Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

     Revenues from court reporting services are primarily derived from services provided for recording sworn testimony at depositions and typically are based on the number of pages transcribed, with a significant portion of revenues being derived from the production of additional certified copies. Substantially all of the Company's court reporting services is performed by independent contractors. Under arrangements with independent court reporters, the Company retains a portion of the total court reporting fee and the independent court reporter receives the balance. The different types of court reporting services provided by the Company yield varying profit margins, with accelerated delivery transcripts, transcript copies and compressed transcripts providing higher margins. In addition, profit margins vary among the different geographic markets in which the Company operates. The Company also derives revenues from its DepoNet(R)network, which consists, in part, of approximately 400 affiliated firms in locations not directly served by the Company. Under contractual arrangements with DepoNet(R)members, the Company refers court reporting and certain other assignments to network participants for which it receives an annual fee.

     The Company recruits and places legal professionals on a temporary or contract basis. The Company charges its clients an hourly fee for the number of hours worked by attorneys and paralegals placed with clients on a temporary or contract basis. Recruiters are paid commissions based upon revenues from hourly fee income less the direct cost of the attorneys or paralegals placed. The Company's permanent placement recruiters are compensated on a commission basis. Fees for successful placement of professionals typically are based upon a percentage, approximately 25% to 30% of such professional's total compensation earned during the year following the placement, of which 40% to 60% is customarily paid to the individual permanent placement recruiter. This fee is subject to a partial refund if the new employment arrangement is terminated prior to the expiration of a negotiated period, usually three months.

Significant Adverse Operating and Financial Developments

     The Company, largely since its inception, has experienced a deficiency in working capital and recurring operating losses. The Company is unable to pay principal of and interest on its outstanding Loan Agreement due January 3, 2000. The Company was unable to repay principal in the amount of $82.8 million due January 3, 2000 under its Loan Agreement and suspended interest payments due thereunder effective November 1999. The lenders to the Loan agreement have agreed to both forbear receiving the payment of interest for the period November 1999 to April 14, 2000 in the amount of approximately $3.3 million and extend the maturity date of the Loan Agreement to April 14, 2000.

     The Company, presently and for the foreseeable future, is unable to pay interest or principal amounts outstanding under the Loan Agreement. To date, the lenders have not agreed to continue to forbear receiving principal and interest or otherwise restructure the terms thereof. The loan is presently due and payable and the lenders to the Loan Agreement presently have the right to accelerate the loan and exercise their remedies under the loan documents, including the foreclosure of their security interest in the Company's assets.

     Additionally, the Company may not be able to fund operations or repay certain other obligations as they become due without increased credit facilities and/or rescheduling payments. The Company's ability to acquire increased credit facilities and/or reschedule payment terms is highly uncertain and cannot be assured.

     One of the potential outcomes of the events described above could result in the ultimate liquidation of the Company.

Results of Operations

Comparison of years ended March 31, 2000 and 1999

     Revenue. Revenue increased by approximately $.8 million, or 2.2%, to $35.6 million for the three months ended March 31, 2000 from $34.8 million for the three months ended March 31, 1999. The increase is primarily due to an increase in deposition business in the Southwest region.

     Operating Expenses. Operating expenses increased by approximately $.8 million, or 3.9%, to $21.4 million for the three months ended March 31, 2000 from $20.6 million for the three months ended March 31, 1999. The increase is consistent with the increase in revenue. As a percentage of revenues, operating expenses increased to 60.1% for the three months ended March 31, 2000 from 59.1% for the three months ended March 31, 1999. The increase is principally the result of higher reporter fees.

     General and Administrative Expenses. General and administrative expenses increased by approximately $.6 million, or 4.8%, to $12.2 million for the three months ended March 31, 2000 from $11.6 million for the three months ended March 31, 1999. General and administrative expense, as a percentage of revenue, increased to 34.3% for the three months ended March 31, 2000 from 33.5% for the three months ended March 31, 1999. The increase was largely due to expenses relating to consulting and occupancy costs.

     Depreciation and Amortization. Depreciation and amortization expenses decreased by approximately $.3 million, or 23.6%, to $1.1 million for the three months ended March 31, 2000 from $1.4 million for the three months ended March 31, 1999. The decrease was due to the write down of $25.7 million of impaired goodwill recorded in the 4th quarter of 1999. The net decrease in amortization expense is partially offset by a change in the estimated period of benefit from 40 to 15 years, also recorded in the 4th quarter of 1999.

     Income from Operations. Income from operations decreased by approximately $.2 million, or 21.0%, to $.9 million for the three months ended March 31, 2000 from $1.1 million for the three months ended March 31, 1999. Income from operations, as a percentage of revenues, decreased to 2.5% for the three months ended March 31, 2000 from 3.3% for the three months ended March 31, 1999.

     Other Expense, Net. Other expense, net, consisting primarily of interest expense, increased by approximately $.8 million, or 40.5%, to $2.9 million for the three months ended March 31, 2000 from $2.1 million for the three months ended March 31, 1999. The increase is due to the incurrence of compounding interest from existing debt.

     Provision (Benefit) for Income Taxes. The Company has no recorded tax expense for the three months ended March 31, 2000. For the three months ended March 31, 1999, the Company recorded tax expense of approximately $18,000.

Liquidity and Capital Resources

     The Company, largely since its inception, has experienced a deficiency in working capital and recurring operating losses. The Company is unable to pay principal of and interest on its outstanding Loan Agreement due January 3, 2000. The Company was unable to repay principal, in the amount of $82.8 million due January 3, 2000 under its Loan Agreement and suspended interest payments due thereunder effective November 1999. The lenders to the Loan agreement have agreed to both forbear receiving the payment of interest for the period November 1999 to April 14, 2000 in the amount of approximately $3.3 million and extend the maturity date of the Loan Agreement to April 14, 2000.

     The Company, presently and for the foreseeable future, is unable to pay interest or principal amounts outstanding under the Loan Agreement. To date, the lenders have not agreed to continue to forbear receiving principal and interest or otherwise restructure the terms thereof. The loan is presently due and payable and the lenders to the Loan Agreement presently have the right to accelerate the loan and exercise their remedies under the loan documents, including the foreclosure of their security interest in the Company's assets.

     Additionally, the Company may not be able to fund operations or repay certain other obligations as they become due without increased credit facilities and/or rescheduling payments. The Company's ability to acquire increased credit facilities and/or reschedule payment terms is highly uncertain and cannot be assured.

     One of the potential outcomes of the events described above could result in the ultimate liquidation of the Company.

Operating Activities

     Net cash provided by operating activities totaled $1.3 million for the three months ended March 31, 2000 compared to $1.0 million used in operating activities for the three months ended March 31, 1999. The cash provided by operating activities is due primarily to an increase in accounts payable and accrued expenses, offset by an increase in net operating loss.

Investing Activities

     Net cash used in investing activities totaled $.2 million and $1.1 million for the three months ended March 31, 2000 and 1999, respectively. The decrease is primarily due to 1999 activity to fund payments for the acquisition of businesses and investments in capital equipment. There was $.004 million in cash used to acquire businesses for the three months ended March 31, 2000 compared to $.3 million for the three months ended March 31, 1999. The Company continues to invest in capital equipment, principally to upgrade facilities, computer systems and photocopy equipment. Such investments totaled $.3 million and $.7 million for the three months ended March 31, 2000 and 1999, respectively.

Financing Activities

     Net cash provided by financing activities for the three months ended March 31, 2000 and 1999 was $.06 million and $2.2, respectively. The decrease is primarily due to increased payments on long term debt offset by an increase in bank overdraft balances for the period March 31, 2000.

     The Company currently has a Loan Agreement with financial institutions which, as amended, provides for borrowings up to $83.5 million based on operating cash flow as defined therein. Borrowings under the Loan Agreement bear interest at the prime rate, plus specified margins. The payment of certain of the margins is deferred until the maturity of the Loan Agreement. The Loan Agreement, which is secured by substantially all the assets of the Company, restricts future indebtedness, investments, distributions, acquisitions or sale of assets and capital expenditures and requires maintenance of certain financial covenants. At March 31, 2000, the effective interest rate was 11.2% and aggregate borrowings under the Loan Agreement were $83.0 million.

     At March 31, 2000, the Company had approximately $9.3 million of indebtedness payable to sellers of various acquired businesses.

     The Company, largely since its inception, has experienced a deficiency in working capital and recurring operating losses. The Company is unable to pay principal of and interest on its outstanding Loan Agreement due January 3, 2000. The Company was unable to repay principal in the amount of $82.8 million due January 3, 2000 under its Loan Agreement and suspended interest payments due thereunder effective November 1999. The lenders to the Loan agreement have agreed to both forbear receiving the payment of interest for the period November 1999 to April 14, 2000 in the amount of approximately $3.3 million and extend the maturity date of the Loan Agreement to April 14, 2000.

     The Company, presently and for the foreseeable future, is unable to pay interest or principal amounts outstanding under the Loan Agreement. To date, the lenders have not agreed to continue to forbear receiving principal and interest or otherwise restructure the terms thereof. The loan is presently due and payable and the lenders to the Loan Agreement presently have the right to accelerate the loan and exercise their remedies under the loan documents, including the foreclosure of their security interest in the Company's assets.

     Additionally, the Company may not be able to fund operations or repay certain other obligations as they become due without increased credit facilities and/or rescheduling payments. The Company's ability to acquire increased credit facilities and/or reschedule payment terms is highly uncertain and cannot be assured.

     One of the potential outcomes of the events described above could result in the ultimate liquidation of the Company.

Inflation

     Certain of the Company's expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, are subject to normal inflationary effects. Supplies, such as paper and related products, can be subject to significant price fluctuations. Although the Company to date has been able to substantially offset any such cost increases through increased operating efficiencies, there can be no assurance that the Company will be able to offset any future cost increases through similar efficiencies or increased charges for its products and services.

ITEM 3:  Quantitative and Qualitative Disclosures About Market Risk

     The Company is exposed to changes in interest rates as a result of its Loan Agreement, which is based on the Prime Rate.

     Based on the indebtedness outstanding under the Company's Loan Agreement at March 31, 2000, a sensitivity analysis was performed using a hypothetical 10% increase in interest rates. The analysis indicated that the Company's interest expense and net loss for the three months ended March 31, 2000 would have increased by approximately $176,000. This amount does not include the effects of other events that could affect interest rates, such as a downturn in overall economic activity, or action management could take to lessen the risk. This also does not take into account any changes in the Company's financial structure that may result from higher interest rates.