UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

xý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OF ~~The~~THE SECURITIES ~~Fiscal~~EXCHANGE ~~Year~~ACT ~~Ended~~OF ~~December 31, 2003~~ 1934

¨For ~~TRANSITION~~The Fiscal ~~REPORT~~Year ~~PURSUANT~~Ended TODecember ~~SECTION~~31, ~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2005

o 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~~WATCHIT MEDIA, INC.

Delaware		94-3173918
(State of incorporation)		(I.R.S. ID)

~~100~~655 Montgomery ~~Theory~~Street, Suite ~~200~~ 1000, ~~Irvine~~San Francisco, CA ~~92612~~ 94111

(~~949~~415) ~~823~~ 477-~~1600~~ 9900

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

None

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

Common Stock ($.01 par value)

Indicate by check mark ~~whether~~if the registrant ~~(1)~~is ~~has~~a ~~filed~~well-known ~~all reports required to be filed~~seasoned byissuer, ~~Section~~as 13defined orin ~~15(d) of~~ the ~~Securities~~Rule ~~Exchange~~405 ~~Act~~ of ~~1934 during~~ the ~~preceding~~Securities ~~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~~Act. Yes x o No ¨ ý

Indicate by check mark if ~~disclosure~~the ofregistrant ~~delinquent filers pursuant to Item 405 of Regulation S-K~~ is not ~~contained~~required ~~herein and will not be contained,~~ to ~~the best of~~file ~~registrant’s~~reports ~~knowledge,~~pursuant into ~~definitive~~Section ~~proxy~~13 or ~~information~~Section ~~statements~~15(d) ~~incorporated by reference in Part III~~ of ~~this~~the ~~Form 10-K~~Act. ¨ Yes o No ý

Indicate by check mark whether the registrant is(1) anhas ~~accelerated~~filed ~~filer~~all ~~(as defined~~reports inrequired ~~Rule~~to ~~12b-2~~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 ~~YES~~(2) ¨has NObeen xsubject to such filing requirements for the past 90 days. YES ý NO o

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark if disclosure of ~~the~~delinquent ~~voting~~filers ~~stock~~pursuant ~~held~~to byItem ~~non-affiliates~~405 of ~~the~~Regulation ~~registrant~~S-K ~~was~~is ~~approximately~~not contained ~~$3,380,496~~herein ~~based~~and onwill ~~the~~not ~~closing price~~be ofcontained, ~~$0.24~~to of the best of registrant’s knowledge, ~~Common~~in ~~Stock~~definitive asproxy ~~reported~~or oninformation ~~the~~statements ~~OTC~~incorporated ~~Bulletin~~by reference ~~Board~~in onPart ~~June~~III ~~30,~~of ~~2003~~this Form 10-K. o

~~The~~Indicate ~~number~~by ofcheck ~~shares~~mark whether of the registrant ~~Common~~is ~~Stock~~an ~~outstanding~~accelerated filer (as ofdefined ~~March~~in ~~25,~~Rule ~~2004~~12b-2 ~~was~~of ~~24,861,625~~the Act). YES o NO ý

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $2,700,261 based on the closing price of $0.10 of the registrant’s Common Stock as reported on the OTC Bulletin Board on June 30, 2005.

The number of shares of the registrant Common Stock outstanding as of April 13, 2006 was 33,668,896.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of this registrant’s definitive proxy statement for its 2004 annual meeting to be filed with the SEC no later than 120 days after the end of the fiscal year are incorporated by reference in Part III of this Annual Report on Form 10-K.

~~COTELLIGENT~~WATCHIT MEDIA, INC.

FORM 10-K

For The Fiscal Year Ended December 31, ~~2003~~ 2005

INDEX

Part I
Item 1.	Business	~~Business~~	3
Item 2.	Properties	~~Properties~~	14
Item 3.	Legal Proceedings	~~Legal Proceedings~~	14
Item 4.	Submission of Matters to a Vote of Security Holders	~~Submission of Matters to a Vote of Security Holders~~	14
Part II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	~~Market for the Registrant’s Common Equity and Related Stockholder Matters~~	15
Item 6.	Selected Financial Data	~~Selected Financial Data~~	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	~~Quantitative and Qualitative Disclosures about Market Risk~~	25
Item 8.	Financial Statements and Supplementary Data	~~Financial Statements and Supplementary Data~~	26
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	~~Changes in and Disagreements With Accountants on Accounting and Financial Disclosure~~	46
Item 9A.	Controls and Procedures	~~Controls and Procedures~~	46
Part III
Item 9B.	Other Information
Item 10.		Directors and Executive Officers of the Registrant	47
Part III
Item 11.		Executive Compensation	47
Item 10.	Directors and Executive Officers of the Registrant
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 11.	Executive Compensation
Item 13.		Certain Relationships and Related Transactions	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 14.		Principal Accountant Fees and Services	47
Item 13.	Certain Relationships and Related Transactions
Part IV
Item 14.	Principal Accountant Fees and Services
Item 15.		Exhibits, Financial Statement Schedules, and Reports on Form 8-K	48
Part IV
		Signatures	51
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Signatures

PART I

Item 1. Business

COMPANY OVERVIEW

~~Cotelligent~~During ~~provides complete business solutions~~2005, ~~specializing~~we inoperated ~~mobile~~two distinct business ~~and~~units; ~~Web~~narrowcasting ~~services~~and ~~solutions,~~Information toTechnology ~~extend information technology~~ (“IT”) ~~beyond~~services. ~~the~~Our IT ~~desktop~~services ~~all~~business ~~the~~operated ~~way~~under to the ~~mobile~~name ~~enterprise~~of toCotelligent, ~~businesses~~Inc. inand the ~~United~~narrowcasting ~~States~~business ofoperated ~~America.~~under ~~Our~~the ~~mobility~~name ~~business~~of ~~solutions~~our ~~keep~~wholly-owned ~~mobile~~subsidiary Watchit ~~workforces~~Media, ~~connected~~Inc. toIn ~~their~~July ~~companies’~~2005 ~~business~~we ~~applications.~~divested ~~Our~~our ~~Web~~IT services ~~solutions~~business ~~keep~~to focus our ~~clients’~~strategy ~~customers,~~taking ~~vendors,~~advantage ~~partners~~of ~~and~~growth ~~employees~~factors ~~connected~~in ~~via~~ the ~~Internet~~ tonarrowcasting asector ~~variety~~ of the ~~information~~media ~~residing~~industry. inAs ~~our~~part ~~clients’~~of ~~information~~this ~~technology~~transformation ~~infrastructures.~~we Wemerged ~~also~~Watchit ~~provide~~Media, Inc. ~~maintenance~~into us and ~~support~~changed onour ~~software~~name ~~products~~from ~~licensed~~Cotelligent, Inc. to ~~our~~Watchit ~~clients~~Media, ~~in connection with solutions we develop~~Inc.

AsOn ~~part~~December 8, 2005, Watchit Media, Inc. (OTCBB-WMDA) changed the company’s ticker symbol to WMDA from CGZT. The change in the company’s ticker symbol reflects its change in identity from Cotelligent, Inc to Watchit Media, Inc. The company is in the process of transitioning ~~our~~all ~~complete~~aspects ~~solutions~~of its former brand, wename ~~offer:~~and identity to Watchit Media, Inc.

•Watchit ~~Custom~~Media, ~~application~~Inc. ~~development~~uses digital media to produce and present television programming to out-of-home place based private television networks (narrowcasting). These private television networks are in both consumer and commercial environments. The convergence of television and the Internet has enabled new rapidly growing applications and markets to evolve. According to a leading market research firm, world-wide spending on narrowcasting was approximately $630 million in 2004 and is expected to grow to over $2.0 billion in 2009.

•Watchit ~~Sales~~Media’s clients are among the largest gaming, lodging and ~~field~~hospitality ~~force~~companies ~~automation~~in ~~solutions~~the world. Today Watchit produces and presents television programming and advertising using digital and Internet Protocol (~~FastTrack™~~IP) technology to over 100 gaming, lodging and hospitality venues in Nevada, New Jersey, California, Oregon, Indiana, Mississippi and Louisiana, Missouri, Illinois and Iowa. We produce and present all of our television programming from our creative media center and television studio in Las Vegas, Nevada.

•Watchit ~~Mobile~~has ~~middleware~~significant market ~~products~~share ~~(JASware™)~~in the gaming and hospitality markets. Forty nine of our clients and approximately 52,000 of the hotel rooms we present our television programming and advertising to are in Las Vegas, Nevada. This represents 47% market share of the available gaming related hotel rooms in this market. Watchit produces and presents its television programming on the gaming floor, in the registration center, in common areas, in restaurants, on outdoor signs and in hotel rooms. Our in-room programming reaches over 17,000,000 viewers a year.

•In ~~Hardware~~hotel rooms, we present our clients own brand advertising and ~~software~~The ~~products~~Watchit Television Network (WTN). WTN is formatted in topic-specific templates that allows our television programming to be easily changed by our client to match the demographic profile of WTN’s audience. In most case our clients license the use of Watchit’s Manageit Enterprise IP television network platform by simply using a browser. Channels on WTN include sports, entertainment, visitor, music, business and others. The difference between WTN and broadcast / cable television is that Watchit’s channels present the hotel’s own brand advertising as part of its

~~• Application hosting and vertical solution provider services.~~1

•programming. ~~Remote~~The ~~support~~cost ~~services~~of similar advertising time on broadcast and cable television would be cost prohibitive. We also sell advertising time to third party advertisers on WTN that matches guest demographic profiles. We’re able to offer our advertisers audiences that are both targeted and engaged.

•Lodging ~~Help~~and ~~desk~~hospitality companies are seeking ways of differentiating their brand and ~~education~~building ~~services~~brand loyalty. Watchit gives these organizations a way, using their private television channels and systems, to accomplish this goal with quality television programming and high-impact advertising. Our clients rely on us to i) produce their television content ii) provide the television network for their private televison channels and iii) sell advertising time on their private television networks to third party advertisers.

•Our ~~Narrowcasting~~business and financial ~~video~~models ~~media~~are ~~services~~highly scalable and combine the strength of high-impact relevant television programming in the gaming, lodging and hospitality markets with our experience and competency in Internet and interactive technology. We believe our narrowcasting and Internet technology capabilities favorably differentiate us giving us a competitive advantage.

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

WeCotelligent, Inc. ~~have~~was ~~expertise~~founded in aFebruary ~~variety of industries, including consumer goods, manufacturing, high-tech, financial services and automotive~~1993. WeIn ~~understand~~February ~~how~~1996 towe ~~build advanced~~executed ~~technology~~a ~~systems~~ transaction that ~~expand~~merged ~~upon~~four aregional ~~company’s~~IT ~~existing~~service ~~systems~~ and ~~compliment~~consulting ~~the~~firms ~~work~~at ~~conducted~~the insame ~~their~~time ~~user~~the Company ~~environments.~~issued Wecommon ~~have~~stock ~~assembled~~in aan ~~technical~~initial ~~staff~~public ~~with~~offering aon ~~broad~~the ~~range~~NASDAQ ~~of skills and industry expertise, including business~~Stock ~~analysts, network architects, account managers and others~~Market. ~~The~~At ~~high~~that ~~level~~time, ofseveral ~~technical~~factors ~~expertise~~favorably ~~and~~influenced ~~business~~our ~~experience~~future opportunities ~~offered~~including: ~~by Cotelligent is an important company differentiator in the markets in which we compete.~~

~~Over the last two years we have positioned ourselves to leverage our foundation of experience~~1) Growth in ~~enterprise,~~demand ~~systems~~for ~~integration and eBusiness solutions, along with our vertical industry experience, to take advantage of~~ the ~~emerging~~outsourcing ~~and growing market for mobility solutions. Cotelligent has over ten years~~ of ~~experience~~information in delivering its FastTrack™ sales force automation solutions and its JASware™ mobile middleware solutions to a variety of leading companies. Cotelligent’s enterprise software, eBusiness and Web services solutions expertise, combined with our FastTrack™ and JASware™ offerings, uniquely position our Company. We use a proprietary consulting project methodology to help ensure that our clients achieve a successful result and help them make well-informed business and technology ~~decisions. Unfortunately, however, the market for these~~ services ~~and solutions has not materialized as expected and our Company has been negatively impacted as a result.~~ ;

At2) High ~~the~~fragmentation ~~end~~in ~~of 2003 Cotelligent refined its business model to reduce expenses related to~~ the ~~pursuit~~ ofimplementation ~~new business. While our~~ services ~~and~~market ~~our~~with ~~ability~~over tothree thousand ~~deliver~~private ~~these~~IT services ~~have~~firms ~~not~~in ~~changed, due to a lack of demand for these services we eliminated most of our sales force and focused on providing~~ the ~~highest~~US ~~level~~market ofgenerating ~~service~~over ~~possible~~$1.0 tomillion ~~our current and long-term clients. During this time our reputation and relationships~~ in ~~the~~revenue ~~industry have brought new client opportunities to us and we have been able to close new business in the first quarter of 2004 at a much lower cost because of our reduced headcount.~~ each;

3) The absence of a ‘market leader’ among companies in the IT services competitive environment; and,

~~In addition, during 2003 we initiated a strategy to acquire businesses with products and services that complement ours.~~4) InThe ~~the~~influx ~~third quarter~~ of ~~2003,~~capital ~~with an understanding that the demand for IT services was soft and was expected to remain soft~~ in the ~~foreseeable~~public ~~future,~~markets wefueling ~~looked~~growth ~~closer at acquisition candidates in industries other then IT services~~companies. On November 25, 2003, we announced the signing of a definitive agreement for the purchase of OnSite Media, Inc, a business that provides narrowcasting services to the hospitality and gambling industry. We believe the convergence of Internet, wireless and video media will soon become a major part of the technology landscape. We believe our infrastructure, our experience in developing sophisticated wireless and Internet business applications along with our system integration expertise are an excellent fit with the rapidly evolving narrowcasting and digital video display business.

~~Cotelligent~~By May ~~acquired~~1999 ~~OnSite~~Cotelligent ~~Media,~~was ~~Inc,~~generating aapproximately ~~Nevada~~$340 ~~corporation,~~million onin ~~March~~revenue 2,with 32 ~~2004.~~offices ~~The results of this acquisition will be included~~ in ~~the~~5 ~~Company’s results from its acquisition date~~countries. ~~OnSite~~During ~~Media~~this ~~was~~period ~~renamed~~Cotelligent ~~Watchit~~acquired ~~Media,~~24 ~~Inc.,~~private businesses and isintegrated ~~a wholly~~them ~~owned~~into ~~subsidiary~~our ofoperating ~~Cotelligent, Inc~~structure. WeIn ~~intend~~February to1998 we ~~aggressively~~moved ~~build~~from the ~~Watchit~~NASDAQ ~~Media~~Stock ~~brand~~Market ~~in the narrowcasting market. OnSite was a ten year old company that developed enabling digital technologies~~ and ~~production~~began ~~services~~listing ~~aimed~~our ~~at providing~~stock ~~complete~~on ~~solutions for video content creation, distribution, scripting and payback for companies with digital display channels and networks. OnSite historically provided this software and service offerings to~~ the ~~hospitality~~New York ~~and~~Stock ~~gambling industries~~Exchange. ~~Narrowcasting~~In ~~consists~~March of1998 ~~delivering~~we ~~dynamic,~~executed ~~compelling promotional messaging to influence the actions of~~ a ~~localized~~successful ~~audience. Promotional messages for hotel in~~follow-~~room~~on ~~channels,~~stock offering ~~driving~~raising ~~commercial~~$65 ~~messages~~million. toAt ~~casino floors and outdoor signage had been~~ the ~~primary~~close ~~business~~ of ~~OnSite.~~this ~~In addition~~transaction, ~~OnSite developed an Internet media creation software application which~~ we ~~believe~~had ~~will~~a ~~give~~market capitalization ~~the~~of ~~newly~~approximately ~~formed~~$500 ~~Watchit Media, Inc~~million. aWe ~~competitive~~also ~~advantage.~~had ~~Watchit~~a ~~Media~~$100 ~~will~~million ~~continue to~~line ~~employ~~of ~~its~~credit ~~marketing~~with ~~expertise~~a ~~and~~syndicate weof ~~will~~five ~~bring~~banks ~~our~~led ~~resources~~by ~~and~~Fleet ~~infrastructure to this smaller company to enhance their current offerings and expand to new markets~~Bank.

~~We believe our technology, marketing, administrative resources~~ Revenue and ~~skills~~profit ~~will~~began ~~help~~declining ~~to differentiate Watchit Media among other competitors~~ in ~~the~~Q2 ~~narrowcasting market~~1999. WeA ~~intend~~trend toof ~~immediately~~losses ~~integrate~~and ~~OnSite~~negative ~~into~~cash ~~Cotelligent / Watchit Media, Inc~~flow followed. WeOur ~~intend~~business todeclined ~~introduce~~through ~~enhanced~~March ~~products~~2000 and ~~services~~at ~~within~~ the ~~first~~end ~~ninety days~~ of ~~ownership~~March ~~that~~our Company ~~will~~announced ~~have~~ the ~~potential~~divestiture toof ~~open~~a ~~new markets~~significant ~~previously~~part ~~not~~of ~~available~~our business related to ~~OnSite,~~IT ~~elevate its value proposition and revenue opportunity with current customers~~staffing. WeOn ~~believe~~June ~~there~~30, ~~are~~2000 ~~many~~we ~~resources~~sold ~~within~~20 ~~Cotelligent~~of ~~that should help to expand~~ our ~~combined~~offices ~~opportunity~~for at$130 ~~minimal incremental cost.~~

For the year ended December 31, 2003, three clients, U.S. Smokeless Tobacco Brands, Inc., Kraft Foods, North America, Inc., and two business units within BMW (BMW of North America, LLC and BMW Financial Services NA, LLC) individually accounted for more than 10% of the Company’s revenues. 2

~~STRATEGY~~million. After the settlement of our bank debt and other payments, we had approximately $44 million in cash remaining.

~~Cotelligent’s~~On July ~~strategy~~1, is2000, ~~comprised~~we refined our business focus by concentrating on projects involving Internet business applications in the enterprise. Unfortunately, six months later, the dot com bubble burst and in September 2001, terrorists attacked the United States. The negative impact of the ~~following~~attack ~~components:~~affected all sectors of our economy, especially technology. Our clients began deferring projects to future periods. Our sales prospects began delaying decisions. At the same time the impact of cheap off-shore labor in the IT services sector materially and adversely affected the competitive environment.

~~Build~~In April ~~Systems~~2003 ~~Using~~we ~~Advanced~~announced ~~Technology~~our ~~Empowering~~plans ~~the~~to ~~Mobile~~seek ~~Workforce~~a merger partner. The ideal merger candidate would have the following attributes:

~~Cotelligent’s~~• Compete ~~strategy is to take advantage of its core competencies~~ in ~~enterprise~~an ~~software,~~industry ~~eBusiness~~showing ~~and~~rapid systems integration, and help our clients take advantage of advances in mobile and Web services technologies, and now, narrowcasting. To that end, we have already accumulated a strong base of client experience in moving information seamlessly from back-end “connected” application systems to front-end “semi-connected” and “disconnected” field force and customer relations applications using our own FastTrack™ and JASware™ solutions and application hosting services. Cotelligent has over ten years of experience in this market. Our strategy is to use our reputation and record of success to gain a significant competitive position in rapidly growing emerging technologies and markets like internet, wireless and video media. growth;

As• Have ~~an example, our Company has developed~~ a ~~foundation~~strong ofreputation ~~experience in developing~~ and ~~implementing~~ ~~Web~~reliable services solutions employing both Microsoft™ .NET and IBM open system technologies. As with our mobile computing expertise, we help our clients achieve success in employing .NET and open system technologies by leveraging our significant expertise in enterpriseproduct ~~software~~or and systems integration. Our experience has led us to conclude that the integration and utilization of Web services solutions require us to have an in-depth knowledge of how enterprise software, and general business applications and functions, interact from end-to-end. Our strategy is to continue to achieve success in developing Web services solutions in our clients’ complex business environments and leveraging this success and our reputation as this market continues to grow in the future. service;

4• Demonstrate the ability to grow revenue, profit and cash;

~~Differentiation~~• Have greater opportunity when combined with our business; and

We• Give ~~intend~~Cotelligent tothe ~~differentiate~~ability ~~ourselves~~to ~~from~~dramatically improve ~~our~~stock ~~competitors in the following ways:~~ performance.

~~Focus~~We evaluated onseveral ~~responding~~hundred tocompanies in a variety of industries. Our market research indicated the ~~specific~~narrowcasting ~~needs~~sector of ~~our~~the ~~existing~~media ~~client~~industry ~~base~~demonstrated the potential for dynamic growth in the years ahead. In March 2004 we acquired Las Vegas-based OnSite Media, Inc. Cotelligent created Watchit Media, Inc., a wholly-owned subsidiary of Cotelligent at the closing of the OnSite Media transaction.

StrongThe relationshipsOnsite withMedia, ourInc. longAcquisition term/ clientsWatchit willMedia, help us to further develop and execute our business strategy: Inc.

•Cotelligent, Inc. ~~Building~~had ~~upon~~been ~~our~~in ~~strongest~~the ~~client~~business ~~relationships~~of ~~will~~providing ~~help~~complete business solutions, specializing in mobile business and Web services solutions, to ~~ensure~~extend information atechnology ~~satisfied~~beyond ~~client~~the ~~base~~desktop ~~and~~all the way to the mobile enterprise to businesses in the US. By acquiring OnSite Media, Inc., a ~~continuing~~narrowcasting service ~~revenue~~provider, ~~stream~~we entered the dynamic and growing business.

•Our vision ~~Until~~is to become the ~~demand~~preeminent ~~for~~producer ~~our~~of ~~traditional~~television ~~service~~programming ~~offerings~~and advertising ~~improve,~~on weout-of-home ~~intend~~place tobased ~~satisfy~~private ~~the~~television ~~needs~~networks. ofWe also believe our ~~clients~~capabilities in wireless technology, when combined with ~~lower~~our television ~~sales~~production, gives us the ability to enter interactive and ~~marketing~~mobile entertainment ~~costs~~markets.

•Over the ~~Focus~~past onseveral ayears ~~narrow~~as ~~set~~Internet, ofvideo ~~specific~~media ~~applications~~ and ~~services~~wireless ~~that~~technology wehave advanced, ~~are~~costs ~~proficient~~have income ~~delivering~~down toand ~~our~~technical ~~markets~~capabilities have dramatically improved. The convergence of Internet, video media and

~~Leverage reputation and expertise in enterprise software and systems integration~~ 3

~~Cotelligent’s~~wireless technologies ~~reputation~~represents ‘the next great trend’ for ~~providing~~consumers ~~outstanding~~and ~~systems~~commercial ~~implementation~~enterprise. ~~and~~For ~~integration~~over ~~services~~seven isyears, ~~key~~Cotelligent tohad ~~our~~been ~~ability~~developing Internet-based tobusiness ~~ensure~~application ~~that~~systems ~~new,~~and ~~more~~media ~~advanced~~in both connected and disconnected environments. In addition, Cotelligent’s ~~solutions~~FastTrack ~~are~~sales ~~properly~~force automation ~~integrated~~business ~~across~~software ~~our~~and ~~clients~~JAS Middleware proprietary products supported over 5000 users. Cotelligent’s ~~information~~experience in providing IT services in these areas of technology ~~infrastructure.~~in hundreds of business environments is well documented.

~~Strategic~~As the ~~Acquisitions~~influence, quality and availability of video media has improved, more sophisticated approaches to employing video have emerged. The result has been the evolution of a new sector of the media industry called narrowcasting. As opposed to broadcast and cable television, narrowcasting is the programming of video content driven to captive audiences through private television systems. These captive audiences may be customers, guests, constituents, attendees, trainees and many other such audiences.

InThe Narrowcasting ~~2003,~~industry ~~the~~is ~~Company~~transitioning ~~initiated~~from athe ~~strategy~~‘early toadapter’ ~~acquire businesses complementary~~ to ~~the~~‘growth ~~Company~~phase’s ~~service~~in ~~offerings. In~~ the ~~third~~U.S. According ~~quarter of 2003, with an understanding that the demand for IT services was soft and was expected~~ to ~~remain~~InfoTrends ~~soft~~/ inCAP ~~the foreseeable future~~Ventures, ~~the~~a ~~Company looked closer at acquisition candidates in~~market ~~industries~~research ~~that~~firm, ~~employ~~spending ~~technology~~on inNarrowcasting ~~the delivery of their~~ products and services. Onin ~~November~~2004 ~~25,~~was approximately ~~2003,~~$630 wemillion ~~announced~~and ~~the~~spending ~~signing~~is ofprojected ato ~~definitive~~grow ~~agreement~~to ~~for~~over ~~the~~$2.0 billion ~~purchase~~by of2009. While ~~OnSite~~growth ~~Media,~~in ~~Inc, a business that provides~~ narrowcasting ~~services~~has ~~through hardware~~been ~~and~~projected ~~software~~in to the past, ~~hospitality~~it ~~and~~was ~~gambling~~not ~~industries.~~until Werecently ~~believe~~ that ~~the~~rapid ~~narrowcasting~~adoption ~~industry~~became ~~has~~possible ~~dynamic~~because ~~growth~~the only ~~potential~~true ~~and~~method weof ~~intend~~delivery to(flat ~~continue~~LCD toor ~~pursue~~Plasma ~~acquisitions~~screens) inwas ~~narrowcasting~~too ~~and video media~~expensive.

~~Acquisition~~In 2004, ofthis ~~OnSite~~and ~~Media,~~other ~~Inc~~delivery hardware became affordable and costs are projected to continue to fall in the years ahead. As with many early stage industries, the narrowcasting competitive landscape is highly fragmented with many small private businesses providing video content, equipment, technical services and related support to a variety of vertical markets across the U.S.

~~Cotelligent~~Watchit uses ~~acquired~~the ~~OnSite Media~~Internet, ~~Inc.,~~digital avideo ~~Nevada~~and ~~corporation,~~computer onediting ~~March~~technology 2,to ~~2004.~~produce ~~The~~and ~~aggregate~~move ~~consideration~~content ~~paid~~from byWatchit’s ~~Cotelligent~~creative ~~was~~media ~~$4.9~~and ~~million~~television ~~(10,679,612~~studio ~~shares~~to ofour ~~the~~client’s venues. ~~Company~~Watchit’s ~~Common~~responsiveness ~~Stock~~and ~~issued~~the athigh ~~fair~~level ~~value~~ of ~~$2.7~~reliability ~~million, warrants to purchase 5,339,806 shares~~ of ~~the Company~~Watchit’s video ~~Common~~infrastructure ~~Stock~~have ~~valued~~distinguished ~~using~~ the ~~Black-Sholes~~ ~~pricing~~Company ~~model~~as ~~with~~a ~~valuation~~leader ofin ~~$1.2~~this ~~million,~~market ~~cash~~over the ~~consideration~~past oftwelve $0years.6 ~~million~~In ~~and~~December ~~direct~~2005 ~~acquisition~~Watchit ~~costs~~moved ofinto ~~$0.4~~a ~~million).~~new, state-of-the-art ~~Net~~facility ~~liabilities~~in ~~assumed~~Las ~~were approximately $6~~Vegas,~~000~~ ~~which~~Nevada ~~resulted~~that ingives the ~~recognition~~Company ~~of net assets of~~the ~~approximately~~ability ~~$4.9~~to ~~million.~~create, ~~The~~produce ~~results~~and ofpresent ~~OnSite Media~~dynamic, ~~Inc.~~highly ~~will~~customized betelevision programming ~~included~~and advertising in ~~the~~conventional ~~Company’s~~or ~~results~~HD ~~from~~format ~~its~~anywhere ~~acquisition~~in ~~date.~~the world.

~~OnSite~~A private ~~Media~~venue ~~was~~in ~~renamed~~virtually ~~Watchit~~any ~~Media,~~commercial ~~Inc.,~~or ~~and~~government isenvironment ~~now~~can use a private ~~wholly~~television ~~owned~~network ~~subsidiary~~to ofentertain, ~~Cotelligent~~inform, ~~Inc.~~educate Weand ~~intend~~influence ~~to aggressively build the Watchit Media brand in the~~an ~~narrowcasting~~audience ~~market.~~once ~~OnSite~~it ~~was~~understands ~~a ten year old company~~ that ~~developed~~audience’s ~~enabling~~profile. The ~~digital~~premise ~~technologies~~of Watchit’s ~~and~~television ~~production~~programming ~~services aimed at providing complete solutions~~ for ~~video~~its ~~content~~clients ~~creation,~~private ~~distribution,~~television ~~scripting~~networks ~~and playback for companies with~~is ~~digital~~based ~~display~~on ~~channels and networks. OnSite historically provided this software and service offerings to~~ the ~~hospitality~~fact ~~and~~that ~~gambling~~every ~~industries.~~private ~~Narrowcasting~~venue ~~consists~~(whether ofretail ~~delivering dynamic~~store, ~~compelling promotional messaging to influence the~~recreation ~~actions~~facility, ofbusiness aoffice, ~~localized~~class ~~audience. Promotional messages for hotel in-~~room, ~~channels~~hotel, ~~driving commercial messages to casino floors and outdoor signage had been the primary business of OnSite~~etc.) Inhas ~~addition, OnSite developed~~ a ~~unique~~captive ~~Internet~~audience ~~media~~that ~~creation~~is ~~software~~demographically ~~application which we believe will give the newly formed Watchit Media~~specific, ~~Inc.~~predictable ~~a competitive advantage. Watchit Media will continue to employ its marketing expertise~~ and ~~we will bring our resources and infrastructure to this smaller company to enhance their current offerings and expand to new markets~~consistent.

~~The~~By ~~technology,~~analyzing ~~marketing, administrative resources~~ and ~~skills~~understanding ofthe ~~Cotelligent~~demographic ~~will~~and ~~help~~related todata ~~differentiate~~for ~~Watchit~~each ~~Media~~venue’s profile, ~~Inc.~~Watchit ~~from~~is ~~the~~able ~~competition. We intend~~ to ~~immediately~~develop ~~integrate~~highly ~~the~~targeted ~~former~~television ~~OnSite~~programming ~~into Cotelligent / Watchit Media, Inc. We intend to~~and ~~introduce~~advertising ~~enhanced~~appealing ~~products~~specifically ~~and services within the first ninety days of ownership that will have the potential~~ to ~~open new markets previously not available to the former OnSite~~ and ~~elevate its value proposition and,~~ therefore ~~revenue~~influencing ~~opportunity, with~~each ~~current customers~~captive audience. We ~~believe~~focus ~~there are many resources within Cotelligent that should help to expand~~ our ~~combined~~video ~~opportunity~~content aton ~~minimal~~what ~~incremental~~is ~~cost.~~of Wegreatest ~~intend~~appeal toand ~~sell our Internet media software application through the Internet, channel~~interest ~~partners~~ to ~~other software companies and directly to large computer hardware manufacturers.~~

5 4

~~SOLUTIONS~~each captive audience. As a result Watchit is far more likely to attract their attention and influence their behavior. Whether the desire is to influence a buying decision, establish brand awareness and loyalty, build a connection with a customer or educate a trainee, Watchit Media’s approach to our television programming on private television networks has the most immediate impression on the captive audience.

~~Capitalizing~~Our strategy onhas ~~our~~been ~~experience~~to ingrow ~~specific~~Watchit’s ~~industries~~existing ~~allows~~service usbusiness and build distribution to ~~support~~provide ~~our~~a ~~clients~~stream inof ~~making~~revenue ~~operational~~which ~~efficiencies~~is ~~using~~predictable ~~eBusiness,~~and ~~mBusiness~~recurring. We have one and ~~Web~~two ~~services technology.~~year ~~The~~exclusive ~~integration~~renewable contracts with each of our ~~portfolio~~clients. Our ofcontracts ~~products,~~provide ~~services~~our ~~and~~clients ~~applications~~with ~~into~~a ~~specific~~license ~~industry~~to ~~areas~~use ~~combine~~our Internet infrastructure for the transmission of televison programming to ~~create:~~their private televison systems and channels.

•We also ~~mBusiness~~generate revenue from clients that choose to outsource their television production activities to Watchit. These have been our primary sources of revenue for the past twelve years. While most of Watchit’s historical revenue has been generated from contracts and ~~mobility~~television production ~~solutions~~services, our business and financial model since mid-2005 includes revenue derived from third party advertising on the Watchit Televison Network (WTN).

•An example ~~eBusiness~~of ~~solutions~~WTN proprietary programming is Watchit Gaming Television Network (WGTN), a television channel offering programming related to learning casino games. Our research indicates a high demand for a new, innovative approach to televised gaming instruction. WGTV is a television experience that includes both venue specific and third party advertising that will be relevant to our target audience. Watchit Business Television Network, Watchit Visitor Television Network and Watchit Music Television Network are other examples of proprietary television programming.

•A technological ~~Web~~extension of our proprietary programming model involves the use of Internet Protocol (IP) to enable an interactive connection for hotel room guests. Internet technology infrastructure can be presented to provide our audience with a mechanism to take immediate action and make buying decisions. We are currently in discussions with technology companies that have developed interactive services ~~solutions~~that are well suited to this application in the hospitality and gaming sectors.

• Narrowcasting and video media.Summary

•We are ~~Other~~executing ~~specialized~~a ~~business~~strategy ~~software~~that ~~solutions~~combines our technical and video media expertise to elevate narrowcasting to the next level for the hospitality and gaming market. Our business and financial models have been developed around the following:

By• Narrowcasting ~~implementing Cotelligent’s solutions, our clients are able to:~~ Services

• Third ~~Cut~~Party ~~costs by automating manual processes.~~Advertising

• Proprietary ~~Improve productivity~~ and ~~timeliness~~Licensed ~~of data throughput to and from mobile workers.~~Television Programming

• Interactive ~~Increase competitive advantage.~~Media

~~Below~~• Mobile ~~is a description of each of these areas:~~ Entertainment

~~mBusiness and Mobility Solutions~~ 5

~~Our~~On ~~knowledge~~July ~~and~~13, ~~expertise~~2005 inwe ~~wireless~~sold ~~data~~our ~~applications~~IT ~~has~~services business ~~resulted~~to inFastTrack, ~~our~~LLC, ~~ability~~an toaffiliate ~~service~~of ~~existing~~Beverly ~~clients~~Hills, ~~and~~California ~~propose~~private equity onfirm ~~new~~Skyview ~~business~~Capital, ~~opportunities.~~LLC Weand ~~have~~divested ~~enhanced~~ our ~~portfolio~~remaining ofIT ~~mBusiness~~services ~~solutions~~business ~~through~~for ~~in-house~~aggregate ~~development~~consideration of ~~our~~$2.3 million ~~JASware™~~in ~~middleware~~cash ~~and~~at ~~FastTrack™~~closing ~~framework.~~and ~~The~~an ~~mBusiness~~earn-out ~~and~~of ~~mobility~~up ~~marketplace~~to ~~reflects~~$950 ~~increase~~if inthe ~~demand.~~buyer ~~Cotelligent~~achieves certain ~~continues~~revenue tolevels ~~offer~~over ~~solutions~~the ~~and~~three ~~expertise~~years infollowing ~~wireless~~completion ~~data~~of ~~applications.~~the sale.

~~eBusiness~~The narrowcasting ~~Solutions~~sector is transitioning from the ‘early adapter’ to ‘growth phase’ in the United States. According to InfoTrends/ CAP Ventures, a market research firm, spending on narrowcasting in 2004 was approximately $600 million and spending is projected to grow to over $2.0 billion by 2009. While growth in narrowcasting has been projected in the past, it was not until recently that rapid adoption became possible because the only true method of delivery (flat LCD or Plasma screens) was too expensive. In 2004, this and other delivery hardware became affordable and costs are projected to continue to decline in the years ahead. As with many early stage industries, the narrowcasting competitive landscape is highly fragmented with many small private businesses providing video content, equipment, technical services and related support to a variety of vertical markets across the United States.

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

~~Web~~The advent ~~Services~~of ~~Solutions~~the television set and commercial video transmission in the early 1950’s introduced a break-through communication medium to the world and an industry was born. It was called broadcast television. Over the years, as this technology improved and the cost of television sets decreased, more and more consumers found it affordable to have television in their homes. Advertisers flocked to present their messages to this growing market as the production, presentation and scheduling of television programming improved.

WeDuring the ~~are~~early a1960’s, ~~solution~~television ~~provider~~found application in a variety of government and commercial environments beyond the ~~technologies~~home. So-called ~~most~~‘closed ~~popular~~circuit’ television was initiated in ~~the~~small ~~development~~television studios and presented to captive ~~deployment~~audiences offor ~~Web~~specific ~~services~~purposes. These –purposes ~~most~~included ~~notably~~education and training, ~~IBM~~public ~~WebSphere®~~relations and ~~Microsoft®.~~promotion, ~~NET.~~internal communication and other Asnarrowly atargeted ~~new~~activities. The ~~breed~~cost of ~~pervasive~~the ~~applications,~~technology ~~these~~meant ~~Web~~that ~~services~~it was only affordable to big companies and ~~Cotelligent’s~~agencies ~~highly~~of ~~skilled~~local, ~~team~~state ~~help~~and ~~our~~federal government. In ~~clients~~addition, ~~promote~~in the ~~publication~~early 1970’s, ~~location~~cable ~~and~~television ~~promotion~~introduced a new variety of ~~never~~programming ~~before~~options ~~possible~~to ITconsumers ~~services~~broadening tothe ~~anyone~~options available ~~with~~for anentertainment ~~Internet~~in ~~connection~~the home.

~~Narrowcasting~~During the 1970’s and ~~Video~~1980’s, ~~Media~~improvements in cost and capabilities of video technology continued, making private use more affordable and the applications of video technology increased. Broadcast and cable television became more targeted, the measurement of the effectiveness of advertising became more scientific, new theme-based television channels like HBO, MTV and Discovery Channel captured the attention of audiences as cable television offered new, exciting program options.

~~Watchit~~The introduction ~~Media,~~of ~~Inc.~~commercially isavailable ~~focused~~and onaffordable ~~delivering~~video ~~dynamic~~cassette recorders and video ~~content~~cameras ~~and~~gave ~~services~~consumers the ability to aboth ~~variety~~record and play video tape ofin ~~industries~~the ~~including~~privacy ~~gaming~~of ~~and~~their ~~hospitality~~own homes. Similarly, Bythis ~~combining~~new ~~Cotelligent’s~~technology provided ~~Internet~~a ~~application~~way ~~development~~for businesses large and small to communicate, ~~wireless~~market, merchandise, ~~business~~promote, ~~application~~educate and ~~system~~train ~~integration~~captive ~~expertise~~audiences ~~with~~as never before. The new ~~video~~flexibility ~~technologies,~~in ~~our~~the ~~Company~~use isof ~~being~~video ~~positioned~~recorders gave their users the ability to ~~grow~~present asa single video recording across numerous television sets or video monitors within a ~~competitor~~single inlocation at the ~~narrowcasting~~same ~~industry~~time. As opposed to broadcast or cable television, this new capability had a ‘narrow’ audience and the term narrowcasting emerged.

~~VALUE~~During ~~PROPOSITION~~the 1990’s, the use of video communication became pervasive. The video cassette gave way to the digital video disc, the cost and capabilities of players and recorders continued to improve and the world

~~We promote the following advantages when differentiating our solutions from those of our competitors:~~ 6

~~Our~~evolved from ~~track~~analog to digital. Video cameras that once weighed hundreds of ~~record~~pounds isand ~~verifiable:~~cost Wehundreds ~~apply~~of ~~expertise~~thousands inof ~~complex~~dollars ~~environments~~have tobeen ~~deliver~~replaced ~~solutions~~with onvideo cameras ~~time~~that ~~and~~fit ~~within~~in ~~budget~~the palm of the hand costing several hundred dollars. These efficiencies created by digital media are the key drivers to the growth of the narrowcasting industry.

~~Our~~Narrowcasting is ~~solutions~~defined ~~are~~as ~~designed~~the ~~for~~digital ~~our~~delivery ~~clients’~~of ~~industries:~~motion Wemedia ~~focus~~through onelectronic ~~our~~displays placed ~~clients’~~out-of-home ~~needs~~in indoor and outdoor settings, where all content is centrally managed and controlled. This new medium allows retailers, brand marketers and other entities to ~~achieve~~communicate ~~their~~with ~~potential~~the public by using an unprecedented level of customization and timeliness. Besides promotional messages narrowcasting can be used by many other content providers that wish to entice viewers with other types of programming; most commonly news programs, personal care information and other customer service messages.

~~Our~~The key ~~business~~aspects ~~experts~~of ~~combine~~the ~~technical~~narrowcasting ~~experience~~value ~~with~~proposition ~~vertical~~will ~~industry expertise:~~be Wedirectly ~~combine~~connected to ~~high~~content ~~levels~~provided, regardless of ~~expertise~~the intype ~~both~~of ~~Microsoft-based~~network and ~~open~~application. ~~systems~~In order ~~environment~~to ~~with~~become ~~experience~~successful, innarrowcasting ~~vertical~~program ~~industry~~content ~~markets.~~must satisfy the following conditions:

~~Our~~• Visually ~~approach~~stimulating iscontent tomust ~~help~~hold ~~our~~a captive ~~clients achieve self-sufficiency: We are dedicated to knowledge transfer and remain accessible as our clients~~audience’s ~~businesses evolve.~~ attention;

6• Targeted content must be relevant to the audience, the site, geography, time and other factors;

~~SERVICES~~• Dynamic content that can be changed quickly;

~~The~~• Interactive ~~integrated~~capabilities ~~set~~the ofaudience ~~services~~can weact upon ~~provide~~according to ~~our~~their ~~clients~~interests; ~~include:~~ and

~~Application~~• Integrated ~~Development~~content that can be linked to other information and systems relevant to the audience.

~~Custom~~The major ~~application~~types ~~development~~of technology and features provided by narrowcasting systems are the following:

~~Development~~• Digital ofdisplays, ~~open~~including ~~system~~CRT ormonitors, ~~Microsoft~~LCD screens, ~~architectured~~LEDs, ~~business~~gas ~~applications.~~plasma Inscreens, ~~the~~rear ~~Web environment~~projection, ~~these~~tiled ~~include~~video ~~eBusiness,~~walls ~~ePortal~~or ~~and~~a combination ~~Web~~of ~~services~~these ~~solutions.~~ displays;

~~Industry~~• Display ~~application~~management ~~framework~~hardware, ~~solutions~~ranging from a PC for a single display site to multiple PCs or a server that can run multi-display sites;

~~Development~~• Software ofat ~~industry-specific and company-specific components layered onto~~ the ~~FastTrack™~~ ~~application~~customer ~~framework,~~site ~~which~~for ~~includes~~content communication and mobile workforce management capabilities. The framework approach begins with a core application of base functionality that is faster and less risky to complete compared with a fully customized application. control;

~~Mobile~~• High-bandwidth ~~Middleware~~communications ~~Products~~for ~~(JASware™)~~routine control and monitoring, and satellites for periodic downloading of large digital video and graphic files; and,

~~Management~~• Central ofcontrol ~~the~~site ~~synchronization~~capable ~~and flow~~ of ~~information~~managing ~~between~~ a ~~variety of devices and/or host systems (all in the same system of~~ ~~enterprise)~~multi-site ~~in a wired or unwired environment~~network. ~~Our middleware product mobilizes enterprise systems while managing assets on the move.~~

~~Application~~There are ~~Hosting~~currently more than 100 companies operating in this industry, excluding the various broadband providers and ~~Solution~~large ~~Provider~~content ~~Services~~creators. Industry product and service providers are categorized as follows:

~~Our~~• Network ~~Data~~operators ~~Center~~such ~~provides~~as aCNN, ~~suitable~~CTN, ~~environment~~Next Generation ~~for~~Network ~~the hosting~~ and ~~operational~~Watchit ~~support~~Media ofwho ~~Sales~~are ~~Force~~responsible ~~Automation,~~for ~~Field~~the ~~Force Automation, mobility and eBusiness~~central ~~applications.~~control ~~Support is available 24 hours a day~~centers, 7working ~~days~~as a ~~week,~~key tointerface ~~monitor~~between ~~and~~system ~~manage~~users ~~the accessibility~~ and ~~functionality of these applications.~~ other partners;

~~Remote Support Services~~ 7

~~Staging,~~• Systems ~~configuration,~~integrators ~~distribution~~such ~~and~~as ~~asset~~Watchit ~~management~~Media ~~services~~and Hoffman ~~assist~~who ~~clients~~install ~~with~~systems, ~~deployment~~integrate ofsoftware ~~new~~and ~~mobile solutions. On-going help desk services are available to support users around the clock.~~ components;

~~Education~~• Software developers such as Allure, AlivePromo, FRED Systems and ~~eLearning~~Watchit Media who program and deploy control, ~~Services~~management, content creation and manipulation software;

~~Education~~• Bandwidth ~~services~~providers ~~offer~~such ~~our~~as ~~clients~~AT&T Broadcast, aVerizon ~~variety of products~~ and ~~solutions~~Time ~~that~~Warner ~~can~~Cable bewho ~~bundled~~have tosatellite ~~meet any business’s education~~ and ~~training~~high ~~needs,~~speed communication ~~whether~~pipelines; ~~it is training end users on a new field force application or training the trainers.~~ and

~~Narrowcasting~~• Display manufacturers such as Barco, Clarity Visual Systems and ~~Video~~NEC ~~Media~~who build and sell displays and perform ongoing research and development on technical improvements.

~~Watchit~~Despite these ~~Media~~broad categories, ~~Inc.~~there isare acompetitors ~~new~~in ~~wholly~~the ~~owned~~sector ~~subsidiary~~capable of ~~our~~vertical integration. ~~Company~~In ~~focused~~several oncases, ~~delivering~~software ~~narrowcasting~~developers ~~and~~act ~~dynamic~~as ~~digital~~system integrators. Also, system integrators are sometimes involved in managing network operations. The display ~~services~~manufacturer is usually a clearly defined category, although from time to atime, ~~variety~~they ofbecome ~~industries~~involved in system integration activities. Often, to create a competitive advantage, partnerships are formed across competitive market segments to implement entire systems.

~~MARKET~~Independent distributors ~~CONDITIONS~~and value added resellers also implement systems for smaller businesses that lack the scale to attract the interest of the larger companies described above. We expect value added resellers will play a more significant role in the market in the future, once narrowcasting product and service providers start marketing industry-specific generic systems to single-site operators.

The most ~~general~~important ~~market~~category ~~for~~of ITthose ~~services~~described inabove ~~the US~~ is ~~soft~~the ~~and~~network ~~reflects uncertain economic conditions~~operator. InNetwork operators ~~addition, many US companies that~~ are ~~pursuing~~responsible ITfor ~~projects~~selling ~~are~~to ~~doing~~end ~~so using off-shore~~users, ~~low~~interacting ~~cost resources in India and other underdeveloped countries. Under these conditions~~with advertisers, wemanaging ~~have~~the found that making significant investments in sales and marketing does not result in proportional incremental revenue. Rather than continue to incur considerable sales and marketing costs pursuing broad-based opportunitynetwork, weinterfacing ~~have~~with ~~decided~~the toother ~~preserve~~product ~~our cash~~ and ~~focus on~~ ~~providing the highest level of~~ service toproviders ~~our existing client base. As a result we have been able to stabilize our revenue stream~~ and ~~reduce~~handling ~~our~~administrative ~~expenses~~issues. ~~We believe that the market for new IT services and applications will be limited for the foreseeable future.~~

OnNarrowcasting theMarket other hand, we have been proactive in researching and analyzing other technology markets where our expertise and know-how are complimentary. One of these markets is the narrowcasting market. We believe that combining Cotelligent’s experience in Internet, wireless and system integration technology with video media and digital signage technology presents new exciting opportunities. According to CAP Ventures, a research firm, spending on narrowcasting in 2002 was approximately $390 million. In 2006, spending is expected to increase to over $2.0 billion. On March 2, 2004, the Company acquired OnSite Media, Inc, a business that provides narrowcasting content through hardware and software to the hospitality and gambling industry. By acquiring a business in the narrowcasting market, Cotelligent is now leveraging its assets in a potentially high growth market. Context

7We have learned that people want choices and the more choices the better. The kinds of things people want to choose depends on the values and behaviors of the individual. Since these values and behaviors are the DNA of lifestyle, they’ve become increasingly important to understand especially to media advertisers. We can define broad categories and identify people with certain values and behaviors fitting these categories. Data companies have built significant businesses by profiling individuals based on, among other criteria, their choices.

~~MARKETING~~The power of communication media has been its ability to bring very specific messages to targeted audiences. As an example, advertising is a $260 billion industry. Of that, $60 billion is focused on television. But the effectiveness of television advertising has been decreasing. Recently the global head of marketing for Proctor and Gamble indicated that in 1965 80% of the audience 18 to 49 years old could be reached with three 60 second commercials while in 2002, 117 prime-time commercials were needed to reach the same audience. This is not very encouraging news for broadcast and cable television.

We initiated a number of important marketing initiatives during 2003. These marketing initiatives were focused on helping the Company transform its identity and build its brand in the markets in which it competes. 8

•While the ~~The~~reasons ~~launch~~are ofsubject ~~our~~to ~~revamped~~interpretation, ~~Web~~we ~~site~~believe tothat, ~~reflect~~as the ~~re-branding~~number of choices ~~Cotelligent~~available to the television audience have increased, ~~subsequent~~attention ~~integration~~spans have decreased. Channel surfing makes it easy to avoid commercials having no relevance to the audience as the viewer randomly surveys the program landscape. The introduction of ~~new~~TIVO ~~information,~~and ~~including~~similar ~~our~~digital ~~JASware™~~video ~~mobile~~recorders ~~solutions~~has the potential to render the broadcast television financial and ~~FastTrack™~~business ~~offerings~~model obsolete. The question is what will take its place?

•Digital media ~~Brand~~is ~~building~~revolutionizing ~~through~~communication ~~all~~and, ~~printed~~therefore, the world as we know it. The Internet is now clearly at the center of the revolution. The rate of consumer adaptation of digital media is accelerating. This is driving innovation surrounding digital media at light-speed as new technologies converge devices, protocol and ~~online~~access ~~materials~~at lower and lower costs making more powerful, higher capacity, faster and better choices available to ~~support~~more ~~our~~and ~~offerings~~more consumers. Consider that Internet advertising was a $10 billion business in 2004 and ~~positioning~~it asis expected to grow at a ~~mobility~~compound ~~solutions~~annual ~~provider~~growth rate exceeding 25% per year.

•Digital media ~~Brand~~is ~~building~~the ~~through~~driving ~~tradeshow~~force ~~presence~~behind atthe ~~partner,~~convergence ~~targeted~~of ~~vertical~~the ~~market~~Internet and television ~~similar~~as we know it today. Conventional analog television technology ~~events~~is being replaced by digital and high-definition television formats allowing for interactive television. This shift is being driven by consumer demand. People want more choices and they want them in a form and format that’s easily accessible and digestible 24x7x365.

•In the Wecontext ~~launched~~of adigital ~~significant~~media ~~direct~~the ~~marketing/telemarketing~~emergence ~~campaign~~of ~~that~~narrowcasting ~~generated~~is not a ~~high~~surprise. ~~quantity~~In essence ~~and~~we’re ~~quality~~moving toward a time when each of ~~inquiries~~us will be a private television network. ~~However~~We see a world where one’s profile, ~~these~~which ~~inquiries~~is ~~did~~comprised ~~not~~of ~~translate~~an ~~into~~index of lifestyle and personal interests, forms the ~~sales~~foundation ~~anticipated~~of ~~due~~what is presented directly to ~~the~~one’s ~~market~~communication ~~conditions~~devices ~~mentioned~~whether ~~earlier~~it be in-home or out-of-home. ~~The~~Whether on ~~campaign~~your ~~was~~television ~~terminated~~at ashome, ayour ~~result~~computer at work, your laptop computer when traveling, your cellular phone or other personal appliance, digital media will be produced, packaged and presented to entertain, inform, educate and influence each of ~~these~~us ~~market~~on ~~conditions~~our private television network. Narrowcasting is making this possible.

•Anytime the ~~Regular~~viewer ~~internal~~desires ~~communications~~more, tonew ~~employees~~and ofdifferent ~~Cotelligent~~choices, ~~announcing~~simply ~~events,~~modify ~~client~~the ~~wins~~profile. And when the narrowcast content is flying fast and ~~successes~~furious directly to ~~promote~~whatever digital ~~involvement~~device ~~and~~is ~~build~~being ~~culture~~used one can simply opt-in, temporarily set it aside, store it for viewing later when it’s more convenient or opt-out all together.

WeIn the ~~employ~~Internet anenvironment ~~integrated~~advertiser’s ~~marketing~~messages ~~approach~~can ~~that~~be ~~links~~‘packaged’ ~~planning~~ and ~~the~~narrowcast along ~~launch~~with other rich video content relevant to their audience. Interactive technology provides this capability. Instead of ~~new~~paying higher and higher rates ~~solutions,~~to ~~products~~broadcast and ~~service~~cable ~~offerings~~television, ~~with~~advertisers ~~active~~will ~~marketing~~pay ~~campaigns~~fees to ~~support~~data ~~them~~companies, access providers and narrowcasters. Narrowcasting presents highly targeted content to audiences with very specific profiles.

InThe primary ~~2004,~~enabling technologies for narrowcasting are high definition television and broadband. At the ~~marketing~~present ~~department~~time ~~will~~approximately ~~support~~30% ~~both~~of ~~Cotelligent~~US households have broadband. Adaptation and ~~Watchit~~usage ~~Media,~~is ~~Inc~~growing. ~~businesses.~~By the end of 2005 it is expected that broadband will be in over 40,000,000 households.

~~SALES~~ 9

ToBroadband is ~~control~~the ~~costs~~principle ~~and~~enabler ~~focus~~of ~~our~~rich ~~sales~~digital ~~activity on our existing clients~~media, ~~the~~particularly ~~sales~~video. ~~force~~With ~~was~~data compression ~~reduced~~becoming inmore ~~2003~~efficient, toprocessing ~~only~~capacity ~~those~~and ~~who~~speeds ~~were~~improving and ~~required~~broadband toconnectivity ~~service~~growing, ~~support~~Internet ~~and~~television ~~grow~~will ~~the~~make ~~existing~~narrowcasting of ~~core~~highly ~~client~~targeted, ~~base.~~customized Weprogramming ~~are~~and ~~finding that~~advertising ~~our~~content ~~selling~~produced and presented ~~marketing approach is well suited~~ to ~~the~~commercial ~~markets~~and ~~OnSite~~consumer ~~Media~~private ~~serves~~television asnetworks ~~well~~pervasive. ~~Currently, OnSite drives its video content~~ Taken to 40the ~~casinos and over 50~~extreme,~~000~~ ~~hotel~~virtually ~~rooms.~~every 19video ofmonitor ~~these~~on ~~casinos~~every ~~and~~device ~~23,000~~has ofthe ~~these~~potential to ~~hotel~~present ~~rooms~~unique ~~are~~video ~~in Las Vegas, Nevada~~content.

~~Within OnSite we have already realigned our personnel to assign~~WATCHIT specific responsibility of people to support and generate more revenue from current customers. Watchit Media will launch a sales effort in early 2004 that is focused on vertical industries that complement products, services and industries. We intend to build upon our expertise and market share in the resort/gambling business and then expand this to the hospitality industry more broadly through 2004, We also expect to provide narrowcasting services and products to the trade show industry by developing video programming centered on large scale conventions and conferences. We intend to accomplish this by leveraging our existing hotel in-room customer base with the demands of large convention and conference organizers. MEDIA DIFFERENTIATION

WeWatchit Media, ~~have~~Inc. is a ~~number~~leader ofin ~~other~~creating, ~~new~~producing ~~product~~television programming and advertising ~~service~~on ~~initiatives~~out-of-home inplace ~~development~~based ~~that~~private wetelevision ~~feel offer~~networks ~~opportunity~~ in ~~this~~the ~~rapidly~~gaming, lodging ~~growing~~and ~~market.~~hospitality markets

~~COMPETITION~~Watchit is the process of establishing a significant market share in the the markets in which we compete first in the United States then in other countries. We currently have over 100 active gaming, lodging and hospitality clients. Our clients are located in Nevada, New Jersey, California, Michigan, Mississippi, Oregon, Illinois, Iowa, Indiana, and Louisiana (see list below). At present our television programming is presented in 47% of the available gaming related hotel rooms in Las Vegas. Approximately half of the jumbo screens of the Las Vegas Strip are presenting Watchit’s video content. In the other geographic markets in which we compete we have double-digit market share however Las Vegas is our largest market.

~~In the emerging marketplace of~~The ~~mobility~~following ~~solutions,~~represents ~~there are few standards established and~~ a ~~number~~partial oflisting ~~ways to extend the functionality~~ of ~~the~~Watchit ~~enterprise IT system~~clients. Therefore, each competitor has determined the scope of the solution they provide and the components used to build them. Thus, Cotelligent has a large number of competitors in part determined by the industry and/or technology niche needed for the particular client’s business.

To compete successfully, we must be able to deliver leading-edge solutions with speed and competence, develop and market cost-effective offerings that meet changing client needs, and respond rapidly to evolving technology by continuously training our technical and sales consultants. 10

The narrowcasting industry is comprised of many small niche companies and a few large well capitalized companies. The market is highly fragmented and, at this early stage of the industry’s development, provides Cotelligent / Watchit Media with a broad landscape of acquisition and merger opportunities. From the outset, we expect Watchit Media’s share of the resort/gambling markets combined with the resources from Cotelligent will differentiate us from a majority of the firms who operate in the space. Clients

8Caesars Entertainment – Nevada – New Jersey – Mississippi

~~REGISTRANT~~Boyd ~~INFORMATION~~Gaming – Nevada – Mississippi – Indiana

~~Cotelligent~~Boyd ~~was~~Gaming ~~incorporated~~– inCoast ~~February~~Casinos ~~1993~~- under the laws of the State of California as TSX, a California corporation. In November 1995, we changed our jurisdiction of incorporation to Delaware and our name to Cotelligent Group, Inc. In September 1998, we changed our name to Cotelligent, Inc. Unless the context otherwise requires, references to “Cotelligent,” “Company,” “we,” “us” and “our” refer to Cotelligent, Inc., a Delaware corporation. Nevada

~~Our~~Harrah’s ~~headquarters~~Entertainment ~~are~~– ~~located~~Nevada at– ~~100~~New ~~Theory,~~Jersey ~~Suite~~– ~~200, Irvine,~~ California ~~92612 and our telephone number is (949) 823-1600. Our internet~~– ~~address~~Iowa is– www.cotelligent.com. We make available free of charge on our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)-15(d) of the Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Missouri

~~EMPLOYEES~~Cannery Casino Resorts – Nevada

~~At December 31, 2003 we had 84 employees, including a technical staff of approximately 57 IT professionals.~~ 11

~~RISK~~Hard ~~FACTORS~~Rock Hotel – Nevada

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

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

IfMGM weMirage ~~are~~- ~~unable~~Primm toValley ~~generate~~Resorts ~~positive~~- ~~cash flow and return to profitability in the near term, we may exhaust our capital.~~ Nevada

WeMandalay ~~have~~Resorts ~~experienced~~– aNevada ~~general~~– reduction in demand for our services. At the same time, we have taken action to divest non-strategic operations and have used the cash proceeds from these divestitures to pay off debt obligations. As a result, we have had adequate working capital to fund our needs as we restructured the business. However, our business has incurred net losses and negative operating cash flows in each of the past three years and our working capital and available cash has also decreased in each of the past three years. Our cash resources are limited and if our business does not begin to generate revenue, a positive cash flow and return to profitability in the near term, our on-going liquidity and financial viability would be materially and adversely affected and we may not be able to pursue our business strategy. Mississippi

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

Our future revenues will depend on the development of the eBusiness, mBusiness and Web services markets. The failure of these markets to materialize, or a delay in the development of these markets, could seriously harm our business. Although there has been widespread adoption of the Internet, critical issues concerning the commercial use of the Internet, such as security, reliability, cost, accessibility and quality of service continue to evolve and unforeseen factors may negatively affect the growth of Internet use or the attractiveness of commerce and business communications over the Internet. The success of mBusiness depends on acceptance of wireless data applications for commercial use, the quality of telecommunications and availability of devices supporting wireless applications. Critical issues in the wireless industry include security, cost, accessibility and reliability of service, and further development of wireless technology standards. 12

9Chumash Casino - California

IfValley ~~the~~View ~~narrowcasting~~Casino ~~market~~– ~~does not continue to develop, our business could be harmed.~~ California

~~Our~~Fitzgerald’s ~~ability~~Las toVegas ~~generate revenue in future periods will increasingly depend upon the market~~- for narrowcasting services, solutions and products. There is a risk that the market for narrowcasting services, solutions and products will not materialize. Critical issues concerning the use of computer hardware and software platforms as well as other video equipment and media, their security, reliability, cost, accessibility and quality continue to evolve. The variability of these factors could materially affect our ability to compete in the market, resulting in an adverse effect on our consolidated financial position, results of operations and cash flows... Nevada

WeHawaiian ~~have~~Gardens aCasino ~~limited~~– ~~operating history in the mBusiness and Web services markets.~~ California

~~The~~Binion’s ~~uncertainty~~Gambling ofHall ~~our~~& ~~future~~Hotel ~~performance~~– in these markets may impact our ability to market and sell mBusiness and Web services solutions to prospective clients, which would adversely affect our consolidated financial position, results of operations and cash flows. Nevada

WeStarwood ~~may~~Hotels ~~make acquisitions,~~& ~~which~~Resorts ifWorldwide ~~proven~~– ~~unsuccessful, could negatively affect our future profitability and growth.~~ Nevada

WeFour ~~believe~~Queens ~~the~~Hotel ~~economic~~& ~~landscapes~~Casino ~~have~~– created opportunity for us to invest in, or acquire businesses that have undergone severe downward pressure in revenues, profit, cash and stock price. We may not be able to identify, acquire or profitably manage additional businesses that we may invest in or acquire without substantial costs, delays or other problems. In addition, acquisitions may involve a number of special risks, including: Nevada

~~• Diversion of management’s attention;~~13

•Marriott ~~Failure~~Hotels to– ~~retain key acquired personnel;~~Nevada

•Embassy ~~Risks~~Suites ~~associated~~– ~~with unanticipated events, circumstances or legal liabilities;~~Nevada

InImperial ~~addition,~~Palace ifHotel ~~the~~& ~~acquired~~Casino ~~businesses~~– have operating losses or negative operating cash flow, our ability to achieve positive cash flow and profitability, as well as our liquidity, could be adversely affected. Some or all of these risks could adversely affect our operations and financial performance. For example, client satisfaction or performance problems at a single acquired business could adversely affect our reputation and financial results. Further, any businesses acquired in the future may not achieve anticipated revenues and earnings and therefore negatively impact our consolidated financial position, results of operations and cash flows Nevada

~~Our~~La ~~future~~Quinta ~~growth~~Inn ~~and~~& ~~ability~~Suites to– ~~differentiate Cotelligent from its competition is, in part, dependent upon our success in developing, marketing and selling our mobile management solution services.~~ Nevada

WeMonte ~~are~~Carlo ~~marketing~~Resort ~~and~~& ~~selling~~Casino ~~mobile~~– management solutions and services. Some of these efforts in the past year have not been successful. In addition, our resources in the mobile management solution area are limited. Nevertheless, we continue to focus on this business as it represents significant opportunity. If we are not able to stay abreast of technical advancements in the market or deliver these solutions and services, our consolidated financial position, results of operations and cash flows could suffer. Nevada

~~Our~~New ~~software~~Frontier ~~applications~~Hotel ~~may~~& ~~not~~Casino ~~work~~– ~~as intended.~~ Nevada

~~Part~~Royal ofResort ~~our~~& ~~strategy~~Casino is– to provide synchronization and transfer of information between disparate systems, platforms and devices, and rapidly implement mobile business solutions. If our software products, including our JASware™ products and FastTrack™ framework, do not work as intended, we will be unable to provide these solutions to our clients and our consolidated financial position, results of operations and cash flows would be adversely affected. Nevada

~~We may need to invest heavily in research and development to keep our software applications viable.~~ 14

WeTuscany ~~may~~Hotel ~~need~~& toCasino ~~invest~~– heavily in research and development to keep our software applications and solutions viable in the rapidly changing markets in which we operate. This research and development effort may require significant resources and may not be successful. The investment of significant resources in research and development could adversely affect our liquidity. In addition, our business may be adversely affected if our investment does not result in the development of software applications and solutions that can be used in providing IT solutions to our clients, resulting in an adverse impact on our consolidated financial position, results of operations and cash flows. Nevada

10The Westin Casuarina Hotel & Spa– Nevada

WeChinook ~~may~~Winds beCasino ~~unable~~& toResort ~~protect~~– ~~our proprietary technology.~~ Nevada

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

WeRiverside ~~may~~Resort ~~not~~Hotel ~~be able~~& toCasino ~~establish~~– ~~successful partnerships or strategic alliances, and partnerships and strategic alliances we do establish may not be successful.~~ Nevada

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

We Lake ~~are~~of ~~subject~~the toTorches ~~rapid~~Hotel & ~~changes~~Casino in– ~~technology~~Wisconsin ~~and client preferences.~~

~~Our~~Ramada ~~market~~Hotel is– ~~characterized~~Nevada by rapidly changing technology, changes in client requirements and preferences, frequent new product and service announcements, and evolving new industry standards and practices that could render our custom software development skills obsolete. Our success will depend, in part, on our ability to acquire or license leading technologies useful in our business; develop new software solutions and technology that address the increasingly sophisticated and varied needs of existing and prospective clients; and respond to technological advances and evolving industry standards and practices on a cost-effective and timely basis. Custom application software development for our clients entails significant technical, financial and business risks. To be successful, we must adapt to the rapidly changing market by continually improving the performance and reliability of software applications for our clients. We could also incur substantial costs to modify our software applications to adapt to these changes. Our consolidated financial position, results of operations and cash flows could be adversely affected if we incurred significant costs without adequate results.

~~We are subject to government regulation and legal uncertainties.~~ 15

~~Our~~Quality ~~business~~Inn ~~may~~– beNevada affected by regulations and laws directly applicable to the Internet. The application of existing laws and regulations to us relating to issues such as user privacy, pricing, taxation, content regulation and quality of products and services can be unclear. In addition, we will also be subject to new laws and regulations directly applicable to our activities. Any existing or new legislation applicable to our business could reduce the rate of growth of the Internet, which could materially adversely affect our consolidated financial position, results of operations and cash flows.

~~Our~~Hilton ~~clients~~Garden ~~may~~Inn ~~cancel~~– orNevada ~~delay spending on IT solution initiatives because of the current economic climate.~~

Since the second half of 2000, many companies have experienced financial difficulties or uncertainty and have canceled or delayed spending on technology consulting initiatives as a result. Furthermore, the severe financial difficulties which many start-up Internet companies have experienced have further reduced the perceived urgency by larger companies to begin or continue technology initiatives. If large companies continue to cancel or delay their technology consulting initiatives because of the current economic climate, or for other reasons, our business and consolidated financial position, results of operations and cash flows could be adversely affected. 16

~~Our~~WVTV ~~revenues~~Hotels ~~and~~– Southern ~~financial condition may be adversely affected by the loss of business from significant clients.~~ California

Our revenues are primarily derived from services provided in response to client requests or on an assignment-by-assignment basis. A significant portion of our revenues come from engagements, which are terminable at any time by our clients, generally without penalty. In addition, for the year ended December 31, 2003, our largest client, second largest client, third largest client and ten 17

11We Use Internet Protocol (IP) and Digital Video Technology

~~largest~~Our ~~clients~~foundation ~~accounted~~of ~~for~~experience ~~approximately~~in ~~21%,~~information technology ~~20%,~~is ~~13%~~a ~~and~~competitive ~~83%,~~advantage ~~respectively,~~to ofWatchit ~~our~~Media ~~revenues~~in the narrowcasting sector. ~~Our~~Over ~~clients~~the ~~may~~past ~~not~~six ~~continue~~years toCotelligent ~~engage~~has usfocused ~~for~~on ~~projects~~providing orits ~~use~~clients ~~our~~with ~~services~~Internet atapplication ~~historical~~development, ~~levels~~local area network, ifwide atarea network, ~~all~~wireless and other advanced technologies. IfAt wethis ~~lose~~stage ain ~~major~~the evolution ~~client~~of ornarrowcasting, ~~suffer~~video adata ~~reduction~~compression, indigital ~~business~~video, ~~our~~computer aided ~~consolidated~~video ~~financial~~editing ~~position~~and broadband delivery of data is becoming increasingly important. As evidence of this fact, ~~results~~we have been awarded a number of significant ~~operations~~client ~~and~~engagements ~~cash~~because ~~flows~~of ~~may~~our beexpertise ~~adversely~~in ~~affected~~both technology and the production of video media.

IfThe weWatchit ~~fail~~Media toFinancial ~~continue~~Model toIs ~~attract~~Based ~~and~~on ~~retain qualified IT professionals~~License, itand ~~could harm~~Digital ~~our~~Video ~~business.~~Production Service

Our ~~success depends upon our ability to attract, hire~~ ~~and~~clients retain ~~technical~~us ~~consultants,~~to ~~software~~manage ~~developers,~~their ~~software~~private ~~engineers~~television ~~and~~channels ~~project managers who possess the necessary skills~~ and ~~experience~~related system ~~to conduct our business. We continually identify~~infrastructure, ~~screen~~ and ~~retain~~to ~~qualified~~produce ITtelevision ~~professionals~~programming pertinent to ~~keep~~their ~~pace~~brand, ~~with~~marketing ~~client~~communications ~~demand for rapidly evolving technologies~~ and ~~varying~~hotel ~~client~~property ~~needs~~amenities. We ~~compete~~have ~~for~~annual renewable ~~these~~contracts ~~professionals~~ with our clients, ~~other~~for ~~providers~~managing ofthe ~~software~~IP ~~solutions~~infrastructure ~~and~~that interfaces ~~services,~~with ~~systems~~their ~~integrators,~~television ~~providers of outsourcing services, computer~~ systems ~~consultants~~ and, ~~temporary staffing companies~~ in asome ~~variety~~cases, oftheir ~~industry~~information ~~segments~~system infrastructure. ~~Competition~~Watchit ~~for~~engages ~~individuals~~each ~~with~~of ~~proven~~its ~~technical~~clients ~~skills is intense. In the past, we have experienced difficulties~~ in ~~identifying~~one ~~and~~to ~~retaining~~two year ~~qualified~~exclusive ITannual ~~professionals~~contracts and, incharges ~~some~~a ~~instances,~~base wemonthly ~~were~~license ~~unable~~fee ~~to meet requests~~ for these services. ~~We cannot assure that qualified IT professionals will continue to be available to us in sufficient numbers.~~

~~Our~~Watchit ~~success~~Media isProprietary ~~dependent~~Television onProgramming ~~our~~With ~~key~~Third ~~management personnel.~~ Party Advertising

~~Our~~During 2004, ~~operations~~Watchit ~~are~~Media ~~dependent~~introduced onits ~~the~~Watchit ~~continued~~branded ~~efforts~~television ofprogramming designed ~~our~~to ~~executive~~be ~~officers~~relevant to the viewing audience at each gaming and ~~senior~~hospitality ~~management~~venue. InOur ~~addition,~~approach weto ~~will~~proprietary ~~likely~~television ~~depend~~programming is based on the ~~senior~~fact that ~~management~~each of ~~any~~our ~~business~~hotel weclient ~~may~~venues ~~merge~~has ~~with~~a orunique ~~acquire~~guest inprofile ~~the~~based ~~future.~~on location, Ifstyle, ~~any~~character, price, amenities, and other related factors. The profiles of ~~these~~the ~~people~~guests ~~are~~that ~~unable~~frequent ora ~~unwilling~~hotel tend to ~~continue~~be insimilar ~~his~~and orconsistent. By ~~her~~understanding ~~present~~the ~~role,~~characteristics orof ifthat weprofile, ~~are~~Watchit ~~unable~~is toable ~~hire,~~to ~~train~~produce and ~~integrate~~present ~~new~~television ~~management~~programming ~~personnel~~that ~~effectively,~~is ~~our~~relevant ~~business~~ and ~~consolidated~~entertaining ~~financial~~to the ~~position~~guest and, ~~results~~at ofthe ~~operations~~same ~~and~~time, ~~cash~~include ~~flows~~venue ~~could~~specific beand ~~adversely~~third ~~affected.~~party advertising Wethat dois ~~not~~targeted ~~maintain~~and ~~key~~focused ~~person~~on ~~life~~that ~~insurance~~audience onat ~~our~~a ~~Chief~~cost ~~Executive~~that ~~Officer~~is orsignificantly ~~Chief~~less ~~Financial~~than ~~Officer~~broadcast orand ~~other~~cable ~~members~~television ~~of senior management~~advertising.

WeIt ~~face~~is ~~intense~~prohibitively ~~competition~~expensive ~~that~~for ~~could~~a ~~adversely~~private ~~affect~~venue ~~our~~like ~~ability~~a hotel to ~~generate~~advertise ~~revenue~~on broadcast or cable television. With the cost of advertising on broadcast and cable ~~profitability~~television going up, mass market, regional and local advertisers are seeking more cost effective ways of reaching target audiences. Watchit proprietary television programming allows the venue to maximize the use of its television asset by customizing its programming and advertising directly to their captive audience. They already have the television system in place; we’re converting it into a powerful branding, marketing and communication system.

WeSTRATEGIC compete with companies that seek to provide solutions to extend the functionality of a company’s enterprise IT system and those that provide mobility solutions. On any project, our competitors will depend, in part, on the industry and/or technology niche needed for the particular client’s business. Our competitors include local, regional and national software firms, IT consulting firms, system integration firms, professional service divisions of application software firms and the professional service groups of computer equipment companies. We may also compete with larger system integrators. Many of our competitors have greater technical, financial or marketing resources than we have. In addition, we intend to enter new markets and expand our solutions and services offerings through internal growth and acquisitions, and we expect to encounter additional competition from established companies in these areas. If we cannot compete effectively in our industry, our consolidated financial position, results of operations and cash flows could be adversely affected. ACQUISITIONS

WeIn doAugust ~~not~~2005, ~~have~~the Company acquired California Visitor Network (CVN). The acquisition has been in business for 5 years and has a ~~credit~~dominant ~~facility~~share of the hospitality market with private video networks in ~~place~~32 ashotels wepresenting ~~operate~~venue ~~from~~related ~~existing~~and ~~cash~~third ~~resources~~party advertising to over 2,500 guest rooms. The acquisition of California Visitor Television has given Watchit entry into an expansive market with a well respected television channel. We plan to aggressively expand our footprint throughout the Orange County market then to San Diego and Los Angeles areas within the next two years.

When we paid off our bank loan on June 30, 2000, our credit facility was terminated. Prior to June 30, 2000, we relied on our credit facility and positive cash flow to satisfy our liquidity needs. We have not secured additional financing and plan to continue operating using our existing cash resources and cash resources generated from the collection of our accounts receivable. Should we find ourselves in need of more cash, we would have to seek financing and might, as a result, have a short-term liquidity problem. Additionally, we may not be successful in securing financing, or if successful, the terms may not be advantageous to us. 18

WeSALES ~~face~~AND ~~potential liability due to the project nature of our business which often requires our IT professionals to work at our clients’ place of business.~~ MARKETING

~~Our~~We ITinitiated ~~professionals are often deployed in the workplace of other businesses. As~~ a ~~result~~number of ~~this~~important ~~activity, we could be subject to possible claims of discrimination and~~selling ~~harassment,~~and ~~employment~~marketing ofinitiatives ~~illegal~~during ~~aliens or other similar claims~~2005. These ~~types~~initiatives ofwere ~~claims~~focused ~~could~~on helping ~~result in negative publicity for~~ us ~~and~~transform ~~money~~our ~~damages~~identity orfrom ~~fines.~~IT ~~Although~~services weto ~~have~~its ~~not~~new ~~had~~Watchit ~~any significant problems in this area~~Media, Inc. webrand ~~could~~and ~~encounter~~to ~~these problems~~increase inrevenue. ~~the~~Significant ~~future.~~marketing initiatives included:

We• Conduct ~~are~~active, ~~also~~aggressive ~~exposed~~outreach to ~~liability for actions of our IT~~ ~~professionals~~Watchit ~~while on assignment~~Media, ~~including~~Inc. ~~damages~~clients ~~caused~~in byorder ~~employee~~to ~~errors,~~educate ~~misuse~~them ofabout ~~client-proprietary~~Watchit’s ~~information~~approach to ornarrowcasting ~~theft~~following ~~of client property. Because of~~ the ~~nature~~acquisition of ~~our~~OnSite ~~assignments and the related potential liability~~Media, ~~we cannot assure that insurance we maintain, if continually available, will be sufficient in amount or scope to cover a loss~~Inc.

12• Convert all Watchit Media, Inc. client agreements from month-to-month to exclusive one year or longer terms.

~~Cotelligent~~• Market ~~may not realize fully~~ the ~~cost~~Watchit ~~savings~~brand ~~and other benefits it expects~~ to ~~realize as a result of~~ the ~~merge~~ ~~with OnSite Media~~gaming, lodging and ~~Inc.~~hospitality ~~This~~markets ~~may~~more broadly ~~adversely~~in ~~affect~~order ~~Cotelligent’s~~to ~~earnings~~win ~~and~~new ~~financial condition~~clients.

~~Although~~• Commence ~~OnSite~~regular ~~and~~internal ~~Cotelligent~~communications ~~expect significant benefits~~ to ~~result from the merger, Cotelligent may not realize any of these anticipated benefits. The merger involves~~ ~~the~~employees ~~integration~~ of ~~two~~our ~~companies~~Company ~~that~~announcing ~~have~~events, ~~previously~~client ~~operated~~wins ~~independently.~~and ~~The~~successes ~~value of Cotelligent common stock following consummation of the merger may be affected by the degree of success in achieving the benefits expected~~ to ~~result from~~ ~~consummation~~promote ofinvolvement ~~the merger. Achieving these benefits will depend in part upon meeting the challenges inherent in the successful combination of two business enterprises~~ and ~~upon~~build the possible resulting diversion of management attention for an extended period of time. Challenges like these may not be met and may negatively impact the operations of Cotelligent following the merger. Delays encountered in the transition process could have a material adverse effect on our ~~consolidated financial position, results of operations and cash flows~~culture.

~~Customer~~NEW ~~uncertainty related~~MARKET ~~to the merger with OnSite Media, Inc. could harm the combined company.~~ DEVELOPMENT

~~Cotelligent’s~~Today, Watchit orMedia ~~OnSite’s~~creates ~~customers~~dynamic ~~may,~~television inprogramming ~~response~~on toprivate ~~the~~television networks ~~consummation~~for ofgaming, ~~the~~lodging ~~merger,~~and ~~delay~~hospitality companies. orWatchit ~~defer~~manages ~~purchasing~~and ~~decisions.~~produces ~~Any~~its ~~delay~~video orcontent, ~~deferral~~which is seen on the gaming floor, in ~~purchasing~~registration bycenters, ~~Cotelligent’s~~in orcommon ~~OnSite’s~~areas, ~~customers~~in ~~could~~restaurants, ~~adversely~~on ~~affect~~outdoor ~~the~~signs ~~consolidated~~and ~~financial~~in ~~position~~guest rooms, ~~results~~that ofpertains ~~operations~~to ~~and~~the ~~cash~~client’s ~~flows~~gaming, ofdining, entertainment, ~~the~~spa ~~combined~~and ~~company.~~fitness, and retail store amenities.

~~The~~An important ~~market~~of ~~price~~Watchit’s ofbusiness ~~Cotelligent~~strategy ~~common~~leverages ~~stock~~our ~~may~~current ~~decline~~distribution network/relationships asand aour ~~result~~production ofcapabilities ~~the~~to ~~merger~~build ~~with~~Watchit proprietary ~~OnSite~~television ~~Media,~~programs ~~Inc~~on the Watchit Television Network (WTN). These proprietary television programs will help us to transition our business model from one of providing only services to being a ‘media and entertainment company’ focused on producing relevant targeted programming and advertising for private television networks that includes third party advertising.

~~The~~Watchit is ~~market~~focused ~~price~~on ofbuilding ~~Cotelligent~~its ~~common~~distribution ~~stock~~network ~~could~~because, ~~decline~~we asbelieve, athe ~~result~~larger the scale of our distribution network, the ~~merger~~more attractive we become to third party advertisers. Watchit has already presented Watchit Gaming Television (WGTV presents gaming instruction programming), ~~based~~Watchit onMusic ~~the~~Television ~~occurrence~~(WMTV presents music video programming with play lists matching venue / guest demographic profiles) and Watchit Visitor Television (WVTV presents point-of-interest aprogramming ~~number~~at the visitors destination). Watchit proprietary television programs are provided to client hotels free of ~~events,~~charge ~~including:~~and Watchit derives revenue from third party advertising.

•Based on ~~the~~our ~~failure~~discussions with top advertising agencies as well as with our clients, a success factor to ~~successfully~~this ~~integrate~~model ~~OnSite~~will ~~into~~be ~~Cotelligent;~~our ability to combine the interests of the demographic profile of the guest who will be watching our programming with third party advertising that is compatible with that guest lifestyle. Fortunately, most gaming, lodging and hospitality companies have significant profile data on their guests. Using select data points, we are able to draw conclusions about the viewing interests of our targeted

~~• delays or failure in the integration of OnSite and Cotelligent technology.~~19

Weaudiences. Our ~~may~~goal ~~not~~is ~~receive~~to ~~any~~attract ~~proceeds~~and ~~from~~retain the ~~exercise~~guest’s ofattention ~~the~~to ~~warrants~~our ~~issued~~programming into the ~~connection~~extent ~~with~~that the ~~acquisition~~advertising ofbecomes ~~OnSite~~a ~~Media,~~relevant ~~Inc.~~part of the viewing experience.

IfOnce our ~~the~~television ~~maximum~~programming ~~amount~~is ofpresented, ~~warrant~~we ~~shares~~intend ~~contemplated~~to byhave ~~the~~third ~~merger~~party ~~agreement are issued and~~firms ~~subsequently~~conduct ~~exercised,~~surveys ~~Cotelligent~~at ~~will~~hotels ~~receive aggregate gross proceeds of approximately $1.3 million. Given the historical share price~~ and ~~market~~conferences ~~for Cotelligent common stock, there is no way~~ to ~~know~~measure ~~whether~~ the ~~warrants~~effectiveness ~~will be in-the-money~~of ~~during~~Watchit’s ~~the two years following the closing~~programming. ~~Consequently~~In addition, ~~neither~~we ~~Cotelligent~~will ~~nor~~have ~~OnSite~~special ~~can~~promotional ~~predict~~programs that ~~whether the warrants~~ will beattract ~~exercised~~our ~~prior~~audience toin ~~their~~ways ~~expiration~~that ~~or whether any funds from their exercise~~ will behelp ~~made~~us ~~available~~ to ~~Cotelligent~~measure atwho’s ~~anytime~~watching inour ~~the~~programming ~~future.~~and ~~Additionally,~~whether ~~the~~we ~~exercise~~are ofbeing ~~warrants~~effective ~~will~~in ~~have~~presenting ~~dilutive effect on~~ the best ~~holders~~advertising offor ~~Cotelligent~~that ~~common stock~~audience.

WeBuilding a ~~may~~large-scale ~~lose~~distribution ~~certain~~network ~~tax~~will ~~attributes~~drive asopportunities ato ~~result~~produce proprietary ofprograms ~~the~~like ~~merger~~WGTV, WVTV, WBTV, and WMTV bringing third party advertising to our client’s private television networks. However, it will be Watchit’s in-house television production capabilities and our ability to license relevant content from other television content libraries and archives that will make it happen.

AtThe greatest ~~December~~benefit ~~31,~~of ~~2003,~~our ~~Cotelligent~~television ~~had~~programming ~~available~~is ~~net~~derived ~~operating~~from ~~loss~~each ~~(NOL)~~hospitality venue ~~carry-forwards~~presenting ~~of approximately $35~~Watchit.7 ~~million.~~Each ~~Under~~hour ~~Section 382~~ of ~~the~~our ~~Internal~~television ~~Revenue~~programming ~~Code~~will ofinclude ~~1986,~~advertising asspots ~~amended,~~for the ~~use~~venue’s ofown ~~prior~~brand ~~losses~~communication, ~~including~~venue ~~NOLs,~~amenities isand other ~~limited~~promotional ~~if a corporation undergoes an “ownership change~~information.” ~~The merger~~So, ~~together~~for ~~with~~example, ~~future~~rather ~~issuances~~than ofrunning ~~equity~~a ~~interests~~half byhour program ~~Cotelligent~~on or the ~~exercise~~hotel’s ofamenities ~~outstanding~~that ~~warrants or~~loops ~~options~~and toruns ~~purchase~~48 ~~Cotelligent~~times ~~stock,~~a ~~may~~day ~~result~~(which infew guests anwatch) ~~ownership~~their ~~change~~own ~~that~~brand iscommunication ~~large~~will ~~enough~~be ~~for~~presented ~~this~~in ~~limitation to apply. If~~ the ~~limitation~~context ~~applies, Cotelligent may be unable to use a material portion~~ of ~~its available NOL carry-forwards to~~ ~~reduce~~Watchit’s ~~future~~relevant ~~taxable~~television ~~income~~programs.

13It is important to remember that broadcast television, cable television and video-on-demand, which most hotels run on their television systems do not offer an opportunity for the venue to promote their brand. The lodging industry is continuously seeking novel ways to improve brand awareness and brand loyalty yet the industry has passed their most powerful communication platform to broadcast, cable and video-on-demand. While hotel venues derive revenue from video-on-demand, there is no direct benefit, aside from offering conventional television programming, to offering broadcast and cable television.

~~Item~~The Watchit 2Television Network enables each hotel venue to use the most powerful communication platform available, their own television system, to their best advantage. ~~Properties~~Watchit’s demographically specific television programming complimented by the venue’s brand communication elevates the brand to the highest level of their guest’s awareness.

WeConsider the ~~currently~~broadcast ~~operate~~and ~~out~~cable oftelevision ~~two~~models. ~~locations~~Due ~~including~~to ~~Irvine,~~the ~~California~~fact ~~and~~the ~~Philadelphia~~audience is, ~~Pennsylvania.~~for the ~~Our~~most ~~operations~~part ~~are~~in-home, ~~located~~the inprogramming ~~facilities~~has ~~with~~to anchange ~~aggregate~~all ofthe ~~approximately~~time ~~48,800~~to ~~square~~keep ~~feet~~the audiences’ ~~and~~interest. ~~are~~Both ~~leased~~programming ~~at aggregate~~and ~~current~~advertising ~~monthly~~must ~~rents~~constantly ofbe refreshed ~~approximately~~to $0be relevant.1 ~~million~~Conversely ~~with~~on noaverage, ~~lease~~hotel ~~commitment~~guests ~~for~~stay approximately ~~these~~two ~~properties~~and ~~extending~~one ~~past~~half ~~the~~days ~~year~~per ~~2005~~visit. ~~The~~Due ~~Company~~to ~~has~~the ~~lease~~fact ~~commitments~~that ~~for~~our ~~certain~~captive audiences ~~properties~~are ~~from~~transient ~~which~~and, ittherefore nobeing ~~longer~~‘refreshed’ ~~operates~~constantly, ~~which~~Watchit’s television ~~extend~~programming ~~past 2005.~~doesn’t Wehave ~~believe~~to ~~that~~change ~~our~~nearly ~~properties~~as ~~are~~often. ~~adequate~~This ~~for~~means ~~our~~we’re able ~~needs.~~to ~~Furthermore,~~use weour ~~believe~~programming ~~that~~for ~~suitable~~a ~~additional~~longer orperiod ~~replacement~~of ~~space~~time. ~~will~~This behelps ~~available~~derive ~~when~~much more ~~required~~value onfrom ~~terms~~our weprogramming ~~believe~~and, ~~will~~therefore behigher ~~acceptable.~~gross margins.

OnSite currently operates out of one facility located in Las Vegas, Nevada. The facility has 2,600 square feet and is leased for $3 per month, through 2007. The Company believes this property is adequate for OnSite’s current needs and believes that suitable additional or replacement space will be available when required on terms we believe will be acceptable. 20

~~Item~~On the 3.other ~~Legal~~hand, ~~Proceedings~~by using our IP television network platform Manageit Enterprise, Watchit (or the hotel) may change the programming whenever necessary to engage and suit their captive audiences by simply using a brower.

CotelligentWatchit hasGaming filedTelevision a claim under arbitration proceedings against Bluebook International Holding, Inc. for unpaid trade accounts receivable. Bluebook International Holding, Inc. has filed a counter claim against Cotelligent for breach of a consulting services agreement. At this time, we do not believe this will have a material adverse impact on our consolidated financial position, results of operations and cash flows. (WGTV)

WeGiven ~~are~~the Company’s strong market presence in the gaming sector, ~~from~~we ~~time~~are continually looking for ways to ~~time~~leverage our strengths. Watchit is currently in the process of developing a WGTV, a proprietary ~~party~~one-hour toprogram ~~litigation~~that ~~arising~~profiles the latest trends in the gaming ~~normal~~industry ~~course~~including ofgaming ~~our~~results, ~~business~~strategies and interviews with players. We plan ~~are~~to ~~not~~produce ~~presently~~and ~~subject~~manage tothis ~~any~~channel ~~material~~in ~~litigation.~~hotels free of charge and share a percentage of the revenue with the hotel presenting WGTV.

~~Item~~Watchit 4.Gaming ~~Submission~~is one hour in length with 20 minutes of ~~Matters~~advertising. Of the 20 minutes, five minutes is for the hotel to either promote their brand and amenities or sell to third parties. The remaining 15 minutes is sold by Watchit to third party advertisers. We believe the gaming companies are interested in this programming because it will stimulate their customers to gamble and will provide them with a ~~Vote~~new ofincome source ~~Security~~at ~~Holders~~no charge.

NoWe ~~matters~~also ~~were~~believe ~~submitted~~this type of programming will appeal to ahotel ~~vote~~customers because the majority of ~~security~~people ~~holders~~staying at gaming hotels are interested in gambling and in related lifestyle programming (an example of this is the ~~fourth~~widespread ~~quarter~~following of the television program The World Series of Poker). Initially, we will be targeting existing clients as potential venues of this program and then we will use this WGTV as an entry into other prospective clients.

14Watchit Visitors Television (WVTV)

~~PART~~We recently IIlaunched WVTV in Las Vegas with a demographically specific one hour television program that includes 20 minutes of both venue specific and third party advertising. In addition in September 2005 Watchit acquired California Visitor Television (CVTV) in Orange County California. CVTV has been presented in over 30 hotels in the Orange County beach cities for the past five years. By acquiring CVTV, Watchit has now entered one of the top destination resorts in the United States with its television programming. Furthermore, this acquisition gives Watchit entry into one of the largest hotel markets in the world in Southern California.

~~Item~~WVTV currently 5.presents ~~Market~~point-of-interest ~~for~~and historical television programming relevant to the ~~Registrant~~hotel guest’s ~~Common~~experience ~~Equity~~in the Las Vegas and ~~Related~~Orange ~~Stockholder~~County California ~~Matters~~beach area markets. We have the expertise, in-house capabilities, and technology infrastructure to create a continuous, powerful venue specific television guest experience.

The following table sets forth, for the periods indicated, the high and low sales prices for the Common Stock. The Common Stock was listed on the NYSE under the symbol “CGZ”, until October 11, 2001, when it was listed on the OTC Bulletin Board, and then temporarily moved to the OTC Pink Sheets on September 25, 2002, returning to the OTC Bulletin Board on February 10, 2003. The Common Stock has been listed on the OTC under the symbol “CGZT”. 21

	Quarter End
Fiscal Year Ended Dec 31, 2002	Mar 31		June 30		Sept 30		Dec 31
Common stock price per share:
High	$	0.50	$	0.75	$	0.65	$	0.62
Low		0.25		0.40		0.11		0.16
Fiscal Year Ended Dec 31, 2003	Mar 31		June 30		Sept 30		Dec 31
Common stock price per share:
High	$	0.48	$	0.35	$	0.43	$	0.30
Low		0.25		0.20		0.20		0.13

Watchit Music Television (WMTV)

OnWatchit ~~April~~Music 8,Television ~~2004,~~(WMTV) ~~the~~presents ~~last~~music ~~reported~~videos conforming to a ~~sales~~demographically ~~price~~specific ofplay list. For example, the ~~Common~~guest ~~Stock~~profile at the Bellagio, asWynn ~~reported~~or onFour Seasons is very different than the ~~OTC~~guest ~~Bulletin~~profile ~~Board~~at the Holiday Inn, ~~was~~Best ~~$0.22~~Western ~~per~~or ~~share~~Sheraton. OnAs ~~April~~a 8result, ~~2004,~~the ~~there~~play ~~were~~lists ~~733~~at ~~stockholders~~these hotels ofare ~~record~~very ofdifferent. It is likely the ~~Common~~play ~~Stock.~~list at Bellagio, Wynn and Four Seasons includes jazz and classical while play list at Holiday Inn, Best Western and Sheraton may include gospel, rock and pop.

~~Item~~In 6WMTV we present our own ‘video jockeys’ (VJ). ~~Selected~~Our ~~Financial~~VJ’s ~~Data~~bring a unique personality to WMTV along with presenting venue specific content that ‘customizes’ programming for the hotel brand / venue. This is yet another way Watchit engages its captive audience in a television experience that connects the hotel more intimately with each guest.

~~The~~Over ~~following~~the ~~selected~~next ~~financial~~four ~~data~~quarters, ~~should~~Watchit will be ~~read~~aggressively inmarketing ~~conjunction~~its other ~~with~~Private ~~the~~Venue ~~financial~~Programs ~~statements,~~to ~~related~~current ~~notes~~ and ~~other~~targeted ~~financial~~hospitality ~~information~~companies ~~of the Company included~~and ~~elsewhere~~hotel ~~herein~~venues. ~~See~~We ~~“Item~~are 7.currently ~~Management’s~~developing ~~Discussion~~the ~~and~~following ~~Analysis~~channels ofto ~~Financial~~round-out our ~~Condition~~first ~~and~~‘Watchit ~~Results~~Television ofNetwork ~~Operations”.~~program package’:

15Watchit Business Television Network

~~SELECTED~~Watchit ~~FINANCIAL~~Sports ~~DATA~~Television Network

~~(In~~Watchit ~~thousands,~~Golf ~~except~~Television ~~share and per share data)~~ Network

	Year Ended December 31,									NineMonths EndedDecember 31			Year EndedMarch 31,
	2003			2002			2001			2000			2000
Statement of Operations Data (1) (2) (3):
Revenues	$	9,936		$	16,956		$	46,843		$	68,444		$	109,164
Cost of services		6,543			10,507			33,372			47,161			73,595
Gross profit		3,393			6,449			13,471			21,283			35,569
Research and development costs		619			1,887			862			—			—
Selling, general and administrative expenses		13,733			19,279			32,332			41,238			45,126
Impairment of long-lived assets		177			—			4,562			42,450			—
Restructuring charge		2,531			691			2,436			1,620			—
Operating loss		(13,667	)		(15,408	)		(26,721	)		(64,025	)		(9,557	)
Other income (expense)		(1,349	)		(1,784	)		(73	)		(1,360	)		(3,756	)
Loss before provision for income taxes		(15,016	)		(17,192	)		(26,794	)		(65,385	)		(13,313	)
Benefit for income taxes		(2,509	)		(7,493	)		(3,455	)		(7,677	)		(4,660	)
Loss from continuing operations		(12,507	)		(9,699	)		(23,339	)		(57,708	)		(8,653	)
Operating loss from discontinued operations, net of income taxes of $5,379 for the year ended March 31, 2000		—			—			—			—			(9,990	)
Income (loss) on sale of discontinued operations, net of income taxes of $12,744, for the nine months ended December 31, 2000-		157			976			(190	)		19,541			—
Income (loss) from discontinued operations		157			976			(190	)		19,541			(9,990	)
Net loss	$	(12,350	)	$	(8,723	)	$	(23,529	)	$	(38,167	)	$	(18,643	)
Loss per share
Basic and diluted–
Loss from continuing operations	$	(0.94	)	$	(0.73	)	$	(1.75	)	$	(4.26	)	$	(0.64	)
Income (loss) from discontinued operations		0.01			0.07			(0.01	)		1.44			(0.74	)
Net loss	$	(0.93	)	$	(0.66	)	$	(1.76	)	$	(2.82	)	$	(1.38	)
Weighted average number of shares outstanding
Basic and diluted		13,324,217			13,201,532			13,379,320			13,537,927			13,536,775
	December 31,												March 31,
	2003			2002			2001			2000			2000
Balance Sheet Data:
Working capital	$	4,567		$	16,396		$	26,689		$	37,353		$	43,047
Total assets	$	8,363		$	25,033		$	36,080		$	65,805		$	159,527
Long-term debt	$	—		$	—		$	—		$	—		$	52
Stockholders’ equity	$	4,483		$	16,697		$	25,456		$	49,284		$	85,980

Watchit Travel Television Network

~~(1)~~Watchit ~~The~~Fashion ~~Company~~Television historically operated on an April 1 to March 31 fiscal year. In July 2000, the Company changed its fiscal year to December 31, resulting in a nine month transition period from April 1, 2000 through December 31, 2000. Prior to March 31, 2000, the Company entered into a plan to divest its IT staff augmentation business. Accordingly, the accompanying financial data have been prepared to present as discontinued operations the Company’s IT staff augmentation business for all periods presented.Network

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

~~(3)~~Watchit ~~Cotelligent~~Food ~~acquired~~Television ~~OnSite Media, Inc., a Nevada corporation, on March 2, 2004. The results of OnSite Media, Inc. will be included in the Company’s results from its acquisition date.~~Network

16Watchit Entertainment Television Network

~~Item~~Watchit ~~7. Management~~Children’s ~~Discussion~~Television ~~and Analysis of Financial Condition and Results of Operations~~Network

~~Cotelligent~~Watchit ~~was~~Luxury ~~formed~~Television in February 1993 to acquire, own and operate IT consulting services businesses. Cotelligent was a non-operating entity until 1996 when it first began to acquire businesses. The Company historically operated on an April 1 to March 31 fiscal year. In July 2000, the Company changed its fiscal year to December 31, resulting in a nine-month transition period from April 1, 2000 through December 31, 2000. Prior to March 31, 2000, the Company entered into a plan to divest its IT staff augmentation business. Accordingly, the Selected Financial Data of Cotelligent has been restated to present as discontinued operations the Company’s IT staff augmentation business for all periods presented. Network

~~Cotelligent~~As ~~provides~~is ITindicated ~~consulting and also provides maintenance~~above, ~~support~~our ~~and~~approach ~~hosting~~is onto ~~software~~‘package’ ~~products~~our ~~it has licensed. The IT consulting services are either provided under time and materials billing arrangements or on a fixed-fee~~television ~~basis.~~programs ~~For~~presenting ~~time~~them ~~and materials arrangements, revenues are recorded as work is performed. Revenues are directly related~~ to the ~~total~~owners ~~number~~ of ~~hours~~private ~~billed~~television tonetworks ~~clients~~in ~~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. Revenues pursuant to fixed-fee contracts are generally recognized as services are rendered on the percentage-of-completion methodway ofthat ~~accounting~~targets ~~based~~demographically onspecific ~~hours~~captive ~~incurred to total estimated labor hours to complete~~audiences. InWe ~~addition, the Company has developed complete mobile workforce management solutions for industries that~~ have ~~medium to large transient sales, field or delivery~~already ~~personnel.~~initiated Athis ~~component~~in ofLas ~~these~~Vegas ~~solutions~~with ~~may~~a ~~include~~package ~~software~~ that ~~has~~includes ~~been developed by the Company. For each element in a software arrangement (e.g.~~WVTV, ~~license,~~WMTV ~~maintenance,~~ and ~~services),~~WGTV. ~~revenue is recognized once there is evidence of an~~As ~~arrangement,~~we ~~delivery~~produce ~~has~~/ ~~been~~license ~~made,~~/ ~~the~~acquire ~~fee is fixed or determinable,~~ the ~~collectibility~~content ~~is probable. The amount of revenue recognized~~ for ~~each~~the ~~element~~other isnetworks ~~based~~we ~~upon vendor specific objective evidence of fair value using the residual method.~~have ~~Maintenance~~listed, ~~and~~they ~~service~~will ~~revenue~~be isadded ~~recognized~~to as the ~~Company~~Watchit ~~performs~~Television ~~the services~~Network. ~~The Company has not had significant sales of software.~~

~~The~~We ~~Company’s~~believe, ~~principal~~as ~~costs~~we ~~are~~broaden ~~professional compensation directly related to~~ the ~~performance~~scale of ~~services~~our ~~and~~distribution ~~related expenses. Gross profits (revenues after professional compensation~~ and ~~related expenses) are primarily a function of hours billed to clients per professional employee or consultant, hourly billing rates of those employees or consultants,~~ the ~~percentage~~ number of ~~effort~~networks ~~complete~~we ~~with~~offer ~~respect~~in ~~to fixed-fee~~our ~~contracts and employee or consultant compensation. Gross profits can be adversely impacted if services provided cannot be billed~~package, if the ~~Company~~Watchit isTelevision ~~not~~Network ~~effective~~will ~~in managing its service activities, if fixed-fee engagements are not properly~~become ~~priced,~~a ifviable ~~consultant~~replacement ~~costs~~/ ~~increase~~supplement ~~beyond relative increases in pricing, or if there are high levels of unutilized time (work activities not chargeable~~ to ~~clients~~broadcast orand ~~unrelated~~cable ~~to client services) of full-time salaried service professional employees~~television.

Operating income 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 business development activities require a higher level of selling, general and administrative activities as well as investment in research and development activities. 22

AsOur agoal ~~service~~is ~~and software organization, the Company responds~~ to ~~service~~help ~~demands~~our ~~from~~hotel ~~its~~ clients. ~~Accordingly,~~offer the ~~Company~~Watchit ~~has~~Television ~~limited control over the timing and~~Network ~~circumstances~~as ~~under~~an ~~which~~important ~~its~~differentiator ~~services~~when ~~are~~a ~~provided.~~visitor ~~Therefore,~~is ~~the~~deciding ~~Company can experience volatility in its operating results from quarter~~ to ~~quarter.~~make ~~The operating results for any quarter are not necessarily indicative of the results for any~~a ~~future period~~reservation.

17Watchit’s Television Content

~~OVERVIEW~~Watchit OFproduces ~~2003~~its ~~AND~~own ~~2002~~content and licenses content from other content providers. The Company is in the process of starting Watchit Entertainment, Inc., a wholly-owned subsidiary of Watchit Media, Inc. for the purpose of isolating Watchit’s content related television production activities. We are currently establishing strategic alliances with major domestic and international content providers.

~~Beginning~~The inWatchit ~~late~~Television ~~1999,~~Network ~~the~~will ~~Company~~present ~~began~~outstanding, highly-relevant totelevision ~~see~~programming afor ~~general~~each ~~softening~~of inthe ~~demand~~networks ~~for IT~~identified ~~services and solutions~~above. ~~This~~It ~~was~~is ~~initially~~important ~~caused~~to byremember, the ~~so-called~~majority ~~Y2K~~of ~~problem.~~our ~~Because~~television ~~Cotelligent~~programming isn’t ~~had~~time ~~framed~~sensitive. ~~its~~The ~~business~~programming ~~around~~we ~~software~~require ~~development~~is available and ITaccessible ~~staffing (as opposed~~ to Watchit. ~~Y2K~~In ~~project~~addition, ~~oriented~~with ~~tasks~~our ~~and~~expertise ~~activities) we experienced a decline~~ in ~~the~~technology ~~demand~~and ~~for~~ our ~~services~~expanding distribution channels and ~~solutions~~network, ~~In the process of executing a retrenchment strategy in 2001~~ we ~~began~~expect to ~~experience~~repurpose ~~the~~much ~~impact~~ of athe ~~downturn~~content we inproduce US and ~~global~~license ~~economic performance which was exacerbated~~ in ~~late~~order ~~2001 and 2002 by international terrorist activities. Furthermore, financial pressures caused by these factors resulted in many of Cotelligent’s clients~~ to ~~either~~present ~~discontinue~~across ~~IT services projects altogether, or pursue~~ a ~~lower~~variety ~~cost option~~ of ~~software~~video ~~development~~delivery ~~in India and other off-shore labor markets~~platforms.

We believe we have been proactive in dealing with these issues in a market environment that continues to be under severe spending pressure. As an example, in June of 2000 the Company divested the majority its staff augmentation business. In the ~~years~~future ~~that~~we ~~followed~~expect ~~leading up~~ to ~~2002,~~ ~~the~~produce ~~Company strategically shifted from providing general IT services and solutions to a targeted approach to offering mobile workforce management and Web services. We changed~~ our go-to-market strategy to better focus our resources and leverage our deep experience and solid client base in these areas. Our decision to do this was reinforced at the time by market research, financial research and the Company’s own ~~research~~television ~~and~~programs ~~analysis indicating that mobile workforce management~~ and ~~Web~~ ~~services~~proprietary ~~were~~television ~~the next emerging growth markets~~content. Our solutions utilized broadly accepted as well as cutting edge technologies. The Company had spent considerable time devoted to the development of these core competencies after divesting the majority of our staff augmentation business in 2000. In addition, the Company carefully assessed and exited a number of solutions and service offerings that were not core to the principal service offerings outlined above.

WhileBeyond executing this strategy we believed we were focused on offering services that would result in additional revenue in the near term. From 2001 through the third quarter of 2003 the Company continued to invest heavily in a large scale salesGaming, marketingLodging and business development organization working to capture new business. In September 2002, the Company hired a marketing executive to develop and implement a more formalized and systematic marketing program for the Company because of the difficulty we were having in selling new business to new clients. Marketing programs re-designed and put in place by early 2003 offered promising results when measured against prior year sales opportunity pipeline and business backlog. By the second quarter of 2003, the Company gained more confidence in its marketing program and saw an unprecedented number of prospect and client proposals. Nevertheless, throughout 2003 we continued to be disappointed by prospects and clients either delaying decisions to initiate projects or pursuing a lower cost off-shore option to executing their projects. In spite of the Company’s investments in its selling organization, we were not successful in signing new business with companies we had not done business with before. We did, however, continue to receive new contracts with existing clients. Hospitality

InWatchit ~~August~~has ofidentified ~~2003,~~other itrelated ~~became~~markets ~~clear~~ to uswhich ~~that~~we abelieve ~~number of~~our ~~opportunities~~approach ~~that only a few months before looked promising were not going to occur. The Company performed an in-depth review of each opportunity~~ and ~~concluded~~demographically ~~that~~specific ~~businesses~~television ~~were~~programming ~~reticent~~are ~~to use discretionary expenditures to invest in mobile workforce and Web service technologies given the fact that their current IT environments operated satisfactorily~~applicable. ~~In addition, fearful of continuing economic circumstances and market pressures, we observed that many of the prospects that decided to~~These ~~pursue~~markets ~~projects did so with larger, better capitalized firms than Cotelligent.~~ include:

ItTime became evident that the outlook for spending in IT services would continue to be uncertain without any clear indication of when a turnaround could be expected. Accordingly, in August 2003, the Company terminated the majority of its senior executive staff along with most of the sales and business development organization. At the same time we aggressively engaged our existing clients and committed ourselves to supporting their project requirements. In some cases we have been successful in securing longer term commitments. By scaling back expenses and focusing intensely on generating revenue from our long term clients we began to stabilize our revenue trend allowing us to move forward in our attempt to restore profitability and positive cash flow in the near term. Share

~~Throughout~~Condo the remainder of 2003, the Company continued to reduce headcount and looked closely at expense activity to scale back and streamline operating costs in line with revenue. The Philadelphia-based operation that supports Cotelligent’s sales force automation application FastTrack has achieved stable revenue over the past several years and our clients continue to give us high marks for performance and client service. In addition, the core team responsible for our custom software development activities is helping us to take advantage of recurring projects with existing clients. By keeping only the top sales account executives and account managers, we have lowered our selling cost and improved our client relationships and retention. Hotels

InMixed ~~April~~Residential ~~2003, our Chief Executive Officer, James Lavelle, sent a letter to our stockholders indicating the Company’s intention to engage in merger~~ and ~~acquisition~~Commercial activities in order to help improve Cotelligent’s prospects for the future and increase our scale. As a matter of course since we started our Company in 1996 and successfully executed an aggressive M&A strategy through early 1999, we have researched and analyzed a variety of vertical markets that could provide new growth opportunities for us through Developments

18Secure Residential Communities

~~merger~~Business ~~or acquisition. In mid-2003 Cotelligent signed a Letter of Intent to acquire a field force automation firm. After 90 days of due diligence, we decided not to consummate the transaction.~~ Centers

InAssisted ~~September~~Living 2003, Cotelligent engaged in a dialog with narrowcasting company, OnSite Media, Inc. The combination of Cotelligent’s deep history in Internet, media and wireless technologies and OnSite’s strength in driving video content to high growth venues in the gaming and hospitality industries looked promising. Cotelligent entered into a definitive agreement to acquire OnSite Media, Inc. on November 24, 2003, and closed the transaction on March 2, 2004. By integrating OnSite’s business with Cotelligent’s infrastructure, and by utilizing our public company know how to position us for the future, we have set about executing a strategy that we believe will allow us to play an important role in the convergence of Internet, video and mobile technology. This is a growing; fast paced market in which we believe the ability to integrate these technologies will help us to differentiate us from many other companies. Centers

YearMobile Ended December 31, 2003 Compared to Year Ended December 31, 2002 Entertainment

~~Revenues~~One of the most dynamic consumer markets today and in the years ahead is mobile entertainment; the delivery of subscription based entertainment and information on cellular ‘mobile’ telephones and PDA’s. Our market research has clearly identified mobile entertainment as a significant Narrowcasting opportunity for Watchit Entertainment, Inc. Consider that in the next 12 months, over 800,000,000 mobile phones will be sold world-wide. The new generation of mobile phones is capable of receiving and presenting motion media downloaded from the Internet.

~~Revenues~~This ~~decreased~~is ~~during~~not ~~the~~new ~~year~~to ~~ended~~mobile ~~December~~telephones ~~31,~~in ~~2003~~other byparts ~~$7,020,~~of orthe ~~41%,~~world. toIn European $9countries,~~936~~ ~~from $16~~Scandinavia,~~956~~ ~~in the year ended December 31, 2002.~~ Japan

During 2003, the Company continued its evolution from providing general IT consulting services towards offering IT solutions targeted in mobile workforce management and Web services. The decrease in revenue was due to a reduction in custom software development projects. The 2002 decrease in revenues occurred at a time when there was a softening in the IT services market and during which time the Company invested heavily in sales and formalized marketing programs. Although the sales and marketing efforts resulted in increased interest from potential clients, the Company’s experience has been that businesses have not increased spending on IT services and continuously delayed spending in anticipation of further evidence that an economic recovery was imminent. 23

~~Gross~~and ~~Profit~~parts of China, mobile phones are able to run short video (MPEG) files. Within the year, Fox Television is planning to produce the program ‘24’ in short segments and a ‘24’ game for mobile phones. Time / Warner and other major communication companies are in this rapidly growing market.

~~Gross~~One ~~profit~~of ~~decreased~~our ingoals ~~the~~is ~~year~~to ~~ended~~launch ~~December~~our ~~31,~~own ~~2003~~subscription byservice ~~$3,056,~~to orthe mobile ~~47%,~~entertainment tomarket ~~$3,393~~called ~~from~~VT3….’Vegas Top Ten Today’. This service ~~$6,449~~will present the top ten significant news events in Las Vegas, the entertainment ~~year~~capital ~~ended~~of ~~December~~the 31world, ~~2002~~everyday. The Company is partnering with a well known television personality in producing and publishing this content on mobile phones.

~~The~~WATCHIT’S ~~decrease~~IP inTELEVISION ~~gross~~NETWORK profit was commensurate with the overall reduction in revenue. Gross profit as a percentage of revenues decreased to 34% from 38% due to utilization of billable staff. As revenues decreased, excess billable staff was retained in order to maintain certain skill levels within multiple locations. Through a reorganization of responsibilities, the Company maintained the necessary skill levels but eliminated a number of underutilized billable people. Consequently, by the fourth quarter of 2003, our gross margin increased to 40%. TECHNOLOGY

~~Research~~Watchit Media provides products and ~~Development~~services ~~Costs~~for the creation, management and distribution of video programming for private television networks. Watchit’s approach allows any business or enterprise to facilitate the production and delivery of motion media advertising and programming to any type of video display device, including plasma, LCD, LED, projectors, and televisions in an efficient and cost-effective way.

~~Research~~Watchit ~~and~~Media ~~development~~owns ~~costs~~a ~~were~~proprietary ~~$619~~technology ~~for~~that enables users to create their own advertising media then present the ~~year~~advertisement ~~ended~~within minutes ~~December~~on their own Private Video Network which we call Watchit’s Makeit. An ~~31,~~important ~~2003~~tool ~~compared~~within toMakeit ~~$1,887~~is ~~for~~Manageit. This comprehensive Internet application is comprised of computer-based tools addressing every step in the process ~~year~~of ~~ended~~creating ~~December~~an ~~31,~~advertising ~~2002~~message then running it on our client’s own Private Video Network. We view its ease of use and low cost to be critical success factors.

InWatchit ~~2003, research~~also ~~and~~owns ~~development~~a ~~costs~~proprietary ofsoftware ~~$619~~product ~~comprised~~called ~~research~~Scheduleit. ~~and~~This software ~~development~~technology ~~incurred~~provides ~~for~~a ~~the~~high ~~development~~level of aflexibility ~~software~~in ~~solution~~the ~~for~~scheduling aof all ~~business~~video ~~partner~~programming ~~($230)~~on ~~and~~our ~~other~~clients ~~ancillary~~private ~~projects~~television ~~($389)~~networks. ByWatchit’s Scheduleit ~~the~~is ~~fourth~~an ~~quarter~~important part of ~~2003,~~all ~~most~~ of ~~the~~our ~~research~~client’s ~~and development staff had left the company through reductions in force~~systems.

InThe ~~2002, research~~following ~~and~~sections ~~development~~describe ~~expense~~Scheduleit ~~of $1,887 comprised research~~ and ~~development costs incurred for~~ the ~~development~~computer-based ~~of a software solution for a business partner ($1,048), together with the continued research and development costs related to the~~tools ~~development~~that ofcomprise ~~middleware software associated with the mobile workforce management service offerings and other ancillary projects ($839)~~Makeit.

19 Makeit

~~Selling~~Broadcast quality video in minutes from your desktop…..Makeit is an online video advertising creation product designed for digital signage and information kiosks. Each client logs onto their own creation and management online studio where step-by-step instructions and a user-friendly interface guide the user through the production process. The user may select from a complete set of pre-built motion backgrounds segregated into different areas such as dining, ~~General~~sports, entertainment, and ~~Administrative~~gaming. ~~Expenses~~The user may also upload their own motion background if they choose.

Selling, general and administrative expenses decreased $5,546, or 29%, to $13,733 for the year ended December 31, 2003 from $19,279 for the year ended December 31, 2002. The $5,546 decrease in selling, general and administrative items comprised the following items. 24

Decrease in wage expense due to reductions in number of operating staff as evidenced by 27 operating staff at the end of 2003 compared to 58 operating staff at the end of 2002	$	3,704
Decrease in outside accounting service and audit fees primarily due to the re-audit of 2000 and 2001 financial statements in the prior year		771
Decrease in occupancy and office operating costs due to the closure of operating locations and lower headcount		725
Decrease in travel and entertainment expenses due to reductions in sales, business development and executive staff positions		514
Decrease in commissions paid to sales people as a result of lower revenues		314
Decrease in legal services due to less litigation		171
Recoveries from previously written off accounts receivable		(399	)
Write down of note receivable from acquirer of a discontinued operation		(303	)
Other effects		49
Total decrease in selling, general and administrative expenses	$	5,546

After selecting a background, text is added into place and formatted, transitions are added and a logo overlaid. Then the user may add music or other vocal to complete a 10-second to 30-second video advertisement. Within minutes users are able to create a fully customized animated MPEG2 encoded video advertisement using Makeit.

~~Impairment~~Completion of the advertisement is confirmed and a link to an online ~~Long-lived~~preview ~~Assets~~is emailed to the user. Once the user approves the advertisement the finished MPEG2 file may be purchased with a major credit card then downloaded into Watchit’s Scheduleit software for registered clients.

~~During~~Makeit ~~the~~offers ~~year~~any ~~ended~~user ~~December~~with ~~31,~~Internet ~~2003,~~access the ~~Company~~ ~~recognized~~ability anto ~~impairment~~maintain their ~~charge~~own ~~for~~online ~~long-lived~~database ~~assets~~ of ~~$177~~graphics, ~~relating~~video toand ~~property~~audio media and backgrounds, along ~~purchased~~with ~~software~~access ~~and~~to ~~equipment~~the ~~associated~~Makeit ~~with~~library, ~~its~~to ~~headquarters~~create ~~location.~~compelling video advertising in minutes.

Restructuring Charge Scheduleit

InScheduleit ~~August~~is ~~2003,~~a asWindows-based ~~part~~application offor ~~the~~local ~~Company’s~~area ~~efforts~~management ~~to streamline its operations commensurate with its revenue base, the Company identified opportunities to reduce~~of ~~its~~media ~~cost~~on ~~structure~~a byprivate ~~reducing~~television ~~headcount~~network. The ~~Company~~software ~~terminated~~allows ~~approximately~~users 33to ~~management~~connect ~~and operating staff between August 2003 and December 2003 and recorded a restructuring charge related~~ to pre-configured ~~the~~video ~~severance~~appliances ~~and extended medical~~ (~~COBRA~~players) ~~benefits provided~~ to schedule the ~~terminated~~playing ~~employees~~ of encoded ~~$2,531.~~video ~~The~~on ~~Company~~televisions, ~~paid~~plasma ~~all severance benefits prior to December 31~~screens, ~~2003.~~LCD ~~A former officer of the Company terminated as part of the restructuring plan~~monitors, ~~used~~LED ~~severance~~reader ~~benefits to re-pay $618 of notes~~boards ~~receivable~~or ~~and accrued interest due the Company~~projectors.

InOnce ~~the~~a ~~fourth~~video ~~quarter~~player ~~of 2002,~~device ashas ~~part~~been ofselected, ~~the~~Scheduleit ~~Company’s~~communicates with ~~effort~~each toappliance ~~reorganize~~individually ~~its marketing approach~~ and ~~delivery~~allows ~~of client services,~~ the ~~Company~~user ~~identified opportunities~~ to ~~reduce its cost structure by reducing headcount. Accordingly~~upload, ~~the~~manage ~~Company~~and ~~adopted a~~schedule the ~~restructuring~~video ~~plan.~~programming ~~The~~that ~~restructuring~~is ~~charge~~stored ofon ~~$691 included provisions for severance of approximately 27 management and operating staff. The entire amount of severance was paid in~~ the ~~fourth~~selected ~~quarter of 2002~~player.

~~Other~~Any ~~Income~~programming ~~(Expense)~~may be scheduled within a play list that runs on a 24/7 continuous loop sending a signal to connected display devices. Video programs are scheduled to play at selected days and times over a designated period, and can be archived when not designated to a slot in the current play list.

~~Other~~ScheduleIT ~~income~~contains ~~(expense)~~convenient ~~primarily~~tools ~~consists~~for ~~of interest income~~grouping, ~~interest~~sorting ~~expense,~~ and ~~equity~~ ~~method~~previewing ~~losses~~video programs on anthe ~~investment~~player. inA an‘split ~~alliance~~screen ~~partner~~interface’ provides simple navigation and a single view of the ~~change~~play inlist ~~market~~and ~~value~~archived ~~associated~~video programs, with aneasy ~~investment~~button inaccess afor ~~marketable~~importing ~~security.~~video programs and other application functions.

~~Interest~~ScheduleIT ~~income,~~is ~~net of interest expense was $259 for~~ the ~~year~~perfect ~~ended~~tool ~~December 31, 2003 compared to $183~~ for ~~the~~managing ~~year~~video ~~ended~~media ~~December~~within ~~31, 2002. The increase in net interest income was the result of recognizing interest income on payment of notes receivable by certain officers of the Company,~~ a ~~decrease in interest expense due the pay-off of an obligation due the sellers of an acquired business, offset by lower interest~~single ~~income~~location onPrivate ~~lower~~Video ~~cash balances on hand during the year ended December 31, 2003~~Network.

OtherManageIT expense for the year ended December 31, 2003 was $1,608, and was principally the change in market value associated with an investment in a marketable security ($1,273) and equity method losses on an investment in an alliance partner ($335). Enterprise

20ManageIT Enterprise is a complete enterprise video media management and display solution. Whether your enterprise is located over several blocks or over several continents, ManageIT can provide the flexible control, distribution, and security necessary for targeted messaging and programming throughout a large or geographically dispersed Private Video Network.

~~Provision~~Users ~~(Benefit)~~can create and schedule programming for ~~Income~~across ~~Taxes~~the hall or around the world, via an easy web-based interface. Administrators add and assign rights to users for access to the system allowing them to operate only within the limits of their authorization.

~~The Company realized an income tax benefit of $2,509 for the year ended December 31, 2003, compared to an income tax benefit of $7,493 for the year ended December 31, 2002.~~ 25

~~The~~Manageit ~~income~~can ~~tax~~interface ~~benefit~~with ofdatabases ~~$2,509~~allowing ~~for~~ the ~~year~~system ~~ended~~to ~~December~~overlay ~~31,~~or scroll ~~2003,~~real-time ~~resulted~~information ~~from~~on ~~the~~televisions ~~reversal~~or ofvideo andisplays. ~~accrual~~Templates provide ~~for~~an ~~income~~easy ~~tax~~way ~~contingencies~~for ofadvertisements ~~$2,549,~~to ~~offset~~be bycreated ~~state~~and ~~tax~~updated ~~payments~~with ~~of $40. During~~ the ~~annual assessment of the tax provision~~help ~~in the fourth quarter~~ of ~~2003,~~online ~~the~~creation ~~Company~~wizards ~~identified additional net operating losses, available for carryback to the tax years~~ that ~~gave~~guide ~~rise to~~ the ~~contingencies,~~user ~~which~~with ~~became~~prompts ~~available~~and fill in ~~2003 to mitigate the exposure~~forms.

~~The~~Clients ~~income~~can ~~tax~~have ~~benefit of $7,493 for~~ the ~~year~~Manageit ~~ended~~server ~~December 31, 2002 was the result of the Job Creation and Worker Assistance Act of 2002, approved by Congress~~ on ~~March~~their 9,premises ~~2002,~~or ~~allowing~~choose ~~net operating losses for the Company’s fiscal tax year ended March 31, 2002~~ to ~~be carried back five years. In accordance with SFAS No. 109, the~~ ~~effect~~have ofWatchit ~~this~~host ~~change~~and inadminister ~~tax~~their ~~law~~complete ~~was~~enterprise ~~reflected in the December 31~~system, ~~2002~~which ~~financial~~is seamless ~~statements~~and astransparent ~~changes~~to ~~in tax law must be reflected in~~ the ~~period~~end ~~of enactment~~user.

~~Income~~Manageit ~~(Loss)~~players ~~from~~are ~~Discontinued~~capable ~~Operations~~of playing any type of video program or media file and can display them concurrently within a created template. ManageIT can administer any number of players, displays, video media files and users, as the system is completely scalable.

~~Discontinued~~Manageit ~~operations~~allows ~~comprised~~integration ~~operations~~via ~~associated~~a ~~with~~‘gaming ~~the~~controller’ ITwith ~~staff~~progressive meters ~~augmentation~~and ~~portion~~triggers offor the ~~Company’s~~gaming ~~business~~industry and ~~the~~allows ~~gain~~for oninterruptive programming ~~the~~to ~~sale~~provide ofjackpot ~~the~~or ~~discontinued~~progressive hits, special announcements and ~~operations.~~emergency broadcast.

~~The~~Manageit ~~income~~is ~~from~~a ~~discontinued~~full-featured ~~operations~~video ofmedia ~~$157~~management ~~for~~and ~~the~~display ~~year ended~~system ~~December~~specifically ~~31,~~designed ~~2003~~for ~~was~~ the ~~result~~enterprise ofwide ~~cash~~private ~~collected~~television ~~on trade accounts receivable written off in prior years to bad debt expense ($51)~~ and communication ~~proceeds from a lawsuit against the predecessor owners of one of the discontinued operations ($106)~~network.

The income from discontinued operations of $976 for the year ended December 31, 2002 was the result of cash collected on trade accounts receivable in 2002 written off in prior years to bad debt expense ($501) and proceeds from a lawsuit against the predecessor owners of one of the discontinued operations ($475). Services

~~Year~~Watchit ~~Ended~~media ~~December~~provides 31full service video and film production services, specializing ~~2002~~in ~~Compared~~creating todynamic ~~Year~~programming ~~Ended~~and ~~December~~advertising ~~31,~~specifically targeted ~~2001~~at profiled audiences within a designated location or enterprise.

RevenuesVideo/Film Production

~~Revenues~~• Script ~~decreased~~Writing - Watchit ~~during~~Media ~~the~~offers ~~year~~script ~~ended~~writing ~~December~~for ~~31,~~video ~~2002~~advertisements byand ~~$29,887,~~Private orVenue Programming. ~~64%,~~We walk our clients through a simple questionnaire to ~~$16,956~~provide the ~~from~~basic ~~$46,843~~message into ~~the~~be ~~year~~conveyed, ~~ended~~the ~~December~~approximate 31length, ~~2001~~then we provide a first draft for their review. We make all necessary changes on the final voice-over.

~~During~~• Shooting ~~2002, the Company~~- ~~continued~~Watchit ~~its~~provides ~~evolution~~on-location ~~from~~digital ~~providing~~video ~~general~~and ITfilm ~~consulting~~production services. ~~towards offering IT solutions targeted in mobile workforce management and Web~~ These services. ~~Consequently,~~range ~~the~~from ~~decrease~~small insingle ~~revenue~~camera ~~was~~B-roll ~~due~~filming to ~~the~~a ~~reduction in general IT services the~~full-scale ~~Company~~television ~~had~~production. ~~decided~~We ~~not~~manage ~~to actively pursue~~equipment, ~~primarily~~cast ~~because these service offerings were not strategic to the Company~~ and alogistics. ~~softening~~Watchit inMedia offers the ~~market~~complete ~~for~~video ~~these~~production ~~service~~crew ~~offering~~including ~~made~~Director, itDirector ~~difficult and expensive to secure new or renewed business. The~~of ~~Company~~Photography, ~~carefully~~gaffers ~~assessed~~ and ~~continued to exit a number of solutions oriented lines of business and service offerings in 2002 that were not core to mobile workforce management and Web services~~grips. ~~Towards~~We ~~the~~can ~~end~~produce ofvideo ~~2002,~~programming ~~approximately~~on ~~77% of the~~virtually ~~Company’s~~any ~~revenue was related to mobile workforce management or Web Services~~budget.

~~Gross~~• Studio ~~Profit~~- At Watchit Media’s creative media and television studio in Las Vegas we have a complete sound stage that can be retrofitted to any specifications that require studio work. We are capable of producing infomercials, newscasts, interviews or any other studio setting programming. Our ‘green screen’ and latest lighting and keying technology are ideally suited to the requirements of Watchit’s target markets.

~~Gross profit decreased in the year ended December 31, 2002 by $7,022, or 52%, to $6,449 from $13,471 in the year ended December 31, 2001.~~ 26

ThePost decrease in gross profit was commensurate with the overall decrease in revenue. Nevertheless, gross profit as a percentage of revenues increased to 38% from 29% due to the implementation of a pricing model that provided for a better analysis of the cost the Company needed to recover on engagements, a mix shift to higher margin projects, caused in part by the end of some long-term, lower margin, legacy system development engagements, and reductions in underutilized billable staff. Production

21Watchit Media has five complete edit bays for post edit and FX compositing. We work side-by-side with our clients or take direction and provide ‘dailies’ for client approval. We handle all video formats and can output to any media platform.

~~Research~~Our workflow includes full Standard Definition resolution, DV and ~~Development~~High Definition ~~Costs~~720p or 1080i standards. Our application suite consists of Apple G5 computers running Final Cut pro HD software, as well as Adobe After Effects, 3D Max and other professional compositing applications. Watchit also has edit suites for Avid and Adobe Premiere projects. We can cut any project from full feature film to a 15 second interstitial advertisement in any format (film, DV, SD or HD).

~~Research and development costs were $1,887 for the year ended December 31, 2002 compared to $862 for the year ended December 31, 2001.~~ COMPETITION

InThe narrowcasting ~~2002,~~sector ~~research~~is ~~and~~comprised ~~development expense~~ of ~~$1,887~~many ~~comprised~~small ~~research~~niche companies and a few large ~~development~~well ~~costs~~capitalized ~~incurred~~companies. ~~for~~The market is highly fragmented at this early stage of the industry’s development. The majority of athe ~~software~~narrowcasting ~~solution~~companies ~~for~~in the acompetitive ~~business~~market ~~partner~~use static delivery media like VHS tape or Digital Video Discs (~~$1,048~~“DVD”) to present video content. Increasingly, ~~together~~users ~~with~~of ~~the~~dynamic ~~continued~~motion media ~~research~~require frequent changes to content. Using Internet Protocol and ~~development~~advanced digital ~~costs~~video ~~related~~technology is an important differentiator for our Company because we are able to ~~the~~change ~~development~~content anytime and immediately. Watchit has another competitive advantage because of ~~middleware~~our ~~software~~strong ~~associated~~background ~~with~~as system integrators and in the ~~mobile~~development ~~workforce management~~and ~~service~~installation ~~offerings~~of local and ~~other~~wide ~~ancillary~~area ~~projects~~networks ~~($839).~~which are becoming the technology backbone of dynamic motion media.

In ~~2001~~ addition, ~~the Company~~we ~~created~~believe awe ~~dedicated~~have ~~team~~an ofadvantage ~~people~~in ~~solely~~making ~~focused~~acquisitions ondue ~~the~~to ~~research~~our past ~~and~~success ~~development~~as ~~activities~~an ~~associated~~active ~~with~~acquirer ~~mobile~~in ~~workforce~~the ~~management~~IT services and ~~Web~~solutions ~~services~~market. ~~solutions~~The narrowcast competitive market has few public companies. InWe ~~2001,~~believe ~~the~~another competitive ~~$862~~advantage ~~was~~for ~~expensed~~our onCompany ~~development~~is ofour apast ~~new~~experience ~~version~~in ofoperating ~~middleware~~as a ~~software~~public ~~associated~~company, ~~with~~raising ~~the~~significant ~~mobile~~capital, ~~workforce~~and ~~management~~effectively ~~service~~managing ~~offerings.~~a dynamically growing enterprise.

Selling,REGISTRANT General and Administrative Expenses INFORMATION

~~Selling,~~Watchit was ~~general~~incorporated ~~and~~in ~~administrative~~February 1993 ~~expenses~~as ~~decreased $13~~TSX,~~053,~~ ora ~~40%~~California corporation. In November 1995, we changed our jurisdiction of incorporation to ~~$19,279~~Delaware inand ~~the~~our ~~year~~name ~~ended~~to Cotelligent ~~December~~Group, Inc. 31In September 1998, ~~2002~~we ~~from~~changed ~~$32~~our name to Cotelligent,~~332~~ Inc. ~~for~~In ~~the~~November 2005, ~~year~~we ~~ended~~changed ~~December~~our ~~31,~~name ~~2001~~to Watchit Media, Inc. ~~The~~Unless ~~$13,053~~the ~~decrease~~context inotherwise ~~selling~~requires, ~~general~~references ~~and~~to “Watchit,” ~~administrative~~“Cotelligent,” ~~items~~“Company,” ~~comprised~~“we,” ~~the~~“us” ~~following~~and ~~items~~“our” refer toWatchit Media, Inc., a Delaware corporation.

Decrease in wage expense due to reductions in number of operating staff as evidenced by 68 operating staff at the end of 2002 compared to 110 operating staff at the end of 2001	$	7,202
Decrease in depreciation on property and equipment due to the write-down of certain property and equipment to zero at December 31, 2001		2,598
Decrease in occupancy and office operating costs due to the closure of operating locations and lower headcount		1,412
Decrease in commissions paid to sales people as a result of lower revenues		1,174
Decrease in bad debt expense due to the realization of a number of recoveries of accounts receivable previously written off		769
Decrease in recruiting expense due to lower levels of revenues resulting in lower attrition of staff or the hiring of new staff members		542
Decrease in marketing and sales expense due to lower revenues		403
Decrease in technical support fees related to internal computer systems		349
Decrease in general operating expenses such as banking fees, benefit plan administration expenses, payroll processing fees, license fees and moving costs		305
Decrease in business taxes		248
Decrease in employee relations expense due to lower headcount		183
Decrease in travel and entertainment expenses due to reductions in revenues and headcount		82
Increase in outside accounting service and audit fees primarily due to the re-audit of 2000 and 2001 financial statements in 2002		(789	)
Increase in legal services and proxy solicitation costs due to increased litigation and a proxy fight involving a dissident stockholder in connection with the Company’s 2002 annual meeting		(1,587	)
Other effects		162
Total decrease in selling, general and administrative expenses	$	13,053

Our headquarters are located at 655 Montgomery Street, Suite 1000, San Francisco, California 94111 and our telephone number is 415.477.9905. Our internet address is www.watchitmedia.com. We make available free of charge on our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)-15(d) of the Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Impairment of Long-lived Assets EMPLOYEES

~~During the year ended~~ At December 31, ~~2001,~~2005 ~~the Company~~we ~~recognized~~had an30 impairment charge for long-lived assets of $4,562 relating to a $3,430 property and equipment impairment charge and a further $1,132 property and equipment impairment charge associated with locations where the Company ceased operationsemployees.

22RISK FACTORS

~~Restructuring~~The ~~Charge~~following discussion contains certain cautionary statements regarding Watchit Media, Inc.’s business and results of operations, which should be considered by our stockholders or any reader of our business and results of financial information disclosure. This information is provided to enable us to avail ourselves of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The following factors should be considered in conjunction with any discussion of our operations

In the fourth quarter of 2002, as part of the Company’s effort to reorganize its marketing approach and delivery of client services, the Company identified opportunities to reduce its cost structure by reducing headcount. Accordingly, the Company adopted a restructuring plan. The restructuring charge of $691 included provisions for severance of approximately 27 ~~management and operating staff. The entire amount of severance was paid in the fourth quarter of 2002.~~

Inor ~~September 2001~~results, asincluding ~~part~~any offorward-looking statements ~~the~~as ~~Company’s~~well ~~efforts~~as tocomments ~~streamline~~contained ~~its~~in ~~operations~~press ~~commensurate with its revenue base~~releases, ~~the~~presentations ~~Company identified opportunities~~ to securities ~~reduce~~analysts ~~its~~or ~~cost~~investors ~~structure by reducing headcount~~ and ~~closing~~all ~~certain~~other ~~operating facilities~~communications tomade ~~conform~~by tous ~~the~~or ~~Company’s new operating structure~~our representatives. ~~The~~We ~~restructuring~~intend ~~charge~~to ofuse ~~$2,436 during~~ the ~~year~~following ~~ended~~words ~~December~~or ~~31,~~variations ~~2001 included provisions for severance~~ of ~~approximately~~the following ~~145~~words ~~management~~to ~~and~~identify ~~operating~~forward-looking ~~staff~~statements: ~~($1~~anticipates,~~034)~~ ~~as well as~~believes, ~~closure~~expects, ~~costs~~estimates, ~~associated~~intends, ~~with~~plans, aprojects ~~plan~~and ~~to dispose of certain locations ($1,402)~~seeks.

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

~~Other income~~Risks ~~(expense)~~Related ~~primarily~~to ~~consists~~Our ~~of interest income, interest expense, and equity method losses on an investment in an alliance partner and the change in market value associated with an investment in a marketable security.~~ Business

~~Interest~~By ~~income,~~completing ~~net~~the sale of ~~interest expense was $183 for~~ the ~~year~~IT ~~ended December 31, 2002~~services ~~compared~~business to ~~$826~~FastTrack, ~~for the year ended December 31~~LLC, ~~2001.~~we ~~The~~are ~~decrease~~losing ina ~~net~~substantial ~~interest~~source ~~income was the result~~ of aour ~~decrease in interest rates offered on investment vehicles and lower cash balances on hand during the year ended December 31, 2002~~revenues.

~~Other~~By discontinuing ~~expense for~~ the ~~year~~operations ~~ended~~of ~~December~~our IT ~~31,~~services ~~2002~~segment ~~was $1,967,~~ and ~~was~~selling our ~~principally~~remaining ~~the~~IT ~~change~~services incomponent, ~~market~~we ~~value~~will ~~associated~~no ~~with~~longer anhave ~~investment~~assets inthat historically agenerated ~~marketable~~the ~~security~~majority ~~and~~of ~~equity~~our revenue ~~method~~stream. ~~losses~~The onIT anservices segment ~~investment~~represented in100% anof ~~alliance~~our ~~partner.~~revenues ~~Other~~in ~~expense~~2002 ~~for~~and ~~the~~2003 ~~year~~and ~~ended~~approximately ~~December~~89% of ~~31,~~our ~~2001~~revenues ~~was~~(from ~~$899~~both continuing and ~~was~~discontinued ~~principally~~operations) ~~equity method losses on an investment~~ in ~~an alliance partner~~2004.

~~Provision~~We ~~(Benefit)~~may make ~~for~~acquisitions, ~~Income~~which ~~Taxes~~if proven unsuccessful, could negatively affect our future profitability and growth.

~~The Company~~We ~~realized~~believe anthe ~~income~~economic ~~tax~~landscape ~~benefit~~has ofcreated $7opportunity for us to invest in,~~493,~~ or acquire anbusinesses ~~effective~~that ~~tax~~have ~~rate~~undergone ofsevere ~~44%~~downward ofpressure ~~pre-tax~~in ~~loss~~revenues, profit, ~~for~~cash ~~the~~and ~~year~~stock ~~ended~~price. ~~December~~We ~~31,~~may not ~~2002,~~be ~~compared~~able to anidentify, ~~income~~acquire ~~tax~~or profitably ~~benefit~~manage ofadditional ~~$3,455,~~businesses orthat anwe ~~effective~~may invest ~~tax~~in ~~rate~~or ofacquire without ~~13%~~substantial ~~for~~costs, ~~the~~delays ~~year~~or ~~ended~~other ~~December~~problems. 31In addition, ~~2001.~~acquisitions may involve a number of special risks, including:

~~The~~• Diversion ~~income tax benefit~~ of ~~$7,493 for the year ended December 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~~management’s fiscal tax year ended 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 December 31, 2002 financial statements as changes in tax law must be reflected in the period of enactment. attention;

~~The~~• Failure ~~income~~to ~~tax~~retain ~~benefit~~certain ofkey ~~$3,455 for the year ended December 31, 2001 resulted from a decrease in a valuation allowance previously established against a goodwill deduction that was utilized on the March 31, 2001 tax return.~~ personnel

~~Income~~• Risks ~~(Loss)~~associated ~~from~~with ~~Discontinued~~unanticipated ~~Operations~~events, circumstances or legal liabilities.

~~Discontinued~~In addition, ~~operations~~if ~~comprised~~the ~~operations~~acquired ~~associated~~businesses ~~with~~have ~~the~~operating ITlosses ~~staff~~or ~~augmentation~~negative operating ~~portion~~cash flow, our ability to achieve positive cash flow and profitability, as well as our liquidity, could be adversely affected. Some or all of ~~the~~these ~~Company’s~~risks could adversely affect our operations and financial performance. For example, client satisfaction or performance problems at a single acquired business could adversely affect our reputation and ~~the~~financial results. ~~gain~~Further, onany ~~the~~businesses ~~sale~~acquired ofin the ~~discontinued~~future may not achieve anticipated revenues and earnings and therefore negatively impact our consolidated financial position, results of operations. and cash flows.

~~The~~We ~~income~~have ~~from~~decided ~~discontinued~~to ~~operations~~focus ofon ~~$976 for the year ended December 31, 2002 was the~~our ~~result~~narrowcasting ofbusiness ~~cash~~and ~~collected~~have ononly ~~trade~~limited ~~accounts~~experience ~~receivable~~ in ~~2002~~this ~~written off in prior years to bad debt expense and proceeds from a lawsuit against the predecessor owners of one of the discontinued operations~~area.

~~The~~Our business ~~income~~strategy ~~from~~in ~~discontinued~~2005 ~~operations~~was ofto ~~$190~~dispose ~~for~~of ~~the~~our ~~year~~IT ~~ended~~services ~~December~~business ~~31,~~and ~~2001 consists~~focus ofon ~~the~~expanding ~~operating~~our ~~results~~narrowcasting ofbusiness. ~~the~~We ~~discontinued~~have ~~operations, which~~ only ~~included~~been ~~one~~operating ~~remaining~~our narrowcasting ~~component~~business ~~from~~since ~~the~~March 2004 ~~original~~when ~~plan.~~we ~~This~~acquired ~~loss~~OnSite ~~was~~Media, Inc. As ~~not~~a ~~anticipated under the original plan and~~result, ~~therefore,~~our ~~was~~senior ~~not~~management ~~accrued~~has ~~for~~only aslimited ofexperience ~~June~~in ~~30,~~this ~~2000.~~area ~~In addition,~~and ~~during~~we ~~the~~cannot ~~year~~assure ~~ended~~you ~~December~~that ~~31,~~we ~~2001,~~will ~~the~~be ~~Company~~successful ~~abandoned~~in ~~its~~our ~~plan~~efforts to ~~sell~~expand ~~the~~our narrowcasting ~~one remaining component, and consequently, closed the~~ business.

~~LIQUIDITY~~The ~~AND~~market ~~CAPITAL~~for ~~RESOURCES~~narrowcasting may not materialize.

InOur ability ~~recent~~to ~~years~~generate revenues in future periods will increasingly depend upon the market for narrowcasting services, solutions and products. There is a risk that the ~~Company~~market ~~has~~for ~~financed~~narrowcasting ~~its~~services, ~~operations~~solutions ~~principally~~and ~~through~~products ~~its~~will ~~own~~not materialize. ~~cash~~Critical issues concerning the use of computer hardware and software platforms as well as other video equipment and media, their security, reliability, cost, accessibility and quality continue to evolve. The variability ~~Company~~of ~~has~~these ~~not~~factors ~~maintained~~could amaterially ~~credit~~affect ~~facility~~our ability to compete in ~~since~~the ~~June~~market, 30resulting in an adverse effect on our consolidated financial position, ~~2000.~~results of operations and cash flows.

~~Cash~~The ~~used~~decline byin ~~operating activities was $13~~tourism,~~373~~ ~~for~~business ~~the year~~travel ~~ended December 31, 2003 compared to cash provided in operating activities of $484 for~~ or the ~~year~~gaming ~~ended~~industry ~~December~~could ~~31,~~have ~~2002.~~a Inmaterial ~~2003,~~adverse ~~the~~effect ~~$12,507~~on ~~loss~~our ~~from continuing operations, $2,371 reduction in~~ narrowcasting business.

23A stagnation or downturn in the economy of Nevada, any jurisdiction in which we operate, or the United States as a whole could have a material adverse effect upon our revenues, results of operations and financial condition. Currently, we provide our

accounts payable and accrued liabilities, offset by the $989 reduction in accounts receivable and the $1,273 unrealized loss on an investment in a marketable security were the primary net uses in operating activities. In 2002, the $6,811 benefit of income tax refunds (net of deferred taxes), 2,927 reduction in accounts receivable, $1,457 unrealized loss on an investment in marketable security, offset by the $9,699 loss from continuing operations and $1,661 decrease in accounts payable and accrued expenses were the primary net sources of cash provided by operating activities. The primary sources of liquidity for the Company going forward are the collection of its accounts receivable and the cash balances at December 31, 2003. Total receivables were 51 and 75 days of quarterly revenue at December 31, 2003 and December 31, 2002, respectively. 28

~~Cash provided by investing activities was $1,159 for the year ended December 31, 2003~~narrowcasting ~~compared~~services to ~~$2,670~~hotels ~~used~~and incasinos ~~investing~~primarily ~~activities~~in ~~for~~Las ~~the year ended December 31~~Vegas, ~~2002~~Nevada. InBecause ~~2003, the Company received $1,080 of payments on a note from the acquirer of a discontinued operation and $270 from the investment in a marketable security for~~our ~~services~~narrowcasting ~~provided~~business byis ~~the Company for which the Company had~~ not ~~recognized revenue~~diversified, ~~offset~~we bywill ~~$191~~be ~~for~~particularly ~~the~~vulnerable to ~~purchase~~adverse ofeconomic ~~property~~conditions ~~and~~in ~~equipment~~tourism, ~~principally~~business ~~for~~travel ~~continuous~~or ~~upgrades to computer software and equipment. In 2002,~~ the ~~Company used $3,000~~gaming ~~for~~industry ~~an investment~~ in a marketable security and $486 for the purchase of property and equipment, principally for continuous upgrades to computer software and equipment offset by $816 of payments on a note from the acquirer of a discontinued operationNevada.

~~Cash~~Our ~~provided~~growth byplan ~~financing~~requires ~~activities~~a ~~was $62 for the year ended~~significant ~~December~~infusion ~~31, 2003 compared to $4 for the year ended December 31, 2002. In 2003, the Company received $62 in proceeds from the sale~~ of ~~common stock~~capital. ~~In 2002, the Company received $4 in proceeds from the sale of common stock.~~

~~During 2003, management has taken action in response to the continued softness in IT services~~We inintend ~~order~~ to ~~preserve~~expand ~~cash,~~our ~~including~~existing ~~but~~narrowcasting ~~not~~business ~~limited~~as towell ~~significant~~as ~~reductions~~create ~~in headcount, outsourcing certain administrative functions, changing benefit plan insurance carriers~~ and ~~entered into an agreement to acquire a business in an industry~~ ~~with~~develop ~~more~~new ~~near~~narrowcasting ~~term growth prospects than IT~~ services~~. Management has carefully forecasted its results of operations and financial position through December 31~~, ~~2004~~which ~~and~~may require ~~believes~~infusions ~~that the remaining cash on hand will provide adequate cash to funds its anticipated cash working capital needs, including cash requirements related to the purchase~~ of ~~OnSite at least through December 31, 2004~~capital. If Inwe ~~the event circumstances arise that~~ are not ~~factored~~able ~~into~~to ~~the~~raise ~~forecast, management can take further action such as~~ additional ~~reductions~~capital, inrevenue ~~headcount~~growth and ~~look for financing alternatives. Management has already begun the process of meeting with various funding sources and will continue to explore alternatives in order to secure financing in advance~~ ofprofitability ~~any finance needs. The Company cannot~~ may be ~~sure,~~adversely ~~however, that its results of operations will be sufficient to meet its cash needs through December 31, 2004, or that it can take additional actions to make up for any cash shortfall~~affected.

~~The~~We ~~following~~may need ~~table~~to ~~reflects~~invest ~~our~~heavily ~~contractual cash obligations as of December 31~~to create, ~~2003~~produce, ~~excluding~~ ~~interest,~~market ~~due~~and ~~over~~sell ~~the~~new ~~indicated~~narrowcasting ~~periods~~services.

	Payments Due by Period
	Total		Lessthan 1 Year		1 to 3 Years		4 to 5 Years		After5 Years
Contractual Cash Obligations:
Operating leases, net of sublet arrangements	$	2,834	$	1,128	$	1,706	$	—	$	—

As the demand for narrowcasting services increases, there will be opportunity to provide these services in new and innovative ways. In order to provide these new narrowcasting services, we may need to invest heavily in the creation, production, marketing and selling of new narrowcasting services.

24We may face intense competition that could adversely affect our ability to generate revenues and profitability.

~~CRITICAL~~The demand ~~ACCOUNTING~~for ~~ESTIMATES~~narrowcasting services is expected to reflect dynamic growth over the next several years. We expect the demand will result in intense competition to provide narrowcasting services. If we are not able to successfully execute our strategy, our business may be materially and adversely affected.

~~Allowance~~We ~~for~~may have ~~Doubtful~~difficulty ~~Accounts~~ managing growth.

~~The~~Our development ~~Company~~has ~~provides~~required anand ~~allowance~~is ~~for~~expected ~~potentially~~to ~~uncollectible~~continue ~~accounts~~to ~~receivable~~require, ~~under~~ the ~~provisions~~full utilization of ~~SFAS~~our ~~No. 5~~management, ~~“Accounting~~financial ~~for~~and ~~Contingencies~~other resources,” inwhich ~~the~~to ~~ordinary~~date ~~course~~has had oflimited ~~business~~working capital. ~~The~~Managing ~~allowance~~our isgrowth ~~derived~~will asdepend ~~the~~upon ~~result~~our ofability to ~~periodic~~improve ~~reviews of aged~~ and ~~known~~expand ~~problem~~our ~~accounts~~operations, ~~during~~including ~~each~~our ~~quarter.~~financial Inand ~~addition the Company~~management ~~reserves~~information ~~for~~systems, ~~unknown~~and ~~issues~~to inrecruit, ~~its~~train ~~receivables~~and atmanage ~~the~~executive ~~balance~~staff ~~sheet date using a formula consistent from quarter to quarter~~and employees. ~~Management~~We ~~believes~~may not ~~that~~be ~~its~~able ~~approach is appropriate~~ to ~~reserve~~efficiently ~~for~~scale ~~potentially~~our ~~uncollectible~~operations, ~~receivables. If management had~~and ~~taken~~this ~~another~~failure ~~approach~~ to ~~developing~~effectively ~~its~~manage ~~reserve,~~growth ~~the~~may have ~~allowance~~a ~~for~~materially ~~doubtful~~adverse effect ~~accounts~~on ~~may~~our ~~have~~operating ~~been~~results ~~different~~and ~~than~~financial ~~that reported~~condition.

~~Revenue~~Our ~~Recognition~~success is dependent on our key management personnel.

~~The~~Our operations ~~Company~~are ~~recognizes~~dependent ~~revenue~~on ~~for~~the ~~time~~continued ~~and~~efforts ~~materials~~of ~~contracts~~our ~~when~~executive ~~there~~officers isand senior ~~evidence~~management. ofIn ~~an agreement~~addition, awe ~~fixed~~will orlikely ~~determinable~~depend ~~fee,~~on ~~collectibility~~the issenior ~~reasonably assured,~~management ~~and~~of ~~delivery~~any ~~has~~business ~~occurred.~~we ~~Revenues~~may merge ~~exclude~~with ~~reimbursable~~or ~~expenses~~acquire ~~charged~~in tothe ~~and collected from clients~~future. ~~Revenues~~If ~~pursuant~~any toof these ~~fixed-fee~~people ~~contracts~~ are ~~generally~~unable ~~recognized~~or asunwilling ~~services~~to ~~are~~continue ~~rendered~~in onhis ~~the~~or ~~percentage-of-completion~~her ~~method~~present ofrole, ~~accounting~~or ~~based~~if onwe ~~hours~~are ~~incurred~~unable to ~~total~~hire, ~~estimated~~train ~~labor~~and ~~hours~~integrate tonew ~~complete.~~management ~~Revenues~~personnel effectively, ~~earned~~our ~~for~~business ~~software license sales~~ and ~~service~~consolidated ~~contracts~~financial ~~are~~position, ~~recorded~~results ~~based~~of operations onand ~~the~~cash ~~provisions~~flows ofcould ~~AICPA~~be ~~SOP~~adversely ~~97-2,~~affected. ~~“Software~~We ~~Revenue~~do ~~Recognition,”~~not asmaintain ~~amended,~~key ~~which~~person ~~shares~~life ~~the~~insurance ~~basic~~on ~~criteria~~our ~~described~~senior ~~above, except collectibility is probable rather than reasonably assured~~management.

~~Accounting~~We ~~for~~may not ~~Long-Lived~~receive ~~Assets~~any proceeds from the exercise of the warrants issued in connection with the acquisition of OnSite Media, Inc.

~~The~~If the ~~Company~~warrant ~~records~~shares ~~impairment~~issued ~~losses~~in onconnection ~~long-lived~~with ~~assets~~our ~~used~~acquisition inof ~~operations~~OnSite ~~when~~Media, Inc. are ~~events~~exercised, ~~and~~we ~~circumstances~~will ~~indicate~~receive ~~that~~aggregate ~~the~~gross ~~assets~~proceeds ~~might~~of beapproximately ~~impaired~~$1.3 million. ~~and~~Given the ~~undiscounted~~historical ~~cash~~share ~~flows~~price ~~estimated~~and tomarket befor ~~generated~~Watchit byMedia ~~those~~common ~~assets~~stock, ~~are~~there ~~less~~is ~~than~~no ~~the~~way ~~carrying~~to ~~amount~~know ofwhether ~~those~~the ~~items.~~warrants ~~Management~~will ~~judgment~~be isin-the-money ~~required~~during the intwo ~~evaluating~~years ~~whether~~period ~~impairment~~in ~~has~~which ~~occurred~~they are exercisable. ~~Furthermore~~Consequently, ~~our~~we ~~estimated~~cannot predict ~~cash~~whether ~~flow~~the iswarrants ~~based~~will onbe ~~historical~~exercised ~~results~~prior ~~adjusted~~ to ~~reflect~~their ~~our~~expiration ~~best estimate of~~or ~~future~~whether ~~market~~any ~~and~~funds ~~operating~~from ~~conditions.~~their ~~Any~~exercise ~~material~~will ~~change~~be ~~affecting~~made ~~the~~available ~~assumptions~~to ~~used~~us toat ~~project~~anytime in the ~~estimated~~future. ~~undiscounted~~Additionally, ~~cash~~the ~~flows~~exercise ~~or our expectation~~ of ~~future~~warrants ~~market~~will ~~conditions~~have ~~could~~dilutive ~~result~~effect on ~~in a different conclusion. Assets for which~~ the ~~carrying~~ ~~value~~holders isof ~~not~~our ~~fully~~common ~~recoverable are reduced to fair value~~stock.

~~Accounting~~We ~~for~~may lose ~~Income~~certain ~~Taxes~~tax attributes as a result of our acquisition program.

~~The Company accounts for~~At ~~income~~December 31, ~~taxes~~2005, ~~under~~Watchit ~~SFAS~~Media ~~No.~~had ~~109,~~available ~~“Accounting~~federal ~~for~~and ~~Income~~state ~~Taxes.”~~net operating ~~This~~loss ~~pronouncement~~(NOL) ~~requires~~carry-forwards ~~using~~of anapproximately ~~asset~~$45 ~~and~~million. ~~liability~~Under ~~approach~~Section 382 of tothe ~~recognize~~Internal ~~deferred~~Revenue ~~tax~~Code ~~assets~~of ~~and~~1986, ~~liabilities~~as ~~for~~amended, the ~~tax~~use ~~consequences~~ of ~~temporary~~prior ~~differences by~~losses, ~~applying~~including ~~enacted~~NOLs, ~~statutory~~is ~~tax~~limited ~~rates~~if toa ~~differences~~corporation ~~between~~undergoes ~~the~~an ~~financial~~“ownership ~~statement~~change.” Our ~~carrying~~merger ~~amounts~~with ~~and~~OnSite ~~the~~Media, ~~tax~~together ~~basis~~with offuture ~~existing~~issuances ~~assets~~of ~~and~~equity interests ~~liabilities.~~by ~~The~~us ~~Company~~or ~~has~~the ~~not~~exercise ~~given~~of ~~benefit~~outstanding towarrants ~~any~~or ~~deferred~~options ~~tax~~to ~~assets~~purchase our orcapital ~~net~~stock, ~~operating~~may result ~~losses~~ in ~~the previous~~an ~~three~~ownership ~~fiscal~~change ~~years~~that ~~due~~is tolarge ~~uncertainty~~enough for ofthis ~~realizing~~limitation ~~these~~to ~~assets in future periods~~apply. InIf ~~addition,~~ the ~~financial~~limitation ~~statements~~applies, ~~have~~we ~~provided~~may be ~~for~~unable to ~~certain~~use ~~tax~~a ~~positions~~material ~~taken~~portion byof ~~the~~its ~~Company~~available inNOL ~~certain~~carry-forwards ~~tax~~to ~~periods~~reduce ~~where the statute of limitations~~future ~~still~~taxable ~~applies~~income.

~~Item 7A. Quantitative and Qualitative Disclosures about Market Risk~~29

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

OnOur ~~August~~revenues ~~19,~~and ~~2002,~~financial ~~the~~condition ~~Company acquired Convertible~~may be ~~Redeemable~~adversely ~~Preferred~~affected ~~Stock~~by ~~in Bluebook International Holding Company (“Bluebook”). The Company accounts for~~ the ~~preferred~~loss ~~stock as a trading security with changes in fair value recorded in the consolidated statements~~ of ~~operations. Accordingly,~~business ~~subsequent~~from tosignificant ~~August 19, 2002, the Company was exposed to market risk related to changes in the market price of the common stock in Bluebook~~clients.

25Our revenues are primarily derived from services provided in response to client requests or on an assignment-by-assignment basis. A significant portion of our revenues come from engagements which are terminable at any time by our clients without penalty. If we lose a major client or suffer a reduction in business our consolidated financial position, results of operations and cash flows may be adversely affected.

~~Item~~Our 8.software ~~Financial~~applications ~~Statements~~may not ~~and~~work as ~~Supplementary Data~~intended.

Our ~~INDEPENDENT~~IT ~~AUDITORS~~services business includes a delivery strategy to provide synchronization and transfer of information between disparate systems, platforms and devices, and rapidly implement them on our own and our client’s ~~REPORT~~platforms. If our software products, including our JASware™ products and FastTrack™ framework, do not work as intended, we will not be able to provide these solutions to our clients and our consolidated financial position, results of operations and cash flows would be adversely affected.

~~The~~We ~~Board~~may be ~~of Directors~~unable ~~and~~to ~~Stockholders~~protect our proprietary technology.

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

We ~~have~~are ~~audited~~subject ~~the~~to ~~accompanying~~rapid ~~consolidated~~changes ~~balance sheets of Cotelligent, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated~~in ~~statements~~technology ~~of operations, stockholders’ equity~~ and ~~cash~~client ~~flows for each of the years in the three-year period ended December 31, 2003~~preferences. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

WeOur markets ~~conducted~~are ~~our~~characterized ~~audits~~by inrapidly ~~accordance~~changing ~~with~~technology, ~~auditing~~changes ~~standards~~in ~~generally~~client requirements ~~accepted~~and inpreferences, ~~the~~frequent ~~United~~new ~~States~~product ofand ~~America.~~service ~~Those~~announcements, and evolving new industry standards ~~require~~and practices that wecould ~~plan~~render ~~and~~our ~~perform~~custom software ~~the~~development ~~audit~~skills obsolete. Our success will depend, in part, on our ability to ~~obtain~~acquire ~~reasonable~~or ~~assurance~~license ~~about~~leading ~~whether~~technologies useful in our business; develop new software solutions and technology that address the ~~financial~~increasingly sophisticated ~~statements~~and ~~are~~varied ~~free~~needs of ~~material~~existing ~~misstatement.~~and Anprospective ~~audit~~clients; ~~includes~~and ~~examining,~~respond to technological advances and evolving industry standards and practices on a cost-effective ~~test~~and timely basis. To be successful, ~~evidence~~we ~~supporting~~must adapt to the ~~amounts~~rapidly changing ~~and~~market ~~disclosures~~by incontinually improving the ~~financial~~performance ~~statements~~and reliability of software applications for our clients. AnWe ~~audit~~could also ~~includes~~incur ~~assessing~~substantial ~~the~~costs ~~accounting~~to modify ~~principles~~our ~~used and~~software ~~significant~~applications ~~estimates~~to ~~made~~adapt byto ~~management,~~these aschanges. ~~well~~Our asconsolidated financial ~~evaluating~~position, ~~the~~results ~~overall~~of ~~financial~~operations ~~statement~~and ~~presentation.~~cash Weflows ~~believe~~could ~~that~~be ~~our~~adversely affected ~~audits~~if ~~provide~~we aincurred ~~reasonable~~significant ~~basis~~costs ~~for~~without ~~our~~adequate ~~opinion~~results.

InWe ~~our~~may not ~~opinion,~~be ~~the~~able ~~consolidated financial statements referred~~ to ~~above present fairly, in all material respects, the financial position of~~establish ~~Cotelligent,~~successful ~~Inc.~~partnerships ~~and~~or ~~subsidiaries~~strategic ~~as of December 31~~alliances, ~~2003~~ and ~~2002,~~partnerships and ~~the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally~~strategic ~~accepted~~alliances inwe ~~the~~do ~~United~~establish ~~States~~may not ofbe ~~America~~successful.

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

~~Costa~~If ~~Mesa~~we fail to continue to attract and retain qualified personnel, ~~California~~it could harm our business.

~~April~~Our success 8depends upon our ability to attract, ~~2004~~hire and retain technical and professional personnel who possess the necessary skills and experience to conduct our business. We continually identify, screen and retain qualified personnel to keep pace with client demand. Competition for individuals with proven technical skills is intense. In the past, we have experienced difficulties in identifying and retaining qualified personnel and, in some instances, we were unable to meet requests for services. We cannot assure that qualified personnel will continue to be available to us in sufficient numbers.

26 30

~~CONSOLIDATED~~Item ~~BALANCE~~2. ~~SHEETS~~ Properties

~~(In~~Our ~~thousands~~executive office is located in San Francisco, ~~except~~California ~~share~~and we operate our narrowcasting business from an office in Las Vegas, Nevada. These facilities have an aggregate of approximately 14,500 square feet and ~~per~~are ~~share~~leased ~~data)~~at aggregate current monthly rents of approximately $19 with no lease commitment for these properties extending past the year 2007. In addition, the Company has lease commitments for a property included in discontinued operations as well as certain other properties from which we no longer operate. None of these lease commitments extend past 2007.

	December 31,2003			December 31,2002
ASSETS
Current assets:
Cash and cash equivalents	$	5,688		$	17,683
Refundable income taxes		85			197
Accounts receivable, including unbilled accounts of $245 and $354 and net of allowance for doubtful accounts of $62 and $124, respectively		1,246			2,399
Notes receivable from officers and stockholder, net of valuation allowance of $796 and $1,703, respectively		—			—
Current portion of note receivable from acquirer of discontinued operation		200			480
Prepaid expenses and other current assets		608			526
Total current assets		7,827			21,285
Property and equipment, net		289			451
Note receivable from acquirer of discontinued operation		—			1,103
Investment in marketable security		—			1,543
Equity investment in alliance partner		—			335
Other assets		247			316
Total assets	$	8,363		$	25,033
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	617		$	1,353
Accrued compensation and related payroll liabilities		984			1,435
Restructuring liabilities		289			117
Deferred revenue		711			247
Other accrued liabilities		659			1,737
Total current liabilities		3,260			4,889
Restructuring liabilities, net of current portion		520			805
Lease deposits on sublet properties		31			24
Income tax payable		69			2,618
Total liabilities		3,880			8,336
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.01 par value; 500,000 shares authorized, no shares issued or outstanding		—			—
Common Stock, $0.01 par value; 100,000,000 shares authorized, 14,826,613 and 15,390,954 shares issued, respectively		148			154
Additional paid-in capital		83,247			86,374
Notes receivable from stockholders		(2,671	)		(5,940	)
Accumulated deficit		(75,741	)		(63,391	)
Treasury stock		(500	)		(500	)
Total stockholders’ equity		4,483			16,697
Total liabilities and stockholders’ equity	$	8,363		$	25,033

On March 16, 2006—Watchit Media, Inc. announced it will be moving its headquarters from its current location at 655 Montgomery Street Suite 1000, San Francisco, California to its Las Vegas, Nevada office location at 3485 West Harmon Avenue, Suite 100. The move is excepted to be completed by May 31, 2006.

~~See~~We ~~accompanying~~believe ~~notes~~that our properties toare ~~consolidated~~adequate ~~financial~~for ~~statements~~our needs. Furthermore, we believe that suitable additional or replacement space will be available when required on terms we believe will be acceptable.

27Item 3. Legal Proceedings

We are, from time to time, a ~~CONSOLIDATED~~party ~~STATEMENTS~~to OFlitigation ~~OPERATIONS~~arising in the normal course of our business.

(In ~~thousands~~June 2005, ~~except~~Advance ~~share~~at Branchburg, LLC (“Advance”) filed a lawsuit against the Company in the Superior Court of New Jersey, Law Division, Somerset County. The lawsuit arises out of a commercial lease agreement between Advance as landlord and Cotelligent as tenant. Specifically, Advance alleges that Cotelligent breached the lease agreement by failing to make base and additional rent payments for the months of March 2005 to the present. Advance seeks payment of all amounts allegedly due under the lease, including base rent, late charges, interest and attorneys’ fees and costs. Advance also seeks “loss of bargain” damages, consisting of all rent due through the end of the lease term, reduced to present value using an interest rate of 6% per ~~share~~annum. ~~data)~~The lawsuit does not specify the specific amount of damages sought. At December 31, 2005, the Company has accrued $595 related to the lease obligation, which is classified as part of restructuring liabilities. The accrual covers obligations for base and additional rent and late charges, offset by estimated potential rent from the sublet of the facility. In addition, the Company maintains a $180 security deposit with Advance in connection with the lease, classified as part of other long term assets.

	For the Year Ended December 31,
	2003			2002			2001
Revenues	$	9,936		$	16,956		$	46,843
Cost of revenues		6,543			10,507			33,372
Gross profit		3,393			6,449			13,471
Research and development costs		619			1,887			862
Selling, general and administrative expenses		13,733			19,279			32,332
Impairment of long-lived assets		177			—			4,562
Restructuring charge		2,531			691			2,436
Operating loss		(13,667	)		(15,408	)		(26,721	)
Other income (expense):
Interest expense		(35	)		(112	)		(119	)
Interest income		294			295			945
Other		(1,608	)		(1,967	)		(899	)
Total other expense		(1,349	)		(1,784	)		(73	)
Loss from continuing operations before income taxes		(15,016	)		(17,192	)		(26,794	)
Income tax benefit		(2,509	)		(7,493	)		(3,455	)
Loss from continuing operations		(12,507	)		(9,699	)		(23,339	)
Income (loss) from discontinued operations, net of income taxes of $-, $-, and $-		157			976			(190	)
Income (loss) from discontinued operations		157			976			(190	)
Net loss	$	(12,350	)	$	(8,723	)	$	(23,529	)
Earnings per share:
Basic and diluted –
Loss from continuing operations	$	(0.94	)	$	(0.73	)	$	(1.75	)
Income (loss) from discontinued operations		0.01			0.07			(0.01	)
Net loss	$	(0.93	)	$	(0.66	)	$	(1.76	)
Basic and diluted weighted average number of shares outstanding		13,324,217			13,201,532			13,379,320

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

~~See~~No ~~accompanying~~matters ~~notes~~ were submitted to ~~consolidated~~a vote ~~financial~~of ~~statements.~~security holders in the fourth quarter of 2004.

28PART II

~~(In~~The following ~~thousands~~table sets forth, ~~except~~for ~~share~~the periods indicated, the high and ~~per~~low ~~share~~sales prices ~~data)~~for the Common Stock. The Common Stock was listed on the NYSE under the symbol “CGZ”, until October 11, 2001, when it was listed on the OTC Bulletin Board, and then temporarily moved to the OTC Pink Sheets on September 25, 2002, returning to the OTC Bulletin Board on February 10, 2003. The Common Stock has been listed on the OTC under the symbol “CGZT”.

	Common Stock					NotesAdditionalPaid-InCapital			ReceivablefromStockholders			AccumulatedDeficit			Treasury Stock				TotalStockholders’Equity
	Shares		Amount												Shares	Amount
Balance at December 31, 2000 (note 12)	15,349,630		$	153		$	86,640		$	(6,368	)	$	(31,139	)	—	$	—		$	49,286
Issuance of Common Stock, net of costs	215,127			3			196			—			—		—		—			199
Cancellation of LSPP Note	(50,000	)		(1	)		(174	)		175			—		—		—			—
Purchase of Treasury Shares	—			—			—			—			—		644,600		(500	)		(500	)
Net loss	—			—			—			—			(23,529	)	—		—			(23,529	)
Balance at December 31, 2001	15,514,757			155			86,662			(6,193	)		(54,668	)	644,600		(500	)		25,456
Issuance of Common Stock, net of costs	31,197			1			3			—			—		—		—			4
Cancellation of LSPP Note	(55,000	)		(1	)		(252	)		253			—		—		—			—
Return of shares issued in connection with earn-out to sellers of acquired business	(100,000	)		(1	)		(39	)		—			—		—		—			(40	)
Net loss	—			—			—			—			(8,723	)	—		—			(8,723	)
Balance at December 31, 2002	15,390,954			154			86,374			(5,940	)		(63,391	)	644,600		(500	)		16,697
Issuance of Common Stock, net of costs	322,501			3			59			—			—		—		—			62
Change in terms of stock options granted	—			—			74			—			—		—		—			74
Modification of notes receivable from stockholders	—			—			(3,048	)		3,048			—		—		—			—
Cancellation of LSPP Notes	(886,842	)		(9	)		(212	)		221			—		—		—			—
Net loss	—			—			—			—			(12,350	)	—		—			(12,350	)
Balance at December 31, 2003	14,826,613		$	148		$	83,247		$	(2,671	)	$	(75,741	)	644,600	$	(500	)	$	4,483

On December 8, 2005, Watchit Media, Inc. (OTCBB-WMDA) changed the company’s ticker symbol to WMDA from CGZT. The change in the company’s ticker symbol reflects its change in identity from Cotelligent, Inc to Watchit Media, Inc. The company is in the process of transitioning all aspects of its former brand, name and identity to Watchit Media, Inc.

See accompanying notes to consolidated financial statements.

	Quarter End
	31-Mar	30-Jun	30-Sep	31-Dec
Fiscal Year Ended Dec 31, 2004
Common stock price per share:
High	0.29	0.29	0.20	0.19
Low	0.18	0.14	0.10	0.10
Fiscal Year Ended Dec 31, 2005

Common stock price per share:
High	0.15	0.15	0.18	0.16
Low	0.10	0.08	0.09	0.04

29On April 1, 2006, the last reported sales price of the Common Stock, as reported on the OTC Bulletin Board, was $0.10 per share. On April 13, 2005, there were 848 stockholders of record of the Common Stock. We did not repurchase any securities of the Company in the fourth quarter of 2005.

CONSOLIDATEDItem STATEMENTS6. OFSelected CASHFinancial FLOWS Data

~~(In~~The following ~~thousands~~selected financial data should be read in conjunction with the financial statements, ~~except~~related ~~share~~notes and ~~per~~other ~~share~~financial ~~data)~~information of the Company included elsewhere herein. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

	For the Year Ended December 31,
	2003			2002			2001
Cash flows from operating activities:
Loss from continuing operations	$	(12,507	)	$	(9,699	)	$	(23,339	)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		176			35			2,634
Impairment of long-lived assets		177			—			4,562
Compensation expense on change in terms of stock options		74			—			—
Equity loss from investment in alliance partner		335			512			919
Unrealized loss on investment in marketable security		1,273			1,457			—
Deferred income taxes, net		—			(7,493	)		2,745
Loss on disposal of property and equipment		—			—			5
Provision for doubtful accounts		164			440			(753	)
Loss on forgiveness of note receivable from acquirer of discontinued operation		303			—			400
Changes in current assets and liabilities:
Accounts receivable		989			2,854			14,553
Prepaid expenses and other current assets		(82	)		280			581
Accounts payable and accrued liabilities		(2,371	)		(1,661	)		(6,280	)
Deferred revenue		464			(627	)		781
Income taxes, net		(2,437	)		14,304			(6,264	)
Other assets		69			82			18
Net cash provided by (used in) operating activities		(13,373	)		484			(9,438	)
Cash flows from investing activities:
Payments received on note from acquirer of discontinued operation		1,080			816			430
Purchases of property and equipment		(191	)		(486	)		(440	)
Investment in marketable security		—			(3,000	)		—
Dividend received from marketable security		270			—			—
Net cash provided by (used in) investing activities		1,159			(2,670	)		(10	)
Cash flows from financing activities:
Payments on capital lease obligations		—			—			(12	)
Payments on amounts due sellers of acquired businesses		—			—			(600	)
Net proceeds from issuance of common stock		62			4			199
Repurchase of common stock		—			—			(500	)
Net cash provided by (used in) financing activities		62			4			(913	)
Cash flows from discontinued operations:
Cash provided by (used in) discontinued operations		157			1,087			2,639
Net decrease in cash and cash equivalents		(11,995	)		(1,095	)		(7,722	)
Cash and cash equivalents at beginning of period		17,683			18,778			26,500
Cash and cash equivalents at end of period	$	5,688		$	17,683		$	18,778

~~See~~Selected ~~accompanying~~Financial ~~notes to consolidated financial statements.~~ Data

30(In thousands, except share and per share data)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	Year Ended December 31,
Statement of Operations Data (1) (2) (3):	2005			2004			2003			2002			2001

Revenues	$	1,844		$	862		$	—		$	—		$	—
Cost of services	806			364			—			—			—
Gross profit	1,038			498			—			—			—
Selling, general and administrative expenses	3,472			1,953			—			—			—
Operating loss	(2,434		)	(1,455		)	—			—			—
Other income (expense)	251			82			(1,349		)	(1,784		)	(73		)
Loss from continuing operations before income tax benefit	(2,183		)	(1,373		)	(1,349		)	(1,784		)	(73		)
Income tax benefit	72			28
Loss from continuing operations	(2,111		)	(1,345		)	(1,349		)	(1,784		)	(73		)
Loss from discontinued operations, net of income tax benefit of $-, $2,509, $7,493, $3,455, $7,677	(469		)	(2,860		)	(11,001		)	(6,939		)	(23,456		)
Income on sale of discontinued operations, net of income taxes of $-, $-, $-, $-, $-	1,520			—			—			—			—
Loss from discontinued operations	(1,051		)	(2,927		)	(11,001		)	(6,939		)	(23,456		)

Net loss	$	(1,060	)	$	(4,205	)	$	(12,350	)	$	(8,723	)	$	(23,529	)
Loss per share
Basic and diluted:
Loss from continuing operations	$	(0.08	)	$	(0.06	)	$	(0.10	)	$	(0.13	)	$	(0.01	)
Loss from discontinued operations	(0.02		)	(0.13		)	(0.83		)	(0.53		)	(1.75		)
Gain on sale of discontinued operations	0.06			—			—			—			—
Net loss	$	(0.04	)	$	(0.19	)	$	(0.93	)	$	(0.66	)	$	(1.76	)
Weighted average number of shares outstanding:
Basic and diluted	27,673,563			22,351,924			13,324,217			13,201,532			13,379,320

(In thousands, except share and per share data)

	December 31,
	2005		2004		2003	2002	2001
Balance Sheet Data:
Working capital (deficiency)	(1,739	)	(1,053	)	4,567	16,396	26,689
Total assets	4,150		5,373		8,363	25,033	36,080
Long-term debt	—		—		—	—	—
Stockholders’ equity	1,955		2,605		4,483	16,697	25,456

	For the Year Ended December 31,
	2003		2002		2001
Supplemental disclosures of cash flow information:
Interest paid	$	36	$	102	$	2
Income taxes paid		2		—		84
Income taxes refunded		53		14,304		199
Significant non-cash financing and investing activities:
Return of shares previously issued in connection with leveraged stock purchase plan		221		253		175
Return of shares previously issued in connection with earn-out to sellers of acquired business		—		40		—
Modification of notes receivable for shares issued under leveraged stock purchase plan		3,048		—		—
Services exchanged for preferred stock of third party		—		2,100		—
Repayment of officer notes receivable with severance and bonus compensation		1,080		—		—

(1) The Company historically operated on an April 1 to March 31 fiscal year. In July 2000, the Company changed its fiscal year to December 31, resulting in a nine month transition period from April 1, 2000 through December 31, 2000. Prior to December 31, 2004, the Company entered into a plan to divest its IT services segment. Accordingly, the accompanying financial data have been prepared to present as discontinued operations the Company’s IT services business for all periods presented.

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

31(3) Cotelligent acquired OnSite Media, Inc., a Nevada corporation, on March 2, 2004. The results of OnSite Media, Inc. were included in the Company’s results from its acquisition date.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)~~ 32

~~Note~~Item 17. –Management’s ~~Summary~~Discussion ofand ~~Significant~~Analysis ~~Accounting~~of Financial ~~Policies~~Condition and ~~Practices~~Results of Operations

~~Description~~Except for statements of ~~Business~~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. Watchit Media’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 Watchit Media’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and other filings made with the Securities and Exchange Commission. 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 Watchit Media as of the date thereof, and Watchit Media assumes no obligation to update any of such forward-looking statements.

~~Cotelligent~~Watchit Media was formed in February 1993 to acquire, own and operate IT services ~~Inc~~businesses. ~~(“Cotelligent”~~Watchit orMedia ~~the~~was “a non-operating entity until 1996 when it first began to acquire businesses. The Company”) historically operated on an April 1 to March 31, afiscal ~~Delaware~~year. ~~corporation~~In July 2000, ~~provides~~the ~~software~~Company ~~consulting~~changed ~~services~~its fiscal year to ~~businesses~~December 31, ~~with~~resulting ~~complex~~in ~~information~~a ~~technology~~nine-month ~~(“IT”)~~transition ~~operations~~period from ~~and~~April 1, ~~provides~~2000 ~~maintenance~~through December 31, ~~support~~2000. ~~and~~In ~~contract~~2004, the Company ~~services~~was onorganized ~~software~~into ~~products~~two itreportable ~~licensed.~~segments, ~~These~~IT ~~financial~~services ~~statements~~and ~~include~~narrowcasting (which became effective with the ~~accounts~~acquisition of ~~Cotelligent~~OnSite Media, Inc. on March 2, 2004). The results of OnSite Media, Inc. ~~and~~have been included in the Company’s results from its ~~subsidiaries~~acquisition date. Prior to December 31, 2004, the Company entered into a plan to divest its IT services segment. Accordingly, the financial information on the Quarterly Report has been restated to present as discontinued operations the Company’s IT services segment for all periods presented.

InOn a ~~2000,~~continuing ~~the~~operations ~~Company~~basis, ~~was~~Watchit ~~organized~~Media inprovides ~~two~~narrowcasting ~~practice~~services which ~~groups,~~includes ~~Technology~~Internet ~~Solutions~~protocol ~~and Professional Services~~ (~~also~~IP) ~~known~~technologies asand ~~its~~production ITservices ~~staff~~for video ~~augmentation~~content, ~~business)~~distribution, scripting and ~~operated across~~playback ~~the~~on ~~United~~digital ~~States~~display ~~along~~video channels ~~with~~and ~~international~~networks, ~~consultant~~as ~~recruiting~~well ~~offices~~as inmaintenance, ~~Brazil~~support and ~~the~~contract ~~Philippines.~~services ~~Prior~~on software toand ~~March~~hardware ~~31,~~products ~~2000,~~it ~~the~~licenses. The Company ~~entered~~provides ~~into~~these aservices primarily ~~plan~~ to ~~divest~~gaming ~~its~~and IThospitality ~~staff augmentation business~~businesses. ~~Accordingly~~Narrowcasting, ~~the~~maintenance ~~accompanying~~and ~~consolidated~~support ~~financial~~services ~~statements~~are ~~and~~provided ~~related~~under ~~footnotes~~term ~~have~~contracts ~~been~~of ~~prepared~~which tomost ~~present~~are asone ~~discontinued~~year or ~~operations~~longer. ~~the~~These ~~Company’s~~contracts ITare ~~staff~~renewable ~~augmentation~~at ~~business~~the ~~for~~discretion ~~all~~of ~~periods~~our ~~presented~~clients.

~~Liquidity~~The Company recognizes revenue for the subscription of maintenance, support and contract services on software and hardware products it licenses to its narrowcasting clients as the Company performs the services. Revenues earned for software license sales and service contracts are recorded based on the provisions of AICPA SOP 97-2, “Software Revenue Recognition,” as amended, which shares the basic criteria described above. For each element in a software arrangement (e.g. license, maintenance, and services), the amount of revenue recognized is based upon vendor specific objective evidence of fair value using the residual method. Revenue for production services for video content, distribution, scripting and playback on digital display video channels and networks on either a time and materials basis, when services are provided or where pursuant to fixed-fee contract, the revenue is generally recognized as services are rendered on the percentage-of-completion method of accounting based on hours incurred to total estimated labor hours to complete. Revenues include reimbursable expenses charged to and collected from clients.

The Company’s ~~has~~principal ~~suffered~~costs ~~significant~~are ~~operating~~professional ~~losses~~compensation asdirectly ~~well~~related asto ~~negative~~the performance ~~operating~~of ~~cash~~services ~~flows~~and inrelated ~~the~~expenses. ~~last~~Gross ~~three~~profits ~~years~~(revenues after professional compensation and ~~continues~~related toexpenses) ~~be subject~~are toprimarily ~~certain~~a ~~risks~~function ~~common~~of tothe number ~~companies~~of ingaming ~~this~~and ~~industry.~~hospitality ~~These~~properties ~~uncertainties~~that ~~include~~subscribe to the ~~availability~~narrowcasting services ofas ~~financing,~~well as the ~~retention~~number of ~~and~~channels ~~dependence~~for ondifferent ~~key~~narrowcasting ~~individuals,~~services each property elects to subscribe to and the ~~affects~~level of ~~intense~~video ~~competition,~~production service purchased by the ~~ability~~client. toGross ~~develop~~profits ~~and~~can ~~successfully market~~be ~~new~~adversely ~~product~~impacted ~~and~~if ~~service~~clients ~~offerings~~do not renew contracts, ~~and~~if the ~~ability~~Company tois ~~streamline~~not ~~operations~~effective ~~and~~in ~~increase~~managing ~~revenues.~~its ~~There~~service activities, ~~can~~or beif nofixed-fee ~~assurance~~engagements ~~the~~for ~~Company~~production ~~will~~services beare ~~profitable~~not properly ~~in the future~~priced.

~~During 2003, management has taken action in response to the continued softness in IT services in order to preserve cash, including but not~~Operating ~~limited~~income tocan ~~significant~~be ~~reductions~~adversely inimpacted ~~headcount,~~by ~~outsourcing~~increased ~~certain~~ administrative ~~functions,~~staff ~~changing benefit plan insurance carriers, entered into an agreement to acquire a business in an industry with more near term growth prospects than IT~~compensation ~~services,~~ and ~~commenced~~expenses ~~looking~~related ~~for~~to ~~financing~~streamlining ~~alternatives.~~or ~~Management~~expanding ~~has carefully forecasted~~ the Company’s ~~results of operations and financial position through December 31~~business, ~~2004 and believes that the remaining cash on hand will provide~~which ~~adequate~~may be ~~cash~~incurred tobefore ~~funds~~revenues ~~its~~or ~~anticipated~~economies ~~cash working capital needs, including cash requirements related to the purchase~~ of ~~OnSite~~scale ~~at least through December 31, 2004. In the event circumstances arise that~~ are ~~not~~generated ~~factored into the forecast, management~~from ~~will take further action~~ such ~~as additional reductions in headcount and to continue looking for financing alternatives~~investment.

~~Basis of Presentation~~ 33

TheOVERVIEW accompanyingOF consolidated2005 financialAND statements and related notes to the consolidated financial statements include the accounts and results of Cotelligent, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 2004

~~Use~~In the years leading up to 2004, we strategically shifted from providing general IT services and solutions to a targeted approach to offering mobile workforce management and Web services. We changed our go-to-market strategy to better focus our resources and leverage our experience and solid client base in these areas. Our decision to do this was reinforced at the time by market research, financial research and our own research and analysis indicating that mobile workforce management and Web services were the next emerging growth markets. Our solutions utilized broadly accepted as well as cutting edge technologies. We spent considerable time on the development of ~~Estimates~~these core competencies after divesting the majority of our IT staffing business in 2000. In addition, the Company carefully assessed and exited a number of solutions and service offerings that were not core to the principal service offerings outlined above.

~~The~~While executing ~~preparation~~this ofstrategy ~~financial~~we ~~statements~~believed ~~in conformity~~we ~~with~~were ~~accounting~~focused ~~principles~~on ~~generally~~offering ~~accepted~~services that would help us increase revenue in the ~~United~~near ~~States~~term. ~~require~~From ~~management~~2001 through the third quarter of 2003 the Company continued to ~~make~~invest ~~estimates~~heavily in a large scale sales, marketing and ~~assumptions~~business ~~that~~development ~~affect~~organization working to capture new business. In September 2002, the ~~reported~~Company ~~amounts~~hired ofa ~~assets~~marketing executive to develop and ~~liabilities~~implement a more formalized and ~~disclosure~~systematic marketing program for the Company because of ~~contingent~~the ~~assets~~difficulty we were having in selling new business to new clients. Marketing programs re-designed and put in place by early 2003 ~~liabilities~~offered atpromising results when measured against prior year sales opportunity pipeline and business backlog. By the ~~date~~second quarter of 2003, the ~~consolidated~~Company gained ~~financial~~more ~~statements~~confidence in its marketing program and ~~the~~saw ~~reported~~an ~~amounts~~unprecedented number of ~~revenue~~prospect and ~~expenses~~client ~~during~~proposals. ~~the~~Nevertheless, ~~period.~~throughout ~~Significant~~2003 ~~items~~we ~~subject~~continued to be ~~estimation~~disappointed ~~include~~by ~~the~~prospects ~~allowance~~and ~~for~~clients ~~doubtful~~either ~~accounts,~~delaying ~~revenue~~decisions ~~recognition,~~to initiate ~~restructuring~~projects ~~liabilities,~~or ~~accounting~~pursuing ~~for~~lower ~~long~~cost off-~~lived~~shore ~~assets~~technical ~~and~~resource ~~income~~to ~~taxes~~executing their projects. ~~Actual~~In ~~results~~spite ~~could~~of ~~differ~~the ~~from~~Company’s ~~those~~investments ~~estimates~~in its selling organization, we were not successful in signing new business with companies we had not done business with before. We did, however, continue to sign new contracts with existing clients.

~~Cash~~In August of ~~Equivalents~~2003, it became clear to us that a number of opportunities that only a few months before looked promising were not going to close. The Company performed an in-depth review of each opportunity and concluded that businesses were reticent to use discretionary expenditures to invest in mobile workforce and Web service technologies (or other new projects) given the fact that their current IT environments operated satisfactorily. In addition, fearful of continuing poor economic conditions and market pressures, we observed that many of the prospects that decided to pursue projects did so with larger, better capitalized firms than Cotelligent.

~~The~~It became evident to us that the outlook for spending in IT services would continue to be uncertain without any clear indication of when a turnaround could be expected. Accordingly, in August 2003, the Company ~~considers~~terminated ~~all~~the majority ~~highly~~of ~~liquid~~its ~~debt~~senior ~~instruments~~executive ~~purchased~~staff along with anmost ~~original~~of ~~maturity~~the ofsales ~~three~~and business ~~months~~development ororganization. ~~less~~At the same time we aggressively engaged our existing clients and committed ourselves to besupporting ~~cash~~their ~~equivalents~~project requirements. In some cases we have been successful in securing longer term commitments. By scaling back expenses and focusing intensely on generating business from our long term clients we began to stabilize our revenue trend allowing us to move forward in our attempt to restore profitability and positive cash flow.

~~Trade~~Throughout the ~~Accounts~~remainder ~~Receivable~~of 2003, the Company continued to reduce headcount and looked closely at expense activity to scale back and streamline operating costs in line with revenue. The Philadelphia-based operation that supports Cotelligent’s sales force automation application FastTrack achieved stable revenue over the past several years and our clients continued to give us high marks for performance and client service. In addition, the core team responsible for our custom software development activities helped us to take advantage of recurring projects with existing clients. By keeping only the top sales account executives and account managers, we lowered our selling cost and improved our client relationships and retention.

~~Trade~~In April 2003, ~~accounts~~our ~~receivable~~Chief ~~are~~Executive ~~recorded~~Officer, atJames ~~the~~Lavelle, ~~invoiced~~sent ~~amount~~a ~~and~~letter doto our ~~not~~stockholders ~~bear~~indicating ~~interest. The allowance for doubtful accounts is~~ the Company’s ~~best~~intention ~~estimate~~to ofengage ~~the~~in merger and ~~amount~~acquisition ofactivities ~~probable~~in ~~credit~~order ~~losses~~to inhelp ~~the~~improve ~~Company~~Cotelligent’s ~~existing~~prospects ~~accounts~~for ~~receivable.~~the future ~~The~~and ~~Company~~increase ~~determines~~our ~~the~~scale. ~~allowance~~As ~~based~~a onmatter ~~historical~~of ~~write-off~~course ~~experience.~~since ~~The~~we started our Company ~~reviews~~in ~~its~~1996 ~~allowance~~and ~~for~~successfully ~~doubtful~~executed ~~accounts~~an ~~monthly.~~aggressive ~~Past~~merger ~~due~~and ~~balances~~acquisition ~~over~~strategy 90through ~~days~~early ~~and~~1999, ~~over~~we abelieved ~~specified~~this ~~amount~~strategy ~~are~~would ~~reviewed~~help ~~individually~~us ~~for~~improve our ~~collectibility~~prospects. ~~All~~We ~~other~~researched ~~balances~~and ~~are~~analyzed ~~reviewed on~~ a ~~pooled~~variety ~~basis.~~of ~~Account~~vertical ~~balances~~markets ~~are~~that could ~~charged~~provide ~~off~~new ~~against~~growth ~~the~~opportunities ~~allowance~~for ~~after~~us ~~all~~through ~~means~~merger ofor ~~collection~~acquisition. ~~have~~In mid-2003 ~~been~~Cotelligent ~~exhausted~~signed ~~and the~~a ~~potential~~letter ~~for~~of ~~recovery~~intent isto ~~considered~~acquire ~~remote.~~a ~~The~~field ~~Company~~force automation ~~does~~firm. ~~not~~After ~~have~~90 ~~any~~days ~~off-balance~~of ~~sheet~~due ~~credit~~diligence, ~~exposure~~we ~~related~~decided not to ~~its~~consummate the ~~customers~~transaction.

32In September 2003, Cotelligent engaged in a dialog with a Las Vegas based narrowcasting company, OnSite Media, Inc. The combination of Cotelligent’s deep history in Internet, media and wireless technologies and OnSite’s strength in driving video content to high growth venues in the gaming and hospitality industries looked promising. Cotelligent entered into a definitive agreement to acquire OnSite Media, Inc. on November 24, 2003, and closed the acquisition transaction on March 2, 2004. By integrating OnSite’s

~~Concentration of Credit Risk~~ 34

~~Financial~~business with ~~instruments~~Cotelligent’s ~~that~~infrastructure, ~~potentially~~and ~~subject~~by ~~the~~utilizing ~~Company~~our topublic ~~concentrations~~company ofknow ~~credit~~how to ~~risk~~position ~~consist~~us ~~principally~~for ofthe ~~trade~~future, ~~accounts receivable.~~we ~~Receivables~~have ~~arising~~set ~~from~~about ~~services~~executing ~~provided~~a tostrategy ~~clients~~that ~~are~~we believe ~~not~~will ~~collateralized~~allow ~~and~~us ~~accordingly,~~to ~~the~~play ~~Company~~an ~~performs~~important ~~ongoing~~role ~~credit~~in ~~evaluations~~the convergence of ~~its~~Internet, video ~~clients~~and tomobile ~~reduce~~technology. ~~the~~This ~~risk~~is ofa ~~loss~~growing, ~~and~~fast ~~provides~~paced anmarket ~~allowance~~in ~~for~~which ~~potentially~~we ~~uncollectible~~believe ~~accounts. In addition,~~ the ~~Company~~ability ~~has~~to aintegrate ~~high~~these ~~concentration~~technologies ofwill ~~its~~help ~~revenues~~us ~~and~~to differentiate ~~accounts~~us ~~receivable~~from inmany aother ~~few clients~~companies.

AtUpon completion ~~December~~of ~~31, 2003,~~ the ~~first~~acquisition, ~~second,~~OnSite ~~third,~~Media ~~fourth~~was ~~and~~renamed ~~fifth~~Watchit ~~largest~~Media ~~customer receivable balances were 15%~~USA, ~~14%~~ Inc., and ~~13%,~~became ~~12%~~a ~~and~~wholly-owned ~~12%~~subsidiary of ~~total receivables~~Cotelligent, ~~respectively~~ Inc. The newly ~~These~~acquired ~~five~~business ~~receivable~~was ~~balances~~immediately ~~were~~integrated into the ~~only~~Cotelligent infrastructure ~~accounts~~from ~~that~~March through ~~exceeded~~October 2004. ~~10%~~Our Board of Directors ~~total~~carefully ~~receivables~~followed and inevaluated the ~~aggregate~~financial ~~represented~~and ~~66%~~operating performance of ~~total~~our ~~receivables~~Company’s two business segments. ~~For~~While the ~~year~~IT ~~ended~~services ~~December~~and solutions ~~31,~~business ~~2003,~~continued ~~the~~to ~~first~~struggle, ~~second,~~Watchit ~~third~~Media performed well and experienced ~~ten~~significant ~~largest~~revenue ~~customers~~growth, together with stabile to increasing ~~comprised~~gross ~~21%,~~margin ~~20%~~performance. In addition, ~~13%~~Watchit’s near and ~~83%~~longer ofterm ~~total~~business opportunities ~~revenues,~~appeared ~~respectively.~~to indicate the strong possibility of future revenue growth.

AtIn November 2004, ~~December~~we announced our plan to divest our entire IT services and 31solutions business and change our name to Watchit Media, Inc. ~~2002~~allowing us to focus all of our attention on narrowcasting. On July 13, ~~three~~2005, ~~clients~~the Company’s ~~individually~~stockholders ~~accounted~~approved ~~for~~the ~~more~~sale ~~than~~of ~~10%~~the IT services business located at Broomall, Pennsylvania, the remaining component of our discontinued operations, pursuant to an Asset Purchase Agreement, dated as of April 1, 2005, as amended on June 27, 2005 (the “Asset Purchase Agreement”) entered into between the Company’s ~~revenues~~and certain of its subsidiaries and FastTech Integrated Solutions, ~~respectively~~LLC, an affiliate of Beverly Hills, California-based private equity firm Skyview Capital, LLC. InThe ~~addition~~transaction ~~five~~was ~~clients~~completed ~~accounted~~on July 15, 2005. Pursuant to the Asset Purchase Agreement, aggregate consideration for ~~more~~the business ~~than~~included: ~~10%~~cash at closing of ~~accounts~~$2,300, ~~receivable~~subject atto ~~December~~closing 31date adjustments, ~~2002.~~and an earn-out of up to $1,450 if certain future revenue targets are attained over the three years following completion of the sale.

~~For~~Year ~~the~~Ended ~~year ended~~ December 31, ~~2001,~~2005 noCompared ~~single~~to ~~client~~Year ~~accounted~~Ended ~~for more than 10% of the Company’s revenues, nor accounts receivable at~~ December 31, ~~2001.~~ 2004

~~Deferred Acquisition Costs~~ Revenues

~~The~~Revenues increased ~~Company~~$982, ~~defers~~or ~~costs associated~~114%, ~~with~~to ~~potential~~$1,844 ~~acquisitions~~in ~~which~~the ~~typically~~twelve ~~include~~months ~~outside~~ended ~~service~~December 31, 2005, ~~costs~~from ~~(such~~$862 asin ~~legal~~the ~~and~~twelve ~~accounting)~~months ~~directly~~ended ~~attributable~~December 31, to2004. aEffective with ~~target~~the acquisition ~~and~~of ~~classifies~~OnSite ~~such amounts in other current assets~~Media, Inc. ~~When~~on aMarch 2, ~~target acquisition is acquired~~2004, the Company ~~associated~~commenced ~~deferred~~reporting ~~acquisition~~revenues ~~costs~~under ~~are~~its ~~included~~narrowcasting insegment. ~~the~~The increase ~~purchase~~in ~~price~~revenues ofresulted ~~the~~from ~~acquisition.~~marketing Atefforts ~~the~~and ~~time the Company determines~~ a ~~potential~~corresponding expansion ~~acquisition~~of ~~will~~business ~~not~~together bewith ~~acquired,~~ the ~~associated~~full ~~deferred~~twelve ~~transaction~~months ~~costs~~effect ~~are~~of ~~charged to~~including ~~selling,~~revenue ~~general~~resulting ~~and~~from ~~administrative~~the ~~expenses.~~March 2, 2004 acquisition.

~~Software~~Our narrowcasting ~~Development~~clients ~~Costs~~retain us to manage a part of their television system infrastructure, produce video content pertinent to their brand, marketing communications and hotel property amenities, and present this content on their Private Video Networks. We have annual renewable contracts with our clients for managing the computer hardware that interfaces with their television systems and, in some cases, their information system infrastructure. Watchit Media charges a base monthly subscription fee for these services.

~~Costs~~Clients also ~~incurred~~pay inus ~~the~~on ~~research~~a ~~and~~time ~~development of new software products~~ and ~~enhancements~~materials tobasis ~~existing~~for ~~software~~the ~~products~~production ~~are~~of ~~expensed~~video ~~as incurred until technological feasibility has been established~~content. ~~After~~In the ~~technological~~gaming ~~feasibility~~and ishospitality ~~established~~industry, ~~any~~our ~~additional~~clients ~~costs~~tend ~~are~~to ~~capitalized~~require ~~in accordance with SFAS No. 86,~~frequent ~~“Accounting~~changes ~~for the Costs of Computer Software~~ to ~~Be Sold, Leased or otherwise Marketed.” Because~~ the ~~Company~~content ~~believes~~we ~~that~~produce ~~its current process~~ for ~~developing~~them. ~~software~~Video iscontent ~~essentially~~pertaining ~~completed~~to ~~concurrently with the establishment of~~their ~~technological feasibility~~entertainment, nocasino ~~software~~games, ~~development~~cross ~~has~~promotions, ~~been~~and ~~capitalized~~activities asare ofamong ~~December~~the dynamic ~~31,~~video ~~2003~~content ~~and~~we ~~2002~~produce.

~~Property~~In addition, Watchit Media provides the service of securing hardware, software and installation ~~Equipment~~and training services from third parties. Clients re-imburse Watchit for hardware and software, and are charged an installation and training service fee in connection with these in installations.

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

~~Investments~~Gross profit increased $540, or 108%, to $1,038 in the twelve months ended December 31, 2005, from $498 in the twelve months ended December 31, 2004. Effective with the acquisition of OnSite Media, Inc. on March 2, 2004, the Company commenced reporting revenues under its narrowcasting segment. The increase in gross profit resulted from marketing efforts and a corresponding expansion of business, together with the full twelve months effect of including revenue resulting from the March 2, 2004 acquisition.

~~Investments~~As a inpercentage ~~other~~of ~~businesses~~revenues, ~~where~~the ~~ownership~~gross ismargin ~~less~~decreased ~~than~~to 2056% ~~are~~in ~~accounted for using~~ the twelve ~~cost~~months ~~basis~~ended ofDecember 31, ~~accounting.~~2005, ~~Investments~~from ~~where~~57% ~~ownership~~in isthe ~~between~~twelve ~~20%~~months ~~and~~ended ~~50%~~December 31, 2004. ~~and~~The ~~where~~decrease ~~the~~in ~~Company~~gross ~~has~~margin was the ~~ability~~result toof ~~exercise~~increased ~~significant~~revenues ~~influence,~~related to ~~are~~hardware ~~accounted~~and ~~for~~software ~~using~~expenses ~~the~~passed ~~equity~~through ~~method~~to ofclients ~~accounting.~~with a nominal mark-up.

Investments in other businesses that meet the definition of a debt security under the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” are classified as trading securities and reported at fair value, with unrealized gains and losses recorded in other income (expense) in the consolidated statements of operations. 35

~~Long-Lived~~Selling, ~~Assets~~General and Administrative Expenses

~~The~~Selling, general ~~Company~~and ~~accounts~~administrative ~~for~~expenses ~~the~~increased ~~impairment~~$1,519, ~~and~~or ~~disposition~~78%, ofto ~~long-lived assets~~$3,472 in ~~accordance~~the twelve ~~with~~months ~~SFAS~~ended ~~No.~~December 31, ~~144~~2005, ~~“Accounting~~from ~~for~~$1,953 in the ~~Impairment~~twelve ormonths ended ~~Disposal~~December 31, ~~of Long-Lived Assets~~2004.” ~~Prior~~The toincrease ~~the~~in ~~adoption~~selling, ofgeneral ~~SFAS~~and administrative Noexpenses ~~144,~~was the ~~Company~~result ~~accounted~~of ~~for~~increased ~~long-lived~~staff, ~~assets~~marketing ~~in accordance with SFAS No. 121,~~programs ~~“Accounting~~and ~~for~~development ~~Impairment~~ of ~~Long-Lived~~new ~~Assets~~proprietary ~~and~~video ~~for~~programming ~~the~~not ~~Long-Lived~~yet ~~Assets~~introduced to ~~Be Disposed Of~~ clients.” In ~~accordance~~addition, ~~with~~corporate ~~SFAS No. 144~~selling, ~~long-lived~~general ~~assets~~and toadministrative beexpense ~~held~~was allocated ~~are~~between ~~reviewed~~the ~~for~~narrowcasting ~~events~~and orIT ~~changes~~services insegment. ~~circumstances,~~Upon ~~which~~completion ~~indicate that~~of ~~their~~the ~~carrying~~divestiture ~~value~~of ~~may~~the ~~not~~remaining becomponent ~~recoverable.~~of ~~The~~the ~~Company~~IT ~~periodically~~services ~~reviews~~segment ~~the~~on ~~carrying~~July 15, 2005, ~~amount~~corporate ofselling, ~~long-lived~~general ~~assets~~and toadministrative ~~determine~~expenses ~~whether~~were orallocated solely ~~not impairment~~ to ~~such~~the ~~amount~~narrowcasting ~~has occurred~~segment.

~~Fair~~Other ~~Value~~Income ~~of Financial Instruments~~ (Expense)

~~The~~Other income ~~Company’s~~(expense) ~~financial~~consists ~~instruments consist~~ of ~~cash,~~interest ~~marketable securities, refundable~~ income ~~taxes~~, ~~short-term~~interest ~~accounts~~expense ~~receivable, a note receivable, accounts payable, accrued liabilities~~ and ~~income taxes payable for which current carrying amounts are equal to or approximate fair market value~~other.

33Interest expense, net of interest income, was $39 for the twelve months ended December 31, 2005 compared to interest income, net of interest expense of $82 for the twelve months ended December 31, 2004. The decrease in net interest income was the result of lower cash balances on hand coupled with interest expense on secured borrowings that commenced in October of 2004.

~~Revenue~~Other income ~~Recognition~~of $290 was the result of $141 in gains on the sales of common stock of Bluebook International Holding Company, Inc., which had previously been written down to a zero book value plus a $149 gain on the abandonment of leasehold improvements when Watchit moved to it new location in Las Vegas in December 2005 .

~~The~~Income ~~Company~~Tax recognizes revenue for time and materials contracts when there is evidence of an agreement, a fixed or determinable fee, collectibility is reasonably assured, and delivery has occurred. Revenues include reimbursable expenses charged to and collected from clients. Revenues pursuant to fixed-fee contracts are generally recognized as services are rendered on the percentage-of-completion method of accounting based on hours incurred to total estimated labor hours to complete. Revenues earned for software license sales and service contracts are recorded based on the provisions of AICPA SOP 97-2, “Software Revenue Recognition,” as amended, which shares the basic criteria described above, except collectibility is probable rather than reasonably assured. For each element in a software arrangement (e.g. license, maintenance, and services), the amount of revenue recognized is based upon vendor specific objective evidence of fair value using the residual method. Maintenance and service revenue is recognized as the Company performs the services. Benefit

~~Cost~~The Company recognized an income tax benefit of ~~Revenues~~$72 for the twelve months ended December 31, 2005 representing federal tax refunds of $69 and state tax refunds of $3.

~~Cost~~The Company ofrecognized ~~revenues~~an ~~consists~~income ~~primarily~~tax benefit of ~~compensation~~$28 ~~and~~for ~~benefits~~the oftwelve ~~Cotelligent’s~~months ~~employees~~ended ~~engaged~~December 31, 2004 inwhich ~~the~~represented ~~delivery~~state oftax ~~consulting services~~refunds.

~~Income~~Discontinued ~~Taxes~~ Operations

~~The~~Discontinued operations ~~Company~~comprised ~~uses~~ the ~~asset~~IT ~~and~~services ~~liability~~segment ~~method~~and ofincluded ~~accounting for income taxes. Provision is made in~~ the ~~Company’s~~operating ~~consolidated financial statements for current~~results ~~income~~of ~~taxes~~businesses ~~payable~~placed ~~and~~into ~~deferred~~discontinued ~~income~~operations ~~taxes arising primarily from net operating loss carryforwards~~ and ~~temporary differences. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in~~ the ~~years~~ ingain ~~which those temporary differences are expected to be realized or settled. The effect~~ on ~~deferred~~the ~~tax~~sale ~~assets and liabilities~~ of ~~a change in tax rates is recognized in income in~~ the ~~period~~remaining ~~that~~component ~~includes~~of ~~the~~discontinued ~~enactment date~~operations. ~~The Company records a valuation allowance to reduce deferred tax assets, when realization may not be likely.~~

~~Repurchase~~The loss from discontinued operations of ~~Common~~$469 ~~Stock~~for the twelve months ended December 31, 2005 compared to a loss from discontinued operations of $2,860 for the months ended December 31, 2004 and consisted of the operating results of the discontinued operations. The improvement in operating performance in 2005 was the result of recognizing previously deferred revenues of $600 on the sale of software licenses, coupled with the effect of only operating the remaining component of discontinued operations through July 15, 2005, the date upon which it was sold, compared to months in the prior year.

The ~~Company~~ ~~records~~gain on the ~~repurchase~~sale of ~~Common~~the ~~Stock~~discontinued asoperations aof ~~reduction~~$1,520 offor ~~stockholders’~~the ~~equity~~period atended ~~cost.~~December 31, 2005 ~~When~~was ~~shares~~the result of ~~common~~the ~~stock~~gain ~~are~~on ~~reissued,~~the sale of the ~~Company~~remaining ~~uses~~component aof discontinued ~~first-in,~~operations ~~first-out~~on ~~method.~~July 15, 2005.

~~Stock-Based~~Year ~~Compensation~~Ended December 31, 2004 Compared to Year Ended December 31, 2003

The Company ~~has~~had ~~adopted~~two reportable segments: IT services and narrowcasting. Prior to December 31, 2004, the ~~disclosure~~Company ~~provisions~~entered ofinto ~~SFAS~~a Noplan to divest its IT services segment. ~~123~~Accordingly, the ~~“Accounting~~financial ~~for~~information ~~Stock-Based~~presented ~~Compensation”~~in this Annual Report has been prepared to present as ~~amended~~discontinued operations the Company’s IT services business. AsThe Company’s ~~permitted~~continuing byoperations consist of the ~~provisions~~narrowcasting segment. The Company commenced reporting revenues for its narrowcasting segment following the acquisition of ~~SFAS~~On-Site NoMedia, Inc. ~~123~~on March 2, ~~the~~2004. ~~Company~~As ~~continues~~a toresult, on ~~apply~~a continuing operations basis, the ~~provision~~Company ofhad ~~APB~~no ~~Opinion~~revenue, 25gross ~~and~~profit ~~related~~or selling, ~~interpretations~~general inand ~~accounting~~administrative ~~for~~expenses ~~its~~to ~~employee~~report ~~stock~~prior ~~option~~to ~~plans~~March 2, 2004.

Accordingly, the Company measures compensation expense for its employee stock-based compensation awards using the intrinsic value method and provides pro forma disclosures of net income (loss) and earnings (loss) per share as if the fair value method had been applied. Therefore, compensation cost for employee’s stock awards is measured as the excess, if any, of the fair value of our common stock at the grant date or re-measurement date over the amount an employee must pay to acquire the stock and is amortized over the related service periods using the straight-line method. Compensation expense previously recorded for unvested employee stock-based compensation awards that are forfeited upon employee termination is reversed in the period of forfeiture. 36

The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing (“Black-Scholes”) model with the following weighted average assumptions for the years ended December 31, 2003, 2002 and 2001, respectively: (1) risk-free interest rates of 1.94%, 3.78% and 3.64%, (2) a dividend yield of 0%, (3) volatility factors of the expected market price of the Company’s common stock of 186%, 187%, 188%, and (4) a weighted average expected life of 3.25, 3.25 and 3.25 years. The weighted average fair values of options granted during the years ended December 31, 2003, 2002 and 2001 were $0.24, $0.38 and $0.20 per share, respectively. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected volatility of the Company’s Common Stock. For purposes of pro forma disclosure, the estimated fair value of options is amortized to expense over the options’ vesting period. If the Company had elected to recognize compensation expense for options granted during the years ended December 31, 2003, 2002 and 2001, based on the fair value as described in SFAS No. 123, net loss and earnings per share would have been changed to the pro forma amounts indicated below. Revenues

34Gross Profit

	For the Year Ended December 31,
	2003			2002			2001
Net loss as reported	$	(12,350	)	$	(8,723	)	$	(23,529	)
Add: Stock-based employee compensation expense included in net loss, net of tax		74			—			—
Deduct: Total Stock-based employee compensation expense determined under fair value based method for all awards, net of tax		243			1,108			3,433
Pro forma net loss	$	(12,519	)	$	(9,831	)	$	(26,962	)
Loss per share, as reported:
Basic and diluted	$	(0.93	)	$	(0.66	)	$	(1.76	)
Pro forma loss per share:
Basic and diluted	$	(0.94	)	$	(0.74	)	$	(2.02	)

Selling, General and Administrative Expenses

~~The~~Revenues from ~~Company~~continuing ~~stock~~operations ~~option~~during ~~awards~~the ~~are typically~~year ~~accounted~~ended ~~for~~December 31, as2004 ~~fixed~~were $862. ~~awards~~Our ~~because~~narrowcasting ~~the~~clients ~~number~~retain ofus ~~shares~~to ~~that~~manage ana ~~individual~~part of ~~employee~~their television issystem ~~entitled to receive~~infrastructure, ~~and~~produce ~~the~~video ~~option~~content ~~price,~~pertinent ifto ~~any~~their brand, ~~are~~marketing ~~known~~communications atand ~~the~~hotel ~~grant~~property ~~date. However~~amenities, ~~awards~~and ~~under~~present ~~the Company’s Leveraged Stock Purchase~~this ~~Plan~~content ~~(“LSPP”),~~on ~~where~~their ~~the~~Private ~~Company~~Video ~~issues~~Networks. ~~shares~~We inhave ~~exchange~~annual renewable ~~for~~contracts awith ~~note~~our ~~considered~~clients ~~nonrecourse~~ for ~~accounting~~managing ~~purposes, are treated as variable awards because~~ the ~~Company~~computer ~~cannot~~hardware ~~determine~~that interfaces ~~the~~with ~~ultimate~~their ~~purchase~~television ~~price~~systems ofand, ~~the~~in ~~shares~~some atcases, ~~the~~their information ~~issuance~~system ~~date~~infrastructure. ~~For~~Watchit ~~variable~~Media ~~awards,~~charges ~~the~~a ~~Company~~base ~~estimates~~monthly ~~total~~subscription ~~compensation cost~~ fee for ~~each~~these ~~period~~services. ~~from~~Currently, ~~the~~Watchit ~~issuance~~derives ~~date~~over to95% ~~the final measurement date based on the quoted market price~~ of ~~the~~its ~~Company’s~~revenue ~~stock at the end of each period. No~~from ~~compensation~~base ~~expense~~monthly ~~has~~subscription ~~been~~fess ~~reported~~under ~~during~~these ~~the~~recurring ~~periods~~revenue ~~presented for the LSPP awards~~contracts.

~~The~~In addition, ~~LSPP~~our ~~awards~~clients ~~resulted~~pay inus ~~outstanding~~on ~~common~~a ~~shares~~time ofand ~~750,000,~~materials ~~1,677,979~~basis ~~and~~for ~~1,696,226~~the atproduction of ~~December~~video ~~31,~~content. ~~2003,~~In ~~2002~~the gaming and ~~2001,~~hospitality ~~respectively~~industry, ~~that~~our ~~are~~clients ~~reflected~~tend into require ~~the~~frequent ~~applicable~~changes ~~accompanying~~to ~~consolidated~~the ~~balance sheets~~content ~~and~~we ~~consolidated~~produce ~~statement~~for ofthem. ~~stockholders~~Video ~~equity.~~content pertaining ~~However,~~to ~~these~~their ~~shares~~entertainment, ~~are~~casino ~~equivalent~~games, tocross ~~stock~~promotions, ~~options~~and activities ~~for~~are ~~purposes~~among ofthe ~~calculating~~dynamic ~~earnings~~video ~~(loss)~~content ~~per~~we ~~share~~produce.

~~Earnings~~Gross profit ~~(Loss)~~from ~~Per~~continuing ~~Share~~operations during the year ended December 31, 2004 was $498 and selling, general and administrative expenses from continuing operations were $1,953 for the year ended December 31, 2004.

~~Basic~~Restructuring earnings (loss) per share are calculated by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. Diluted earnings per share include the impact of Common Stock options outstanding, when dilutive. Charge

~~Discontinued~~In 2001 ~~Operations~~the Company took a restructuring charge to provide for remaining lease obligations on certain facilities it no longer operated from. The initial restructuring charge for this program has been classified as part of discontinued operations as the underlying operating facilities related to the IT services segment.

~~Discontinued operations~~Other ~~consist~~Income of the Company’s IT staff augmentation business. The Company entered into a plan to divest of these operations prior to March 31, 2000. The operating results of these operations subsequent to April 1, 2000, have been reflected in the accompanying consolidated financial statements as income (~~loss~~Expense) ~~from discontinued operations.~~

~~Restructuring~~Other income ~~Charges~~(expense) primarily consists of interest income, interest expense, and equity method losses on an investment in an alliance partner and the change in market value associated with an investment in a marketable security.

~~In June 2002,~~Interest ~~FASB Statement No. 146~~income, ~~“Accounting~~net ~~for~~of ~~Costs~~interest ~~Associated with Exit or Disposal Activities~~expense,” was ~~issued.~~$82 ~~Statement No. 146 addresses financial accounting and reporting~~ for ~~costs~~the ~~associated~~year ~~with~~ended ~~exit or disposal activities and~~December 31, ~~nullifies~~2004 ~~EITF~~compared ~~Issue~~to ~~No.~~$259 ~~94 -3, “Liability Recognition~~ for ~~Certain~~the ~~Employee~~year ~~Termination~~ended ~~Benefits~~December 31, ~~and~~2003. ~~Other~~The ~~Costs~~decrease in tonet ~~Exit~~interest anincome ~~Activity.”~~was ~~The~~the ~~provisions~~result of ~~Statement~~lower ~~146~~cash ~~were~~balances ~~effective~~on ~~for~~hand ~~exit~~during orthe year ~~disposal~~ended ~~activities initiated after~~ December 31, ~~2002, with earlier application encouraged~~2004.

35There was no other expense for the year ended December 31, 2004 compared to $1,608 of other expense for the year ended December 31, 2003. The decrease was principally the result of the change in 2003 of the market value associated with an investment in a marketable security ($1,273) and equity method losses on an investment in an alliance partner ($335).

~~Reclassifications~~ Income Tax Benefit

~~Certain~~The Company ~~reclassifications~~realized ~~have~~an ~~been~~income ~~made~~tax inbenefit ~~the~~of ~~prior~~$28 ~~years’~~for ~~financial~~the ~~statements~~year toended ~~conform~~December 31, 2004 towhich ~~the~~consisted ~~presentation~~of insome ~~the~~state ~~current~~income ~~period.~~tax deposit refunds.

~~Note~~Loss 2from –Discontinued ~~Allowance for Doubtful Accounts~~ Operations

~~Allowance~~Discontinued operations comprised operations associated with the IT services segment. Loss from discontinued operations was $2,860 for ~~doubtful~~the ~~accounts~~year ~~activity~~ended isDecember 31, 2004 ~~presented~~compared ~~below~~to $11,001 for the year ended December 31, 2003. The reduction in loss was the result of improvements to the utilization of billable staff due to the elimination of a number of underutilized billable people and reductions in selling, general and administrative expenses.

Balance, December 31, 2000	$	3,241
Provision for doubtful accounts		753
Recoveries		151
Write-offs		(3,612	)
Balance, December 31, 2001		533
Provision for doubtful accounts		(440	)
Recoveries		164
Write-offs		(133	)
Balance, December 31, 2002		124
Provision for doubtful accounts		(164	)
Recoveries		111
Write-offs		(9	)
Balance, December 31, 2003	$	62

LIQUIDITY AND CAPITAL RESOURCES

~~Note~~In recent 3years, –the Company has financed its operations principally through its ~~Property~~own cash. On October 8, 2004, the Company entered into a Contract of Sale Security Agreement, (as amended, the “Agreement”) with CAPCO Financial Company, a division of Greater Bay Bank N.A. (the “Lender”). Under the Agreement, the Company has agreed to sell to the Lender all of its accounts receivable existing as of the date of the Agreement or thereafter created during the term of the Agreement at a discount below face value. The Lender has reserved the sum of $1,000 for the purchase of the Company’s accounts receivable and ~~Equipment~~these funds are available daily at the Company’s option, subject to the restriction that the maximum amount available to the Company may not exceed 80% of the accounts receivable that meet the Lender’s eligibility requirements. Funds advanced by the Lender to the Company under the Agreement are subject to a daily fee equal to the Lender’s prime rate plus 4%, 11.25% at December 31, 2005. The Company has granted the Lender a first priority security interest in all accounts, contract rights, chattel paper, documents, instruments and related general intangibles now owned or hereafter acquired and the proceeds thereof.

~~Property~~The Agreement had an initial term of 12 calendar months and ~~equipment~~was isrenewed until ~~comprised~~October, 2006. The Agreement includes customary covenants regarding events of default. Upon an event of default, the Lender may, among other ~~following:~~things, declare any amounts outstanding under the Agreement immediately due and payable.

	Useful Lives(In Years)	December 31,2003			December 31,2002
Computer software and office equipment	3-5	$	406		$	420
Furniture and fixtures	5		—			3
Leasehold improvements	2		—			63
			406			486
Less: Accumulated depreciation			(117	)		(35	)
Property and equipment, net of accumulated depreciation		$	289		$	451

Cash used in operating activities was $2,474 for the twelve months ended December 31, 2005, compared to cash used in operating activities of $4,790 for the twelve months ended December 31, 2004. In the twelve months ended December 31, 2005, the primary uses of cash in operating activities was $1,060 net loss, gain on sale of discontinued operations of $1,520, gain on sale of investment in common stock of $141, gain from lease terminations of $149, and decrease in deferred revenue of 596, offset by $195 increase in accounts receivable, $160 increase in prepaid expenses and other current assets, $314 increase in accounts payable and accrued liabilities, and $258 of amortization of identifiable assets and depreciation of property and equipment. In 2004, the $4,205 net loss, $1,617 decrease in accounts payable, $129 decrease in deferred revenue and $100 adjustment to the valuation allowance for note receivable from a former officer, offset by $768 reduction in accounts receivable, $239 of depreciation and amortization and $143 reduction in prepaid expenses and other current assets were the primary net uses in operating activities.

~~Depreciation~~Cash provided ~~expense~~by ~~included~~investing ~~in selling~~activities was $1,695 ~~general~~for ~~and~~the ~~administrative~~twelve ~~expense~~months ended December 31, 2005, compared to $563 used for the ~~years~~twelve months ended December 31, ~~2003,~~2004. In ~~2002~~the ~~and~~twelve ~~2001,~~months ~~was~~ended ~~$176~~December 31, ~~$35~~2005, ~~and~~the ~~$2,634,~~primary ~~respectively.~~use of investing activities was $66

~~Note 4 – Investments~~ 37

~~Investment~~for the acquisition of the assets of California Visitors Network and $97 used to acquire property and equipment. In the twelve months ended December 31 2005, the primary source of cost was $1,568 related to the sale of discontinued operations, $149 related to the proceeds form lease terminations, and $141 related to the proceeds from the sale of investment in ~~White~~common ~~Horse~~stock. ~~Interactive~~In the twelve months ended December 31, 2004 the primary sources from investing activities were $200 of payments received on a note from the acquirer of a previously sold business offset by $605 used to purchase a business and $258 used to acquire property and equipment. In 2004, the Company used $605 for transaction costs associated with the purchase of On-Site Media, Inc, $258 for the purchase of property and equipment, offset by $200 of payments on a note from the acquirer of a previously sold business and $100 of payments on a note receivable from stockholder.

OnCash provided ~~July~~by ~~18,~~financing ~~2000,~~activities was $264 in the ~~Company~~twelve ~~paid~~months $2ended December 31,~~000~~ 2005, towhich ~~acquire~~consisted aof ~~35%~~$420 ~~ownership~~of ~~interest~~cash inprovided ~~White~~by ~~Horse~~financing ~~Interactive,~~activities anfrom ~~integrated~~the issuance ~~media~~of ~~agency~~common stock and warrants, ~~which~~offset ~~resulted~~by in$99 aof ~~difference~~net repayments of ~~between~~advances ~~the~~against ~~cost~~secured borrowings and $57 of ~~the~~expenses ~~investment~~incurred ~~and~~for the issuance ~~amount~~ of ~~underlying~~common ~~equity~~stock inand ~~net~~warrants. ~~assets~~Cash ~~totaling~~provided ~~$1,300.~~by ~~The~~financing ~~Company~~activities was ~~uses~~$191 for the ~~equity~~year ~~method~~ended December 31, 2004, which comprised $386 of ~~accounting~~secured borrowings ~~for~~offset ~~this~~by ~~investment~~$195 ~~and~~of ~~recorded~~cost anassociated ~~equity~~with ~~loss~~the issuance of ~~$335~~Common Stock, compared ~~$510~~to ~~and~~ $~~919~~62 for the ~~years~~year ended December 31, 2003, ~~2002~~which ~~and~~represented ~~2001,~~net proceeds ~~respectively.~~on the issuance of common stock.

~~Bluebook International~~The ~~Holding~~primary sources of liquidity for the Company going forward are the collection of its accounts receivable and existing cash balances at December 31, ~~Inc~~2005 along with an aggressive fund raising program through the additional sales of the Company’s stock . Accounts receivables of the continuing operations were 32 and 36 days of annual revenues of the continuing operations at December 31, 2005 and December 31, 2004, respectively.

OnDuring the ~~August~~past ~~19,~~and ~~2002~~in 2005, management has taken action in response to the ~~Company~~continued softness ~~acquired~~in 3IT services in order to preserve cash,~~055,540 shares~~ ofincluding ~~Series~~but Cnot ~~Convertible~~limited ~~Redeemable~~to significant ~~Preferred~~reductions ~~Stock~~in ~~(“Series~~headcount, ~~C”)~~outsourcing ofcertain ~~Bluebook~~administrative functions, ~~International~~changing ~~Holding~~benefit ~~Company~~plan insurance carriers, ~~Inc.~~relocating ~~(“Bluebook”)~~the headquarters office resulting in lower lease obligations, ~~representing~~acquiring a business in an ~~approximately~~industry 9%with ~~ownership~~more ~~interest~~near ~~(assuming~~term ~~conversion~~growth prospects than IT services, securing a line of ~~all~~credit ~~outstanding~~agreement against its accounts receivable and announcing the ~~preferred~~plan ~~stock)~~to indivest ~~exchange~~its ~~for~~IT $services segment. Between February 1,~~000~~ in2005 ~~cash~~and April 27, 2005, ~~conversion~~the Company entered into Stock and Warrant Purchase Agreements with certain accredited investors pursuant to which the Company sold shares of Common Stock and warrants to purchase additional shares of Common Stock resulting in a cash infusion to the Company of approximately $~~500~~355. ~~bridge~~In ~~loan~~addition, on ~~from~~July 15, ~~Cotelligent~~2005 the Company sold its remaining IT services business to FastTech ~~Bluebook~~Integrated Solutions LLC, ~~advanced~~an ~~earlier~~affiliate inof ~~the~~Beverly ~~third~~Hills, California-based ~~quarter~~private equity firm Skyview Capital, LLC, resulting in cash of approximately ~~2002~~$2,300. InManagement ~~accordance~~has ~~with~~carefully ~~the~~forecasted ~~purchase~~its results of operations and ~~development~~financial ~~agreement~~position through December 31, ~~management~~2006, ofand has determined that the ~~Company~~remaining cash on hand, together with cash available from ~~expected~~the ~~Cotelligent~~line of credit, proceeds from the sales of Common Stock to beaccredited investors, aproceeds ~~preferred~~from ~~provider~~the sale of ~~implementation~~the IT services ~~for~~segment, ~~Bluebook’s~~will ~~future~~provide adequate ~~software~~cash ~~products~~to fund its anticipated working capital needs. In the event circumstances arise that are not factored into the forecast, management will take further action to streamline operations and seek financing alternatives.

~~Under~~The following ~~the~~table ~~Series~~reflects Cour ~~purchase~~contractual ~~and development agreement, the Company contributed additional services and funded an additional $1,500 in~~ cash, ~~due~~obligations ~~upon~~as ~~Bluebook’s first sale~~ of ~~certain software associated with the purchase and development agreement in the fourth quarter of 2002. Upon payment of the additional $1~~December 31,~~500 and delivery of the remaining services, the Company received an additional 2,261,164 shares of~~ ~~Series C~~2005, ~~which~~excluding ~~increased the Company’s ownership~~ interest ~~in Bluebook to 15% (assuming conversion of all outstanding preferred stock~~, ~~and~~due ~~assuming~~over nothe ~~further~~indicated ~~stock issuances on behalf of Bluebook)~~periods.

	Payments Due by Period
Contractual Cash Obligations:	Total		Less than 1 Year		1 to 3 Years		4 to 5 Years		After 5 Years
Operating leases, net of sublet arrangements	$	1,096	$	908	$	151	$	—	$	—

~~The~~RECENT ~~value~~ACCOUNTING of the Series C was initially recorded at $3,000, the amount of cash paid to Bluebook. The cost of the contributed services was recorded as research and development costs in the accompanying consolidated statements of operations. PRONOUNCEMENTS

~~Under~~Recent Accounting ~~the~~Pronouncements ~~certificate~~- ofIn ~~designation~~May of2005, the ~~Series~~Financial Accounting CStandards ~~stock~~Board (“FASB”) issued SFAS No. 154, ~~Bluebook~~Accounting Changes isand ~~required~~Error Corrections, ata ~~the~~replacement ~~Company’s~~of ~~option~~APB Opinion No. 20 and FASB Statement No. 3, to(“SFAS 154”). ~~either~~This ~~convert~~statement carries forward without change the ~~Series~~guidance Ccontained ~~shares~~in toAPB ~~common~~Opinion ~~stock~~No. 20 atfor reporting ~~any~~the ~~time~~correction orof ~~redeem~~an error in previously issued financial statements and changes the ~~Series~~requirements Cfor ~~shares~~the accounting for ~~cash~~and ~~beginning~~reporting ~~four~~of ~~years~~a change in accounting principle. This Statement is effective for accounting changes and corrections upof ~~through~~errors ~~six~~made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 is not expected to have a significant impact on the ~~date~~Company’s results of ~~initial~~operations ~~issuance.~~or financial position.

~~The~~In ~~Series~~November C2004, ~~meets~~ the ~~definition~~FASB issued ofSFAS aNo. 151, ~~debt~~Inventory ~~security~~Costs, ~~under~~an ~~the~~amendment ~~provisions~~ of ~~SFAS~~ARB No. ~~115~~ 43, Chapter 4 (“~~Accounting~~SFAS 151”), ~~for~~to ~~Certain~~clarify ~~Investments~~that inabnormal ~~Debt~~amounts ~~and~~of ~~Equity~~idle ~~Securities.”~~facility Inexpense, ~~accordance~~freight, ~~with~~handling ~~SFAS No. 115~~costs, ~~the~~and ~~Company~~wasted ~~classified~~material ~~the~~(spoilage) should ~~Series~~be Crecognized as acurrent ~~trading~~period ~~security~~charges, and ~~consequently~~that ~~reports~~fixed ~~the~~production overheads ~~investment~~should atbe ~~fair~~allocated ~~value,~~to ~~with~~inventory ~~unrealized~~based ~~gains~~on ~~and~~normal ~~losses~~capacity ~~recorded~~of production infacilities. ~~other~~This ~~income~~statement ~~(expense)~~is ineffective ~~the~~for inventory costs incurred ~~consolidated~~during ~~statements~~fiscal ofyears ~~operations~~beginning after June 15, 2005. Accordingly, the Company ~~investment~~will ~~was~~adopt ~~reduced~~SFAS 151 byin ~~$1,457 during~~ the fiscal year ~~ended~~beginning ~~December 31~~January 1, 2006. ~~2002~~The ~~and~~adoption ~~$1,273~~of ~~during~~SFAS 151 ~~the~~is ~~year~~not ~~ended~~expected ~~December~~to ~~31,~~have ~~2003~~a ~~due~~significant impact toon the ~~decrease~~Company’s inresults ~~fair~~of ~~value~~operations ~~since~~or ~~the~~financial ~~acquisition date~~position.

~~During~~In ~~the~~December ~~year~~2004, ~~ended~~the ~~December~~FASB issued ~~31,~~SFAS ~~2002~~No. 123(R), ~~the~~Share-Based ~~Company~~Payment ~~delivered~~(“SFAS 123 (R)”). This Statement revises SFAS 123 and ~~contributed~~supersedes APB 25. SFAS 123(R) ~~software~~focuses ~~development~~primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123(R) requires companies to ~~Bluebook,~~recognize in ~~connection~~the ~~with~~statement of operations the ~~investment~~cost ~~and~~of employee services received in exchange for ~~which~~awards noof ~~revenue~~equity ~~was~~instruments ~~recognized~~based on the grant-date fair value of those awards. ~~Costs~~This Statement is effective and will be adopted in the first quarter of $12006. The Company plans to adopt SFAS 123(R) using the modified prospective method,~~048~~ ~~associated~~whereby ~~with~~the ~~this~~Company ~~development~~will expense ~~project~~the ~~were~~remaining ~~recorded~~portion of the requisite service under previously granted unvested awards outstanding as ~~research~~of January 1, 2006 and ~~development~~new ~~costs~~share-based payment awards granted or modified after January 1, 2006. The Company intends to use the Black-Scholes valuation method to estimate the fair value of its options. The Company expects that implementation of SFAS 123(R) will result in an immaterial amount of additional expense related to share-based compensation in 2006. However, the actual expense in 2006 depends on a number of factors, including fair value of awards at the time of grant and the number of share-based awards granted in 2006.

During the year ended December 31, 2003, the Company provided software development services to Bluebook for which no revenue was recognized. Payments of $270 were received from Bluebook for the delivery of such services during the year ended December 31, 2003 which were applied against and further reduced the carrying value of the investment. Costs of $230 associated with software development services during the year ended December 31, 2003 were recognized as research and development expense. At December 31, 2003, the book value of our investment in Bluebook was zero as a result of recognizing the decrease in fair value of the investment and the partial return of the investment. 38

~~Note~~CRITICAL 5ACCOUNTING ~~– Other Accrued Liabilities~~ ESTIMATES

	December 31,2003		December 31, 2002
Obligation due sellers of an acquired business, net of discount for imputed interest	$	—	$	418
Legal fee accrual		258		287
Audit fee accrual		170		468
Other accrued liabilities		231		564
Total other current liabilities	$	659	$	1,737

Allowance for Doubtful Accounts

~~Note~~The Company 6provides -an allowance for potentially uncollectible accounts receivable ~~Impairment~~under the provisions of ~~Long-lived~~SFAS ~~Assets~~No. 5, “Accounting for Contingencies,” in the ordinary course of business. The allowance is derived as the result of periodic reviews of aged and known problem accounts during each quarter. In addition, the Company reserves for unknown issues in its receivables at the balance sheet date using a formula consistent from quarter to quarter. Management believes that its approach is appropriate to reserve for potentially uncollectible receivables. If management had taken another approach to developing its reserve, the allowance for doubtful accounts may have been different than that reported.

AsRevenue a result of a reduction in demand for its services, during the year ended December 31, 2001, the Company entered into a restructuring plan to streamline operations in line with its existing revenue stream. In connection with this restructuring, the Company ceased operations at several operating locations and recognized a $1,132 property and equipment impairment charge. This restructuring caused the Company to further test for impairment of long-lived assets, which resulted in a $3,430 property and equipment impairment charge as the future discounted cash flows (fair value) of its property and equipment were estimated to be less than the related carrying value. Recognition

~~During~~The Company ~~the~~recognizes ~~year~~revenue ~~ended~~when ~~December~~there ~~31,~~is ~~2003,~~evidence asof an agreement, a ~~result~~fixed ofor determinable ~~continued~~fee, ~~operating~~and ~~losses~~collectibility is reasonably assured, ~~the~~and ~~Company~~delivery ~~recognized~~has occurred. anRevenues ~~impairment~~exclude ofreimbursable ~~long~~expenses charged to and collected from clients. Revenues pursuant to fixed-~~lived~~fee ~~assets~~contracts ~~charge~~are ~~for~~generally ~~$177~~recognized as services are rendered on the percentage-of-completion method of accounting ~~future~~based ~~discounted~~on ~~cash~~hours ~~flows~~incurred ~~(fair~~to ~~value)~~total ofestimated ~~its~~labor ~~property~~hours to complete. Revenues earned for software license sales and ~~equipment~~service ~~related~~contracts toare ~~its~~recorded ~~headquarters~~based ~~location~~on the ~~were~~provisions ~~estimated~~of toAICPA beSOP ~~less~~97-2, ~~than~~“Software Revenue Recognition,” as amended, which shares the ~~related~~basic ~~carrying~~criteria described ~~value~~above.

~~Note~~Accounting 7for –Long-Lived ~~Restructuring Expense~~ Assets

~~June~~The Company ~~1999~~records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those items. Management judgment is required in evaluating whether impairment has occurred. Furthermore, our estimated cash flow is based on historical results adjusted to reflect our best estimate of future market and operating conditions. Any material change affecting the assumptions used to project the estimated undiscounted cash flows or our expectation of future market conditions could result in a different conclusion. Assets for which the carrying value is not fully recoverable are reduced to fair value.

InAccounting 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 restructuring charge of $4,920. The charge included provisions for ~~severance~~Income 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). At December 31, 2000, $57 of the total June 1999 restructuring charge, related to severance, remained unpaid. Taxes

37The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes.” This pronouncement requires using an asset and liability approach to recognize deferred tax assets and liabilities for the tax consequences of temporary differences by applying enacted statutory tax rates to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The Company has not given benefit to any deferred tax assets or net operating losses in the previous three fiscal years due to uncertainty of realizing these assets in future periods. In addition, the financial statements have provided for certain tax positions taken by the Company in certain tax periods.

~~December~~Item 7A. ~~2000~~Quantitative and ~~September~~Qualitative ~~2001~~Disclosures about Market Risk

~~In December 2000 and September 2001~~On October 8, ~~as part of the Company’s efforts to streamline its operations commensurate with its revenue base~~2004, ~~the~~ ~~Company identified additional opportunities to reduce its cost structure. Accordingly,~~ the Company ~~adopted~~entered aninto ~~exit plan which resulted in~~ a ~~restructuring~~Contract ~~charge~~ of ~~$1,620~~Sale ~~during the nine months ended December 31~~Security Agreement, ~~2000~~(as ~~and $2~~amended,~~436~~ ~~during~~ the ~~year ended December 31, 2001. The December 2000 charge included provisions for severance of approximately 90 management and operating staff ($707~~“Agreement”) ~~as well as closure costs associated~~ with aCAPCO ~~plan~~Financial toCompany, ~~consolidate or dispose of certain locations ($913). The~~a ~~September~~division ~~2001 plan included provisions for severance~~ of ~~approximately~~Greater ~~145~~Bay ~~management~~Bank ~~and~~N.A. ~~operating staff~~ (~~$1,034)~~the ~~as well as closure costs associated with a plan to consolidate or dispose of certain locations ($1,402~~“Lender”). ~~The~~Funds ~~September~~advanced ~~2001~~by ~~plan~~the ~~did~~Lender ~~not~~to ~~meet~~ the ~~requirements~~Company ofunder the ~~aforementioned~~Agreement ~~standards~~are insubject ~~order~~ to ~~accrue~~a ~~costs~~daily asfee ofequal ato ~~commitment~~the ~~date.~~Lender’s prime ~~Therefore,~~rate ~~the~~plus ~~September~~4%. ~~2001~~Beginning ~~plan~~October 8, ~~costs~~2004, ~~that~~the ~~did~~Company ~~not~~was ~~provide~~exposed ato market ~~future~~risk ~~benefit~~related ~~were~~to ~~charged~~changes toin ~~operations~~interest ~~when~~rates ~~due~~on ~~and~~this ~~payable~~agreement.

~~October 2002~~ 39

InOn August 19, ~~the fourth quarter of~~ 2002, the Company ~~developed~~acquired aConvertible ~~new~~Redeemable ~~approach~~Preferred Stock toin ~~marketing~~Bluebook ~~and~~International ~~delivering~~Holding ~~its~~Company ~~service~~(“Bluebook”), ~~offerings~~which ~~and consequently,~~was ~~created~~converted ~~a plan~~ to ~~reorganize~~common ~~and~~stock ~~streamline~~during ~~the~~2004. ~~organization~~The ~~responsible~~Company accounts for the ~~delivery~~common stock ofas ~~the~~a ~~client~~trading ~~services.~~security ~~This~~with ~~reorganization~~changes ~~resulted~~ in afair ~~headcount~~value ~~reduction~~recorded ofin 27the consolidated ~~people~~statements of operations. Accordingly, subsequent to August 19, 2002, the Company ~~recognized~~was ~~$691~~exposed ofto ~~termination~~market ~~benefits paid~~risk ~~during~~related to changes in the ~~fourth~~market price ~~quarter~~of asthe acommon ~~restructuring~~stock ~~charge~~in Bluebook. AtThe ~~December~~final ~~31,~~shares ~~2002,~~of ~~there~~the ~~was~~Company’s holdings noof ~~remaining~~Bluebook ~~liability~~stock ~~related~~were tosold ~~this~~in ~~restructuring~~the ~~program.~~fourth quarter of 2005; realizing a gain of $141.

~~August 2003~~ 40

InItem ~~August 2003, 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~~8. ~~The Company~~Financial ~~terminated~~Statements ~~approximately 33 management~~ and ~~operating~~Supplementary staff between August 2003 and December 2003 and recorded a restructuring charge related to the severance and extended medical coverage (“COBRA”) benefits provided to the terminated employees of $2,531. The Company paid all severance benefits prior to December 31, 2003. A former officer of the Company terminated as part of the restructuring plan, used severance benefits to re-pay $618 of notes receivable and accrued interest due the Company. Data

~~The following table provides a reconciliation of the~~REPORT ~~beginning~~OF ~~and~~INDEPENDENT ~~ending~~REGISTERED ~~liability~~PUBLIC ~~balances~~ACCOUNTING ~~for each of the years in the three-year period ended December 31, 2003:~~ FIRM

	June 1999			December 2000						September 2001						August 2003
	Severance			Severance			FacilitiesClosure			Severance			FacilitiesClosure			Severance& Benefits			Total
Balance - December 31, 2000	$	57		$	507		$	913		$	—		$	—		$	—		$	1,477
Restructuring charge		—			—			—			1,034			1,402			—			2,436
Spending		(57	)		(507	)		(913	)		(1,034	)		(112	)		—			(2,623	)
Balance - December 31, 2001		—			—			—			—			1,290			—			1,290
Spending		—			—			—			—			(368	)		—			(368	)
Balance - December 31, 2002		—			—			—			—			922			—			922
Restructuring charge		—			—			—			—			—			2,531			2,531
Severance payment withheld and applied to note receivable from officer		—			—			—			—			—			(618	)		(618	)
Spending		—			—			—			—			(123	)		(1,864	)		(1,987	)
Adjustments		—			—			—			—			(39	)		—			(39	)
Balance - December 31, 2003	$	—		$	—		$	—		$	—		$	760		$	49		$	809

The Board of Directors and Stockholders

38Watchit Media, Inc.:

~~Note~~We have 8audited –the ~~Income~~accompanying ~~Taxes~~consolidated balance sheets of Watchit Media, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

~~All~~We conducted our audits in accordance with the standards of the Public Company’s Accounting ~~pre-tax~~Oversight ~~losses~~Board ~~are~~(United ~~derived~~States). ~~from~~Those ~~operations~~standards inrequire that we plan and perform the ~~United~~audit ~~States~~to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company ~~income~~has ~~tax~~determined ~~provision~~that ~~(benefit)~~it ~~from~~is not required to have, nor were we engaged to ~~continuing~~perform, ~~operations~~an ~~consists~~audit of its internal controls over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the ~~following:~~circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

	For the Year Ended December 31,
	2003			2002			2001
Current:
Federal	$	(2,549	)	$	(7,493	)	$	(6,264	)
State		40			—			64
		(2,509	)		(7,493	)		(6,200	)
Deferred:
Federal		—			—			2,745
State		—			—			—
		—			—			2,745
Total provision (benefit) for income taxes	$	(2,509	)	$	(7,493	)	$	(3,455	)

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Watchit Media, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with United States generally accepted accounting principles.

~~Significant~~/s/ ~~components~~Rowbotham ~~of deferred tax assets~~ and ~~liabilities~~Company ofLLP ~~the~~San ~~Company~~Francisco, ~~are~~California asApril ~~follows:~~14, 2006

	December 31,2003			December 31, 2002
Deferred tax assets:
Allowance for doubtful accounts	$	23		$	47
Allowance for officer notes		296			637
Restructuring liabilities		282			344
Accrued vacation		106			142
Accrued liabilities		279			270
Net operating loss carry forwards		13,363			8,426
Investments		2,640			1,115
Contract obligations		—			278
Depreciation and amortization		639			703
Other		1,006			1,160
Valuation allowance		(18,634	)		(13,122	)
Net deferred taxes	$	—		$	—

~~The Company has fully reserved for all~~CONSOLIDATED ~~net~~BALANCE deferred tax assets generated from continuing operations, including net operating losses, due to management’s uncertainty of their realizability. The Company will continue to assess the adequacy of and need for the valuation allowance and to the extent it is determined that such allowance is no longer required; the tax benefit of the remaining net deferred tax assets will be recognized in the future. SHEETS

~~At December 31, 2003, the Company had available Federal net operating loss~~ (~~NOL)~~In ~~carry-forwards of approximately $35~~thousands,~~700,~~ ~~which~~except ~~expire~~share ~~in the~~and ~~2019~~per ~~through~~share 2023 tax years. Under Section 382 of the Internal Revenue Code of 1986, as amended, the use of prior losses, including NOLs, is limited if a corporation undergoes an “ownership change.” The acquisition of OnSite Media, Inc., together with future issuances of equity interests by the Company or the exercise of outstanding warrants or options to purchase the Company’s common stock, may result in an ownership change that is large enough for this limitation to apply. If the limitation applies, the Company may be unable to use a material portion of its available NOL carry-forwards to reduce future taxable income. data)

In the first quarter of 2002, Congress approved the Job Creation and Worker Assistance Act of 2002 (the Act) allowing net operating losses for the Company’s fiscal tax year ending March 31, 2002 to be carried back five years. In accordance with SFAS No. 109, the effect of this change in tax law was reflected in the December 31, 2002 financial statements as changes in tax law are reflected in the period of enactment.

	December 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	11		$	526
Refundable income taxes	13			16
Accounts receivable, including unbilled accounts of $— and $2, net of allowance for doubtful accounts of $54 and $60, and $394 and $590 pledged as collateral security, respectively	340			530
Prepaid expenses and other current assets	92			133
Current assets of discontinued operations held for sale	—			160
Total current assets	456			1,365
Property and equipment, net	177			259
Goodwill	2,728			2,592
Other intangibles, net	607			748
Other assets	182			239
Non current assets of the discontinued operations held for sale	—			170
Total assets	$	4,150		$	5,373

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Secured borrowings	$	287		$	386
Accounts payable	801			247
Accrued compensation and related payroll liabilities	269			264
Restructuring liabilities	595			425
Other accrued liabilities	243			198
Current liabilities of the discontinued operations held for sale	—			898
Total current liabilities	2,195			2,418
Restructuring liabilities, net of current portion	—			268
Lease deposits on sublet properties	—			13
Income taxes payable	—			69
Total liabilities	2,195			2,768

Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.01 par value; 500,000 shares authorized, no shares issued or outstanding
Common Stock, $0.01 par value; 100,000,000 shares authorized, 28,868,229 and 24,984,792 shares issued, respectively	289			250
Additional paid-in capital	82,785			82,801
Accumulated deficit	(81,006		)	(79,946		)
Treasury stock	(113		)	(500		)
Total stockholders’ equity	1,955			2,605
Total liabilities and stockholders’ equity	$	4,150		$	5,373

~~The~~See ~~income~~accompanying ~~tax~~notes benefit of $2,509 for the year ended December 31, 2003 resulted from the reversal of an accrual for income tax contingencies of $2,549, offset by state tax payments of $40. During the annual assessment of the tax provision in the fourth quarter of 2003, the Company identified additional net operating losses, available for carryback to the ~~tax~~consolidated ~~years~~financial ~~that gave rise to the contingencies, which became available in 2003 to mitigate the exposure~~statements.

39 42

~~The Company’s effective income tax rate for its continuing operations varied from the U.S. federal statutory tax~~CONSOLIDATED ~~rate~~STATEMENTS asOF ~~follows:~~ OPERATIONS

	For the Year Ended December 31,
	2003		2002		2001
U.S. federal statutory rate	(34.0	%)	(34.0	%)	(34.0	%)
State income taxes, net of federal benefit	(2.9	%)	(3.2	%)	(6.0	%)
Effects on deferred assets and liabilities due to change in state tax	—		1.8	%	—
Non-deductible items	0.3	%	0.4	%	2.3	%
Change in valuation allowance	37.1	%	(3.1	%)	24.7	%
Reduction to income tax accrual	(17.2	%)	—		—
Other	—		(5.5	%)	0.1	%
Effective tax rate	(16.7	%)	(43.6	%)	(12.9	%)

(In thousands, except share and per share data)

During the year ended December 31, 2003, the Internal Revenue service commenced an audit of the tax returns and related tax refund claims for the Company’s two fiscal years ended March 31, 2001 and 2002. Management does not expect the examination to have a material adverse impact on the Company’s consolidated financial position, results of operations or cash flows.

	For the Year Ended December 31,
	2005			2004			2003

Revenues	$	1,844		$	862		$	—
Cost of revenues	806			364			—
Gross profit	1,038			498			—
Selling, general and administrative expenses	3,472			1,953			—
Operating loss	(2,434		)	(1,455		)	—
Other income (expense):
Interest expense	(41		)	(9		)	(35		)
Interest income	2			91			294
Other	290			—			(1,608		)
Total other income (expense)	251			82			(1,349		)
Loss from continuing operations before income tax benefit	(2,183		)	(1,373		)	(1,349		)
Income tax benefit	72			28			—
Loss from continuing operations	(2,111		)	(1,345		)	(1,349		)
Loss from discontinued operations, net of income tax-benefit of $-, $-, and $2,509	(469		)	(2,860		)	(11,001		)
Gain on sale of discontinued operations, net of income tax benefit of $-, $-, and $-	1,520			—			—
Net loss	$	(1,060	)	$	(4,205	)	$	(12,350	)

Earnings per share:
Basic and diluted –
Loss from continuing operations	$	(0.08	)	$	(0.06	)	$	(0.10	)
Loss from discontinued operations	(0.02		)	(0.13		)	(0.83		)
Gain on sale of discontinued operations	0.06			—			—
Net loss	$	(0.04	)	$	(0.19	)	$	(0.93	)

Basic and diluted weighted average number of shares outstanding	27,673,563			22,351,924			13,324,217

~~Note~~See 9accompanying –notes ~~Discontinued~~to ~~Operations~~the consolidated financial statements.

Prior to March 31, 2000, the Company entered into a plan to divest its IT staff augmentation business. The following financial data reflects the summary of operating results for the years ended December 31, 2003, 2002 and 2001. 43

~~Summary~~CONSOLIDATED STATEMENTS ofOF ~~Operating~~STOCKHOLDERS’ ~~Income (Loss) From Discontinued Operations:~~ EQUITY

	For the Year Ended December 31,
	2003			2002			2001
Revenues	$	—		$	—		$	3,453
Cost of services		—			—			2,692
Gross profit		—			—			761
Selling, general and administrative expenses		(51	)		(461	)		951
Operating income (loss)		51			461			(190	)
Other income		106			515			—
Income (loss) from discontinued operations	$	157		$	976		$	(190	)

(In thousands, except share and per share data)

On March 31, 2000, the Company committed to a plan to discontinue its IT staff augmentation segment, which was comprised of operating locations throughout the United States of America. The Company’s initial intent was to sell the entire segment to one buyer on or about June 30, 2000. Ultimately, the Company sold three components of the segment prior to December 31, 2000 and continued to hold one remaining component in discontinued operations. The Company could not find a buyer for this component and therefore closed the business in the fourth quarter of 2001.

				Additional											Total
	Common Stock			Paid-In			Accumulated			Treasury Stock					Stockholders’
	Shares	Amount		Capital			Deficit			Shares		Amount			Equity

Balance, January 1, 2003	13,754,112	$	138	$	80,450		$	(63,391	)	644,600		$	(500	)	$	16,697
Issuance of Common Stock, net of costs	322,501	3		59			—			—		—			62
Change in terms of stock options granted	—	—		74			—			—		—			74
Net loss	—	—		—			(12,350		)	—		—			(12,350		)
Balance, December 31, 2003	14,076,613	141		80,583			(75,741		)	644,600		(500		)	4,483
Issuance of Common Stock in connection with purchase of business	10,679,608	107		1,708			—			—		—			1,815
Issuance of Warrants in connection with purchase of business	—	—		676			—			—		—			676
Cost of registering and issuing securities in connection with purchase of business	—	—		(195		)	—			—		—			(195		)
Issuance of Common Stock in connection with director compensation	228,571	2		29			—			—		—			31
Net loss	—	—		—			(4,205		)	—		—			(4,205		)
Balance, December 31, 2004	24,984,792	250		82,801			(79,946		)	644,600		(500		)	2,605
Issuance of Common Stock in connection with private placement	3,550,000	35		168			—			—		—			203
Issuance of Warrants in connection with private placement	—	—		217			—			—		—			217
Cost of registering and issuing securities in connection with private placement	—	—		(57		)	—			—		—			(57		)
Issuance of Common Stock from treasury stock	—	—		(387		)	—			(500,000	)	387			—
Issuance of Common Stock in connection with acquisition of business	202,667	3		27			—			—		—			30
Issuance of Common Stock in connection with director compensation	130,770	1		16			—			—		—			17
Net loss	—	—		—			(1,060		)	—		—			(1,060		)
Balance, December 31, 2005	28,868,229	$	289	$	82,785		$	(81,006	)	144,600		$	(113	)	$	1,955

40See accompanying notes to the consolidated financial statements.

~~Note 10 – Lease Commitments~~ 44

~~The~~CONSOLIDATED ~~Company~~STATEMENTS ~~leases~~OF ~~various~~CASH office space and certain equipment under noncancelable lease agreements which expire at various dates. Future minimum rental payments under such leases at December 31, 2003 for the Company are as follows. FLOWS

	OperatingLeases
2004	$	1,830
2005		1,049
2006		604
2007		151
Total minimum lease payments		3,634
Less: Sublease payments		(800	)
Net minimum lease payments	$	2,834

(In thousands, except share and per share data)

Rental expense under these leases for the years ended December 31, 2003, 2002 and 2001, was $1,458, $1,957 and $2,601, respectively. The rental expense in fiscal 2003, 2002 and 2001 is net of sublease income totaling approximately $266, $51 and $355, respectively.

	For the Year Ended December 31,
	2005			2004			2003

Cash flows from operating activities:
Net loss	$	(1,060	)	$	(4,205	)	$	(12,350	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	117			121			176
Impairment of long-lived assets	—			—			177
Gain on sale of discontinued operations	(1,520		)	—			—
Amortization of identifiable intangible assets	141			118			—
Restricted shares issued in connection with director compensation	17			31			—
Compensation expense resulting from change in terms of stock options	—			—			74
Gain on sale of investment in common stock	(141		)	—			—
Gain from lease termination	(149		)	—			—
Adjustment to valuation allowance for note receivable from stockholder	—			(100		)	—
Equity loss from investment in alliance partner	—			—			335
Unrealized loss on investment in marketable security	—			—			1,273
Provision for doubtful accounts	(6		)	(2		)	164
Loss on abandonment of leasehold improvements	62
Loss on forgiveness of note receivable from acquirer of a previously sold business	—			—			303
Changes in current assets and liabilities:
Accounts receivable	195			768			989
Prepaid expenses and other current assets	160			143			(82		)
Accounts payable and accrued liabilities	314			(1,617		)	(2,371		)
Deferred revenue	(596		)	(129		)	464
Income taxes, net	(65		)	69			(2,437		)
Other assets	57			13			69
Net cash used in operating activities	(2,474		)	(4,790		)	(13,216		)

Cash flows from investing activities:
Payments received on note from acquirer of previously sold business	—			200			1,080
Repayment of note receivable from stockholder	—			100			—
Purchases of property and equipment	(97		)	(258		)	—
Proceeds on sale of discontinued operations, net of selling expenses of $732, $-, and $-	1,568			—			—
Proceeds from lease termination	149			—			—
Proceeds on sale of investment in common stock	141			—			—
Investment in marketable security	—			—			—
Cash paid for purchase of business	(66		)	(605		)	(191		)
Dividend received from marketable security	—			—			270
Net cash provided by (used in) investing activities	1,695			(563		)	1,159

Cash flows from financing activities:
Secured borrowings	(99		)	386			—
Cost of issuing of common stock and warrants	(57		)	(195		)	—
Net proceeds from issuance of common stock	420			—			62
Net cash provided by financing activities	264			191			62

Net decrease in cash and cash equivalents	(515		)	(5,162		)	(11,995		)
Cash and cash equivalents at beginning of period	526			5,688			17,683
Cash and cash equivalents at end of period	$	11		$	526		$	5,688

~~Note~~See 11accompanying –notes ~~Employee~~to ~~Benefit~~the ~~Plans~~consolidated financial statements.

~~Long-term Incentive Plan~~ 45

The Company maintains the 1998 Long-Term Incentive Plan (the “1998 Plan”) and the 2000 Long-Term Incentive Plan (the “2000 Plan”). The 1998 Plan was adopted as a replacement to the Company’s 1995 Long-Term Incentive Plan (the “1995 Plan”). No further awards may be granted under the 1995 Plan, although awards granted prior to the adoption of the 1998 Plan remain outstanding under the 1995 Plan in accordance with their terms. The 2000 Plan is similar to the 1998 Plan, except that (i) awards under the 2000 Plan are to be made primarily to employees who are not officers or directors, (ii) the 2000 Plan does not contain a limit as to the number of shares that may be subject to outstanding awards granted either individually or in the aggregate (whereas the 1998 Plan contains 750,000 per individual annual limit, and aggregate limit of 18% of total outstanding shares), and (iii) incentive stock options (ISOs) cannot be granted under the 2000 Plan. Of the non-qualified options granted to date, a majority are generally exercisable beginning one year from the date of the grant in cumulative yearly amounts of 25% to 33% of the shares under option and all expire ten years from the date of the grant. Under the provisions of the plans, stock-based awards are granted at terms and prices determined by the Compensation Committee of the Board of Directors as defined in each plan, except for grants of 10,000 stock options or less, which are administered by the Chief Executive Officer of the Company.

	For the Year Ended December 31,
	2005			2004			2003
Supplemental disclosures of cash flow information:
Interest paid	$	41		$	9		$	36
Income taxes paid	$		—	$		4	$		2
Income taxes refunded	$		3	$		14	$		53
Significant non-cash financing and investing activities:

Delaware

94-3173918

StrongThe relationshipsOnsite withMedia, ourInc. longAcquisition term/ clientsWatchit willMedia, help us to further develop and execute our business strategy: Inc.

• Narrowcasting and video media.Summary

14Watchit Visitors Television (WVTV)

Watchit Music Television (WMTV)

17Watchit’s Television Content

YearMobile Ended December 31, 2003 Compared to Year Ended December 31, 2002 Entertainment

19 Makeit

Restructuring Charge Scheduleit

OtherManageIT expense for the year ended December 31, 2003 was $1,608, and was principally the change in market value associated with an investment in a marketable security ($1,273) and equity method losses on an investment in an alliance partner ($335). Enterprise

RevenuesVideo/Film Production

Selling,REGISTRANT General and Administrative Expenses INFORMATION

Impairment of Long-lived Assets EMPLOYEES

28PART II

CONSOLIDATEDItem STATEMENTS5. OFMarket STOCKHOLDERSfor the Registrant’s EQUITYCommon Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

CONSOLIDATEDItem STATEMENTS6. OFSelected CASHFinancial FLOWS Data

LIQUIDITY AND CAPITAL RESOURCES

Allowance for Doubtful Accounts

Filing Compare · WATCHIT MEDIA, INC.