-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ViL5hr3J/JTa5HD1iIoPxKgtZIzcBqXYdzggeXCdlVUmA2v7EHGcPMLReMc9Xx50 4eCseTVSON+YfM3uJDamdA== 0000930413-03-001093.txt : 20030411 0000930413-03-001093.hdr.sgml : 20030411 20030411171100 ACCESSION NUMBER: 0000930413-03-001093 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIND SVP INC CENTRAL INDEX KEY: 0000801338 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 132670985 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-75828 FILM NUMBER: 03647561 BUSINESS ADDRESS: STREET 1: 625 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2126454500 10-K 1 c27776_10k-.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________TO_______________ FIND/SVP, INC. NEW YORK 0-15152 13-2670685 State of Incorporation Commission File Number IRS Identification Number 625 AVENUE OF THE AMERICAS NEW YORK, NY 10011 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 645-4500 ------------------------------------------------------------------ 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 $.0001 PER SHARE TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED: NONE -------------------- ----------------------------------------- COMMON STOCK, $.0001 PAR VALUE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT 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. [ ] INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). YES [ ] NO [X] AS OF APRIL 7, 2003, THE AGGREGATE MARKET VALUE OF THE VOTING COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $8,232,160 BASED ON THE AVERAGE BID AND ASK PRICE PER SHARE OF THE COMMON STOCK ON THE OTC BULLETIN BOARD ON APRIL 7, 2003, WHICH WAS $1.43 PER SHARE. ALL (I) EXECUTIVE OFFICERS AND DIRECTORS OR THE REGISTRANT AND (II) ALL PERSONS FILING A SCHEDULE 13D WITH THE SECURITIES AND EXCHANGE COMMISSION IN RESPECT TO REGISTRANT'S COMMON STOCK WHO HOLD 10% OR MORE OF THE REGISTRANT'S OUTSTANDING COMMON STOCK, HAVE BEEN DEEMED, SOLELY FOR THE PURPOSE OF THE FOREGOING CALCULATION, TO BE "AFFILIATES" OF THE REGISTRANT. THERE WERE 10,790,644 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $.0001 PER SHARE, AS OF APRIL 7, 2003. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders, which is to be filed subsequent to the date hereof, are incorporated by reference into Part III. 1 FIND/SVP, INC. INDEX TO FORM 10-K PART I PAGE Item 1. Business 3 Item 2. Properties 10 Item 3. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 10 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 11 Item 6. Selected Financial Data 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27 Item 8. Financial Statements and Supplementary Data 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 28 PART III Item 10. Directors and Executive Officers of the Registrant 29 Item 11. Executive Compensation 29 Item 12. Security Ownership of Certain Beneficial Owners and Management 29 Item 13. Certain Relationships and Related Transactions 29 Item 14. Disclosure Controls and Procedures 29 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 30 Signatures 33 Certifications 34 Index to Exhibits 36 2 PART I ITEM 1. BUSINESS FIND/SVP, Inc. and its wholly owned subsidiaries (collectively, "FIND/SVP" or the "Company" which may be also referred to in this report as "we", "us" or "our") was incorporated in the state of New York in 1969. In 1971, the Company became affiliated with SVP International S.A. ("SVP International") through a licensing agreement which gave the Company the right to the SVP name and provided access to the resources of what is currently 8 additional SVP affiliated companies located around the world. We are a knowledge services company that leverages the expertise and resources of its professional research teams on behalf of executives and other decision-making employees of client companies, primarily in the United States. The Company currently operates in two business segments, our Quick Consulting and Research Service ("QCS") which provides retainer clients with access to the expertise of the Company's staff and information resources as well as a Live AnswerDesk ("LAD") service; and our Strategic Consulting and Research Group ("SCRG") which provides more extensive, in-depth custom market research and competitive intelligence information, as well as customer satisfaction and loyalty programs. The Company's strategy is to build a base of regular clients who will utilize the Company's people and resources for their research, business intelligence and information needs. Substantially all of the Company's personnel and operations are located in Manhattan. Through QCS, FIND/SVP provides retainer clients with access to the subject and technical expertise of its staff as well as the resources of a large information center. Within each retainer client's organization, specific individuals receive a QCS membership card (the "Membership Card"), which entitles them to make requests via the telephone and the Internet for immediate consultation and research assistance. In response, the staff of QCS provides customized answers in rapid turnaround time, generally within two business days or less of the request. The QCS service is positioned to be an indispensable daily partner for decision-makers by providing, on a retainer basis, a cost-effective "quick consulting" service primarily delivered by electronic mail. The service is designed to be a valuable resource to small and medium sized corporations that do not maintain in-house information centers and as a supplement to in-house resource centers of large corporations. At December 31, 2002, we had 1,563 QCS retainer clients and 10,162 Membership Cardholders. The Company intends to seek to expand its base of QCS retainer clients, and to offer these clients an expanded array of business intelligence, research and advisory services. The Company's Live AnswerDesk offers immediate, on-demand, question answering and personal search assistance from live experts. It is designed as a way to enhance the loyalty of the members of various consumer groups. The market research services of SCRG are designed to handle more extensive, in-depth custom market research and competitive intelligence requests, as well as customer satisfaction and loyalty programs. The QCS and SCRG businesses represent the core competencies of the Company, which is to provide the expertise of its staff in an on-demand, consulting and business advisory relationship with small, medium and large sized corporations. FIND/SVP's research resources include access to approximately 4,000 computer databases and subscription-paid web sites, approximately 8,000 of its own files organized by subject and by company, current and back issues of approximately 1,500 periodicals and journals and approximately 5,000 books and reference works. Through our licensing agreement with SVP International, we are associated with its network of companies and correspondents 3 providing similar services. This enables FIND/SVP to obtain information for our clients through the use of approximately 1,000 additional consultants in the SVP worldwide network. RECENT DEVELOPMENTS On April 1, 2003, the Company purchased all of the issued and outstanding stock of Guideline Research Corp. ("Guideline"). Guideline, together with its wholly owned subsidiaries Guideline/Chicago, Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and Tabline Data Services, Inc. is a provider of custom market research. Simultaneously with the acquisition, Guideline entered into employment agreements with, among others, the former shareholders of Guideline, Robert La Terra and Jay L. Friedland. Also, 150,000 stock options were granted to one of the former shareholders after the close of this transaction pursuant to the terms of an employment agreement entered into with Guideline at the closing. The purchase price consisted of approximately $4,454,000 in cash (including $525,000 of estimated transaction costs), and 571,237 unregistered shares of the Company's common stock, of which 295,043 shares were placed in escrow. The shares placed in escrow will be distributed to the Sellers on or about May 31, 2004, subject to reduction for the resolution of purchase price adjustments, if any. The Guideline purchase price was financed by the Company's cash resources, the assumption of certain liabilities of Guideline, and by the receipt of $3,400,000 (net of financing costs) obtained from the issuance of: (i) a promissory note with a $3,000,000 face value, with stated interest at 13.5%, due April 1, 2008 (the "Note") to Petra Mezzanine Fund, L.P. ("Petra"), which is secured by a second lien and security interest on substantially all of the Company's assets; (ii) 333,333 shares of convertible, redeemable, cumulative preferred stock, designated as Series A Preferred Stock, to Petra, which are redeemable at Petra's option beginning April 1, 2009 at an initial redemption price of $1.50 per share, or $500,000, plus all accrued but unpaid dividends; and (iii) warrants to Petra to purchase 675,000 shares of the Company's common stock at an exercise price of $.01 per share. The preferred shares are entitled to receive either cash or "payment-in-kind" dividends at a rate of 8.0% annually, and the future redemption price is subject to adjustment for anti-dilution. The warrants are exercisable at any time, and, beginning April 1, 2009, and for a period of four years thereafter, Petra shall have the right to cause the Company to use commercially reasonable efforts to complete a private placement to sell Petra's shares of the Company's common stock issuable upon exercise of the Warrant (the "Warrant Shares") to one or more third parties at a price equal to the market value of the Warrant Shares based on the closing bid price of the Company's common shares as of the date Petra so notifies the Company (the "Put Exercise Date"). In the event a change in control takes place during the period in which the put may be exercised, Petra would have the right to cause the Company to fulfill its repurchase obligations in the same form of consideration as that received by the other selling shareholders. On April 1, 2003, the Company also amended and restated: (i) its term Note with JP Morgan Chase Bank, in the principal amount of $1,500,000 and (ii) its line of credit with JP Morgan Chase Bank in the principal amount of $1,000,000. These amended and restated agreements had the effect of reducing the term Note principal amount from $2,000,000 to $1,500,000, reflecting the current outstanding balance. The final repayment date of the term Note has been moved up from December 31, 2006 to December 31, 2005. As a result, the Company will have a $500,000 balloon payment due at December 31, 2005 instead of making payments of $100,000 each quarter in 2006. In addition, JP Morgan Chase Bank consented to the Company's acquisition of Guideline and the related financing transactions with Petra, and amended various financial covenants of both the term Note and line of credit as follows: 4 1) The previous Debt to Consolidated Tangible Net Worth Covenant of 2.00 was replaced with a Senior Debt to Consolidated Tangible Net Worth plus Subordinated Debt covenant of 0.75; and 2) The previous Consolidated Tangible Net Worth covenant of $3,500,000 was replaced with a Consolidated Tangible Net Worth plus Subordinated Debt covenant of $3,300,000. SERVICES AND PRODUCTS The Company's services and products offer business executives fully integrated research, business intelligence and management advisory services in a broad range of industries and disciplines. The Company provides services to help clients acquire, interpret and use information. At December 31, 2002, Find/SVP's staff included 80 consultants and researchers in its QCS and SCRG divisions. The materials used in the generation of the Company's services and products are updated and checked by staff members. The Company has its own training program in which its employees participate. SERVICES QUICK CONSULTING AND RESEARCH SERVICE QCS provides clients with access to the staff and resources of a large information center, which seeks to handle research inquiries and requests for business assistance in rapid turnaround time. Through QCS, the Company is in the business of providing, on a volume basis, customized answers to business questions on a wide variety of topics. The service is offered only on a retainer basis. Retainer client organizations pay in advance, either monthly, quarterly, semi-annually or annually, a retainer fee. In return, the client organizations receive Membership Cards for their designated executives or employees. The Membership Card entitles each cardholder to use QCS and also offers preferential use of, and/or discounts on, the Company's other services and products. The Company has several fixed and adjustable fee retainer programs in effect. Out-of-pocket expenses incurred to answer questions are invoiced in addition to retainer fees. When our retainer clients call FIND/SVP with their business issues and research needs, they provide their card number and explain their request to our staff consultants who are organized into the following six practice groups: PRACTICE GROUPS: THE CONSUMER PRODUCTS AND SERVICES GROUP is responsible for research on retailing and apparel, home furnishings, cosmetics and toiletries, food and beverages, media and entertainment, publishing, sports and leisure, education, philanthropy, restaurants, food services, household products, appliances and furniture. THE TECHNOLOGY, INFORMATION AND COMMUNICATIONS GROUP is responsible for computers, software, electronic media and office equipment, and provides expert help with Internet research, hands-on training, on-site seminars, competitive intelligence, Web marketing/trends and Internet user demographics. 5 THE HEALTHCARE AND PHARMACEUTICALS GROUP is responsible for products and services manufactured by and marketed to businesses in healthcare fields, including pharmaceuticals, medical and diagnostic equipment, biotechnology, health resources and clinical information. THE FINANCIAL AND BUSINESS SERVICES GROUP is responsible for requests on banking, insurance, mergers and acquisitions, real estate and mortgages, the securities and investment industries, customer satisfaction and corporate management theory, and provides credit reports on specific companies and Securities and Exchange Commission documents on public companies. THE INDUSTRIAL PRODUCTS AND SERVICES GROUP is responsible for manufacturing, energy, chemicals, plastics, pulp and paper, metals and mining, transportation, environment, construction and agriculture. THE MANAGEMENT ADVISORY GROUP is responsible for legal research, human resource issues, accounting and tax issues, international trade and finance, and the advertising and marketing industries. Each of our groups are supported by THE DOCUMENTS TEAM which locates and obtains copies of articles, documents, patents, books, pamphlets, catalogs, conference proceedings, government reports and product samples to supplement the information provided to our clients. Membership Cardholders discuss their research needs with the Company's staff consultants who provide assistance in formulating a focused information request. After the request has been clarified, FIND/SVP's specialists find the needed information using a combination of the Company's available resources. After reviewing the findings, the staff consultants select what appears most relevant to the client's need, and report the findings, with commentary, as needed. Documentation of the findings are primarily sent by electronic mail or any one of a combination of the following methods: facsimile, courier, messenger, mail or electronic mail. QCS allows clients to benefit from a fast, convenient and confidential method to gather knowledge and use the multitude of research resources available today. Cardholders may ask questions on virtually any business subject. Information requests that require business intelligence from overseas are answered by one or more of the information centers in 9 SVP companies worldwide or by using special SVP correspondents in selected countries where no official SVP company exists. QCS is designed to handle client questions requiring less than approximately three hours of actual staff time. These are automatically covered by the retainer fee. Requests requiring a more extensive search or a lengthy written report are not covered by the QCS retainer program and are referred to the Company's Strategic Consulting and Research Group to be handled separately. QCS activity is tracked and controlled by a proprietary management information system called QUESTRAC, which uses recently upgraded state-of-the-art software technology. The program is based on the know-how provided by SVP France, the founders of the SVP concept of quick business advisory services by telephone. Input into the QUESTRAC system provides an exclusive and confidential database of information about each client, and the information requested and handled for clients. 6 At December 31, 2002, there were 1,563 retainer clients, an 8.6% decrease from December 31, 2001, and 10,162 holders of the Membership Card, a 4.0% decrease from December 31, 2001. During 2002, monthly fees billed to retainer clients (the retainer base) increased by 1.2% to $1,488,338. Approximately 40% of the top Fortune 100 industrial companies are QCS retainer clients. Revenues generated by QCS represented 88%, 85% and 82% of the Company's total revenues for the years ended December 31, 2002, 2001 and 2000, respectively. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part II of this Report. STRATEGIC CONSULTING AND RESEARCH GROUP SCRG is designed to handle more in-depth custom market research and competitive intelligence assignments. The service is most often used by the Company's QCS retainer clients as a supplement to that service. Common project requests include customized market and industry studies, telephone surveys, competitive intelligence data-gathering and analysis assignments, acquisition studies and large information collection projects. Additionally, through the Customer Satisfaction Survey & Research Group, SCRG provides customer satisfaction and loyalty programs, through focus groups and customer surveys. Through SCRG, the Company provides research as well as interpretation and analysis. All projects are quoted in advance and billed separately. Revenues generated by SCRG represented 11%, 13% and 16% of the Company's total revenues for each of the years ended December 31, 2002, 2001 and 2000. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part II of this Report. GROWTH STRATEGY The Company intends to expand its services through continued internal development during 2003. This includes various initiatives aimed at both business-to-business and consumer users of the Internet. Additionally, the Company will consider exploring possible strategic alliances with and/or acquisitions of consulting, research or information properties and companies whose primary markets are complimentary to FIND/SVP's market and which would be accretive to our earnings. However, there are no commitments or understandings in this regard and no assurance can be given that the Company will in fact enter into such relationships, conclude any acquisitions or internally develop any related services. The foregoing plans are subject to, among other things, the availability of funds for these purposes. Except for the Petra Financing in connection with the closing of Guideline, we have not made arrangements for, and such additional external funding may never be, available to us on acceptable terms, if at all. See RECENT DEVELOPMENTS above. SVP NETWORK; LICENSING AGREEMENT WITH SVP INTERNATIONAL Through licensing agreements with SVP International, 9 companies (each an "SVP International Company," and collectively, the "SVP International Companies"), including FIND/SVP, form an international network of information centers. Since each SVP International Company is based in a different country, the network has provided the means by which the Company can obtain international information requested by its clients which it may not maintain in its library or have access to if generated by or located in another country. When an SVP International Company accesses the information center of another SVP International Company it is charged a fee for the services provided thereby. Each SVP International Company is linked to the SVP International network primarily by virtue of its licensing agreement. In 1971, the Company entered into its licensing agreement with SVP International, which was amended in 1981 and again in 2001, and obtained the U.S. rights, in perpetuity, to the "SVP" name and 7 know-how and access to the SVP International network. Pursuant thereto, SVP International assisted in the creation, implementation, development and operation of the Company. Historically, SVP International has engaged in periodic telephonic conversations and meetings with the Company. By virtue thereof, the Company has benefited from exchanges of knowledge with SVP International with respect to any enhancements made to SVP International's information retrieval or billing systems or other proprietary know-how. Until November 2001, SVP International (including its affiliates) owned approximately 37% of the outstanding common shares of the Company, excluding outstanding warrants. In November 2001, SVP International and its affiliates sold their entire interest (stock and warrants) in the Company to Marlin Equities, LLC and Walke Associates, Inc., and terminated their management involvement. Our license agreement provides that SVP International or any SVP International Company will not compete with the Company in the United States or enter into any agreement or arrangement with respect to services similar to those offered by the Company with any entity which operates or proposes to operate such services in the United States. The Company, in return, pays SVP International royalties of $18,000 per year, plus 2% of the amount of FIND/SVP's gross revenues for each such year, excluding publishing revenues, derived from certain of its services in excess of $2,000,000 but less than $4,000,000 and 1% of the amount of such non-publishing gross revenues in excess of $4,000,000 but less than $10,000,000, and 1.2% of the gross profit from all publications included in FIND/SVP's gross revenue less than $10,000,000 for such year. MARKETS AND CLIENTS The market for FIND/SVP's services and products is comprised primarily of business executives in a variety of functions, including top management and marketing, planning, marketing research, sales, information/library, legal, accounting, tax and product development. FIND/SVP's primary market, in terms of client organizations, consists of medium to small sized companies. Larger corporations are, however, among the Company's clients. In certain cases, the service is sold to more than one department or division of a large corporation. The Company's appeal to medium to small sized corporations is primarily based on the fact that these companies do not ordinarily maintain their own research staff and resource libraries and when they do, they are generally not comprehensive. Large corporations, on the other hand, often maintain in-house resource centers. The Company believes, however, that in-house corporate libraries are generally not as comprehensive. Therefore, QCS may be perceived as a valuable supplemental resource to our client's in-house capabilities. In addition, in-house centers are good prospects for the Company's other services. Approximately 40% of the top Fortune 100 industrial companies are QCS retainer clients. Overall, the factors that will affect the growth of the Company's potential market and its ability to penetrate it include: (1) the market's perception of the need for and value of consulting, business intelligence and research services; (2) the trends in the use of internal information centers and databases; and (3) the Company's ability to extend its personal selling efforts throughout the country. SALES AND MARKETING The Company's primary marketing focus is to expand its QCS retainer client base. In addition to generating revenues from the QCS services, the retainer client base serves as a ready-made marketplace for SCRG and other potential services of the Company. QCS is marketed through a combination of advertising, direct mail, exhibits, sales promotion activities and the Company's web site. Qualified leads are followed up by FIND/SVP's sales force. These leads 8 are supplemented by referrals and cold-call selling efforts. The cost of the Company's advertising and public relations efforts is modest. The Company also produces The Information Advisor newsletter. This newsletter is published monthly, and provides a comprehensive evaluation of research tools, new sources valuable to researchers and analysis of the most popular information sources. COMPETITION The Company faces competition from three distinct sources: (1) other research and information services, (2) in-house corporate research centers, and (3) institutions that sell information directly to end-users. The Company is aware of several other smaller fee-based on-demand business information services in the United States. The Company believes that of these companies it is the largest in terms of revenues, staff size and resources. Although the Company is not aware of direct competitive companies with larger staffs and revenues, there is no assurance that as the information industry expands, more competitive companies will not enter the market. In addition, there is no assurance that a competitive company will not develop a superior product or service. The Company believes, however, that by reason of its experience in the industry, its association with the SVP International Companies and its intent to closely monitor the consulting industry, it will be able to compete effectively with any potential competitors. In-house corporate information and research centers present a significant source of competition for the Company today. Large corporations, in an effort to stay on top of the vast amount of information available, began to develop in increasing numbers, in-house libraries and information centers for their employees. While the Company believes that its own information center serves the added functions of analysis and generation of information and is larger and better staffed than a majority of these corporate resource centers, there is no assurance that a significant number of these large companies will choose to utilize the Company's services and products. The advent of on-line databases, the Internet and CD-ROM products has increased the ability of companies to perform information searches and other research for themselves. Consequently, to the extent companies perceive they can directly access information from the Internet, on-line databases and acquire CD-ROM products, FIND/SVP competes with information producers that sell to end-users. The Company believes, however, that its consultants deliver a value-added service based on their technical expertise and their ability to search more information products more quickly than most end users, thereby delivering a more thorough and economical service. There is no assurance, however, that companies which develop extensive resource centers will not accordingly staff them with equally productive personnel. EMPLOYEES As of December 31, 2002, the Company had approximately 160 full-time employees, including 34 marketing and sales employees, 80 staff consultants and research employees, and 39 administrative and general personnel. The Company's ability to develop, market and sell its services and to establish and maintain its competitive position will depend, in part, on its ability to attract and retain qualified personnel. While the Company believes that it has been successful to date in attracting such personnel, there can be no assurance that it will continue to do so in the future. The Company is not a party to any collective bargaining agreements with its employees. It considers its relations with its employees to be good. 9 The corporate headquarters are located at 625 Avenue of the Americas, New York, NY 10011, and the telephone number is (212) 645-4500. The Company makes available free of charge through our website, www.findsvp.com, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the proxy statement for the annual meeting of stockholders, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. ITEM 2. PROPERTIES At December 31, 2002, the Company has a lease on approximately 32,000 square feet of office space at 625 Avenue of the Americas, New York, New York, which have been the main offices of the Company since 1987. The lease is subject to standard escalation clauses, and expires in June 2005. Basic annual rent expense, determined on the straight-line basis over the term of the lease, is approximately $694,000. The Company has additional leased office space for approximately 20,000 square feet at 641 Avenue of the Americas, New York, New York. Such lease arrangements are subject to standard escalation clauses, and expire in June 2005. Basic annual rent expense, determined on the straight-line basis over the term of the lease, is approximately $497,000. ITEM 3. LEGAL PROCEEDINGS There are no material legal proceedings pending against the Company. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock, par value $.0001 per share ("Common Stock") is traded on the Over The Counter Bulletin Board under the symbol "FSVP.OB". There were approximately 847 common shareholders of record on April 7, 2003. The Company currently does not and does not intend to pay cash dividends on its common stock in the foreseeable future, and is restricted from doing so under the terms of its debt agreements. Cash generated from operations will be used for general corporate purposes, including acquisitions and supporting organic growth. The following table sets forth the range of high and low bids of our Common Stock for the calendar quarters indicated. The quotes listed below reflect inter-dealer prices or transactions solely between market-makers, without retail mark-up, mark-down or commission and may not represent actual transactions. In April 2001, due to its failure to comply with NASDAQ's $1.00 minimum bid price requirement, the Company's shares of Common Stock were delisted. Trading has since continued to be conducted on the Over The Counter Bulletin Board. Price Range High Low - ----------- ---- --- 2002 - ---- 1st Quarter 1.80 0.80 2nd Quarter 1.75 1.05 3rd Quarter 1.50 0.97 4th Quarter 1.53 1.30 2001 - ---- 1st Quarter 0.81 0.50 2nd Quarter 0.77 0.33 3rd Quarter 0.75 0.48 4th Quarter 1.00 0.34 CHANGES IN SECURITIES AND USE OF PROCEEDS During 2002, options to purchase 353,000 shares of common stock were granted under the Plan, at prices ranging from $0.83 to $1.429, to various employees. These were private transactions not involving a public offering that were exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. At the time of issuance, the foregoing securities were deemed to be restricted securities for purposes of the Securities Act. Information regarding our equity compensation plans required by Item 5, including both stockholder approved plans and non-stockholder approved plans, appearing under the caption "Executive Compensation--Equity Compensation Plan Information" in our proxy statement for the 2003 Annual Meeting of Stockholders is incorporated herein by reference. The proxy statement is anticipated to be filed with the Commission on or about April 30, 2003. 11 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth our selected financial data as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998. The selected financial data set forth below has been derived from our audited consolidated financial statements and related notes for the respective fiscal years. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part II of this Report as well as our consolidated financial statements and notes thereto. These historical results are not necessarily indicative of the results to be expected in the future. STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31 ------------------------------------------------- (in thousands, except per share amounts) 2002 2001 2000 1999 1998 -------- -------- -------- ------- ------- Revenues $ 20,828 $ 22,215 $ 23,800 $22,738 $28,175 Operating (Loss) Income (1,007) (1,148) (753) 348 1,329 Net (Loss) Income (1,124) (945) (535) 883 756 Net (Loss) Income Per Share: Basic (.11) (.12) (.06) .12 .11 Diluted (.11) (.12) (.06) .12 .11 Weighted Average Number of Shares: Basic 10,139 7,880 7,450 7,121 7,094 Diluted 10,139 7,880 7,450 7,213 7,100 Cash Dividends Paid Per Common Share -- -- -- -- -- BALANCE SHEET DATA AS OF DECEMBER 31 ------------------------------------------------- (in thousands) 2002 2001 2000 1999 1998 -------- -------- -------- ------- ------- Working Capital (Current assets less current liabilities) $ 1,433 $ 1,352 $ 1,587 $ 2,699 $ 2,569 Total Assets 9,538 10,692 11,012 11,443 12,064 Long-Term Notes Payable excluding current amounts 1,200 895 1,685 3,039 3,523 Shareholders' Equity 3,713 4,490 3,992 3,889 2,988 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with "Selected Financial Data" as well as our consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K. GENERAL FIND/SVP, Inc. and its wholly owned subsidiaries provided a broad consulting, advisory and business intelligence service to executives and other decision-making employees of client companies, primarily in the United States. The Company currently operates primarily in two business segments, providing consulting and business advisory services including: the Quick Consulting and Research Service ("QCS") which provides retainer clients with access to the expertise of the Company's staff and information resources as well as Live AnswerDesk ("LAD") services; and the Strategic Consulting and Research Group ("SCRG") which provides more extensive, in-depth custom market research and competitive intelligence information, as well as customer satisfaction and loyalty programs. The Company considers its QCS and SCRG service businesses, which operate as "consulting and business advisory" businesses, to be its core competency. On April 1, 2003, the Company acquired Guideline Research Corp. and its wholly owned subsidiaries (see RECENT DEVELOPMENTS in Part 1, Item 1. Business, of this report). The Company expects Guideline to immediately contribute to earnings. RESULTS OF OPERATIONS CALENDAR YEAR 2002 COMPARED TO CALENDAR YEAR 2001 REVENUES Revenues for 2002 were $20,828,000 and revenues for 2001 were $22,215,000. The decreases in revenue, in all aspects of our business, were related to the weakened economy and the weakened market for the Company's services, most notably since the events of September 11, 2001. Specifically, QCS was affected by cancellations of retainer accounts, which was not sufficiently offset by new business, during 2002. The primary factor, which contributed to the decline in SCRG revenue, was the decline in the number of new projects booked. QCS QCS revenues, which result from annual retainer contracts paid by clients on a monthly, quarterly, semi-annual or annual basis, decreased by $469,000, or 2.5%, from $18,978,000 in 2001 to $18,509,000 in 2002. The decrease from 2001 to 2002 was a result of cancellations which were not sufficiently offset by new clients and increased rates. At December 31, 2002, there were a greater number of annual renewals which were billed than the same period in the prior year, and this contributed to a higher accounts receivable balance at December 31, 2002 than December 31, 2001. The fees billed to retainer clients (the retainer base) increased from the beginning of 2002 to the end of 2002 by 1.2% from $1,470,659 to $1,488,338. LAD revenues decreased by $321,000, or 73.6%, from $436,000 in 2001 to $115,000 in 2002. The decrease from 2001 to 2002 was a result of the cancellation of the service's largest client. 13 SCRG SCRG revenues, which result from consulting engagements addressing clients' business issues, decreased by $597,000, or 21.3%, from $2,801,000 in 2001 to $2,204,000 in 2002. The decrease from 2001 to 2002 was due to the continued decline in new projects booked. The Customer Satisfaction Survey and Research Division accounted for 19.0% and 16.7% of SCRG's revenue for 2002 and 2001, respectively. COSTS OF PRODUCTS AND SERVICES SOLD Direct costs (those costs directly related to generating revenue, such as direct labor, expenses incurred on behalf of clients and the costs of electronic resources and databases) decreased by $939,000, or 8.6%, from $10,966,000 in 2001 to $10,027,000 in 2002. Direct costs represented 48.1% and 49.4% of revenues, respectively, in 2002 and 2001. The decrease in total direct costs was due primarily to a decrease in expenses incurred on behalf of clients, in addition to a reduction in direct labor costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased by $589,000, or 4.8%, from $12,397,000, or 55.8% of revenue, in 2001 to $11,808,000, or 56.7% of revenue, in 2002. In 2002 and 2001, the Company recorded an accrual of $257,000 and $228,000, respectively, for restructuring under a Severance Plan approved by the Board of Directors and communicated to employees. In 2001, selling, general and administrative expenses included approximately $169,000 in negative effects related to the events of September 11, 2001. The decrease in selling, general and administrative expenses in terms of dollars during 2002 was due primarily to reductions in general expenses in response to cost containment measures that began in the second quarter of 2001. Bad debt expense decreased as a result of a significant improvement in accounts receivable management during 2002. Also, telecommunication costs decreased as a result of more favorable rates with carriers. INTEREST INCOME AND EXPENSE In 2002, the Company earned $15,000 in interest income, which decreased from $49,000 in 2001. The decrease in 2002 was a result of lower cash balances in interest bearing accounts throughout 2002. Interest expense in 2002 was $156,000, which was a decrease from $246,000 in 2001. The decrease was a result of the replacement of certain of our senior subordinated notes with a term note bearing a lower interest rate. IMPAIRMENT ON INVESTMENT In 1999, the Company entered into an agreement with idealab! and Find.com, Inc. whereby the Company assigned the domain name "find.com" and licensed the use of certain rights to the trademarks "find.com" and "find" to Find.com, Inc. idealab! and Find.com, Inc. are not otherwise related to the Company. Under terms of the agreement, the Company received cash and non-marketable preferred shares in idealab!, and was entitled to certain future royalties. The preferred shares received were valued by the Company at $500,000, and carried various rights including the ability to convert them into common shares of Find.com, Inc., and a put option to resell the shares to idealab! The put option became exercisable in December 2002. 14 Under the terms of the put option, idealab! could either repurchase the preferred shares for $1,500,000 in cash, or elect to return the find.com domain name to the Company. In the latter case, the Company would retain the preferred shares. In January 2003, the Company exercised its put option and idealab! declined to repurchase the preferred shares. This information was considered by the Company in its recurring evaluation of the carrying value of the preferred shares at the lower of historical cost or estimated net realizable value. Using this information together with other publicly available information about idealab!, the Company concluded the net realizable value of its idealab! preferred shares had declined to an estimated $185,000 at December 31, 2002, which resulted in a charge to operations of $315,000 during the quarter ended December 31, 2002. Since the idealab! preferred shares continue to be an investment in a start-up enterprise, it is reasonably possible in the near term that the Company's estimate of the net realizable value of the preferred shares will be further reduced. OPERATING (LOSS) INCOME The Company's operating loss was $1,007,000 in 2002, compared to $1,148,000 in 2001, a decrease in loss of $141,000. This is primarily the result of decreases in direct costs and selling, general and administrative expenses. INCOME TAXES The $339,000 income tax benefit for the year ended December 31, 2002 represents 23% of pre-tax loss. In 2002, a valuation allowance was provided for certain state and local carryforward tax operating loss assets, as the Company determined that it was no longer more likely than not that such assets would be realized during the carryforward period. It is reasonably possible that future valuation allowances will need to be recorded contingent upon the Company's ability to produce future taxable income to offset deferred tax assets. The income tax benefit was lower than the statutory rate due primarily to the recording of a valuation allowance, and expenses, such as meals and entertainment and key-man life insurance premiums, which are not deductible for tax purposes. The $400,000 income tax benefit for the year ended December 31, 2001 represents 29.7% of pre-tax loss. The income tax benefit was lower than the statutory rate due primarily to expenses, such as meals and entertainment expense and non-deductible goodwill, which are not deductible for tax purposes. CALENDAR YEAR 2001 COMPARED TO CALENDAR YEAR 2000 REVENUES The Company's revenues decreased by $1,585,000, or 6.7%, from $23,800,000 in 2000 to $22,215,000 in 2001. The decrease in 2001 was caused by a decrease in the number and size of retainer clients and a decrease in the number and size of SCRG projects, caused by the weakened economy, as described below. QCS QCS revenues, which result from annual retainer contracts paid by clients on a monthly, quarterly, semi-annual or annual basis, decreased by $731,000, or 3.7%, from $19,709,000 in 2000 to $18,978,000 in 2001. The decrease was due to the weakened economy which caused 15 cancellations and a decrease in new sales. In addition, certain accounts cancelled when they ceased operation due to the events of September 11, 2001. Also, the monthly fees billed to retainer clients (the retainer base) decreased from the beginning of 2001 to the end of 2001 by 7.1% from $1,583,308 to $1,470,659. SCRG SCRG revenues, which result from consulting engagements addressing clients' business issues, decreased by $1,069,000, or 27.6%, from $3,870,000 in 2000 to $2,801,000 in 2001. The decrease was due to a decline in new projects booked, caused by the weakened economy. The Customer Satisfaction Survey and Research Division accounted for 16.7% and 13.6% of SCRG's revenue for 2001 and 2000, respectively. COSTS OF PRODUCTS AND SERVICES SOLD Direct costs (those costs directly related to generating revenue, such as direct labor, expenses incurred on behalf of clients and the costs of electronic resources and databases) decreased by $1,161,000, or 9.6%, from $12,127,000 in 2000 to $10,966,000 in 2001. Direct costs represented 49.4% and 51.0% of revenues, respectively, in 2001 and 2000. The decrease in total direct costs was due primarily to a decrease in expenses incurred on behalf of clients, in addition to a reduction in direct labor costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased by $29,000, or less than 1%, from $12,426,000, or 52.2% of revenues in 2000 to $12,397,000, or 55.8% of revenues in 2001. In 2001, selling, general and administrative expenses included approximately $169,000 in negative effects related to the events of September 11, 2001. In 2001, the Company recorded an accrual of $228,000 for restructuring under a Severance Plan. The decrease in selling, general and administrative expenses in terms of dollars was due primarily to reductions in general expenses in response to cost containment measures that began in the second quarter of 2001. Specifically, there were decreases in travel and entertainment expenses, computer supplies, hiring fees, due to the reduced usage of outside agencies, and professional fees, offset by increases in bad debt expense, sales literature and copier rentals. During 2001, the Company incurred losses, which were included in selling, general and administrative expenses, of $169,000 as a result of the events of September 11, 2001. These losses were related to the recording of additional reserves on receivables and incremental staffing costs necessary to maintain service to clients during the week of September 11, 2001. INTEREST INCOME AND EXPENSE In 2001, the Company earned $49,000 in interest income, which decreased from $119,000 in 2000. The decrease in 2001 was a result of lower cash balances throughout 2001, coupled with interest rates reduced from the previous years. Interest expense in 2001 was $246,000, which was a decrease from $336,000 in 2000. The decrease was a result of the reduction in outstanding debt in 2001 as compared to previous years. In the third quarter of 2000, the Company reduced its interest expense by replacing a portion of its Senior Subordinated Notes with a Term Note bearing a lower interest rate. 16 OPERATING (LOSS) INCOME The Company's operating loss was $1,148,000 in 2001, compared to $753,000 in 2000, an increase in loss of $395,000. The increased loss was primarily related to the effects of the weakened economy and the effects of the events of September 11, 2001. INCOME TAXES The $400,000 income tax benefit for the year ended December 31, 2001 represents 29.7% of pre-tax loss. The income tax benefit was lower than the statutory rate due primarily to expenses, such as meals and entertainment expense and non-deductible goodwill, which are not deductible for tax purposes. The $323,000 income tax benefit for the year ended December 31, 2000 represents 38.9% of pre-tax loss. SEGMENT REPORTING The Company operated in two segments during 2002, 2001 and 2000. Segment data, which is useful in understanding results, is as follows: YEARS ENDED DECEMBER 31, (IN THOUSANDS) -------------------------------- 2002 2001 2000 -------- -------- -------- REVENUES QCS, including LAD $ 18,624 $ 19,414 $ 19,930 SCRG 2,204 2,801 3,870 -------- -------- -------- Total revenues $ 20,828 $ 22,215 $ 23,800 ======== ======== ======== OPERATING (LOSS) INCOME QCS, including LAD $ 4,127 $ 4,429 $ 4,545 SCRG (99) (314) (58) -------- -------- -------- Segment operating income 4,028 4,115 4,487 Corporate and other (1) (5,035) (5,263) (5,240) -------- -------- -------- Operating loss $ (1,007) $ (1,148) $ (753) ======== ======== ======== DEPRECIATION AND AMORTIZATION QCS, including LAD $ 460 $ 539 $ 583 SCRG 59 66 68 -------- -------- -------- Total segment depreciation and amortization 519 605 651 Corporate and other 420 482 459 -------- -------- -------- Total depreciation and amortization $ 939 $ 1,087 $ 1,110 ======== ======== ======== TOTAL ASSETS QCS, including LAD $ 3,161 $ 2,871 SCRG 467 315 -------- -------- Total segment assets 3,628 3,186 Corporate and other 5,910 7,506 -------- -------- Total assets $ 9,538 $ 10,692 ======== ======== CAPITAL EXPENDITURES QCS, including LAD $ 134 $ 119 $ 160 SCRG 3 5 30 -------- -------- -------- Total segment capital expenditures 137 124 190 Corporate and other 320 180 380 -------- -------- -------- Total capital expenditures $ 457 $ 304 $ 570 ======== ======== ======== (1) Includes certain direct costs and selling, general and administrative expenses not attributable to a single segment. 17 QUARTERLY FINANCIAL DATA The following table sets forth selected quarterly data for the years ended December 31, 2002 and 2001 (in thousands, except per share data). The operating results are not indicative of results for any future period. (Loss) income before provision (Loss) (Loss) (benefit) income income Operating for Net per per (loss) income (loss) share: share: Quarter Ended Revenues income taxes income basic diluted ------------- -------- ------ ----- ------ ----- ------- March 31, 2002 $ 5,044 $ (674) $ (674) $ (473) $(0.05) $(0.05) June 30, 2002 5,226 (239) (267) (186) (0.02) (0.02) September 30, 2002 5,209 113 79 55 0.01 0.00 December 31, 2002 5,349 (207) (600) (520) (0.05) (0.05) March 31, 2001 $ 6,123 $ 78 $ 24 $ 18 $ 0.00 $ 0.00 June 30, 2001 5,753 (143) (191) (143) (0.02) (0.02) September 30, 2001 5,381 (268) (323) (213) (0.03) (0.03) December 31, 2001 4,958 (815) (855) (607) (0.08) (0.08) In the fourth quarter of 2002, the Company recorded a charge to operations of $315,000 to write-down the carrying value of its preferred shares of idealab! In the fourth quarter of 2002 and 2001, charges related to severance costs of $147,000 and $228,000, respectively, were recorded. Also, approximately $80,000 was recorded related to bonus and commission arrangements at December 31, 2002. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Historically, the Company's primary sources of liquidity and capital resources have been cash flow from retainer accounts (including prepaid retainer fees from clients) and borrowings. Cash balances were $968,000 and $1,951,000 at December 31, 2002 and 2001, respectively. The Company's working capital position (current assets, less current liabilities) at December 31, 2002 was $1,433,000, as compared to $1,352,000 at December 31, 2001. Cash provided by (used in) operating activities was $(677,000), $299,000 and $(690,000) in the years ended December 31, 2002, 2001 and 2000, respectively. Cash used in investing activities was $319,000, $167,000 and $433,000 in the years ended December 31, 2002, 2001 and 2000, respectively. Capital expenditures during 2002 and 2001 were mainly for computer hardware upgrades and leasehold improvements. Capital expenditures for the migration of the Company's 10-year-old management information system to a new computer system platform were a significant component of the amounts invested in 2000. 18 Total capital expenditures were $457,000, $304,000 and $570,000 in the years ended December 31, 2002, 2001 and 2000, respectively. During the year ending December 31, 2003, the Company expects to spend approximately $500,000 for capital items, the major portions of which will be used for computer hardware and software upgrades and for leasehold improvements. Cash provided by (used in) financing activities was $13,000, $918,000 and ($72,000) in the years ended December 31, 2002, 2001 and 2000, respectively. In 2001, the most significant item was the net proceeds obtained from the issuance of shares of common stock for $1,443,000. In 2000, the most significant items related to the early repayment of debt, which were otherwise due in installments in the years 2001 and 2002. In connection with the repayment of such bank borrowings, the bank released two $1,000,000 standby letters of credit that had been provided by a shareholder, SVP, S.A. In February 2002, the Company entered into a financing arrangement with JP Morgan Chase Bank providing for a term note (the "Term Note") in the principal amount of $2,000,000. The Term Note bears interest at prime plus 1.25%, and is payable in quarterly installments beginning March 31, 2002. As of December 31, 2002, there was $1,600,000 outstanding on this Note, of which $400,000 is classified as current. Interest expense related to this note amounted to $94,000 for the year ended December 31, 2002. The Term Note contains certain restrictions on the conduct of our business, including, among other things, restrictions, generally, on incurring debt, making investments, creating or suffering liens, tangible net worth, cash flow coverage, or completing mergers. The proceeds from the February 2002 Term Note were used to repay the $1,100,000 balance on its $1,400,000 Term Note, due June 30, 2005, and to repay the remaining balance of $475,000 on certain outstanding senior subordinated notes. The Company maintains a $1,000,000 line of credit with JP Morgan Chase Bank (the "Line of Credit"). Interest on the unpaid balance of the Line of Credit is at JP Morgan Chase Bank's prime commercial lending rate plus one-half percent. The Line of Credit is renewable annually, and was initially put in place on December 30, 1999. In July 2002, we accessed $1,000,000 under the Line of Credit, of which approximately $824,000 was used to acquire approximately 3% of the outstanding shares of common stock of a publicly traded research and consulting company. The Company consulted with, and obtained the consent of, JP Morgan Chase Bank with respect to this transaction. The Company sold all of its holdings in this publicly traded research and consulting company, and the proceeds approximated the carrying value of these securities. The proceeds from the sale of these securities were used to repay $824,000 of the balance outstanding on the Line of Credit. As of December 31, 2002, $176,000 remains outstanding. The Line of Credit contains certain restrictions on the conduct of our business, including, among other things, restrictions, generally, on incurring debt, and creating or suffering liens. The Company's Term Note and Line of Credit are secured by a general security interest in substantially all of the Company's assets. In May 2002, JP Morgan Chase agreed to lower the minimum tangible net worth covenant in the Term Note agreement to $3,500,000, and the waived the prior covenant at the March 31, 2002 report date. In March 2003, JP Morgan Chase agreed to waive the prior cash flow coverage covenant for the twelve-month period ended December 31, 2002. On April 1, 2003, the Company amended and restated: (i) its term Note with JP Morgan Chase Bank, in the principal amount of $1,500,000 and (ii) its line of credit with JP Morgan 19 Chase Bank in the principal amount of $1,000,000. These amended and restated agreements had the effect of reducing the term Note principal amount from $2,000,000 to $1,500,000, reflecting the current outstanding balance. The final repayment date of the term Note has been moved up from December 31, 2006 to December 31, 2005. As a result, the Company will have a $500,000 balloon payment due at December 31, 2005 instead of making payments of $100,000 each quarter in 2006. In addition, JP Morgan Chase Bank consented to the Company's acquisition of Guideline and the related financing transactions with Petra, and amended various financial covenants of both the term Note and line of credit as follows: 1) The previous Debt to Consolidated Tangible Net Worth Covenant of 2.00 was replaced with a Senior Debt to Consolidated Tangible Net Worth plus Subordinated Debt covenant of 0.75; and 2) The previous Consolidated Tangible Net Worth covenant of $3,500,000 was replaced with a Consolidated Tangible Net Worth plus Subordinated Debt covenant of $3,300,000. As a result of these financial covenant amendments and the consent by JP Morgan Chase, the Company believes it was in compliance with all of its loan agreements with JP Morgan Chase upon the closing of the Company's acquisition of Guideline and its related financing with Petra. The Company believes that cash generated from operations, the proceeds from its Term Note and Line of Credit with JP Morgan Chase and its cash and cash equivalents will be sufficient to fund our operations for the foreseeable future. The following summarizes the Company's financial obligations and their expected maturities, and the effect such obligations are expected to have on liquidity and cash flow in the periods indicated. - -------------------------------------------------------------------------------- As of December 31, 2002 (in thousands) --------------------------------------------------- Less than 1 - 3 After 3 Total 1 year years years --------- --------- --------- --------- Notes payable $ 1,806 $ 606 $ 1,200 $ -- Long term lease commitments 2,132 853 1,279 -- Deferred compensation 441 -- -- 441 --------- --------- --------- --------- $ 4,379 $ 1,459 $ 2,479 $ 441 ========= ========= ========= ========= - -------------------------------------------------------------------------------- INFLATION The Company has in the past been able to increase the price of its products and services sufficiently to offset the effects of inflation on direct costs, and anticipates that it will be able to do so in the future. 20 CRITICAL ACCOUNTING POLICIES Our management's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. Our preparation of our financial statements requires us to make estimates and judgments that affect reported amounts of assets, liabilities and revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to allowances for doubtful accounts, restructuring, useful lives of property, plant and equipment and intangible assets, income tax valuation allowances and other accrued expenses. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations. INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has tax loss carryforwards that have been recognized as assets on its balance sheet. These assets are subject to expiration from 2012 to 2022. Realization of the net deferred tax assets is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. In 2002, after the Company performed an analysis of its deferred tax assets and projected future taxable income, a valuation allowance was provided for certain state and local carryforward tax operating loss assets, as the Company determined that it was no longer more likely than not that such assets would be realized during the carryforward period. It is reasonably possible that future valuation allowances will need to be recorded if the Company is unable to generate sufficient future taxable income to realize such deferred tax assets during the carryforward period. Although realization is not assured, management believes that it is more likely than not that the deferred tax assets will be realized. NON-MARKETABLE EQUITY SECURITIES The preferred share securities in idealab! are an investment in a start-up enterprise. It is reasonably possible in the near term that the Company's estimate of the net realizable value of the preferred shares will be less than the carrying value of the preferred shares. NEW ACCOUNTING PRONOUNCEMENTS ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which will be adopted by the Company as of January 1, 2003. This standard addresses issues associated with the retirement of tangible long-lived assets. The Company does 21 not believe that there will be any impact on its consolidated financial position and results of operations that will result from the adoption of this standard. RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". The Company elected to early adopt the provisions of this omnibus statement, which makes changes to several existing authoritative pronouncements to make technical corrections, to clarify meanings, or to describe their applicability under changed conditions. The adoption of this standard did not affect the current financial position or results of operations of the Company. Adoption of the standard caused the loss on repayment of debt that occurred in the year ended December 31, 2000 to be reclassified as interest expense on the statement of operations, from its prior presentation as an extraordinary item. ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that costs associated with an exit or disposal plan be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Management believes that the adoption of this standard will not have an impact on the Company's reported financial position or results of operations, as treatment of this standard is prospective. ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE - AN AMENDMENT OF FASB STATEMENT NO. 123 In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123." This statement amends SFAS No. 123 by providing alternative methods of adopting the fair-value method of accounting for stock-based compensation, if an entity elects to discontinue using the intrinsic-value method of accounting permitted in Accounting Principles Board (APB) Opinion No. 25. One of these adoption methods, under which a prospective adoption of the fair-value method would be permitted without the need for a cumulative restatement of prior periods, is only available to the Company if adopted in 2003. The statement also amended with immediate effect certain disclosure requirements of SFAS No. 123 which the Company adopted as of December 31, 2002. Management continues to study whether it will continue to account for stock-based compensation under APB No. 25 or whether it will adopt SFAS No. 123 as amended. COMMITMENTS AND CONTINGENCIES In March 2003, the Company became aware of a lease modification agreement from 1992 related to its primary offices at 625 Avenue of the Americas that differs from a second lease modification agreement signed by the same parties also in 1992. The lease modification agreement that the Company believes to be in effect has been consistently disclosed and used to account for this operating lease since 1992. These two agreements are dated within two days of each other. The significant difference between the terms of the documents are that the newly 22 discovered document indicates a lease expiration in June 2004, one year prior to the June 2005 expiration date in the agreement that the Company believes to be in effect. The Company has requested its landlord to investigate their files, however, this investigation remains incomplete and accordingly no determination as to which agreement is definitive has been made. The Company believes that the agreement it has consistently relied upon and which expires in June 2005 is the governing agreement. Based upon review of the documents that have been located, outside counsel has advised the Company that a reasonable basis exists for the Company's position. If the newly discovered document is determined to be the definitive agreement, as of December 31, 2002 the Company would be obligated to write-off approximately $310,000 of the rental asset recorded on its balance sheet, which would cause an after-tax reduction to shareholders equity of approximately $210,000. FORWARD-LOOKING STATEMENTS In this report, and from time to time, we may make or publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, and similar matters. Such statements are necessarily estimates reflecting management's best judgment based on current information. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Such statements are usually identified by the use of words or phrases such as "believes," "anticipates," "expects," "estimates," "planned," "outlook," and "goal." Because forward-looking statements involve risks and uncertainties, our actual results could differ materially. In order to comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in forward-looking statements. While it is impossible to identify all such factors, the risks and uncertainties that may affect the operations, performance and results of our business include the following: FACTORS THAT COULD AFFECT OUR FUTURE RESULTS WE ARE DEPENDENT ON CLIENT RENEWALS OF OUR RETAINER-BASED SERVICES. We derived approximately 90% of our total revenues in 2002 from QCS, our retainer business. In the year ended December 31, 2002, QCS experienced an 8.6% decrease in retainer clients, and a 4% decrease in holders of its Membership Card. We may not be successful in maintaining retainer renewal rates or the size of its retainer client base. Also, the Company's ability to renew retainer accounts is subject to a number of risks, including the following: o We may be unsuccessful in delivering consistent, high quality and timely analysis and advice to its clients. o We may not be able to hire and retain a large and growing number of highly talented professionals in a very competitive job market. o We may be unsuccessful in understanding and anticipating market trends and the changing needs of its clients. o We may not be able to deliver products and services of the quality and timeliness to withstand competition. If the Company is unable to successfully maintain its retainer rates or sustain the necessary level of performance, such an inability could have a material adverse effect on the 23 Company's business and financial results, which may require us to modify our business objectives or reduce or cease some of products and services that we offer. WE ARE DEPENDENT ON THE REVENUE WE RECEIVE FROM NON-RECURRING SCRG ENGAGEMENTS. The Company derived approximately 10% of its revenues during the year ended December 31, 2002, from SCRG. The Company currently anticipates growth in revenues from SCRG as projected demand increases for projects of longer duration and complexity. SCRG engagements vary in number, size and scope and typically are project based and non-recurring. The Company's ability to replace completed SCRG engagements with new engagements is subject to a number of risks, including the following: o We may be unsuccessful in delivering consistent, high quality and timely consulting services to its clients. o We may not be able to hire and retain a large and growing number of highly talented professionals in a very competitive job market. o We may be unsuccessful in understanding and anticipating market trends and the changing needs of its clients. o We may not be able to deliver consulting services of the quality and timeliness to withstand competition. If the Company is not able to replace completed SCRG engagements with new engagements, such an inability could have a material adverse effect on the Company's business and financial results, which may require us to modify our business objectives or reduce or cease some of products and services that we offer. OUR OPERATING RESULTS ARE SUBJECT TO POTENTIAL FLUCTUATIONS BEYOND OUR CONTROL. The Company's operating results vary from quarter to quarter. The Company expects future operating results to fluctuate due to several factors, many of which are out of the Company's control: o The disproportionately large portion of our QCS retainers that expire in the fourth quarter of each year. o The level and timing of renewals of retainers of our QCS services. o The mix of QCS revenue versus SCRG revenue. o The number, size and scope of SCRG engagements in which the Company is engaged, the degree of completion of such engagements, and the Company's ability to complete such engagements. o The timing and amount of new business generated by the Company. o The timing of the development, introduction, and marketing of new products and services and modes of delivery. o The timing of hiring consultants and corporate sales personnel. o Consultant utilization rates and specifically, the accuracy of estimates of resources required to complete ongoing SCRG engagements. o Changes in the spending patterns of the Company's clients. o The Company's accounts receivable collection experience. o Competitive conditions in the industry. 24 Due to these factors, the Company believes period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as an indication of future results of operations. WE MAY NOT BE ABLE TO TIMELY RESPOND TO RAPID CHANGES IN THE MARKET OR THE NEEDS OF OUR CLIENTS. The Company's success depends in part upon its ability to anticipate rapidly changing market trends and to adapt its products and services to meet the changing needs of its clients. Frequent and often dramatic changes, including the following, characterize the Company's industry: o Introduction of new products and obsolescence of others o Changing client demands concerning the marketing and delivery of the Company's products and services This environment of rapid and continuous change presents significant challenges to the Company's ability to provide its clients with current and timely analysis and advice on issues of importance to them. The Company commits substantial resources to meeting these challenges. If the Company fails to provide insightful timely information in a manner that meets changing market needs, such a failure could have a material and adverse effect on the Company's future operating results. WE ARE DEPENDENT ON OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL. The Company needs to hire, train and retain a significant number of additional qualified employees to execute its strategy and support its growth. In particular, the Company needs trained consultants, corporate sales specialists, and product development and operations staff. The Company continues to experience intense competition in recruiting and retaining qualified employees. The pool of experienced candidates is small, and the Company competes for qualified employees against many companies. If the Company is unable to successfully hire, retain, and motivate a sufficient number of qualified employees, such an inability will have a material adverse effect on the Company's business and financial results. WE FACE SEVERE COMPETITION. The consulting industry is extremely competitive. The Company competes directly with other independent providers of similar services and indirectly with the internal staffs of current and prospective client organizations. The Company also competes indirectly with larger electronic and print media companies and consulting firms. The Company's indirect competitors, many of which have substantially greater financial, information gathering and marketing resources than the Company, could choose to compete directly against the Company in the future. The Company's market has few barriers to entry. New competitors could easily compete against the Company in one or more market segments addressed by the Company's QCS or SCRG services. The Company's current and future competitors may develop products and services that are more effective than the Company's products and services. Competitors may also produce their products and services at less cost and market them more effectively. If the Company is unable to successfully compete against existing or new competitors, such an inability will have a material adverse effect on the Company's operating results and would likely result in pricing pressure and loss of market share. 25 WE MAY NOT BE SUCCESSFUL IN THE DEVELOPMENT AND MARKETING OF NEW PRODUCTS OR SERVICES. The Company's future success depends on its ability to develop or acquire new products and services that address specific industry and business sectors and changes in client requirements. The process of internally researching, developing, launching and gaining client acceptance of a new product or service is inherently risky and costly. Assimilating and marketing an acquired product or service is also risky and costly. Currently, the Company has formed several strategic alliances with other information providers and various business associations in order to expand its client base and allow for the rollout of a new service continuum. If the Company is unable to develop new products and services or manage its strategic investments, such inabilities could have a material adverse effect on the Company's operating results. WE ARE DEPENDENT ON KEY PERSONNEL, THE LOSS OF ANY MAY ADVERSELY EFFECT THE COMPANY. The Company relies, and will continue to rely, in large part on its key management, research, consulting, sales, product development and operations personnel. The Company's success in part depends on its ability to motivate and retain highly qualified employees. If any members of the Company's Operating Management Group, which, at the time of the filing of this Report, includes the CEO, President, CFO and two other Senior Vice Presidents, leave the Company, such loss or losses could have a material adverse effect on the Company. RISK OF PRODUCT PRICING LIMITING POTENTIAL MARKET. The Company's pricing strategy may limit the potential market for the Company's QCS and SCRG services to substantial commercial and governmental entities. As a result, the Company may be required to reduce prices for its QCS and SCRG services or to introduce new products and services with lower prices or offered for free over the Internet in order to expand or maintain its market share or broaden its addressed market. These actions could have a material adverse effect on the Company's business and results of operations. WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH. Growth places significant demands on the Company's management, administrative, operational and financial resources. The Company's ability to manage growth, should it continue to occur, will require the Company to continue to improve its systems and to motivate and effectively manage an evolving workforce. If the Company's management is unable to effectively manage a changing and growing business, the quality of the Company's products, its retention of key employees, and its results of operations could be materially adversely affected. ANY ACQUISITIONS THAT WE ATTEMPT OR COMPLETE COULD PROVE DIFFICULT TO INTEGRATE OR REQUIRE A SUBSTANTIAL COMMITMENT OF MANAGEMENT TIME AND OTHER RESOURCES. As part of its business strategy, the Company looks to buy or make investments in complementary businesses, products and services. If the Company finds a business it wishes to acquire, the Company could have difficulty negotiating the terms of the purchase, financing the purchase, and integrating and assimilating the employees, products and operations of the acquired business. Acquisitions may disrupt the ongoing business of the Company and distract management. Furthermore, acquisition of new businesses may not lead to the successful development of new products, or if developed, such products may not achieve market acceptance or prove to be profitable. A given acquisition may also have a material adverse effect on the 26 Company's financial condition or results of operations. In addition, the Company may be required to incur debt or issue equity to pay for any future acquisitions. WE ARE VULNERABLE TO VOLATILE MARKET CONDITIONS. The market prices of our common stock have been highly volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Please see the table contained in Item 5 "Market for Registrant's Common Equity and Related Stockholder Matters" of Part II of this Report which sets forth the range of high and low bids of our common stock for the calendar quarters indicated. WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE. Although our shareholders may receive dividends if, as and when declared by our board of directors, we do not intend to pay dividends on our common stock in the foreseeable future. Therefore, you should not purchase our common stock if you need immediate or future income by way of dividends from your investment. OUR COMMON STOCK IS SUBJECT TO RULES REGARDING "PENNY STOCKS" WHICH MAY AFFECT ITS LIQUIDITY. In April 2001, due to its failure to comply with NASDAQ's minimum bid price, our Common Stock was delisted from the NASDAQ and is now traded on the OTC Bulletin Board. Because the trading price of our common stock is currently below $5.00 per share, trading is subject to certain other rules of the Securities Exchange Act of 1934. Such rules require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a "penny stock." "Penny stock" is defined as any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery of a disclosure schedule explaining the penny stock market and the risks associated with that market before entering into any penny stock transaction. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. The rules also impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to the sale. Finally, monthly statements are required to be sent disclosing recent price information for the penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our Common Stock. This could severely limit the market liquidity of our Common Stock and your ability to sell the Common Stock. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary exposures to market risks include fluctuations in interest rates on its short-term and long-term borrowings of $1,806,000 as of December 31, 2002 under its credit facility. Management does not believe that the risk inherent in the variable-rate nature of these instruments will have a material adverse effect on the Company's consolidated financial statements. However, no assurance can be given that such a risk will not have a material adverse effect on the Company's financial statements in the future. As of December 31, 2002, the outstanding balance on all of the Company's credit facilities was $1,806,000. Based on this balance, an immediate change of one percent in the 27 interest rate would cause a change in interest expense of approximately $20,000 on an annual basis. The Company's objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared with fixed-rate borrowings. In July 2002, the Company borrowed $1,000,000 under its line of credit, of which approximately $824,000 was used to acquire approximately 3% of the outstanding common shares of a publicly traded research and consulting company. As a result, the Company's total outstanding debt increased as compared to December 31, 2001, which has increased the Company's exposure to interest rate market risk. The Company consulted with, and obtained the consent of, its lender with respect to this transaction. In September and October 2002, the Company sold its shares of a publicly traded research and consulting company for approximately $824,000. These proceeds were used to pay down a portion of this line of credit. As of December 31, 2002, approximately $176,000 was outstanding under this line. Interest expense related to this note amounted to approximately $20,000 for the year ended December 31, 2002. Except as set forth in the preceding paragraph, there has been no material change in the Company's assessment of its sensitivity to market risk as of December 31, 2002, as compared to the information included in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk", of the Company's Form 10-K for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on April 1, 2002. The Company does not invest or trade in any derivative financial or commodity instruments, nor does it invest in any foreign financial instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements are submitted in a separate section of this report on pages F-1 through F-27. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 28 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Other information required by Item 10 including information regarding directors, appearing under the captions "Election of Directors" and "Other Matters" of the Company's proxy statement for the 2003 Annual Meeting of Stockholders is incorporated herein by reference. The proxy statement is anticipated to be filed with the Commission on or about April 30, 2003. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 appearing under the caption "Executive Compensation" of the Company's proxy statement for the 2003 Annual Meeting of Stockholders is incorporated herein by reference. The proxy statement is anticipated to be filed with the Commission on or about April 30, 2003. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 appearing under the captions "Executive Compensation - Equity Compensation Plans" and "Security Ownership of Certain Beneficial Owners and Management" of the Company's proxy statement for the 2003 Annual Meeting of Stockholders is incorporated herein by reference. The proxy statement is anticipated to be filed with the Commission on or about April 30, 2003. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 appearing under the caption "Certain Relationships and Related Transactions" of the Company's proxy statement for the 2003 Annual Meeting of Stockholders is incorporated herein by reference. The proxy statement is anticipated to be filed with the Commission on or about April 30, 2003. ITEM 14. DISCLOSURE CONTROLS AND PROCEDURES Within 90 days prior to the filing of this report, an evaluation was performed under the supervision and participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation. 29 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Financial Statements: Location In 10-K ---------- Report of independent auditors F-2 Consolidated balance sheets - December 31, 2002 and 2001 F-3 Consolidated statements of operations - Years ended December 31, 2002, 2001 and 2000 F-4 Consolidated statements of changes in stockholders' equity - Years ended December 31, 2002, 2001 and 2000 F-5 Consolidated statements of cash flows - Years ended December 31, 2002 2001 and 2000 F-6 Notes to consolidated financial statements F-7 (2) Financial Statement Schedule: See Schedule II of this Form 10-K. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 2002 (c) Exhibits: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 3.1 Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 3.2 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 3.3 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 30 3.4 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 2, 1995) 3.5 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 13, 1998) 3.6 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 27, 1998) 3.7 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 10, 2002) 3.8 By-laws of the Company (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1987) 3.9 Amendment to the By-laws of the Company (filed herewith) 4.1 Specimen of the Company's Common Stock Certificate (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 10.1 License Agreement, dated October 11, 1971, between the Company and SVP International (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 10.2 Amendment to License Agreement, dated March 23, 1981, between the Company and SVP International (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 10.3 Amendment to License Agreement, dated November 21, 2001, between the Company and SVP International (filed herewith) 10.4 Lease, dated March 15, 1995, between Urbicum Associates, L.P. and the Company, related to premises on 4th floor at 641 Avenue of the Americas, New York, NY (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1994) 10.5 Lease, dated December 15, 1986, between Chelsea Green Associates and the Company, related to premises at 625 Avenue of the Americas, New York, NY (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1992) 10.6 The Company's 401(k) and Profit Sharing Plan (incorporated by reference to the Company's Form S-8, filed on March 29, 1996)* 10.7 The Company's 1996 Stock Option Plan (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 10, 2002)* 31 10.8 Collaboration Agreement, dated as of December 19, 1999, by and among Bill Gross' idealab!, the Company, and find.com, Inc. (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1999) 10.9 $2,000,000 Term Note, dated February 20, 2002, by the Company in favor of JPMorgan Chase Bank (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001) 10.10 $1,000,000 Senior Grid Promissory Note, dated June 18, 2002, by the Company in favor of JPMorgan Chase Bank (filed herewith) 10.11 Stock Purchase Agreement, dated January 15, 1998, between SVP, S.A. and the Company (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1999) 10.12 Amended and restated Employment Agreement, dated November 21, 2001, between the Company and Andrew P. Garvin (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.13 Amendment No. 1 to Amended and Restated Employment Agreement, dated December 31, 2002, between the Company and Andrew P. Garvin (filed herewith)* 10.14 Employment Agreement, dated November 21, 2001, between the Company and David Walke (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.15 Employment Agreement, dated February 6, 2002, between the Company and Martin E. Franklin (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.16 Employment Agreement, dated May 13, 2002, between the Company and Peter M. Stone (incorporated by reference to the Company's Form 10-Q filed for the quarter ended June 30, 2002)* 10.17 Employment Agreement, dated May 13, 2002, between the Company and Daniel S. Fitzgerald (incorporated by reference to the Company's Form 10-Q filed for the quarter ended June 30, 2002)* 21 List of Subsidiaries (filed herewith) 23 Consent of Independent Auditors (filed herewith) 99.1 Certifications Pursuant to 18 U. S. C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) * This exhibit represents a management contract or a compensatory plan. 32 SIGNATURES 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. FIND/SVP, INC. (Registrant) By: /s/ DAVID WALKE --------------------------------- David Walke, Chief Executive Officer April 11, 2003 Pursuant to the requirement(s) of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. (1) Principal Executive Officer: /s/ DAVID WALKE Chief Executive Officer --------------------------------- April 11, 2003 David Walke (2) Principal Financial Officer and Principal Accounting Officer: /s/ PETER M. STONE Chief Financial Officer --------------------------------- April 11, 2003 Peter M. Stone (3) Board of Directors: /s/ ANDREW P. GARVIN President and Director --------------------------------- April 11, 2003 Andrew P. Garvin /s/ MARTIN E. FRANKLIN Chairman of Board of Directors --------------------------------- April 11, 2003 Martin E. Franklin /s/ MARC L. REISCH Director --------------------------------- April 11, 2003 Marc L. Reisch /s/ DENISE L. SHAPIRO Director --------------------------------- April 11, 2003 Denise L. Shapiro /s/ ROBERT J. SOBEL Director --------------------------------- April 11, 2003 Robert J. Sobel /s/ WARREN STRUHL Director --------------------------------- April 11, 2003 Warren Struhl 33 CERTIFICATIONS I, David Walke, certify that: 1. I have reviewed this annual report on Form 10-K of FIND/SVP, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 11, 2003 /s/ DAVID WALKE - --------------- David Walke Chief Executive Officer 34 CERTIFICATIONS (CONTINUED) I, Peter Stone, certify that: 1. I have reviewed this annual report on Form 10-K of FIND/SVP, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 11, 2003 /s/ PETER M. STONE - ------------------ Peter M. Stone Chief Financial Officer 35 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 3.1 Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 3.2 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 3.3 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 3.4 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 2, 1995) 3.5 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 13, 1998) 3.6 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 27, 1998) 3.7 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 10, 2002) 3.8 By-laws of the Company (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1987) 3.9 Amendment to the By-laws of the Company (filed herewith) 4.1 Specimen of the Company's Common Stock Certificate (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 10.1 License Agreement, dated October 11, 1971, between the Company and SVP International (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 10.2 Amendment to License Agreement, dated March 23, 1981, between the Company and SVP International (incorporated by reference to the Company's Registration Statement on Form S-18 (Reg. No. 33-8634-NY) which became effective with the Securities and Exchange Commission on October 31, 1986) 36 10.3 Amendment to License Agreement, dated November 21, 2001, between the Company and SVP International (filed herewith) 10.4 Lease, dated March 15, 1995, between Urbicum Associates, L.P. and the Company, related to premises on 4th floor at 641 Avenue of the Americas, New York, NY (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1994) 10.5 Lease, dated December 15, 1986, between Chelsea Green Associates and the Company, related to premises at 625 Avenue of the Americas, New York, NY (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1992) 10.6 The Company's 401(k) and Profit Sharing Plan (incorporated by reference to the Company's Form S-8, filed on March 29, 1996)* 10.7 The Company's 1996 Stock Option Plan (incorporated by reference to the Company's Definitive Proxy Statement, filed on May 10, 2002) * 10.8 Collaboration Agreement, dated as of December 19, 1999, by and among Bill Gross' idealab!, the Company, and find.com, Inc. (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1999) 10.9 $2,000,000 Term Note, dated February 20, 2002, by the Company in favor of JPMorgan Chase Bank (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001) 10.10 $1,000,000 Senior Grid Promissory Note, dated June 18, 2002, by the Company in favor of JPMorgan Chase Bank (filed herewith) 10.11 Stock Purchase Agreement, dated January 15, 1998, between SVP, S.A. and the Company (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 1999) 10.12 Amended and restated Employment Agreement, dated November 21, 2001, between the Company and Andrew P. Garvin (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.13 Amendment No. 1 to Amended and Restated Employment Agreement, dated December 31, 2002, between the Company and Andrew P. Garvin (filed herewith)* 10.14 Employment Agreement, dated November 21, 2001, between the Company and David Walke (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.15 Employment Agreement, dated February 6, 2002, between the Company and Martin E. Franklin (incorporated by reference to the Company's Form 10-K filed for the year ended December 31, 2001)* 10.16 Employment Agreement, dated May 13, 2002, between the Company and Peter M. Stone (incorporated by reference to the Company's Form 10-Q filed for the quarter ended June 30, 2002)* 37 10.17 Employment Agreement, dated May 13, 2002, between the Company and Daniel S. Fitzgerald (incorporated by reference to the Company's Form 10-Q filed for the quarter ended June 30, 2002)* 21 List of Subsidiaries (filed herewith) 23 Consent of Independent Auditors (filed herewith) 99.1 Certifications Pursuant to 18 U. S. C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 38 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FIND/SVP, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule PAGE ---- Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 2002 and 2001 F-3 Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000 F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2002, 2001 and 2000 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 F-6 Notes to Consolidated Financial Statements F-7 Schedule: Independent Auditors' Report on Supplemental Schedule F-26 Schedule II - Valuation and Qualifying Accounts F-27 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Find/SVP, Inc. We have audited the accompanying consolidated balance sheets of Find/SVP, Inc. and subsidiaries (the Company) as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Stamford, Connecticut April 4, 2003 F-2 FIND/SVP, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31 (in thousands, except share and per share data) ASSETS 2002 2001 Current assets: Cash and cash equivalents $ 968 $ 1,951 Accounts receivable, less allowance for doubtful accounts of $150 and $126 in 2002 and 2001, respectively 1,953 1,415 Note receivable -- 138 Deferred tax assets 272 194 Prepaid expenses and other current assets 948 828 -------- -------- Total current assets 4,141 4,526 Equipment, software development and leasehold improvements, at cost, less accumulated depreciation and amortization 2,334 2,892 Other assets: Deferred tax assets 1,324 1,063 Rental asset 575 580 Cash surrender value of life insurance 418 747 Non-marketable equity securities 185 500 Other assets 561 384 -------- -------- $ 9,538 $ 10,692 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of notes payable $ 606 $ 924 Trade accounts payable 353 469 Accrued expenses and other 1,749 1,781 -------- -------- Total current liabilities 2,708 3,174 -------- -------- Unearned retainer income 1,476 1,753 Notes payable 1,200 895 Deferred compensation 441 380 Commitments and contingencies Shareholders' equity: Preferred stock, $.0001 par value Authorized 2,000,000 shares; zero issued and outstanding in both 2002 and 2001 -- -- Common stock, $.0001 par value. Authorized 100,000,000 shares; issued and outstanding 10,214,102 shares in 2002; issued and outstanding 10,043,443 shares in 2001 1 1 Capital in excess of par value 7,332 6,985 Accumulated deficit (3,620) (2,496) -------- -------- Total shareholders' equity 3,713 4,490 -------- -------- $ 9,538 $ 10,692 ======== ======== See accompanying notes to consolidated financial statements. F-3 FIND/SVP, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31 (in thousands, except share and per share data) 2002 2001 2000 Revenues $ 20,828 $ 22,215 $ 23,800 ----------- ---------- ---------- Operating expenses: Direct costs 10,027 10,966 12,127 Selling, general and administrative expenses 11,808 12,397 12,426 ----------- ---------- ---------- Operating loss (1,007) (1,148) (753) Interest income 15 49 119 Other income -- -- 139 Interest expense (156) (246) (372) Impairment on investment (315) -- -- ----------- ---------- ---------- Loss before benefit for income taxes (1,463) (1,345) (867) Benefit for income taxes (339) (400) (332) ----------- ---------- ---------- Net loss $ (1,124) $ (945) $ (535) =========== ========== ========== Loss per common share - basic and diluted: $ (.11) $ (.12) $ (.06) =========== ========== ========== Weighted average number of common shares outstanding: Basic 10,138,703 7,879,744 7,449,986 =========== ========== ========== Diluted 10,138,703 7,879,744 7,449,986 =========== ========== ========== See accompanying notes to consolidated financial statements. F-4 FIND/SVP, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended December 31 (in thousands, except share amounts)
Common Stock Capital in Total --------------------------- excess of Accumulated shareholders' Shares Amount par value deficit equity ------------ ------------ ------------ ------------ ------------ Balance at January 1, 2000 7,136,919 $ 1 $ 4,904 $ (1,016) $ 3,889 Net loss -- -- -- (535) (535) Exercise of stock options and warrants 319,024 -- 638 -- 638 Common stock issued in exchange for warrants 150,000 -- -- -- -- ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2000 7,605,943 1 5,542 (1,551) 3,992 Net loss -- -- -- (945) (945) Common stock issued 2,437,500 -- 1,443 -- 1,443 ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2001 10,043,443 1 6,985 (2,496) 4,490 Net loss -- -- -- (1,124) (1,124) Exercise of stock options and warrants 108,159 -- 49 -- 49 Common stock issued 62,500 -- 50 -- 50 Stock-based compensation -- -- 248 -- 248 ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2002 10,214,102 $ 1 $ 7,332 $ (3,620) $ 3,713 ============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements F-5 FIND/SVP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31 (in thousands) 2002 2001 2000 Cash flows from operating activities: Net loss $(1,124) $ (945) $ (535) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 939 1,087 1,110 Allowance for doubtful accounts 128 454 217 Unearned retainer income (277) (318) 142 Deferred income taxes (339) (398) (342) Compensation from option grants 248 -- -- Impairment on investment 315 -- -- Deferred compensation 61 57 56 Changes in assets and liabilities: (Increase) decrease in accounts receivable (666) 651 (796) (Increase) decrease in prepaid expenses and other current assets (120) 131 (119) Decrease (increase) in rental asset 5 (206) (199) Decrease (increase) in cash surrender value of life insurance 329 (44) (70) Increase in other assets (29) (76) (37) Decrease in accounts payable and accrued expenses (147) (94) (117) ------- ------- ------- Net cash (used in) provided by operating activities (677) 299 (690) ------- ------- ------- Cash flows from investing activities: Capital expenditures (457) (304) (570) Repayment of notes receivable 138 137 137 ------- ------- ------- Net cash used in investing activities (319) (167) (433) ------- ------- ------- Cash flows from financing activities: Principal borrowings under notes payable 3,230 200 1,400 Principal payments under notes payable (3,243) (725) (1,474) Proceeds from exercise of stock options and warrants 49 -- 37 Proceeds from issuance of common stock 50 1,443 -- Increase in deferred financing fees and acquisition costs (73) -- (35) ------- ------- ------- Net cash provided by (used in) financing activities 13 918 (72) ------- ------- ------- Net (decrease) increase in cash and cash equivalents (983) 1,050 (1,195) Cash and cash equivalents at beginning of year 1,951 901 2,096 ------- ------- ------- Cash and cash equivalents at end of year $ 968 $ 1,951 $ 901 ======= ======= ======= See accompanying notes to consolidated financial statements. F-6 FIND/SVP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2002, 2001 and 2000 (1) ORGANIZATION AND NATURE OF OPERATIONS Find/SVP, Inc. and its wholly owned subsidiaries (the "Company") is a knowledge services company that leverages the expertise and resources of its professional research teams on behalf of executives and other decision-making employees, primarily in the United States. The Company currently operates in two business segments, providing consulting and business advisory services including: the Quick Consulting and Research Service ("Quick Consulting") which provides retainer clients with access to the expertise of the Company's staff and information resources as well as a Live AnswerDesk ("LAD") service; and the Strategic Consulting and Research Group ("SCRG") which provides more extensive, in-depth custom market research and competitive intelligence information, as well as customer satisfaction and loyalty programs. Substantially all of the Company's personnel and operations are located in Manhattan. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Find/SVP, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. EQUIPMENT AND LEASEHOLD IMPROVEMENTS Equipment and leasehold improvements are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Electronic equipment and computer software is primarily depreciated over five years, and the Company's proprietary management information software system is depreciated over ten years. Leasehold improvements are amortized by the straight-line method over the shorter of the term of the lease or the estimated life of the asset. GOODWILL Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Effective January 1, 2002 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," under which goodwill is no longer amortized. Instead, goodwill is evaluated for impairment using a two-step process that is performed at least annually and whenever events or circumstances indicate impairment may have occurred. The first step is a comparison of the fair value an internal reporting unit with its carrying amount including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired and the second step is unnecessary. If the carrying value of the reporting unit exceeds its fair value, a F-7 second test is performed to measure the amount of impairment by comparing the carrying amount of the goodwill to a determination of the implied value of the goodwill. If the carrying amount of the goodwill is greater than the implied value, an impairment loss is recognized for the difference. The implied value of the goodwill is determined as of the test date by performing a purchase price allocation as if the reporting unit had just been acquired, using currently estimated fair values of the individual assets and liabilities of the reporting unit, together with an estimate of the fair value of the reporting unit taken as a whole. The estimate of the fair value of the reporting unit is based upon information available regarding prices of similar groups of assets, or other valuation techniques including present value techniques based upon estimates of future cash flow. Prior to adoption of SFAS No. 142, the Company amortized goodwill on a straight-line basis, resulting in the recording of approximately $10,000 of expense in each of the years ended December 31, 2001 and 2000. The Company retains $75,000 of goodwill on its balance sheet in other assets, for which no impairment has been identified. DEFERRED CHARGES Deferred charges primarily comprise the cost of acquired library information files and electronic databases, which are amortized to expense over the estimated period of benefit of three years using the straight-line method. INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Realization of the net deferred tax assets is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax assets will be realized. (LOSS) EARNINGS PER SHARE Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income (loss) by a diluted weighted average number of common shares outstanding. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock, unless they are anti-dilutive. In computing basic and diluted earnings per share for the years ended December 31, 2002, 2001 and 2000, the Company used a weighted average number of common shares outstanding of 10,138,703, 7,879,744 and 7,449,986, respectively. In the years ended December 31, 2002, 2001 and 2000 there was no dilutive effect. F-8 Options and warrants to purchase 3,320,522, 3,460,472 and 1,847,872 common shares during the years ended December 31, 2002, 2001 and 2000, respectively, were antidilutive and were therefore excluded from the computation of diluted earnings per share. REVENUE RECOGNITION Revenues from annual retainer fees are recognized ratably over the contractual period. Revenues from projects are recognized as work is completed. Revenues from publications are recognized on a subscription basis as issues are delivered. Revenues include certain out-of-pocket and other expenses billed to clients which aggregated approximately $1,221,000, $1,111,000 and $1,770,000 in 2002, 2001 and 2000, respectively. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes all highly liquid investments with original maturities of three months or less. NON-MARKETABLE EQUITY SECURITIES Non-marketable equity securities are valued at the lower of historical cost or estimated net realizable value. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used in estimating the fair value of financial instruments: The carrying values reported in the balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair values. The fair value of notes payable, which approximates its carrying value, is estimated based on the current rates offered to the Company for debt of the same remaining maturities. IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The adoption of this standard did not affect the current financial position or results of operations of the Company. Long-lived assets of the Company (other than goodwill, deferred tax assets and financial instruments) including equipment, software development and leasehold improvements, rental asset, and deferred charges, are reviewed for impairment whenever events or changes in circumstances indicate that the net carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to F-9 undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. STOCK BASED EMPLOYEE COMPENSATION COSTS The Company applies Accounting Principles Board Opinion No. 25 when accounting for stock options, and no compensation cost is recognized for grants made to employees or directors when the grant price is greater than or equal to the market price of a common share on the date of grant. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, the Company's net income (loss) would have been reduced (increased) to the pro forma amounts indicated below: - -------------------------------------------------------------------------------- 2002 2001 2000 Net loss, as reported $(1,124,000) $ (945,000) $ (535,000) Add: Stock based employee compensation expense included in reported net loss, net of tax related effects 174,000 -- -- Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (296,000) (299,000) (222,000) ----------- ----------- ----------- Pro forma net loss $(1,246,000) $(1,244,000) $ (757,000) =========== =========== =========== Loss per share: Basic and Diluted As reported $(0.11) $(0.12) $(0.06) ====== ====== ====== Pro forma $(0.12) $(0.16) $(0.10) ====== ====== ====== - -------------------------------------------------------------------------------- The per share weighted-average fair value of stock options granted during 2002, 2001 and 2000 was $0.96, $0.30 and $1.21, respectively. Such amounts were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: 2002 - expected dividend yield of 0%, risk-free interest rate of 6%, volatility of 111% and an expected life of 5 years; 2001 - expected dividend yield of 0%, risk-free interest rate of 6%, volatility of 93.0% and an expected life of 5 years; 2000 - expected dividend yield of 0%, risk-free interest rate of 6%, volatility of 82.1% and an expected life of 5 years. Volatility is calculated over the five preceding years. F-10 NEW ACCOUNTING PRINCIPLES In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which will be adopted by the Company as of January 1, 2003. This standard addresses issues associated with the retirement of tangible long-lived assets. The Company does not believe that there will be any impact on its consolidated financial position and results of operations that will result from the adoption of this standard. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". The Company elected to adopt the provisions of this omnibus statement early, which makes changes to several existing authoritative pronouncements to make technical corrections, to clarify meanings, or to describe their applicability under changed conditions. The adoption of this standard did not affect the current financial position or results of operations of the Company. Adoption of the standard caused the loss on repayment of debt that occurred in the year ended December 31, 2000 to be reclassified as interest expense on the statement of operations, from its prior presentation as an extraordinary item. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that costs associated with an exit or disposal plan be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Management believes that the adoption of this standard will not have an impact on the Company's reported financial position or results of operations, as treatment of this standard is prospective. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123." This statement amends SFAS No. 123 by providing alternative methods of adopting the fair-value method of accounting for stock-based compensation, if an entity elects to discontinue using the intrinsic-value method of accounting permitted in Accounting Principles Board (APB) Opinion No. 25. One of these adoption methods, under which a prospective adoption of the fair-value method would be permitted without the need for a cumulative restatement of prior periods, is only available to the Company if adopted in 2003. The statement also amended with immediate effect certain disclosure requirements of SFAS No. 123 which the Company adopted as of December 31, 2002. Management continues to study whether it will continue to account for stock-based compensation under APB No. 25 or whether it will adopt SFAS No. 123 as amended. USE OF ESTIMATES Management makes estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. F-11 RECLASSIFICATIONS Certain prior year balances have been reclassified to conform with current year presentation. (3) EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET At December 31, 2002 and 2001, equipment and leasehold improvements consist of the following: - -------------------------------------------------------------------------------- 2002 2001 Furniture, fixtures and equipment, including computer software $ 9,459,000 $ 9,202,000 Leasehold improvements 1,987,000 1,954,000 ----------- ----------- 11,446,000 11,156,000 Less: accumulated depreciation and amortization 9,112,000 8,264,000 ----------- ----------- $ 2,334,000 $ 2,892,000 =========== =========== - -------------------------------------------------------------------------------- Depreciation expense amounted to approximately $939,000, $1,087,000 and $1,110,000 for the years ended December 31, 2002, 2001 and 2000, respectively. (4) OTHER ASSETS At December 31, 2002 and 2001, other assets consist of the following: - -------------------------------------------------------------------------------- 2002 2001 Deferred charges $ 278,000 $ 160,000 Security deposits 132,000 132,000 Goodwill, net 75,000 75,000 Employee loan receivable 50,000 -- Deferred financing fees, net 26,000 17,000 ----------- ----------- $ 561,000 $ 384,000 =========== =========== - -------------------------------------------------------------------------------- (5) LEASES The Company has an operating lease agreement for its principal offices, which expires in 2005, under which rental payments decline over the term of the lease. Rental expense under this lease is recorded on a straight-line basis. Rental payments through December 31, 2002 and 2001 exceeded rental expense recorded on this lease through such dates by $741,000 and $788,000, respectively. The Company has two operating leases for additional office space that expire in 2005, under which rental payments increase over the term of the lease. Rental expense on these leases is recorded on a straight-line basis. Accordingly, rent recorded through December 31, 2002 and F-12 2001 exceeded scheduled payments through such dates by $166,000 and $207,000, respectively. In September 2000, the Company gave up its rights to a portion of this space for which the Company received $100,000 from its landlord, which is included in other income in 2000. The Company's leases of office space include standard escalation clauses. Rental expense under leases for office space was $1,504,000, $1,587,000 and $1,497,000 in 2002, 2001 and 2000, respectively. The future minimum lease payments under noncancellable operating leases as of December 31, 2002 were as follows: - -------------------------------------------------------------------------------- Year ending December 31 Operating Leases - ----------------------- ---------------- 2003 $ 853,000 2004 853,000 2005 426,000 Thereafter -- ---------- Total minimum lease payments $2,132,000 ========== - -------------------------------------------------------------------------------- (6) NOTES PAYABLE Notes payable as of December 31, 2002 and 2001 consist of the following: - -------------------------------------------------------------------------------- 2002 2001 Bank borrowings under term note $ 1,600,000 $ 1,100,000 Bank borrowings under line of credit 176,000 200,000 Borrowings under debt agreements with investors: $475,000 Series A Senior Subordinated Note - SVP, S.A., net of unamortized discount of $1,000 as of December 31, 2001, due August 25, 2002 -- 474,000 Note payable to landlord, due 2003 30,000 45,000 ----------- ----------- Total notes payable 1,806,000 1,819,000 Less current installments 606,000 924,000 ----------- ----------- Notes payable, excluding current installments $ 1,200,000 $ 895,000 =========== =========== - -------------------------------------------------------------------------------- F-13 DEBT AGREEMENTS WITH BANK In February 2002, the Company entered into a financing agreement with a commercial bank for a Term Note. The Term Note bears interest at prime plus 1.25%, and is payable in quarterly installments beginning March 31, 2002. As of December 31, 2002, there was $1,600,000 outstanding on this note, of which $400,000 is classified as current. Interest expense related to this note amounted to $94,000 for the year ended December 31, 2002. This agreement was amended and restated on April 1, 2003, reducing the principal amount from $2,000,000 to $1,500,000, reflecting the current outstanding balance, and moving the final repayment date from December 31, 2006 to December 31, 2005. This will require the Company to make a balloon payment of $500,000 on December 31, 2005. The proceeds from this Term Note were used to repay the $1,100,000 balance on a Term Note due June 30, 2005, and to repay the remaining portion of the Company's Senior Subordinated Notes. At December 31, 2001, the Company had a term note at the prime commercial lending rate plus 1.25% with commercial bank under which $1,100,000 was borrowed. Interest expense related to this note was $9,000, $102,000, and $63,000 for the years ended December 31, 2002, 2001 and 2000, respectively. The Company has a $1,000,000 line of credit at the prime commercial lending rate plus 0.5%. The line is renewable annually, and expires on December 30, 2003. At December 31, 2002 and 2001, $176,000 and $200,000, respectively, were outstanding under this line of credit. Average borrowings under the line of credit were $379,000 and $30,000 in the years ended December 31, 2002 and 2001, with the highest month end balances being $1,000,000 and $200,000, respectively. Related interest expense was $20,000 and $2,000 in the years ended December 31, 2002 and 2001, respectively. There were no borrowings under the line during the year ended December 31, 2000. DEBT AGREEMENTS WITH INVESTORS Prior to their repayment in February 2002, the Company had Senior Subordinated Notes under debt agreements with investors. Such notes accrued interest at an annual rate of 12%. Interest expense under such notes was $12,000, $112,000, and $270,000 in the years ended December 31, 2002, 2001, and 2000, respectively. F-14 The aggregate principal maturities of notes payable for the next five years, including full amortization of discounts, are as follows: - -------------------------------------------------------------------------------- Year Ending December 31, - ------------------------ 2003 $ 606,000 2004 400,000 2005 800,000 Thereafter -- ------------ $ 1,806,000 ============ - -------------------------------------------------------------------------------- (7) SHAREHOLDERS' EQUITY SALE OF COMMON STOCK In November 2001, the Company issued 2,437,500 shares for net cash proceeds of $1,443,000, after transaction costs of $557,000. This transaction resulted in a triggering of the change in control provisions of certain employment and severance agreements (see Note 10). COMMON STOCK WARRANTS On January 1, 2000 warrants to purchase 1,472,222 of the Company's common shares at $2.25 per share were outstanding. During the first quarter of 2000, 266,945 of such warrants were exercised. Under the terms of such warrants, $600,626 of face value of the Senior Subordinated Note due October 31, 2001 was surrendered as payment. In August 2000 as part of the early retirement of the Senior Subordinated Note due October 31, 2001, 633,055 warrants were converted into 150,000 shares of the Company's common stock. As a result of this transaction, no gain or loss was recognized. At December 31, 2002 and 2001, warrants to purchase 572,222 of the Company's common shares remain outstanding. STOCK OPTION PLAN The Company's 1996 Stock Option Plan (the "Plan"), as amended in 1998, 2000 and 2001, authorizes grants of options to purchase up to 3,500,000 shares of common stock, issuable to employees, directors and consultants of the Company. The options to be granted under the Plan will be designated as incentive stock options or non-incentive stock options by our Board of Directors' Stock Option Committee. Options granted under the Plan are exercisable during a period of no more than ten years from the date of the grant (five years for options granted to holders of 10% or more of the outstanding shares of common stock). All options outstanding at December 31, 2002 expire within the next ten years if not exercised. Options that are cancelled or expire during the term of the Plan are eligible to be re-issued under the Plan and, therefore, are considered available for grant. F-15 Activity under the stock option plans is summarized as follows: - -------------------------------------------------------------------------------- WEIGHTED AVAILABLE AVERAGE FOR OPTIONS EXERCISE GRANT GRANTED PRICE ---------- --------- -------- January 1, 2000 486,300 875,900 $ 1.12 Additional authorized 500,000 -- -- Granted (772,500) 772,500 2.15 Exercised -- (80,910) 1.68 Cancelled 291,840 (291,840) 1.14 No longer available under 1986 Plan (30,140) -- -- ---------- --------- -------- December 31, 2000 475,500 1,275,650 1.74 Additional authorized 1,850,000 -- -- Granted (1,872,050) 1,872,050 0.49 Exercised -- -- -- Cancelled 259,450 (259,450) 1.84 No longer available under the 1986 Plan (166,200) -- -- ---------- --------- -------- December 31, 2001 546,700 2,888,250 0.92 Granted (353,000) 353,000 1.10 Exercised -- (142,850) 0.76 Cancelled 350,100 (350,100) 1.99 ---------- --------- -------- December 31, 2002 543,800 2,748,300 $ 0.82 ========== ========= ======== Exercisable at December 31, 2002 1,351,724 $ 0.92 ========= ======== Exercisable at December 31, 2001 863,779 $ 1.25 ========= ======== Exercisable at December 31, 2000 435,550 $ 1.56 ========= ======== - -------------------------------------------------------------------------------- During 2002, options to purchase 353,000 shares of common stock were granted under the Plan at prices ranging from $0.83 to $1.429. The options issued qualified as incentive stock options whereby the price of the options were at fair market value at the time of grant. As of December 31, 2002, there were 2,748,300 options outstanding, having exercise prices ranging from $0.41 to $3.6875, with an average remaining contractual life of 6.5 years. As of December 31, 2002, there were 1,351,724 exercisable options, having exercise prices ranging from $0.41 to $3.6875, with an average remaining contractual life of 6.5 years. PREFERRED STOCK The Company has authorized and unissued preferred stock consisting of 2,000,000 shares at $.0001 par value. F-16 (8) SVP INTERNATIONAL The Company has an agreement with SVP International S.A. ("SVP International"), a subsidiary of Amalia S.A. Prior to November 2001, SVP International and its affiliates owned 37% of the common shares of the Company. The agreement provides that SVP International will aid and advise the Company in the operation of an information service and permit access to other global SVP information centers, and the use of the SVP trademark and logo. The agreement shall continue in perpetuity, unless amended by the parties. The Company pays royalties to SVP International computed using a formula based on percentages of service and product revenues, subject to certain limitations, as defined. Royalty expense under the agreement was $133,000 for the year ended December 31, 2002 and $118,000 in each of the years ended December 31, 2001 and 2000. The Company receives and renders information services to other members of the SVP network. Charges for such services are made at rates similar to those used for the Company's other clients. (9) INCOME TAXES The provision (benefit) for income taxes consists of the following: - -------------------------------------------------------------------------------- 2002 2001 2000 Current: Federal $ -- $ -- $ -- State and local -- -- -- ---------- ---------- ---------- -- -- -- Deferred: Federal (455,000) (348,000) (267,000) State and local (127,000) (52,000) (65,000) ---------- ---------- ---------- (582,000) (400,000) (332,000) ---------- ---------- ---------- Change in valuation allowance 243,000 -- -- ---------- ---------- ---------- (339,000) (400,000) (332,000) ---------- ---------- ---------- $ (339,000) $ (400,000) $ (332,000) ========== ========== ========== - -------------------------------------------------------------------------------- In 2002, a valuation allowance was provided for certain state and local carryforward tax operating loss assets, as the Company determined that it was no longer more likely than not that such assets would be realized during the carryforward period. It is reasonably possible that future valuation allowances will need to be recorded if the Company is unable to generate sufficient future taxable income to realize such deferred tax assets during the carryforward period. Income tax (benefit) expense differs from the amount computed by multiplying the statutory rate of 34% to income before income taxes due to the following: F-17 - -------------------------------------------------------------------------------- 2002 2001 2000 Income tax (benefit) expense at statutory rate $ (494,000) $ (457,000) $ (295,000) Increase (reduction) in income taxes resulting from: Change in valuation allowance 243,000 -- -- State and local (benefit) taxes, net of federal income tax benefit (127,000) (52,000) (66,000) Taxable (nontaxable) income resulting from decrease (increase) in cash surrender value of life insurance -- -- (24,000) Nondeductible expenses 22,000 66,000 25,000 Other 17,000 43,000 28,000 ---------- ---------- ---------- $ (339,000) $ (400,000) $ (332,000) ========== ========== ========== - -------------------------------------------------------------------------------- The tax effects of temporary differences that give rise to significant portions of the deferred tax assets, net of deferred tax liabilities at December 31, 2002 and 2001 are presented below: - -------------------------------------------------------------------------------- 2002 2001 Deferred tax assets: Federal tax loss carryforwards $ 653,000 $ 445,000 State and local tax loss carryforwards 402,000 348,000 Deferred compensation 184,000 159,000 Royalty expenses 179,000 141,000 Depreciation and amortization 139,000 136,000 Stock compensation expense 104,000 -- Write-down of non-marketable equity securities 132,000 -- Other, net 46,000 28,000 ----------- ----------- Deferred tax asset 1,839,000 1,257,000 Valuation allowance (243,000) -- ----------- ----------- Net deferred tax asset $ 1,596,000 $ 1,257,000 =========== =========== - -------------------------------------------------------------------------------- Of the net deferred tax asset, $272,000 and $194,000 as of December 31, 2002 and 2001, respectively, are classified as current. Federal tax loss carryforward assets expire from 2020 to 2022. Of the state and local tax loss carryforward assets, approximately $236,000 expire in 2012, with the remainder expiring from 2020 to 2022. F-18 (10) EMPLOYEE BENEFITS AND DEFERRED COMPENSATION EMPLOYEE BENEFIT PLANS The Company sponsors a 401(k) and profit sharing plan under which eligible participants may elect to defer eligible compensation up to governmental limitations. The Company contributes 20% of the employees' contributions up to 1% of their annual compensation and may contribute additional profit sharing amounts at the discretion of the Company. Expense relating to the 401(k) and profit sharing plan was $79,000, $88,000 and $86,000 for the years ended December 31, 2002, 2001 and 2000, respectively. DEFERRED COMPENSATION The Company has deferred compensation agreements with two individuals, with benefits commencing upon retirement, death or disability. Deferred compensation is a discounted obligation. In 2002, the expense was determined using a discount rate of 6%. In 2001 and 2000, a discount rate of 8.5% was used. Deferred compensation expense under these agreements was approximately $61,000 in 2002 and $56,000 in both 2001 and 2000. EMPLOYMENT AGREEMENTS The Company has an employment agreement with Andrew Garvin, the President of the Company, which expires in December 2005. The employment agreement contains certain severance provisions entitling the President to receive compensation for various lengths of time upon termination without cause, or voluntary termination upon certain conditions, which includes the acquisition by a party of 30% or more of the outstanding shares of common stock of the Company or a change in the majority of incumbent Board members, and certain other occurrences. The Company has an employment agreement with David Walke, the CEO of the Company, which expires in November 2004. The employment agreement provides for the issuance of options to purchase shares of the Company's common stock. The options are to vest ratably over the first three years of the term of the employment agreement, and such vesting shall accelerate and vest immediately upon certain conditions. The employment agreement also contains certain severance provisions entitling the CEO to receive compensation and certain benefits for various lengths of time upon termination without cause, or voluntary termination upon certain conditions, which includes the acquisition by a party of 30% or more of the outstanding shares of common stock of the Company or a change in the majority of incumbent Board members, and certain other occurrences. The Company has an employment agreement with Peter Stone, the CFO of the Company, which expires in May 2005. The employment agreement provides for the issuance of options to purchase shares of the Company's common stock. The options are to vest ratably over the first three years of the term of the employment agreement, and such vesting shall accelerate and vest immediately upon certain conditions. The employment agreement also contains certain severance provisions entitling the CFO to receive compensation and certain benefits for various lengths of time upon termination without cause, or voluntary termination upon certain F-19 conditions, which includes the acquisition by a party of 30% or more of the outstanding shares of common stock of the Company and certain other occurrences. The Company has an employment agreement with Martin Franklin, the Chairman of the Board of Directors of the Company, which expires in November 2004. The employment agreement provides for the issuance of options to purchase shares of the Company's common stock. The options are to vest ratably over the term of the employment agreement, and such vesting shall accelerate and vest immediately upon certain conditions, which includes the acquisition by a party of 30% or more of the outstanding shares of common stock of the Company or a change in the majority of incumbent Board members, or upon his termination of employment without cause or upon his death or disability. Severance arrangements for one member of the Operating Management Group ("OMG") was authorized by the Board of Directors on January 25, 1999. In the event of certain changes of control, the severance agreement with this member of the OMG would be triggered. The agreement provides for (a) a normal severance benefit for one (1) year in the event the employee's services are terminated without cause, and (b) a severance benefit of one (1) year in the event the separation from service is due to (i) a change in control, and (ii) the employee suffers, within one (1) year thereafter, either (A) a discontinuation of duties, or (B) an office change of at least 50 miles, or (C) a reduction in compensation, or (D) a termination of employment other than for cause. Following the change in control in November 2001, the Company estimated at December 31, 2001 that $134,000 would be payable under these provisions. In March 2002, the Company accrued an additional liability of $188,000 related to contractual severance payments due to the former Chief Financial Officer, a former member of the OMG. Severance benefits relating to the resignation of our former Chief Financial Officer were reduced by $93,000 during the quarter ended September 30, 2002, as the result of a revised and signed agreement between the Company and the former Chief Financial Officer. At December 31, 2002, $60,000 remains payable to a former member of the OMG. (11) SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest and income taxes during the years ended December 31, 2002, 2001 and 2000 was as follows: - -------------------------------------------------------------------------------- 2002 2001 2000 Interest $ 217,000 $ 236,000 $ 235,000 ========== ========== ========== Income taxes $ 6,000 $ 12,000 $ 10,000 ========== ========== ========== - -------------------------------------------------------------------------------- The Company had the following non-cash financing activities: During 2002, the Company recorded the cashless exercise of 79,000 options at prices ranging from $0.50 to $1.062, in exchange for 34,691 shares of common stock at prices ranging from $1.40 to $1.71. Such shares were held for a period of at least six months before the respective exchange. The value of these transactions was $59,000. F-20 During the first quarter of 2000, the Company issued 266,945 common shares upon the exercise of warrants in exchange for the retirement of $600,626 of the Company's Senior Subordinated Note due October 31, 2001. In August 2000, the Company issued 150,000 shares of common stock in exchange for the cancellation of 633,055 warrants to purchase common stock. During 2000, the Company recorded the cashless exercise of 47,860 options at prices ranging from $0.75 to $2.25, in exchange for 28,831 shares of common stock at prices ranging from $3.3125 to $4.01325. Such shares were held for a period of at least six months before the respective exchange. The value of these transactions was $97,000. (12) ACCRUED EXPENSES Accrued expenses at December 31, 2002 and 2001 consisted of the following: - -------------------------------------------------------------------------------- 2002 2001 Accrued bonuses and employee benefits $ 538,000 $ 554,000 Accrued expenses incurred on behalf of clients 27,000 27,000 Accrued SVP royalty 954,000 854,000 Other accrued expenses 230,000 346,000 ----------- ----------- $ 1,749,000 $ 1,781,000 =========== =========== - -------------------------------------------------------------------------------- In 2002 and 2001, the Company recorded an accrual $257,000 and $228,000, respectively, for restructuring under a severance plan approved by the Board of Directors and communicated to employees. The $228,000 amount included the $134,000 of severance related to OMG employment agreements discussed in Note 10. In 2002, the Company paid $273,000 related to both the restructuring plans. As of December 31, 2002, a balance of $212,000 remains accrued, which includes the $60,000 related to a former OMG member as discussed in Note 10. Payments related to the remaining severance accrual at December 31, 2002 will be completed by the end of October 2003. (13) NON-MARKETABLE EQUITY SECURITIES In 1999, the Company entered into an agreement with idealab! and Find.com, Inc. whereby the Company assigned the domain name "find.com" and licensed the use of certain rights to the trademarks "find.com" and "find" to Find.com, Inc. idealab! and Find.com, Inc. are not otherwise related to the Company. Under terms of the agreement, the Company received cash and non-marketable preferred shares in idealab!, and was entitled to certain future royalties. The preferred shares received were valued by the Company at $500,000, and carried various rights including the ability to convert them into common shares of Find.com, Inc., and a put option to resell the shares to idealab! The put option became exercisable in December 2002. Under the terms of the put option, idealab! could either repurchase the preferred shares for F-21 $1,500,000 in cash, or elect to return the find.com domain name to the Company. In the latter case, the Company would retain the preferred shares. In January 2003, the Company exercised its put option and idealab! declined to repurchase the preferred shares. This information was considered by the Company in its recurring evaluation of the carrying value of the preferred shares at the lower of historical cost or estimated net realizable value. Using this information together with other publicly available information about idealab!, the Company concluded the net realizable value of its idealab! preferred shares had declined to an estimated $185,000 at December 31, 2002, which resulted in a charge to operations of $315,000 during the quarter ended December 31, 2002. Since the idealab! preferred shares continue to be an investment in a start-up enterprise, it is reasonably possible in the near term that the Company's estimate of the net realizable value of the preferred shares will be further reduced. F-22 (14) SEGMENT REPORTING The Company manages its consulting and business advisory services in two business segments: Quick Consulting and Strategic Consulting. The Company operates primarily in the United States. The Company considers its quick consulting and strategic consulting services to be its core competency. Corporate and other relates to assets and activities that are not allocated to a segment. - -------------------------------------------------------------------------------- (in thousands) Years Ended December 31, 2002 2001 2000 Revenues QCS, including LAD $ 18,624 $ 19,414 $ 19,930 SCRG 2,204 2,801 3,870 ---------- ---------- ---------- Total revenues $ 20,828 $ 22,215 $ 23,800 ========== ========== ========== Operating (loss) income QCS, including LAD $ 4,127 $ 4,429 $ 4,545 SCRG (99) (314) (58) ---------- ---------- ---------- Segment operating (loss) income 4,028 4,115 4,487 Corporate and other (1) (5,035) (5,263) (5,240) ---------- ---------- ---------- Operating loss $ (1,007) $ (1,148) $ (753) ========== ========== ========== Depreciation and amortization QCS, including LAD $ 460 $ 539 $ 583 SCRG 59 66 68 ---------- ---------- ---------- Total segment depreciation and amortization 519 605 651 Corporate and other 420 482 459 ---------- ---------- ---------- Total depreciation and amortization $ 939 $ 1,087 $ 1,110 ========== ========== ========== Total Assets QCS, including LAD $ 3,161 $ 2,871 SCRG 467 315 ---------- ---------- Total segment assets 3,628 3,186 Corporate and other 5,910 7,506 ---------- ---------- Total assets $ 9,538 $ 10,692 ========== ========== Capital Expenditures QCS, including LAD $ 134 $ 119 $ 160 SCRG 3 5 30 ---------- ---------- ---------- Total segment capital expenditures 137 124 190 Corporate and other 320 180 380 ---------- ---------- ---------- Total capital expenditures $ 457 $ 304 $ 570 ========== ========== ========== (1) Includes certain direct costs and selling, general, and administrative expenses not attributable to a single segment. - -------------------------------------------------------------------------------- F-23 (15) FOURTH QUARTER EVENTS (UNAUDITED) As discussed in Note 13, in the fourth quarter of 2002, the Company recorded a charge to operations of $315,000 to write-down the carrying value of its preferred shares of idealab! As discussed in Note 12, in the fourth quarter of 2002 and 2001, charges related to severance costs of $147,000 and $228,000, respectively, were recorded. Also, approximately $80,000 was recorded related to bonus and commission arrangements in the quarter ended December 31, 2002. (16) COMMITMENTS AND CONTINGENCIES In March 2003, the Company became aware of a lease modification agreement from 1992 related to its primary offices at 625 Avenue of the Americas that differs from a second lease modification agreement signed by the same parties also in 1992. The lease modification agreement that the Company believes to be in effect has been consistently disclosed and used to account for this operating lease since 1992. These two agreements are dated within two days of each other. The significant difference between the terms of the documents are that the newly discovered document indicates a lease expiration in June 2004, one year prior to the June 2005 expiration date in the agreement that the Company believes to be in effect. The Company has requested its landlord to investigate their files, however, this investigation remains incomplete and accordingly no determination as to which agreement is definitive has been made. The Company believes that the agreement it has consistently relied upon and which expires in June 2005 is the governing agreement. Based upon review of the documents that have been located, outside counsel has advised the Company that a reasonable basis exists for the Company's position. If the newly discovered document is determined to be the definitive agreement, as of December 31, 2002 the Company would be obligated to write-off approximately $310,000 of the rental asset recorded on its balance sheet, which would cause an after-tax reduction to shareholders equity of approximately $210,000. (17) SUBSEQUENT EVENT On April 1, 2003, the Company purchased all of the issued and outstanding stock of Guideline Research Corp. ("Guideline"). Guideline, together with its wholly owned subsidiaries Guideline/Chicago, Inc., Advanced Analytics, Inc., Guideline Consulting Corp., and Tabline Data Services, Inc. is a provider of custom market research. Simultaneously with the acquisition, Guideline entered into employment agreements with, among others, the former shareholders of Guideline, Robert La Terra and Jay L. Friedland. Also, 150,000 stock options were granted to one of the former shareholders after the close of this transaction pursuant to the terms of an employment agreement entered into with Guideline at the closing. The purchase price consisted of approximately $4,454,000 in cash (including $525,000 of estimated transaction costs), and 571,237 unregistered shares of the Company's common stock, of which 295,043 shares were placed in escrow. The shares placed in escrow will be distributed to the Sellers on or about May 31, 2004, subject to reduction for the resolution of purchase price adjustments, if any. F-24 The Guideline purchase price was financed by the Company's cash resources, the assumption of certain liabilities of Guideline, and by the receipt of $3,400,000 (net of financing costs) obtained from the issuance of: (i) a promissory note with a $3,000,000 face value, with stated interest at 13.5%, due April 1, 2008 (the "Note") to Petra Mezzanine Fund, L.P. ("Petra"), which is secured by a second lien and security interest on substantially all of the Company's assets; (ii) 333,333 shares of convertible, redeemable, cumulative preferred stock, designated as Series A Preferred Stock, to Petra, which are redeemable at Petra's option beginning April 1, 2009 at an initial redemption price of $1.50 per share, or $500,000, plus all accrued but unpaid dividends; and (iii) warrants to Petra to purchase 675,000 shares of the Company's common stock at an exercise price of $.01 per share. The preferred shares are entitled to receive either cash or "payment-in-kind" dividends at a rate of 8.0% annually, and the future redemption price is subject to adjustment for anti-dilution. The warrants are exercisable at any time, and, beginning April 1, 2009, and for a period of four years thereafter, Petra shall have the right to cause the Company to use commercially reasonable efforts to complete a private placement to sell Petra's shares of the Company's common stock issuable upon exercise of the Warrant (the "Warrant Shares") to one or more third parties at a price equal to the market value of the Warrant Shares based on the closing bid price of the Company's common shares as of the date Petra so notifies the Company (the "Put Exercise Date"). In the event a change in control takes place during the period in which the put may be exercised, Petra would have the right to cause the Company to fulfill its repurchase obligations in the same form of consideration as that received by the other selling shareholders. On April 1, 2003, the Company also amended and restated: (i) its term Note with JP Morgan Chase Bank, in the principal amount of $1,500,000 and (ii) its line of credit with JP Morgan Chase Bank in the principal amount of $1,000,000. These amended and restated agreements had the effect of reducing the term Note principal amount from $2,000,000 to $1,500,000, reflecting the current outstanding balance. The final repayment date of the term Note has been moved up from December 31, 2006 to December 31, 2005. As a result, the Company will have a $500,000 balloon payment due at December 31, 2005 instead of making payments of $100,000 each quarter in 2006. In addition, JP Morgan Chase Bank consented to the Company's acquisition of Guideline and the related financing transactions with Petra, and amended various financial covenants of both the term Note and line of credit as follows: 1) The previous Debt to Consolidated Tangible Net Worth Covenant of 2.00 was replaced with a Senior Debt to Consolidated Tangible Net Worth plus Subordinated Debt covenant of 0.75; and 2) The previous Consolidated Tangible Net Worth covenant of $3,500,000 was replaced with a Consolidated Tangible Net Worth plus Subordinated Debt covenant of $3,300,000. F-25 Independent Auditors' Report on Supplemental Schedule To the Board of Directors and Shareholders of Find/SVP, Inc. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the table of contents on page F-1 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. This schedule is the responsibility of the Company's management. Such schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. Deloitte & Touche LLP Stamford, Connecticut April 4, 2003 F-26 SCHEDULE II FIND/SVP, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 2002, 2001 and 2000 (in thousands of dollars) Balance at Additions beginning charged to Deduc- Balance at CLASSIFICATION of year earnings tions(1) end of year ---------- ---------- ------- ----------- Year ended December 31, 2002: Allowance for doubtful accounts $ 126 $ 128 $ 104 $ 150 ===== ===== ===== ===== Year ended December 31, 2001: Allowance for doubtful accounts $ 101 $ 454 $ 429 $ 126 ===== ===== ===== ===== Year ended December 31, 2000: Allowance for doubtful accounts $ 101 $ 217 $ 217 $ 101 ===== ===== ===== ===== Note: (1) Amounts written off, net of recoveries. F-27 EX-3.9 3 c27776_ex3-9.txt EXHIBIT 3.9 AMENDMENT NO. 1 TO THE BY-LAWS OF FIND/SVP, INC. The By-laws of Find/SVP, Inc. a New York corporation (the "By-laws"), shall be amended as follows: 1. Article IV, Sections 2 and 3 of Find/SVP, Inc. (the "Corporation") By-laws be, and the same hereby is, amended to read as follows: "Section 2. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall preside at the meetings of the Board of Directors and of the shareholders. Except where, by law, the signature of the President is required, the Chairman shall possess the same power as the President to sign all certificates, contracts, and other instruments of the Corporation which may be authorized by the Board of Directors. He shall have such other power and perform such other duties as the Board of Directors may from time to time prescribe. Section 3. PRESIDENT. The President in the absence of the Chairman of the Board, shall preside at all meetings of the Board of Directors and shareholders. He shall be the chief executive officer of the Corporation and have the general supervision of the officers of the Corporation. He shall sign or countersign all certificates, contracts or other instruments of the Corporation as authorized by the Board of Directors, and shall perform such other duties as are incident to his office or are properly required of him by the Board of Directors." [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] I hereby certify that the foregoing is a full, true and correct copy of Amendment No. 1 to the By-laws of Find/SVP, Inc., a New York, as in effect on the date hereof. DATED: APRIL 11, 2003 /s/ PETER M. STONE - ------------------ Peter M. Stone, Secretary of Find/SVP, Inc. EX-10.3 4 c27776_ex10-3.txt EXHIBIT 10.3 FIND SVP, INC. 625 Avenue of the Americas New York, NY 10011 November 21, 2001 SVP International Inc. SVP Conseil Kaufhasgasse 7 CH-4001 Switzerland RE: AGREEMENT DATED AS OF OCTOBER 11, 1971 Gentlemen: For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, this letter agreement (the "Amendment Agreement") shall serve further to amend the agreement dated as of October 11, 1971, as amended on March 23, 1981 (the "Agreement"), by and between SVP International, Inc., formerly known as SVP Conseil: Compagnie International de Documentation, Information et Service, a Swiss company ("SVP"), and FIND SVP, Inc., formerly known as Information Clearing House, Inc., a New York corporation ("FIND"). 1. The trademark license contained in Paragraph 4(a) of the Agreement shall be deemed to include the right of FIND to use the service mark "SVP" that is registered with the United States Patent and Trademark Office, Registration No. 2065043 in the United States and its territories. It shall be the responsibility of SVP to maintain and renew this registration. 2. Paragraph 5(d) of the Agreement shall be deleted in its entirety and in its place the following shall be inserted: "FIND may assign its rights and obligations under the Agreement or its rights in and to the FIND SVP Service to an entity controlled by, under common control with or controlling FIND, or to an entity that succeeds to all or substantially all of the stock of FIND or the assets of FIND relating to its information services business. In the event that SVP assigns all or substantially all of its assets, it shall assign the Agreement as part of those assets." 3. Paragraph 5(e) of the Agreement is hereby deleted in its entirety. 4. Paragraph 6 of the Agreement shall be deleted in its entirety and the following inserted in its place: "FIND may enter into new areas of activity or acquire other companies engaged in new areas of activity and may provide services or products other than the FIND Service provided however, that FIND will not use the registered SVP trademark or logo in connection with any activities other than those integrally related to the `FIND SVP Service,' without prior approval from SVP International." 5. Paragraph 9 is hereby deleted in its entirety and the following shall be inserted in its place: "The term of the Agreement shall expire on August 1, 2031." 6. The parties acknowledge and recognize that FIND is the successor in interest to Information Clearing House, Inc., a New York corporation ("ICH"), and that the Agreement shall be amended to replace ICH with FIND wherever it appears. 7. Except as set forth above, the Agreement shall continue in full force and effect in accordance with all its terms. Please confirm your agreement to these terms by signing where indicated below and returning a copy to me. Sincerely, FIND SVP, Inc. By:_____________________ Name: Title: Confirmed and Agreed: SVP International, Inc. By: ____________________ Name: Title: EX-10.10 5 c27776_ex10-10.txt EXHIBIT 10.10 SENIOR GRID PROMISSORY NOTE New York, New York $1,000,000 June 18, 2002 For value received, the undersigned unconditionally (and if more than one, jointly and severally) promises to pay to the order of JPMORGAN CHASE BANK (`Chase"), at its office located at 270 Park Avenue, New York, New York 10017, or to such other address as Chase may notify the undersigned, the sum of One Million and no/100 Dollars ($1,000,000) or such unpaid principal amount of each loan made to the undersigned by Chase and outstanding under this Note, on the earlier of (i) demand, (ii) the maturity date(s) as shown on the attached schedule or any continuation of the schedule, or (iii) June 30, 2003 (the "Maturity Date"). This Note includes any Schedule or Rider attached hereto. 1. DEFINITIONS. As used in this Note: "BANKING DAY" means any day on which commercial banks are not authorized or required to close in New York and whenever such day relates to an Euro Rate loan or notice with respect to any Euro Rate loan, a day on which dealings in U.S. dollar deposits are also carried out in the London interbank market. "CONSOLIDATED CURRENT ASSETS" means, in respect of the undersigned, all of its current assets and the current assets of its Subsidiaries (if any) on a consolidated basis which should, in accordance with GAAP, be classified as current assets. "CONSOLIDATED CURRENT LIABILITIES" means, in respect of the undersigned, all of its current liabilities and the current liabilities of its Subsidiaries (if any) on a consolidated basis which should, in accordance with GAAP, be classified as current liabilities. "CONSOLIDATED TANGIBLE NET WORTH" means, in respect of a Person, the consolidated stockholders' equity in such Person and its Subsidiaries determined in accordance with GAAP, except that there shall be deducted therefrom all intangible assets (other than leasehold improvements) of such Person and its Subsidiaries, such as organization costs, unamortized debt discount and expense, goodwill, patents, trademarks, copyrights, contractual franchises, and research and development expenses. "DEBT" of any Person means (i) all obligations of such Person for borrowed money (including in the case of the undersigned) the aggregate outstanding amount of loans hereunder) or the deferred purchase price of property or services, (ii) all obligations of such Person evidenced by bonds, notes, debentures, drafts or similar instruments or securities, (iii) indebtedness for borrowed money or the deferred purchase price of property or services accrued by any lien existing on property owned or acquired by such Person, whether or not the liability secured thereby shall have been incurred or assumed by such Person, (iv) all capitalized lease obligations of such Person, (v) the undrawn amount of all letters of credit issued for the account of such Person, and (vi) all guaranties and other contingent obligations of such Person in respect of obligations and liabilities of others referred to in clauses (i)-(v) above. "EURO RATE" means, for any Fixed Rate loan based upon the LIBOR Rate for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) to be equal to the quotient of (i) the LIBOR Rate for such loan for such Interest Period, divided by (ii) one minus the Reserve Requirement for such loan for such Interest Period plus two and one-half percent (2.5%). "FISCAL YEAR" means the undersigned's fiscal year consisting of a twelve month period ending on each December 31. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the date hereof and from time to time hereafter consistently applied. "INTEREST PERIOD" means with respect to Euro Rate loans, the period as Chase may offer and as the Borrower may select, commencing on the Loan Date and ending on the numerically corresponding day in the first, second, third, or sixth calendar month thereafter, provided that each such Interest Period which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month. In no event shall an Interest Period have a duration of less than one month or exceed the Maturity Date. "INTEREST PERIOD" means with respect to Money Market Rate loans, for any single borrowing, the period for which such borrowing is offered. "LIBOR RATE" means the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by the London office of Chase at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the Second Business Day prior to the commencement of an Interest Period for the offering by Chase to leading banks in the London interbank market of United States dollar deposits having a term comparable to such Interest Period and in an amount comparable to the principal amount of the loan under the Note. "LOAN DATE" means the date on which a loan under this Note is made. "MONEY MARKET RATE" means if offered, a rate of interest per year as offered by Chase from time to time on any single commercial borrowing for a period of up to ninety (90) days. The Money Market Rate of interest available for any subsequent borrowings may differ since Money Market Rates may fluctuate on a daily basis. "PERSON" means an individual, a corporation, a company, a voluntary association, a partnership, a trust, an unincorporated organization or a government or any agency, instrumentality or political subdivision thereof. "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" means any change after the date hereof in United States federal, state or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including the Bank of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "RESERVE REQUIREMENT" means, for any Euro Rate loan for any Interest Period therefor, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding $5,000,000,000 against "Eurocurrency liabilities" (as such term is used in Regulation D). "SUBSIDIARY" means any corporation or other entity of which at least a majority of the securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the undersigned. 2. MATURITY DATE(S). Each loan shall mature on the earlier of demand, the last day of the Interest Period therefore as noted on the Interest Period column on the attached schedule or the Maturity Date. As to a Variable Rate loan, if no Interest Period is noted, then such loan is payable on the earlier of demand or the Maturity Date. 3. INTEREST. The undersigned promises to pay interest on the unpaid balance of the principal amount of each such loan from and including the date of each such loan to but excluding the date such loan shall be paid in full at the following applicable rates, as may be offered by Chase and selected by the undersigned: Variable Rate: A rate of interest per year which shall automatically increase or decrease from time to time so that at all times such rate shall remain equal to that rate of interest from time to time announced by Chase at its head office as its prime commercial lending rate (the "Prime Rate") plus one-half percent (.50%). Changes in the rate of interest hereunder shall be effective as of and for the entire day on which such change in the Prime Rate becomes effective; and Fixed Rate: A rate per year for each Interest Period for each loan under this Note equal to either the Euro Rate or the Money Market Rate. Unless three Business Days prior to the expiration of an Interest Period, the undersigned requests and Chase quotes a new Fixed Rate for a subsequent Interest Period on an existing Fixed Rate loan, such Fixed Rate loan shall automatically convert to a Variable Rate loan on the day immediately following the last day of the current Interest Period. The minimum principal amount of a Variable Rate or Fixed Rate loan shall be $500,000. Interest shall be payable in arrears (a) as to a Variable Rate loan, on the first day of each month and (b) as to a Fixed Rate loan, on the last day of each Interest Period, or if such Interest Period is more than 90 days, then on the 90th day after the date of such loan and on the last day of such Interest Period, unless otherwise specified on a Rider attached hereto, in respect of the corresponding principal and (c) on the maturity date of any loan. Interest shall be calculated (i) on a Variable Rate loan, on the basis of a year of 365 days or 366 days (as the case may be), and (ii) on a Fixed Rate loan, on the basis of a year of 360 days and payable for the actual number of days elapsed. After the occurrence of an Event of Default set forth below, Chase, at its option, by written notice to the undersigned, may increase the interest rate on this Note by an additional two percent (2%) per year, effective on the date of such notice. 4. PAYMENTS. All payments under this Note shall be made in lawful money of the United States of America and in immediately available funds at Chase's office specified above. Chase may (but shall not be obligated to) debit the amount of any payment (principal or interest) under this Note when due to the deposit accounts of the undersigned with Chase listed below. This Note may be prepaid without penalty or premium unless otherwise specified herein. Chase may apply any money received or collected for payment of this Note to the principal of, interest on or any other amount payable under, this Note in any order that Chase may elect. All amounts payable hereunder shall be made without set-off or counterclaim and clear of and without deduction for any and all taxes, registration fees, duties, levies or any other deductions or withholdings whatsoever imposed, collected or made with repeat to this Note. In the event the undersigned or Chase is compelled by applicable law to pay or deduct any such amounts, the undersigned shall pay to Chase such additional amounts to insure that Chase receives an amount equal to the full amount it otherwise would have received had such deduction not been made. Whenever any payment to be made hereunder (including principal and interest) shall be stated to be due on a day on which Chase's head office is not open for business, that payment will be due on the next following Banking Day, and any extension of time shall in each case be included in the computation of interest payable on this Note. If any payment (principal or interest) shall not be paid when due other than a payment of the entire principal balance of the Note due upon acceleration after default, to the extent permitted by applicable law, the undersigned shall pay a late payment charge equal to five percent (5%) of the amount of such delinquent payment, provided that the amount of such late payment charge shall be not less than $25 nor more than $500. 5. ADDITIONAL COSTS. If as a result of any Regulatory Change, Chase determines (which determination shall be conclusive) that the cost to Chase of making or maintaining the loan is increased, or any amount received or receivable by Chase hereunder is reduced, or Chase is required to make any payment (including without limitation in connection with any reserves or capital adequacy requirements or assessments) in connection with any transaction contemplated hereby, then the undersigned shall pay to Chase on demand such additional amount or amounts as Chase determines will compensate Chase for such increased cost, reduction or payment. Chase will, within 90 days of such demand, provide the undersigned with a statement setting forth the calculation of such additional amount or amounts; provided, however, the failure of Chase to provide such statement shall not relieve the undersigned of its payment obligation. 6. ILLEGALITY. If it becomes unlawful for Chase or its lending office to make, convert or maintain any loan, Chase shall promptly notify the undersigned, and Chase shall not make, convert or maintain any loan and any loan outstanding shall be prepaid on demand, together with interest and any amounts due under the CERTAIN COMPENSATION section below. 7. CERTAIN COMPENSATION (FIXED RATE LOAN ONLY). If for any reason there is a principal payment of a loan on a date other than the last day of the Interest Period thereof (whether by demand, prepayment, or otherwise) or a failure to borrow on the date specified for borrowing, the undersigned will pay to Chase on demand such amount or amounts as shall be sufficient (in the reasonable opinion of Chase) to compensate Chase for any loss, cost or expense which Chase determines is attributable to such payment or such failure to borrow. A determination by Chase of the amounts payable pursuant to this provision shall be conclusive absent manifest error. 8. AUTHORIZATIONS. The undersigned hereby authorizes Chase to make loans and disburse the proceeds thereof to the account listed below and to make repayments of such loans by debiting such account upon oral, telephonic or telecopied instructions made by any person purporting to be an officer or agent of the undersigned who is empowered to make such requests and give such instructions. The undersigned may amend these instructions, from time to time, effective upon actual receipt of the amendment by Chase. Chase shall not be responsible for the authority, or lack of authority, of any person giving such telephonic instructions to Chase pursuant to these provisions. By executing this Note, the undersigned agrees to be bound to repay any loan obtained hereunder as reflected on Chase's books and records and made in accordance with these authorizations, regardless of the actual receipt of the proceeds thereof. 9. RECORDS. The date, principal amount, interest rate and maturity date of each loan under this Note and each payment of principal, loan(s) to which such principal is applied (which shall be at the discretion of Chase) and the outstanding principal balance of loans, shall be recorded by Chase on its books and prior to any transfer of this Note (or, at the discretion of Chase at any other time) endorsed by Chase on the schedule attached or any continuation of the schedule. Any such endorsement shall be conclusive absent manifest error. 10. REPRESENTATIONS AND WARRANTIES. The undersigned represents and warrants upon the execution and delivery of this Note and upon each loan request hereunder, that: (a) it is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (b) it has the power to execute and deliver this Note and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance; (c) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its organizational documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any material contractual restriction binding on or materially affecting it or any of its assets; (d) to the best of undersigned's knowledge, all governmental and other consents that are required to have been obtained by it with respect to this Note have been obtained and are in full force and effect and all conditions of any such consents have been complied with; (e) its obligations under this Note constitute its legal, valid and binding obligations, enforceable in accordance with its terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws affecting creditors' rights generally; (f) all financial statements and related information furnished and to be furnished to Chase from time to time by the undersigned are true and complete and fairly present the financial or other information stated therein as at such dates or for the periods covered thereby; (g) there are no actions, suits, proceedings or investigations pending or, to the knowledge of the undersigned, threatened against or affecting the undersigned before any court, governmental agency or arbitrator, which involve forfeiture of any assets of the undersigned or which may materially adversely affect the financial condition, operations, properties or business of the undersigned or the ability of the undersigned to perform its obligation under this Note; and (h) there has been no material adverse change in the financial condition of the undersigned since the last such financial statements or information. 11. AFFIRMATIVE COVENANTS. The undersigned agrees that it shall: (a) Furnish to Chase, within 120 days after and as at the close of each Fiscal Year, a consolidated (and consolidating) balance sheet(s) of undersigned and its consolidated Subsidiaries, and consolidated (and consolidating) statements of income, cash flows and changes in shareholders' equity of undersigned and its consolidated Subsidiaries prepared in accordance with GAAP consistently applied, on an audit basis, prepared by Delloite & Touche, LLP, or other independent public accounting firm satisfactory to Chase, and accompanied by a satisfactory report of such accountants which shall not contain any qualification of opinion or disclaimer; (b) Furnish to Chase, within 45 days after the end of each Fiscal Quarter, a consolidated (and consolidating) balance sheet(s) of undersigned and its consolidated Subsidiaries as at the end of each such quarter and related consolidated (and consolidating) statements of income, cash flow and changes in shareholders' equity of the undersigned and its consolidated Subsidiaries for the Fiscal Quarter and from the beginning of such Fiscal Year to the end of such Fiscal Quarter, together with comparisons to the previous year, if appropriate, and to budget projections, prepared in conformity with GAAP consistently applied, and certified by an appropriate financial officer of undersigned; (c) Furnish to Chase when loans are outstanding, within 20 days after the end of each month, a statement of accounts receivable, to be in form and substance satisfactory to Chase; (d) Furnish to Chase such other books, records and reports as Chase may from time to time reasonably request; (e) Permit representatives of Chase to visit and inspect any of the properties of undersigned and its Subsidiaries, examine its corporate books and records, and to make extracts or copies of such books and records, and discuss its affairs, finances and accounts with its officers, accountants and agents, provided that the foregoing shall only be done at reasonable times and with not more than reasonable frequency, and provided further that the reasonable cost of such inspections and examinations shall be paid by undersigned. 12. NEGATIVE COVENANTS. The undersigned agrees that it shall not, and shall not permit any Subsidiary to: (a) Incur, create, permit to exist or assume, directly or indirectly, any Debt other than (i) Debt to Chase, (ii) and (ii) trade indebtedness (which shall not include any borrowing, trade acceptances or notes given in settlement of trade indebtedness) incurred in the ordinary course of business and not more than 30 days overdue; (b) Pledge or encumber any of its assets, except mortgages, liens, security interests or encumbrances granted to Chase; (c) Loan or make advances to, or guarantee, indorse or otherwise be or become liable or contingently liable in connection with the obligations or indebtedness of any other Person, directly or indirectly; 13. FINANCIAL COVENANTS. The undersigned shall maintain at all times the following financial covenants and ratios: (a) Debt to Consolidated Tangible Net Worth plus Subordinated Debt of not more than 2 to 1; (b) Consolidated Current Assets to Consolidated Current Liabilities of not less than 1.25 to 1. 14. NO COMMITMENT. This Note does not create and shall not be deemed or construed to create any contractual commitment to lend by Chase. Any such commitment in respect of this Note can only be made by and shall only be effective to the extent set forth in a separate writing expressly designated for that purpose and subscribed by a duly authorized officer of Chase. 15. SECURITY. As collateral security for the payment of this Note and of any and all other obligations and liabilities of the undersigned to Chase, now existing or hereafter arising, the undersigned grants to Chase a security interest in and a lien upon and right of offset against all moneys, deposit balances, securities or other property or interest therein of the undersigned now or at any time hereafter held or received by or for or left in the possession or control of Chase or any of its affiliates, including subsidiaries, whether for safekeeping, custody, transmission, collection, pledge or for any other or different purpose. 16. DEFAULT. If any of the following events of default shall occur with respect to any of the undersigned (each an "Event of Default"): (a) the undersigned shall fail to pay the principal of, or interest on, this Note, or any other amount payable under this Note, as and when due and payable; (b) any representation or warranty made or deemed made by the undersigned in this Note or in any document granting security or support for (or otherwise executed in connection with) this Note or by any third party supporting or liable with respect to this Note (whether by guaranty, subordination, grant of security or any other credit support, a "Third Party") in any document evidencing the obligations of a Third Party (this Note and all of the foregoing documents and all agreements, instruments or other documents executed by the undersigned or a Third Party being the "Facility Documents") or which is contained in any certificate, document, opinion, financial or other statement furnished at any time under or in connection with any Facility Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) the undersigned or any Third Party shall fail to perform or observe any term, covenant or agreement contained in any Facility Document on its part to be performed or observed (not constituting an Event of Default under any other clause of this section), and such failure shall continue for 30 consecutive days; (d) the undersigned or any Third Party shall fail to pay when due any indebtedness (including but not limited to indebtedness for borrowed money) or if any such indebtedness shall become due and payable, or shall be capable of becoming due and payable at the option of any holder thereof, by acceleration of its maturity, or if there shall be any default by the undersigned or any Third Party under any agreement relating to such indebtedness; (e) the undersigned or any Third Party: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; (ii) shall make an assignment for the benefit of creditors; (iii) shall file a petition in bankruptcy or for any relief under any law of any jurisdiction relating to reorganization, arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have any such petition filed against it and the same shall remain undismissed for a period of 30 days or shall consent or acquiesce thereto; or (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of its property; (f) if the undersigned or any Third Party is an individual, such individual shall die or be declared incompetent; (g) any Third Party Facility Document shall at any time and for any reason cease to be in full force and effect or shall be declared null and void, or its validity or enforceability shall be contested by the relevant Third Party or such Third Party shall deny it has any further liability or obligation under any Facility Document or shall fail to perform its obligations under any Facility Document; (h) any security agreement or other agreement (whether by the undersigned or any Third Party) granting a security interest, lien, mortgage or other encumbrance securing obligations under any Facility Document shall at any time and for any reason cease to create a valid and perfected first priority security interest, lien, mortgage or other encumbrance in or on the property purported to be subject to such agreement or shall cease to be in full force and effect or shall be declared null and void, or the validity or enforceability of any such agreement shall be contested by any party to such agreement, or such party shall deny it has any further liability or obligation under such agreement or any such party shall fail to perform any of its obligations under such agreement; (i) the undersigned shall make or permit to be made any material change in the character, management or direction of the undersigned's business or operations (including, but not limited to, a change in its executive management or in the ownership of its capital stock which effects a change in the control of any such business or operations), which is not satisfactory to Chase; (j) the undersigned or any Third Party shall suffer a material adverse change in its business, financial condition, properties or prospects; (k) any action, suit, proceeding or investigation against or affecting the undersigned or a Third Party before any court or governmental agency which involves forfeiture of any assets of the undersigned or a Third Party shall have been commenced; or (l) one or more judgments, decrees or orders for the payment of money in excess of $50,000 in the aggregate shall be rendered against the undersigned and shall continue unsatisfied and in effect for a period of 30 consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal. THEN, in any such case, if Chase shall elect by notice to the undersigned, the unpaid principal amount of this Note, together with accrued interest and any other amounts due hereunder shall become forthwith due and payable; provided that in the case of an event of default under (e) above, the unpaid principal amount of this Note, together with accrued interest and any other amounts due hereunder shall immediately become due and payable without any notice or other action by Chase. 17. CERTAIN WAIVERS. The undersigned waive(s) presentment, notice of dishonor, protest and any other notice or formality with respect to this Note. 18. COSTS. The undersigned agree(s) to reimburse Chase on demand for all reasonable costs, expenses and charges (including, without limitation, any taxes, fees and charges of external legal counsel for Chase and costs allocated by its internal legal department) in connection with the preparation, interpretation, administration, performance or enforcement of this Note and the Facility Documents. 19. NOTICES. All notices, requests, demands or other communications to or upon the undersigned or Chase shall be in writing and shall be deemed to be delivered upon receipt if delivered by hand or overnight courier or five days after mailing to the address (a) of the undersigned as set forth next to the undersigned's execution of this Note, (b) of Chase as first set forth above, or (c) of the undersigned or Chase at such other address as the undersigned or Chase shall specify to the other in writing. 20. ASSIGNMENT. This Note shall be binding upon the undersigned and its or their successors and shall inure to the benefit of Chase and its successors and assigns. 21. AMENDMENT AND WAIVER. This Note may be amended only by a writing signed on behalf of each party and shall be effective only to the extent set forth in that writing. No delay by Chase in exercising any power or right hereunder shall operate as a waiver thereof or of any other power or right; nor shall any single or partial exercise of any power or right preclude other or future exercise thereof, or the exercise of any other power or right hereunder. 22. GOVERNING LAW; JURISDICTION. This Note shall be governed by and construed in accordance with the laws of the State of New York. The undersigned consent(s) to the nonexclusive jurisdiction and venue of the state or federal courts located in such state. The undersigned hereby waives any objection which it or they may now or hereafter have to the laying of venue of any suit or action arising out of this Note in such courts and further waives any claim that any such suit or action brought in any such court has been brought in an inconvenient forum. In the event of a dispute hereunder, suit may be brought against the undersigned is such courts or in any jurisdiction where the undersigned or any of its assets may be located. Service of process by Chase in connection with any dispute shall be binding on the undersigned if sent to the undersigned by registered mail at the address(es) specified below or to such further address(es) as the undersigned may specify to Chase in writing. 23. MAXIMUM INTEREST. Notwithstanding any other provision of this Note, the undersigned shall not be required to pay any amount pursuant to this Note which is in excess of the maximum amount permitted to be charged under applicable law and any such excess interest paid shall be refunded to the undersigned or applied to principal owing hereunder. 24. JURY, CERTAIN DEFENSES AND SET-OFF WAIVERS. THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE(S) (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE OR ANY FACILITY DOCUMENT, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S OPTION, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. IN ADDITION, THE UNDERSIGNED WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE BASED UPON ANY STATUTE OF LIMITATIONS OR ANY CLAIM OF DELAY BY CHASE AND ANY SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION. CHASE ACCOUNT NO. TO BE CHARGED FOR DISBURSEMENTS AND PAYMENTS: --------------------------------- FIND SVP, INC. BY: ___________________________________ PRINT NAME: ___________________________ TITLE: ________________________________ ADDRESS FOR NOTICES: 625 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10011 TELECOPIER NO. (212)255-7632 SCHEDULE TO GRID PROMISSORY NOTE OF FIND SVP, INC. DATED JUNE 18, 2002
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EX-10.13 6 c27776_ex10-13.txt EXHIBIT 10.13 AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT Amendment No. 1 to Employment Agreement (Amended and Restated as of November 21, 2001) (the "Amendment"), entered into as of this 31st day of December, 2002, by and between FIND/SVP, Inc., a New York corporation with an address at 625 Avenue of the Americas, New York, New York 10011 (the "Company") and ANDREW P. GARVIN, residing at 401 East 89th Street, New York, New York (the "Employee"). WHEREAS, the Company and the Employee entered into a certain Employment Agreement (Amended and Restated as of November 21, 2001) (the "Employment Agreement"); WHEREAS, the Company and the Employee desire to amend and modify certain terms of the Employment Agreement, effective as of December 31, 2002; NOW, THEREFORE, in consideration of the promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows: 1. The Employment Agreement shall be amended to incorporate the terms set forth herein. Except as expressly amended below, the Employment Agreement and all provisions, terms and conditions set forth therein shall remain in full force and effect. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Employment Agreement. 2. Section 1.1 of the Employment Agreement is hereby amended and restated in its entirety to read as follows: "1.1 The Company hereby employs and engages the Employee to serve (A) for the Term hereof, as President of the Company performing the duties set forth in subsection 1.1(a) hereof, together with such related duties and responsibilities that are customary to such position as may be assigned from time to time by the Chief Executive Officer or the Board of Directors of the Company and (B) through December 31, 2003, as the Chief Marketing Officer of the Company performing the duties set forth in subsection 1.1(b) hereof, in each case subject to the supervision of the Chief Executive Officer of the Company. (a) PRESIDENT. As President of the Company, Employee shall have the following responsibilities with respect to the Company: (i) act as an advisor to all executives; (ii) assist in brand and image building; (iii) serve on the Company's OMG; (iv) assist the Chief Financial Officer of the Company in connection with the financial health and productivity of the Company's QCS business unit; (v) assist in the development and solicitation of acquisition prospects and assist with the integration of such prospects upon acquisition; (vi) propose and develop cross-departmental revenue producing ideas and programs; (vii) review/oversee non-standardized written materials, including published materials, for consistency prior to forwarding to clients and prospects; (viii) assist in the coordination and development of (A) products sales to existing clients and through the web site of the Company and (B) the Live Answer Desk business; (ix) generally assist in business transitions; and (x) assist in developing and executing partnerships and alliances. (b) CHIEF MARKETING OFFICER. As Chief Marketing Officer of the Company, Employee shall have primary responsibility for the marketing department and marketing decisions of the Company, including, without limitation, marketing decisions directly relating to the following subject matters: (i) positioning, branding, trademarking, packaging and distribution of products and services; (ii) market segmentation; (iii) advertising, direct marketing, and e-marketing and web site marketing (including approval of content used); (iv) sales support and promotion; (v) public relations, events and event marketing; (vi) client and prospect newsletters and usage stimulation programs and use of content for marketing purposes; (vii) client and prospect database development and management; (viii) participation in alliances, partnerships and value enhancement ideas and programs; (ix) market research with respect to prospects, existing clients and competitors; (x) client feedback programs; and (xi) internal communications with respect to marketing and advertising programs and results. For the avoidance of doubt, Employee shall at all times report to, and be subject to the oversight of, the Chief Executive Officer of the Company. 3. Article 3 of the Employment Agreement is hereby amended as follows: 3.1 Section 3.6(a) of the Employment Agreement is amended to add the words "after December 31, 2003" after the word "Company" in the third line. 3.2 A new section 3.6(f) shall be added as follows: "(f) In the event the Employee's employment by the Company is terminated by the Employee voluntarily leaving the employ of the Company, other than pursuant to Section 3.6(b) above, on or 2 before December 31, 2003, the Employee shall be entitled to receive the compensation provided for in Sections 3.1; 3.3 and the access to a car provided for in Section 3.5 hereof for a nine-month period, and the Employee shall have no obligation to mitigate damages, and shall be entitled to such compensation provided for herein even if Employee is employed elsewhere." 4. The word "President" in the first sentence of Section 5.1 of the Employment Agreement is hereby deleted and replaced with the words "an Officer." 5. The Company and Employee agree and understand that the change in the Employee's title, role and responsibilities provided in Section 1.1 above shall not be deemed a material diminution of title, role or responsibilities. 6. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 7. This Amendment No. 1 to the Employment Agreement shall be governed and construed on the same basis as the Employment Agreement, as set forth therein. 3 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. FIND/SVP, INC. By: /s/ DAVID WALKE ------------------------------ Name: David Walke Title: Chief Executive Officer /s/ ANDREW P. GARVIN ------------------------------ Andrew P. Garvin 4 EX-21 7 c27776_ex21.txt EXHIBIT 21 LIST OF SUBSIDIARIES SUBSIDIARY STATE OF INCORPORATION Find/SVP Published Products, Inc. Delaware Find/SVP Internet Services, Inc. Delaware Guideline Research Corp. New York EX-23 8 c27776_ex23.txt EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference of our reports dated April 4, 2003, appearing in this Annual Report on Form 10-K of Find/SVP, Inc. for the year ended December 31, 2002, in Registration Statement No. 333-22445 on Form S-8 (pertaining to the Find/SVP, Inc. 1996 Stock Option Plan); and Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 No. 333-68315 (pertaining to the Find/SVP, Inc. 1996 Stock Option Plan). We consent to the incorporation by reference in Registration Statement No. 333-43940 (pertaining to the Find/SVP, Inc. 1996 Stock Option Plan) of Find/SVP, Inc. on Form S-8 of our reports dated April 4, 2003, that have been incorporated by reference from Registration Statement No. 333-22445 on Form S-8 (pertaining to the Find/SVP, Inc. 1996 Stock Option Plan), and that originally appear in this Annual Report on Form 10-K of Find/SVP, Inc. for the year ended December 31, 2002. Deloitte & Touche LLP Stamford, Connecticut April 4, 2003 EX-99.1 9 c27776_ex99-1.txt EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of FIND/SVP, Inc. (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Walke, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ DAVID WALKE David Walke Chief Executive Officer April 11, 2003 A signed original of this written statement required by Section 906 has been provided to FIND/SVP, Inc. and will be retained by and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of FIND/SVP, Inc. (the "Company") on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter Stone, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ PETER M. STONE Peter M. Stone Chief Financial Officer April 11, 2003 A signed original of this written statement required by Section 906 has been provided to FIND/SVP, Inc. and will be retained by and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----