SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-24928
THE SOLOMON-PAGE GROUP LTD.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 51-0353012
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization Number)
1140 Avenue of the Americas, New York, New York 10036
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 764-9200
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Securities registered pursuant to Section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value $.001
Common Stock Purchase Warrants
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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Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. /X/
State the issuer's revenues for its most recent fiscal year:
The issuer's revenues for the fiscal year ended September 30, 1997 were
$28,996,485.
The aggregate market value of the voting stock held by
non-affiliates of the Registrant computed by reference to the price at which the
stock was sold on December 31, 1997 was approximately: $11,603,400. Solely for
the purposes of this calculation, shares held by directors and officers of the
Registrant have been excluded. Such exclusion should not be deemed a
determination or an admission by the Registrant that such individuals are, in
fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date: At December
31, 1997, there were outstanding 5,129,285 shares of the Registrant's Common
Stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy
statement to be filed not later than January 28, 1998 pursuant to Regulation 14A
are incorporated by reference in Items 9 through 12 of Part III of this Annual
Report on Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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General
The Company is a specialty niche provider of staffing services
organized into two primary operating divisions: executive search / full time
contingency recruitment and temporary staffing and consulting. The executive
search and full time contingency recruitment division has eight lines of
business, including four industry (capital markets, publishing and new media,
healthcare and fashion services), and four functional (information technology,
accounting, human resources and legal). The temporary staffing and consulting
division provides services to companies seeking personnel in the information
technology, accounting and human resources areas. The accounting and human
resources temporary staffing and consulting businesses commenced operations
during fiscal 1997.
In the executive search and full time contingency recruitment division,
fees usually range between 20% and 33% of the placed employee's guaranteed first
year's compensation. In the executive search sector, the Company generally
obtains a non-refundable retainer of approximately one-third of the estimated
fee at the inception of an engagement, with the balance of the fee payable on
terms negotiated with the client. A substantial portion of the deferred payment
is usually contingent on the successful completion of the placement. In the full
time contingency recruitment sector, the entire fee is contingent upon
successful completion of the placement, although under certain circumstances a
non-refundable retainer payment of a portion of the fee may be received at the
outset. In the temporary staffing and consulting division, the Company is
compensated by its clients for services provided by temporary employees on a
time and materials basis. The Company's primary costs, in addition to its fixed
costs such as rental expense, salaries of administrative personnel and
advertising, are the variable costs attributable to payroll relating to
temporary staffing requirements, commissions of sales and recruiting personnel
and employee benefits.
The Solomon-Page Group Ltd. is a Delaware corporation formed in June
1993 that succeeded to the business of a predecessor New York corporation with
the same name through a merger that was effected in May 1994. The predecessor
commenced operations in 1990. References herein to the "Company" are references
to The Solomon-Page Group Ltd. and its wholly-owned subsidiary, Information
Technology Partners, Inc. ("ITP").
Industry Overview
According to the Staffing Industry Report, revenues for the staffing
industry were expected to exceed $86 billion for 1997. Temporary help, the
largest staffing services segment, was estimated to have 1997 revenues of
approximately $54 billion and has grown at an average annual rate of
approximately 19% over the past five years. Information technology services has
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become one of the fastest growing segments to the staffing services industry, as
the increased use of technology has led to a dramatic rise in demand for
technical project support, software development and other computer-related
services. Revenues from the information technology services segment were
estimated at approximately $15 billion for 1997, representing a 27% increase
over 1996. The placement and search sector of the staffing industry consists of
three segments, retained search, contingency recruitment and temp-to-perm.
Revenues for the placement and search sector were estimated to exceed $10
billion for 1997.
Scope of Staffing Services Provided
The Company provides its services to clients primarily in the New York
metropolitan area, but increasingly on a nationwide and global basis to certain
of the industries and functional areas that it serves. The Company's retained
executive search and contingency recruitment business is currently divided into
eight groups.
Retained Executive Search
CAPITAL MARKETS (SALES AND TRADING/INVESTMENT BANKING). The Company's
capital markets group primarily services global financial services institutions
in North America, Europe and Asia. This group places traders, institutional
sales people, investment bankers, research and quantitative analysts and
portfolio managers, and focuses on middle and senior level positions.
HEALTH CARE. The Company's health care group services hospitals,
managed care firms, group health insurance companies and other health care
related companies. The Company fills primarily middle to senior level executive
positions in various functional areas of the health care industry such as sales,
marketing, operations, financial management and medical management.
PUBLISHING AND NEW MEDIA AND TECHNOLOGY. The Company's publishing
division provides executive search services to businesses engaged in consumer
and business magazine publishing, educational publishing, professional reference
and trade book publishing, and information services on a nationwide basis. This
group handles primarily retained senior executive level searches in such
functional areas as editorial, marketing, sales, circulation and product and
technology development. One of the fastest growth areas within the publishing
industry is New Media and Technology. The marketplaces serviced within this area
include educational and consumer software publishers, internet and website
developers, on-line services, CD-ROM producers and distance learning companies.
Contingency Recruitment
INFORMATION TECHNOLOGY. The Company's information technology division
conducts search assignments for a diverse client base, including those in the
investment banking, financial services, communications, retail and high
technology industries. The division fills positions at many levels and
functions, such as Chief Information Officers and Directors, project managers
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and programmers, as well as less technical positions such as systems liaisons,
business systems analysts and help desk personnel.
LEGAL PROFESSIONALS. The Company's legal professional division serves
primarily the New York metropolitan area, providing attorneys to law firms,
financial institutions and public and privately held companies. In law firms,
the division fills positions at the associate, of counsel and partner level. For
corporations, lawyers are provided for all positions under the auspices of
General Counsel. Specialty practice areas include corporate, banking, real
estate, ERISA and tax law, labor and employment, environmental law, trusts and
estates, intellectual property and litigation.
HUMAN RESOURCES: The Company's human resources division undertakes
search assignments for a diverse client base, from Fortune 1000 companies to
mid-size companies, in various industries such as financial services, consumer
products, manufacturing, publishing, telecommunications and high technology. The
Company fills positions for such human resources areas as management and
organizational planning, compensation and benefits, labor relations and
training. In addition, the Company recruits communications professionals with
backgrounds in areas including marketing communications, internal
communications, investor relations, public relations, media relations, writing
and editing.
ACCOUNTING AND FINANCE. The Company's accounting and finance group
specializes in providing financial and accounting personnel such as chief
financial officers, controllers, treasurers, financial analysts, financial
systems managers, bookkeepers and other related personnel to a wide variety of
corporate employers in various industries such as publishing, investment
banking, advertising, insurance, healthcare, apparel and real estate. Within
this division, the Company has added a concentration in management consulting.
This area focuses on addressing the needs of clients in the areas of business
and strategic planning, corporate development and change management.
FASHION SERVICES. The Company's fashion services group specializes in
providing management, design and other professionals to clients engaged in the
fashion services and retail industries, including manufacturers, specialty and
department stores, chains, mass merchandisers and catalogue companies. The
Company fills positions at the middle to senior executive levels in many
functional areas such as buyers, designers, sales and production.
Temporary Staffing and Consulting
INFORMATION TECHNOLOGY. The Company's information technology temporary
staffing and consulting business provides services on a time and materials basis
to clients within the financial services, consumer products, telecommunications,
consulting and insurance industries. The Company supplies skilled professionals
in the areas of Application Development, Business Analysis, Help Desk Support,
Networking, Project Management and Quality Assurance.
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ACCOUNTING AND HUMAN RESOURCES. During Fiscal 1997, the Company
expanded its existing presence within its full time accounting and human
resources specialty niches by providing temporary staffing and consulting
services to existing as well as new clients through dedicated teams of
experienced staffing or industry personnel.
Operational Procedures
The Company concentrates on establishing and maintaining strong
relationships with its clients in each industry or functional group. In this
way, it is able to become familiar with and sensitive to its clients' specific
needs, thereby facilitating its ability to provide high-quality services, which
in turn enhances client loyalty and repeat business. In addition, although the
Company's divisional structure causes its employees to concentrate on specific
areas, they are trained and compensated to recognize cross-selling opportunities
when they exist. The Company believes that its focus on comprehensive client
service is one of the primary reasons it receives a large number of new business
referrals from existing clients.
The Company recruits its candidates primarily through targeted
telephone solicitation and referrals by past and current candidates and through
advertising in local and national media and on the Internet.
Two customers of the Company accounted for approximately 11% and 10%,
respectively, of the Company's revenues during the fiscal year ended September
30, 1997.
Business Expansion
During the next fiscal year, the Company intends to continue to expand
its current retained executive search, full-time contingency recruitment and
temporary staffing and consulting business sectors through the retention of its
existing staff of experienced personnel counselors as well as the addition of
new counselors with placement experience, who will complement the Company's
current scope of business. Also, the Company aggressively pursues opportunities
to attract highly skilled staffing industry professionals in new areas of
retained executive search, contingency recruitment and temporary staffing and
consulting on an ongoing proactive basis.
The Company intends to focus on blending temporary and full time
placement services by continuing to expand its existing presence within the
Information Technology, Accounting, Legal and Human Resources businesses in
order to capitalize on synergies in client relationships as well as extensive
knowledge of applicants and consultants in these functional areas of expertise.
ITP, the Company's information technology temporary staffing and consulting
business, is aggressively pursuing a strategy of continued rapid expansion,
either by attracting seasoned sales and recruitment professionals or by
acquisition. According to staffing industry analysts, information technology
temporary placement is the most rapidly growing sector of the staffing market
with high gross margins and continued forecasts of additional long-term revenue
growth potential. ITP has recruited experienced marketing, recruiting and
administrative professionals to service Fortune 1000 and mid-sized clients on a
local, regional and subsequently
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nationwide basis. The staff comprises senior level individuals with existing
client and consultant relationships so that the business can continue to grow in
an expedient manner with a high degree of customer satisfaction. The Company
believes that this expansion will achieve operating efficiencies due to its
existing infrastructure. This expansion will be facilitated through either
internal growth or acquisition.
This extension of services would enable the Company to expand its
product mix and geographic scope as well as to further the consultative nature
of long-term client relationships. This expansion would also enable the Company
to market a number of recruitment services to clients by cross-selling the
firm's diversified capabilities.
Competition
The Company believes that the personnel services industry is highly
competitive and that the services provided by the Company are also provided by
many other companies ranging from local, small operations to large recruitment
and placement and temporary personnel agencies, many of which are national in
scope. Some of the Company's competitors, including all of the national firms,
are substantially larger and have greater financial resources than the Company.
The Company believes that many clients generally use more than one
company to satisfy their personnel requirements, and the major factors affecting
competition in the industry are customer service, the availability of qualified
personnel, reputation for integrity and, to varying degrees, pricing. The
Company believes that it has a favorable competitive position that is
attributable to its firm-wide dedication to client service, integrity and
knowledge of the markets it serves, which enables it to fulfill its clients'
needs expeditiously and effectively. In addition, the diverse number of industry
categories and functional areas of placement provided by the Company creates a
number of cross-selling opportunities in enhancing the potential for account
penetration and increased revenues.
Employees
As of September 30, 1997, the staff of the Company consisted of 110
full-time employees, including the Company's four executive officers, 76
recruitment and placement counselors and 30 administrative and clerical
employees. None of the Company's employees is represented by a labor
organization and the Company is not aware of any activity seeking such
organization. The Company considers its relationships with its employees to be
excellent.
Regulation
The Company's operations are subject to state laws and regulations that
may require employment agencies and/or other personnel services firms to be
licensed. The principal requirements of such laws and regulations are
satisfactory prior experience and good moral character. Requirements for
licensing vary from state to state in those states that mandate
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licensing. The Company believes that it has obtained all licenses and
registrations material to the conduct of its business.
Trademarks and Service Marks
The Company does not own any registered trademarks, service marks or
trademarks, but may seek the registration of its logo, trade name or domain name
in the future.
ITEM 2. DESCRIPTION OF PROPERTY
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In May 1993, the Company entered into a lease, expiring September 30,
2006, for approximately 9,400 square feet of office space in New York, New York,
which is the Company's principal executive office. The lease provides for
minimum annual rental and utility obligations for years two through six of the
lease (after one rent-free year) of approximately $210,000. It further provides
for minimum annual rental and utility obligations for years seven through 11 of
the lease of approximately $226,000 and for minimum annual rental and utility
obligations for years 12 and 13 of the lease of approximately $282,000.
In December 1994, the Company amended the lease described above to
include approximately 9,400 square feet of additional office space at the same
location. The minimum annual rental and utility obligations for the additional
office space through September 30, 2000 is approximately $259,000 (after four
rent-free months following the first anniversary and four rent-free months
following the second anniversary of the amendment commencement date) and is
$306,000 from October 1, 2000 through September 30, 2006. The Company occupied
this space in July 1995.
In April 1997, the Company leased approximately 9,400 square feet of
additional office space at its current headquarters. The minimum annual rental
and utility obligations for the additional office space through July 14, 1999 is
approximately $190,000, approximately $300,000 from July 15, 1999 through
December 31, 2001 and is approximately $345,000 from January 1, 2002 through
September 30, 2006. The Company occupied this space in August 1997.
ITEM 3. LEGAL PROCEEDINGS
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Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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The Company's Common Stock is traded on the National Association of
Securities Dealers Automated Quotation (Nasdaq) SmallCap market under the symbol
SOLP. The table below sets forth the range of sale prices of the Common Stock as
reported by Nasdaq for the fiscal periods specified.
Common Stock
High Low
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Fiscal 1997
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First Quarter.................................... $2-5/16 $1-3/8
Second Quarter................................... 3-1/8 1-15/16
Third Quarter.................................... 2-13/16 1-15/16
Fourth Quarter .................................. 3-11/16 2-1/2
Fiscal 1996
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First Quarter.................................... $15/16 $1/2
Second Quarter................................... 7/8 5/16
Third Quarter.................................... 2-1/2 27/32
Fourth Quarter .................................. 2-11/16 1-1/2
As of December 31, 1997, there were 39 record holders of the Company's
Common Stock. The Company believes that there are in excess of 700 beneficial
owners of its Common Stock additional to such record holders.
The Company has never paid any dividends on its Common Stock and does
not intend to pay such dividends in the foreseeable future. The Company
currently intends to retain any future earnings for the development and growth
of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
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The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the historical
financial statements and notes thereto appearing elsewhere in this document.
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Overview
The Company is a specialty niche provider of staffing services
organized into two primary operating divisions: executive search and full time
contingency recruitment as well as temporary staffing and consulting. The
executive search and full time contingency recruitment division has eight lines
of business including four industry (capital markets, publishing and new media,
healthcare and fashion services), and four functional (information technology,
accounting, human resources and legal). The temporary staffing and consulting
division provides services to all companies seeking personnel in the information
technology, accounting and human resources areas. The accounting and human
resources temporary staffing and consulting businesses commenced operations
during fiscal 1997.
The following is a summary of the Company's consolidated financial and
operating data:
Fiscal Year Ended September 30,
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Statements of Operations Data: 1997 1996
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Revenue $28,996,485 $17,165,836
Income from Operations 1,691,499 509,313
Net Income 1,282,365 710,326
Primary Income Per Common Share $.20 $.14
Fully Diluted Income Per Common Share .20 $.13
Balance Sheet Data: September 30, 1997
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Working Capital $4,921,334
Total Assets 12,815,456
Long-term Debt, Net of Current Maturities 36,473
Stockholders' Equity 8,331,465
Results of Operations
Fiscal 1997 Compared to Fiscal 1996
Revenue increased to approximately $28,996,000 for the fiscal year
ended September 30, 1997 from approximately $17,166,000 for the fiscal year
ended September 30, 1996, an increase of approximately $11,830,000 or 69%. These
results were achieved with only a 19% increase in recruitment and placement
counselors. Revenues from the Company's executive search and full time
contingency recruitment division experienced an increase of 37% to approximately
$14,517,000 for the fiscal year ended September 30, 1997 compared to
approximately $10,559,000 for the same period in 1996. Revenues from the
Company's temporary staffing and consulting division were approximately
$14,479,000 for the fiscal year ended September 30, 1997 compared to
approximately $6,607,000 for the same period in 1996, an increase of
approximately $7,872,000 or 119%.
The increase in revenues for the fiscal year ended September 30, 1997
compared to the fiscal year ended September 30, 1996 for the Company's executive
search and full time contingency recruitment division is primarily attributable
to the expansion of its client base and
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strong demand for personnel from existing clients. Also, the addition of
experienced counselors contributed to the increase in revenues. The Company's
information technology temporary staffing and consulting business experienced
significant increases in revenues for fiscal year ended September 30, 1997
compared to the same period in 1996. This increase was attributable to the
hiring of experienced sales and recruiting personnel as well as the
establishment and penetration of customer relationships. In addition, during
fiscal 1997 the Company expanded its existing presence within its accounting and
human resources specialty niches by providing temporary staffing and consulting
services to existing as well as new clients through dedicated teams of
experienced staffing or industry personnel. These expanded operations also
contributed to the increase in revenues for the fiscal year ended September 30,
1997.
Selling expenses for the fiscal year ended September 30, 1997 totaled
approximately $22,413,000 (77% of revenues) compared with approximately
$12,763,000 (74% of revenues) for the fiscal year ended September 30, 1996. The
increase in selling expenses as a percentage of revenues is directly related to
the Company's temporary staffing and consulting business, which incurred startup
costs during fiscal 1997 associated with the commencement of operations in the
accounting and human resources temporary staffing and consulting business. In
addition, the Company has incurred costs due to the hiring of senior level
counselors within various segments of the executive search and full time
contingency recruitment division. Such costs consist primarily of payroll
relating to temporary staffing requirements, salaries and commissions of sales
and recruiting personnel, employee benefits, telephone and advertising.
General and Administrative expenses increased to approximately
$4,555,000 (16% of revenues) for the fiscal year ended September 30, 1997
compared to approximately $3,653,000 (21% of revenues), for the same period in
1996. The improvements as a percentage of revenues relates to operating
efficiencies and economies of scale associated with increased revenues. The
increase in general and administrative expenses is primarily a result of planned
business expansion through the retention of additional administrative personnel
and leasing of additional office space.
Depreciation and Amortization expense for the fiscal year ended
September 30, 1997 totaled approximately $337,000 compared to approximately
$241,000 for same period in 1996. The increase is due to increased capital
expenditures and the amortization of intangible assets related to the
acquisition of trade names.
Income from operations was approximately $1,691,000 for the fiscal year
ended September 30, 1997 compared to approximately $509,000 for the fiscal year
ended September 30, 1996. The Company's operating results for the fiscal year
ended September 30, 1997 include charges of approximately $300,000 relating to
the startup of its accounting and human resource temporary staffing and
consulting business and a $200,000 charge relating to a potentially
uncollectible receivable.
Income Tax Expense for the fiscal year ended September 30, 1997 was
approximately $553,000 compared with approximately $19,000 for the fiscal year
ended September 30, 1996.
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At September 30, 1997, the Company has net operating loss carryforwards of
approximately $54,000 which can be applied to future taxable income. The
Company's effective tax rate for the fiscal year ended September 30, 1997 was
approximately 30% compared to approximately 3% in Fiscal 1996, due to the
utilization of net operating loss carryforwards in Fiscal 1996.
Due to the factors mentioned above net income was approximately
$1,282,000 for the fiscal year ended September 30, 1997 compared to
approximately $710,000 for the fiscal year ended September 30, 1996.
Fiscal 1996 Compared to Fiscal 1995
Revenue increased to approximately $17,166,000 for the fiscal year
ended September 30, 1996, from approximately $7,331,000 for the fiscal year
ended September 30, 1995, an increase of approximately $9,835,000, or 134%.
Revenues from the Company's retained executive search and contingency
recruitment business were approximately $10,559,000 for the fiscal year ended
September 30, 1996 compared to approximately $5,831,000 for the same period in
1995 and revenues from the professional interim staffing business were
approximately $6,607,000 for the fiscal year ended September 30, 1996 compared
to approximately $1,500,000 for the same period in 1995.
The increase in revenues for the fiscal year ended September 30, 1996
compared with the fiscal year ended September 30, 1995 for the Company's
retained executive search and contingency recruitment sector can be attributed
to the expansion of its client base, strong demand for personnel from existing
clients and hiring of additional experienced counselors. In addition, during
1995 the Company expanded into providing executive search services to clients in
the publishing industry and augmented its presence in the managed health care
area through the expansion of executive search services to managed health care
clients on the West Coast. These expanded operations also contributed to the
increase in revenues for the fiscal year ended September 30, 1996. The Company's
professional interim staffing business, which commenced operations in November
1994, experienced a significant increase in revenues for the fiscal year ended
September 30, 1996 compared to the same period in 1995. The increase was
attributable to the retention of experienced sales and recruiting personnel,
establishment of various customer relationships as well as the expansion into
new geographical markets.
Selling expenses for the fiscal year ended September 30, 1996 totaled
approximately $12,763,000 (74% of revenues) compared with approximately
$6,255,000 (85% of revenues) for the fiscal year ended September 30, 1995. The
improvements as a percentage of revenues relates to operating efficiencies and
economies of scale associated with increased revenues. The increase in selling
expenses is directly related to the Company's subsidiary ITP, which contributed
approximately $5,369,000 of the increased costs for the fiscal year ended
September 30, 1996. Such costs consist primarily of payroll relating to
temporary staffing requirements, salaries and commissions on sales and recurring
personnel, employee benefits and advertising expenses.
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General and Administrative expenses increased to approximately
$3,653,000 (21% of revenues) for the fiscal year ended September 30, 1996 from
approximately $3,021,000 (41% of revenues) for the fiscal year ended September
30, 1995. The improvement as a percentage of revenues relates to operating
efficiencies and economies of scale associated with increased revenues. The
increase in general and administrative expenses is primarily a result of the
Company's planned business expansion through the retention of additional
administrative personnel, leasing additional office space and professional fees.
Depreciation and Amortization for the fiscal year ended September 30,
1996 totaled approximately $241,000 compared to approximately $148,000 for the
same period in 1995. The increase is due to amortization of intangible assets
related to the acquisition of trade names along with the acquisition of capital
assets, such as computer equipment, furniture and fixtures and leasehold
improvements.
Income from operations as a result of the above-mentioned factors
increased to approximately $509,000 in fiscal 1996 from an operating loss of
approximately $2,094,000 in fiscal 1994.
Due to the factors mentioned above net income was approximately
$710,000 for the fiscal year ended September 30, 1996 compared to a net loss of
approximately $1,928,000 for the fiscal year ended September 30, 1995.
Liquidity and Capital Resources
As of September 30, 1997, the Company's sources of liquidity included
approximately $1,309,000 in cash and cash equivalents. The Company's working
capital was approximately $4,921,000 at September 30, 1997. In addition, the
Company has available approximately $1,251,000 of long term investments as a
source of liquidity as required.
In February 1997, the Company entered into a one year $4,000,000 demand
line of credit facility agreement with The Dime Savings Bank which is
collateralized by all of the Company's assets. The agreement provides for
borrowings at the Dime Reference Rate + 1% (currently 9.50%) in amounts not
exceeding 80% of eligible accounts receivable (as defined therein) and expires
on February 28, 1998, on which date the outstanding principal amount is required
to be repaid. The Company has borrowed approximately $1,400,000 under the credit
facility during the period from October 9, 1997 to December 31, 1997, most of
which was used for the repurchase of the Company's Class A redeemable common
stock purchase warrants. The Company believes that it will be able to extend
such facility on substantially the same terms as are currently in effect for an
additional one year period. If the Company is unable to extend such facility,
the Company believes that an alternative facility can be obtained on
substantially similar terms, although there can be no assurance in such regard.
Cash flows provided by (used in) operating activities for the fiscal
years ended September 30, 1997 and 1996 were approximately $292,000 and
($650,000), respectively. The improvement in cash flows for the year ended
September 30, 1997 compared to 1996 was due primarily to
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higher earnings. Cash flows used in investing activities for the fiscal years
ended September 30, 1997 and 1996 were approximately $1,861,000 and $1,568,000,
respectively. Most of the cash used in investing activities was for the purchase
of short-term investments and capital expenditures.
Capital expenditures for fiscal 1998 are expected to be approximately
$500,000, which will primarily relate to the upgrading of computers, telephone
system and various leasehold improvements.
On October 31, 1997, the Company announced that its Board of Directors
had authorized the repurchase of up to 1,000,000 of the Class A Warrants.
Purchases are being made from time to time on the Nasdaq Small Cap market or
otherwise at prevailing market prices and may be made in privately negotiated
transactions. At December 31, 1997, an aggregate of 962,562 Class A Warrants had
been repurchased for an aggregate purchase price of $1,018,303. The Company also
terminated its common stock repurchase plan which was authorized on December 31,
1996.
The Company believes that its current cash position and investment
balances, together with financing available under its working capital facility
will be sufficient to support current working capital requirements for the next
twelve months.
Impact of Inflation
Inflation has not been a major factor in the Company's business since
inception. There can be no assurances that this will continue.
New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," in October of 1995. SFAS No. 123 uses a fair value based method
of accounting for stock options and similar equity instruments as contrasted to
the intrinsic value based method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. The accounting requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after December 15, 1995;
the disclosure requirements of SFAS No. 123 are effective for financial
statements for fiscal years beginning after December 15, 1995. The Company
anticipates continuing to account for stock-based compensation using the
intrinsic value method. SFAS No. 123 will not have an impact on the Company's
results of operations or financial position.
The FASB has also issued SFAS No. 128, "Earnings per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structure," in February 1997.
SFAS No. 128 simplifies the earnings per share ("EPS") calculations
required by APB Opinion No. 15, and related interpretations, by replacing the
presentation of primary EPS with a presentation of basic EPS. SFAS No. 128
requires dual presentation of basic and diluted EPS
-12-
<PAGE>
by entities with complex capital structures. Basic EPS includes no dilution and
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the earnings
of an entity, similar to the fully diluted EPS of APB Opinion No. 15. SFAS No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. When adopted, SFAS No. 128 will require restatement of all
prior-period EPS data presented. The Company's basic EPS as calculated under
SFAS No. 128 would have been $.25 and $.14 for the years ended September 30,
1997 and 1996, respectively. The Company diluted EPS as calculated under SFAS
No. 128 would have been $.23 and $.14 for the years ended September 30, 1997 and
1996, respectively.
SFAS No. 129 does not change any previous disclosure requirements, but
rather consolidates existing disclosure requirements for ease of retrieval.
The FASB also issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Earlier application is permitted. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company is in
the process of determining its preferred format. The adoption of SFAS No. 130
will have no impact on the Company's consolidated results of operations,
financial position or cash flows.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are reported in annual financial statements and requires the reporting of
selected information about operating segments in interim financial reports
issued to shareholders. SFAS No. 131 is effective for periods beginning after
December 15, 1997, and comparative information for earlier years is to be
restated. SFAS No. 131 need not be applied to interim financial statements in
the initial year of its application. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's consolidated results of operations, financial position or cash
flows.
ITEM 7. FINANCIAL STATEMENTS
--------------------
See Index to Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
None.
-13-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
-------------------------------------------------------------
The information required by this item is incorporated by
reference from the Company's definitive proxy statement to be filed not later
than January 28, 1998 pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934 ("Regulation 14A").
ITEM 10. EXECUTIVE COMPENSATION
----------------------
The information required by this item is incorporated by
reference from the Company's definitive proxy statement to be filed not later
than January 28, 1998 pursuant to Regulation 14A.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
The information required by this item is incorporated by
reference from the Company's definitive proxy statement to be filed not later
than January 28, 1998 pursuant to Regulation 14A.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this item is incorporated by
reference from the Company's definitive proxy statement to be filed not later
than January 28, 1998 pursuant to Regulation 14A.
-14-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
--------
Exhibit
Number Exhibits
- ------ --------
3.1 (a) Certificate of Incorporation, as amended, of The
Solomon-Page Group Ltd. (Incorporated by reference to
Exhibit 3.1(a) to Registration Statement on Form SB-2, No.
33-81026)
(b) Certificate of Amendment to Certificate of Incorporation
of The Solomon- Page Group Ltd (Incorporated by reference
to Exhibit 3.1(b) to Registration Statement on Form SB-2,
No. 33-81026)
3.2 Amended and Restated By-Laws of the Company (Incorporated
by reference to Exhibit 3 to the Company's Current Report
on Form 8-K dated June 8, 1995)
4.1 Specimen Common Stock Certificate (Incorporated by
reference to Exhibit 4.1 to Registration Statement on Form
SB-2, No. 33-81026)
4.2 Specimen Warrant Certificates (Incorporated by reference
to Exhibit 4.2 to Registration Statement on Form SB-2, No.
33-81026)
10.1 1993 Long Term Incentive Plan (Incorporated by reference
to Exhibit 10.2 to Registration Statement on Form SB-2,
No. 33-81026)
10.2 1995 Directors' Stock Option Plan of the Company
(Incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated June 8, 1995)
10.3 Employment Agreement dated June 14, 1993, as amended,
between the Company and Herbert Solomon (Incorporated by
reference to Exhibit 10.3 to Registration Statement on
Form SB-2, No. 33-81026)
10.4 Employment Agreement dated June 14, 1993, as amended,
between the Company and Lloyd Solomon (Incorporated by
reference to Exhibit 10.4 to Registration Statement on
Form SB-2, No. 33-81026)
10.5 Amendment dated June 8, 1995 to that certain Employment
Agreement dated as of June 14, 1993, by and between the
Company and Lloyd Solomon (Incorporated by reference to
Exhibit 99.4 to the Company's Current Report on Form 8-K
dated June 8, 1995)
10.6 Employment Agreement dated June 14, 1993, as amended,
between the Company and Scott Page (Incorporated by
reference to Exhibit 10.5 to Registration Statement on
Form SB-2, No. 33-81026)
10.7 Amendment dated June 8, 1995 to that certain Employment
Agreement dated as of June 14, 1993, by and between the
Company and Scott Page (Incorporated by reference to
Exhibit 99.5 to the Company's Current Report on Form 8-K
dated June 8, 1995)
-15-
<PAGE>
Exhibit
Number Exhibits
- ------ --------
10.8 1996 Stock Option Plan, (Incorporated by reference to
Exhibit 10.8 to the Company's Form 10-KSB for the fiscal
year ended September 30, 1996)
10.9 Form of Indemnification Agreement between the Company and
its officers and directors (Incorporated by reference to
Exhibit 10.13 to the Company's Form 10-KSB for the fiscal
year ended September 30, 1995)
10.10 Charter of the Audit Committee of the Board of Directors
of the Company (Incorporated by reference to Exhibit 99.2
to the Company's Current Report on Form 8-K dated June 8,
1995)
10.11 The Company's Policy on Transactions in Company Securities
by Company Officers, Directors and Employees (Incorporated
by reference to Exhibit 99.3 to the Company's Current
Report on Form 8-K dated June 8, 1995)
*11 Schedule of Computation of Net Income per Common Share
*23 Consent of Moore Stephens P.C. dated January 12, 1998
*27 Financial Data Schedule
- ---------------------------
* Filed herewith.
(b) Reports on Form 8-K
None.
-16-
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE SOLOMON-PAGE GROUP LTD.
Dated: January 12, 1998 By: /S/Lloyd Solomon
--------------------------
Lloyd Solomon
Vice Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
The Solomon-Page Group, Ltd. and each of the undersigned do hereby
appoint Lloyd Solomon, Scott Page and Eric Davis and each of them severally, its
or his true and lawful attorney to execute on behalf of The Solomon-Page Group,
Ltd. and the undersigned any and all amendments to this Annual Report on Form
10-KSB and to file the same with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission; each of such
attorneys shall have the power to act hereunder with or without the other.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/S/Herbert Solomon Chairman of the Board and January 12, 1998
- --------------------------- Director
Herbert Solomon
/S/Lloyd Solomon Vice Chairman of the Board, January 12, 1998
- --------------------------- Chief Executive Officer and
Lloyd Solomon Director (Principal Executive
Officer)
/S/Scott Page President and Director January 12, 1998
- ---------------------------
Scott Page
/S/Eric M. Davis Vice President - Finance, Chief January 12, 1998
- --------------------------- Financial Officer and Director
Eric M. Davis (Principal Financial and
Accounting Officer)
-17-
<PAGE>
/S/Edward Ehrenberg Director January 9, 1998
- ---------------------------
Edward Ehrenberg
/S/Joel A. Klarreich Director January 12, 1998
- ---------------------------
Joel A. Klarreich
-18-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Page
----
Independent Auditor's Report ......................................... F-2..
Consolidated Balance Sheet as of September 30, 1997 .................. F-3..
Consolidated Statements of Operations for the years ended
September 30, 1997 and 1996........................................... F-5..
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997 and 1996........................................... F-6..
Consolidated Statements of Cash Flows for the years ended
September 30, 1997 and 1996........................................... F-7..
Notes to Consolidated Financial Statements ........................... F-8..
. . . . . . . . . . . .
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
The Solomon-Page Group Ltd.
We have audited the accompanying consolidated balance sheet of
The Solomon-Page Group Ltd. and its subsidiary as of September 30, 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two fiscal years in the period ended September 30, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of The Solomon-Page Group Ltd. and its subsidiary as of September 30,
1997, and the consolidated results of their operations and their cash flows for
each of the two fiscal years in the period ended September 30, 1997, in
conformity with generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
December 18, 1997, except as to
Note 14 for which the date is
December 31, 1997
F-2
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
- --------------------------------------------------------------------------------
ASSETS:
CURRENT ASSETS:
Cash and Cash Equivalents $ 409,856
Investments 899,220
Accounts Receivable - [Net of Allowance
for Doubtful Accounts of $125,000] 7,378,027
Other Current Assets 297,886
----------
TOTAL CURRENT ASSETS 8,984,989
----------
PROPERTY AND EQUIPMENT:
Equipment 1,155,072
Furniture and Fixtures 406,372
Leasehold Improvements 578,764
----------
Total - At Cost 2,140,208
Less: Accumulated Depreciation 682,826
----------
PROPERTY AND EQUIPMENT -NET 1,457,382
----------
OTHER ASSETS:
Investments 1,251,207
Intangible Assets - [Net of
Accumulated Amortization of $110,569] 753,564
Due from Related Parties 177,920
Security Deposits 133,172
Restricted Investment 34,466
Other Assets 22,756
----------
TOTAL OTHER ASSETS 2,373,085
----------
TOTAL ASSETS $12,815,456
==========
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements.
F-3
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accrued Payroll and Commissions $ 2,494,101
Accounts Payable and Accrued Expenses 967,887
Income Taxes Payable 267,104
Current Portion of Obligations Under Capital Leases 63,325
Other Current Liabilities 271,238
----------
TOTAL CURRENT LIABILITIES 4,063,655
----------
LONG-TERM LIABILITIES:
Obligations Under Capital Leases 36,473
Deferred Credit 383,863
----------
TOTAL LONG-TERM LIABILITIES 420,336
----------
COMMITMENTS AND CONTINGENCIES --
----------
STOCKHOLDERS' EQUITY:
Preferred Stock - Par Value $.001 Per Share; Authorized
2,000,000 Shares, None Issued or Outstanding --
Common Stock - Par Value $.001 Per Share;
Authorized 20,000,000 Shares, 5,139,285 Shares
Issued and 5,129,285 Shares Outstanding 5,139
Additional Paid-in Capital 8,488,247
Treasury Stock; 10,000 Common Shares - At Cost (16,250)
Accumulated Deficit (145,671)
----------
TOTAL STOCKHOLDERS' EQUITY 8,331,465
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,815,456
==========
The Accompanying Notes are an Integral Part of
these Consolidated Financial Statements.
F-4
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Years ended
-----------
September 30,
-------------
1 9 9 7 1 9 9 6
------- -------
REVENUE $ 28,996,485 $ 17,165,836
---------- ----------
OPERATING EXPENSES:
Selling Expenses 22,412,747 12,762,977
General and Administrative 4,555,081 3,652,619
Depreciation and Amortization 337,158 240,927
---------- ----------
TOTAL OPERATING EXPENSES 27,304,986 16,656,523
---------- ----------
INCOME FROM OPERATIONS 1,691,499 509,313
---------- ----------
OTHER INCOME [EXPENSES]:
Interest and Dividend Income 133,077 130,937
Interest Expense (26,820) (49,215)
Net Realized and Unrealized
Gain on Investments 37,140 137,411
Other Income -- 1,080
---------- ----------
TOTAL OTHER INCOME 143,397 220,213
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 1,834,896 729,526
INCOME TAX EXPENSE 552,531 19,200
---------- ----------
NET INCOME $ 1,282,365 $ 710,326
========= =======
PRIMARY INCOME PER COMMON SHARE $ .20 $ .14
========= =======
FULLY DILUTED INCOME PER COMMON SHARE $ .20 $ .13
========= =======
The Accompanying Notes are an Integral Part of
these Consolidated Financial Statements.
F-5
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Total
---------- -----
Preferred Stock Common Stock Paid-in Treasury Stock Accumulated Stockholders'
--------------- ------------ ------- -------------- ----------- -------------
Shares Amount Shares Amount Capital Shares Amount Deficit Equity
------ ------ ------ ------ ------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - October 1,
1995 -- $-- 5,139,285 $5,139 $8,488,247 -- $ -- $(2,138,362) $6,355,024
Net Income -- -- -- -- -- -- -- 710,326 710,326
------- ------- ---------- ------ ---------- -------- -------- ----------- ----------
Balance - September 30,
1996 -- -- 5,139,285 5,139 8,488,247 -- -- (1,428,036) 7,065,350
Treasury Shares
Purchased -- -- -- -- -- 10,000 (16,250) -- (16,250)
Net Income -- -- -- -- -- -- -- 1,282,365 1,282,365
------- ------- ---------- ------ ---------- -------- -------- ----------- ----------
Balance - September 30,
1997 -- $-- 5,139,285 $5,139 $8,488,247 10,000 $(16,250) $ (145,671) $8,331,465
======= ======= ========= ====== ========== ====== ======== =========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of
these Consolidated Financial Statements.
F-6
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended
September 30,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 1,282,365 $ 710,326
----------- -----------
Adjustments to Reconcile Net Income
to Net Cash Provided by [Used for]
Operating Activities:
Depreciation and Amortization 337,158 240,927
Provision for Losses on Accounts Receivable 35,100 235,157
[Gain] on Disposal of Assets -- (580)
Deferred Credit 117,871 52,139
Net Realized and Unrealized Gain on Investments (37,140) (137,411)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (3,253,036) (2,944,843)
Other Current Assets (79,613) (120,881)
Security Deposits (47,894) (7,531)
Increase [Decrease] in:
Accounts Payable and Accrued Expenses 1,491,840 1,260,388
Income Tax Payable 290,104 --
Other Current Liabilities 155,676 62,198
----------- -----------
Total Adjustments (989,934) (1,360,437)
----------- -----------
NET CASH - OPERATING ACTIVITIES 292,431 (650,111)
----------- -----------
INVESTING ACTIVITIES:
Capital Expenditures (791,427) (302,189)
Purchases of Investments (2,183,043) (4,618,641)
Proceeds from Sales of Investments 1,380,081 3,446,508
Acquisitions of Trade Names (264,532) (179,601)
Proceeds from Insurance Claim -- 23,799
Advances to Related Parties (11,637) (46,888)
Cash Received from Related Parties 10,000 19,000
Transfer from Restricted Investment -- 90,043
----------- -----------
NET CASH - INVESTING ACTIVITIES (1,860,558) (1,567,969)
----------- -----------
FINANCING ACTIVITIES:
Principal Payments Under Capital Lease Obligations (119,323) (113,525)
Purchase of Treasury Stock (16,250) --
----------- -----------
NET CASH - FINANCING ACTIVITIES (135,573) (113,525)
----------- -----------
NET [DECREASE] IN CASH AND CASH EQUIVALENTS (1,703,700) (2,331,605)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEARS 2,113,556 4,445,161
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEARS $ 409,856 $ 2,113,556
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the years for:
Interest $ 26,820 $ 49,215
Income Taxes $ 422,402 $ --
</TABLE>
The Accompanying Notes are an Integral Part of
these Consolidated Financial Statements.
F-7
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
Organization - The Solomon-Page Group Ltd. and its wholly-owned subsidiary [the
"Company"] provide retained executive search and full-time contingency
recruitment services in the fields of capital markets, accounting, fashion,
human resources, legal, health care, publishing and information technology.
Temporary staffing and consulting services are provided in the fields of
information technology, accounting and human resources. The Company provides its
services principally in the New York metropolitan area through its offices
located in New York and New Jersey. The Company also provides services in
California and Georgia through its offices located in those areas.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiary. All material intercompany accounts
and transactions are eliminated.
Revenue Recognition - Search revenues are recognized in full-time contingency
search engagements upon the successful completion of the assignment. In a
retained search engagement, the non-refundable retainer is recognized upon
execution of the agreement, with the balance recognized on completion of the
search. Reserves are established to estimate losses due to placed candidates not
remaining in employment for the Company's guarantee period. Temporary staffing
and consulting revenue is recognized when the temporary personnel provide the
service.
Investments - The Company accounts for investments in accordance with Statement
of Financial Accounting Standards ["SFAS"] No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Management determines the
appropriate classification of its investments in debt and equity securities at
the time of purchase and reevaluates such determination at each balance sheet
date. Equity securities, and debt securities which the Company does not have the
intent to hold to maturity, are classified as trading or available for sale.
Securities available for sale are carried at fair value, with any unrealized
holding gains and losses, net of tax, reported in a separate component of
shareholders' equity until realized. Trading securities are carried at fair
value with any unrealized gains or losses included in earnings. Held to maturity
securities are carried at amortized cost. Marketable debt and equity securities
available for current operations are classified in the balance sheet as current
assets while securities held for non-current uses are classified as long-term
assets. Realized gains and losses are calculated utilizing the specific
identification method [See Note 2].
Property and equipment - Equipment, furniture and leasehold improvements are
recorded at cost.
Depreciation and Amortization - Depreciation is computed utilizing the
straight-line method based on estimated useful lives ranging from three to seven
years. Amortization is computed utilizing the straight-line method over the
remaining lease term. Depreciation expense was $272,863 and $203,153 for the
years ended September 30, 1997 and 1996, respectively.
Deferred Income Taxes - The Company accounts for deferred income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." The statement
requires that deferred income taxes reflect the tax consequences on future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts.
Deferred Credit - The Company's lease on its premises provides for periodic
increases over the lease term. Pursuant to SFAS No. 13, "Accounting for Leases,"
the Company records rent expense on a straight-line basis. The effect of these
differences is recorded as a deferred credit.
Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased.
F-8
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
Income Per Share - Income per share of common stock is based on the weighted
average number of common shares outstanding for each period presented. Common
stock equivalents are included if dilutive. The number of weighted average
common shares outstanding utilized to compute primary income per share was
9,091,644 and 5,139,285 and to compute fully diluted income per share was
9,091,644 and 5,452,595 for the years ended September 30, 1997 and 1996,
respectively. For the year ended September 30, 1997, income per share was
computed using the modified treasury stock method [See Note 13].
Intangibles - Intangibles which consist of trade names and customer lists are
amortized utilizing the straight-line method over periods ranging from 5 to 15
years. When changing circumstances warrant the Company evaluates the carrying
value and the periods of amortization based on the current and expected future
non-discounted cash flows from operations to determine whether revised estimates
of carrying value or useful lives is required. Amortization expense was $64,295
and $37,774 for the years ended September 30, 1997 and 1996, respectively [See
Note 7].
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to concentrations of credit risk include cash, cash equivalents and
accounts receivable arising from its normal business activities. The Company
places its cash and cash equivalents with high credit quality financial
institutions. At September 30, 1997, the Company has approximately $580,000 in a
financial institution that is subject to normal credit risk beyond insured
amounts.
The Company believes that credit risk related to accounts receivable is limited
due to the large number of Fortune 1000 companies comprising the Company's
customer base and the diversified industries in which the Company operates. The
Company has two customers whose sales comprise approximately 21 percent of total
revenue and whose receivables at September 30, 1997 comprise 14 percent of total
accounts receivable. The Company does not require collateral on accounts
receivable or other financial instruments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
Advertising - The Company expenses advertising costs as incurred. Total
advertising costs charged to expense amounted to approximately $207,000 and
$150,000 for the years ended September 30, 1997 and 1996, respectively.
Stock Based Compensation - The Company accounts for employee stock based
compensation under the intrinsic value based method as prescribed by Accounting
Principles Board ("APB") Opinion No. 25. The Company applies the provisions of
SFAS No. 123, "Accounting for Stock Based Compensation," to non-employee
stock-based compensation and the pro forma disclosure provisions of that
statement to employee stock-based compensation.
[2] Investments in Debt and Equity Securities
At September 30, 1997, the Company's securities were classified as available for
sale and held to maturity while at September 30, 1996, the Company's securities
were classified as trading and held to maturity. At September 30, 1997, cost
approximates fair value for the Company's available for sale securities.
F-9
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3
- --------------------------------------------------------------------------------
[2] Investments in Debt and Equity Securities [Continued]
At September 30, 1997, the Company's available for sale and held to maturity
securities consisted of certain highly liquid debt securities. A summary of the
Company's investments in debt securities is as follows:
September 30, 1997
Financial Statement Caption Carrying Value Fair Value
Available for Sale:
Cash and Cash Equivalents $ 9,188 $ 9,188
============= =============
Investments $ 2,150,427 $ 2,150,427
============= =============
Held to Maturity:
Restricted Investment - Noncurrent $ 34,466 $ 34,466
============= =============
Gross proceeds from sale of available for sale securities was $2,041,991 and net
realized gain on sales was $28,990 for the year ended September 30, 1997. Net
unrealized gains on trading securities was $4,332 and is included in earnings
for the year ended September 30, 1996.
Contractual maturities of debt securities classified as available for sale and
held to maturity are as follows:
Available for Sale Held to Maturity
Within 1 year $ 899,220 $ 34,466
Between 1 and 5 years $ 1,251,207 $ --
[3] Due From Related Parties
At September 30, 1997, the Company had a balance due from various officers of
the Company aggregating $177,920 including accrued interest. The advances bear
interest at 8 percent. Interest income on the advances was $11,637 and $10,401
for the years ended September 30, 1997 and 1996, respectively. Interest
receivable on the advances was $23,272 at September 30, 1997.
[4] Credit Facility
On February 24, 1997, the Company entered into a $4,000,000 line of credit which
expires on February 28, 1998. The line carries interest at the banks reference
rate plus one percent [9.5% at September 30, 1997]. Borrowings are limited to 80
percent of eligible receivables as defined in the agreement and is
collateralized by all the assets of the Company. There were no borrowings at
September 30, 1997 [See Note 14].
[5] Leases
Capital Leases - The Company is the lessee of furniture, fixtures and office
equipment under capital leases expiring in various years through 1999. The
assets and liabilities under capital leases are recorded at the present value of
the net future minimum lease payments. The assets are amortized over their
estimated productive lives. Amortization of assets under capital leases is
included in depreciation expense.
Following is a summary of property held under capital leases:
Furniture and Fixtures $ 110,481
Office Equipment 360,778
-----------
Total - At Cost 471,259
Less: Accumulated Amortization 315,127
-----------
Total $ 156,132
----- ===========
F-10
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4
- --------------------------------------------------------------------------------
[5] Leases [Continued]
Minimum future lease payments under capital leases for each of the next five
years and in the aggregate are:
1998 $ 75,090
1999 38,497
2000 --
2001 --
2002 --
Thereafter --
--
---------
Net Minimum Lease Payments 113,587
Less: Amount Representing Interest (13,789)
---------
Present Value of Net Minimum Lease Payments 99,798
Less: Current Portion 63,325
---------
Long-Term Portion $ 36,473
----------------- ==========
Operating Leases - The Company leases office space under operating leases
expiring through September 2006. In lieu of a cash security deposit, the Company
has delivered to the landlord a letter of credit in the amount of $34,466 which
expires June 15, 1998. This letter of credit is collateralized by a U.S.
Treasury Bill which is classified as a restricted investment in the accompanying
balance sheet. The Company leases office equipment under operating leases
expiring through 1999.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of September 30, 1997 for each of the
next five years and in the aggregate are:
Year Ending
September 30,
1998 $ 771,094
1999 769,519
2000 846,742
2001 874,331
2002 905,324
Subsequent to 2002 3,294,700
-----------
Total Minimum Future Rental Payments $ 7,461,710
------------------------------------ ===========
In addition, the Company is liable for its pro-rata share of increases in real
estate taxes and escalations as provided in the lease agreements.
Rent expense was $616,778 and $593,322 for the years ended September 30, 1997
and 1996, respectively.
[6] Capital Stock
On December 18, 1996, the Company's Board of Directors authorized the repurchase
of up to 500,000 shares of the Company's common stock from time to time in the
open market or in privately negotiated transactions. The Company repurchased
10,000 shares during the year ended September 30, 1997 [See Note 14].
F-11
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
- --------------------------------------------------------------------------------
[7] Commitments and Contingencies
Employment Arrangements - On June 14, 1993, the Company entered into employment
agreements with Mr. Herbert Solomon, Mr. Lloyd Solomon and Mr. Scott Page. In
addition, Mr. Herbert Solomon and Mr. Scott Page are entitled to receive
commission payments based on the revenues generated by their executive
recruitment and placement activities and Mr. Lloyd Solomon is entitled to
receive incentive compensation for each fiscal year during the term of his
employment equal to that percentage of consolidated pre-tax operating income
that consolidated pre-tax operating income bears to total consolidated revenue.
These employment agreements are for an initial term of five years commencing
June 14, 1993 and will be extended automatically for additional one-year periods
unless terminated by either party. These employment agreements also prohibit the
employee from competing with the Company's business during the term thereof and
for a period of one year thereafter. At September 30, 1997, the Company's
obligation for salaries under these employment agreements amounts to $549,000
which is to be paid during the year ending September 30, 1998.
For the years ended September 30, 1997 and 1996, approximately $727,345 and
$615,000, respectively, was charged to operations under the commission portion
and approximately $200,000 and $34,000, respectively under the incentive
compensation portion of the above described executive compensation plans.
On September 18, 1996, the Company terminated an agreement relating to 794,136
escrow shares that had been made available for issuance to certain executives of
the Company. These escrow shares were to have been released based on the
achievement by the Company of prescribed levels of pre-tax earnings. In
consideration for terminating the escrow share agreement, the Company granted
stock options to purchase 200,000 shares of common stock at fair market value on
the date of grant to each of the three executives who would have been eligible
to receive escrow shares.
Litigation - The Company is party to litigation arising from the normal course
of business. In managements' opinion, this litigation will not materially affect
the Company's financial position, results of operations or cash flows.
Acquisitions - In connection with certain acquisitions, the Company will be
required to pay purchase price adjustments through July 6, 2000 based on the
achievement of various criteria. These additional payments are charged to
intangibles and are amortized over the then remaining life of the intangible.
Purchase price adjustments amounted to $264,532 during the year ended September
30, 1997.
[8] Options and Warrants
On April 1, 1994, the Company issued 175,000 Class A warrants and 175,000 Class
B warrants in connection with certain bridge financing which was repaid on
October 20, 1994. The Class A warrants are identical to those issued in the
Company's initial public offering. The Class B warrants are identical to the
Class A warrants except that the exercise price is $6.00 per share.
On October 20, 1994, in connection with its initial public offering the Company
issued 2,300,000 Class A redeemable common stock purchase warrants. Each Class A
warrant entitles the holder to purchase one share of common stock exercisable at
$4.50 per share commencing October 20, 1995 and expiring on October 20, 1999.
The Class A warrants are redeemable at $.05 per warrant based on the achievement
of certain criteria [See Note 14].
On October 20, 1994, in connection with its initial public offering, the Company
granted to its underwriter an option to purchase an aggregate 200,000 units
exercisable at $6.60 per unit commencing October 20, 1995 and expiring October
20, 1999.
F-12
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6
- --------------------------------------------------------------------------------
[8] Options and Warrants [continued]
On August 17, 1995, the Company adopted the 1995 Director's Stock Option Plan
[the "Director's Plan"]. The Director's Plan provides for the grant of options
to purchase up to 100,000 shares of common stock to Directors who are not
employees of the Company. Options granted under the Director's Plan will be
exercisable commencing a minimum of 6 months from the date of grant for a period
of 10 years from the date of grant at an exercise price which is not less than
the fair market value of the common stock on the date of the grant. Options vest
at a rate of 50% after one year and 50% after two years.
On August 6, 1993, the Company adopted the 1993 Long Term Incentive Plan [the
"1993 Plan"], which was amended on June 24, 1994. The 1993 Plan provides for the
issuance of incentive awards in the form of but not limited to stock options,
stock appreciation rights, restricted stock and performance grants to purchase
up to 1,500,000 shares of common stock and provides that all individuals
performing services for the Company are eligible to receive incentive awards.
The 1993 Plan is administered by a committee designated by the Board of
Directors. The selection of participants, allotment of shares, determination of
price and other conditions of purchase of any awards granted will be determined
by such committee at its sole discretion. The purpose of the 1993 Plan is to
attract and retain persons instrumental to the success of the Company. Incentive
stock options granted under the 1993 Plan will be exercisable for a period of up
to 10 years from the date of grant at an exercise price which is not less than
the fair market value of the common stock on the date of the grant, except that
the term of an incentive stock option granted under the 1993 Plan to a
stockholder owning more than 10% of the outstanding shares of the common stock
may not exceed five years and its exercise price may not be less than 110% of
the fair market value of the common stock on the date of the grant.
Non-executive officer options vest at a rate of 33 1/3% after three years, 33
1/3% after four years and 33 1/3% after five years. Options to purchase 450,000
shares of common stock have been granted to executive officers and vest at a
rate of 33 1/3% upon grant, 33 1/3% after six months and 33 1/3% after thirteen
months.
On September 17, 1996, the Company adopted the 1996 Stock Option Plan [the "1996
Plan"]. The 1996 Plan provides for awards of incentive stock options and
non-qualified options to purchase up to 1,000,000 shares of common stock to
employees and directors of the Company. The 1996 Plan provides that
non-qualified options must be granted at not less than 80 percent of fair market
value on the date granted. No options at less than fair market value have been
awarded. Options principally vest at a rate of 33 1/3% after one year, 33 1/3%
after two years and 33 1/3% after three years.
A summary of the activity in the option plans is as follows:
Weighted Average
----------------
Shares Exercise Price
------ --------------
Outstanding at September 30, 1995 1,372,000 $ 1.46
Granted 758,500 2.06
Exercised --
Expired/Canceled (357,000) 1.49
---------
Outstanding at September 30, 1996 1,773,500 1.71
Granted 246,750 2.33
Exercised --
Expired/Canceled (55,000) 1.43
---------
Outstanding at September 30, 1997 1,965,250 1.80
=========
Exercisable at September 30, 1997 709,666 1.68
--------------------------------- =========
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
- --------------------------------------------------------------------------------
[8] Options and Warrants [Continued]
If compensation cost for the stock option plans had been determined based on the
fair value at the grant dates for awards under the plans, consistent with the
alternative method set forth under SFAS No. 123, the Company's net income and
net income per share would have been reduced on a pro forma basis as indicated
below:
1 9 9 7 1 9 9 6
------- -------
Year ended September 30:
Primary Income:
As Reported $ 1,282,365 $ 710,326
Pro Forma $ 952,889 $ 307,459
Net Income Per Share:
As Reported $ .20 $ .14
Pro Forma $ .17 $ .06
Fully Diluted Income Per Share
As Reported $ .20 $ .13
Pro Forma $ .16 $ .06
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option- pricing model with the following weighted-average
assumptions used for the grants awarded in 1997 and 1996, respectively:
September 30,
-------------
1 9 9 7 1 9 9 6
------- -------
Dividend Yields 0.00% 0.00%
Expected Volatility 105.29% 122.66%
Risk-Free Interest Rate 5.99% 6.41%
Expected Lifes 4 Years 4.79 Years
The weighted-average fair value of options granted was $1.73 and $1.74 for the
years ended September 30, 1997 and 1996, respectively.
The following table summarizes information about stock options at September 30,
1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------- --------------------------
Weighted Weighted Weighted
Range of Remaining Average Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
$ .01 to $2.00 1,089,250 7.6 years $ 1.40 473,000 $ 1.40
$2.01 to $3.00 876,000 6.6 years $ 2.29 236,666 $ 2.25
--------- -------
1,965,250 7.2 years $ 1.80 709,666 $ 1.68
========= =======
</TABLE>
F-14
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8
- --------------------------------------------------------------------------------
[9] Income Taxes Expense
The provision for income tax expense consists of the following:
September 30,
-------------
1 9 9 7 1 9 9 6
------- -------
Current:
Federal $ 835,681 $ 379,000
Utilization of Net Operating Loss Carryforward (423,131) (379,000)
State and City 453,680 200,000
Utilization of Net Operating Loss Carryforward (229,504) (196,000)
--------- ---------
Total Current 636,726 4,000
--------- ---------
Deferred [Benefit]:
Federal (60,923) 15,200
State and City (23,272) --
--------- ---------
Total Deferred (84,195) 15,200
--------- ---------
Total Income Tax Expense $ 552,531 $ 19,200
------------------------ ========= =========
Income tax at the federal statutory rate reconciled to the Company's effective
rate is as follows:
September 30,
-------------
1 9 9 7 1 9 9 6
------- -------
Federal Statutory Rate 34.0% 34.0%
Non Deductible Expenses 4.4 17.4
Benefit of Net Operating Loss Carryforward (23.1) (51.4)
Change in Deferred Tax Asset Valuation Allowance 7.8 --
State Income Taxes [Net of Federal Tax Benefit] 8.1 .5
Other (1.1) 2.1
------- -------
Effective Rate 30.1% 2.6%
-------------- ======= =======
The Company has net operating loss carryforwards of approximately $54,000 which
will expire in 2009.
The major components of deferred income tax assets and liabilities are as
follows:
September 30,
1 9 9 7
Deferred Tax Liabilities:
Cash Basis Adjustments $(159,279)
Accelerated Depreciation (91,332)
---------
Total Deferred Tax Liabilities (250,611)
Deferred Tax Assets:
Rent Deferrals 149,972
Net Operating Loss 18,419
Reserves 156,099
Other 10,316
---------
Total Deferred Tax Assets 334,806
Net Deferred Tax Asset:
Before Valuation Allowance: 84,195
Valuation Allowance ---------
Net Deferred Income Tax Asset $ 84,195
----------------------------- =========
F-15
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9
- --------------------------------------------------------------------------------
[9] Income Taxes Expense [Benefit] [Continued]
The net deferred income tax asset is included in other current assets in the
accompanying balance sheet.
The Company recorded a reduction of $421,917 in its valuation allowance from
September 30, 1996 due to the achievement, and expected continuation, of
profitable operations.
[10] Significant Customers
For the year ended September 30, 1997, two customers accounted for 11 and 10
percent of revenue.
For the year ended September 30, 1996, one customer accounted for 15 percent of
revenue.
[11] Retirement Plan
The Company maintains a 401[k] savings plan which covers substantially all
employees. Under the plan, employees may elect to defer up to 15 percent of
their salary, subject to the Internal Revenue Code limits. The Company may make
a discretionary match as well as a discretionary contribution. The Company
recorded pension expense of $2,641 and $-0- during the years ended September 30,
1997 and 1996, respectively.
[12] Fair Value of Financial Instruments
Effective October 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 107, "Disclosure about Fair Value of Financial Instruments," which
requires disclosing fair value to the extent practicable for financial
instruments which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
Carrying value approximates fair value for amounts classified as due from
related parties as the receivables carry market rates of interest. For certain
instruments, including cash and cash equivalents, trade receivables and trade
payables, it was estimated that the carrying amount approximates fair value for
the majority of these instruments because of their short maturities.
[13] New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] has issued Statement of
Financial Accounting Standards ["SFAS"] No. 128, "Earnings per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structure," in February 1997.
SFAS No. 128 simplifies the earnings per share ["EPS"] calculations required by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the presentation of primary EPS with a presentation of basic EPS.
SFAS No. 128 requires dual presentation of basic and diluted EPS by entities
with complex capital structures. Basic EPS includes no dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution of securities that could share in the earnings of an entity,
similar to the fully diluted EPS of APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. When
adopted, SFAS No. 128 will require restatement of all prior-period EPS data
presented. The Company's basic EPS as calculated under SFAS No. 128 would have
been $.25 and $.14 for the years ended September 30, 1997 and 1996,
respectively. The Company diluted EPS as calculated under SFAS No. 128 would
have been $.23 and $.14 for the years ended September 30, 1997 and 1996,
respectively.
F-16
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10
- --------------------------------------------------------------------------------
[13] New Authoritative Accounting Pronouncements
SFAS No. 129 does not change any previous disclosure requirements, but rather
consolidates existing disclosure requirements for ease of retrieval.
The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 130, "Reporting Comprehensive Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. The Company is in the
process of determining its preferred format. The adoption of SFAS No. 130 will
have no impact on the Company's consolidated results of operations, financial
position or cash flows.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information." SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December 15,
1997, and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. The Company is in the process of evaluating the disclosure
requirements. The adoption of SFAS No. 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
[14] Subsequent Event
On October 31, 1997, the Company's Board of Directors authorized the repurchase
of up to 1,000,000 of the Company's Class A redeemable common stock purchase
warrants in open market or privately negotiated transactions. Through December
31, 1997, the Company has repurchased 962,562 warrants at a cost of $1,018,303
which was financed through borrowings on the Company's line of credit. The
Company also terminated its common stock repurchase plan which was authorized on
December 31, 1996.
. . . . . . . . . . . .
F-17
Exhibit 11
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
SCHEDULE OF COMPUTATION OF NET INCOME PER COMMON SHARE
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
PRIMARY:
Net Income $1,282,365
Assumed Interest of 5.1% on Government Securities Interest,
Net of Tax Effect 542,700
Interest Expense Reduction, Net of Tax Effect 18,326
----------
NET INCOME USED FOR PRIMARY PER SHARE AMOUNTS $1,843,391
==========
Average Shares Outstanding 5,131,751
Add - Common Equivalent Shares, Determined Using the "Modified Treasury
Stock Method" Issuable upon Exercise 3,959,893
----------
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATION OF PRIMARY
INCOME PER SHARE 9,091,644
==========
PRIMARY NET INCOME PER COMMON SHARE $ .20
==========
FULLY DILUTED:
Net Income $1,282,365
Assumed Interest of 5.1% on Government Securities Interest,
Net of Tax Effect 504,187
Interest Expense Reduction, Net of Tax Effect 18,326
----------
NET INCOME USED FOR FULLY DILUTED PER SHARE AMOUNTS $1,804,878
==========
Average Shares Outstanding 5,131,751
Add - Common Equivalent Shares, Determined Using the "Modified Treasury
Stock Method" Issuable upon Exercise 3,959,893
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATION OF FULLY DILUTED
INCOME PER SHARE 9,091,644
==========
FULLY DILUTED NET INCOME PER COMMON SHARE $ .20
==========
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to incorporation by reference in the Registration
Statement on Forms S-3 [File Number 033-81026] and S-8 [File Number 333-32293]
of The Solomon-Page Group Ltd. and its subsidiary of our report dated December
18, 1997, except as to Note 14 for which the date is December 31, 1997, relating
to the consolidated balance sheet of The Solomon Page Group Ltd. and its
subsidiary as of September 30, 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the two fiscal
years in the period ended September 30, 1997 which report appears in the
September 30, 1997 annual report on Form 10-KSB of The Solomon-Page Group Ltd.
/s/ Moore Stephens, P.C.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
January 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-KSB for the year ended September 30, 1997 and is qualified in
its entirety by reference to such Financial Statements and Notes, thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 409,856
<SECURITIES> 2,150,427
<RECEIVABLES> 7,503,027
<ALLOWANCES> 125,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,984,989
<PP&E> 1,457,382
<DEPRECIATION> 272,863
<TOTAL-ASSETS> 12,815,456
<CURRENT-LIABILITIES> 4,063,655
<BONDS> 0
0
0
<COMMON> 5,139
<OTHER-SE> 8,326,326
<TOTAL-LIABILITY-AND-EQUITY> 12,815,456
<SALES> 28,996,485
<TOTAL-REVENUES> 28,996,485
<CGS> 22,412,747
<TOTAL-COSTS> 27,304,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,820
<INCOME-PRETAX> 1,834,896
<INCOME-TAX> 552,531
<INCOME-CONTINUING> 1,691,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,282,365
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
