599 2,435,721 $ 7,655
======= ========= =======
</TABLE>

---------

(1) George M. Siegel, Marshall G. Webb, Thomas A. Hudgins, Daniel M.
Cofall, Mark D. Diggs, Michael A. Sooley and an employee of BrightStar
each agreed to exchange up to an aggregate of 346,800 of their shares
of Common stock for an equal number of shares of restricted Common
stock contemporaneously with the closing of the initial public
offering to the extent necessary to ensure that the shareholders of
Blackmarr will become, collectively, the largest holder of Common
stock entitled to vote immediately following the acquisitions. See
"Description of Capital Stock -- Common stock and Restricted Common
stock."

(2) Does not include shares of Common stock issuable in connection with a
post-closing adjustment based upon 1998 revenue.

(3) Does not include shares of Common stock issuable in connection with a
post-closing adjustment based upon 1998 pre-tax net income. The cash
consideration includes the assumed repayment of a $550,000 promissory
note (which is not included in the amount shown for debt assumed)
issued in December 1997 to a former stockholder of SII in exchange for
his equity interest in SII in anticipation of our acquisition of SII.

29
<PAGE> 32

As consideration for their interests in the founding companies, certain
officers, directors and beneficial owners of more than 5% of the outstanding
shares of Common stock received cash and shares of Common stock as set forth in
the table below.

<TABLE>
<CAPTION>
SHARES OF
CASH COMMON STOCK
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
George M. Siegel................................. $ -- 54,698
Brian R. Blackmarr............................... 2,518 774,646
Mark D. Diggs.................................... 338 139,225
------- -------
Total.............................. $ 2,856 968,569
======= =======
</TABLE>

In connection with the acquisitions, we entered into employment
agreements with certain key employees of the founding companies. Total annual
compensation pursuant to such agreements ranged from approximately $100,000 to
approximately $225,000 depending on the duties of such employees and their
positions with the founding companies. These employment agreements have initial
terms of three years and generally provide, among other things, that the
employee will not compete with BrightStar during the term of the employment
agreement and for additional periods of up to the greater of one year after the
termination of their employment thereunder for cause or the termination date set
forth in the agreement. For a discussion of the employment agreements between
BrightStar and our executive officers, see "Management -- Executive Compensation
and Employment Agreements."

FINANCIAL ADVISORY SERVICES

In August 1997, BITG engaged McFarland, Grossman & Company, Inc., or
MGCO, to provide financial advisory services for a period of six months in
connection with the acquisitions and related financings. Under the terms of the
engagement letter between BrightStar and MGCO, we paid MGCO an initial advisory
fee of $15,500, plus monthly fees aggregating $75,000 through December 1997, and
reimbursed MGCO for its out-of-pocket expenses relating to the services
provided. In connection with the MGCO engagement letter, BITG issued a warrant
to MGCO for $100 in cash. Pursuant to the share exchange agreement, BrightStar
assumed all obligations of BITG under the warrant. As adopted by BrightStar, the
warrant provided for the purchase of up to 50,000 shares of common stock, at a
per share exercise price equal to the lesser of $6.00 or 60% of the initial
public offering price. The warrant has been exercised. We granted certain
registration rights to MGCO with respect to the shares of common stock issuable
upon exercise of the warrant.

Pursuant to the MGCO engagement letter, MGCO received a fee of $1.6
million payable upon the closing of the acquisitions, together with a warrant to
purchase an amount equal to 10% of the securities issued in any such private
placement at the issue price in that private placement.

In September 1997, BITG engaged Brewer-Gruenert Capital Advisors, LLC,
or BGCA, to provide consulting services regarding corporate development matters
for a period of one year in connection with future acquisitions of IT companies
by BrightStar and any private investors introduced to BrightStar by BGCA. Under
the terms of the consulting agreement between BITG and BGCA, as assumed by
BrightStar, BrightStar paid BGCA, at the closing of our initial public offering,
an executive search fee of $60,000 for services rendered thereunder and
thereafter reimbursed BGCA from time to time for its out-of-pocket expenses
relating to the services provided. In connection with the BGCA agreement,
BrightStar also issued an option giving BGCA the option to purchase the number
of shares of common stock equal to $100,000 divided by the difference between
the per share initial public offering price and the exercise price of $6.00 per
share.

Pursuant to the BGCA agreement, BGCA was entitled to receive the
following fees: (i) a graduated success fee, payable on the closing of an
acquisition by BrightStar of a company presented to us by BGCA, and (ii) a cash
fee equal to 10% of the amount of the gross investment proceeds received by us
from any investor identified by BGCA during the term of the BGCA agreement.

30
<PAGE> 33

DESCRIPTION OF CAPITAL STOCK

GENERAL

Our authorized capital shares include 3,000,000 shares of preferred
stock, 2,000,000 shares of restricted stock and 35,000,000 shares of common
stock. Rights, preferences and other terms of the preferred stock will be
determined by the board of directors at the time of issuance; no preferred stock
was issued at December 31, 1999. The following describes certain terms of our
capital stock that we consider to be material to prospective investors.

COMMON STOCK AND RESTRICTED COMMON STOCK

The holders of common stock are each entitled to one vote for each
share held on all matters to which they are entitled to vote, including the
election of directors. The holders of restricted common stock have no voting
rights. The Board of Directors are elected annually and serve one-year terms.
Cumulative voting for the election of directors is not permitted. Any director,
or the entire Board of Directors, may be removed at any time, with cause, by a
majority of the aggregate number of votes which may be cast by the holders of
outstanding shares of common stock.

Any shares of restricted common stock that may be issued will
automatically convert into common stock on a share-for-share basis (i) in the
event of a disposition of such shares of restricted common stock by the holder
thereof (other than a disposition which is a distribution by a holder to its
partners or beneficial owners or a transfer to a related party of such holder),
(ii) in the event any person acquires beneficial ownership of 25% or more of the
outstanding shares of common stock of BrightStar at any time after consummation
of our initial public offering, (iii) 18 months after the closing of our initial
public offering or (iv) in the event a majority of the aggregate number of votes
which may be cast by the holders of outstanding shares of common stock approve
such conversion.

Subject to the rights of any then outstanding shares of preferred
stock, holders of common stock (and restricted common stock if any are issued)
are entitled to participate pro rata in such dividends as may be declared in the
discretion of the Board of Directors out of the funds legally available
therefor. Holders of common stock (and restricted common stock if any are
issued) are entitled to share ratably in the net assets of BrightStar on
liquidation after payment or provision for all liabilities and any preferential
liquidation rights of any preferred stock then outstanding. Holders of common
stock and holders of restricted common stock will have no preemptive rights to
purchase shares of BrightStar. Shares of common stock are not subject to any
redemption provisions and are not convertible into any other securities of
BrightStar. Shares of restricted common stock, if issued, will not be subject to
any redemption provisions, but will be convertible into common stock on the
occurrence of certain events as described above. All outstanding shares of
common stock are, on payment therefor, fully paid and non-assessable.

PREFERRED STOCK

The preferred stock may be issued from time to time by the Board in one
or more classes or series. Subject to the provisions of our certificate of
incorporation and limitations prescribed by law, the Board is expressly
authorized to adopt resolutions to issue the shares, to fix the number of shares
and to change the number of shares constituting any class or series and to
provide for or change the voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, including dividend rights (including whether dividends are
cumulative), dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights and liquidation preferences of
the shares constituting any series of the preferred stock, in each case without
any further action or vote by the stockholders. We have no current plans to
issue any shares of preferred stock.

One of the effects of undesignated preferred stock may be to enable the
Board to render more difficult or to discourage an attempt to obtain control of
BrightStar by means of a tender offer, proxy contest, merger or otherwise, and
thereby to protect the continuity of our management. The issuance of shares of
the preferred stock pursuant to the Board's authority described above may
adversely affect the rights of the holders of common stock and restricted common
stock. For example, preferred stock issued by us may rank prior to the common
stock and restricted common stock as to dividend rights, liquidation preference
or both, may have full or limited voting rights and may be convertible into
shares of common stock. Accordingly, the issuance of shares of preferred stock
may discourage bids for the common stock or may otherwise adversely affect the
market price of the common stock.

31
<PAGE> 34

STATUTORY BUSINESS COMBINATION PROVISION

BrightStar is subject to Section 203 of the Delaware General
Corporation Law which, with certain exceptions, prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with any
"interested stockholder" for a period of three years following the date that
stockholder became an interested stockholder, unless: (i) prior to that date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) on closing of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and also
officers of the corporation and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) on or after that date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholder. Under Section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the announcement or notification of one of
certain extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors who were directors prior to that person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed those directors by a majority of those directors.
An "interested stockholder" is defined as any person that is (a) the owner of
15% or more of the outstanding voting stock of the corporation or (b) an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date it is sought to be determined
whether that person was an interested stockholder.

The foregoing provisions of Section 203 could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of common stock even if such removal or assumption would be
beneficial, in the short term, to our stockholders. The provisions could also
discourage or make more difficult a merger, tender offer or proxy contest even
if such event would be favorable to the interests of our stockholders.

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS

Pursuant to our certificate of incorporation and as permitted by
Delaware law, a director of BrightStar is not liable to BrightStar or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability in connection with a breach of duty of loyalty to
BrightStar or its stockholders, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, for dividend
payments, stock repurchases or redemptions illegal under Delaware law or any
transaction in which that director derived an improper personal benefit.

Additionally, our certificate of incorporation provides that directors
and officers of BrightStar will be indemnified by BrightStar to the fullest
extent authorized by Delaware law, as it now exists or may in the future be
amended, against all expenses and liabilities actually and reasonably incurred
in connection with service for or on behalf of BrightStar, and further permits
the advancing of expenses incurred in defense of claims.

The inclusion in our certificate of incorporation of the provisions
described in the two preceding paragraphs may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter our stockholders or management from bringing a lawsuit against its
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited BrightStar and its stockholders.

Our certificate of incorporation also provides that any action required
or permitted to be taken by the stockholders of BrightStar must be effected at a
duly called meeting and may not be taken or effected by a written consent of
stockholders in lieu thereof. Our certificate of incorporation provides that a
special meeting of

32
<PAGE> 35

stockholders may be called only by the President, the Board or by such other
person or persons as may be authorized in BrightStar's bylaws. BrightStar's
bylaws provide that only those matters set forth in the notice of the special
meeting may be considered or acted on at that special meeting. Our certificate
of incorporation provides that the Board may adopt, amend or repeal BrightStar's
bylaws by the affirmative vote of a majority of the Board without the consent or
vote of BrightStar's stockholders; provided, however, that the stockholders of
BrightStar may adopt, amend or repeal BrightStar's bylaws by the affirmative
vote of the holders of at least a majority of the shares entitled to vote in the
election of directors which are present in person or represented by proxy at a
duly constituted meeting of BrightStar's stockholders at which a quorum is
present.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.

ISSUANCE OF COMMON STOCK, WARRANTS AND OPTIONS TO SELLING STOCKHOLDERS

On March 10, 2000, we completed the private placement of 709,555 shares
of our common stock and issued to certain selling stockholders fixed warrants to
purchase 202,500 shares of our common stock and adjustable warrants to purchase
shares of our common stock. Pursuant to the terms of the fixed warrants and the
adjustable warrants, the holders thereof have elected to fix the number of
common shares issuable under such warrants upon exercise thereof, which has been
determined to be 1,525,000 shares in the aggregate. Such shares were issued on
September 29, 2000 at an exercise price of $.001 per share. Proceeds from the
private placements have been classified at temporary equity, subject to
registration becoming effective.

As of December 16, 1997, BrightStar entered into an option agreement,
pursuant to which we issued options which are exercisable for 137,830 shares of
common stock. This prospectus covers the 3,085,853 shares of our common stock
issued (or to become issuable upon exercise of the warrants and options issued).
As of June 23, 2000, we issued a total of 668,468 shares of our common stock in
connection with the payment of a portion of the purchase price under an asset
purchase agreement by which we acquired the assets of Integrated Systems
Consulting in April 1999.

Pursuant to the terms of the registration rights agreement between
BrightStar, Strong River Investment, Inc. and Montrose Investments Ltd.,
BrightStar agreed to file a registration statement covering the shares held by
the selling stockholders with the SEC on or prior to April 15, 2000, and to
cause such registration statement to be declared effective prior to June 8,
2000. Because we did not meet these obligations, these selling stockholders have
certain rights to receive payment from us. We are presently negotiating the
terms of these rights with these selling stockholders, but we have not proposed
a settlement. A settlement payment to these selling stockholders, if any, will
not affect their registration rights.

SELLING STOCKHOLDERS

The following table sets forth information as of September 29, 2000
with respect to the selling stockholders:

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES OF SHARES BENEFICIALLY
PRIOR COMMON STOCK OWNED AFTER
NAME OF STOCKHOLDER TO THE OFFERING OFFERED HEREBY THE OFFERING(1)
------------------- ------------------------- -------------- --------------------
NUMBER PERCENT(2) NUMBER PERCENT
---------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Strong River Investment, Inc.(3) 923,353 8.0% ______ 0 --
Montrose Investments Ltd.(4) 1,042,793 9.0% ______ 0 --
Polystick Real Estate Ltd (5) 268,492 2.3%
Wharton Capital Partners, Ltd.(6) 45,000 * 45,000 0 --
Brewer Capital Group, LLC(7) 11,430 * 11,430 0 --
Mr. Michael A Sooley 46,400 * 46,400 0 --
Mr. Mark D. Diggs 80,000 * 80,000 0 --
Mr. Deryle T. House, Jr. 167,117 1.4% 167,117 0 --
Mr. Ray M. Barry 167,117 1.4% 167,117 0 --
Mr. Christopher M. Bailey 167,117 1.4% 167,117 0 --
Mr. Christopher J. Miguel 167,117 1.4% 167,117 0 --
</TABLE>

33
<PAGE> 36

---------

(1) Assumes sale of all shares offered hereby and no other purchases or
sales of BrightStar's common stock. See "Plan of Distribution."

(2) Based on 11,545,057 issued and outstanding shares of BrightStar's
common stock as of September 29, 2000.

(3) Enright Holding Corp., of which Mr. Avi Vigder is managing director,
has voting and investment power over the securities beneficially owned
by Strong River Investments, Inc.

(4) Each of Harlan B. Korenvaes, Kenneth M. Hirsh, Laurence H. Lebowitz,
William E. Rose, Richard L. Booth, David C. Haley and Jamiel A. Akhtar
may be deemed to have voting control as the members of HBK Management
LLC, the general partner of HBK Partners II L.P., which is the general
partner of HBK Investments L.P

(5) Polystick Real Estate Ltd, Bat Yam, Israel, operates under the
direction of Mr. Sasic Matza, President.

(6) Includes a warrant to purchase 45,000 shares of BrightStar's common
stock. Wharton Capital Partners, Ltd. acted as broker in connection
with the private placement completed March 10, 2000, and is an
affiliate of Wharton Capital Markets, LLC, which is a broker-dealer
registered with the Commission. Barry R. Minsky and Michael M. Arnouse
have voting or investment control over Wharton Capital Partners, Ltd.

(7) Includes a warrant to purchase 11,430 shares of BrightStar's common
stock. Brewer Capital Group, LLC is an affiliate of Augusta Securities
Corp., which is a broker-dealer registered with the Commission.
Stephen Brewer has sole voting or investment power over Brewer Capital
Group, LLC and Augusta Securities Corp.

* Less than one percent.

Each of Wharton Capital Partners, Ltd. and Brewer Capital Group, LLC
has purchased the securities in the ordinary course of business and at the time
of the purchase of the securities, each had no agreements or understandings,
directly or indirectly, with any person to distribute the common shares to be
received upon exercise of the warrants.

PLAN OF DISTRIBUTION

The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:

o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o an exchange distribution in accordance with the rules of the
applicable exchange;

o privately negotiated transactions;

o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;

o a combination of any such methods of sale; and

o any other method permitted pursuant to applicable law.

34
<PAGE> 37

The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.

BrightStar is required to pay all fees and expenses incident to the
registration of the shares, including up to $7,500 of the fees and disbursements
of counsel to the selling stockholders. BrightStar has agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
us by Orrick, Herrington & Sutcliffe LLP, Old Federal Reserve Bank Building, 400
Sansome Street, San Francisco, California 94111.

EXPERTS

The 1999 consolidated financial statements and schedule included in
this prospectus have been included in reliance on the report of Grant Thornton
LLP, independent auditors, given on the authority of said firm as experts in
auditing and accounting.

The consolidated financial statements as of December 31, 1998, and for
the year ended September 30, 1997, the three months ended December 31, 1997 and
the year ended December 31, 1998, included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein and elsewhere in the registration statement (of which the 1998
financial statements have been restated and are no longer presented herein), and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to
these shares of common stock. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules to the registration statement. We refer you to the registration
statement and its exhibits and schedules for further information. Statements
contained in this prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete; reference is made in
each instance to the copy of such contract or document filed as an exhibit to
the registration statement. Each such statement is qualified by such reference
to such exhibit.

The registration statement, including exhibits and schedules thereto,
may be inspected without charge at the Commission's Public Reference Room at 450
Fifth Street, N.W., Washington D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. You may obtain copies of all or any part of the registration
statement from the Commission after paying the prescribed fees. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.

Our common stock is quoted on the Nasdaq National Market under the
symbol "BTSR." Reports, proxy and information statements and other information
about BrightStar may be inspected at the Nasdaq National Market, 1735 K Street,
N.W., Washington, DC 20006-1506.

35
<PAGE> 38

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Consolidated Financial Statements
Reports of Independent Certified Public Accountants...................................................F-2--F-3
Consolidated Balance Sheets................................................................................F-4
Consolidated Statements of Operations......................................................................F-5
Consolidated Statements of Stockholders' Equity.......................................................F-6--F-7
Consolidated Statements of Cash Flows......................................................................F-8
Notes to Consolidated Financial Statements...........................................................F-9--F-18
Schedule of Valuation and Qualifying Accounts.............................................................F-19
Condensed Consolidated Balance Sheets (unaudited).........................................................F-20
Condensed Consolidated Statements of Operations (unaudited) ..............................................F-21
Condensed Consolidated Statements of Cash Flows (unaudited)...............................................F-22
Notes to Condensed Consolidated Financial Statements................................................F-23--F-26
</TABLE>

F-1

<PAGE> 39

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
BrightStar Information Technology Group, Inc.

We have audited the accompanying consolidated balance sheet of BrightStar
Information Technology Group, Inc. (the "Company"), a Delaware corporation, as
of December 31, 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The consolidated financial statements of the
Company, as of and for the year ended December 31, 1998, were audited by other
auditors whose report dated March 30, 1999, expressed an unqualified opinion on
those statements. As discussed in Note 3, the Company has restated its 1998
consolidated financial statements to reflect its discontinued operations. The
other auditors reported on the 1998 financial statements before the restatement.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BrightStar
Information Technology Group, Inc. as of December 31, 1999, and the consolidated
results of its operations and its consolidated cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.

We also audited the adjustments described in Note 3 to the consolidated
financial statements that were applied to restate the 1998 consolidated
financial statements. In our opinion, such adjustments are appropriate and have
been properly applied.

/s/ GRANT THORNTON LLP

San Jose, California
March 28, 2000

F-2

<PAGE> 40

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors BrightStar Information Technology Group, Inc.,
Pleasanton, California

We have audited the accompanying consolidated balance sheet as of December
31, 1998 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows of BrightStar Information Technology Group,
Inc. ("the Company") for the year ended September 30, 1997, the three months
ended December 31, 1997 and the year ended December 31, 1998 (of which the 1998
financial statements have been restated and are no longer presented herein).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion such financial statements present fairly, in all material
respects, the consolidated balance sheet as of December 31, 1998 and the results
of its operations and its cash flows for the year ended September 30, 1997, the
three months ended December 31, 1997 and the year ended December 31, 1998 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 30, 1999

F-3

<PAGE> 41

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................ $ 973 $ 3,122
Trade accounts receivables, net of allowance for doubtful
accounts of $1,987 in 1999 and $1,296 in 1998 ................ 16,127 17,140
Unbilled revenue ................................................ 1,591 2,238
Deferred tax asset .............................................. 1,712 785
Income tax receivable ........................................... 810 --
Prepaid expenses and other ...................................... 1,166 1,070
Net assets of discontinued operations ........................... 4,000 12,260
-------- --------
Total current assets .................................... 26,379 36,615
Property and equipment ............................................ 6,736 3,513
Less-accumulated depreciation ................................... (2,720) (1,207)
-------- --------
Property and equipment, net ..................................... 4,016 2,306
Goodwill .......................................................... 56,848 53,940
Less-accumulated amortization ................................... (2,284) (873)
-------- --------
Goodwill, net ................................................... 54,564 53,067
Other ............................................................. 49 413
-------- --------
Total ................................................... $ 85,008 $ 92,401
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable ................................................ $ 4,063 $ 3,542
Acquisition payables ............................................ 2,000 4,784
Restructuring reserve ........................................... 1,761 4,383
Accrued salaries and other expenses ............................. 8,105 5,936
Income taxes payable ............................................ -- 1,791
Deferred revenue ................................................ 41 1,831
-------- --------
Total current liabilities ............................... 15,970 22,267
Line of credit .................................................... 8,579 --
Other liabilities ................................................. 8 60
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 35,000,000 shares
authorized; 8,642,034 and 7,989,059 shares issued and
outstanding in 1999 and 1998, respectively ................... 9 8
Additional paid-in capital ...................................... 89,693 82,818
Common stock payable ............................................ -- 6,875
Common stock warrant and option ................................. 100 100
Deferred stock compensation ..................................... -- (468)
Accumulated other comprehensive income .......................... 171 248
Retained earnings (deficit) ..................................... (29,522) (19,507)
-------- --------
Total stockholders' equity .............................. 60,451 70,074
-------- --------
Total ................................................... $ 85,008 $ 92,401
======== ========
</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE> 42

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR END
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1999 1998 1997 1997
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Revenue ..................................... $ 103,449 $ 63,584 $ 6,623 $ 12,190
Cost of revenue ............................. 76,476 45,409 5,810 10,063
----------- ----------- ----------- -----------
Gross profit ................................ 26,973 18,175 813 2,127
Operating expenses:
Selling, general and administrative ....... 26,797 15,445 817 1,668
Stock compensation ........................ 468 6,766 -- 305
In process research & development ......... -- 3,000 -- --
Restructuring charge ...................... -- 7,614 -- --
Goodwill amortization ..................... 1,423 883 -- --
Depreciation and amortization ............. 1,633 769 31 135
----------- ----------- ----------- -----------
Total operating expenses .......... 30,321 34,477 848 2,108
Income (loss) from operations ............. (3,348) (16,302) (35) 19
Other income (expense) .................... (15) 158 7 33
Interest expense, net ..................... (518) (66) (31) (96)
----------- ----------- ----------- -----------
Loss from continuing operations before
income taxes ........................... (3,881) (16,210) (59) (44)
Income tax provision (benefit) .............. (1,313) 612 (22) 6
----------- ----------- ----------- -----------
Loss from continuing operations ............. (2,568) (16,822) (37) (50)
Discontinued operations:
Income (loss) from discontinued
operations, net of tax ................. (648) 278 -- --
Loss on disposal of discontinued
operations, net of tax ................. (6,799) -- -- --
----------- ----------- ----------- -----------
Total discontinued operations ............. (7,447) 278
----------- -----------
Net income (loss) ................. $ (10,015) $ (16,544) $ (37) $ (50)
=========== =========== =========== ===========
Net income (loss) per share (basic and
diluted):
Income (loss) from continuing
operations ............................. $ (0.30) $ (2.68) $ (0.04) $ (0.06)
Loss from discontinued operations ......... (0.86) 0.04 -- --
----------- ----------- ----------- -----------
Net loss .................................. $ (1.16) $ (2.64) $ (0.04) $ (0.06)
=========== =========== =========== ===========

Shares outstanding (basic and diluted): ..... 8,642,034 6,275,031 1,012,306 893,475
=========== =========== =========== ===========

</TABLE>

See notes to consolidated financial statements

F-5

<PAGE> 43

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
COMMON STOCK STOCK
------------------------- ADDITIONAL COMMON WARRANT
SHARES AMOUNT PAID-IN-CAPITAL STOCK PAYABLE AND OPTION
--------- --------- --------------- ------------- ----------

<S> <C> <C> <C> <C> <C>
Balance, September 30, 1996 ...................... 10,000 $ 10 -- -- --
Issuance of common stock ....................... 3,068 308
Net loss and comprehensive loss.................
--------- --------- --------- --------- ---------
Balance, September 30, 1997 ...................... 13,068 318 -- -- --
Net loss and comprehensive loss.................
--------- --------- --------- --------- ---------
Balance, December 31, 1997 ....................... 13,068 318 -- -- --
Issuance of common stock in public offering .... 4,887,500 5 $ 58,635 $ 450
Stock used for acquisition of Founding
Companies .................................... 1,408,120 1 15,934 $ 5,300
Common stock issued to management and
promoters .................................... 648,126 1 7,582
Stock split to conform Blackmarr ............... 999,238 (317) 317
Exercise of stock warrants ..................... 33,007 -- 350 (350)
Common stock granted to employees .............. 1,575
Amortization of deferred compensation...........
Write-off of deferred compensation of
terminated employees..........................
Net loss........................................
Other comprehensive income (loss)...............
--------- --------- --------- --------- ---------
Balance, December 31, 1998 ....................... 7,989,059 8 $ 82,818 $ 6,875 100
Stock issued to owners of Founding Company ..... 441,400 1 5,300 (5,300)
Common stock issued to directors and
management ................................... 11,575
Common stock issued to employees ............... 200,000 1,575 (1,575)
Common stock issued to management and
promoters.....................................
Amortization of deferred compensation...........
Net loss........................................
Other comprehensive income (loss)...............
--------- --------- --------- --------- ---------
Balance, December 31, 1999 ....................... 8,642,034 $ 9 $ 89,693 $ -- $ 100
========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements

F-6

<PAGE> 44

<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE RETAINED TOTAL
UNEARNED INCOME EARNINGS STOCKHOLDERS' COMPREHENSIVE
COMPENSATION (LOSS) (DEFICIT) EQUITY INCOME (LOSS)
------------ ------------- --------- -------- ========

<S> <C> <C> <C> <C> <C>
Balance, September 30, 1996 .................... -- -- $ 413 $ 423
Issuance of common stock ..................... 308
Net loss and comprehensive loss .............. (50) (50) $ (50)
-------- -------- -------- -------- ========
Balance, September 30, 1997 .................... -- -- 363 681
Net loss and comprehensive loss .............. (36) (36) $ (36)
-------- -------- -------- -------- ========
Balance, December 31, 1997 ..................... -- -- 327 645
Issuance of common stock in public offering... 59,090
Stock used for acquisition of Founding
Companies .................................. (3,290) 17,945
Common stock issued to management and
promoters .................................. (7,583) --
Stock split to conform Blackmarr ............. --
Exercise of stock warrants....................
Common stock granted to employees ............ 1,575
Amortization of deferred compensation ........ 5,055 5,055
Write-off of deferred compensation of
terminated employees ....................... 2,060 2,060
Net loss ..................................... (16,544) (16,544) $(16,544)
Other comprehensive income ................... 248 248 248
-------- -------- -------- -------- --------
Balance, December 31, 1998 ..................... (468) 248 (19,507) 70,074 $(16,296)
Stock issued to owners of Founding Company.... 1
Common stock issued to directors and
management ................................. --
Common stock issued to employees ............. --
Amortization of deferred compensation ........ 468 468
Net loss ..................................... (10,015) (10,015) $(10,015)
Other comprehensive income (loss) ............ (77) (77) (77)
-------- -------- -------- -------- --------
Balance, December 31, 1999 ..................... $ -- $ 171 $(29,522) $ 60,451 $(10,092)
======== ======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements

F-7

<PAGE> 45

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1999 1998 1997 1997
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss ......................................... $(10,015) $(16,544) $ (37) $ (50)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Restructuring charge ........................... -- 6,443
Write down of certain intangible and other
assets ....................................... -- 841
In process research and development
expense ...................................... -- 3,000
(Income) loss from discontinued
operations ................................... 7,447 (278)
Depreciation and amortization .................. 3,056 1,652 31 135
Effect of exchange rate on cash ................ (77) 248
Additions to allowance for doubtful
accounts ..................................... 691 857 15 (5)
Deferred income taxes .......................... (1,944) (1,311) (22) 8
Compensation expense on issuance of common
stock ........................................ 468 6,766 305
Changes in operating working capital:
Trade accounts receivable .................... 322 (4,137) (1,451) (1,632)
Income tax refund receivable ................. (810) 38 -- --
Unbilled revenue ............................. 647 (672) (501) 133
Prepaid and other assets ..................... 268 (167) 2 (24)
Accounts payable ............................. 521 (299) 2 (3)
Restructuring reserve ........................ (2,622)
Accrued salaries other accrued expenses ...... 2,340 (3,061) 1,928 448
Income taxes payable ......................... (1,791) 1,509 57 (33)
Deferred revenue ............................. (1,790) 1,210 -- 462
Discontinued operations ...................... 813 (149) -- --
-------- -------- -------- --------
Net cash provided by (used in)
operating activities .................... (2,476) (4,054) 24 (256)
Investing activities:
Cash paid to acquire founding companies .......... -- (32,576)
Cash paid to retire debt of founding
companies ...................................... -- (9,865)
Cash paid for acquisitions ....................... (4,898) (6,106)
Redemption of certificate of deposit ............. -- -- -- 60
Capital expenditures ............................. (3,354) (997) (15) (112)
-------- -------- -------- --------
Net cash used in investing activities ..... (8,252) (49,544) (15) (52)
Financing activities:
Net borrowings under line of credit .............. 8,579 -- 25 223
Proceeds from (payments on) term loan ............ -- -- (33) 142
Payments on note payable and capital lease
obligations .................................... -- (2,373) (18) (57)
Net proceeds from issuance of common stock ....... -- 59,090 -- 3
-------- -------- -------- --------
Net cash provided by (used in)
financing activities .................... 8,579 56,717 (26) 311
Net increase (decrease) in cash .................... (2,149) 3,119 (17) 3
Cash:
Beginning of period .............................. 3,122 3 20 17
-------- -------- -------- --------
End of period .................................... $ 973 $ 3,122 $ 3 $ 20
======== ======== ======== ========
Supplemental information:
Interest paid .................................... $ 518 $ 73 $ 31 $ 96
======== ======== ======== ========
Income taxes paid ................................ $ 2,747 -- $ -- $ 50
======== ======== ======== ========
</TABLE>

See notes to consolidated financial statements

F-8

<PAGE> 46

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation -- BrightStar Information Technology Group, Inc.,
(the "Company" or "BrightStar") is a leading international e-business solutions
and applications service provider (ASP). BrightStar conducted no operations
prior to April 16, 1998 when it completed its initial public offering ("IPO").
The accompanying historical consolidated financial statements for the year ended
December 31, 1999 and the period from the IPO to December 31, 1998 includes the
accounts of all BrightStar subsidiaries. The accompanying financial statements
for all periods prior to the IPO include only the historical financial
information for Blackmarr the "accounting acquirer," which elected to change its
fiscal year-end from September 30 to December 31 prior to the IPO. See note 2
for further discussion of the IPO, and the definition of the "accounting
acquirer."

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.

Revenue recognition -- The Company provides services to customers for fees
that are based on time and materials 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. Revenue related to the sale of hardware is recognized when the
hardware is shipped. Deferred revenue primarily represents the excess of amounts
billed over contract costs and expenses incurred.

Concentration of credit risk is limited to trade receivables and unbilled
revenue and is subject to the financial conditions of certain major clients. The
Company does not require collateral or other security to support client's
receivables. The Company conducts periodic reviews of its clients' financial
conditions and vendor payment practices to minimize collection risk on trade
receivables.

Property and equipment -- Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of 3
years for computer equipment and software and 5 years for furniture and
fixtures. Leasehold improvements are amortized over the shorter of the lease
term or the assets useful life. Expenditures for repairs and maintenance that do
not improve or extend the life of assets are expensed as incurred.

Goodwill -- Goodwill is the cost in excess of tangible assets acquired.
Goodwill recorded in conjunction with the Founding Companies and all other
acquisitions in 1998 is being amortized over 40 years on a straight-line basis.
Goodwill associated with the acquisition of ISC is being amortized over 20 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 would be recognized. Total amortization
of goodwill from continuing operations for 1999 and 1998 amounted to $1,423 and
$833, respectively.

Cumulative translation adjustment -- Cumulative translation adjustment in
stockholders' equity reflects the unrealized adjustments resulting from
translating the financial statements of foreign subsidiaries. The functional
currency of the Company's foreign subsidiaries is the local currency of that
country. Accordingly, assets and liabilities of the foreign subsidiaries are
translated to U.S. dollars at year-end exchange rates. Income and expense items
are translated at the average rates prevailing during the year. Changes in
exchange rates that affect cash flows and the related receivables or payables
are recognized as transaction gains and losses in the determination of net
income.

F-9

<PAGE> 47

Income taxes -- The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes." SFAS No. 109 requires an asset and liability approach to accounting for
income taxes. The Company provides deferred income taxes for temporary
differences that will result in taxable or deductible amounts in future years. A
valuation allowance is recognized if it is anticipated that some or all of a
deferred tax asset may not be realized.

Earnings per share (EPS) -- EPS is based on Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." Accordingly, Basic
EPS is calculated using income available to common shareholders divided by the
weighted average number of common shares outstanding during the year. Diluted
EPS is similar to Basic EPS except that it is based on the weighted average
number of common and potentially dilutive shares, from dilutive stock options
and warrants, outstanding during each year. The weighted average shares used to
calculate earnings per share on the statements of operations prior to the IPO
has been determined by converting the number of outstanding shares of Blackmarr
during the periods presented, based upon the ratio of approximately 77 to 1,
which was the ratio received by Blackmarr as a result of the offering. Common
shares issuable upon exercise of common stock options and convertible debt
instruments are anti-dilutive (decreases net loss per share) for the periods
presented.

Stock based compensation -- the Company utilizes Accounting Principles
Board Opinion No. 25 ("APB No. 25") in its accounting for stock options issued
to employees. No compensation expense is recognized for stock options issued to
employees under the Company's stock option plan as the option price equals or
exceeds the fair market value of the Company's Common Shares at the date of
grant. In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation." The accounting method as provided in
the pronouncement is not required to be adopted; however, it is encouraged. The
Company has adopted the disclosure-only provisions of SFAS No. 123 with respect
to options issued to employees. Compensation expense associated with stock
options and warrants issued to non-employees and non-directors is recognized in
accordance with SFAS No. 123.

Reclassifications -- Certain reclassifications have been made to conform
the prior years' financial statement amounts to the current year
classifications.

(2) ACQUISITIONS

Concurrent with and as a condition to the closing of the IPO, 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. ("ICON"), Mindworks Professionals Education Group, Inc.
("Mindworks"), Software Innovators, Inc. ("SII"), Zelo Group, Inc. ("Zelo"),
Software Consulting Services America, LLC ("SCS America") and SCS Unit Trust
("SCS Australia")(the "Founding Companies"). The acquisitions have been
accounted for using the purchase method of accounting with Blackmarr being
treated as the accounting acquirer, in accordance with Staff Accounting Bulletin
No. 97. The purchase method of accounting requires that the results of
operations of the acquired companies only be included in the consolidated
financial statements subsequent to their respective acquisition dates. At the
acquisition date, the purchase price was allocated to assets acquired, and
liabilities assumed based on their fair market values. The excess of the total
purchase price over the fair value of the net assets acquired represents
goodwill.

The following table sets forth the consideration paid in cash and shares of
common stock. For purposes of computing the estimated purchase price for
accounting purposes, the value of the shares was determined using an estimated
fair value of $11.70 per share, which represents a discount of 10% from the
initial public offering price of $13.00 per share, due to restrictions on the
resale and transferability of the shares issued in the acquisitions. The
estimated purchase price for each acquisition is subject to certain purchase
price adjustments.

F-10

<PAGE> 48

<TABLE>
<CAPTION>
AMOUNT IN COMMON
COMMON STOCK
CASH STOCK SHARES
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FOUNDING COMPANIES:
ICON ................ $ 6,224 $ 4,149 319,197
Mindworks ........... 445 1,052 80,894
SCS America ......... 11,000 5,000 384,615
SCS Australia(1) .... 9,815 5,889 452,976
SII ................. 450 2,413 185,633
Zelo ................ 375 1 100
--------- --------- ---------
Subtotal .... 28,309 18,504 1,423,415
Blackmarr ........... 3,290 13,160 1,012,306
--------- --------- ---------
Total ....... $ 31,599 $ 31,664 2,435,721
========= ========= =========
</TABLE>

----------

(1) Common stock shares were issued in 1999. Such shares are included in common
stock payable at December 31, 1998.

The following is the calculation of goodwill arising from the acquisitions
of the Founding Companies and BITG (in thousands):

<TABLE>
<S> <C>
Cash paid to Founding Companies ................................. $ 31,599
Stock issued to Founding Companies (valued at $11.70 per
share) ........................................................ 28,498
Cash paid to Blackmarr, charged to retained earnings ............ (3,290)
Discounted value of stock issued to Blackmarr included in
amount of stock issued to Founding Companies above ............ (11,844)
--------
Total consideration (purchase price) attributable to
acquisition of the Founding Companies and BITI by
Blackmarr, the accounting acquirer ............................ 44,963
Pro forma combined net assets of all Founding Companies
and BITI ........................................................ (1,216)
Net assets of Blackmarr ......................................... 1,107
Deferred offering costs at BITI ................................. 4,907
Other acquisition costs ......................................... 1,366
Goodwill at ICON ................................................ 94
In-process research and development ............................. (3,000)
--------
Total ................................................. $ 48,221
========
</TABLE>

Additionally, 437,681 shares of common stock were issued as consideration
for class A units at BITI. These shares were valued at a discount of 10% to the
initial public offering price of $13. These shares, less 46,153 shares issued to
affiliated parties charged to paid-in capital, have been included in goodwill in
the amount of $4,581, as a cost of the acquisition of the Founding Companies.

Since the IPO BrightStar has completed four acquisitions which were
accounted for as purchase business combinations as follows:

- On June 30, 1998, the Company completed the acquisition of Cogent
Technologies, LLC, for $250 and certain costs, resulting in total
goodwill of approximately $254. The Company will be required to
provide additional consideration in 2000 related to an earnout
agreement with the prior owners.

- On August 31,1998, the Company completed the acquisition of Total
Business Quality Associates, Inc. (TBQ), a provider of SAP consulting
and implementing services for $1,450 and certain costs, resulting in
total goodwill of approximately $1,478.

F-11

<PAGE> 49

- Effective September 30, 1998, the Company completed the acquisition of
PROSAP Australia Pty. LTD (PROSAP), a SAP certified National
Implementation Partner located in Sydney, Australia for $8,884 and
certain acquisition costs resulting in total goodwill of approximately
$8,525; $4,100 was paid at closing, $4,284 was paid in 1999. The
remaining amount of $500 is recorded as an acquisition payable at
December 31, 1999.

- On May 28, 1999, the Company purchased Integrated Systems Consultants,
LLC ("ISC") pursuant to an Asset Purchase Agreement (the "Agreement"),
dated as of April 1, 1999. ISC is a provider of SAP consulting
services based in Phoenix, Arizona. The aggregate consideration for
this transaction was $3,000; of which $500 was paid in cash upon
closing; $1,000 will be paid on June 1, 2000 in up to 255,183 shares
of common stock, or a combination of cash and stock as defined in the
Agreement; $500 was financed by a Convertible Subordinated Promissory
Note due August 1, 2000; and, the remaining $1,000 of contingent
consideration will be recorded as additional goodwill paid subject to
the achievement of ISC earnings during the twelve months ending March
31, 2000. The Company has allocated the entire purchase price and
certain other acquisition costs to goodwill. The pro forma results of
operations assuming the acquisition occurred on January 1, 1999, would
not be materially different than the operating results reported.

(3) DISCONTINUED OPERATIONS

In October 1999, the Company's management approved a plan to discontinue
the operations of its Training, Controls and Infrastructure Support businesses.
Each of the underlying businesses were acquired by BrightStar as part of its IPO
in April 1998. The Company believes that the continued investment in the
Training, Controls, and Infrastructure Support businesses is not consistent with
its long-term strategic objectives. Accordingly, these businesses are reported
as discontinued operations and the consolidated financial statements have been
reclassified to segregate operating results and net assets of the businesses.
Management's plan to discontinue the operations of each of the businesses
includes the following:

Training Business

The completed sale and closure of the training business -- the Company:

- Sold Mindworks Professional Education Group, Inc. (Mindworks) to its
former owners. The sale of Mindworks was completed in December, 1999
for approximately $1,100. The Company recorded a pre-tax loss on the
sale of Mindworks of $900, ($1,000, or $0.12 per share including
taxes), the loss includes the associated write-off of net goodwill
totaling $1,600.

- Closed its training business in Texas in October 1999. The Company
recorded no gain or loss upon closing the Texas training operations.

Controls Business

The planned sale of the Controls Business within Integrated Controls, Inc.
-- while the Company has had discussions with potential buyers, no formal sales
agreement has been reached as of March, 2000. The Company expects to sell its
Control's business during the first half of 2000. The Company recorded an
estimated loss on the disposal of the Controls business of $5.1 million ($5.8
million including taxes, or $0.67 per share) including provision of $800 for
estimated operating losses until disposal. The amount of operating losses and
the amount the Company will ultimately realize upon the sale could significantly
differ from the amount assumed in arriving of the estimated operating losses
until disposal and estimated proceeds upon disposal.

Infrastructure Support Business

The discontinuance of its Infrastructure Support Business in December 1999
-- the Infrastructure Support Business was engaged in hardware sales and
consulting services relative to systems infrastructure and security. The Company
recorded no gain or loss on the discontinuance of the business.

F-12

<PAGE> 50

Summary operating results and financial data for the discontinued
operations for 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
1999 1998
---------------------------------------------- ----------------------------------------------
INFRASTRUCTURE INFRASTRUCTURE
TRAINING CONTROLS SUPPORT TOTAL TRAINING CONTROLS SUPPORT TOTAL
-------- -------- -------------- -------- -------- -------- -------------- --------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................... $ 4,477 $ 11,064 $ 8,635 $ 24,176 $4,465 $ 9,795 $ 3,084 $ 17,344
Cost of revenue............... 3,156 8,145 8,678 19,979 3,288 6,971 2,501 12,760
Operating expenses............ 1,582 3,303 70 4,955 1,208 2,908 -- 4,116
-------- -------- ------- -------- ------ -------- ------- --------
Operating income (loss)....... (261) (384) (113) (758) (31) (84) 583 468
Loss on discontinued
operations, net of tax...... $ (1,173) $ (6,206) $ (68) $ (7,447) $ (22) $ (50) $ 350 $ 278
Current assets................ $ 1,542 $ 1,542 $ 263 $ 3,122 $ 3,385
Property and equipment, net... 720 720 244 996 1,240
Deferred income taxes......... 320 320 -- --
Goodwill, net................. 3,234 3,234 1,667 7,046 8,713
Other assets.................. 19 19 36 49 85
-------- -------- ------ -------- --------
Total assets.......... 5,835 5,835 2,210 11,213 13,423
Provision for loss until
disposal.................... 800 800 -- -- --
Other current liabilities..... 1,035 1,035 214 949 1,163
-------- -------- ------ -------- --------
Total liabilities..... 1,835 1,835 214 949 1,163
-------- -------- ------ -------- --------
Net assets of discontinued
operations.................. $ 4,000 $ 4,000 $1,996 $ 10,264 $ 12,260
======== ======== ====== ======== ========
</TABLE>

(4) BUSINESS RESTRUCTURING

During the fourth quarter of 1998, the Company announced a plan to
restructure its operations and recorded a restructuring charge of $7,614. The
plan provided for the following:

- Reorganizing the operations of its wholly owned subsidiaries into one
operation that will result in an integrated sales force, focused
operating divisions and consolidated finance and administrative
functions

- Realignment into separate operating divisions/consulting service lines

- Relocation of its corporate office

- Reduction of workforce of 13 employees, all of which have been
terminated.

- The write-down of certain property and equipment and other assets as a
result of business closures and termination of service lines.

- Contract terminations and other obligations.

The major categories of the 1998 charges are summarized below:

<TABLE>
<CAPTION>
AMOUNTS AMOUNTS TO
CHARGED TO BE PAID
EARNINGS IN BEYOND
1998 1999
----------- ----------

<S> <C> <C>
Workforce severance obligations ....... $4,960 $1,209
Asset impairment ...................... 1,171 --
Lease and other contract obligations... 1,483 552
------ ------

Total ....................... $7,614 $1,761
====== ======
</TABLE>

F-13

<PAGE> 51

As of December 31, 1999, the Company had expended $5,853 of the charge. The
remaining $1,761 reserved as of December 31, 1999 pertains to 1) remaining
severance obligations which will be paid through the April 2001, and 2)
remaining lease obligations which continue to extend past one year.

(5) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
------- -------

<S> <C> <C>
Computer equipment and software .............. $ 5,099 $ 2,325
Furniture, fixtures and office equipment ..... 1,294 944
Leasehold improvements ....................... 343 244
------- -------
Total .............................. 6,736 3,513
Accumulated depreciation and amortization .... (2,720) (1,207)
------- -------
Property and equipment, net ........ $ 4,016 $ 2,306
======= =======
</TABLE>

(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
------ ------
<S> <C> <C>
Accrued payroll and payroll taxes ...................... $3,901 $4,895
Accrued operating losses on discontinued operations .... 800 --
Accrued losses on fixed fee contract ................... 1,263 --
Other accrued expenses ................................. 2,141 1,041
------ ------
Total accrued expenses ....................... $8,105 $5,936
====== ======
</TABLE>

(7) CREDIT FACILITY

Effective March 29, 1999, the Company established a $15 million credit
facility (the "Credit Facility") with Comerica Bank. Under terms of the
agreement, the Credit Facility will be used for working capital needs, including
issuance of letters of credit, and for general corporate purposes. Borrowings
under the Credit Facility bear an interest rate of prime plus .25%, or the
Eurodollar rate plus 2.5%. The Company pays a commitment fee on unused amounts
of the Credit Facility amounting to .375% per annum based on the average daily
amount by which the commitment amount exceeds the principal amount outstanding
during the preceding month. Interest is payable monthly on prime rate borrowings
and quarterly or at the end of the applicable interest period for the Eurodollar
rate borrowings.

The Credit Facility is secured by liens on substantially all the Company's
assets (including accounts receivable) and a pledge of all of the outstanding
capital stock of the Company's domestic operating subsidiaries. The Credit
Facility also requires 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 quarters ended September 30, 1999 and
December 31, 1999, the Company was not in compliance with a certain financial
covenant. Comerica Bank has agreed to waive the defaults for both periods.

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. Borrowings outstanding under the Credit Facility amounted to $8.6
million at December 31, 1999. As of March 28, 2000 the Company had reduced
amounts borrowed under the Credit Facility to approximately $2 million. The
Credit Facility expires on March 30, 2001.

F-14

<PAGE> 52

(8) STOCKHOLDERS' EQUITY AND OTHER STOCK RELATED INFORMATION

Capital Stock

Authorized capital shares of the company include 3,000,000 shares of
preferred stock, 2,000,000 shares of restricted stock and 35,000,000 shares of
common stock. Rights, preferences and other terms of the preferred stock will be
determined by the board of directors at the time of issuance; no preferred stock
was issued at December 31, 1999.

Common Stock Payable

Common stock payable at December 31, 1998 represented stock issuable under
the terms based upon of the purchase agreement between the Company and SCS
Australia, achieving certain 1998 revenue targets. Upon the final settlement of
the purchase price, the unit holders of SCS Unit Trust received 441,400 common
shares during the first quarter of 1999, with the difference of 11,575 shares
issued to certain directors and members of management under the terms of the
original exchange agreement. As a result, a charge to stock compensation expense
in the amount of $135 was recorded in 1998.

Other Common Stock Warrants and Options

In 1997, the Company entered into an advisory agreement with an investment
banking firm, and issued a warrant to that firm for $100. The warrant provides
for the purchase of 50,000 shares of common stock at an exercise price of $6 per
share, and is exercisable at any time prior to August 14, 2004.

Also in 1997, the Company entered into an agreement for corporate
development services and issued a common stock option to the consulting firm.
The option grants the holder the option to purchase 14,285 shares.

The estimated combined fair value of the warrant and the option of $450
were recorded as offering costs and charged against paid-in-capital. The common
stock warrant was exercised during 1998, with the holder surrendering
approximately 17,000 common shares in lieu of payment for 33,000 common shares.

Stock Options -- During 1998 a stock option plan (The 1997 Plan) was
established, which provides for the issuance of incentive and non-qualified
stock options, restricted stock awards, stock appreciation rights or performance
stock awards. The total number of shares that may be issued under the Plan is
2,000,000 shares, of which only 1,930,000 shares may be granted for incentive
stock options. Options, which constitute the only issuance under the incentive
plans, have been generally granted at fair value of the company's common stock
on the date of grant. The following table summarizes the plan's stock option
activity:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE REMAINING
SHARES PRICE LIFE
------ -------- ---------

<S> <C> <C> <C>
Options outstanding at December 31, 1997.... --
Granted in 1998............................. 603,402 $ 13.00 5.07
years
Exercised................................... --
Cancelled................................... --
---------
Options outstanding at December 31, 1998.... 603,402 $ 13.00 9.75
========= years
Granted in 1999............................. 1,428,750 $ 6.88
Exercised................................... -- --
Cancelled................................... (218,664) $ 9.96
---------
Options outstanding at December 31, 1999.... 1,813,448 $ 8.50
---------
Exercisable at December 31, 1999............ 413,929(a)
=========
</TABLE>

----------

(a) 400,179 and 13,750 options are exercisable at $13.00 and $6.00-$7.50,
respectively.

F-15

<PAGE> 53

Pro forma disclosures as if the Company had applied the cost recognition
requirements under SFAS No. 123 in 1998 are presented below. The pro forma
compensation cost may not be representative of that expected in future years.

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net loss (in thousands)
As reported ..................................... $ (10,015) $ (16,544)
Pro Forma ....................................... $ (12,048) $ (17,622)
Loss per share -- basic and diluted
As reported ..................................... $ (1.16) $ (2.64)
Pro Forma ....................................... $ (1.39) $ (2.81)
Weighted average fair value of options granted .... $ 4.39 $ 9.71
</TABLE>

Compensation cost for 1999 and 1998 was calculated in accordance with the
binomial model, using the following weighted average assumptions: (i) expected
volatility of 110% and 60%; (ii) expected dividend yield of 0% in both years;
(iii) expected option term of 10 years in both years; (iv) risk-free rate of
return of 5.86% and 5.60%; and expected (v) a forfeiture rate of 11%.

Recent Sales of Unregistered Securities.

On March 10, 2000, pursuant to an agreement with Strong River Investments,
Inc. and Montrose Investments Ltd. (collectively, the "Purchasers"), the Company
sold to the Purchasers 709,555 shares of the Company's common stock (the
"Shares") for $7.5 million, or $10.57 per share (the "Transaction"). Net
proceeds to the Company amounted to $7.2 million after related issuance costs.
Proceeds were applied to the Company's borrowings under its Credit Facility. In
connection the purchase of the Shares, the Company issued two warrants to the
Purchasers. One warrant has a five-year term during which the Purchasers may
purchase up to 157,500 shares of the Company's common stock at a price of $12.00
per share. The second warrant covers an adjustable amount of shares of the
Company's common stock at an adjustable exercise price, based on the market
price of the Company's common stock during three (3) separate periods of thirty-
one (31) trading days commencing 270 calendar days after the date of the
Transaction. The Company also issued to Wharton Capital Partners Ltd.
("Wharton"), as compensation for Wharton's services in completing the
Transaction, a warrant which has five-year term during which Wharton may
purchase up to 45,000 shares of the Company's common stock at a price of $12.00
per share. The Company anticipates registering the Shares sold to Purchaser in
April 2000. The Company and the Purchaser further agreed that the Company will
sell and the Purchaser will purchase up to an additional $7.5 million worth of
the Company's common stock six months following the Transaction subject to
certain conditions.

(9) STOCK COMPENSATION EXPENSE

In connection with the offering and acquisition of the Founding Companies,
certain directors and members of management received 648,126 shares of common
stock. These shares, valued at $11.70, were recorded as deferred compensation
and were amortized to stock compensation expense over a one year period based
upon the terms of a stock repurchase agreement between the Company and related
shareholders. Total stock compensation expense recorded during 1999 and 1998 in
connection with the above was $468 and $5,055, respectively. At December 31,
1998, certain members of management that had received substantially all of these
shares were terminated in connection with the Company's restructuring. As a
result, the remaining deferred compensation totaling $2,060, attributable to the
shares held by these terminated employees was charged to expense and included in
the restructuring charge.

In connection with the terms of the acquisition of SCS Unit Trust, certain
key employees were granted 200,000 shares of common stocks under an incentive
stock bonus plan. Based on the share price of $7.88 per share on the date of the
grant, the Company recorded stock compensation expense of $1,575. At December
31, 1998 these common shares had not been formally issued, and accordingly, are
recorded in common stock payable. The shares were issued in 1999.

F-16

<PAGE> 54

During March 1997, the Company issued 3,068 shares of common stock with an
estimated fair value of approximately $100 per share to certain employees for $1
per share. Compensation expense totaling $305 was recognized during the year
ended September 30, 1997.

(10) INCOME TAXES

The components of income (loss) before income taxes from continuing
operations and the related income taxes provided for the years ended December
31, 1999, 1998 and September 30, 1997, are presented below:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic ..................................................................... $ (5,803) $ (17916) $ (44)
Foreign: ..................................................................... 1,922 1,706 --
-------- -------- -------
$ (3,881) $(16,210) $ (44)
======== ======== =======

<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Provision (benefit) for income taxes:
Current:
Domestic .................................................................. $ (156) $ 707 $ (2)
Foreign ................................................................... 787 528 --
Deferred:
Domestic .................................................................. (1,721) (623) 8
Foreign ................................................................... (223) -- --
-------- -------- -------
Total ................................................................ $ (1,313) $ 612 $ 6
======== ======== =======
</TABLE>

The Company's deferred tax assets are reflected below as of December 31,
1999 and 1998, respectively:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Bad debt reserves ................................................................................ $ 628 $ 387
Restructure reserve .............................................................................. 669 1,665
Accrued compensation ............................................................................. 422
Losses on discontinued operations ................................................................ 304
Foreign tax assets ............................................................................... 223 --
Change in accounting method ...................................................................... (151)
Other ............................................................................................ 154 120
-------- -------
Net deferred tax asset ........................................................................... 2,249 2,172
Valuation allowance .............................................................................. (537) (1,387)
-------- -------
$ 1,712 $ 785
======== =======
</TABLE>

The table below reconciles the expected U.S. federal statutory tax to the
recorded income tax:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Provision (benefit) at statutory tax rate...................................... $ (2,031) $ (6,270) $ (15)
State income taxes, net of federal benefit..................................... 103 (111) (1)
Goodwill amortization ......................................................... 498 361
Foreign tax ................................................................... 564 527 --
Deferred compensation ......................................................... 164 3,041 --
Goodwill writeoff ............................................................. -- 1,506 --
Valuation allowance ........................................................... (850) 1,386 --
Other, net .................................................................... 239 172 22
-------- -------- -------
Total ............................................................... $ (1,313) $ 612 $ 6
======== ======== =======
</TABLE>

F-17

<PAGE> 55

(11) EMPLOYEE BENEFIT PLANS

The Company has a 401(k) plan that covers substantially all U.S. employees.
If applicable, employees would vest in Company contributions evenly over five
years from their date of employment. The Company may provide matching
contributions of up to 6% of the employees base salary. Employer matching and
profit sharing contributions are discretionary, and, to date, no matching or
profit sharing contributions have been made.

(12) COMMITMENTS AND CONTINGENCIES

The Company leases office space, computer and office equipment under
various operating lease agreements that expire at various dates through December
31, 2004. Minimum future commitments under these agreements for the years ending
December 31 are; 2000, $2,641; 2001, $2,240; 2002, $1,625; 2003, $511; and 2004,
$758.

Rent expense was $394, $113, $1,636, $4,048 during the periods ended
September 30, 1997, December 31, 1997 and December 31, 1998, and 1999
respectively.

Employment Agreements -- As of December 31, 1999, the Company had entered
into employment agreements with certain key management personnel which provided
for minimum compensation levels and incentive bonuses, along with provisions for
termination of benefits in certain circumstances and for certain severance
payments in the event of a change in control.

(13) SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company did not have any customer, individually or considered as a
group under common ownership that accounted for 10% of revenues or accounts
receivable for the periods presented.

The Company operates in a single segment, as a provider of internet
services. Since April 16, 1998, the Company has primarily operated in two
geographic regions. Prior to April 16, 1998, the Company primarily operated in
the United States. Specific information related to the Company's geographic
areas are found in the following table:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------- --------------------------------------------
UNITED STATES AUSTRALIA CONSOLIDATED UNITED STATES AUSTRALIA CONSOLIDATED
------------- --------- ------------ ------------- --------- ------------

<S> <C> <C> <C> <C> <C> <C>
Revenue ............................. $ 69,119 $ 34,250 $ 103,449 $ 45,607 $ 17,977 $ 63,584
Income (loss) from continuing
operations before income taxes .... (5,803) 1,922 (3,881) (18,146) 1,936 (16,210)

Long-lived assets ................... 57,601 1,028 58,629 54,951 835 55,786
Total assets ........................ 77,133 7,875 85,008 81,889 10,512 92,401
</TABLE>

F-18

<PAGE> 56

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------------------- ---------- ---------- ---------- --------------
ADDITIONS
----------
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
--------------------------------------- ---------- ---------- ---------- --------------

<S> <C> <C> <C> <C>
Allowance deducted from assets to which
it applies:
Allowance for doubtful accounts:
Year ended December 31, 1998 ............... $ 439 -- $ 857 $1,296
Year ended December 31, 1999 ............... 1,296 $1,926 1,235 1,987
Accrued Restructuring Charge:
Year ended December 31, 1998 ............... -- 7,614 3,231 4,383
Year ended December 31, 1999 ............... 4,383 2,622 1,761
Tax valuation allowance:
Year ended December 31, 1998 ............... -- 1,387 -- 1,387
Year ended December 31, 1999 ............... 1,387 -- 850 537
</TABLE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE

To the Board of Directors and Stockholders
BrightStar Information Technology Group, Inc.

In connection with our audit of the consolidated financial statements of
BrightStar Information Technology Group, Inc. referred to in our report dated
March 28, 2000, which is included in the annual report on Form 10-K and this
prospectus, we have also audited Schedule II for the years ended December 31,
1999 and 1998. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.

/s/ Grant Thornton LLP

San Jose, California
March 28, 2000

F-19

<PAGE> 57

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

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 385 $ 973
Trade accounts receivable, net
of allowance for doubtful accounts
of $727 and $1,987 9,360 16,127
Unbilled revenue 274 1,591
Deferred tax asset -- 1,712
Income tax receivable 9 810
Prepaid expenses and other 967 1,166
Net assets of discontinued operations 850 4,000
-------- --------
Total current assets 11,845 26,379

PROPERTY AND EQUIPMENT 6,845 6,736
Less-accumulated depreciation (3,617) (2,720)
-------- --------
Property and equipment, net 3,228 4,016

GOODWILL 33,200 56,848
Less-accumulated amortization (1,988) (2,284)
-------- --------
Goodwill, net 31,212 54,564

OTHER 47 49
-------- --------
TOTAL ASSETS $ 46,332 $ 85,008
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 4,798 $ --
Accounts payable 2,967 4,063
Acquisition payable 2,078 2,000
Restructuring reserve 1,768 1,761
Accrued salaries and other expenses 4,918 8,105
Payable to stockholders 900 --
Deferred revenue 115 41
-------- --------
Total current liabilities 17,544 15,970

LINE OF CREDIT -- 8,579
OTHER LIABILITIES 72 8
COMMITMENTS AND CONTINGENCIES
TEMPORARY EQUITY 6,275 --
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 35,000,000
shares authorized; 11,545,057 and 8,642,034
shares issued and outstanding 11 9
Additional paid-in capital 92,031 89,693
Common stock warrants 100 100
Accumulated other comprehensive income (loss) (395) 171
Retained earnings (deficit) (69,306) (29,522)
-------- --------
Total stockholders' equity 22,441 60,451
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 46,332 $ 85,008
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-20

<PAGE> 58

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,
2000 1999 2000 1999
------------- ------------- ------------- -------------

<S> <C> <C> <C> <C>
REVENUE $ 13,923 $ 26,830 $ 51,624 $ 81,841

COST OF REVENUE 9,269 20,072 35,013 60,604
------------ ------------ ------------ ------------
GROSS PROFIT 4,654 6,758 16,611 21,237

OPERATING EXPENSES:
Selling, general and administrative expenses 7,694 5,674 22,756 18,034
Restructuring charge -- -- 2,525 --
Stock compensation expense -- -- -- 468
Write down of goodwill 24,793 -- 24,793 --
Goodwill amortization 381 355 1,130 1,043
Depreciation and amortization 467 441 1,411 1,139
------------ ------------ ------------ ------------
Total operating expenses 33,335 6470 52,615 20,684

INCOME (LOSS) FROM OPERATIONS (28,681) 288 (36,004) 553

OTHER INCOME (EXPENSE) -- 1 (4) (31)

INTEREST EXPENSE, net (151) (234) (419) (312)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (28,832) 55 (36,427) 210

INCOME TAX PROVISION (CREDIT) 4,825 (433) 2,174 125
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (33,657) 488 (38,601) 85

DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations,
net of tax -- (123) -- 26

Loss on disposal of discontinued operations,
net of tax (960) -- (1,183) --
------------ ------------ ------------ ------------
Total discontinued operations (960) (123) (1,183) 26
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (34,617) $ 365 $ (39,784) $ 111
============ ============ ============ ============

NET INCOME (LOSS) PER SHARE: BASIC AND DILUTED
Continuing operations $ (3.34) $ 0.05 $ (4.02) $ 0.01
Discontinued operations (.10) (0.01) (0.12) 0.00
------------ ------------ ------------ ------------
Net income (loss) $ (3.44) $ 0.04 $ (4.14) $ 0.01
============ ============ ============ ============

SHARES OUTSTANDING: BASIC AND DILUTED 10,053,209 8,642,034 9,619,823 8,755,448
============ ============ ============ ============

</TABLE>

See notes to condensed consolidated financial statements.

F-21

<PAGE> 59

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(39,784) $ 111
Adjustments to reconcile net loss to net cash
used in operating activities:

Loss from discontinued operations 1,183 26
Depreciation and amortization 2,541 2,182
Write down of goodwill 24,793 --
Change in allowance for doubtful accounts (1,260) 376
Compensation expense on issuance of common stock -- 468
Deferred taxes 1,712 (206)
Cash provided by (used in) operating activities:
Trade accounts receivable 8,027 (4,814)
Unbilled revenue 1,317 (1,185)
Prepaid expenses and other 201 (279)
Accounts payable (1,096) 1,695
Restructuring reserve 7 (1,620)
Accrued salaries and other expenses (2,899) 3,988
Income taxes receivable/payable 801 (1,496)
Deferred revenue 74 (1,575)
-------- --------
Net cash used in operating activities (4,383) (2,329)

INVESTING ACTIVITIES:
Payments for acquisitions (4,896)
Additions of property and equipment, net of disposals (1,406) (2,428)
Proceeds from sale of subsidiary and realization
of net assets retained 1,967 --
-------- --------
Net cash provided by (used in) investing activities 561 (7,324)

FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 7,175 --
Costs associated with common stock transactions (160) --
Borrowings (repayments) under line of credit (3,781) 10,910
Net payments on capital lease obligations -- (100)
-------- --------
Net cash provided by financing activities 3,234 10,810

NET (DECREASE) INCREASE IN CASH (588) 1,157

CASH:
Beginning of period 973 3,672
-------- --------
End of period $ 385 $ 4,829
======== ========

SUPPLEMENTAL DISCLOSURE:
Noncash issuance of common stock at fair value
in connection with prior acquisition $ 2,500 $ 1,575
======== ========

Noncash settlement in connection with
prior acquisition $ 1,578 $ --
======== ========
</TABLE>

See notes to condensed consolidated financial statements.

F-22

<PAGE> 60
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
AND SUBSIDIARIES

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 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 generally accepted accounting
principles 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, 2000, are not necessarily indicative of the results that may
be expected for the year ending December 31, 2000. The balance sheet at December
31, 1999, has been derived from the audited financial statements at that date
but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For additional
information, refer to financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.

The preparation of the condensed financial statements in conformity with
generally accepted accounting principles 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 and warrants (using the if-converted method). Potentially dilutive
securities are excluded from the computation if their effect is anti-dilutive.
At September 30, 2000, the Company had no potentially dilutive securities, as
the underlying value of the Company's common stock was less than the strike
price of outstanding options and warrants.

2. LIQUIDITY

Our operations require material amounts of additional capital in the
immediate future. Although we are attempting to reduce operating losses
(and generate operating profits) through cost reductions, cash generated by
operations and available credit facilities will not be sufficient in the near
term to meet our cash needs. We are continuing negotiations to sell our
Australian subsidiary, BrightStar Information Technology Group Ltd., to a
potential buyer with whom we had entered into a Letter of Intent that has
expired. There can be no assurance that the sale will close, and the timing of a
closing is uncertain. We are also attempting to arrange additional financing,
but there is no certainty that additional financing will be available. If a sale
of our Australian subsidiary and the realization of a significant amount of cash
proceeds are substantially delayed or do not occur, and if we are unable to
arrange additional financing, our operations will likely be substantially harmed
and we may be unable to continue as a going concern.

As a result of our need for additional capital, we have engaged Cherry Tree
& Co. as our financial adviser to assist us in considering our strategic
alternatives. Transactions that we may consider include an investment in our
company by another company, a merger, and a sale of all or a portion of our
operations. There is no assurance that any such transaction could be carried out
before we become unable to continue as a going concern.

3. RESTRUCTURING

On June 20, 2000, the Company announced that revenue and earnings for the
second quarter and the remainder of the calendar year will be lower than
expected and that the Company is realigning its operations to improve operating
margins by reducing expenses associated with underutilized office space and
personnel.

As a result of the realignment, the Company recorded a restructuring charge
of $2.5 million in the second quarter. Of the total charge, approximately $1.0
million was reserved for ongoing lease obligations for facilities that were
closed and $0.5 million was

F-23

<PAGE> 61
recorded to write-down related fixed assets. The remainder of the charge relates
to the severance of approximately 90 employees, or 15% of the Company's
workforce. Approximately $2.0 million of the charge applies to obligations
funded by cash disbursements, of which approximately $475,000 was disbursed for
severance and $150,000 was disbursed for rents during the second and third
quarters of 2000. The remaining charge relates to longer term severance
obligations and related costs amounting to $0.4 million to be paid over the next
nine months and $0.7 million of rents, net of sublease income, to be paid
related to leases which expire through April 2003.

Remaining amounts accrued of $0.6 million related to the restructuring
charge recorded in the fourth quarter of 1998 relate primarily to ongoing
severance obligations to be paid through April 2001.

4. CREDIT FACILITIES

Effective March 31, 2000, the Company established an AU$3 million ($1.8
million U.S. dollars) credit facility (the "Australian Credit Facility") with
Macquarie Bank Limited (the "Bank"). Under the terms of the agreement, the
Australian Credit Facility will be used for working capital needs and other
general corporate purposes. Borrowings under the Australian Credit Facility bear
an interest rate calculated as the aggregate of the 30 day Macquarie Bank Bill
Rate plus 3.0%. The Company's Australian subsidiary will pay a commitment fee on
unused amounts of the Australian Credit Facility amounting to 1.0% per annum
calculated daily and payable monthly based on the difference between AU$3.0
million and borrowings outstanding.

The Australian Credit Facility is secured by liens on substantially all of
the assets of the Company's Australian subsidiary and guaranteed by the Company.
Borrowings under the Australian Credit Facility are limited to 60% of
outstanding customer accounts receivable less than 90 days old plus 40% of
unbilled revenue. The Australian Credit Facility requires that both the Company
and its Australian subsidiary comply with various financial covenants and
reporting requirements. This Australian Credit Facility matures on December 31,
2004. As of September 30, 2000 and November 10, 2000, the Company had AU$0.5
million outstanding under the Australian Credit Facility.

Borrowings outstanding under the Company's Credit Facility with Comerica
Bank amounted to $4.5 million at September 30, 2000, and $3.8 million on
November 14, 2000, which approximated total availability under the facility at
these dates. As of, and during the quarter ended September 30, 2000, the Company
was not in compliance with a certain financial covenants. Comerica Bank has
agreed to waive the default. The Company's Credit Facility expires on March 31,
2001 and Comerica Bank has advised the Company that it does not intend to renew
the facility.

5. INCOME TAXES

6. COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income," requires companies to
report and display comprehensive income and its components in the financial
statements. Comprehensive income includes all changes in equity during a period
except those resulting from investment by owners and distributions to owners.
Comprehensive income (loss) is approximately ($0.4 million) higher than the net
loss recorded for the nine months ended September 30, 2000, and approximates net
income reported for the nine months ended September 30, 1999.

7. ACQUISITION PAYABLES

On June 23, 2000, the Company issued 668,468 shares of common stock to the
prior owners of Integrated Systems Consulting (ISC) as payment for the remaining
amount due of $2.5 million in connection with the 1999 acquisition of ISC.

On October 19, 2000, we agreed in principle to a settlement of claims
presented by the prior owners of Cogent Technologies, LLC ("Cogent") for (1) the
unpaid balance of the purchase price for our purchase of the business of Cogent
from them in June 1999; and (2) breach of employment agreements with us.
Pursuant to the proposed settlement, in exchange for a mutual release from the
agreement by which we acquired Cogent and the employment agreements with the
prior owners, they will receive 1,000,000

F-24

<PAGE> 62
shares of our common stock, up to $75,000 in legal fee reimbursement and monthly
compensation due under the terms of their employment agreements until June 30,
2001. The Company has recorded additional goodwill and an acquisition payable of
$1.6 million related to the settlement, of which $0.2 million will be paid in
cash. In the third quarter, Cogent's operations were discontinued resulting in a
charge of $1.8 million.

An acquisition payable of $0.5 million is due in connection with the 1998
acquisition of PROSAP Australia Pty.

8. RECENT SALES OF UNREGISTERED SECURITIES

On March 10, 2000, pursuant to an agreement with Strong River Investments,
Inc. and Montrose Investments Ltd. (collectively, the "Purchasers"), the Company
sold to the Purchasers 709,555 shares of the Company's common stock (the
"Shares") for $7.5 million, or $10.57 per share (the "Transaction"). Net
proceeds to the Company amounted to $7.175 million after related issuance costs.
Proceeds were applied to the Company's borrowings under its Credit Facility. In
connection with the purchase of the Shares, the Company issued two warrants to
the Purchasers. One warrant has a five-year term during which the Purchasers may
purchase up to 157,500 shares of the Company's common stock. at a price of
$12.00 per share. The second warrant covers an adjustable amount of shares of
the Company's common stock. Pursuant to the terms of the adjustable warrants,
the holders thereof have elected to fix the number of common shares issuable
under such warrants upon exercise thereof, which has been determined to be
1,525,000 shares in the aggregate. Such shares were issued on September 29, 2000
at an exercise price of $0.001 per share. Proceeds from the private placements
have been classified as temporary equity, subject to registration becoming
effective.

Pursuant to the terms of the registration rights agreement between
BrightStar, Strong River Investment, Inc. and Montrose Investments Ltd.,
BrightStar agreed to file a registration statement with the SEC covering the
shares held by the selling stockholders on or prior to April 15, 2000, and to
cause such registration statement to be declared effective prior to June 8,
2000. Because we did not meet these obligations, these selling stockholders have
certain rights to receive payment from us. We are presently negotiating the
terms of these rights with these selling stockholders, but we have not proposed
a settlement. A settlement payment to these selling stockholders, if any, will
not affect their registration rights. The settlement amount, as described by the
registration rights agreement if paid, would amount to $0.9 million at September
30, 2000. The Company has recorded the settlement amount as a payable to
stockholders and corresponding reduction of temporary equity.

The Company also issued to Wharton Capital Partners Ltd. ("Wharton"), as
compensation for Wharton's services in completing the Transaction, a warrant,
which has a five-year term during which Wharton may purchase up to 45,000 shares
of the Company's common stock at a price of $12.00 per share. The Company
anticipates registering the Shares sold to the Purchaser in December 2000.

9. SALE OF SUBSIDIARIES

On September 8, 2000, we entered into an asset purchase agreement with
Integrated Controls Systems, Inc., a Delaware corporation, and Integrated
Controls, Inc., a Louisiana corporation and our wholly-owned subsidiary
("ICON"). Pursuant to the asset purchase agreement, we sold to Integrated
Control Systems substantially all of the assets, except for accounts receivable,
and transferred certain liabilities of ICON's business of systems integration
for the energy industry, which ICON ran through its controls division. The
aggregate purchase price was $2.1 million subject to certain adjustments. The
Company recorded a third quarter charge of $1.0 million as a result of the sale.

On September 15, 2000, we entered into a Heads of Agreement to sell our
Australian subsidiary, BrightStar Information Technology Group LTD. The Heads of
Agreement which is essentially a letter of intent, which terminated on October
31, 2000. Negotiations are continuing to carry out the transaction contemplated
by the Heads of Agreement on different terms, although there can be no assurance
that a transaction will occur. The closing of any transaction would be subject
to a number of significant conditions, including satisfactory completion of due
diligence, negotiation of a mutually agreeable acquisition agreement, and the
obtaining of necessary consents and approvals. Assuming that all such conditions
have been satisfied, the closing of any transaction would not be expected to
occur until the latter part of the fourth quarter or later. The value of the
possible transaction does not provide for the recovery of $23 million of
goodwill associated with our Australian subsidiary. As such, the Company has
recorded a $23 million charge to write down Australian goodwill in the third
quarter.

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<PAGE> 63

10. LITIGATION

The Company has provided for $1.2 million of estimated legal settlements,
related primarily to three separate claims brought against the Company for
damages related to software development and implementation services provided by
the Company. The aggregate amount of the claims filed against the Company is
$7.2 million. While any litigation contains an element of uncertainty, the
Company believes, based upon its assessment of the claims and negotiations to
settle with the plaintiffs, that the liability recorded as of September 30,
2000, combined with possible coverage under the Company's errors and omissions
insurance policy, is adequate to cover the estimated exposure.

F-26

<PAGE> 64

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

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY BRIGHTSTAR OR BY ANY SELLING STOCKHOLDER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BRIGHTSTAR SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

----------

TABLE OF CONTENTS

<TABLE>
<S> <C>
PROSPECTUS SUMMARY 1
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 2
RISK FACTORS 3
USE OF PROCEEDS 8
DIVIDEND POLICY 8
PRICE RANGE OF COMMON STOCK 8
SELECTED CONSOLIDATED FINANCIAL DATA 9
SELECTED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 11
Quantitative And Qualitative Disclosures About
Market Risk 20
BUSINESS 20
MANAGEMENT 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 28
CERTAIN TRANSACTIONS 29
DESCRIPTION OF CAPITAL STOCK 31
ISSUANCE OF COMMON STOCK, WARRANTS AND OPTIONS TO
SELLING STOCKHOLDERS 33
SELLING STOCKHOLDERS 33
PLAN OF DISTRIBUTION 34
LEGAL MATTERS 35
EXPERTS 35
WHERE YOU CAN FIND MORE INFORMATION 35
</TABLE>

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

3,085,853 SHARES

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

COMMON STOCK

----------

PROSPECTUS

----------

, 2000
------------

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

<PAGE> 65

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale and distribution of the common stock
being registered. Selling commissions and brokerage fees and any applicable
transfer taxes and fees and disbursements of counsel for the selling
stockholders are payable individually by the selling stockholders. All amounts
are estimates except the registration fee.

<TABLE>
<CAPTION>
Amount
To Be Paid
--------------
<S> <C>
Registration Fee ............................................ $ 3,678.96
Legal Fees and Expenses ..................................... $ 20,000.00
Accounting Fees and Expenses ................................ $ 20,000.00
Fees of Wharton Capital Partners Inc. in connection with
the private placement and related transactions ........... $ 325,000.00
Miscellaneous ............................................... $ 2,500.00
--------------
Total .................................................... $ 371,178.96
==============
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Seven of BrightStar's Certificate of Incorporation provides that
directors of BrightStar shall not be personally liable to BrightStar or its
stockholders for monetary damages for breach of fiduciary duty as a director, to
the fullest extent permitted by the General Corporation Law of the State of
Delaware. Section 6.1 of BrightStar's Bylaws provide for indemnification of
officers and directors to the maximum extent and in the manner provided by the
General Corporation Law of Delaware. Section 145 of the Delaware General
Corporation Law makes provision for such indemnification in terms sufficiently
broad to cover officers and directors under certain circumstances for
liabilities arising under the Securities Act of 1933.

BrightStar has obtained directors' and officers' liability insurance
covering, subject to certain exceptions, actions taken by BrightStar's directors
and officers in their capacities as such.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Set forth below is certain information concerning all sales of securities
by BrightStar that were not registered under the Securities Act.

1. Effective October 17, 1997, BrightStar issued and sold 1,000 shares of
common stock to BIT Group Services, Inc. ("BITG") for $1,000.

2. Concurrently with the closing of its initial public offering and
pursuant to the Agreement and Plan of Exchange (the "Share Exchange") dated as
of December 15, 1997 among BrightStar, BITG, BIT Investors, LLC ("BITI"), and
the holders of the outstanding capital stock of BITG, (i) BrightStar issued to
BITI an aggregate of 739, 007 shares of common stock in exchange for all the
shares of common stock of BITG held by BITI and (ii) BrightStar issued up to an
aggregate of 346,800 shares of common stock in exchange for all the shares of
common stock of BITG held by members of BrightStar's management, as follows:
42,900 shares to George M. Siegel; 70,000 shares to Marshall G. Webb; 60,000
shares to Thomas A. Hudgins; 60,000 shares to Daniel M. Cofall; 60,000 shares to
Michael A. Sooley; 33,900 shares to Tarrant Hancock; and 20,000 shares to Mark
D. Diggs.

3. In connection with the Share Exchange, BrightStar assumed all
obligations of the issuer pursuant to an option issued by BrightStar to
Brewer-Gruenert Capital Advisors, LLC, which provides for the purchase of up to
14,285 shares of common stock at an exercise price of $6.00 per share.

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<PAGE> 66

4. Effective April 20, 1998, BrightStar issued 33,008 shares of common
stock upon the exercise of a warrant held by McFaland, Grossman & Company.

5. Pursuant to the Share Exchange, on January 11, 1999, the Company issued
11,575 shares of common stock to the holder of the Series A-1 Class A Unites of
BITI.

6. Concurrently with the closing of its initial public offering, BrightStar
issued to Software Consulting Services America, LLC ("SCS America") and the
stockholder of the other companies acquired concurrently with the closing of
BrightStar's initial public offering (the "Founding Companies") an aggregate of
1,982,645 shares of common stock in connection with the acquisition of the
Founding Companies.

7. On January 11, 1999, BrightStar issued to the beneficiaries of the SCS
Unit Trust an aggregate of 441,400 shares of common stock in consideration of
substantially all the assets of the SCS Unit Trust.

8. On March 10, 2000, pursuant to an agreement with Strong River
Investments, Inc. and Montrose Investments Ltd. (collectively, the
"Purchasers"), the Company sold to the Purchasers 709,555 shares of the
Company's common stock (the "Shares") for $7.5 million, or $10.57 per share (the
"Transaction"). In connection with the purchase of the Shares, the Company
issued two warrants to the Purchasers. One warrant had a five-year term during
which the Purchasers could purchase up to 157,500 shares of the Company's common
stock. at a price of $12.00 per share. The second warrant covered an adjustable
amount of shares of the Company's common stock. Pursuant to the terms of the
adjustable warrants, the holders thereof elected to fix the number of common
shares issuable under such warrants at 1,525,000 shares in the aggregate. Such
shares were issued on September 29, 2000 at an exercise price of $0.001 per
share. The Company also issued to Wharton Capital Partners Ltd. ("Wharton"), as
compensation for Wharton's services in completing the Transaction, a warrant
with a five-year term during which Wharton may purchase up to 45,000 shares of
the Company's common stock at a price of $12.00 per share.

The sales and issuances of the securities by BrightStar, by BITG to BITI
and to BrightStar's management and by BITI to its members, referenced above were
or will be, as applicable, exempt from registration under the Securities Act
pursuant to Section 4(2) thereof as transactions not involving any public
offerings, with the recipients representing their intentions to acquire the
securities for their own accounts and not with a view to the distribution
thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

EXHIBIT
NO. DESCRIPTION

3.1 -- Certificate of Incorporation, as amended (Incorporated by reference
from Exhibit 3.1 to Amendment No. 1 to BrightStar's Registration
Statement on Form S-1 filed February 27, 1998 (File No. 333-43209)).

3.2 -- Bylaws, as amended (Incorporated by reference from Exhibit 3.2 to
Amendment No. 3.2 to BrightStar's Registration Statement on Form S-1
filed April 14, 1998 (File No. 333-43209)).

4.1 -- Specimen Common Stock Certificates (Incorporated by reference from
Exhibit 4.1 to Amendment No. 1 to BrightStar's Registration Statement
on Form S-1 filed February 27, 1998 (File No. 333-43209)).

4.2 -- Agreement and Plan of Exchange dated December 15, 1997 among
BrightStar, BITG, BITI and the holders of the outstanding capital
stock of BITG (Incorporated by reference from Exhibit 4.2 to
Amendment No. 1 to BrightStar's Registration Statement on Form S-1
filed February 27, 1998 (File No. 333-43209)).

4.3 -- Option Agreement dated as of December 16, 1997 between BrightStar and
Brewer-Gruenert Capital Advisors, LLC (Incorporated by reference from
Exhibit 4.4 to Amendment No. 1 to BrightStar's Registration Statement
on Form S-1 filed February 27, 1998 (File No. 333-43209)).

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<PAGE> 67

5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP.*

10.1 -- BrightStar 1997 Long-Term Incentive Plan (Incorporated by reference
from Exhibit 10.1 to Amendment No. 1 to BrightStar's Registration
Statement on Form S-1 filed February 27, 1998 (File No. 333-43209)).

10.2 -- Agreement and Plan of Exchange by and among BrightStar and the
holders of the outstanding capital stock of Brian R. Blackmarr and
Associates, Inc. (Incorporated by reference from Exhibit 10.2 to
BrightStar's Registration Statement on Form S-1 filed December 24,
1997 (File No. 333-43209)).

10.3 -- Agreement and Plan of Exchange by and among BrightStar and the
holders of the outstanding capital stock of Integrated Controls, Inc.
(Incorporated by reference from Exhibit 10.3 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.4 -- Agreement and Plan of Exchange by and among BrightStar and the
holders of the outstanding capital stock of Mindworks Professional
Education Group, Inc. (Incorporated by reference from Exhibit 10.4 to
BrightStar's Registration Statement on Form S-1 filed December 24,
1997 (File No. 333-43209)).

10.5 -- Agreement and Plan of Exchange by and among BrightStar, Software
Consulting Services America, LLC and the holders of the outstanding
ownership interests of Software Consulting Services America, LLC.
(Incorporated by reference from Exhibit 10.5 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.6 -- Agreement and Plan of Exchange by and among BrightStar and Software
Consulting Services Pty. Ltd. in its capacity as Trustee of the
Software Consulting Services Unit Trust and the holders of all of the
outstanding ownership interests in the Software Consultants Unit
Trust (Incorporated by reference from Exhibit 10.6 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.7 -- Agreement and Plan of Exchange by and among BrightStar and The
holders of the outstanding capital stock of Software Innovators, Inc.
(Incorporated by reference from Exhibit 10.7 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.8 -- Agreement and Plan of Exchange by and among BrightStar and the holder
of the outstanding capital stock of Zelo Group, Inc. and Joel Rayden
(Incorporated by reference from Exhibit 10.8 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.9 -- Form of Employment Agreement between BrightStar and Marshall G. Webb,
Thomas A. Hudgins and Daniel M. Cofall (Incorporated by reference
from Exhibit 10.9 to Amendment No. 1 to BrightStar's Registration
Statement on Form S-1 filed February 27, 1998 (File No. 333-43209)).

10.10 -- Employment Agreement between Software Consulting Services America,
Inc. and Michael A. Ober (Incorporated by reference from Exhibit
10.10 to BrightStar's Annual Report on Form 10-K dated April 1,
1999).

10.11 -- Office Lease dated November 11, 1998, between Principal Life
Insurance Company and BrightStar (Incorporated by reference from
Exhibit 10.11 to BrightStar's Annual Report on Form 10-K dated April
1, 1999).

10.12 -- Employment Agreement dated Jan. 31, 1999 between BrightStar and
Donald Rowley (Incorporated by reference from Exhibit 10.12 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.13 -- Employment Agreement between Brian R. Blackmarr and Associates, Inc.
and Brian R. Blackmarr (Incorporated by reference from Exhibit 10.10
to Amendment No. 1 to BrightStar's Registration Statement on Form S-1
filed February 27, 1998 (File No. 333-43209)).

10.14 -- Letter Agreement dated August 14, 1997 between BITG and McFarland,
Grossman and Company, Inc., and amended as of March 17, 1998
(Incorporated by reference from Exhibit 10.11 to Amendment No. 2 to
BrightStar's Registration Statement on Form S-1 filed March 24, 1998
(File No. 333-43209)).

10.15 -- Letter Agreement dated September 26, 1997 between BITG and
Brewer-Gruenert Capital Advisors, LLC, and amended as of December 15,
1997 (Incorporated by reference from Exhibit 10.12 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.16 -- Loan Agreement dated October 16, 1997 between BITI and BITG
(Incorporated by reference from Exhibit 10.13 to Amendment No. 1 To
BrightStar's Registration Statement on Form S-1 filed February 27,
1998 (File No. 333-43209)).

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<PAGE> 68

10.17 -- Stock Repurchase Agreement between BrightStar and Marshall G. Webb,
Daniel M. Cofall, and Thomas A. Hudgins (Incorporated by reference
from Exhibit 10.17 to BrightStar's Annual Report on Form 10-K dated
April 1, 1999).

10.18 -- Agreement Regarding Repurchase of Stock by and among BrightStar,
George M. Siegel, Marshall G. Webb, Thomas A. Hudgins, Daniel M.
Cofall, Mark D. Diggs, Michael A. Sooley, Michael B. Miller, and
Tarrant Hancock (Incorporated by reference from Exhibit 10.18 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.19 -- Amendment to Agreement and Plan of Exchange dated as of June 5, 1998
by and BrightStar and the holder of the outstanding capital stock of
Zelo Group, Inc. and Joel Rayden (Incorporated by reference from
Exhibit 10.19 to BrightStar's Annual Report on Form 10-K dated April
1, 1999).

10.20 -- Deed of Variation dated as of April 17, 1998 by and among BrightStar
and Software Consulting Services Pty. Ltd. and Kentcom Pty. Ltd.,
Salvatore Fazio, Pepper Tree Pty. Ltd., Christopher Richard Banks,
Cedarman Pty. Ltd, Stephen Donald Caswell, Quicktrend Pty. Ltd.,
Desmond John Lock, Kullamurra Pty. Ltd., Robert Stephen Langford, and
KPMG Information Solutions Pty. Ltd. and Data Collection Systems
Integration Pty. Ltd. (Incorporated by reference from Exhibit 10.20
to BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.21 -- Asset Purchase Agreement dated as of June 30, 1998 among BrightStar,
Cogent Acquisition Corp., Cogent Technologies, LLC and the holders of
all of all the outstanding membership interest of Cogent
Technologies, LLC (Incorporated by reference from Exhibit 10.21 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.22 -- Asset Purchase Agreement dated as of August 31, 1998 among
BrightStar, Software Consulting Services America, Inc., TBQ
Associates, Inc. and the holders of all the outstanding capital stock
of TBQ Associates, Inc. (Incorporated by reference from Exhibit 10.22
to BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.23 -- Stock Purchase Agreement dated effective as of September 30, 1998
among BrightStar, BrightStar Group International, Inc. and the
holders of the outstanding capital stock of PROSAP AG (Incorporated
by reference from Exhibit 2.1 to the Current Report On Form 8-K of
BrightStar dated November 10, 1998).

10.24 -- Factoring Agreement and Security Agreement dated January 22, 1999
among Metro Factors, Inc. dba Metro Financial Services, Inc., Brian
R. Blackmarr and Associates, Inc., Software Consulting Services
America, Inc., Software Innovators, Inc., and Integrated Controls,
Inc. (Incorporated by reference to Exhibit 10.24 to BrightStar's
Annual Report on Form 10-K dated March 30, 2000).

10.25 -- Guaranty dated January 22, 1999 by BrightStar for the benefit Of
Metro Factors, Inc. dba Metro Financial Services, Inc. (Incorporated
by reference to Exhibit 10.25 to BrightStar's Annual Report on Form
10-K dated March 30, 2000).

10.26 -- Severance Agreement and Release effective November 20, 1998 between
BrightStar and Thomas A. Hudgins (Incorporated by reference to
Exhibit 10.26 to BrightStar's Annual Report on Form 10-K dated March
30, 2000).

10.27 -- Severance Agreement and Release effective January 31, 1999 between
BrightStar and Daniel M. Cofall. (Incorporated by reference to
Exhibit 10.27 to BrightStar's Annual Report on Form 10-K dated March
30, 2000).

10.28 -- Severance Agreement and Release effective January 31, 1999 between
Marshall G. Webb. (Incorporated by reference to Exhibit 10.28 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.29 -- Revolving Credit Agreement dated March 29,1999 between BrightStar and
Comerica Bank (Incorporated by reference to Exhibit 10.29 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.30 -- Form of subsidiaries guaranty dated March 29,1999, between BrightStar
subsidiaries and Comerica Bank (Incorporated by reference to Exhibit
10.30 to BrightStar's Annual Report on Form 10-K dated March 30,
2000).

10.31 -- Security Agreement (Negotiable collateral) dated March 29,1999
between BrightStar and Comerica Bank (Incorporated by reference to
Exhibit 10.31 to BrightStar's Annual Report on Form 10-K dated March
30, 2000).

10.32 -- Security Agreement (All assets) dated March 29, 1999 between
BrightStar and Comerica Bank (Incorporated by reference to Exhibit
10.32 to BrightStar's Annual Report on Form 10-K dated March 30,
2000).

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<PAGE> 69

10.33 -- $15,000,000 Revolving Note dated March 29, 1999 from BrightStar to
Comerica Bank (Incorporated by reference to Exhibit 10.33 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.34 -- Asset Purchase Agreement LLC dated as of April 1, 1999 among
BrightStar Information Technology Group, Inc., Software Consulting
Services America, Inc., Integrated Systems Consulting, LLC and the
Individuals Owning all of the Membership Interests of Integrated
Systems Consulting (Incorporated by reference to Exhibit 10.34 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.35 -- Securities Purchase Agreement dated as of March 10, 2000 among
BrightStar Information Technology Group, Inc. and Strong River
Investments, Inc. and Montrose Investments LTD (Incorporated by
reference to Exhibit 10.35 to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.36 -- Registration Rights Agreement dated as of March 10, 2000 among
BrightStar Information Technology Group, Inc. and Strong River
Investments, Inc. and Montrose Investments LTD.*

10.37 -- Adjustable Warrant issued to Strong River Investments, Inc. on March
10, 2000 (Incorporated by reference to BrightStar's Annual Report on
Form 10-K dated March 30, 2000).

10.38 -- Adjustable Warrant issued to Montrose Investments LTD on March 10,
2000 (Incorporated by reference to BrightStar's Annual Report on Form
10-K dated March 30, 2000).

10.39 -- Warrant issued to Montrose Investments LTD on March 10, 2000
(Incorporated by reference to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.40 -- Warrant issued to Wharton Capital Partners Ltd. on March 10, 2000
(Incorporated by reference to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.41 -- Amendment to Asset Purchase Agreement Among BrightStar Information
Technology Group, Inc., Software Consulting Services America, Inc.,
Integrated Systems Consulting, LLC and the Individuals Owning All Of
The Membership Interests of Integrated Systems Consulting, LLC dated
as of June 2000.*

10.42 -- Executive and Operational Management Service Agreement Between
BrightStar Information Technology Group, Inc. and Altamont Capital
Management.

21.1 -- List of Subsidiaries of the Company.*

23.1 -- Consent of Grant Thornton LLP, Independent Auditors.

23.2 -- Consent of Deloitte & Touche LLP, Independent Auditors.

23.3 -- Consent of Counsel.*

24.1 -- Power of Attorney (see page II-4).

27.1 -- Financial Data Schedule.*

* Previously filed.

(b) Financial Statement Schedules

All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.

ITEM 17. UNDERTAKINGS.

A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Registrant pursuant to the provisions
described in Item 14 above, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

B. The undersigned Registrant hereby undertakes to do the following, to the
extent that such actions are required by the rules and regulations of the
Securities and Exchange Commission:

II-5

<PAGE> 70

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

II-6

<PAGE> 71

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Pleasanton, State of California, on the 18th day of December
2000.

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

By: /s/ Joseph A. Wagda
-----------------------------
Joseph A. Wagda
Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on December 18, 2000:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ Joseph A. Wagda President, Chief Executive Officer and Director December 18, 2000
------------------------------- (Principal Executive Officer)
Joseph A. Wagda

/s/ David L. Christeson* Vice President of Finance and Administration December 18, 2000
------------------------------- (Principal Financial Officer)
David L. Christeson

/s/ George M. Siegel* Chairman of the Board of Director December 18, 2000
-------------------------------
George M. Siegel

/s/ Jennifer T. Bartlett* Director December 18, 2000
-------------------------------
Jennifer T. Bartlett

/s/ W. Barry Zwahlen* Director December 18, 2000
-------------------------------
W. Barry Zwahlen
</TABLE>

*By: /s/ Joseph A. Wagda
-------------------
Joseph A. Wagda
Attorney-in-fact

<PAGE> 72

BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------

<S> <C>
3.1 -- Certificate of Incorporation, as amended (Incorporated by reference
from Exhibit 3.1 to Amendment No. 1 to BrightStar's Registration
Statement on Form S-1 filed February 27, 1998 (File No. 333-43209)).

3.2 -- Bylaws, as amended (Incorporated by reference from Exhibit 3.2 to
Amendment No. 3.2 to BrightStar's Registration Statement on Form S-1
filed April 14, 1998 (File No. 333-43209)).

4.2 -- Agreement and Plan of Exchange dated December 15, 1997 among
BrightStar, BITG, BITI and the holders of the outstanding capital stock
of BITG (Incorporated by reference from Exhibit 4.2 to Amendment No. 1
to BrightStar's Registration Statement on Form S-1 filed February 27,
1998 (File No. 333-43209)).

5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP.*

10.2 -- Agreement and Plan of Exchange by and among BrightStar and the holders
of the outstanding capital stock of Brian R. Blackmarr and Associates,
Inc. (Incorporated by reference from Exhibit 10.2 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.3 -- Agreement and Plan of Exchange by and among BrightStar and the holders
of the outstanding capital stock of Integrated Controls, Inc.
(Incorporated by reference from Exhibit 10.3 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.4 -- Agreement and Plan of Exchange by and among BrightStar and the holders
of the outstanding capital stock of Mindworks Professional Education
Group, Inc. (Incorporated by reference from Exhibit 10.4 to
BrightStar's Registration Statement on Form S-1 filed December 24, 1997
(File No. 333-43209)).

10.6 -- Agreement and Plan of Exchange by and among BrightStar and Software
Consulting Services Pty. Ltd. in its capacity as Trustee of the
Software Consulting Services Unit Trust and the holders of all of the
outstanding ownership interests in the Software Consultants Unit Trust
(Incorporated by reference from Exhibit 10.6 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

10.7 -- Agreement and Plan of Exchange by and among BrightStar and The holders
of the outstanding capital stock of Software Innovators, Inc.
(Incorporated by reference from Exhibit 10.7 to BrightStar's
Registration Statement on Form S-1 filed December 24, 1997 (File No.
333-43209)).

<PAGE> 73

<TABLE>
<S> <C>
10.9 -- Form of Employment Agreement between BrightStar and Marshall G. Webb,
Thomas A. Hudgins and Daniel M. Cofall (Incorporated by reference from
Exhibit 10.9 to Amendment No. 1 to BrightStar's Registration Statement
on Form S-1 filed February 27, 1998 (File No. 333-43209)).

10.10 -- Employment Agreement between Software Consulting Services America, Inc.
and Michael A. Ober (Incorporated by reference from Exhibit 10.10 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.11 -- Office Lease dated November 11, 1998, between Principal Life Insurance
Company and BrightStar (Incorporated by reference from Exhibit 10.11 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.12 -- Employment Agreement dated Jan. 31, 1999 between BrightStar and Donald
Rowley (Incorporated by reference from Exhibit 10.12 to BrightStar's
Annual Report on Form 10-K dated April 1, 1999).

10.13 -- Employment Agreement between Brian R. Blackmarr and Associates, Inc.
and Brian R. Blackmarr (Incorporated by reference from Exhibit 10.10 to
Amendment No. 1 to BrightStar's Registration Statement on Form S-1
filed February 27, 1998 (File No. 333-43209)).

10.17 -- Stock Repurchase Agreement between BrightStar and Marshall G. Webb,
Daniel M. Cofall, and Thomas A. Hudgins (Incorporated by reference from
Exhibit 10.17 to BrightStar's Annual Report on Form 10-K dated April 1,
1999).

10.18 -- Agreement Regarding Repurchase of Stock by and among BrightStar, George
M. Siegel, Marshall G. Webb, Thomas A. Hudgins, Daniel M. Cofall, Mark
D. Diggs, Michael A. Sooley, Michael B. Miller, and Tarrant Hancock
(Incorporated by reference from Exhibit 10.18 to BrightStar's Annual
Report on Form 10-K dated April 1, 1999).

10.19 -- Amendment to Agreement and Plan of Exchange dated as of June 5, 1998 by
and BrightStar and the holder of the outstanding capital stock of Zelo
Group, Inc. and Joel Rayden (Incorporated by reference from Exhibit
10.19 to BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.20 -- Deed of Variation dated as of April 17, 1998 by and among BrightStar
and Software Consulting Services Pty. Ltd. and Kentcom Pty. Ltd.,
Salvatore Fazio, Pepper Tree Pty. Ltd., Christopher Richard Banks,
Cedarman Pty. Ltd, Stephen Donald Caswell, Quicktrend Pty. Ltd.,
Desmond John Lock, Kullamurra Pty. Ltd., Robert Stephen Langford, and
KPMG Information Solutions Pty. Ltd. and Data Collection Systems
Integration Pty. Ltd. (Incorporated by reference from Exhibit 10.20 to
BrightStar's Annual Report on Form 10-K dated April 1, 1999).

10.21 -- Asset Purchase Agreement dated as of June 30, 1998 among BrightStar,
Cogent Acquisition Corp., Cogent Technologies, LLC and the holders of
all of all the outstanding membership interest of Cogent Technologies,
LLC. (Incorporated by reference from Exhibit 10.21 to BrightStar's
Annual Report on Form 10-K dated April 1, 1999).

10.22 -- Asset Purchase Agreement dated as of August 31, 1998 among BrightStar,
Software Consulting Services America, Inc., TBQ Associates, Inc. and
the holders of all the outstanding capital stock of TBQ Associates,
Inc. (Incorporated by reference from Exhibit 10.22 to BrightStar's
Annual Report on Form 10-K dated April 1, 1999).

10.23 -- Stock Purchase Agreement dated effective as of September 30, 1998 among
BrightStar, BrightStar Group International, Inc. and the holders of the
outstanding capital stock of PROSAP AG (Incorporated by reference from
Exhibit 2.1 to the Current Report On Form 8-K of BrightStar dated
November 10, 1998).

10.24 -- Factoring Agreement and Security Agreement dated January 22, 1999 among
Metro Factors, Inc. dba Metro Financial Services, Inc., Brian R.
Blackmarr and Associates, Inc., Software Consulting Services America,
Inc., Software Innovators, Inc., and Integrated Controls, Inc.
(Incorporated by reference to Exhibit 10.24 to BrightStar's Annual
Report on Form 10-K dated March 30, 2000).
</TABLE>

<PAGE> 74

<TABLE>
<S> <C>
10.25 -- Guaranty dated January 22, 1999 by BrightStar for the benefit Of Metro
Factors, Inc. dba Metro Financial Services, Inc. (Incorporated by
reference to Exhibit 10.25 to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.26 -- Severance Agreement and Release effective November 20, 1998 between
BrightStar and Thomas A. Hudgins (Incorporated by reference to Exhibit
10.26 to BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.27 -- Severance Agreement and Release effective January 31, 1999 between
BrightStar and Daniel M. Cofall. (Incorporated by reference to Exhibit
10.27 to BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.28 -- Severance Agreement and Release effective January 31, 1999 between
Marshall G. Webb. (Incorporated by reference to Exhibit 10.28 to
BrightStar's Form 10-K dated March 30, 2000).

10.31 -- Security Agreement (Negotiable collateral) dated March 29,1999 between
BrightStar and Comerica Bank (Incorporated by reference to Exhibit
10.31 to BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.32 -- Security Agreement (All assets) dated March 29, 1999 between BrightStar
and Comerica Bank (Incorporated by reference to Exhibit 10.32 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.33 -- $15,000,000 Revolving Note dated March 29, 1999 from BrightStar to
Comerica Bank (Incorporated by reference to Exhibit 10.33 to
BrightStar's Annual Report on Form 10-K dated March 30, 2000).

10.34 -- Asset Purchase Agreement LLC dated as of April 1, 1999 among BrightStar
Information Technology Group, Inc., Software Consulting Services
America, Inc., Integrated Systems Consulting, LLC and the Individuals
Owning all of the Membership Interests of Integrated Systems Consulting
(Incorporated by reference to Exhibit 10.34 to BrightStar's Annual
Report on Form 10-K dated March 30, 2000).

10.36 -- Registration Rights Agreement dated as of March 10, 2000 among
BrightStar Information Technology Group, Inc. and Strong River
Investments, Inc. and Montrose Investments LTD.*

10.37 -- Adjustable Warrant issued to Strong River Investments, Inc. on March
10, 2000 (Incorporated by reference to BrightStar's Annual Report on
Form 10-K dated March 30, 2000).

10.38 -- Adjustable Warrant issued to Montrose Investments LTD on March 10, 2000
(Incorporated by reference to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.39 -- Warrant issued to Montrose Investments LTD on March 10, 2000
(Incorporated by reference to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.40 -- Warrant issued to Wharton Capital Partners Ltd. on March 10, 2000
(Incorporated by reference to BrightStar's Annual Report on Form 10-K
dated March 30, 2000).

10.42 -- Executive and Operational Management Service Agreement Between
BrightStar Information Technology Group, Inc. and Altamont Capital
Management.

21.1 -- List of Subsidiaries of the Company.*

23.1 -- Consent of Grant Thornton LLP, Independent Auditors.

23.2 -- Consent of Deloitte & Touche LLP, Independent Auditors.

23.3 -- Consent of Counsel*

24.1 -- Power of Attorney (see page II-4).

27.1 -- Financial Data Schedule.*
</TABLE>

* previously filed