SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1999
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/ / 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.
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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 Number)
incorporation or organization
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) 403-6100
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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-K 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-K
or any amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates
of the Registrant computed by reference to the closing price at which the stock
was sold on December 17, 1999 was approximately: $5,093,064. 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 17,
1999, there were outstanding 4,153,948 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, 2000 pursuant to Regulation 14A are
incorporated by reference in Items 10 through 13 of Part III of this Annual
Report on Form 10-K. /X/
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
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 approximately 58% of the Company's revenue for the year ended
September 30, 1999. The executive search/full-time contingency recruitment
division comprises ten lines of business, including five industry (capital
markets, publishing and new media, healthcare, fashion services and banking),
and five functional (information technology, accounting, human resources, legal
and administrative support). The executive search/full-time contingency
recruitment division generated approximately 42% of the Company's revenue for
the year ended September 30, 1999.
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, its clients
compensate the Company 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 support personnel and advertising, are the
variable costs of compensation 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, the staffing industry grew
from approximately $43 billion in revenue in 1993 to approximately $102 billion
in 1998, a compound annual growth rate of approximately 19%. Temporary help, the
largest staffing services segment, had estimated revenue of approximately $62
billion in 1998 and has grown at an average annual rate of approximately 17%
over the past five years. Information technology services has 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. The
information technology services segment had estimated revenues of approximately
$18 billion for 1998 and had a compounded annual growth rate of approximately
26% since 1993. The placement and search sector of the staffing industry
consists of three segments, retained search, contingency recruitment and
temp-to-perm. The placement and search sector had estimated revenues of
approximately $13 billion in 1998 and had a compounded annual growth rate of 22%
since 1993.
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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
ten divisions.
RETAINED EXECUTIVE SEARCH
Capital Markets (Sales and Trading/Investment Banking). The Company's
capital markets division primarily services global financial service
institutions in North America, Europe and Asia. This division 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 division services hospitals,
managed care firms, group health insurance companies and other health care
related companies. This division 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
division 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. This division fills positions at many levels and
functions, such as Chief Information Officers and Directors, project managers
and programmers, as well as less technical positions such as systems liaisons,
business systems analysts and help-desk personnel.
Banking. The Company's banking division, which operates under the trade
name "The Bankers Register," is engaged in the recruitment of personnel in a
variety of job categories which include credit, lending, accounting, auditing,
branch, trading, securities clearance, operations, risk management, and mortgage
banking. This division services candidates at all levels, from entry level to
management. The division's client base includes money-center and regional banks,
thrift institutions, foreign banks, commercial finance lending companies and
mortgage lending companies in New York, New Jersey and Connecticut.
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 direction of such
corporation's general counsel. Specialty practice areas are also serviced by
this division, including corporate law, 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.
This division fills positions
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for such human resources areas as management and organizational planning,
compensation and benefits, labor relations and training. In addition, this
division 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 division
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 variety of
corporate employers in industries such as publishing, investment banking,
advertising, insurance, healthcare, apparel and real estate. Within this
division, the Company has recently added a concentration in management
consulting. This division also 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 division 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. This
division fills positions at the middle to senior executive level in many
functional areas such as buyers, designers, sales and production.
Administrative Support. The Company's administrative support division
serves primarily the New York metropolitan area, providing services in various
industries such as financial services, consumer products, publishing, insurance,
entertainment and telecommunications and technology. This division fills
positions at the administrative support level within all functional areas and
hierarchy of a client's organization.
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. This division supplies skilled
professionals in the areas of application development, business analysis, help -
desk support, networking, project management and quality assurance.
Legal, Accounting and Human Resources. The Company expanded its
existing presence within its full time legal, 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
and industry personnel.
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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 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.
One customer of the Company, Deutsche Bank A.G., accounted for
approximately 10% of the Company's revenue during the fiscal year ended
September 30, 1999.
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BUSINESS STRATEGY
During the past year, the Company accomplished its goal of primarily
increasing profitability while continuing to build revenues.
The Company is now in the strategic phase of developing and launching a
new web site. The site will be community-driven and will focus on institutional
brand-building, as well as client development and recruitment. Through content
and an aggressive marketing strategy to draw traffic to the site, the Company
intends to attract the passive as well as the active job seeker and to maintain
a highly interactive environment with portals for all industry and functional
lines of business in which the Company presently operates. The initial phases of
this launch are currently scheduled to take place during the second quarter of
fiscal 2000.
The Company is also initiating a dedicated focus on e-business
companies by establishing a specific practice area that will service this
rapidly growing sector and a task force of members from various divisions within
the Company. The Company will seek to offer a one-stop staffing solution to
companies in this entrepreneurial phase of their evolution. We believe that this
will be an area of rapid growth during the next several years. The Company
currently believes that its diversified capabilities in retained executive
search, contingency recruitment and temporary staffing and consulting will
enable it to capture market share with clients in need of senior and mid-level
resources quickly and in volume as they evolve from start-up status.
The Company recently augmented its expanding presence in San Jose by
adding an information technology consulting group to complement its efforts in
the accounting and financial areas.
The Company is actively seeking to add experienced search consultants
and temporary staffing account executives and recruiters in all of our
divisions. The Company is rolling out a cross-selling initiative that it
believes will enhance brand identity and create increased client penetration
across a multi-faceted platform of services. The Company is also increasing its
focus on training and development in both traditional as well as on-line
recruitment.
The Company believes that as a result of a continuation of its talent
acquisition strategy, retention of existing staff, retention of its placement
staff, its web initiative, its new e-business practice and its increased focus
on cross- selling, training and development, the Company is positioned to
capitalize on certain current trends in the economy, since management believes
that attracting and retaining human capital is critical to the attainment of its
success, as well as that of its clients. The Company believes that its goals can
be accomplished without a corresponding increase in general and administrative
expenses as a percentage of revenues.
MARKETING AND SALES
Marketing efforts are currently focused on providing the Company's full
complement of services across a broad range of functional specialties in both
the full-time and temporary and consulting areas (information technology,
accounting, human resources, legal and administrative support) in specific major
geographic markets (New York, New Jersey, Connecticut) as well as certain
capabilities (information technology, accounting and healthcare) in Atlanta and
California. By developing a "brand identity" identifying the Company with a
consistent level of quality services in each specialty niche it covers, the
Company is positioned as a value-added resource serviced by experienced
personnel in every area of its expertise. Management has implemented an ongoing
emphasis on cross - selling of services and compensates employees for their
efforts in selling customers the Company's diversified capabilities.
COMPETITION
The Company believes that the staffing 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 and
international in scope. Some of the
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Company's competitors, including all of the national and international 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, which enhance the potential for account
penetration and increased revenues.
The Company has several competitors in its retained executive search
and contingency recruitment businesses. These include Romac International,
Robert Half International and Winston Resources. Further, the Company's
competitors in its temporary staffing and consulting business include Interim
Services, Computer Horizons, Kelly Services, Select Appointments and Staff Mark,
Inc.
EMPLOYEES
As of September 30, 1999, the Company employed 161 full-time employees,
including the Company's four executive officers, 110 recruitment and placement
counselors and 47 administrative and support staff. 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 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
The Company leases its corporate headquarters in New York City, as well
as space for its other locations. The aggregate area of space under lease is
approximately 47,000 square feet. The Company's lease terms run from month to
month to seven years and the aggregate rent paid for the year ended September
30, 1999 was approximately $1,231,000. The Company believes that its current
facilities are adequate for its needs and does not expect to have difficulty
leasing additional office space to satisfy anticipated future needs.
ITEM 3. LEGAL PROCEEDINGS
On November 5, 1998, ITP filed a complaint and an application for an
order to show cause against a former employee of ITP, Anthony J. Allen, Jr.
("Allen") and a competing company, C.A.P. Consulting, Inc. ("CCI") in the New
Jersey Superior Court, Chancery Division, Middlesex County (the "Court"). In its
complaint, ITP seeks temporary,
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preliminary and permanent restraints, as well as damages, against Allen and CCI
as a result of Allen's alleged acts of disloyalty while employed by ITP as a
sales representative. ITP has also asserted causes of action against Allen for
breach of duty of loyalty, misappropriation, tortious interference with
prospective economic advantage and unfair competition and has asserted the same
causes of action against CCI, except for the breach of duty of loyalty.
On November 10, 1998, the Court entered an order to show cause with
temporary restraints that required Allen and CCI, inter alia, to (1) refrain
from using any of ITP's information not otherwise available in the public
domain; (2) refrain from making any disparaging, negative or false statements
about ITP; and (3) turn over all of ITP's confidential documents to be described
by ITP in a document request.
On December 28, 1998, Allen filed an answer and counterclaim against
ITP, and a third party complaint against the Company. Allen's counterclaim
against ITP included a slander claim, several breach of contract claims related
to his employment compensation and alleged violations of certain unspecified
statutes as a result of ITP's refusal to pay Allen certain wages. In a third
party complaint, Allen asserted a slander claim against the Company. The Company
and ITP have denied various allegations in the answer and counterclaim and in
the third party complaint and have asserted various affirmative defenses.
The parties have exchanged written discovery responses and several
depositions have been taken. A trial in the matter is currently scheduled for
January 19, 2000, but counsel for both parties currently plan to seek an
adjournment of at least several months in order to complete discovery.
The Company does not believe that this proceeding will have a material
effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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 bid prices of the Common Stock
as reported by NASDAQ for the fiscal periods specified.
Common Stock
High Low
Fiscal 1999
First Quarter...............................................$2.469 $1.438
Second Quarter..............................................$1.875 $1.344
Third Quarter...............................................$2.938 $1.563
Fourth Quarter .............................................$3.375 $1.938
Fiscal 1998
First Quarter...............................................$4.594 $2.875
Second Quarter..............................................$3.688 $2.625
Third Quarter...............................................$4.875 $3.125
Fourth Quarter .............................................$3.688 $1.438
As of December 17, 1999, there were 35 record holders of the Company's
Common Stock. The Company believes that there are approximately 1,143 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.
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ITEM 6. SELECTED FINANCIAL DATA
The following summary of the Company's consolidated financial and
operating data for the years ended September 30, 1999, 1998, 1997, 1996 and 1995
were derived from the audited consolidated financial statements:
(Amounts in thousands except for per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
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Statements of Operations Data: 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Revenue 56,329 $44,639 $28,996 $17,166 $7,331
Income (Loss) from Operations 3,759 1,622 1,691 509 (2,094)
Net Income (Loss) 1,999 823 1,282 710 (1,928)
Primary Income (Loss) Per Common Share $.44 $.16 $.25 $.14 $(.39)
Fully Diluted Income (Loss) Per Common Share .41 .14 .23 .13 (.39)
September 30,
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Balance Sheet Data: 1999 1998 1997 1996 1995
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Working Capital $4,130 $3,794 $4,921 $5,530 $5,402
Total Assets 18,348 16,735 12,815 9,613 7,642
Total Liabilities 10,494 8,696 4,484 2,548 1,287
Stockholders' Equity 7,854 8,039 8,331 7,065 6,355
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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 approximately 58% of the Company's revenue for the year ended
September 30, 1999. The executive search/full-time contingency recruitment
division comprises ten lines of business, including five industry (capital
markets, publishing and new media, healthcare, fashion services and banking),
and five functional (information technology, accounting, human resources, legal
and administrative support). The executive search/full-time contingency
recruitment division generated approximately 42% of the Company's revenue for
the year ended September 30, 1999.
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RESULTS OF OPERATIONS
FISCAL 1999 COMPARED TO FISCAL 1998
Revenue increased to $56.3 million for the fiscal year ended September
30, 1999 from $44.6 million for the fiscal year ended September 30, 1998, an
increase of $11.7 million or 26%. These increases were comprised of $6 million
in temporary staffing and consulting, and $5.7 million in executive search and
full time contingency and recruitment for the fiscal year ended September 30,
1999, and were the result of factors further described below.
Revenues from the Company's temporary staffing and consulting business
were $32.9 million for the fiscal year ended September 30, 1999 compared to
$26.9 million for the same period in 1998, an increase of $6 million or 22%. The
increase in temporary staffing revenue for the year ended September 30, 1999 as
compared to the same period in 1998 is attributable to increases in both the
number of hours billed and average bill rates in the information technology
division. In addition, the Company's expansion to provide temporary staffing
services to companies seeking personnel in the legal, human resource and
accounting fields contributed to the increase in revenue.
Revenues from the Company's executive search and full time contingency
recruitment business were $23.4 million for the fiscal year ended September 30,
1999 compared to $17.7 million for the same period in 1998, a increase of $5.7
million or 32%. The increase in revenues from the Company's executive search and
full time contingency recruitment division was primarily due to an increase in
demand for services within the capital markets. In addition, the information
technology, accounting and healthcare businesses experienced increases in
placements made in the fiscal year ended September 30, 1999 compared to the
fiscal year ended September 30, 1998. In addition, during 1999 the Company
expanded its temporary staffing/consulting division to include the placement of
legal services personnel within the New York metropolitan area, which
contributed to the increase in revenue.
Selling expenses for the fiscal year ended September 30, 1999 totaled
$44.1 million (78% of revenues) compared with $35 million (78% of revenues) for
the fiscal year ended September 30, 1998. The increase in selling expenses is
primarily related to compensation expense of temporary personnel within the
Company's temporary staffing and consulting division as well as increased
expenses related to certain employee benefits. 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 $7.8 million (14% of revenues)
for the fiscal year ended September 30, 1999 compared to $7.5 million (17% of
revenues) for the same period in 1998. For the fiscal year ended September 30,
1999 compared to the same period in 1998, general and administrative expenses
have remained relatively constant, but have decreased as a percentage of revenue
primarily as a result of an increase in revenue.
Depreciation and Amortization expense for the fiscal year ended
September 30, 1999 totaled $660,000 compared to $516,000 for the same period in
1998. Depreciation expense increased principally as a result of capital
expenditures made during fiscal 1998. The amortization of intangible assets
associated with certain acquisitions also contributed to this increase.
Income from operations was $3.8 million for the fiscal year ended
September 30, 1999 compared to $1.6 million for the fiscal year ended September
30, 1998, primarily due to the factors mentioned in the first three paragraphs
of this section.
Other Income and (Expenses) for the fiscal year ended September 30,
1999 totaled $156,000 of expense compared to $89,000 of expense for the same
period in 1998. The increases in other expenses primarily were due to interest
expense charged for borrowings under the Company's line of credit and term loan.
Income Tax Expense for the fiscal year ended September 30, 1999 was
$1,604,000 (44.5% effective tax rate) compared with $710,000 (46% effective tax
rate) for the same period in 1998. The decrease in the Company's effective tax
rate was due to a decrease in the amount of certain non-deductible expenses,
including a portion of meals, entertainment and provisions on key person life
insurance policies.
Net income was $1,999,000 for the fiscal year ended September 30, 1999
compared to $823,000 for the fiscal year ended September 30, 1998, due to the
factors set forth in the first three paragraphs of this section.
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FISCAL 1998 COMPARED TO FISCAL 1997
Revenue increased to approximately $44.6 million for the fiscal year
ended September 30, 1998 from $29 million for the fiscal year ended September
30, 1997, an increase of approximately $15.6 million or 54%. Revenues from the
Company's temporary staffing/consulting division were $26.9 million for the
fiscal year ended September 30, 1998 compared to $14.5 million for the same
period in 1997, an increase of approximately $12.4 million or 86%. Revenues from
the Company's executive search/full-time contingency recruitment division
experienced an increase of 22% to approximately $17.7 for the fiscal year ended
September 30, 1998 compared to approximately $14.5 million for the same period
in 1997
The increase in revenues for the fiscal year ended September 30, 1998
compared to the fiscal year ended September 30, 1997 was primarily due to the
expansion of the Company's temporary staffing/consulting division within the
areas of accounting, human resource and information technology. The Company's
information technology temporary staffing/consulting business experienced
significant increases in revenue to $22.8 million for fiscal year ended
September 30, 1998 compared to $13.4 million the same period in 1997, an
increase of $9.4 million or 70%. The increase in revenues can also be attributed
to the hiring of revenue generating personnel within the executive
search/full-time contingency recruitment division, which increased the number of
search placements made during fiscal 1998 compared with the same period in 1997.
In addition, during fiscal 1998 the Company expanded its contingency recruitment
division by providing administrative support services to clients within the New
York metropolitan area, which contributed to the increase in revenue.
Selling expenses for the fiscal year ended September 30, 1998 totaled
$35 million (78% of revenues) compared with $22.4 (77% of revenues) for the
fiscal year ended September 30, 1997. The increase in selling expenses is
primarily related to compensation expense of temporary personnel within the
Company's temporary staffing/consulting division. This increase can also be
attributed to payroll, commissions and benefits associated with the hiring of
revenue-generating personnel within the executive search/full-time contingency
recruitment division. 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 increased to $7.5 million (17% of
revenues) for the fiscal year ended September 30, 1998 compared to approximately
$4.6 million (16% of revenues), for the same period in 1997. The increase in
general and administrative expenses is primarily a result of additional
infrastructure costs related to business expansion, including additional office
space and the hiring of additional support personnel within corporate
accounting, information systems and administration.
Depreciation and Amortization expense increased to $516,000 for the
fiscal year ended September 30, 1998 compared to $337,000 for same period in
1997. The increase is primarily related to a full year depreciation expense on
$800,000 of capital expenditures incurred during fiscal 1997. In addition, the
Company began depreciating $1,100,000 of property and equipment acquired in
fiscal 1998. In addition, the amortization of intangible assets contributed to
this increase.
Other Income and (Expenses) for the year ended September 30, 1998
totaled $89,000 of expense compared to $143,000 of income for the same period in
1997. The increase in other expenses was due primarily to interest expense of
$219,000, charged for borrowings under the Company's line of credit.
Income from operations was $1,622,000 for the fiscal year ended
September 30, 1998 compared to $1,691,000 for the fiscal year ended September
30, 1997 primarily due to the above mentioned factors.
Income Tax Expense for the fiscal year ended September 30, 1998 was
$710,000 (46% effective tax rate) compared with $552,000 (30% effective tax
rate) for the same period in 1997. The increase in the Company's effective tax
rate was due to increased state and local taxes and because certain expenses,
including a portion of meals,
-12-
<PAGE>
entertainment and premiums on keyperson life insurance policies are
non-deductible for income tax purposes. In addition, the Company received a tax
benefit for net operating loss carryforwards utilized in fiscal 1997.
Net income was $823,000 for the fiscal year ended September 30, 1998
compared to $1,282,000 for the fiscal year ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company's sources of liquidity included
$1.4 million in cash and cash equivalents and short-term investments. The
Company's working capital was $4.1 million at September 30, 1999 compared to
$3.8 million at September 30, 1998. In addition, the Company spent $2.2 million
during fiscal 1999 relating to the repurchase of its Common Stock, as discussed
below. The Company has available $686,000 of long-term investments as a source
of liquidity if required.
In February 1999, the Company entered into a $6.5 million credit
facility agreement with The Dime Savings Bank. The credit facility agreement
consists of a $5 million working capital line of credit and a term loan of $1.5
million, which are collateralized by all of the Company's assets. The credit
facility 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 to be paid in 12 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 September 30, 1999 was 8.50%. At September 30,
1999, there was $350,000 of borrowings under the working capital line of credit,
and $1.25 million was outstanding under the term loan. The credit facility
agreement contains various covenants among which are minimum working capital and
tangible net worth requirements and a provision restricting payment of dividends
in excess of 50% of net profits.
Net cash provided by operating activities for the fiscal year ended
September 30, 1999 improved to $4.4 million compared to net cash used by
operating activities of $468,000 for the same period in 1998. The increase in
net cash provided by operating activities was due primarily to increased net
income, as well as increases in certain liability categories. Net cash used in
financing activities for the fiscal year ended September 30, 1999 was $3.7
million, which was primarily due to net repayment of $1.5 million of borrowings
under the line of credit and $2.2 million used for the repurchase of the
Company's Common Stock.
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.
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". As a result, computer systems and software used by government
agencies, utility companies, providers of telecommunication services, suppliers,
and other third parties may need to be upgraded to comply with such Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness
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 currently
believes its software and information technology systems are 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.
-13-
<PAGE>
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 working with key third party
vendors to understand their ability to continue to provide services and products
through the change to 2000. The Company intends to continue to partner with its
key third party vendors to avoid any business interruptions in 2000. The Company
is dependent upon its customers for sales and cash flow. The Company currently
does not believe that it is subject to significant business risks related to its
customers' and suppliers' Year 2000 efforts; however, if the Company's customers
or vendors experience Year 2000 problems, the Company's results of operations
could be materially adversely affected.
COSTS TO DATE
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.
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] issued SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities-Deferral of
Effective Date of FASB Statements No. 133." This statement defers for one year
the effective date of FASB Statement No. 133, "Accounting Derivative Instruments
and Hedging Activities." The rule now will apply to all fiscal quarters of all
fiscal years beginning after June 15, 2000. In June 1998, the FASB issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
is required to be adopted in years beginning after June 15, 1999. This statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. This statement will require the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Company has not yet determined what the effect of SFAS No. 133 will be on
the earnings and financial position of the Company.
-14-
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Certain financial instruments held by the Company, such as cash, cash
equivalents and accounts receivable arising in the ordinary course of business,
may subject the Company to concentrations of credit risk.
While the Company seeks to place its cash and cash equivalents with
high credit-quality financial institutions, the Company is still exposed to
credit risk for uninsured amounts held by such institutions. Such uninsured
amounts subject to credit risk totaled approximately $370,000 on September 30,
1999. The Company does not expect its exposure to such credit risk to cause a
material adverse effect on its financial condition or results of operation.
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. While the Company does not require collateral on accounts receivable
or other financial instruments, it does not believe that its exposure to credit
risk relating to its accounts receivable will result in a material adverse
effect on its financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-15-
<PAGE>
PART III
ITEM 10. 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, 2000 pursuant to Regulation 14A of the General Rules and Regulations under
the Securities Exchange Act of 1934 ("Regulation 14A").
ITEM 11. 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, 2000 pursuant to Regulation 14A.
ITEM 12. 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, 2000 pursuant to Regulation 14A.
ITEM 13. 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, 2000 pursuant to Regulation 14A.
-16-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 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)
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)
*10.12 Form of Amended and Restated Indemnification Agreement
between the Company and its officers and directors
*23 Consent of Moore Stephens P.C. dated December __, 1999
*27 Financial Data Schedule
- --------------------
* Filed herewith.
-17-
<PAGE>
(b) Reports on Form 8-K
None.
-18-
<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: December 28, 1999 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-K 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 December 28, 1999
- -------------------- Director
Herbert Solomon
/s/ Lloyd Solomon Vice Chairman of the Board, December 28, 1999
- -------------------- Chief Executive Officer and
Lloyd Solomon Director (Principal
Executive Officer)
/s/ Scott Page President and Director December 28, 1999
- --------------------
Scott Page
/s/ Eric M. Davis Vice President-Finance, December 28, 1999
- -------------------- Chief Financial Officer and
Eric M. Davis Director (Principal Financial
and Accounting Officer)
/s/ Edward Ehrenberg Director December 28, 1999
- --------------------
Edward Ehrenberg
/s/ Joel A. Klarreich Director December 28, 1999
- ---------------------
Joel A. Klarreich
-19-
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report ...............................................F-2
Consolidated Balance Sheets as of September 30, 1999 and 1998...............F-3
Consolidated Statements of Operations for the years ended
September 30, 1999, 1998 and 1997...........................................F-5
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1999, 1998 and 1997...........................................F-6
Consolidated Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997...........................................F-7
Notes to Consolidated Financial Statements .................................F-9
<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 sheets of The
Solomon-Page Group Ltd. and subsidiary as of September 30, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three fiscal years in the period ended September 30,
1999. 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 subsidiary as of September 30, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three fiscal years in the period ended September 30, 1999, in conformity
with generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
November 16, 1999
F-2
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
September 30,
1 9 9 9 1 9 9 8
Assets:
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 580 $ 935
Investments 849 603
Accounts Receivable - [Net of Allowances of $280 and $200,
Respectively] 11,416 10,161
Other Current Assets 391 246
------- -------
Total Current Assets 13,236 11,945
------- -------
Property and Equipment:
Equipment 2,022 1,727
Furniture and Fixtures 797 563
Leasehold Improvements 1,103 938
------- -------
Totals - At Cost 3,922 3,228
Less: Accumulated Depreciation 1,659 1,113
------- -------
Property and Equipment -Net 2,263 2,115
------- -------
Other Assets:
Investments 686 1,112
Intangible Assets - [Net of Accumulated Amortization of $310 and
$195, Respectively] 1,444 1,019
Deferred Tax Asset 324 177
Due from Related Parties 135 136
Other Assets 260 231
------- -------
Total Other Assets 2,849 2,675
------- -------
Total Assets $18,348 $16,735
======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-3
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
September 30,
1 9 9 9 1 9 9 8
<S> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accrued Payroll and Commissions $ 4,607 $ 3,498
Accounts Payable and Accrued Expenses 1,276 968
Income Taxes Payable 1,417 298
Line of Credit 350 3,100
Term Loan Payable 500 --
Deferred Revenue 380 131
Other Current Liabilities 576 156
-------- -------------
Total Current Liabilities 9,106 8,151
-------- -------------
Long-Term Liabilities:
Term Loan Payable - Net of Current Portion 750 --
Deferred Credit 638 545
-------- -------------
Total Long-Term Liabilities 1,388 545
-------- -------------
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, 5,163,948 and 5,162,282 Shares
Issued and 4,153,948 and 5,121,282 Shares Outstanding
at September 30, 1999 and 1998, Respectively 5 5
Additional Paid-in Capital 7,428 7,426
Accumulated Other Comprehensive Income (7) 11
Treasury Stock - At Cost; 1,010,000 and 41,000 Common Shares
at September 30, 1999 and 1998, Respectively (2,248) (80)
Retained Earnings 2,676 677
-------- -------------
Total Stockholders' Equity 7,854 8,039
-------- -------------
Total Liabilities and Stockholders' Equity $ 18,348 $ 16,735
======== =============
</TABLE>
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
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
<S> <C> <C> <C>
Revenue $ 56,329 $ 44,639 $ 28,996
----------- ----------- -----------
Operating Expenses:
Selling Expenses 44,139 35,015 22,413
General and Administrative 7,771 7,486 4,555
Depreciation and Amortization 660 516 337
----------- ----------- -----------
Total Operating Expenses 52,570 43,017 27,305
----------- ----------- -----------
Income from Operations 3,759 1,622 1,691
----------- ----------- -----------
Other Income [Expenses]:
Interest and Dividend Income 110 128 133
Interest Expense (269) (219) (27)
Realized Gain on Investments 3 2 37
----------- ----------- -----------
Total Other [Expenses] Income (156) (89) 143
----------- ----------- -----------
Income Before Income Tax Expense 3,603 1,533 1,834
Income Tax Expense 1,604 710 552
----------- ----------- -----------
Net Income $ 1,999 $ 823 $ 1,282
=========== =========== ===========
Basic Earnings Per Common Share $ .44 $ .16 $ .25
=========== =========== ===========
Diluted Earnings Per Common Share $ .41 $ .14 $ .23
=========== =========== ===========
Basic Weighted Average Shares 4,517,298 5,134,122 5,131,751
=========== =========== ===========
Diluted Weighted Average Shares 4,885,699 5,985,319 5,633,806
=========== =========== ===========
</TABLE>
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
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C>
Balance - October 1, 1996 -- $ -- 5,139,285 $ 5 $ 8,488
Treasury Shares
Purchased -- -- -- -- --
Net Income -- -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1997 -- -- 5,139,285 5 8,488
Repurchase of 1,000,000
Class A Warrants -- -- -- -- (1,054)
Costs Associated with
Registering Class A
Warrants -- -- -- -- (37)
Exercise of Options -- -- 22,997 -- 29
Treasury Shares Purchased -- -- -- -- --
Unrealized Gain on Available
for Sale Securities - Net -- -- -- -- --
Net Income -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1998 -- -- 5,162,282 5 7,426
Exercise of Options -- -- 1,666 -- 2
Treasury Shares Purchased -- -- -- -- --
Unrealized [Loss] on Available
for Sale Securities - Net -- -- -- -- --
Net Income -- -- -- --
------ -------- --------- ------- -----------
Balance - September 30, 1999 -- $ -- 5,163,948 $ 5 $ 7,428
====== ======== ========= ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Retained Total
Comprehensive Treasury Stock Earnings Stockholders'
Income Shares Amount [Deficit] Equity
<S> <C> <C> <C> <C> <C>
Balance - October 1, 1996 $ -- -- $ -- $ (1,428) $ 7,065
Treasury Shares
Purchased -- 10,000 (16) -- (16)
Net Income -- -- -- 1,282 1,282
-------- ------ --------- --------- ----------
Balance - September 30, 1997 -- 10,000 (16) (146) 8,331
Repurchase of 1,000,000
Class A Warrants -- -- -- -- (1,054)
Costs Associated with
Registering Class A
Warrants -- -- -- -- (37)
Exercise of Options -- -- -- -- 29
Treasury Shares Purchased -- 31,000 (64) -- (64)
Unrealized Gain on Available
for Sale Securities - Net 11 -- -- -- 11
Net Income -- -- -- 823 823
-------- ------ --------- --------- ----------
Balance - September 30, 1998 11 41,000 (80) 677 8,039
Exercise of Options -- -- -- -- 2
Treasury Shares Purchased -- 969,000 (2,168) -- (2,168)
Unrealized [Loss] on Available
for Sale Securities - Net (18) -- -- -- (18)
Net Income -- -- -- 1,999 1,999
-------- --------- --------- --------- ----------
Balance - September 30, 1999 $ (7) 1,010,000 $ (2,248) $ 2,676 $ 7,854
======== ========= ========= ========= ==========
</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
[AMOUNTS IN THOUSANDS]
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Operating Activities:
<S> <C> <C> <C>
Net Income $ 1,999 $ 823 $ 1,282
------- ------- -------
Adjustments to Reconcile Net Income to
Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization 660 516 337
Deferred Credit 93 161 118
Provision for Losses on Accounts Receivable 80 75 35
Net Realized Gain on Investments (3) (2) (37)
Deferred Taxes (297) (79) (84)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (1,335) (2,858) (3,253)
Other Assets (27) (49) (32)
Increase [Decrease] in:
Accounts Payable, Accrued Expenses,
Accrued Payroll and Commissions 1,417 1,004 1,492
Income Tax Payable 1,119 31 290
Deferred Revenue 249 155 --
Other Current Liabilities 448 (245) 36
------- ------- -------
Total Adjustments 2,404 (1,291) (1,098)
------- ------- -------
Net Cash - Operating Activities 4,403 (468) 184
------- ------- -------
Investing Activities:
Capital Expenditures (693) (1,089) (791)
Purchases of Investments (602) (800) (2,845)
Proceeds from Sales of Investments 750 1,249 2,042
Acquisitions of and Additions to Trade Names (540) (350) (265)
Cash Received from Related Parties 1 55 10
Increase in Cash Surrender Value of Officer
Life Insurance (8) (46) (23)
------- ------- -------
Net Cash - Investing Activities (1,092) (981) (1,872)
------- ------- -------
Financing Activities:
Borrowings Under Term Loan and Line of Credit 4,164 3,100 --
Repayments Under Term Loan and Line of Credit (5,664) -- --
Purchase of Treasury Stock and Warrants (2,168) (1,118) (16)
Warrant Registration Costs -- (37) --
Proceeds from Exercise of Stock Options 2 29 --
------- ------- -------
Net Cash - Financing Activities (3,666) 1,974 (16)
------- ------- -------
Net [Decrease] Increase in Cash and
Cash Equivalents - Forward $ (355) $ 525 $(1,704)
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-7
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
[AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
Y e a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
<S> <C> <C> <C>
Net [Decrease] Increase in Cash and
Cash Equivalents - Forwarded $ (355) $ 525 $(1,704)
Cash and Cash Equivalents - Beginning of Years 935 410 2,114
------- ------- -------
Cash and Cash Equivalents - End of Years $ 580 $ 935 $ 410
======= ======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $ 269 $ 219 $ 27
Income Taxes $ 861 $ 777 $ 422
</TABLE>
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
F-8
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[1] Nature of Operations
The Solomon-Page Group Ltd. and its wholly-owned subsidiary [the "Company"]
provides staffing services comprised of two primary operating divisions: (i)
temporary staffing and consulting, which provides approximately 58% of the
Company's revenue and (ii) retained executive search and full-time contingency
search which provides approximately 42% of the Company's revenue. 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.
[2] Summary of Significant Accounting Policies
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 executive search engagement, the non-refundable retainer is recognized
according to the terms of the search contract, with the unearned portions of the
retainer reflected as deferred revenue. The balance of the contract is
recognized upon successful completion of the search. Temporary staffing and
consulting revenue is recognized when the temporary personnel provide the
service.
Receivable Allowances - The Company records allowances against accounts
receivable, based on historical experience to estimate losses due to placed
candidates not fulfilling the terms of the search agreement or not remaining in
employment for the Company's guarantee period which generally ranges from 30 to
120 days but may extend up to one year. Losses from bad debts are charged to
expense and losses related to contract fulfillment are charged to revenue.
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
stockholders' 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, and maturing within one year, are classified
in the balance sheet as current assets while securities held for non-current
uses, and maturing after one year, are classified as long-term assets. Realized
gains and losses are calculated utilizing the specific identification method
[See Note 3].
Depreciation - Depreciation of furniture, fixtures and equipment is computed
utilizing the straight-line method based on estimated useful lives ranging from
5 to 7 years. Depreciation of leasehold improvements is computed utilizing the
straight-line method over the lesser of the life of the improvement or the
remaining lease term. Depreciation expense was $545, $431 and $273 for the years
ended September 30, 1999, 1998 and 1997, respectively.
F-9
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[2] Summary of Significant Accounting Policies [Continued]
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.
Earnings Per Common Share - Basic earnings per share represents the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period. Diluted earnings per share reflects the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of securities into
common stock.
The computation of diluted earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on earnings per share. The dilutive effect of outstanding options and
warrants and their equivalents is reflected in diluted earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earning per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the option or
warrants.
Potential future dilutive securities include 2,050,000, 2,050,000 and 3,050,000
shares issuable under outstanding warrants and 350,500, 225,500 and 0 shares
issuable under outstanding options as of September 30, 1999, 1998 and 1997,
respectively.
Intangibles - Intangibles which consist of trade names and customer lists are
recorded at cost and are amortized utilizing the straight-line method over
periods ranging from 4 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 $115, $85 and $64 for the years ended
September 30, 1999, 1998 and 1997, respectively [See Note 9].
Accumulated Other Comprehensive Income - Accumulated other comprehensive income
consists entirely of unrealized gains and losses on available for sale
securities. The financial statement and footnote disclosures required by SFAS
130 have not been presented as they are not material.
F-10
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[2] Summary of Significant Accounting Policies [Continued]
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. The Company had approximately $370 and $561 in financial
institutions that is subject to normal credit risk beyond insured amounts at
September 30, 1999 and 1998, respectively.
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 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 $410, $430 and
$207 for the years ended September 30, 1999, 1998 and 1997, 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.
Reclassifications - Certain amounts in prior years consolidated financial
statements have been reclassified to conform with the current year presentation.
[3] Investments in Debt and Equity Securities
At September 30, 1999 and 1998, the Company's securities consisted of certain
highly liquid debt securities which were classified as available for sale and
held to maturity. A summary of the Company's investments in debt securities is
as follows:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
Financial Statement Caption Cost Fair Value Cost Fair Value
- --------------------------- ---- ---------- ---- ----------
Available for Sale:
<S> <C> <C> <C> <C>
Investments $ 1,550 $ 1,535 $ 1,695 $ 1,715
Held to Maturity:
Restricted Investment - Noncurrent $ -- $ -- $ 34 $ 34
</TABLE>
Gross proceeds from sale of available for sale securities was $750, $1,249 and
$2,042 and realized gains on sales was $3, $2 and $37 for the years ended
September 30, 1999, 1998 and 1997, respectively.
F-11
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[3] Investments in Debt and Equity Securities [Continued]
At September 30, 1999 and 1998, gross unrealized [losses] gains on available for
sale securities was $(15) and $20 and is included in stockholders' equity net of
taxes of $8 and $(9), respectively.
Contractual maturities of debt securities classified as available for sale and
held to maturity are as follows:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
Available for Sale Held to Maturity Available for Sale Held to Maturity
------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Within 1 year $ 850 $ -- $ 600 $ 36
Between 1 and 5 years $ 700 $ -- $ 1,100 $ --
</TABLE>
[4] Due From Related Parties
At September 30, 1999 and 1998, the Company had a balance due from various
officers of the Company aggregating $135 and $136, respectively. The advances
bear interest at 8%. Interest income on the advances was $10, $13, and $12 for
the years ended September 30, 1999, 1998 and 1997, respectively. No interest was
receivable at September 30, 1999 and 1998.
[5] Line of Credit
In February 1999, the Company entered into a $6,500 credit facility agreement.
The facility agreement consists of a $5,000 working capital line of credit under
which up to $250 can be borrowed under standby letters of credit at a commitment
rate of 2%, and a term loan of $1,500. The facility agreement is collateralized
by all of the Company's assets. The agreement provides for borrowings under the
working capital line of credit at 1% above the bank reference rate and expires
on February 28, 2002. The bank's reference rate at September 30, 1999 was 8.5%.
At September 30, 1999, there was $350 of borrowings under the working capital
line of credit and $161 under standby letters of credit leaving $4,489 of credit
available. The agreement contains various covenants among which are minimum
working capital and tangible net worth requirements and a provision that
restricts the payment of dividends in excess of 50% of net profits.
In February 1998, the Company entered into a one year $4,000 demand line of
credit facility agreement, which was collateralized by all the Company's assets.
The agreement provided for borrowing at 1% above the bank's reference rate (8.5%
at September 30, 1998). Borrowings were limited to 80% of eligible accounts
receivable and expired in February 1999, on which date the outstanding principal
amount was repaid. As of September 30, 1998, the full balance under the line was
available and the Company borrowed approximately $3,100 under the credit
facility, of which approximately $1,118 was used for the repurchase of the
Company's common stock, and Class A redeemable common stock purchase warrants
with the balance used to fund current working capital requirements.
The weighted average interest rate on short-term borrowings outstanding as of
September 30, 1999 and 1998 was 9.3% and 9.5%, respectively.
F-12
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[6] Long-Term Debt
At September 30, 1999 and 1998, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8
<S> <C> <C>
Note payable under credit facility agreement [See Note 5], payable in equal
quarterly principal installments of $125 plus interest at 1.25% above bank's
reference rate per annum through February 2002 $1,250 $ --
Less: Current Portion 500 --
------ -------
Totals $ 750 $ --
====== =======
</TABLE>
<TABLE>
<CAPTION>
Long-term debt at September 30, 1999 matures as follows:
<S> <C>
2000 $ 500
2001 500
2002 250
------
Total $1,250
======
</TABLE>
[7] Leases
Operating Leases - The Company leases office space under operating leases
expiring through September 2006.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of September 30, 1999 for each of the
next five years and in the aggregate are:
Year ending
September 30,
2000 $ 1,111
2001 1,137
2002 1,151
2003 1,057
2004 993
Subsequent to 2004 1,776
--------
Total Minimum Future Rental Payments $ 7,225
========
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 approximately $1,231, $1,017 and $617 for the years ended
September 30, 1999, 1998 and 1997, respectively.
F-13
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[8] Capital Stock
On September 11, 1998, the Company's Board of Directors authorized the
repurchase of 1,000,000 shares of the Company's common stock, from time to time,
in the open market or in privately negotiated transactions. During the year
ended September 30, 1999, 969,000 shares were repurchased at a cost of $2,168.
During the year ended September 30, 1998, 31,000 shares were repurchased at a
cost of $64.
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, at a cost of $16. On
October 31, 1997, the Company's Board of Directors terminated the December 18,
1996 common stock repurchase plan.
[9] Commitments and Contingencies
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.
Intangibles - In connection with certain acquisitions, the Company will be
required to pay purchase price adjustments through September 2004 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 approximately $190 and $350 during the
years ended September 30, 1999 and 1998, respectively. During the fiscal year
ending September 30, 1999, the Company acquired two trade names for $350. The
acquisitions also include potential purchase price adjustments.
[10] 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 at $4.50 per
share commencing October 20, 1995 and expired on October 20, 1999.
The Class A warrants are redeemable at $.05 per warrant based on the achievement
of certain criteria.
On October 20, 1994, in connection with its initial public offering, the Company
granted to its underwriter an option to purchase an aggregate of 200,000 units
of Company securities [consisting of one share of common stock and one Class A
redeemable common stock purchase warrant] exercisable at $6.60 per unit
commencing October 20, 1995 and expired on October 20, 1999.
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. On February 12,
1998, the Company completed the repurchase of 1,000,000 Class A redeemable
common stock purchase warrants at a cost of $1,054.
F-14
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[10] 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% of fair market value
on the date granted. No options at less than fair market value have been
awarded. 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. Executive officers
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:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
<S> <C> <C>
Outstanding at October 1, 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
Granted 355,500 2.70
Exercised (22,997) 1.27
Expired/Canceled (128,169) 1.85
---------
Outstanding at September 30, 1998 2,169,584 1.95
Granted 190,000 2.13
Exercised (1,666) 1.25
Expired/Canceled (94,000) 2.35
---------
Outstanding at September 30, 1999 2,263,918 1.95
=========
Exercisable at September 30, 1999 1,429,888 $ 1.80
=========
</TABLE>
F-15
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[10] Options and Warrants [Continued]
No compensation cost was charged to earnings during the years ended September
30, 1999, 1998 and 1997. 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, basic and diluted earnings per share would have been
reduced on a pro forma basis as indicated below:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8 1 9 9 7
Year ended September 30:
Net Income:
<S> <C> <C> <C>
As Reported $ 1,999 $ 823 $ 1,282
Pro Forma $ 1,888 $ 500 $ 953
Basic Earnings Per Common Share:
As Reported $ .44 $ .16 $ .25
Pro Forma $ .42 $ .10 $ .19
Diluted Earnings Per Common Share:
As Reported $ .41 $ .14 $ .23
Pro Forma $ .40 $ .09 $ .17
</TABLE>
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 1999 and 1998, respectively:
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Dividend Yields 0.00% 0.00% 0.00%
Expected Volatility 88.86% 131.54% 105.29%
Risk-Free Interest Rate 5.41% 4.32% 5.99%
Expected Lives 4 Years 5.5 Years 4 Years
The weighted-average fair value of options granted was $1.42, $2.40 and $1.73
for the years ended September 30, 1999, 1998 and 1997, respectively.
The following table summarizes information about stock options at September 30,
1999:
<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> <C> <C>
$0.56 - $2.00 1,157,918 4.2 Years $ 1.47 717,988 $ 1.35
$2.01 - $3.69 1,106,000 6.3 Years $ 2.45 712,000 $ 2.25
--------- ---------
2,263,918 4.9 Years $ 1.95 1,429,988 $ 1.80
========= =========
</TABLE>
F-16
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[11] Income Taxes Expense
The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
Current:
<S> <C> <C> <C>
Federal $ 1,283 $ 524 $ 836
Utilization of Net Operating Loss Carryforward (5) (13) (423)
State and City 623 278 453
Utilization of Net Operating Loss Carryforward -- -- (230)
------- ------- -------
Total Current 1,901 789 636
------- ------- -------
Deferred [Benefit]:
Federal (200) (50) (61)
State and City (97) (29) (23)
------- ------- -------
Total Deferred (297) (79) (84)
------- ------- -------
Total Income Tax Expense $ 1,604 $ 710 $ 552
======= ======= =======
</TABLE>
Income tax at the federal statutory rate reconciled to the Company's effective
rate is as follows:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
<S> <C> <C> <C>
Federal Statutory Rate 34.0% 34.0% 34.0%
Non Deductible Expenses 2.2 1.9 4.4
Benefit of Net Operating Loss Carryforward (.1) (.9) (23.1)
Change in Deferred Tax Asset Valuation Allowance -- -- 7.8
State and City Income Taxes [Net of Federal Tax Benefit] 11.5 12.0 8.1
Other (3.1) (.7) (1.1)
----- ---- ----
Effective Rate 44.5% 46.3% 30.1%
===== ==== ====
</TABLE>
The major components of deferred income tax assets and liabilities are as
follows:
September 30,
1 9 9 9 1 9 9 8
Deferred Tax Liabilities:
Cash Basis Adjustments $ -- $ (89)
Accelerated Depreciation (65) (90)
Other -- (9)
--------- --------
Total Deferred Tax Liabilities (65) (188)
--------- --------
Deferred Tax Assets:
Rent Deferrals 276 240
Net Operating Loss -- 5
Reserves 121 79
Other 47 --
Deferred Revenue 72 27
--------- --------
Total Deferred Tax Assets 516 351
--------- --------
Net Deferred Tax Asset $ 451 $ 163
========= ========
F-17
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[11] Income Taxes Expense [Continued]
The provision for income tax expense consists of the following:
September 30,
1 9 9 9 1 9 9 8
------- -------
Net Current Deferred Tax Asset [Liability] $ 127 $ (14)
Net Noncurrent Deferred Tax Asset 324 177
-------- --------
Net Deferred Tax Asset $ 451 $ 163
======== ========
As of September 30, 1999, the net current deferred tax asset is included in
other current assets in the accompanying balance sheet.
As of September 30, 1998, the net current deferred tax liability is included in
other current liabilities in the accompanying balance sheet.
[12] Earnings Per Share
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the years ended September 30, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
------- ------- -------
<S> <C> <C> <C>
Basic Earnings Per Common Share $ .44 $ .16 $ .25
=========== ========= ==========
Weighted Average Shares Outstanding - Basic 4,517,298 5,134,122 5,131,751
Dilutive Options 368,401 851,197 502,055
----------- --------- ----------
Weighted Average Shares Outstanding - Diluted 4,885,699 5,985,319 5,633,806
=========== ========= ==========
Diluted Earnings Per Common Share $ .41 $ .14 $ .23
=========== ========= ==========
</TABLE>
[13] 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% of their
salary, subject to the Internal Revenue Code limits. The Company may make a
discretionary match as well as a discretionary contribution. No discretionary
match or contribution was made, and no amount was charged to operations, during
the years ended September 30, 1999, 1998 or 1997.
[14] Segment Information
Significant Customers - For the year ended September 30, 1999, one customer
accounted for 10% of revenues from continuing operations. For the year ended
September 30, 1998, another customer accounted for 14% of revenues from
continuing operations. For the year ended September 30 1997, two customers each
accounted for 11% of revenues from continuing operations.
Geographic Information - For the years ended September 31, 1999, 1998 and 1997,
the Company derived substantially all of its revenues from businesses located in
the United States, and no other country accounted for more than 10% of the
Company's revenues.
F-18
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[14] Segment Information [Continued]
Business Segments - The Company is provider of staffing services organized into
two primary operating divisions: temporary staffing and consulting and executive
search and full-time contingency recruitment. The temporary staffing and
consulting division provides services to companies seeking personnel in the
information technology, accounting, human resources and legal areas. The
executive search and full-time contingency recruitment division comprises ten
lines of business, including five industry [capital markets, publishing and new
media, healthcare and fashion services and banking], and five functional
[information technology, accounting, human resources, legal and administrative
support].
The Company evaluates performance based on the segments' profit from operations
before unallocated corporate overhead. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies [see Note 2].
<TABLE>
<CAPTION>
Temporary Executive
Staffing and Search and
Consulting Full-Time Corporate Total
---------- --------- --------- -----
Year ended September 30, 1999:
<S> <C> <C> <C> <C>
Revenues $ 32,894 $ 23,435 $ -- $ 56,329
Income from Operations $ 2,424 $ 2,328 $ (993) $ 3,759
Capital Expenditures $ 235 $ 354 $ 104 $ 693
Total Assets $ 6,401 $ 7,508 $ 4,439 $ 18,348
Depreciation and Amortization $ 253 $ 210 $ 197 $ 660
Year ended September 30, 1998:
Revenues $ 26,865 $ 17,774 $ -- $ 44,639
Income from Operations $ 1,206 $ 1,159 $ (743) $ 1,622
Capital Expenditures $ 185 $ 740 $ 164 $ 1,089
Total Assets $ 6,268 $ 6,643 $ 3,824 $ 16,735
Depreciation and Amortization $ 209 $ 162 $ 145 $ 516
Year ended September 30, 1997:
Revenues $ 14,479 $ 14,517 $ -- $ 28,996
Income from Operations $ 1,129 $ 1,085 $ (523) $ 1,691
Capital Expenditures $ 201 $ 471 $ 119 $ 791
Segment Assets $ 5,064 $ 3,980 $ 3,771 $ 12,815
Depreciation and Amortization $ 122 $ 113 $ 102 $ 337
Reconciliation to Net Income:
</TABLE>
Ye a r s e n d e d
S e p t e m b e r 30,
1 9 9 9 1 9 9 8 1 9 9 7
Segment Income from Operations $ 3,759 $ 1,622 $ 1,691
Unallocated Amounts:
Interest and Dividend Income 110 128 133
Interest Expense (269) (219) (27)
Realized Gain on Investments 3 2 37
---------- --------- ---------
Income Before Income Tax Expense $ 3,603 $ 1,533 $ 1,834
========== ========= =========
F-19
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS]
[15] Fair Value of Financial Instruments
Effective October 1, 1995, the Company adopted SFAS 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 and line of credit, it was
estimated that the carrying amount approximates fair value for the majority of
these instruments because of their short maturities.
[16] Quarterly Information [Unaudited]
<TABLE>
<CAPTION>
Q u a r t e r E n d e d
December 31, March 31, June 30, September 30,
Fiscal 1999:
<S> <C> <C> <C> <C>
Revenues $ 11,516 $ 12,779 $ 16,151 $ 15,928
Income from Operations 342 733 1,768 926
Net Income 165 372 929 533
Net Income per Share - Basic .03 .08 .21 .12
Net Income per Share - Diluted .03 .08 .20 .11
</TABLE>
[17] New Authoritative Accounting Pronouncements
The Financial Accounting Standards Board ["FASB"] issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of
Effective Date of FASB Statements No. 133." The Statement defers for one year
the effective date of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The rule now will apply to all fiscal
quarters of all fiscal years beginning after June 15, 2000. In June 1998, the
FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years beginning after June 15,
1999. The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company has not yet determined what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.
F-20
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULE
To the Stockholders and Board of Directors of
The Solomon-Page Group Ltd.
Our report on the consolidated financial statements of The Solomon-Page
Group Ltd. and subsidiary as of September 30, 1999 and 1998 is included in this
Form 10-K. In connection with our audits of such financial statements, we have
also audited the related accompanying financial statement Schedule II -Valuation
and Qualifying Accounts.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
November 16, 1999
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Additions
Balance at Charged Charged to Balance at
Beginning to Costs and Other End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year Ended September 30, 1999:
Deducted from Assets Accounts:
Allowance for Doubtful Accounts $ 25 $ 257 $ -- $ 222[1] $ 60
Receivable Allowances 175 -- 1,178 1,133[2] 220
------ ------ -------- ------ ------
$ 200 $ 257 $ 1,178 $1,355 $ 280
====== ====== ======== ====== ======
Year Ended September 30, 1998:
Deducted from Assets Accounts:
Allowance for Doubtful Accounts $ 25 $ 97 $ -- $ 97[1] $ 25
Receivable Allowances 100 -- 753 678[2] 175
------ ------ -------- ------ ------
$ 125 $ 97 $ 753 $ 775 $ 200
====== ====== ======== ====== ======
Year Ended September 30, 1997:
Deducted from Assets Accounts:
Allowance for Doubtful Accounts $ -- $ 25 $ -- $ -- $ 25
Receivable Allowances 90 -- 590 580[2] 100
------ ------ -------- ------ ------
$ 90 $ 25 $ 590 $ 580 $ 125
====== ====== ======== ====== ======
</TABLE>
[1] Uncollectible accounts written-off.
[2] Charges to revenue in connection with candidates not satisfying terms of
search contract.
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
April 15, 1999
The Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
Dear_____________:
In consideration of your continued service as a director of The
Solomon-Page Group Ltd. (the "Company"), the Company will, to the extent
provided herein, indemnify you and hold you harmless from and against any and
all "Losses" (as defined below) that you may incur by reason of your election or
service as a director, officer, employee, agent, fiduciary or representative of
the Company or any "Related Entity" (as defined below) to the fullest extent
permitted by law.
1. (a) "Losses" means all liabilities, "Costs and Expenses" (as defined
below), amounts of judgments, fines, penalties or excise taxes (or other amounts
assessed, surcharged or levied under the Employee Retirement Income Security Act
of 1974, as amended) and amounts paid in settlement of or incurred in defense of
any settlement in connection with any threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether brought by or in the right of the Company or
otherwise, and appeals in which you may become involved, as a party or
otherwise, by reason of acts or omissions in your capacity as and while serving
as a director, officer, employee, agent, fiduciary or representative of the
Company or any Related Entity.
(b) A "Related Entity" means any corporation, partnership, joint
venture, trust or other entity or enterprise in which the Company is in any way
interested, or in or as to which you are serving at the Company's request or on
its behalf, as a director, officer, employee, agent, fiduciary or representative
including, but not limited to, any employee benefit plan or any corporation of
which the Company or any Related Entity is, directly or indirectly, a
stockholder or creditor.
(c) "Costs and Expenses" means all reasonable costs and expenses
incurred by you in investigating, defending or appealing any threatened, pending
or completed claim, action, suit or proceeding including, without limitation,
counsel fees and disbursements.
2. Costs and Expenses shall be paid promptly by the Company as they are
incurred or, at your request, shall be advanced on your behalf against delivery
of invoices therefor (prior to an ultimate determination as to whether you are
entitled to be indemnified by the Company on account thereof); provided,
however, that if it shall ultimately be determined by final decision of a court
of competent jurisdiction, including the Court
<PAGE>
of Chancery of the state of Delaware (the "Court of Chancery") that you are not
entitled to be indemnified on account of any Costs or Expenses for which you
have theretofore received payment or reimbursement, you shall promptly repay in
full such amount to the Company.
3. The Company shall indemnify you and hold you harmless from and
against any and all Losses that you may incur if you are a party to or
threatened to be made a party to or otherwise involved in any proceeding or
action (other than a proceeding or action by or in the right of the Company to
procure a judgment in its favor), unless it is determined that you did not act
in good faith and for a purpose that you reasonably believed to be in, or, in
the case of service to a Related Entity, not opposed to, the best interests of
the Company and, in the case of a criminal proceeding or action, in addition,
that you had reasonable cause to believe that your conduct was unlawful.
4. The Company shall indemnify you and hold you harmless from and
against any and all Losses that you may incur if you are a party to or
threatened to be made a party to any proceeding or action by or in the right of
the Company to procure a judgment in its favor, unless it is determined that you
did not act in good faith and for a purpose that you reasonably believed to be
in, or, in the case of service to a Related Entity, not opposed to, the best
interests of the Company, except that no indemnification for Losses shall be
made under this Paragraph 4 in respect of (a) any claim, issue or matter as to
which you shall have been adjudged to be liable to the Company or (b) any
threatened or pending action to which you are a party or are threatened to be
made a party that is settled or otherwise disposed of, unless and only to the
extent that the Court of Chancery or the court in which such action or
proceeding was brought shall determine upon application that, in view of all the
circumstances of the matter, you are fairly and reasonably entitled to indemnity
for such expenses as such court shall deem proper.
5. Anything hereinabove to the contrary notwithstanding, "Losses" shall
not include, and you shall not be entitled to indemnification under this
agreement on account of (i) amounts payable by you to the Company or any Related
Entity in satisfaction of any judgment or settlement in the Company's or such
Related Entity's favor (except amounts for which you shall be entitled to
indemnification pursuant to Paragraph 4), (ii) amounts payable on account of
profits realized by you in the purchase or sale of securities of the Company or
any Related Entity within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of state law; (iii)
Losses in connection with which you are not entitled to indemnification as a
matter of law or public policy; or (iv) Losses to the extent you are indemnified
by the Company otherwise than pursuant to this agreement, including any Losses
for which payment is made to you under an insurance policy.
6. Termination of any action, suit or proceeding by judgment, order,
settlement or conviction, upon a plea of nolo contendere or its equivalent shall
not, of itself, create any presumption that you did not act in good faith and
for a purpose that you reasonably believed to be in or not opposed to the best
interests of the Company or a Related Entity and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that your conduct was
unlawful.
-2-
<PAGE>
7. The determination on behalf of the Company that you are not entitled
to be indemnified for Losses hereunder by reason of the provisions of Paragraphs
3 or 4 or clause (iii) of Paragraph 5 may be made either by (a) directors who
are not parties to such action, suit or proceeding, even through less than a
quorum, (b) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, (c) if there are no such directors,
or if such directors so direct, by independent legal counsel (who may be the
outside counsel regularly employed by the Company) in a written opinion, or (d)
the stockholders of the Company, as the Company's Board of Directors shall
determine. Notwithstanding such determination, the right to indemnification or
advances of Costs and Expenses as provided in this agreement shall be
enforceable by you in a court of competent jurisdiction, including the Court of
Chancery. The burden of proving that indemnification is not appropriate shall be
on the Company. Neither the failure of the Company (including its Board of
Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification is proper in the
circumstances because you have met the applicable standard of conduct, nor an
actual determination by the Company (including its Board of Directors or
independent legal counsel) that you have not met such applicable standard of
conduct shall be a defense to the action or create a presumption that you have
not met the applicable standard of conduct. Costs and expenses, including
counsel fees, reasonably incurred by you in connection with successfully
establishing your right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Company.
8. You agree to give prompt notice to the Company of any claim with
respect to which you seek indemnification and, unless a conflict of interest
shall exist between you and the Company with respect to such claim, you will
permit the Company to assume the defense of such claim with counsel of its
choice, such counsel to be selected in the Company's sole discretion. Whether or
not such defense is assumed by the Company, the Company will not be subject to
any liability for any settlement made without its consent. The Company will not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to you a release from all liability with respect to such claim or litigation. If
the Company is not entitled to, or does not elect to, assume the defense of a
claim, the Company will not be obligated to pay the fees and expenses of more
than one counsel for you and any other directors, officers or employees of the
Company who are indemnified pursuant to similar indemnity agreements with
respect to such claim, unless a conflict of interest shall exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the Company will be obligated to pay the fees and expenses
of an additional counsel for each indemnified party or group of indemnified
parties with whom a conflict of interest exists.
9. The Company's obligation to indemnify you under this agreement is in
addition to any other rights to which you may otherwise be entitled by operation
of law, vote of the Company's stockholders or directors or otherwise and will be
available to you whether or not the claim asserted against you is based upon
matters that occurred before the date of this agreement.
-3-
<PAGE>
10. The obligation of the Company to indemnify you with respect to
Losses that you may incur by reason of your service as a director, officer,
employee, agent, fiduciary or representative of the Company or a Related Entity,
as provided under this agreement, shall survive the termination of your service
in such capacities and shall inure to the benefit of your heirs, executors and
administrators.
11. The Company agrees that, so long as you shall serve as a director,
officer, employee, agent, fiduciary or representative of the Company or any
Related Entity and thereafter so long as you shall be subject to any possible
claim or threatened, pending or completed action or proceeding by reason of your
service as a director, officer, employee, agent, fiduciary or representative of
the Company or any Related Entity, the Company shall purchase and maintain in
effect for your benefit valid, binding and enforceable policies of directors and
officers liability insurance ("D & O Insurance"), covering Losses; provided,
however, that the Company shall not be required to maintain D & O Insurance in
effect if such insurance is not reasonably available or if, in the reasonable
business judgment of the directors of the Company, either (i) the premium cost
for such insurance is substantially disproportionate to the amount of coverage
or (ii) the coverage provided by such insurance is so limited by exclusions that
there is insufficient benefit from such insurance.
12. If you are entitled under this agreement or otherwise to
indemnification by the Company for some or a portion of the Losses actually and
reasonably incurred by you but not, however, for the total amount thereof, the
Company shall nevertheless indemnify you for the portion of the Losses to which
you are entitled.
13. It is the intention of the parties to this agreement to provide for
indemnification in all cases and under all circumstances where to do so would
not violate applicable law (and notwithstanding any limitations permitted, but
not required by statute) and the terms and provisions of this agreement shall be
interpreted and construed consistent with that intention. Nonetheless, if any
provision of this agreement or any indemnification made under this agreement
shall for any reason be determined by a court of competent jurisdiction,
including the Court of Chancery to be invalid, unlawful or unenforceable under
current or future laws, such provision shall be fully severable and, the
remaining provisions of this agreement shall not otherwise be affected thereby,
but shall remain in full force and effect and, to the fullest extent possible,
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
14. This agreement shall be governed by and interpreted and construed
in accordance with the laws of the State of Delaware, except that body of law
relating to choice of law.
-4-
<PAGE>
15. No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both the Company and
you.
Your signature below will evidence your agreement and acceptance with
respect to the foregoing.
Very truly yours,
THE SOLOMON-PAGE GROUP LTD.
By:______________________________________
Name: Lloyd Solomon
Title: Vice Chairman and Chief
Executive Officer
AGREED TO AND ACCEPTED:
___________________________
-5-
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to incorporation by reference in the
Registration Statement on Form S-8 [File Number 333-32293] of The Solomon-Page
Group Ltd. and its subsidiary of our report dated November 16, 1999, relating to
the consolidated balance sheet of The Solomon Page Group Ltd. and its subsidiary
as of September 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three fiscal
years in the period ended September 30, 1999 which report appears in the
September 30, 1999 annual report on Form 10-K of The Solomon-Page Group Ltd.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
December 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-K for the year ended September 30, 1999 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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 580,000
<SECURITIES> 1,535,000
<RECEIVABLES> 11,696,000
<ALLOWANCES> 280,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,236,000
<PP&E> 2,263,000
<DEPRECIATION> 545,000
<TOTAL-ASSETS> 18,348,000
<CURRENT-LIABILITIES> 9,106,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 7,849,000
<TOTAL-LIABILITY-AND-EQUITY> 18,348,000
<SALES> 56,329,000
<TOTAL-REVENUES> 56,329,000
<CGS> 44,139,000
<TOTAL-COSTS> 52,570,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 269,000
<INCOME-PRETAX> 3,603,000
<INCOME-TAX> 1,604,000
<INCOME-CONTINUING> 3,759,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,999,000
<EPS-BASIC> .44
<EPS-DILUTED> .41
</TABLE>
