FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to ___________________
COMMISSION FILE NUMBER 0-24928
THE SOLOMON-PAGE GROUP LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0353012
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1140 AVENUE OF THE AMERICAS, NEW YORK, NY 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 403-6100
N/A
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(Former name, former address and former fiscal year, if changed since last
report.)
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 / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: At May 3, 1999, there were
outstanding 4,478,982 shares of the Registrant's Common Stock, $.001 par value.
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
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FORM 10-Q
QUARTERLY REPORT
FOR THE SIX MONTHS ENDED MARCH 31, 1999
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INDEX
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PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements PAGE NUMBER
Consolidated Balance Sheets as of March 31, 1999 [Unaudited]
and September 30, 1998 1
Consolidated Statements of Operations for the three and six
months ended March 31, 1999 and 1998 [Unaudited] 3
Consolidated Statements of Cash Flows for the six months
ended March 31, 1999 and 1998 [Unaudited] 4
Notes to Consolidated Financial Statements [Unaudited] 6
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
ITEM 3: Quantitative and Qualitative Disclosures About
Market Risk. Inapplicable
PART II: OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders 12
ITEM 6: Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
-------------------- --------------------
(UNAUDITED)
ASSETS:
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 533 $ 935
Investments 754 603
Accounts receivable, net 10,469 10,161
Other current assets 352 246
------- -------
TOTAL CURRENT ASSETS 12,108 11,945
------- -------
Property and equipment 3,749 3,228
Less: accumulated depreciation 1,393 1,113
------- -------
PROPERTY AND EQUIPMENT 2,356 2,115
------- -------
OTHER ASSETS:
Investments 792 1,112
Intangible assets, net of accumulated
amortization of $252 and $195 respectively 962 1,019
Deferred tax asset 242 177
Due from related parties 136 136
Security deposits 107 128
Restricted investment 34 34
Other assets 104 69
------- -------
TOTAL OTHER ASSETS 2,377 2,675
------- -------
TOTAL ASSETS $16,841 $16,735
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
-------------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY: (UNAUDITED)
CURRENT LIABILITIES:
<S> <C> <C>
Accrued payroll and commissions $ 3,164 $ 3,498
Accounts payable and accrued expenses 1,001 968
Income taxes payable 699 298
Term loan payable 500 --
Line of credit 1,839 3,100
Deferred revenue 466 131
Other Current Liabilities 247 156
----------- -----------
TOTAL CURRENT LIABILITIES 7,916 8,151
Term loan payable, net of current portion 1,000 --
Deferred credit 592 545
----------- -----------
TOTAL LIABILITIES 9,508 8,696
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value; 2,000,000
shares authorized, none issued or outstanding -- --
Common stock - $.001 par value; 20,000,000 shares
authorized, 5,162,282 shares issued and 4,541,082
and 5,121,282 shares outstanding at March 31, 1999
and September 30, 1998, respectively 5 5
Additional paid-in capital 7,426 7,426
Accumulated other comprehensive income 1 11
Treasury stock at cost; 621,200 and 41,000 common shares
at March 31, 1999 and September 30, 1998, respectively (1,312) (80)
Retained Earnings 1,213 677
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,333 8,039
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 16,841 $ 16,735
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER
SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE $12,779 $11,278 $24,295 $ 21,491
----------- ----------- ----------- ------------
OPERATING EXPENSES:
Selling Expenses 10,164 8,986 19,561 16,725
General and Administrative 1,710 1,717 3,322 3,348
Depreciation and Amortization 172 129 337 244
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 12,046 10,832 23,220 20,317
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 733 446 1,075 1,174
----------- ----------- ----------- -----------
OTHER INCOME [EXPENSES]
Interest and Dividend Income 21 37 47 64
Interest Expense (87) (48) (163) (64)
Realized Gain on Investments (7) (1) (7) 1
----------- ----------- ----------- -----------
TOTAL OTHER INCOME [EXPENSES] (73) (12) (123) 1
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSE 660 434 952 1,175
INCOME TAX EXPENSE 288 198 415 533
----------- ----------- ----------- -----------
NET INCOME $ 372 $ 236 $ 537 $ 642
=========== =========== =========== ===========
BASIC EARNINGS PER COMMON SHARE $ 0.08 $ 0.05 $ 0.11 $ 0.13
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE $ 0.08 $ 0.04 $ 0.11 $ 0.11
=========== =========== =========== ===========
BASIC WEIGHTED AVERAGE SHARES 4,607,036 5,129,285 4,750,289 5,129,285
=========== =========== =========== ===========
DILUTED WEIGHTED AVERAGE SHARES 4,893,878 5,969,147 4,993,393 6,052,669
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1999 1998
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 537 $ 642
----------- --------------------
Adjustments to reconcile net income
to net cash provided by [used for] operating activities:
Depreciation and amortization 337 244
Deferred credit 47 80
Provision for losses on accounts receivable - 31
Net realized loss/(gain) on investments 9 (1)
Deferred taxes (65) -
Change in assets and liabilities:
[Increase] decrease in:
Accounts receivable (308) (1,817)
Other assets (141) (369)
Security deposits 21 4
Increase [decrease] in:
Accounts payable, accrued expenses, accrued payroll
and commissions (302) 444
Income tax payable 401 (60)
Deferred revenue 335 -
Other liabilities 91 (305)
----------- --------------------
Total Adjustments $ 425 $ (1,749)
----------- --------------------
NET CASH - OPERATING ACTIVITIES-
FORWARD $ 962 $ (1,107)
----------- --------------------
INVESTING ACTIVITIES:
Capital Expenditures (521) (552)
Purchase of Investments (399) (450)
Proceeds from Sales of Investments 549 949
Received from Related Parties - 15
----------- --------------------
NET CASH - INVESTING ACTIVITIES -
FORWARD $ (371) $ (38)
----------- --------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1999 1998
---- ----
NET CASH - OPERATING ACTIVITIES -
<S> <C> <C>
FORWARDED $ 962 $ (1,107)
----------- ------------
NET CASH - INVESTING ACTIVITIES -
FORWARDED $ (371) $ (38)
----------- ------------
FINANCING ACTIVITIES:
Borrowings Under the Line of Credit 239 2,400
Purchase of Treasury Stock and Warrants (1,232) (1,054)
----------- ------------
NET CASH - FINANCING ACTIVITIES $ (993) $ 1,346
----------- ------------
NET INCREASE [DECREASE] IN CASH AND CASH EQUIVALENTS (402) 201
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIODS 935 410
----------- ------------
CASH AND CASH EQUIVALENTS - END OF PERIODS $ 533 $ 611
=========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest $ 163 $ 64
Income Taxes 80 616
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
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[1] BASIS OF REPORTING
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. These unaudited financial statements include the accounts
of The Solomon-Page Group Ltd. and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited consolidated financial
statements included in this Form 10-Q reflect all adjustments [consisting only
of normal recurring items] which are considered necessary for a fair
presentation of the results of operations for the periods presented. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
It is suggested that these financial statements be read in conjunction with the
audited financial statements and notes for the fiscal year ended September 30,
1998 included in The Solomon-Page Group Ltd. Form 10-KSB.
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPREHENSIVE INCOME - The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," as of October 1,
1998. SFAS No. 130 establishes new rules for reporting and display of
comprehensive income and its components, however it has no material impact on
the Company's net income or total stockholders' equity. Accumulated other
comprehensive income presented in the accompanying consolidated balance sheets
consists of the accumulated net unrealized gains on available-for-sale
investments.
RECLASSIFICATION - Certain prior period amounts have been reclassified to
conform to the current period presentation.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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OVERVIEW
The Company is a specialty niche provider of staffing services
organized into two primary operating divisions: temporary staffing/consulting
and executive search/full-time contingency recruitment. The temporary
staffing/consulting division provides services to companies seeking personnel in
the information technology, accounting, human resources and legal areas and
generated 65% of the Company's revenue for the six months ended March 31, 1999.
The executive search/full-time contingency recruitment division comprises nine
lines of business, including four industry (capital markets, publishing and new
media, healthcare and fashion services), and five functional (information
technology, accounting, human resources, legal and administrative support). The
executive search/full-time contingency recruitment division generated 35% of the
Company's revenue for the six months ended March 31, 1999.
The following is a summary of the Company's consolidated financial
and operating data (amounts in thousands, except for per share amounts).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
STATEMENT OF OPERATIONS DATA: 1999 1998 1999 1998
- ----------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $12,779 $11,278 $24,295 $21,491
Income from Operations 733 446 1,075 1,174
Income Before Income Tax Expense 660 434 952 1,175
Income Tax Expense 288 198 415 533
Net Income 372 236 537 642
Basic Earnings Per Common Share $0.08 $0.05 $0.11 $0.13
Diluted Earnings Per Common Share $0.08 $0.04 $0.11 $0.11
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: MARCH 31, 1999 SEPTEMBER 30, 1998
- ------------------- -------------- ------------------
<S> <C> <C>
Working Capital $ 4,192 $3,794
Total Assets 16,841 16,735
Total Liabilities 9,508 8,696
Stockholders' Equity 7,333 8,039
</TABLE>
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this document.
Revenue increased to $12.8 million for the three months ended March
31, 1999 from $11.3 million for the three months ended March 31, 1998, an
increase of $1.5 million or 13%. Revenues from the Company's temporary staffing
and consulting division were $7.8 million for the three months ended March 31,
1999 compared to $6.5 million for the same period in 1998, an increase of $1.3
million or 20%. Revenues from the Company's executive search and full time
contingency recruitment division were $5 million for the three months ended
March 31, 1999 compared to $4.7 million for the same period in 1998, an increase
of $300,000 or 6%.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS [CONTINUED]
Revenue increased to $24.3 million for the six months ended March
31, 1999 from $21.5 million for the six months ended March 31, 1998, an increase
of $2.8 million or 13%. Revenues from the Company's temporary staffing and
consulting division were $15.9 million for the six months ended March 31, 1999
compared to $12.5 million for the same period in 1998, an increase of $3.4
million or 27%. Revenues from the Company's executive search and full time
contingency recruitment division were $8.4 million for the six months ended
March 31, 1999 compared to $9 million for the same period in 1998, a decrease of
$600,000 or 7%.
The increase in revenues for the three and six months ended March
31, 1999 compared to the three and six months ended March 31, 1998 was primarily
due to the expansion of the Company's temporary staffing/consulting division
within the areas of accounting, human resource, legal and information
technology. The Company's executive search and full time contingency recruitment
division experienced an increase in revenues for the three months ended March
31, 1999 and a decrease in revenues for the six months ended March 31, 1999
compared to the same periods in 1998. The increase in the most recent three
month period resulted from an increase in demand for services, which generated
higher revenues. The decrease in revenue for the six months ended March 31, 1999
was attributable to global events during mid 1998 that impacted the financial
services industry, which subsequently had an impact on providers of services to
the financial community. In addition, mergers and consolidations within a
variety of industries affecting the Company's clients have contributed to the
decrease in revenues within the executive search and full time contingency
recruitment business.
Selling expenses for the three months ended March 31, 1999 totaled
$10.2 million (80% of revenues) compared with $9 million (80% of revenues) for
the three months ended March 31, 1998. Selling expenses for the six months ended
March 31, 1999 totaled $19.6 million (81% of revenues) compared with $16.7
million (78% of revenues) for the six months ended March 31, 1998. The increase
in selling expenses as a percentage of revenue for the six months ended March
31, 1999 is primarily attributable to payroll, commissions and benefits
associated with the hiring of revenue-generating personnel within the executive
search/full-time contingency recruitment division offset by a decrease in
revenue. Selling expenses consist primarily of temporary staffing/consulting
compensation, salaries and commissions of revenue generating personnel, employee
benefits, telephone and advertising.
General and Administrative expenses were $1.7 million (13% of
revenues) and $3.3 million (14% of revenues) for the three and six months ended
March 31, 1999 respectively, compared to $1.7 million (15% of revenues) and $3.3
million (16% of revenues), for the same period in 1998. For the three and six
months ended March 31, 1999 compared to the same periods in 1998, general and
administrative expenses have remained constant, but have decreased as a
percentage of revenue primarily as a result of increased revenue.
Depreciation and Amortization expense for the three and six months
ended March 31, 1999 totaled $172,000 and $337,000 respectively, compared to
$129,000 and $244,000 for same periods in 1998. The increase is due to increased
capital expenditures incurred during fiscal 1998. The amortization of intangible
assets also contributed to this increase.
Due to the above mentioned factors, income from operations was
$733,000 and $1,075,000 for the three and six months ended March 31, 1999
respectively, compared to $446,000 and $1,175,000 for the three and six months
ended March 31, 1998.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS [CONTINUED]
Other Income and (Expenses) for the three and six months ended March
31, 1999 totaled $73,000 and $123,000 of expense respectively, compared to
$12,000 of expense and $1,000 of income for the same periods in 1998. The
increases in other expenses primarily were due to interest expense charged for
borrowings under the Company's line of credit.
Income Tax Expense for the three and six months ended March 31, 1999
was $288,000 (44% effective tax rate) and $415,000 (44% effective tax rate)
respectively, compared with $198,000 (45% effective tax rate) and $533,000 (45%
effective tax rate) for the same periods in 1998. The changes in the Company's
effective tax rate reflect the impact of state and local taxes and other
non-deductible items for income tax purposes.
Net income was $372,000 and $537,000 for the three and six months
ended March 31, 1999 respectively, compared to $236,000 and $642,000 for the
three and six months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended
March 31, 1999 was $962,000, compared to net cash used in operations of
$1,100,000 for the same period in 1998. The improvement in net cash from
operations was primary attributable to the decrease in accounts payable, accrued
commissions and accrued expenses, offset by a decrease in accounts receivable.
Net cash used in investing activities was $371,000 for the six months
ended March 31, 1999 compared to $38,000 for the same period in 1998. The
increase in net cash used was primarily a result of capital expenditures offset
by $950,000 of proceeds from the sale of investments in 1998 compared to
$550,000 in 1999.
Net cash used in financing activities for the six months ended March
31, 1999 was $993,000, which was primarily due to $239,000 of borrowings under
the line of credit offset by the $1,232,000 used for the repurchase of the
Company's Common Stock.
As of March 31, 1999, the Company's sources of liquidity included
$1,287,000 in cash and cash equivalents and short-term investments. The
Company's working capital was $4.3 million at March 31, 1999 compared to $3.8
million at September 30, 1998. The increase in working capital was primarily due
to the restructuring of a portion of the Company's credit facility to a term
loan, which is described below. Also, the Company has available $792,000 of
long-term investments as a source of liquidity if required.
In February 1999, the Company entered into a $6,500,000 credit
facility agreement with The Dime Savings Bank. The facility agreement consists
of a $5,000,000 working capital line of credit and a term loan of $1,500,000,
which are collateralized by all of the Company's assets. Under the facility
agreement the Company is required to meet certain covenants. Under the most
restrictive covenants, the Company must maintain a minimum level of tangible net
worth of $700,000 and minimum working capital of $500,000 The agreement provides
for borrowings under the working capital line of credit at 1% above the Dime
Reference Rate and expires on February 28, 2002. The term loan is required to be
paid in 12 equal quarterly installments commencing May 31, 1999 and ending on
February 28, 2002 and bears interest at 1.25% above the Dime Reference Rate. The
Dime Reference Rate at March 31, 1999 was 8.50%. At March 31, 1999, borrowings
under the working capital line of credit were $1.8 million, and $1.5 million was
outstanding under the term loan.
On September 11, 1998, the Company announced that its Board of
Directors had authorized the repurchase of up to 1,000,000 shares of common
stock. 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 May 3, 1999, an aggregate of 673,300 shares of common stock had
been repurchased for an aggregate purchase price of $1,417,000.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS [CONTINUED]
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 at least
the next twelve months.
YEAR 2000 COMPLIANCE
Many computer systems in use today were designed and developed using
two digits, rather than four, to specify years, and as a result, such systems
will recognize the year 2000 as 1900. This is commonly referred to as the "Year
2000 Issue". This could cause many computer applications to fail or to create
erroneous results unless corrective measures are taken. The Company utilizes
software and related information technology systems in the course of its
operations that are essential to its business. The Company has reviewed its
current software and information technology systems for compliance with the
potential hazards of the Year 2000 Issue and presently believes the vast
majority of its software and information technology systems are currently, or by
mid 1999, will be Year 2000 compliant. The Company does not expect any material
adverse impact on its financial position or results of operations to arise from
Year 2000 failures of its software and information technology systems.
Ultimately, the potential impact of the Year 2000 Issue will depend
not only on the Company's internal Year 2000 compliance, but also on the way in
which the Year 2000 is addressed by the Company's customers, vendors, banking
institutions and service utilities. The Company is currently in the process of
determining the extent to which it may be vulnerable to any Year 2000 failures
by external parties with which the Company conducts business. The Company plans
to request written confirmations from external parties indicating whether their
systems are Year 2000 compliant by mid 1999. Once the Company receives responses
from external parties as to their Year 2000 compliance, the Company plans to
develop contingency plans as it deems necessary based on such responses. The
efforts of third parties are not within the Company's control, however, and
their failure to remedy Year 2000 issues successfully could result in business
disruption, loss of revenue and increased operating costs.
The Company has not incurred any material costs and does not
anticipate any material future costs relating to its software and information
technology systems due to the Year 2000 Issue. The Company cannot estimate at
this time whether it will incur any material costs due to the failure of any of
its service providers or clients to be Year 2000 compliant.
The foregoing discussion regarding Year 2000 contains
forward-looking statements, which are based on management's best estimates
derived using various assumptions. These forward-looking statements involve
inherent risks and uncertainties, and actual results could differ materially
from those contemplated by such statements. Factors that might cause material
differences include, but not limited to, (i) the Company's ability to obtain
alternative sources of financing or cash should its current sources operations
be disrupted due to Year 2000 complications, (ii) the Company's ability to
respond to a potential loss of revenue of a major client due to Year 2000
complications, and (iii) the Company's ability to respond to any unforeseen Year
2000 complications. Such material differences could result in business
disruption, operational problems and financial loss.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS [CONTINUED]
NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and how it is designated, for
example, gains or losses related to changes in the fair value of a derivative
not designated as a hedging instrument are recognized as earnings in the period,
while certain types of hedges may be initially reported as a component of other
comprehensive income until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Initial application of SFAS No. 133 should be as
of the beginning of a fiscal quarter, on that date, hedging relationships must
be designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier applications of all the provisions of SFAS No. 133 are encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods. The
Company will evaluate the new standard to determine whether it requires any new
disclosures or accounting.
11
<PAGE>
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Corporation
was held on April 15, 1999. Votes were cast with respect to the
election of two directors to Class III of the Board of Directors to
serve until the 2002 Annual Meeting of Stockholders as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
NUMBER OF SHARES OF COMMON STOCK STOCK AS TO WHICH AUTHORITY
NOMINEES VOTED IN FAVOR TO VOTE WAS WITHHELD
<S> <C> <C>
Scott Page 3,206,655 93,803
Edward Ehrenberg 3,206,655 93,803
</TABLE>
The terms of the following directors of the corporation
continued following the Annual Meeting of Stockholders: Lloyd
Solomon and Joel Klarreich, Class I Directors until 2000; Eric M
Davis and Herbert Solomon, Class II Directors until 2001.
The Stockholders also ratified the appointment of Moore
Stephens, P.C. as the independent public accountants for the
Corporation for the fiscal year ending September 30, 1999 by a vote
of 3,281,414 shares in favor, 15,870 shares against. There were
3,174 abstentions and no broker non-votes with respect to this
action.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K: NONE
12
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
THE SOLOMON-PAGE GROUP LTD.
---------------------------------------
(Registrant)
Date: May 6, 1999 /S/ LLOYD B. SOLOMON
--------------------------------------
Lloyd B. Solomon, Chief Executive Officer
Date: May 6, 1999 /S/ ERIC M. DAVIS
-----------------------------------
Eric M. Davis, Chief Financial Officer
Vice President - Finance
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the six months ended March 31, 1999 and is qualified in
its entirety by reference to such Financial Statements and Notes, thereto.
</LEGEND>
<S> <C>
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0
0
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</TABLE>
