SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 1999
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Commission file no.0-15152
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FIND/SVP, INC.
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(Exact name of Registrant as specified in its charter)
NEW YORK 13-2670985
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
625 Avenue of the Americas, New York, NY 10011
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 645-4500
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Number of shares of Common Stock outstanding at May 1, 1999: 7,120,669
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1999 (unaudited) and
December 31, 1998 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1999
and 1998 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999
and 1998 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM I.
FINANCIAL STATEMENTS
FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
ASSETS (unaudited)
Current assets:
<S> <C> <C>
Cash $ 1,749,000 2,307,000
Accounts receivable, net 2,269,000 2,188,000
Note receivable 184,000 200,000
Deferred tax assets 322,000 322,000
Prepaid expenses 396,000 466,000
------------ ----------
Total current assets 4,920,000 5,483,000
Equipment and leasehold improvements, at cost, less accumulated
depreciation and amortization of $5,701,000 in 1999 and
$5,472,000 in 1998 4,178,000 4,250,000
Goodwill, net 104,000 106,000
Other assets 1,853,000 1,865,000
------------ ----------
$ 11,055,000 11,704,000
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current installments -- 500,000
Accounts payable 600,000 497,000
Other current liabilities 1,290,000 1,917,000
------------ ----------
Total current liabilities 1,890,000 2,914,000
Unearned retainer income 2,760,000 1,917,000
Notes payable, net, excluding current installments 2,959,000 3,307,000
Other liabilities 388,000 578,000
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Total liabilities 7,997,000 8,716,000
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Shareholders' equity:
Preferred stock, $.0001 par value. Authorized 2,000,000 shares;
none issued and outstanding -- --
Common stock, $.0001 par value. Authorized 20,000,000 shares;
issued and outstanding 7,120,669 shares at March 31, 1999;
issued and outstanding 7,114,169 shares at December 31, 1998 1,000 1,000
Capital in excess of par value 4,891,000 4,886,000
Accumulated deficit (1,834,000) (1,899,000)
------------ ----------
Total shareholders' equity 3,058,000 2,988,000
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$ 11,055,000 11,704,000
============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues $ 5,486,000 8,197,000
----------- -----------
Operating expenses:
Direct costs 2,776,000 4,324,000
Selling, general and administrative expenses 2,483,000 3,508,000
Restructuring charge -- 321,000
----------- -----------
Operating income 227,000 44,000
Interest income 33,000 7,000
Other income -- 289,000
Interest expense (139,000) (136,000)
Other expense -- (289,000)
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Income (loss) before provision (benefit) for income taxes 121,000 (85,000)
Provision (benefit) for income taxes 56,000 (39,000)
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Net income (loss) $ 65,000 (46,000)
=========== ===========
Earnings (loss) per common and common stock equivalent share:
Basic $ 0.01 (0.01)
=========== ===========
Diluted $ 0.01 (0.01)
=========== ===========
Weighted average number of common and common stock equivalent shares
outstanding:
Basic 7,117,586 7,042,177
=========== ===========
Diluted 7,203,913 7,042,177
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 65,000 (46,000)
----------- -----------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 289,000 319,000
Provision for losses on accounts receivable 7,000 53,000
Decrease in assets held for sale -- 18,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (88,000) 258,000
Decrease (increase) in prepaid expenses 70,000 (45,000)
Increase in other assets (44,000) (107,000)
Increase (decrease) in accounts payable 103,000 (385,000)
Decrease in other current liabilities (627,000) (74,000)
Increase in unearned retainer income 843,000 1,004,000
(Decrease) increase in other liabilities (190,000) 29,000
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Total adjustments 363,000 1,070,000
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Net cash provided by operating activities 428,000 1,024,000
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Cash flows from investing activities:
Capital expenditures (157,000) (194,000)
Other 16,000 42,000
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Net cash used in investing activities (141,000) (152,000)
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Cash flows from financing activities:
Principal payments under notes payable (850,000) (1,374,000)
Proceeds from issuance of
convertible note-related party -- 250,000
Proceeds from exercise of stock options 5,000 2,000
Proceeds from issuance of common stock -- 750,000
Payments to acquire treasury stock -- (206,000)
Proceeds from insurance company, net of expenses -- 206,000
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Net cash used in financing activities (845,000) (372,000)
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Net (decrease) increase in cash (558,000) 500,000
Cash at December 31, 1998 and 1997 2,307,000 139,000
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Cash at March 31, 1999 and 1998 $ 1,749,000 639,000
=========== ===========
Non-cash financing activities:
Conversion of note into common stock $ -- 250,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FIND/SVP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
A. MANAGEMENT'S STATEMENT
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position at March 31, 1999, and the results of operations
for the three month period ended March 31, 1999 and 1998 and cash flows for the
three month period ended March 31, 1999 and 1998. Operating results for the
three month period ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
FIND/SVP, Inc. (the "Company") has reclassified certain prior year balances to
conform with the current presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
B. EARNINGS (LOSS) PER SHARE
For the three month periods ended March 31, 1999 and 1998 there were 7,117,586
and 7,042,177, respectively, weighted-average common shares outstanding. Diluted
earnings per share reflects the potential dilution that could occur if options
and warrants to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of
the entity. For the three month period ended March 31, 1999, there were
7,203,913 diluted weighted-average common and common equivalent shares
outstanding. For the three month period ended March 31, 1998, diluted
weighted-average common and common equivalent shares outstanding were the same
as basic weighted-average common and common equivalent shares outstanding as all
common share equivalents were antidilutive given that the Company had a net loss
for that period.
The number of common share equivalents that could potentially dilute basic
earnings (loss) per share in the future and that were not included in the
computation of diluted earnings (loss) per share because they were antidilutive
were 2,504,343 and 2,821,648, respectively, for the three month periods ended
March 31, 1999 and 1998.
C. BORROWINGS
During the quarter ended March 31, 1999, the Company paid in full its
outstanding borrowings under five-year Term Notes with State Street Bank and
Trust (the "Bank") in the amount of $850,000. Additionally, during March 1999,
the Company decided not to renew its line of credit with the Bank to eliminate
the expense of the stand-by letters of credit provided by SVP, S.A. ("SVP"), a
major shareholder of the Company, as security on the debt agreements. In
connection with the payment of the Term Notes and the decision to not renew its
line of credit with the Bank, the Bank released two $1 million standby letters
of credit provided by SVP.
During the quarter ended March 31, 1999, the Company paid $367,000 of accrued,
deferred interest related to its borrowings under debt agreements with
investors, to fully fund previously deferred interest payments.
6
<PAGE>
D. INCOME TAXES
The $56,000 provision for income taxes as of March 31, 1999 represents 46% of
the income before provision for income taxes as of March 31, 1999. The provision
consists of federal, state and local income taxes. The effective tax benefit was
45.9% as of March 31, 1998. The benefit represented a deferred tax benefit from
a net operating loss carryforward for federal, state and local income taxes.
E. SEGMENT REPORTING
The Company currently operates primarily in one business segment, providing
consulting and business advisory services including the Quick Consulting and
Research Service ("QCS") which provides retainer clients with access to the
expertise of the Company's staff and information resources; and the Strategic
Consulting and Research Group ("SCRG") which provides more extensive, in-depth
custom market research and competitive intelligence information, as well as
customer satisfaction and loyalty programs. Prior to its sale in the third
quarter of 1998, the Company had an additional segment, Published Research
Products. The Company considers its QCS and SCRG service activities, which
operate as a "Consulting and Business Advisory" business, to be its core
competency.
<TABLE>
<CAPTION>
Three months ended March 31,
(Amounts in thousands)
1999 1998
--------------------------- ---------------------------
PERCENT PERCENT
$ OF TOTAL $ OF TOTAL
- -------- - --------
NET ASSETS
<S> <C> <C> <C> <C>
Consulting and Business Advisory 11,055 100.0% 11,099 87.8%
Published Research Products -- 0.0% 1,540 12.2%
--------------------------- ---------------------------
Total Net Assets 11,055 100.0% 12,639 100.0%
--------------------------- ---------------------------
REVENUES
Consulting and Business Advisory 5,486 100.0% 6,866 83.8%
Published Research Products -- 0.0% 1,331 16.2%
--------------------------- ---------------------------
Total Revenues 5,486 100.0% 8,197 100.0%
--------------------------- ---------------------------
OPERATING INCOME
Consulting and Business Advisory (1) 227 100.0% 40 90.9%
Published Research Products -- 0.0% 4 0.1%
--------------------------- ---------------------------
Total Operating Income (1) 227 100.0% 44 100.0%
--------------------------- ---------------------------
DEPRECIATION AND AMORTIZATION
INCLUDED ABOVE
Consulting and Business Advisory 265 100.0% 251 81.8%
Published Research Products -- 0.0% 56 18.2%
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Total Depreciation and Amortization 265 100.0% 307 100.0%
--------------------------- ---------------------------
</TABLE>
(1) 1998 Operating Income included a $321,000 restructuring charge for severance
and related costs.
7
<PAGE>
H. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
No. 133 established accounting and reporting standards for derivative
instruments and for hedging activities. The Company intends to adopt SFAS No.
133 on January 1, 2000. At the current time the Company does not utilize
derivative instruments, and accordingly it is anticipated that the adoption of
SFAS No. 133 will not affect the Company's consolidated financial position and
results of operations.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended March 31, 1999 compared to three months ended March 31, 1998.
GENERAL
FIND/SVP, Inc. provides a broad consulting, advisory and business intelligence
service to executives and other decision-making employees of client companies,
primarily in the United States. The Company currently operates primarily in one
business segment, providing consulting and business advisory services including
the Quick Consulting and Research Service ("QCS") which provides retainer
clients with access to the expertise of the Company's staff and information
resources; and the Strategic Consulting and Research Group ("SCRG") which
provides more extensive, in-depth custom market research and competitive
intelligence information, as well as customer satisfaction and loyalty programs.
Prior to its sale in the third quarter of 1998, the Company had an additional
segment, Published Research Products ("PRP"). The Company considers its QCS and
SCRG service activities, which operate as a "Consulting and Business Advisory"
("CBA") business, to be its core competency.
SEGMENT REPORTING
In accordance with SFAS No. 131, the Company is disclosing the results of the
operating segments for each of the quarters below.
<TABLE>
<CAPTION>
Three months ended March 31,
(Amounts in thousands)
1999 1998
--------------------------- ---------------------------
PERCENT PERCENT
$ OF TOTAL $ OF TOTAL
- -------- - --------
NET ASSETS
<S> <C> <C> <C> <C>
Consulting and Business Advisory 11,055 100.0% 11,099 87.8%
Published Research Products -- 0.0% 1,540 12.2%
--------------------------- ---------------------------
Total Net Assets 11,055 100.0% 12,639 100.0%
--------------------------- ---------------------------
REVENUES
Consulting and Business Advisory 5,486 100.0% 6,866 83.8%
Published Research Products -- 0.0% 1,331 16.2%
--------------------------- ---------------------------
Total Revenues 5,486 100.0% 8,197 100.0%
--------------------------- ---------------------------
OPERATING INCOME
Consulting and Business Advisory (1) 227 100.0% 40 90.9%
Published Research Products -- 0.0% 4 0.1%
--------------------------- ---------------------------
Total Operating Income (1) 227 100.0% 44 100.0%
--------------------------- ---------------------------
DEPRECIATION AND AMORTIZATION
INCLUDED ABOVE
Consulting and Business Advisory 265 100.0% 251 81.8%
Published Research Products -- 0.0% 56 18.2%
--------------------------- ---------------------------
Total Depreciation and Amortization 265 100.0% 307 100.0%
--------------------------- ---------------------------
</TABLE>
(1) 1998 Operating Income included a $321,000 restructuring charge for severance
and related costs.
9
<PAGE>
REVENUES
The Company's revenues decreased by $2,711,000 or 33.0% to $5,486,000 for the
three-month period ended March 31, 1999 from $8,197,000 for the three-month
period ended March 31, 1998. The decrease was due to the sale of assets from PRP
completed during the third quarter of 1998, and a decline in revenues of 20.1%
in the CBA segment.
QCS accounted for 85.6% and 64.2%, and SCRG accounted for 13.4% and 19.1% of the
Company's revenues for the three-month periods ended March 31, 1999 and 1998,
respectively. QCS revenues decreased by 10.8% and SCRG revenues decreased by
53.1% for the three-month period ended March 31, 1999, as compared to the
comparable period of the prior year. The decrease in QCS was due primarily to a
reduction in the number of retainer clients and a reduction in the retainer base
during the period ended March 31, 1999 as compared to the comparable period of
the prior year. During the first quarter of 1999 the Company experienced a
reduction in the number of retainer clients of 4.1% and a reduction in the
retainer base of 4.6%. The Company believes these reductions are primarily due
to staff turnover in the sales force during 1998, the Company's reorganization
in the months following the sale of the PRP assets and the subsequent
reorganization of the sales department for 1999. The Company anticipates a
continued decline in the retainer base through at least the second quarter of
1999. Until this trend is reversed, and the retainer base is brought back to
previous levels, the Company expects revenue declines in QCS on a quarter to
quarter basis. The decrease in SCRG revenues is primarily due to staff turnover
during 1998, which affected the marketing efforts of SCRG. The Company believes
the staff turnover in this area is now under control. However, the Company
anticipates reduced revenues to continue through at least the second quarter of
1999, as compared to the like quarters of 1998.
DIRECT COSTS
Direct costs decreased by 35.8% or $1,548,000 to $2,776,000 for the three-month
period ended March 31, 1999, from $4,324,000 for the three month period ended
March 31, 1998. As a percent of revenues, direct costs decreased to 50.6% for
the three-month period ended March 31, 1999, from 52.8% for the corresponding
period in 1998. The decrease in total direct costs and direct costs as a
percentage of revenues are due primarily to the sale of the PRP assets, which
was completed in the third quarter of 1998, and a general reduction of direct
operating expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses declined by 29.2% or $1,025,000 to
$2,483,000 for the three-month period ended March 31, 1999 from $3,508,000 for
the three month period ended March 31, 1998. As a percent of revenues, selling,
general and administrative expenses increased to 45.3% for the three-month
period ended March 31, 1999, from 42.8% for the corresponding period in 1998.
The decrease in selling, general and administrative expenses is due primarily to
the sale of assets, the reduction of the general and administrative staff and
the sales staff (primarily due to turnover), and the continued reduction of
general operating expenses. The increase in selling, general and administrative
expenses as a percent of revenues was due primarily to the reduced level of CBA
revenues during the period as compared to the same period in the prior year.
10
<PAGE>
RESTRUCTURING CHARGE
On March 27, 1998, the Company reduced its full-time labor force in its core
business by 20 positions. As a result, the Company recorded a restructuring
charge of $321,000 during the quarter ended March 31, 1998. The charge consisted
mainly of severance payments, which were fully paid by February 15, 1999,
outplacement services and legal costs associated with the elimination of the
positions. As of March 31, 1999, $2,000 related to this charge remains accrued
but unpaid.
OPERATING INCOME
The Company had operating income of $227,000 for the three months ended March
31, 1999, as compared to operating income of $44,000 for the three months ended
March 31, 1998. The three months ended March 31, 1998 included a pre-tax
restructuring charge of $321,000 related to a reduction in its full time labor
force. During the period ended March 31, 1999, all operating income was derived
from the CBA segment as compared to the same period in 1998 when CBA had
operating income of $40,000, including the $321,000 restructuring charge, and
PRP had operating income of $4,000.
INTEREST INCOME AND EXPENSE
During the quarter ended March 31, 1999, the Company earned $33,000 in interest
income, which increased from $7,000 in 1998. The increase in 1999 was a result
of the increased cash balance during the quarter ended March 31, 1999, coupled
with interest earned on notes receivable.
Interest expense was $139,000 for the three-month period ended March 31, 1999,
which was an increase from $136,000 for the same period in 1998. The increase in
interest expense was primarily due to the expensing of $12,000 of deferred
financing fees related to the payment in full of outstanding Term Notes with the
Bank (see Liquidity and Capital Resources).
OTHER INCOME AND EXPENSE
During the first quarter of 1998, the Company entered into a settlement
agreement regarding a shareholder lawsuit, which began during 1997, pursuant to
which the suit was dismissed with prejudice. As part of the settlement, the
Company purchased 274,400 shares of the Company's Common Stock from the
plaintiff for $1.25 per share, totaling $343,000. The purchase price contained a
premium of $0.50 per share over the closing trade price of the Company's Common
Stock on the date of settlement, or $137,000. As a result of the above, the
Company recorded treasury stock of $206,000 and expense of $137,000. The Company
used proceeds from its insurance company of $495,000 to purchase the shares and
to pay plaintiff and Company legal fees in the amount of $110,000 and $42,000,
respectively. Accordingly, the Company recorded other income and other expense
of $289,000, respectively, related to this matter, with the remaining balance of
$206,000 offset against the aforementioned treasury stock repurchase amount,
thus reducing the net treasury stock transaction to zero.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $461,000 to $3,030,000 on March 31,
1999, as compared to December 31, 1998. Cash balances were $1,749,000 and
$2,307,000 on March 31, 1999 and December 31, 1998, respectively.
11
<PAGE>
During the quarter ended March 31, 1999, the Company paid in full its
outstanding borrowings under five-year Term Notes with the Bank in the amount of
$850,000. In addition, the Company paid all of the accrued, deferred interest
related to its debt agreements with investors, in the amount of $367,000. Also
during March 1999, the Company decided not to renew its line of credit with the
Bank to eliminate the expense of the stand-by letters of credit provided by SVP
as security on the debt agreements. In connection with the payment of the Term
Notes and the decision to not renew its line of credit with the Bank, the Bank
released two $1 million standby letters of credit provided by SVP.
The Company currently is negotiating with a financial institution for a line of
credit. No assurance can be given that the Company will be successful in
obtaining a new line of credit.
The Company expects to spend approximately $550,000 for capital items for the
remainder of 1999. The major portion of these expenditures will be for the
continued enhancement of internal software and computer equipment, as well as to
repair the HVAC system at one of its locations.
The Company believes that its current cash balance and cash flow from operations
will be sufficient to cover its expected capital expenditures for the next 12
months and that it will have sufficient liquidity for the next 12 months.
MARKET FOR COMPANY'S COMMON EQUITY
On April 27, 1999, the Company received notification from the NASDAQ Stock
Market, Inc. ("NASDAQ") that the Company was not in compliance with NASDAQ's
$1.00 minimum bid price requirement, the shares of the Company's Common Stock
having closed below the minimum bid price for 30 consecutive business days. To
regain compliance with this standard the Company's common stock must have a
closing bid price at or above $1.00 for ten consecutive trading days within the
90- calendar day period following the advent of non-compliance. If compliance is
not met, NASDAQ will issue a delisting letter which will identify the review
procedures. The Company may request a review at that time, which will generally
stay delisting. The Company also had received non-compliance notifications on
January 21, 1999 and during the first quarter of 1998. However with respect to
those notifications, the Company's Common Stock subsequently met the required
minimum bid price for ten consecutive trading days.
The Company's failure to meet NASDAQ's maintenance criteria in the future may
result in the discontinuance of the inclusion of its securities in NASDAQ. In
such event, trading, if any, in the securities may then continue to be conducted
in the non-NASDAQ over-the-counter market in what are commonly referred to as
the electronic bulletin board and the "pink sheets". As a result, an investor
may find it more difficult to dispose of or to obtain accurate quotations as to
the market value of the securities. In addition, the Company would be subject to
a Rule promulgated by the Securities and Exchange Commission that, if the
Company fails to meet criteria set forth in such Rule, imposes various practice
requirements on broker-dealers who sell securities governed by the Rule to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transactions prior to sale. Consequently, the Rule may have an
adverse effect on the ability of brokers-dealers to sell the securities, which
may affect the ability of shareholders to sell the securities in the secondary
market.
12
<PAGE>
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs which were written using
only two digits, rather than four, to represent a year. Date sensitive software
or hardware may not be able to distinguish between 1900 and 2000 and programs
that perform arithmetic operations, comparisons or sorting of date fields may
begin yielding incorrect results. This could potentially cause a system failure
or miscalculations that could disrupt operations.
The Company has developed a remediation plan for its Year 2000 issue that
involves three overlapping phases:
1) Inventory - This phase includes the creation of an inventory of three
functional areas:
a) Applications and information technology (IT) equipment - These
include all mainframe, network and desktop hardware and software, including
custom and packaged applications, and IT embedded systems.
b) Non-information technology (non-IT) embedded systems - These
include non-IT equipment. Non-IT embedded systems, such as security, fire
prevention and climate control systems typically include embedded
technology, such as microcontrollers.
c) Vendor relationships - These include significant third party
vendors and suppliers of goods and services, as well as vendor and supplier
interfaces.
The Company has completed the inventory phase.
2) Analysis - This phase includes the evaluation of the inventoried items
for Year 2000 compliance, the determination of the remeditation method and
resources required and the development of an implementation plan. A significant
portion of the analysis phase is complete. The Company completed the analysis
phase for non-IT and IT embedded systems.
3) Implementation - This phase includes executing the implementation plan
for all applicable hardware and software, interfaces and systems. This involves
testing the changes in a Year 2000-simulated environment, beginning to utilize
the changed procedures in actual operations, and vendor interface testing. The
implementation phase, including testing for certain critical applications, has
commenced and is expected to be completed by June 1999 for applications and IT
equipment and non-IT embedded systems. All other components of the
implementation phase are expected to be completed by September 1999.
Additionally, subsequent to final implementation, the Company will conduct live
testing on January 1 and 2, 2000, before business commences on January 3, 2000.
The Company's remediation plan for its Year 2000 issue is an ongoing process and
the estimated completion dates above are subject to change.
THE RISK OF THE COMPANY'S YEAR 2000 ISSUE
Overall, at this time the Company believes that its systems will be Year 2000
compliant in a timely manner for several reasons. Several significant marketing
and fulfillment systems already are compliant. In addition, the Company
extensively utilizes certain shared applications that should be remediated once
and then deployed. Also, comprehensive testing of all critical systems is
planned to be conducted in a simulated Year 2000 environment.
The Company believes that the area of greatest risk to the Company surrounding
the Year 2000 issue relates to significant suppliers' failing to remediate their
Year 2000 issues in a timely manner. The Company has relationships with certain
significant suppliers. These relationships may be material in the aggregate to
the Company. The Company relies on suppliers to deliver a broad range of
services, including Internet access, online search capabilities, supplies of
promotional materials and paper, warehouse facilities, lettershops which
assemble promotional mailings, postal delivery services, banking services,
telecommunications and electricity. The Company is communicating with its
significant suppliers to determine the extent to which it may be affected by
those third parties' plans to remediate their own Year 2000 issue in a timely
manner. The level of preparedness of significant suppliers can vary greatly. If
a number of significant suppliers are not Year 2000 compliant, this could have a
material adverse effect on the Company's results of operations, financial
position or cash flow.
THE COMPANY'S CONTINGENCY PLANS
The Company is developing its contingency plans and expects to have them
completed by June 1999. To mitigate the effects of the Company's or significant
suppliers' potential failure to remediate the Year 2000 issue in a timely
manner, the Company would take appropriate actions. Such actions may include
having arrangements for alternate suppliers, re-running the processes if errors
occur, using manual intervention to ensure the continuation of operations where
necessary, and scheduling activity in December 1999 that would normally occur at
the beginning of January 2000. If it becomes necessary for the Company to take
these corrective actions, it is uncertain whether this would result in
significant delays in business operations or have a material adverse effect on
the Company's results of operations, financial position or cash flow.
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUE
The total cost of the Company's remediation plan is estimated at approximately
$75,000 to $100,000 and is being funded through operating cash flows. Of the
total cost, approximately $35,000 to $40,000 will be attributable to new
hardware and software that will be capitalized. The remainder of the cost will
be expensed as incurred. As of March 31, 1999, $10,000 has been spent on new
software.
INFLATION
The Company has in the past been able to increase the price of its products and
services sufficiently to offset the effects of inflation on wages and other
expenses, and anticipates that it will be able to do so in the future.
FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
Certain statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Form 10-Q
that are not related to historical results are forward looking statements.
Actual results may differ materially from those projected or implied in the
forward looking statements. The forward looking statements are based upon
assumptions of future events, which may not prove to be accurate. These forward
looking statements involve risks and uncertainties, including but not limited to
the Company's dependence on regulatory approvals, its future cash flows, sales,
gross margins and operating costs, the effect of conditions in the industry and
the economy in general, and legal proceedings. Subsequent written and oral
forward looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by cautionary statements in
this paragraph and elsewhere in this Form 10-Q, and in other reports filed by
the Company with the Securities and Exchange Commission.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. EXHIBITS
27. Financial Data Schedule
B. REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIND/SVP INC.
(REGISTRANT)
DATE: MAY 14, 1999 /S/ ANDREW P. GARVIN
- ------------------- --------------------------------------------
Andrew P. Garvin, Chief
Executive Officer and President
DATE: MAY 14, 1999 /S/ VICTOR L. CISARIO
- ------------------ --------------------------------------------
Victor L. Cisario
Vice President and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
16
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