-----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, Ihe7fHlKpXaZAvMyFaWHYcg5GyXSCZHrS1hVa0zNqsmKDfV5uH1E9+6k2xvDp7XC lXJnYH2oCdQqD9Q3HO6QGg== 0000930413-97-000287.txt : 19970520 0000930413-97-000287.hdr.sgml : 19970520 ACCESSION NUMBER: 0000930413-97-000287 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970519 SROS: NASD 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: ARS SEC ACT: 1934 Act SEC FILE NUMBER: 000-15152 FILM NUMBER: 97611343 BUSINESS ADDRESS: STREET 1: 625 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2126454500 ARS 1 ANNUAL REPORT Worldwide Research, Advisory & Business Intelligence Services [LOGO] 1996 Annual Report A SINGLE RESOURCE TO ANSWER MANY QUESTIONS - -------------------------------------------------------------------------------- THE EXPERTS IN OUR QUICK CONSULTING AND RESEARCH SERVICE FIND COST-EFFECTIVE RESPONSES TO QUESTIONS LIKE THESE: o What can you find out about a new frozen cookie being test-marketed by my competitor? o What is the outlook for usage of flat-rolled steel in cars in the next ten years? o Has the executive I'm about to enter a business deal with been involved in any litigation? o Who are some of the leading doctors doing research on retinitis pigmentosa? o What are the typical matches and vesting schedules for a 401(k)? o What local government regulations apply to the export of computers to Hong Kong? o What tax or accounting issues should I be aware of before launching a national contest for our customers? OUR STRATEGIC CONSULTING AND RESEARCH GROUP CONDUCTS CUSTOM STUDIES AND SURVEYS TO ADDRESS STRATEGIC QUESTIONS SUCH AS: o What are the best branding practices in the OEM market for computers and peripherals? o What is the strategic direction of my competitor? Are they a suitable acquisitions target? o Should I expand into a new product category given current market conditions? How will emerging technology standards affect this decision? o What is the interest level for new long-distance calling services among a specific consumer segment? CLIENTS DEPEND ON OUR CUSTOMER SATISFACTION AND LOYALTY GROUP FOR ANSWERS TO THESE KEY CONCERNS: o How satisfied are my customers with my company's performance? o What are the primary needs and concerns of my customers? o What are my company's competitive strengths and weaknesses? o What do my customers value most about the products and services we provide? THE RESEARCH PUBLICATIONS GROUP PRODUCES HUNDREDS OF RESOURCES TO HELP ANSWER THESE TYPES OF QUESTIONS: o What is the size of the market currently? Historically? What about forecasts for future growth? o What companies command the highest market share? o What economic, regulatory, technological and competitive trends are driving the market? o Can you provide current import and export data? o What is the industry structure and corresponding barriers to entry? OUR EMERGING TECHNOLOGIES RESEARCH GROUP PROVIDES ANSWERS TO THESE CRITICAL QUESTIONS: o What consumer segments can be reached and effectively marketed to via the Internet? o Where does the Internet fit into other marketing and media plans? o When, and how much, should I invest in Internet market development? o What technology factors will most influence the purchase and use of new interactive products and services? o What types of products offered online are most likely to inspire a purchase? --------------------------- COMPANY PROFILE --------------------------- FIND/SVP provides fully integrated research, business intelligence and management advisory services in a broad range of industries and disciplines. Founded in 1969, FIND/SVP pioneered the delivery of quick question-answering services through telephone consultations with experienced specialists. Today, it is a leading provider of outsourced and co-sourced research and knowledge support services. The Company's 1,100 experts around the world serve as advisors to more than 17,000 executives in 2,300 client organizations. FIND/SVP's services range from quick, cost-effective consulting over the telephone to strategic, in-depth intelligence and analysis. FIND/SVP's core activity is its Quick Consulting and Research Service which delivers fast, focused answers to questions from clients. These clients pay on a retainer basis, thus providing a continuing base of recurring revenue. The Company's Strategic Consulting and Research Group handles more in-depth market research, benchmarking and competitive intelligence assignments. Its Customer Satisfaction and Loyalty Group assists clients in monitoring and assessing their performance through satisfaction and loyalty measurement programs. Its Emerging Technologies Research Group performs primary research on consumer and business use of interactive products and services through ground-breaking multi-client studies and its continuous advisory programs. FIND/SVP's Research Publications Group produces syndicated market intelligence reports and profiles available in both print and online formats. Finally, the Company's Knowledge Management Group assist clients with a variety of knowledge support services. Through a licensing agreement, FIND/SVP is a member of the international SVP network of companies, which enables it to provide executives with worldwide research assistance. The Company's strategy is to increase its base of recurring revenue clients by delivering broad-based decision support, and to provide those clients with a highly integrated group of additional research, advisory and business intelligence services. TO OUR SHAREHOLDERS - -------------------------------------------------------------------------------- When the corporate biography of FIND/SVP is written, the chronicler is likely to record that 1996 was one of the most important years in the Company's history. This was the year in which FIND/SVP launched its transition into a 21st century organization - the Company's new beginning. While the 1996 financial results were a disappointment, if you were to probe beneath the surface with a more thorough analysis of what transpired and what was accomplished, I believe you would interpret the results as the price of admission into an exceptionally bright future. (A succinct statistical financial summary appears on page 4) You might ask, "why 1996?" Quite simply, the rapidly changing business environment combined with the achievement of a certain critical mass (we exceeded $30 million in annual revenues for the first time) indicated that the timing was right for a new set of initiatives. Underlying all of our activities last year was our corporate mission - to be the leading resource offering an integrated group of research, advisory and business intelligence services in a broad range of industries and disciplines. Our goal is to help clients acquire and use the knowledge they need to strengthen decision-making, problem solving and performance so they may gain a real competitive advantage. More specifically, by forming "partnerships" with the more than 17,000 executives in nearly 2,300 organizations who are retainer clients of our core business, we make them more competitive and save them time and money in addressing their knowledge needs. PLANS FOR THE FUTURE During the past year, we set forth four principal strategies: o Increase the growth rate of the Company's highly successful and profitable Quick Consulting and Research Service, which accounts for 65 percent of revenues and provides a recurring revenue base that has grown each quarter since 1969. We have planned new sales and marketing programs to increase penetration of the potential market, which we believe is more than 75,000 U.S. companies. In addition, we initiated new programs to enable our clients to interact electronically through the Internet with the people in our practice groups, and to enable us to deliver results to their desktops. o Vertically integrate our services and market them as a total package. Whether executives need quick tactical searching, insightful research or in-depth intelligence and analysis, we want them to come to us first. Our published research, for example, will now be used primarily to attract and retain recurring revenue clients. Among other things, this shift in strategy resulted in a $802,000 restructuring charge during 1996. 2 o Leverage our core competence of customized question-answering on a large scale. To this end, we created FINDOUT, a new Web site that is a reference help desk for consumers. Our plan is to offer this service as a value-added feature for major publications, marketing organizations and Internet services through ongoing contracts and alliances. While it is too soon to predict results, there are two early indications of progress: first, a trial program is underway with a major nationally recognized newspaper; and second, in early 1997 FINDOUT was named by YAHOO! INTERNET LIFE as one of its "25 Most Incredibly Useful Sites." o Make both strategic and opportunistic acquisitions and alliances to enhance our ability to provide one-stop service to our clients. FINANCINGS FOR GROWTH To implement our new and ambitious plans, additional financing was required. An important vote of confidence was cast near year-end when the Company closed an initial $2.5 million financing (part of a potential $5 million total package) led by a fund managed by Furman Selz Investments LLC (Furman Selz), which included participation by FIND/SVP's international shareholder and affiliate, SVP, S.A. The executive vice president of Furman Selz, Jim Luikart, has joined the Company's Board of Directors. In addition, Furman Selz has made its highly regarded investment banking skills available to the Company. What do we hope to achieve by these new initiatives? Over the past five years, FIND/SVP's revenues have increased by 78 percent. The initiatives are intended to accelerate the Company's revenue growth over the next five years. The goal, apart from being the best knowledge resource to corporate America, is to enhance the Company's stock value for our shareholders. Realistically, of course, it is not going to be a straight-line improvement. There is still much work to be done in the repositioning of the Company that will require further investment. Most of this effort and expense will impact financial performance during the first three quarters of 1997. However, it is our belief that by the close of 1997 results will become self-evident. At this writing, significant progress has already been made. An experienced new Vice President of Business Development has joined FIND/SVP. New marketing communications materials and programs have been created. A new online "virtual consulting" capability has been launched. A major upgrade of our internal question and client tracking systems, designed to improve efficiency, has been implemented. Clearly, 1996 was an eventful and progressive year for our Company. As I review the year in its totality, there is no question in my mind that our accomplishments position FIND/SVP to be a premier growth company in the knowledge service business as we head towards the 21st century. /s/ Andrew P. Garvin Andrew P. Garvin Chairman and President 3 SELECTED FINANCIAL DATA The following financial data set forth below is derived from the consolidated financial statements of the Company.
Years Ended December 31, -------------------------------------------------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS Revenues $ 30,525 $28,606 $24,357 $20,257 $18,164 Operating (Loss) Income (839) 1,043 1,144 726 198 Cumulative Effect of Change in Accounting for Income Taxes -- -- -- 157 -- Extraordinary Item - Effect of Utilization of Tax Loss Carryforwards -- -- -- -- 77 Net (Loss) Income (719) 476 673 726 207 (Loss) Earnings per Common and Common Equivalent Share: (Loss) Income Before Cumulative Effect of Change in Accounting and Extraordinary item (.11) .07 .10 .09 .02 Cumulative Effect of Change in Accounting for Income Taxes -- -- -- .02 -- Extraordinary Item - Effect of Utilization of Tax Loss Carryforward -- -- -- -- .01 Net (Loss) Income Per Common and Common Equivalent Share (.11) .07 .10 .11 .03 Weighted Average Number of Common and Common Equivalent Shares Outstanding 6,710 6,667 6,645 6,471 6,166 Cash Dividends Declared Per Common Share -- -- -- -- -- ===================================================================================================== Years Ended December 31, -------------------------------------------------- (AMOUNTS IN THOUSANDS) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------ BALANCE SHEET DATA Working Capital $ 3,937 $ 3,854 $ 2,796 $ 2,713 $ 2,392 Total Assets 12,996 11,445 9,705 7,050 5,871 Long-Term Indebtedness excluding amounts currently payable 3,826 2,896 1,191 207 266 Shareholders' Equity 4,059 4,659 4,160 3,495 2,775 =====================================================================================================
4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES The Company's revenues increased by $1,919,000 or 6.7% to $30,525,000 in 1996 and by $4,249,000 or 17.4% to $28,606,000 in 1995 from $24,357,000 in 1994. The increases were due to revenue increases in all facets of the Company. The Company's Quick Consulting and Research Service revenues grew by $1,086,000 or 5.8% to $19,718,000 in 1996 and by $1,930,000 or 11.6% to $18,632,000 in 1995. The increases in 1996 and 1995 were due to an increase in the average retainer fee paid per client, due primarily to an increase in the number of membership cardholders and an increase in fees. Revenues in the Strategic Consulting and Research area of the Company increased $496,000 or 12.5% to $4,450,000 in 1996 and $739,000 or 23.0% to $3,954,000 in 1995. The increases were due primarily to an increase in the number of assignments and their average size, resulting from a stronger marketing effort and the addition of the Customer Satisfaction Strategies Division in April 1994. The Customer Satisfaction Strategies Division accounted for 17.8%, 18.5% and 13.3% of the Strategic Consulting and Research area's revenue for 1996, 1995 and 1994, respectively. Revenues of Published Research increased $872,000 or 16.8% to $6,049,000 in 1996 and $925,000 or 21.7% to $5,177,000 in 1995, due primarily to increased sales of published studies both in print and electronic format and the sales of the Emerging Technologies Research Group's multi-client studies and the Continuous Advisory Service (which began in June 1996). The Company operates a small newsletter publishing operation. However the newsletters that are produced generated less than 1% of the Company's revenues in 1996, 1995 and 1994. DIRECT COSTS Direct costs increased by $1,684,000 or 10.8% to $17,349,000 in 1996 and by $2,813,000 or 21.9% to $15,665,000 in 1995 from $12,852,000 in 1994. Direct costs represented 56.8%, 54.8% and 52.8% of revenues, respectively, in those years. The increase in total direct costs is due to the planned expansion of services including an increase in the production of published studies, the costs associated with the promotion of new products and the costs associated with the integration of new services which began in 1994, such as customer satisfaction measurement studies and multi-client studies, and the Continuous Advisory Service which began in 1996. The fluctuations in the percentage of revenue is due mainly to the timing of costs related to the expansion of services versus the timing of the incremental revenue, coupled with lower than expected revenues in the Published Research Division in the second half of 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $1,315,000 or 11.1% to $13,213,000 or 43.3% of revenues in 1996 and by $1,537,000 or 14.8% to $11,898,000 or 41.6% of revenues in 1995 from $10,361,000 or 42.5% of revenues in 1994. The increases are due to the continued investment in sales and promotional efforts to generate incremental revenues and continued management development in the general and administrative areas, coupled with lower than expected revenues in the Published Research Division in the second half of 1996. The decrease in this expense as a percentage of revenues in 1995 compared to 1994 is due to the fact that costs in the selling, general and administrative areas do not generally increase at the same rate as revenues. The Company's lease for its main premises includes scheduled rent increases over the 15-year lease term. Financial Accounting Standards Board Statement No. 13 ("FASB No. 13") requires that rent expense under these circumstances be recognized on a straight-line basis. Accordingly, rent expense will exceed the amount actually paid in the first third of the lease, will be approximately equal to the amount actually paid in the middle third of the lease and will be less than the amount actually paid in the final third of the lease. Partly as the result of the lease renegotiation in 1992, rent payable exceeded rent expense by $142,000 in 1996 for the main premises. The Company's lease for additional premises includes scheduled rent increases over the 10-year lease term. FASB No. 13 requires that rent expense be recognized on a straight-line basis. As a result, rent expense exceeded rent payable by $71,000 in 1996 for the additional premises. In 1996, 1995 and 1994, total accrued rent payable decreased by $71,000, $182,000 and $227,000, respectively. See Note 4 of Notes to Consolidated Financial Statements. RESTRUCTURING CHARGE Due to lower than expected revenues and profits in the Published Research Division during the third quarter of 1996, and due to the anticipation of a more aggressive growth strategy, the Company announced and immediately began implementing a plan to restructure and consolidate operations, which included the re-organization of its operating units and a change in the method of marketing and cross-selling its various products. This plan resulted in a pre-tax charge of $802,000 during the third quarter of 1996. The charge includes a writedown of certain Published Research products and deferred charges of $490,000, severance and retirement charges of $167,000, charges relating to marketing and planning materials which will not be used after the restructuring of $117,000 and charges for the consolidation and reduction of several small, unprofitable product groups of $28,000, of which $122,000 in severance and retirement payments has been included in accrued expenses as of December 31, 1996. Management does not anticipate incurring additional charges such as these in the foreseeable future. OPERATING (LOSS) INCOME The Company's operating loss was $839,000 in 1996 as compared to operating income of $1,043,000 in 1995 and $1,144,000 in 1994. The operating loss in 1996 was due primarily to an $802,000 restructuring charge in the third quarter of 1996, coupled with an increase in direct costs and selling, general and administrative expenses as a percentage of revenues. The decrease 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in 1995's operating income when compared to 1994 was due to an increase in direct costs as a percentage of revenue, partially off-set by a decrease in selling, general and administrative expenses as a percentage of revenues. INTEREST INCOME AND EXPENSE; OTHER ITEMS In 1996, the Company earned $19,000 in interest income, which decreased from $49,000 in 1995 and $59,000 in 1994. The decrease was a result of a lower level of cash invested. Interest expense in 1996 was $305,000 which was an increase from $248,000 in 1995 and $52,000 in 1994. The increase in interest expense in 1996 was primarily due to additional bank borrowings during the second quarter of 1996 for equipment, additional borrowings under the Company's revolving credit line during the first ten months of 1996 and the issuance of subordinated notes during the fourth quarter of 1996. The increase in 1995 was the direct result of the $2,000,000 five-year note entered into in April 1995, resulting from the Company's refinancing of its long-term debt for equipment and facility expansion, and borrowings under the Company's revolving credit line. Loan and borrowings are described in "Liquidity and Capital Resources" below. In 1996, the Company recorded a loss on sale of marketable investment securities of $8,000, resulting from the sale of certain securities classified as available for sale for $168,000. The Company also recorded a loss on sale of assets of $73,000 resulting from the sale of certain assets. In 1995, the Company recorded a gain on sale of marketable investment securities of $10,000, resulting from the sale of certain securities classified as available for sale for $209,000. In 1994, the Company recorded a gain on sale of assets of $80,000, resulting from the sale of certain assets within the Company's Published Research Division. INCOME TAXES The provision for income taxes consists of federal, state and local income taxes. The $487,000 tax benefit recognized for 1996 represents 40% of the 1996 loss before benefit for income taxes. The benefit represents a net operating loss carryback for federal purposes, a deferred tax benefit from a net operating loss carryforward for state and local taxes, and a net deferred tax benefit for temporary items, offset by a prior period underaccrual. The effective tax rate was 44% in 1995 and 45% in 1994. The reduction of income before taxes in 1995 affected the amount of income tax expense, decreasing by $180,000 from $558,000 in 1994 to $378,000 in 1995. The decrease in the effective tax rate for 1995 from 1994 was due primarily to an over accrual in 1994. Based on the Company's history of prior operating earnings and its expectations for the future, which include the Company's restructuring efforts to improve performance, management has determined that the future operating income of the Company will more likely than not be sufficient to recognize fully the net deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES The Company finances its business primarily from operating revenues, working capital provided by deferred revenues in the form of prepaid retainer fees, capital leases and bank debt. In 1996, there was a positive cash flow from operating activities of $105,000. This resulted from a net loss of $719,000, a decrease in accrued rent payable of $71,000, an increase in cash surrender value of life insurance of $110,000, an increase in deferred income taxes of $107,000, an increase in accounts receivable of $180,000, an increase in inventory of $585,000, an increase in prepaid expenses, deferred charges, deferred financing fees and goodwill of $844,000, an increase in security deposits of $7,000 and an increase in prepaid and refundable income taxes of $543,000. These items were more than offset by depreciation and amortization of $1,050,000, amortization of discount on notes payable of $1,000, the non-cash portion of restructuring charge of $610,000, a $287,000 provision for losses on accounts receivable, a loss on sale of marketable investment securities of $8,000, a loss on sale of assets of $73,000, common stock issued for services of $40,000, an increase in deferred compensation of $25,000, an increase in accounts payable and accrued expenses of $624,000 and an increase in unearned retainer income of $553,000. In 1995, there was a negative cash flow from operating activities of $545,000. Positive cash flow resulted from net income of $476,000 adjusted for depreciation and amortization of $865,000, a $179,000 provision for losses on accounts receivable, an increase in accounts payable and accrued expenses of $95,000, an increase in unearned income of $35,000, an increase in deferred compensation of $21,000, a decrease in security deposits of $1,000 and a writedown of investment in joint venture of $1,000. These items were more than offset by a $479,000 increase in accounts receivable, a $522,000 increase in prepaid expenses, deferred charges, deferred financing fees and goodwill, a $716,000 increase in inventory, a $216,000 decrease in taxes payable, a $182,000 decrease in accrued rent, a $10,000 gain on the sale of marketable investment securities, a $54,000 increase in cash surrender value of life insurance, a $33,000 increase in deferred income taxes and a $6,000 increase in prepaid and refundable income taxes. In 1994, there was a negative cash flow from operating activities of $373,000. Positive cash flow resulted from net income of $673,000, adjusted for depreciation and amortization of $656,000, a $171,000 provision for losses on accounts receivable, an increase in accounts payable and accrued expenses of $615,000, an increase in taxes payable of $162,000, an increase in deferred compensation of $20,000 and a decrease in security deposits of $3,000. These items were more than offset by an $812,000 increase in accounts receivable, a $1,008,000 increase in prepaid expenses, deferred charges, deferred financing fees and goodwill, a $463,000 increase in inventory, a $227,000 decrease in accrued rent, a gain on sale of assets of $80,000, an increase in cash surrender value of $37,000, an increase in deferred income taxes of $20,000 and a decrease in unearned retainer income of $26,000. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Capital expenditures were $1,261,000, $1,246,000 and 1,146,000 in 1996, 1995 and 1994, respectively, and consisted principally of computer equipment as well as a local area network. On October 31, 1996, the Company and its subsidiaries entered into a Note and Warrant Purchase Agreement (the "Agreement") with Furman Selz SBIC, L.P. ("Furman Selz"). Pursuant to the Agreement, Furman Selz purchased from the Company and its subsidiaries, for an aggregate consideration of $2,025,000, five-year promissory notes ("Notes") in the principal amount of $2,025,000, and 10-year warrants ("Warrants") to purchase 900,000 shares of the Company's common stock, par value $.0001 per share ("Common Stock"), at $2.25 per share. The Notes accrue interest at an annual rate of 12% on the unpaid principal balance. Accrued but unpaid interest is due and payable on November 30, 1997, November 30, 1998 and on May 30 and November 30 of each year thereafter, commencing on May 30, 1999, except that final payment of interest shall be due and payable on October 31, 2001. However, one-half of the interest due and payable on November 30, 1997 shall be deferred and payable on November 30, 2000 and one-half of the interest due and payable on November 30, 1998, May 30, 1999 and November 30, 1999 shall be deferred and payable on October 31, 2001. Any interest deferred shall compound and accrue interest at the rate of the Notes until paid. The Agreement also provides that the Company and its subsidiaries may enter into an agreement on similar terms with SVP, S.A. or affiliates thereof, pursuant to which SVP, S.A. may purchase Notes from the Company and its subsidiaries up to the principal amount of $475,000, and Warrants to purchase up to 211,111 shares of Common Stock. On November 30, 1996, the Company and SVP, S.A. entered into such a Note and Warrant Agreement as described above, for an aggregate consideration of $475,000. SVP, S.A. currently owns about 1,438,374 shares of Common Stock, including shares issuable under outstanding Warrants, or approximately 21.3% of the outstanding shares. The Agreement further provides that Furman Selz and SVP, S.A. at their option, can purchase up to the amount of their respective initial investments, up to an additional $2,500,000 in Notes and Warrants on the same terms and conditions as the first $2,500,000, at any time before December 31, 1997. The Company anticipates that it shall use the proceeds received pursuant to the Agreement to adopt a more aggressive growth strategy, to make strategic acquisitions and for general corporate purposes. On September 19, 1996, the Company signed a thirty day Commercial Revolving Promissory Note with State Street Bank and Trust Company (the "Bank") for $500,000 at .25 percentage points above the prime rate. The Note expired on October 18, 1996 and was accordingly paid in full and cancelled on that date. The Note was in addition to the $2,000,000 Commercial Revolving Promissory Note with State Street Bank signed on April 27, 1995. On May 31, 1996, the Company signed a Commercial Term Loan and Security Agreement with the Bank for $500,000. The Term Loan is for a period of five years at .75 percentage points above the prime rate and requires quarterly principal payments of $25,000. On April 27, 1995, in conjunction with a refinancing of the Company's prior banking arrangements, the Company signed a Commercial Revolving Loan, Term Loan and Security Agreement with State Street Bank and Trust Company for a $2,000,000 Commercial Revolving Promissory Note and a $2,000,000 Commercial Term Promissory Note. The Commercial Revolving Promissory Note is for a period of two years at .25 percentage points above the prime rate, and the Commercial Term Note is for a period of five years at an interest rate of 8.86% per annum. The Revolving and Term Promissory Notes are secured by all of the assets of the Company. The principal payment schedule for the Term Promissory Note is $100,000 per quarter. As of December 31, 1996, the balance outstanding was $1,400,000. Additionally, there were no outstanding advances under the $2,000,000 revolving credit agreement with State Street Bank at December 31, 1996. The Company recorded an $802,000 restructuring charge to operations in the third quarter of 1996, which included $70,000 of cash expenditures in 1996 and future cash expenditures of $122,000. The Company's working capital was $3,937,000 at December 31, 1996, as compared to $3,854,000 as of December 31, 1995. Cash balances and marketable investment securities were $634,000 and $697,000 on December 31, 1996 and 1995, respectively. Marketable investment securities, which were $0 and $175,000 on December 31, 1996 and 1995, respectively, consist primarily of preferred shares of publicly traded companies that are considered available for sale. The Company expects to spend approximately $1,300,000 for capital items in 1997, the major portion of which will be to enlarge and upgrade the local area network that serves the Company's library, on-line and research areas. The Company believes that cash flow from operations and borrowings under the line of credit will be sufficient to cover its expected capital expenditures for the next 12 months and that it has sufficient liquidity for the next 12 months. The Company had non-cash financing activities relating to the cashless exercise of stock options. In the 12-month period ended December 31, 1996, 275,686 options were exercised at prices ranging from $0.275 to $2.1875, in exchange for 51,041 shares of common stock of the Company at prices ranging from $2.125 to $3.00. Such shares were held for a period of at least six months before the respective exchange. The value of these transactions was $119,000. INFLATION The Company has in the past been able to increase the price of its products and services sufficiently to offset the effects of inflation on wages and other expenses, and anticipates that it will be able to do so in the future. 7 CONSOLIDATED BALANCE SHEETS December 31, 1996 and 1995
ASSETS 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT ASSETS: Cash and cash equivalents $ 634,000 522,000 Marketable investment securities (note 2) - 175,000 Accounts receivable, less allowance for doubtful accounts of $103,000 in 1996 and $105,000 in 1995 2,837,000 2,944,000 Note receivable 50,000 - Inventories 2,281,000 1,935,000 Prepaid and refundable income taxes 549,000 6,000 Deferred tax assets (note 8) 99,000 47,000 Prepaid expenses and other current assets 525,000 549,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 6,975,000 6,178,000 - ------------------------------------------------------------------------------------------------------------------------------------ Equipment and leasehold improvements, at cost, less accumulated depreciation and amortization (note 3) 3,687,000 3,239,000 OTHER ASSETS: Deferred charges 1,197,000 1,063,000 Goodwill, net 276,000 297,000 Note receivable - 50,000 Cash surrender value of life insurance 424,000 314,000 Deferred tax assets (note 8) 200,000 145,000 Deferred financing fees, net 93,000 22,000 Security deposits 144,000 137,000 - ------------------------------------------------------------------------------------------------------------------------------------ $12,996,000 11,445,000 ==================================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable, current installments (note 5) 516,000 426,000 Trade accounts payable 1,082,000 824,000 Accrued expenses (note 12) 1,440,000 1,074,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 3,038,000 2,324,000 - ------------------------------------------------------------------------------------------------------------------------------------ Unearned retainer income 1,724,000 1,171,000 Notes payable, net, excluding current installments (note 5) 3,826,000 2,896,000 Accrued rent payable (note 4) 197,000 268,000 Deferred compensation (note 9(b)) 152,000 127,000 SHAREHOLDERS' EQUITY (note 6): Preferred stock, $.0001 par value. Authorized 2,000,000 shares; none issued and outstanding - - Common stock, $.0001 par value. Authorized 10,000,000 shares; issued and outstanding 6,547,184 shares in 1996; issued and outstanding 6,209,848 shares in 1995 1,000 1,000 Capital in excess of par value 3,861,000 3,743,000 Accumulated earnings 197,000 916,000 Net unrealized losses on marketable equity securities (note 2) - (1,000) - ------------------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 4,059,000 4,659,000 Commitments and contingencies (notes 4, 5, 6, 7, 9 and 13) - ------------------------------------------------------------------------------------------------------------------------------------ $12,996,000 11,445,000 ====================================================================================================================================
See accompanying notes to consolidated financial statements. 8 CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 - ---------------------------------------------------------------------------------------------------- Revenues .............................................. $ 30,525,000 28,606,000 24,357,000 - ---------------------------------------------------------------------------------------------------- OPERATING EXPENSES: Direct costs ........................................ 17,349,000 15,665,000 12,852,000 Selling, general and administrative expenses (notes 4, 7 and 9) ................................ 13,213,000 11,898,000 10,361,000 Restructuring charge (note 14) ...................... 802,000 -- -- - ---------------------------------------------------------------------------------------------------- Operating (loss) income ..................... (839,000) 1,043,000 1,144,000 Interest income ....................................... 19,000 49,000 59,000 (Loss) gain on sale of net assets ..................... (73,000) -- 80,000 (Loss) gain on sale of marketable investment securities (8,000) 10,000 -- Interest expense ...................................... (305,000) (248,000) (52,000) - ---------------------------------------------------------------------------------------------------- (Loss) income before (benefit) provision for income taxes .......................... (1,206,000) 854,000 1,231,000 (Benefit) provision for income taxes (note 8) ......... (487,000) 378,000 558,000 - ---------------------------------------------------------------------------------------------------- Net (loss) income ............................ $ (719,000) 476,000 673,000 ==================================================================================================== (Loss) earnings per common and common equivalent share ................................... $ (.11) .07 .10 ====================================================================================================
See accompanying notes to consolidated financial statements. 9 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years ended December 31, 1996, 1995 and 1994
Preferred stock Common stock Capital in Accumulated ----------------- -------------------- excess of earnings Shares Amount Shares Amount par value (deficit) - ------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 - $ - 6,154,648 1,000 3,727,000 (233,000) Effect of change in accounting for available-for-sale securities (net of tax effect of $7,000) - - - - - - Net income - - - - - 673,000 Purchase of treasury stock - - - - - - Exercise of stock options and warrants - - 70,600 - 60,000 - Retirement of common stock - - (21,600) - (39,000) - Change in market value of available-for-sale securities (net of tax benefit of $21,000) - - - - - - - ------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 - - 6,203,648 1,000 3,748,000 440,000 - ------------------------------------------------------------------------------------------------------------------------------ Net income - - - - - 476,000 Purchase of treasury stock - - - - - - Exercise of stock options and warrants - - 21,200 - 24,000 - Retirement of common stock - - (15,000) - (30,000) - Change in market value of available-for-sale securities (net of tax effect of $14,000) - - - - - - Investment in joint venture - - - - 1,000 - - ------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 - - 6,209,848 1,000 3,743,000 916,000 - ------------------------------------------------------------------------------------------------------------------------------ Net loss - - - - - (719,000) Exercise of stock options and warrants - - 315,396 - 53,000 - Common stock issued for services - - 21,940 - 40,000 - Sale of warrants in connection with Series A Senior Subordinated Notes - - - - 25,000 - Change in market value of available-for-sale securities (net of tax effect of $0) - - - - - - - ------------------------------------------------------------------------------------------------------------------------------ BALANCE AT DECEMBER 31, 1996 - $ - 6,547,184 $1,000 3,861,000 197,000 ==============================================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Net unrealized gains (losses) Treasury stock on marketable Total ---------------------- equity securities shareholders' Shares Amount (note 2) equity - ----------------------------------------------------------------------------------------------------- Balance at December 31, 1993 - $ - - 3,495,000 Effect of change in accounting for available-for-sale securities (net of tax effect of $7,000) - - 13,000 13,000 Net income - - - 673,000 Purchase of treasury stock 21,600 (39,000) - (39,000) Exercise of stock options and warrants - - - 60,000 Retirement of common stock (21,600) 39,000 - - Change in market value of available-for-sale securities (net of tax benefit of $21,000) - - (42,000) (42,000) - ------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 - - (29,000) 4,160,000 - ------------------------------------------------------------------------------------------------------ Net income - - - 476,000 Purchase of treasury stock 15,000 (30,000) - (30,000) Exercise of stock options and warrants - - - 24,000 Retirement of common stock (15,000) 30,000 - - Change in market value of available-for-sale securities (net of tax effect of $14,000) - - 28,000 28,000 Investment in joint venture - - - 1,000 - ------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 - - (1,000) 4,659,000 - ------------------------------------------------------------------------------------------------------ Net loss - - - (719,000) Exercise of stock options and warrants - - - 53,000 Common stock issued for services - - - 40,000 Sale of warrants in connection with Series A Senior Subordinated Notes - - - 25,000 Change in market value of available-for-sale securities (net of tax effect of $0) - - 1,000 1,000 - ----------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1996 - $ - - 4,059,000 ===================================================================================================== SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
10 CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ....................................... $ (719,000) 476,000 673,000 - ------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ......................... 1,050,000 865,000 656,000 Amortization of discount on notes payable ............. 1,000 -- -- Non-cash portion of restructuring charge .............. 610,000 -- -- Provision for losses on accounts receivable ........... 287,000 179,000 171,000 Loss (gain) on sale of marketable investment securities 8,000 (10,000) -- Loss (gain) on sale of net assets ..................... 73,000 -- (80,000) Common stock issued for services ...................... 40,000 -- -- Writedown of investment in joint venture .............. -- 1,000 -- Increase in deferred compensation ..................... 25,000 21,000 20,000 Decrease in accrued rent payable ...................... (71,000) (182,000) (227,000) Increase in cash surrender value of life insurance .... (110,000) (54,000) (37,000) Increase in deferred income taxes ..................... (107,000) (33,000) (20,000) Changes in assets and liabilities: Increase in accounts receivable ..................... (180,000) (479,000) (812,000) Increase in prepaid and refundable income taxes ..... (543,000) (6,000) -- Increase in inventory ............................... (585,000) (716,000) (463,000) Increase in prepaid expenses, deferred charges, deferred financing fees and goodwill .............. (844,000) (522,000) (1,008,000) (Increase) decrease in security deposits ............ (7,000) 1,000 3,000 Increase in accounts payable and accrued expenses ... 624,000 95,000 615,000 (Decrease) increase in taxes payable ................ -- (216,000) 162,000 Increase (decrease) in unearned retainer income ..... 553,000 35,000 (26,000) - -------------------------------------------------------------------------------------------------------- Total adjustments .................................. 824,000 (1,021,000) (1,046,000) - -------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 105,000 (545,000) (373,000) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures .................................... (1,261,000) (1,246,000) (1,146,000) Proceeds from sale of net assets ........................ 3,000 -- 84,000 Proceeds from sale of marketable investment securities .. 168,000 209,000 -- - -------------------------------------------------------------------------------------------------------- Net cash used in investing activities ................... (1,090,000) (1,037,000) (1,062,000) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal borrowings under notes payable ................ 2,975,000 3,381,000 1,560,000 Principal payments under notes payable .................. (1,956,000) (1,893,000) (111,000) Principal payments under capital lease obligations ...... -- -- (3,000) Proceeds from exercise of stock options ................. 53,000 24,000 60,000 Proceeds from sale of warrants in connection with Series A Senior Subordinated Notes .................... 25,000 -- -- Payments to acquire treasury stock ...................... -- (30,000) (39,000) - -------------------------------------------------------------------------------------------------------- Net cash provided by financing activities ............... 1,097,000 1,482,000 1,467,000 - -------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents .... 112,000 (100,000) 32,000 Cash and cash equivalents at beginning of year .......... 522,000 622,000 590,000 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year ................ $ 634,000 522,000 622,000 ========================================================================================================
See accompanying notes to consolidated financial statements. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1996, 1995 and 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of FIND/SVP, Inc. and its wholly owned subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates in one business segment, providing information services and products to customers primarily in the United States. (B) CASH EQUIVALENTS - Cash equivalents of $0 and $33,000 at December 31, 1996 and 1995, respectively, consist solely of money market accounts. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. (C) INVENTORIES - Inventories comprise costs of studies, printing and other publication costs of research reports held for sale. They are valued at the lower of amortized cost or market. The cost of reports is amortized over periods not exceeding eighteen months using the straight-line method beginning with the date of publication. (D) EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Equipment and leasehold improvements are stated at cost. Depreciation of equipment is computed by the straight-line method over the estimated useful lives of the assets, which are five years for electronic equipment and ten years for other assets. Computer software and databases are depreciated over five years in general. 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. (E) DEFERRED CHARGES AND GOODWILL - Deferred charges primarily comprise the cost of acquired library information files and databases, which are amortized to expense over the estimated period of benefit of three years using the straight-line method and certain costs, offset by cash advances relating to multi-client studies. Revenues and expenses of multi-client studies are recognized when the studies are published. Goodwill arising from various acquisitions represents excess purchase price over fair market value and is being amortized on a straight-line basis over 15 to 40 years. (F) 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 bases and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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. (G) (LOSS) EARNINGS PER SHARE - The weighted average number of shares of common stock and common stock equivalents outstanding during 1996, 1995 and 1994 was 6,710,000, 6,667,000 and 6,645,000 respectively. The computation of (loss) earnings per common and common equivalent share is based upon the weighted average number of common shares outstanding during the period and, when dilutive, the assumed exercise of stock options and warrants less the number of treasury shares assumed to be purchased from the proceeds using the average market price of the Company's common stock for primary and the year-end market price for fully diluted. The fully diluted (loss) earnings per share are not presented in any of the periods because such amounts are the same as primary (loss) earnings per share. (H) REVENUE RECOGNITION - Revenues from annual retainer fees are recognized ratably over the contractual period. Other revenues are recognized as earned. Revenues include certain out-of-pocket and other expenses billed to clients which aggregated approximately $3,376,000, $3,428,000 and $3,087,000 in 1996, 1995 and 1994, respectively. (I) MARKETABLE INVESTMENT SECURITIES - Marketable investment securities at December 31, 1995 consist of corporate equity securities. The Company classifies its debt and marketable equity securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS from earnings and are reported as a separate component of shareholders' equity until realized. Realized gains and losses from the sale of available-for-sale securities are included in earnings and are derived using the specific identification method for determining the cost of securities sold. Transfers of securities between categories are recorded at fair value at the date of transfer. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings and results in the establishment of a new cost basis for the security. Dividend and interest income are recognized when earned. (J) 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 and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximates fair values because of their short maturities. The carrying value of marketable investment securities approximates fair value and is reported at quoted market prices at the reporting date for those investments. 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. (K) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF - The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 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 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 exceed 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. Adoption of this Statement did not have a material impact on the Company's financial position, results of operations, or liquidity. (L) USE OF ESTIMATES - Management of the Company has made a number of 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. (M) RECLASSIFICATIONS - Certain prior year balances have been reclassified to conform with current year presentation. (2) MARKETABLE INVESTMENT SECURITIES At December 31, 1996 and 1995, the cost, gross unrealized holdings gains and losses and related fair value of marketable investment securities available-for-sale are as follows: 1996 1995 - -------------------------------------------------------------------------------- Available-for-sale: Equity securities: Cost $ - 176,000 Gross unrealized losses - (2,000) Gross unrealized gains - 1,000 - -------------------------------------------------------------------------------- Fair market value $ - 175,000 ================================================================================ The net change in market value of securities available-for-sale for 1996 and 1995 resulted in a $1,000 and a $28,000 unrealized gain, respectively, which was recorded as a separate component of shareholders' equity. During 1996 and 1995, proceeds from the sale of marketable investment securities available for sale were $168,000 and $209,000, respectively, and gross realized losses included in income were $8,000 in 1996 and gross realized gains included in income were $10,000 in 1995. (3) EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET At December 31, 1996 and 1995, equipment and leasehold improvements consist of the following: 1996 1995 - -------------------------------------------------------------------------------- Furniture, fixtures and equipment, including computer software and databases $5,849,000 4,904,000 Leasehold improvements 1,841,000 1,677,000 - -------------------------------------------------------------------------------- 7,690,000 6,581,000 Less: accumulated depreciation and amortization 4,003,000 3,342,000 - -------------------------------------------------------------------------------- $3,687,000 3,239,000 ================================================================================ 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) LEASES In December 1986, the Company entered into an operating lease agreement for its principal offices. The lease agreement provided for a term of approximately 15 years, commencing in May 1987. The initial annual rental was $576,000 with scheduled increases in succeeding periods. During 1991, modifications were made to the timing of certain payments. During 1992, the lease was extended an additional three years. Rental expense under this lease is recorded on a straight-line basis. Accordingly, rental expense recorded on this lease through December 31, 1996 and 1995 exceeded scheduled payments through such dates by $126,000 and $268,000, respectively. In August 1994, the Company entered into a five-year operating lease agreement for office space. The initial annual rental was $267,000 with scheduled increases in succeeding periods. In March 1995, the Company entered into a ten-year lease, expiring June 30, 2005, for additional office space with an initial annual rental of $414,000 with scheduled increases in succeeding periods. In connection with this lease, the Company extended the August 1994 lease through June 30, 2005. Rental expense on this lease is recorded on a straight-line basis. Accordingly, rent recorded through December 31, 1996 exceeded scheduled payments by $71,000. The Company's leases of office space include standard escalation clauses. Rental expenses under leases for office space and certain items of equipment accounted for as operating leases were $1,794,000, $1,396,000 and $1,187,000 in 1996, 1995 and 1994, respectively. The future minimum lease payments under noncancellable operating leases as of December 31, 1996 were as follows: Operating Year ending December 31 leases - -------------------------------------------------------------------------------- 1997 $ 1,665,000 1998 1,677,000 1999 1,629,000 2000 1,629,000 2001 1,639,000 Thereafter 4,296,000 - -------------------------------------------------------------------------------- Total minimum lease payments $12,535,000 ================================================================================ (5) NOTES PAYABLE Notes payable consist of the following: 1996 1995 - -------------------------------------------------------------------------------- Borrowings under debt agreements with a bank: $2,000,000 fixed rate five-year note, payable in quarterly installments of $100,000, at an interest rate of 8.86% through April 2000 $1,400,000 1,800,000 $500,000 five-year note, payable in quarterly installments of $25,000, at an interest rate of prime plus 0.75%, which was 9.0% at December 31, 1996 450,000 - Borrowings under a $2,000,000 line of credit facility due April 30, 1997, at an interest rate of prime plus 0.25%, which was 8.5% at December 31, 1996 - 1,481,000 - -------------------------------------------------------------------------------- Subtotal 1,850,000 3,281,000 - -------------------------------------------------------------------------------- Borrowings under debt agreements with investors: $2,025,000 Series A Senior Subordinated Note, issued at 99%, due October 31, 2001, at an interest rate of 12%, net of unamortized discount of $20,000 2,005,000 - $475,000 Series A Senior Subordinated Note - SVP, S.A., issued at 99%, due November 30, 2001, at an interest rate of 12%, net of unamortized discount of $4,000 471,000 - - -------------------------------------------------------------------------------- Subtotal 4,326,000 3,281,000 - -------------------------------------------------------------------------------- $60,000 note payable due in monthly installments of $1,800, including interest at 8% through October 1997 16,000 35,000 $25,000 note payable due in monthly installments of $695, including interest at 7% through September 1996 - 6,000 - -------------------------------------------------------------------------------- Total debt 4,342,000 3,322,000 Less current installments 516,000 426,000 - -------------------------------------------------------------------------------- Notes payable, excluding current installments $3,826,000 2,896,000 ================================================================================ 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On October 31, 1996, the Company entered into a Note and Warrant Purchase Agreement with Furman Selz SBIC, L.P. ("Furman Selz"). Pursuant to the agreement, Furman Selz purchased from the Company $2,025,000 Series A Senior Subordinated Note, issued at 99%. The Company sold warrants in conjunction with the note (see note 6 (a)). In connection with these transactions, the Company recorded debt discount of $20,250. On November 30, 1996, the Company entered into a Note and Warrant Purchase Agreement with SVP, S.A. Pursuant to the agreement, SVP, S.A. purchased from the Company $475,000 Series A Senior Subordinated Note, issued at 99%. The Company sold warrants in conjunction with the note (see note 6 (a)). In connection with these transactions, the Company recorded debt discount of $4,750. The Note and Warrant Purchase Agreements further provide that Furman Selz and SVP, S.A., at their option, can purchase up to the amount of their respective initial investments, up to an additional $2,500,000 in notes and warrants on the same terms and conditions as the first $2,500,000, at any time before December 31, 1997. During 1995, the Company entered into a financing agreement with a commercial bank for a $2,000,000 fixed rate term loan through April 2000 and a commercial revolving loan that permits the Company to borrow up to $2,000,000 on a line of credit facility through April 1997. During 1996 the Company amended its financing agreement with a commercial bank to allow for an additional $500,000 term loan through April 2001. For a thirty day period during September and October 1996, the line of credit facility was increased to $2,500,000. The term notes and line of credit are secured by all of the assets of the Company. The Company's debt agreements contain numerous affirmative and negative covenants, including financial covenants relating to the Company's net worth, working capital and additional borrowings, and restrict payment of dividends. The Company's line of credit agreement calls for quarterly payments of a nonrefundable facility fee at an annual rate of 0.25% of the unused portion of the line. The aggregate maturities of long-term debt for each of the five years subsequent to December 31, 1996 are as follows: Year ending December 31 Amount - -------------------------------------------------------------------------------- 1997 $ 516,000 1998 500,000 1999 500,000 2000 300,000 2001 2,550,000 - -------------------------------------------------------------------------------- $4,366,000 - -------------------------------------------------------------------------------- (6) SHAREHOLDERS' EQUITY (A) COMMON STOCK WARRANTS - On June 22, 1993, the Company issued warrants to a vice president of the Company under which he is entitled to purchase 4,000 shares of common stock for $1.31 per share during the five-year period commencing from that date. No warrants have been exercised to date. On February 10, 1995, the Company issued warrants to a Company with which it formed a joint venture to develop a new on-line, Internet-based service for consumers, under which it is entitled to purchase 150,000 shares of the Company's common stock at $2.25 per share, the estimated fair market value at date of joint venture. The warrant becomes exercisable at the rate of 50,000 shares each year beginning February 13, 1996 and expires ten years from the date of grant. No warrants have been exercised to date. On October 31, 1996, in conjunction with the issuance of the Series A Subordinated Note (see note 5), the Company sold warrants to Furman Selz, under which it is entitled to purchase 900,000 shares of the Company's common stock at $2.25 per share for ten years commencing from that date. No warrants have been exercised to date. On November 30, 1996, in conjunction with the issuance of the Series A Subordinated Note (see note 5), the Company sold warrants to SVP, S.A., under which it is entitled to purchase 211,111 shares of the Company's common stock at $2.25 per share for ten years commencing from that date. No warrants have been exercised to date. (B) STOCK OPTION PLAN - In January 1996 the Company adopted the FIND/SVP, Inc. 1996 Stock Option Plan (the "Plan"). The Plan authorizes grants of options to purchase up to 650,000 shares of common stock, issuable to employees, directors and consultants of the Company, at prices at least equal to fair market value at the date of grant (110% of the fair market value for holders of 10% or more of the outstanding shares of common stock). At December 31, 1996 there were 238,150 shares available for grant under the Plan. The options to be granted under the Plan will be designated as incentive stock options or non-incentive stock options by the 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, 1996 expire within the next five years if not exercised. Options which 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. 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were 21,000 options available for grant under the FIND/SVP, Inc. 1986 Stock Option plan (the "1986 Plan") upon its expiration in August 1996. These options, along with an additional 16,950 options from the 1986 Plan which either expired or were cancelled after August 1996, were no longer available for grant at December 31, 1996. Activity under the stock option plans is summarized as follows: 1996 1995 1994 - ------------------------------------------------------------------------------- Outstanding options at January 1 966,000 861,100 588,800 Granted - option prices ranging from $1.875 to $2.875 per share in 1996, $1.9375 to $2.25 per share in 1995 and $1.375 to $2.0625 per share in 1994 689,350 129,500 303,500 Exercised (366,437) (21,200) (20,600) Cancelled and expired (35,950) (3,400) (10,600) - ------------------------------------------------------------------------------ Outstanding (in 1996, exercisable at $0.625 to $2.875 per share) at December 31 1,252,963 966,000 861,100 ============================================================================== Exercisable (in 1996, exercisable at $0.625 to $2.875 per share) at December 31 589,713 776,383 561,901 ============================================================================== Available for grant at December 31 238,150 279,500 155,600 ============================================================================== Included in the options granted in 1996 are 300,000 options the Company granted to the President of the Company. Contingent upon meeting certain earnings levels over the life of his employment agreement, these options will vest on the certification date of the targeted earnings levels. The exercise price of these options will be equal to the fair market value of the common stock on the vesting date or 110% of such fair market value if the President is a holder of 10% or more of the outstanding shares of common stock on such date. At December 31, 1996 and 1995, the number of options exercisable was 589,713 and 776,383, respectively, and the weighted-average exercise price of those options was $1.61 and $1.04, respectively. The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation costs has been recognized for its stock options in the financial statements. 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", the Company's net (loss) income would have been reduced to the pro forma amounts indicated below: 1996 1995 - -------------------------------------------------------------------------------- Net (loss) income As reported $(719,000) 476,000 Proforma (766,000) 451,000 - -------------------------------------------------------------------------------- (Loss) earnings As reported (.11) .07 per share Proforma (.11) .07 - -------------------------------------------------------------------------------- The per share weighted-average fair value of stock options granted during 1996 and 1995 was $0.35 and $0.39, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 1996 - expected dividend yield of 0%, risk-free interest rate of 6.5%, volatility of 14.06% per year and an expected life of 3 years; 1995 - expected dividend yield of 0%, risk-free interest rate of 6.5%, volatility of 17.32% per year and an expected life of 3 years. Volatility is calculated over the five preceding years for 1996 and 1995, respectively. Proforma net (loss) income reflects only options granted in 1996 and 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the proforma net income amounts presented above because compensation cost for options granted prior to January 1, 1995 is not considered and compensation cost is reflected over the options' vesting period of up to 5 years. At December 31, 1996, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $0.625 to $2.875 and 3.35 years, respectively. (C) COMMON STOCK ISSUED FOR SERVICES - In 1996, the Company issued 21,940 shares of common stock with a value of $40,000 to a third party for services rendered. (D) PREFERRED STOCK - Effective June 1995, the Company amended its Certificate of Incorporation to authorize an additional class of stock consisting of 2,000,000 shares of $.0001 par value preferred stock. No shares have been issued as of December 31, 1996. 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) SVP INTERNATIONAL The Company entered into an agreement in 1971, amended in 1981, with SVP International ("SVP"), a Swiss company which is an 8% shareholder of the Company. The agreement provides that SVP will aid and advise the Company in the operation of an information service and permit access to other foreign SVP information centers and the use of the SVP trademark and logo. The agreement shall continue in perpetuity, unless amended by the parties thereto. It provides that the Company will pay to SVP royalties computed on an annual basis at the following rates: $18,000 per year, plus 1.2% of the gross profit from all publications included in the Company's gross revenues less than $10 million for such year, and 2% of the amount of the Company's nonpublishing gross revenues for each such year derived from the "FIND/SVP Service" in excess of $2 million but less than $4 million and 1% of the amount of such nonpublishing gross revenues in excess of $4 million but less than $10 million. Royalty charges under the agreement were $137,000, $139,000 and $142,000 in 1996, 1995 and 1994, respectively. Royalties accrued but unpaid were approximately $74,000 and 219,000 at December 31, 1996 and 1995, respectively, and are included in accrued expenses in the consolidated balance sheets. 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. (8) INCOME TAXES The provision for income taxes consists of the following: 1996 1995 1994 - -------------------------------------------------------------------------------- Current: Federal $(342,000) 255,000 369,000 State and local 6,000 156,000 209,000 - -------------------------------------------------------------------------------- (336,000) 411,000 578,000 - -------------------------------------------------------------------------------- Deferred: Federal (40,000) (22,000) (20,000) State and local (111,000) (11,000) - - -------------------------------------------------------------------------------- $(487,000) 378,000 558,000 =============================================================================== Income tax expense differs from the amount computed by multiplying the statutory rate of 34% to income before income taxes due to the following: 1996 1995 1994 - ------------------------------------------------------------------------------- Income tax (benefit) expense at statutory rate $(410,000) 290,000 419,000 Increase (reduction) in income taxes resulting from: State and local income taxes, net of Federal income tax benefit (111,000) 83,000 115,000 Nontaxable income (33,000) (22,000) (13,000) Nondeductible expenses 38,000 34,000 15,000 Reversal of prior year's under (over)accruals 29,000 (7,000) 22,000 - ------------------------------------------------------------------------------- $(487,000) 378,000 558,000 =============================================================================== The significant components of deferred tax expense for the years ended December 31, 1996 and 1995 are attributable to the followings: 1996 1995 - -------------------------------------------------------------------------------- Accounts receivable, principally due to allowance for doubtful accounts $ 1,000 (3,000) Leasehold improvements, principally due to differences in amortization (34,000) (41,000) Deferred compensation, principally due to accrual for financial reporting purposes (11,000) (20,000) Equipment, principally due to differences in depreciation 46,000 30,000 State and local net operating loss carryforward (99,000) - Restructuring charge (54,000) - Other - 1,000 - -------------------------------------------------------------------------------- $(151,000) (33,000) =============================================================================== 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1996 and 1995 are presented below: 1996 1995 - ------------------------------------------------------------------- Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 46,000 47,000 Leasehold improvements, principally due to differences in amortization 155,000 121,000 Deferred compensation, principally due to accrual for financial reporting purposes ............... 67,000 56,000 State and local net operating loss carryforward .................. 99,000 -- Restructuring charge ................. 54,000 -- Deferred tax liability: Equipment, principally due to differences in depreciation....... (120,000) (30,000) Goodwill, principally due to difference in amortization ....... (1,000) (1,000) Other .............................. (1,000) (1,000) - ------------------------------------------------------------------- Net deferred tax asset ............... $ 299,000 192,000 =================================================================== Management of the Company has determined, based on the Company's history of prior years' operating earnings and its expected income for the future, that operating income will more likely than not be sufficient to fully utilize these deferred tax assets as they mature. (9) EMPLOYEE BENEFITS AND DEFERRED COMPENSATION (A) PENSION PLANS - The Company established a 401(k) and profit sharing plan for all eligible employees. Participants may elect to defer up to 12% of their annual compensation which is subject to annual limitation as provided in Internal Revenue Code Section 415(d). The Company will contribute 20% of the employees' contributions up to 1% of their annual compensation. Profit sharing contributions are at the discretion of the Company. Participants vest in the employer's contribution at 20% after three years of service increasing by 20% for each additional year of service. The Company's contribution, accrued but unpaid, to this plan was $77,000, and $70,000 at December 31, 1996 and 1995, respectively. The Company maintains a Target Benefit Pension Plan for all eligible employees. The target benefit is 4% of average annual compensation plus 4% of compensation in excess of covered compensation reduced proportionally for less than 35 years of service. Participants vest at 20% after three years of service increasing by 20% for each additional year of service. The Company's contribution, accrued but unpaid, to this plan was $68,000 and $44,000 at December 31, 1996 and 1995, respectively. (B) DEFERRED COMPENSATION - The Company maintains deferred compensation agreements for two officers, with benefits commencing upon retirement, death or disability. Deferred compensation expense under these agreements was approximately $25,000, $21,000 and $20,000 in 1996, 1995 and 1994, respectively. (C) EMPLOYMENT AGREEMENTS - Effective January 1, 1996 the Company entered into an employment agreement with the President of the Company. The Agreement terminates on December 31, 2001. The Agreement supersedes a May 1991 Agreement and provides for a base salary with cost of living escalations. The Agreement provides a performance bonus equal to 10% per annum of the pre-tax profits of the Company in excess of $1,000,000 for each year through the end of the Agreement. The Agreement was amended in December 1996 to limit the amount of bonus to a maximum of $250,000 in any year. In addition, the Agreement contains certain severance provisions, as defined in the Agreement, entitling the President to receive compensation through the end of the Agreement upon termination without cause, change of control and certain other occurrences. On January 11, 1995, the Company entered into severance agreements with two of its officers, which call for payment of their current base salary for a period of one year from the date of termination, without cause or voluntary termination upon certain conditions, as defined in the agreement. In addition, if the individuals are terminated, all options granted to the respective individuals shall become immediately exercisable. At December 31, 1996, 131,400 options in the aggregate were not exercisable by the two officers. (10) SUPPLEMENTAL CASH FLOWS INFORMATION Cash paid for interest and income taxes during the years ended December 31, 1996, 1995 and 1994 was as follows: 1996 1995 1994 - -------------------------------------------------------------------------------- Interest $271,000 229,000 52,000 =============================================================================== Income taxes $164,000 631,000 320,000 =============================================================================== 18 The Company had the following non-cash financing activities in 1996: The Company issued 21,940 shares of common stock with a value of $40,000 to a third party for services rendered. The Company recorded the cashless exercise of 275,686 options at prices ranging from $0.275 to $2.1875 in exchange for 51,041 shares of common stock at prices ranging from $2.125 to $3.00. Such shares were held for a period of at least six months before the respective exchange. The value of these transactions was $119,000. (11) ACQUISITIONS/INVESTMENT On February 10, 1995, the Company entered into a joint venture to develop a new on-line, Internet-based service for consumers. Under the terms of the agreement, the Company will initially have a 20% interest in the joint venture. In conjunction with the agreement, the joint venture partner received warrants to purchase 150,000 shares of FIND/SVP, Inc. common stock at $2.25 per share. Utilizing the Black-Scholes method of valuation, management has attributed a nominal value of $1,000 to such warrants and the investment in the joint venture. At December 31, 1995, the Company recorded a $1,000 loss on the investment. As of March 1, 1996, the joint venture partner has ceased funding the operations of the joint venture, which effectively terminated the joint venture. During 1996, the Company developed its own version of an on-line Internet-based service for consumers, which is currently available on a limited test basis. (12) ACCRUED EXPENSES Accrued expenses at December 31, 1996 and 1995 consisted of the following: 1996 1995 - -------------------------------------------------------------------------------- Accrued bonuses and employee benefits (note 9) $ 696,000 495,000 Accrued severance and retirement (note 14) 122,000 - Accrued SVP royalty (note 7) 74,000 219,000 Accrued interest 59,000 24,000 Other accrued expenses 489,000 336,000 - ------------------------------------------------------------------------------- $1,440,000 1,074,000 =============================================================================== (13) LITIGATION On March 19, 1996, Findout Corporation ("Plaintiff") and Steven Sanford ("Sanford"), Plaintiff's assignor, commenced an action in the Supreme Court of the State of New York, County of New York, entitled Findout Corp. et al v. Find/SVP, Inc. et al, Index No. 105079/96 (the "Action"). On April 19, 1996, Plaintiff served an Amended Complaint in the Action, in which it asserts claims against the Company and others for fraud, negligent misrepresentation, breach of fiduciary duty, promissory estoppel, unfair competition and the imposition of a constructive trust arising out of failed negotiations between the Company and Sanford concerning the financing of a joint venture. Plaintiff seeks compensatory damages for lost profits and out-of-pocket expenses in an amount to be determined at trial but not less than $28 million, and punitive damages in an amount to be determined at trial but not less than $50 million. With respect to the claim of unfair competition, Plaintiff alternatively seeks preliminary and permanent injunctive relief. On June 7, 1996, in lieu of serving an answer, the Company served a motion to dismiss the Amended Complaint ("Motion to Dismiss") in its entirety on the ground that Plaintiff failed to state a cause of action and cannot establish any basis for recovering punitive damages or lost profits. Disclosure in the Action was thereby stayed by operation of law. On July 16, 1996, Plaintiff served a cross-motion requesting that the Court lift the automatic stay of disclosure, direct expedited disclosure and reverse discovery priorities. By decision dated September 5, 1996, and an order dated November 27, 1996, the Court granted the Company's Motion to Dismiss to the extent of dismissing the fraud, negligent misrepresentation, breach of fiduciary duty, promissory estoppel, and constructive trust causes of action. The only remaining cause of action against the Company is for unfair competition by misappropriation of an idea allegedly disclosed to the Company by Sanford during negotiations between December 1995 and March 1996 that did not result in the execution of a joint venture agreement. The Company strenuously disputes the legal basis for and factual allegations underlying the unfair competition cause of action, and intends to continue to defend the Action vigorously. The Company's time to serve an answer to the remaining cause of action asserted in the Amended Complaint has not yet started to run, and Plaintiff has not served any disclosure requests. The Company believes the action will not result in an award of damages that is material to the results of operations or financial position of the Company. (14) RESTRUCTURING CHARGE During the third quarter of 1996, the Company implemented a plan to restructure and consolidate operations, which included the reorganization of its operating units and a change in the method of marketing and cross-selling its various products. As a result, the Company recorded a pre-tax restructuring charge of $802,000 during the third quarter of 1996. The restructuring charge included a writedown of certain inventories and deferred charges of $490,000, severance and retirement charges of $167,000, charges relating to marketing and planning materials which will not be used after the restructuring of $117,000 and charges for the consolidation and reduction of several small and unprofitable product groups of $28,000, of which $122,000 of the remaining severance and retirement payments has been included in accrued expenses at December 31, 1996. 19 INDEPENDENT AUDITOR'S REPORT The Board of Directors and Shareholders FIND/SVP, Inc.: We have audited the accompanying consolidated balance sheets as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three year period ended December 31, 1996 of FIND/SVP, Inc. and subsidiaries. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FIND/SVP, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP New York, New York February 21, 1997 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The Common Stock, par value $.0001 per share, of the Company ("Common Stock") is traded on the over-the-counter market with quotations reported on the National Association of Securities Dealers Automated Quotation System (NASDAQ) under the symbol "FSVP." The following table sets forth the high and low closing bid prices for the Common Stock for the periods indicated. The NASDAQ quotations, which represent prices between dealers, do not include retail markups, markdowns, or commissions, and may not represent actual transactions. Price Range High Low - -------------------------------------------------------------------------------- 1996 COMMON STOCK 1ST QUARTER 2 3/8 1 11/16 2ND QUARTER 3 1/8 2 1/8 3RD QUARTER 3 1/4 2 4TH QUARTER 2 7/16 1 13/16 1995 Common Stock 1st Quarter 2 1/2 1 15/16 2nd Quarter 2 1/8 2 3rd Quarter 2 3/8 1 15/16 4th Quarter 2 3/8 1 13/16 ===============================================================================- On December 31, 1996, There were approximately 1,046 holders of record of the Common Stock. Such numbers do not include shares held in "street name." DIVIDEND HISTORY AND POLICY The Company has never paid cash dividends on its Common Stock and anticipates that, for the foreseeable future, it will continue to follow a policy of retaining earnings to finance the expansion and development of its business. The Company's debt agreements restrict the payment of dividends. 20 CORPORATE DATA OFFICERS: ANDREW P. GARVIN Chairman of the Board, President and Chief Executive Officer PETER J. FIORILLO Executive Vice President, Finance & Administration Chief Financial Officer, Treasurer and Secretary JOHN KURANZ Vice President & General Manager FIND/SVP Published Products, Inc. DIRECTORS: CHARLES BAUDOIN Chairman, Ecoban Finance Ltd., a finance company JEAN-LOUIS BODMER Managing Director, SVP, S.A. and Vice President, SVP International, an information and consulting service firm HOWARD S. BRESLOW Breslow & Walker, LLP, a New York-based law firm FREDERICK H. FRUITMAN Managing Director, Loeb Partners Corporation, an investment banking firm ANDREW P. GARVIN Chairman of the Board, President and Chief Executive Officer BRIGITTE DE GASTINES President, SVP, S.A., an information and consulting service firm JAMES L. LUIKART Executive Vice President, Furman Selz Investments LLP OPERATING UNIT MANAGERS: KENNETH A. ASH Vice President and Managing Director, Strategic Consulting & Research Group LYNN E. CHRISTIE Vice President and Managing Editor, Research Publication Group VICTOR L. CISARIO Vice President & Controller ANNE DENNIS Vice President, Special Client Services and Education, Quick Consulting & Research Service JOHN KURANZ Vice President & General Manager, FIND/SVP Published Products, Inc. THOMAS E. MILLER Vice President, Emerging Technologies Research Group SUSAN OGULNICK Vice President, Quick Consulting & Research Service MARK H. SCHAEFFER Vice President, Business Development Quick Consulting & Research Service MICHAEL SHOR Vice President, Direct & Database Marketing STEPHAN B. SIGAUD Vice President and Managing Director, Customer Satisfaction and Loyalty Group TRANSFER AGENT & WARRANT AGENT American Securities Transfer, Incorporated 1825 Lawrence Street Denver, CO 80202 AUDITORS KPMG Peat Marwick LLP 345 Park Avenue New York, NY 10154 LEGAL COUNSEL Breslow & Walker, LLP 767 Third Avenue New York, NY 10017 COMPANY ADDRESS FIND/SVP, Inc. 625 Avenue of the Americas New York, NY 10011 (212) 645-4500 FORM 10-K A copy of the Company's Form 10-K is available, without charge, upon request by writing to: Peter J. Fiorillo Executive Vice President, FIND/SVP, Inc. 625 Avenue of the Americas New York, NY 10011 NASDAQ SYMBOL: FSVP This annual report contains forward-looking statements about the results FIND/SVP is striving to achieve. Realization of these goals involves risks and uncertainties, including the success of the Company's growth strategies and objectives. Actual results may be different from those discussed here. The SVP Network FIND/SVP SVP BELGIQUE SVP DEUTSCHLAND SVP ESPAN~A SVP FRANCE SVP ITALIA SVP JAPAN SVP NEDERLAND SVP NORDIC SVP PORTUGAL SVP ROMANIA SVP SWITZERLAND SVP UNITED KINGDOM SVP Correspondents Australia Brazil Canada Czech Republic Egypt Greece Hong Kong Hungary India Israel Jordan Mexico Poland South Korea Republic of China Russia Taiwan Thailand Turkey Vietnam [Logo] THE BEST PEOPLE TO FIND THE ANSWERS 625 Avenue of the Americas New York, NY 10011-2002 tel (212) 645-4500 fax (212) 645-7681 http://www.findsvp.com NASDAQ: FSVP -----END PRIVACY-ENHANCED MESSAGE-----