<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

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

For the fiscal year ended December 31, 2001.

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from          to
                               --------    --------
Commission file number 0-27412

                                COTELLIGENT, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                    94-3173918
(State or other jurisdiction of                     (I.R.S.Employer
incorporation or organization)                     Identification No.)

                        44 Montgomery Street, Suite 4050
                         San Francisco, California 94104
               (Address of principal executive offices) (Zip Code)

                                 (415) 439-6400
              (Registrant's telephone number, including area code)

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

                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of class)

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $6,407,383 based on the closing price of $0.43 of
the registrant's Common Stock as reported on the OTC Bulletin Board on March 28,
2002.

The number of shares of the registrant Common Stock outstanding as of March 28,
2002 was 14,900,891.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the 2002 Annual Meeting of Stockholders are
incorporated by reference in Part III, Items 10, 11, 12 and 13, of this Form
10-K. We anticipate that our Proxy Statement will be filed with the Securities
and Exchange Commission within 120 days after the end of our fiscal year.
<PAGE>

                                COTELLIGENT, INC.
                                TABLE OF CONTENTS
                                    FORM 10-K
<TABLE>
<CAPTION>
                                                                                                    PAGE
<S>               <C>                                                                                <C>
Part I
     Item 1       Business......................................................................      3
     Item 2       Properties....................................................................     13
     Item 3       Legal Proceedings.............................................................     13
     Item 4       Submission of Matters to a Vote of Security Holders...........................     13

Part II
     Item 5       Market for the Registrant's Common Stock and Related Stockholder Matters......     14
     Item 6       Selected Financial Data.......................................................     14
     Item 7       Management's Discussion and Analysis of Financial Condition and
                      Results of Operations.....................................................     16
     Item 8       Financial Statements and Supplementary Data...................................     22
     Item 9       Changes in and Disagreements With Accountants on Accounting and
                      Financial Disclosure......................................................     45
Part III
     Item 10      Directors and Executive Officers of the Registrant............................     46
     Item 11      Executive Compensation........................................................     46
     Item 12      Security Ownership of Certain Beneficial Owners and Management................     46
     Item 13      Certain Relationships and Related Transactions................................     46

Part IV
     Item 14      Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............     47
Signatures .....................................................................................     49
</TABLE>

                                       2
<PAGE>

                                     PART I

Item 1. Business.
        --------

Company Overview

Cotelligent provides complete business solutions, specializing in mobile
business and Web services solutions, to extend information technology ("IT")
beyond the desktop all the way to the mobile enterprise. Our mobility business
solutions keep mobile workforces connected to their companies' business
applications. Our Web services solutions keep our clients' customers, vendors,
partners and employees connected via the Internet to a variety of information
residing in our clients' information technology infrastructures. We also provide
maintenance and support on software products licensed to our clients in
connection with solutions we develop.

As part of our complete solutions, we offer:

     .    Strategic IT consulting services
     .    Enterprise Resource Planning (ERP) and Implementation/integration
          services
     .    Custom application development
     .    Sales and field force automation solutions (FastTrack(TM))
     .    Mobile middleware products (JASware(TM))
     .    Hardware and software products (partners)
     .    Application hosting and Vertical Solution Provider Services
     .    Remote support services
     .    Help desk and Education services

While expanding the capabilities of enterprise systems can benefit
Business-to-Business (B2B) and Business-to-Consumer (B2C) initiatives, we
believe the greatest demand today is in the Business-to-Employee (B2E) category.
This includes the management of mobile workers responsible for functions like
route sales, pre-sales, merchandising, route delivery, distribution and field
service/repair. The software and hardware used to facilitate these functions
include laptops, handheld PCs, PDAs and Web-based Customer Relationship
Management (CRM) applications. Cotelligent's complete business solutions, which
include software, hardware and information services, are focused on extending
information technology functionality to a broad spectrum of office-based and
mobile workers. These complete solutions allow mobile workers to do their jobs
more effectively from wherever they are located. They allow the client to
receive more reliable information. These solutions increase productivity from
the field in ways not experienced by the client before. We believe Cotelligent
is different from traditional software and services companies because we are
able to provide the range of products and services needed to develop complete
business solutions that employ advanced mobility and Web-based technologies.

We have expertise in a variety of industries, including consumer goods,
manufacturing, high-tech, financial services and automotive. We understand how
to build advanced technology systems that expand upon a company's existing
systems and compliment the work conducted in their user environments. We have
assembled a technical staff with a broad range of skills and industry expertise,
including business analysts, network architects, account managers and others.
The high level of technical expertise and business experience offered by
Cotelligent is an important Company differentiator in the markets in which we
compete.

Over the past year, we have positioned ourselves to leverage our foundation of
experience in enterprise, systems integration and eBusiness solutions, along
with our vertical industry experience, to take advantage of the emerging and
growing market for mobility solutions. Cotelligent has over ten years of
experience in delivering its FastTrack(TM) sales force automation solutions and
its JASware(TM) mobile middleware solutions to a variety of leading companies.
Cotelligent's enterprise software, eBusiness and Web services solutions
expertise, combined with our FastTrack(TM) and JASware(TM) offerings, uniquely
position our Company. We use a proprietary consulting project methodology to
help ensure that our clients achieve a successful result and help them make
well-informed business and technology decisions.

While we continue to pursue opportunities in eBusiness, our focus on enterprise
solutions is directed toward linking eBusiness and mBusiness solutions in the
enterprise. Our goal is to continue growing our eBusiness revenue but outpace
that growth with mBusiness revenue, which we believe should become the dominant
part of the business over the next two years. For 2001, our largest client
accounted for approximately 9.3% of our revenue, while our ten largest clients
(each over $1 million) accounted for approximately 44% of our revenue.

                                       3
<PAGE>

Strategy

Cotelligent's strategy is comprised of the following components:

Build Systems Using Advanced Technology Empowering the Mobile Workforce

IDC, a technology market research company, predicts that the Mobile Enterprise
Applications ("MEA") market will be a $150 billion industry by 2003.
Cotelligent's strategy is to take advantage of this market opportunity by
leveraging its core competencies in enterprise software, eBusiness and systems
integration, and help our clients take advantage of advances in mobile and Web
services technologies. To that end, we have already accumulated a strong base of
client experience in moving information seamlessly from back-end "connected"
application systems to front-end "semi-connected" and "disconnected" field force
and customer relations applications using our own FastTrack(TM) and JASware(TM)
solutions and application hosting services. Cotelligent has over ten years of
experience in this market. Our strategy is to use our reputation and record of
success in this area to gain a significant competitive position in the emerging
market aimed at empowering the mobile workforce.

The Company has also developed a strong base of experience in developing and
implementing Web services solutions employing both Microsoft(R) .NET and IBM
open system technologies. As with our mobile computing expertise, we help our
clients achieve success in employing .NET and open system technologies by
leveraging our significant expertise in enterprise software and systems
integration. Our experience has led us to conclude that the effective
integration and utilization of Web services solutions require us to have an
in-depth knowledge of how enterprise software, and general business applications
and functions, interact from end-to-end. Our strategy is to continue to achieve
success in developing Web services solutions in our clients' complex business
environments and leveraging this success and our reputation as this market
continues to grow in the future.

Partnerships

To successfully execute our business strategy, Cotelligent has determined that
we must be able to offer complete business solutions to our clients. We believe
that in the increasingly interconnected world, key alliances are important. We
leverage the resources and depth that come from having strategic partnerships
with the companies that complement our capabilities. Our partners include Symbol
Technologies, IBM, Microsoft, SAP, Computer Associates, PeopleSoft, Cognos and
White Horse Interactive.

Cotelligent has partnered with companies that provide the best components for
solutions in our targeted markets. Our Partner Selection Model has been
acknowledged in 2001 by IDC as one of the best models of its kind. By carefully
choosing which companies provide the best technical solutions and the best
partnership opportunities, Cotelligent can offer the best total solution for the
best value to our clients. As we continue to evolve to a software
solution-centric company, we expect that our partnership program will be
expanded in order to enhance our ability to deliver advanced mobile computing
and Web services solutions.

Differentiation

We intend to differentiate ourselves from our competitors in the following ways:

..    Invest in partnerships. Strong partnerships will help us to further develop
     ----------------------
     and execute our business strategy:
     .    Using partner products and technologies to compliment ours improves
          "time to market" for Cotelligent solutions.
     .    Partners integrating JASware(TM) and/or FastTrack(TM) into their
          offerings broaden revenue opportunities through channels.
     .    Cotelligent is able to improve gross and operating margins through
          reduced costs of sales and solution delivery.
..    Invest in technology. Cotelligent's ability to be competitive in mobility
     --------------------
     and Web services solutions require us to make investments in technology.
     These investments will ensure that our software solutions continue to
     advance our clients' capabilities and, at the same time, keep Cotelligent
     competitive in the market.
..    Leverage reputation and expertise in enterprise software and systems
     --------------------------------------------------------------------
     integration. Cotelligent's reputation for providing outstanding systems
     -----------
     implementation and integration services is key to our ability to ensure
     that new, more advanced Cotelligent solutions are properly integrated
     across our clients' information technology infrastructure.
..    Stress optimization in our marketing messages. Our marketing messages will
     ---------------------------------------------
     increasingly focus on how Cotelligent solutions optimize business
     activities from end-to-end. We will demonstrate this by employing return on
     investment ("ROI") analysis and specific factors residing in each
     Cotelligent target market.

                                       4
<PAGE>

Cotelligent Solutions

Capitalizing on our experience in specific industries allows us to support
targeted companies seeking improvements in operational efficiencies and
marketplace performance ("optimization") using eBusiness, mBusiness and Web
services technology. The integration of our portfolio of products, services and
applications into specific industry areas combine to create:

     .    Sales Force Automation (SFA) solutions
     .    Field Force Automation (FFA) solutions
     .    eBusiness solutions
     .    Web services solutions
     .    Other specialized business software solutions

By implementing Cotelligent's solutions, our clients are able to:

     .    Cut costs by automating manual processes
     .    Improve productivity and timeliness of data throughput to and from
          mobile workers
     .    Increase competitive advantage

At the center of our strategy is taking our most effective solutions to market.
In determining this, we use a variety of sources for market analysis and data,
including Gartner Group and IDC. This information has helped Cotelligent target
the most effective components that create the most value (for competitive
positioning) and maximize our profitability. In addition, this approach allows
us to combine and package our software solutions and services, price them
competitively and deliver them as a complete solution to the marketplace.

Below is a description of each of these areas:

Enterprise solutions - Our experience in this field distinguishes us from our
--------------------
competitors by giving us expertise to offer our clients a reliable and scalable
framework for managing and moving business data across a variety of platforms.
We integrate client systems across their organizations, build better customer
relationships, improve back-office efficiencies, share knowledge and generally
ensure that software applications in their eBusiness and mBusiness environments
work together in form and function within their enterprise.

eBusiness solutions - This portion of our business is built from our experience
-------------------
and expertise in many facets of eBusiness application design and creation. We
can facilitate the development and execution of a viable plan that integrates
the Internet into new and/or existing business processes, systems and cultures.

Web services solutions - We are a leader in the technologies most popular in the
----------------------
development and deployment of Web services - most notably, IBM WebSphere(R) and
Microsoft(R) .NET. As a new breed of pervasive applications, these Web services
and Cotelligent's highly skilled team help our clients promote the publication,
location and promotion of never before possible IT services to anyone with an
Internet connection.

mBusiness and mobility solutions - This field continues to gain significant
--------------------------------
momentum from our knowledge and expertise in wireless data applications. We are
enhancing our portfolio of mBusiness solutions through in-house development of
our JASware(TM) middleware and FastTrack(TM) framework. We continue to form
strategic alliances with key hardware and application development providers to
strengthen our solution offerings and capabilities.

Cotelligent's Value Proposition

We promote the following advantages when differentiating our solutions from
those of our competitors:

..    Our track record is verifiable: We apply expertise in complex environments
     ------------------------------
     to deliver solutions on time and within budget.
..    Our solutions are designed for our clients' industries: We focus on our
     ------------------------------------------------------
     clients' needs to achieve their potential.
..    Our business experts combine technical experience with vertical industry
     ------------------------------------------------------------------------
     expertise: We combine high levels of expertise in both Microsoft-based and
     ---------
     open systems environment with over 26 years of experience in vertical
     industry markets.
..    Our framework approach shortens development life cycle: We reduce risk and
     ------------------------------------------------------
     development time by using proven components and methodologies.

                                       5
<PAGE>

..    Our partnerships are carefully managed: We choose and monitor these
     --------------------------------------
     relationships in a way that ensures each delivers application and industry
     solutions that best fit our clients' business needs.
..    Our approach is to help our clients achieve self-sufficiency: We are
     ------------------------------------------------------------
     dedicated to knowledge transfer and remain accessible as our clients'
     businesses evolve.

Cotelligent Services

The integrated set of services we provide to our clients include:

     .    Strategic IT consulting services - Analysis of business organization
          --------------------------------
          and processes. After reviewing the technology landscape to determine
          strengths and weaknesses inherent in our clients' current environment,
          we provide recommendations that address their infrastructure to
          hardware needs. This assessment includes defining, analyzing,
          reviewing and affirming functional and non-functional requirements. We
          make our clients more competitive in the markets in which they do
          business by focusing on their business strategy and process,
          technology and personnel transformation.

     .    Enterprise Resource Planning and Implementation/integration services -
          --------------------------------------------------------------------
          Implementation, integration and optimization of Enterprise Resource
          Planning applications, including customization and configuration. We
          optimize manufacturing, order entry, accounting, purchasing,
          warehousing, transportation and human resource systems to make
          businesses more responsive and more profitable.

     .    Application development
          .    Custom application development: Development of open system or
               ------------------------------
               Microsoft architectured business applications. In the Web
               environment, these include eBusiness, ePortal and Web services
               solutions.
          .    Industry application framework solutions: Development of
               ----------------------------------------
               industry-specific and company-specific components layered onto
               the FastTrack(TM) application framework, which includes
               communication and mobile workforce management capabilities. The
               framework approach begins with a core application of base
               functionality that is faster and less risky to complete compared
               with a fully customized application.

     .    Mobile middleware products (JASware(TM)) - Management of the
          ---------------------------------------
          synchronization and flow of information between a variety of devices
          and/or host systems (all in the same system of enterprise) in a wired
          or unwired environment. Our middleware product mobilizes enterprise
          systems while managing assets on the move.

     .    Hardware and software products (Partners) - Partners' products,
          ----------------------------------------
          services and applications that complement and extend our products,
          services and applications to create a more complete end-to-end
          business solution.

     .    Application hosting and Vertical Solution Provider services - Our
          -----------------------------------------------------------
          Pervasive Data Center provides a suitable environment for the hosting
          and operational support of Sales Force Automation, Field Force
          Automation, mobility and eBusiness applications. Support is available
          24 hours a day, 7 days a week, to monitor and manage the accessibility
          and functionality of these applications

     .    Remote support services - Staging, configuration, distribution and
          -----------------------
          asset management services assist clients with deployment of new mobile
          solutions. On-going help desk services are available to support users
          around the clock.

     .    Education and eLearning services - Education services offer our
          --------------------------------
          clients a variety of products and solutions that can be bundled to
          meet any business's education and training needs, whether it is
          training end users on a new field force application or training the
          trainers.

     .    Specialized consulting services - Our technological professionals
          -------------------------------
          provide the necessary skills to assist our clients in the completion
          of their internal development projects or ongoing operational needs.

                                       6
<PAGE>

Market Conditions

A study by Gartner Group, a market research company, shows that in North
America, the largest 20 IT professional services providers, which are referred
to as Tier 1 providers, account for approximately 30 percent of the entire
market. By default, about 70 percent of the North American market demand is
satisfied by smaller, or Tier 2, IT professional services providers. Tier 2 IT
professional services providers are companies with less than $500 million in
revenue per annum and deliver some or all the IT professional service lines.
These service lines are combined with technology products (for example, software
or hardware) to create an IT solution. Examples of IT solutions include Customer
Relationship Management, Sales Force Automation, Field Force Automation, data
warehousing, business intelligence, eCommerce, Enterprise Resource Planning,
knowledge management and Supply Chain Management.

Tier 2 IT professional services providers focus on delivering back-office,
project-based services requiring technical architecture and design, project
management, business solution architecture, application development, systems
integration and Internet services. They are not focused on delivering business
strategy consulting or staff augmentation services. eCommerce solutions, on
average, account for 28 percent of IT professional services revenue of the Tier
2 companies surveyed by Gartner Group, followed by Customer Relationship
Management, human resources and business intelligence solutions accounting for
10 percent, 9 percent and 6 percent, respectively. Similarly, Tier 2 companies
that deliver consulting and systems integration services, on average, derive
about 40 percent of their revenue from clients, earning less than $500 million
per annum.

Tier 2 IT professional services providers have grown in importance throughout
most of 2001 for three primary reasons:

     .    The rise and subsequent fall of pure-play eBusiness services companies
          has left a major IT professional services delivery gap.
     .    Research indicates that the small and mid-size business market in the
          United States may increase spending on front office and back-office
          eBusiness initiatives over the next few years.
     .    The absence of a technological catalyst, such as client/server,
          Enterprise Resource Planning, Y2K and eBusiness with the potential to
          disrupt markets, has enabled Tier 2 competitors to effectively catch
          up to Tier 1 competitors through the development of reusable templates
          and solutions that also require strong systems integration skills.

Marketing

We initiated a number of important marketing initiatives during 2001. These
marketing initiatives were focused on helping the Company transform its identity
and build its brand in the markets in which it competes.

     .    The launch of our revamped Web site to reflect the re-branding of
          Cotelligent, subsequent integration of new information, including our
          JASware(TM)mobile solutions and FastTrack(TM)offerings.
     .    Brand building through all printed and online materials to support our
          offerings and positioning as a mobility solutions provider.
     .    Brand building through tradeshow presence at partner, targeted
          vertical market and similar technology events.
     .    By employing a PR firm, the Company generated numerous articles in
          industry publications and several speaking opportunities at industry
          events improving brand awareness.
     .    Regular internal communications to employees of Cotelligent announcing
          events, client wins and successes to promote involvement and build
          culture.

We employ an integrated marketing approach that links planning and the launch of
new solutions, products and service offerings with active marketing campaigns to
support them. Our first step toward this was to organizationally link our
Business Development and Marketing functions together.

Sales

It is important to educate, orient and measure our sales force utilizing
consistent benchmarking procedures. In 2001, we continued the development of
numerous industry-specific sales kits (Client Engagement Guides, or "CEGs") for
each of our target vertical markets. In addition, we have introduced
solution-based CEGs that provide detailed information on how to effectively sell
Cotelligent software solutions and services.

The CEGs provide Cotelligent with market intelligence, enabling our sales teams
to focus on specific market niches. Further, these valuable documents accelerate
the education of new sales Account Executives as they join the Company. Using
these guides, we have advanced the effectiveness of our sales force in the
following ways:

                                       7
<PAGE>

     .    Establishing a working knowledge of Cotelligent, our core
          competencies, market focus and value proposition. Our Account
          Executives are now equipped to approach prospective clients with a
          greater understanding of their industry and issues, and articulate
          Cotelligent's value proposition.
     .    Building valued relationships with clients by solving today's problems
          and providing them with a vision/strategy for the future.
     .    Accelerating sales opportunities by focusing our selling activities on
          discreet market segments in Cotelligent core competencies.
     .    Increasing revenue.

Our solutions and services are sold by our direct sales force as well as by our
channel sales force. We also utilize telesales and telemarketing sales in order
to generate leads and open new opportunities.

Competition

In the emerging marketplace of mobility solutions, there are few standards
established and a number of ways to extend the functionality of the enterprise
IT system. Therefore, each competitor has determined the scope of the solution
they provide and the components used to build them. Thus, Cotelligent has a
large number of competitors in part determined by the industry and/or technology
niche needed for the particular client's business. In other cases, the
competitor is left over from the days of a more traditional IT consulting model.

For example, mobilization often requires a middleware product. In this area, our
JASware(TM) products compete with companies like Synchrologic and Aether
Systems. The development of the mobile business application requires in-depth
industry knowledge and the ability to customize applications. In the consumer
goods market, we compete with companies like SAP, MEI and Thinque. To make a
mobile solution efficient, it should be integrated into the legacy systems or
added as an enterprise Web service. In this area, we may compete with larger
system integrators or a "Big Five" accounting firm.

To compete successfully, we must be able to deliver leading-edge solutions with
speed and competence, develop and market cost-effective offerings that meet
changing client needs, and respond rapidly to evolving technology by
continuously training our technical and sales consultants.

Registrant Information

Cotelligent was incorporated in February 1993 under the laws of the State of
California as TSX, a California corporation. In November 1995, we changed our
jurisdiction of incorporation to Delaware and our name to Cotelligent Group,
Inc. In September 1998, we changed our name to Cotelligent, Inc. Unless the
context otherwise requires, references to "Cotelligent," "Company," "we," "us"
and "our" refer to Cotelligent, Inc., a Delaware corporation.

Our headquarters are located at 44 Montgomery St., Suite 4050, San Francisco,
California 94104 and our telephone number is (415) 439-6400.

Employees

At December 31, 2001 we had 275 employees, including a technical staff of
approximately 165 IT professionals.

                                       8
<PAGE>

Risk Factors

--------------------------------------------------------------------------------
The following discussion contains certain cautionary statements regarding
Cotelligent, Inc.'s business and results of operations, which should be
considered by our stockholders or any reader of our business and results of
financial information disclosure. This information is provided to enable us to
avail ourselves of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The following factors should be considered in
conjunction with any discussion of our operations or results, including any
forward-looking statements as well as comments contained in press releases,
presentations to securities analysts or investors and all other communications
made by us or our representatives. We intend to use the following words or
variations of the following words to identify forward-looking statements:
anticipates, believes, expects, estimates, intends, plans, projects and seeks.

In making these statements, we disclaim any intention or obligation to address
or update each factor in future filings or communications regarding our business
or results, and we do not undertake to address how any of these factors may have
caused changes to discussions or information contained in previous filings or
communications. In addition, any of the matters discussed below may have
affected our past results and may affect future results, so that our actual
results may differ materially from those expressed here and in prior or
subsequent communications.
--------------------------------------------------------------------------------

If we are unable to generate positive cash flow and return to profitability in
the near term, we may exhaust our capital.

We have experienced a general reduction in demand for our services. At the same
time, we have taken action to divest non-strategic operations and have used the
cash proceeds from these divestitures to pay off debt obligations. As a result,
we have had adequate working capital to fund our needs as we restructured the
business. Nevertheless, we realize these cash resources are limited and that if
our business does not begin to generate revenue, a positive cash flow and return
to profitability in the near term, our on-going liquidity and financial
viability could be materially and adversely affected.

If the eBusiness, mBusiness and Web services markets do not continue to develop,
or if their development is delayed, our business could be harmed.

Our future revenues will depend on the development of the eBusiness, mBusiness
and Web services markets. The failure of these markets to materialize, or a
delay in the development of these markets, could seriously harm our business.
The success of eBusiness depends substantially upon the widespread adoption of
the Internet as a primary medium for commerce, business applications and
communications. Critical issues concerning the commercial use of the Internet,
such as security, reliability, cost, accessibility and quality of service
continue to evolve and unforeseen factors may negatively affect the growth of
Internet use or the attractiveness of commerce and business communications over
the Internet. The success of mBusiness depends on acceptance of wireless data
applications for commercial use, the quality of telecommunications and
availability of devices supporting wireless applications. Critical issues in the
wireless industry include security, cost, accessibility and reliability of
service, and further development of wireless technology standards.

We have a limited operating history in the mBusiness and Web services markets.

The uncertainty of our future performance in these markets may impact our
ability to market and sell mBusiness and Web services solutions to prospective
clients, which would adversely affect our operating results.

Our future growth and ability to differentiate Cotelligent from its competition
is, in part, dependent upon our success in developing, marketing and selling our
mobile management solution services.

We are developing, marketing and selling mobile management solutions and
services. Some of these efforts in the past year have not been successful. In
addition, our resources in the mobile management solution area are limited.
Nevertheless, we continue to focus on this business as it represents significant
opportunity. If we are not able to stay ahead of technical advancements in the
market or deliver these solutions and services, our operating results could
suffer.

                                       9
<PAGE>

Our JASware(TM) and FastTrack(TM) applications may not be accepted by the
market.

We have recently deployed our JASware(TM) Web-enabled mobile management software
and our FastTrack(TM) mobile solutions addressing field force automation, and
these software applications are an important part of our strategy. The use of
JASware(TM) and FastTrack(TM) in client solutions may fail to gain market
acceptance due to a variety of factors, many of which are outside our control.
These factors include:

     .    Client preferences;
     .    Competition from companies offering and selling similar solutions and
          services;
     .    Introduction of new technologies not compatible with our existing
          solutions and services that render our offerings obsolete;
     .    Actual or perceived quality and usefulness issues that negatively
          impact the Company's prospects.

If our software applications are not accepted by the market, our business could
be adversely affected.

Our software applications may not work as intended.

Part of our strategy is to provide synchronization and transfer of information
between disparate systems, platforms and devices, and rapidly implement mobile
business solutions. If our software products, including our JASware(TM) products
and FastTrack(TM) framework, do not work as intended, we will be unable to
provide these solutions to our clients and our business would be adversely
affected.

We may need to invest heavily in research and development to keep our software
applications viable.

We may need to invest heavily in research and development to keep our software
applications viable in the rapidly changing markets in which we operate. This
research and development effort may require significant resources and may not be
successful. The investment of significant resources in research and development
could adversely affect our liquidity. In addition, our business may be adversely
affected if our investment does not result in the development of software
applications that can be used in providing IT solutions to our clients.

We may be unable to protect our proprietary technology.

Our success in providing mBusiness and Web services solutions depends, in part,
upon our proprietary software applications and other intellectual property
rights. We rely on a combination of trade secrets, nondisclosure, other
contractual arrangements, copyright and trademark laws to protect our
proprietary rights. We enter into confidentiality agreements with our employees,
consultants and clients, and limit access to and distribution of our proprietary
information. We cannot be certain that the steps we take in this regard will be
adequate to deter misappropriation of our proprietary information or that we
will be able to detect unauthorized use and take appropriate steps to enforce
our intellectual property rights. In addition, although we believe that our
services and products do not infringe on the intellectual property rights of
others, infringement claims may be asserted against us in the future, and, if
asserted, these infringement claims may be successful. A successful claim
against us could materially adversely affect our business and results of
operations.

We may not be able to establish successful partnerships or strategic alliances,
and partnerships and strategic alliances we do establish may not be successful.

Part of our strategy is to form partnerships and strategic alliances with
entities that have complementary products, services or technologies which can
help us provide complete IT solutions to our clients. Even if we identify
suitable candidates, we may not be able to form partnerships or alliances on
reasonable commercial terms. In addition, any partnerships or alliances we do
establish may not complement our business or help us provide IT solutions to our
clients. If we fail to establish successful partnerships or strategic alliances,
our ability to provide clients with complete IT solutions could be adversely
affected.

We are subject to rapid changes in technology and client preferences.

Our market is characterized by rapidly changing technology, changes in client
requirements and preferences, frequent new product and service announcements,
and evolving new industry standards and practices that could render our existing
proprietary technology obsolete. Our success will depend, in part, on our
ability to acquire or license leading technologies useful in our business;
enhance

                                       10
<PAGE>

our existing software solutions; develop new software solutions and technology
that address the increasingly sophisticated and varied needs of existing and
prospective clients; and respond to technological advances and evolving industry
standards and practices on a cost-effective and timely basis. The development of
proprietary technology entails significant technical, financial and business
risks. To be successful, we must adapt to the rapidly changing market by
continually improving the performance and reliability of our software
applications. We could also incur substantial costs to modify our software
applications to adapt to these changes. Our business could be adversely affected
if we incurred significant costs without adequate results.

Capacity constraints may restrict the use of the Internet as a commercial
marketplace, resulting in decreased demand for our products.

The Internet infrastructure may not be able to support the demands placed on it
by increased usage or by the transmission of large quantities of data. Other
risks associated with commercial use of the Internet could slow its growth,
including:

     .    Outages and other delays resulting from inadequate network
          infrastructure;
     .    Slow development of enabling technologies and complementary products;
     .    Limited availability of cost-effective, high-speed access.

Delays in the development or adoption of new equipment standards or protocols
required to handle increased levels of Internet activity, or increased
governmental regulation, could cause the Internet to lose its viability as a
means of communication among participants in the supply chain, resulting in
decreased demand for our services and products.

We are dependent on continued expansion of the Internet infrastructure.

The recent growth in Internet traffic has caused frequent periods of decreased
performance, requiring Internet service providers and users of the Internet to
upgrade their infrastructures. If Web usage continues to grow rapidly, the
Internet infrastructure may not be able to support the demands placed on it by
this growth and its performance and reliability may decline. If these outages or
delays on the Internet occur frequently, overall Web usage could grow more
slowly or decline. Our ability to increase the speed and scope of our services
to customers is ultimately limited by and dependent upon the speed and
reliability of both the Internet and the capacity of the computer equipment used
by our customers. Consequently, the emergence and growth of the market for our
services is dependent on improvements being made to the entire Internet and to
computer equipment in general to alleviate overloading and congestion.

We are subject to government regulation and legal uncertainties.

The Internet is rapidly changing, and federal and state regulation relating to
the Internet is evolving. Currently, there are few laws or regulations directly
applicable to access to the Internet. Due to the increasing popularity of the
Internet, it is possible that laws and regulations may be enacted covering
issues such as user privacy, pricing, taxation, content and quality of products
and services. The adoption of such laws or regulations could reduce the rate of
growth of the Internet, which could materially and adversely affect our
business.

Our clients may cancel or delay spending on IT solution initiatives because of
the current economic climate.

Since the second half of 2000, many companies have experienced financial
difficulties or uncertainty and have begun to cancel or delay spending on
technology consulting initiatives as a result. Furthermore, the severe financial
difficulties which many start-up Internet companies have experienced has further
reduced the perceived urgency by larger companies to begin or continue
technology initiatives. If large companies continue to cancel or delay their
technology consulting initiatives because of the current economic climate, or
for other reasons, our business and results of operations could be adversely
affected.

Our revenues and financial condition may be adversely affected by the loss of
business from significant clients.

Our revenues are primarily derived from services provided in response to client
requests or on an assignment-by-assignment basis. Our engagements, generally
billed on a time and materials basis, are terminable at any time by our clients,
generally without penalty. In addition, for the year ended December 31, 2001,
our largest client and our ten largest clients accounted for approximately 9.3%
and 44%, respectively, of our revenues. Our clients may not continue to engage
us for projects or use our services at historical levels, if at all. If we lose
a major client or suffer a reduction in business, our revenues and financial
condition may be adversely affected.

                                       11
<PAGE>

If we fail to continue to attract and retain qualified IT professionals, it
could harm our business.

Our success depends upon our ability to attract, hire and retain technical
consultants, software developers, software engineers and project managers who
possess the necessary skills and experience to conduct our business. We
continually identify, screen and retain qualified IT professionals to keep pace
with client demand for rapidly evolving technologies and varying client needs.
We compete for these professionals with our clients, other providers of software
solutions and services, systems integrators, providers of outsourcing services,
computer systems consultants and temporary staffing companies in a variety of
industry segments. Competition for individuals with proven technical skills is
intense. In the past, we have experienced difficulties in identifying and
retaining qualified IT professionals and, in some instances, we were unable to
meet requests for services. We cannot assure that qualified IT professionals
will continue to be available to us in sufficient numbers.

Our success is dependent on our key management personnel.

Our operations are dependent on the continued efforts of our executive officers
and senior management. In addition, we will likely depend on the senior
management of any business we may merge with or acquire in the future. If any of
these people are unable or unwilling to continue in his or her present role, or
if we are unable to hire, train and integrate new management personnel
effectively, our business could be adversely affected. We do not currently
maintain key person life insurance covering any of our executive officers or
other members of senior management.

We face intense competition that could adversely affect our ability to generate
revenue and profitability.

The IT consulting services industry is highly competitive, fragmented and
subject to rapid change. Our competitors include local, regional and national
software firms, IT consulting firms, system integration firms, professional
service divisions of applications software firms and the professional service
groups of computer equipment companies. We also compete with management
information outsourcing companies, "Big Five" accounting firms and other
management consulting firms. Many of our competitors have greater technical,
financial or marketing resources than we have. In addition, we intend to enter
new markets and expand our solutions and services offerings through internal
growth and acquisitions, and we expect to encounter additional competition from
established companies in these areas. Further, traditional purchasers of
consulting services have consolidated their vendor lists to a smaller number of
preferred solutions and service providers. If we are unable to become a
preferred solutions and service provider, our ability to acquire new clients and
retain existing clients could be adversely affected. If we cannot compete
effectively in our industry, our revenues and profitability could be adversely
affected.

We do not have a credit facility in place as we operate from existing cash
resources.

When we paid off our bank loan on June 30, 2000, our credit facility was
terminated. Prior to June 30, 2000, we have relied on our credit facility and
positive cash flow to satisfy our liquidity needs. We have not secured
additional financing and plan to continue operating using our existing cash
resources and cash resources generated from the collection of our accounts
receivable. Should we find ourselves in need of more cash, we would have to seek
financing and might, as a result, have a short-term liquidity problem.
Additionally, we may not be successful in securing financing, or if successful,
the terms may not be advantageous to us.

If we are unable to increase our revenues through the deployment of our sales
and business development organization, our future growth could suffer.

We re-organized our sales force in 2000, which resulted in significant turnover
and the hiring of a number of new sales people. Although we feel this new sales
team is better suited than our prior sales force to develop the business we are
targeting, we recognize there is an extensive ramp-up time associated with a new
sales force and market conditions for our services are competitive. If this new
team is not successful in growing the number of profitable client engagements in
the near term, our revenues and profitability may not improve. Consequently, our
financial performance could be materially and adversely affected.

                                       12
<PAGE>

We may make acquisitions, which if proven unsuccessful, could negatively affect
our future profitability and growth.

Although our strategy is focused on internal growth, it is possible that we
might make acquisitions. We may not be able to identify, acquire or profitably
manage additional businesses without substantial costs, delays or other
problems. In addition, acquisitions may involve a number of special risks,
including: (1) diversion of management's attention; (2) failure to retain key
acquired personnel; (3) risks associated with unanticipated events,
circumstances or legal liabilities; and (4) amortization of acquired intangible
assets. Some or all of these risks could adversely affect our operations and
financial performance. For example, client satisfaction or performance problems
at a single acquired business could adversely affect our reputation and
financial results. Further, any businesses acquired in the future may not
achieve anticipated revenues and earnings.

We face potential liability due to the project nature of our business which
often requires our IT professionals to work at our clients' place of business.

Our IT professionals are often deployed in the workplace of other businesses. As
a result of this activity, we could be subject to possible claims of
discrimination and harassment, employment of illegal aliens or other similar
claims. These types of claims could result in negative publicity for us and
money damages or fines. Although we have not had any significant problems in
this area, we could encounter these problems in the future.

We are also exposed to liability for actions of our IT professionals while on
assignment, including damages caused by employee errors, misuse of
client-proprietary information or theft of client property. Because of the
nature of our assignments and the related potential liability, we cannot assure
that insurance we maintain, if continually available, will be sufficient in
amount or scope to cover a loss.

Item 2. Properties.
        ----------

Our principal executive offices and our continuing operating subsidiaries are
located in 8 facilities with an aggregate of approximately 77,480 square feet
and are leased at aggregate current monthly rents of approximately $0.1 million
with no lease commitment extending past the year 2007. We believe that our
properties are adequate for our needs. Furthermore, we believe that suitable
additional or replacement space will be available when required on terms we
believe will be acceptable.

Item 3. Legal Proceedings.
        -----------------

We are, from time to time, a party to litigation arising in the normal course of
our business. We are not presently subject to any material litigation.

Item 4. Submission of Matters to a Vote of Security Holders.
        ---------------------------------------------------

No matters were submitted to a vote of security holders.

                                       13
<PAGE>

                                     PART II
                                     -------

Item 5. Market for the Registrant's Common Stock and Related Stockholder
        ----------------------------------------------------------------
        Matters.
        -------

Price range of common stock

The following table sets forth, for the periods indicated, the high and low
sales prices for the Common Stock. Since October 11, 2001 the Common Stock has
been listed on the OTC Bulletin Board under the symbol "CGZT," prior to which it
was listed on the NYSE under the symbol "CGZ".

                                                         High     Low
                                                        ------   -----

Fiscal Year Ended March 31, 2000
     April 1, 1999 through June 30, 1999.............   $15.31   $5.63
     July 1, 1999 through September 30, 1999.........   $ 7.81   $3.50
     October 1, 1999 through December 31, 1999.......   $ 6.94   $2.88
     January 3, 2000 through March 31, 2000 .........   $ 6.69   $4.25

Nine Months Ended December 31, 2000
     April 1, 2000 through June 30, 2000.............   $ 7.25   $3.75
     July 1, 2000 through September 30, 2000.........   $ 5.56   $3.06
     October 1, 2000 through December 31, 2000.......   $ 3.44   $0.63

Fiscal Year Ended December 31, 2001
     January 1, 2001 through March 31, 2001..........   $ 5.00   $0.58
     April 1, 2001 through June 30, 2001.............   $ 0.95   $0.40
     July 1, 2001 through September 30, 2001.........   $ 0.99   $0.12
     October 1, 2001 through December 31,2001........   $ 0.32   $0.10

Fiscal  Year Ended December 31, 2002
     January 1, 2002 through March 28, 2002..........   $ 0.50   $0.25

On March 28, 2002, the last reported sales price of the Common Stock, as
reported on the OTC Bulletin Board, was $0.43 per share. On March 28, 2002,
there were 784 stockholders of record of the Common Stock.

Item 6. Selected Financial Data.
        -----------------------

The Company historically operated on an April 1 to March 31 fiscal year. In July
2000, the Company announced a change in its fiscal year end to December 31 from
March 31, resulting in a nine month transition period from April 1, 2000 through
December 31, 2000.

The selected financial data with respect to Cotelligent's consolidated
statements of operations for the year ended December 31, 2001, the nine months
ended December 31, 2000 and years ended March 31, 1998, 1999 and 2000 and with
respect to the consolidated balance sheets as of December 31, 2001 and 2000 and
March 31, 1998, 1999 and 2000 have been derived from Cotelligent's financial
statements which have been audited by Arthur Andersen LLP.

The following selected financial data should be read in conjunction with the
financial statements, related notes and other financial information of the
Company included elsewhere herein. See "Item 7. Management's Discussion and
                                                ---------------------------
Analysis of Financial Condition and Results of Operations".
----------------------------------------------------------

                                       14
<PAGE>

                             Selected Financial Data
                                Cotelligent, Inc.
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                     Year Ended December 31,       Nine Months Ended December 31,
                                                   ----------------------------    ------------------------------
                                                                    (Unaudited)                      (Unaudited)
                                                       2001           2000             2000             1999
                                                   ------------    ------------    ------------     -------------
<S>                                                 <C>             <C>             <C>              <C>
Statement of Operations Data (1)(2):
 Revenues ......................................    $    45,901     $    93,592     $    66,292      $    78,264
 Cost of services ..............................         31,976          63,621          44,884           51,258
                                                    -----------     -----------     -----------      -----------
   Gross profit ................................         13,925          29,971          21,408           27,006
 Selling, general and administrative expense ...         29,876          48,228          36,742           30,374
 Depreciation and amortization of goodwill .....          2,634           3,888           3,035            2,413
 Impairment of long-lived assets ...............             --          41,478          41,478               --
 Restructuring charge ..........................          3,373           4,200           4,200               --
 Non-recurring transaction costs ...............             --              --              --               --
                                                    -----------     -----------     -----------      -----------
 Operating income (loss) .......................        (21,958)        (67,823)        (64,047)          (5,781)
 Other income (expense) ........................          1,249          (1,605)           (323)          (2,474)
                                                    -----------     -----------     -----------      -----------
 Income (loss) before provision for income taxes        (20,709)        (69,428)        (64,370)          (8,255)
 Provision (benefit) for income taxes ..........         (5,074)        (11,104)         (9,334)          (2,890)
                                                    -----------     -----------     -----------      -----------
 Income (loss) from continuing operations ......        (15,635)        (58,324)        (55,036)          (5,365)
                                                    -----------     -----------     -----------      -----------
 Income (loss) from discontinued operations ....            (32)          5,133           2,889          (12,234)
 Gain on sale of discontinued operations, net of
   income taxes of $14,464 .....................             --           9,963           9,963               --
                                                    -----------     -----------     -----------      -----------
 Income (loss) from discontinued operations ....            (32)         15,096          12,852          (12,234)
                                                    -----------     -----------     -----------      -----------
 Net income (loss) .............................        (15,667)    $   (43,228)    $   (42,184)     $   (17,599)
                                                    ===========     ===========     ===========      ===========
 Earnings per share
 Basic -
 Income (loss) from continuing operations ......          (1.04)          (3.84)    $     (3.61)     $     (0.38)
 Income (loss) from discontinued operations ....             --            0.99            0.84            (0.87)
                                                    -----------     -----------     -----------      -----------
 Net income (loss) .............................          (1.04)          (2.85)    $     (2.77)     $     (1.25)
                                                    ===========     ===========     ===========      ===========
 Diluted -
 Income (loss) from continuing operations ......    $     (1.04)    $     (3.84)    $     (3.61)     $     (0.38)
 Income (loss) from discontinued operations ....             --            0.99            0.84            (0.87)
                                                    -----------     -----------     -----------      -----------
 Net income (loss) .............................    $     (1.04)    $     (2.85)    $     (2.77)     $     (1.25)
                                                    ===========     ===========     ===========      ===========
 Weighted average number of shares outstanding
 Basic .........................................     15,075,546      15,173,898      15,230,969       14,060,481
 Diluted .......................................     15,075,546      15,173,898      15,230,969       14,060,481

<CAPTION>
                                                               Year Ended March 31,
                                                   -------------------------------------------

                                                        2000           1999            1998
                                                   ------------    ------------    -----------
<S>                                                 <C>             <C>            <C>
Statement of Operations Data (1)(2):
 Revenues ......................................    $   105,564     $    88,739    $    59,202
 Cost of services ..............................         69,995          55,730         39,303
                                                    -----------     -----------    -----------
   Gross profit ................................         35,569          33,009         19,899
 Selling, general and administrative expense ...         41,860          25,641         20,619
 Depreciation and amortization of goodwill .....          3,266           1,838            654
 Impairment of long-lived assets ...............             --              --             --
 Restructuring charge ..........................             --              --             --
 Non-recurring transaction costs ...............             --              --            214
                                                    -----------     -----------    -----------
 Operating income (loss) .......................         (9,557)          5,530         (1,588)
 Other income (expense) ........................         (3,756)            128           (684)
                                                    -----------     -----------    -----------
 Income (loss) before provision for income taxes        (13,313)          5,658         (2,272)
 Provision (benefit) for income taxes ..........         (4,660)          2,268         (1,201)
                                                    -----------     -----------    -----------
 Income (loss) from continuing operations ......         (8,653)          3,390         (1,071)
                                                    -----------     -----------    -----------
 Income (loss) from discontinued operations ....         (9,990)         11,926          7,502
 Gain on sale of discontinued operations, net of
   income taxes of $14,464 .....................             --              --             --
                                                    -----------     -----------    -----------
 Income (loss) from discontinued operations ....         (9,990)         11,926          7,502
                                                    -----------     -----------    -----------
 Net income (loss) .............................    $   (18,643)    $    15,316    $     6,431
                                                    ===========     ===========    ===========
 Earnings per share
 Basic -
 Income (loss) from continuing operations ......    $     (0.60)    $      0.24    $     (0.09)
 Income (loss) from discontinued operations ....          (0.70)           0.85           0.65
                                                    -----------     -----------    -----------
 Net income (loss) .............................    $     (1.30)    $      1.09    $      0.56
                                                    ===========     ===========    ===========
 Diluted -

 Income (loss) from continuing operations ......    $     (0.60)    $      0.24    $     (0.09)
 Income (loss) from discontinued operations ....          (0.70)           0.84           0.64
                                                    -----------     -----------    -----------
 Net income (loss) .............................    $     (1.30)    $      1.08    $      0.55
                                                    ===========     ===========    ===========
 Weighted average number of shares outstanding
 Basic .........................................     14,298,693      14,078,068     11,485,393
 Diluted .......................................     14,298,693      14,236,786     11,610,339
</TABLE>

<TABLE>
<CAPTION>
                                             December 31,                March 31,
                                          -----------------   ------------------------------
                                           2001       2000      2000       1999       1998
                                          -------   -------   --------   --------   --------
<S>                                       <C>       <C>       <C>        <C>        <C>
Balance Sheet Data:
 Working capital ......................   $22,387   $34,255   $ 43,047   $ 97,614   $ 79,025
  Total assets ........................   $43,652   $64,714   $159,527   $158,374   $103,335
 Long-term debt less current portion      $   538   $  1000   $     52   $ 28,191   $    171
 Stockholders' equity .................   $29,035   $45,003   $ 85,980   $107,833   $ 90,339
</TABLE>

(1)  During fiscal 1998, the Company acquired four businesses accounted for
     under the pooling-of-interests method (the "Pooled Companies") and has
     restated its financial statements for all periods to present financial data
     as if Cotelligent and the Pooled Companies had always been members of the
     same operating group. In addition, during the fiscal years ended March 31,
     1998, 1999 and 2000, the Company acquired ten businesses accounted for
     under the purchase method (the "Purchased Companies"). The consolidated
     financial statements include the operating results of the Purchased
     Companies subsequent to their respective acquisition dates. Prior to March
     31, 2000, the Company entered into a plan to divest its IT staff
     augmentation business. Accordingly, the accompanying financial data have
     been prepared to present as discontinued operations the Company's IT staff
     augmentation business for all periods presented.

(2)  On August 8, 2000, the Company contributed cash and its Philadelphia-based
     operation to a joint venture, bSmart.to LLC for 50% ownership and joint
     control. On December 6, 2000, the Company exercised its right to terminate
     the relationship under the joint venture agreement, and consequently, the
     net assets of the Philadelphia-based operation, including cash and another
     subsidiary of the joint venture, JAS Concepts, reverted back to the
     Company. Accordingly, during the period of August 8 through December 6,
     2000, the Company's investment in the joint venture was accounted for on
     the equity method of accounting. Prior to August 8, 2000 and after December
     6, 2000, the results of the Philadelphia-based operation were consolidated
     with the accounts of the Company.

                                       15
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        -----------------------------------------------------------------------
        of Operations.
        -------------

Cotelligent was formed in February 1993 to acquire, own and operate IT
consulting services businesses. Cotelligent was a non-operating entity until
1996 when it first began to acquire businesses. The Company historically
operated on an April 1 to March 31 fiscal year. In July 2000, the Company
changed its fiscal year to December 31, resulting in a nine-month transition
period from April 1, 2000 through December 31, 2000.

Prior to March 31, 2000, the Company entered into a plan to divest its IT staff
augmentation business. Accordingly, the Selected Financial Data of Cotelligent
has been restated to present as discontinued operations the Company's IT staff
augmentation business for all periods presented.

On August 8, 2000, the Company contributed cash and its Philadelphia-based
operation to a joint venture, bSmart.to LLC, for 50% ownership and joint
control. On December 6, 2000, the Company exercised its right to terminate the
relationship under the joint venture agreement, and consequently, the net assets
of the Philadelphia-based operation, including cash and another subsidiary of
the joint venture, JAS Concepts, reverted back to the Company. Accordingly,
during the period of August 8 through December 6, 2000, the Company's investment
in the joint venture was accounted for on the equity method of accounting. Prior
to August 8, 2000 and after December 6, 2000, the results of the
Philadelphia-based operation were consolidated with the accounts of the Company.

Cotelligent provides IT consulting and maintenance, support and hosting on
software products it licenses. The majority of these activities are provided
under time and materials billing arrangements, and revenues are recorded as work
is performed. Revenues are directly related to the total number of hours billed
to clients and the associated hourly billing rates. Hourly billing rates are
established for each service provided and are a function of the type of work
performed and the related skill level of the consultant. In addition, the
Company has developed complete mobile workforce management solutions for
industries that have medium to large transient sales, field or delivery
personnel. A component of these solutions may be software that has been
developed by the Company. Revenues associated with software licensing, related
maintenance and consulting services are recognized once a contract is signed,
delivery has been made and collectibility is probable.

The Company's principal costs are professional compensation directly related to
the performance of services and related expenses. Gross profits (revenues after
professional compensation, related expenses and depreciation of deferred
development costs) are primarily a function of hours billed to clients per
professional employee or consultant, hourly billing rates of those employees or
consultants and employee or consultant compensation relative to those billing
rates. Gross profits can be adversely impacted if services provided cannot be
billed, if the Company is not effective in managing its service activities, if
fixed-fee engagements are not properly priced, if consultant cost increases
exceed bill rate increases or if there are high levels of unutilized time (work
activities not chargeable to clients or unrelated to client services) of
full-time salaried service professional employees.

Operating income (gross profit less depreciation, research and development
costs, and selling, general and administrative expenses) can be adversely
impacted by increased administrative staff compensation and expenses related to
streamlining or expanding the Company's business, which may be incurred before
revenues or economies of scale are generated from such investment. Solution
development activities require a higher level of selling, general and
administrative activities as well as investment in research and development
activities.

As a service and software organization, the Company responds to service demands
from its clients. Accordingly, the Company has limited control over the timing
and circumstances under which its services are provided. Therefore, the Company
can experience volatility in its operating results from quarter to quarter. The
operating results for any quarter are not necessarily indicative of the results
for any future period.

                                       16
<PAGE>

Results of Operations (in thousands)

For comparability purposes, the following discussion will make reference to
comparisons between the year ended December 31, 2001 and the year ended December
31, 2000, and the nine-month transition period ended December 31, 2000 and
December 31, 1999. The Company believes that these comparisons are meaningful as
they represent identical period-over-period comparisons.

Results for the year ended December 31, 2000 and the nine months ended December
31, 1999 are unaudited. The Company changed its year end to December 31 from
March 31 and reported audited results for the nine month transition period ended
December 31, 2000 in its Transition Report on Form 10-K.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
(Unaudited)

Revenues. Revenues decreased during the year ended December 31, 2001 by $47,691,
or 51%, to $45,901 from $93,592 in the year ended December 31, 2000. The
decrease was due to a general reduction in demand for services due to softening
in the market coupled with the Company's evolution from providing general IT
consulting services towards offering mobile workforce management solutions.

Gross profit. Gross profit decreased in the year ended December 31, 2001 by
$16,046, or 54%, to $13,925 from $29,971 in the year ended December 31, 2000.
The decrease was due to a general reduction in demand for services due to
softening in the market coupled with the Company's evolution from providing
general IT consulting services towards offering mobile workforce management
solutions. Gross profit as a percentage of revenues decreased to 30% from 32%
primarily due to lower utilization of salaried billable staff caused by a
downturn in demand for services.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased in the year ended December 31, 2001 by
$18,352, or 38%, to $29,876 from $48,228 in the year ended December 31, 2000.
The decrease was primarily due to the closure of three operating locations in
the later part of 2000, reductions in operating staff following the divestiture
of the majority of the IT staff augmentation business, as well as the effects of
other reductions in staff to streamline operations in line with revenue, and a
decrease in the provision for doubtful accounts receivable (which in the year
ended December 31, 2000 primarily related to dot.com customers where venture
capital funding had not materialized). Selling, general and administrative
expenses as a percent of revenues were 65% for the year ended December 31, 2001
compared to 52% for the same period of the prior year. Although the Company has
streamlined operations, the Company continues to invest heavily in sales,
marketing and business development activities as it shifts away from general IT
consulting services towards offering mobile workforce management solutions. By
the end of 2001, 39% of the selling, general and administrative spending was
attributable to selling, marketing and business development activities.

Depreciation and Amortization of Goodwill. Depreciation and amortization
decreased in the year ended December 31, 2001 by $1,254, or 32%, to $2,634 from
$3,888 in the year ended December 31, 2000. The decrease was due to the
reduction of amortization related to goodwill, following the complete write-off
of goodwill in the quarter ended December 31, 2000.

Impairment of long-lived assets. During the year ended December 31, 2000, the
Company recognized an impairment of long-lived assets charge for $41,478
representing a $37,371 goodwill impairment charge and a $4,107 write-off of
investment costs associated with the bSmart.to joint venture.

Restructuring Charge. In September 2001 and December 2000, as part of the
Company's efforts to streamline its operations commensurate with its revenue
base, the Company identified opportunities to reduce its cost structure by
reducing headcount and closing certain operating facilities to conform to the
Company's new operating structure. Accordingly, the Company adopted
restructuring plans in accordance with Staff Accounting Bulletin No. 100,
"Restructuring and Impairment Charges." The restructuring charge of $3,373
during the year ended December 31, 2001 included provisions for severance of
approximately 145 management and operating staff ($1,059) as well as closure
costs associated with a plan to consolidate or dispose of certain locations,
including the write-down of associated property and equipment ($2,314). The
restructuring charge of $4,200 during the year ended December 31, 2000 included
provisions for severance of approximately 90 management and operating staff
($1,100) as well as closure costs associated with a plan to consolidate or
dispose of certain locations, including the write-down of associated property
and equipment ($3,100).

Other Income (Expense). Other income (expense) primarily consists of interest
income, net of interest expense. Interest income, net of interest expense, was
$1,249 for the year ended December 31, 2001 as compared to interest expense, net
of interest income of $1,605 for the year ended December 31, 2000. The change to
net interest income for the year ended December 31, 2001 from net interest
expense for the year ended December 31, 2000 was due to the elimination of all
obligations due under the Company's Credit

                                       17
<PAGE>

Agreement and an earn-out agreement resulting from the Company's sale of the
majority of the IT staff augmentation business on June 30, 2000. Subsequent to
June 30, 2000, interest expense was reduced and the Company also earned
additional interest income on the cash proceeds received from the sale on June
30, 2000 during the years ended December 31, 2000 and 2001.

Provision (Benefit) for Income Taxes. The Company realized an income tax benefit
of $5,074, or an effective tax rate of 24% of pre-tax loss for the year ended
December 31, 2001, compared to an income tax benefit of $11,104, or an effective
tax rate of 16% for the year ended December 31, 2000. The increase in the
effective tax rate was the result of a valuation allowance against the tax
benefit associated with the net operating loss generated in the year ended
December 31, 2001, due to the uncertainty of realization, as it is only
available to carry forward against future years' income.

In the first quarter of 2002, Congress approved the Job Creation and Worker
Assistance Act of 2002, allowing March 31, 2002 net operating losses to be
carried back five years. Under SFAS No. 109, the effect of this change in tax
law is not reflected in the December 31, 2001 financial statements as changes in
tax law must be reflected in the period of enactment. Had this change in tax law
been reflected in the financial statements at December 31, 2001, additional tax
benefits would have been recorded.

Income (Loss) from Discontinued Operations. Discontinued operations is comprised
of operations associated with the IT staff augmentation portion of the Company's
business and the gain on the sale of the discontinued operations.

The net loss from discontinued operations of $32 for the year ended December 31,
2001 compares to net income of $5,133 for the year ended December 31, 2000. The
decrease in income from discontinued operations is the result of the sale of all
components of discontinued operations, except one component, by October 31,
2000. In addition, during the year ended December 31, 2001, the Company
abandoned its plan to divest the one remaining component, and consequently,
closed the business.

The gain on sale of the discontinued operations of $9,963 for the year ended
December 31, 2000 consists of three separate transactions, including: 1) the
sale of the majority of the IT staff augmentation business on June 30, 2000 for
proceeds of $116,495 and the assumption of approximately $10,000 in liabilities,
2) the sale of the IT staff augmentation operations in Orlando on July 14, 2000
for $650 and the assumption of $385 of assumed liabilities, and 3) the sale of
the international IT staff augmentation operation for $4,459, consisting of a
secured promissory note bearing interest at prime plus 1%, payable over five
years.

Nine Months Ended December 31, 2000 Compared to Nine Months Ended December 31,
1999 (Unaudited)

Revenues. Revenues decreased in the nine months ended December 31, 2000 by
$11,972, or 15%, to $66,292 from $78,264 in the nine months ended December 31,
1999. The decrease was primarily due to a general reduction in demand for the
Company's services and the discontinuation of revenues from the Company's
Philadelphia-based operations from August 8, 2000 through December 6, 2000 while
contributed to the bSmart.to joint venture and accounted for on the equity
method of accounting. Partially offsetting the decrease in revenues was a 21%
increase in the average billing rate.

Gross Profit. Gross profit decreased in the nine months ended December 31, 2000
by $5,598, or 21%, to $21,408 from $27,006 in the nine months ended December 31,
1999. The decrease was primarily due to a general reduction in demand for the
Company's services and the contribution of the Company's Philadelphia-based
operations to the joint venture from August 8, 2000 through December 6, 2000.
Gross profit as a percentage of revenues decreased due to lower utilization of
salaried billable staff caused by a downturn in demand for services and the
exclusion of the Philadelphia-based operations, which, contributed to the
bSmart.to joint venture, had inherently higher gross profit as a percentage of
revenue. The decrease was partially offset by an increase in the average billing
rate.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in the nine months ended December 31, 2000 by
$6,368, or 21%, to $36,742 from $30,374 in the nine months ended December 31,
1999. The increase was primarily due to increases in employee wages and benefits
incurred in the Company's effort to move towards a centralized business model
which required a more robust infrastructure and was put into place prior to
management's decision to divest the majority of its IT staff augmentation
business. In addition, the Company increased the provision for doubtful accounts
receivable (primarily related to dot.com customers where venture capital funding
has not materialized), paid termination benefits to employees at locations
closed, and increased marketing efforts associated with the re-branding of the
Company. Selling, general and administrative expenses as a percent of revenues
were 55% for the nine months ended December 31, 2000 compared to 39% for the
same period of the prior year. Although the Company was in the process of
divesting its discontinued operations during the nine months ended December 31,
2000, selling, general and administrative expenses did not decrease as the
Company continued to provide infrastructure and support for the divested
operations.

                                       18
<PAGE>

Depreciation and Amortization of Goodwill. Depreciation and amortization
increased in the nine months ended December 31, 2000 by $622, or 26%, to $3,035
from $2,413 in the nine months ended December 31, 1999. The increase was
primarily due to the spending on new state-of-the art technology equipment and
related depreciation.

Impairment of long-lived assets. During the nine months ended December 31, 2000,
the Company recognized an impairment of long-lived assets charge for $41,478,
representing a $37,371 goodwill impairment charge and a $4,107 write-off of
investment costs associated with the bSmart.to joint venture.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
the Company considers, among other factors, deterioration of operating
performance or a general reduction in demand for services for a sustainable
period to be indicators of potential impairment of long-lived assets. The
Company experienced a reduction in demand for its services. As a result of this
reduction in demand for its services, the Company recognized a $37,371
impairment of goodwill during the nine months ended December 31, 2000 as the
future discounted cash flows of its certain long-lived assets were estimated to
be less than the asset's related carrying value.

In December 2000, the Company exercised its right to terminate the bSmart.to
joint venture when the Company believed that the wireless venture would require
a substantial additional investment to remain viable and that making such an
investment would not be in the best interest of the Company. As a result of
termination of the joint venture, the Company recognized a $4,107 impairment of
long-lived assets charge related to investment costs associated with the
formation of and the investment in the bSmart.to joint venture.

Restructuring Charge. During the nine months ended December 31, 2000, the
Company recognized a $4,200 restructuring charge resulting from a thorough
review of its cost structure in order to streamline its operations commensurate
with its revenue base. The charge included provisions for severance of
approximately 90 management and operating staff ($1,100) as well as closure
costs associated with a plan to consolidate or discontinue certain operating
locations ($3,100).

Other Income (Expense). Other income (expense) primarily consists of interest
expense, net of interest income. Interest expense, net of interest income, was
$323 for the nine months ended December 31, 2000 as compared to interest
expense, net of interest income of $2,474 for the nine months ended December 31,
1999. The decrease in net interest expense was due to the elimination of all
obligations due under the Company's Credit Agreement and an earn-out agreement
resulting from the Company's sale of the majority of the IT staff augmentation
business on June 30, 2000 which reduced interest expense. The Company also
earned additional interest income on the cash proceeds received from the sale on
June 30, 2000 during the nine months ended December 31, 2000.

Provision (Benefit) for Income Taxes. The Company realized a benefit of $9,334,
or an effective tax rate of 15% of pre-tax loss for the nine months ended
December 31, 2000, compared to an income tax benefit of $2,890, or an effective
tax rate of 35% for the nine months ended December 31, 1999. The decrease in the
effective tax rate reflects recognition of a valuation allowance against the
current year benefit.

Income (Loss) from Discontinued Operations. Discontinued operations is comprised
of operations associated with the IT staff augmentation segment of the Company's
business and the gain on the sale of the discontinued operations.

The net income from discontinued operations of $2,889 for the nine months ended
December 31, 2000 compares to a net loss of $12,234 for the nine months ended
December 31, 1999. The increase in profitability was the result of one-time
charges in the nine months ended December 31, 1999 of $20,000 related to
goodwill impairment and $4,920 for restructuring. The non-recurrence of these
one-time charges were offset by lower revenues in the nine months ended December
31, 2000 resulting from the sale of the majority of the discontinued operations
on June 30, 2000.

The gain on sale of the discontinued operations of $9,963 for the nine months
ended December 31, 2000 consists of three separate transactions including: 1)
the sale of the majority of the IT staff augmentation business on June 30, 2000
for proceeds of $116,495 and the assumption of approximately $10,000 in
liabilities, 2) the sale of the IT staff augmentation operations in Orlando on
July 14, 2000 for $650 and the assumption of $385 of assumed liabilities and 3)
the sale of the international IT staff augmentation operation for $4,459,
consisting of a secured promissory note bearing interest at prime plus 1%,
payable over five years.

                                       19
<PAGE>

Liquidity and Capital Resources

The Company has historically financed its growth principally through cash flows
from operations, borrowing under its credit facilities and the use the net
proceeds from its public offerings.

Prior to June 30, 2000, the Company maintained a credit facility ("Credit Line")
with a consortium of banks (the "Lenders") under which it borrowed to fund
working capital needs. On June 30, 2000, the Company completed the sale of the
majority of the IT staff augmentation business for $116,495 and the assumption
of certain liabilities. The Company used a portion of the cash proceeds from the
sale to pay off all obligations under the Credit Line and to pay an earn-out
obligation due sellers of an acquired business. Upon settlement of all
obligations under the Credit Line, the Credit Line was terminated. Subsequent to
June 30, 2000, the Company maintained no credit facility.

Cash used in operating activities was $6,995 for the year ended December 31,
2001. The primary sources of liquidity for the Company going forward are the
collection of its accounts receivable, the cash balances resulting from the sale
of the discontinued operations and refundable federal and state income taxes
resulting from the carry-back of net operating losses. Total receivables were 56
and 82 days of quarterly revenue at December 31, 2001 and December 31, 2000,
respectively. In the first quarter of 2002, Congress approved the Job Creation
and Worker Assistance Act of 2002, allowing fiscal tax year end March 31, 2002
net operating losses to be carried back five years. The effect of this change in
tax law is expected to result in the Company's ability to receive additional tax
refunds estimated at $7,200, which could be received late in 2002. Shortly after
December 31, 2001, the Company completed a detailed forecast of the Company's
operations that includes a plan to achieve a positive cash flow and return to
profitability prior to December 31, 2002. Based on this forecast and the
Company's operations through March 2002, management believes that the remaining
cash on hand will provide adequate cash to fund its anticipated cash working
capital needs at least through next year.

Quantitative and Qualitative Disclosures about Market Risk

During the year ended March 31, 2000 and through the quarter ended June 30,
2000, the Company was exposed to market risk related to changes in interest
rates on its Credit Line. The interest rate for the Credit Line was tied to the
Agent's prime rate and LIBOR. The Credit Line was terminated on June 30, 2000
upon the complete payment of all of the Company's obligations under the Credit
Agreement.

Recent Accounting Pronouncements

A FASB staff announcement was issued in November 2001 regarding "Income
Statement Characterization of Reimbursements Received for `Out-of-Pocket'
Expenses Incurred." In this announcement, the FASB staff concluded that amounts
billed by service providers for reimbursement of out-of-pocket expenses incurred
should be characterized as revenue in the Company's income statement. EITF
Issues No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an
Agent," and No. 00-10, "Accounting for Shipping and Handling Fees and Costs,"
provide the principal support for the FASB staff's conclusion. Currently, the
Company records revenue received on such arrangements as an offset to the
expenses incurred, as these arrangements are billed at zero margin. In
accordance with this announcement, the Company intends to reclassify amounts
received for reimbursement of out-of-pocket expenses as revenues in its December
31, 2002 income statement. Management does not believe that the impact of this
reclassification will have a material effect on the Company's gross margins.

Critical Accounting Policies

Allowance for Doubtful Accounts
The Company provides an allowance for potentially uncollectible accounts
receivable under the provisions of SFAS No. 5, "Accounting for Contingencies",
in the ordinary course of business. The allowance is derived as the result of
periodic and thorough reviews of aged and known problem accounts during each
quarter. In addition the Company reserves for unknown issues in its receivables
at the balance sheet date using a formula consistent from quarter to quarter.
Management believes that its approach is appropriate to reserve for potentially
uncollectible receivables. Should management have taken another approach to
developing its reserve, the allowance for doubtful accounts may have been
different than that reported.

Revenue Recognition

The Company accounts for revenue under the provisions of SAB 101, "Staff
Accounting Bulletin No. 101: Revenue Recognition in Financial Statements", which
requires revenue to be recorded when there is evidence of an agreement, a fixed
and determinable fee, collectibility is probable, and delivery has occurred.
Revenues pursuant to time and materials contracts are generally recognized as
services are performed and collectibility is determined. Revenues pursuant to
fixed-fee contracts are generally recognized as services are rendered on the
percentage-of-completion method of accounting based on hours incurred to total
estimated labor hours to complete. Revenues exclude reimbursable expenses
charged to and collected from clients. Revenues earned for software license

                                       20
<PAGE>

sales and service contracts are recorded based on the provisions of AICPA SOP
97-2, "Software Revenue Recognition", which shares the basic criteria of SAB No.
101.

Divestiture Liabilities

Over the course of the past three fiscal years, the Company has divested its IT
staff augmentation business. The divestiture of its IT staff augmentation
business included the sale of the majority of this business to a third party,
COMSYS Information Technology Services, Inc., for cash and the assumption of
certain liabilities. The Company also sold two other components of this
operation, its international IT staff augmentation operation, and its staff
augmentation business in Orlando, to two other third parties for a note
receivable and cash and the assumption of certain liabilities, respectively.
Lastly, the Company abandoned the final business included in discontinued
operations during 2001. Certain reserves for remaining obligations and trailing
liabilities were established at the time of these sales that were based on facts
and circumstances known at the time of the discontinuance. These estimates were
established under Accounting Principles Board Opinion No. 30 and have been
revised over time as new information is obtained that changes the nature of
future divestiture obligations. Should additional information be received in the
future, the Company will adjust the remaining divestiture reserves in the
financial statements as appropriate.

Restructuring Liabilities

As part of the Company's efforts to streamline its operations commensurate with
its revenue base, the Company identified opportunities to reduce its cost
structure by reducing headcount and closing certain operating facilities to
conform to the Company's changing operating structure in June 1999, December
2000, and September 2001. These restructuring obligations were calculated using
information known at the date of the respective accruals based on the provisions
of EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity". Management has adjusted these obligations
over the payment periods of each restructuring plan as liabilities have been
settled and payments have been made.

Accounting for Stock Options

The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," and as permitted by the provisions of SFAS No. 123, the Company
continues to apply the provisions of Accounting Principles Board Opinion ("APB")
No. 25, FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock Compensation," and related interpretations in
accounting for its employee stock option plans. Under APB No. 25 and FIN 44, the
Company is required to record compensation expense at intrinsic value if stock
options are granted at an exercise price below the fair value of the Company's
stock. The Company chose to account for options issued under its option plan in
this manner for comparability purposes, as it is the acceptable method amongst
the Company's competitors and in the industry. Had the Company chosen to account
for its options using the fair value method of the options issued under SFAS No.
123, the Company's net loss would have been greater by $234 for the year ended
December 31, 2001, $6,130 for the nine months ended December 31, 2000, and
$4,118 for the year ended March 31, 2000.

Accounting for Income Taxes

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". This pronouncement requires using an asset and liability approach to
recognize deferred tax assets and liabilities for the tax consequences of
temporary differences by applying enacted statutory tax rates to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities. The Company has not given benefit to any deferred tax
assets or net operating losses in the previous two fiscal years due to
uncertainty of realizing these assets in future periods. In addition, the
financial statements have provided reserves for certain tax positions taken by
the Company in the March 31, 1999, 2000, and 2001 tax returns based on enacted
tax laws during those periods. In the first quarter of 2002, Congress approved
the Job Creation and Worker Assistance Act of 2002, allowing March 31, 2002 net
operating losses to be carried back five years. Under SFAS No. 109, the effect
of this change in tax law is not reflected in the December 31, 2001 financial
statements as changes in tax law must be reflected in the period of enactment.
Had this change in tax law been reflected in the financial statements at
December 31, 2001, additional tax benefits would have been recorded.

                                       21
<PAGE>

Item 8. Financial Statements and Supplementary Data.
        -------------------------------------------

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cotelligent, Inc.:

We have audited the accompanying consolidated balance sheets of Cotelligent,
Inc. and subsidiaries (a Delaware corporation) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year ended December 31, 2001, the nine months ended December
31, 2000, and the year ended March 31, 2000. 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 audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cotelligent, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the year ended December 31, 2001, the nine
months ended December 31, 2000, and the year ended March 31, 2000, in conformity
with accounting principles generally accepted in the United States.

                                               /S/ Arthur Andersen LLP

San Francisco, California
March 21, 2002

                                       22
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                              December 31, 2001   December 31, 2000
                                                                              -----------------   -----------------
<S>                                                                               <C>                 <C>
                              ASSETS
Current assets:
   Cash and cash equivalents ..............................................       $ 18,778            $ 26,500
   Refundable income taxes ................................................          7,008                  --
   Accounts receivable, including unbilled accounts of $1,627
          and $4,043 and net of allowance for doubtful accounts
          of $1,566 and $2,615, respectively ..............................          4,660              19,229
   Deferred tax assets ....................................................             13               1,435
   Notes receivable from officers and stockholder .........................          1,829               1,703
   Current portion of note receivable from acquirer of
          discontinued operation ..........................................            525                  --
   Prepaid expenses and other current assets ..............................          1,022               1,916
                                                                                  --------            --------
     Total current assets .................................................         33,835              50,783
Capitalized software costs, net ...........................................            862                  --
Property and equipment, net ...............................................          3,430               6,761
Note receivable from acquirer of discontinued operation ...................          3,508               4,459
Equity investment in alliance partner .....................................          1,860               2,047
Other assets ..............................................................            157                 664
                                                                                  --------            --------
     Total assets .........................................................       $ 43,652            $ 64,714
                                                                                  ========            ========

               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term debt ....................................       $    350            $    212
  Accounts payable ........................................................          1,535               2,047
  Accrued compensation and related payroll liabilities ....................          2,217               5,826
  Obligations related to acquired/sold businesses .........................          3,170               3,125
  Restructuring liabilities ...............................................          1,334               2,136
  Other accrued liabilities ...............................................          2,842               3,182
                                                                                  --------            --------
     Total current liabilities ............................................         11,448              16,528
Long-term debt ............................................................            538               1,000
Deferred tax liabilities ..................................................             13               1,435
Income tax reserves .......................................................          2,618                 748
                                                                                  --------            --------
     Total liabilities ....................................................         14,617              19,711

Stockholders' equity:
   Preferred Stock, $0.01 par value; 500,000 shares authorized,
   no shares issued or outstanding ........................................             --                  --
   Common Stock, $0.01 par value; 100,000,000 shares authorized, 15,514,757
     and 15,349,630 shares issued, respectively ...........................            155                 153
   Additional paid-in capital .............................................         86,888              86,866
   Notes receivable from stockholders .....................................         (6,193)             (6,368)
   Retained deficit .......................................................        (51,315)            (35,648)
   Treasury Stock .........................................................           (500)                 --
                                                                                  --------            --------
     Total stockholders' equity ...........................................         29,035              45,003
                                                                                  --------            --------
     Total liabilities and stockholders' equity ...........................       $ 43,652            $ 64,714
                                                                                  ========            ========
</TABLE>

 The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       23
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                             Year Ended    Nine Months Ended   Year Ended
                                                            December 31,     December 31,       March 31,
                                                               2001              2000             2000
                                                            ------------   -----------------   -----------
<S>                                                         <C>               <C>              <C>
Revenues ................................................   $    45,901       $    66,292      $   105,564
Cost of services ........................................        31,976            44,884           69,995
                                                            -----------       -----------      -----------
        Gross profit ....................................        13,925            21,408           35,569
Selling, general and administrative expenses ............        29,876            36,742           41,860
Depreciation and amortization of goodwill ...............         2,634             3,035            3,266
Impairment of long-lived assets .........................            --            41,478               --
Restructuring charge ....................................         3,373             4,200               --
                                                            -----------       -----------      -----------
Operating loss ..........................................       (21,958)          (64,047)          (9,557)
Other income (expense):
   Interest expense .....................................            (2)           (1,564)          (3,915)
   Interest income ......................................         1,418             1,194              278
   Other ................................................          (167)               47             (119)
                                                            -----------       -----------      -----------
     Total other income (expense) .......................         1,249              (323)          (3,756)
                                                            -----------       -----------      -----------
Loss from continuing operations before income taxes .....       (20,709)          (64,370)         (13,313)
Benefit for income taxes ................................         5,074             9,334            4,660
                                                            -----------       -----------      -----------
Loss from continuing operations .........................       (15,635)          (55,036)          (8,653)
    Income (loss) from discontinued operations less
    Provision (benefit) for income taxes of $0, $1,556
    and ($5,379) ........................................           (32)            2,889           (9,990)
    Gain on sale of discontinued operation, net of income
    taxes of  $0, $14,464 and $0 ........................            --             9,963               --
                                                            -----------       -----------      -----------
    Income (loss) from discontinued operations ..........           (32)           12,852           (9,990)
                                                            -----------       -----------      -----------
Net loss ................................................   $   (15,667)      $   (42,184)     $   (18,643)
                                                            ===========       ===========      ===========
Earnings per share:
  Basic -
  Income (loss) from continuing operations ..............   $     (1.04)      $     (3.61)     $     (0.60)
  Income (loss) from discontinued operations ............            --              0.84            (0.70)
                                                            -----------       -----------      -----------
Net loss ................................................   $     (1.04)      $     (2.77)     $     (1.30)
                                                            ===========       ===========      ===========
  Diluted -
  Income (loss) from continuing operations ..............   $     (1.04)      $     (3.61)     $     (0.60)
  Income (loss) from discontinued operations ............            --              0.84            (0.70)
                                                            -----------       -----------      -----------
Net loss ................................................   $     (1.04)      $     (2.77)     $     (1.30)
                                                            ===========       ===========      ===========
Basic and diluted weighted average number of shares
outstanding .............................................    15,075,546        15,230,969       14,298,693
                                                            ===========       ===========      ===========
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                       24
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (In thousands, except share data)
<TABLE>
<CAPTION>

                                                                         Notes
                                          Common Stock     Additional   Receivable               Treasury Stock          Total
                                       ------------------   Paid-In       from       Retained  --------------------  Stockholders'
                                         Shares    Amount  Capital     Stockholders  Earnings    Shares     Amount      Equity
                                       ------------------  ----------  ------------  --------  --------------------  ------------
<S>                                    <C>          <C>    <C>           <C>         <C>        <C>        <C>         <C>
Balance at March 31, 1999 ..........   14,489,510   $145   $ 93,667      $    --     $ 25,179     833,479  $(11,158)   $107,833
Issuance of Common Stock, net of
costs ..............................    1,045,099     11      8,062       (6,149)          --          --        --       1,924
Tax benefit on stock options
exercised ..........................           --     --         38           --           --          --        --          38
Repurchase of Common Stock .........           --     --         --           --           --     238,400    (2,477)     (2,477)
Re-issuance of Treasury Stock ......           --     --    (13,635)          --           --  (1,071,879)   13,635          --
Return of Common Stock previously
issued to acquire company ..........     (469,209)    (5)    (2,690)          --           --          --        --      (2,695)
Net loss ...........................           --     --         --           --      (18,643)         --        --     (18,643)
                                       ----------   ----   --------      -------     --------  ----------  --------    --------
Balance at March 31, 2000 ..........   15,065,400    151     85,442       (6,149)       6,536          --        --      85,980
Issuance of Common Stock, net of
costs ..............................      209,230      2        739         (332)          --          --        --         409
Shares issued in connection with
earnout to sellers of acquired
businesses .........................      100,000      1        571           --           --          --        --         572
Return of shares issued under note
receivable from stockholder ........      (25,000)    (1)      (112)         113           --          --        --          --
Warrants received in connection
with investment in joint venture ...           --     --        900           --           --          --        --         900
Warrants cancelled in connection
with dissolution of joint venture ..           --     --       (900)          --           --          --        --        (900)
Warrants issued in connection with
investment in joint venture ........           --     --        226           --           --          --        --         226
Net loss ...........................           --     --         --           --      (42,184)         --        --     (42,184)
                                       ----------   ----   --------      -------     --------  ----------  --------    --------
Balance at December 31, 2000 .......   15,349,630    153     86,866       (6,368)     (35,648)         --        --      45,003

Issuance of Common Stock, net of
costs ..............................      215,127      3        196                                    --        --         199
Cancellation of LSPP Note ..........      (50,000)    (1)      (174)         175           --          --        --          --
Purchase of Treasury Shares ........           --     --         --           --           --     644,600      (500)       (500)
Net loss ...........................           --     --         --           --      (15,667)         --        --     (15,667)
                                       ----------   ----   --------      -------     --------  ----------  --------    --------
Balance at December 31, 2001 .......   15,514,757   $155   $ 86,888      $(6,193)    $(51,315)    644,600  $   (500)   $ 29,035
                                       ==========   ====   ========      =======     ========  ==========  ========    ========
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       25
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                            Year Ended    Nine Months Ended   Year Ended
                                                                           December 31,     December 31,       March 31,
                                                                              2001              2000              2000
                                                                           ------------   -----------------   ----------
<S>                                                                          <C>              <C>              <C>
Cash flows from operating activities:
     Net loss ..........................................................     $(15,667)        $(42,184)        $(18,643)
     Adjustments to reconcile net loss to net cash used in operating
          activities:
            Gain on sale of discontinued operations ....................           --           (9,963)              --
            Loss (income) from discontinued operations .................           32           (2,889)           9,990
            Depreciation and amortization ..............................        2,634            3,035            3,266
            Impairment of long-lived assets ............................           --           41,478               --
            Equity loss from investments ...............................          169               13               --
            Deferred income taxes, net .................................           --              564             (425)
            Loss on disposal of property and equipment .................            5               11               10
            Provision for doubtful accounts ............................        1,702            3,845              818
            Changes in current assets and liabilities:
                   Accounts receivable .................................       12,867              435             (931)
                   Prepaid expenses and other current assets............          731              (65)             980
                   Accounts payable and accrued expenses ...............       (4,073)          (2,981)          (1,079)
                   Income taxes, net ...................................       (5,138)          (1,209)          (3,745)
            Changes in other assets ....................................         (257)             128               63
                                                                             --------         --------         --------
     Net cash used in operating activities .............................       (6,995)          (9,782)          (9,696)
Cash flows from investing activities:
     Proceeds from sale of assets ......................................           --               --              603
     Investments, net ..................................................           --           (6,097)            (253)
     Payment received on note from acquirer of discontinued operation ..           26               --               --
     Purchase of businesses, net of cash of acquired companies .........           --               --           (2,756)
     Purchases of property and equipment ...............................         (408)          (1,778)          (3,892)
     Capitalized software costs ........................................         (862)              --               --
                                                                             --------         --------         --------
     Net cash used in investing activities .............................       (1,244)          (7,875)          (6,298)
Cash flows from financing activities:
     Borrowing under credit agreement ..................................           --            9,111           20,668
     Payments under credit agreement ...................................           --          (57,890)              --
     Payments on capital lease obligations .............................          (44)            (122)             (82)
     Payments on amounts due sellers of acquired businesses ............         (600)          (8,534)            (730)
     Net borrowings (repayments) on short-term debt ....................         (261)              --                9
     Net repayments (borrowings) on notes receivable from officers .....           --              100           (1,433)
     Net proceeds from issuance of common stock ........................          199              409            1,462
     Repurchase of common stock ........................................         (500)              --           (2,477)
                                                                             --------         --------         --------
     Net cash provided by (used in) financing activities ...............       (1,206)         (56,926)          17,417
                                                                             --------         --------         --------
Cash flows provided by discontinued operations:
     Cash provided by (used for) discontinued operations ...............        1,723          (21,192)           2,399
     Proceeds from sale of IT staff augmentation business ..............           --          117,481               --
                                                                             --------         --------         --------
     Cash provided by discontinued operations ..........................        1,723           96,289            2,399
                                                                             --------         --------         --------
     Net increase (decrease) in cash and cash equivalents ..............       (7,722)          21,706            3,822
     Cash and cash equivalents at beginning of period ..................       26,500            4,794              972
                                                                             --------         --------         --------
     Cash and cash equivalents at end of period ........................     $ 18,778         $ 26,500         $  4,794
                                                                             ========         ========         ========
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       26
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                       Year Ended    Nine Months Ended   Year Ended
                                                                      December 31,     December 31,       March 31,
                                                                         2001              2000              2000
                                                                      ------------   -----------------   ----------
<S>                                                                      <C>              <C>              <C>
Supplemental disclosures of cash flow information:
      Interest paid ...............................................      $  2             $1,914           $3,338
      Income taxes paid ...........................................        74                 32              788
Significant non-cash transactions:
      Fair market value of Common Stock issued to acquire business         --                 --              500
      Return of shares previously issued to acquire business ......        --                 --            2,695
      Adjustments to purchase price of businesses acquired in prior
      years .......................................................        --              1,018            8,386
    Fair value of Common Stock issued to seller of acquired
    business ......................................................        --                572               --
      Common stock issued to employees for notes receivable .......        --                332            6,149
    Return of Common Stock previously issued to employee for note
    receivable ....................................................       175                113               --
    Warrants issued in connection with joint venture ..............        --                226               --
    Note receivable issued in connection with sale of discontinued
    operation .....................................................        --              4,459               --
    Reduction in note receivable from acquirer of discontinued
    operations ....................................................       400                 --               --
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                       27
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Note 1 - Business Organization

Cotelligent, Inc. ("Cotelligent" or the "Company"), a Delaware corporation,
provides software consulting services to businesses with complex information
technology ("IT") operations and maintenance, support and contract services on
software products it licenses. These financial statements include the accounts
of Cotelligent, Inc. and its subsidiaries.

During the fiscal year ended March 31, 2000, the Company was organized in two
practice groups, Technology Solutions and Professional Services (also known as
its IT staff augmentation business), and operated across the United States along
with international consultant recruiting offices in Brazil and the Philippines.
Prior to March 31, 2000, the Company entered into a plan to divest its IT staff
augmentation business. Accordingly, the accompanying consolidated financial
statements and related footnotes have been prepared to present as discontinued
operations the Company's IT staff augmentation business for all periods
presented.

The Company historically operated on an April 1 to March 31 fiscal year. In July
2000, the Company changed its fiscal year to December 31, resulting in a
nine-month transition period from April 1, 2000 through December 31, 2000.

The Company has suffered significant operating losses as well as negative
operating cash flows in the last three fiscal periods and continues to be
subject to certain risks common to companies in this industry. These
uncertainties include the availability of financing, the retention of and
dependence on key individuals, the affects of intense competition, the ability
to develop and successfully market new product and service offerings, and the
ability to streamline operations and increase revenues. There can be no
assurance the Company will be profitable in the future.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements and related notes to the
consolidated financial statements include the accounts and results of
Cotelligent, Inc. and its subsidiaries. In addition, the consolidated financial
statements and related notes include those companies acquired utilizing the
purchase method of accounting from their respective acquisition dates. All
significant intercompany transactions and accounts have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable. Receivables
arising from services provided to clients are not collateralized and
accordingly, the Company performs ongoing credit evaluations of its clients to
reduce the risk of loss and provides a reserve for potentially uncollectible
accounts.

Software Development Costs

Capitalized software costs are comprised of purchased software and internal
software development costs. All development costs incurred prior to the
establishment of a software product's technical feasibility are expensed as
research and development costs. Software costs incurred subsequent to this
determination are capitalized. Capitalization ceases and depreciation of
capitalized costs begins when the software product is available for general
release to clients. Capitalized software depreciation expense is included in
cost of services.

                                       28
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the respective assets on a straight-line basis.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful life of the respective assets.

Goodwill

In prior periods, goodwill represented the excess of cost over fair value of net
tangible assets acquired through acquisitions and previously was amortized on a
straight-line basis over the period of 30 years.

Investments

Investments in other businesses where ownership is less than 20% are accounted
for using the cost basis of accounting. Investments where ownership is between
20% and 50%, and where the Company has the ability to exercise significant
influence, are accounted for using the equity method of accounting.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash, short-term accounts
receivable and accounts payable for which current carrying amounts are equal to
or approximate fair market value. Additionally, interest rates on outstanding
debt are at market rates for debt with similar terms and average maturities;
therefore, the carrying value of debt approximates its fair value.

Revenue Recognition

Revenues associated with software licensing and the related maintenance and
consulting services are recognized once a contract is signed, delivery has been
made and collectibility is probable. Revenues pursuant to time and materials
contracts are generally recognized as services are performed and collectibility
is determined. Revenues pursuant to fixed-fee contracts are generally recognized
as services are rendered on the percentage-of -completion method of accounting
based on labor hours incurred to total estimated labor hours to complete.
Revenues exclude reimbursable expenses charged to and collected from clients.

Cost of Services

Cost of services expenses consist primarily of compensation and benefits of
Cotelligent's employees engaged in the delivery of consulting services.

Income Taxes

The Company accounts for income taxes using an asset and liability approach
requiring the recognition of deferred tax assets and liabilities for the tax
consequences of temporary differences by applying enacted statutory tax rates to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities.

Return of Common Stock

The return of Common Stock previously issued to acquire purchased companies is
recorded at the market price of the Common Stock on the day the shares are
returned and results in a decrease to stockholders' equity.

Repurchase of Common Stock

The Company records the repurchase of Common Stock as a reduction of
stockholders' equity at cost. When common shares are reissued, the Company uses
a first-in, first-out method.

Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted
average number of shares of Common Stock outstanding during the period. Diluted
earnings per share includes the impact of Common Stock options outstanding, when
dilutive.

                                       29
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Discontinued Operations

Discontinued operations consist of the Company's IT staff augmentation business.
The Company entered into a plan to divest of these operations prior to March 31,
2000. The operating results and the net assets of these operations are reflected
in the accompanying consolidated financial statements as discontinued operations
and net assets of discontinued operations, respectively.

Restructuring Charges

Restructuring charges are recognized in the period when management enters into a
plan to reorganize or streamline the operations. The charges include costs
associated with the termination of employees and the closure of operating
locations.

Recent Accounting Pronouncements

A FASB staff announcement was issued in November 2001 regarding "Income
Statement Characterization of Reimbursement Received for `Out-of-Pocket'
expenses Incurred." In this announcement, the FASB staff concluded that amounts
billed by service providers for reimbursement of out-of-pocket expenses incurred
should be characterized as revenue in the Company's income statement. EITF
Issues No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an
Agent," and No. 00-10, "Accounting for Shipping and Handling Fees and Costs,"
provide the principal support for the FASB staff's conclusion. Currently, the
Company records revenue received on such arrangements as an offset to the
expenses incurred, as these arrangements are billed at zero margin. In
accordance with this announcement, the Company intends to reclassify amounts
received for reimbursement of out-of-pocket expenses as revenues in its December
31, 2002 income statement. Management does not believe that the impact of this
reclassification will have a material effect on the Company's gross margins.

Reclassifications

Certain reclassifications have been made in the prior years' financial
statements to conform to the presentation in the current period.

Note 3 - Business Combinations

During the year ended March 31, 2000, Cotelligent acquired one company accounted
for under the purchase method for aggregate consideration of $2,800 (100,758
shares issued at fair market value of $500 and $2,300 of cash). Total assets
acquired related to this acquisition were $1,481, which resulted in the
recognition of goodwill of $2,085. The results of this acquisition have been
included in the Company's results from its respective acquisition date.

Prior to December 31, 2000, goodwill was amortized over a 30-year period. On
December 31, 2000, the Company recognized an impairment charge, which reduced
the remaining goodwill to zero (see Note 9).

Pro forma Statement of Operations

The following pro forma consolidated statement of operations for the year ended
March 31, 2000 gives effect to the acquisition of the business during that
fiscal year as if this acquisition was made on April 1, 1999. The pro forma
consolidated income statement reflects adjustments for interest expense on cash
consideration and amortization of goodwill for the Company accounted for under
the purchase method of accounting.

                                       30
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

                                                                 (Unaudited)
                                                            Year Ended March 31,
                                                                   2000
                                                            --------------------
Revenues ................................................       $   108,608
Cost of services ........................................            72,152
                                                                -----------
     Gross profit .......................................            36,456
Selling, general and administrative expenses ............            43,017
Depreciation and amortization of goodwill ...............             3,322
                                                                -----------
Operating loss ..........................................            (9,883)
Other expense ...........................................            (3,922)
                                                                -----------
Loss before provision for income taxes ..................           (13,805)
Benefit for income taxes ................................            (4,660)
                                                                -----------
Net loss ................................................       $    (9,145)
                                                                ===========

Basic and diluted loss per share ........................            $(0.64)
                                                                ===========
Basic and diluted weighted average shares ...............        14,340,538
                                                                ===========

Note 4 - Allowance for Doubtful Accounts

Allowance for doubtful accounts activity is as follows:

Balance, March 31, 1999 .................................       $ 1,449
    Balance of newly acquired companies' allowance
        for doubtful accounts at acquisition ............           174
    Charges to costs and expenses .......................           818
    Write-offs ..........................................          (561)
                                                                -------
Balance, March 31, 2000 .................................         1,880
    Charges to costs and expenses .......................         3,845
    Write-offs ..........................................        (3,110)
                                                                -------
Balance, December 31, 2000 ..............................       $ 2,615
    Charges to costs and expenses .......................        1,702
    Write-offs ..........................................        (2,751)
                                                                -------
Balance, December 31, 2001 ..............................       $ 1,566
                                                                =======

Note 5 - Capitalized Software Costs

The Company capitalizes software development costs when a development project
reaches technological feasibility and ceases capitalization when the product is
ready for release. Research and development costs related to software
development that has not reached technological feasibility are expensed as
incurred. During the year ended December 31, 2001, the Company capitalized $862
software development costs and expects to commence depreciating these costs in
2002 over the software's expected life of two years.

                                       31
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Note 6 - Property and Equipment

Property and equipment is comprised of the following:

                                                   December 31,   December 31,
                                                       2001          2000
                                                   ------------   ------------
Computer and office equipment...................     $ 7,744        $10,545
Furniture and fixtures..........................       1,089          1,758
Leasehold improvements..........................         897          1,154
                                                     -------        -------
                                                       9,730         13,457
Less: Accumulated depreciation..................      (6,300)        (6,696)
                                                     -------        -------
Total property and equipment....................     $ 3,430        $ 6,761
                                                     =======        =======

Depreciation is provided on the estimated useful lives of the respective assets
(ranging from three to ten years). Depreciation expense of property and
equipment for the twelve months ended December 31, 2001 and the nine months
ended December 31, 2000 was $2,634 and $1,839, respectively.

Note 7 - Investments

During the fiscal period ended December 31, 2000, the Company made two
investments as follows:

Investment in White Horse Interactive. On July 18, 2000, the Company paid $2,000
to acquire a 35% ownership interest in White Horse Interactive, an integrated
media agency. The Company uses the equity method of accounting for this
investment and recorded equity income of $13 for the nine months ended December
31, 2000, and an equity loss of $169 for the year ended December 31, 2001.

Investment in bSmart.to LLC. On August 8, 2000, the Company executed a
definitive joint venture agreement with bSmart.to Technologies, Inc. The Company
contributed: (1) cash of $5,000, of which $2,500 was paid directly to the joint
venture and $2,500 was distributed to the developer of certain technology, and
(2) its Philadelphia-based IT solutions staff and ASP data center and,
accordingly, reclassified $1,200 of working capital and property and equipment
as well as $10,073 of goodwill, in exchange for a 50% interest in the joint
venture. In addition, the Company incurred approximately $1,500 in transaction
costs that were capitalized as a part of its investment in the joint venture. In
connection with the investment in the joint venture with bSmart.to Technologies,
Inc., the Company issued to and received from bSmart.to Technologies, Inc.
warrants for the purchase of common shares. Accordingly, the Company recognized
an investment of $900 for the warrants in bSmart.to Technologies, Inc. stock
received, and a corresponding amount in additional paid-in capital for the
warrants issued on the Company's stock.

On December 6, 2000, the Company exercised its right under the joint venture
agreement to terminate the relationship. As a result, the Company regained
complete ownership of the Philadelphia-based operation, including $1,400 in cash
and more working capital than originally contributed, 100% ownership in JAS
Concepts, Inc., an investment made by the joint venture prior to its
dissolution, and consequently, recognized a charge of $4,107 to reduce the
investment in the joint venture to its realizable value. The charge is included
in Impairment of long-lived assets in the Statement of Operations for the nine
months ended December 31, 2000.

During the period August 8, 2000 through December 6, 2000 the Company used the
equity method of accounting for this investment and recorded an equity loss of
$33 for the nine months ended December 31, 2000. The Company commenced
consolidating the results from the Philadelphia-based operation upon regaining
complete ownership on December 6, 2000.

                                       32
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Note 8 - Long-term Debt

<TABLE>
<CAPTION>
                                                                                      December 31,   December 31,
                                                                                          2001           2000
                                                                                      ------------   ------------
<S>                                                                                     <C>            <C>
Non-interest bearing notes payable with maturities of $350 in 2002, $443 in 2003,
   and $95 in 2004 (discounted based on inputed interest of 9.5%) .................     $ 888          $1,200
Other notes payable, with interest rates from 8.0% to 11.0%, with maturities
   through March 2001 .............................................................        --              12
Less: current maturities ..........................................................      (350)           (212)
                                                                                        -----          ------
Total long-term debt ..............................................................     $ 538          $1,000
                                                                                        =====          ======
</TABLE>

Note 9 - Impairment of Long-Lived Assets

During the nine months ended December 31, 2000, the Company recognized an
impairment of long-lived assets charge for $41,478, representing a $37,371
goodwill impairment charge and a $4,107 write-off of investment costs associated
with the bSmart.to joint venture (see Note 7).

In accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
the Company considers, among other factors, deterioration of operating
performance or a general reduction in demand for services for a sustainable
period to be indicators of potential impairment of long-lived assets. The
Company has experienced a reduction in demand for its services. As a result of
this reduction in demand, the Company recognized a $37,371 impairment of
goodwill during the nine months ended December 31, 2000 as the future
undiscounted cash flows of certain of its long-lived assets were estimated to be
less than the asset's related carrying value.

Note 10 - Restructuring Programs

In June 1999, as part of the Company's reorganization into practice groups, the
Company identified opportunities to align its operating structure by closing
certain of its redundant facilities and rationalizing headcount to conform to
the Company's new operating structure. Accordingly, the Company adopted a
restructuring plan, which resulted in a pre-tax restructuring charge of $4,920.
The charge included provisions for severance of approximately 60 management and
operating staff ($3,510) as well as closure costs related to a plan of
consolidating certain operating locations ($1,410). The change was originally
recorded as an operating expense in June 1999. Upon the Company's decision to
discontinue its IT staff augmentation segment the amount was reclassified to
discontinued operations, as all charges related to severance or other activities
of the discontinued operations (see Note 12).

In December 2000 and September 2001, as part of the Company's efforts to
streamline its operations commensurate with its revenue base, the Company
identified additional opportunities to reduce its cost structure. Accordingly,
the Company adopted a restructuring plan in accordance with Staff Accounting
Bulletin No. 100, "Restructuring and Impairment Charges", which resulted in a
pre-tax restructuring charge of $4,200 during the nine months ended December 31,
2000 and $3,373 during the twelve months ended December 31, 2001. The December
2000 charge included provisions for severance of approximately 90 management and
operating staff ($1,100) as well as closure costs associated with a plan to
consolidate or dispose of certain locations including the write-down of
associated property and equipment ($3,100). The September 2001 charge included
provisions for severance of approximately 145 management and operating staff
($1,059) as well as closure costs associated with a plan to consolidate or
dispose of certain locations including the write-down of associated property and
equipment ($2,314).

                                       33
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

The following summarizes the activity and balances in each restructuring program
from inception through December 31, 2001:

<TABLE>
<CAPTION>
                                        June 1999              December 2000            September 2001
                                  Restructuring Program    Restructuring Program    Restructuring Program
                                  ----------------------   ----------------------   ----------------------
                                              Facilities               Facilities               Facilities
                                  Severance    Closure     Severance    Closure     Severance    Closure      Total
                                  ---------   ----------   ---------   ----------   ---------   ----------   -------
<S>                                <C>          <C>         <C>         <C>          <C>         <C>         <C>
Restructuring charge ..........    $ 3,510      $1,410      $   --      $    --      $    --     $    --     $ 4,920
Spending and write-downs ......     (2,636)       (409)         --           --           --          --      (3,045)
                                   -------      ------      ------      -------      -------     -------     -------
Balance, March 31, 2000 .......        874       1,001          --           --           --          --       1,875
Restructuring charge ..........         --          --       1,100        3,100           --          --       4,200
Spending and write-downs ......       (351)       (498)       (200)      (2,100)          --          --      (3,149)
Release of excess restructuring
 liability ....................       (466)       (324)         --           --           --          --        (790)
                                   -------      ------      ------      -------      -------     -------     -------
Balance, December 31, 2000 ....         57         179         900        1,000           --          --       2,136
Restructuring charge ..........         --          --          --           --        1,059       2,314       3,373
Spending and write-downs ......        (57)        (36)       (900)        (791)      (1,034)     (1,357)     (4,175)
                                   -------      ------      ------      -------      -------     -------     -------
Balance, December 31, 2001 ....    $    --      $  143      $   --      $   209      $    25     $   957     $ 1,334
                                   =======      ======      ======      =======      =======     =======     =======
</TABLE>

Note 11 - Income Taxes

The income tax provision (benefit) from continuing operations consists of the
following:

<TABLE>
<CAPTION>
                                                  Year Ended     Nine Months Ended   Year Ended
                                                  December 31,      December 31,     March 31,
                                                      2001              2000            2000
                                                  ------------   -----------------   ----------
<S>                                                 <C>               <C>             <C>
Current:
  Federal .....................................     $(6,224)          $    --         $(1,164)
  State .......................................          50                --              --
                                                    -------           -------         -------
                                                     (6,174)               --          (1,164)
                                                    -------           -------         -------
Deferred:
  Federal .....................................       1,100            (8,815)         (3,059)
  State .......................................          --              (519)           (437)
                                                    -------           -------         -------
                                                      1,100            (9,334)         (3,496)
                                                    -------           -------         -------
Total provision (benefit) for income taxes ....     $(5,074)          $(9,334)        $(4,660)
                                                    =======           =======         =======
</TABLE>

The tax benefits associated with nonqualified stock options reduced taxes
currently payable as shown above by $38 for the year ended March 31, 2000. Such
tax benefits are credited to capital when realized. No benefits were realized
for the fiscal periods ended December 31, 2001 and December 31, 2000. In
addition to the benefit recorded on continuing operations for the nine months
ended December 31, 2000, the Company recorded a tax provision associated with
discontinued operations and the gain on the sale of its discontinued operations
of $16,020.

                                       34
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Significant components of deferred tax assets and liabilities of the Company are
as follows:

                                                     December 31,   December 31,
                                                         2001           2000
                                                     ------------   ------------

Current
-------
Deferred tax assets:
  Allowance for doubtful accounts .................    $   609        $    514
  Accrued vacation ................................        138             401
  Accrued liabilities .............................      2,254           1,064
  Other ...........................................        (40)             --
Valuation allowance ...............................     (2,948)           (544)
                                                       -------        --------
     Net current deferred tax assets ..............         13           1,435
Non-current
Deferred tax assets:
  Net operating loss carry forwards ...............      6,926           1,165
  Goodwill ........................................      3,225           7,209
  Other ...........................................        144              --

Valuation allowance ...............................    (10,295)         (8,374)
                                                       -------        --------
     Net non-current deferred tax assets ..........         --              --

Deferred tax liabilities:
   Cash to accrual ................................         --              (8)
   Capital lease ..................................         --            (921)
   Other ..........................................        (13)           (506)
                                                       -------        --------
     Total deferred tax liabilities ...............        (13)         (1,435)
                                                       -------        --------
     Net deferred taxes ...........................    $    --        $     --
                                                       =======        ========

During the year ended March 31, 2000, the Company decided to dispose of its IT
staff augmentation business and recorded a deferred tax asset for $7,190 on the
books of its discontinued operations (see Note 12). Upon the ultimate sale of
the majority of these operations during the nine months ended December 31, 2000,
the Company reclassified this deferred tax asset to continuing operations.
During the year ended December 31, 2001, the Company utilized a portion of its
net operating losses in a carryback claim, thus resulting in a current benefit.
At December 31, 2001, the Company has fully reserved for all net deferred tax
assets generated from continuing operations, including net operating losses, due
to management's uncertainly to their realizability. The Company will continue to
assess the adequacy of and need for the valuation allowance and to the extent it
is determined that such allowance is no longer required, the tax benefit of the
remaining net deferred tax assets will be recognized in the future. The Company
had approximately $20,000 of net operating losses carryforwards for U.S. federal
and state income tax purposes that will begin expiring in the 2021 tax year.

In the first quarter of 2002, Congress approved the Job Creation and Worker
Assistance Act of 2002 (the Act) allowing net operating losses for the Company's
fiscal tax year ending March 31, 2002 to be carried back five years. In
accordance with SFAS No. 109, the effect of this change in tax law is not
reflected in the December 31, 2001 financial statements as changes in tax law
must be reflected in the period of enactment. Management expects that its fiscal
year 2001 net operating losses reserved for above will become fully realizable
during the first quarter of 2002 as a result of the enactment of the Act.

                                       35
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

The Company's effective income tax rate for its continuing operations varied
from the U.S. federal statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                           Year Ended     Nine Months Ended   Year Ended
                                                           December 31,      December 31,      March 31,
                                                              2001               2000            2000
                                                          -------------   -----------------   ----------
<S>                                                          <C>                <C>             <C>
U.S. federal statutory rate .........................        (34.0%)            (34.0%)         (34.0%)
State income taxes, net of federal benefit ..........         (4.9)              (2.0)           (2.0)
Tax benefit from net operating loss carry back ......         30.0                 --              --
Non-deductible amortization .........................         (9.3)              15.0              --
Deferred taxes not previously benefited .............         24.6                 --              --
Change in valuation allowance .......................        (20.9)               4.9              --
Increase in tax reserve .............................         (9.0)                --              --
Other ...............................................         (1.0)               1.6             1.0
                                                             -----               ----            ----
     Effective tax rate .............................        (24.5%)            (14.5%)         (35.0%)
                                                             =====              =====           =====
</TABLE>

Note 12 - Discontinued Operations

Prior to March 31, 2000, the Company entered into a plan to divest its IT staff
augmentation business. The following financial data reflects the net assets at
December 31, 2001 and 2000, and the summary of operating results for the year
ended December 31, 2001, the nine months ended December 31, 2000, and the year
ended March 31, 2000 for these discontinued operations.

Net Assets of Discontinued Operations:

<TABLE>
<CAPTION>
                                                                         December 31,   December 31,
                                                                            2001            2000
                                                                         ------------   ------------
<S>                                                                           <C>         <C>
Assets
Accounts receivable, including unbilled accounts of $0 and $375 ......        $--         $4,095
Prepaid expenses and other ...........................................         --             52
Property and equipment, net of accumulated depreciation of $0 and $286         --            296
                                                                              ---         ------
          Total assets ...............................................         --          4,443
                                                                              ---         ------
Liabilities
Accounts payable .....................................................         --            293
Accrued compensation .................................................         --          1,348
Other current liabilities ............................................         --          2,802
                                                                              ---         ------
                   Total liabilities .................................         --          4,443
                                                                              ---         ------
Net assets of discontinued operations ................................        $--         $   --
                                                                              ===         ======
</TABLE>

                                       36
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Summary of Operating Results of Discontinued Operations:

<TABLE>
<CAPTION>
                                                     Year Ended     Nine Months Ended   Year Ended
                                                     December 31,      December 31,      March 31,
                                                        2001              2000             2000
                                                     ------------   -----------------   ----------
<S>                                                    <C>              <C>              <C>
Revenues .........................................     $3,453           $69,528          $233,278
Cost of services .................................      2,692            51,464           174,289
                                                       ------           -------          --------
  Gross profit ...................................        761            18,064            58,989
Impairment of long-lived assets ..................         --                --            20,000
Restructuring charge .............................         --              (790)            4,920
Selling, general and administrative expenses .....        793            13,511            46,182
Depreciation and amortization of goodwill ........         --               916             3,293
                                                       ------           -------          --------
  Operating income (loss) ........................        (32)            4,427           (15,406)
Other income .....................................         --                18                37
                                                       ------           -------          --------
Income (loss) before provision for income taxes...        (32)            4,445           (15,369)
Provision (benefit) for income taxes .............         --             1,556            (5,379)
                                                       ------           -------          --------
Income (loss) from discontinued operations .......     $  (32)          $ 2,889          $ (9,990)
                                                       ======           =======          ========
</TABLE>

On June 30, 2000, the Company sold the majority of its IT staff augmentation
business for $116,495 and the assumption of certain liabilities totaling
approximately $10,000. The Company agreed to assist the acquiring company for up
to one year following the close of the sale, which included maintaining certain
computer systems. The Company also took responsibility and has reserves for
certain aged receivables greater than 90 days.

On July 14, 2000, the Company sold its staff augmentation operations in Orlando
for a cash payment of $650 and approximately $385 of assumed liabilities. The
Company has written down the remaining net assets related to this sale,
including goodwill, to zero during the quarter ended June 30, 2000.

On October 31, 2000, the Company sold its international IT staff augmentation
business for a secured promissory note of $4,459 bearing interest at the prime
rate of interest, plus one percent and payable over five years. Management has
written down the net assets related to this operation, including goodwill, to
zero during the quarter ended June 30, 2000 based on the preliminary estimate of
the entity's net realizable value prior to the sale.

The net gain on the disposal of the IT staff augmentation businesses was $9,963
for the nine months ended December 31, 2000.

During the first nine months of 2001, the Company held one remaining component
in discontinued operations. During the fourth quarter, the Company abandoned its
plan to divest of this operation and has consequently closed this business.
Subsequent to the closure of this business, the Company continues to service any
residual client contracts and has classified the financial results related to
these contracts in continuing operations.

In connection with accounting for the sale of the discontinued operations the
Company accrued costs related to the divestiture program including expenses of
the sale, estimated closure costs and the write-down of operating assets to
zero. A summary of the originally accrued liabilities and activities through
December 31, 2001 is as follows. The balance of divestiture accrued liabilities
is included in obligations related to acquired/sold businesses.

                                       37
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                              Divestiture
                                                                                           Accrued Liabilities
                                                                                           -------------------
<S>                                                                                             <C>
Accrued liabilities established upon recording the sale of the majority of the IT staff
augmentation business .................................................................         $ 5,084
Change in book value of discontinued operations through December 31, 2000 .............            (676)
Expenses paid out related to divestiture ..............................................          (2,908)
                                                                                                -------
Balance, December 31, 2000 ............................................................           1,500
Change in book value of discontinued operations through December 31, 2001 .............           1,771
Adjustment of note receivable from acquirer of discontinued operation .................            (400)
Expenses paid out related to divestiture ..............................................            (743)
                                                                                                -------
Balance, December 31, 2001 ............................................................         $ 2,128
                                                                                                =======
</TABLE>

Note 13 - Lease Commitments

Cotelligent leases various office space and certain equipment under
noncancelable lease agreements which expire at various dates. Future minimum
rental payments under such leases at December 31, 2001 for the Company's
continuing operations are as follows.

                                                                Operating Leases
                                                                ----------------
2002 .........................................................      $ 2,991
2003 .........................................................        2,172
2004 .........................................................        1,691
2005 .........................................................        1,105
2006 .........................................................          613
Thereafter ...................................................          150
                                                                    -------
Total minimum lease payments .................................        8,722
Less: Sublease payment due Cotelligent .......................       (2,295)
                                                                    -------
Net minimum lease payments ...................................      $ 6,427
                                                                    =======

Rental expense under these leases for the year ended December 31, 2001, the nine
months ended December 31, 2000 and the year ended March 31, 2000 was $2,601,
$3,061 and $3,126 respectively.

Note 14 - Employee Benefit Plans

Long-term Incentive Plan

The Company maintains the 1998 Long-Term Incentive Plan (the "1998 Plan") and
the 2000 Long-Term Incentive Plan (the "2000 Plan"). The 1998 Plan was adopted
as a replacement to the Company's 1995 Long-Term Incentive Plan (the "1995
Plan"). No further awards may be granted under the 1995 Plan, although awards
granted prior to the adoption of the 1998 Plan remain outstanding under the 1995
Plan in accordance with their terms. The 2000 Plan is similar to the 1998 Plan,
except that (i) awards under the 2000 Plan are to be made primarily to employees
who are not officers or directors, (ii) the 2000 Plan does not contain a limit
as to the number of shares that may be subject to outstanding awards granted
either individually or in the aggregate (whereas the 1998 Plan contains 750,000
per individual annual limit, and aggregate limit of 18% of total outstanding
shares), and (iii) incentive stock options (ISOs) cannot be granted under the
2000 Plan. Of the non-qualified options granted to date, a majority are
generally exercisable beginning one year from the date of the grant in
cumulative yearly amounts of 25% to 33% of the shares under option and all
expire ten years from the date of the grant. Under the provisions of the plans,
stock-based awards are granted at terms and prices determined by the Long-Term
Incentive Plan Committee as defined in each plan.

                                       38
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

A summary of option transactions is described in the table below. All options
described below are non-qualified and were granted with exercise prices no less
than the fair market value of the underlying stock on the date of the grant,
except for options issued and exchanged on January 4, 1999 in connection with
one of the Company's acquisitions. The difference between the grant price and
the market value of these options was recorded as purchase price.

<TABLE>
<CAPTION>
                                                                Weighted
                                                Option Price     Average
                                  Number of      Range per      Exercise     Expiration
                                   Shares          Share          Price        Date
                                 ----------    -------------    --------    -----------
<S>                              <C>           <C>               <C>        <C>
Outstanding at March 31, 1999     2,574,892    $1.54 -$29.00     $16.16     2006 - 2009
      Granted ...............       341,425    $4.00 - $6.13     $ 5.02     2006 - 2010
      Exercised .............       (45,808)   $1.54 - $9.00     $ 2.60     2006 - 2009
      Cancelled .............      (980,216)   $1.54 -$29.00     $17.09     2006 - 2010
                                 ----------    -------------     ------     -----------
Outstanding at March 31, 2000     1,890,293    $1.54 -$29.00     $13.99            2010
      Granted ...............     1,459,965    $2.56 -$ 6.69     $ 4.25            2010
      Exercised .............          (900)   $        1.54     $ 1.54            2009
      Cancelled .............    (1,150,642)   $3.44 -$29.00     $10.32     2006 - 2010
                                 ----------    -------------     ------     -----------
Outstanding at Dec. 31, 2000      2,198,716    $1.54 -$29.00     $ 9.37     2006 - 2010
      Granted ...............     5,097,732    $0.14 -$ 1.13     $ 0.23            2011
      Exercised .............            --               --         --              --
      Cancelled .............    (2,215,994)   $0.17 -$29.00     $ 9.02     2006 - 2011
                                 ----------    -------------     ------     -----------
Outstanding at Dec. 31, 2001      5,080,454    $0.14 -$27.50     $ 0.35     2006 - 2011
</TABLE>

On March 9, 2001, the Company notified all option holders under the Long-Term
Incentive Plan of a stock option exchange program. The exchange program was
developed as a way to bring the option exercise prices back in line with the
market price for the Company's Common Stock. Completely voluntary on the part of
the option holder, the program allows the option holder to exchange existing
stock option grants for a new option grant of the same number of options at an
exercise price equal to the fair value of the Company's Common Stock as of the
date of grant, September 21, 2001. The vesting schedule was not interrupted as a
result of the exchange program. The number of options cancelled in the year
ended December 31, 2001 include 1,399,638 options surrendered and cancelled on
March 16, 2001 in order to participate in the option exchange program. These
options surrendered had an option price range per share of $0.25-$23.06 and a
weighted average exercise price per share of $12.59. The number of options
issued in the year ended December 31, 2001 include 1,169,446 new options granted
on September 21, 2001 at $0.25 per share as part of the option exchange program.

The following table summarizes information concerning outstanding and
exercisable options at December 31, 2001:

<TABLE>
<CAPTION>
                                Weighted
                                 Average     Exercise
                  Number of     Remaining    Weighted   Number of       Weighted
   Range of       Options      Contractual   Average     Options        Average
Exercise Price   Outstanding        Life      Price     Exercisable   Exercise Price
--------------   -----------   -----------   --------   -----------   --------------
<S>              <C>              <C>         <C>        <C>              <C>
$  0.14-$0.25    4,591,457        9.77        $ 0.19     1,083,612        $ 0.24
$ 0.30-$16.25      485,865        8.90        $ 1.77       105,495        $ 2.65
$17.53-$27.25        3,132        6.20        $19.84         2,599        $19.76
-------------    ---------        ----        ------     ---------        ------
$ 0.14-$27.25    5,080,454        9.69        $ 0.35     1,191,706        $ 0.50
=============    =========        ====        ======     =========        ======
</TABLE>

Exercisable options at December 31, 2001, December 31, 2000, and March 31, 2000
were 1,191,706, 1,004,512, and 943,571 at exercise prices between $0.14 and
$29.00, and weighted average exercise prices of $0.50, $13.72, and $15.79,
respectively.

                                       39
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," and the Company continues to apply the provisions of Accounting
Principals Board ("APB") Opinion No. 25 and FASB Interpretation No. 44 in
accounting for its employee stock option plans. The fair value of these options
was estimated at the date of grant using a Black-Scholes option pricing
("Black-Scholes") model with the following weighted average assumptions for the
year ended December 31, 2001, the nine months ended December 31, 2000 and the
year ended March 31, 2000, respectively: (1) risk-free interest rates of 4.67%,
4.77%, and 6.04%, (2) a dividend yield of 0%, (3) volatility factors of the
expected market price of the Company's common stock of 193%, 106%, and 89%, and
(4) a weighted average expected life of 4.76, 4.61 years and 4.8 years. The
weighted average fair values of options granted during the year ended December
31, 2001, the nine months ended December 31, 2000, and the year ended March 31,
2000 were $0.23, $2.74, and $3.62 per share, respectively.

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

For purposes of pro forma disclosure, the estimated fair value of options is
amortized to expense over the options' vesting period. If the Company had
elected to recognize compensation expense for options granted during the year
ended December 31, 2001, the nine months ended December 31, 2000, and the year
ended March 31, 2000 based on the fair value as described in SFAS No. 123, net
loss and earnings per share would have been changed to the pro forma amounts
indicated below.

<TABLE>
<CAPTION>
                                         Year Ended        Nine Months Ended
                                        December 31,          December 31,      Year Ended March 31,
                                            2001                  2000                  2000
                                    -------------------   -------------------   --------------------
                                       As        Pro         As        Pro         As         Pro
                                    Reported    Forma     Reported    Forma     Reported     Forma
                                    --------   --------   --------   --------   --------   ---------
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>
Loss from continuing operations     $(15,635)  $(15,869)  $(55,036)  $(61,166)  $ (8,653)  $(12,771)
Net loss                            $(15,667)  $(15,901)  $(42,184)  $(48,314)  $(18,643)  $(22,761)
Earnings (loss) per share:
    Basic --
        Income (loss) from
            continuing operations      (1.04)     (1.05)     (3.61)     (4.02)     (0.60)     (0.89)
        Net income (loss)              (1.04)     (1.05)     (2.77)     (3.17)     (1.30)     (1.59)
    Diluted --
        Income (loss) from
            continuing operations      (1.04)     (1.05)     (3.61)     (4.02)     (0.60)     (0.89)
    Net income (loss)                  (1.04)     (1.05)     (2.77)     (3.17)     (1.30)     (1.59)
</TABLE>

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan (the "ESPP") allows eligible
employees to purchase shares of the Company's Common Stock at a price equal to
85 % of the lower of the closing market price on the first or last trading day
of the ESPP's quarter. A total of 950,000 shares of Common Stock have been
reserved for issuance under the ESPP. During the year ended December 31, 2001,
the nine months ended December 31, 2000, and the year ended March 31, 2000,
employees purchased 215,127, 101,719 and 318,802 shares for aggregate proceeds
to the Company of $95, $395 and $1,251, respectively.

                                       40
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

On February 1, 2002, the Company terminated the Employee Stock Purchase Plan
(ESPP). Because the number of employees in the Company had decreased
significantly over the prior two fiscal years, the administrative costs of the
plan were out of line with the remaining number of active participants. The
Company terminated the plan as a means to streamline its operating expenses
going forward.

401(k) Plan

The Company sponsors the Cotelligent, Inc. 401(k) Retirement Saving Plan (the
"401(k) Plan") for the benefit of all employees upon date of hire. The 401(k)
Plan is funded by employee payroll deductions and a matching program whereby the
Company contributes 25% of an employee's first 4% of salary deferral to the
401(k) Plan. Matching contributions vest over a four-year period. The Company
contributed $109, $152 and $503, respectively, in connection with the matching
program during the year ended December 31, 2001, the nine months ended December
31, 2000, and the year ended March 31, 2000.

Leveraged Stock Purchase Plan

In 1999, the stockholders approved the Cotelligent, Inc. 1999 Leveraged Stock
Purchase Plan (the "LSPP") which authorizes the purchase of shares of Common
Stock by eligible employees who are selected by the Compensation Committee of
the Board of Directors (the "Committee") to participate in the LSPP on terms and
conditions determined by the Committee.

Through December 31, 2001, 1,691,842 shares are outstanding under the LSPP
resulting in notes receivable from stockholders for $6,193 which is included as
a component of stockholders' equity. The notes receivable (1) include varying
rates of interest; (2) are secured by the pledge of Cotelligent stock issued;
(3) are full recourse as to the employee, except that in the case of death,
disability, termination by the Company without cause or a change of control of
the Company, where recourse against the employees is limited to the pledged
stock; and (4) have a term of five years from date of issuance, provided that if
the stock is sold, the loan shall be prepaid, and if the stock is not sold, the
loan may not be prepaid. The stock issued under the LSPP is restricted from sale
in the open market for a period of two years from the date of issuance,
provided, however, that in the case of death, disability, termination by the
Company without cause or change of control of the Company, the stock may be sold
and the proceeds used to repay the loan.

Note 15 - Stockholders' Equity

Preferred Stock

The Company has authorized 500,000 shares of one class of $0.01 par value
Preferred Stock. The Board of Directors has authority, without further vote or
action by stockholders, to issue the shares, fix the number of shares and change
the number of shares constituting any 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 (and whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), a redemption
price or prices, conversion rights and liquidation preferences of the shares
constituting any class or series of the Preferred Stock. No Preferred Stock was
outstanding at December 31, 2001 or 2000. The Company has no current plans to
issue any shares of Preferred Stock.

Common Stock

The Company has authorized 100,000,000 shares of one class of $0.01 par value
Common Stock. The holders of Common Stock are entitled to one vote for each
share on all matters voted upon by stockholders, including the election of the
directors. At December 31, 2001 and 2000, there were respectively 15,514,757 and
15,349,630 shares of Common Stock outstanding. In May 1998, the Company
registered 4 million shares of its Common Stock to be used in connection with
merger and acquisition activities. The Company repurchased 664,600 and 238,400
shares of its Common Stock during the year ended December 31, 2001 and the
fiscal year ended March 31, 2000, respectively. In addition, during the fiscal
year ended March 31, 2000, the Company negotiated the return of 469,209 shares
of Common Stock from the original seller of its Orlando operations pursuant to
terms in the original purchase agreement.

                                       41
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Anti-takeover Provisions

The Company has a stockholder rights plan in effect (the "Rights Plan"). Under
the terms of the Rights Plan, the holders of the Common Stock received one
preferred share purchase right (each, a "Right") as a dividend for each share of
Common Stock held as of the close of business on September 24, 1997. Each Right
entitles the holder to buy 1/10,000 of a share of Series A Junior Preferred
Stock of the Company at an exercise price of $90.00. Further, each Right gives
the holder the right to buy Common Stock of the Company having twice the value
of the exercise price of the Rights if a person or group acquires beneficial
ownership of 20% or more of the Common Stock or commences a tender or exchange
offer that would result in such a person or group owning 20% or more of the
Common Stock. In addition, the Board of Directors of the Company is empowered to
issue up to 500,000 shares of Preferred Stock, and to determine the price,
rights, preferences and privileges of such shares, without any further
stockholder action. The existence of the Rights Plan and this "blank check"
preferred stock may have the effect of delaying, discouraging, inhibiting,
preventing or rendering more difficult an attempt to obtain control of the
Company by means of a tender offer, merger, proxy contest or otherwise. In
addition, this "blank check" preferred stock, or any issuance thereof, may have
an adverse effect on the market price of the Common Stock. The Company's
Certificate of Incorporation provides for a "staggered" Board of Directors,
which may also have the effect of inhibiting a change of control of the Company
and may have an adverse effect on the market price of the Common Stock.

Note 16 - Earnings Per Share
Earnings per share is as follows:

                                                       For The Year Ended
                                                        December 31, 2001
                                               ---------------------------------
                                                                       Per Share
                                                Income      Shares      Amount
                                               --------   ----------   ---------
Basic/diluted earnings (loss) per share-
Loss from continuing operations                $(15,635)  15,075,546    $(1.04)
Income from discontinued operations                 (32)  15,075,546     (0.00)
                                               --------   ----------    ------
Net loss applicable to common stockholders     $(15,667)  15,075,546    $(1.04)

The effect of options issued to directors and employees has not been considered
in the diluted earnings per share calculation due to the loss position of the
Company's continuing operations for the year ended December 31, 2001. As such,
there is no difference between the basic and diluted loss per share
calculations.

                                                   For The Nine Months Ended
                                                       December 31, 2000
                                               ---------------------------------
                                                                       Per Share
                                                Income       Shares     Amount
                                               --------   ----------   ---------
Basic/diluted earnings (loss) per share-
Loss from continuing operations                $(55,036)  15,230,969    $(3.61)
Income from discontinued operations              12,852   15,230,969      0.84
                                               --------   ----------    ------
Net loss applicable to common stockholders     $(42,184)  15,230,969    $(2.77)

The effect of options issued to directors and employees has not been considered
in the diluted earnings per share calculation due to the loss position of the
Company's continuing operations for the nine months ended December 31, 2000. As
such, there is no difference between the basic and diluted loss per share
calculations.

                                       42
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

                                                      For The Year Ended
                                                        March 31, 2000
                                              ----------------------------------
                                                                       Per Share
                                               Income       Shares      Amount
                                              --------    ----------   --------
Basic/diluted earnings (loss) per share-
Loss from continuing operations               $ (8,653)   14,298,693    $(0.60)
Income from discontinued operations             (9,990)   14,298,693    (0.70)
                                              --------    ----------    -----
Net loss applicable to common stockholders    $(18,643)   14,298,693    $(1.30)

The effect of options issued to directors and employees has not been considered
in the diluted earnings per share calculation due to the loss position of the
Company's continuing operations for the year ended March 31, 2000. As such,
there is no difference between the basic and diluted loss per share
calculations.

Options to purchase common shares of 5,080,454, 2,198,716, and 1,544,843 were
excluded from the computation of diluted earnings per share for the twelve
months ended December 31, 2001, the nine months ended December 31, 2000 and for
the fiscal year ended March 31, 2000, respectively, as the options' exercise
price was greater than the market price of the common shares for the respective
periods.

Note 17 - Commitments and Contingencies

Employment Agreements

The executive officers have entered into employment agreements with the Company
which contain provisions for compensation upon termination without cause or
changes in control. Pursuant to such employment agreements, each such officer is
eligible to earn bonus compensation payable out of a bonus pool determined by
the Board of Directors or its Compensation Committee. Bonuses will be determined
by measuring, among other objective and subjective measures, such officer's
performance, the performance of the local operation for which such officer has
primary responsibility and the Company's performance against targets.

Loans to White Horse Interactive

The Company has agreed to advance White Horse Interactive up to $70 for
short-term working capital purposes. At December 31, 2001, no advances had been
made under this agreement.

Legal Matters

The Company is involved in various legal matters in the normal course of
business. In the opinion of management, these matters are not anticipated to
have a material adverse effect on the financial position or results of
operations or cash flows of the Company.

Note 18 - Segment Information

During the year ended March 31, 2000, the Company streamlined its operations
into two operating segments, Professional Services, also known as the IT staff
augmentation business, and Technology Solutions. The Company subsequently
discontinued the IT staff augmentation business. Accordingly, assets,
liabilities, results of operations and cash flows have been segregated and
reported as discontinued operations for all periods presented and previously
reported results have been restated (see Note 12). Within the Technology
Solutions segment, the Company continues to provide licensed software,
consulting services including custom application software development and
outsourcing solutions, solutions in conjunction with national partnerships with
leading enterprise application software companies, network design, intranet and
internet application design and development, hosting and support service, and IT
Education. These services can either be provided discretely, or bundled together
with the Company's software offerings that result in a total technology
solution. Management has considered the requirements of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", and has
determined that the Company has one continuing operating segment; therefore, no
additional disclosure has been provided.

                                       43
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

Note 19 - Quarterly Financial Data (Unaudited)

The following is quarterly data for the periods presented on the statement of
operations. In addition, quarterly data for the nine month period ended December
31, 1999 is presented for comparative purposes to the nine month period ended
December 31, 2000.

<TABLE>
<CAPTION>
                                                           For the Year Ended December 31, 2001
                                                  -----------------------------------------------------
                                                     First        Second         Third        Fourth
                                                    Quarter       Quarter       Quarter       Quarter
                                                  -----------   -----------   -----------   -----------
<S>                                               <C>           <C>           <C>           <C>
Revenues ......................................   $    16,022   $    12,073   $    10,187   $     7,619
Gross profit ..................................         4,740         3,017         3,152         3,016
Income (loss) from continuing operations ......        (4,265)       (6,017)       (7,905)        2,552
Income (loss) from discontinued operations ....            (6)           23           (49)           --
Net income (loss) .............................        (4,271)       (5,994)       (7,954)        2,552
Earnings per share:
  Basic and diluted
  Income (loss) from continuing operations ....   $     (0.28)  $     (0.39)  $     (0.54)  $      0.17
  Income (loss) from discontinued operations            (0.00)         0.00          0.00          0.00
                                                  -----------   -----------   -----------   -----------
Net income (loss) .............................   $     (0.28)  $     (0.39)  $     (0.54)  $      0.17
                                                  ===========   ===========   ===========   ===========
Weighted average shares:
     Basic and diluted ........................    15,349,060    15,273,716    14,824,310    14,852,326
                                                  ===========   ===========   ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                    For the Nine Months Ended December 31, 2000
                                                   ----------------------------------------------
                                                   First Quarter   Second Quarter   Third Quarter
                                                   -------------   --------------   -------------
<S>                                                 <C>              <C>             <C>
Revenues ......................................     $    23,753      $    22,475     $    20,064
Gross profit ..................................           7,253            7,571           6,584
Income (loss) from continuing operations ......          (5,130)          (2,856)        (47,050)
Income (loss) from discontinued operations ....           6,011              148           6,693
Net income (loss) .............................             881           (2,708)        (40,357)
Earnings per share:
  Basic -
  Income (loss) from continuing operations ....     $     (0.34)     $     (0.19)    $     (3.07)
  Income (loss) from discontinued operations ..            0.40             0.01            0.44
                                                    -----------      -----------     -----------
Net income (loss) .............................     $      0.06      $     (0.18)    $     (2.63)
                                                    ===========      ===========     ===========
  Diluted -
  Income (loss) from continuing operations ....     $     (0.34)     $     (0.19)    $     (3.07)
  Income (loss) from discontinued operations ..            0.40             0.01            0.44
                                                    -----------      -----------     -----------
     Net income (loss) ........................     $      0.06      $     (0.18)    $     (2.63)
                                                    ===========      ===========     ===========
Weighted average shares:
     Basic ....................................      15,123,639       15,235,827      15,332,273
                                                    ===========      ===========     ===========
     Diluted ..................................      15,124,960       15,235,827      15,332,273
                                                    ===========      ===========     ===========
</TABLE>

                                       44
<PAGE>

                       COTELLIGENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                   For the Nine Months Ended December 31, 1999
                                                  ----------------------------------------------
                                                  First Quarter   Second Quarter   Third Quarter
                                                  -------------   --------------   -------------
<S>                                                <C>             <C>              <C>
Revenues ......................................    $    26,806     $    26,162      $    25,296
Gross profit ..................................          9,750           8,945            8,311
Income (loss) from continuing operations ......           (940)         (1,672)          (2,753)
Income (loss) from discontinued operations ....        (15,394)          1,751            1,409
Net income (loss) .............................        (16,334)             79           (1,344)
Earnings per share:
  Basic -
  Income (loss) from continuing operations ....    $     (0.07)    $     (0.12)     $     (0.18)
  Income (loss) from discontinued operations ..          (1.14)           0.13             0.09
                                                   -----------     -----------      -----------
Net income (loss) .............................    $     (1.21)    $      0.01      $     (0.09)
                                                   ===========     ===========      ===========
  Diluted -
  Income (loss) from continuing operations ....    $     (0.07)    $     (0.12)     $     (0.18)
  Income (loss) from discontinued operations ..          (1.14)           0.13             0.09
                                                   -----------     -----------      -----------
     Net income (loss) ........................    $     (1.21)    $      0.01      $     (0.09)
                                                   ===========     ===========      ===========
Weighted average shares:
     Basic ....................................     13,461,007      13,565,326       15,167,742
                                                   ===========     ===========      ===========
     Diluted ..................................     13,461,007      13,573,264       15,167,742
                                                   ===========     ===========      ===========
</TABLE>

Note 20 - Related Party Transactions

The Company has notes receivable due from certain Officers and a former Officer
of the Company. At December 31, 2001, the notes included $735 due from the Chief
Executive Officer to cover margin calls, $549 due from the Chief Operating
Officer for relocation assistance ($83) and to cover margin calls ($466), and
$545 due from a former Chief Operating Officer to cover margin calls. The notes
are unsecured except for the notes due from the former Officer of the Company
are secured by the principal residence of that individual. The notes, although
due on demand, were issued with original due dates in 2001. The notes due from
the Chief Executive Officer and the Chief Operating Officer were extended by a
vote of the Compensation Committee of the Board of Directors on October 29, 2001
for three years to October 29, 2004. There is also acceleration on payment of
the Chief Executive Officer's and Chief Operating Officer's notes should the
Company's stock reach certain sustained target values.

Item 9. Changes in and Disagreements With Accountants on Accounting and
        ---------------------------------------------------------------
        Financial Disclosure.
        --------------------

None.

                                       45
<PAGE>

                                    PART III
                                    --------

Item 10 - Directors and Executive Officers of the Registrant.
          --------------------------------------------------

The information called for by Item 10 with respect to identification of
directors and executive officers of the Company is incorporated herein by
reference to the material under the captions "Election of Directors" and "Other
Executive Officers of the Company" in the Company's Proxy Statement for its 2002
Annual Meeting of Stockholders which will be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
(the "Proxy Statement").

Item 11 - Executive Compensation.
          ----------------------

The information called for by Item 11 with respect to executive compensation is
incorporated herein by reference to the material under the caption "Executive
Compensation" in the Proxy Statement.

Item 12 - Security Ownership of Certain Beneficial Owners and Management.
          --------------------------------------------------------------

The information called for by Item 12 with respect to security ownership of
certain beneficial owners and management is incorporated herein by reference to
the material under the caption "Security Ownership of Certain Beneficial Owners
and Management" in the Proxy Statement.

Item 13 - Certain Relationships and Related Transactions.
          ----------------------------------------------

The information called for by Item 13 with respect to certain relationships and
related transactions is incorporated herein by reference to the material under
the caption "Certain Transactions" in the Proxy Statement.

                                       46
<PAGE>

                                     PART IV
                                     -------

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
         ----------------------------------------------------------------

     (a)  The following documents are filed as a part of the Annual Report on
          Form 10-K:

<TABLE>
<CAPTION>
          1.   Financial Statements                                                    Form 10-K Page No.
               --------------------                                                    -----------------
<S>                                                                                          <C>
               Report of Independent Public Accountants                                       22

               Consolidated Balance Sheets at December 31, 2001 and 2000                      23

               Consolidated Statements of Operations for the year ended
                  December 31, 2001, the nine months ended December 31, 2000
                  and the year ended March 31, 2000                                           24

               Consolidated Statements of Stockholders' Equity for the year ended
                  December 31, 2001, the nine months ended December 31, 2000
                  and the year ended March 31, 2000                                           25

               Consolidated Statements of Cash Flows for the year ended
                  December 31, 2001, the nine months ended December 31, 2000
                  and the year ended March 31, 2000                                          26-27

               Notes to Consolidated Financial Statements                                    28-45
</TABLE>

     2.   The following is a list of all Exhibits filed as part of this report.
          Exhibit 11.1 is omitted because the information is included in Note 16
          to Consolidated Financial Statements, page 42.

EXHIBIT NO.                      DESCRIPTION
----------                       -----------

     3.1  Certificate of Incorporation of Cotelligent, Inc. (Exhibit 3.1 of the
          Company's Registration Statement on Form S-1 (File No. 33-80267),
          effective February 9, 1996, is hereby incorporated by reference)

     3.2  Amended and Restated By-Laws of Cotelligent, Inc. (Exhibit 4.1 of the
          Company's Registration Statement on Form S-8 (File No. 333-67589),
          filed with the SEC on November 19, 1998, is hereby incorporated by
          reference)

     3.3  Certificate of Amendment of Certificate of Incorporation of
          Cotelligent, Inc. (Exhibit 3.3 of the Company's Annual Report on Form
          10-K (File No. 0-27412), filed with the SEC on June 29, 1999, is
          hereby incorporated by reference)

     4.1  Form of certificate evidencing ownership of Common Stock of
          Cotelligent, Inc. (Exhibit 4.1 of the Company's Registration Statement
          on Form S-1 (File No. 33-80267), effective February 9, 1996, is hereby
          incorporated by reference)

     4.2  Rights Agreement, dated as of September 24, 1997, between Cotelligent,
          Inc. and BankBoston, N.A. (Exhibit 4.1 of the Company's Form 8-K (File
          No. 0-27412), filed with the SEC on September 24, 1997, is hereby
          incorporated by reference)

     10.1 Amended and Restated Employment Agreement, dated as of January 5,
          2000, between Cotelligent, Inc. and James R. Lavelle (Exhibit 10.1 of
          the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on July 14, 2000, is hereby incorporated by reference)*

     10.2 Amended and Restated Employment Agreement, dated as of January 25,
          2000, between Cotelligent, Inc. and Daniel E. Jackson (Exhibit 10.2 of
          the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on July 14, 2000, is hereby incorporated by reference)*

                                       47
<PAGE>

     10.3 Employment Agreement, dated as of December 19, 2000, between
          Cotelligent, Inc. and Curtis J. Parker *, **

     10.4 Long-Range Bonus Incentive Plan, effective as of November 18, 1999,
          among Cotelligent, Inc., James R. Lavelle and Daniel E. Jackson
          (Exhibit 10.6 of the Company's Annual Report on Form 10-K (File No.
          0-27412), filed with the SEC on July 14, 2000, is hereby incorporated
          by reference)*

     10.5 Cotelligent 1995 Long-Term Incentive Plan (Exhibit 10.9 of the
          Company's Registration Statement on Form S-1/A (File No. 33-80267),
          filed with the SEC on January 24, 1996, is hereby incorporated by
          reference)*

     10.6 Amended and Restated Senior Secured Credit Agreement, dated as of
          March 12, 1999, among Cotelligent, Inc., the Co-Borrowers named
          therein, the Banks named therein and BankBoston, N.A. (Exhibit 10.12
          of the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on June 29, 1999, is hereby incorporated by reference)

     10.7 Cotelligent 1998 Long-Term Incentive Plan (Exhibit 10.13 of the
          Company's Annual Report on Form 10-K (File No. 0-27412), filed with
          the SEC on June 29, 1999, is hereby incorporated by reference)*

     10.8 Cotelligent, Inc. 1999 Leveraged Stock Purchase Plan (Exhibit 2 of the
          Company's Schedule 13D (File No. 5-47567), filed with the SEC on
          January 31, 2000, is hereby incorporated by reference)*

     10.9 Forbearance and Reinstatement of Noncompetes Agreement, dated as of
          May 2, 2000, among Cotelligent USA, Inc., Cotelligent, Inc., E.W. &
          Associates, Inc., Thomas H. Edwards and Timothy M. Wooten (Exhibit
          10.1 of the Company's Registration Statement on Form S-3 (File No.
          333-37586), filed with the SEC on May 22, 2000, is hereby incorporated
          by reference)

     10.10 Securities Issuance Agreement, dated as of May 2, 2000, between
           Cotelligent, Inc. and E.W. & Associates, Inc. and/or its assigns
          (Exhibit 10.2 of the Company's Registration Statement on Form S-3
          (File No. 333-37586), filed with the SEC on May 22, 2000, is hereby
          incorporated by reference)

     10.11 Asset Purchase Agreement, dated as of June 14, 2000, by and among
          Cotelligent, Inc., Cotelligent U.S.A., Inc. and Comsys Information
          Technology Services, Inc. (Exhibit 10.3 of the Company's Registration
          Statement on Form S-3/A (File No. 333-37586), filed with the SEC on
          June 20, 2000, is hereby incorporated by reference)

     10.12 Settlement and Mutual Release, dated as of December 21, 2000, among
          Comsys Information Technology Services, Inc. and Cotelligent USA, Inc.
          (Exhibit 10.18 of the Company's Annual Report on Form 10-K (File No.
          0-27412), filed with the SEC on April 2, 2001 is hereby incorporated
          by reference)

     10.13 Cotelligent 2000 Long-Term Incentive Plan (Exhibit 10.19 of the
          Company's Annual Report on Form 10-K (File No. 0-27412), filed with
          the SEC on April 2, 2001 is hereby incorporated by reference)

     21.1 Subsidiaries of the registrant **

     23.1 Consent of Arthur Andersen LLP **

     24.1 Power of attorney as reflected on signatures page included herewith **

     99   Letter pursuant to temporary note 3T**

     (b)  Reports on Form 8-K
          Current Report on Form 8-K dated December 6, 2000, filed with the SEC
          on January 3, 2001

     *    Management contracts and compensatory plans or arrangements required
          to be filed as exhibits to this Form 10-K.

     **   Filed herewith.

                                       48
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California on the 29th day of March, 2002.

                                                   COTELLIGENT, INC.


                                                 By:/s/ James R. Lavelle
                                                    -------------------------
                                                    James R. Lavelle
                                                    Chief Executive Officer

                                POWER OF ATTORNEY

          Pursuant to the requirements of the Securities Exchange Act of 1934,
     this report has been signed below by the following persons on behalf of the
     registrant and in the capacities and on the dates indicated. Each person
     whose signature appears below hereby authorizes and constitutes James R.
     Lavelle, Daniel E. Jackson and Curtis J. Parker, and each of them singly,
     his true and lawful attorneys-in-fact with full power of substitution and
     resubstitution for him and in his name, place and stead, in any and all
     capacities (including his capacity as a director and/or officer of
     Cotelligent, Inc.) to sign and file any and all amendments to this report
     with all exhibits thereto, and other documents in connection therewith with
     the Securities and Exchange Commission, and he hereby ratifies and confirm
     as all that said attorneys-in-fact or any of them, or this or his
     substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<CAPTION>
             Signature                                        Capacity                                Date
     ---------------------------       ------------------------------------------------------    --------------
<S>                                    <C>                                                       <C>


     /s/ James R. Lavelle
     --------------------------
     James R. Lavelle                  Chairman of the Board of Directors, Director and Chief    March 29, 2002
                                       Executive Officer (Principal Executive Officer)


     /s/ Edward E. Faber
     --------------------------
      Edward E. Faber                  Vice Chairman of the Board of Directors                   March 29, 2002


     /s/ Daniel E. Jackson
     --------------------------
     Daniel E. Jackson                 President, Chief Operating Officer and Director           March 29, 2002


     /s/ Curtis J. Parker
     --------------------------
     Curtis J. Parker                  Executive Vice President, Chief Financial Officer         March 29, 2002
                                       (Principal Financial and Accounting Officer)


     /s/ Anthony M. Frank
     --------------------------
     Anthony M. Frank                  Director                                                  March 29, 2002


     /s/ Debra J. Richardson
     --------------------------
     Debra J. Richardson               Director                                                  March 29, 2002
</TABLE>

                                       49
<PAGE>

EXHIBIT NO.                      DESCRIPTION
----------                       -----------

     3.1  Certificate of Incorporation of Cotelligent, Inc. (Exhibit 3.1 of the
          Company's Registration Statement on Form S-1 (File No. 33-80267),
          effective February 9, 1996, is hereby incorporated by reference)

     3.2  Amended and Restated By-Laws of Cotelligent, Inc. (Exhibit 4.1 of the
          Company's Registration Statement on Form S-8 (File No. 333-67589),
          filed with the SEC on November 19, 1998, is hereby incorporated by
          reference)

     3.3  Certificate of Amendment of Certificate of Incorporation of
          Cotelligent, Inc. (Exhibit 3.3 of the Company's Annual Report on Form
          10-K (File No. 0-27412), filed with the SEC on June 29, 1999, is
          hereby incorporated by reference)

     4.1  Form of certificate evidencing ownership of Common Stock of
          Cotelligent, Inc. (Exhibit 4.1 of the Company's Registration Statement
          on Form S-1 (File No. 33-80267), effective February 9, 1996, is hereby
          incorporated by reference)

     4.2  Rights Agreement, dated as of September 24, 1997, between Cotelligent,
          Inc. and BankBoston, N.A. (Exhibit 4.1 of the Company's Form 8-K (File
          No. 0-27412), filed with the SEC on September 24, 1997, is hereby
          incorporated by reference)

     10.1 Amended and Restated Employment Agreement, dated as of January 5,
          2000, between Cotelligent, Inc. and James R. Lavelle (Exhibit 10.1 of
          the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on July 14, 2000, is hereby incorporated by reference)*

     10.2 Amended and Restated Employment Agreement, dated as of January 25,
          2000, between Cotelligent, Inc. and Daniel E. Jackson (Exhibit 10.2 of
          the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on July 14, 2000, is hereby incorporated by reference)*

     10.3 Employment Agreement, dated as of December 19, 2000, between
          Cotelligent, Inc. and Curtis J. Parker *, **

     10.4 Long-Range Bonus Incentive Plan, effective as of November 18, 1999,
          among Cotelligent, Inc., James R. Lavelle and Daniel E. Jackson
          (Exhibit 10.6 of the Company's Annual Report on Form 10-K (File No.
          0-27412), filed with the SEC on July 14, 2000, is hereby incorporated
          by reference)*

     10.5 Cotelligent 1995 Long-Term Incentive Plan (Exhibit 10.9 of the
          Company's Registration Statement on Form S-1/A (File No. 33-80267),
          filed with the SEC on January 24, 1996, is hereby incorporated by
          reference)*

     10.6 Amended and Restated Senior Secured Credit Agreement, dated as of
          March 12, 1999, among Cotelligent, Inc., the Co-Borrowers named
          therein, the Banks named therein and BankBoston, N.A. (Exhibit 10.12
          of the Company's Annual Report on Form 10-K (File No. 0-27412), filed
          with the SEC on June 29, 1999, is hereby incorporated by reference)

     10.7 Cotelligent 1998 Long-Term Incentive Plan (Exhibit 10.13 of the
          Company's Annual Report on Form 10-K (File No. 0-27412), filed with
          the SEC on June 29, 1999, is hereby incorporated by reference)*

     10.8 Cotelligent, Inc. 1999 Leveraged Stock Purchase Plan (Exhibit 2 of the
          Company's Schedule 13D (File No. 5-47567), filed with the SEC on
          January 31, 2000, is hereby incorporated by reference)*

     10.9 Forbearance and Reinstatement of Noncompetes Agreement, dated as of
          May 2, 2000, among Cotelligent USA, Inc., Cotelligent, Inc., E.W. &
          Associates, Inc., Thomas H. Edwards and Timothy M. Wooten (Exhibit
          10.1 of the Company's Registration Statement on Form S-3 (File No.
          333-37586), filed with the SEC on May 22, 2000, is hereby incorporated
          by reference)

     10.10 Securities Issuance Agreement, dated as of May 2, 2000, between
          Cotelligent, Inc. and E.W. & Associates, Inc. and/or its assigns
          (Exhibit 10.2 of the Company's Registration Statement on Form S-3
          (File No. 333-37586), filed with the SEC on May 22, 2000, is hereby
          incorporated by reference)

                                       50
<PAGE>

     10.11 Asset Purchase Agreement, dated as of June 14, 2000, by and among
          Cotelligent, Inc., Cotelligent U.S.A., Inc. and Comsys Information
          Technology Services, Inc. (Exhibit 10.3 of the Company's Registration
          Statement on Form S-3/A (File No. 333-37586), filed with the SEC on
          June 20, 2000, is hereby incorporated by reference)

     10.12 Settlement and Mutual Release, dated as of December 21, 2000, among
          Comsys Information Technology Services, Inc. and Cotelligent USA, Inc.
          (Exhibit 10.18 of the Company's Annual Report on Form 10-K (File No.
          0-27412), filed with the SEC on April 2, 2001 is hereby incorporated
          by reference)

     10.13 Cotelligent 2000 Long-Term Incentive Plan (Exhibit 10.19 of the
          Company's Annual Report on Form 10-K (File No. 0-27412), filed with
          the SEC on April 2, 2001 is hereby incorporated by reference)

     21.1 Subsidiaries of the registrant **

     23.1 Consent of Arthur Andersen LLP **

     24.1 Power of attorney as reflected on signatures page included herewith **

     99   Letter pursuant to temporary note 3T**

     (b)  Reports on Form 8-K Current Report on Form 8-K dated December 6, 2000,
          filed with the SEC on January 3, 2001

     *    Management contracts and compensatory plans or arrangements required
          to be filed as exhibits to this Form 10-K.

     **   Filed herewith.

                                       51