Colorado MEDtech, Inc. Announces Third-Quarter Results.

Business Editors & Health/Medical Writers

BOULDER, Colo.--(BUSINESS WIRE)--May 13, 2003

Colorado MEDtech, Inc. (Nasdaq:CMED) today announced results for its third quarter ended March 31, 2003.

On January 24, 2003, the Company sold a majority of the assets of its Colorado operations. These assets generated all of the Company's outsourcing services revenue and a portion of its medical products revenue. As a result of the sale, the Company is no longer in this business segment, and the amount of outsourcing services revenue and expenses in the current period is significantly lower than in prior periods. The Company's business now includes only the operations of its CIVCO Medical Instruments Co., Inc. subsidiary.

Sales in the third quarter were $7,930,919, compared to $17,661,974 for the same period in the prior year. Loss from operations in the third quarter was $5,552,100, compared to a loss from operations of $1,896,766 in the same period of the prior year. The loss from operations includes a loss of $6,387,902 associated with the sale of the Colorado operations. Net loss for the quarter ended March 31, 2003, was $5,619,944, with a loss per share, on a diluted basis, of 42 cents per share. In the third quarter of the prior year, the Company had a net loss of $1,239,683 and a loss per share, on a diluted basis, of 9 cents.

Sales in the nine months ended March 31, 2003, were $36,608,020, compared to $52,369,635 for the same period in the prior year. Loss from operations in the nine months ended March 31, 2003, was $5,323,837, compared to $5,203,801 in the same period of the prior year. The loss from operations includes a loss of $6,387,902 associated with the sale of the Colorado operations. Net loss for the nine months ended March 31, 2003, was $5,439,727, with a loss per share, on a diluted basis, of 41 cents per share. In the same period of the prior year, the Company had a net loss of $3,203,850 and a loss per share, on a diluted basis, of 25 cents.

"We are pleased to have accomplished several steps toward the completion of the sale of Colorado MEDtech, and we continue to work to close the remaining open items," said Stephen K. Onody, President and CEO.

Colorado MEDtech, Inc., through its CIVCO Medical Instruments Co., Inc. subsidiary, is a full-service developer and manufacturer of medical devices and equipment for the ultrasound and minimally invasive OEM and end-user markets.

Conference Call

Colorado MEDtech will hold a conference call at 8:00 a.m. MDT (10:00 a.m. EDT) on Tuesday, May 13, 2003, to discuss its third-quarter results. Interested parties may listen to the call by calling 800/240-5318. A replay of the call will be available until May 27, 2003, at 800/405-2236, passcode 537520#.

Forward-Looking Statements

The statements in this news release that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Forward-looking statements can be identified by the use of words such as "believes," "intends," "estimates," "may," "will," "should," "anticipated," "expected" or comparable terminology or by discussions of strategy. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. Such statements involve risks and uncertainties, including, but not limited to, the risk that the Company may be unable to successfully complete the sale of the Company, the risk that our existing level of orders may not be indicative of the level or trend of future orders, the risk that we may not successfully complete the work encompassed by current or future orders, the risk that unforeseen technical or production difficulties may adversely impact project timing and financial performance, the risk of potential litigation and the risk that acquired companies cannot be successfully integrated with our existing operations. Should one or more of these risks, as well as others not known to us or not considered to be material at this time, materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. These factors are more fully described in the Company's documents filed from time to time with the Securities and Exchange Commission. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

Additional Information And Where To Find It

Colorado MEDtech, Inc. plans to mail a proxy statement to its shareholders containing information about the sale of the Company to an affiliate of KRG Capital Partners, LLC (the "Merger"). Investors and shareholders of Colorado MEDtech, Inc. are advised to read the proxy statement carefully when it becomes available because it will contain important information about the Merger, the persons soliciting proxies related to the Merger, their interests in the Merger, and related matters. Investors and shareholders may obtain free copies of the proxy statement (when available) and other documents filed by Colorado MEDtech at the Securities and Exchange Commission's website at http://www.sec.gov. Free copies of the proxy statement will also be available from Colorado MEDtech by directing such requests to the attention of Mr. Peter J. Jensen, Secretary, Colorado MEDtech, Inc., 345 S. Francis St., Unit F, P.O. Box 819, Longmont, CO 80502-0819; telephone: [phone].

Information Concerning Participants

Colorado MEDtech and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Colorado MEDtech shareholders in favor of the Merger. Information regarding the participants is included in Colorado MEDtech's Proxy Statement for its Annual Meeting of Shareholders filed with the Securities and Exchange Commission on October 11, 2002, and its preliminary Proxy Statement for its Special Meeting of Shareholders filed with the Securities and Exchange Commission on April 11, 2003. This document is available free of charge at the SEC's website at http://www.sec.gov and from Colorado MEDtech.

                COLORADO MEDTECH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                              (UNAUDITED)



                                                March 31,    June 30,
                                                  2003         2002
                                                ---------    --------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                   $ 5,732,456 $ 6,366,303
  Short-term investments                                -     993,319
  Accounts receivable, net                      3,125,390   9,644,164
  Unbilled receivables                                  -     169,438
  Inventories                                   2,279,295   5,781,665
  Investment in HEI common stock                1,910,000           -
  Note receivable from HEI                      1,692,600           -
  Income taxes receivable                         697,958   3,589,907
  Deferred income taxes                         3,623,434   1,557,803
  Prepaid expenses and other                      275,409     824,563
                                               ----------- -----------
     Total current assets                      19,336,542  28,927,162

NON-CURRENT ASSETS:
  Property and equipment, net                   4,424,051   5,700,043
  Goodwill and other intangibles, net           6,035,233   5,876,785
  Land held for sale                              500,000     500,000
  Deferred income taxes                           524,782   1,227,143
  Other assets                                    181,649     302,726
                                               ----------- -----------
     Total non-current assets                  11,665,715  13,606,697

TOTAL ASSETS                                  $31,002,257 $42,533,859
                                               =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                            $ 1,226,031 $ 4,878,784
  Accrued product service costs                    16,000     376,907
  Accrued salaries and wages                      706,132   1,989,815
  Other accrued expenses                        1,336,851   1,435,222
  Customer deposits and deferred revenue          645,094   1,733,746
  Capital lease obligation                              -      33,503
                                              ------------ -----------
     Total liabilities                          3,930,108  10,447,977

SHAREHOLDERS' EQUITY:
  Preferred stock, no par value; 5,000,000
   shares authorized; none issued
  Common Stock, no par value, 25,000,000
   shares authorized; 13,257,459 and
   13,168,783 issued and outstanding at
   December 31, 2002, and June 30, 2002,
   respectively                                16,884,349  16,718,092
  Accumulated other comprehensive loss                  -      (7,432)
  Notes receivable -- related parties            (447,494)   (699,799)
  Retained earnings                            10,635,294  16,075,021
                                               ----------- -----------
     Total shareholders' equity                27,072,149  32,085,882
                                               ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $31,002,257 $42,533,859
                                               =========== ===========


                COLORADO MEDTECH, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  FOR THE THREE AND SIX MONTH PERIODS ENDED MARCH 31, 2003, AND 2002
                              (UNAUDITED)

                          Three Months Ended      Nine Months Ended
                               March 31,              March 31,
                          ------------------     -----------------
                           2003       2002        2003       2002
                           ----       ----        ----       ----

NET REVENUE:
  Outsourcing
   Services           $   494,957 $ 6,958,751 $ 7,717,255 $20,240,585
  Medical Products      7,435,962  10,703,223  28,890,765  32,129,050
                       ----------- ----------- ----------- -----------
  Total net revenue     7,930,919  17,661,974  36,608,020  52,369,635
                       ----------- ----------- ----------- -----------

COST OF PRODUCTS AND
 SERVICES:
  Outsourcing Services    395,998   6,736,328   8,215,630  19,022,564
  Medical Products      3,705,117   6,306,957  16,574,027  19,005,446
                       ----------- ----------- ----------- -----------
  Total cost of
   products and
   services             4,101,115  13,043,285  24,789,657  38,028,010
                       ----------- ----------- ----------- -----------

GROSS PROFIT            3,829,804   4,618,689  11,818,363  14,341,625
                       ----------- ----------- ----------- -----------

COSTS AND EXPENSES:
  Research and
   development            358,881     879,414   1,306,201   2,747,020
  Marketing and selling   411,972     940,181   2,303,777   2,894,220
  Operating, general
   and administrative   1,721,530   3,409,733   6,148,512  11,550,549
  Other operating
   expenses               501,619   1,286,127     995,808   2,353,637
  Loss on sale of
   Colorado operations  6,387,902           -   6,387,902           -
                       ----------- ----------- ----------- -----------
     Total operating
      expenses          9,381,904   6,515,455  17,142,200  19,545,426
                       ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS   (5,552,100) (1,896,766) (5,323,837) (5,203,801)

OTHER INCOME
 (EXPENSE), net        (1,513,844)     45,083  (1,442,890)    180,951
                       ----------- ----------- ----------- -----------
LOSS BEFORE INCOME
 TAXES                 (7,065,944) (1,851,683) (6,766,727) (5,022,850)

INCOME TAX BENEFIT     (1,446,000)   (612,000) (1,327,000) (1,819,000)
                       ----------- ----------- ----------- -----------

NET LOSS              $(5,619,944)$(1,239,683)$(5,439,727)$(3,203,850)
                       =========== =========== =========== ===========

NET INCOME (LOSS) PER
 SHARE
    Basic and diluted       $(.42)      $(.09)      $(.41)      $(.25)
                             =====       =====       =====       =====

WEIGHTED AVERAGE
  SHARES OUTSTANDING
    Basic and diluted  13,257,003  13,114,961  13,198,082  13,015,833
                       =========== =========== =========== ===========