ON ASSIGNMENT INC, 10-K405, 1999-03-31

ON ASSIGNMENT INC
10-K405, 1999-03-31
HELP SUPPLY SERVICES

Previous: PENNCORP FINANCIAL GROUP INC /DE/, DEF 14A, 1999-03-31

Next: PLD TELEKOM INC, 10-K, 1999-03-31

<PAGE> 1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

------------------------

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 0-20540
------------------------

ON ASSIGNMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 95-4023433
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

26651 WEST AGOURA ROAD
CALABASAS, CALIFORNIA 91302
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 878-7900

------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
NONE NONE
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)

------------------------

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 of the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the 7,044,727 shares of voting stock (based
on the closing price reported by the Nasdaq Stock Market on January 31, 1999)
held by non-affiliates of the registrant as of January 31, 1999 was
approximately $259,774,000. For purposes of this disclosure, shares of common
stock held by persons who own 5% or more of the shares of outstanding common
stock and shares of common stock held by each officer and director have been
excluded in that such persons may be deemed to be "affiliates" as that term is
defined under the Rules and Regulations of the Act. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

As of January 31, 1999, the registrant had outstanding 11,006,722 shares of
Common Stock, $0.01 par value.

DOCUMENT INCORPORATED BY REFERENCE

Portions of the On Assignment, Inc. Proxy Statement for the registrant's
Annual Meeting of Stockholders scheduled to be held on June 8, 1999 are
incorporated by reference into Part III of this Report on Form 10-K.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K contains forward-looking statements
regarding the future financial condition and results of operations and the
Company's business operations. The words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Risk Factors that May Affect Future Results" in item 1 of
this report, as well as those discussed elsewhere in this report and the
registrant's other filings with the Securities and Exchange Commission.

GENERAL

On Assignment, Inc. (the "Company"), through its first operating division,
Lab Support, is a leading nationwide provider of temporary scientific
professionals to laboratories in the biotechnology, environmental, chemical,
pharmaceutical, food and beverage and petrochemical industries. In July 1998,
the Company acquired substantially all of the assets, offices and operations of
LabStaffers, Inc., which were added to the Lab Support division. In January
1994, the Company established its second operating division, Finance Support,
with the acquisition of 1st Choice Personnel, Inc. The Finance Support division
was expanded in December 1994, with the acquisition of substantially all of the
assets, offices and operations of Sklar Resource Group, Inc. With a shift in
Finance Support's business development focus to medical billing and collections,
in January 1997 the name of the Finance Support division was changed to
Healthcare Financial Staffing. In March 1996, the Company established its third
operating division, EnviroStaff, with the acquisition of EnviroStaff, Inc.,
which specializes in providing temporary environmental professionals to the
environmental services industry. On May 12, 1997, the Company formed Assignment
Ready Inc., a Canadian corporation and wholly owned subsidiary of the Company,
and commenced operations in Toronto as Lab Support Canada, during the third
quarter of 1997. As of December 31, 1998, the Company served 57 operational
markets through a network of 115 branch offices.

The Company's principal executive offices are located at 26651 West Agoura
Road, Calabasas, California 91302 and its telephone number is (818) 878-7900.

ON ASSIGNMENT'S APPROACH

The Company's strategy is to serve the needs of targeted industries for
quality assignments of temporary professionals. In contrast to the mass market
approach used for temporary office/clerical and light industrial personnel, the
Company believes effective assignments of temporary professionals require the
person making assignments to have significant knowledge of the client's industry
and be able to assess the specific needs of the client as well as the temporary
professionals' qualifications. As a result, the Company has developed a tailored
approach to the assignment process -- the Account Manager System. Unlike
traditional approaches, the Account Manager System is based on the use of
experienced professionals, Account Managers, to manage the assignment process.
Account Managers meet with clients' managers to understand position descriptions
and workplace environments, and with temporary employee candidates to assess
their qualifications and interests. With this information, Account Managers can
make quality assignments of temporary professionals to clients, typically within
24 to 48 hours of client requests. The Company's corporate office performs many
functions that allow Account Managers to focus more effectively on the
assignment of temporary professionals. These functions include recruiting,
ongoing training and coaching, appointment making, business development and
administrative support. The corporate office also selects, opens and maintains
branch offices according to a standardized model.

Temporary personnel assigned to clients are employees of the Company,
though clients provide on-the-job supervisors for temporary personnel.
Therefore, clients control and direct the work of temporary personnel and
approve hours worked, while the Company is responsible for many of the
activities typically handled by the client's personnel department.

2
<PAGE> 3

BRANCH OFFICE NETWORK

At December 31, 1998, the Company had 62 Lab Support branch offices, 32
Healthcare Financial Staffing branch offices, and 21 EnviroStaff branch offices.
Of this total of 115 branch offices, 75 branch offices involve shared office
space among divisions. Through this network of branch offices, the Company
served the following operational markets:

<TABLE>
<S> <C> <C> <C> <C>
Allentown, PA Denver, CO Memphis, TN Piscataway, NJ San Francisco, CA
Atlanta, GA Detroit, MI Miami, FL Pittsburgh, PA San Jose, CA
Baltimore, MD Ft. Lauderdale, FL Milwaukee, WI Pleasanton, CA Seattle, WA
Boston, MA Greensboro, NC Minneapolis, MN Portland, OR St. Louis, MO
Buffalo, NY Greenville, SC Montreal, QC, Princeton, NJ Tampa, FL
Charlotte, NC Harrisburg, PA Canada Providence, RI Toronto, ON, Canada
Chicago, IL Houston, TX Nashville, TN Raleigh-Durham, NC Vancouver, BC,
Cincinnati, OH Indianapolis, IN New Orleans, LA Richmond, VA Canada
Cleveland, OH Kansas City, MO Oklahoma City, OK Sacramento, CA Washington, DC
Columbus, OH Los Angeles, CA Orlando, FL Salt Lake City, UT Westport, CT
Costa Mesa, CA Louisville, KY Philadelphia, PA San Antonio, TX White Plains, NY
Dallas, TX Madison, WI Phoenix, AZ San Diego, CA
</TABLE>

CLIENTS

Lab Support's clients primarily include biotechnology, environmental,
chemical, pharmaceutical, food and beverage, petrochemical and manufacturing
companies. Healthcare Financial Staffing's clients include companies engaged in
the healthcare services industry. EnviroStaff's clients primarily include
companies in the environmental services industry. During the year ended December
31, 1998, the Company provided assignment professionals to approximately 4,200
clients. All temporary assignments, regardless of their planned length, may be
terminated without prior notice by the client or the temporary employee.

THE TEMPORARY PROFESSIONAL

The skill and experience levels of Lab Support's temporary professional
employees range from scientists with bachelor and/or masters degrees and
considerable laboratory experience to technicians with limited chemistry or
biology background and lab experience. The skill and experience levels of
Healthcare Financial Staffing's temporary professional employees typically
include two or more years of medical billing and collection experience. The
skill and experience levels of EnviroStaff's temporary professional employees
range from engineers, geologists, industrial hygienists and safety professionals
with bachelor and/or masters degrees and several years of experience to field
technicians with some applicable experience.

Hourly wage rates are established according to local market conditions. The
Company pays the related costs of employment including social security taxes,
federal and state unemployment taxes, workers' compensation insurance and other
similar costs. After minimum service periods and hours worked, the Company also
provides paid holidays, allows participation in the Company's 401(k) Retirement
Savings Plan and Employee Stock Purchase Plan, creates eligibility for an annual
bonus, and facilitates access to health insurance for its temporary employees.

EXPANSION IN EXISTING PROFESSIONS AND INTO OTHER PROFESSIONS

The Company intends to expand its services domestically and internationally
in the laboratory and scientific, medical billing and collections, and
environmental health and safety fields it currently serves and to apply its
approach to the assignment of temporary professionals in other fields. The
Company believes that its experience with the Account Manager System and
centralized operational support will enable it to enter new markets effectively.
The Company continually reviews opportunities in various industries, evaluating
the current volume and profitability of temporary assignments, the length of
assignments, the degree of specialization necessary to be successful, the
competitive environment and the applicability of its Account Manager approach.
If attractive markets are identified, the Company may enter these markets
through acquisition or internal growth. The Company's January 1994 acquisition
of 1st Choice Personnel, Inc., December 1994 acquisition of substantially all of
the assets of Sklar Resource Group, Inc., March 1996 acquisition of EnviroStaff,
Inc., and July 1998 acquisition of substantially all of the assets of
LabStaffers, Inc. were consistent with this ongoing activity, and the Company
periodically engages in discussions with possible acquisition candidates. Also,
in March 1999, the Company announced its plans to expand the Lab Support
division into the United Kingdom.

3
<PAGE> 4

COMPETITION

The temporary services industry is highly competitive and fragmented and
has low barriers to entry. The Company believes its Lab Support division is one
of the few nationwide temporary service providers that specialize exclusively in
scientific laboratory personnel. Although other nationwide temporary personnel
companies compete with the Company with respect to scientific, medical billing
and collections and environmental personnel, many of these companies focus on
office/clerical and light and heavy industrial personnel, which account for
approximately 80% of the overall temporary personnel services market. These
companies include Manpower, Inc., Kelly Services, Inc., The Olsten Corporation,
ADIA Services, Inc., and Aerotech, Inc., each of which is larger and has
substantially greater financial and marketing resources than the Company.

The Company also competes with temporary personnel agencies on a regional
and local basis. Frequently, the strongest competition in a particular market is
a local company with established relationships. The Company also competes with
its clients that directly advertise or seek referrals of qualified candidates on
their own behalf.

The principal competitive factors in attracting qualified candidates for
temporary employment are salaries and benefits, speed, quality and duration of
assignments and responsiveness to the needs of employees. The Company believes
that many persons seeking temporary employment through the Company are also
pursuing employment through other means, including other temporary employment
service firms. Therefore, the speed and availability of appropriate assignments
is an important factor in the Company's ability to complete assignments of
qualified candidates. In addition to having high quality temporary personnel to
assign in a timely manner, the principal competitive factors in obtaining and
retaining clients in the temporary services industry are correctly understanding
the client's specific job requirements, the appropriateness of the temporary
personnel assigned to the client, the price of services and the monitoring of
client satisfaction. Although the Company believes it competes favorably with
respect to these factors, it expects competition to increase.

EMPLOYEES

At December 31, 1998, the Company employed approximately 210 regular
employees, including Account Managers and corporate office employees. During the
year ended December 31, 1998, the Company employed approximately 13,000
temporary employees. None of the Company's employees, including its temporary
employees, are represented by a collective bargaining agreement. The Company
believes its employee relations are good.

REGULATION

The Company's operations are subject to applicable state and local
regulations governing the provision of personnel placement services which
require personnel companies to be licensed or separately registered. To date,
the Company has not experienced any material difficulties in complying with such
regulations. State mandated workers' compensation and unemployment insurance
premiums, which the Company pays for its temporary and regular employees, can
have a direct effect on the Company's cost of services and thereby,
profitability.

PROPRIETARY RIGHTS

The Company has registered its Lab Support and EnviroStaff service marks
with the United States Patent and Trademark Office and applied for registration
of its Healthcare Financial Staffing service mark. The Company has also
registered "The Quality Assignment" mark with the United States Patent and
Trademark Office. The Company has rights in other trademarks used in connection
with its business.

4
<PAGE> 5

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company operates in a highly competitive environment that involves a
number of risks, many of which are beyond the Company's control. The following
discussion highlights some of the risks that may affect the Company's future
results.

Uncertainty of Future Operating Results, Quarterly Fluctuations and
Seasonality. Future operating results will depend on many factors, including
demand for the Company's services, the market's acceptance of price changes, the
productivity, recruitment and retention of Account Managers, the results of the
Company's expansion into new geographic markets, the degree and nature of
competition, the effectiveness of the Company's expansion into other
professions, and the Company's ability to control costs and manage its accounts
receivable. The Company and the temporary services industry as a whole typically
experience seasonal declines in demand from the year-end holiday season through
early February and during June, July and August. The Company has experienced
variability in the duration and depth of these seasonal declines, which in turn
have materially affected period-to-period and current period-to-prior period
comparisons of its financial and operating performance. As a result of these and
other factors, there can be no assurance that the Company will be able to grow
in future periods, sustain its past rate of revenue growth or maintain
profitability on a quarterly or annual basis. If in some future quarter or
quarters the Company's operating results are below the expectations of public
market analysts or investors, the market price of its common stock may decline
significantly.

Reliance on and Ability to Attract, Develop and Retain Account
Managers. The Company relies significantly on the performance of its Account
Managers, who have primary responsibility for all aspects of the process of
assigning the Company's temporary employees to clients. The Company is highly
dependent on its ability to hire, develop and retain qualified Account Managers,
as well as on the productivity of its Account Managers. The available pool of
qualified Account Manager candidates is limited. In addition, prior to joining
the Company, the typical Account Manager has no prior experience in the
temporary employment industry. The Company commits substantial resources to the
recruitment, training, development and operational support of its Account
Managers. There can be no assurance that the Company will be able to continue to
recruit, train and retain sufficient numbers of qualified Account Managers or
that Account Managers will achieve desired productivity levels. Failure to
achieve planned numbers of Account Managers or productivity of Account Managers
could result in a material adverse effect on the Company's financial condition,
results of operations and business.

Expansion in Existing Professions and into Other Professions. The Company
plans to expand its services domestically and internationally within the
laboratory and scientific, healthcare financial and environmental health and
safety fields it currently serves and to other professional fields. The success
of the Company's expansion efforts, including its EnviroStaff division, will
depend on a number of factors, including the Company's ability to adapt the
Account Manager system used in its Lab Support division to other industries and
professions, recruit and train new Account Managers with the particular industry
or professional experience, establish client relationships in new industries and
successfully recruit, qualify and orient new temporary professionals. The
ability to manage these factors may be more difficult or take more resources
than the Company anticipates, particularly since they may involve industries,
clients and professionals that the Company has no experience with. The Company
may decide to pursue future expansion by internal growth or acquisition. The
rate at which the Company establishes new services may significantly affect the
Company's operating and financial results, especially in the quarters of and
immediately following expansion into new domestic and international professional
markets or the integration of acquired operations. There can be no assurance
that the Company will be able to successfully expand its services in the fields
it currently serves, identify new professional fields suitable for expansion or
continue to grow. Furthermore, in the event the Company pursues an acquisition,
there can be no assurance that the Company will identify suitable acquisition
candidates on reasonable terms, that the Company will be able to successfully
integrate acquisitions, that anticipated benefits of the acquisition will be
achieved, or that diversion of management attention to the acquisition and
integration process will not have an adverse effect on the Company's existing
businesses.

5
<PAGE> 6

Planned International Operations Face Special Risks. To date, the Company
has not generated any revenues outside of North America. However, the Company
has announced the expansion of its operations to the United Kingdom and intends
to expand its operations to other countries in Europe in the future. The Company
has no experience in marketing, selling and supporting its services outside of
North America. Development of such skills may be more difficult or take longer
than the Company anticipates, especially due to the fact that its centralized
support functions in Calabasas, California will not be able to provide the same
level of support to operations outside of North America as it does to its
current North American operations. In addition to establishing operations
support functions outside North America, the Company will have to address
language barriers and different regulations of temporary employment. Moreover,
international operations are subject to a variety of additional risks associated
with conducting business internationally that could seriously harm the Company's
financial condition and results of operations. These risks may include the
following: problems in collecting accounts receivable; the impact of recessions
in economies outside the United States; unexpected changes in regulatory
requirements; fluctuations in currency exchange rates; seasonal reductions in
business activity during the summer months in Europe; and potentially adverse
tax consequences.

Dependence on Availability of Qualified Temporary Professional
Employees. The Company is dependent upon continuing to attract qualified
laboratory and scientific, healthcare financial and environmental services
personnel with a broad range of skills and experience in order to meet client
needs. The Company competes for such personnel with other temporary personnel
companies, as well as actual and potential clients, some of which seek to fill
positions with either regular or temporary employees. In addition, the Company's
temporary employees sometimes become regular employees of the Company's clients.
There can be no assurance that qualified laboratory and scientific, medical
billing and collections, and environmental services personnel will be available
to the Company in adequate numbers.

Highly Competitive Market. The temporary services industry is highly
competitive and fragmented, with limited barriers to entry. The Company competes
in national, regional and local markets with full-service agencies and in
regional and local markets with specialized temporary services agencies. Several
of these companies have significantly greater marketing and financial resources
than those of the Company. As the Company expands into new geographic markets,
its success will depend in part on its ability to gain market share from
competitors. The Company expects that competition will increase in the future
and there can be no assurance that the Company will remain competitive.

Effect of Fluctuations in the General Economy. Demand for temporary
services is significantly affected by the general level of economic activity. As
economic activity slows, many companies reduce their usage of temporary
employees before undertaking layoffs of their regular employees. As economic
activity increases, many clients convert their temporary employees to regular
employees which, depending on the Company's agreement with the client and when
such conversion occurs, may not result in any conversion fee revenue for the
Company. The Company is unable to predict the level of economic activity at any
particular time and its effect on the Company's operating and financial results.

Terminability of Client Arrangements. The Company's arrangements with
clients are terminable at will and do not require clients to use the Company's
services. All temporary assignments, regardless of their planned length, may be
terminated without advance notice. There can be no assurance that existing
clients will continue to use the Company's services at historical levels, if at
all.

Employment Liability Risks. The Company employs and assigns temporary
employees to the workplaces of other businesses. Inherent risks of such activity
include possible claims of errors and omissions, misuse of customers'
proprietary information, discrimination and harassment, theft of client
property, and other criminal activity or torts by temporary employees. The
Company seeks to reduce its liability for the acts of its temporary employees by
providing in its arrangements with most clients that temporary personnel work
under the client's supervision, control and direction. There can be no assurance
that such arrangements will be enforceable or that, if enforceable, would be
sufficient to preclude liability as a result of the actions of the Company's
temporary personnel. In addition, there can be no assurance that current
liability insurance coverage will be adequate or will continue to be available
in sufficient amounts.

6
<PAGE> 7

Workers' Compensation Expense. The Company maintains a partially
self-insured workers' compensation program. In connection with this program, the
Company pays a base premium plus actual losses incurred up to certain levels,
and is insured for losses greater than certain levels per occurrence and in the
aggregate. The Company seeks to minimize the impact of workers' compensation
losses through a proactive claims management and accident reduction program.
While the Company believes that current loss reserves are reasonable based on
claims filed and an estimate of claims incurred but not yet reported, there can
be no assurance that loss reserves and insurance coverage will be adequate in
amount to cover all workers' compensation claims.

Dependence on Key Officers. The Company's future success depends in
significant part upon the continued service of its key officers. Competition for
such personnel is intense and there can be no assurance that the Company will
retain its key officers or that it can attract or retain other highly qualified
managerial personnel in the future. The loss of any of its key officers could
have a material adverse effect upon the Company's business, operating results
and financial condition.

Government Regulations. In many states, the temporary services industry is
regulated, and firms such as the Company must be registered or qualify for an
exemption from registration. While these regulations have not materially
effected the conduct of the Company's business to date, there can be no
assurance that future regulations will not have such effect. State mandated
workers' compensation and unemployment insurance premiums, which the Company
pays for its temporary as well as its regular employees, can have a direct
effect on cost of services and thereby, profitability. In the past, federal
legislative proposals for national health insurance have included provisions
extending health insurance benefits to temporary employees and some states could
impose sales taxes or raise sales tax rates on temporary services. Further
increases in such premiums or rates or the introduction of new regulatory
provisions could substantially raise the costs associated with hiring temporary
employees and there is no assurance that these increased costs could be passed
on to clients without a significant decrease in the demand for temporary
employees.

Year 2000. Many currently installed computer systems and software products
are coded to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than one year, computer
systems and/or software used by many companies, including those used to pay
temporary employees and bill clients for temporary employees, may need to be
upgraded to comply with such "Year 2000" requirements. The Company is continuing
the process of assessing Year 2000 issues as they relate to its systems,
business and operations. The Company has developed a Year 2000 Readiness Plan to
address the Year 2000 issues, particularly with respect to its critical systems.
While the Company is not aware of any significant Year 2000 issues for which it
will not be adequately prepared, there can be no assurance that the Company's
business, operating results, or financial condition will not be adversely
affected by issues surrounding the Year 2000 conversion. If any of the Company's
clients or temporary employees experience Year 2000 problems with respect to
their relationship with the Company, such clients or employees could assert
claims for damages against the Company. Any such litigation could result in
costs and diversion of the Company's resources, even if ultimately decided in
favor of the Company. The occurrence of any of the foregoing could have a
material adverse effect on the Company's business, operating results or
financial condition. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Readiness
Disclosure."

ITEM 2. PROPERTIES

The Company has leased approximately 27,700 square feet of office space
through February 2004, for its corporate headquarters in Calabasas, California.
In addition, the Company leases office space in 62 branch office locations in
the metropolitan areas listed under the caption "Branch Office Network" in Item
1 hereof. A branch office typically occupies space ranging from approximately
1,200 to 1,500 square feet with lease terms that typically range from six months
to five years.

7
<PAGE> 8

ITEM 3. LEGAL PROCEEDINGS

(a) There is no material legal proceeding to which the Company is a party
or to which its properties are subject.

(b) No material legal proceedings were terminated in the fourth quarter of
1998.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company and their ages as of December 31,
1998 were:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
H. Tom Buelter...... 57 Chairman of the Board and Chief Executive Officer
Kathy J. West....... 47 President and Chief Operating Officer
Ronald W. Rudolph... 55 Senior Vice President, Finance and Operations Support and
Chief Financial Officer(1)
Carrie S. Nebens.... 41 Senior Vice President, Strategic Operations(2)
Jeffrey A. 30 Vice President and General Manager, Healthcare Financial
Evans(3).......... Staffing and EnviroStaff divisions
</TABLE>

- ---------------
(1) Senior Vice President, Finance and Chief Financial Officer, effective
January 1, 1999.

(2) Executive Vice President, U.S. Operations, effective January 1, 1999.

(3) Mr. Evans resigned as an officer and employee effective February 9, 1999.

H. TOM BUELTER has served as Chief Executive Officer and a director of the
Company since he joined the Company in March 1989. Mr. Buelter was elected
Chairman of the Company's Board of Directors in December 1992. Mr. Buelter also
held the title of President from March 1989 to September 1997. From 1983 to
1989, he was Senior Vice President of Kelly Services, Inc. ("Kelly Services"), a
temporary personnel firm, and Chief Operating Officer of Kelly Assisted Living,
a division of Kelly Services which provides temporary home-care personnel.

KATHY J. WEST has served as President and Chief Operating Officer since
September 1997. From March 1995 to September 1997, Ms. West served as the
Company's Senior Vice President, Chief Operating Officer. From October 1993 to
March 1995, Ms. West served as the Company's Senior Vice President, Operations.
From April 1993 to October 1993, Ms. West served as the Company's Senior Vice
President, Employee and Business Services and, from January 1992 to April 1993,
as the Company's Vice President, Employee and Business Services. Ms. West joined
the Company in 1990, as Director of Branch Operations. From 1987 to 1990, she
served as the founding principal of Performance Training Systems, a training
services firm. From 1973 to 1987, she was employed by Kelly Services, where she
held a variety of field operating and corporate positions. Her responsibilities
included field sales, corporate branch operations, training and developing
international sales and service schools.

RONALD W. RUDOLPH has served as Senior Vice President, Finance and Chief
Financial Officer since January 1, 1999. From October 1996 through December
1998, Mr. Rudolph served as Senior Vice President, Finance and Operations
Support, and Chief Financial Officer. From January 1996 through October 1996,
Mr. Rudolph served as Senior Vice President, Finance and Administration, and
Chief Financial Officer. Mr. Rudolph joined the Company in April 1995, as Vice
President, Finance and Administration, and Chief Financial Officer. From April
1987 to September 1994, Mr. Rudolph was Vice President, Finance and
Administration, and Chief Financial Officer of Retix, a manufacturer of
enterprise networking devices, and from June 1993 to September 1994, Mr. Rudolph
was a director of Retix.

CARRIE S. NEBENS has served as Executive Vice President, U.S. Operations
since January 1, 1999. From July 1, 1998 through December 1998, Ms. Nebens
served as Senior Vice President, Strategic Operations.

8
<PAGE> 9

From September 1997 through June 1998, she served as Senior Vice President and
General Manager, Lab Support division. From October 1996 through September 1997,
Ms. Nebens served as Vice President and General Manager, Lab Support division.
From January 1996 through October 1996, Ms. Nebens served as Vice President,
Support Services. From April 1995 through December 1996, she served as Vice
President, Assignment Services and Training, and was designated an executive
officer of the company in September 1995. From June 1993 to March 1995, she was
Vice President, Field Operations for the Company's Lab Support division. From
January 1992 to May 1993, Ms. Nebens served as Vice President, Operations of the
Company. From 1991 to 1992, Ms. Nebens served as Director, Branch Operations for
the Company. Ms. Nebens joined the Company in 1988, as an Account Manager,
served from 1988 to 1990, as the regional Manager for the Chicago office, and in
1991, was promoted to Regional Director and Director of Field Services.

JEFFREY A. EVANS served as Vice President and General Manager, Healthcare
Financial Staffing and EnviroStaff divisions from June 1998 until his
resignation as an officer and employee of the Company effective February 9,
1999. From March 1997 through June 1998, he served as Vice President and General
Manager, Healthcare Financial Staffing division. From September 1996 through
March 1997, Mr. Evans served as Director, Operations Central. From March 1996
through September 1996, Mr. Evans served as Director, Account Manager Casting.
From September 1995 through March 1996, Mr. Evans served as Director, Business
Development, Mergers and Acquisitions. From May 1995 through September 1995, Mr.
Evans served as Director, Operations and Planning.

9
<PAGE> 10

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock trades on the Nasdaq Stock Market under the
symbol ASGN. The following table sets forth the range of high and low sales
prices, as reported on the Nasdaq Stock Market for the period from January 1,
1997, to December 31, 1998. At January 31, 1999, the Company had approximately
102 holders of record of its Common Stock (although the Company has been
informed there are in excess of approximately 2,100 beneficial owners) and
11,006,722 shares outstanding.

<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON STOCK
----------------
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1997
First Quarter............................................. 18 7/8 12 1/2
Second Quarter............................................ 20 5/16 12
Third Quarter............................................. 23 1/8 17 3/8
Fourth Quarter............................................ 29 5/8 20 3/8
Fiscal Year Ended December 31, 1998
First Quarter............................................. 32 1/8 21 3/8
Second Quarter............................................ 34 15/16 28 1/4
Third Quarter............................................. 37 3/4 32 1/16
Fourth Quarter............................................ 37 1/2 22 5/8
</TABLE>

On September 24, 1997, the Board of Directors authorized a two-for-one
stock split, effected as a 100 percent common stock dividend, distributed on
October 20, 1997 to shareholders of record on October 13, 1997. All references
to number of shares, sales prices and per share amounts of the Company's common
stock have been retroactively restated to reflect the increased number of common
shares outstanding.

Since inception, the Company has not declared or paid any cash dividends on
its Common Stock and currently plans to retain all earnings to support the
development and expansion of its business. The Company has no present intention
of paying any dividends on its Common Stock in the foreseeable future. However,
the Board of Directors of the Company periodically reviews the Company's
dividend policy to determine whether the declaration of dividends is
appropriate.

10
<PAGE> 11

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial data of the Company. This
historical data should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................................... $53,617 $72,617 $88,188 $107,849 $132,741
Cost of services......................... 37,343 50,812 61,231 74,748 90,705
------- ------- ------- -------- --------
Gross profit............................... 16,274 21,805 26,957 33,101 42,036
Operating expenses....................... 10,661 14,950 17,699 20,714 25,308
------- ------- ------- -------- --------
Operating income........................... 5,613 6,855 9,258 12,387 16,728
Acquisition costs........................ -- -- 401 -- --
------- ------- ------- -------- --------
Income before interest and income taxes.... 5,613 6,855 8,857 12,387 16,728
Interest income, net..................... 164 410 549 833 1,336
------- ------- ------- -------- --------
Income before income taxes................. 5,777 7,265 9,406 13,220 18,064
Provision for income taxes............... 2,296 2,924 3,800 4,954 6,748
------- ------- ------- -------- --------
Net income................................. $ 3,481 $ 4,341 $ 5,606 $ 8,266 $ 11,316
------- ------- ------- -------- --------
Basic earnings per share................... $ 0.36 $ 0.44 $ 0.55 $ 0.78 $ 1.04
------- ------- ------- -------- --------
Weighted average number of common shares
outstanding.............................. 9,690 9,974 10,207 10,561 10,860
------- ------- ------- -------- --------
Diluted earnings per share................. $ 0.34 $ 0.41 $ 0.51 $ 0.75 $ 1.00
------- ------- ------- -------- --------
Weighted average number of common and
common equivalent shares outstanding..... 10,248 10,530 10,898 11,031 11,302
------- ------- ------- -------- --------
BALANCE SHEET DATA
Cash, cash equivalents and current portion
of marketable securities................. $ 5,403 $ 6,892 $14,102 $ 23,709 $ 30,466
Working capital............................ 11,208 14,702 23,709 35,225 44,025
Total assets............................... 17,584 23,922 31,874 44,864 62,028
Long-term liabilities...................... -- -- -- -- --
Stockholders' equity....................... 14,829 20,148 27,635 39,272 54,226
</TABLE>

11
<PAGE> 12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The discussion in this Report contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, management of growth,
particularly in international markets, risks inherent in expansion into new
international markets and new professions, the integration of acquired
operations, the Company's ability to attract, train and retain qualified Account
Managers and temporary employees in the laboratory, science, financial and
environmental fields, and other risks discussed in "Risk Factors That May Affect
Future Results" in Item 1 of this Annual Report, beginning on page 5, as well as
those discussed elsewhere in this Report and from time to time in the Company's
other reports filed with the Securities and Exchange Commission.

SEASONALITY

The Company's results have historically been subject to seasonal
fluctuations. Demand for the Company's temporary employees typically declines
from the year-end holiday season through February, resulting in a corresponding
decrease in revenues, operating income and net income. Demand for the Company's
temporary employees also often declines in June, July and August due to
decreases in clients' activity during vacation periods and the availability of
students to perform temporary work. As a result, the Company has experienced
slower growth or declines in revenues, operating income and net income during
the first quarter and from the second quarter to third quarter of prior years.

YEARS ENDED DECEMBER 31, 1997 AND 1998

REVENUES. Revenues increased by 23.1% from $107,849,000 in the year ended
December 31, 1997, to $132,741,000 in the year ended December 31, 1998, as a
result of the increased revenues of the Lab Support and the Healthcare Financial
Staffing divisions, partially offset by a decrease in the revenues of the
EnviroStaff division.

The growth of the Healthcare Financial Staffing division's revenues were
primarily attributable to an increase in the number of temporary employees on
assignment and to a lesser extent to an increase in average hourly billing rates
during 1998. The increase in the number of temporary employees on assignment was
primarily attributable to the strong performance in most of the markets in which
the Healthcare Financial Staffing division has older, better established
branches and to a lesser extent the contribution of new offices opened in the
past year.

The decrease in the EnviroStaff division's revenues were primarily
attributable to the continuing transition of the division's business away from
serving clients in the remediation business and the resulting planned decline in
remediation assignments, partially offset by increases in revenue from the
division's higher margin regulatory compliance business and an increase in
average hourly billing rates during 1998.

COST OF SERVICES. Cost of services consists solely of compensation for
temporary employees and payroll taxes and benefits paid by the Company in
connection with such compensation. Cost of services increased 21.3% from
$74,748,000 in 1997 to $90,705,000 in 1998. Cost of services as a percentage of
revenues decreased from 69.3% in 1997 to 68.3% in 1998. This decrease was
primarily attributable to a decrease in workers' compensation expense and
employer payroll taxes in all three divisions, and an increase in conversion fee
revenue (which has no associated cost of services) of the Lab Support and
Healthcare Financial Staffing divisions in 1998, partially offset by an increase
in employer paid benefits in all three divisions. In addition, lower training
and medical monitoring expenses in the EnviroStaff division, primarily as a
result of the transition of the division's business away from remediation
assignments, contributed to the decrease in 1998.

12
<PAGE> 13

OPERATING EXPENSES. Operating expenses include the costs associated with
the Company's network of Account Managers and branch offices, including Account
Manager compensation, rent, other office expenses and advertising for temporary
employees, and corporate office expenses, such as the salaries of corporate
operations and support personnel, management compensation, Account Manager
recruiting and training expenses, corporate advertising and promotion, rent and
other general and administrative expenses. Operating expenses increased 22.2%
from $20,714,000 in 1997 to $25,308,000 in 1998. Operating expenses as a
percentage of revenues decreased from 19.2% in 1997 to 19.1% in 1998. This
result was primarily attributable to leveraging a centralized support system
over a larger revenue base, partially offset by an increase in the hiring of new
Account Managers for the opening of new offices and the expansion of existing
offices.

INTEREST INCOME. Interest income increased 60.4% from $833,000 in 1997 to
$1,336,000 in 1998, primarily as a result of interest earned on higher
interest-bearing cash, cash equivalent and marketable security account balances
in 1998.

PROVISION FOR INCOME TAXES. Provision for income taxes increased 36.2% from
$4,954,000 in 1997 to $6,748,000 in 1998. The Company's effective tax rate
remained relatively unchanged from 37.5% in 1997 compared to 37.4% in 1998.

YEARS ENDED DECEMBER 31, 1996 AND 1997

REVENUES. Revenues increased by 22.3% from $88,188,000 in the year ended
December 31, 1996, to $107,849,000 in the year ended December 31, 1997, as a
result of the increased revenues of the Lab Support and the Healthcare Financial
Staffing divisions, partially offset by a decrease in the revenues of the
EnviroStaff division.

The growth of the Lab Support division's revenues were primarily
attributable to an increase in the number of temporary employees on assignment
and to a lesser extent to an increase in average hourly billing rates during
1997. The increase in the number of temporary employees on assignment in the Lab
Support division was primarily attributable to the strong performance in most of
the markets in which the Lab Support division has older, better established
branches and to a lesser extent the contribution of new offices opened in the
past year. Lab Support's revenue growth was tempered by an unusually high number
of conversions of temporary employees to permanent status in the fourth quarter
of 1997, primarily as a result of the tight domestic labor market.

The growth of the Healthcare Financial Staffing division's revenues were
primarily attributable to an increase in the number of temporary employees on
assignment and to a lesser extent to an increase in average hourly billing rates
during 1997, which were principally attributable to a concentration on new
business with a higher price structure. The increase in the number of temporary
employees on assignment in the Healthcare Financial Staffing division was
primarily attributable to the strong performance in most of the markets in which
the Healthcare Financial Staffing division has older, better established
branches and to a lesser extent the contribution of new offices opened in the
past year. Healthcare Financial Staffing's revenue growth was tempered by an
unusually high number of conversions of temporary employees to permanent status
in the fourth quarter of 1997, primarily as a result of the tight U.S. labor
market.

The decrease in the EnviroStaff division's revenues were primarily
attributable to the continuing transition of the division's business away from
clients in the remediation business and the resulting planned decline in
remediation assignments, partially offset by increases in revenue from the
division's higher margin core business and an increase in average hourly billing
rates. In addition, severe winter weather in several key markets contributed to
the decrease in revenues in 1997.

COST OF SERVICES. Cost of services increased 22.1% from $61,231,000 in 1996
to $74,748,000 in 1997. Cost of services as a percentage of revenues decreased
from 69.4% in 1996 to 69.3% in 1997. This decrease was primarily attributable to
an increase in conversion fee revenue (which has no associated cost of services)
of the Lab Support and Healthcare Financial Staffing divisions in 1997. In
addition, an increase in average gross margins of the EnviroStaff division was
offset by an increase in employer paid benefits and workers' compensation
expense reserves.

13
<PAGE> 14

OPERATING EXPENSES. Operating expenses increased 17.0% from $17,699,000 in
1996 to $20,714,000 in 1997. Operating expenses as a percentage of revenues
decreased from 20.1% in 1996 to 19.2% in 1997. This result was primarily
attributable to the increased productivity of the Account Managers.

ACQUISITION COSTS. Acquisition costs consisted principally of legal,
accounting, financial advisory services and other expenses related to the
initial combination of EnviroStaff, Inc. and the Company in 1996. The combined
companies incurred approximately $401,000 in acquisition costs during the first
quarter of 1996.

INTEREST INCOME, NET. Interest income, net increased 51.7% from $549,000 in
1996 to $833,000 in 1997, primarily as a result of interest earned on higher
interest-bearing cash, cash equivalent and marketable security account balances
in 1997, and the effect of interest expense charged on EnviroStaff, Inc.'s line
of credit borrowings in 1996.

PROVISION FOR INCOME TAXES. Provision for income taxes increased 30.4% from
$3,800,000 in 1996 to $4,954,000 in 1997. The Company's effective tax rate
decreased from 40.4% in 1996 to 37.5% in 1997. This decrease was primarily
attributable to the consolidation of divisional field operations into Assignment
Ready, Inc., a Delaware corporation and wholly owned subsidiary of the Company,
which resulted in a lower overall effective state tax rate.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of cash in 1997 and 1998 were funds provided
by operating activities. In 1997, operating activities provided $8,281,000 of
cash compared to $11,622,000 in 1998. This increase was primarily attributable
to higher net income, an increase in income taxes receivable, and a larger
increase in accounts payable and accrued expenses in 1998 compared to 1997,
partially offset by a larger increase in accounts receivable and other assets,
and an increase in prepaid expenses in 1998 compared to 1997.

Cash used for investing activities totaled $3,537,000 in 1997 compared to
$4,716,000 in 1998. This increase was primarily attributable to cash payments of
$808,000 for the acquisition of substantially all of the assets of LabStaffers,
Inc. and higher purchases of marketable securities in 1998, partially offset by
higher proceeds from the maturity of marketable securities in 1998.

Cash provided by financing activities was $2,497,000 in 1997 compared to
$2,472,000 in 1998. The decrease was primarily attributable to lower proceeds
from the issuance of common stock pursuant to the Company's Stock Option Plan
during 1998, partially offset by greater proceeds from the issuance of common
stock pursuant to the Company's Employee Stock Purchase Plan during 1998.

Effective August 28, 1998, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement are $7,000,000 and
bear interest at the bank's reference rate (7.75% at December 31, 1998). The
agreement expires on July 1, 2000. No borrowings were outstanding under this
credit line at December 31, 1998.

The Company believes that its cash balances, together with the funds from
operations and its borrowing capacity, will be sufficient to meet its cash
requirements through at least the next twelve months.

YEAR 2000 READINESS DISCLOSURE

The Company is continuing the process of assessing Year 2000 issues as they
relate to its systems, business and operations. The Year 2000 issue is the
result of computer systems designed and developed using two digits rather than
four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations unless
corrective measures are taken.

The Company has developed a Year 2000 Readiness Plan to address the Year
2000 issues, particularly with respect to its critical systems. Critical systems
are those whose failure poses a risk of disruption to the Company's ability to
provide employment for its temporary employees and temporary staffing services
to its clients. The Company's plan includes five core phases; (1) initiating a
master plan and schedule in which key staff members are notified of their
responsibilities; (2) assessing the impact of mission-critical system failures

14
<PAGE> 15

on core business processes by performing a complete inventory of software and
both information technology and non-information technology systems, such as
computer hardware containing embedded technology, implementing quality assurance
checks on vendors, and defining failure scenarios; (3) modifying, upgrading or
replacing hardware and software in order to meet compliance standards, to be
completed by June 30, 1999; (4) identifying and documenting contingency plans
and establishing resumption procedures for each core business process; (5)
validating all contingency plans by preparing and executing tests. The Company
has completed phase 1, estimates that it is 80% complete on phase 2 and 10%
complete on phase 3, and has yet to commence phases 4 and 5.

The Company does not believe that it will incur material costs or encounter
significant operational issues associated with Year 2000 issues; however, the
Company has not completed its Year 2000 Readiness Plan and there can be no
assurance Year 2000 issues will not result in material costs or significant
operational issues for the Company. In addition, the Company may experience
significant unanticipated problems and costs caused by errors or defects in
internal systems or Year 2000 issues with its customers or vendors. The
worst-case scenario if such problems occur, would be the Company's inability to
employ its temporary employees and record revenue. If any of the Company's
clients, temporary employees or vendors experience Year 2000 problems with
respect to their relationship with the Company, such clients, employees or
vendors could assert claims for damages against the Company. While the Company
is not aware of any significant Year 2000 issues for which it will not be
adequately prepared, there can be no assurance that the Company's business,
operating results or financial condition will not be adversely affected by
issues surrounding the Year 2000 conversion. To date, the costs incurred by the
Company with respect to Year 2000 compliance have not been material. The Company
anticipates that the majority of costs associated to Year 2000 will be related
to ongoing scheduled software and hardware maintenance upgrades and licensing of
phone systems, PC operating systems and business applications. The Company
currently anticipates that the future costs to become Year 2000 compliant will
not be material; however, such future costs are difficult to estimate at the
present stage of the execution of the Company's Readiness Plan and, accordingly,
there can be no assurance that such costs will not become material.

15
<PAGE> 16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
On Assignment, Inc.

We have audited the accompanying consolidated balance sheets of On
Assignment, Inc. and subsidiaries (the "Company") as of December 31, 1997 and
1998, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedule listed at Item
14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of On
Assignment, Inc. and subsidiaries as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

/s/ DELOITTE & TOUCHE LLP
- --------------------------------------
Deloitte & Touche LLP

Los Angeles, California
January 22, 1999

16
<PAGE> 17

ON ASSIGNMENT, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 1)........................ $18,339,000 $27,706,000
Marketable securities (Note 1)............................ 5,370,000 2,760,000
Accounts receivable, net of allowance for doubtful
accounts of $734,000 (1997) and $1,009,000 (1998)...... 15,215,000 18,578,000
Advances and deposits..................................... 67,000 70,000
Prepaid expenses.......................................... 679,000 1,149,000
Income taxes receivable................................... 111,000 254,000
Deferred income taxes (Notes 1 and 7)..................... 1,036,000 1,310,000
----------- -----------
Total current assets................................... 40,817,000 51,827,000
----------- -----------
Office Furniture, Equipment and Leasehold Improvements, net
(Notes 1 and 2)........................................... 2,572,000 2,703,000
Marketable securities (Note 1).............................. -- 5,325,000
Deferred income taxes (Notes 1 and 7)....................... 182,000 235,000
Workers' compensation restricted deposits (Note 5).......... 596,000 168,000
Goodwill, net (Note 3)...................................... 534,000 1,215,000
Other assets (Note 4)....................................... 163,000 555,000
----------- -----------
Total Assets...................................... $44,864,000 $62,028,000
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 414,000 $ 309,000
Accrued payroll........................................... 3,043,000 4,552,000
Deferred compensation (Note 4)............................ -- 319,000
Accrued workers' compensation (Note 5).................... 1,168,000 1,437,000
Other accrued expenses.................................... 967,000 1,185,000
----------- -----------
Total current liabilities.............................. 5,592,000 7,802,000
----------- -----------
Commitments and Contingencies (Notes 4 and 5)
Stockholders' Equity (Note 8):
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued or outstanding in 1997 and
1998................................................... -- --
Common Stock, $0.01 par value, 25,000,000 shares
authorized, 10,727,235 issued and outstanding in 1997
and 10,944,040 issued and outstanding in 1998.......... 107,000 109,000
Paid-in capital........................................... 12,099,000 15,752,000
Retained earnings......................................... 27,072,000 38,388,000
Accumulated other comprehensive income (Note 1)........... (6,000) (23,000)
----------- -----------
Total stockholders' equity............................. 39,272,000 54,226,000
----------- -----------
Total Liabilities and Stockholders' Equity........ $44,864,000 $62,028,000
=========== ===========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

17
<PAGE> 18

ON ASSIGNMENT, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Revenues (Note 1)................................. $88,188,000 $107,849,000 $132,741,000
Cost of services................................ 61,231,000 74,748,000 90,705,000
----------- ------------ ------------
Gross profit...................................... 26,957,000 33,101,000 42,036,000
Operating expenses.............................. 17,699,000 20,714,000 25,308,000
----------- ------------ ------------
Operating income.................................. 9,258,000 12,387,000 16,728,000
Acquisition costs (Note 11)..................... 401,000 -- --
----------- ------------ ------------
Income before interest and income taxes........... 8,857,000 12,387,000 16,728,000
Interest income, net (Notes 1 and 6)............ 549,000 833,000 1,336,000
----------- ------------ ------------
Income before income taxes........................ 9,406,000 13,220,000 18,064,000
Provision for income taxes (Notes 1 and 7)...... 3,800,000 4,954,000 6,748,000
----------- ------------ ------------
Net income........................................ 5,606,000 8,266,000 11,316,000
----------- ------------ ------------
Other comprehensive income:
Foreign currency translation adjustment......... -- (6,000) (17,000)
----------- ------------ ------------
Comprehensive income.............................. $ 5,606,000 $ 8,260,000 $ 11,299,000
----------- ------------ ------------
Basic earnings per share (Note 1)................. $ 0.55 $ 0.78 $ 1.04
----------- ------------ ------------
Weighted average number of Common Shares
Outstanding..................................... 10,207,000 10,561,000 10,860,000
----------- ------------ ------------
Diluted earnings per share (Note 1)............... $ 0.51 $ 0.75 $ 1.00
----------- ------------ ------------
Weighted average number of Common and Common
Equivalent Shares Outstanding................... 10,898,000 11,031,000 11,302,000
----------- ------------ ------------
</TABLE>

See accompanying Notes to Consolidated Financial Statements

18
<PAGE> 19

ON ASSIGNMENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK COMMON STOCK OTHER
--------------- --------------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------ ------ ---------- -------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................ 0 $0 10,048,922 $100,000 $ 6,848,000 $13,200,000 $ 0 $20,148,000
Exercise of common
stock options....... -- -- 249,392 3,000 1,016,000 -- -- 1,019,000
Common stock issued --
Employee Stock
Purchase Plan....... -- -- 12,806 -- 149,000 -- -- 149,000
Disqualifying
dispositions........ -- -- -- -- 713,000 -- -- 713,000
Net income............ -- -- -- -- -- 5,606,000 -- 5,606,000
-- -- ---------- -------- ----------- ----------- -------- -----------
Balance, December 31,
1996................ 0 0 10,311,120 103,000 8,726,000 18,806,000 0 27,635,000
Exercise of common
stock options....... -- -- 402,563 4,000 2,321,000 -- -- 2,325,000
Common stock issued --
Employee Stock
Purchase Plan....... -- -- 13,552 -- 172,000 -- -- 172,000
Disqualifying
dispositions........ -- -- -- -- 880,000 -- -- 880,000
Other comprehensive
income --
Translation
adjustments......... -- -- -- -- -- -- (6,000) (6,000)
Net income............ -- -- -- -- -- 8,266,000 -- 8,266,000
-- -- ---------- -------- ----------- ----------- -------- -----------
Balance, December 31,
1997................ 0 0 10,727,235 107,000 12,099,000 27,072,000 (6,000) 39,272,000
Exercise of common
stock options....... -- -- 207,291 2,000 2,265,000 -- -- 2,267,000
Common stock issued --
Employee Stock
Purchase Plan....... -- -- 9,514 -- 205,000 -- -- 205,000
Disqualifying
dispositions........ -- -- -- -- 1,183,000 -- -- 1,183,000
Other comprehensive
income --
Translation
adjustments......... -- -- -- -- -- -- (17,000) (17,000)
Net income............ -- -- -- -- -- 11,316,000 -- 11,316,000
-- -- ---------- -------- ----------- ----------- -------- -----------
Balance, December 31,
1998................ 0 $0 10,944,040 $109,000 $15,752,000 $38,388,000 $(23,000) $54,226,000
== == ========== ======== =========== =========== ======== ===========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

19
<PAGE> 20

ON ASSIGNMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 5,606,000 $ 8,266,000 $ 11,316,000
Adjustments to reconcile net income to net cash provided
by operating activities, net of acquisitions:
Depreciation and amortization.......................... 701,000 815,000 948,000
Increase in allowance for doubtful accounts............ 504,000 451,000 593,000
Increase in deferred income taxes...................... (368,000) (250,000) (327,000)
Loss on disposal of furniture and equipment............ 1,000 141,000 215,000
Increase in accounts receivable........................ (2,624,000) (3,403,000) (3,934,000)
(Increase) Decrease in income taxes receivable......... -- (111,000) 1,040,000
Increase in accounts payable and accrued expenses...... 1,238,000 1,360,000 2,215,000
Increase in income taxes payable....................... 415,000 873,000 --
Decrease in workers' compensation restricted
deposits............................................. 117,000 147,000 428,000
Decrease (Increase) in prepaid expenses................ 118,000 2,000 (470,000)
Increase in other assets............................... (30,000) (10,000) (402,000)
----------- ----------- ------------
Net cash provided by operating activities.............. 5,678,000 8,281,000 11,622,000
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities......................... (1,000,000) (7,250,000) (10,345,000)
Proceeds from the maturity of marketable securities....... 3,565,000 4,880,000 7,630,000
Acquisition of furniture, equipment and leasehold
improvements........................................... (1,204,000) (1,180,000) (1,193,000)
Proceeds from sale of furniture and equipment............. 4,000 8,000 2,000
Decrease (Increase) in advances and deposits.............. 39,000 5,000 (2,000)
Acquisition (Note 11)..................................... -- -- (808,000)
----------- ----------- ------------
Net cash provided by (used for) investing activities... 1,404,000 (3,537,000) (4,716,000)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options and
warrants............................................... 1,019,000 2,325,000 2,267,000
Proceeds from issuance of common stock --
Employee Stock Purchase Plan........................... 149,000 172,000 205,000
Borrowings on line of credit.............................. 450,000 -- --
Repayments of line of credit borrowings................... (925,000) -- --
----------- ----------- ------------
Net cash provided by financing activities.............. 693,000 2,497,000 2,472,000
----------- ----------- ------------
Effect of exchange rate changes on cash and cash equivalents
(Note 1).................................................. -- (4,000) (11,000)
----------- ----------- ------------
Net Increase in Cash and Cash Equivalents................... 7,775,000 7,237,000 9,367,000
Cash and Cash Equivalents at Beginning of Period............ 3,327,000 11,102,000 18,339,000
----------- ----------- ------------
Cash and Cash Equivalents at End of Period.................. $11,102,000 $18,339,000 $ 27,706,000
----------- ----------- ------------
Acquisition (Note 11):
Fair value of assets acquired.......................... $ 58,000
Goodwill............................................... 750,000
----------- ----------- ------------
Cash paid.............................................. $ 808,000
----------- ----------- ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Tax benefit of disqualifying dispositions (Note 7)........ $ 713,000 $ 880,000 $ 1,183,000
=========== =========== ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements

20
<PAGE> 21

ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

On Assignment, Inc. (the "Company"), through its Lab Support division,
provides temporary and permanent placement of scientific personnel with
laboratories and other institutions. The Company's EnviroStaff division provides
temporary and permanent placement of environmental professionals to the
environmental services industry. The Company's Healthcare Financial Staffing
division provides temporary and permanent placement of medical billing and
collection professionals to the healthcare industry. Significant accounting
policies are as follows:

Principles of Consolidation. The Consolidated Financial Statements include
the accounts of the Company and its wholly owned domestic and foreign
subsidiaries (see Note 11). All significant intercompany accounts and
transactions have been eliminated.

On January 1, 1997, the Company effected a corporate reorganization
resulting in a consolidation of the Company's divisional field operations into
Assignment Ready, Inc. ("ARI"), a Delaware corporation and wholly owned
subsidiary of the Company, in order to centralize management functions into one
entity, to optimize regional activities and achieve economies of scale.

On May 12, 1997, the Company formed Assignment Ready Inc., a Canadian
corporation and wholly owned subsidiary of the Company, and commenced operations
in Toronto as Lab Support Canada during the third quarter of 1997.

Cash Flows and Marketable Securities. For purposes of the Consolidated
Statements of Cash Flows, the Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Investments having a maturity of more than three months and less than twelve
months are classified under current assets as marketable securities. Investments
having a maturity of more than twelve months are classified under non-current
assets as marketable securities. Marketable securities, which have been
classified as held to maturity, are recorded at amortized cost which
approximated market at December 31, 1997 and 1998.

The amortized cost and estimated fair value of marketable securities at
December 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED COST GAINS LOSSES FAIR VALUE
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997:
Current marketable securities.............. $5,370,000 $ 17,000 $ -- $5,387,000
Non-current marketable securities.......... -- -- -- --
---------- -------- ------- ----------
Total............................ $5,370,000 $ 17,000 $ -- $5,387,000
========== ======== ======= ==========
1998:
Current marketable securities.............. $2,760,000 $ 44,000 $ -- $2,804,000
Non-current marketable securities.......... 5,325,000 61,000 (7,000) 5,379,000
---------- -------- ------- ----------
Total............................ $8,085,000 $105,000 $(7,000) $8,183,000
========== ======== ======= ==========
</TABLE>

Cash paid for income taxes (net of refunds) for the years ended December
31, 1996, 1997, and 1998 was $3,739,000, $4,443,000 and $6,035,000,
respectively. Cash paid for interest for the years ended December 31, 1996,
1997, and 1998 was $15,000, $0 and $0, respectively.

Office Furniture, Equipment and Leasehold Improvements and
Depreciation. Office furniture, equipment and leasehold improvements are stated
at cost. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the related assets, generally three to
five years.

21
<PAGE> 22
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

Pursuant to Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets to be Disposed of," the Company reviews
long-lived assets and certain identifiable intangibles for impairment at least
quarterly. An impairment loss is recognized when the sum of the undiscounted
future cash flows is less than the carrying amount of the asset. No such
impairment losses have been recognized as of December 31, 1996, 1997 and 1998.

Goodwill. Goodwill is being amortized on a straight-line basis over fifteen
years. The Company periodically reviews goodwill to assess recoverability;
impairments would be recognized in operating results if a permanent diminution
in value were to occur.

Income Taxes. Deferred taxes result from temporary differences between the
bases of assets and liabilities for financial and tax reporting purposes.
Deferred tax assets and liabilities represent future tax consequences of these
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.

Revenue Recognition. Revenue from temporary assignments is recognized when
earned, based on hours worked by the Company's temporary employees. Permanent
placement fees are recognized when earned, upon conversion of a temporary
employee to a client's regular employee.

Foreign Currency Translation. Assets and liabilities of foreign operations,
where the functional currency is the local currency, are translated into U.S.
dollars at the rate of exchange in effect on the balance sheet date. Income and
expenses are translated at the average rates of exchange prevailing during the
period. The related translation adjustments are recorded as cumulative foreign
currency translation adjustments, a separate component of stockholders' equity.

Earnings per Share. In December 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Basic earnings per
share are computed based upon the weighted average number of common shares
outstanding and diluted earnings per share are computed based upon the weighted
average number of common shares outstanding and dilutive common share
equivalents (consisting of incentive stock options, non-qualified stock options,
and warrants) outstanding during the periods using the treasury stock method.
Following is a reconciliation of the shares used to compute basic and diluted
earnings per share:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of shares outstanding used to
compute basic earnings per share..................... 10,207,000 10,561,000 10,860,000
Dilutive effect of stock options....................... 691,000 470,000 442,000
---------- ---------- ----------
Number of shares used to compute diluted earnings per
share................................................ 10,898,000 11,031,000 11,302,000
========== ========== ==========
</TABLE>

On September 24, 1997, the Board of Directors authorized a two-for-one
stock split, effected as a 100 percent common stock dividend, distributed on
October 20, 1997 to shareholders of record on October 13, 1997. All references
in the accompanying consolidated financial statements to number of shares, sales
prices and per share amounts of the Company's common stock have been
retroactively restated to reflect the increased number of common shares
outstanding. In addition, stockholders' equity has been restated to give
retroactive recognition to the stock split by reclassifying from paid-in capital
to common stock the par value of the additional shares arising from the split.

Stock-Based Compensation. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." The Company has adopted only the
disclosure portion of the statement (see Note 8).

22
<PAGE> 23
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

Use of Estimates. The preparation of 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 the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk. Financial instruments that potentially
subject the Company to credit risks consist primarily of cash and cash
equivalents, marketable securities, and trade receivables. The Company places
its cash and cash equivalents and marketable securities with quality credit
institutions, and limits the amount of credit exposure with any one institution.
Concentration of credit risk with respect to accounts receivable are limited
because of the large number of geographically dispersed customers, thus
spreading the trade credit risk. The Company performs ongoing credit evaluations
to identify risks and maintains an allowance to address these risks.

Fair Value of Financial Instruments. The recorded values of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximate their fair value based on their short-term nature. The fair values
of marketable securities were estimated using quoted market prices.

Comprehensive Income. In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130), which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 defines comprehensive income as
the change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. SFAS No. 130 requires that an enterprise (i)
classify items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. Disclosure in the accompanying consolidated
financial statements include the presentation of comprehensive income for the
years ended December 31, 1997 and 1998.

Business Segments. Effective for the year ended December 31, 1998, the
Company adopted SFAS No. 131, which requires a new basis of determining
reportable business segments, i.e., the management approach. This approach (as
contrasted with the prior requirement which utilized a specified classification
system for determining segments) designates the Company's internal organization
as used by management for making operating decisions and assessing performance
as the source of business segments. On this basis, the Company has two principal
businesses and, therefore, two reportable business segments: Lab Support
(including the Company's Lab Support and EnviroStaff divisions) and Healthcare
Financial Staffing. Segment results are presented on this new basis in 1998, as
well as retroactively.

Reclassifications. Certain reclassifications have been made to the prior
year consolidated financial statements to conform with the current year
consolidated financial statement presentation.

23
<PAGE> 24
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

2. OFFICE FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS.

Office furniture, equipment and leasehold improvements at December 31, 1997
and 1998, consisted of the following:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Furniture and fixtures............................ $ 1,018,000 $ 1,202,000
Computers and related equipment................... 2,252,000 2,592,000
Machinery and equipment........................... 859,000 1,064,000
Leasehold improvements............................ 609,000 726,000
Construction in progress.......................... 450,000 570,000
----------- -----------
5,188,000 6,154,000
Less accumulated depreciation and amortization.... (2,616,000) (3,451,000)
----------- -----------
Total................................... $ 2,572,000 $ 2,703,000
=========== ===========
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1996,
1997 and 1998 was $634,000, $753,000 and $860,000, respectively.

3. GOODWILL.

Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired (see Note 11). Goodwill is stated net of accumulated
amortization of $175,000 at December 31, 1997 and $243,000 at December 31, 1998.

4. 401(k) RETIREMENT SAVINGS PLAN, DEFERRED COMPENSATION PLAN AND CHANGE IN
CONTROL SEVERANCE PLAN.

Effective January 1, 1995, the Company adopted the On Assignment, Inc.
401(k) Retirement Savings Plan under Section 401(k) of the Internal Revenue
Code, under which eligible employees may elect to have a portion of their salary
deferred and contributed to the plan. The amount of salary deferred is not
subject to Federal and State income tax at the time of deferral. The Plan covers
all eligible employees and provides for matching or discretionary contributions
at the discretion of the Board of Directors. The Company made no matching or
discretionary contributions to the plan during the years ended December 31,
1996, 1997 and 1998.

Effective January 1, 1998, the Company implemented the On Assignment, Inc.
Deferred Compensation Plan. The plan permits a select group of management or
highly compensated employees or directors to annually elect to defer up to 100
percent of their base salary, annual bonus or fees on a pre-tax basis, and earn
tax-deferred interest on these amounts. Distributions from the plan are made at
retirement, death or termination of employment, in a lump sum, or over five, ten
or fifteen years. At December 31, 1998, the liability under the plan was
approximately $319,000. A life insurance policy is maintained on the
participants relating to the plan, whereby the Company is the sole owner and
beneficiary of such insurance. The cash surrender value of this life insurance
policy, which is reflected in other assets, was approximately $300,000 at
December 31, 1998. In addition, a Master Trust Agreement has been established
and, at least annually, the Company will transfer assets for its respective
future liabilities created with respect to the annual deferral amounts and
annual company contribution amounts, if any, for such participants for all
periods prior to the transfer.

On February 12, 1998, the Company adopted the On Assignment, Inc. Change in
Control Severance Plan to provide severance benefits for officers and other
eligible employees who are terminated following an acquisition of the Company.
Under the plan, if an eligible employee is involuntarily terminated within 18
months of a Change in Control, as defined in the Severance Plan, then the
employee will be entitled to salary plus target bonus payable in a lump sum. The
amounts payable would range from one month to

24
<PAGE> 25
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

18 months of salary and target bonus depending on the employee's length of
service and position with the Company.

5. COMMITMENTS AND CONTINGENCIES.

The Company leases its facilities and certain office equipment under
operating leases which expire at various dates through 2004. Certain leases
contain rent escalations and/or renewal options.

The following is a summary of future minimum lease payments by year:

<TABLE>
<CAPTION>
OPERATING
LEASES
----------
<S> <C>
1999........................................... $1,429,000
2000........................................... 1,087,000
2001........................................... 836,000
2002........................................... 643,000
2003........................................... 504,000
Thereafter..................................... 227,000
----------
Total Minimum Lease Payments......... $4,726,000
==========
</TABLE>

Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$1,153,000, $1,433,000 and $1,593,000, respectively.

The Company and its subsidiaries are involved in various legal proceedings,
claims and litigation arising in the ordinary course of business. However, based
on the facts currently available, management believes that the disposition of
matters that are pending or asserted will not have a materially adverse effect
on the financial position of the company.

Effective September 1, 1993, the Company became partially self-insured for
workers' compensation expense. In connection with this program, cash deposits
are required to be held by the reinsurer for the payment of losses and as
collateral amounting to $596,000 and $168,000 at December 31, 1997 and 1998,
respectively. These workers' compensation deposits are restricted as to
withdrawal and have therefore been classified as non-current assets in the
accompanying Consolidated Balance Sheets. These funds are invested primarily in
three-month treasury bills and are recorded at amortized cost which approximated
market at December 31, 1997 and 1998. In addition, the Company has provided a
stand-by letter of credit amounting to approximately $334,000 at December 31,
1997 and $878,000 at December 31, 1998, in connection with this program. The
self-insurance claim liability is determined based on claims filed and an
estimate of claims incurred but not yet reported and amounted to approximately
$1,168,000 and $1,437,000 at December 31, 1997 and 1998, respectively.

The Company's EnviroStaff subsidiary was operating under a loss-retro
workers' compensation policy from July 1, 1995 through September 30, 1996. In
connection with this program, EnviroStaff paid a base premium with an excess
loss cap of $50,000 per occurrence. Medical and indemnity expenses are paid at
cost plus administration fees and taxes. The insurance claim liability is
determined based on claims filed and an estimate of claims incurred but not yet
reported. In addition, EnviroStaff provided a standby letter of credit amounting
to approximately $120,000 that expired on July 1, 1998. Effective October 1,
1996, EnviroStaff was added to the Company's workers' compensation program.

6. BORROWING ARRANGEMENTS.

Effective August 28, 1998, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement are $7,000,000 and
bear interest at the bank's reference rate

25
<PAGE> 26
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

(7.75% at December 31, 1998). The agreement expires on July 1, 2000. No
borrowings were outstanding under this credit line at December 31, 1997 and
1998.

7. INCOME TAXES.

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Federal:
Current.............................. $3,277,000 $4,166,000 $6,164,000
Deferred............................. (296,000) (271,000) (290,000)
---------- ---------- ----------
2,981,000 3,895,000 5,874,000
---------- ---------- ----------
State:
Current.............................. 891,000 1,038,000 911,000
Deferred............................. (72,000) 21,000 (37,000)
---------- ---------- ----------
819,000 1,059,000 874,000
---------- ---------- ----------
Total........................ $3,800,000 $4,954,000 $6,748,000
========== ========== ==========
</TABLE>

Deferred income taxes arise from the recognition of certain assets and
liabilities for tax purposes in periods different from those in which they are
recognized in the financial statements. These differences relate primarily to
workers' compensation, state taxes, bad debt, and depreciation and amortization
expenses.

Deferred assets and liabilities are classified as current and non-current
according to the nature of the assets or liabilities from which they arose.

The components of deferred tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
---------------------- ----------------------
FEDERAL STATE FEDERAL STATE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Deferred tax assets:
Current:
Allowance for doubtful accounts......... $ 249,000 $ 33,000 $ 343,000 $ 49,000
Vacation accrual........................ 58,000 8,000 59,000 8,000
State taxes............................. 221,000 -- 297,000 --
Net operating loss carryforward......... 45,000 2,000 37,000 1,000
Workers' compensation loss reserve...... 406,000 55,000 499,000 71,000
---------- -------- ---------- --------
Total current deferred tax assets............ 979,000 98,000 1,235,000 129,000
---------- -------- ---------- --------
Non-current:
Depreciation and amortization expense... 158,000 24,000 205,000 30,000
---------- -------- ---------- --------
Total deferred tax assets.................... 1,137,000 122,000 1,440,000 159,000
Deferred tax liabilities:
Current:
Other................................... (41,000) -- (54,000) --
---------- -------- ---------- --------
Net deferred tax asset....................... $1,096,000 $122,000 $1,386,000 $159,000
========== ======== ========== ========
</TABLE>

The net operating loss carryforwards included in the deferred tax asset at
December 31, 1997 and 1998, were acquired through the 1994 acquisition of 1st
Choice Personnel, Inc. These carryforwards are available to offset future
taxable income, subject to annual limitations, through the year 2007.

26
<PAGE> 27
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

The reconciliation between the amount computed by applying the U.S. federal
statutory tax rate of 35% in 1996, 1997 and 1998 to income before income taxes
and the actual income taxes is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Income tax expenses at the statutory rate.............. $3,292,000 $4,627,000 $6,322,000
State income taxes, net of federal income tax
benefit.............................................. 534,000 401,000 575,000
Tax-free interest and other............................ (26,000) (74,000) (149,000)
---------- ---------- ----------
Total........................................ $3,800,000 $4,954,000 $6,748,000
========== ========== ==========
</TABLE>

At December 31, 1997 and 1998, net income taxes payable and additional
paid-in capital include tax benefits amounting to $880,000 and $1,183,000,
respectively, resulting from disqualifying dispositions by officers and
employees of common stock of the Company acquired through the exercise of stock
options.

8. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN.

Under its Stock Option Plan, the Company may grant employees, contractors,
and non-employee members of the Board of Directors incentive or non-qualified
stock options to purchase an aggregate of up to 4,000,000 shares of its Common
Stock. Optionees, option prices, option amounts, grant dates and vesting are
established by the Compensation Committee of the Board of Directors. The option
prices may not be less than 85% of the fair market value of the stock at the
time the option is granted. Stock options granted to date generally become
exercisable over a pro rata period of four years and have a maximum term of ten
years measured from the grant date.

The following summarizes stock option activity for the years ended December
31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
WEIGHTED
NON- AVERAGE
INCENTIVE QUALIFIED EXERCISE
STOCK STOCK PRICE
OPTIONS OPTIONS PER SHARE
--------- --------- ---------
<S> <C> <C> <C>
Outstanding at January 1, 1996.............................. 1,192,274 276,626 $ 7.31
Granted................................................... 434,324 106,640 $16.58
Exercised................................................. (193,054) (56,338) $ 4.20
Canceled.................................................. (306,774) (5,218) $14.07
--------- -------
Outstanding at December 31, 1996............................ 1,126,770 321,710 $10.05
Granted................................................... 409,968 161,032 $20.46
Exercised................................................. (335,358) (67,201) $ 5.77
Canceled.................................................. (405,573) (29,392) $14.14
--------- -------
Outstanding at December 31, 1997............................ 795,807 386,149 $15.04
Granted................................................... 340,192 142,958 $32.37
Exercised................................................. (136,843) (70,448) $10.94
Canceled.................................................. (199,784) (1,500) $21.53
--------- -------
Outstanding at December 31, 1998............................ 799,372 457,159 $21.34
========= =======
</TABLE>

27
<PAGE> 28
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

The following summarizes pricing and term information for options
outstanding as of December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE AVERAGE
RANGE OF OUTSTANDING AT REMAINING EXERCISE EXERCISABLE AT EXERCISE
EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE PRICE DECEMBER 31, 1998 PRICE
--------------- ----------------- ---------------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.35 to $14.50 293,235 5.6 years $ 7.36 241,045 $ 6.07
15.125 to 19.625 253,768 7.4 years 17.25 175,763 17.42
20.75 to 22.50 23,687 8.7 years 21.57 7,309 21.65
22.75 to 22.75 251,691 9.0 years 22.75 63,353 22.75
23.00 to 36.75 434,150 9.8 years 32.34 35,170 30.74
- ------------------ --------- --------- ------ ------- ------
$ 0.35 to $36.75.. 1,256,531 8.1 years $21.34 522,640 $13.79
================== ========= ========= ====== ======= ======
</TABLE>

The Employee Stock Purchase Plan allows eligible employees to purchase
Common Stock of the Company, through payroll deductions, at 85% of the lower of
the market price on the first day or the last day of the semi-annual purchase
period. Eligible employees may contribute up to 10% of their base earnings
toward the purchase of the stock. During 1996, 1997 and 1998, shares issued
under the plan were 12,806, 13,552 and 9,514, respectively.

The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its Stock Option Plan and Employee Stock
Purchase Plan and accordingly, no compensation cost has been recognized for its
stock option and purchase plans. The Company has adopted the disclosure only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS No. 123). The estimated fair value of
options granted during 1996, 1997 and 1998 pursuant to SFAS No. 123 was
approximately $4,268,000, $5,530,000 and $7,342,000, respectively, and the
estimated fair value of stock purchased under the Company's Employee Stock
Purchase Plan was approximately $51,000, $60,000 and $72,000, respectively. Had
compensation cost for the Company's Stock Option Plan and its Employee Stock
Purchase Plan been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of SFAS No. 123, the
Company's pro forma net income would have been $4,850,000, $7,368,000 and
$9,771,000 and pro forma earnings per share would have been $0.45, $0.68 and
$0.87 for 1996, 1997 and 1998, respectively. Because the SFAS No. 123 method of
accounting has not been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.

The fair value of options granted under the Company's Stock Option Plan
during 1996, 1997 and 1998 was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: (i) no dividend yield in 1996, 1997 or 1998, (ii) expected
volatility of approximately 47% in 1996, 48% in 1997 and 49% in 1998, (iii)
risk-free interest rate of approximately 6.3% in 1996, 6.2% in 1997 and 5.0% in
1998, and (iv) expected lives of the options of approximately 5 years in 1996,
1997 and 1998. Pro forma compensation cost of shares purchased under the
Employee Stock Purchase Plan is measured based on the discount from market
value.

9. BUSINESS SEGMENTS.

Indicated below is the information required to comply with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.

The Company has two reportable operating segments: Lab Support and
Healthcare Financial Staffing. The Lab Support operating segment includes the
combined results of the Lab Support and EnviroStaff divisions, as they have
similar economic characteristics and they meet the aggregation criteria of SFAS

28
<PAGE> 29
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

No. 131. The Lab Support segment provides temporary and permanent placement
services of laboratory and scientific professionals to the biotechnology,
environmental, chemical, pharmaceutical, food and beverage and petrochemical
industries. The Healthcare Financial Staffing segment provides temporary and
permanent placement services of medical billing and collection professionals to
the healthcare industry.

The Company's management evaluates performance of each segment primarily
based on revenues and operating income (before acquisition costs, interest and
income taxes). The accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies (see Note 1). The
information in the following table is derived directly from the segments'
internal financial reporting used for corporate management purposes. Certain
corporate expenses are not allocated to and/or among the operating segments.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Lab Support........................................ 81,981,000 96,610,000 110,644,000
Healthcare Financial Staffing...................... 6,207,000 11,239,000 22,097,000
---------- ----------- -----------
88,188,000 107,849,000 132,741,000
========== =========== ===========
Gross Profit:
Lab Support........................................ 24,963,000 29,528,000 34,750,000
Healthcare Financial Staffing...................... 1,994,000 3,573,000 7,286,000
---------- ----------- -----------
26,957,000 33,101,000 42,036,000
========== =========== ===========
Operating Income:
Lab Support........................................ 9,003,000 11,367,000 13,532,000
Healthcare Financial Staffing...................... 255,000 1,020,000 3,196,000
---------- ----------- -----------
9,258,000 12,387,000 16,728,000
========== =========== ===========
</TABLE>

29
<PAGE> 30
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

10. UNAUDITED QUARTERLY RESULTS.

The following table presents unaudited quarterly financial information for
each of the eight quarters ended December 31, 1998. In the opinion of
management, the quarterly information contains all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation thereof. The
operating results for any quarter are not necessarily indicative of the results
for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......................... $23,570 $26,410 $28,854 $29,015 $28,567 $32,508 $35,535 $36,131
Cost of services............... 16,435 18,447 20,176 19,690 19,754 22,261 24,192 24,498
------- ------- ------- ------- ------- ------- ------- -------
Gross profit..................... 7,135 7,963 8,678 9,325 8,813 10,247 11,343 11,633
Operating expenses............. 4,661 5,090 5,449 5,514 5,397 6,230 6,966 6,715
------- ------- ------- ------- ------- ------- ------- -------
Operating income................. 2,474 2,873 3,229 3,811 3,416 4,017 4,377 4,918
Interest income................ 155 203 227 248 302 322 357 355
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes....... 2,629 3,076 3,456 4,059 3,718 4,339 4,734 5,273
Provision for income taxes..... 999 1,153 1,293 1,509 1,400 1,614 1,772 1,962
------- ------- ------- ------- ------- ------- ------- -------
Net income....................... $ 1,630 $ 1,923 $ 2,163 $ 2,550 $ 2,318 $ 2,725 $ 2,962 $ 3,311
------- ------- ------- ------- ------- ------- ------- -------
Basic earnings per share......... $ 0.16 $ 0.18 $ 0.20 $ 0.24 $ 0.22 $ 0.25 $ 0.27 $ 0.30
------- ------- ------- ------- ------- ------- ------- -------
Weighted average number of common
shares outstanding............. 10,372 10,548 10,626 10,696 10,767 10,842 10,898 10,934
------- ------- ------- ------- ------- ------- ------- -------
Diluted earnings per share....... $ 0.15 $ 0.18 $ 0.20 $ 0.23 $ 0.21 $ 0.24 $ 0.26 $ 0.29
------- ------- ------- ------- ------- ------- ------- -------
Weighted average number of common
and common equivalent shares
outstanding.................... 10,860 10,956 11,092 11,163 11,202 11,296 11,361 11,332
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

30
<PAGE> 31
ON ASSIGNMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

11. ACQUISITIONS.

On March 27, 1996, the Company issued 343,158 shares of its common stock
for all of the outstanding common stock of EnviroStaff, Inc. ("ESI"), a
Minnesota corporation, which specialized in providing employees on temporary
assignments to the environmental services industry. The acquisition has been
accounted for as a pooling-of-interests and, accordingly, the Company's
consolidated financial statements have been restated for all periods prior to
the acquisition to include the results of operations, financial positions, and
cash flows of ESI. Revenues, net income and diluted earnings per share for the
individual entities are as follows:

<TABLE>
<CAPTION>
ON ASSIGNMENT ENVIROSTAFF COMBINED
------------- ----------- -----------
<S> <C> <C> <C>
Three Months Ended March 31, 1996
Revenues......................................... $16,379,000 $ 2,523,000 $18,902,000
Net income (loss)................................ $ 1,086,000 $ (228,000) $ 858,000
Diluted earnings (loss) per share................ $ 0.10 $ (0.02) $ 0.08
Year Ended December 31, 1995
Revenues......................................... $62,042,000 $10,575,000 $72,617,000
Net income....................................... $ 4,330,000 $ 11,000 $ 4,341,000
Diluted earnings per share....................... $ 0.41 $ 0.00 $ 0.41
Year ended December 31, 1994
Revenues......................................... $48,402,000 $ 5,215,000 $53,617,000
Net income....................................... $ 3,348,000 $ 133,000 $ 3,481,000
Diluted earnings per share....................... $ 0.33 $ 0.01 $ 0.34
</TABLE>

Acquisition costs of approximately $401,000 related to the acquisition of ESI
were charged to expense during the three-month period ended March 31, 1996. The
after-tax impact of these expenses on diluted earnings per share was $0.02 for
the three-month period ended March 31, 1996. Acquisition costs include legal,
accounting, financial advisory services, and other costs of the acquisition.
Effective January 1, 1997, ARI became a wholly owned subsidiary of ESI in
accordance with the corporate reorganization (see Note 1).

On July 20, 1998, the Company acquired substantially all of the assets of
LabStaffers, Inc., a provider of temporary science and medical laboratory
professionals through its branches in Greensboro and Charlotte, N.C. The
LabStaffers, Inc. offices and operations acquired have been added to the
Company's Lab Support division. This acquisition has been accounted for using
the purchase method of accounting. Pro Forma information is not presented as the
impact on revenues, net income and earnings per share are not significant.
Consideration for the purchase consisted of $808,000 in cash. However,
contingent on certain revenue targets, aggregate additional consideration not to
exceed $840,000 may be paid according to an installment payment schedule 13 and
25 months after the closing date, and any contingent consideration will be added
to goodwill.

31
<PAGE> 32

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

Information regarding the Company's directors will be set forth under the
caption "Proposal One -- Election of Directors" in the Company's proxy statement
for use in connection with its Annual Meeting of Stockholders scheduled to be
held on June 8, 1999 (the "1999 Proxy Statement") and is incorporated herein by
reference. The 1999 Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year.

Information regarding the Company's executive officers is set forth in Part
I of this Annual Report on Form 10-K and is incorporated herein by reference.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Information regarding compliance with Section 16(a) of the Exchange Act
will be set forth under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Company's 1999 Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year and is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding remuneration of the Company's directors and officers
will be set forth under the captions "Proposal One -- Election of Directors",
and "Executive Compensation and Related Information" in the Company's 1999 Proxy
Statement to be filed within 120 days after the end of the Company's fiscal year
and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management will be set forth under the captions "General Information for
Stockholders -- Record Date, Voting and Share Ownership" in the Company's 1999
Proxy Statement to be filed within 120 days after the end of the Company's
fiscal year and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions will
be set forth under the caption "Executive Compensation and Related
Information -- Certain Relationships and Related Transactions" in the Company's
1999 Proxy Statement to be filed within 120 days after the end of the Company's
fiscal year and is incorporated herein by reference.

32
<PAGE> 33

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Financial Statements:

Report of Independent Auditors........................... 16

Consolidated Balance Sheets at December 31, 1997 and
1998..................................................... 17

Consolidated Statements of Income for the Years Ended
December 31, 1996, 1997 and 1998......................... 18

Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1997 and 1998............. 19

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998......................... 20

Notes to Consolidated Financial Statements............... 21

2. Financial Statement Schedule:

Schedule II -- Valuation and Qualifying Accounts......... 36
</TABLE>

Schedules other than those referred to above have been omitted because they
are not applicable or not required under the instructions contained in
Regulation S-X or because the information is included elsewhere in the financial
statements or notes thereto.

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the three months ended December
31, 1998.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1(1) Agreement and Plan of Reorganization dated as of March 27,
1996 by and among the Company, ESI Acquisition Corporation,
EnviroStaff, Inc. (ESI) and the stockholders of ESI listed
therein.
3.1(2) Amended and Restated Certificate of Incorporation of the
Company.
3.2(3) Amended and Restated Bylaws of the Company.
4.2(4) Specimen Common Stock Certificate.
10.1(4) Form of Indemnification Agreement.
10.2(5) Restated 1987 Stock Option Plan, as amended.
10.3(6) 1992 Employee Stock Purchase Plan.
10.9(7) Office lease dated December 7, 1993, by and between the
Company and Malibu Canyon Office Partners, LP.
</TABLE>

33
<PAGE> 34

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.14(8) Offer letter agreement by and between the Company and Ronald
W. Rudolph dated March 27, 1995.
11.1 Statement regarding computation of earnings per share.
21.1 Subsidiaries of the Registrant.
24.1 Consent of Deloitte & Touche LLP.
25.1 Power of Attorney (see page 35).
</TABLE>

- ---------------
(1) Incorporated by reference from an exhibit filed with the Company's Current
Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange
Commission on April 10, 1996.

(2) Incorporated by reference from an exhibit filed with the Company's Annual
Report on Form 10-K (File No. 0-20540) filed with the Securities and
Exchange Commission on March 30, 1993.

(3) Incorporated by reference from an exhibit filed with the Company's Current
Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange
Commission on February 4, 1998.

(4) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-1 (File No. 33-50646) declared effective by
the Securities and Exchange Commission on September 21, 1992.

(5) Incorporated by reference from an exhibit filed with the Company's Annual
Report on Form 10-K (File No. 0-20540) filed with the Securities and
Exchange Commission on March 28, 1997.

(6) Incorporated by reference from an exhibit filed with the Company's
Registration Statement on Form S-8 (File No. 33-57078) filed with the
Securities and Exchange Commission on January 19, 1993.

(7) Incorporated by reference from an exhibit filed with the Company's Annual
Report on Form 10-K (File No. 0-20540) filed with the Securities and
Exchange Commission on March 24, 1994.

(8) Incorporated by reference from an exhibit filed with the Company's Annual
Report on Form 10-K (File No. 0-20540) filed with the Securities and
Exchange Commission on March 31, 1995.

34
<PAGE> 35

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Calabasas, California on this 29th day of March, 1999.

ON ASSIGNMENT, INC.

By: /s/ H. TOM BUELTER
------------------------------------
H. Tom Buelter
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints H. Tom Buelter and Ronald W. Rudolph and
each of them, as his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and re-substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Report on Form 10-K, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ H. TOM BUELTER Chairman of the Board and March 29, 1999
- -------------------------------------------------------- Chief Executive Officer
H. Tom Buelter (Principal Executive Officer)

/s/ RONALD W. RUDOLPH Senior Vice President, March 29, 1999
- -------------------------------------------------------- Finance and Chief Financial
Ronald W. Rudolph Officer (Principal Financial
and Accounting Officer)

/s/ KAREN BRENNER Director March 29, 1999
- --------------------------------------------------------
Karen Brenner

/s/ JONATHAN S. HOLMAN Director March 29, 1999
- --------------------------------------------------------
Jonathan S. Holman

/s/ JEREMY M. JONES Director March 29, 1999
- --------------------------------------------------------
Jeremy M. Jones

/s/ WILLIAM E. BROCK Director March 29, 1999
- --------------------------------------------------------
William E. Brock
</TABLE>

35
<PAGE> 36

ON ASSIGNMENT, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful
accounts.................... $435,000 504,000 -- (386,000) $ 553,000
Year ended December 31, 1997
Allowance for doubtful
accounts.................... $553,000 451,000 -- (270,000) $ 734,000
Year ended December 31, 1998
Allowance for doubtful
accounts.................... $734,000 593,000 -- (318,000) $1,009,000
</TABLE>

<PAGE> 1

EXHIBIT 11.1

ON ASSIGNMENT, INC.

STATEMENT OF COMPUTATION OF DILUTED EARNINGS PER SHARE

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net income used to compute basic and diluted
earnings per share................................ $ 5,606,000 $ 8,266,000 $11,316,000
----------- ----------- -----------
Basic earnings per share............................ $ 0.55 $ 0.78 $ 1.04
----------- ----------- -----------
Weighted average number of shares outstanding used
to compute basic earnings per share............... 10,207,000 10,561,000 10,860,000
Dilutive effect of stock options and warrants....... 691,000 470,000 442,000
----------- ----------- -----------
Number of shares used to compute diluted earnings
per share......................................... 10,898,000 11,031,000 11,302,000
----------- ----------- -----------
Diluted earnings per share.......................... $ 0.51 $ 0.75 $ 1.00
=========== =========== ===========
</TABLE>

<PAGE> 1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Assignment Ready, Inc., a Delaware corporation, is a wholly owned
subsidiary of EnviroStaff, Inc., a Minnesota corporation, which in turn is a
wholly owned subsidiary of the Registrant. Assignment Ready, Inc. does business
under the names "Lab Support," "Healthcare Financial Staffing," and
"EnviroStaff."

Other subsidiaries of the Registrant are omitted from this exhibit pursuant
to Regulation S-K 601(b)(21)(ii).

<PAGE> 1

EXHIBIT 24.1

INDEPENDENT AUDITOR'S CONSENT

We consent to the incorporation by reference in Registration Statements No.
33-57078 and No. 333-38849 of On Assignment, Inc. and subsidiaries on Form S-8
of our report dated January 22, 1999, with respect to the consolidated financial
statements and financial statement schedule of On Assignment, Inc. appearing in
this Annual Report on Form 10-K of On Assignment, Inc. for the year ended
December 31, 1998.

/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP

March 29, 1999
Los Angeles, California

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS; CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 27,874,000
<SECURITIES> 8,085,000
<RECEIVABLES> 19,587,000
<ALLOWANCES> 1,009,000
<INVENTORY> 0
<CURRENT-ASSETS> 51,827,000
<PP&E> 6,154,000
<DEPRECIATION> 3,451,000
<TOTAL-ASSETS> 62,028,000
<CURRENT-LIABILITIES> 7,802,000
<BONDS> 0
0
0
<COMMON> 109,000
<OTHER-SE> 54,117,000
<TOTAL-LIABILITY-AND-EQUITY> 62,028,000
<SALES> 0
<TOTAL-REVENUES> 132,741,000
<CGS> 0
<TOTAL-COSTS> 90,705,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 593,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,064,000
<INCOME-TAX> 6,748,000
<INCOME-CONTINUING> 11,316,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,316,000
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.00

</TABLE>