Management's Discussion and Analysis

Results of Operations

        The following table sets forth certain operating data as a percentage of
        consolidated revenues for the periods indicated. All percentages include
        the  operations  of Spargo  Consulting  PLC combined with the Company on
        June  24,   1998.   This   combination   has  been   accounted   for  as
        pooling-of-interests. Comparisons with prior years are based on restated
        combined results:
<TABLE>
<CAPTION>
                                                        Year Ended December 31, 1997
                                                         1998      1997      1996
                                                         ----      ----      ----
                                                         100.0%    100.0%    100.0%
<S>                                                      <C>       <C>       <C> 
Revenues
Costs and Expenses:
     Direct costs ................................       63.4      66.7      69.0
     Selling, general and administrative .........       22.0      21.1      22.8
     Merger-related expenses .....................        0.8       0.3
Income from operations ...........................       13.8      11.9       8.2
Other income (expense):
     Interest income/(expense),net ...............        0.9       0.4       --
     Equity in net earnings of joint venture .....        --        --        0.3
     Gain on sale of joint venture ...............        0.8       --        --
Income before income tax .........................       15.5      12.3       8.5
Income taxes:
     Current .....................................        7.7       5.6       3.6
     Deferred ....................................       (0.7)     (0.3)     (0.1)
Net income .......................................        8.5       7.0       5.0
</TABLE>
<PAGE>
Year Ended December 31,
1998 Compared to Year
Ended December 31, 1997

        Revenues

         Revenues  increased  to $514.9  million in the year ended  December 31,
         1998 from  $350.3  million  in the year ended  December  31,  1997,  an
         increase of $164.6 million,  or 47%. This increase was comprised of 34%
         internal growth,  primarily from increased headcount, and 13% resulting
         from 1998  acquisitions.  Staffing revenues increased to $266.6 million
         in the year ended  December  31, 1998 from  $224.5  million in the year
         ended December 31, 1997, an increase of $42.1 million or 19%. Solutions
         revenues,  including Year 2000 services, increased to $225.5 million in
         the year ended December 31, 1998, from $125.9 million in the year ended
         December  31,  1997,  an  increase of $99.6  million or 79%.  Year 2000
         Service revenues increased to $136.0 million in the year ended December
         31, 1998,  from $72.1  million in the year ended  December 31, 1997, an
         increase of $63.9  million or 89%.  The  Company's  Year 2000  business
         accounted  for  approximately  26% of total  revenues in the year ended
         December  31, 1998 from $53.8  million for the year ended  December 31,
         1997, an increase of $35.7 million or 66%.  Product revenues were $22.8
         million in the year ended  December 31, 1998,  an increase  from nil in
         the year ended December 31, 1997.

        Direct Costs

         Direct costs increased to $326.8 million in the year ended December 31,
         1998 from $233.6  million in the year ended  December 31,  1997.  Gross
         margin  increased  to 36.6% in the year ended  December  31,  1998 from
         33.3% in the year ended December 31, 1997. The increase in gross margin
         was primarily due to stable margins in the Company's  staffing business
         and an increase in the Company's higher margin Year 2000 business.  The
         Company's  margins  are  subject  to  fluctuation  due to a  number  of
         factors,  including the level of salary and other  compensation-related
         expenses necessary to attract and retain qualified  technical personnel
         and the mix of staffing versus solutions business during the year.

        Selling, General and Administrative

        Selling,  general and administrative expenses (excluding  merger-related
        expenses)  increased  to $113.0  million in the year ended  December 31,
        1998 from $74.2 million in the year ended December 31, 1997, an increase
        of $38.8  million  or  52.3%.  The  increase  in  selling,  general  and
        administrative   expenses  was   primarily  a  result  of  salaries  and
        commissions  for  additional  sales and  recruiting  personnel and, to a
        lesser extent,  growth in the Company's  administrative  infrastructure.
        During   1998,   the  Company   incurred   merger-related   expenses  of
        approximately  $4.3 million or 0.8% of revenues,  an increase  from $1.0
        million, or 0.3% of revenues in 1997.

        Income from Operations

        Operating margins increased to 13.8% in the year ended December 31, 1998
        from  11.9% in the year ended  December  31,  1997.  This  increase  was
        primarily  due to an increase in the  Company's  higher margin Year 2000
        business and the  acquisition  of a high margin  products  company.  The
        Company's  business is  labor-intensive  and, as such,  is  sensitive to
        inflationary  trends.  This sensitivity applies to client billing rates,
        as well as to payroll costs.

        Other Income

        Other income  increased  to $8.7 million in the year ended  December 31,
        1998 from $1.4 million in the year ended  December 31, 1997, an increase
        of $7.3  million.  This increase was primarily the result of the sale of
        the  Company's  Birla  Horizons  Joint  Venture,  as well  as  increased
        interest income  resulting from the follow-on  offering of approximately
        $84 million completed in the third quarter of 1997.

        Provision for Income Taxes

        The  effective  tax rate for  Federal,  state and local income taxes was
        45.2%  and  43.0%  in the  years  ended  December  31,  1998  and  1997,
        respectively.  The increase in the 1998 effective tax rate was primarily
        due to an increase in non-deductible merger-related expenses incurred in
        1998.

         Net Income

         Net income  increased to $43.6  million in the year ended  December 31,
         1998 from  $24.5  million  in the year  ended  December  31,  1997,  an
         increase  of $19.1  million,  or 78%.  Net income  per share  (diluted)
         increased to $1.35 in the year ended  December 31, 1998,  from $0.85 in
         the year ended December 31, 1997. The effect of merger-related expenses
         amounted to $.11 per share in 1998, compared to $.03 per share in 1997.
         All net  income  per share  and share  amounts  have been  adjusted  to
         reflect a  three-for-two  common stock  split,  effected as a 50% stock
         distribution, distributed on June 9, 1997.

Year Ended December 31,
1997 Compared to Year
Ended December 31,
1996 
        Revenues

        Revenues increased to $350.3 million in the year ended December 31, 1997
        from $261.4  million in the year ended December 31, 1996, an increase of
        $88.9 million or 34%. Staffing  revenues  increased to $224.5 million in
        the year ended  December 31, 1997 from $186.0  million in the year ended
        December  31,  1996,  an  increase  of $38.5  million or 21%.  Solutions
        revenues,  including Year 2000 services,  increased to $125.9 million in
        the year ended  December  31, 1997 from $74.4  million in the year ended
        December  31,  1996,  an  increase  of $51.5  million or 69%.  Year 2000
        revenues  increased to $72.1 million in the year ended December 31, 1997
        from $10.4  million  in the year  ended  December  31,  1996.  Solutions
        revenues,  excluding Year 2000  services,  decreased to $53.8 million in
        the year ended  December  31, 1997 from $64.0  million in the year ended
        December 31,  1996, a decrease of $10.2  million or 16%. The decrease in
        Solutions revenues,  excluding Year 2000 services,  was primarily caused
        by a shift in client demand.

        Direct Costs

        Direct costs  increased to $233.6 million in the year ended December 31,
        1997 from $180.4  million in the year ended  December  31,  1996.  Gross
        margin increased to 33.3% in the year ended December 31, 1997 from 31.0%
        in the year ended  December 31,  1996.  The increase in gross margin was
        primarily due to stable margins in the Company's  staffing  business and
        an increase in Computer Horizons' higher margin Year 2000 business.  The
        Company's margins are subject to fluctuation due to a number of factors,
        including  the level of salary and other  compensation-related  expenses
        necessary to attract and retain  qualified  technical  personnel and the
        mix of staffing versus solutions business during the year.

        Selling, General and Administrative

        Selling,  general and administrative expenses (excluding  merger-related
        expenses) increased to $74.2 million in the year ended December 31, 1997
        from $59.7  million in the year ended  December 31, 1996, an increase of
        $14.5 million or 24.3%. As a percentage of revenue, selling, general and
        administrative  expenses  decreased to 21.2% in the year ended  December
        31, 1997,  from 22.8% in the year ended  December 31, 1996. The increase
        in selling,  general and administrative expenses in 1997 was primarily a
        result  of  salaries   and   commissions   for   additional   personnel,
        infrastructure  necessary to pursue large,  high-profile  opportunities,
        and  marketing  expenses  incurred  to raise  the  Company's  visibility
        through public relations, trade shows and conferences.

        Income from Operations

        Income  from  operations  increased  to $41.6  million in the year ended
        December  31,  1997 from $21.3  million in the year ended  December  31,
        1995, an increase of $20.3 million or 95%.  Operating  margins increased
        to 11.9% in the year ended December 31, 1997 from 8.2% in the year ended
        December 31, 1996. The increase was  attributable to increased  revenues
        and  improved  gross  margins,  as well as the  percentage  decrease  in
        selling,  general and  administrative  expenses in 1997.  The  Company's
        business is  labor-intensive  and, as such, is sensitive to inflationary
        trends.  This sensitivity applies to client billing rates, as well as to
        payroll costs.

        Other Income

        Other income  increased  to $1.4 million in the year ended  December 31,
        1997 from  $0.8  million  in the year  ended  December  31,  1996.  This
        increase was primarily a result of increased  interest income  resulting
        from the follow-on  offering of approximately  $84 million  completed in
        the third quarter of 1997.

        Provisions for Income Taxes

        The  effective  tax rate for  Federal,  state and local income taxes was
        43.0%  and  40.95  in the  years  ended  December  31,  1997  and  1996,
        respectively.  The  1997  rate  reflects  a  decrease  in  undistributed
        earnings of the Joint Venture for which taxes have not been provided.

        Net Income

        Net income  increased  to $24.5  million in the year ended  December 31,
        1997 from $13.1 million in the year ended December 31, 1996, an increase
        of $11.4  million  or 87.6%.  Net  income  increased  to $0.85 per share
        (diluted)  in the year  ended  December  31,  1997 from  $0.47 per share
        (diluted) in the year ended  December 31, 1996. All net income per share
        and share amounts have been adjusted to reflect a  three-for-two  common
        stock split,  effected as a 50% stock distribution,  distributed on June
        9, 1997.

        Liquidity and Capital Resources

        Since 1995,  Computer  Horizons has financed  its  operations  primarily
        through cash generated from operations and the public sale of its common
        stock.  At December 31, 1998,  the Company had $158.8 million in working
        capital,  of  which  $63.1  million  were  cash,  cash  equivalents  and
        short-term   investments.   At  December  31,  1998,  $140,000  Canadian
        (approximately $91,000 U.S.) was outstanding on a line of credit.

        Net cash  provided by  operating  activities  was $12.7  million,  $17.0
        million and $7.0 million,  for the years ended  December 31, 1998,  1997
        and 1996,  respectively,  consisting primarily of net income,  offset in
        part by an increase in accounts receivable.

        Net cash used in investing  activities was $54.6 million,  $22.1 million
        and $2.7 million in the years ended  December  31,  1998,  1997 and 996,
        respectively.  Net cash used in investing  activities in 1998  consisted
        primarily  of $49.4  million used for the  acquisition  of the assets of
        Enterprise  Solutions Group, RPM Consulting and Informatics Search Group
        in the third quarter.  In addition,  the Company used approximately $6.0
        million relating to the Company's new accounting/information system. Net
        cash used in investing  activities  in 1997  consisted  primarily of the
        purchase of short-term investments, as well as the Company's acquisition
        of the assets of Millenium  Computer  Technology  for  approximately  $5
        million on December 31, 1997.  Net cash used in investing  activities in
        the year ended  December  31, 1996  consisted  primarily of purchases of
        furniture and equipment.

        For the Years ended  December  31, 1998 and 1997,  net cash  provided by
        financing  activities was $2.4 million and $83.4 million,  respectively.
        Net provided in 1998  resulted  primarily  form cash  received  from the
        exercise of stock options,  offset by repayments of notes to banks.  Net
        cash  provided in the year ended  December  31, 1997 was $83.4  million,
        consisting primarily of $83.7 million in net proceeds form the Company's
        public  offering of common  stock Net cash used in 1996 was $1.5 million
        resulting primarily from the scheduled repayment of long-term debt.

        At December 31, 1998, the Company had a current ratio position of 4.4 to
        1,  no  long-term  debt  and no  outstanding  borrowings  under  its two
        unsecured  discretionary  lines of  credit  of $15.0  million  and $10.0
        million.  The Company  believes that its cash and cash  equivalents  and
        short-term  investments,  lines of credit and internally generated funds
        will be sufficient to meet its working capital needs through 1999.

        The Company's  billed  accounts  receivable were $83.4 million and $60.3
        million at December 31, 1998 and December 31, 1997, respectively. Billed
        days sales  outstanding were 53 days at December 31, 1998 and 55 days at
        December 31, 1997 based on fourth quarter sales.

        Year 2000

        The Year 2000 issue is the result of  computer  programs  being  written
        using two digits  rather than four to define the  applicable  year.  Any
        company's  computer  programs  or  hardware  that  have   date-sensitive
        software or embedded  chips may  recognize a date using "00" as the year
        1900 rather than the year 2000.  This could result in system  failure or
        miscalculations causing disruptions of operations including, among other
        things, a temporary inability to process transactions, send invoices, or
        engage in similar  normal  business  activities.  The Company's  plan to
        resolve  the  Year  2000  issue  involves  the  following  four  phases:
        assessment, remediation, testing and implementation.

        The  assessment  phase included an examination of all systems that could
        be significantly  affected by the Year 2000. With the completion of this
        phase,  it  was  concluded  that  many  of  the  Company's   significant
        information  technology  systems could be affected,  particularly in the
        time  capture  and  billing  areas.  Concurrently,  a review  was  being
        conducted to select a new  accounting/information  system to support the
        future growth of the Company.  As a result,  as part of the  remediation
        phase, the Company chose a new system that addressed, among other areas,
        Year 2000 compliance.  Following extensive testing procedures, including
        Year 2000  compliance,  the new  system  was  implemented  in late 1998.
        Subsidiaries operating with independent  accounting/information  systems
        are already  compliant  or will  transfer  financial  operations  to the
        Company's core business system by the Year 2000.

        The Company  has  utilized  both  internal  and  external  resources  to
        implement the new  accounting/information  system. The total cost of the
        project  is  estimated  at $6.8  million,  of which  approximately  $6.0
        million  will be  capitalizaed.  The  project  is being  funded  through
        operating cash flows.  As of December 31, 1998, the Company has incurred
        approximately $6.0 million relating to the project.

        The Company has queried and continues to monitor Year 2000 compliance of
        all  significant  outside  vendors and service  providers.  To date, the
        Company is not aware of any  outside  vendor with a Year 2000 issue that
        would materially  impact the Company's  results of operations.  However,
        the Company has no means of ensuring that external  vendors will be Year
        2000 ready.  The  inability of external  vendors to complete  their Year
        2000 resolution  process in a timely fashion could materially impact the
        Company.

        As described above, the Company believes it has an effective  program in
        place to resolve the Year 2000 issue in a timely manner.  However, there
        is no guarantee  that possible  "worst case" Year 2000 issues of outside
        vendors,  suppliers  and  customers  would not  impact the  Company.  In
        addition,  disruptions in the economy generally resulting from Year 2000
        issues  could  adversely  affect the  Company.  The amount of  potential
        liability and lost revenue cannot be reasonably estimated at this time.

        The Company has contingency plans for certain critical  applications and
        is working on such plans for others.  These  contingency  plans involve,
        among  other  actions,   manual   workarounds  and  adjusting   staffing
        strategies.

        Market Risk Exposure

        The Company has financial  instruments that are subject to interest rate
        risk, principally short-term investments.  Historically, the Company has
        not  experienced  material  gains or losses due to interest rate changes
        when selling  short-term  investments.  Based on the current holdings of
        short-term  investments,  the  exposure  to  interest  rate  risk is not
        material.

        Foreign Currency Exposure

        The Company's  international  operations  expose it to translation  risk
        when the local  currency  financial  statements  are  translated to U.S.
        dollars.  As  currency  exchange  rates  fluctuate,  translation  of the
        statements of income of international  businesses into U.S. dollars will
        affect the comparability of revenues and expenses between years. None of
        the  components of the Company's  consolidated  statements of income was
        materially affected by exchange rate fluctuations in 1998, 1997 or 1996.
<PAGE>












                       FINANCIAL STATEMENTS AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                             COMPUTER HORIZONS CORP.

                           December 31, 1998 and 1997
<PAGE>
                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS




Board of Directors and Shareholders
Computer Horizons Corp.


We have  audited  the  accompanying  consolidated  balance  sheets  of  Computer
Horizons  Corp.  and  Subsidiaries  as of December  31,  1998 and 1997,  and the
related consolidated  statements of income,  shareholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1998.  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 Computer Horizons
Corp.  and  Subsidiaries  as of December 31, 1998 and 1997 and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted accounting principles.





GRANT THORNTON LLP


Parsippany, New Jersey
February 15, 1999
<PAGE>
<TABLE>
<CAPTION>
                    Computer Horizons Corp. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                                                       December 31,
                                                                   -------------------
                                                                     1998       1997
                                                                   --------   --------
                                                                      (in thousands)
<S>                                                                <C>        <C>     
               ASSETS

Current assets:
      Cash and cash equivalents                                    $ 51,796   $ 92,086
      Short-term investments (Note 1)                                11,259     13,165
      Accounts receivable (Note 3)                                  135,447     81,547
      Deferred income tax benefit (Note 7)                            4,987      1,854
      Other                                                           2,049      1,087
                                                                   --------   --------

                  Total current assets                              205,538    189,739
                                                                   --------   --------

Property and equipment:
      Furniture, equipment and other                                 26,469     13,202
      Less accumulated depreciation                                  11,141      7,502
                                                                   --------   --------

                                                                     15,328      5,700
                                                                   --------   --------

Other assets - net:
      Goodwill (Note 1)                                              66,315     17,090
      Deferred income tax benefit (Note 7)                            1,348        816
      Other (Note 4)                                                  7,523      4,280
                                                                   --------   --------

                                                                     75,186     22,186
                                                                   --------   --------

                  Total Assets                                     $296,052   $217,625
                                                                   ========   ========
</TABLE>

The accompanying notes are an integral part of these statements 
<PAGE>
<TABLE>
<CAPTION>
                                                                             December 31,
                                                                       ----------------------
                                                                         1998          1997
                                                                       ---------    ---------
                                                                           (in thousands)
<S>                                                                <C>        <C>     
                 LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt (Note 5)                       $            $   1,473
      Accrued payroll, payroll taxes and benefits                         24,262       18,231
      Accounts payable                                                     5,258        2,211
      Income taxes payable                                                 6,437        4,309
      Other accrued expenses                                              10,821        3,145
                                                                       ---------    ---------

                  Total current liabilities                               46,778       29,369
                                                                       ---------    ---------


Other liabilities (Note 10)                                                2,740        2,282
                                                                       ---------    ---------

Commitments (Note 11)

Shareholders' equity:
      Preferred stock, $.10 par; authorized and unissued,
           200,000 shares, including 50,000 Series A
      Common stock, $.10 par; authorized, 100,000,000
           shares; issued  32,351,580 shares and 31,247,069
           shares at December 31, 1998 and 1997, respectively              3,235        3,125
      Additional paid-in capital                                         128,821      117,718
      Accumulated comprehensive income                                      (762)          84
      Retained earnings                                                  123,943       78,919

                                                                         255,237      199,846
                                                                       ---------    ---------

      Less shares held in treasury, at cost; 1,061,662 and 1,692,253
           shares at December 31, 1998 and 1997, respectively             (8,703)     (13,872)
                                                                       ---------    ---------

                  Total shareholders' equity                             246,534      185,974
                                                                       ---------    ---------

                  Total Liabilities and Shareholders' Equity           $ 296,052    $ 217,625
                                                                       =========    =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                    Computer Horizons Corp. and Subsidiaries

                        CONSOLIDATED STATEMENTS OF INCOME

                                                                 Year ended December 31,
                                                       --------------------------------------------
                                                            1998            1997           1996
                                                       ------------    ------------    ------------
                                                       ----(in thousands, except per share data)---
<S>                                                    <C>             <C>             <C>         
Revenues                                               $    514,921    $    350,310    $    261,411
                                                       ------------    ------------    ------------
Costs and expenses:
    Direct costs                                            326,795         233,574         180,410
    Selling, general and administrative                     113,035          74,165          59,677
    Merger-related expenses                                   4,272             976
                                                       ------------    ------------    ------------
                                                            444,102         308,715         240,087
                                                       ------------    ------------    ------------
Income from operations                                       70,819          41,595          21,324
                                                       ------------    ------------    ------------
Other income (expense):
    Interest income                                           5,334           1,700             404
    Interest expense                                           (750)           (276)           (507)
    Equity in net earnings of joint venture (Note 4)            (90)             13             885
    Gain on sale of joint venture                             4,180
                                                       ------------    ------------    ------------
                                                              8,674           1,437             782
                                                       ------------    ------------    ------------
Income before income taxes                                   79,493          43,032          22,106
                                                       ------------    ------------    ------------
Income taxes (Notes 1 and 7):
    Current                                                  39,645          19,448           9,413
    Deferred                                                 (3,739)           (950)           (382)
                                                       ------------    ------------    ------------
                                                             35,906          18,498           9,031
                                                       ------------    ------------    ------------
Net Income                                             $     43,587    $     24,534    $     13,075
                                                       ============    ============    ============
Earnings per share (Notes 1 and 8):
      Basic                                            $       1.41    $        .89    $        .50
                                                       ============    ============    ============
      Diluted                                          $       1.35    $        .85    $        .47
                                                       ============    ============    ============
Weighted average number of shares outstanding:
      Basic                                              30,925,000      27,567,000      26,380,000
                                                       ============    ============    ============
      Diluted                                            32,230,000      28,999,000      27,932,000
                                                       ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
                    Computer Horizons Corp. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                  Years ended December 31, 1998, 1997 and 1996

                                                                                  Addi-     Accumulat-
                                                                                 tional     ed other
                                                             Common stock       paid-in    comprehen-      Retained    
                                                       Shares      Amount       capital    sive income     earnings    
                                                       ------      ------       -------    -----------     --------    
                                                                         (dollars in thousands)
<S>                                                  <C>          <C>          <C>            <C>         <C>        
Balance, December 31 1995, as restated                 19,043,292   $1,904       $27,505       $37        $ 43,133     

Net income for the year                                                                                     13,075     
Other comprehensive income:
    Foreign currency translation
    adjustments                                                                                253                     
                                                                                                                       
Total comprehensive income                                                                                             
Stock options exercised                                   467,022      47         1,679                                
Tax benefits related to
    stock option plans                                                            1,589                                
Dividends paid (Spargo)                                                                                       (827)    
                                                       ----------   -----        ------        ---          ------     
Balance, December 31, 1996                             19,510,314   1,951        30,773        290          55,381     

Net income for the year                                                                                     24,534     
Other comprehensive income:
    Foreign currency translation                                                              (206)
    adjustments                                                                                                        
Total comprehensive income                                                                                             
Three-for-two stock split
    declared May 1997                                   8,861,715     886          (886)
Stock options exercised                                   375,040      38         1,759                      
Tax benefits related to                                                                                                
    stock option plans                                                            2,610                                
Sale of common stock, net of
    expenses                                            2,500,000     250        83,462                                
Dividends paid (Spargo)                                                                                       (996)    
                                                       ----------   -----        ------         --          ------     
Balance, December 31, 1997                             31,247,069   3,125       117,718         84          78,919     

Net income for the year                                                                                     43,587     
Other comprehensive income:
    Foreign currency translation
    adjustments                                                                               (846)                    
                                                                                                                       
Total comprehensive income                                                                                             
Increase resulting from
    immaterial pooling                                    954,213      95           170                      2,607     
Stock options exercised                                     2,265                  (250)                      (399)    
Tax benefits related to
    stock option plans                                                            2,998                                
Stock issuance costs                                                                (20)                               
Issuance of common stock for
    purchase of assets                                    148,033      15         8,205                                
Dividends paid (Spargo)                                                                                       (771)    
                                                       ----------   -----        ------      -----        --------     
Balance, December 31, 1998                             32,351,580  $3,235      $128,821      $(762)       $123,943     
                                                       ==========  ======      ========      =====        ========     
<PAGE>
<CAPTION>
                    Computer Horizons Corp. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                  Years ended December 31, 1998, 1997 and 1996
                                                       
                                                       
                                                                Treasury stock
                                                            Shares         Amount         Total
                                                            ------         ------         -----
                                                                     (dollars in thousands)
<S>                                                         <C>            <C>         <C>    
Balance, December 31 1995, as restated                      1,786,883     $14,648        $57,931

Net income for the year                                                                   13,075
Other comprehensive income:
    Foreign currency translation
    adjustments                                                                              253
                                                                                         -------
Total comprehensive income                                                                13,328
Stock options exercised                                                                    1,726
Tax benefits related to
    stock option plans                                                                     1,589
Dividends paid (Spargo)                                                                     (827)
                                                            ---------      ------        -------
Balance, December 31, 1996                                  1,786,883      14,648         73,747

Net income for the year                                                                   24,534
Other comprehensive income:
    Foreign currency translation                       
    adjustments                                                                             (206)
Total comprehensive income                                                                24,328
Three-for-two stock split
    declared May 1997                                  
Stock options exercised                                       (94,630)       (776)         2,573
Tax benefits related to                                                                    
    stock option plans                                                                     2,610
Sale of common stock, net of
    expenses                                                                              83,712
Dividends paid (Spargo)                                                                     (996)
                                                            ---------      ------        -------
Balance, December 31, 1997                                  1,692,253      13,872        185,974

Net income for the year                                                                   43,587
Other comprehensive income:
    Foreign currency translation
    adjustments                                                                             (846)
                                                                                          ------
Total comprehensive income                                                                42,741
Increase resulting from
    immaterial pooling                                                                     2,872
Stock options exercised                                      (510,209)     (4,182)         3,533
Tax benefits related to
    stock option plans                                                                     2,998
Stock issuance costs                                                                         (20)
Issuance of common stock for
    purchase of assets                                       (120,382)       (987)         9,207
Dividends paid (Spargo)                                                                     (771)
                                                            ---------      ------        -------

Balance, December 31, 1998                                  1,061,662      $8,703       $246,534
                                                            =========      ======       ========
</TABLE>

The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>
<CAPTION>
                                         Computer Horizons Corp. and Subsidiaries
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            Year ended December 31,
                                                                                     ------------------------------------
                                                                                       1998          1997         1996
                                                                                     ---------     --------      --------   
                                                                                               (in thousands) 
<S>                                                                                  <C>           <C>           <C>     
Cash flows from operating activities
    Net income .................................................................     $ 43,587      $ 24,534      $ 13,075
    Adjustments to reconcile net income to net cash provided by
        operating activities:
           Deferred taxes ......................................................       (3,665)         (950)         (382)
           Depreciation ........................................................        3,218         1,857         1,367
           Loss on disposal of fixed assets ....................................          (26)          (25)
           Gain on sale of joint venture .......................................       (3,125)
           Amortization of intangibles .........................................        4,145           602           587
           Provision for bad debts .............................................        1,676           575            54
           Changes in assets and liabilities, net of acquisitions:
               Accounts receivable .............................................      (43,085)      (22,850)       (9,323)
               Other current assets ............................................         (572)         (108)           (6)
               Other assets ....................................................       (1,462)          (64)          (12)
               Accrued payroll, payroll taxes and benefits .....................        5,784         4,887         1,535
               Accounts payable ................................................          415           328          (776)
               Income taxes payable ............................................        4,544         5,187         1,023
               Other accrued expenses ..........................................       (1,529)        2,370          (571)
               Other liabilities ...............................................        5,866           626           465
                                                                                     --------      --------      --------
               Net cash provided by operating activities .......................       15,797        16,968         7,011
                                                                                     --------      --------      --------
Cash flows from investing activities
    Purchases of furniture and equipment .......................................      (11,122)       (2,480)       (1,543)
    Acquisitions, net of cash ..................................................      (51,948)       (5,467)         (363)
    Changes in goodwill ........................................................          262
    Changes in other assets ....................................................         (968)         (761)
    Proceeds from sale of joint venture ........................................        4,695
    Purchases of short-term investments ........................................        2,556       (13,165)
                                                                                     --------      --------      --------
               Net cash used in investing activities ...........................      (55,557)      (22,080)       (2,667)
                                                                                     --------      --------      --------
Cash flows from financing activities
    Notes payable - banks, net .................................................       (2,313)
    Long-term debt .............................................................       (1,000)       (1,903)       (2,420)
    Dividends paid (Spargo) ....................................................         (771)         (996)         (827)
    Stock issuance cost ........................................................          (20)
    Stock options exercised ....................................................        3,533         2,573         1,727
    Proceeds from issuance of stock ............................................       83,712
                                                                                                   --------      --------
               Net cash (used in)/provided by financing activities .............         (571)       83,386        (1,520)
                                                                                     --------      --------      --------
              Foreign currency gains/(losses) ..................................          (41)         (315)          160
               Net (decrease)/increase in cash and cash equivalents ............      (40,290)       77,959         2,984
Cash and cash equivalents at beginning of year .................................       92,086        14,127        11,143
                                                                                     --------      --------      --------
Cash and cash equivalents at end of year .......................................     $ 51,796      $ 92,086      $ 14,127
                                                                                     ========      ========      ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                         Computer Horizons Corp. and Subsidiaries
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            Year ended December 31,
                                                                                     ------------------------------------
                                                                                       1998          1997         1996
                                                                                     ---------     --------      -------- 
                                                                                                 (in thousands) 
<S>                                                                                  <C>           <C>           <C>     
Supplemental  disclosures  of cash flow  information: 
    Cash paid during the year for:
        Interest ...............................................................     $    132      $    249      $    470
        Income taxes ...........................................................       35,111        13,694         8,219

Details of acquisition:
    Fair value of assets .......................................................     $ 70,590      $  5,590
    Liabilities ................................................................       20,177           242
                                                                                     --------      --------
    Cash paid for acquisition ..................................................     $ 50,413      $  5,348
                                                                                     ========      ========
</TABLE>


The accompanying notes are an integral part of these statements.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1998, 1997 and 1996



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Description of Business

        Computer Horizons Corp. is a diversified information technology services
        company that provides  clients with resource  augmentation  and advanced
        technology   solutions  to  business   problems   through   applications
        development,  applications outsourcing client/server migration,  network
        design and management,  legacy systems maintenance, its solutions to the
        millennium  date-change  problem, and emerging  technologies,  including
        e-business and internet development.

        Principles of Consolidation

        The consolidated  financial  statements include the accounts of Computer
        Horizons Corp. and its wholly-owned  subsidiaries  (the "Company").  The
        Company's investment in a joint venture (Note 4) was accounted for under
        the equity method of accounting.  All material intercompany accounts and
        transactions have been eliminated.

        Revenue Recognition

        The Company recognizes revenues as professional  services are performed.
        On fixed fee engagements,  revenue and gross profit adjustments are made
        to reflect  revisions  in  estimated  total costs and  contract  values.
        Estimated losses are recorded when identified.

        Recruitment Costs

        Recruitment costs are charged to operations as incurred.
<PAGE>


                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996



NOTE 1 (continued)

        Cash and Cash Equivalents

        Cash and cash equivalents  include all highly liquid  instruments with a
        maturity of three  months or less at the time of purchase and consist of
        the following at December 31:
<TABLE>
<CAPTION>
                                                         1998              1997
                                                       -------           -------
                                                       -----(in thousands)------
<S>                                                    <C>               <C>    
      Cash                                             $ 7,170           $ 6,901
      Money market funds                                24,689            45,460
      Demand obligations                                17,962            21,924
      Commercial paper                                   1,975            17,801
                                                       -------           -------

                                                       $51,796           $92,086
                                                       =======           =======
</TABLE>

        Short-term Investments

        The Company  classifies  investments  with an original  maturity of more
        than three  months at the time of  purchase as  short-term  investments.
        Short-term  investments  are  classified  as  held  to  maturity,  which
        approximates  fair value. At December 31, 1998,  short-term  investments
        maturing within one year consist of commercial paper valued at cost.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996



NOTE 1 (continued)

        Concentrations of Credit Risk

        Financial   instruments,   which  potentially  subject  the  Company  to
        concentrations  of credit risk,  regardless  of the degree of such risk,
        consist principally of cash and cash equivalents, short-term investments
        and trade accounts  receivable.  The Company invests the majority of its
        excess  cash  in  money  market  funds,   commercial  paper  and  demand
        obligations  of  high-credit,  high-quality  financial  institutions  or
        companies,  with  certain  limitations  as to  the  amount  that  can be
        invested in any one entity.

        The Company  maintains its cash balances  principally  in five financial
        institutions  located  in the  United  States,  Canada  and  the  United
        Kingdom.  The balances in U.S. banks are insured by the Federal  Deposit
        Insurance   Corporation   up  to  $100,000   for  each  entity  at  each
        institution. The balance in the Canadian bank is insured by the Canadian
        Deposit  Insurance  Corporation  up to $60,000  Canadian  (approximately
        $39,000 US). There is no depository  insurance in the United Kingdom. At
        December  31,   1998,   uninsured   amounts  held  at  these   financial
        institutions total approximately $11,459,000.

        The Company's customers are generally very large,  Fortune 500 companies
        in many  industries and with wide geographic  dispersion.  The Company's
        largest  customer  accounts for  approximately  7.5% of billed  accounts
        receivable at December 31, 1998.  The Company  establishes  an allowance
        for doubtful accounts based upon factors  surrounding the credit risk of
        specific customers, historical trends, and other information.

        The  Company's  largest  client  accounted  for  8.8%,  11.2%  and 8.8%,
        respectively,  of the Company's  consolidated revenues in 1998, 1997 and
        1996. No other client accounted for more than 8.5% in those years.

        Fair Value of Financial Instruments

        The carrying value of financial instruments  (principally  consisting of
        cash and cash equivalents,  short-term investments,  accounts receivable
        and payable and long-term debt)  approximates  fair value because of the
        short  maturities or, as to long-term debt, the rates currently  offered
        to the Company.

        Property and Equipment and Depreciation

        Property  and  equipment  are stated at cost.  Depreciation  is computed
        using the  straight-line  method over the estimated  useful lives of the
        assets.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996



NOTE 1 (continued)

        Goodwill

        Goodwill,  the cost in excess of the fair value of net assets  acquired,
        is being amortized by the straight-line method, for periods ranging from
        twenty to thirty  years.  Accumulated  amortization  is  $6,301,000  and
        $4,523,000  at December 31, 1998 and 1997,  respectively.  On an ongoing
        basis, management reviews the valuation and amortization of goodwill. As
        part of this review, the Company estimates the value and future benefits
        of income generated, to determine that no impairment has occurred.

        Income Taxes

        The Company and its domestic  subsidiaries  file a consolidated  Federal
        income tax return. The foreign  subsidiaries file in each of their local
        jurisdictions.

        Deferred income taxes result from temporary  differences  between income
        reported  for  financial  and  income  tax  purposes.   These  temporary
        differences  result  primarily from the allowance for doubtful  accounts
        provision and certain  accrued  expenses which are  deductible,  for tax
        purposes, only when paid.

        Tax benefits  from early  disposition  of the stock by  optionees  under
        incentive stock options and from exercise of  non-qualified  options are
        credited to additional paid-in capital.

        The Company  provides  United  States  income  taxes on the  earnings of
        foreign  subsidiaries,  unless they are considered  permanently invested
        outiside  the  United  States.  As of  December  31,  1998,  there is no
        cummulative amount of earnings on which Unoited States income taxes have
        not been provided.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996



NOTE 1 (continued)

        Earnings Per Share

        Basic  Earning  Per  Share is based on the  weighted  average  number of
        common  shares  outstanding   without   consideration  of  common  stock
        equivalents. Diluted earnings per share is based on the weighted average
        number  of  common  and  common  equivalent  shares   outstanding.   The
        calculation  takes  into  account  the  shares  that may be issued  upon
        exercise of stock options, reduced by the shares that may be repurchased
        with the funds  received from the  exercise,  based on the average price
        during the year.

        Use of Estimates in Financial Statements

        In preparing financial  statements in conformity with generally accepted
        accounting  principles,  management makes estimates and assumptions that
        affect the reported amounts of assets and liabilities and disclosures of
        contingent   assets  and  liabilities  at  the  date  of  the  financial
        statements,  as well as the  reported  amounts of revenues  and expenses
        during the  reporting  period.  Actual  results  could differ from those
        estimates.

        Foreign Currency Translation

        For  operations   outside  the  United  States  that  prepare  financial
        statements in currencies other than the United States dollar, results of
        operations and cash flows are  translated at the average  exchange rates
        during the period,  and assets and  liabilities are translated at end of
        period  exchange  rates.  Translation  adjustments  are  included  as  a
        separate component of shareholders' equity.

        New Accounting Pronouncements

        In June 1998,  FASB  issued  SFAS No. 133,  "Accounting  for  Derivative
        Instruments and Hedging  Activities"  ("SFAS 133"). SFAS 133 establishes
        new  accounting  and  reporting   standards  for  derivative   financial
        instruments and for hedging  activities.  SFAS 133 requires an entity to
        measure  all  derivatives  at fair  value and to  recognize  them in the
        balance sheet as an asset or liability, depending on the entity's rights
        or obligations under the applicable derivative contract. SFAS No. 133 is
        effective for financial statements for fiscal years beginning after June
        1999.  The impact of adopting SFAS 133 is not expected to be material to
        the consolidated financial statements or notes to consolidated financial
        statements.
<PAGE>
                     Computer Horizons Corp. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996


NOTE 2 - ACQUISITIONS

        On September  25, 1998,  the Company  acquired the assets of  Enterprise
        Solutions  Group,  LLC  ("ESG"),  a  Cincinnati,  Ohio-based  technology
        organization that provides training and educational  services as well as
        consulting  services  for Fortune 500  companies.  The  acquisition  was
        accounted for as a purchase.  The total purchase price was approximately
        $7,333,000 in cash and common stock.  The purchase price may be adjusted
        based on the actual  earnings of the company for the twelve months ended
        December 31, 1998, up to a maximum  purchase price of  $11,000,000.  The
        remaining  purchase price is to be paid out in three  payments  starting
        December  1998 and ending  December  2000.  Had the  acquisition  of ESG
        occurred on January 1, 1998, the effect on revenues and net income would
        have been immaterial.

        On August 4, 1998,  the Company  acquired  the assets of RPM  Consulting
        ("RPM"), a leading provider of network consulting services, specializing
        in  architecting,  designing and upgrading  large  enterprise  networks,
        based in Maryland,  for a combination  of cash and common stock totaling
        approximately $27,700,000,  and two earnout payments (not to exceed $2.0
        million in total) based on pretax profit  margins.  The  acquisition was
        accounted  for as a purchase.  Had the  acquisition  of RPM  occurred on
        January 1, 1998,  the effect on revenues  and net income would have been
        immaterial.

        On July 2, 1998,  the  Company  acquired  the net  assets of  Infomatics
        Search Group  ("ISG),  a Toronto,  Canada based  information  technology
        service firm,  offering both professional  staffing and career placement
        services.  The  acquisition  was accounted for as a purchase.  The total
        purchase  price was  approximately  $21,600,000  in cash.  The  purchase
        agreement  includes an earnout  clause  equal to two times  increases in
        prior period adjusted earnings (as defined in the purchase agreement) to
        be earned in 1998,  1999, and 2000. Had the  acquisition of ISG occurred
        on January 1, 1998,  the effect on  revenues  and net income  would have
        been immaterial.

        On June 24, 1998, the Company acquired all of the common stock of Spargo
        Consulting PLC ("Spargo"), an information technology consultancy service
        provider,  organized  under the laws of the United Kingdom for 1,887,000
        shares of Computer Horizon stock.  This transaction was accounted for as
        a pooling of interests  and,  accordingly,  the  consolidated  financial
        statements  for the periods  presented have been restated to include the
        accounts  of  Spargo.  The  combination  with  Spargo  was  treated as a
        Qualified Stock Purchase for U.S. Federal Income Tax purposes.

        The  reconciliation  below details the effect of the pooling noted above
        on the previously  reported revenues,  net income and earnings per share
        of the separate companies for the periods preceding the acquisition:
<PAGE>
<TABLE>
<CAPTION>
                                                     Three Months
                                                         Ended                    Year Ended         Year Ended           Year Ended
                                                    March 31, 1998                   1997               1996                 1995
                                                   ---------------------------------------------------------------------------------
<S>                                                   <C>                        <C>                 <C>                 <C>       
Revenues
                 Computer Horizons Corp.                $107,101                   $334,729            $249,152            $213,165
                 Spargo                                    4,410                     15,581              12,259              11,644
                                                   ---------------------------------------------------------------------------------
                 Combined                               $111,511                   $350,310            $261,411            $224,809
                                                   =================================================================================

Net Income
                 Computer Horizons Corp.                  $8,174                    $22,644             $11,864             $10,425
                 Spargo                                      530                      1,890               1,211                 890
                                                   ---------------------------------------------------------------------------------
                 Combined                                 $8,704                    $24,534             $13,075             $11,315
                                                   =================================================================================

Earnings Per Share
Basic
                 Computer Horizons Corp.                   $0.28                      $0.88               $0.48               $0.46
                 Spargo                                     0.00                       0.01                0.02                0.01
                                                   ---------------------------------------------------------------------------------
                 Combined                                  $0.28                      $0.89               $0.50               $0.47
                                                   =================================================================================
Diluted
                 Computer Horizons Corp.                   $0.27                      $0.84               $0.46               $0.44
                 Spargo                                     0.00                       0.01                0.01                0.00
                                                   ---------------------------------------------------------------------------------
                 Combined                                  $0.27                      $0.85               $0.47               $0.44
                                                   =================================================================================

Shares Outstanding
                 Basic                                30,714,000                 27,567,000          26,380,000          24,312,000
                 Diluted                              32,270,000                 28,999,000          27,932,000          25,823,000
</TABLE>

        On February  27, 1998,  the Company  acquired all of the common stock of
        Princeton Softech, Inc.  ("Princeton") in exchange for 954,213 shares of
        Computer Horizons stock.  Princeton specializes in relational databases,
        data  synchronization,  intelligent  data migration and data  management
        tools,  and is based in  Princeton,  New Jersey.  This  transaction  was
        accounted for as an  immaterial  pooling of interests and the results of
        Princeton have been included since January 1, 1998.

        On December 31, 1997, the Company acquired, for approximately $5 million
        cash,  certain  assets  from  Millennium   Computer   Technology,   Inc.
        ("Millennium"),   a   Chattanooga-based   IT  services   provider.   The
        acquisition  was recorded under the purchase  method of accounting.  Had
        the acquisition of Millennium occurred on January 1, 1997, the effect on
        revenues and net income would have been immaterial.

        On December  19, 1997,  the Company  acquired all the common stock of CG
        Computer  Services  ("CG") in exchange  for  566,666  shares of Computer
        Horizons stock. CG provides IT provisioning and staffing  solutions with
        offices in San Francisco,  Los Angeles,  Chicago,  and  Parsippany,  New
        Jersey. This transaction was accounted for as a pooling of interests.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 2 (continued)
        In  June  1994,  the  Company  acquired  the  net  assets  of  Strategic
        Outsourcing Services,  Inc. ("SOS"), a New Jersey-based provider of data
        processing  services,   for  approximately   $250,000.  The  acquisition
        agreement also provides for contingent consideration based on the future
        performance of SOS, through 1998. The acquisition was accounted for as a
        purchase.  There was no  contingent  consideration  recorded in 1998. In
        1997 and 1996, the Company recorded contingent  consideration,  totaling
        approximately  $119,000  and  $137,000,   respectively,   as  additional
        goodwill,  with certain  additional  amounts  payable  subject to future
        performance.  These contingent consideration payments were not dependent
        upon the continued employment of the former shareholder.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 3 - ACCOUNTS RECEIVABLE

        Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
                                                              1998        1997
                                                            --------    --------
                                                            ---(in thousands)---
<S>                                                         <C>         <C>     
              Billed                                        $ 83,394    $ 60,274
              Unbilled                                        55,262      23,015
                                                            --------    --------

                                                             138,656      83,289
              Less allowance for doubtful accounts             3,209       1,742
                                                            --------    --------

                                                            $135,447    $ 81,547
                                                            ========    ========
</TABLE>
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 4 - GAIN ON SALE OF JOINT VENTURE

        In 1995, the Company  entered into a software  development  and services
        joint venture with the Birla Group, a large  multinational  conglomerate
        located in India.  The foreign joint  venture,  known as Birla  Horizons
        International  ("BHI"),  was  headquartered in New Delhi,  India and had
        operations in India, the United States, the United Kingdom and Canada.

        The Company and the Birla Group each made cash contributions of $500,000
        and each received a 50% interest in the joint  venture.  The Birla Group
        had also  contributed  the net assets of its then  existing  information
        technology  company  to the  joint  venture  and  the  Company  provided
        technological and management support.

        The Company's  total  investment  in BHI was  $1,672,000 at December 31,
        1997, representing the initial cost plus equity in the undistributed net
        earnings since formation,  and was included in other noncurrent  assets.
        BHI provided  consultants to the Company at a total cost of $ 3,437,000,
        $5,017,000  and  $4,216,000  in  1998,  1997  and  1996,   respectively.
        Approximately  $992,000 was included in accounts payable at December 31,
        1998.

        During the fourth  quarter of 1998, the Company sold its 50% interest to
        the Birla Group for a cash payment of $5,750,000. Accordingly, a gain of
        $4,180,000  was  recognized.  The impact on net income was $1,975,000 or
        $.06 per share.


NOTE 5 - LONG-TERM DEBT AND LINES OF CREDIT

        The  Company  has no long  term  debt as of  December  31,  1998.  As of
        December 31, 1997, long-term debt consisted of the following:


        9.55% senior notes              $1,432
        Notes payable at prime              41
                                        ------
                                         1,473
        Less current maturities          1,473
                                        ------
                                        $  -- 
                                        ======
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 5 (continued)

        In 1988,  the Company issued two senior notes  aggregating  $10,000,000,
        bearing interest at 9.55%, payable semiannually.  The notes were payable
        in annual  installments  of $1,428,000  from April 15, 1992 through 1997
        with a final payment of $1,432,000 made in March, 1998.

        At December 31, 1998, the Company has two unused bank lines of credit in
        the amounts of $15,000,000  and  $10,000,000  expiring June 30, 1999 and
        May 31, 1999, respectively.  Under the first line of credit, the Company
        has two irrevocable standby letters of credit in the amounts of $666,000
        and  $190,000   expiring  December  31,  1999  and  September  25,  1999
        respectively.  At December 31, 1998, there were no outstanding  balances
        on these lines of credit. In addition to the above lines of credit,  the
        Company also has two ancillary  lines of credit  totaling  $204,000 used
        for  various  day to day  purchases.  During  1998,  the  Company had no
        borrowings  against  either  line.  The  Company  also has a  $1,000,000
        Canadian  (approximately  $650,000 US)  overdraft  line of credit at its
        Canadian bank. At December 31, 1998,  $140,000  Canadian  (approximately
        $91,000 US) was outstanding on this line of credit.


NOTE 6 - SHAREHOLDERS' EQUITY

        Authorized Shares

        On May 6, 1998,  the Company  approved  an  amendment  to the  Company's
        Certificate of Incorporation  increasing the authorized number of shares
        of the Company's common stock from 60,000,000 to 100,000,000.

        Stock Splits

        The Board of Directors of the Company  declared a  three-for-two  common
        stock split in the form of a 50% stock  distribution on May 7, 1997, for
        shareholders of record as of May 22, 1997. The  distribution was paid on
        June 9, 1997.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 6 (continued)

        An amount equal to the $.10 par value of the common  shares  distributed
        has been  retroactively  transferred from additional  paid-in capital to
        common stock. All references in the financial  statements with regard to
        number of shares of common  stock,  common  stock  prices  and per share
        amounts have been restated to reflect the above-mentioned stock split.

        Stock Options and SFAS No. 123 Pro Forma Disclosure

        In 1994, the Company  adopted a stock option plan which provides for the
        granting, to officers and key employees,  of options for the purchase of
        a maximum of  7,594,000  shares of common  stock and stock  appreciation
        rights  (SARs).  Options and SARs  generally  expire five years from the
        date of grant and become  exercisable  in specified  amounts  during the
        life of the respective options. No SARs have been granted as of December
        31, 1998.  This plan,  which  replaces  the  Company's  1985 Plan,  will
        terminate on June 15, 2004.  There were 4,789,000  shares  available for
        option at December 31, 1998.

        In 1998, the Company amended the  non-qualified  Directors' Stock Option
        Plan,  providing  that each new  director  of the  Company who is not an
        employee  of the  Company  (i)  shall  immediately  receive  options  to
        purchase 10,000 shares of its common stock and (ii) shall receive annual
        grants to purchase  10,000 shares of its common stock.  The plan expires
        on March 4, 2001.  There were  484,000  shares  available  for option at
        December 31, 1998.

        The exercise  price per share on all options and/or SARs granted may not
        be  less  than  the  fair  value  at  the  date  of  the  option  grant.
        Accordingly, no compensation cost has been recognized for the plans. Had
        compensation  cost for the plans been determined based on the fair value
        of the options at the grant dates consistent with the method of SFAS No.
        123,  the  Company's  net income and  earnings per share would have been
        reduced to the pro forma amounts indicated below:
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996



NOTE 6 (continued)
<TABLE>
<CAPTION>
                                                   1998                1997                  1996
                                            -----------------     -------------          -------------
<S>                     <C>                    <C>                 <C>                    <C>
Net income              As reported            $43,587,000         $24,534,000            $13,075,000
                        Pro forma               39,516,000          21,623,000             10,746,000

Earnings per share
    Basic               As reported              $1.41                $.89                   $.50
                        Pro forma                $1.28                 .78                    .41

    Diluted             As reported              $1.35                $.85                   $.47
                        Pro forma                $1.23                 .75                    .38
</TABLE>

        The fair value of each option  grant is  estimated  on the date of grant
        using  the  Black-Scholes   options-pricing  model  with  the  following
        weighted-average  assumptions  used for  grants in 1998,  1997 and 1996,
        respectively:  expected  volatility  of  127%,  61% and  97%;  risk-free
        interest rates of 5.27%,  5.47%,  and 6.28%;  and expected lives of 4.5,
        5.0 and 4.9 years.

        A  summary  of the  status of the  Company's  stock  option  plans as of
        December 31, 1998, 1997 and 1996, and changes during the years ending on
        those dates is presented below:
<TABLE>
<CAPTION>
                                                      1998                                           1997                  
                                       -------------------------------------          -------------------------------------
                                                                Weighted                                       Weighted    
                                                                 average                                        average    
                                                                exercise                                       exercise    
                                          Shares                  price                   Shares                 price     
                                          ------                  -----                   ------                 -----     
                                           (000)                                           (000)                           

<S>                                    <C>                   <C>                      <C>                 <C>              
Outstanding - January 1                     2,035                 $9.97                    2,200               $  7.03     

Granted                                     1,634                 26.39                      333                 23.39     
Exercised                                    (512)                 6.88                     (462)                 5.37     
Canceled/forfeited                           (747)                35.09                      (36)                13.36     
                                         ---------                                       --------                          

Outstanding - December 31                   2,410                 13.94                    2,035                  9.97     
                                           ======                                          =====                           

Options exercisable - December 31           1,003                 10.84                      833                  7.10     
                                           ======                                         ======                           

Weighted average fair value of
   options granted during the year                                13.03                                          23.30     
<PAGE>
<CAPTION>
                                                       1996
                                       -----------------------------------
                                                                 Weighted
                                                                  average
                                                                 exercise
                                           Shares                  price
                                           ------                  -----
                                             (000)

<S>                                     <C>                 <C>    
Outstanding - January 1                      2,260               $  3.80

Granted                                        885                 14.65
Exercised                                     (678)                 2.50
Canceled/forfeited                            (267)                17.47
                                            ------

Outstanding - December 31                    2,200                  7.03
                                             =====

Options exercisable - December 31              764                  4.94
                                            ======

Weighted average fair value of
   options granted during the year                                 11.65

</TABLE>

<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 6 (continued)

        The following information applies to options outstanding at December 31,
1998:
<TABLE>
<CAPTION>
                                                Options outstanding                                  Options exercisable
                            ------------------------------------------------------------   ----------------------------------
                                                      Weighted
                                Outstanding            average             Weighted            Exercisable           Weighted
                                   as of              remaining             average               as of               average
                               December 31,          contractual           exercise           December 31,           exercise
Range of exercise prices           1998                 life                 price                1998                 price
------------------------    ------------------   ------------------   ------------------   ------------------   ------------
                                  (000's)                                                        (000's)
<S>                               <C>                 <C>             <C>                        <C>              <C>     
    $ 0.00 -   $ 9.99                 853               4.2                $  4.48                 529                 $3.98
     10.00 -    19.99                 491               4.9                  13.79                 190                 13.69
     20.00 and over                 1,066               5.2                  21.42                 284                 21.68
                                  -------             ----------           ----------             ----                ------

                                    2,410               4.7             $    13.94                1,003             $  10.84
                                   =======            =======            ==========               ======             =======
</TABLE>

        Certain  officers have the right to borrow from the Company  against the
        exercise price of options exercised.

        The Company has issued  warrants to purchase  shares of its common stock
        to two outside business/ legal consulting firms.  There were no warrants
        issued in 1998.  Warrants  for 8,625 and  30,000  shares  were  granted,
        respectively,  in 1997 and 1996. The exercise price is the fair value at
        the date of grant.

        Shareholder Rights Plan

        In July 1989, the Board of Directors declared a dividend distribution of
        .131 preferred stock purchase right on each outstanding  share of common
        stock of the Company. The rights were amended on February 13, 1990. Each
        right will, under certain  circumstances,  entitle the holder to buy one
        one-hundredth  (1/100)  of a share  of  Series A  preferred  stock at an
        exercise price of $30.00 per one one-hundredth (1/100) share, subject to
        adjustment.  Each  one  one-hundredth  (1/100)  of a share  of  Series A
        preferred  stock  has  voting,   dividend  and  liquidation  rights  and
        preferences substantively equivalent to one share of common stock.

        The rights will be  exercisable  and  transferable  separately  from the
        common stock only if a person or group acquires 20% or more,  subject to
        certain  exceptions,  of  the  Company's  outstanding  common  stock  or
        announces a tender  offer that would  result in the  ownership of 20% or
        more of the common
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 6 (continued)

        stock.  If a person  becomes the owner of at least 20% of the  Company's
        common shares (an "Acquiring Person"), each holder of a right other than
        the  Acquiring  Person is  entitled,  upon  payment of the then  current
        exercise  price per right (the "Exercise  Price"),  to receive shares of
        common stock (or common stock  equivalents)  having a market value equal
        to twice the Exercise Price.

        Additionally,  if the Company  subsequently engages in a merger or other
        business  combination  with the Acquiring Person in which the Company is
        not the surviving corporation, or in which the outstanding shares of the
        Company's common stock are changed or exchanged,  or if more than 50% of
        the Company's  assets or earning power is sold or  transferred,  a right
        would  entitle a  Computer  Horizon  Corp.  shareholder,  other than the
        Acquiring  Person and its  affiliates,  to purchase  upon payment of the
        Exercise Price,  shares of the Acquiring Person having a market value of
        twice  the  Exercise  Price.  Prior to a person  becoming  an  Acquiring
        Person, the rights may be redeemed at a redemption price of one cent per
        right, subject to adjustment. The rights are subject to amendment by the
        Board. No shareholder  rights have become  exercisable.  The rights will
        expire on July 16, 1999.

        Repricing of Stock Options

        On October 16,  1998,  the  Company's  Board of  Directors  approved the
        repricing of  approximately  732,000 stock options that had been granted
        to employees  earlier in the year. This decision was made in response to
        competitive  pressures  and as a  means  to  retain  key  employees.  No
        compensation  expense was  recorded as a result of the repricing.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 7 - INCOME TAXES


        The following is a geographical breakdown of the Company's income before
        taxes:
<TABLE>
<CAPTION>

                                  Year Ended December 31,
                         1998                1997                1996
                       -------             -------             -------
                       --------------- (in thousands)----------------
<S>                    <C>                 <C>                 <C>    
Domestic               $72,714             $40,169             $19,342
Foreign                  6,779               2,863               2,764
                       -------             -------             -------
  Total                $79,493             $43,032             $22,106
                       =======             =======             =======
</TABLE>
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

        The provision  for income taxes  consists of the following for the years
        ended December 31:
<TABLE>
<CAPTION>
                                           1998            1997          1996
                                         --------       --------       --------
                                          -----------(in thousands)------------
<S>                                      <C>            <C>            <C>     
Current
      Federal                            $ 28,539       $ 13,927       $  6,629
      State                                 8,334          4,558          2,108
      Foreign                               2,772            963            676
                                         --------       --------       --------
              Total current                39,645         19,448          9,413
Deferred
      Federal                              (2,926)          (703)          (341)
      State                                  (794)          (244)           (33)
      Foreign                                 (19)            (3)            (8)
                                         --------       --------       --------
              Total deferred               (3,739)          (950)          (382)

     Total                               $ 35,906       $ 18,498       $  9,031
                                         ========       ========       ========
</TABLE>
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 7 (continued)

        Deferred tax assets and liabilities consist of the following at December
        31:
<TABLE>
<CAPTION>
                                                                             1998       1997
                                                                           -------    -------
                                                                              (in thousands)
<S>                                                                        <C>        <C>    
      Deferred tax liabilities
            Depreciation and amortization                                     --         (123)
            Capitalized software development costs                            (290)      --
            Other                                                             (466)      --
                                                                           -------    -------
                      Total deferred tax liabilities                          (756)      (123)
      Deferred tax assets
            Accrued insurance                                              $   293    $   588
      Accrued payroll and benefits                                           1,982      1,413
      Deferred revenue                                                       2,346       --
            Allowance for doubtful accounts                                  1,059        469
            Depreciation and amortization                                      715       --
          Other                                                                696        323
                                                                           -------    -------
                     Deferred tax assets                                   $ 7,091    $ 2,670
                                                                           =======    =======
</TABLE>

        A  reconciliation  of income  taxes,  as reflected  in the  accompanying
        statements,  with the statutory  Federal  income tax rate of 35% for the
        years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
                                                   1998       1997        1996
                                                 --------   --------    --------
                                                 ---------(in thousands)--------
<S>                                              <C>        <C>         <C>     
Statutory Federal income taxes                   $ 27,822   $ 15,061    $  7,737
State and local income taxes, net of
         Federal tax benefit                        4,901      2,804       1,349
Foreign taxes provided at rates other than
         the U.S. statutory rate                      122        (37)         10
Amortization of goodwill                              203        203         201
Equity in net earnings of joint venture               343                   (310)
Merger-related expenses                             1,673
Other, net                                            842        467          44
                                                 --------   --------    --------
                                                 $ 35,906   $ 18,498    $  9,031
                                                 ========   ========    ========
</TABLE>
<PAGE>

        Certain  foreign  subsidiaries  of the Company have net  operating  loss
        carryforwards  at December  31,1998,  totaling  approximately  $850,000,
        264,000 expires in 2005 and the remainder has no expiration.

        During 1998, the Company  completed a business  combination  which,  for
        financial   statement   purposes,   has   been   accounted   for   as  a
        pooling-of-interests.  For income tax purposes the Company  believes the
        transaction  qualifies as a taxable  purchase  that gives rise to future
        tax deductions. Since the tax structure of the transaction is subject to
        determination by the tax  authorities,  the Company has not recorded any
        potential tax impact in its financial  statements.  When  resolved,  the
        Company will record a deferred tax asset net of an appropriate valuation
        allowance.  The  net  benefit  will  be  reflected  as  an  increase  in
        additional  paid-in-capital.  Any adjustments to the valuation allowance
        will be charged or credited to income.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 8 - EARNINGS PER SHARE DISCLOSURES
<TABLE>
<CAPTION>
                                                            For the year ended
                                                    ---------------------------------
                                                                                Per
                                                      Income      Shares       share
                                                   (numerator) (denominator)   amount
                                                   -----------  ------------   ------
                                                   (in 000's, except per share data)
<S>                                                <C>          <C>          <C>
December 31, 1998
      Net income                                   $   43,587
                                                   ==========
      Basic earnings per share
         Income available to common stockholders   $   43,587   30,925,000   $   1.41
                                                                             ========

      Effect of diluted securities
         Options                                                1,305,000
                                                                ---------
      Diluted earnings per share
         Income available to common stock-
             holders plus assumed conversions      $   43,587   32,230,000   $   1.35
                                                   ==========   ==========   ========

December 31, 1997
      Net income                                   $   24,534
                                                   ==========

      Basic earnings per share
         Income available to common stockholders   $   24,534   27,567,000   $   0.89
                                                                             ========
      Effect of diluted securities
         Options                                                 1,432,000
                                                                 ---------

      Diluted earnings per share
         Income available to common stock-
             holders plus assumed conversions      $   24,534   28,999,000   $   0.85
                                                   ==========   ==========   ========

December 31, 1996
      Net income                                   $   13,075
                                                   ==========
      Basic earnings per share
         Income available to common stockholders   $   13,075   26,380,000   $   0.50
                                                                             ========
      Effect of diluted securities
         Options                                                1,552,000
                                                                ---------

      Diluted earnings per share
         Income available to common stock-
             holders plus assumed conversions      $   13,075   27,932,000   $   0.47
                                                   ==========   ==========   ========
</TABLE>
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 8 (continued)

        Options to purchase 8,713 shares of common stock, ranging from $25.67 to
        $35.58,  per share were  outstanding  during 1998 and 1997, but were not
        included in the  computation  of diluted  earnings per share because the
        option's  exercise  price was greater  than the average  market price of
        common shares.  The options which expire  between  December 31, 2001 and
        January 1, 2007 were still outstanding at December 31, 1998. All options
        to purchase  shares of common stock were included in the  computation of
        diluted earnings per share in 1996.

NOTE 9 - SEGMENT INFORMATION

        In 1998, the Company adopted SFAS No. 131,  "Disclosures  about Segments
        of  an  Enterprise  and  Related  Information".   SFAS  131  establishes
        standards  for  the  way  that  public   business   enterprises   report
        information about operating segments in annual financial  statements and
        requires  that  those  enterprises  report  selected  information  about
        operating  segments in interim financial reports issued to shareholders.
        It also establishes standards for related disclosures about products and
        services,  geographic  areas,  and  major  customers.  SFAS No.  131 was
        effective  for financial  statements  for fiscal years  beginning  after
        December 15, 1997. Financial statement disclosures for all prior periods
        have been restated.

        The Company has  identified  three  segments:  Staffing,  Solutions  and
        Products.  There are no intersegment  sales. The accounting  policies of
        the reportable  segments are the same as those  described in the summary
        of significant  accounting policies.  The Company evaluates  performance
        and allocates  resources  based on operating  income.  Operating  income
        consists of income before income  taxes,  excluding net interest  income
        and  amortization  of  intangibles,  amounting  to 439,000,  822,000 and
        (690,000) in 1998, 1997 and 1996, respectively. Long-term assets is made
        up of goodwill and property,  plant and equipment.  Corporate  services,
        consisting  of general and  administrative  services are provided to the
        segments  from a centralized  location.  Such costs are allocated to the
        segments   based  on  either   revenue  or   headcount.   In   addition,
        substantially all of the sales and recruiting  workforce is contained in
        the staffing segment. These costs are allocated to the solutions segment
        based generally on forecasted revenues.

<PAGE>

<TABLE>
<CAPTION>
                                                            (In Thousands)
BY LINE OF BUSINESS                                    1998      1997      1996
                                                     -------   -------   -------
<S>                                                  <C>       <C>       <C>    
REVENUE
     Staffing ....................................   266,637   224,451   185,575
     Solutions ...................................   225,528   125,859    75,836
     Products ....................................    22,756
     Corporate and other
                                                     -------   -------   -------
          Total Revenue ..........................   514,921   350,310   261,411
                                                     =======   =======   =======

OPERATING INCOME
     Staffing ....................................    36,065    24,069    20,229
     Solutions ...................................    32,445    18,128     1,709
     Products ....................................     6,454
     Corporate and other .........................     4,090        13       885
                                                     -------   -------   -------
          Total Operating Income .................    79,054    42,210    22,823
                                                     =======   =======   =======

ASSETS
     Staffing ....................................   114,523    68,373    53,577
     Solutions ...................................    78,936    30,264    18,207
     Products ....................................    15,454
     Corporate and other .........................    87,139   118,988    24,826
                                                     -------   -------   -------
          Total Assets ...........................   296,052   217,625    96,610
                                                     =======   =======   =======

DEPRECIATION EXPENSE
     Staffing ....................................       651       668       495
     Solutions ...................................       561       417       276
     Products ....................................       279
     Corporate and other .........................     1,727       772       596
                                                     -------   -------   -------
          Total Depreciation .....................     3,218     1,857     1,367
                                                     =======   =======   =======
<PAGE>

<CAPTION>
                                                            (In Thousands)
BY LINE OF BUSINESS                                    1998      1997      1996
                                                     -------   -------   -------
<S>                                                  <C>       <C>       <C>    
BY GEOGRAPHIC AREA
REVENUE
     United States ...............................   476,252   334,334   249,152
     United Kingdom ..............................    23,651    15,581    12,259
     Canada ......................................    15,018       395
                                                     -------   -------   -------
          Total Revenue ..........................   514,921   350,310   261,411
                                                     =======   =======   =======

LONG-TERM ASSETS
     United States ...............................    61,815    22,395    17,618
     United Kingdom ..............................       334       323       339
     Canada ......................................    19,494        72
                                                     -------   -------   -------
          Total Long-Term Assets .................    81,643    22,790    17,957
                                                     =======   =======   =======

</TABLE>


NOTE 10 - SAVINGS PLAN AND OTHER RETIREMENT PLANS

        The  Company  maintains a defined  contribution  savings  plan  covering
        eligible  employees.  The Company makes  contributions  up to a specific
        percentage  of  participants'  contributions.  The  Company  contributed
        approximately  $704,000,  $469,000 and $345,000 in 1998,  1997 and 1996,
        respectively.

        In 1995, the Company instituted a Supplemental Executive Retirement Plan
        whereby key executives are entitled to receive lump-sum payments (or, if
        they elect, a ten-year  payout) upon reaching the age of 65 and being in
        the employ of the Company.  The maximum  commitment  if all plan members
        remain in the employ of the Company until age 65 is approximately  $11.0
        million.  Benefits  accrue  and vest based on a formula  which  includes
        total years with the Company and total years  possible until age 65. The
        plan is nonqualified and not formally funded. Life insurance policies on
        the members are  purchased  to assist in funding the cost.  The deferred
        compensation  expense  is  charged to  operations  during the  remaining
        service  lives of the members and  amounted to  approximately  $285,000,
        $183,000 and $97,000 in 1998, 1997 and 1996, respectively.

        In addition,  the Company adopted a Deferred  Compensation  Plan for Key
        Executives  that  permits  the  individuals  to defer a portion of their
        annual salary or bonus for a period of at least five years.  There is no
        effect on the Company's  operating  results  since any amounts  deferred
        would have previously been expensed. Amounts deferred as of December 31,
        1998 have been included in other noncurrent liabilities.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996


NOTE 11 - COMMITMENTS

        Leases

        The  Company  leases  office  space  under  long-term  operating  leases
        expiring  through  2006.  As of December 31, 1998,  approximate  minimum
        rental commitments were as follows:

        Year ending                   (in thousands)
              1999                         $ 5,526
              2000                           3,287
              2001                           2,656
              2002                           2,249
              2003                           1,453
              Thereafter                     1,255
                                         ---------
                                          $ 16,426
                                          ========

        Office  rentals are subject to  escalations  based on  increases in real
        estate  taxes  and  operating  expenses.   Aggregate  rent  expense  for
        operating leases approximated $5,136,000,  $3,721,000 and $2,899,000, in
        the years ended December 31, 1998, 1997 and 1996, respectively.

        Other

        In 1994,  the Vice Chairman and Executive  Vice President of the Company
        announced  his  resignation  effective  February 15,  1995.  The Company
        recorded  approximately  $400,000 of deferred compensation in 1994 which
        is being paid  beginning  February 1998 through  2005.  The Company also
        agreed to retain this former  officer as a  consultant  for a three-year
        period  for   approximately   $75,000  each  year  and  entered  into  a
        noncompetition agreement for that period.


        NOTE 12 - SUBSEQUENT EVENTS

        On  February  11,  1999,  the  Company's  Board of  Directors  adopted a
        resolution  allowing  for  the  repurchase  of up to 10  percent  of the
        Company's outstanding common shares. The Company may, from time to time,
        purchase  shares through  periodic open market  transactions  or through
        privately negotiated transactions.

        Also on February 11, 1999, the Board of Directors  approved the creation
        of an employee  stock purchase plan.  The plan,  which  qualifies  under
        section 423 of the Internal  Revenue Service code,  allows  employees to
        purchase shares of the Company's  common stock through  periodic payroll
        deductions.
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                        December 31, 1998, 1997 and 1996

NOTE 13 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

        For the years  ended  December  31,  1998 and 1997,  selected  quarterly
        financial data is as follows:
<TABLE>
<CAPTION>
                                                                                          Quarters
                                                               ---------------------------------------------------------------
                                                                  First          Second               Third             Fourth
                                                                          (in thousands, except per share data)
<S>                                                             <C>               <C>              <C>                <C>      
1998
      Revenues                                                  $111,512          $123,735         $ 136,633          $ 143,041
      Direct costs                                                70,748            79,619            86,587             89,841
      Selling, general and administrative                         24,439            26,244            29,127             33,225
      Merger-related expenses                                      1,328             2,209               735
      Income from operations                                      14,997            15,663            20,184             19,975
      Interest income - net                                        1,333             1,526               951                774
      Equity in net earnings of joint
           venture                                                   (90)
      Gain on sale of joint venture                                                                                       4,180
      Income before income taxes                                  16,240            17,189            21,135             24,929
      Income taxes                                                 7,603             7,653             9,316             11,334
      Net income                                                   8,637             9,536            11,819             13,595

      Earnings per share:
         Basic                                                     $0.28             $0.31             $0.38              $0.44
         Diluted                                                   $0.27             $0.30             $0.37              $0.42


1997
      Revenues                                                   $77,205           $83,645           $89,861            $99,599
      Direct costs                                                52,485            56,102            59,698             65,289
      Selling, general and administrative                         17,106            18,320            18,687             20,052
      Merger-related costs                                                                                                  976
      Income from operations                                       7,614             9,223            11,476             13,282
      Interest income - net                                           57                31               114              1,222
      Equity in net earnings of joint
           venture                                                   150                63               (75)              (125)
      Income before income taxes                                   7,821             9,317            11,515             14,379
      Income taxes                                                 3,371             3,927             4,898              6,303
      Net income                                                   4,450             5,390             6,617              8,076

      Earnings per share:
         Basic                                                    $0.17             $0.20             $0.25              $0.27
         Diluted                                                   0.16              0.19              0.23               0.26
</TABLE>
<PAGE>
                    Computer Horizons Corp. and Subsidiaries

                         MARKET AND DIVIDEND INFORMATION

                     Years ended December 31, 1998 and 1997


The Company's  common stock is quoted on the Nasdaq National  Market,  under the
symbol CHRZ. The range of high and low closing stock prices,  as reported by the
Nasdaq  National  Market,  for each of the quarters for the years ended December
31, 1998 and 1997,  retroactively  adjusted to reflect the three-for-two  common
stock split declared by the Board of Directors in May 1997, is as follows:
<TABLE>
<CAPTION>
                                           1998                                   1997
                             -------------------------------          -------------------------------
                                High                 Low                 High                Low
                                ----                 ---                 ----                ---
<S>                           <C>                 <C>                   <C>                <C>   
     Quarter
           First              $ 52.19             $ 39.50               $25.42             $16.83
           Second               51.75               30.38                38.88              19.67
           Third                43.75               23.38                44.13              32.13
           Fourth               28.63               18.13                45.50              27.00
</TABLE>

        The  Company   plans  to  reinvest   its   earnings  in  future   growth
        opportunities and, therefore,  does not anticipate paying cash dividends
        in the near future and has not paid any to date except for payments made
        to Spargo  shareholders prior to the combination with Computer Horizons.
        As of December  31,  1998,  there were  approximately  1,250  holders of
        record of common stock.