Cotelligent Reports First Quarter Results


SAN FRANCISCO, Aug. 8, 2000 (PRIMEZONE) -- Cotelligent, Inc. (NYSE:CGZ), a leading provider of end-to-end information technology (IT) solutions, today announced results for the three months ended June 30, 2000.

During the quarter ended June 30, 2000, Cotelligent was in a period of transition as it completed the divestiture of the majority of its IT staff augmentation business. During this period, Cotelligent continued to provide the infrastructure and support for the divested operations. The financial results for the quarter clearly reflect an imbalance in the Company's cost structure in relation to its current revenue stream. The Company is in the process of streamlining its operations commensurate with its revenue base. The process of identifying and eliminating these inefficiencies will take the remainder of the calendar year.

"It is important that our stockholders know, now that the divestiture is complete, the Company's total focus is on balancing revenue and expenses in order to return to profitability in the near term, while becoming a global force in IT consulting," said Jim Lavelle, Cotelligent's Chairman and Chief Executive Officer. "Our new marketing and outreach activities to client and investor markets will stimulate interest in Cotelligent and reposition our value proposition to a significantly higher standard." Lavelle added, "We are committed to taking all the necessary steps to make Cotelligent a great Company".

The Company reported revenues for the quarter ended June 30, 2000, of $23.8 million, down 11.4% from $26.8 million in the same period of the prior year. The loss from continuing operations in the quarter was $5.1 million compared to $0.9 million in the prior year. Loss per diluted share from continuing operations was $0.34 for the quarter compared to a loss of $0.07 per diluted share for the same period in the prior year. Net income for the quarter was $0.9 million including a gain on the sale of its IT staff augmentation business of $4.4 million, compared to a net loss of $16.3 million for the same period of the prior year.Net income per diluted share was $0.06 for the quarter, compared to a loss of $1.21 per diluted share for the same period of the prior year. For future comparative analysis, historical quarterly results restated to present continuing and discontinued operations for the fiscal year ended March 31, 2000, have been attached.

As previously announced, Cotelligent completed all the necessary due diligence and negotiations to close the divestiture of the majority of its staff augmentation business. On June 30, with the consummation of the transaction, the Company received cash proceeds of $116.5 million, less $5.0 million to be held in escrow for one year to cover potential contingent claims by the buyer. On the same day, the Company paid-off in full its bank debt of $57.9 million and fulfilled its earn-out obligations of $8.5 million to the previous owner of an acquired business. The remaining cash of $45.1 million will be available for divestiture closing costs, strategic investments, and general working capital needs.

In April, Cotelligent announced the signing of an agreement to form a wireless Internet joint venture. Since that time, the two companies have been in the process of completing the due diligence and final negotiations. Cotelligent anticipates completion of this process shortly and will issue a full press release describing the transaction.

The Cotelligent Earnings Release Conference Call will be on Tuesday, August 8, 2000 at 5:15 P.M. EST. The live call can be accessed via the Company Web site or by dialing (800) 865-4460 or (973) 628-6885. Replay of the call will be available on the Company Web site.

About Cotelligent, Inc.

Cotelligent (www.cotelligent.com) is an information technology (IT) consulting firm that is transforming itself to focus on delivering end-to-end eBusiness solutions and emerging wireless data applications ("mBusiness") solutions. Cotelligent assists companies to receive information from multiple locations in an efficient format. Areas of specialization include Web-enabled applications, Web design, eCommerce, Web portals, and ERP eSolutions ("eBusiness"), as well as custom application development, system integration and implementation, strategic consulting and assessments, and business intelligence ("Enterprise Solutions"). As part of its wireless initiative, Cotelligent is also developing its knowledge and expertise in mBusiness. Employing over 600 technical consultants and operating staff, Cotelligent delivers services from major metropolitan locations throughout the United States. Cotelligent's stock is traded on the New York Stock Exchange under the symbol CGZ.

Safe Harbor Statement

Except for historical information contained herein, the information contained in this news release includes forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from such statements. All forward-looking statements included in this release are based upon information available to Cotelligent as of the date thereof, and Cotelligent assumes no obligation to update any such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the extent to which customers invest in IT infrastructures; the review of the restructuring charge by the Securities and Exchange Commission or other governmental agency; the availability of qualified IT professionals; the rate of hiring, productivity and retention of revenue-generating personnel; changes in the pricing of Cotelligent's services; the timing and rate of entrance into new regional markets; the structure and timing of acquisitions; the conditions relating to divestiture of the staff augmentation business; the conditions relating to the closing of the joint venture with bSmart.to Technologies; the possibility that the new joint venture requires capital beyond amounts currently contemplated; the possibility that revenues earned by or derived from the new joint venture is less than current expectations; the possibility that technologies will not perform according to expectations; and general economic conditions. Please refer to the discussion of risk factors and other factors included in Cotelligent's Annual Report on Form 10K for the year ended March 31, 2000, the Company's most recent Report on Form 10Q, and other filings made with the Securities and Exchange Commission.

COTELLIGENT, INC.
            CONSOLIDATED STATEMENTS OF OPERATIONS
              (In thousands, except share data)
                        (Unaudited)

                             Three Months Ended June 30,
                               2000            1999

 Revenues                  $    23,753   $    26,806
 Cost of services               16,500        17,056
 Gross profit                    7,253         9,750
 Selling, general and
  administrative expenses       12,526         9,880
 Depreciation and
  amortization of goodwill       1,042           723
 Operating loss                 (6,315)         (853)
 Other income(expense):
   Interest expense             (1,556)         (652)
   Interest income                  49           118
   Other                            49           (60)
    Total other income
     (expense)                  (1,458)         (594)
    Loss from continuing
     operations before
     income taxes               (7,773)       (1,447)
 Income tax benefit              2,643           507
    Loss from continuing
     Operations                 (5,130)         (940)
 Operating income (loss)
  from discontinued
  operations net of
  income tax (benefit) of
  $1,551 and $(8,289)            1,615       (15,394)
 Gain on sale of discontinued
  operation, net of income
  taxes of $4,224                4,396          --
    Income (loss) from
     discontinued operations     6,011       (15,394)
    Net income (loss)         $    881   $   (16,334)
 Earnings per share:
   Basic -
   Income (loss) from
    continuing operations     $  (0.34)  $     (0.07)
 Income (loss) from
  discontinued operations         0.40         (1.14)
    Net income (loss)         $   0.06   $     (1.21)
 Diluted -
   Income (loss) from
    continuing operations     $  (0.34)  $     (0.07)
   Income (loss) from
    discontinued operations       0.40         (1.14)
     Net income (loss)        $   0.06   $     (1.21)
 Weighted average number
  of shares outstanding
   Basic                    15,123,639    13,461,007
   Diluted                  15,124,960    13,461,007

                     COTELLIGENT, INC.
            CONSOLIDATED CONDENSED BALANCE SHEETS
    (In thousands, except share data and operating statistics)

                             June 30,      March 31,
                              2000           2000
                          (Unaudited)

 ASSETS
 Cash                     $   45,913    $    4,794
 Accounts receivable          20,255        23,435
 Net assets of
  discontinued operations       --          84,721
 Other current assets          9,387         3,358
 Total current assets         75,555       116,308
 Long-term assets             49,503        43,102
 Total                    $  125,058    $  159,410

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Short-term debt and
  current maturities of
  long-term debt.         $      154    $   48,958
 Other current
 liabilities                  37,193        24,420
 Total current
  Liabilities                 37,347        73,378
 Long-term debt                   52            52
 Total liabilities            37,399        73,430
 Total stockholders'
  Equity                      87,659        85,980
 Total liabilities and
  stockholders' equity    $  125,058    $  159,410

 COTELLIGENT, INC.
 OPERATING STATISTICS (Unaudited)

                         Three Months Ended June 30,
                             2000           1999

 Average Bill Rate            $100            $85
 Hours of Service              234            296

                          COTELLIGENT, INC.
               CONSOLIDATED STATEMENTS OF OPERATIONS*
                          (In thousands)
                            (Unaudited)

                                Year Ended March 31, 2000
                     Q1         Q2        Q3        Q4        Total

 Revenues        $ 26,806   $ 26,162  $  25,296   $ 27,300   $105,564
 Cost of 
  services         17,056     17,217     16,985     18,737     69,995
 Gross profit       9,750      8,945      8,311      8,563     35,569
 Selling, general 
  and administrative 
   expenses         9,880      9,960     10,534     11,486     41,860
 Depreciation and
  amortization of 
   goodwill           723        816        874        853      3,266
 Operating loss      (853)    (1,831)    (3,097)    (3,776)    (9,557)
 Total other 
  expense            (594)      (741)    (1,139)    (1,282)    (3,756)
 Loss from 
  continuing 
  operations before
  income taxes     (1,447)    (2,572)    (4,236)    (5,058)   (13,313)
 Income tax 
  benefit             507        900      1,483      1,770      4,660
 Income (loss) from
  continuing 
  operations         (940)    (1,672)    (2,753)    (3,288)    (8,653)
 Income (loss) 
  from discontinued 
  operations      (15,394)     1,751      1,409      2,244     (9,990)
   Net income 
    (loss)       $(16,334)  $     79    $(1,344)   $(1,044)  $(18,643)
 Diluted earnings 
  per share:
 Income (loss) 
  from continuing 
  operations     $  (0.07)  $  (0.12)  $  (0.18)   $ (0.22) $   (0.60)
  Income (loss) 
   from discontinued 
   operations       (1.14)      0.13       0.09       0.15      (0.70)
  Net income 
   (loss)       $   (1.21)  $   0.01   $  (0.09)   $ (0.07) $   (1.30)
 Weighted 
  average number 
  of shares 
  outstanding  13,461,007 13,573,264 15,167,742 15,001,429 14,298,693

2000 have been restated to present continuing and discontinued operations.

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CONTACT:  Cotelligent, San Francisco
          Jeffrey B. Van Horn, Chief Financial Officer
          Sonali Sen, VP of Investor Relations 
          Telephone: 415-439-6400