<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] 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 0-21963
THE JUDGE GROUP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-1726661
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
TWO BALA PLAZA, SUITE 800
BALA CYNWYD, PENNSYLVANIA 19004
------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(610) 667-7700
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to 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 (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes____ No_____
As of May 5, 1999, 13,497,576 of the Registrant's Common Shares, $0.01
par value per share, were outstanding.
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
NUMBER
-------
<S> <C>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 AND DECEMBER 31, 1998 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998 4
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS
ENDED MARCH 31, 1999 AND 1998 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31,1999 AND 1998 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 13-18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19-21
</TABLE>
2
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36,566 $ 43,568
Accounts receivable, net 24,053,606 21,767,995
Inventories 1,043,802 1,185,302
Prepaid income taxes and deferred taxes 2,107,365 1,909,919
Other 1,219,016 977,295
------------ ------------
TOTAL CURRENT ASSETS 28,460,355 25,884,079
------------ ------------
PROPERTY AND EQUIPMENT
Property and Equipment 8,312,040 8,166,048
Less: accumulated depreciation and amortization 3,440,182 3,220,212
------------ ------------
NET PROPERTY AND EQUIPMENT 4,871,858 4,945,836
------------ ------------
OTHER ASSETS
Deposits and other 674,105 716,634
Covenant not to compete, net of accumulated amortization of $48,737, 1999 and
$37,490, 1998 41,239 52,486
Goodwill, net of accumulated amortization of $4,929,158, 1999 and $4,731,788, 1998 16,164,022 16,286,392
------------ ------------
TOTAL OTHER ASSETS 16,879,366 17,055,512
------------ ------------
TOTAL ASSETS $ 50,211,579 $ 47,885,427
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 743,677 $ 743,677
Accounts payable and accrued expenses 9,643,034 8,679,519
Payroll and sales taxes 1,465,416 576,562
Other liabilities 1,572,154 2,634,954
Deferred revenue 871,599 1,035,558
------------ ------------
TOTAL CURRENT LIABILITIES 14,295,880 13,670,270
------------ ------------
LONG-TERM LIABILITIES
Note payable, Bank 12,511,463 9,881,595
Deferred rent obligation 777,297 666,879
Debt obligations, net of current portion 402,137 585,490
------------ ------------
TOTAL LONG-TERM LIABILITIES 13,690,897 11,133,964
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000 shares authorized; at March 31, 1999,
and December 31, 1998, 13,541,302 shares issued and 13,501,302 outstanding 135,412 135,412
Preferred stock, $.01 par value, 10,000,000 shares authorized -- --
Additional paid-in capital 24,623,974 24,900,474
Deficit (2,314,584) (1,734,693)
------------ ------------
22,444,802 23,301,193
Less treasury stock, 40,000 shares; at cost 220,000 220,000
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 22,224,802 23,081,193
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,211,579 $ 47,885,427
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET REVENUES $ 31,577,621 $ 25,089,818
------------ ------------
COSTS AND EXPENSES
Cost of sales (exclusive of items shown separately below) 21,536,052 17,419,944
Selling and operating 6,455,834 4,477,452
General and administrative 4,155,773 2,598,078
------------ ------------
Total costs and expenses 32,147,659 24,495,474
------------ ------------
INCOME (LOSS) FROM OPERATIONS (570,038) 594,344
OTHER INCOME (EXPENSES), NET (202,690) 61,457
------------ ------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (772,728) 655,801
INCOME TAX EXPENSE (BENEFIT) (192,837) 292,663
------------ ------------
NET INCOME (LOSS) ($ 579,891) $ 363,138
============ ============
NET INCOME (LOSS) PER SHARE:
BASIC ($ 0.04) $ 0.03
============ ============
Weighted Average Shares Outstanding 14,140,579 13,369,191
=========== ============
DILUTED ($ 0.04) $ 0.03
============ ============
Weighted Average Shares Outstanding 14,140,579 13,380,607
=========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
Paid-In Treasury
Shares Amount Capital Deficit Stock Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 13,541,302 $ 135,412 $24,900,474 ($1,734,693) ($ 220,000) $ 23,081,193
Contingent Stock Price
Payable -- -- (276,500) -- -- (276,500)
Net loss -- -- -- (579,891) -- (579,891)
---------- --------- ----------- ----------- ---------- ------------
Balance, March 31, 1999 13,541,302 $ 135,412 $24,623,974 ($2,314,584) ($ 220,000) $ 22,224,802
========== ========= =========== =========== ========== ============
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 13,347,969 $ 133,479 $22,758,517 $ 3,382,300 $ -- $ 26,274,296
Acquisition transactions 150,000 1,500 695,375 -- -- 696,875
Purchase treasury stock -- -- -- -- (220,000) (220,000)
Net Income -- -- -- 363,138 -- 363,138
---------- --------- ----------- ----------- ----------- ------------
Balance, March 31, 1998 13,497,969 $ 134,979 $23,453,892 $ 3,745,438 ($ 220,000) $ 27,114,309
========== ========= =========== =========== =========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the period ($ 579,891) $ 363,138
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation 338,622 200,940
Amortization 208,617 116,354
Deferred rent 110,418 (1,752)
Provision for losses on accounts receivable 157,134 37,042
Changes in operating assets and liabilities:
(Increase) decrease in:
Short term investments -- 5,500,000
Accounts receivable (2,442,745) (2,277,387)
Inventories 141,500 38,066
Deposits and other 42,529 (229,834)
Prepaid income taxes (197,446) (77,956)
Other current assets (316,721) (665,783)
Increase (decrease) in:
Accounts payable and accrued expenses 247,401 2,454,269
Payroll and sales taxes 888,854 981,667
Deferred revenue (163,959) 91,696
Income taxes payable -- (291,515)
----------- -----------
Net cash provided by (used in) operating activities (1,565,687) 6,238,945
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (264,644) (593,350)
Purchase/acquisition of companies -- (4,679,392)
Covenant not to compete -- (89,976)
----------- -----------
Net cash used in investing activities (264,644) (5,362,718)
----------- -----------
FINANCING ACTIVITIES
Cash acquired in business combination -- 100,000
Proceeds from notes payable, bank, net 2,629,868 --
Proceeds of bank overdrafts 716,114 --
Principal payments on long-term debt (183,353) (681,480)
Contingent stock price payable (1,339,300) --
Purchase of Treasury Stock -- (220,000)
----------- -----------
Net cash provided by (used in) financing activities 1,823,329 (801,480)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,002) 74,747
CASH AND CASH EQUIVALENTS, BEGINNING 43,568 1,684,482
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 36,566 $ 1,759,229
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 170,000 $ 9,000
=========== ===========
Cash paid during the period for Income taxes $ 187,000 $ 644,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1. DESCRIPTION OF BUSINESS
The Judge Group, Inc. (the "Company") (formerly Judge, Inc.), a Pennsylvania
corporation founded in 1970, provides information technology ("IT") and
engineering professionals to its clients on both a temporary basis (through its
"Contract Placement" business) and a permanent basis (through its "Permanent
Placement" business) as well as IT training (through its "IT Training" business)
on a range of software and network applications to corporate, governmental and
individual clients. The Company also provides computer network and document
management system integration, implementation, maintenance and training (through
its "Information Management Solutions" business). At March 31, 1999, the
Company, headquartered in Bala Cynwyd, Pennsylvania, operated 21 regional
offices in sixteen states in the United States. A substantial portion of the
Company's revenues are derived from customers located in the Mid-Atlantic
corridor of the United States.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and the Company's wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
The financial statements as of March 31, 1999 and for the three months ended
March 31, 1999 and 1998 are unaudited; however, in the opinion of management,
such statements include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the results for the periods
presented.
The interim financial statements should be read in conjunction with the
financial statements for the fiscal year ended December 31, 1998 and the notes
thereto.
Risks and Uncertainties
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 1999.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Intangible Assets - Goodwill
Goodwill represents the excess of the cost of businesses acquired by the Company
over the fair value of their net assets at the date of acquisition and is being
amortized on the straight-line method over terms ranging from ten years to
twenty-five years. Amortization of goodwill is based upon management's
estimates, and it is reasonably possible that such estimates may change in the
near term. Amortization of goodwill for the periods ended March 31, 1999 and
1998 was approximately $197,000 and $112,600, respectively, and is included in
general and administrative expense in the consolidated statements of operations.
7
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interim Financial Reporting
For interim financial reporting purposes, costs and expenses are accounted for
in accordance with Accounting Principles Board Opinion No. 28 ("APB 28").
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
Statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. However, this
Statement need not be applied to interim financial statements in the initial
year of its application, but comparative information for interim periods in the
initial year of application is to be reported in financial statements for
interim periods in the second year of application. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. The Company adopted this statement in 1998. (See Note 10.)
Earnings Per Share
Basic earnings (loss) per share amounts are computed based on net income (loss)
divided by the weighted average number of shares actually outstanding increased
by contingently issuable shares based on some acquired companies achieving
certain pre-tax income targets in 1998, and reduced by treasury shares of the
Company. The number of shares used in the computation were approximately
14,141,000 in 1999, and 13,369,000 in 1998.
Diluted earnings (loss) per share amounts for the three months ended March 31,
1999 and 1998 are based on the weighted average number of shares calculated for
basic earnings (loss) per share purposes increased by the number of shares that
would be outstanding assuming the exercise of all outstanding stock options
issued by the Company. The number of shares used in the computation were
approximately 14,141,000 in 1999 and 13,381,000 in 1998. Outstanding options to
purchase 1,423,050 common shares in 1999 and 521,500 common shares in 1998, were
not included in the computation of diluted earnings per share because the option
exercise price was greater than the average market price of the Company's common
shares.
On February 26, 1998 the Company repurchased 40,000 common shares at a price of
$5.50 per share, which shares are considered treasury stock.
NOTE 3. NOTE PAYABLE, BANK
Note payable, Bank, consists of advances to the Company under a $25,000,000 line
of credit facility. The line of credit bears interest at the bank's prime rate
(7.75% at March 31, 1999) or, at the option of the Company, a portion of the
outstanding balance bears interest at 200 basis points over the London
Inter-Bank Offering Rate. Maximum permitted borrowings thereunder are the lesser
of $25,000,000 or 85% of qualified accounts receivable, as defined in the line
of credit agreement. The line of credit is collateralized by substantially all
of the Company's assets, expires May 31, 2003 and is subject to certain
covenants which from time to time have been reset by the Bank, including
financial covenants requiring certain levels of net worth, debt service ratios,
fixed charge coverage and limiting capital expenditures. In addition, the
Company and all of its subsidiaries are jointly and severally responsible for
all of the debt outstanding under the line.
8
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 3. NOTE PAYABLE, BANK (Continued)
Included in accounts payable and accrued expenses at March 31, 1999 were
approximately $2,301,000 of bank overdrafts.
NOTE 4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
March 31, 1999
--------------
<S> <C>
Note Payable, purchase of certain assets and assumption of certain liabilities
of ISI; payable in various monthly installments plus interest at 8%, through
March 2000 $ 137,500
Note Payable, purchase of certain assets and assumption of certain liabilities
of ISI; payable in 24 monthly installments of $12,500 plus interest at 8%,
through March 2000 137,500
Note Payable, additional purchase cost of ISI attaining certain pre-tax income
in 1998; payable in 8 quarterly payments of $102,333 including interest at 8%,
through December 2000 662,297
Note Payable, purchase of certain assets and assumption of certain liabilities
of Tech Stars; payable in 36 monthly installments of $6,944 plus interest at
8%, through October 2001 208,517
----------
1,145,814
Less: Current portion (743,677)
----------
Long-term portion $ 402,137
==========
</TABLE>
9
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 4. LONG-TERM DEBT - (Continued)
Maturities of long-term debt are as follows:
Year Ending March 31, Amount
--------------------- ------
2000 $ 743,677
2001 378,449
2002 23,505
-----------
$ 1,145,631
===========
Interest expense charged to operations was approximately $204,000 and $9,000 for
the periods ended March 31, 1999 and 1998, respectively.
NOTE 5. INCOME TAXES
The Company files a consolidated Federal income tax return with its wholly-owned
subsidiaries. State income taxes are determined on the basis of filing separate
returns for each subsidiary as required by applicable state regulations.
In accordance with Accounting Principles Board Opinion No. 28 (Interim Financial
Reporting), income taxes (benefit) are calculated at the estimated effective
annual (federal and state) tax rates.
The effective tax (benefit) rate for 1999 and 1998 is higher (lower) than the
applicable federal statutory tax rate of 34% due to the Company's state tax
liabilities (benefit) and certain expenses that were not deductible for tax
purposes.
NOTE 6. COMMITMENTS AND CONTINGENCIES
The Company is aware of the issues associated with the programming code in many
existing computer systems as the year 2000 approaches. The "Year 2000" problem
is pervasive and complex, as many computer systems will be affected in some way
by the rollover of the two-digit year value to 00. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The "Year 2000" issue creates risk for the Company from unforeseen
problems in its own computer systems and from those of its suppliers as well as
third parties for whom the Company implements "Year 2000" solutions on their
computer systems.
The Company believes its recently implemented financial information system is
"Year 2000" compliant. Further, the Company is currently in the process of
replacing its candidate and client databases utilized in its Contract Placement
and Permanent Placement business with software systems that are represented to
be "Year 2000" compliant. The Company is analyzing its remaining computer
systems to identify any potential "Year 2000" issues and will take appropriate
corrective action based on the results of such analysis. Management does not
expect that total incremental spending by the Company to deal with the "Year
2000" problem will be material. Management believes, based on its available
information, that it will be able to manage its total "Year 2000" transition
without any material adverse effects on its business operations or financial
condition.
10
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 7. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
Stock Option Plan
On September 4, 1996 the Company adopted the 1996 Incentive Stock Option and
Non-Qualified Stock Option Plan (the "Incentive Plan") for key employees and
non-employee directors. Options may be granted under the Incentive Plan to
purchase up to a maximum of 3,500,000 of the Company's common shares, subject to
certain adjustments and restrictions. The price of each option is the fair
market value of the Company's common shares on the date of the grant. The
options granted are generally subject to a four-year vesting schedule in equal
increments annually and are exercisable any time after vesting up to 10 years
from the grant date.
During the quarter ended March 31, 1999, the Company granted options to purchase
30,000 common shares at a weighted average exercise price of $1.94 per common
share. No options were exercised during the period ended March 31, 1999.
The Company accounts for its Incentive Plan in accordance with Accounting
Principles Board Opinion No. 25 and related interpretations. Accordingly, no
compensation expense has been recognized for the Incentive Plan.
NOTE 8. STATEMENT OF CASH FLOWS
Supplemental disclosure of non-cash investing and financing transactions:
During the three months ended March 31, 1999, the Company did not enter into any
non-cash transactions.
During the three months ended March 31, 1998, the Company entered into the
following non-cash transactions:
o incurred long-term debt ($890,000) for certain business combinations;
o incurred goodwill of $2,390,000 in the business combination with ISI; and
o incurred goodwill of $750,000 in the business combination with Cella.
NOTE 9. SUBSEQUENT EVENTS
Subsequent to March 31, 1999 the following event occurred:
o The Company completed a sale/lease-back of certain of its fixed assets
with PNC Leasing Corp. in the amount of $1,425,000, payable in 36 monthly
installments.
11
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 10. SEGMENT INFORMATION
Effective with the first quarter of 1999, the Company began reporting in two
industry segments, the IT Staffing segment (consisting of the Company's Contract
Placement business, Permanent Placement business, and the IT Training business)
and the Information Management Solutions segment. The following represents
financial information for each of the Company's reportable industry segments:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
Information
Management
IT Staffing Solutions Eliminations Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 28,572,312 $ 3,005,309 $ -- $ 31,577,621
Intersegment sales 116,763 -- 116,763 --
------------ ------------ ------------ ------------
Total revenues $ 28,689,075 $ 3,005,309 $ 116,763 $ 31,577,621
============ ============ ============ ============
Income (loss) from operations $ 848,893 ($ 1,418,931) $ -- ($ 570,038)
============ ============ ============ ============
Net Income (loss) $ 383,977 ($ 963,868) $ -- ($ 579,891)
============ ============ ============ ============
Depreciation and amortization $ 325,844 $ 221,395 $ -- $ 547,239
============ ============ ============ ============
Identifiable assets $ 46,761,011 $ 14,736,653 $ 11,286,085 $ 50,211,579
============ ============ ============ ============
Capital expenditures $ 125,128 $ 139,516 $ -- $ 264,644
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
Information
Management
IT Staffing Solutions Eliminations Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 21,045,112 $ 4,044,706 $ -- $ 25,089,818
Intersegment sales 44,680 -- 44,680 --
------------ ------------ ------------ ------------
Total revenues $ 21,089,792 $ 4,044,706 $ 44,680 $ 25,089,818
============ ============ ============ ============
Income (loss) from operations $ 961,484 ($ 367,140) $ -- $ 594,344
============ ============ ============ ============
Net Income (loss) $ 583,243 ($ 220,105) $ -- $ 363,138
============ ============ ============ ============
Depreciation and amortization $ 173,499 $ 143,795 $ -- $ 317,294
============ ============ ============ ============
Identifiable assets $ 40,603,990 $ 7,757,658 $ 9,883,217 $ 38,478,431
============ ============ ============ ============
Capital expenditures $ 503,766 $ 90,184 $ -- $ 593,350
============ ============ ============ ============
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998
The following discussion should be read in conjunction with the
condensed consolidated financial statements of The Judge Group, Inc. (the
"Company") and related notes thereto appearing elsewhere in this Report and in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
OVERVIEW
In 1999 the Company reorganized its four operating units into two
business segments to enable financial analysis that more closely tracks its
lines of business. The Company's Contract Placement, Permanent Placement and IT
Training operating units have been consolidated with the IT Staffing segment.
The Information Management Solutions ("IMS") business is the other segment,
which the Company intends to separate from its operations in the future. The
Company achieved overall revenue growth rates of 25.9% for the three months
ended March 31, 1999, compared to the prior year period, with IT Staffing
experiencing revenue growth of 35.8% while IMS experienced a decline in revenue
of 25.7%. The revenue growth in IT Staffing was due primarily to increased
revenues in offices open over one year, which represented 77% of such increase,
as well as to acquisitions and revenues from offices open less than one year.
The decrease in revenue in the IMS segment was due primarily to management's
decision in 1998 to discontinue new sales in its Network Services Division,
since such sales generally had low profit margins. In the three months ended
March 31, 1998 the Network Services Division of IMS produced revenues of
approximately $2 million, or 50% of total IMS revenues. During the three months
ended March 31, 1999, the IT Staffing segment relocated its staff from the
Foxborough, Massachusetts location to Providence, Rhode Island to better serve
the Providence area and incurred certain expenses related to this relocation.
The Company anticipates that the relocation will assist it in continuing to
attract and retain experienced staff and enable it to better service its
clients.
In the first quarter of 1999, the Company's IMS business incurred an
operating loss of $1.4 million compared to a loss of $367,000 in the prior year
period. This increase in operating loss was attributable to continued high
overhead costs and a decrease in revenues. The Company plans to separate the IMS
business from its operations before year end 1999 and as soon as possible in a
way that will maximize shareholder value. The Company's IT Staffing segment
generated operating income of $1.2 million in the quarter ended March 31, 1999,
an increase of 4.2% over the prior year period.
The following table presents the net revenues (net of intercompany
eliminations) and the income (loss) from operations attributable to each of the
Company's businesses, in dollars and as a percentage of net revenues, for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Revenues:
IT Staffing $28,572 90.5% $21,045 83.9%
Information Management Solutions 3,005 9.5% 4,045 16.1%
------- ------ ------- -----
Consolidated Net Revenues $31,577 100.0% $25,090 100.0%
======= ====== ======= =====
Income (loss) from Operations:
IT Staffing $ 1,228 4.3% $ 1,178 5.6%
Information Management Solutions ( 1,419) -47.2% (367) -9.1%
Corporate Overhead Expense (379) N/A (217) N/A
------- ------ ------- -----
Consolidated Income (Loss) from Operations ($ 570) -1.8% $ 594 2.4%
======= ====== ======= =====
</TABLE>
Included in corporate overhead expense are salaries, benefits and related costs
for corporate level financial, legal, human resources, management information
systems and marketing personnel. Operating income (loss) in 1998 has been
restated to reflect corporate overhead allocation on the same basis as 1999.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as
a percentage of consolidated net revenues for each of the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net Revenues 100.0% 100.0%
Cost of Sales (exclusive of items shown separately below) 68.2 69.4
Selling and Operating 20.4 17.9
General and Administrative 13.2 10.3
---- -----
Total Costs and Expenses 101.8 97.6
Income (Loss) From Operations (1.8) 2.4
Interest Income (Expense) and Other, Net (0.6) 0.2
----- -----
Income (Loss) Before Income Taxes (2.4%) 2.6%
===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Net Revenues. Consolidated net revenues increased by 25.9%, or approximately
$6.5 million, for the three months ended March 31, 1999 compared to the prior
year period. Revenue for the IT Staffing business increased 35.8%, or
approximately $7.5 million, for the three months ended March 31, 1999 compared
to the prior year period. Of such increase approximately $5.3 million, or 77% of
the increased revenues, was attributable to offices open over one year. In
particular the Company's offices in Bala Cynwyd, Pennsylvania, Edison, New
Jersey, and Alexandria, Virginia contributed the greatest increases in revenues.
Also contributing to the revenue increase was approximately $1.7 million in
revenue from companies acquired during 1998 and from offices opened less than
one year. The increased revenues in the offices open over one year were largely
due to increased marketing efforts in those markets. The Company's IMS segment
reported revenues decreased 25.7%, or approximately $1 million, for the period
ended March 31, 1999 over the same period in 1998. This decrease was primarily a
result of management's decision in late 1998 to discontinue new sales in the
Network Services division of IMS due to the low margins achieved on that
business. In the period ended March 31, 1998 the Network Services division
generated revenues of approximately $2 million, or approximately 50% of the IMS
segment's revenues in that period. The Company continues to emphasize higher
margin imaging and systems integration business to replace those revenues.
Cost of Sales. Consolidated cost of sales increased by 23.6%, or approximately
$4.1 million, for the three months ended March 31, 1999 compared to the prior
year period. Cost of sales as a percentage of consolidated net revenues
decreased to 68.2% from 69.4%. In the Company's IT Staffing business, cost of
sales as a percentage of its revenue decreased to 67.7% from 69.0% primarily as
a result of increased sales efforts on higher margin services. In the Company's
IMS business, cost of sales as a percentage of its revenue increased to 73.4%
from 71.6% in the prior year period. This increase was attributable to the
higher cost of sales payrolls in the three businesses acquired in 1998, which
have lower profit margins than offices open over one year.
Selling and Operating. Consolidated selling and operating expenses increased by
44.2%, or approximately $2 million, for the three months ended March 31, 1999
compared to the prior year period. Of such increase approximately $1.5 million,
or 75% of the increased expenses, was due to businesses acquired in 1998 and
offices open less than one year. Selling and operating expenses as a percentage
of consolidated net revenues increased to 20.4% from 17.9% for the three months
ended March 31, 1999 compared to the prior year period. Selling and operating
expenses as a percentage of revenues for the IT Staffing business increased to
14
<PAGE>
18.5% from 17.2% for the three months ended March 31, 1999 compared to the prior
year period. This increase was attributable to increased salaries and
commissions paid on the increased revenues, and to higher costs associated with
offices open less than one year and businesses acquired in 1998. Selling and
operating expenses as a percentage of revenues for the IMS business increased to
38.8% from 21.2% for the three months ended March 31, 1999 compared to the prior
year period, primarily due to the increased salaries and related salesperson
expenses associated with businesses acquired in 1998.
General and Administrative. Consolidated general and administrative expenses
increased 60.0%, or approximately $1.6 million, for the three months ended March
31, 1999 compared to the prior year period. Of such increase approximately
$900,000, or 56% of the increased expenses, was attributable to businesses
acquired in 1998 and offices open less than one year. General and administrative
expenses as a percentage of consolidated net revenues, increased to 13.2% from
10.3% for the three months ended March 31, 1999 compared to the prior year
period. Contributing to this increase was the expansion of the Company's
corporate staff, primarily management information systems, human resources, and
accounting personnel hired to manage the expanded businesses, which added to
corporate overhead for the three months ended March 31, 1999 compared to the
prior year period. In addition, the amortization of goodwill increased by
approximately $84,000 in the three months ended March 31, 1999 compared to the
prior year period due to a full quarter of amortization of goodwill from
acquisitions in 1998. In the Company's IT Staffing business general and
administrative expenses as a percentage of revenues increased to 10.5% from 9%
for the three months ended March 31, 1999 compared to the prior year period.
General and administrative expenses as a percentage of revenue in the IMS
business increased to 31.9% from 14.6% for the three months ended March 31, 1999
compared to the prior year period. In both segments such increases were
primarily due to businesses acquired in 1998 and to offices open less than one
year.
Interest. Interest expense was approximately $204,000 and approximately $9,000
for the three months ended March 31, 1999 and 1998, respectively. Interest
income was approximately $1,000 and approximately $71,000 for the three months
ended March 31, 1999 and 1998, respectively. This increase in interest expense
and decrease in interest income was attributable to the Company's use of its
short term investments and its bank borrowings to fund the rapid expansion
through both acquisitions and the opening of new offices in 1998.
Income Taxes. The effective tax benefit rate for the three months ended March
31, 1999 is lower than the applicable federal statutory tax rate of 34%,
primarily due to the Company's state tax liabilities and certain expenses not
deductible for tax purposes. For the three months ended March 31, 1998 the
effective tax rate was higher than the federal statutory tax rate due to the
same reasons.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for working capital has increased as its revenues have grown,
and it has used borrowings under its credit facility to fund working capital. In
June 1998 the Company began using its line of credit to fund the cost of its
acquisitions and for working capital, and as of March 31, 1999 approximately
$12.5 million was owing on the line. The Company typically maintains minimal
cash balances, as reflected in the balance of approximately $37,000 as of March
31, 1999. The Company redeemed short term investments of approximately $5.5
million during the first quarter of 1998 and used the proceeds to acquire
substantially all of the assets of ISI and Cella.
The Company used approximately $1.6 million cash in operations during the
quarter ended March 31, 1999 compared to cash generated from operations of
approximately $6.2 million for the three months ended March 31, 1998. This
result is attributable to several factors, including a decrease in net income of
approximately $943,000, from a profit of approximately $363,000 in the three
months ended March 31, 1998 to a loss of approximately $580,000 in the three
months ended March 31, 1999, an increase in accounts receivable due to increased
revenues, and the redemption of short term investments in 1998.
15
<PAGE>
Cash purchases of fixed assets for the three months ended March 31, 1999 were
approximately $265,000 compared to purchases of approximately $593,000 in the
comparable period in the prior year. This decrease reflects management's
implementation of stricter capital expenditures budgeting. These purchases were
related primarily to the purchases of computers, software and imaging equipment
to upgrade the Company's technology infrastructure and the furnishing of new
office facilities.
The Company borrowed approximately $3.3 million through its line of credit and
overdraft proceeds facilities in the quarter ended March 31, 1999. The Company
paid approximately $1.3 million related to its guarantee that common shares
issued in connection with one of its acquisitions would equal or exceed a
specified price at the anniversary date of the issuance. Additional amounts may
be payable in the future to meet similar guaranties that could equal or exceed
the amount reflected as "Other Liabilities" on the accompanying balance sheet.
In the quarter ended March 31, 1998 the Company repaid the remaining $238,000
balance outstanding on the notes payable related to the acquisition of The
Berkeley Associates Corp. ("Berkeley"), and repurchased 40,000 common shares
(now accounted for as treasury stock), at a price of $5.50 per share from the
sellers of Berkeley.
Since April 24, 1998, the Company has had availability under a $25.0 million
revolving advance facility (the "Line of Credit") with PNC Bank, N.A. The Line
of Credit expires on May 31, 2003. The Line of Credit allows the Company to
borrow the lesser of 85% of eligible accounts receivable or $25.0 million. As of
March 31, 1999, the Company had $12.5 million outstanding against the Line of
Credit. The Line of Credit is secured by substantially all of the Company's
assets and contains customary restrictive covenants which from time to time have
been reset by the Bank, including limitations on loans the Company may extend to
its officers and employees, the incurrence of additional debt and the payment of
dividends on the Company's common shares. The Line of Credit bears interest, at
the Company's option, at either the bank's prime rate or 200 basis points over
the London Inter-bank Offering Rate ("LIBOR").
Subsequent to March 31, 1999 the Company completed a sale/lease back of certain
of its fixed assets with PNC Leasing Corp., an affiliate of PNC Bank, N.A. The
resulting lease obligation is approximately $1.4 million repayable in 36 equal
monthly rental payments. The Company anticipates that its primary uses of
capital in future periods will be to fund increases in accounts receivable and
to support internal growth by financing new offices. The Company believes that
its Line of Credit, or other credit facilities which may be available to the
Company in the future will be sufficient to meet the Company's capital needs for
at least the next twelve months. However, the lack of a separation of the IMS
business on a timely basis may adversely affect the Company's available
borrowings.
YEAR 2000 ISSUES
The Company believes its recently implemented financial information system is
"Year 2000" compliant. Further, the Company is currently in the process of
replacing its candidate and client databases utilized in its Contract Placement
and Permanent Placement business with software systems that are represented to
be "Year 2000" compliant. The Company is analyzing its remaining computer
systems to identify any potential "Year 2000" issues and will take appropriate
corrective action based on the results of such analysis. Management does not
expect that total incremental spending by the Company to deal with the "Year
2000" problem will be material. Management believes, based on its available
information, that it will be able to manage its total "Year 2000" transition
without any material adverse effects on its business operations or financial
condition.
FORWARD LOOKING INFORMATION
This report and other reports and statements filed by the Company from
time to time with the United States Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K filed on April 15, 1999 with
the Securities and Exchange Commission (collectively, "SEC Filings"), contain or
may contain certain forward-looking statements and information that are based on
beliefs of, and information currently available to, the Company's management as
well as estimates and assumptions made by the Company's management. When used in
16
<PAGE>
SEC Filings, the words "anticipate," "believe," "estimate," "expect," "future,"
"intend," "plan" and similar expressions as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions relating to the
Company's operations and results of operations, competitive factors and pricing
pressures, shifts in market demand, the performance and needs of the industries
served by the Company, and other risks and uncertainties, including, in addition
to any uncertainties specifically identified in the text surrounding such
statements and those identified below, uncertainties with respect to changes or
developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions and actions taken or omitted to be taken
by third parties, including the Company's shareholders, customers, suppliers,
business partners, competitors, and legislative, regulatory, judicial and other
governmental authorities and officials. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may vary significantly from those anticipated, believed,
estimated, expected, intended or planned.
Dependence on Availability of Qualified Technical Consultants. The
Company is dependent upon its ability to attract and retain technical
consultants who possess the skills and experience necessary to meet the staffing
requirements of its clients. To keep pace with rapidly evolving information
technologies and changing client needs, the Company must continually evaluate
and upgrade its database of available qualified technical consultants.
Competition for individuals with proven technical skills is intense, and, as is
currently customary in the industry, the Company does not have any exclusive
contracts with its consultants. The Company competes for such individuals with
other providers of technical staffing services, systems integrators, providers
of outsourcing services, computer systems consultants, clients and temporary
personnel agencies. Factors influencing such competition include compensation,
benefits, growth opportunities and pre-existing relationships with other
companies, particularly specialty staffing companies. As the Company expands
into new geographic areas, it may experience difficulty attracting qualified
technical consultants who have a prior relationship or familiarity with more
established specialty staffing companies in such areas. There can be no
assurance that qualified technical consultants will continue to be available to
the Company in sufficient numbers to meet the Company's current and anticipated
growth requirements.
Ability to Manage Growth. Sustained or significant growth, if achieved,
will subject the Company to risks by placing a substantial strain on the
Company's available managerial, financial and other resources. Specifically,
such growth will require the Company to: (i) hire, integrate and retain
qualified managers, sales personnel and recruiters in existing markets as well
as markets in which the Company has no prior operating experience; (ii) develop
and maintain relationships with an increasingly large number of highly qualified
technical consultants; and (iii) apply its management practices to a
significantly larger organization. Expansion beyond the geographic areas where
the Company's offices are presently located will further increase demands on the
Company's management. The Company's ability effectively to manage its staff and
facilities growth will require it to continue to expand its operational,
financial and other internal systems. There can be no assurance that the
Company's systems, procedures and controls will be successfully implemented or
adequate to support the Company's expanded operations. Furthermore, an element
of the Company's business strategy is to cross-sell the existing services of its
businesses to new and existing clients. Historically, these businesses have
operated independently, producing only occasional referrals, and there can be no
assurance that the Company will successfully market such services on an
integrated basis.
Acquisition Risks. A component of the Company's growth strategy is the
acquisition of companies that will complement and expand the Company's existing
businesses, principally in new geographic markets. The successful implementation
of this strategy is dependent on the Company's ability to identify suitable
acquisition candidates, acquire such companies on suitable terms and integrate
their operations with those of the Company. There can be no assurance that the
Company will be able to identify suitable acquisition candidates or that, if
identified, the Company will be able to acquire such companies on suitable
terms. The specialty staffing industry is relatively mature. Acquisitions in
this industry are therefore likely to be at higher relative prices than for
other industries due to competition from other staffing companies for
acquisition candidates. Acquisitions also involve a number of special risks,
including: (i) potential adverse effects on the Company's reported operating
17
<PAGE>
results, including increased goodwill amortization and interest expense; (ii)
diversion of management attention; (iii) risks associated with unanticipated
problems, liabilities or contingencies; and (iv) difficulties related to the
integration of the acquired business. The occurrence of some or all of the
events described in these risks could have a material adverse effect on the
Company's business, financial condition and results of operations.
History of Operating Losses in Information Management Solutions
Business. The Company's Information Management Solutions business has had net
operating losses since its commencement in 1988, experienced a loss from
operations of approximately $1.4 million for the three month period ended March
31, 1999, and at March 31, 1999 had an accumulated deficit of approximately $8.7
million. The losses have resulted from high marketing, general and
administrative costs associated with developing the Company's imaging and
document management infrastructure and capabilities, combined with historically
low profit margins related to the hardware component of the networking business
and a slower emergence of the imaging and document management market than had
been anticipated by management. Specifically, the costs associated with building
this division's imaging and document management capabilities have included the
hiring of sales and technical personnel and costs associated with the
acquisition and integration of three imaging and document management companies.
The Company is currently focusing on separating this business from its
operations. If the Company is not successful in separating the Information
Management Solutions business before the end of 1999, or on the terms and
conditions satisfactory to the Company, there may be additional adverse effects
on the Company's cash flow, results of operations, or financial condition.
Dependence on Contract Placement Business. The Company's Contract
Placement business was responsible for 75.0%, 71.4% and 70.9% of total Company
revenues for the years ended December 31, 1996, 1997 and 1998, respectively. In
addition, for the years ended 1997 and 1998, one customer of the Contract
Placement business, Merck, accounted for approximately 9.8% and 6.0% of total
Contract Placement revenues, respectively, and 7.0% and 4.3% of total Company
revenues, respectively. There can be no assurance that the Company will be able
to retain this level of revenue from this client. The ability of the Company to
sustain or increase revenues in the Contract Placement business is subject to
various factors, including its ability to attract and retain qualified technical
consultants, to hire, integrate and retain qualified managers, recruiters and
sales personnel in existing and new markets and to apply its management
practices to a significantly larger organization. There can be no assurance that
the Company will be able to sustain or increase its Contract Placement revenues.
Furthermore, a decline in the level of Contract Placement revenues would have a
material adverse effect on the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
18
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this Quarterly Report on Form
10-Q.
Exhibit No. Description of Document
11.1 Statement re: Computation of Earnings Per Share.
27.1 Financial Data Schedule.
(b) No reports were filed by the Registrant on Form 8-K during the quarter ended
March 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1999
THE JUDGE GROUP, INC. THE JUDGE GROUP, INC.
By: /s/ John M. Work By: /s/ Martin E. Judge, Jr.
------------------------------ -----------------------------
John M. Work Martin E. Judge, Jr.
Chief Accounting Officer Chairman of the Board and
Chief Executive Officer
19
<PAGE>
Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Basic
Weighted average common shares outstanding(1) 14,140,579 13,369,191
Net income (loss) ($ 579,891) $ 363,138
=========== ===========
Basic net income (loss) per common share ($ 0.04) $ 0.03
=========== ===========
Diluted
Weighted average common shares outstanding(1)(2)(3) 14,140,579 13,380,607
Net income (loss) ($ 579,891) $ 363,138
=========== ===========
Diluted net income (loss) per common share ($ 0.04) $ 0.03
=========== ===========
</TABLE>
- ----------------------
(1) Excludes 40,000 shares of treasury stock from their date of purchase on
February 28, 1998. Includes 639,277 contingently issuable shares based
on certain acquired companies achieving agreed upon levels of pre-tax
income in 1998.
(2) In 1998 options to purchase 82,500 shares, less 71,084 shares to be
purchased under the treasury stock method, are included in weighted
average shares outstanding.
(3) Options on 1,423,050 shares and 521,500 shares in 1999 and 1998,
respectively, not included in computing diluted earnings per share
because their effects are anti-dilutive.
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE JUDGE GROUP, INC. QUARTERLY REPORT ON FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 36,566
<SECURITIES> 0
<RECEIVABLES> 24,831,834
<ALLOWANCES> 778,228
<INVENTORY> 1,043,802
<CURRENT-ASSETS> 28,460,355
<PP&E> 8,312,040
<DEPRECIATION> 3,440,182
<TOTAL-ASSETS> 50,211,579
<CURRENT-LIABILITIES> 14,295,880
<BONDS> 0
0
0
<COMMON> 135,412
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,211,579
<SALES> 0
<TOTAL-REVENUES> 31,577,621
<CGS> 21,536,052
<TOTAL-COSTS> 32,147,659
<OTHER-EXPENSES> 202,690
<LOSS-PROVISION> 157,134
<INTEREST-EXPENSE> 204,199
<INCOME-PRETAX> (772,728)
<INCOME-TAX> (192,837)
<INCOME-CONTINUING> (579,891)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (579,891)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
