Cotterill told the official web-site: "Our Director of Football John Rudge has been handling all of this, and we know there have been talks between the player and the club over the last few days.
"But so far we have heard nothing to indicate that any agreements have been reached. That's the next step for us - to hear from Rikki or Lillestrom."
City have agreed to release the Icelandic international with no initial fee, but there would be future payments based on appearances.
Adds the manager: "The deal which has been agreed is satisfactory to us and we are looking for it to go through in the next couple of days if it is going to happen.
"It would create the space to allow us to bring someone new in and it is important we are able to do that sooner rather than later because players available on Bosmans are going to start getting snapped up pretty soon."