ITEM 1. BUSINESS
GENERAL
Judge.com, Inc. (the "Company") (formerly The Judge Group, Inc.), incorporated in Pennsylvania in June 1970, services the information technology ("IT") and engineering needs of its clients by providing IT and engineering personnel on both a temporary contract basis ("technical consultants") and on a permanent basis, and by providing standard and customized IT training for established and emerging software applications.
The Company provides technical consultants skilled in a variety of fields, such as software applications programming and development, client/server technology, legacy systems conversion, software architecture and design, data communications, systems engineering, Internet/Web-Site design, project consulting, project management, and Help Desk management. Technical consultants are provided on a nationwide basis through the Company's National Division, and on a regional and local level through a network of 11 offices in 10 states. The Company maintains a database of approximately 170,000 technical consultants, and in 1999 provided over 1,850 technical consultants to approximately 650 clients.
The Company provides IT and engineering personnel on a permanent basis to clients nationwide through a network of 8 offices in 7 states, and maintains a database of approximately 180,000 candidate professionals. In 1999 the Company placed 995 candidates with more than 480 clients.
The Company provides training on a range of software and network applications to the Company's technical consultants and in-house personnel, as well as to corporate, governmental, and individual clients. It currently offers licensed diploma courses, certificate courses, and more than 130 open-enrollment courses, either in its own computer labs or at client locations. In addition to expanding the Company's range of technical service offerings, the training business assists the Company in identifying emerging technologies and integrating such technologies into its organization.
In February 2000 the Company announced a new service of on-line recruiting through a website which contains both on-line resumes and job postings. This service is intended to provide a regional job board specifically tailored to the IT industry. Initially the Company is offering the service in its headquarters region, and plans to expand this targeted service on a regional basis throughout the United States.
In January 1999 the Company reorganized its four operating units into two business segments to enable financial analysis that more closely tracks its lines of business. The Company's Contract Placement, Permanent Placement and IT Training operating units were consolidated within the IT Staffing segment. The Information Management Solutions ("IMS") business was the other segment, which the Company adopted a plan to dispose of in June 1999. The IMS business had provided computer network and document management system integration, implementation, maintenance and training. Through sales occurring in June through August 1999, the Company divested substantially all of the assets of the IMS business. The results of operations of the IMS business are shown separately in the accompanying consolidated statements of operations as "loss from discontinued operations".
CONTINUING OPERATIONS
The Company has provided IT and engineering personnel on a permanent basis since the Company was founded in 1970. Permanent placements generated revenues of $8.6 million, $11.2 million, and $12.5 million in 1997, 1998 and 1999 respectively, representing 10.4%, 11.7%, and 11.0% of total Company revenues for the respective periods. The Company provides IT and engineering personnel on a permanent basis nationwide through its regional offices in Bala Cynwyd, Pennsylvania; Edison, New Jersey; Tampa, Florida; Needham, Massachusetts; Dallas, Texas; Atlanta, Georgia; and Chicago, Illinois. The Texas, Georgia, and Illinois locations were added through an acquisition in 1998, while the Massachusetts location was a new operation in 1998 sharing office space in the location where the Company has previously provided contract placements. In early 2000 the Company began providing permanent placement services from its Jacksonville, Florida office, which was initially opened to provide contract placements. A significant portion of the Company's engineering placements are in food related industries and, to a lesser extent, the pharmaceutical industry. The Company maintains a database of over 180,000 engineering and IT candidate professionals, and in 1999 it placed 995 professionals with more than 480 clients. As compensation for its service, the Company receives a fee based on a percentage of each placed professional's first year salary, subject to forfeitures if the placed professional leaves such position during a standard period (typically thirty days).
In 1986 the Company began to provide technical consultants on a temporary contract basis, which generated revenue of $70.6 million, $81.6 million and $98.7 million in fiscal 1997, 1998 and 1999 representing 86.0%, 85.7% and 86.8% of the Company's consolidated net revenues in those periods, respectively. The Company provides IT, engineering and other professional consultants on a contract basis to organizations with complex technology and staffing needs through its regional offices in Bala Cynwyd, Pennsylvania; Edison, New Jersey; Alexandria, Virginia; Needham, Massachusetts; Providence, Rhode Island; Walled Lake, Michigan; Raleigh and Charlotte, North Carolina; Nashville, Tennessee; Jacksonville, Florida; and nationally through its National Division based in Providence. In early 2000 the Company began to provide technical consultants in its Atlanta, Georgia office, which had previously provided only permanent placements. The Company maintains a database of approximately 170,000 technical consultants, and in 1999 placed over 1,850 consultants with approximately 650 clients. Typical engagements range in duration from six to twelve months, though some of the Company's technical consultants have been performing services for its clients for a period of more than seven years. The Company's technical consultants and independent contractors often work jointly with clients' in-house IT personnel. This aspect of the Company periodically experiences diminished revenue growth in the fourth quarter due to the effect of the Thanksgiving and Christmas holidays. Further, revenues can be depressed in the first quarter due to the effect of winter weather which can prevent contractors from performing billable services.
The majority of the Company's contract business is derived from providing technical consultants skilled in IT and software engineering. In addition to staff augmentation, the Company provides project consulting services, which can include project management, workflow analysis, database design, custom software applications and system integration. In a project management engagement, which can be on either a fixed fee or a time and material basis, the Company will typically oversee an entire IT project from inception to completion, utilizing technical consultants with specialty skills in the relevant technologies.
The Company has expanded the type of skilled personnel its contract placement business is capable of providing to such diverse areas as finance, life sciences, desktop publishing, PC support and help desk, and human resources. During 1999 the Company increased the hiring of technical consultants as "bench employees", which are full time Company employees that receive lower hourly rates than technical consultants that are retained on a per job basis. Bench employees are paid their hourly rate even if they are not billed to a client. The use of bench employees increases the Company's profit margin due to the lower hourly rate paid the employee. However, there would be an adverse effect on net income if bench employees were not fully occupied for clients. In the past the Company has focused its efforts on attracting and placing contractors with more specialized skills thereby enabling the Company to achieve higher margin placements.
Originally established in 1991, the National Division provides both engineering and IT personnel on a contract basis nationwide, primarily to larger national corporations. Revenue attributable to the National Division was $11.3 million, $12.4 million, and $13.6 million in 1997, 1998, and 1999, respectively, representing 13.8%, 13.0% and 12.0% of total Company revenues for the respective periods.
The Company has provided IT training since September 1996, when it acquired an IT training business. It provides training in a variety of software and network applications and generated revenue of $3.2 million, $3.0 million, and $3.1 million in 1997, 1998, and 1999, respectively, which represented 3.9%, 3.1%, and 2.7% of the Company's consolidated net revenues during such periods, respectively. The Company provides IT training services at its facility in Bala Cynwyd, Pennsylvania and at various off-site locations. The Company delivers certified training for all Microsoft products at its location. It provides custom IT training for clients across all hardware and software platforms, dependent on the needs and requirements of the client. The IT training business is an authorized training center for many major software manufacturers, including Microsoft Corporation, Adobe Systems Incorporated, Quark, Inc., Core Corporation, and Claris Corporation, and is also an approved Apple Training Alliance Center. The Company is a Microsoft Solutions Provider and Certified Technical Education Center. The Company's diploma programs in Desktop Publishing, Business Software, Multimedia and Internet are licensed and accredited by the Pennsylvania Board of Private Licensed Schools and are approved for veterans' education by the U.S. Veterans Administration. The Company frequently conducts its courses at the in-house facilities of its corporate clients and has the ability to provide the necessary computer equipment at conference centers, hotels and other off-site locations as requested by its clients.
DISCONTINUED OPERATIONS
In June 1999 the Company adopted a plan to dispose of the IMS business. Through sales occurring in June through August 1999, the Company divested substantially all of the assets of the IMS business. As of December 31, 1999 those assets had been sold for total consideration of approximately $4,358,000 consisting of cash, note receivable, and forgiveness of amounts payable to the buyer. Assets sold consisted primarily of accounts receivable, inventory, and property and equipment. Liabilities assumed by the buyer consisted primarily of trade accounts payable, accrued expenses, and equipment leases payable. The Company incurred a loss on disposal of the IMS business of $6,275,056 (net of tax effect of $1,994,830). Included in such loss was the write off of approximately $7,063,000 of goodwill representing the unamortized balance of goodwill recorded in 1998 when the Company purchased all or substantially all of the business of three IMS companies. Also included in such loss is an estimated loss for operations during the phase out period of approximately $134,000 for the remaining business, which was sold in August 1999.
Operating results of the IMS business for the years ended December 31, 1999, 1998, and 1997 are shown separately in the accompanying consolidated statements of operations. Net revenues of the IMS business for the years ended December 31, 1999, 1998, and 1997 were approximately $7,027,000, $19,280,000 and $16,443,000, respectively.
INTELLECTUAL PROPERTY
While the Company does not own any patents, or registered copyrights or trademarks, it routinely enters into non-disclosure and confidentiality agreements with employees, contractors, consultants and customers. Licenses for a number of software products have been granted to the Company for its own use or for remarketing to its customers. In the aggregate, these licenses are material to the business of the Company, but the Company believes that the loss of any one of these licenses would not materially affect the Company's results of operations or financial position.
CUSTOMERS
The primary industries served by the Company include financial services, manufacturing, software/computers, government, and pharmaceutical. In 1999, no customer accounted for more than 10% of the Company's consolidated revenues.
COMPETITION
The IT professional services industry is highly competitive and fragmented on the local, regional and national levels. The Company believes that some of its competitors are, or will soon be, offering the full range of technical staffing and training services that the Company currently provides. In addition, many companies offer one or more of the Company's services in all of the geographical markets in which the Company currently operates. Many of the Company's competitors have significantly greater name recognition and financial, technical and other resources and generate greater revenues and profits than the Company.
Within any given geographical or technical specialty market, the Company competes for clients with other IT, engineering and professional service providers, outsourcing and consulting companies, systems integrators and, to a lesser extent, temporary personnel agencies. The majority of the competition is made up of smaller local and regional firms with a strong presence in their local markets and occasionally with a nationally franchised firm. The principal competitive factors for obtaining and retaining clients include: the ability to match technical consultant skills and personality with the client's requirements and culture; expertise of its technical consultants; price; client satisfaction; and overall responsiveness to client needs. The Company competes for technical consultants with other professional services providers, outsourcing and consulting companies, systems integrators, temporary personnel agencies and client companies. The principal competitive factors for recruiting and retaining technical consultants include compensation, availability and quality of benefits, consistent flow of high quality, varied assignments and an understanding of consultant skills and work preferences.
Within the IT training industry, there is competition among the available training methods, such as instructor-led training versus computer-based training. With the instructor-led training methods, some of the major software and equipment manufacturers maintain their own training programs for both internal training and public training. The Company believes its established library of courses and proprietary course materials that can be updated (or customized for a particular customer) provide it with a competitive advantage. Moreover, the Company believes that the diversity of its course offerings, the quality of its personnel, its flexibility in the locations at which it provides its services and its ability to recognize emerging technologies and develop the requisite courses responsive thereto, permit it to remain competitive with others in the marketplace. The Company competes in the IT training business on the basis of its pricing, perceived quality and breadth of course offerings.
REGULATION
The Company's operations, as currently conducted, are subject to governmental regulation in the State of New Jersey, where the Company's Permanent Placement business is a licensed employment agency, and its Contract Placement business has registered with the Temporary Help Service Section of the Bureau of Employment and Personnel Services, part of the Division of Consumer Affairs of the Department of Law and Public Safety and in Massachusetts where its Contract Placement business is registered as a service firm with the Massachusetts Department of Labor and Workforce Development. Compliance with such New Jersey and Massachusetts regulations has not and is not expected to have a material effect on the Company's business. The Company is unaware of any other jurisdictions in which its operations are subject to material governmental regulation.
All the jurisdictions in which the Company operates its training centers regulate and license certain kinds of vocational, trade, technical or other post-secondary education. The Company believes that employer-funded or reimbursed IT training is exempt from such requirements in many of these states. The Company is licensed in each jurisdiction in which it operates training centers.
If the Company were found to be in violation of a state's licensing or other regulatory requirements, it could be subject to civil or criminal sanctions, including monetary penalties. No state educational or regulatory authority has cited the Company or commenced any proceeding against it for the violation of any licensing or other vocational educational requirement.
EMPLOYEES
As of December 31, 1999, the Company had 302 full-time, non-consultant, employees. On that date, there were also approximately 775 IT consultants working on full-time assignments for the Company's clients, of which approximately 84% were treated as employees of the Company and 16% were treated as independent contractors for federal and state tax purposes. The Company is not a party to any collective bargaining agreements and considers its relationships with its employees to be good.
ITEM 2.
ITEM 2. PROPERTIES
The Company does not own any real property. The Company has leased offices in the following locations:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings from time to time in the ordinary course of business. As of the date of this Report, there are no legal proceedings pending against the Company which management believes will have a material adverse effect on the Company's financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 1999.
For the purposes of calculating the aggregate market value of the shares of common stock of the Company held by nonaffiliates, as shown on the cover page of this Report, it has been assumed that all the outstanding shares were held by nonaffiliates except for the shares beneficially owned by directors and executive officers of the Company. However, this should not be deemed to constitute an admission that all directors and executive officers of the Company are, in fact, affiliates of the Company, or that there are not other persons who may be deemed to be affiliates of the Company. Further information concerning shareholdings of officers, directors and principal shareholders is included in the Company's definitive proxy statement filed or to be filed with the Securities and Exchange Commission.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's Common Shares, $0.01 par value per share, are traded on The NASDAQ National Stock Market under the symbol JUDG. The closing quotation for the Company's Common Shares on March 15, 2000 was $3.00. At March 15, 2000, there were 202 shareholders of record of the Company's Common Shares. Because many of such shares are held by brokers and other institutions on behalf of shareholders, the Company is unable to estimate the total number of shareholders represented by these record holders. The following table sets forth the high and low sales price per share of the Company's Common Shares for the periods indicated:
Price Range ----------- High Low ---- --- Fiscal 1998 First Quarter $ 5.750 $ 3.938 Second Quarter $ 6.875 $ 4.375 Third Quarter $ 5.188 $ 2.000 Fourth Quarter $ 3.438 $ 1.750 Fiscal 1999 First Quarter $ 2.313 $ 1.250 Second Quarter $ 1.969 $ 1.344 Third Quarter $ 1.688 $ 0.969 Fourth Quarter $ 1.813 $ 0.938
The Company has never paid any cash dividends on its Common Shares and does not anticipate paying cash dividends on its Common Shares in the foreseeable future and is prohibited from doing so under the terms of its primary credit facility. The Company's ability to pay dividends on its Common Shares is further dependent on the earnings and cash flow of its operating subsidiaries and the availability of such cash flow to the Company.
The Company issued the following unregistered shares of its $0.01 par value common stock in separate transactions related to its acquisitions pursuant to Section 4(2) of the Securities Act:
June 3, 1999 OnSite Solutions earnout, 443,071 shares for consideration of $932,200
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated operating statement and balance sheet data for the periods indicated. Operating statement data has been restated to reflect the discontinued operations. The selected consolidated operating statement and balance sheet data at and for each of the five fiscal years presented below are derived from the Company's audited Consolidated Financial Statements. This data should be read in conjunction with management's discussion and analysis of financial condition and results of operations and the Company's Consolidated Financial Statements included herein.
(1) All per share and share amounts reflect a 52.6 for 1.0 stock split, which occurred in September 1996.
(2) Diluted shares include common stock equivalents and 526,000 Common Shares issued upon conversion of the Company's Convertible Notes.
(3) Includes line of credit and term loan.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company and related notes thereto appearing elsewhere in this Report.
OVERVIEW
In January 1999 the Company reorganized its four operating units into two business segments to enable financial analysis that more closely tracks its lines of business. The Company's Contract Placement, Permanent Placement and IT Training operating units were consolidated within the IT Staffing segment. The Information Management Solutions ("IMS") business was the other segment, which the Company adopted a plan to dispose of in June 1999. Through sales occurring in June through August 1999, the Company divested substantially all of the assets of the IMS business. As of December 31, 1999 those assets had been sold for total consideration of approximately $4,358,000 consisting of cash, note receivable, and forgiveness of amounts payable to the buyer. Assets sold consisted primarily of accounts receivable, inventory, and property and equipment. Liabilities assumed by the buyer consisted primarily of trade accounts payable, accrued expenses, and equipment leases payable. The Company incurred a loss on disposition of the IMS business of $6,275,056 (net of tax effect of $1,994,830). Included in such loss was the write-off of approximately $7,063,000 of goodwill representing the unamortized balance of goodwill recorded in 1998 when the Company purchased all or substantially all of the business of three IMS companies. Also included in such loss is an estimated loss for operations during the phase out period of approximately $134,000 for the remaining business, which was sold in August 1999.
Operating results of the IMS business for the years ended December 31, 1999, 1998, and 1997 are shown separately in the accompanying consolidated statements of operations. Net revenues of the IMS business for the years ended December 31, 1999, 1998, and 1997 were approximately $7,027,000, $19,280,000 and $16,443,000, respectively.
As a result of the loss on disposition of the IMS business, and the operating losses in the discontinued IMS operations, the Company experienced a net loss of $6.1 million, or $0.44 per common share, in 1999 compared to a net loss of $5.1 million, or $0.38 per common share, in 1998. Income from continuing operations was $2.3 million, or $0.17 per common share, in 1999 compared to $8,000, or $0.00 per common share, in 1998.
ACQUISITIONS
In 1998, the Company implemented a strategy to accelerate its growth through the addition of new services, geographic expansion and strategic acquisitions. The Company aggressively pursued that strategy by acquiring all or substantially all of the business of two Contract Placement firms, one Permanent Placement firm, and three Information Management Solutions firms. In 1999, as part of the disposition of the IMS business, the three Information Management Solutions firms were sold. The table below presents information regarding the remainder of the Company's acquisitions in 1998:
(1) Includes amounts paid in 1999 based on the business attaining certain pre-tax income amounts in the period ended December 31, 1998.
The Company made no acquisitions in 1999.
NEW OFFICES
In early 1999, upon expiration of the Foxborough, Massachusetts lease, the Company's Providence regional operation and the National Division moved into new facilities in Providence, Rhode Island.
REVENUES
The Company's contract placement revenues are derived from professional service activities, primarily the placement of skilled IT, engineering and professional personnel whose work is billed at an hourly rate. An engagement of the Company's technical consultants typically lasts from six to 12 months. Revenues are directly related to the total number of hours billed to clients and the associated hourly billing rates. Hourly billing rates are established for each technical consultant based on the technical consultant's skills, experience and the type of work performed. For the year ended December 31, 1999, total hours billed were 1,647,103, with an average billing rate of $55.27, compared to total hours billed of 1,485,616 with an average billing rate of $50.69 for the prior year period. The Company believes that the increase in the average billing rates for its technical consultants has resulted from an increased demand for skilled and experienced technical consultants and to its intentional focus on making higher level IT placements. Cost of sales in the contract placement business consists primarily of the compensation expenses related to the consultants, such as salaries, fringe benefits and payroll taxes. Selling and operating expenses consist primarily of salaries and fringe benefits for selling representatives, and also include marketing expenditures and bad debt charges. General and administrative expenses consist primarily of management and administrative salaries and related fringe benefits, as well as other overhead, such as rent and depreciation.
The Company's permanent placement revenues are generated from one-time fees received upon successful placements of engineering and IT professionals with clients. The standard fee arrangement is 1% of each thousand dollars of salary, up to a maximum of 33% of the professional's first year salary. Revenue is recognized upon commencement of the employment, subject to reversal if employment terminates during a guarantee period (typically 30 - 90 days). The permanent placement business placed 995 professionals with an average placement fee of $12,350 in 1999, compared to 895 professionals placed with an average placement fee of $12,320 for the prior year period. The increase in placements was directly attributable to offices acquired or opened in 1998, which provided 205 placements in 1999 compared to 107 placements in 1998. No cost of sales is recorded in the permanent placement business.
The Company's IT training business provides training in a variety of software and network applications. Tuition and fee revenues are recognized generally when the classes are held. Payments received prior to the class commencing are recorded as deferred revenues. The IT training business provides its services at its facility in Bala Cynwyd, Pennsylvania and at various off-site locations. The Company frequently conducts its courses at the in-house facilities of its corporate clients and has the ability to provide the necessary computer equipment at conference centers, hotels and other off-site locations as requested by its clients.
BUSINESS STRATEGY
The Company's business objectives are to increase market share in existing markets by offering additional services, such as its regional website for on-line recruiting and job posting; to increase cross-selling opportunities by offering all of its services in each location; and to continue to strengthen its market position, by expansion through internal growth. The Company continues to pursue cost controls originally put in place in 1998, by reevaluating its current operating practices to find ways to improve the productivity of its personnel. In 1999 the Company continued a focused strategic planning and budgeting process resulting in a 2000 internal operating plan that attempts to increase revenues approximately 20%, while controlling costs, and returns the Company to profitability. However, this plan is subject to many factors and contingencies, and the Company may not be able to realize this goal. A part of the increase in revenues includes a planned expansion of the sales and recruiting staffs. The internal operating plan more closely ties management's compensation to its ability to meet revenue and profit goals. If the Company is able to achieve its internal operating plan, which relies upon certain assumptions including, but not limited to, its ability to increase sales and recruiting staffs in the contract placement and permanent placement businesses, and to maintain strict cost controls in all of its operating units, the Company believes it can achieve earnings before interest and taxes of approximately 5.0% of its revenues. Failure to achieve the aforementioned assumptions as well as other factors could prevent the Company from achieving these goals, which are Forward-Looking statements. See "Forward-Looking Information" herein for additional factors that could materially alter the Company's ability to meet this objective and its other operational goals in 2000.
RESULTS OF OPERATIONS
The following table sets forth certain statement of continuing operations data as a percentage of consolidated net revenues for each of the periods indicated:
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Revenues. Consolidated net revenues from continuing operations increased by $18.5 million, or 19.4%, for the year ended December 31, 1999 compared to the prior year period. Of such increase $17.1 million, or 93% of the increase, was attributable to the Company's contract placement business. The contract placement business generated revenues of $98.7 million for the year ended December 31, 1999, a 21% increase over revenues of $81.6 million in the prior year period. Such increase resulted primarily from increased marketing efforts in the Company's offices that offer contract placement services, as well as approximately $2.8 million in increased revenues reflecting a full year of operations in offices opened or acquired during 1998. The Company's permanent placement business generated revenues of $12.5 million in 1999, an increase of $1.3 million, or 11.3%, over 1998 revenues of $11.2 million. Approximately $500,000 of such increase reflects the full year operations of offices opened or acquired in 1998, and the remainder is attributable to increased marketing efforts in the offices that offer permanent placement services. The IT training business increased revenues approximately $100,000, or 6%, from $3.0 million in 1998 to $3.1 million in 1999.
Revenues from discontinued operations were $7.0 million in 1999 compared to $19.3 million in 1998. These amounts are not included in consolidated net revenues from continuing operations. The loss from discontinued operations, net of tax benefits, was $8.4 million in 1999, consisting of a loss from operations of $2.1 million and a loss on disposal of $6.3 million, compared to $5.1 million loss from discontinued operations in the prior year period.
Cost of Sales. Consolidated cost of sales increased by $11.3 million, or 17.5%, for the year ended December 31, 1999 to $75.6 million from $64.3 million in the prior year period. Cost of sales as a percentage of consolidated net revenues decreased to 66.5% from 67.5% in the respective periods. In the Company's contract placement business cost of sales as a percentage of its net revenues decreased to 75.4% for the year ended December 31, 1999 from 77.4% for the prior year period. Such decrease was primarily a result of an increased focus on higher margin services in all of the Company's offices that offer contract placement services. The decrease in cost of sales as a percentage of consolidated net revenues was also attributable to an increase in net revenue from the permanent placement business, the expenses for which are not included in cost of sales, but are included in other expense categories. The Company's IT training business contributed approximately $1.6 million in expenses included in cost of sales, a decrease of approximately $76,000 from the prior year period.
Selling and Operating. Consolidated selling and operating expenses increased by approximately $1.7 million, or 9.0%, for the year ended December 31, 1999 to $20.6 million from $18.9 million in the prior year period. Selling and operating expenses as a percentage of consolidated net revenues for the year ended December 31, 1999 decreased to 18.1% from 19.8% in the prior year period. This decrease was due primarily to management's efforts to control costs in areas such as office supplies, travel and entertainment, and advertising. In the Company's contract placement business selling and operating expenses increased approximately $2.3 million, or 25.2%, over the prior year period of which $1.3 million reflected full year operations of offices opened or acquired in 1998. In the Company's permanent placement business selling and operating expenses decreased approximately $0.3 million, or 3.8%, over the prior year period due to management's efforts to control costs in the areas mentioned above. In the Company's IT training business selling and operating expenses decreased approximately $0.2 million, or 16.3% over the prior year period. Such decrease was attributable to management's efforts to control costs in the areas mentioned above.
General and Administrative. Consolidated general and administrative expenses increased by approximately $2.3 million, or 23.0%, for the year ended December 31, 1999 to $12.5 million from $10.2 million in the prior year period. General and administrative expenses as a percentage of consolidated net revenues for the year ended December 31, 1999 increased to 11.0% from 10.8% in the prior year period. General and administrative expenses related to contract placement increased approximately $1.7 million, or 25.6%, over the prior year period of which $0.6 million reflected full year operations of offices opened or acquired in 1998. General and administrative expenses related to permanent placement increased approximately $0.7 million, or 24.9%, over the prior year period of which $0.2 million was attributable to the full year operations of offices opened or acquired in 1998. Amortization of goodwill increased approximately $0.1 million in the year ended December 31, 1999 compared to the prior year period, reflecting a full year of amortization of the goodwill incurred from the businesses acquired in 1998.
Interest. Interest expense increased to approximately $829,000 for the year ended December 31, 1999 from approximately $154,000 in the prior year period while interest income decreased to approximately $13,000 from $94,000 in the respective periods. Such increase in interest expense reflects the Company's increased usage of its line of credit during the year 1999, primarily to fund additional accounts receivable from the increased revenues, as well as additional debt to repay notes payable to former owners of businesses acquired in 1998. The Company also incurred additional debt through its sale/leaseback of substantially all of its fixed assets, for which a portion of the repayment reflects interest costs. Additionally, the interest rate on the Company's line of credit increased from 7.75% at December 31, 1998 to 8.50% at December 31, 1999, contributing to the increased interest expense. The decrease in interest income is primarily due to the Company redeeming its short-term investments at the end of the first quarter of 1998 to finance the acquisition of businesses in 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Revenues. Consolidated net revenues from continuing operations increased by 16.0%, or $13.1 million, for the year ended December 31, 1998 compared to the prior year period. Revenue for the contract placement business increased by 15.5%, or $10.9 million, for the year ended December 31, 1998 compared to the prior year period. This increase was primarily due to an increase in revenue of $8.9 million attributable to acquisitions and new offices. Revenue for the permanent placement business increased by 30.2%, or $2.6 million, for the year ended December 31, 1998 compared to the prior year period. Of such increase $1.5 million was attributable to its acquisition and new offices, and the remainder was due to increased marketing efforts in its established offices, primarily the New Jersey office which contributed $0.9 million in increased revenues, a 64% increase over the prior year period. The IT training business generated net revenues of $3.0 million, a decrease of $261,000 from the prior year period.
Revenues from discontinued operations were $19.3 million in 1998 compared to $16.4 million in 1997. These amounts are not included in net revenue from continuing operations. The loss from discontinued operations, net of tax benefit, was $5.1 million in 1998 compared to $1.4 million loss from discontinued operations in the prior year period.
Cost of Sales. Consolidated cost of sales increased by 11.6%, or $6.7 million, for the year ended December 31, 1998 compared to the prior year period. Cost of sales as a percentage of consolidated net revenues decreased to 67.5% from 70.2%. In the Company's contract placement business, cost of sales as a percentage of revenue decreased to 77.4% from 78.1%. This decrease was primarily a result of the contract placement business focusing its sales efforts on higher margin services. The decline in cost of sales as a percentage of consolidated net revenues was also attributable to an increase in revenue for the permanent placement business, the expenses for which are not included in cost of sales, but are included in other expense categories. The IT training business contributed an additional $1.7 million of expenses included in cost of sales, an increase of $233,000 over the prior year period.
Selling and Operating. Consolidated selling and operating expenses increased by 54.8%, or $6.7 million, for the year ended December 31, 1998 compared to the prior year period. Of such increase $3.4 million of expenses were attributable to acquisitions and new offices. Selling and operating expenses as a percentage of consolidated net revenues for the year ended December 31, 1998 increased to 19.8% from 14.9% in the prior year. In the contract placement business selling and operating expenses increased $3.3 million, or 53.6%, over the prior year period, of which $2.0 million was attributable to acquisitions and new offices. The permanent placement business increased selling and operating expenses $2.2 million, or 38.2%, over the prior year period, of which $1.4 million was attributable to its acquisition and new offices. The IT training business contributed $1.0 million to selling and operating expenses, an increase of $.2 million, or 21.4%, over the prior year period.
General and Administrative. Consolidated general and administrative expenses increased 71.8%, or $4.3 million, for the period ending December 31, 1998 compared to the prior year period, of which $1.8 million was attributable to acquisitions and new offices. Amortization of goodwill added $.3 million to general and administrative expenses, an increase of $.2 million over the prior year period, primarily associated with the acquisitions in 1998. General and administrative expenses as a percentage of consolidated net revenues increased to 10.8% for the year ended December 31, 1998 compared to 7.2% for the prior year period. Contributing to this increase was an increase of 76.1%, or $2.0 million, in the contract placement business, primarily consisting of a $1.3 million increase in costs associated with acquisitions and new offices. In the permanent placement business general and administrative expenses increased $.9 million, or 77.3%, of which $.5 million was attributable to its acquisition and new offices. The IT Training business increased general and administrative expenses 38.6%, or $.3 million, over the prior year period. Expansion of the Company's corporate staff, specifically the hiring of additional management information systems personnel, human resources personnel and accounting personnel increased payroll costs by $278,000 over the prior year period. Such expansion was necessary to manage the increased level of business resulting from the acquisitions and new offices.
Interest. Interest expense increased to $154,000, at December 31, 1998 from $142,000 at December 31, 1997 while interest income decreased to $94,000 at December 31, 1998 from $313,000 at December 31, 1997. This increase in interest expense and decrease in interest income reflects the Company's utilization of the proceeds from its initial public offering in 1997 for its expanded operations, and the need to use its line of credit to fund acquisitions and working capital in 1998.
INCOME TAXES
The Company adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993. In 1999 the Company's income tax expense from continuing operations was $1.9 million, or 44.4% of pre-tax income from continuing operations. This effective tax rate is higher than the applicable statutory rate of 34% primarily due to the Company's state tax liabilities and certain expenses that are not deductible for tax purposes. The effective tax rate was 98.9% and 36.4% of continuing operations for fiscal years 1998 and 1997, respectively. The effective tax rates for 1998 and 1997 are higher than the applicable statutory tax rate of 34%, primarily due to the Company's state tax liabilities and certain expenses, including the write-off of goodwill as a non-recurring charge, that are not deductible for tax purposes, partially offset by non-taxable interest income in 1997.
SEASONALITY AND QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly statements of data from continuing operations for each of the Company's last eight fiscal quarters. In the opinion of the Company's management, this quarterly information has been prepared on the same basis as the audited financial statements appearing elsewhere in this Report and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results set forth herein. The Company's quarterly results have in the past been subject to fluctuations, and thus, the operating results for any quarter are not necessarily indicative of results for any future period.
Because the Company derives revenue in its contract placement business only when its consultants are actually working, its revenues and operating results are adversely affected when its clients' facilities close due to holidays or inclement weather. During the quarters ended December 31, 1999 and 1998, the number of holidays and vacation days slightly affected revenues in the contract placement business. In addition, as companies approached the Y2K turnover they postponed some non-Y2K projects, which was reflected in decreased revenues for the third and fourth quarters of 1999 above. Overall, however, revenues in those quarters still exceeded the comparable quarters of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for working capital has increased as its revenues have grown and it has used borrowings under its credit facility to fund working capital. The Company typically maintains minimal cash balances as reflected in the balance of $5,000 in cash and cash equivalents as of December 31, 1999. The Company redeemed its short-term investments of approximately $5.5 million held at December 31, 1997 and used the proceeds for acquisitions in 1998.
The Company used cash in operations of approximately $200,000, $6,000, and $2.4 million in 1999, 1998 and 1997, respectively. This reflects the Company's net losses for 1999 and 1998 offset by non-cash items, including the loss on disposition of discontinued operations in 1999 and non-recurring charges in 1998. In addition, the redemption of short term investments in 1998 noted above was offset by a corresponding increase in accounts receivable related to increased sales.
Cash purchases of fixed assets for the fiscal years ended December 31, 1999, 1998, and 1997 were $1.0 million, $2.8 million, and $1.6 million respectively. These purchases were related primarily to the purchases of computers, software, and imaging equipment to upgrade the Company's technology infrastructure, as well as the furnishing of its new office facilities. The Company plans to use approximately $1.0 million for capital expenditures in 2000. In 1999 the Company received approximately $2.8 million in cash proceeds from the disposition of the IMS business. In 1998 the Company used $9.2 million to complete acquisitions and an additional $495,000 to repay indebtedness assumed in several of its acquisitions. In the first quarter of 1997 the Company received repayment of its loans to officers and related parties in the aggregate amount of $577,000.
The Company's borrowings, net of repayments, under its line of credit and overdraft facilities at December 31, 1999 were approximately $93,000, compared to $11.5 million net borrowings from those facilities at December 31, 1998. In the year ended December 31, 1999 the Company paid approximately $2.1 million related to its guarantee that common shares issued in connection with two of its acquisitions would equal or exceed a specified price at the anniversary date of the issuance. One such guarantee remains to be determined in August 2000, which the Company believes, based on its recent market price per common share, it has adequately accrued for. The Company also completed a sale/lease back of certain of its fixed assets with an affiliate of PNC Bank, N.A. The lease obligation was approximately $1.4 million repayable in 36 equal monthly rental payments. During 1998 the Company repaid the remaining $238,000 balance outstanding on the notes payable related to the acquisition of the IT training business, and repurchased 40,000 common shares (accounted for as treasury stock), at a price of $5.50 per share from the sellers of the IT training business.
Since April 24, 1998, the Company has had available a $25.0 million revolving advance facility (the "Line of Credit") with PNC Bank, N.A. (the "Bank"). The Line of Credit expires on May 31, 2003. This facility allows the Company to borrow the lesser of 85% of eligible accounts receivable, or $25.0 million. As of December 31, 1999, the Company had approximately $9.7 million outstanding against the Line of Credit. The Line of Credit is secured by substantially all of the Company's assets and contains customary restrictive covenants which from time to time have been reset by the Bank, including limitations on loans the Company may extend to officers and employees, the incurrence of additional debt and the payment of dividends on the Company's common shares. The Line of Credit bears interest at the Bank's prime rate.
The Company anticipates that its primary uses of capital in future periods will be to fund increases in accounts receivable, to support internal growth by financing new offices, and to finance additional acquisitions. The Company believes that its Line of Credit, or other credit facilities which may be available to the Company in the future, will be sufficient to meet the Company's capital needs for at least the next twelve months.
INFLATION
The Company does not believe that the rates of inflation prevailing in the United States in recent years have had a significant effect on its operations.
"YEAR 2000" ISSUES
The Company implemented a "Year 2000" compliance program to prepare for the rollover of the two-digit year value to 00 in its computer systems on January 1, 2000. The compliance program required the Company to develop and validate contingency plans in the event a critical system failed, and to form a rapid response team to address any operational problems during the "Year 2000" date change period.
The Company experienced no significant "Year 2000" system related problems and it has continued to operate normally after January 1, 2000. The Company is unaware of any significant problems in the computer systems of third parties for whom the Company implemented "Year 2000" solutions on their computer systems. Total incremental spending on "Year 2000" issues was not material and was charged to operations in 1999 as it occurred.
FORWARD LOOKING INFORMATION
This report and other reports and statements filed by the Company from time to time with the Securities and Exchange Commission (collectively, "SEC Filings") contain or may contain certain forward-looking statements and information that are based on beliefs of, and information currently available to, the Company's management as well as estimates and assumptions made by the Company's management. When used in SEC Filings, and in oral statements by the Company the words "anticipate," "believe," "estimate," "expect," "future," "intend," "plan" and similar expressions as they relate to the Company or the Company's management, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, competitive factors and pricing pressures, shifts in market demand, the performance and needs of the industries served by the Company, and other risks and uncertainties, including, in addition to any uncertainties specifically identified in the text surrounding such statements and those identified below, uncertainties with respect to changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's shareholders, customers, suppliers, business partners, competitors, and legislative, regulatory, judicial and other governmental authorities and officials. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those anticipated, believed, estimated, expected, intended or planned.
Dependence on Availability of Qualified Technical Consultants. The Company is dependent upon its ability to attract and retain technical consultants who possess the skills and experience necessary to meet the staffing requirements of its clients. To keep pace with rapidly evolving information technologies and changing client needs, the Company must continually evaluate and upgrade its database of available qualified technical consultants. Competition for individuals with proven technical skills is intense, and, as is currently customary in the industry, the Company does not have any exclusive contracts with its consultants. The Company competes for such individuals with other providers of technical staffing services, systems integrators, providers of outsourcing services, computer systems consultants, clients and temporary personnel agencies. Factors influencing such competition include compensation, benefits, growth opportunities and pre-existing relationships with other companies, particularly specialty staffing companies. As the Company expands into new geographic areas, it may experience difficulty attracting qualified technical consultants who have a prior relationship or familiarity with more established specialty staffing companies in such areas. There can be no assurance that qualified technical consultants will continue to be available to the Company in sufficient numbers to meet the Company's current and anticipated growth requirements.
Acquisition Risks. The Company from time to time evaluates the possible acquisition of companies that will complement and expand the Company's existing businesses, principally in new geographic markets. The successful implementation of this strategy is dependent on the Company's ability to identify suitable acquisition candidates, acquire such companies on suitable terms and integrate their operations with those of the Company. There can be no assurance that the Company will be able to identify suitable acquisition candidates or that, if identified, the Company will be able to acquire such companies on suitable terms. The specialty staffing industry is relatively mature. Acquisitions in this industry are therefore likely to be at higher relative prices than for other industries due to competition from other staffing companies for acquisition candidates. Acquisitions also involve a number of special risks, including: (i) adverse effects on the Company's reported operating results, including increased goodwill amortization and interest expense; (ii) diversion of management attention; (iii) risks associated with unanticipated problems, liabilities or contingencies; (iv) difficulties and higher than expected costs related to the integration of the acquired business; and (v) dilution of existing shareholders. The occurrence of some or all of the events described in these risks could have a material adverse effect on the Company's business, financial condition and results of operations.
Ability to Manage Growth. Sustained or significant growth, if achieved, will subject the Company to risks by placing a substantial strain on the Company's available managerial, sales, recruiting, financial and other resources. Specifically, such growth will require the Company to: (i) hire, integrate and retain qualified managers, recruiters and sales personnel in existing markets as well as markets in which the Company has no prior operating experience; (ii) develop and maintain relationships with an increasingly large number of highly qualified technical consultants; (iii) maintain cost controls in all of the Company's businesses; and (iv) apply its management practices to a significantly larger organization. Expansion beyond the geographic areas where the Company's offices are presently located will further increase demands on the Company's management. The Company's ability to manage its staff and facilities growth effectively will require it to continue to expand its operational, financial and other internal systems. There can be no assurance that the Company's systems, procedures and controls will be successfully implemented or adequate to support the Company's expanded operations. Furthermore, an element of the Company's business strategy is to cross-sell the existing services of its businesses to new and existing clients. Historically, these businesses have operated independently, producing only occasional referrals, and there can be no assurance that the Company will successfully market such services on an integrated basis. In addition, if the technology sector of the economy experiences a downturn, the Company could be affected more so than other businesses.
Dependence on Contract Placement Business. The Company's Contract Placement business was responsible for 86.0%, 85.7% and 86.8% of total Company revenues for the years ended December 31, 1997, 1998 and 1999, respectively. In addition, for the year ended 1999, one customer of the Contract Placement business, Merck & Company, Inc., accounted for approximately 7.2% of total Contract Placement revenues, and 6.2% of total Company revenues. There can be no assurance that the Company will be able to retain this level of revenue from this client. The ability of the Company to sustain or increase revenues in the Contract Placement business is subject to various factors, including its ability to attract and retain qualified technical consultants, to hire, integrate and retain qualified managers, recruiters and sales personnel in existing and new markets, to apply its management practices to a significantly larger organization and to consummate acquisitions of and to successfully integrate profitable staffing companies. The inability of the Company to successfully manage these factors would have a material adverse effect on the revenues of the Contract Placement business. There can be no assurance that the Company will be able to sustain or increase its Contract Placement revenues. Furthermore, a decline in the level of Contract Placement revenues would have a material adverse effect on the Company.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JUDGE.COM, INC. AND SUBSIDIARIES
(FORMERLY THE JUDGE GROUP, INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
INDEPENDENT AUDITORS' REPORT
Board of Directors Judge.com, Inc. Bala Cynwyd, Pennsylvania
We have audited the accompanying consolidated balance sheets of Judge.com, Inc. (formerly The Judge Group, Inc.) and Subsidiaries as of December 31, 1999 and December 31, 1998, and the related consolidated statements of operations, shareholders' equity, and of cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Judge.com, Inc. (formerly The Judge Group, Inc.) and Subsidiaries as of December 31, 1999 and December 31, 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
RUDOLPH PALITZ, LLC
February 25, 2000 Blue Bell, PA
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 1. DESCRIPTION OF BUSINESS
Judge.com, Inc. (the "Company") (formerly The Judge Group, Inc.), a Pennsylvania corporation founded in 1970, provides (i) information technology ("IT") and engineering professionals to its clients on both a temporary basis (through its "Contract Placement" business) and a permanent basis (through its "Permanent Placement" business), and (ii) information technology training (through its "IT Training" business) on a range of software and network applications to corporate, governmental and individual clients. The Company also formerly provided computer network and document management system integration, implementation, maintenance and training (through its "Information Management Solutions" business ("IMS")). On June 15, 1999 the Company adopted a plan to dispose of the IMS business through the sale of substantially all of the assets of that business (See Note 3). At December 31, 1999, the Company, headquartered in Bala Cynwyd, Pennsylvania, operated regional offices in twelve states throughout the United States. A substantial portion of the Company's revenues are derived from customers located in the Mid-Atlantic corridor of the United States.
During 1996, the Company engaged an investment banking firm to assist it in an initial public offering of its common stock. On September 30, 1996, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended. Effective February 20, 1997 the Company successfully completed its initial public offering of common shares. The Company sold 3,000,000 common shares at a price of $7.50 per share, realizing approximately $20,906,000 in proceeds net of underwriting discounts and commissions. In connection with the initial public offering, the Company incurred approximately $1,694,000 of accounting, legal, printing and other costs and such costs have been charged to additional paid-in capital as a reduction of the proceeds from the initial public offering.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company, and the Company's wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Risks and Uncertainties. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition in Contract Placement and Permanent Placement Businesses. The Company recognizes permanent placement revenues at the date employment of the placed professional commences, subject to reversal and adjustments if such employment is terminated during a guarantee period. Revenues related to temporary placement services are recognized on a weekly basis as the services are performed.
Revenue Recognition in IT Training Business. Tuition and fee revenues are recognized generally when the classes are held. Payments received prior to the class commencing are recorded as deferred revenues.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash in bank and other short-term investments with original maturities of three months or less.
The Company maintains cash balances at financial institutions. These balances are insured by the Federal Deposit Insurance Corporation up to $100,000 at each institution.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (continued)
Inventories. Inventories of computer and related supplies and equipment held for resale are valued at the lower of cost (first-in, first-out) or market. Inventories at December 31, 1998 include approximately $614,000 of costs and estimated earnings in excess of billings on contracts-in-progress.
Accounts Receivable and Accounts Payable. Accounts receivable at December 31, 1999, 1998, and 1997 were net of allowances for doubtful accounts of $987,000, $511,000, and $465,000, respectively.
Included in accounts receivable was unbilled work-in-process of approximately $1,234,000, $1,134,000, and $584,000 at December 31, 1999, 1998 and 1997, respectively. Included in accounts payable and accrued expenses was approximately $913,000, $867,000, and $442,000 of accrued employee and contractor payroll principally relating to unbilled work-in-process at December 31, 1999, 1998 and 1997,respectively.
The allowance for doubtful accounts is established through charges to earnings in the form of a charge to bad debt expense. Accounts that are determined to be uncollectible are charged against the allowance account. Management makes periodic assessments of the adequacy of the allowance that requires the Company to recognize additions or reductions to the allowance. It is reasonably possible that factors may change significantly and, therefore, affect management's determination of the allowance for doubtful accounts in the near term. An analysis of the allowance for doubtful accounts follows:
Property and Equipment and Depreciation and Amortization. Property and equipment are stated at cost. Depreciation and amortization is computed on the straight-line and accelerated methods over the estimated useful lives of the related assets, principally five to ten years for furniture and office equipment, and three to five years for computer equipment.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful lives of the improvements, principally five to ten years.
Depreciation and amortization expense charged to continuing operations related to property and equipment, including property under capital leases, amounted to $877,849 in 1999, $701,648 in 1998, and $425,997 in 1997.
Property Under Capital Leases and Amortization. Property under capital leases is stated at the lower of fair market value or net present value of the minimum lease payments at inception of the leases. Property under capital leases consists of furniture, office and computer equipment and is included in "property and equipment" in the accompanying consolidated balance sheets. Amortization is provided over the shorter of the related lease terms or the estimated useful lives of the related assets.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (continued)
Income Taxes. Deferred taxes are accounted for in accordance with Statement of Financial Accounting Standards ("Statement") No. 109, "Accounting for Income Taxes". The Statement requires the use of the liability method to account for income taxes. Deferred income taxes are provided for the difference between the tax basis of an asset or liability and its reported amount in the financial statements and at the tax rates that are expected to be in effect when the taxes are actually paid or recovered.
Deferred income taxes arise principally from differences between financial and income tax reporting, including amounts recorded for workers' compensation funding, amounts recorded for the allowance for doubtful accounts, the availability of net operating loss carryforwards and certain other temporary differences.
Deferred income tax assets are reduced by a valuation allowance when, based on the weight of evidence available, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The determination of the requirement for a valuation allowance is an estimate, which is reasonably possible to change in the near term.
Intangible Assets. Goodwill represents the excess of the cost of companies acquired over the fair value of their net assets at the date of acquisition and is being amortized on the straight-line method over terms ranging from ten years to twenty-five years. Amortization of goodwill is based upon management's estimates, for which it is reasonably possible that such estimates may change in the near term. Amortization of goodwill charged to continuing operations for the periods ended December 31, 1999, 1998 and 1997 was approximately $403,000, $347,000, and $102,000 respectively, and is included in general and administrative expenses in the consolidated statements of operations. An additional $7,063,000 of goodwill was written off as part of the disposal of the IMS business, and is included in the loss on disposal of IMS in the accompanying consolidated statements of operations for the year ended December 31, 1999.
The covenant not to compete is being amortized on a straight-line method over the life of the covenant (twenty-four months). Amortization expense related to the covenant was approximately $45,000 for 1999 and $37,000 for 1998.
Deferred Rent Obligation. The Company is party to operating lease agreements for certain of its office facilities, which contain provisions for free rent for a certain period, with subsequent rent increases. In accordance with generally accepted accounting principles, the Company records monthly rent expense equal to the total of the payments due over the lease terms, divided by the number of months of the respective lease agreements. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent obligation in the accompanying consolidated balance sheets. Deferred rent at December 31, 1999 also includes a liability of approximately $231,000 with respect to the closing of the Company's New York City office in 1998 (see "Non-recurring Charges" below).
Non-recurring Charges. In 1998 the Company recorded pretax non-recurring charges related to the impairment of purchased goodwill and an estimated loss related to its lease commitment on the closing of its New York City office. These charges consisted of the following:
Impairment of purchased goodwill: IT Training $ 707,000 Closing of New York City office 312,000 ----------- Total charges $ 1,019,000 ===========
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (continued)
The impairment of purchased goodwill was a non-cash charge determined in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", due to continuing losses in that business. The SFAS 121 charge had no impact on the Company's 1998 cash flow or its ability to generate cash flow in the future. As a result of the SFAS 121 charge, amortization expense related to goodwill will decrease in future periods. During the fourth quarter of 1998 the Company decided to cease operations in its New York City office and recorded a charge to reserve for future losses, primarily related to its lease commitment which was recorded at the net present value of the difference between the lease obligation and related sublease income.
The effect of these non-recurring charges, net of tax effect, was ($0.06) per common share.
Advertising Expenses. The Company participates in various advertising programs. All costs related to advertising are expensed in the period incurred. Advertising expense charged to continuing operations amounted to approximately $847,000, $1,119,000, and $658,000 in 1999, 1998, and 1997, respectively.
Earnings (Loss) Per Share. The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share, beginning in the fourth quarter of 1997. All prior period earnings per common share were recomputed to conform to the provisions of SFAS 128. The recomputations did not result in any restatements in earnings per share previously reported.
Basic earnings (loss) per share amounts are computed based on net income (loss), and divided by the weighted average number of shares actually issued, reduced by Treasury Shares. The number of shares used in the computation were approximately 13,761,000 in 1999, 13,458,000 in 1998, and 12,761,000 in 1997.
Diluted earnings (loss) per share amounts for years 1999, 1998 and 1997 are based on the weighted average number of shares calculated for basic earnings (loss) per share purposes increased by (when dilutive) the number of shares that would be outstanding assuming exercise of outstanding stock options, and assumed conversion of convertible debt (for 1997). The number of shares used in the computation was approximately 13,797,000 in 1999, 13,458,000 in 1998, and 12,826,000 in 1997. In computing diluted earnings (loss) per share, certain options to purchase shares of common stock were excluded from the computation for the years ended December 31, 1999, 1998, and 1997. The options were excluded from the 1999 computation because the exercise prices of such options were greater than the average market price of the Company's common stock during that period. The options were excluded from the 1998 and 1997 computations because the assumed exercise of the options would be anti-dilutive.
On February 26, 1998 the Company repurchased 40,000 shares of its common stock at a price of $5.50 per share, which shares are held as Treasury Stock.
Reclassifications. Certain items in the 1998 and 1997 financial statements have been reclassified to conform to the 1999 financial statement presentation.
Fair Value of Financial Instruments. The estimated fair values of substantially all of the Company's financial instruments are approximately equal to their carrying values for all periods presented.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 3. BUSINESS COMBINATIONS AND DISPOSITIONS
During 1998 the Company, through its subsidiaries, consummated several acquisitions which were accounted for as purchase transactions, with the results of their operations included in the accompanying financial statements since each of their respective purchase dates. In each acquisition, the excess cost over the fair value of net assets acquired is considered goodwill and is being amortized over terms ranging from fifteen years to twenty-five years, beginning with the month following the acquisition. Following is a description of the acquisitions:
Effective March 5, 1998, the Company, through a subsidiary, purchased substantially all of the assets of Information Systems, Inc. and ISI Systems, Inc. (together "ISI"), a company engaged in the IT placement business in the Detroit, Michigan area, for total original acquisition cost of $6,290,000, payable in cash, notes and Company stock. An additional $500,000 note payable was issued to the sellers of ISI based on ISI having attained certain pre-tax income amounts in calendar year 1998.
Effective March 31, 1998, the Company, through a subsidiary, purchased substantially all of the assets of Cella Associates of Atlanta, Inc. ("Cella"), a company engaged in the placement of personnel with offices in Connecticut, Georgia, Texas and Illinois, for a total acquisition cost of $1,529,000, payable in cash and Company stock.
Effective October 12, 1998, the Company, through a subsidiary, purchased substantially all of the assets of Tech Stars, Inc. ("Tech Stars"), a company engaged in the IT placement business with offices in Nashville, Tennessee and Charlotte, North Carolina, for a total acquisition cost of $1,331,000.
Effective May 11, 1998, the Company, through its now discontinued IMS subsidiary, purchased all of the outstanding common stock of On-Site Solutions, Inc. ("On-Site"), a company engaged in the systems integration business in the Irvine, California area, for total original acquisition cost of the assumption of approximately $709,000 in liabilities. An additional $872,000 was paid in cash and 443,071 shares of Company stock were issued as consideration for $932,000, based on On-Site having attained certain pre-tax income in the period April 1,1998 through December 31, 1998. In 1999, as part of the disposal of the IMS business, substantially all of the assets of this company were sold.
Effective May 29, 1998, the Company, through its now discontinued IMS subsidiary, purchased substantially all of the assets of AOP Solutions ("AOP"), a company engaged in the Information Management Services business in the Buffalo, New York area, for a total acquisition cost of $3,240,000, payable in cash and Company stock. An additional $510,000 in cash was paid, based on AOP having attained certain pre-tax income in calendar 1998. In 1999, as part of the disposal of the IMS business, substantially all of the assets of this company were sold.
Effective June 8, 1998, the Company, through its now discontinued IMS subsidiary, purchased all of the outstanding common stock of Systems Solutions, Inc. d/b/a Corebridge Technologies, Inc. ("Corebridge"), a company engaged in document management, imaging and workflow solutions in the Seattle, Washington area, for a total acquisition cost of $155,000, payable in cash. In 1999, as part of the disposal of the IMS business, substantially all of the assets of this company were sold.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 3. BUSINESS COMBINATIONS AND DISPOSITIONS -- (continued)
The following sets forth the unaudited pro forma consolidated results from continuing operations for the Company for the year ended December 31, 1998 as though these business combinations occurred at January 1, 1998.
Year Ended December 31, 1998 ----------------- Net revenues $ 98,097,000 ============ Income before non-recurring charges $ 2,102,000 ============ Income from continuing operations $ 148,000 ============
Pro-forma adjustments included adjustments to goodwill amortization expense, interest expense and income tax expense/benefit.
Unaudited pro-forma basic and diluted income from continuing operations per share of common stock is calculated as follows:
Year Ended December 31, 1998 ----------------- Income from continuing operations $ 148,000 ========== Weighted average number of shares: Basic 13,508,000 ========== Diluted 13,508,000 ========== Income from continuing operations per share, basic and diluted $ 0.01 ==========
On June 15, 1999 the Company adopted a formal plan to dispose of the IMS business. During 1999 substantially all of the net assets of the IMS business were disposed of for total consideration of $4,357,673 consisting of cash, note receivable, and forgiveness of amounts payable to the buyer. The December 31, 1998 balance sheet has not been restated. Assets sold consisted primarily of accounts receivable, inventory, and property and equipment. Liabilities assumed by the respective purchasers consist primarily of accounts payable, accrued expenses, and equipment leases payable.
The loss on disposal of the IMS business of $6,275,056 represents the actual and estimated loss on the disposal of the assets and a provision of $134,000 for operating losses during the phase-out period.
Operating results of the IMS business for the years ended December 31, 1999, 1998, and 1997 are shown separately in the accompanying consolidated statements of operations, as "loss from discontinued operations".
Net revenues of the IMS business for the years ended December 31, 1999, 1998, and 1997 were $7,026,611, $19,280,184, and $16,443,294, respectively. These amounts are not included in net revenues in the accompanying consolidated statements of operations for the respective periods.
NOTE 4. NOTE PAYABLE, BANK
Note payable, Bank, consists of advances to the Company under a $25,000,000 line of credit facility. The line of credit bears interest at the Bank's prime rate (8.50% at December 31, 1999). Maximum permitted borrowings thereunder are the lesser of $25,000,000 or 85% of qualified accounts receivable, as defined in the line of credit agreement. The line of credit is collateralized by substantially all of the Company's assets, expires May 31, 2003 and is subject to certain covenants, including financial covenants
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 4. NOTE PAYABLE, BANK - (continued)
requiring certain levels of net worth, cash flow coverage, and leverage, as well as limitations on capital expenditures. In addition, the Company and all of its subsidiaries are jointly and severally responsible for all of the debt outstanding under the line.
Included in accounts payable and accrued expenses at December 31, 1999 and 1998 were approximately $1,871,000 and $1,585,000, respectively, of bank overdrafts.
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following:
Maturities of long-term debt are as follows:
Year Ending December 31, Amount ------------------------ ------ 2000 $ 902,118
2001 504,713
2002 328,845 ---------- $1,735,676 ==========
Interest expense charged to continuing operations was approximately $829,000, $154,000, and $142,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 6. CONVERTIBLE NOTES
In 1994, the Company received $500,000 from a group of investors in the form of 10% convertible senior subordinated promissory notes. The notes were exchanged for 526,000 Company common shares, immediately prior to the Company's 1997 initial public offering. The notes bear 10% interest per annum and were scheduled to mature in July 1997. Since the Company effected a successful initial public offering before July 31, 1997, in accordance with the Note Purchase Agreement, the financial advisor who arranged such financing was paid a fee equal to 1% of the proceeds of the initial public offering (approximately $225,000) in February 1997.
NOTE 7. INCOME TAXES
The Company files a consolidated Federal income tax return with all of its wholly-owned subsidiaries. Prior to February 20, 1997, the IMS subsidiary was not included in the Company's consolidated Federal income tax return, as the Company owned less than 80% of the IMS subsidiary's outstanding common shares. Under Internal Revenue regulations, the IMS subsidiary was not part of the consolidated group for tax purposes and filed its own Federal income tax returns. Effective February 20, 1997, the IMS subsidiary began filing as part of the consolidated group. State income taxes are determined on the basis of filing separate returns for each company as required by the applicable state regulations.
The net deferred tax asset at December 31, 1999 and 1998 included the following:
At December 31, 1999 and 1998, the net deferred tax assets of $2,518,000 and $865,000, respectively, were included in "prepaid income taxes and deferred taxes" in the accompanying consolidated balance sheets.
The tax effect of major temporary differences that gave rise to the Company's net deferred tax asset are as follows:
Income tax expense for continuing operations for the years ended December 31, 1999, 1998 and 1997 consisted of the following:
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 7. INCOME TAXES -- (continued)
The effective rate of income tax expense from continuing operations for all periods presented was higher than the applicable statutory tax rate, due to certain expenses that were not deductible for tax purposes and state tax provisions. A reconciliation of the Company's effective income tax rate with the statutory Federal rate follows:
As a result of operating losses, no provision for income taxes was required for all periods prior to February 20, 1997 for the IMS subsidiary. The IMS subsidiary's operating losses subsequent to February 20, 1997 have been used in the consolidated tax accrual. For income tax reporting purposes, as of December 31, 1999, the IMS subsidiary had an unused operating loss carryforward of approximately $4,200,000, which may be applied against future taxable income of the IMS subsidiary, subject to certain Federal income tax limitations. These carryforwards expire between 2002 and 2012.
As a result of a net operating loss incurred in 1999 by the consolidated group, the Company has a net operating loss carryforward of approximately $5,000,000, which can be applied against future taxable income of the Company.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries lease office facilities under operating lease agreements that expire at various times through the year 2008. Certain of these leases contain optional provisions for additional periods of time. Rent expense was approximately $2,228,000, $1,899,000 and $986,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Minimum annual future rental commitments, net of subleases rents (see Note 2), at December 31, 1999, and exclusive of common area maintenance costs and utilities, are as follows:
Year Ending December 31, Amount ------------------------ ------ 2000 $ 1,837,000 2001 1,738,000 2002 1,489,000 2003 704,000 2004 448,000 Thereafter 322,000 ----------- $ 6,538,000 ===========
The Company is self-insured for workers' compensation purposes and is liable for aggregate claims up to approximately $249,000 for 1999, $164,000 for 1998, and $164,000 for 1997. In addition, the Company is responsible for certain fixed costs including underwriting, brokerage, reinsurance and administration costs.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 8. COMMITMENTS AND CONTINGENCIES -- (continued)
The Company is partially self-insured for health care claims for eligible active employees. The Company is currently liable for aggregate claims up to approximately $1,288,000 annually. Self-insurance costs are accrued based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported.
The Company experienced no significant adverse effects from the rollover of the two-digit year value to 00 on January 1, 2000. The Company's computer systems continue to operate normally after the "Year 2000" transition. The Company is unaware of any significant problems in the computer systems of third parties for whom the Company implemented "Year 2000" solutions on their computer systems. Total incremental spending on "Year 2000" issues was not material and were charged to operations in 1999 as they occurred.
NOTE 9. RETIREMENT PLAN
The Company has a 401(k) retirement plan (the "Plan") covering substantially all employees. Employees are able to contribute a percentage of their pre-tax salary to the Plan. The Plan has no Company contribution provision.
NOTE 10. SHAREHOLDERS' EQUITY AND EARNINGS (LOSS) PER SHARE
Dividends. In accordance with the provisions of its line of credit, the Company is not permitted to declare or pay any cash dividends on its common stock.
Stock Option Plan. On September 4, 1996 the Company adopted an Incentive Stock Option and Non-Qualified Stock Option Plan (the "Incentive Plan") for key employees and non-employee directors. Options may be granted under the Incentive Plan to purchase up to a maximum of 3,500,000 of the Company's common shares, subject to certain adjustments and restrictions. The price of each option shall be the fair market value of the shares on the date of the grant. The options granted are generally subject to a four year vesting schedule in equal increments annually, and are exercisable any time after vesting up to 10 years from grant date.
During 1999, 1998 and 1997, the Company granted two non-employee Directors options to purchase 10,000 common shares each at an exercise price of $1.813, $4.938 and $3.25, respectively, under the Incentive Plan.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 10. SHAREHOLDERS' EQUITY AND EARNINGS (LOSS) PER SHARE -- (continued)
A summary of the Company's Incentive Plan activity for common shares for the years ended December 31, 1999, 1998 and 1997 follows:
The following table summarizes information about stock options outstanding at December 31, 1999:
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 10. SHAREHOLDERS' EQUITY AND EARNINGS (LOSS) PER SHARE -- (continued)
The Company accounts for its Incentive Plan in accordance with Accounting Principles Board Opinion No. 25 and related interpretations. Accordingly, no compensation expense has been recognized for the Incentive Plan. Had compensation cost been determined in accordance with the fair value method of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), the Company's pro forma net income (loss) and net income (loss) per share for the years ended December 31, 1999, 1998 and 1997 would be as follows:
The resulting pro forma compensation cost may not be representative of that to be expected in future years.
The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1999 and 1998, respectively; risk-free interest rate of 5.50% and 5.10%, expected dividend yields of 0%, expected life of option of five years from date of grant, and expected price volatility of 125% and 131%. The weighted average fair value of the options granted was $1.12 in 1999 and $3.59 in 1998.
NOTE 11. STATEMENT OF CASH FLOWS
Supplemental disclosure of non-cash investing and financing transactions:
During 1999, the Company entered into the following non-cash transactions:
o entered into certain capital lease arrangements to fund the purchase of equipment in the amount of approximately $345,700
o recorded the following with respect to the disposition of the IMS segment:
o reduced contingent stock payables which were forgiven in the amount of a pproximately $952,000
o reduced earnouts payable which were forgiven in the amount of approximately $718,000
o wrote off approximately $7,063,000 of goodwill
During 1998, the Company entered into the following non-cash transactions:
o recorded the following with respect to business combinations entered into in 1998 (Note 3):
o goodwill of $15,908,000;
o incurred long-term debt ($1,640,000) and contingent purchase price ($2,635,000) and other liabilities ($1,595,000);
o issued stock (193,333 shares - $1,933) and recorded additional paid-in capital ($2,141,957);
o reduced goodwill $707,000 due to an impairment loss in IT Training subsidiary;
o reduced goodwill $2,914,099 due to an impairment loss in IMS subsidiary.
JUDGE.COM, INC. AND SUBSIDIARIES (FORMERLY THE JUDGE GROUP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
NOTE 11. STATEMENT OF CASH FLOWS - (continued)
During 1998, the Company effected various business combinations:
During 1997, the Company entered into the following non-cash transactions:
o incurred goodwill of $2,399,190 in the business combination with IMS;
o converted $300,000 of long-term debt to equity in accordance with an agreement;
o converted $500,000 of convertible debentures into 526,000 shares of common stock;
o reversed $572,200 of goodwill and long-term debt due to a contingent payment which was not required to be made, relating to the Berkeley acquisition.
NOTE 12. SEGMENT INFORMATION
With the sale of the IMS segment in 1999, substantially all of the Company's revenues and assets are derived from the IT Staffing business. The Company also generates minor revenues from its IT training subsidiary which amounted to approximately $3,100,000 in 1999, $2,950,000 in 1998, and $3,200,000 in 1997. The IT training subsidiary incurred a loss from continuing operations of approximately $500,000 in 1999, $1,426,000 in 1998, and $75,000 in 1997.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
INCORPORATION BY REFERENCE
The information called for by Item 10
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a.) The following documents are filed as a part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements:
Report of Independent Auditors 19
Consolidated Balance Sheets 20
Consolidated Statements of Operations 21
Consolidated Statements of Shareholders' Equity 22
Consolidated Statements of Cash Flows 23
Notes to Consolidated Financial Statements 24-36
2. Consolidated Financial Statement Schedules:
Included in Part IV of this report:
All such information is included in the Notes to the Consolidated Financial Statements.
Other Schedules are omitted because of the absence of conditions under which they are required.
3. Exhibits
No reports were filed by the Registrant on Form 8-K during the quarter ended December 31, 1999.
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,
Dated: March 27, 2000 JUDGE.COM, INC. (FORMERLY THE JUDGE GROUP, INC.)
By: /s/ Robert G. Alessandrini By: /s/ Martin E. Judge, Jr. -------------------------- ------------------------ Robert G. Alessandrini Martin E. Judge, Jr. Chief Financial Officer Chairman of the Board and 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.
/s/ Martin E. Judge, Jr. Chairman of the Board, March 27, 2000 - ------------------------ Director, President and Chief Martin E. Judge, Jr. Executive Officer (Principal Executive Officer)
/s/ Richard T. Furlano Director March 27, 2000 - ---------------------- Richard T. Furlano
/s/ Michael A. Dunn Director and Executive March 27, 2000 - ------------------- Vice President Michael A. Dunn
/s/ Randolph J. Angermann Director March 27, 2000 - ------------------------- Randolph J. Angermann
/s/ James C. Hahn Director March 27, 2000 - ----------------- James C. Hahn