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SEC Letter

 August 2, 2004

 Securities and Exchange Commission

 Division of
Corporation Finance

 Attn: Melissa N. Rocha

 450 Fifth Street, N.W., Mail Stop 4-6

 Washington, D.C. 20549-0404

Re:
Cotelligent, Inc.

Form 8-K filed July 8, 2004

 Dear Ms. Rocha:

 We are responding to the comments of the Staff of the Securities and Exchange Commission (the “Commission”) in your July 20, 2004 letter to us with respect to Cotelligent, Inc.’s
(“Cotelligent” or the “Company”) Form 8-K, which was filed with the Commission by the Company on July 8, 2004 (the “8-K”).

 In response to your letter, set forth below are your comments in bold followed by the Company’s responses to your comments.

 1. Comment: Supplementally provide us a copy of any management letters from
KPMG, LLP to the audit committee or Board of directors, as well as copies of any correspondence, reports, or notes to and from the company that addressed the weaknesses in the company’s financial accounting systems for each of the years ended
December 31, 2003 and 2002.

 Response: Please find marked as
Attachment I, a management letter issued by KPMG December 22, 2003, related to the audit for the year ended December 31, 2002. To date, KPMG has not issued a management letter related to the audit for the year ended December 31, 2003.
KPMG LLP notified the Company orally in April 2004, prior to the filing of Form 10-K (which was filed on April 14), that a material weakness existed with respect to the audit of the 2003 financial statements. The Company then received a letter
dated April 8, 2004, a copy of which is attached and marked as Attachment II, formally notifying the Company of the reportable condition.

 There are no other reports, notes, or correspondence to and from the Company that addressed weaknesses in the Company’s financial accounting systems for either of
the years ended December 31, 2003 and 2002.

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 2. Comment: In detail, supplementally describe the nature of each reportable condition and material
weakness and the amounts involved as applicable. Also, tell us:

•

in what period each material weakness and accounting error or misapplication of GAAP occurred,

•

the amount of each accounting error or misapplication of GAAP,

•

the reason(s) for each error or misapplication of accounting,

•

whether or not you intend to restate any prior period for any adjustments. If not, tell us why not, and,

•

in detail, all the steps you have taken (or plan to take) and procedures you have implemented (or plan to implement) to correct each concern detailed by KPMG, LLP.

 Response: The material weakness noted by KPMG, LLP
occurred in the year ended December 31, 2003 and was the direct cause of the matter that led to the need for an audit adjustment that reduced an accrual for income taxes by $2.5 million.

 The Company previously established a $2.6 million accrual in 2001 to provide for income tax
contingencies related to earlier tax periods and continued to maintain the $2.6 million accrual while the statute of limitations for the respective tax years remained open.

 During the year ended December 31, 2003, the Company was audited by the Internal Revenue Service for the tax years ended March 31,
2001 and 2002, years in which the tax contingencies initially arose. Subsequent to December 31, 2003, but prior to the filing of Form 10-K for the year ended December 31, 2003, the Company’s tax preparer informed the Company that they
had received notice from the Internal Revenue Service that the tax audit fieldwork was complete and that no additional tax was due (the only adjustment required was a $55,000 reduction to the net operating loss carry forward). In January 2004, the
Internal Revenue Service requested, and the Company agreed to, an extension to the statute of limitations for the tax years under examination until July 28, 2005 in order to allow time for the tax audit fieldwork to be reviewed by the Internal
Revenue Service.

 In light of the extension of the statute of limitations, the
Company continued to maintain the $2.6 million accrual for income taxes at December 31, 2003 based upon its view that the audit by the Internal Revenue Service was incomplete and therefore, exposure to further tax audit adjustments potentially
existed.

 In connection with its audit, KPMG concluded that the income tax
accrual should be reduced by $2.5 million. KPMG pointed to the fact that the Company’s continued operating loss experience in years subsequent to the years related to the tax exposure coupled with the more recent change in tax law allowing
operating losses to be carried back five years, covered the original tax exposure, such that, if the items giving rise to the

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exposure were adjusted, there were now sufficient net operating losses available to apply against the adjustments. The Company had not identified the need to
reduce this accrual. It is the Company’s understanding that KPMG determined that the Company’s failure to reduce its income tax accrual demonstrated that the Company failed to monitor business activities and changing circumstances in order
to identify events that necessitate a more in-depth written and contemporaneous analysis or revaluation of prior management judgments and accounting estimates.

The Company does not intend to restate any prior period as the reduction to the income tax accrual was appropriately recorded to the fourth quarter of 2003 The
following two paragraphs explain why this adjustment was appropriately recorded in the fourth quarter of 2003.

 For tax purposes, Cotelligent changed its year-end from March 31 to a calendar year as of December 31, 2002. Therefore, it filed a 9-month return for the tax year ended December 31, 2002. According to
Rev. Proc. 2002-37, if Cotelligent would have generated any taxable income during the first quarter of 2003, it would have been prohibited from carrying the $11,445,000 NOL generated in December 31, 2002 back to tax year ended March 31,
1999. (The 12-month loss through March 31, 2003 must be greater than the 9-month loss ending December 31, 2002.)

 At the time the 2002 tax provision was prepared in connection with the Company’s preparation of its Form 10-K for the fiscal year ended December 31, 2002, which
10-K was filed with the Commission prior to and near March 31, 2003, the Company did not know whether it would incur a loss for the first quarter of 2003 since the March quarter results were not known. Furthermore, the Company did not file its
tax return for the tax period ended December 31, 2002 until September 15, 2003. It was only after the filing of the 2002 tax return on September 15, 2003 that all the pertinent information became available as to the magnitude of the
losses for all periods and the fact that a taxable loss for the period April 1, 2002 – March 31, 2003 was in fact greater than the tax loss reported for the period April 1. 2002- December 31, 2002. It would have then became
clear in the fourth quarter of 2003 that the losses for 2002 qualified for the 2002 Job Creation and Workers Assistance Act of 2002, which provides that NOLs arising in tax years ending in 2001 and 2002 can be carried back for 5 years. The Company
would have then known in the fourth quarter of 2003 that certain tax contingencies no longer existed.

 The Company addressed KPMG LLP’s comment that it failed to monitor business activities and changing circumstances in order to identify events that necessitate a more in-depth written and contemporaneous analysis
or revaluation of prior management judgments and accounting estimates. Within one month after receiving KPMG’s comment, the Company modified its internal control to require a written analysis prior to the filing of each quarter’s Form 10-Q
and the 10-K that identifies changes in the Company’s business activities and changing circumstances and considers potential revaluation of prior management judgments and accounting estimates. This analysis is

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applied to each of the areas of accounting identified under Critical Accounting Estimates on Form 10-K.

 In addition, immediately after receiving KPMG’s comment, the Company prepared a written
analysis to support the $2.5 million reduction to the accrual for income taxes prior to the filing of Form 10-K for the year ended December 31, 2003. Please find marked as Attachment III, a copy of the memorandum that discusses the accrual for
income taxes.

 3. Comment: Provide us with a list of year-end
closing or adjusting entries you recorded to close the books, or in connection with or as a result of the audit for fiscal 2003 and 2002. Disclose the dollar effect of each adjustment on net loss. Briefly explain each entry. Explain why none of the
adjustments related to prior periods and does not require restatement of the financial statements in prior periodic reports.

 Response: The following is a summary of the year end closing entries in connection with and as a result of the audit for the years ended December 31,
2003 and 2002. Except as otherwise noted below, these adjustments were identified as a result of the audit for the particular year. As a general rule, the Company records all adjustments identified regardless of materiality.

 The net effect of the 2003 entries, absent the entry that resulted from the material
weakness, was an increase to the net operating loss of $2,337, which represented approximately 0.02% of our $12.5 million net loss in 2003.

 The net effect of the 2002 entries was a reduction to the net operating loss of $3,023, which represented approximately 0.03% of our $9.7 million net loss in 2002.

 Year Ended December 31, 2003

 Adjustment number 1 –

DR

Prepaid assets (deferred acquisition costs)

$
174,663

CR

Selling, general and administrative expense

$
174,663

 To defer costs related to the
potential acquisition of a target company until the date of completion of the purchase of the business.

 The adjustment reduced the net operating loss for the year by $174,663.

 The adjustment did not require restatement of any prior financial statements since the spending related to the acquisition occurred in the fourth quarter of 2003 and was therefore appropriately recorded in the fourth
quarter of 2003.

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 Adjustment number 2 –

DR

Accrual for income tax

$
2,548,831

CR

Provision for income taxes

$
2,548,831

 To reduce the accrual for income taxes
as fully described in the response to item 1 of this comment letter.

 The
adjustment reduced the net operating loss for the year by $2,548,831.

 The
adjustment did not require restatement of any prior financial statements since the adjustment related to the fourth quarter of 2003 as more fully described in response to item 1 of this comment letter.

 Adjustment number 3 –

DR

Obligation due seller of an acquired business

$
492,000

CR

Retained earnings

$
492,000

 To reduce an accrual related to a
claim by the seller of an acquired business. The Company accrued for the claim in 2000 as internal counsel concluded that the likelihood of loss was probable. Upon a re-examination of the facts supporting the initial claim in the course of the 2003
audit, it was concluded that the likelihood of loss was never anything but remote. Accordingly, the accrual for the loss contingency was reversed to opening retained earnings. Disclosure of the adjustment to December 31, 2000 retained earnings
was provided in the Form 10-K for the year ended December 31, 2003 on the consolidated statement of stockholders’ equity with a parenthetical reference to footnote 12.

 The adjustment did not impact the net operating loss for 2003.

 The adjustment did not require restatement of any prior financial statements because the adjustment was considered not material to the
operating loss for the year ended December 31, 2000 of $23.5 million.

 Adjustment number 4 –

DR

Impairment of long-lived assets

$
177,000

CR

Property and equipment

$
177,000

 The Company’s initial calculation
of the annual impairment test had resulted in no impairment loss. During the course of the audit, changes to the impairment test analysis resulted in an impairment of long-lived assets related to property and equipment at the Company
headquarters’ location due to a change in the grouping of assets between reporting units.

 The adjustment increased the net operating loss for 2003 by $177,000.

 The adjustment did not require restatement of any periodic reports as the asset impairment test was appropriately performed in the fourth quarter of 2003.

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 Adjustment number 5 –

DR

Other current liabilities

$
66,217

CR

Restructuring liabilities

$
66,217

 To reclassify an accrual for benefits
related to people severed in connection with a restructuring to the restructuring liability.

 The adjustment had no impact on the net operating loss for 2003.

 The adjustment did not require restatement of any prior financial statements, even though the original accrual was created in September 2003, since the reclassification within current liabilities was not considered
material individually or in the aggregate with the other adjustments identified by KPMG and the Company.

 Adjustment number 6 –

DR

Selling, general and administrative expenses

$
302,884

CR

Loss from discontinued operations

$
302,884

 To reclassify a write-down of amounts
receivable from an acquirer of a discontinued operation to loss from continuing operations.

 The adjustment had no impact on the net operating loss for 2003.

 The adjustment was identified by the Company prior to the commencement of the audit but after the Company closed the books for the period.

 The adjustment did not require restatement of any prior financial statements since the write-down resulted from a revision to a note
agreement agreed to in December 2003.

 Year Ended December 31, 2002

 Adjustment number 1 –

DR

Revenue

$
310,159

CR

Accounts receivable

$
310,159

DR

Research and development expenses

$
133,000

CR

Cost of services

$
133,000

 To reverse revenue on services
delivered to Bluebook International during the fourth quarter of 2002 and reclassify the associated cost of delivering such services to research and development expense.

 Between August and November of 2002, the Company had contributed services in addition to cash in exchange for an investment in preferred
stock of Bluebook International. The Company did not recognize revenue in connection with this investment. Yet, for services provided in the fourth quarter of 2002, subsequent to the

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investment, the Company initially recognized revenue. The revenue was reversed when it was determined that collectibility of the associated receivable was
not certain.

 The adjustment increased the net operating loss for 2002 by
$310,159.

 The adjustment did not require restatement of any prior financial
statements since the services delivered in connection with the adjustment were provided in the fourth quarter of 2002.

 Adjustment number 2 –

DR

Selling, general and administrative expense

$
20,667

CR

Prepaid expense

$
20,667

 To write-down a reimbursement from a
third party deemed to be un-collectible.

 The adjustment increased the net loss
for 2002 by $20,667.

 The adjustment did not require restatement of any prior
financial statements since the amount was considered to be not material.

 Adjustment number 3-

DR

Selling, general and administrative expense

$
39,935

DR

Cost of services

$
64,964

CR

Accounts payable

$
104,899

 To accrue unrecorded liabilities at
December 31, 2002.

DR

Accounts payable

$
100,216

CR

Selling, general and administrative expense

$
100,216

 To reverse the estimate for unrecorded
liabilities established by the Company at December 31, 2002.

 The Company
initially provided an estimate for unrecorded liabilities when closing the December 2002 general ledger in January 2003. As more information became available during the course of the audit in