ESQUIRE COMMUNICATIONS LTD, 10-K, 2000-04-14

ESQUIRE COMMUNICATIONS LTD
10-K, 2000-04-14
MAILING, REPRODUCTION, COMMERCIAL ART & PHOTOGRAPHY

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1999
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _____________________
Commission file number: 1-11782

ESQUIRE COMMUNICATIONS LTD.
---------------------------
(Exact name of Registrant as specified in its charter)

DELAWARE 13-3703760
- -------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

750 B STREET, SAN DIEGO, CALIFORNIA 92101
- ----------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (619) 515-0811
--------------

Securities registered pursuant to Section 12(b) of the Act:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------- -------------------------
Common Stock, $.02 par value Boston Stock Exchange

Securities registered pursuant to Section 12(g) of
the Act: Common Stock, par value $.02

Indicate by check mark whether 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 Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes X No __

As of March 1, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the closing price, was approximately
$2,607,000.

As of March 1, 2000, the registrant had 5,334,479 shares of Common Stock
outstanding.

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]

<PAGE>

BUSINESS

GENERAL

Esquire Communications Ltd. (the "Company") is the nation's leading
provider of court reporting services to law firms, insurance companies and
corporations through Company-owned offices located in 24 markets in 11 states
and the District of Columbia. In certain markets, the Company also provides
permanent and temporary staffing of legal and financial professionals, legal
video services, records retrieval, process service and document depository
services. The Company also has contractual relationships with approximately 400
independent court reporting, legal video and process service firms through its
DepoNet(R) marketing network, which together with Company-owned offices enables
the Company to deliver these services to its clients in every market within the
United States.

The Company, largely since its inception, has experienced a deficiency
in working capital and recurring operating losses. The Company is unable to
repay principal, in the amount of $82.8 million due January 3, 2000 under its
Revolving Loan Agreement (the "Loan Agreement") and suspended interest payments
due thereunder effective November 1999. The lenders to the Loan Agreement have
agreed to both forebear 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 loan is
presently due and payable.

The Company, presently and for the foreseeable future, is unable to
pay interest or principal amounts outstanding under the Loan Agreement and is
currently negotiating with the lenders thereunder to continue to forebear
receiving principal and interest or otherwise restructure the terms thereof. In
the event the Company is unable to successfully renegotiate an appropriate
period of continued forebearance or other satisfactory restructuring of the Loan
Agreement, the lenders thereunder 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. The accompanying financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.

Between 1993 and 1998, the Company pursued a strategy of consolidating
the highly fragmented court reporting industry. In pursuit of this strategy,
since 1997 the Company acquired 42 court reporting companies and 3 providers of
permanent and temporary legal and financial professionals. Certain of those
acquisitions have performed significantly below expectations, such that the
associated "excess of purchase price over assets acquired" (goodwill), in the
amount of $25.7 million, has been deemed to be permanently impaired as of
December 31, 1999. Goodwill associated with acquisitions with remote potential
to achieve profitability in the foreseeable future has been written off.
Goodwill associated with under-performing acquisitions has been written down to
estimated recovery value. The Company continuously evaluates recoverability of
goodwill and may be required to take future impairment charges.

INDUSTRY

The legal support services industry is comprised of a broad range of
services that assist legal professionals in all aspects of their practice. The
Company provides services primarily in two components within the legal support
services industry: court reporting and temporary and permanent legal staffing,
and to a lesser extent process services, document depository and records
retrieval within the legal support services industry.

Based on available industry data, the Company believes that the market
for court reporting and temporary and permanent legal staffing services exceeds
$5 billion and is highly fragmented with more than 1,000 independent court
reporting and over 400 legal staffing firms. The Company believes that growth in
the legal support services market is characterized by several trends, including
an increase in: (i) efforts by law firms and corporations, especially insurance
companies, to reduce legal expenses; (ii) the outsourcing of legal support
services to companies that specialize in providing such services; (iii) the use
of lawyers on a temporary basis by law firms and corporations; (iv) the volume
and complexity of litigation; and (v) the national scope of litigation,
particularly in class action and product liability lawsuits.

Legal support services, such as court reporting, records retrieval and
temporary and permanent legal staffing, traditionally have been, and continue to
be, marketed to law firms. Increasingly, insurance companies and corporations,
who ultimately pay the cost of legal support services used by their counsel, are
seeking to control and reduce the costs associated with lawsuits, centralize
their purchasing decisions and ensure consistent service quality. As a result,
these companies are more frequently selecting the providers of legal support
services themselves, rather than delegating that decision to the law firms
engaged to represent them.

The highly fragmented legal support services industry consists
primarily of local and regional firms that typically provide a single or limited
number of services. Legal support businesses often lack a broad range of
services, regional or national coverage or effective marketing programs and,
therefore, are unable to meet the needs of large, geographically dispersed
clients.

LEGAL SUPPORT SERVICES OFFERED BY THE COMPANY

The Company provides court reporting and permanent and temporary
placement of legal and financial personnel and to a significantly lesser extent,
records retrieval, process services and document depository services as
described below.

Technology is, and continues to, rapidly transform both the delivery
of and the legal support services and products offered by the Company. The
Company anticipates the need to allocate significant resources to evolving
technologies, including electronic delivery capabilities, necessary to remain
competitive and ensure a pipeline of differentiating legal support products and
services, as well as to recruiting and training highly qualified technology
differentiated court reporters and staff.

COURT REPORTING. Court reporting is the verbatim transcription of the
spoken word into the written word, generally from sworn legal testimony. The
industry is divided into two distinct sectors: (i) the recording of proceedings
in court, or "official" court reporting and (ii) all other private sector court
reporting. Official court reporting is performed by civil servant court
reporters employed by local, state or federal courts. All other private sector
court reporting is performed outside the courtroom by free-lance court
reporters, who are self-employed or employees of, or have an independent
contractor relationship with, a court reporting agency. Through the use of
independent contractors, the Company provides court reporting services for legal
proceedings (typically civil proceedings) outside the courtroom and, to a lesser
extent, the recording of other events such as hearings, arbitrations, board
meetings, stockholders' meetings, conferences, conventions and media events.

Most states require court reporters to be licensed, which requires
them to attend a certified court reporting school and pass required
examinations. Court reporting requires a skilled professional capable of
transcribing speech, which generally approximates 200 words per minute, using
shorthand symbols. Most of the Company's court reporters use a computer-aided
transcription ("CAT") system for transcribing the spoken word into phonetic
symbols. The shorthand notes, which can be recorded in both paper and electronic
form, are translated and edited to produce a final transcript. CAT systems
enable the computer to interpret the shorthand symbols and translate them into
English.

Technology has, and is expected to continue to, transform the products
and services offered by court reporting companies. Commonly available
"value-added" services include:

o LEGAL VIDEO SERVICES. The Company provides a staff of certified legal
video specialists using broadcast quality equipment to record
depositions, presentations and other events. The Company provides
editing, indexing and courtroom playback that enables the client to
search time-coded transcripts and retrieve key segments of testimony
with software that synchronizes the video with the text of the
transcript.

o REALTIME TRANSCRIPTION. The Company's court reporters provide instant
transcripts of testimony on laptop computer monitors, which may be
located where the testimony is taking place, as well as simultaneously
at remote locations. This system also allows attorneys to receive a
transcript of the testimony on diskette at the conclusion of the
proceeding.

o INTERACTIVE REALTIME TRANSCRIPTION. Interactive realtime transcription
enables an attorney to connect a computer to the court reporter's
system using specialized software which enables the attorney to review
earlier testimony and make notes during or immediately following the
deposition.

o TEXT SEARCH AND RETRIEVAL PROGRAMS. The Company uses specialized
software that enables the client to search, store, index and manage
transcripts and other documents to locate a word or portion of text
quickly and easily.

PERMANENT AND TEMPORARY PLACEMENT OF LEGAL AND FINANCIAL
PROFESSIONALS. The Company provides permanent and temporary staffing of legal
and financial professionals as a result of the Company's 1998 acquisitions of
three New York-based executive search firms. The Company is engaged and paid by
the hiring firm or corporation on either an exclusive or non-exclusive basis
pursuant to arrangements that may include a non-refundable retainer paid to the
Company or that entitle the Company to a fee contingent upon the successful
placement of a candidate with the client. Temporary attorney or paralegal
assignments may range from one day to more than a year and may involve one
professional or a team of professionals.

RECORDS RETRIEVAL. Records retrieval services are labor-intensive and
involve the preparation, handling, tracking and delivery of large numbers of
written documents from public or private sources, a significant portion of which
involves records acquired on behalf of insurance companies and their counsel,
for litigation or other legal proceedings.

PROCESS SERVICE. Process service includes the preparation and delivery
of written notices and subpoenas and the monitoring of the recipient's response.

DOCUMENT DEPOSITORY SERVICES. The Company offers document depository
services, which include document storage, archiving, indexing and retrieval of
documents in a hardcopy or digital format. The Company is able to quickly
retrieve specific documents on demand for use by its clients in various legal
proceedings.

ACQUISITION STRATEGY

Founded in 1988, the Company's predecessor was created to consolidate
the highly fragmented court reporting industry.

Since 1997, the Company has acquired 42 court reporting companies and
3 providers of permanent and temporary staffing of legal and financial
professionals. The Company has ceased its acquisition strategy and over the near
term intends to focus on building the infrastructure and operating platforms
necessary to integrate the existing acquired businesses. The Company does not
contemplate making any acquisitions in the foreseeable future.

The following table summarizes the Company's acquisition activity
since 1997. All acquisitions were of court reporting firms, except as otherwise
indicated.

DATE OF
ACQUIRED COMPANY ACQUISITION MARKETS SERVED
- ------------------------------- ------------- ---------------------

Nevill & Swinehart.............. January 1997 Southern California
Pelletier & Jones............... January 1997 Southern California
Wolfe, Rosenberg & Associates... May 1997 Chicago
Krauss, Katz & Ackerman......... June 1997 Philadelphia
American Network Services
(DepoNet)..................... June 1997 Nationwide Referral Network
Hyatt Court Reporting........... August 1997 Denver
Kim Tindall & Associates........ October 1997 San Antonio
Associates/Certified Reporting.. October 1997 Fort Lauderdale
County Reporting................ October 1997 Fort Lauderdale
Justice Reporting............... October 1997 Fort Lauderdale
Lauderdale Reporting............ October 1997 Fort Lauderdale
Merit Reporting................. October 1997 Fort Lauderdale
Haynes & Harpster Court
Reporters..................... October 1997 Southern California
Cynthia Varelli................. October 1997 Chicago
Jurist-Begley Reporting Services November 1997 Philadelphia
Henry Jacobs & Associates....... December 1997 New York City
Certified Reporting Company..... December 1997 New York City
A&A Court Reporters............. January 1998 Houston
Brody & Geiser.................. January 1998 Northern New Jersey
Kerns & Gradillas............... January 1998 Southern California
Jewelinski Court Reporters...... February 1998 Southern California
Friedli, Wolff & Pastore........ February 1998 District of Columbia
VerbaVolant..................... March 1998 New York City
McGuire's Reporting Service..... March 1998 Chicago
Morrissy & Others............... March 1998 Chicago
Pollock & Upshaw................ April 1998 San Antonio
Atlantic Court Reporting........ April 1998 Fort Lauderdale
Bright & Associates............. May 1998 Austin
Riggleman, Turk & Nelson........ May 1998 Baltimore
A-L Associates(1)/A-L
Attorneys on Assignment(2).... May 1998 New York City
Rubin Reporting................. May 1998 Chicago
Summit Reporting(3)............. June 1998 Houston
Hamilton-Legato Deposition
Centers....................... June 1998 Michigan
Cooksey-Regal Deposition
Reporters..................... July 1998 Sacramento
Messenger and Associates........ July 1998 Dallas
Mudrick Witt Professional
Reporting..................... July 1998 South Florida
Sandra S. Phillips and
Associates.................... August 1998 Sacramento
Gregory & Gregory Associates(4)/
Gregory & Gregory Staffing(2). August 1998 New York City
Lieberman & Chaim............... October 1998 Philadelphia
Precise/Verbatim Reporting...... November 1998 Ft. Lauderdale
Mannion Reporting............... November 1998 Southwest New Jersey
The Granite Group(2)............ December 1998 New York City
CAT-LINKS Incorporated(5)....... January 1999 Southern California
LawTek, Inc..................... January 1999 Fort Lauderdale
Mudrick-Witt Legal Video
Services, Inc................. June 1999 South Florida

- ----------

(1) Retained Executive Search.

(2) Temporary legal staffing services.

(3) Includes document retrieval business.

(4) Permanent staffing services.

(5) Computer software development.

CLIENT RELATIONSHIPS, NATIONAL BRAND LEVERAGE, SALES AND MARKETING

The Company believes that its clients purchase services based on a
variety of factors, the most important of which are the quality of the local
service provided, the strength of their relationship with the Company and price.
The Company's client base is comprised of more than 1,000 law firms, insurance
companies and corporations. The Company has a broad client base, and no single
client accounted for more than 2% of the Company's revenue for 1999. Clients
typically engage the Company for a single job, an entire litigation matter or
pursuant to a contractual relationship to provide ongoing legal support services
on a regional or nationwide basis.

The Company's strategy to immediately transition the local and
regional companies it has acquired to the Esquire brand name has had mixed
results. Post acquisition success, including transition to a national brand, is
highly dependent on the motivation and participation of former owners, court
reporters, and employees of acquired companies. A number of acquisitions have
suffered significant local client erosion subsequent to acquisition, however,
the Company believes that it does enjoy significant brand equity and leverage
through its industry leadership position and ability to deliver nationwide court
reporting services. The Company's national accounts program seeks to leverage
the national brand, targeting establishing relationships with those large
national law firms, insurance providers, and corporations who value and are
seeking to centralize their purchasing decisions to control litigation costs and
ensure quality.

In addition to the Esquire proprietary court reporting network, the
Company provides referrals for court reporting, process services, and legal and
video services through its DepoNet(R) brand. DepoNet(R) is a referral network
with contractual relationships with approximately 400 independent court
reporting, legal videography, and process service firms. DepoNet(R) targets
legal professionals who require services outside of their normal work locations
but do not have the direct ability to easily identify quality of out-of-town
providers. The Company leverages the DepoNet(R) system to service requests
through company-owned operations where available. Significant financial,
infrastructure, and management resources are necessary to revitalize and
leverage the DepoNet(R) brand and market position.

The Company's general managers and local sales staff target regional
and local accounts, permitting the Company to capitalize on the local expertise
and client relationships of its branch office employees. The Company views its
network of independent court reporters as a potential source of new business
referrals and is evaluating programs designed to motivate court reporters to
generate additional new and repeat business. The Company solicits new business
through professional sales presentations, telemarketing, direct mail, referrals
from existing clients and advertising in a variety of local and national legal
trade publications and journals. The Company also participates in a number of
legal trade shows.

COMPETITION

The market for legal support services is highly competitive.

The Company competes primarily on the basis of quality, personal
relationships with clients, reputation, breadth and timeliness of service,
geographic coverage and price.

The Company competes with numerous local and regional court reporting
and records retrieval companies, and also competes with permanent and temporary
legal staffing companies, including national temporary staffing firms. Certain
of the Company's competitors in legal staffing have substantially greater
resources and operate in broader geographic areas than the Company.

Many larger clients retain multiple legal support and placement and
staffing service providers, which exposes the Company to continuous competition.
Furthermore, there can be no assurance that clients will continue to increase
their outsourcing of legal support and staffing services needs or that such
businesses will not bring in-house services that they currently outsource.

INDEPENDENT CONTRACTORS

The Company provides court reporting services through the use of
independent contractors who are not employees of the Company, but are essential
to the success of the Company. Typically court reporters are contracted on a
job-by-job basis and are free to move between court reporting companies. The use
of independent contractors as court reporters is a widespread practice in the
court reporting industry. The Company has active relationships with in excess of
1,000 independent contractors.

The Company does not pay federal or state employment taxes or withhold
income taxes with respect to these independent contractors or include such
persons in the Company's employee benefit plans. Independent court reporters are
responsible for purchasing and operating their own court reporting equipment. In
the event the Company were required to treat court reporters as its employees,
the Company could become responsible for the taxes required to be paid or
withheld and could incur additional costs associated with employee benefits and
other employee costs on both a current and retroactive basis, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

EMPLOYEES

As of March 1, 2000, the Company had approximately 580 full-time
employees. The Company's employees are not represented by a collective
bargaining agreement. Hourly wages for the Company's temporary employees are
determined based on local market conditions. The Company pays mandated costs of
employment, including the employer's share of social security taxes, federal and
state unemployment taxes, unemployment compensation insurance, general payroll
expenses and workers' compensation insurance. The Company offers access to
various insurance programs and benefits to its temporary employees. The Company
believes its employee relations are good.

REGULATION

Court reporters in many states and attorneys in every state are
subject to licensure requirements and to the continuing oversight by their
respective regulatory bodies, many of whom have broad discretion in interpreting
and enforcing applicable laws and regulations. The conduct of court reporters is
also subject to ethical and other restrictions imposed by state laws and
regulations. While these regulations are not directly applicable to the Company,
they affect the Company's court reporting business. Legislation has been adopted
by several states, where the Company does not currently have Company-owned
operations, and in Georgia, where the Company does have a Company-owned
operation, that prohibit the provision of services by a court reporter under any
agreement other than on a case-by-case basis. Legislation has also been enacted
or proposed in certain other states that prohibit a court reporter from being
employed by, or serving as an independent contractor for, a court reporting firm
unless a majority of the firm is owned by certified shorthand reporters. Any
such laws effectively prohibit the Company from providing court reporting
services in such states. The Company expects that there will continue to be
efforts to sponsor the adoption of similar prohibitions by legislative or
regulatory action or through the ethics codes governing the conduct of court
reporters. In addition, federal and state legislative proposals have included
limitations on the number and length of depositions or have proposed the
substitution of video tape recording for stenographic transcription of certain
legal proceedings.

In addition, attorneys are subject to significant regulation by
committees on legal ethics and professional responsibility of the various state
and national bar associations, who, from time to time, examine and issue
opinions regarding attorney services, including the use of temporary attorneys
through a placement agency. These opinions have suggested that the payment of
fees to agencies that place temporary attorneys may constitute, in certain
circumstances, the improper splitting of legal fees with a non-lawyer. The
applicability of these opinions to the Company's business is uncertain, and
there can be no assurance that a state will not determine that the business as
conducted by the Company violates ethical or professional responsibility
regulations for attorneys. In addition, the practice of placing temporary
lawyers with a number of firms may raise conflict of interest issues under
applicable ethics codes, particularly when attorneys from the same placement
firm are placed with opposing parties, or law firms representing such parties,
in a lawsuit or business transaction.

Although the Company believes that its existing operations, which
include an integrated offering of legal support services in one state, are in
material compliance with applicable laws, the relationships among various legal
support services are unique, and many aspects of these relationships have not
been subject to judicial or regulatory interpretations. The Company has not
sought judicial or regulatory interpretations with respect to the manner in
which it conducts and plans to conduct its business. Changes in these laws and
regulations, particularly in the states from which the Company derives most of
its revenues, could have a material adverse effect on the Company's business,
financial condition or results of operations.

ITEM 2. PROPERTIES

The Company leases office space in all the locations where the Company
operates. The Company leases a total of 52 offices, ranging from 800 square feet
deposition-only suites to 21,780 square feet, full-service local and regional
offices. The leases generally run for a term of five years and expire at various
dates ranging from February 28, 2000 through June 30, 2009, with annual rents
ranging from $21,900 to $430,200. The leases provide, among other things, that
the Company is responsible for its share of increases in certain utilities,
maintenance and property taxes over a base amount. The Company believes its
facilities are generally adequate for its needs and does not anticipate
difficulty replacing such facilities or locating additional facilities if needed
in the future.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to various claims and legal actions in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial statements taken as a whole.

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

Not Applicable
<PAGE>

PART II

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

PRICE RANGE OF COMMON STOCK

All share and per share information set forth herein has been adjusted
to reflect the Company's one-for-two reverse stock split of its Common Stock
which occurred in November 1998. Effective May 18, 1993, the Common Stock of the
Company was listed on the Boston Stock Exchange and Nasdaq Stock Market under
the symbol "ESQS." Effective the close of business on July 27, 1999, the
Company's stock was delisted from the Nasdaq Stock Market for failure to meet
continued listing requirements. The following table sets forth for the calendar
periods indicated the high and low bid prices on the Nasdaq Stock Market for the
Common Stock for the period commencing January 1, 1998 through July 27, 1999 and
prices in the over-the-counter market thereafter. The prices set forth below do
not include retail mark-ups, mark-downs or commissions and represent prices
between dealers and are not necessarily actual transactions.

HIGH LOW
1999

First Quarter $6.75 $2.00
Second Quarter 6.13 1.66
Third Quarter 2.16 .69
Fourth Quarter 1.19 .41

1998

First Quarter $14.75 $9.50
Second Quarter 13.75 10.50
Third Quarter 14.50 6.50
Fourth Quarter 7.125 4.00

There were approximately 110 stockholders of record of Common Stock as
of March 1, 2000. This number does not include beneficial owners holding shares
through nominee or "street" names. The Company believes that it has more than
2,000 beneficial holders of Common Stock.

DIVIDEND POLICY

The Company has never declared or paid cash or other dividends on its
Common Stock. The declaration or payment of dividends, if any, in the future is
within the discretion of the Board of Directors and will depend upon the
Company's earnings, capital requirements, financial condition, and other
relevant factors.

Pursuant to the terms of the Company's Series A and Series C Preferred
Stock and Loan Agreement with its lenders, the Company is prohibited from paying
cash dividends on its Common Stock. Series A and C Preferred Stock dividends
accrue at 6% and have certain liquidation priorities. The Company paid cash
dividends on its Series A Preferred Stock through October 1997. Subsequent to
October 1997, financial constraints have precluded payment of cash dividends,
which have been accrued in the amount of $2.9 million through December 31, 1999,
on either the Series A or C Preferred Stock.

The Company presently intends to retain any earnings for use in its
business and does not anticipate declaring or paying cash dividends on its
Common Stock or Preferred Stock, which accrue at $1.5 million annually, in the
foreseeable future.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA (000'S EXCEPT PER SHARE INFORMATION)

1999 1998 1997 1996 1995

Net Sales $144,264 $110,586 $ 53,178 $29,501 $26,781
Net Income (Loss) $(41,380) $ (2,093) $ (3,157) $ (608) $ 321
Earnings (Loss) Per Share $ (7.76) $ (.48) $ (1.12) $ (.25) $ .06
Total Assets $123,143 $151,256 $ 82,851 $31,834 $20,573
Long Term Obligations:

Long Term Debt (including
current portion) $95,060 $ 94,108 $ 49,803 $15,139 $10,239

ITEM 7. 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 are 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
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 forebear 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 loan is presently due and payable.

The Company presently and for the foreseeable future, is unable to pay
interest or principal amounts outstanding under the Loan Agreement and is
currently negotiating with the lenders thereunder to continue to forebear
receiving principal and interest or otherwise restructure the terms thereof. In
the event the Company is unable to successfully renegotiate an appropriate
period of continued forebearance or other satisfactory restructuring of the Loan
Agreement, the lenders thereunder have the right to accelerate the loan and
exercise their remedies under the loan documents, including the foreclosure of
their security interests in the Company's assets.

Between 1993 and 1999, the Company pursued an aggressive acquisition
strategy, having acquired 48 court reporting companies and three permanent and
temporary staffing companies. Of these acquisitions, three were acquired in
1996, 17 were acquired in 1997, 25 were acquired in 1998 and 3 were acquired in
1999. All but one of these acquisitions have been accounted for using the
purchase method, and a substantial portion of each acquisition's purchase price
is represented by goodwill in the amount of $121.3 million before subsequent
amortization.

Certain of those acquisitions have performed significantly below
expectations, such that the associated "excess of purchase price over assets
acquired" (goodwill) has been deemed to be permanently impaired. Accordingly,
goodwill was written down and an associated charge recorded in the amount of
$25.7 million, as of December 31, 1999. Goodwill associated with acquisitions
with remote potential to achieve profitability in the foreseeable future has
been written off. Goodwill associated with under-performing acquisitions has
been written down to estimated recovery value. The Company continuously
evaluates recoverability of goodwill and may be required to take future
impairment charges.

RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

REVENUE. Revenue increased by approximately $33.7 million, or 30.5%,
to $144.3 million in 1999 from $110.6 million in 1998. Substantially all of the
increase was due to 1999 having a full year of revenue for all of the
acquisitions completed during 1998.

OPERATING EXPENSES. Operating expenses increased by approximately
$23.1 million, or 36.3%, to $86.5 million in 1999 from $63.5 million in 1998.
This increase is the result of a full year of operating expenses relating to the
acquisitions completed during 1998 as well as an increase in salaries relating
to the temporary staffing business acquired in August of 1998 which has a
smaller gross profit margin than the court reporting business.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by approximately $16.1 million, or 43.3%, to $53.3 million in
1999 from $37.2 in 1998.

General and administrative expenses in 1999 included charges of
approximately $7.2 million which included approximately $2.8 million reserve for
increased doubtful accounts and approximately $1.5 million of severance costs
associated with certain terminated executive management and other personnel. The
remaining increase was largely due to expenses related to acquisitions completed
during 1998, consisting of payroll and occupancy expenses, as well as increased
sales compensation and administrative support expenses due to increased revenue
levels. General and administrative expenses in 1998 included approximately $0.8
million relating to the write-off of costs associated with its abandoned
secondary offering.

Excluding the foregoing items, general and administrative expenses
increased by approximately $9.7 million, or 26.6%, to $46.1 million in 1999 from
$36.4 million in 1998. The increase was largely due to expenses related to the
acquisitions completed during 1998, consisting of payroll and occupancy
expenses, as well as significantly increased overheads, including sales
compensation and administrative support expenses to manage and operate the
increased acquisitions and associated increased revenue levels.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by approximately $2.0 million, or 41.4%, to $6.7 million in 1999 from
$4.8 million in 1998. This increase was due primarily to additional amortization
expense resulting from the acquisitions completed in 1998 and the change in
amortization life for goodwill to 25 years effective October 1, 1999. A
significant component of the amortization expense relates to goodwill, which is
the cost in excess of fair market value of net tangible assets of acquired
businesses.

ASSET WRITEDOWN AND OTHER CHARGES. During 1999, the Company recognized
asset write down and other charges of $27.0 million, including $25.7 million due
to the impairment of goodwill. Goodwill associated with acquisitions with remote
potential to achieve profitability in the foreseeable future has been written
off. Goodwill associated with underperforming acquisitions has been written down
to estimated recovery value. The remaining $1.3 million charge related to the
write-off of $1.0 million associated with discontinued capitalized information
system development and $0.3 million due to the write-off of fixed assets.

INCOME FROM OPERATIONS. Income from operations decreased by
approximately $34.5 million, or 670.0%, to a loss of $29.3 million in 1999 from
income of $5.1 million in 1998. Excluding the $27.0 million charge relating to
goodwill impairment and other asset write-offs taken in 1999 and the $0.8
abandoned secondary offering charge in 1998 discussed above, income from
operations decreased by $8.2 million to a loss of $2.3 million, or 139.0%, in
1999 from income of $5.9 million, or 5.3%, in 1998. The $7.2 million of charges
recognized in 1999 and discussed above under General and Administrative
expenses, accounted for 20.9% of the change in income from operations from 1998
to 1999.

OTHER EXPENSE, NET. Other expense, net, consisting primarily of
interest expense, increased by approximately $4.0 million to $10.6 million in
1998 from $6.6 million in 1998 due to the full year impact of the debt incurred
to purchase the 1998 Acquisitions and additional interest required under the
Company's Loan Agreement.

PROVISION FOR INCOME TAXES (BENEFIT). The Company recorded a tax
benefit of approximately $78,000 in 1999 and $589,000 in 1998 as a result of tax
refunds generated by the carryback of its tax loss generated in 1998 and 1997.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

REVENUE. Revenue increased by approximately $57.4 million, or 108.0%,
to $110.6 million in 1998 from $53.2 million in 1997. Substantially all of the
increase was due to the effect of acquisitions completed after June 30, 1997.

OPERATING EXPENSES. Operating expenses increased by approximately
$33.2 million, or 109.6%, to $63.5 million in 1998 from $30.3 million in 1997.
This increase was consistent with the increase in revenue. Operating expenses as
a percentage of revenue increased to 57.4% in 1998 from 57.0% in 1997. This
small increase is the result of higher operating expenses, principally salaries,
in the staffing business, which was added in 1998 as compared to the court
reporting business.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by approximately $17.2 million, or 85.6%, to $37.2 million in
1998 from $20.0 million in 1997. General and administrative expenses in 1998
included approximately $839,000 relating to the write-off of costs associated
with its abandoned secondary offering, and general and administrative expenses
in 1997 included approximately $1.3 million relating to an officer's termination
agreement and termination expenses relating to certain marketing activities, as
well as approximately $922,000 in costs incurred in connection with an
acquisition accounted for using the pooling of interests method of accounting.
Excluding the foregoing items, general and administrative expenses increased by
approximately $18.6 million, or 104.1%, to $36.4 million in 1998 from $17.8
million in 1997. The increase was largely due to expenses related to the
acquisitions completed after June 30, 1997, consisting of payroll and occupancy
expenses, as well as increased sales compensation, marketing and promotional
expenses and administrative support expenses due to increased revenue levels.
Excluding the items described above, general and administrative expenses as a
percentage of revenue decreased to 32.9% in 1998 from 33.5% in 1997. This
decrease was due to the large number of tuck-in acquisitions completed in 1998
(which allowed the Company to operate the acquired businesses through its
existing infrastructure), resulting in a lower impact of corporate overhead as a
percentage of revenue.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
by approximately $2.2 million, or 88.5%, to $4.7 million in 1998 from $2.5
million in 1997. This increase was due primarily to additional amortization
resulting from the acquisitions completed in 1997 and 1998. A significant
component of the amortization expense relates to goodwill, which is the cost in
excess of fair market value of net tangible assets of acquired businesses.

INCOME FROM OPERATIONS. Income from operations increased by
approximately $4.8 million to $5.1 million in 1998 from $326,000 in 1997.
Excluding the $839,000 relating to the write-off of costs associated with its
abandoned secondary offering in 1998, and approximately $1.3 million relating to
an officer's termination agreement and termination expenses relating to certain
marketing activities and approximately $922,000 in costs incurred in connection
with an acquisition accounted for using the pooling of interests method of
accounting in 1997, income from operations increased by approximately $3.5
million, or 135.0%, to $6.0 million in 1998 from $2.5 million in 1997. Excluding
the foregoing items, income from operations as a percentage of revenues
increased to 5.4% in 1998 from 4.8% in 1997.

OTHER EXPENSE, NET. Other expense, net, consisting primarily of
interest expense, increased by approximately $3.9 million to $6.6 million in
1998 from $2.7 million in 1997 due to the incurrence of additional debt to
finance acquisitions and to fund working capital.

PROVISION FOR INCOME TAXES (BENEFIT). The Company recorded a tax
benefit of approximately $589,000 in 1998 as a result of a tax refund generated
by the carryback of its tax loss generated in 1997, and recorded a tax expense
of approximately $125,000 in 1997 as a result of offsetting the majority of its
current income tax expense by utilizing its deferred tax asset.

LIQUIDITY AND CAPITAL RESOURCES

The Company, largely since its inception, has experienced a deficiency
in working capital and recurring operating losses which have largely been funded
through term debt financing. The Company is 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 forebear 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 loan is presently due and payable.

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
facilites 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 used in operating activities totaled $21,000 for the
year ended December 31, 1999 compared to $0.5 million in 1998. The decrease in
cash used in operating activities 1999 was 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 $3.9 million and $47.0
million for the years ended December 31, 1999 and 1998, respectively, and
primarily has been used to fund payments for the net assets of acquired
businesses and investments in capital equipment. Net cash used to acquire
businesses was $1.5 million and $43.7 million for the years ended December 31,
1999 and 1998, respectively. Cash used to invest in capital equipment totaled
$5.1 million and $3.3 million in 1999 and 1998, respectively. The Company
continues to invest in capital equipment, principally to upgrade facilities,
computer systems and photocopy equipment. At December 31, 1999, the Company had
no commitments to purchase equipment; however, the Company expects to make
additional capital expenditures in excess of $2.0 million in 2000, none of which
is pursuant to a firm commitment.

FINANCING ACTIVITIES

Net cash provided by financing activities for 1999 and 1998 was $4.6
million and $48.3 million, respectively, and consisted primarily of proceeds
from Loan Agreement borrowings and the issuance of Series A and Series C
Convertible Preferred Stock used to fund payments for acquired businesses and
for working capital. In addition, the Company from time to time issues
promissory notes in connection with acquisitions.

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 also requires maintenance of certain
financial covenants. At December 31, 1999, the effective interest rate was 11.2%
and aggregate borrowings under the Loan Agreement were $82.8 million.

In connection with the Company's acquisition of Gregory & Gregory
Associates and Gregory & Gregory Staffing in August 1998, a preferred
stockholder guaranteed the repayment of a $2.5 million overadvance made to the
Company under the Loan Agreement and received a fee of $125,000 in consideration
of such guarantee. In January 1999, preferred stockholders paid $2,437,500
pursuant to its guaranty and received 2,437.5 shares of Series C Preferred
Stock. Additionally, in February 1999, the preferred stockholders guaranteed
$1.5 million of an overadvance made to the Company under the Loan Agreement and
is entitled to receive a fee of $75,000. Preferred stockholders paid $1.5
million pursuant to its guaranty in April 1999. The funds paid by preferred
stockholders on the guaranty are evidenced by a subordinated promissory note
with interest at the rate of 18% per annum, principal and interest to be due and
payable, as extended, October 16, 2000.

At December 31, 1999, the Company had approximately $9.4 million of
indebtedness payable to sellers of various acquired businesses.

The Company is unable to repay the principal and interest due on both
the Loan Agreement and the note due the preferred stockholders. The lenders
under both the Loan Agreement and the note have agreed to waive the payment of
current interest and have agreed to extend the maturity date of the Loan
Agreement to April 14, 2000. The Company presently is unable to repay amounts
outstanding under either the Loan Agreement or the note and may not be able to
renegotiate or enter into a replacement facility. Additionally, the Company may
not be able to continue to fund operations or repay certain other obligations as
they become due without increased credit facilities and/or rescheduling
payments, which cannot be assured.

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.

YEAR 2000 COMPLIANCE

The Company did not experience any material difficulties with respect
to year 2000 compliance. The costs incurred by the Company to address year 2000
compliance did not have a material adverse effect on the Company's business,
financial condition or results of operations.

NEW ACCOUNTING STANDARDS

In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
was issued and is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities.

The Company anticipates that the adoption of SFAS No. 133 will not
have a material effect on the financial position, results of operations or
liquidity of the Company.

ITEM 7A. 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 December 31, 1999, 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 twelve months ended December 31,
1999 would have increased by approximately $704,000. This amount does not
include the effects of other events that could affect interest rates, such as a
downturn in overall economic activity, or actions 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Financial Statements, the reports thereon and
notes thereto, commencing on page F-1 to this report.

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

On September 16, 1999, the Company engaged Deloitte & Touche LLP as its
independent accountants to audit its financial statements in place of KPMG LLP
(the "Former Accountants").

The decision to change accountants was approved by the Board of Directors
and the Audit Committee of the Company.

The Former Accountant's report on the financial statements of the
Company for each of the past two years did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. There were no disagreements of the type
described in paragraph (a)1(i)(iv) of Item 304 of Regulation S-K or any
reportable event as described in paragraph (a)(1)(v), paragraph (a)(2) or
paragraph (b) of Item 304 of Regulation S-K.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company are as follows:

DIRECTOR OR
NAME AGE POSITION WITH COMPANY OFFICER SINCE

Malcolm L. Elvey(1)(2) 58 Chairman of the Board and Director 1993
Paul H. Bellamy 51 Chief Executive Officer and Director 1999
Carole L. Hughes 52 Senior Vice President-- Government
and Industry Relations 1998
Steven L. Wolkenstein 40 Vice President, Treasurer and
Secretary 1997
Mortimer R. Feinberg(1)(2) 77 Director 1993
Joseph P. Nolan(1)(2) 35 Director 1996
Cary A. Sarnoff 52 Director 1994

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

(1) Member of the Compensation Committee

(2) Member of the Audit Committee

MALCOLM L. ELVEY has served as Chairman of the Board of Directors of
the Company since its incorporation in 1993 and also served as Chief Executive
Officer of the Company until February 1997. Mr. Elvey is the founder of The
Elvey Partnership, a boutique venture catalyst specializing in internet related
companies in the United States, Europe and South Africa. Mr. Elvey is also a
general partner in Collaborative Capital, a venture capital fund focusing on
early-stage internet enabling technology companies. Mr. Elvey sits on the Board
of Directors of Algol, a public company headquartered in Milan, Italy and on the
Advisory Board of VastVideo, a leading B2B video application service provider.

PAUL BELLAMY has been Chief Executive Officer and a member of the
Board of Directors of the Company since December 13, 1999. From October 1992 to
May 1995, Mr. Bellamy was Chief Executive Officer and President, Chief Financial
Officer, a member of the Board of Directors, and consultant to Nichols
Institute, Inc., a medical diagnostics and services company. From October 1995
to February 1998, Mr. Bellamy was Chief Financial Officer of Davis Vision, Inc.,
an eye care HMO and optical retail company. From March 1998 to March 1999, Mr.
Bellamy was President and Chief Operating Officer, Chief Financial Officer, and
a member of the Board of Directors of Graham Field, Inc., a medical home health
care and surgical products manufacturer. From April 1999 to December 1999, Mr.
Bellamy was an independent consultant. During November and December 1999, Mr.
Bellamy was a consultant to the Board of Directors of Esquire.

CARY A. SARNOFF was Senior Vice President of Litigation Support until
his resignation in September 1999, and was the former Vice Chairman of the
Company. Mr. Sarnoff has been a director and officer of the Company since
November 1994. Prior thereto, Mr. Sarnoff was President of Sarnoff Deposition
Service, Inc. ("SDS"), a court reporting firm acquired by the Company in 1994.
Mr. Sarnoff has more than 25 years experience in the court reporting industry.

CAROLE L. HUGHES is Senior Vice president, Government and Industry
Relations. Prior thereto, Ms. Hughes was Senior Vice President of East Coast
Operations for the Company since February 1998. From 1981 to November 1997, Ms.
Hughes was the Vice President and a principal shareholder of Jurist-Begley
Reporting Services (or its predecessor), a court reporting company in
Philadelphia, Pennsylvania, that was acquired by the Company in November 1997.

STEVEN L. WOLKENSTEIN was appointed Vice President and Treasurer of
the Company in September 1997 and Secretary in March 2000. From April 1993 to
August 1997, he was tax and treasury/international finance manager for the Upper
Deck Company, and for five years prior thereto he was with KPMG LLP, with his
last position being senior tax manager.

MORTIMER R. FEINBERG, PH.D., has served as a director of the Company
since its incorporation. He is the co-founder of BFS Psychological Associates,
Inc., a human resources consulting firm, and has served as Chairman of its Board
of Directors since 1960. Dr. Feinberg is Professor Emeritus, Baruch College,
City University of New York and is a frequent contributor to the WALL STREET
JOURNAL on human resources and other business topics.

JOSEPH P. NOLAN has served as director of the Company since October
1996. Mr. Nolan joined GTCR in 1994 and became a Principal in 1996. Mr. Nolan
was previously a Vice President in mergers and acquisitions with Dean Witter
Reynolds Inc. and an Associate at Coopers & Lybrand. Mr. Nolan graduated with an
MBA from the University of Chicago and a BS in accounting with honors from the
University of Illinois. Mr. Nolan was an Illinois gold medalist and a national
silver medalist on the CPA examination. Mr. Nolan is currently a director of
Excaliber Tubular, DeLite Outdoor, Province Healthcare, Lason, LeapSource,
Alliant, Proximus Information, Heritage Golf Group and Global Passenger
Services. In the past, Mr. Nolan has also been a director of Golf Enterprises.

DIRECTOR COMPENSATION

Compensation for directors who are not officers of the Company
presently is $1,250 per meeting, plus reimbursement for any out-of-pocket
expenses incurred in connection with attending such meetings. In addition, each
current outside director has received, and each outside director upon election
to the Board of Directors will receive, options to purchase shares of Common
Stock of the Company.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of the Company's common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Executive officers, directors and holders of more than ten percent are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of the copies of such forms
furnished to the Company and written representations from the Company's
executive officers and directors, the Company believes that during the year
ended December 31, 1999, its executive officers, directors and holders of more
than ten percent complied with all applicable Section 16(a) filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information regarding
compensation paid by the Company or accrued for services rendered in all
capacities during the fiscal year ended December 31, 1999, to the Company's
Chief Executive Officer and to each of the other most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000:

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

Annual Compensation Long Term Compensation
------------------------------- -------------------------------------------------------
Awards Payouts
Other Restricted
Name and Annual Stock Options LTIP All Other
Principal Position Year Salary Bonus Compensation Awards(s) /SARS Payouts Compensation
($) ($) ($) ($) (#) ($) ($)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Malcolm L. Elvey 1999(1) $200,527 ---
Chairman 1998 203,187 20,000
1997 200,043 15,000

David A. White 1999(2) 208,333 ---
Chief Executive 1998 233,675 100,000
Officer 1997 174,791 125,000

Carole L. Hughes 1999 137,323 60,000 10,000
Senior Vice President 1998 131,875 12,000

David A. Higson (7) 1999 175,000 25,000
Executive Vice President 1998 170,833 87,500
1997(3) 93,750 13,000 62,500

Paul H. Bellamy 1999(4) -- --
Chief Executive Officer

Steven N. Welch (7) 1999(5) 147,890 100,000
Chief Financial Officer/
Acting Chief Executive
Officer

William J. Forbes (7) 1999 128,867 22,500
Vice President 1998(6) 81,005 30,000

(1) Mr. Elvey's employment with the Company terminated on April 30, 1999.
(2) Mr. White's employment with and service as director of the Company terminated October 31, 1999.
(3) Represents compensation for the partial year from May 15, 1997.
(4) Mr. Bellamy earned $15,000 for all services provided in November and December 1999.
(5) Represents compensation for the partial year from March 22, 1999.
(6) Represents compensation for the partial year from May 4, 1998.
(7) Employment with the Company was terminated February 29, 2000.
</TABLE>

<PAGE>

EMPLOYMENT AND RELATED AGREEMENTS

Malcolm L. Elvey was employed by the Company under an employment
agreement which expired in April 1999. Mr. Elvey entered into a severance
agreement with the Company which provided for the continued payment of his
salary through March 31, 2000. Mr. Elvey is entitled to sales commissions on new
business generated by him for the Company. The Company agreed to use its best
efforts to cause Mr. Elvey to be elected as a director as long as he continues
to own at least 200,000 shares of Common Stock. In addition, Mr. Elvey has
agreed not to compete with the Company for a period of two years following the
termination of his employment with the Company.

David A. White was employed under an agreement which was terminated in
October 1999. Mr. White has agreed not to compete with the Company for a period
of one year following the termination of his employment with the Company.

David A. Higson was employed under an agreement which was terminated
effective February 29, 2000. Mr. Higson entered into a severance agreement with
the Company which provides for the equivalent of six months salary and
associated benefits.

Carole L. Hughes is employed under a three-year employment agreement
which expires November 2000 at an annual salary of $135,000. Ms. Hughes is also
entitled to a performance bonus of up to 50% of her annual salary if the Company
achieves financial and operating objectives agreed to by Ms. Hughes and the
Company, with Ms. Hughes to receive a minimum bonus of at least $60,000 for the
first year. Ms. Hughes has agreed not to compete with the Company for a period
of two years following the termination of her employment with the Company.

The Company entered into change in control agreements with its key
executive officers, including, but not limited to, Mr. Higson, Mr. Welch, Mr.
Forbes and Ms. Hughes, which provide that if an executive's employment is
terminated within six months after a change in control of the Company, or the
executive terminates employment within such six month period of time, then the
executive shall be entitled to a lump sum severance payment and all of the
executive's options, if any, which are not then vested shall immediately vest.
All recipients of change in control agreements have been notified in writing
that the Company does not intend to renew any of these agreements beyond the
current term expiring June 30, 2000. The lump sum severance payment for Mr.
Higson is 150% of base salary and bonus at the time of termination and for the
other executives is 100% of base salary and bonus at the time of termination. At
December 31, 1999 and based on salary levels currently in effect, in the event
of a change in control, the above listed officers would have been entitled to
receive a lump sum of approximately $760,000. If the payments to be received
under the agreements would not be deductible for tax purposes by the Company as
the result of such payment constituting an excess parachute payment, the payment
would be reduced to an amount which would make the entire payment deductible for
tax purposes. As used in the agreements, change in control means a person or a
group of persons becomes the beneficial owner of more than 30% of the Company's
Common Stock, stockholders approve a merger of the Company into another entity
or a sale of substantially all the Company's assets or a change in the
composition of a majority of the members of the Board of Directors.

<PAGE>

STOCK OPTION PLAN

In February 1993, the Board of Directors of the Company adopted the
1993 Stock Option Plan (the "Plan"), which was approved by stockholders of the
Company. The Plan was amended to increase the number of options which may be
granted thereunder to 1,750,000 shares of Common Stock. Incentive stock options,
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended, and nonqualified stock options may be granted under the Plan.

The Plan is administered by the compensation committee of the Board of
Directors, which may grant options to key employees, directors, consultants and
independent contractors to the Company. The term of each option may not exceed
ten years from the date of grant. The exercise price of an option may not be
less than 100% of the fair market value of a share of Common Stock. The options
vest over a three-year period, commencing one year following their issuance.

The table below sets forth information regarding the grant of stock
options made to the executive officers named in the Summary Compensation Table
during the fiscal year ended December 31, 1999. By terms of the Plan, options
granted Messrs. Higson, Welch, and Forbes expired and were cancelled March 15,
2000.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)

Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date

Malcolm L. Elvey --- --- --- ---
David A. White --- --- --- ---
Paul H. Bellamy --- --- --- ---
David A. Higson 25,000 8.26% $1.03 9/2009
Steven N. Welch 50,000 16.53% 3.25 3/2009
50,000 16.53% 1.03 9/2009
William J. Forbes 22,500 7.44% 1.03 9/2009
Carole L. Hughes 10,000 3.31% 1.03 9/2009

The table below sets forth information for the executive officers
named in the Summary Compensation Table concerning option exercises during 1999
and outstanding options at December 31, 1999.

AGGREGATED OPTION/SAR EXERCISES IN 1999 AND DECEMBER 31, 1999 OPTION/SAR VALUES
<TABLE>
<CAPTION>

Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Shares Options/SARs at Options/SARs at
Acquired December 31, 1999 December 31, 1999
On Value -------------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable

<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Elvey 0 - 127,500 30,000 0 0
David A. White 0 - 0 0 0 0
Paul H. Bellamy 0 - 0 0 0 0
David A. Higson 0 - 70,833 104,167 0 0
Steven N. Welch 0 - 0 100,000 0 0
William J. Forbes 0 - 10,000 42,500 0 0
Carole L. Hughes 0 - 4,000 18,000 0 0

- ------------------
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 15, 2000, certain
information with respect to the beneficial ownership of the Common Stock by: (i)
each of the Company's Directors, (ii) each officer named in the Summary
Compensation Table, (iii) all directors and executive officers of the Company as
a group, and (iii) each other person (including any "group," as that term is
used in Section 13(d)(3) of the Exchange Act) who is known by the Company to own
beneficially 5% or more of the Common Stock. The Company believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares, except as noted below. The address of each person listed below is
750 "B" Street, Suite 2350, San Diego, California 92101, unless otherwise
indicated.

PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES OF CLASS

Malcolm L. Elvey (1) 439,500 8.0%
666 Fifth Avenue
New York, NY 10103

The Sarnoff Trust (2) 375,000 7.0%
P.O. Box 11079
Zephyr Cove, Nevada 89448

Allied Investment Corporation (3) 312,500 5.5%
Allied Investment Corporation II
Allied Capital Corporation II
1666 K Street
Washington, DC 20006

Mortimer R. Feinberg(4) 5,000 *

David J. Feldman (5) 312,950 5.8%
100A Store Hill Road
Old Westbury, NY 11568

Paul H. Bellamy (6) --- ---

Golder, Thoma, Cressey, Rauner Fund IV, L.P. (7) 4,275,000 46.3%

Joseph P. Nolan (7) --- ---

Cary A. Sarnoff (8) 478,890 8.8%

David A. Higson --- ---

Carole L. Hughes (9) 148,763 2.8%

Steven N. Welch --- ---

All directors and executive officers as a
group (10) (5 persons) 1,097,153 19.4%

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

* Less than 1%

(1) Includes options to purchase 157,500 shares of the Company's Common Stock
granted to Mr. Elvey under the Plan.
(2) The Sarnoff Trust is a revocable trust of which Cary A. Sarnoff and his
wife, Michelle A. Sarnoff, are settlors, trustees and beneficiaries.
(3) These entities in the aggregate own warrants to purchase an aggregate of
312,500 shares of Common Stock at an exercise price of $5.80 per share,
subject to adjustment.
(4) Consists of options to purchase 5,000 shares of the Company's Common Stock
granted to Mr. Feinberg under the Plan.
(5) Includes options to purchase 62,500 shares of the Company's Common Stock
granted to Mr. Feldman under the Plan.
(6) Mr. Bellamy has no equity ownership.
(7) GTCR is the direct owner of 19,012.5 shares of Series A Convertible
Preferred Stock which are convertible into 3,656,250 shares of Common Stock
and 2,437.50 shares of Series C Convertible Preferred Stock which are
convertible into 243,750 shares of Common Stock. GTCR IV, L.P., a limited
partnership, is the general partner of GTCR and Golder, Thoma, Cressey,
Rauner, Inc. ("GTCR Inc.") is the general partner of GTCR IV, L.P. As such,
they may be deemed to be the indirect beneficial owners of such securities.
Mr. Nolan is a principal of GTCR Inc.
(8) Includes shares owned by The Sarnoff Trust and options to purchase 100,000
shares of the Company's Common Stock granted to Mr. Sarnoff under the Plan.
See Note (2).
(9) Includes options to purchase 22,000 shares of the Company's Common Stock
granted to Ms. Hughes under the Plan.
(10) Includes options to purchase 309,500 shares of the Company's Common Stock
granted under the Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For as long as The Sarnoff Trust owns 20% or more of the Common Stock
issued in connection with the acquisition of Sarnoff Deposition Services
("SDS"), the Company has agreed to nominate, recommend and use its best efforts
to have Mr. Sarnoff elected as a director of the Company.

SDS was a party to an agreement with Edward Sarnoff, the father of
Cary Sarnoff, pursuant to which SDS agreed to pay to Edward Sarnoff, in the
event of the sale of SDS, the amount of $1.0 million payable in equal monthly
installments over a period of five years. In connection with the Company's
acquisition of SDS, the Company assumed the obligations of SDS under this
agreement. (Additionally, a substantial portion of the goodwill associated with
the acquisition of SDS was written off as permanently impaired as of December
31, 1999.)

In January 1999, the Company acquired all the stock of CAT-LINKS,
Inc., a corporation owned by Cary Sarnoff for a purchase price consisting of
50,000 shares of Common Stock of the Company and the assumption of a $170,000
promissory note payable to Cary Sarnoff. The promissory note was paid in full
during 1999. (Goodwill associated with this acquisition, of approximately
$381,000 was written off as permanently impaired as of December 31, 1999.)

On October 23, 1996, the Company entered into a Purchase Agreement, as
amended (the "Purchase Agreement"), pursuant to which the Company sold to GTCR
and Antares Leveraged Capital Corp. (collectively, the "Investors") 21,937.5 and
562.5 shares of Series A Convertible Preferred Stock, respectively, for an
aggregate purchase price of $22.5 million. In addition, in January 1998, the
Investors were given the further right on or prior to December 2, 1999 to
acquire up to 5,000 shares of Series B Convertible Preferred Stock at a price of
$1,000 per share. In June 1998, GTCR acquired an option to acquire up to an
additional 2,500 shares of Series B Convertible Preferred Stock at a price of
$1,000 per share, which stock is convertible into an aggregate of 208,333 shares
of Common Stock at a conversion price of $12.00 per share. In August 1998, GTCR
converted its options to acquire 7,500 shares of Series B Convertible Preferred
Stock into 375,000 shares of Common Stock. In connection with the Company's
acquisition of Gregory & Gregory Associates and Gregory & Gregory Staffing in
August 1998, GTCR guaranteed the repayment of a $2.5 million overadvance made to
the Company under the Loan Agreement and received a fee of $125,000 in
consideration of such guarantee. In January 1999, GTCR paid $2,437,500 under the
guarantee and received a new series of convertible preferred stock (Series C
Convertible Preferred Stock) of the Company which is identical to the Series A
Convertible Preferred Stock except that it has a conversion price of $10.00 per
share. The liquidation value of this new series is $2.5 million. In February
1999, GTCR guaranteed the repayment of 50% of a $3 million overadvance made to
the Company under the Loan Agreement and is entitled to receive a fee of
$75,000. In April 1999, GTCR paid $1.5 million pursuant to its guaranty. GTCR
received a subordinated promissory note in the amount of such payment, which
note is due and payable, as extended, on October 16, 2000, together with
interest at the rate of 18% per annum.

The Series A Convertible Preferred Stock is convertible into Common
Stock of the Company at a conversion price of $6.00 per share (subject to
anti-dilution adjustments) and bears cumulative annual dividends at the rate of
6% ($60.00) per annum. The holders of Series A Convertible Preferred Stock have
a liquidation preference of $1,000 per share, plus accrued dividends. Holders of
Series A Convertible Preferred Stock have the right to vote together with the
holders of Common Stock and are entitled to one vote for each whole share of
Common Stock into which the Series A Convertible Preferred Stock is convertible
(presently 166 2/3 votes per share). GTCR was granted various rights to ask for
registration under the Securities Act of any shares of Common Stock acquired by
it upon conversion of the Series A Convertible Preferred Stock. Without the
consent of the holders of a majority of the Series A Convertible Preferred
Stock, the Company may not take various actions, including paying dividends on
capital stock if there are any accrued but unpaid dividends on the Series A
Convertible Preferred Stock, issuing any equity securities which are senior to
or on a parity with the Series A Convertible Preferred Stock, merging with
another entity, selling or otherwise disposing of all or substantially all its
assets, or acquiring other entities. In addition, the Company may not issue in a
private offering any equity securities without first offering the holders of
Series A Convertible Preferred Stock the right to acquire their pro rata share.
In connection with the Purchase Agreement, the Investors and Malcolm L. Elvey,
Chairman of the Board of the Company, Cary A. Sarnoff, a director of the
Company, David J. Feldman, former President of the Company, CMNY Capital L.P.
and Allied entered into a Stockholder's Agreement dated as of October 23, 1996,
as amended (the "Stockholder's Agreement"), pursuant to which (a) the parties
agreed to vote their shares to elect as directors four representatives
designated by management, two representatives designated by GTCR and four
representatives jointly designated by GTCR and management; provided, however,
that if they are unable to agree on such joint designees within 90 days, then
GTCR may elect the joint designees; (b) management granted to the other
stockholders rights of first refusal to acquire their shares if they desire to
sell the same, subject to exceptions for public sales and for transfers to
family members; and (c) if the Company's Board of Directors approves a sale of
the Company's assets or capital stock (whether by merger or otherwise), each
stockholder other than Allied and CMNY Capital L.P. agreed to consent to such
transaction.

The Series C Convertible Preferred Stock is identical to the Series A
Convertible Preferred Stock except that it is junior to the Series A Convertible
Preferred Stock, has a conversion price of $10.00 per share and has 100 votes
per share.

In February 1997, the Company engaged Harlingwood Partners, L.P., a
partnership of which Mr. White is a principal ("Harlingwood Partners"), to
provide acquisition services for acquisitions other than in the court reporting
area. Harlingwood Partners was entitled to a fee of 1% of value of each
completed transaction. In connection with the acquisitions of A-L Associates and
A-L Attorneys on Assignment in May 1998 and Gregory & Gregory Associates and
Gregory & Gregory Staffing in August 1998, Harlingwood Partners received total
fees of $10,000 in 1999 and $162,500 in 1998. (Goodwill associated with A-L was
written off as permanently impaired as of December 31, 1999.)

Additionally, in February 1997, the Company entered into a management
services agreement with Harlingwood Partners, L.P., pursuant to which
Harlingwood provided management services, including Mr. David White acting as
Chief Executive Officer of the Company. This agreement terminated effective in
June 1998 upon the Company entering into an employment agreement with David
White. Mr. White fulfilled all of Harlingwood's obligations under the management
agreement, including acting as Chief Executive Officer of the Company . In
connection with the management agreement, the Company granted options to
Harlingwood to purchase 75,000 shares of Common Stock at an exercise price of
$18.00 per share, which were forfeited during 1999, and sold to Harlingwood
125,000 shares of Common Stock at a price of $6.25 per share, which purchase
price was paid by Harlingwood issuing to the Company a promissory note in the
principal amount of $781,250, bearing interest at the rate of 7% per annum. The
note is secured by a pledge of the shares and is payable in full on April 15,
2001. On December 15, 1997, Harlingwood exercised options to purchase 50,000
shares of Common Stock at an exercise price of $7.50 per share and delivered to
the Company in payment of the exercise price a promissory note in the principal
amount of $375,000, bearing interest at the rate of 7% per annum. The note is
secured by a pledge of the shares and is payable in full on December 15, 2001.
As the result of the foregoing, at December 31, 1999, Harlingwood was indebted
to the Company in the principal amount of $1,156,250. In May 1998, the Company
granted to Harlingwood options to purchase 100,000 shares of Common Stock at an
exercise price of $12.00 per share, which were forfeited during 1999.

The agreements with Harlingwood and Harlingwood Partners, excluding
the Harlingwood promissory notes discussed above, were terminated in October
1999 when Mr. White resigned as an officer and director of the Company.

<PAGE>

PART IV

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

(a)(1). Financial Statements. The following consolidated financial
statements of Esquire Communications Ltd. and Subsidiaries, required by Part II,
Item 8, are included in Part IV of this report:

Independent Auditors' Reports

Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998.

Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.

Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997.

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.

Notes to the Consolidated Financial Statements

Exhibits

(a)(3). Exhibits:

EXHIBIT NO.

3.1 Certificate of Incorporation of the Company, as amended.
Incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998 ("1998
10-K").
3.2 By-Laws of the Company. Incorporated by reference to Exhibit 3.2
to the Current Report on Form 8-K reporting on an event which
occurred October 28, 1996 ("October 1996 8-K").
10.1 Severance Agreement dated as of April 30, 1999, between the
Company and Malcolm L. Elvey.
10.2 Employment Agreement dated November 7, 1997, between the Company
and Carole L. Hughes. Incorporated by reference to Exhibit 10.3
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 ("1997 10-K").
10.3 Purchase Agreement dated October 23, 1996 by and between the
Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR")
and Antares Leveraged Capital Corp. (collectively with GTCR, the
"Investors"). Incorporated by reference to Exhibit 10.4 to
October 1996 8-K.
10.4 Stockholders Agreement dated October 23, 1996 by and between the
Investors, Malcolm L. Elvey, Cary A. Sarnoff, David J. Feldman,
CMNY Capital L.P. and Allied Investment Corporation, Allied
Investment Corporation II and Allied Capital Corporation II.
Incorporated by reference to Exhibit 10.5 to October 1996 8-K.
10.5 Registration Agreement dated October 23, 1996 among the Company
and the Investors. Incorporated by reference to Exhibit 10.6 to
October 1996 8-K.
10.6 Agreement dated October 23, 1996 among the Company, GTCR, David
J. Feldman, The Sarnoff Trust, Allied Investment Corporation I,
Allied Investment Corporation II and Allied Capital Corporation
II relating to registration rights. Incorporated by reference to
Exhibit 10.7 to October 1996 8-K.
10.7 Amended and Restated Credit Agreement dated as of August 10, 1998
by and among Esquire Communications Ltd., as Borrower, Antares
Leveraged Capital Corp., as Agent and the Other Financial
Institutions Party Hereto, as Lenders. Incorporated by reference
to Exhibit 10.10 of 1998 10-K.
10.8 Amendment No. 2 dated as of January 8, 1998 to Purchase Agreement
dated October 23, 1996, among the Company, Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and Antares Leveraged Capital Corp.
Incorporated by reference to Exhibit 10.16 to 1997 10-K.
10.9 Amendment No. 1 dated as of June 17, 1997 to Purchase Agreement
dated October 23, 1996, among Esquire, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Antares Leveraged Capital Corp.
Incorporated by reference to Exhibit 10.3 to June 1997 8-K.
10.10 Amendments No. 1 and No. 2 to Stockholder's Agreement dated
October 23, 1996, among Esquire and various stockholders of
Esquire. Incorporated by reference to Exhibit 10.4 to June 1997
8-K.
10.11 Employment Agreement dated June 30, 1998 between the Company and
David A. Higson. Incorporated by reference to Exhibit 10.19 to
1998 10-K.
10.12 Form of Change in Control Agreement between the Company and each
of its key executive officers. Incorporated by reference to
Exhibit 10.20 to 1998 10-K.
21 Subsidiaries of the Registrant. Incorporated by reference to
Exhibit 21 to 1998 10-K.
23.1 Consent of independent accountants.
23.2 Consent of independent accountants.

(b) Reports on Form 8-K.

None

ESQUIRE COMMUNICATIONS LTD.
AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 1999 and 1998

(With Independent Auditors' Reports Thereon)

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of Esquire Communications Ltd.:

We have audited the accompanying consolidated balance sheet of Esquire
Communications Ltd. and subsidiaries (the "Company") as of December 31, 1999,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Esquire
Communications Ltd. and subsidiaries as of December 31, 1999 and the results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements for the year ended December
31, 1999 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the
Company's recurring losses from operations, negative working capital and
defaults under the Company's debt agreements raise substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

San Diego, California
April 12, 2000
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Esquire Communications Ltd.:

We have audited the accompanying consolidated balance sheet of Esquire
Communications Ltd. and subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the two year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 consolidated financial position of Esquire
Communications Ltd. and subsidiaries as of December 31, 1998 and the results of
their operations and their cash flows for each of the years in the two year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.

KPMG LLP

San Diego, California
March 26, 1999

<PAGE>
ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands, except share data)
<TABLE>
<CAPTION>

Assets (Pledged) 1999 1998
---------- ----------
Current assets:
<S> <C> <C>
Cash $ 1,554 $ 933
Accounts receivable, less allowance for doubtful accounts of
$5,281 in 1999 and $2,098 in 1998 28,427 27,574
Prepaid expenses and other current assets 1,311 2,944
----------- ------------
Total current assets 31,292 31,451

Property and equipment, net 5,451 5,937
Cost in excess of fair value of net identifiable assets of acquired
businesses, less accumulated amortization of $7,100 in 1999
and $6,039 in 1998 86,079 112,840
Other assets, less accumulated amortization of $2,612 in 1999
and $769 in 1998 321 1,028
----------- ------------
$ 123,143 $ 151,256
=========== ============
Liabilities and Stockholders' Equity

Current liabilities:
Bank overdraft $ 2,312 $ 727
Accounts payable 7,629 8,826
Accrued expenses 14,709 6,798
Current portion of long-term debt, including related parties 89,403 3,779
----------- ------------
Total current liabilities 114,053 20,130

Long-term debt, including related parties, net of unamortized discount 5,657 90,329
Other liabilities 831 331
----------- ------------
Total liabilities 120,541 110,790

Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized in series:
Series A convertible preferred stock 22,500 shares authorized;
22,500 shares issued and outstanding in 1999 and 1998;
$22,500 aggregate liquidation preference in 1999 and 1998 -- --
Series C convertible preferred stock 2,500 shares authorized;
2,500 shares issued and outstanding in 1999
$2,500 aggregate liquidation preference in 1999; -- --
Common stock, $.02 par value, 100,000,000 shares authorized;
5,426,229 and 5,213,729 shares issued in 1999 and 1998,
respectively; 5,334,479 and 5,121,979 shares outstanding
in 1999 and 1998, respectively 105 104
Additional paid-in capital 51,556 48,041
Treasury stock, at cost - 91,750 shares in 1999 and 1998 (550) (550)
Notes receivable - stockholder (1,156) (1,156)
Accumulated deficit (47,353) (5,973)
----------- ------------
Total stockholders' equity 2,602 40,466
----------- ------------
Commitments and contingencies -- --

$ 123,143 $ 151,256
=========== ============
</TABLE>

See accompanying notes to consolidated financial statements.

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 1999, 1998 and 1997

(In thousands, except share and per share data)

<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- -----------
(Note 3)
<S> <C> <C> <C>
Revenue $ 144,264 $ 110,586 $ 53,178
Costs and expenses:
Operating expenses 86,534 63,470 30,284
General and administrative expense 53,313 37,214 20,046
Depreciation and amortization 6,719 4,753 2,522
Asset writedown and other charges 27,047 -- --
------------ --------- ------------
173,613 105,437 52,852
------------ --------- ------------
Income (loss) from operations (29,349) 5,149 326
------------ --------- ------------

Interest expense, net (10,619) (6,582) (2,656)
------------ ---------- ------------
Loss before provision (benefit)
for income taxes (39,968) (1,433) (2,330)

Provision (benefit) for income taxes (78) (589) 125
------------ ----------- ------------
Net loss (39,890) $ (844) (2,455)

Dividends on preferred stock (1,490) (1,249) (702)
------------ ----------- ------------
Net loss applicable to common
stockholders $ (41,380) $ (2,093) $ (3,157)
============ =========== ============
Net loss per common share:
Basic and diluted $ (7.76) $ (0.48) $ (1.12)
============ =========== ============
Weighted-average shares outstanding:
Basic and diluted 5,330,815 4,352,055 2,815,142
</TABLE>

See accompanying notes to consolidated financial statements.
ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years ended December 31, 1999, 1998 and 1997

(In thousands, except share data)
<TABLE>
<CAPTION>

Addi- Stock-
Series A Series C tional holder Total
convertible convertible Common paid- Trea- notes Accumu- stock
preferred stock preferred stock stock in sury rece- lated holders'
Shares Amount Shares Amount Shares Amount capital stock ivable deficit equity

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 7,500 $ -- -- $ -- 2,375,878 $ 51 $ 14,903 $ (1,300) $-- $ (723) $ 12,931

Issuance of common stock in
connection with acquisitions
of businesses -- -- -- -- 678,000 14 5,680 -- -- -- 5,694
Issuance of common stock in
connection with warrant
exchange offering, net of
issuance costs -- -- -- -- 92,448 2 (177) -- -- -- (175)
Exercise of nonemployee warrants -- -- -- -- 76,540 2 224 -- -- -- 226
Exercise of employee stock options -- -- -- -- 35,333 1 278 -- -- -- 279
Reissuance of treasury stock
in connection with exercise of
employee stock options for
note receivable -- -- -- -- 125,000 -- 31 750 (781) -- --
Issuance of stock options to
non-employees -- -- -- -- -- -- 632 -- -- -- 632
Dividends on preferred stock -- -- -- -- -- -- -- -- -- (702) (702)
Exercise of employee stock
options for note receivable -- -- -- -- 50,000 1 374 -- (375) -- --
Issuance of 7,500 shares of
Series A convertible preferred
stock, net of issuance costs 7,500 -- -- -- -- -- 7,110 -- -- -- 7,110
Net loss -- -- -- -- -- -- -- -- -- (2,455) (2,455)
------- -------- -------- ------ --------- ------ ------- ------- ---- -------- -------
Balance, December 31, 1997 15,000 -- -- -- 3,433,199 71 29,055 (550) (1,156)(3,880) 23,540
======= ======== ======== ====== ========= ====== ======= ======= ===== ======= =======
Issuance of common stock in
connection with acquisitions
of businesses -- -- -- -- 739,290 15 7,066 -- -- -- 7,081
Issuance of stock options in
connection with business
acquisitions -- -- -- -- -- -- 514 -- -- -- 514
Exercise of nonemployee warrants -- -- -- -- 570,615 11 3,894 -- -- -- 3,905
Exercise of employee stock options -- -- -- -- 3,875 -- 31 -- -- -- 31
Exchange of options to purchase
Series B convertible preferred
stock for common stock -- -- -- -- 375,000 7 (7) -- -- -- --
Dividends on preferred stock -- -- -- -- -- -- -- -- -- (1,249) (1,249)
Issuance of 7,500 shares of
Series A convertible preferred
stock, net of issuance costs 7,500 -- -- -- -- -- 7,488 -- -- -- 7,488
Net loss -- -- -- -- -- -- -- -- -- (844) (844)
------- -------- -------- ------ -------- ------ ------- ------- ---- -------- --------
Balance, December 31, 1998 22,500 -- -- -- 5,121,979 104 48,041 (550) (1,156)(5,973) 40,466
======= ======== ========= ====== ========= ====== ======= ======= ===== ======= ========
Issuance of common stock in
connection with acquisitions
of businesses -- -- -- -- 212,500 1 1,025 -- -- -- 1,026
Issuance of stock options to
non-employees -- -- -- -- -- -- 4 -- -- -- 4
Dividends on preferred stock -- -- -- -- -- -- -- -- -- (1,490) (1,490)
Issuance of 2,500 shares of
Series C convertible preferred -- -- 2,500 -- -- -- 2,486 -- -- -- 2,486
stock, net of issuance costs -- -- -- -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- -- -- (39,890) (39,890)
------- -------- -------- ------ -------- ----- ------- ----- ------- ------- --------
Balance, December 31, 1999 22,500 $ -- 2,500 $ -- 5,334,479 $105 $51,556 $(550) $(1,156)$(47,353)$2,602
======= ======== ======== ====== ========= ===== ======= =====- ======= ======== =======
</TABLE>

See accompanying notes to consolidated financial statements.
ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31, 1999, 1998 and 1997

(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (39,890) $ (844) $ (2,455)
Adjustments to reconcile net loss to net cash
used in operating activities, excluding effect
of business acquisitions:
Depreciation and amortization 6,719 4,753 2,522
Loss on disposal of property and equipment 5 -- --
Asset writedown and other charges 27,047 -- --
Commission expense related to grant of
stock options 4 -- 329
Provision for deferred income taxes -- -- 140
(Increase) decrease in assets:
Accounts receivable, net (853) (1,100) (2,815)
Prepaid expenses and other current assets 1,221 (417) (415)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses and
unearned revenue 5,224 (3,037) 1,753
Other liabilities 502 166 (95)
------------- -------------- ------------
Net cash used in operating activities ( 21) (479) (1,036)
------------- -------------- ------------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (1,283) (43,683) (34,866)
Proceeds from sale of property and equipment 96 -- --
Purchases of property and equipment (2,795) (3,324) (737)
------------- -------------- ------------
Net cash used in investing activities (3,982) (47,007) (35,603)
------------- -------------- ------------
Cash flows from financing activities:
Change in bank overdraft 1,586 727 --
Proceeds from long-term debt 5,311 39,650 31,846
Payment of preferred stock dividends -- -- (627)
Principal payments on long-term debt (4,360) (3,110) (1,552)
Payment of deferred financing costs (399) (388) (538)
Proceeds from exercise of employee stock
options -- 31 279
Warrant exchange offering issuance costs -- -- (175)
Proceeds from issuance of Series A convertible
preferred stock, net -- 7,488 7,110
Proceeds from issuance of Series C convertible
preferred stock, net 2,486
Proceeds from exercise of warrants, net -- 3,905 226
------------- -------------- ------------
Net cash provided by financing activities 4,624 48,303 36,569
------------- -------------- ------------
Net increase (decrease) in cash 621 817 (70)
Cash at beginning of year 933 116 186
------------- -------------- ------------
Cash at end of year $ 1,554 $ 933 $ 116
============= ============== ============
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

(1) BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a going concern
basis.

The Company, largely since its inception, has experienced a deficiency in
working capital and recurring operating losses, which have been
funded primarily through term debt financing.

The Company is unable to repay principal, in the amount of $82,842 due
January 3, 2000 under its Revolving Loan Agreement ("Loan Agreement") and
suspended interest payments due thereunder effective November 1999. The
lenders to the Loan Agreement have agreed to both forebear receiving the
payment of interest for the period November 1999 to April 14, 2000 in the
amount of approximately $3,300 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 and is
currently negotiating with the lenders thereunder to continue to forebear
receiving principal and interest or otherwise restructure the terms
thereof. In the event the Company is unable to successfully renegotiate an
appropriate period of continued forebearance or other satisfactory
restructuring of the Loan Agreement, the lenders thereunder have the right
to accelerate the loan and exercise their remedies under the loan
documents, including the foreclosure of their security interests 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.

The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

(a) PRINCIPLES OF CONSOLIDATION AND DESCRIPTION OF BUSINESS

The accompanying consolidated financial statements include the
financial statements of Esquire Communications Ltd. and its
subsidiaries, all of which are wholly owned (collectively, the
"Company"). All significant intercompany accounts and transactions
have been eliminated.

The Company is the nation's leading provider of court reporting
services to law firms, insurance companies and major corporations
through Company-owned offices located in 24 markets in 11 states and
the District of Columbia. In addition, the Company provides permanent
and temporary staffing of financial and legal professionals, legal
video services, record retrieval, process service and document
depository services in a limited number of markets.

(b) REVENUE RECOGNITION

Revenue and the related direct costs of court reporters and
transcribers are recognized when services rendered are billable, which
generally occurs at the time the final documents are transcribed and
completed.

Permanent staffing income is recognized when a candidate is accepted
for employment. Provisions are made for estimated losses in
realization (principally due to failure of applicants to complete
stipulated employment periods). Temporary staffing income is
recognized when the temporary personnel provide the services.

Property and equipment are recorded at cost. Depreciation is computed
using both accelerated and straight-line methods over the estimated
useful lives of the assets. Property and equipment held under capital
leases and leasehold improvements are amortized on a straight-line
basis over the shorter of the estimated useful lives of the assets or
the lease terms. Maintenance and repairs are charged to expense as
incurred while improvements are capitalized.

(d) GOODWILL AND OTHER INTANGIBLE ASSETS

The cost in excess of the fair values of net identifiable tangible and
intangible assets of acquired businesses (goodwill) is amortized using
the straight-line method over periods ranging from 15 to 40 years.
The Company periodically reviews goodwill to evaluate whether changes
have occurred that would suggest that goodwill may be impaired based
on the estimated undiscounted cash flows of the assets acquired over
the remaining amortization period. If this review indicates that the
remaining estimated useful life of goodwill requires revision or that
the goodwill is not recoverable, the carrying amount of the goodwill
is reduced by the estimated shortfall of cash flows on a discounted
basis. Effective October 1, 1999, the Company changed the estimated
period of benefit to 15 years for all of its goodwill (see discussion
of impairment in Note (5)).

Other intangible assets consisting primarily of customer lists,
covenants not to compete and deferred financing costs are amortized
using the straight-line method over the assets' respective estimated
lives or terms, typically no more than ten years.

Amortization expense for fiscal years 1999, 1998 and 1997 related to
goodwill and other intangible assets was $4,886, $3,217 and $1,824,
respectively.

(e) INCOME TAXES

The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

(f) LOSS PER COMMON SHARE

The following table sets forth the computation of basic and diluted
net loss per share:
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
Numerator:
<S> <C> <C> <C>
Net loss $ (39,890) $ (844) $ (2,455)
Less dividends on preferred stock (1,490) (1,249) (702)
---------------- ---------------- ----------------

Numerator for basic and diluted net loss per
share - loss available to common stockholders $ (41,380) $ (2,093) $ (3,157)
================ ================ ================

Denominator for basic and diluted net loss per
share - weighted-average shares outstanding 5,330,815 4,352,055 2,815,142
================ ================ ================

Basic and diluted net loss per share $ (7.76) $ (0.48) $ (1.12)
================ ================ ================

Options, warrants, convertible preferred stock and debt and
contingently issuable shares of common stock totaling approximately
5,847,292, 4,280,818 and 2,717,216 shares were excluded from the
computations of net loss per common share for the years ended December
31, 1999, 1998 and 1997, respectively, as their effect is
anti-dilutive.
</TABLE>

(g) ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for its stock option plan in accordance with the
provisions of APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and the Company provides pro forma net income disclosures
for employee stock option grants made as if the Company had adopted
the fair value method under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION.

(h) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF

Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or change in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future cash flows
(undiscounted and without interest charges) expected to be generated
by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less selling costs.

(i) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, accounts receivable, current maturities of
long-term debt, accounts payable and accrued expenses approximates
their fair value because of the short-term maturity of these
instruments. The carrying value of long-term debt approximates its
fair value as such amounts bear rates of interest which approximate
the Company's current borrowing rate for instruments with similar
terms.

(j) SEGMENT INFORMATION

The Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, in 1998. This statement
establishes standards for the reporting of information about operating
segments in annual and interim financial statements and requires
restatement of prior year information. Operating segments are defined
as components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief
operating decision maker(s) in deciding how to allocate resources and
in assessing performance. SFAS No. 131 also requires disclosures about
products and services, geographic areas and major customers. The
adoption of SFAS No. 131 did not affect results of operations or
financial position but did affect the disclosure of segment
information, as presented in Note 11.

(k) ACCOUNTING STANDARDS

In June 1998, Statement of Financial Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
was issued and is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. This statement establishes accounting
and reporting standards for derivative instruments and hedging
activities.

The Company anticipates that the adoption of SFAS No. 133 will not
have a material effect on the financial position, results of
operations or liquidity of the Company.

(l) 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, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.

(m) RECLASSIFICATIONS

Certain reclassifications have been made to the 1998 and 1997
balances in order to conform to the presentation for the year ended
December 31, 1999.

(3) BUSINESS COMBINATIONS

Between 1993 and 1999, the Company pursued an aggressive acquisition
strategy of consolidating the highly fragmented court reporting
industry. In pursuit of this strategy, since 1997 the Company acquired
42 court reporting companies and 3 providers of permanent and
temporary legal and financial professionals. Of these acquisitions, 17
were acquired in 1997, 25 were acquired in 1998 and three were
acquired in 1999. All but one of these acquisitions have been
accounted for using the purchase method, and a substantial portion of
each acquisition's purchase price was represented by goodwill in the
amount of $121,276 before subsequent amortization and write-off.

(a) PURCHASE BUSINESS COMBINATIONS

The financial statements include the operating results of each
acquired business from the date of acquisition.

During 1999, the Company acquired the assets and liabilities of 3
court reporting service related companies. The aggregate consideration
paid for these acquisitions consisted of $1,420 in cash, $220 in
subordinated notes payable, and 50,000 unregistered shares of the
Company's common stock valued at $170. The cost in excess of fair
value of net identifiable assets acquired was approximately $1,787.

During 1998, the Company acquired the assets and liabilities of 22
court reporting agencies and three professional placement firms. The
aggregate consideration paid for these acquisitions consisted of
$44,792 in cash, $7,274 in subordinated notes payable, 901,794
unregistered shares of the Company's common stock valued at $7,877 and
120,000 stock options valued at $514. The cost in excess of fair value
of net identifiable assets acquired was approximately $54,251.

During 1997, the Company acquired the assets and liabilities of 17
court reporting agencies. The aggregate consideration paid for these
acquisitions consisted of $34,296 in cash, $5,829 in subordinated
notes payable, and 678,000 unregistered shares of the Company's common
stock valued at $5,694. The cost in excess of fair value of net
identifiable assets acquired was approximately $44,952.

The following unaudited pro forma information assumes the acquisitions
completed in 1998 and 1997 occurred on January 1, 1997. Acquisition
pro forma information with respect to acquisitions completed in 1999
is immaterial and thus not provided. These results are not necessarily
indicative of future operations, nor of results that would have
occurred had the acquisitions and other transactions been consummated
as of the beginning of the periods presented:

1998 1997
------------ -----------
Revenue $ 135,979 $ 135,590
Net (loss) income applicable to common
stockholders (1,827) (489)
Net (loss) income per common share - basic (0.40) (0.13)
Net (loss) income per common share - diluted (0.40) (0.13)

(b) POOLING OF INTERESTS BUSINESS COMBINATION

On November 7, 1997, the Company merged with Jurist-Begley Reporting
Services, Inc., Jurist, Inc. and Aarons & Associates, Inc.
(collectively Jurist) in exchange for 427,214 shares of the Company's
common stock. Jurist is a Philadelphia, Pennsylvania-based court
reporting company.

The merger constituted a tax-free reorganization and has been
accounted for as a pooling of interests, and accordingly, the
accompanying consolidated financial statements have been restated to
include the results of Jurist for all periods presented. The fiscal
year-end of Jurist was conformed to the Company's.

Revenue and net loss from continuing operations of the combining
companies for the periods preceding the acquisition are as follows:

JANUARY 1, 1997
TO NOVEMBER 6,
1997
---------------
Revenue:
Esquire $ 37,010
Jurist 3,952
--------------
$ 40,962
==============

Net loss before extraordinary item:
Esquire $ (1,475)
Jurist (511)
--------------
$ (1,986)
==============

The combined financial results presented above include adjustments
made to conform to the accounting policies of the two companies. In
connection with the merger, the Company recorded charges of $922 in
the year ended December 31, 1997. These charges include legal,
accounting and other fees.

(4) PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31, 1999
and 1998:
Depreciable
1999 1998 Lives
------------- -------------- --------------
Buildings $ 184 $ 208 31 years
Equipment 9,427 8,128 5 to 7 years
Leasehold improvements 1,970 1,782 5 to 10 years
------------- --------------
11,581 10,118
Less accumulated depreciation
and amortization (6,130) (4,181)
-------------- ---------------
$ 5,451 $ 5,937
============== ===============

Depreciation and amortization expense, exclusive of the charge for fixed asset
write off of $350, for property and equipment amounted to $1,833, $1,537 and
$698 for the years ended December 31, 1999, 1998 and 1997, respectively.

<PAGE>

(5) ASSET WRITE DOWN AND OTHER CHARGES

Goodwill related to certain operating locations was deemed impaired and a
charge to operating earnings for $25,700 was recognized at December 31,
1999. The Company determined the goodwill impairment by measuring the
difference between the carring amount of goodwill to fair value (calculated
as the discounted projected cash flows for disaggregated locations using a
discount rate commensurate with the risk involved). The discount rate used
for 1999 was 18%. The Company believes that this is the appropriate method
of measurement of the remaining fair value of goodwill, considering the
Company's circumstances, particularly with the continuing exposure to the
decline in revenues and margins in certain disaggregated locations.

As of December 31, 1999, fixed assets in the amount of $710, with
accumulated depreciation of $360, were written off and charged to operating
earnings in the amount of $350.

As of December 31, 1999, a charge to operating earnings in the amount of
$997 was recognized to write off capitalized costs associated with the
development of a new management information system for scheduling, billing
and paying independent contractors due to the discontinuance of the
project during the fourth quarter.

(6) LONG-TERM DEBT

Long-term debt consists of the following as of December 31, 1999 and 1998:

1999 1998
--------------- --------------

Revolving loan agreement (a) $ 82,842 $ 79,715
Promissory notes (b) 4,183 8,402
Contract obligation (c) 253 341
Other notes and obligations (d) 1,531 815
Convertible notes (e) 4,476 4,560
Common stock repurchase guaranty (f) 275 275
Loan from preferred stockholder (g) 1,500 ---
--------------- ---------------
95,060 94,108

Less current portion of long-term debt (89,403) (3,779)
--------------- ---------------

$ 5,657 $ 90,329
================ ===============

(a) The Company is presently, and for the foreseeable future, unable to
repay the three-year revolving Loan Agreement entered into in December
1996, as amended, which became due January 3, 2000. The lenders to the
Loan Agreement have agreed to both forebear receiving the payment of
interest for the period November 1999 to April 14, 2000 in the amount
of approximately $3,300 and extend the maturity date of the Credit
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 and may not be able to
renegotiate or enter into a replacement facility.

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 also required the maintenance of certain financial ratios and
covenants. During 1999 and 1998, the Company did not comply with
certain covenant requirements and exceeded permitted capital
expenditures, for which the Company received lender waivers and
executed amendments to the Loan Agreement.

Borrowings under the Loan Agreement bear interest at either prime rate
or London Inter-Bank Offered Rate (LIBOR), at the Company's election,
plus an applicable margin rate. The effective rate at December 31,
1999 and 1998 was 10.8% and 8.7%, respectively.

Substantially all other lenders to the Company have entered into a
subordination agreement with this financial institution.

The Loan Agreement, as amended, consists of two segments. Segment A
consists of revolving loans totaling $77,000. The interest rate on the
borrowings under this segment is prime rate or LIBOR, plus an
applicable margin rate of 1.75% and 3.25%, respectively, plus a PIK
(interest which is accrued but not payable until loan maturity) margin
of 0.75% and an additional PIK margin of 1.25% on outstanding
borrowings in excess of the available borrowing capacity based upon
operating cash flows, if any. Segment B consists of revolving loans
totaling $3,800 through May 31, 1999 and $6,500 thereafter. The
interest rate on the borrowings under this segment is prime rate, plus
an applicable margin rate of 1.75%, plus a PIK margin of 1.50% from
January 1, 1999 through June 30, 1999, 2.25% from July 1, 1999 through
September 30, 1999 and 3.75% thereafter. No payments with respect to
the PIK margin are due until January 3, 2000, subject to certain
provisions. The lenders have agreed to forbear receiving payments with
respect to the PIK margin and extend the due date to April 14, 2000.

(b) Promissory notes with former owners of acquired businesses are
generally payable in quarterly installments plus interest at rates
ranging from no interest to 10% through August 2003. In December 1998
and January and February 1999, the Company amended certain of these
promissory notes. These amendments contained provisions to defer all
payments until June 30, 1999 and provide an interest rate of 9% on all
deferred amounts. The Company was current on these obligations as of
December 31, 1999.

(c) Contract obligation -- an agreement with a former employee of an
acquired company, who is related to an officer/director of the
Company, provides for monthly payments of $9 through June 2002. The
Company was current on this obligation as of December 31, 1999.

(d) Other notes and obligations -- outstanding amounts relate to various
equipment capital leases and are payable in aggregate monthly
installments with interest ranging from 8% to 15% through October
2003. The Company was current on these obligations as of December 31,
1999.

(e) Convertible promissory notes with former owners of acquired
businesses, with due dates ranging from November 2000 through June
2003. The notes are convertible at any time at the option of the
Company into shares of the Company's common stock at conversion prices
ranging from $16.00 - $20.00 per share only if certain conditions are
met.

(f) Common stock repurchase guaranty -- contractual obligation to
repurchase 13,750 shares of the Company's common stock at $20.00 per
share from former owners of an acquired business in May 2000. The
obligation is at the option of the former owners.

(g) In February 1999, a preferred stockholder guaranteed $1,500 of an
over-advance made to the Company under the Loan Agreement, and
received a fee of $75 in consideration of such guaranty. In April
1999, the preferred stockholder paid $1,500 pursuant to this
guarantee, which is evidenced by a subordinated promissory note
bearing interest at the rate of 18% per annum, which was due October
1999 and subsequently extended until October 16, 2000. The Company,
presently and for the foreseeable future, is unable to pay interest or
principal outstanding on this note.

In connection with an acquisition in August 1998, a preferred
stockholder guaranteed the repayment of a $2,500 over-advance made to
the Company under the Loan Agreement and received a fee of $125 in
consideration of such guaranty. In January 1999, preferred
stockholders paid $2,500 pursuant to this guaranty and received 2,500
shares of the Company's Series C Convertible Preferred Stock.

Scheduled annual principal payments of long-term debt are as follows:

2000 $ 89,403
2001 3,880
2002 1,308
2003 388
2004 32
Thereafter 49
-----------------
$ 95,060
=================

(7) STOCKHOLDERS' EQUITY

(a) COMMON STOCK

Effective November 30, 1998, the Company's stockholders voted to amend
the Company's Certificate of Incorporation and effect a 1-for-2
reverse stock split of all outstanding common stock, and to increase
the par value of the Company's common stock from $.01 to $.02. All
share and per share amounts have been restated to give effect to the
reverse stock split.

On April 15, 1997, as provided for in the Management Agreement dated
February 13, 1997 between Esquire Communications Ltd., Harlingwood &
Company, LLC (Harlingwood) and David A. White, Harlingwood acquired
125,000 shares of common stock at a price of $6.25 per share. Payment
by Harlingwood was with a promissory note, due on April 15, 2001, in
the amount of $781. The note accrues interest at the rate of 7% per
annum, and the interest is payable on April 15, 2001. The amount due
under the note is secured by a pledge of the 125,000 shares of common
stock issued. The 125,000 shares of common stock were issued out of
the Company's treasury stock.

On December 15, 1997, Harlingwood exercised 50,000 stock options
granted under the Company's stock option plan at the exercise price of
$7.50 per share, resulting in the issuance of 50,000 shares of common
stock. Payment by Harlingwood was with a promissory note due on
December 15, 2001 in the amount of $375. The note accrues interest at
the rate of 7% per annum, and the interest is payable on December 15,
2001. The amount due under the note is secured by a pledge of the
50,000 shares of common stock issued.

In connection with the 1999, 1998 and 1997 acquisitions, the Company
issued 212,500, 739,290 and 678,000 shares of common stock,
respectively, valued at approximately $1,026, $7,081 and $5,694,
respectively.

(b) PREFERRED STOCK

The Series A Convertible Preferred Stock is convertible into common
stock of the Company at a conversion price of $6.00 per share (subject
to anti-dilution adjustments) and bears cumulative annual dividends at
the rate of 6% ($60.00 per share) per annum. The holders of Series A
Convertible Preferred Stock have a liquidation preference of $1,000
per share, plus accrued dividends. Holders of Series A Convertible
Preferred Stock have the right to vote together with the holders of
common stock and are entitled to one vote for each whole share of
common stock into which the Series A Convertible Preferred Stock is
convertible (presently 166 2/3 votes per share).

In January 1999, pursuant to a guarantee agreement entered into by the
Company with a preferred stockholder (Note 6(g)), the Company issued
2,500 shares of Series C convertible preferred stock. The Series C
Convertible Preferred Stock is identical to the Series A Convertible
Preferred Stock, except that it has a conversion price of $10.00 per
share and has 100 votes per share.

(8) STOCK OPTIONS AND WARRANTS

(a) STOCK OPTION PLAN

In 1993, the Company adopted a stock option plan (the Plan) pursuant
to which the Company's Board of Directors may grant stock options to
officers, employees, directors, consultants and independent
contractors of the Company. The Plan was amended in 1998 to increase
the number of shares of common stock issued under the Plan. The Plan,
as amended, authorizes grants of options to purchase up to 1,750,000
shares of authorized but unissued common stock. Stock options are
granted with an exercise price equal to the stock's fair market value
at the date of grant. Stock options have ten-year terms and generally
vest and become fully exercisable over a three-year period, commencing
one year from the date of grant.

The per share weighted-average fair value of stock options granted
during 1999, 1998 and 1997 was $.87, $5.69 and $3.16, respectively, on
the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: 1999 - expected volatility
of 71%, expected dividend rate of 0%, risk-free interest rate of
5.875% and expected life of five years; 1998 - expected volatility of
51%, expected dividend yield of 0%, risk-free interest rate of 4.69%,
and an expected life of five years; 1997 - expected volatility of 30%,
expected dividend yield of 0%, risk-free interest rate of 6%, and an
expected life of five years.

The Company applies APB Opinion No. 25 in accounting for its Plan, and
accordingly, no compensation cost has been recognized for its employee
stock options in the consolidated financial statements. Had the
Company determined compensation cost based on the fair value at the
grant date for its employee stock options under SFAS No. 123, the
Company's net loss would have been adjusted to the pro forma amounts
indicated below:

1999 1998 1997
----------- ----------- ---------
Net loss applicable to common
stockholders:
As reported $ (41,380) $ (2,093) $ (3,157)
Pro forma (41,984) (3,279) (3,511)

Basic and diluted net loss per
common share:
As reported $ (7.76) $ (0.48) $ (1.12)
Pro forma (7.88) (0.75) (1.25)

Pro forma net loss reflects only options granted in 1998, 1997 and
1996. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net
loss amounts presented above because compensation cost is reflected
over the options' vesting period of three years, and compensation cost
for options granted prior to January 1, 1996 is not considered.

Stock option activity during the periods indicated is as follows:

WEIGHTED-AVERAGE
NUMBER OF SHARES EXERCISE PRICE
----------------- ----------------
Balance at January 1, 1997 364,250 $ 7.52
Granted 349,000 9.96
Exercised (85,333) 7.68
Forfeited (7,683) 8.00
---------- -------

Balance at December 31, 1997 620,234 8.84
Granted 319,500 11.44
Exercised (3,875) 8.00
Forfeited (40,625) 8.25
---------- -------

Balance at December 31, 1998 895,234 9.80
Granted 302,500 1.76
Exercised -- --
Forfeited (273,442) 11.72
---------- -------

Balance at December 31, 1999 924,292 $ 6.48
========== =======

The following table summarizes information about Plan options
outstanding at December 31, 1999:

WEIGHTED- WEIGHTED-
AVERAGE NUMBER OF AVERAGE EXERCISE
REMAINING OPTIONS PRICE OF OPTIONS
CONTRACTUAL CURRENTLY CURRENTLY
EXERCISE PRICE LIFE EXERCISABLE EXERCISABLE
---------------- ------------ --------------- -------------------
$1.03 - $8.00 5.76 years 363,790 $ 7.43
$10.63 - $13.50 8.22 years 71,335 11.89

At December 31, 1999, 1998 and 1997, the number of options exercisable
was 435,125, 479,837 and 251,983, respectively, and the
weighted-average exercise price of those options was $8.16, $9.25 and
$7.75, respectively.

(b) OPTIONS GRANTED OUTSIDE THE PLAN

During the year ended December 31, 1999, the Company granted to
non-employees options to purchase 30,000 shares of the Company's
common stock outside the plan at a price of $8.00, which was also the
fair value of the stock options granted at the date of grant. The
Company recognized $4 of commission expense relating to these options
during the year ended December 31, 1999 using the Black-Scholes
option-pricing model. The following weighted-average assumptions were
included in this method for 1999: expected volatility of 71%; expected
dividend yield of 0%; risk-free interest rate of 5.875%; and an
expected life of five years.

During the year ended December 31, 1998, the Company granted to
non-employees options to purchase 120,000 shares of the Company's
common stock outside the Plan at prices ranging from $12.50 to $18.00.
The Company capitalized as goodwill $514 for these options which were
granted in connection with certain business acquisitions accounted for
as a purchase, using the Black-Scholes option-pricing model. The
Company determined that the per share weighted-average fair value of
stock options granted outside the Plan during 1998 was $12.25 on the
date of grant. The following weighted-average assumptions were
included in this method for 1998: expected volatility of 51%; expected
dividend yield of 0%; risk-free interest rate of 4.69%; and an
expected life of five years.

During the year ended December 31, 1997, the Company granted to
non-employees options to purchase 175,000 shares of the Company's
common stock outside the Plan at a price range of $8.00 to $9.00. The
Company recognized $329 of commission expense relating to these
options during the year ended December 31, 1997, and capitalized as
goodwill $303 of commission expense for options granted in connection
with a business acquisition accounted for as a purchase, using the
Black-Scholes option-pricing model. The Company determined that the
per share weighted-average fair value of stock options granted outside
the Plan during 1997 was $8.83 on the date of grant. The following
weighted-average assumptions were included in this method for 1997:
expected volatility of 30%; expected dividend yield of 0%; risk-free
interest rate of 6% and an expected life of five years.

The following table summarizes information about options granted
outside the Plan at December 31, 1999:

WEIGHTED-AVERAGE NUMBER OF OPTIONS WEIGHTED-AVERAGE
REMAINING CURRENTLY EXERCISE PRICE OF
CONTRACTUAL LIFE EXERCISABLE OPTIONS CURRENTLY
EXERCISE PRICE EXERCISABLE
---------------------------- ------------------- ------------------- ----------------------
<S> <C> <C> <C>
$8.00 - $9.00 7.93 years 205,000 $ 8.71
$12.50 - $18.00 7.58 years 120,000 17.23
</TABLE>

At December 31, 1999, 1998 and 1997, the Company had outstanding,
312,500, 354,500 and 951,284 warrants, respectively, at exercise
prices ranging from $5.28 to $9.00 per warrant. At December 31, 1999,
1998 and 1997, the weighted-average exercise price of those warrants
was $5.80, $6.18 and $7.14, respectively, and the weighted-average
remaining contractual life of those warrants was 3.00, 3.59 and 2.86
years, respectively. All warrants outstanding are exercisable at
December 31, 1999.

(9) PROFIT SHARING PLAN

In September 1995, the Company adopted a 401(k) savings plan covering all
eligible employees. The plan allows employees to voluntarily contribute up
to l5% of their compensation. The Company may make discretionary matching
contributions prior to the end of each plan year. The current matching
percentage is 10%. The Company may also make additional discretionary
contributions to the plan. The Company's total contributions to the plan
for 1999, 1998 and 1997 amounted to $291, $34 and $15, respectively.

(10) INCOME TAXES

The income tax provision (benefit) for the years ended December 31, 1999,
1998 and 1997 is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---------------- --------------- ----------------
Current tax expense (benefit):
<S> <C> <C> <C>
Federal $ (108) (604) --
State and city 30 15 (15)
---------------- --------------- ----------------
Total current (78) (589) (15)
---------------- --------------- ----------------
Deferred tax (benefit) expense:
Federal -- -- 101
State and city -- -- 39
---------------- --------------- ----------------
Total deferred -- -- 140
---------------- --------------- ----------------
Total income tax provision (benefit) $ (78) $ (589) $ 125
================ =============== ================

The income tax provision (benefit) for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the combined
federal and state statutory rate of 40% as follows:

1999 1998 1997
------------------- -------------- --------------
Computed at combined federal and state $(15,987) $ (487) $ (792)
statutory rate
State tax 18 15 24
Change in the valuation allowance 15,660 (329) 489
Amortization of goodwill 207 210 157
Nondeductible expenses 116 -- 38
Pre-acquisition earnings -- 174
Other (92) 2 35
-------------- --------------- -------------
$ (78) $ (589) $ 125
============== =============== =============
</TABLE>

<PAGE>

Significant components of the Company's net deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:

1999 1998
--------------- --------------
Deferred tax assets:
Contract obligation $ 110 $ 136
Allowances and accrued expenses 1,752 202
Net operating loss (NOL) carryforwards 7,245 1,869
Goodwill write down 10,279 --
Other 188
----------- ------------

Total gross deferred tax assets 19,574 2,207

Less valuation allowance (15,820) (160)
------------ ------------

Net deferred tax assets 3,754 2,047

Deferred tax liabilities - depreciation and
amortization (3,754) (2,047)
------------- --------------

Net deferred tax asset $ -- $ --
============= ==============

At December 31, 1999, the Company has approximately $17,581 in net
operating loss carryforwards, which begin to expire in 2017.

In accordance with Internal Revenue Code Section 382, the annual
utilization of net operating loss carryforwards and credits existing prior
to a change in control may be limited.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income in the
periods in which those temporary differences become deductible. Management
believes that there is a risk that certain of these NOL, tax credit
carryforwards and other deferred tax assets may expire unused and,
accordingly, has established a valuation allowance against them.

(11) REPORTABLE SEGMENT DATA

The Company believes that all of its material operations are part of the
legal services industry, and it currently reports as a single industry
segment. The Company's reportable segments are geographically aligned
business units and include three regions within the United States, the
Western region, the Northeast region and the Southeast region. The Western
region includes the Company's operations in California, Colorado and Texas,
the Northeast region includes the Company's operations in Illinois,
Michigan, New Jersey, New York, Pennsylvania and Washington, D.C. and the
Southeast Region includes the Company's operations in Florida and Georgia.

The geographic reportable segments of the Company's revenues, operating
income and identifiable assets are summarized in the following table. The
"Other" column includes corporate related items, income, and expense not
allocated to reportable segments.

WESTERN NORTHEAST SOUTHEAST
REGION REGION REGION OTHER CONSOLIDATED
------------- -------------- -------------- -------------- ----------------
1999:
<S> <C> <C> <C> <C> <C>
Revenue $ 42,459 $ 68,241 $ 33,564 $ -- $ 144,264
Operating income 7,139 8,087 2,764 (47,339) (29,349)
Identifiable assets 24,524 23,631 8,954 66,034 123,143

1998:
Revenue 36,975 56,661 16,950 -- 110,586
Operating income 6,413 7,715 1,352 (10,331) 5,149
Identifiable assets 16,830 16,835 5,490 112,101 151,256

1997:
Revenue 23,813 26,536 2,829 -- 53,178
Operating income 3,473 2,380 551 (6,078) 326
Identifiable assets 9,547 4,521 2,306 66,477 82,851
</TABLE>

No single customer accounted for as much as 10% of consolidated revenue in
1999, 1998 and 1997.

(12) SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for the years ended December 31, 1999, 1998 and 1997 have
included:

1999 1998 1997
-------------- ------------------ ------------------

Interest $ 7,599 $ 6,636 $ 2,687
Income taxes 30 15 78

During 1999, 1998 and 1997, the Company issued 222,920, 739,290 and 678,000
shares of common stock, respectively, in connection with the acquisitions.

During 1998 and 1997, the Company issued 72,120 and 50,313 shares of common
stock, respectively, in connection with noncash exercises of warrants.

During 1997, $627 in preferred stock dividends was paid. At December 31,
1999, 1998 and 1997, accrued and unpaid preferred stock dividends were
$2,888, $1,399 and $150, respectively.

During 1997, 175,000 shares of the Company's common stock were issued for
notes receivable of which 125,000 shares were issued from the Company's
treasury stock.

During 1997, the Company issued 92,448 shares of common stock in connection
with a warrant exchange offering.

<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------

Supplemental noncash investing and financing activities:
<S> <C> <C> <C>
Acquisitions:
Fair value of assets acquired $ (194) 14,359 7,144
Liabilities assumed (2) (8,156) (6,674)
Cash paid for acquisitions 2,693 43,683 34,866
Stock issued (1,026) (7,081) (5,694)
Stock options issued -- (514) --
Notes issued (535) (7,359) (4,707)
</TABLE>

(13) COMMITMENTS

(a) EMPLOYMENT AGREEMENTS

The Company has employment agreements and arrangements with certain of
its executive officers and management personnel. The agreements
generally continue until terminated by expiration of time, the
executive or the Company, and provide for severance payments under
certain circumstances. The majority of the agreements include a
covenant against competition with the Company, which extends for a
period of time after termination. As of December 31, 1999, if all
employees under contract were to be terminated by the Company without
good cause, under these contracts the Company's liability would be
approximately $4,450 payable over the remaining terms of the
employment agreements.

In addition, the Company has entered into change in control agreements
with certain key executive officers which provide that if an
executive's employment is terminated within six months after a change
in control of the Company, or the executive terminates employment
within such six month period of time, then the executive is entitled
to a lump sum severance payment ranging from $117 to $263 based upon
salary levels currently in effect, and all of the executive's options
shall immediately vest. Written notice has been provided that all
change of control agreements will expire by their terms and will not
be renewed beyond June 30, 2000. As of December 31, 1999, if a change
of control were to occur, the Company's liability would be
approximately $760.

Effective May 1, 1997, the Company reached an agreement with David
Feldman, the then President of the Company, whereby the Company bought
out the remaining term of the employment agreement. Total compensation
earned under the employment agreement prior to termination amounted to
$230. The Company recognized a $1,000 expense in 1997 related to the
future costs associated with the termination agreement.

On February 13, 1997, the Company entered into a management agreement
with Harlingwood, whereby Harlingwood would provide the services of a
Chief Executive Officer. David White, an employee of Harlingwood,
became the Chief Executive Officer effective February 13, 1997. The
agreement expired on June 30, 1998, and provided for an annual
management fee of $175. During 1999 and 1998, the Company paid $10 and
$163, respectively, to Harlingwood for services rendered in connection
with business acquisitions.

During 1999, the Company recognized a $1,516 expense related to the
costs of certain terminated key executives and other personnel.

(b) LEASE COMMITMENTS

The Company is obligated under operating leases for office facilities,
which expire through June 2009. The leases provide, among other
things, that the Company is responsible for its share of increases in
certain utilities, maintenance and property taxes over a base amount.
In addition, the Company is also obligated under various equipment and
vehicle leases that expire through September 2003. Total lease expense
for 1999, 1998 and 1997 under the above leases amounted to
approximately $4,578, $3,170 and $1,641, respectively.

The anticipated future annual lease payments under operating leases at
December 31, 2000, inclusive of the base utility, maintenance and
property tax charges for the office facilities, are as follows:

2000 $ 4,035
2001 3,983
2002 3,597
2003 3,168
2004 2,286
Thereafter 5,963
-------------
$ 23,032
=============

Future annual rental income under remaining noncancelable subleases is
as follows: 2000 - $392, 2001 - $392, 2002 - $127, and 2003 - $101.

The Company is involved in various claims and legal actions in the
ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial statements taken as a
whole.

(14) RELATED PARTIES

In January 1999, the Company acquired all the stock of CAT-LINKS, Inc., a
corporation owned by Cary Sarnoff, a director of the Company, for a
purchase price consisting of 50,000 shares of common stock of the Company
and the assumption of a $170 promissory note payable to Cary Sarnoff. The
promissory note was paid in full during 1999.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ESQUIRE COMMUNICATIONS LTD.

April 14, 2000 By: /s/ Paul H. Bellamy
------------------------
Chief Executive Officer

Pursuant to the requirements of the Securities 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.

NAME TITLE DATE

/s/ Malcolm L. Elvey Chairman of the Board April 14, 2000
- --------------------
Malcolm L. Elvey

/s/ Paul H. Bellamy Chief Executive April 14, 2000
- ------------------- Officer and Director
Paul H. Bellamy

/s/ Steven Wolkenstein Vice President/Treasurer April 14, 2000
- ---------------------- Corporate Secretary
Steven Wolkenstein Principal Accounting Officer

Director April __, 2000
- ---------------------
Mortimer R. Feinberg

/s/ Cary A. Sarnoff Director April 14, 2000
- ---------------------
Cary A. Sarnoff

/s/ Joseph P. Nolan Director April 14, 2000
- ---------------------
Joseph P. Nolan

Exhibit 10.1
AGREEMENT

Agreement dated as of April 30, 1999, by and between Malcolm L. Elvey
(the "Employee") and Esquire Communications Ltd., a Delaware corporation (the
"Corporation"). W I T N E S S E T H : WHEREAS, the Corporation and the Employee
are parties to an Employment, Non-Competition and Non-Disclosure Agreement dated
as of March 1, 1993 (the "Employment Agreement"); and

WHEREAS, the Corporation and the Employee mutually desire to provide
for the termination of Employee's employment;

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Terms defined in the Employment Agreement shall have the same
meaning when used herein.

2. Effective the date hereof, Employee's employment with the
Corporation is hereby terminated and Employee hereby resigns as an employee of
the Corporation. Employee shall continue as Chairman of the Board of the
Corporation until he is requested to relinquish such position by the Board of
Directors.

3. Concurrently herewith, the Corporation is paying to the Employee
the amount of $20,000, by check, plus all accrued but unpaid expenses due to
Employee under the Employment Agreement. The Employee's automobile and garage
expenses will no longer be paid by the Corporation. The Employee shall be
entitled to retain the equipment, including computer, located in his office.

4. Except for the provisions contained in Sections 8.0, 9.0, 10.0 and
13.0 of the Employment Agreement, the Employment Agreement is hereby terminated
and is of no further force and effect. The provisions of Sections 8.0, 9.0, 10.0
and 13.0 shall continue in full force and effect.

5. In consideration of the Corporation's buyout of the Employment
Agreement pursuant to this Agreement and the non-competition covenants of
Employee, the Corporation agrees to pay to the Employee the amount that he would
have received as compensation under his Employment Agreement through March 31,
2000, in accordance with the Corporation's existing practices, adjusted to
reflect the cost of living adjustments contained therein from and after January
1, 1999, retroactive to January 1, 1999; provided, however, that if the
Corporation is Sold (as defined herein) prior to March 31, 2000, such amount
shall continue to be paid through December 31, 2000. If the Corporation is not
so Sold, but has a material improvement in its financial condition, the
Corporation and the Employee shall review and reconsider an increase in the
amount to be paid the Employee hereunder. As used herein, "Sold" means either of
the following, at a price of greater than $6.00 per share: (i) the sale of all
or substantially all the assets of the Corporation or (ii) a merger of the
Corporation with another entity where the existing stockholders of the
Corporation will own less than 10% of the outstanding stock of the surviving
entity.

6. For as long as the Employee is a director of the Corporation, if
the Employee generates new business for the Corporation, at the discretion and
subject to the approval of the Chief Executive Officer of the Corporation he
shall be eligible to sales commissions on such new business in accordance with
the Corporation's existing practices or practices to be developed.

7. All options held by Employee shall continue to vest and be
exercisable in accordance with their terms, whether or not the Employee remains
a director of the Corporation. If the Corporation reprices any of its
outstanding options on or prior to March 31, 2000 and executives of the
Corporation participate therein, the Employee's options will be eligible for
consideration to be similarly repriced.

8. Until the date Employee is no longer a director of the Corporation,
subject to the Corporation obtaining permission from its insurance carrier, the
Corporation shall continue to pay for Employee and his dependents all costs for
group health coverage under the Corporation's health benefit plans. The coverage
shall be the same as that provided to the employees of the Corporation. If the
Corporation is unable to continue the Employee under its plans, it shall pay to
the Employee the cost of his COBRA coverage as long as he remains a director.

9. If the Employee decides to remain as a director of the Corporation,
he shall not be entitled to any fees or compensation for services as a director.
The Corporation agrees to use its best efforts to continue to cause the Employee
to be elected as a director of the Corporation as long as the Employee continues
to own at least 200,000 shares of Common Stock (subject to adjustment to reflect
stock splits or similar events) of the Corporation. When Employee is no longer a
director of the Corporation, the Corporation shall use its best efforts to have
Employee released from all his rights and obligations under the October 23, 1996
Stockholders Agreement.

10. In the event of Employee's death or disability, all payments and
benefits of Employee under this Agreement shall continue to accrue and shall be
payable to Employee's estate or legal representatives.

11. This Agreement shall be governed by the internal domestic laws of
the State of New York without reference to conflict of laws principles. This
Agreement shall be binding upon and inure to the benefit of the legal
representatives, successors and assigns of the parties hereto (provided,
however, that the Employee shall not have the right to assign this Agreement in
view of its personal nature). This Agreement, including the provisions of the
Employment Agreement which survive, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
negotiations, understandings and writings (or any part thereof) whether oral or
written between the parties hereto relating to the subject matter hereof. There
are no oral agreements in connection with this Agreement. Neither this Agreement
nor any provision of this Agreement may be waived, modified or amended orally or
by any course of conduct but only by an agreement in writing duly executed by
both of the parties hereto. If any article, section, portion, subsection or
subportion of this Agreement shall be determined to be unenforceable or invalid,
then such article, section, portion, subsection or subportion shall be modified
in the letter and spirit of this Agreement to the extent permitted by applicable
law so as to be rendered valid and any such determination shall not affect the
remainder of this Agreement, which shall be and remain binding and effective as
against all parties hereto. The change in control agreement dated June 30, 1998
to which the Employee was a party, is hereby terminated and of no further force
or effect.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

--------------------------
Malcolm L. Elvey

ESQUIRE COMMUNICATIONS LTD.

By:
------------------------

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Esquire Communications Ltd.

We consent to the incorporation by reference in Registration Statement No.
333-33629 of Esquire Communications Ltd. on Form S-8 of our report dated April
12, 2000 (which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the Company's ability to continue as a going
concern), appearing in this Annual Report on Form 10-K of Esquire Communications
Ltd. for the year ended December 31, 1999.

DELOITTE & TOUCHE LLP

San Diego, California
April 12, 2000

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Esquire Communications Ltd.:

We consent to incorporation by reference in the registration statement (No.
333-33629) on Form S-8 of Esquire Communications Ltd. of our report dated March
26, 1999 relating to the balance sheet of Esquire Communications Ltd. as of
December 31, 1998 and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the two-year period ended
December 31, 1998, which report appears in the December 31, 1999 annual report
on Form 10-K of Esquire Communications Ltd.

KPMG LLP

San Diego, California
April 13, 2000

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,554
<SECURITIES> 0
<RECEIVABLES> 33,708
<ALLOWANCES> (5,281)
<INVENTORY> 0
<CURRENT-ASSETS> 1,311
<PP&E> 11,582
<DEPRECIATION> (6,130)
<TOTAL-ASSETS> 123,143
<CURRENT-LIABILITIES> 114,053
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 2,497
<TOTAL-LIABILITY-AND-EQUITY> 123,143
<SALES> 144,264
<TOTAL-REVENUES> 144,264
<CGS> 86,534
<TOTAL-COSTS> 86,534
<OTHER-EXPENSES> 45,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,619)
<INCOME-PRETAX> (39,890)
<INCOME-TAX> 78
<INCOME-CONTINUING> (39,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,380)
<EPS-BASIC> (7.76)
<EPS-DILUTED> (7.76)

</TABLE>