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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2002
[_] 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.
Delaware 94-3173918
(State of incorporation) (I.R.S. ID)
44 Montgomery Street, Suite 4050 San Francisco, California 94104
(415) 439-6400
(Former name, former address and former fiscal year, if changed since last
report)
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 ___________
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At May 10, 2002, there were 14,900,891 shares of common stock outstanding.
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COTELLIGENT, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2002
INDEX
Part I - Financial Information
Item 1. Financial Statements Page
----
Cotelligent, Inc.
Consolidated Balance Sheets at March 31, 2002 and December 31, 2001 3
Consolidated Statements of Operations for the Three Months Ended March 31, 2002 4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
2
Item 1. Financial Statements
COTELLIGENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March 31, December 31,
2002 2001
------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 23,110 $ 18,778
Refundable income taxes........................................... 225 7,008
Accounts receivable, including unbilled accounts of $992
And $1,627 and net of allowance for doubtful accounts
of $1,668 and $1,566, respectively........................ 2,937 4,660
Deferred tax assets.............................................. 7,413 13
Notes receivable from officers and stockholder................... 1,860 1,829
Current portion of note receivable from acquirer of
Discontinued operation.................................... 642 525
Prepaid expenses and other current assets........................ 960 1,022
-------------- ------------
Total current assets......................................... 37,147 33,835
Capitalized software costs, net...................................... 827 862
Property and equipment, net.......................................... 3,036 3,430
Note receivable from acquirer of discontinued operation.............. 3,352 3,508
Equity investment in alliance partner................................ 1,871 1,860
Other assets......................................................... 110 157
-------------- ------------
Total assets................................................. $ 46,343 $ 43,652
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................. $ 252 $ 350
Accounts payable................................................. 1,084 1,535
Accrued compensation and related payroll liabilities............. 1,930 2,217
Obligations related to acquired/sold businesses.................. 3,085 3,170
Restructuring liabilities........................................ 1,042 1,334
Other accrued liabilities........................................ 2,259 2,842
-------------- ------------
Total current liabilities.................................... 9,652 11,448
Long-term debt....................................................... 508 538
Deferred tax liabilities............................................. 13 13
Income tax reserves.................................................. 2,368 2,618
-------------- ------------
Total liabilities............................................ 12,541 14,617
-------------- ------------
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 Respectively
authorized, 15,545,491 and 15,514,757 shares
issued, respectively........................................... 155 155
Additional paid-in capital....................................... 86,891 86,888
Notes receivable from stockholders............................... (6,193) (6,193)
Retained deficit................................................. (46,551) (51,315)
Treasury Stock................................................... (500) (500)
-------------- ------------
Total stockholders' equity................................... 33,802 29,035
-------------- ------------
Total liabilities and stockholders' equity................... $ 46,343 $ 43,652
============== ============
The accompanying notes are an integral part of these consolidated financial
statements.
3
COTELLIGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended March 31,
--------------------------------
2002 2001
--------------------------------
Revenues...................................................................... $ 5,784 $ 16,596
Cost of services.............................................................. 3,803 11,856
------------- ------------
Gross profit.......................................................... 1,981 4,740
Research and development costs................................................ 219 -
Selling, general and administrative expenses.................................. 4,174 8,859
Depreciation and amortization of goodwill..................................... 400 676
------------- ------------
Operating loss................................................................ (2,812) (4,795)
Other income (expense):
Interest expense........................................................... (21) (1)
Interest income............................................................ 186 485
Other...................................................................... 11 46
------------- ------------
Total other income (expense)............................................. 176 530
------------- ------------
Loss from continuing operations before income taxes...................... (2,636) (4,265)
Income tax benefit....................................................... 7,400 -
------------- ------------
Income (loss) from continuing operations...................................... 4,764 (4,265)
Loss from discontinued operations net of income taxes Of $0................... - (6)
------------- ------------
Net income (loss).......................................................... $ 4,764 $ (4,271)
============= ============
Earnings (loss) per share:
Basic........................................................................ $ 0.32 $ (0.28)
============= ============
Diluted...................................................................... $ 0.31 $ (0.28)
============= ============
Weighted average number of shares outstanding
Basic 14,890,646 15,349,060
Diluted 15,556,747 15,349,060
The accompanying notes are an integral part of these consolidated financial
statements.
4
COTELLIGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
--------------------------------
2002 2001
---------- ----------
Cash flows from operating activities:
Net income (loss)..................................................... $ 4,764 $ (4,271)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Operating (income) loss from discontinued operations....... - 6
Equity (income) loss from investments...................... (11) (39)
Depreciation and amortization.............................. 435 676
Deferred income taxes, net................................. (7,400) -
Provision for doubtful accounts............................ 75 676
Changes in current assets and liabilities:
Accounts receivable, net............................. 1,648 5,896
Prepaid expenses and other current assets............ 31 (446)
Accounts payable and accrued expenses................ (1,613) (2,778)
Income taxes payable, refundable..................... 6,533 1
Changes in other assets.................................... 47 -
---------- ----------
Cash provided by (used for) operating activities....................... 4,509 (279)
Cash flows from investing activities:
Payments received on note from acquirer of discontinued operations.... 39 -
Purchases of property and equipment................................... (6) (161)
---------- ----------
Cash provided by (used for) investing activities...................... 33 (161)
Cash flows from financing activities:
Payments on capital lease obligations................................. - 15
Payments on long-term debt............................................ (128) -
Net proceeds on issuance of stock..................................... 3 148
---------- ----------
Cash provided by (used for) financing activities...................... (125) 163
Cash flows from discontinued operations:
Cash flow provided (used) by discontinued operations.................. (85) 377
---------- ----------
Net increase in cash....................................................... 4,332 100
Cash at beginning of period................................................ 18,778 26,500
---------- ----------
Cash at end of period...................................................... $ 23,110 $ 26,600
========== ==========
Supplemental disclosures of cash flow information:
Interest paid......................................................... $ 21 $ 1
Income taxes paid (refunded).......................................... $ (6,533) $ 20
The accompanying notes are an integral part of these consolidated financial
statements.
5
COTELLIGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
Note 1 - Business Organization and Basis of Presentation
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 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
The accompanying interim financial statements do not include all disclosures
included in the financial statements in Cotelligent's Annual Report on Form 10-K
for the year ended December 31, 2001 ("Form 10-K"), and therefore these
financial statements should be read in conjunction with the financial statements
included in Cotelligent's Form 10-K.
In the opinion of management, the interim financial statements filed as part of
this Quarterly Report on Form 10-Q reflect all adjustments necessary for a fair
presentation of the financial position and the results of operations and of cash
flows for the interim periods presented. Certain balances of the prior year
have been reclassified to conform to the current presentation.
Note 3 - Changes in Stockholders' Equity
Notes
Common Stock Additional Receivable Treasury Stock Total
------------------ Paid-In From Retained --------------- Stockholders'
Shares Amount Capital Stockholders Deficit Shares Amount Equity
------------------ ----------- -------------- ---------- ------------------- -------------
Balance at December 31, 2001.. 15,514,757 $155 $86,888 $(6,193) $(51,315) 644,600 $(500) $29,035
Issuance of Common Stock...... 30,734 - 3 - - 3
Net income.................... - - - - 4,764 4,764
------------------ ----------- -------------- ---------- ------------------- -------------
Balance at March 31, 2002..... 15,545,491 $155 $86,891 $(6,193) $(46,551) 644,600 $(500) $33,802
==================================================================================================
6
COTELLIGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
Note 4 - Discontinued Operations
The following financial data reflects a summary of operating results for the
Company's discontinued operations for the three months ended March 31, 2001.
Summary of Operating Results of Discontinued Operations:
Three Months Ended
March 31, 2001
--------------------
Revenues.......................................... $ 1,858
Cost of services.................................. 1,453
--------------------
Gross profit................................ 405
Selling, general and administrative expenses...... 411
Depreciation and amortization of goodwill......... -
--------------------
Operating loss ............................ (6)
--------------------
Other expense..................................... -
--------------------
Operating loss before provision for taxes......... (6)
Provision for income taxes........................ -
--------------------
Operating loss from discontinued operations....... $ (6)
====================
On June 30, 2000, the Company sold the majority of its IT staff augmentation
business and on July 14, 2000 and October 31, 2000 sold other components of the
IT staff augmentation business. During the quarter ended March 31, 2001, the
Company held one remaining component in discontinued operations. During the
fourth quarter of fiscal 2001, the Company abandoned its plan to divest of this
operation and consequently closed this business. Subsequent to the closure of
this business, the Company continued to service any residual client contracts
and has classified the financial results related to these contracts in
continuing operations.
Note 5 - Earnings (loss) Per Share
Earnings (loss) per share were as follows:
For the Three Months Ended March 31, 2002
----------------------------------------------------------------
Per Share
Income (Loss) Shares Amount
--------------------- ----------------- --------------
Basic earnings (loss) per share-
Income from continuing operations.................. 4,764 14,890,646 $0.32
Income from discontinued operations................ - 14,890,646 -
--------------------- ----------------- --------------
Net income available to common stockholders........ 4,764 14,890,646 $0.32
Diluted earnings (loss) per share-
Income from continuing operations.................. 4,764 15,556,747 $0.31
Income from discontinued operations................ - 15,556,747 -
--------------------- ----------------- --------------
Net income available to common stockholders........ 4,764 15,556,747 $0.31
Share amounts used in the diluted earnings per share calculation reflect the
effect of options issued to directors and employees.
For the Three Months Ended March 31, 2001
-------------------------------------------------------------------
Income (Loss) Shares Per Share
Amount
------------------------ ----------------- --------------
Basic and diluted earnings (loss) per share-
Loss from continuing operations................... $(4,265) 15,349,060 $(0.28)
Loss from discontinued operations................. (6) 15,349,060 -
------------------------ ----------------- --------------
Net loss available to common stockholders......... $(4,271) 15,349,060 $(0.28)
7
COTELLIGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(Unaudited)
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 quarter ended March 31, 2001. As such,
there is no difference between the basic and diluted loss per share calculation
for the quarter.
Note 6 - 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 charge 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.
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 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 a restructuring plan, which
resulted in a pre-tax restructuring charge of $4,200 during the nine months
ended December 31, 2000 and $3,373 during the nine months ended September 30,
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).
The following summarizes the activity and balances in each restructuring program
for the three months ended March 31, 2002:
June 1999 December 2000 September 2001
Restructuring Program Restructuring Program Restructuring Program Total
----------------------- ---------------------- ------------------------ --------
Facilities Facilities Facilities
Severance Closure Severance Closure Severance Closure
------------ ------------ ----------- ------------ ----------- ------------
Balance at December 31, 2001...... $ - $143 $ - $209 $ 25 $ 957 $1,334
Spending and adjustments.......... - (26) - 23 (25) (264) (292)
------------ ------------ ----------- ------------ ----------- ------------ -------
Balance at March 31, 2002......... $ - $117 $ - $232 $ - $ 693 $1,042
============ ============ =========== ============ =========== ============ =======
Note 7 - Income Taxes
On March 9, 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 was reflected in the March
31, 2002 financial statements as changes in tax law must be reflected in the
period of enactment. Consequently, the Company recorded a $7,400 tax benefit
during the quarter ended March 31, 2002, which reflects the release of a
valuation allowance against a deferred tax asset previously written down to zero
due to the uncertainty of its realization. The Company intends to apply for a
refund of taxes estimated to be $7,400, which it expects to receive late in
2002.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for statements of historical fact contained herein, any statements
contained in this report may be deemed to be forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. For example,
words such as "may," "will," "should," "estimates," "predicts," "potential,"
"continue," "strategy," "believes," "anticipates," "plans," "expects," "intends"
and similar expressions are intended to identify forward-looking statements.
All such forward-looking statements are based upon current expectations that
involve risks and uncertainties. Cotelligent's actual results and the timing of
certain events may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those discussed under "Risk
Factors" in Cotelligent's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, other filings made with the Securities and Exchange
Commission and Cotelligent's press release announcing earnings for the quarter
ended March 31, 2002, which was issued on April 30, 2002. The following
discussion is qualified in its entirety by, and should be read in conjunction
with, the more detailed information set forth in our financial statements and
the notes thereto included elsewhere in this filing. All forward-looking
statements included in this report are based upon information available to
Cotelligent as of the date thereof, and Cotelligent assumes no obligation to
update any of such forward-looking statements.
OVERVIEW
Cotelligent provides IT consulting and maintenance, support and hosting on
software products its licenses. These activities are provided under time and
materials billing arrangements or on a fixed-fee basis. For time and materials
billing arrangements, 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. For fixed-fee arrangements, work is
performed in line with established deliverables and revenue is calculated on a
percentage of completion basis. In addition, the Company has developed complete
mobile workforce management solutions for industries that have medium to large
transient sales, filed 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.
9
CONSOLIDATED RESULTS OF OPERATIONS
(In Thousands)
Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001
Revenues
Revenues decreased $10,812, or 65%, to $5,784 in the three months ended March
31, 2002 from $16,596 in the three months ended March 31, 2001. The decrease
was due to a general reduction in demand for its services due to softening in
the market coupled with a shift away from general IT consulting services towards
offering mobile workforce management and Web services solutions.
Gross Profit
Gross profit decreased $2,759, or 58%, to $1,981 in the three months ended March
31, 2002 from $4,740 in the three months ended March 31, 2001. The decrease was
due to lower revenues following a general reduction in demand for its services
due to softening in the market coupled with a shift away from general IT
consulting services towards offering mobile workforce management and Web
services solutions. The gross profit margin increased to 34% from 29%, due to
better pricing and a mix shift to higher margin projects, caused in part by the
end of some long-term, lower margin, legacy system development engagements.
Research and Development Costs
Research and development costs were $219 for the three months ended March 31,
2002. During the three months ended March 31, 2002, the Company created a
dedicated team of people solely focused on research and development activities
associated with mobile workforce management and Web services solutions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $4,685, or 53%, to $4,174
in the three months ended March 31, 2002 from $8,859 in the three months ended
March 31, 2001. The decrease was primarily due to reductions in operating staff
and associated spending in order to streamline operations in line with revenues.
Depreciation and Amortization
Depreciation and amortization decreased $276, or 41%, to $400 in the three
months ended March 31, 2002 from $676 in the three months ended March 31, 2001.
The decrease was due to the write-off of assets in connection with a
restructuring charge in the prior year together with a number of assets becoming
fully depreciated towards the end of 2001, resulting in less depreciation going
forward.
Other Income (Expense)
Other income (expense) primarily consists of interest income. Interest income
was $186 for the three months ended March 31, 2002 compared to interest income
of $485 for the three months ended March 31, 2001. The decrease in interest
income was due to lower cash and cash equivalents on hand during the three
months ended March 31, 2002 and lower interest rates available on cash
equivalents.
Income Tax Benefit
The income tax benefit of $7,400 for the quarter ended March 31, 2002 was the
result of the Job Creation and Worker Assistance Act of 2002, approved by
Congress on March 9, 2002, 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 was reflected
in the March 31, 2002 financial statements as changes in tax law must be
reflected in the period of enactment. The Company did not record an income tax
benefit for the three months ended March 31, 2001 due to the uncertainty of its
realization at the time.
Loss from Discontinued Operations
Discontinued operations is comprised of the Company's IT staff augmentation
business. During the quarter ended March 31, 2001, the Company held one
remaining component in discontinued operations which resulted in a loss from
discontinued operations of $6. During the fourth quarter of fiscal 2001, the
Company abandoned its plan to divest of this operation and consequently closed
this business. Subsequent to the closure of this business, the Company
continued to service any residual client contracts and has classified the
financial results related to these contracts in continuing operations.
10
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed itself principally through cash flows from operations,
periodic borrowing under its credit facilities, net proceeds from its public
offerings and net proceeds from the sale of its IT staff augmentation business.
The Company previously maintained a credit facility with a consortium of
banks under which it borrowed to fund working capital needs. On June 30, 2000,
the Company used a portion of the cash proceeds from the sale of its IT staff
augmentation business to pay off all obligations under the credit facility and
to pay existing earn-out obligations to sellers of an acquired business. Upon
settlement of all obligations under the credit facility, the credit facility was
terminated. Since June 30, 2000, the Company has not maintained a credit
facility.
Cash provided by operating activities was $4,509 for the three months ended
March 31, 2002 and the average cash balance during the quarter was $20,994. The
Company's primary sources of liquidity for the Company going forward include the
collection of accounts receivable and refundable federal and state income taxes
resulting from the carry-back of net operating losses. In addition, the Company
continues to utilize the cash proceeds generated from the sales of its IT staff
augmentation businesses. Total receivables were 46 days of quarterly revenues
at March 31, 2002 and 56 days at December 31, 2001. 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 $7,400.
The Company intends to apply for these additional tax refunds and expects to
receive an estimated $7,400 refund 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Cotelligent has invested its existing cash in highly liquid money market
accounts and does not use derivative financial instruments, derivative commodity
instruments or other market risk sensitive instruments, positions or
transactions. Accordingly, the Company believes that it is not subject to any
material risks arising from changes in interest rates, foreign currency exchange
rates, commodity prices, equity prices or other market changes that affect
market risk sensitive instruments. Cotelligent's policy is to invest its cash
in a manner that provides Cotelligent with the appropriate level of liquidity to
enable it to meet its current obligations, primarily accounts payable, capital
expenditures and payroll, recognizing that it does not currently have outside
bank funding available.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None
12
SIGNATURE
Pursuant to the requirements 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.
COTELLIGENT, INC.
Date: May 14, 2002 /s/ Curtis J. Parker
------------ ---------------------
Curtis J. Parker
Executive Vice President,
Chief Financial Officer and Treasurer
13