================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 11, 1996
(Date of Report)
COTELLIGENT GROUP, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The registrant hereby amends Form 8-K dated June 28, 1996 as set
forth in the pages attached hereto. The filing of this report occurs
within 60 days after the date of application for extension of time to
file.
DELAWARE 0-25372 94-3173918
(State or other (Commission File Number) (IRS Employer Identification No.)
jurisdiction of
incorporation)
101 California Street, Suite 2050
San Francisco, California 94111
(address of principal executive offices) (Zip Code)
(415) 439-6400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC. FORM 8-K/A
INDEX
<CAPTION>
Page
Item 7 - Financial Statements and Exhibits
COTELLIGENT GROUP, INC.
<S> <C>
Restated and Pro Forma Consolidated Statement of Operations for the Year Ended
March 31, 1996 (Unaudited).................................................................. 4
Restated Consolidated Statement of Operations for the Year Ended March 31, 1995 (Unaudited)..... 5
Restated Consolidated Statement of Operations for the Year Ended March 31, 1994 (Unaudited)...... 6
Notes to Restated and Pro Forma Consolidated Statements of Operations............................ 7
ESP SOFTWARE SERVICES, INC.
Report of Price Waterhouse LLP, Independent Accountants......................................... 8
Balance Sheet at December 31, 1995 and 1994 and March 31, 1996 (Unaudited)...................... 9
Statement of Operations for the Years Ended December 31, 1995 and 1994 and for the Three Months
Ended March 31, 1996 and 1995 (Unaudited).................................................... 10
Statement of Stockholder's Equity (Deficit) for the Years Ended December 31, 1995 and 1994 and
for the Three Months Ended March 31, 1996 (Unaudited)....................................... 11
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994 and for the Three Months
Ended March 31, 1996 and 1995 (Unaudited).................................................... 12
Notes to Financial Statements.................................................................... 13
INNOVA SOLUTIONS, INC.
Report of Price Waterhouse LLP, Independent Accountants.......................................... 18
Balance Sheet at December 31, 1995 and 1994 and at March 31, 1996 (Unaudited).................... 19
Statement of Operations for the Years Ended December 31, 1995 and 1994 and for the Three Months
Ended March 31, 1996 and 1995 (Unaudited).................................................... 20
Statement of Stockholder's Equity for the Years Ended December 31, 1995 and 1994 and for the
Three Months Ended March 31, 1996 (Unaudited) .............................................. 21
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994 and for the Three Months
Ended March 31, 1996 and 1995 (Unaudited) ................................................... 22
Notes to Financial Statements.................................................................... 23
Signatures......................................................................................... 28
</TABLE>
2
<PAGE>
COTELLIGENT GROUP, INC.
RESTATED AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cotelligent Group, Inc. ("Cotelligent" or the "Company") was formed to
acquire, own and operate software professional service businesses specializing
in computer consulting and contract programming. On February 20, 1996,
Cotelligent merged with four companies: Financial Data Systems, Inc. ("FDSI"),
BFR Co., Inc. ("BFR"), Data Arts & Sciences, Inc. ("DASI") and Chamberlain
Associates, Inc. ("CAI"), collectively the Founding Companies. All outstanding
shares of the Founding Companies' capital stock was converted into shares of
Cotelligent's Common Stock concurrently with the consummation of an initial
public offering (the "Offering") of Cotelligent Common Stock.
Additionally , on June 28, 1996 Cotelligent acquired ESP Software Services,
Inc. ("ESP") and INNOVA Solutions Inc. ("ISI") (the "Pooled Companies") in
business combinations accounted for under the pooling-of-interests method.
Accordingly, the historical financial statements of Cotelligent have been
restated in accordance with generally accepted accounting principles to present
the financial data as if Cotelligent and the Pooled Companies had always been
members of the same operating group.
The accompanying Restated and Pro Forma Consolidated Statement of
Operations for the year ended March 31, 1996 reflects the business combinations
with ESP and ISI and also gives effect to the acquisitions of the Founding
Companies as if they were made on April 1, 1995. Additionally, the restated and
pro forma consolidated statement reflects adjustments for the acquisitions of
the Pooled Companies and the Founding Companies including compensation
differentials to employees and former owners of the Founding Companies and the
Pooled Companies, the planned termination of contributions to retirement plans,
incremental selling, general and administrative costs of the corporate
activities of Cotelligent, one-time, non-recurring acquisition costs related to
the Pooled Companies and adjustments to reflect income taxes as if the entities
were combined and subject to the effective federal and state statutory rates for
the combined entity throughout the periods presented.
The accompanying Restated Consolidated Statement of Operations for the
years ended March 31, 1995 and 1994, give effect to the business combinations
with ESP and ISI which have been accounted for as poolings-of-interest.
Pro forma adjustments are based upon historical information,
preliminary estimates and certain assumptions management deems appropriate. The
pro forma consolidated statement of operations presented herein are not
necessarily indicative of the results Cotelligent would have obtained had such
events occurred at the beginning of the period, as assumed, or of the future
results of Cotelligent. The Restated and Pro Forma Consolidated Statement of
Operations should be read in conjunction with the other financial statements and
notes thereto appearing elsewhere in this report.
As the acquisitions of ESP and ISI were consummated June 28, 1996, the
financial statements for the most recent quarter ended June 30, 1996 have not
been included in this report as they have been provided in a previous filing on
Form 10-Q with a filing date of August 14, 1996.
3
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC.
RESTATED AND PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1996
(In Thousands Except Share and Per Share Amounts)
<CAPTION>
Founding
INNOVA Companies
Cotelligent ESP Software Solutions April 1, 1995- Pro Forma
Group, Inc. Service, Inc. Inc. Feb. 19, 1996 Adjustments Pro Forma
------------- ---------------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............. $ 8,265 $ 10,274 $ 5,867 $ 55,745 $ -- $ 80,151
Cost of services...... 6,173 6,712 4,017 42,361 (298) (a) 58,965
------------- ---------------- ------------ ------------- ------------- -----------
Gross margin........ 2,092 3,562 1,850 13,384 298 21,186
Selling, general and
administrative
expenses........... 1,895 3,247 1,174 10,374 (664) (b) 16,026
------------- ---------------- ------------ ------------- ------------- -----------
Operating income...... 197 315 676 3,010 962 5,160
Other expense (income):
Interest expense
(income), net..... (13) 108 11 421 (202) (c) 325
Other expense
(income).......... (3) -- (3) (36) -- (42)
------------- ---------------- ------------ ------------- ------------- -----------
Total other expense
(income).......... (16) 108 8 385 (202) 283
------------- ---------------- ------------ ------------- ------------- -----------
Income before income
taxes............. 213 207 668 2,625 1,164 4,877
Provision (benefit)
for income taxes 125 2 -- 1,952 (128) (d) 1,951
------------- ---------------- ------------ ------------- ------------- -----------
Net income (loss)..... $ 88 $ 205 $ 668 $ 673 $ 1,292 $ 2,926
============= ================ ============ ============= ============= ============
Earnings per share.... $ .51
===========
Weighted average
shares outstanding. 5,692,973 (e)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC.
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1995
(In Thousands Except Share and Per Share Amounts)
<CAPTION>
Cotelligent As Restated for
Group, Inc. ESP ISI Pooled Companies
-------------- -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Revenues........................ $ -- $ 6,950 $ 2,860 $ 9,810
Cost of services................ -- 4,496 1,887 6,383
-------------- -------------------- ---------------- --------------------
Gross margin................. -- 2,454 973 3,427
Selling, general and
administrative expenses...... 201 2,660 1,140 4,001
-------------- -------------------- ---------------- --------------------
Operating loss.................. (201) (206) (167) (574)
Other expense (income):
Interest expense, net........ -- 11 11 22
Other expense (income)....... -- -- (7) (7)
-------------- -------------------- ---------------- --------------------
Total other expense..... -- 11 4 15
-------------- -------------------- ---------------- --------------------
Loss before income taxes........ (201) (217) (171) (589)
-------------- -------------------- ---------------- --------------------
Provision (benefit) for income taxes -- 2 (92) (90)
-------------- -------------------- ---------------- --------------------
Net loss........................ $ (201) $ (219) $ (79) $ (499)
============== ==================== ================ ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
COTELLIGENT GROUP, INC.
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1994
(In Thousands Except Share and Per Share Amounts)
<CAPTION>
As Restated
Cotelligent for Pooled
Group, Inc. ESP ISI Companies
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues................................. $ -- $ 4,937 $ 4,304 $ 9,241
Cost of services......................... -- 3,093 2,136 5,229
--------------- --------------- ---------------- ---------------
Gross margin....................... -- 1,844 2,168 4,012
Selling, general and
administrative expenses............... 167 1,559 1,715 3,441
--------------- --------------- ---------------- ---------------
Operating income (loss).................. (167) 285 453 571
Other expense:
Interest expense, net................. -- -- 17 17
Other expenses....................... -- -- -- --
--------------- --------------- ---------------- ---------------
Total other expense................ -- -- 17 17
--------------- --------------- ---------------- ---------------
Income (loss) before income taxes........ (167) 285 436 554
Provision for income taxes............... -- 2 153 155
--------------- --------------- ---------------- ---------------
Net income (loss)........................ $ (167) $ 283 $ 283 $ 399
=============== =============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
COTELLIGENT GROUP, INC.
NOTES TO RESTATED AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Note 1 - Unaudited Pro Forma Adjustments
Pro forma data reflects adjustments for the following.
a) Reduction in compensation to former owners and employees as a result of the
renegotiation of executive compensation arrangements and the termination of
contributions to employee benefit plans made in conjunction with the
acquisition of the Founding Companies;
b) Reduction in compensation to former owners and employees of the Founding
Companies and the Pooled Companies as a result of the renegotiation of
executive compensation arrangements ($983), termination of contributions to
employee benefit plans ($485), offset by increased expenses for corporate
operating activities ($804);
c) Reduction in interest expense as a result of termination of an employee
stock ownership plan ($147) and the payoff of debt to a former stockholder
of ESP ($55);
d) Income taxes as if the entities were combined and subject to the effective
federal and state statutory rates throughout the periods presented (40%);
e) Historical weighted average shares and earnings per share have not been
presented because they are not considered meaningful as a result of the
acquisitions of the Founding Companies and the Offering. Earnings per
share have been presented on a pro forma basis only for the year ended
March 31, 1996. Pro forma weighted average shares outstanding used to
determine pro forma earnings per share were calculated based on the
following: (i) shares issued by Cotelligent prior to the Offering,
shares issued to the stockholders of the Founding Companies in connection
with the acquisition of the Founding Companies and shares sold in the
Offering to pay the cash portion of the consideration of the Founding
Companies were considered outstanding for the entire period,
(ii) additional shares sold to the public in the Offering, (iii) shares
issued to acquire the Pooled Companies and (iv) dilution attributable to
options to purchase common stock in applying the treasury method.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder
of ESP Software Services, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of ESP Software
Services, Inc. at December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, on June 28, 1996, ESP Software Services, Inc.
entered into and completed an agreement and plan of reorganization and merger
with Cotelligent Group, Inc.
Price Waterhouse LLP
Minneapolis, Minnesota
July 23, 1996
8
<PAGE>
<TABLE>
ESP SOFTWARE SERVICES, INC.
BALANCE SHEET
(In Thousands, Except Share Amounts)
<CAPTION>
(Unaudited)
December 31, March 31,
------------------------------- ---------------
ASSETS 1995 1994 1996
------------- ------------- ---------------
<S> <C> <C> <C>
Current assets:
Cash.................................................................... $ 1 $ -- $ --
Accounts receivable, less allowance for doubtful accounts of $15
at March 31, 1996................................................... 1,423 1,096 1,715
Prepaid expenses and other assets....................................... 100 57 64
------------- ------------- ---------------
Total current assets................................................. 1,524 1,153 1,779
Property and equipment, net............................................. 287 79 300
Note receivable - stockholder........................................... 94 -- 91
Other assets............................................................ 1 4 --
============= ============= ===============
Total assets......................................................... $1,906 $1,236 $2,170
============= ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Cash overdraft.......................................................... $ -- $ 11 $ 53
Bank line of credit..................................................... 625 -- 824
Current portion of long-term debt....................................... 51 14 52
Accounts payable - trade................................................ 70 31 188
Related party payable................................................... 6 208 --
Unearned revenue........................................................ -- 62 --
Accrued compensation and payroll taxes.................................. 301 312 280
Other liabilities....................................................... 1 3 1
------------- ------------- ---------------
Total current liabilities............................................ 1,054 641 1,398
Long-term debt; including related party of $136, $150, and $-0-............ 188 136 175
Deferred compensation..................................................... 548 548 548
Stockholders' equity (deficit):
Common stock - authorized 20,000 shares, no par
value, issued and outstanding 1,074 shares........................... 1 1 1
Retained earnings (deficit)............................................. 115 (90) 48
------------- ------------- ---------------
Total stockholders' equity (deficit)................................. 116 (89) 49
============= ============= ===============
Total liabilities and stockholders' equity (deficit)................. $1,906 $ 1,236 $2,170
============= ============= ===============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
ESP SOFTWARE SERVICES, INC.
STATEMENT OF OPERATIONS
(In Thousands)
<CAPTION>
(Unaudited)
For the Year Ended For the Three Months Ended
December 31, March 31,
---------------------------------------------- ------------------------------------------
1995 1994 1996 1995
-------------------- ---------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Revenues.............................. $ 10,274 $ 6,950 $ 2,757 $ 2,269
Cost of services...................... 6,712 4,496 1,798 1,419
-------------------- ---------------------- --------------------- -----------------
Gross margin.................... 3,562 2,454 959 850
Selling, general and
administrative expenses............ 3,247 2,660 994 816
-------------------- ---------------------- --------------------- -----------------
Operating income (loss)............... 315 (206) (35) 34
Other (income) expense:
Interest income.................... -- (3) (2) --
Interest expense................... 108 14 34 16
-------------------- ---------------------- --------------------- -----------------
Total other expense............. 108 11 32 16
-------------------- ---------------------- --------------------- -----------------
Income (loss) before provision for
income taxes....................... 207 (217) (67) 18
Provision for income taxes............ 2 2 -- --
-------------------- ---------------------- --------------------- -----------------
Net income (loss)..................... $ 205 $ (219) $ (67) $ 18
==================== ====================== ===================== =================
Unaudited Pro Forma information:
Income (loss) before provision for
income taxes ...................... $ 207 $ (217) $ (67) $ 18
Pro Forma provision (benefit) for
income taxes....................... 83 (87) (27) 7
--------------------- ----------------------- --------------------- -----------------
Pro Forma net income (loss)
(see Note 8) ...................... $ 124 $ (130) $ (40) $ 11
===================== ======================= ===================== =================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
ESP SOFTWARE SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In Thousands, Except Share Amounts)
<CAPTION>
Common Stock
---------------------------------- Retained
Shares Amount Earnings Total
---------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993................ 2,027 $ 2 $ 589 $ 591
Stock redemption........................ (953) (1) (206) (207)
Net (loss).............................. -- -- (219) (219)
Dividends paid.......................... -- -- (254) (254)
---------------- --------------- ------------------- -----------------
Balance at December 31, 1994................ 1,074 1 (90) (89)
Net income.............................. -- -- 205 205
---------------- --------------- ------------------- -----------------
Balance at December 31, 1995................ 1,074 1 115 116
Net (loss).............................. -- -- (67) (67)
--------------- --------------- ------------------ -----------------
Balance at March 31, 1996 (Unaudited)....... 1,074 $ 1 $ 48 $ 49
================ =============== =================== ==================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
11
<PAGE>
<TABLE>
ESP SOFTWARE SERVICES, INC.
STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
(Unaudited)
For the Year Ended For the Three Months Ended
December 31, March 31,
---------------------------------- ----------------------------------
1995 1994 1996 1995
---------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 205 $ (219) $ (67) $ 18
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................... 81 23 33 12
Changes in assets and liabilities:
Increase in accounts receivable................ (327) (431) (292) (11)
(Increase) decrease in prepaids and
other assets............................... (42) (45) 37 (32)
Increase (decrease) in accounts payable and
accrued liabilities.......................... (238) 381 91 100
Increase in deferred compensation.............. -- 550 -- --
--------------- --------------- ------------- ---------------
Net cash provided by (used in) operating
activities............................. (321) 259 (198) 87
--------------- --------------- ------------- ---------------
Cash flows from investing activities:
Purchase of equipment.............................. (156) (39) (45) (171)
Loan to stockholder................................ (94) -- 3 --
--------------- --------------- ------------- ---------------
Net cash (used in) investing activities... (250) (39) (42) (171)
--------------- --------------- ------------- ---------------
Cash flows from financing activities:
Stock redemption................................... -- (206) -- --
Dividends to stockholders.......................... -- (254) -- (185)
Proceeds from long-term debt....................... -- 165 -- 131
Principal payments of long-term debt............... (14) (15) (4) (8)
Payment of capital lease obligations............... (28) -- (9) --
Proceeds from bank line of credit.................. 625 -- 199 200
--------------- --------------- ------------- ---------------
Net cash provided (used in)
by financing activities............... 583 (310) 186 138
--------------- --------------- ------------- ---------------
Net increase (decrease) in cash........................
12 (90) (54) 54
Cash (overdraft) at beginning of period................ (11) 79 1 (11)
--------------- --------------- ------------- ---------------
Cash (overdraft) at end of period...................... $ 1 $ (11) $ (53) $ 43
=============== =============== ============= ===============
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 108 $ 14 $ 34 $ 16
Income taxes paid.................................. $ 3 $ 1 $ -- $ --
<FN>
The Company had non-cash financing transactions relating to capital leases on new equipment of $131 in 1995.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
12
<PAGE>
ESP SOFTWARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Amounts)
Note 1 - Business Organization
ESP Software Services, Inc. ("ESP") is a professional services firm that
provides information systems analysis, programming and support to various
industries. Substantially all of ESP's operations are in Minnesota.
On June 28, 1996, ESP entered into and completed an agreement and plan of
reorganization and merger with Cotelligent Group Inc. ("Cotelligent"), whereby
ESP exchanged all of its outstanding stock for common stock of Cotelligent. The
business combination will be accounted for under the pooling-of-interests method
of accounting.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment are stated at historical cost. Depreciation,
including amortization of capital leases, is provided over the estimated useful
lives of the respective assets on a straight line basis. Leasehold improvements
are depreciated over the shorter of the remaining lease term or estimated useful
life.
Concentration of Credit Risk
Financial instruments that potentially subject ESP to concentrations of
credit risk consist principally of trade accounts receivable. Receivables
arising from services provided to clients are not collateralized and
accordingly, ESP performs ongoing credit evaluations of its clients to reduce
the risk of loss.
Revenue Recognition
Revenue is recognized as services are performed.
Fair Value of Financial Instruments
For cash and cash equivalents, the carrying amount approximates fair value
because of the short-term maturity of those instruments. The fair value of debt
is considered to approximate carrying value as the rates approximate those
currently available.
13
<PAGE>
ESP SOFTWARE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Income Taxes
ESP accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
asset and liability approach used in SFAS 109 requires the recognition of
deferred tax assets and liabilities for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
Prior to the merger on June 28, 1996, ESP elected to be taxed as an S
corporation for federal and state income tax purposes. Accordingly, any tax
liabilities were the responsibility of the ESP stockholder. The State of
Minnesota imposes a minimum fee on all corporations, which was $2 in both 1995
and 1994, and which has been properly reflected in the financial statements.
Effective June 28, 1996, ESP's S Corporation status terminated and the
Company will be taxed as a C corporation as a result of the merger with
Cotelligent. In connection with this conversion, approximately $608 was recorded
as income tax expense which represents the net deferred tax liabilities of ESP.
This amount will be paid ratably over a four-year period. See Note 8 for
unaudited pro forma income tax information.
Unaudited Interim Financial Statements
In the opinion of management, ESP has made all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of the financial
condition of ESP as of March 31, 1996 and the results of operations and cash
flows for the three months ended March 31, 1995 and 1996, as presented in the
accompanying unaudited interim financial statements.
<TABLE>
Note 3 - Property and Equipment
<CAPTION>
1995 1994
--------------- ----------------
<S> <C> <C>
Office equipment.......................................... $ 369 $ 109
Software.................................................. 23 7
Leasehold improvements.................................... 11 --
--------------- ----------------
403 116
Less: Accumulated depreciation............................ 116 37
--------------- ----------------
$ 287 $ 79
=============== ================
<FN>
Depreciation and amortization expense for the years ended December 31, 1995 and 1994 was $81 and $23, respectively.
</FN>
</TABLE>
14
<PAGE>
ESP FINANCIAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note 4 - Credit Facilities
Bank Line of Credit
In 1995, Electronic Systems Personnel, Inc., an affiliated organization
through common ownership, and ESP obtained a combined revolving line of credit
of $1,000 personally guaranteed by the stockholder with interest at 1 1/4% over
the bank's base rate. The line of credit was secured by accounts receivables and
general tangible assets of both companies and required the maintenance of
certain financial covenants. ESP had outstanding advances of $625 and Electronic
Systems Personnel, Inc. had outstanding advances of $195 at December 31, 1995.
In conjunction with the merger with Cotelligent, ESP has subsequently repaid
this line of credit. <TABLE>
Long-term debt consists of the following.
<CAPTION>
1995 1994
------------------- ------------------
<S> <C> <C>
Note - Former stockholder, payable in quarterly installments
of $7 plus interest at 2% over the index rate established by National City
Bank on January 1 of each year, due in
December 2001............................................. $ 136 $ 150
Lease obligation - Financial Management Leasing, payable
in monthly installments of $4 including interest at
14.35%, due in March 1998................................. 103 --
------------------- ------------------
239 150
Less: Current portion........................................ 51 14
------------------- ------------------
$ 188 $ 136
=================== ==================
</TABLE>
<TABLE>
Total maturities of long-term debt are as follows.
<CAPTION>
Years ending December 31,
------------------------------------------------------------
<S> <C>
1996........................ $ 51
1997........................ 58
1988........................ 42
1999........................ 20
2000........................ 22
Thereafter.................. 46
--------------
Less: Current portion....... 51
--------------
Total long-term debt........ $ 188
==============
<FN>
The note payable to a former stockholder in the amount of $136 was subsequently
paid in full in conjunction with the merger with Cotelligent on June 28, 1996.
</FN>
</TABLE>
15
<PAGE>
ESP FINANCIAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note 5 - Related Parties
Related Party Transactions
ESP is related to Electronic Systems Personnel, Inc. through common
ownership. ESP shares office space as well as various administrative resources
with Electronic Systems Personnel, Inc. Additionally, certain ESP employees are
hired through Electronic Systems Personnel, Inc., a placement firm. Below is a
summary of significant transactions and account balances between the two
companies:
<TABLE>
<CAPTION>
1995 1994
---------------- ---------------
<S> <C> <C>
Due to Electronic Systems Personnel, Inc............................. $ 6 $ 209
Administrative expense............................................... 164 73
Placement fee expense................................................ 527 526
</TABLE>
Stock Redemption
On May 5, 1994, ESP entered into an agreement with a stockholder owning a
47% interest in the Company to redeem all of the 953 shares held by him for
$206, of which $41 was paid at closing and the balance of $165 payable quarterly
over an eight year period with interest accruing at the rate of 2% in excess of
the index rate established by National City Bank. In addition, the agreement
provided for an additional payment for the stock in the event of a subsequent
sale of ESP. The balance outstanding on this obligation at December 31, 1995 and
1994 was $136 and $150, respectively.
In conjunction with the agreement and plan of reorganization and merger,
the remaining principal balance of the note payable above was paid in full on
June 28, 1996. Additionally, $552 was paid as a distribution to the former
stockholder in accordance with the terms of the stock redemption agreement.
Deferred Compensation Plan
In connection with the stock redemption agreement discussed above, ESP
entered into a salary continuation agreement with the former stockholder in
recognition of his contributions to the growth, management and success of ESP.
The salary continuation agreement provided that the stockholder be paid an
annual sum of $45 for each of the years 1994 through 1997, and an annual sum of
$93 for each of the years 1998 through 2005. The agreement provides for a
discount rate of 8% to arrive at the present value of the unpaid salary
continuation payments. The unpaid present value of this obligation at December
31, 1995 and 1994 was $548.
In conjunction with the agreement and plan of reorganization and merger,
the remaining principal balance of the deferred compensation was paid in full on
June 28, 1996.
16
<PAGE>
ESP FINANCIAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note Receivable - Stockholder
At December 31, 1995, ESP had a $94 note receivable from its principal
stockholder due in five equal principal installments of $19 beginning January 1,
1997. Interest at 8% is due quarterly with the first payment on April 1, 1996.
Note 6 - Pension Plan
ESP adopted a salary reduction/profit sharing plan (the "Plan") in 1994
under the provisions of Section 401(k) of the Internal Revenue Code. The Plan
covers all full-time employees who have completed one full year of service with
ESP. ESP is required to contribute an amount equal to 25% of the salary
reduction elected by each employee up to a maximum reduction of 4% of their
annual salary. In addition, ESP may make a discretionary contribution. ESP
contributions totaled $27 and $15 for December 31, 1995 and 1994, respectively.
Note 7 - Commitments
In June 1991, in connection with the purchase of certain assets of
Professional Resources, Inc., employment and non-compete agreements were entered
into with this entity's president. The employment agreement provides for payment
of monthly compensation of $13 plus bonuses equal to 10% of ESP's monthly net
income. This bonus was $47 and $18 in 1995 and 1994, respectively. The
non-compete agreement states that the former president may not compete, directly
or indirectly, during his employment with ESP and for one year thereafter.
Note 8 - Unaudited Pro Forma Income Tax Information
As described in Note 2, effective June 28, 1996, ESP will be taxed as a C
corporation as a result of the merger with Cotelligent. The following unaudited
pro forma income tax information is presented in accordance with Statement of
Financial Accounting Standards No. 109 as if ESP had been a C corporation
subject to federal and state income taxes through the periods presented.
<TABLE>
<CAPTION>
For the Year Ended For the Three Months Ended
December 31, March 31,
------------------------------- -------------------------------
1995 1994 1996 1995
------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Income (loss) before provision for income taxes... $ 207 $ (217) $ (67) $ 18
Provision (benefit) for income taxes.............. 83 (87) (27) 7
------------- ------------- -------------- -------------
Pro forma net income (loss)....................... $ 124 $ (130) $ (40) $ 11
============= ============= ============== =============
</TABLE>
Note 9 - Significant Clients
One client accounted for approximately 15% and 15% of revenues in 1995 and
1994, respectively.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
INNOVA Solutions, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of INNOVA Solutions, Inc. at December
31, 1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1, on June 28, 1996, INNOVA Solutions, Inc. entered
into and completed an agreement and plan of reorganization and merger with
Cotelligent Group, Inc.
Price Waterhouse LLP
Minneapolis, Minnesota
July 1, 1996
18
<PAGE>
<TABLE>
INNOVA SOLUTIONS, INC.
BALANCE SHEET
(In Thousands, Except Share Amounts)
<CAPTION>
(Unaudited)
December 31, March 31,
---------------------------------------- ------------------
ASSETS 1995 1994 1996
------------------ --------------- ------------------
<S> <C> <C> <C>
Current assets:
Cash................................................... $ 6 $ 203 $ 355
Restricted cash........................................ 100 -- --
Accounts receivable, less allowance for doubtful
accounts of $15 at March 31, 1996................... 1,161 437 1,190
Receivable from stockholder............................ 28 -- 28
Other current assets................................... 1 3 --
------------------ --------------- ------------------
Total current assets................................ 1,296 643 1,573
Property and equipment, net............................ 45 22 54
Receivable from stockholder............................ - 36 -
------------------ --------------- ------------------
Total assets........................................ $ 1,341 $ 701 $ 1,627
================== =============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt, including notes payable to related
parties of $99 and $159, respectively............... $ 196 $ 159 $ 281
Accounts payable....................................... 54 13 --
Accrued compensation................................... 255 147 261
Accrued income taxes................................... -- 35 --
Other liabilities...................................... 15 17 45
------------------ ---------------- -------------------
Total current liabilities........................... 520 371 587
Capital lease obligation, less current portion............ 12 -- 11
Stockholder's equity:
Common stock - $.01 par value, 100,000 shares
authorized and issued, 51,000 shares outstanding.... 1 1 1
Additional paid-in capital............................. 9 9 9
Treasury stock - 49,000 shares......................... (100) (100) (100)
Retained earnings...................................... 899 420 1,119
------------------ --------------- ------------------
Total stockholder's equity.......................... 809 330 1,029
------------------ --------------- ------------------
Total liabilities and stockholder's equity.......... $ 1,341 $ 701 $ 1,627
================== =============== ==================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
19
<PAGE>
<TABLE>
INNOVA SOLUTIONS, INC.
STATEMENT OF OPERATIONS
(In Thousands)
<CAPTION>
(Unaudited)
For the Year Ended For the Three Months Ended
December 31, March 31,
------------------------------------ ------------------------------------
1995 1994 1996 1995
----------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Revenues................................ $ 5,867 $ 2,860 $ 2,034 $ 1,283
Cost of services........................ 4,017 1,887 1,369 865
------------------ ------------------ ------------------ ------------------
Gross margin..................... 1,850 973 665 418
Selling, general and administrative
expenses............................. 1,174 1,140 350 223
------------------ ------------------ ------------------ ------------------
Operating income (loss)................ 676 (167) 315 195
Other (income) expense:
Interest expense..................... 17 19 5 2
Interest income...................... (6) (8) -- (1)
Other................................ (3) (7) -- --
------------------ ------------------ ------------------ -------------------
Total other expense................ 8 4 5 1
------------------ ------------------ ------------------ -------------------
Income (loss) before provision for
income taxes......................... 668 (171) 310 194
(Benefit) for income taxes............. -- (92) -- --
------------------ ------------------ ------------------ ------------------
Net income (loss)...................... $ 668 $ (79) $ 310 $ 194
================== ================== ================== ==================
Unaudited Pro Forma information:
Income (loss) before provision
for income taxes.................. $ 668 $ (171) $ 310 $ 194
Pro Forma provision (benefit)
for income taxes.................. 227 (58) 124 66
------------------ ------------------ ------------------ -----------------
Pro Forma net income (loss)........... $ 441 $ (113) $ 186 $ 128
================== ================== ================== =================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
20
<PAGE>
<TABLE>
INNOVA SOLUTIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Amounts)
<CAPTION>
Additional
Common Stock Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
---------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993.. 100,000 $ 1 $ 9 $ 499 $ (100) $ 409
Net (loss)........................ -- -- -- (79) -- (79)
---------- --------- -------- ---------- ---------- ---------
Balance at December 31, 1994... 100,000 1 9 420 (100) 330
Dividends......................... -- -- -- (189) -- (189)
Net income........................ -- -- -- 668 -- 668
---------- --------- --------- ---------- ---------- ---------
Balance at December 31, 1995... 100,000 1 9 899 (100) 809
Net income........................ -- -- -- 310 -- 310
Dividends......................... -- -- -- (90) -- (90)
---------- --------- --------- ---------- ---------- ---------
Balance at March 31, 1996 (Unaudited).... 100,000 $ 1 $ 9 $1,119 $ (100) $ 1,029
========== ========= ========= ========== ========== =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
21
<PAGE>
<TABLE>
INNOVA SOLUTIONS, INC.
STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
(Unaudited)
For the Year Ended For the Three Months Ended
December 31, March 31,
---------------------------------- --------------------------------
1995 1994 1996 1995
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 668 $ (79) $ 310 $ 194
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation..................................... 8 22 3 1
Deferred income taxes, net....................... -- 47 -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable..... (724) 254 (29) (217)
(Increase) decrease in prepaid expenses and
other current assets......................... 2 (3) 1 (6)
(Decrease) in income taxes payable............. (35) (39) -- --
Increase (decrease) in accounts payable
and accrued expenses....................... 147 (114) (18) 54
--------------- --------------- -------------- --------------
Net cash provided (used in)by operating
activities................................ 66 88 267 26
--------------- --------------- -------------- --------------
Cash flows from investing activities:
Purchase of property and equipment................. (12) (20) (12) (1)
Stockholder receivable............................. 8 (25) -- 10
--------------- --------------- -------------- --------------
Net cash provided by (used in) investing
activities................................ (4) (45) (12) 9
--------------- --------------- -------------- --------------
Cash flows from financing activities:
Proceeds from line of credit, net.................. 95 -- 100 --
Payment on capital lease obligations............... (5) -- (1) --
Payment of loans from related parties.............. (60) -- (15) --
Payment of dividends............................... (189) -- (90) --
Proceeds from related parties loans................ -- 10 -- --
Payment of other long-term debt.................... -- (32) -- --
--------------- --------------- -------------- --------------
Net cash provided by (used in) financing
activities................................ (159) (22) (6) --
--------------- --------------- -------------- --------------
Net (decrease) increase in cash and cash equivalents... (97) 21 249 35
Cash and restricted cash at beginning of period........ 203 182 106 203
=============== =============== ============== ==============
Cash and restricted cash at end of period.............. $ 106 $ 203 $ 355 $ 238
=============== =============== ============== ==============
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 18 $ 23 $ 5 $ 5
Income taxes paid.................................. $ 35 $ -- $ -- $ --
<FN>
ISI had non-cash financing transactions relating to capital leases on new equipment of $19 in 1995.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
22
<PAGE>
INNOVA SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Amounts)
Note 1 - Business Organization
Innova Solutions, Inc. ("ISI"), a Texas corporation, commenced operations
in 1991. ISI is a professional services firm that provides computer consulting
and contract programming services.
On June 28, 1996, ISI entered into and completed an agreement and plan of
reorganization and merger with Cotelligent Group, Inc. ("Cotelligent"), whereby
ISI exchanged all of its outstanding stock for common stock of Cotelligent. The
business combination will be accounted for under the pooling-of-interests method
of accounting.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Restricted Cash
In accordance with the terms of ISI's line of credit, ISI is required to
maintain a restricted cash reserve of $100.
Property and Equipment
Property and equipment are recorded at cost. Depreciation, including
amortization of capitalized leases, is calculated using the straight-line method
over the estimated useful lives of the respective assets.
Concentration of Credit Risk
Financial instruments that potentially subject ISI 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.
Revenue Recognition
Revenue is recognized as services are performed.
Income Taxes
ISI accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
asset and liability approach used in SFAS 109 requires the recognition of
deferred tax assets and liabilities for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities.
23
<PAGE>
INNOVA SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Effective with the tax year beginning January 1, 1995, ISI elected to be
taxed for federal and state income tax purposes as an S corporation.
Accordingly, as an S corporation, any tax liabilities are the responsibility of
the ISI shareholder.
In addition, effective June 28, 1996 the Company's S corporation status
terminated and the Company will be taxed as a C corporation as a result of the
merger with Cotelligent. In connection with this conversion, approximately $191
was recorded as income tax expense which represents the net deferred tax
liabilities of ISI. See also Notes 5 and 8.
Fair Value of Financial Instruments
For cash and cash equivalents, the carrying amount approximates fair value
because of the short-term maturity of those instruments. The fair value of debt
is considered to approximate carrying value as the rates approximate those
currently available.
Unaudited Interim Financial Statements
In the opinion of management, ISI has made all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of the financial
condition of ISI as of March 31, 1996 and the results of operations and cash
flows for the three months ended March 31, 1995 and 1996, as presented in the
accompanying unaudited interim financial statements.
Note 3 - Property & Equipment
<TABLE>
Property and equipment consists of the following.
<CAPTION>
1995 1994
--------------------- ------------------
<S> <C> <C>
Automobiles and trucks....................... $ 20 $ --
Furniture and fixtures....................... 18 15
Office equipment............................. 39 31
--------------------- ------------------
77 46
Less: Accumulated depreciation.............. 32 24
--------------------- ------------------
$ 45 $ 22
===================== ==================
<FN>
Depreciation expense for the years ended December 31, 1995 and 1994 was $8 and $22, respectively.
</FN>
</TABLE>
Note 4 - Credit Facilities
<TABLE>
Short-term debt consists of the following:
<CAPTION>
1995 1994
--------------------- -------------------
<S> <C> <C>
Revolving line of credit...................... $ 95 $ --
Loans from related parties.................... 99 159
Current portion of capital lease obligation... 2 --
--------------------- ------------------
$ 196 $ 159
===================== ==================
</TABLE>
24
<PAGE>
INNOVA SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
ISI's line of credit agreement with its bank provides for borrowings up to
a maximum amount of $250. Borrowings bear interest at the prime rate plus 2.0%
per annum (10.5% at December 31, 1995), payable monthly. The agreement, which
expired May 9, 1996, is secured by accounts receivable and property and
equipment. The line is personally guaranteed by the stockholder.
The loans from related parties bear interest between 8.0 % and 12.5%,
payable on demand and contain no financial or restrictive covenants.
Long-Term Debt
Long-term debt consists of a capital lease obligation, net of the current
portion, of $12 and $0 as of December 31, 1995 and 1994, respectively.
Note 5 - Income Taxes
As discussed in Note 2, ISI was a C corporation until December 31, 1994 at
which time ISI elected to be taxed as an S corporation, and therefore, any tax
liabilities subsequent to this date were the responsibility of ISI's
shareholder. Accordingly, net deferred tax liabilities of approximately $117 as
of December 31, 1994 were recognized in income upon the conversion in 1994.
<TABLE>
The provision (benefit) for income taxes is as follows:
<CAPTION>
1994
------------
<S> <C>
Current federal................................................................................... $ 51
Deferred federal.................................................................................. (143)
------------
Total........................................................................................ $ (92)
============
</TABLE>
<TABLE>
The Company's effective income tax rate varied from the U.S. federal statutory rate as follows:
<CAPTION>
1994
-------------
<S> <C>
U.S. federal statutory rate...................................................................... (34.0)%
Conversion to S corporation...................................................................... (19.8)
=============
Effective rate........................................................................ (53.8)%
=============
</TABLE>
As a result of the merger with Cotelligent on June 28, 1996, ISI's S
corporation will be terminated. Approximately $191 of deferred tax liabilities
was recorded at this time and these federal and state taxes will be paid ratably
over the next four years.
25
<PAGE>
INNOVA SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Amounts)
Note 6 - Lease Commitments
<TABLE>
Future minimum lease payments under ISI's operating leases are as follows:
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1996 ............................................................ $ 3
1997 ............................................................ 3
1998 ............................................................ 1
=============
$ 7
=============
</TABLE>
Total rent and lease expense recorded by ISI in fiscal years 1995 and 1994
was $44 and $34, respectively.
ISI leases certain equipment under a lease arrangement, which has been
accounted for as a capital lease. Assets under capital lease with a cost of $19
and net book value of approximately $17 at December 31, 1995 are included in
property, plant, and equipment in the accompanying balance sheet. Depreciation
of the capital lease is included in depreciation expense.
Note 7 - Employee Benefit Plans
ISI maintains an unfunded 401(k) plan which includes employees who have at
least one-half a year of continuous service. Contributions to the plan are made
at the discretion of ISI based on employee elections. ISI made no contributions
for the years ended December 31, 1995 or 1994.
Note 8 - Unaudited Pro Forma Income Tax Information
As described in Note 2, effective June 28, 1996, ISI will be taxed as a C
corporation as a result of the merger with Cotelligent. The following unaudited
pro forma income tax information is presented in accordance with Statement of
Financial Accounting Standards No. 109 as if ISI had been a C corporation
subject to federal and state income taxes through the periods presented.
<TABLE>
<CAPTION>
For the Year Ended For the Three Months Ended
December 31, March 31,
--------------------------------- -----------------------------------
1995 1994 1996 1995
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income (loss) before provision
for income taxes........................... $ 668 $ (171) $ 310 $ 194
Provision (benefit) for income taxes........... 227 (58) 124 66
--------------- -------------- --------------- ---------------
Pro forma net income (loss)................... $ 441 (113) 186 128
=============== ============= ================ ===============
</TABLE>
26
<PAGE>
Note 9 - Significant Clients
During 1995 and 1994, four major clients generated revenues that exceeded
10% of total revenues. The percentage of net revenues from these clients is as
follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
<S> <C> <C>
Client A................................ 20% ---
Client B................................ 13% 21%
Client C................................ 14% 23%
Client D................................ 14% 12%
Client E................................ --- 15%
</TABLE>
27
<PAGE>
SIGNATURES
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 GROUP, INC.
September 11, 1996 /s/ Duane W. Bell
Date ----------------------
Duane W. Bell
Senior Vice President
and Chief Financial Officer
28
