FIND SVP INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------------------

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD_____________ TO _____________

--------------------------------------

Commission file no.0-15152
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FIND/SVP, INC.
-----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

New York 13-2670985
-------------------------- ---------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)

625 Avenue of the Americas, New York, NY 10011
---------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (212) 645-4500
--------------

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 whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES NO X
----------- -----------

Number of shares of Common Stock, $.0001 par value per share outstanding at
November 5, 2003: 13,198,982

FIND/SVP, INC. AND SUBSIDIARIES
Index

Page
PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets 3
September 30, 2003 and December 31, 2002

Condensed Consolidated Statements of Operations 4
Nine Months Ended September 30, 2003 and 2002

Condensed Consolidated Statements of Operations 5
Three Months Ended September 30, 2003 and 2002

Condensed Consolidated Statements of Cash Flows 6
Nine Months Ended September 30, 2003 and 2002

Notes to Condensed Consolidated Financial Statements 7

ITEM 2. Management's Discussion and Analysis of Financial Condition and 19
Results of Operations

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 28

ITEM 4. Controls and Procedures 28

PART II. OTHER INFORMATION

ITEM 2. Changes in Securities and Use of Proceeds 29

ITEM 5. Other Information 29

ITEM 6. Exhibits and Reports on Form 8-K 29

SIGNATURES 31

INDEX TO EXHIBITS 32

2

PART I.
FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share data)

September 30, December 31,
2003 2002
------------- ------------
ASSETS

Current assets:
Cash and cash equivalents $ 1,368 $ 968
Accounts receivable, net 5,501 1,953
Deferred tax assets 312 272
Prepaid expenses and other current assets 977 948
-------- --------
Total current assets 8,158 4,141

Equipment and leasehold improvements, at cost, less accumulated
depreciation and amortization of $9,295 in 2003 and
$8,626 in 2002 2,355 2,334

Other assets:

Goodwill, net 10,229 75
Deferred tax assets 1,143 1,324
Rental asset 428 575
Cash surrender value of life insurance 241 418
Non-marketable equity securities 185 185
Other assets 726 486
-------- --------
$ 23,465 $ 9,538
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable $ 827 $ 606
Trade accounts payable 2,549 353
Accrued expenses and other 3,203 1,749
Unearned retainer income 4,231 1,476
-------- --------

Total current liabilities 10,810 4,184
-------- --------

Notes payable 3,189 1,200
Deferred compensation and other liabilities 354 441

Commitments and contingencies

Redeemable, convertible, Preferred stock, $.0001 par value
Authorized 2,000,000 shares; issued and outstanding 333,333
at September 30, 2003 and zero at December 31, 2002 520 --

Redeemable common stock, $.0001 par value, issued and
outstanding 571,237 at September 30, 2003 and zero at December 31, 2002 997 --
Shareholders' equity:
Common stock, $.0001 par value. Authorized 100,000,000 shares;
issued and outstanding 13,230,502 at September 30, 2003 and
10,214,102 at December 31, 2002 2 1
Capital in excess of par value 10,933 7,332
Accumulated deficit (3,340) (3,620)
-------- --------
Total shareholders' equity 7,595 3,713
-------- --------
$ 23,465 $ 9,538
======== ========

See accompanying notes to condensed consolidated financial statements

3

FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Nine months ended September 30
(in thousands, except share and per share data)

2003 2002
---- ----

Revenues $ 21,333 $ 15,479
------------- -------------

Operating expenses:
Direct costs 11,358 7,698
Selling, general and administrative expenses 9,164 8,582
------------- -------------

Operating income (loss) 811 (801)

Other income 93 56

Interest expense (424) (118)
------------- -------------

Income (loss) before (provision) benefit for income taxes 480 (863)

(Provision) benefit for income taxes (200) 258
------------- -------------

Net income (loss) 280 (605)

Less: Preferred dividends (20) --

Less: Accretion on redeemable common shares (270) --
------------- -------------

Net loss attributable to common shareholders $ (10) $ (605)
============= =============

Loss per common share:
Basic and diluted $ 0.00 $ (0.06)
============= =============

Weighted average number of common shares:
Basic and diluted 11,324,055 10,132,731
============= =============

See accompanying notes to condensed consolidated financial statements.

4

FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended September 30
(in thousands, except share and per share data)

2003 2002
---- ----

Revenues $ 9,168 $ 5,209
------------- -------------

Operating expenses:
Direct costs 5,077 2,491
Selling, general and administrative expenses 3,320 2,605
------------- -------------

Operating income 771 113

Other income 1 8

Interest expense (207) (42)
------------- -------------

Income before provision for income taxes 565 79

Provision for income taxes (226) (24)
------------- -------------

Net income 339 55

Less: Preferred dividends (20) --
Less: Accretion on redeemable common shares (123) --
------------- -------------

Net income attributable to common shareholders $ 196 $ 55
============= =============

Earnings per common share:
Basic $ 0.02 $ 0.01
============= =============

Diluted $ 0.01 $ 0.00
============= =============

Weighted average number of common shares:
Basic 12,934,120 10,200,680
============= =============
Diluted 15,048,190 11,583,601
============= =============

See accompanying notes to condensed consolidated financial statements.

5

FIND/SVP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended September 30
(in thousands)

2003 2002
---- ----

Net cash provided by (used in) operating activities $ 1,488 $ (1,923)
----------- -----------

Cash flows from investing activities:
Purchase of Guideline Research Corp., including transaction costs,
and net of cash acquired (3,942) --
Purchase of Teltech, including transaction costs (3,071)
Capital expenditures (316) (264)
Repayment of note receivable -- 28
----------- -----------

Net cash used in investing activities (7,329) (236)
----------- -----------

Cash flows from financing activities:
Principal borrowings under notes payable, net of closing costs 2,536 3,030
Principal payments under notes payable (335) (2,075)
Issuance of preferred stock 693 --
Issuance of warrant 838 --
Issuance of common stock 2,376
Proceeds from exercise of stock options 133 82
----------- -----------

Net cash provided by financing activities 6,241 1,037
----------- -----------

Net increase (decrease) in cash and cash equivalents 400 (1,122)
Cash and cash equivalents at beginning of period 968 1,951
----------- -----------

Cash and cash equivalents at end of period $ 1,368 $ 829
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest paid $ 113 $ 105
=========== ===========
Taxes paid $ -- $ 1
=========== ===========

See accompanying notes to condensed consolidated financial statements.

6

FIND/SVP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)

A. MANAGEMENT'S STATEMENT

In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments necessary to present fairly the financial
position at September 30, 2003, the results of operations for the nine and three
month periods ended September 30, 2003 and 2002, and cash flows for the nine
months ended September 30, 2003 and 2002. All such adjustments are of a normal
and recurring nature. Operating results for the nine and three month periods
ended September 30, 2003 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2003.

FIND/SVP, Inc. and its subsidiaries (the "Company") have reclassified certain
prior year balances to conform with the current year presentation. References in
this report to "we," "us," or "our" refer to FIND/SVP, Inc. and its
subsidiaries.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with our
consolidated financial statements and notes thereto for the year ended December
31, 2002 included in the Company's 2002 Annual Report on Form 10-K/A.

B. REVENUE RECOGNITION

Revenues from retainer arrangements that are based on a fixed fee are recognized
ratably over the contractual period. Revenues from retainer arrangements that
are based on a unit of service are recognized as units of service are performed.
Revenues from projects are recognized in proportion to the level of service
performed in relation to the project's estimated total level of service to be
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.

C. EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share is computed by dividing net income (loss)
attributable to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings (loss) per common share is computed by
dividing net income (loss) attributable to common shareholders by a diluted
weighted average number of common shares outstanding. Diluted earnings (loss)
per common 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.

7

The table below sets forth the number of common shares used in computing basic
and diluted earnings (loss) per share.

- ---------------------------------------------------------------------------------------------------------------

Nine months ended Three months ended
September 30, September 30,
2003 2002 2003 2002
----------------------------------------------------------------

Basic number of common shares 11,324,055 10,132,731 12,934,120 10,200,680
================================================================

Effect of dilutive securities:

Warrants -- -- 986,681 138,685
Convertible preferred stock -- -- 13,892 --
Stock options -- -- 1,113,497 1,244,236
----------------------------------------------------------------

Diluted number of common shares 11,324,055 10,132,731 15,048,190 11,583,601
================================================================

- ---------------------------------------------------------------------------------------------------------------

Warrants to purchase 150,000 shares of common stock at $2.25 per share were
outstanding during the three months ended September 30, 2003 and 2002, and
options to purchase 149,000 shares of common stock at prices ranging from $2.22
to $3.69 per share, and options to purchase 222,250 shares of common stock at
prices ranging from $1.22 to $3.69 per share were outstanding during the three
months ended September 30, 2003 and 2002, respectively, but were not included in
the computation of diluted EPS because the warrants' and options' exercise price
was greater than the average market price of the common shares. Warrants,
convertible preferred shares, and options to purchase 5,054,481 and 3,417,622
shares of common stock were outstanding during the nine months ended September
30, 2003 and 2002, respectively, but were not included in the computation of
diluted EPS because the Company had a net loss attributable to common
shareholders during these periods.

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. 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.

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 loss would have
been increased to the pro forma amounts indicated below:

8

- ---------------------------------------------------------------------------------------------------------------------------------
THREE
NINE MONTHS NINE MONTHS THREE MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER 30, SEPTEMBER
30, 2003 30, 2002 2003 30, 2002

Net income (loss) attributable to common
shareholders, as reported $ (10,000) $ (605,000) $ 196,000 $ 55,000

Add: Stock based employee compensation
expense included in reported net loss, net
of tax related effects
77,000 140,000 29,000 47,000

Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects
(321,000) (367,000) (107,000) (122,000)
--------------------------------------------------------------------------------

Pro forma net income (loss) attributable to
common shareholders $ (254,000) $ (832,000) $ 118,000 $ (20,000)
================================================================================

Earnings (loss) per share:
As reported
Basic $ 0.00 $ (0.06) $ 0.02 $ 0.01
============ ============ =========== ============
Diluted $ 0.00 $ (0.06) $ 0.01 $ 0.00
============ ============ =========== ============
Pro forma
Basic $ (0.02) $ (0.08) $ 0.01 $ 0.00
============ ============ =========== ============
Diluted $ (0.02) $ (0.08) $ 0.01 $ 0.00
============ ============ =========== ============

- ---------------------------------------------------------------------------------------------------------------------------------

Such amounts were determined using the Black-Scholes option pricing model with
the following weighted-average assumptions: 2003 - expected dividend yield of
0%, risk-free interest rate of 3.24%, volatility of 109% and an expected life of
5 years; 2002 - expected dividend yield of 0%, risk-free interest rate of 6%,
volatility of 111% and an expected life of 5 years.

D. INVESTMENTS

PARTNERSHIP INTEREST

The Company has a 9.1% interest in a limited partnership, and in March 2003,
received an $87,000 distribution. This is the first distribution that the
Company has received from this partnership interest, and the distribution was
recognized as other income during the nine months ended September 30, 2003.

E. DEBT

As of September 30, 2003, there was $1,300,000 outstanding on a term note with
JP Morgan Chase Bank (the "Term Note"), of which $400,000 is classified as
current. Interest expense related to the Term Note amounted to $62,000 for the
nine months ended September 30, 2003. The Term Note contains

9

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, current ratio, cash flow coverage, or
completing mergers.

The Company maintains a $1,000,000 line of credit with JP Morgan Chase Bank (the
"Line of Credit"). As of September 30, 2003, $427,000 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.

On April 1, 2003, the Company amended and restated the Term Note and Line of
Credit with JP Morgan Chase Bank. These amended and restated agreements had the
effect of reducing the Term Note principal amount from $2,000,000 to $1,500,000,
and moving up the final repayment date of the Term Note 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 Research Corp. ("Guideline") and the related financing
transactions with Petra Mezzanine Fund, L.P. ("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.

In connection with the above, on April 1, 2003, the Company and JPMorgan Chase
Bank entered into amendment No. 1 to their existing security agreement (the
"Security Agreement Amendment"). Also on April 1, 2003, Guideline together with
its subsidiaries executed and delivered in favor JPMorgan Chase Bank: (i) a
security agreement (the "Subsidiary Security Agreement"), granting a lien and
security interest on substantially all of the Company's assets; and (ii) a
guaranty agreement (the "Guaranty Agreement"), guaranteeing the Company's
payment and performance obligations under the Term Note and the Line of Credit.

On November 13, 2003, the Company obtained an amendment and waiver to the Term
Note ("Amendment No. 2") from JPMorgan Chase. Amendment No. 2 amended the debt
covenant regarding tangible net worth plus subordinated debt of both the Term
Note and Line of Credit by replacing the previous consolidated tangible net
worth plus subordinated debt covenant of $3,300,000 with a consolidated tangible
net worth plus subordinated debt covenant of $2,300,000.

Furthermore, on November 13, 2003, the covenant to compute the ratio of current
assets to current liabilities under the Term Note and Line of Credit was waived
as of September 30, 2003.

On August 18, 2003, the Term Note was amended to change the definition of
consolidated current liabilities for purposes of calculating the ratio of
current assets to current liabilities under the Term Note, to exclude unearned
retainer income from the calculation.

The Company believes it is in compliance with all of its loan agreements, as
amended, with JP Morgan Chase as of September 30, 2003.

On April 1, 2003, the Company issued a Promissory Note (the "Note") with a face
value of $3,000,000 and a stated interest rate of 13.5%, as a part of the
financing for the acquisition of Guideline. Quarterly principal payments of
$250,000 are due beginning March 31, 2006. The Note was recorded at its initial
relative fair value of $1,868,000. The difference between the initial relative
fair value and the stated value will be accreted as additional interest expense
over the maturities of the Note, and the resulting effective interest rate is
approximately 30%. Related interest expense was $307,000 and $156,000 for

10

the nine and three month periods ended September 30, 2003, respectively, of
which $106,000 and $55,000 related to the non-cash accretion of the carrying
value of the Note for the nine and three month periods ended September 30, 2003,
respectively. The Company has the right to prepay the Note at any time without
premium or penalty. The Note is secured by a security interest in substantially
all assets of the Company, and is subject to covenants relating to the conduct
of the Company's business including financial covenants related to a defined
fixed charge coverage and a defined funded indebtedness to Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio. The Company
believes it was in compliance with this loan agreement as of September 30, 2003.

On July 1, 2003, the Company issued a Second Promissory Note (the "Second Note")
with a face value of $500,000 and a stated interest rate of 13.5%, as a part of
the financing for the acquisition of Teltech, the business unit of Sopheon
Corporation ("Teltech"). Quarterly principal payments of $42,000 are due
beginning March 31, 2006. The Second Note was recorded at its initial relative
fair value of $320,000. The difference between the initial relative fair value
and the stated value will be accreted as additional interest expense over the
maturities of the Second Note, and the resulting effective interest rate is
approximately 30%. Related interest expense was $26,000 for the nine and
three-month periods ended September 30, 2003, of which $9,000 related to the
non-cash accretion of the carrying value of the Second Note for the nine and
three-month periods ended September 30, 2003. The Company has the right to
prepay the Second Note at any time without premium or penalty. The Second Note
is secured by a security interest in substantially all assets of the Company,
and is subject to covenants relating to the conduct of the Company's business
including financial covenants related to a defined fixed charge coverage and a
defined funded indebtedness to EBITDA ratio. The Company believes it was in
compliance with this loan agreement as of September 30, 2003.

F. INCOME TAXES

The $200,000 income tax provision for the nine months ended September 30, 2003
represents 42% of the income before provision for income taxes. The $226,000
income tax provision for the three months ended September 30, 2003 represents
40% of the income before provision for income taxes. The $258,000 income tax
benefit for the nine months ended September 30, 2002 and $24,000 income tax
provision for the three months ended September 30, 2002, represent 30% of the
income/loss before provision/benefit for income taxes. The difference between
these rates and the statutory rate primarily relates to expenses that are not
deductible for income tax purposes.

Of the net deferred tax asset, $312,000 and $272,000 are classified as current
as of September 30, 2003 and December 31, 2002, respectively.

G. NEW ACCOUNTING PRINCIPLES

On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity.

This Statement became effective for financial instruments entered into or
modified after May 31, 2003, and otherwise shall be effective at the beginning
of the first interim period beginning after June 15, 2003. For financial
instruments created before the issuance date of this Statement and still
existing at the beginning of the interim period of adoption, transition shall be
achieved by reporting the cumulative effect of a change in an accounting
principle by initially measuring the financial instruments at fair value or
other measurement attribute required by this Statement. The adoption of this
Statement

11

is not expected to have a material impact on the Company's consolidated results
of operations or financial position.

H. STOCK OPTIONS

During the nine month period ended September 30, 2003, options to purchase
621,000 shares of common stock were granted under the Company's Stock Option
Plans, at prices ranging from $1.15 to $1.55, a substantial portion of which
were one-time issuances to Guideline and Teltech employees in connection with
the Company's acquisitions of Guideline and Teltech.

During the nine month period ended September 30, 2002, options to purchase
321,750 shares of common stock were granted under the Company's Stock Option
Plan, at prices ranging from $0.83 to $1.50.

Stock options were granted in November 2001 for future services to be rendered
to the Company by the Chief Executive Officer ("CEO"), the Chairman and a
consultant. In 2003, the Company's Board approved the acceleration of the
vesting of 117,000 and 105,000 options granted to the CEO and Chairman,
respectively. This action was taken to generate additional funds at the time of
the Company's acquisition of Teltech. Compensation expense related to such
grants is amortized over the vesting period of the options and was $110,000 and
$200,000 and $41,000 and $68,000 for the nine and three-month periods ended
September 30, 2003 and 2002, respectively.

At the Company's Annual Meeting of Shareholders, held on June 12, 2003,
shareholders ratified and approved the FIND/SVP, Inc. 2003 Stock Incentive Plan
(the "2003 Incentive Plan"), which was adopted by the Company's Board of
Directors on April 30, 2003. The 2003 Incentive Plan authorizes the issuance of
up to 1,500,000 shares of the Company's Common Stock upon the exercise of stock
options or in connection with the issuance of restricted stock and stock
bonuses. Options granted under the Company's other equity plans remain
outstanding according to their terms. During the nine month period ended
September 30, 2003, options to purchase 77,500 shares of common stock were
granted under the 2003 Incentive Plan, at prices ranging from $1.47 to $1.55.

I. SEGMENT REPORTING

The Company manages its consulting and business advisory services in the
following four business segments: Quick Consulting ("QCS"), Strategic Consulting
("SCRG"), Guideline Research ("Guideline") and Teltech. The Company operates
primarily in the United States. Guideline was added as a segment as a result of
its acquisition by the Company on April 1, 2003. Teltech was added as a segment
as a result of its acquisition by the Company on July 1, 2003. See footnote N
"Acquisitions" for a more detailed description of these acquisitions. References
to "Corporate" and "Other" in our financial statements refer to the portion of
assets and activities that are not allocated to a segment. Prior year segment
amounts have been revised as a result of a realignment of certain activities,
including the association of certain QCS expenses with Corporate and Other.

- ----------------------------------------------------------------------------------------------------
(in thousands) NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ----------------------------

2003 2002 2003 2002
---- ---- ---- ----

REVENUES
- --------
QCS $ 13,469 $ 13,271 $ 4,485 $ 4,658
SCRG 1,575 2,208 498 551
Guideline 4,372 -- 2,268 --
Teltech 1,917 -- 1,917 --
-----------------------------------------------------------------------
Revenues $ 21,333 $ 15,479 $ 9,168 $ 5,209
=======================================================================

12

INCOME (LOSS) BEFORE INCOME TAXES
- ---------------------------------
QCS $ 1,961 $ 3,005 $ 719 $ 1,152
SCRG (461) (183) (76) (11)
Guideline 24 -- 83 --
Teltech 129 -- 129 --
-----------------------------------------------------------------------
Total segment income before income taxes 1,653 2,822 855 1,141
Corporate & other (1) (1,173) (3,685) (290) (1,062)
-----------------------------------------------------------------------
Income (Loss) before benefit for income taxes
$ 480 $ (863) $ 565 $ 79
=================================== ====================================

(1) Includes certain direct costs and selling, general, and administrative
expenses not attributable to a single segment
- --------------------------------------------------------------------------------

J. ACCRUED EXPENSES

As of December 31, 2002, a balance of $212,000 remained accrued for
restructuring charges under a severance plan approved by our Board of Directors.
During the third quarter of 2003, the Company revised its estimate of these
restructuring charges, and recorded an additional $7,000 accrual. Payments
totaling $205,000 were made to 12 individuals during the nine months ended
September 30, 2003. The remainder of the balance will be paid through October
2003.

K. DEFERRED COMPENSATION

The Company has a deferred compensation arrangement with Andrew Garvin, Founder
and President. In November 2003, Mr. Garvin announced his early retirement as of
December 31, 2003. As a result, the estimates that were previously applied to
the calculation of his accrued deferred compensation have been revised to
reflect his announced date of retirement. As a result, the Company adjusted
accrued deferred compensation by reducing the liability by $146,000 in the
quarter ended September 30, 2003. After this adjustment, the present value of
the obligation is approximately $243,000, which will be paid over the
contractual term of 10 years.

L. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

In connection with the Guideline acquisition, the Company issued 571,237
unregistered shares of the Company's common stock that were fair valued at
$760,000.

In connection with the Teltech acquisition, the Company issued 32,700
unregistered shares of the Company's common stock that were fair valued at
$50,000.

During the nine months ended September 30, 2003, the Company recorded preferred
dividends of $20,000.

During the nine months ended September 30, 2003, the Company recorded accretion
on redeemable common shares of $270,000.

In September 2003, the Company purchased certain equipment under a capital lease
arrangement for approximately $48,000, with payments on a monthly basis over a
48 month period commencing October 1, 2003.

13

M. LEASE EXTENSION

On July 1, 2003, the Company extended its lease for its space at 625 Avenue of
the Americas, New York, New York through June 30, 2013.

Minimum lease payments through the end of the lease extension are as follows:

- --------------------------------------------------------------------------------
Minimum lease
payments
----------------
Remainder of 2003 $ 100,000
2004 400,000
2005 616,000
2006 840,000
2007 857,000
2008 874,000
Thereafter 4,417,000
----------------
$ 8,104,000
================

- --------------------------------------------------------------------------------

N. ACQUISITIONS

GUIDELINE

On April 1, 2003, the Company purchased all of the issued and outstanding stock
of Guideline. Guideline is a provider of custom market research.

The consideration for this acquisition consisted of the following:

o Approximately $4,058,000 to be paid in cash, less cash acquired
(includes $595,000 of paid and accrued transaction costs as of
September 30, 2003);

o 571,237 common shares (295,043 of the common shares were placed in
escrow to secure the indemnification obligations of the sellers);

o Within thirty days from the first anniversary date of the acquisition,
a potential deferred consideration amount (the "One Year Deferred
Consideration") of $1 million contingent upon Guideline achieving
adjusted EBITDA (as defined in the purchase agreement) for the
twelve-month period following the acquisition ("One Year Adjusted
EBITDA") of at least $1.2 million. If One Year Adjusted EBITDA is less
than $1.2 million, but greater than $841,000, the One Year Deferred
Consideration shall be between $0 and $1.0 million based on a specific
formula set forth in the purchase agreement. Each of the Sellers may
separately elect to have up to fifty percent (50%) of the amount of
any One Year Deferred Consideration payable to such Seller in an
amount of duly authorized and non-assessable unregistered shares of
Company common stock;

o Within thirty days from the second anniversary date of the
acquisition, a potential deferred consideration amount (the "Two Year
Deferred Consideration") of $1.845 million contingent upon Guideline
achieving adjusted EBITDA (as defined in the purchase agreement) for
the 24-month period following the acquisition ("Two Year Adjusted
EBITDA") of $2.65 million plus 25% of the amount by which Two Year
Adjusted EBITDA exceeds $2.65 million. If Two Year Adjusted EBITDA is
less than $2.65 million, but greater than $2.2 million, the

14

Two Year Deferred Consideration shall be between $0 and $1.845 million
based on a specific formula set forth in the purchase agreement.

The 571,237 shares issued to the former owners of Guideline may be put back to
the Company during a 120-day period beginning April 5, 2005. Such shares are
classified in the balance sheet as redeemable common stock. If the shares are
put back to the Company, the cash to be paid by the Company will be the greater
of (i) $727,000, which was the defined initial redemption value of the shares at
the acquisition date of Guideline, or (ii) a defined average trading price of
the Company's common shares immediately prior to the exercise of the put.
However, in the latter case, the cash to be paid by the Company upon exercise of
the put is limited to 150% of the initial redemption value of the shares, or
$1,090,000. The redeemable common shares were recorded at their fair value of
$760,000 when issued. If the fair value of the shares at a balance sheet date is
in the range between the initial redemption value of the shares and 150% of the
original amount, the redemption value of such shares is accreted or decreted as
a charge or credit, respectively, to "Capital in excess of par value" using the
defined redemption value of the shares at each balance sheet date.

Simultaneously with the acquisition, Guideline entered into new employment
agreements with each of the sellers, as well as three other senior executives of
Guideline.

This acquisition was financed at closing with the combination of the Company's
cash resources, the assumption of certain liabilities of Guideline and by the
receipt of cash of $3,303,000 (net of financing costs, of which, $58,000 is
accrued as of September 30, 2003) consisting of (a) a promissory note with a
$3,000,000 face value; (b) the issuance of 333,333 shares of convertible,
redeemable, Series A preferred stock ("Preferred Stock"); and (c) the issuance
of a warrant.

The 333,333 shares of Preferred Stock were issued pursuant to a Series A
Preferred Stock Purchase Agreement (the "Preferred Stock Purchase Agreement")
dated April 1, 2003. These shares have been recorded at estimated fair value of
$693,000 using the relative fair value method. The Preferred Stock is
convertible into shares of the Company's common stock one-for-one, subject to
adjustment for certain dilutive issuances, splits and combinations. The
Preferred Stock is also redeemable at the option of the holders of the Preferred
Stock beginning April 1, 2009, at a redemption price of $1.50 per share, or
$500,000 in the aggregate, plus all accrued but unpaid dividends. The holders of
the Preferred Stock are entitled to receive cumulative dividends, prior and in
preference to any declaration or payment of any dividend on the common stock of
the Company, at the rate of 8% on the $500,000 redemption value, per annum,
payable in cash or through the issuance of additional shares of Preferred Stock
at the Company's discretion. The holders of shares of Preferred Stock have the
right to one vote for each share of common stock into which shares of the
Preferred Stock could be converted into, and with respect to such vote, each
holder of shares of Preferred Stock has full voting rights and powers equal to
the voting rights and powers of the holders of the Company's common stock.

In connection with this loan agreement and the Preferred Stock Purchase
Agreement, the Company issued a warrant to purchase 675,000 shares of the
Company's common stock, at an exercise price of $.01 per share, subject to
adjustment for reorganization or distribution of common stock, or the issuance
of convertible or option securities (the "Warrant"). This Warrant was recorded
at estimated fair value of $742,000 using the relative fair value method. The
Warrant is immediately exercisable, and, for a four-year period commencing in
2009, the holder has the right to cause the Company to use commercially
reasonable efforts to complete a private placement to sell the 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 the holder so notifies the Company that it is exercising its put
right.

15

The Company also entered into an investor rights agreement (the "Investor Rights
Agreement") dated April 1, 2003 among Petra Mezzanine Fund, L.P. ("Petra"),
David Walke, the Company's CEO, and Martin Franklin, Chairman of the Board of
the Company, pursuant to which, among other things, Petra was granted certain
rights with respect to common stock issuable upon conversion of the Preferred
Stock and Warrant. The Investor Rights Agreement also provides Petra with
certain registration, demand, piggyback and co-sale rights.

The Company is in the process of finalizing its valuation of the assets and
liabilities it has acquired for its allocation of the purchase price of the
transaction. The Company expects to finalize its valuation no later than the
fourth quarter of 2003. The Company's preliminary allocation of the purchase
price is subject to refinement based on the final determination of fair values.

TELTECH

As of July 1, 2003, TTech Acquisition Corp. ("TTech"), a subsidiary of the
Company, purchased from Sopheon Corporation ("Sopheon") assets and assumed
certain specified liabilities of Sopheon's Teltech business unit ("Teltech").
Teltech is a provider of custom research and information services, focused on
Research and Development and Engineering Departments of larger corporations.

The consideration for this acquisition consisted of the following:

o Approximately $3,071,000 paid in cash (including transaction costs)

o 32,700 unregistered shares of the Company's Common Stock. These shares
were placed in escrow to secure the indemnification obligations of the
Sellers set forth in the purchase agreement through June 25, 2004,
pursuant to an escrow agreement among Sopheon, the Company, TTech and
Kane Kessler, P.C. (the "Escrow Agreement").

o Contingent consideration of up to a maximum of $400,000 may become
payable by the Company to Sopheon if certain customer subscription
renewal goals, as defined in the Purchase Agreement, are attained.

o An adjustment to the cash purchase price based on a determination of
the net assets on TelTech's balance sheet at the date of closing in
comparison to the amounts on which the preliminary cash purchase price
was based, as outlined in the purchase agreement. Sopheon has asserted
that an additional $259,000 of purchase price is due under this
provision. The Company is in discussions with Sopheon regarding this
issue, and believes that the final resolution of this amount will be
less than this amount. Any final settlement under this provision would
result in an adjustment to goodwill.

The acquisition was funded at closing as follows:

o The Company's available cash resources

o A private placement whereby the Company raised $2,376,000 through the
issuance of 1,616,685 shares of its common stock and warrants to
purchase 808,293 shares of its common stock (the "Private Placement
Warrants"). The Private Placement Warrants are immediately exercisable
for a period of three years up to and including the close of business
on July 11, 2006, after which, the Private Placement Warrants expire.
The Private Placement Warrants have an exercise price of $1.47 per
share, subject to adjustment for certain defined events to avoid
dilution.

16

o The receipt of $416,000 of cash (net of financing costs) from the
issuance of a $500,000 promissory note with a relative fair value of
$320,000 and warrant with a relative fair value of $96,000.

The Company is in the process of finalizing its valuation of the assets and
liabilities it has acquired and assumed for its allocation of the purchase price
of the transaction. The Company expects to finalize its valuation no later than
the first quarter of 2004. The Company's preliminary allocation of the purchase
price is subject to refinement based on the final determination of fair values.

The following table sets forth the components of the purchase price for both the
Guideline and Teltech acquisitions:

GUIDELINE TELTECH TOTAL
--------- ------- -----

Cash paid (including $491,000 of transaction costs) $ 3,942,000 $ 3,071,000 $ 7,013,000
Accrued transaction costs 116,000 121,000 237,000
Common stock issued to sellers 760,000 50,000 810,000
----------------------------------------------------------
Total purchase consideration $ 4,818,000 $ 3,242,000 $ 8,060,000
==========================================================

The following table provides the preliminary estimated fair value of the
acquired assets and assumed liabilities:

GUIDELINE TELTECH TOTAL
--------- ------- -----

Current assets $ 1,686,000 $ 1,247,000 $ 2,933,000
Property and equipment 102,000 287,000 389,000
Other assets 267,000 -- 267,000
Liabilities assumed, current (2,236,000) (3,447,000) (5,683,000)
----------------------------------------------------------
Fair value of net liabilities assumed (181,000) (1,913,000) (2,094,000)
Preliminary goodwill and intangible assets 4,999,000 5,155,000 10,154,000
----------------------------------------------------------
Total purchase consideration $ 4,818,000 $ 3,242,000 $ 8,060,000
==========================================================

In accordance with the provisions of SFAS No. 142 "Goodwill and other Intangible
Assets", the Company will not amortize goodwill with indefinite lives recorded
in connection with the acquisition of Guideline. The Company will perform an
annual impairment test of goodwill, once finalized, but has not yet determined
what effect these tests will have on the results of operations or the financial
position of the Company in future periods.

The unaudited pro forma information below represents the Company's consolidated
results of operations as if the acquisitions of Guideline and Teltech had
occurred as of January 1, 2003 and 2002. The unaudited pro forma information has
been included for comparative purposes and is not indicative of the results of
operations of the consolidated Company had the acquisition occurred as of
January 1, 2003 and 2002, nor is it necessarily indicative of future results.

PRO FORMA RESULTS OF OPERATIONS

(in thousands, except per share data) NINE MONTHS ENDED
SEPTEMBER 30,
2003 2002
---- ----

Total pro forma revenue $ 26,964 $ 28,960
Pro forma net income $ 262 $ 405
Pro forma earnings per share attributable
to common shareholders:
Basic and diluted $ 0.00 $ 0.02

17

O. SUBSEQUENT EVENT

On November 12, 2003, the Company's President and Founder, Andrew Garvin,
announced he would be retiring at the end of 2003. Mr. Garvin will continue to
serve his term on the Board of Directors, and will be a consultant to the
Company in 2004. In the fourth quarter of 2003, the Company expects to take a
charge of approximately $330,000 triggered by Mr. Garvin's retirement, and
consisting of certain early-retirement benefits provided for in his employment
agreement as well as certain other negotiated benefits. See Note K for more
details.

18

ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Nine months ended September 30, 2003 compared to nine months ended September 30,
2002. Three months ended September 30, 2003 compared to three months ended
September 30, 2002.

GENERAL

FIND/SVP, Inc. and its wholly owned subsidiaries provide broad consulting,
advisory and business intelligence services to executives and other
decision-making employees of client companies, primarily in the United States.
The Company manages its consulting and business advisory services in four
business segments: Quick Consulting ("QCS"), which provides retainer clients
with access to the expertise of the Company's staff and information resources;
Strategic Consulting ("SCRG"), which provides more extensive, in-depth custom
market research and competitive intelligence information, as well as customer
satisfaction and loyalty programs; Guideline Research ("Guideline"), which also
provides custom market research; and Teltech, which provides custom research and
information services, focusing on research and development and engineering
departments of larger corporations. References to "Corporate" and "Other" in our
financial statements refer to the portion of assets and activities that are not
allocated to a segment.

On April 1, 2003, the Company acquired Guideline and Guideline's results of
operations are included in the Company's results of operations as of such date.

On July 1, 2003, the Company acquired Teltech, and Teltech's results of
operations are included in the Company's results of operations as of such date.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2002

REVENUES

Revenues for the nine-month period ended September 30, 2003 were $21,333,000 and
revenues for the nine-month period ended September 30, 2002 were $15,479,000.

QCS

QCS revenues, which result from monthly, quarterly, semi-annual or annual
retainer contracts, increased by $198,000, or 1.5%, from $13,271,000 for the
nine months ended September 30, 2002 to $13,469,000 for the nine months ended
September 30, 2003. The increase was primarily the result of a pricing program
whereby the Company is reimbursed for certain operating expenses necessary to
provide retainer services.

SCRG

SCRG revenues, which result from in-depth research projects addressing clients'
business issues, decreased by $633,000, or 28.7%, from $2,208,000 for the nine
months ended September 30, 2002 to $1,575,000 for the nine months ended
September 30, 2003. The decrease was due to a continued decline in new projects
booked.

19

GUIDELINE

Guideline revenues, which result from custom market research consulting
engagements, such as conducting surveys and focus groups, were $4,372,000 for
the nine months ended September 30, 2003. Revenues increased by $163,000 or 7.7%
from the second to the third quarter 2003 as a result of increased projects
booked, and the level of projects completed. The Company acquired this line of
business on April 1, 2003.

TELTECH

Teltech revenues, which result from custom research and information services,
were $1,917,000 for the three months ended September 30, 2003 since its
acquisition on July 1, 2003.

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) increased by $3,660,000, or 47.5%, from $7,698,000 for
the nine months ended September 30, 2002 to $11,358,000 for the nine months
ended September 30, 2003. Direct costs represented 53.3% and 49.7% of revenues,
respectively, for the nine-month periods ended September 30, 2003 and 2002. The
increase in total direct costs was primarily the result of the acquisition of
Guideline during the quarter ended June 30, 2003 and the acquisition of Teltech
during the quarter ended September 30, 2003. Guideline's and Teltech's direct
costs consist of both direct labor and direct costs, such as subcontractors who
perform fieldwork for many of their projects. Exclusive of Guideline and
Teltech, direct costs decreased as a result of decreased use of sub-contractors
in SCRG, and more favorable pricing from the Company's use of outside electronic
services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased by $582,000, or 6.8%,
from $8,582,000, or 55.4% of revenue, for the nine months ended September 30,
2002 to $9,164,000, or 43.0% of revenue, for the nine months ended September 30,
2003. The increase in selling, general and administrative was due primarily to
the acquisition of Guideline during the quarter ended June 30, 2003 and the
acquisition of Teltech during the quarter ended September 30, 2003, offset by
various cost containment measures implemented during the nine months ended
September 30, 2003 and by an adjustment made during the third quarter of 2003 to
an accrual for deferred compensation (see Note K to the accompanying financial
statements for more details regarding this adjustment). Exclusive of Guideline
and Teltech, selling, general and administrative expenses decreased by $622,000,
or 7.2%, as a result of various cost containment measures. Primarily, the
Company experienced decreases in bad debt expense, as the level of uncollectible
accounts decreased; travel and entertainment, as a result of reduced staff
levels and the use of video and teleconferencing; telecommunications expense
decreased as a result of more favorable rates with carriers. We experienced a
decrease in labor costs as a result of reduced staff levels. Also, during 2002,
restructuring costs of $209,000 were incurred, that were not incurred again in
2003.

OPERATING INCOME (LOSS)

The Company's operating income was $811,000 for the nine months ended September
30, 2003, compared to an operating loss of $801,000 for the nine months ended
September 30, 2002, an improvement of $1,612,000. This is primarily the result
of increased revenues offset by an increase in selling, general and
administrative expenses and direct costs.

20

OTHER INCOME

The Company has a 9.1% interest in a limited partnership, and in March 2003,
received an $87,000 distribution. This is the first distribution that the
Company has received from this partnership interest, and the distribution was
recognized as other income during the nine months ended September 30, 2003.

INTEREST EXPENSE

Interest expense for the nine months ended September 30, 2003 was $424,000,
which was an increase from $118,000 for the nine months ended September 30,
2002. The increase was a result of additional borrowings, related to the
acquisitions of Guideline and Teltech, during the nine months ended September
30, 2003, partially offset by repayments on existing debt.

INCOME TAXES

The $200,000 income tax provision for the nine months ended September 30, 2003
and the $258,000 income tax benefit for the nine months ended September 30, 2002
represent approximately 42% and 30%, respectively of the income/loss before
provision/benefit for income taxes. The difference between these rates and the
statutory rate primarily relates to expenses that are not deductible for income
tax purposes.

THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2002

REVENUES

Revenues for the three-month period ended September 30, 2003 were $9,168,000 and
revenues for the three-month period ended September 30, 2002 were $5,209,000.

QCS

QCS revenues, which result from annual retainer contracts paid by clients on a
monthly, quarterly, semi-annual or annual basis, decreased by $173,000, or 3.7%,
from $4,658,000 for the three months ended September 30, 2002 to $4,485,000 for
the three months ended September 30, 2003. The decrease was the result of client
cancellations in excess of new retainer accounts additions.

SCRG

SCRG revenues, which result from project-based consulting engagements addressing
general business issues, decreased by $53,000, or 9.6%, from $551,000 for the
three months ended September 30, 2002 to $498,000 for the three months ended
September 30, 2003. The decrease was due to the continued decline in new
projects booked.

GUIDELINE

Guideline revenues, which result from custom market research consulting
engagements, such as conducting surveys and focus groups, were $2,268,000 for
the three months ended September 30, 2003. Revenues increased by $163,000 or
7.7% from the second to the third quarter 2003 as a result of increased projects
booked, and the level of projects completed. The Company acquired this line of
business on April 1, 2003.

21

TELTECH

Teltech revenues, which result from custom research and information services,
were $1,917,000 for the three months ended September 30, 2003. The Company
acquired this line of business on July 1, 2003.

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) increased by $2,586,000, or 103.4%, from $2,491,000 for
the three months ended September 30, 2002 to $5,077,000 for the three months
ended September 30, 2003. Direct costs represented 55.4% and 47.8% of revenues,
respectively, for the three-month periods ended September 30, 2003 and 2002. The
increase in total direct costs was primarily the result of the acquisition of
Guideline during the quarter ended June 30, 2003 and the acquisition of Teltech
during the quarter ended September 30, 2003. Guideline's and Teltech's direct
costs consist of direct labor and direct costs, such as subcontractors who
perform fieldwork for many of their projects. Exclusive of Guideline and
Teltech, direct costs decreased as a result of decreased use of sub-contractors
in SCRG, and more favorable pricing from the Company's use of outside electronic
services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased by $715,000, or 27.5%,
from $2,605,000, or 50.0% of revenue, for the three months ended September 30,
2002 to $3,320,000, or 36.2% of revenue, for the three months ended September
30, 2003. The increase in selling, general and administrative was primarily due
to the acquisitions of Guideline and Teltech, offset by decreases in other
selling, general and administrative expenses as a result of continued cost
containment measures and by an adjustment made during the third quarter of 2003
to an accrual for deferred compensation (see Note K to the accompanying
financial statements for more details regarding this adjustment). Exclusive of
Guideline and Teltech, selling, general and administrative expenses increased
slightly, by $26,000, or 2.1%.

OPERATING INCOME (LOSS)

The Company's operating income was $771,000 for the three months ended September
30, 2003, compared to operating income of $113,000 for the three months ended
September 30, 2002, an improvement of $658,000. This is primarily the result of
increased revenues, offset by increases in direct costs and selling, general and
administrative expenses.

INTEREST EXPENSE

Interest expense for the three months ended September 30, 2003 was $207,000,
which was an increase from $42,000 for the three months ended September 30,
2002. The increase was a result of additional borrowings related to the
acquisitions of Guideline and Teltech during the nine months ended September 30,
2003, partially offset by repayments on existing debt.

INCOME TAXES

The $226,000 income tax provision for the three months ended September 30, 2003
and the $24,000 income tax provision for the three months ended September 30,
2002, represents 40% and 30%, respectively, of the income before provision for
income taxes. The difference between these rates and the statutory rate
primarily relates to expenses that are not deductible for income tax purposes.

22

OTHER ITEMS

Stock options were granted in November 2001 for future services to be rendered
to the Company by the Chief Executive Officer, the Chairman and a consultant. In
2003, the Company's Board approved the acceleration of the vesting of 105,000
and 117,000 options granted to the Chairman and CEO, respectively. This action
was taken to generate additional funds at the time of the Company's acquisition
of Teltech. Compensation expense related to such grants is amortized over the
vesting period of the options and was $110,000 and $200,000 and $41,000 and
$68,000 for the nine and three-month periods ended September 30, 2003 and 2002,
respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 generally accepted accounting principles in the
United States. 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, useful lives of property,
plant and equipment and intangible assets, goodwill, deferred tax asset
valuation allowances, valuation of non-marketable equity securities 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.

GOODWILL

Goodwill represents the excess of purchase price over net assets acquired or net
liabilities assumed. Goodwill is not being amortized in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. The recoverability of goodwill will be
evaluated annually at the operating unit level by analyzing operating results
and considering other significant events or changes in the business environment.
If an operating unit had current operating losses, and based upon projections
there was a likelihood that such operating losses would continue, the Company
would determine whether impairment existed on the basis of undiscounted expected
future cash flows from operations before interest for the remaining amortization
period. If impairment existed, goodwill would be reduced by the estimated
shortfall of discounted cash flows.

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

23

tax operating loss assets, as the Company determined that it was no longer
probable that these 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. As of September 30, 2003, the carrying value of these preferred
share securities is $185,000, included as a component of other assets. 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.

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 $1,368,000 and $968,000 at September
30, 2003 and December 31, 2002, respectively. The Company's working capital
position (current assets, less current liabilities) at September 30, 2003 was
$(2,652,000) as compared to $(43,000) at December 31, 2002. Working capital is
reduced by $4,231,000 and $1,476,000 of unearned retainer income as of September
30, 2003 and December 31, 2002, respectively. Such amounts reflect amounts
billed, but not yet earned.

Cash of $1,488,000 was provided by, and $1,923,000 was used in operating
activities in the nine months ended September 30, 2003 and 2002, respectively.

Cash used in investing activities was $7,329,000 and $236,000 in the nine months
ended September 30, 2003 and 2002, respectively. The primary use of cash was the
acquisition of Guideline during the quarter ended June 30, 2003 for $3,942,000
and the acquisition of Teltech during the quarter ended September 30, 2003 for
$3,071,000. Capital expenditures were made for computer hardware upgrades and
leasehold improvements. 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 of $6,241,000 and $1,037,000 was provided by financing activities in the
nine months ended September 30, 2003 and 2002, respectively. In 2003, the most
significant items were the net proceeds obtained from the borrowings under notes
payable of $2,536,000, related to the acquisitions of Guideline and Teltech,
offset by repayments of $335,000, the issuance of preferred stock for $693,000,
the issuance of warrants for $838,000, the proceeds from the issuance of common
stock of $2,376,000 and the proceeds from exercise of stock options of $133,000.

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 with interest at prime plus 1.25% (5.5% at September 30,
2003), as amended on April 1, 2003. As of September 30, 2003, there was
$1,300,000 outstanding on this Term Note, of which $400,000 is classified as
current. Interest expense related to this Term Note amounted to $62,000 and
$72,000 for the nine months ended September 30, 2003 and 2002, respectively. 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, current
ratio, 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

24

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-quarter percent (4.5%
at September 30, 2003). The Line of Credit is renewable annually. As of
September 30, 2003, $476,000 is 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 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 the Term Note and Line of
Credit with JP Morgan Chase Bank. These amended and restated agreements had the
effect of reducing the Term Note principal amount from $2,000,000 to $1,500,000
and moving up the final repayment date of the Term Note 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.

In connection with the above, on April 1, 2003, the Company and JPMorgan Chase
Bank entered into amendment No. 1 to their existing security agreement (the
"Security Agreement Amendment"). Also on April 1, 2003, Guideline together with
its subsidiaries executed and delivered in favor JPMorgan Chase Bank: (i) a
security agreement (the "Subsidiary Security Agreement"), granting a lien and
security interest on substantially all of the Company's assets; and (ii) a
guaranty agreement (the "Guaranty Agreement"), guaranteeing the Company's
payment and performance obligations under the Term Note and the Line of Credit.

On November 13, 2003, the Company obtained an amendment and waiver to the Term
Note ("Amendment No. 2") from JPMorgan Chase. Amendment No. 2 amended the debt
covenant regarding tangible net worth plus subordinated debt of both the Term
Note and Line of Credit by replacing the previous consolidated tangible net
worth plus subordinated debt covenant of $3,300,000 with a consolidated tangible
net worth plus subordinated debt covenant of $2,300,000.

Furthermore, on November 13, 2003, the covenant to compute the ratio of current
assets to current liabilities under the Term Note and Line of Credit was waived
as of September 30, 2003.

On August 18, 2003, the Term Note was amended to change the definition of
consolidated current liabilities for purposes of calculating the ratio of
current assets to current liabilities under the Term Note, to exclude unearned
retainer income from the calculation.

The Company believes it is in compliance with all of its loan agreements, as
amended, with JP Morgan Chase as of September 30, 2003.

On April 1, 2003, the Company issued a Promissory Note (the "Note") with a face
value of $3,000,000 and a stated interest rate of 13.5%, as a part of the
financing for the acquisition of Guideline. Quarterly principal payments of
$250,000 are due beginning March 31, 2006. The Note was recorded at its initial
relative fair value of $1,868,000. The difference between the initial relative
fair value and the stated

25

value will be accreted as additional interest expense over the maturities of the
Note, and the resulting effective interest rate is approximately 30%. Related
interest expense was $307,000 and $156,000 for the nine and three month periods
ended September 30, 2003, respectively, of which $106,000 and $55,000 related to
the non-cash accretion of the carrying value of the Note for the nine and three
month periods ended September 30, 2003, respectively. The Company has the right
to prepay the Note at any time without premium or penalty. The Note is secured
by a security interest in substantially all assets of the Company, and is
subject to covenants relating to the conduct of the Company's business including
financial covenants related to a defined fixed charge coverage and a defined
funded indebtedness to EBITDA ratio. The Company believes it was in compliance
with this loan agreement as of September 30, 2003.

On July 1, 2003, the Company issued a Second Promissory Note (the " Second
Note") with a face value of $500,000 and a stated interest rate of 13.5%, as a
part of the financing for the acquisition of Teltech, the business unit of
Sopheon Corporation ("Teltech"). Quarterly principal payments of $42,000 are due
beginning March 31, 2006. The Second Note was recorded at its initial relative
fair value of $320,000. The difference between the initial relative fair value
and the stated value will be accreted as additional interest expense over the
maturities of the Second Note, and the resulting effective interest rate is
approximately 30%. Related interest expense was $26,000 for the nine and
three-month periods ended September 30, 2003, of which $9,000 related to the
non-cash accretion of the carrying value of the Second Note for the nine and
three-month periods ended September 30, 2003. The Company has the right to
prepay the Second Note at any time without premium or penalty. The Second Note
is secured by a security interest in substantially all assets of the Company,
and is subject to covenants relating to the conduct of the Company's business
including financial covenants related to a defined fixed charge coverage and a
defined funded indebtedness to EBITDA ratio. The Company believes it was in
compliance with this loan agreement as of September 30, 2003.

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.

MARKET FOR COMPANY'S COMMON EQUITY

Trading of our shares of common stock is conducted on the Over-The-Counter
Bulletin Board.

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.

FORWARD LOOKING INFORMATION: CERTAIN CAUTIONARY 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 risks and uncertainties 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

26

all such factors, the risks and uncertainties that may affect the operations,
performance and results of our business include the risks and uncertainties set
forth in the section headed "Factors That May Affect Our Future Results" of Part
7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002
and those risks and uncertainties described in this Quarterly Report on Form
10-Q for the quarter ended September 30, 2003.

SUBSEQUENT EVENT

On November 12, 2003, the Company's President and Founder, Andrew Garvin,
announced he would be retiring at the end of 2003. Mr. Garvin will continue to
serve his term on the Board of Directors, and will be a consultant to the
Company in 2004. In the fourth quarter of 2003, the Company expects to take a
charge of approximately $330,000 triggered by Mr. Garvin's retirement, and
consisting of certain early-retirement benefits provided for in his employment
agreement as well as certain other negotiated benefits. See Note K to the
accompanying financial statements for more details.

27

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change to our exposure to market risk since December
31, 2002.

ITEM 4.
CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the 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 as of the end of the period covered
by this report. 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.

During the quarter ended September 30, 2003, the Company integrated the internal
controls of Teltech as a result of its acquisition by the Company on July 1,
2003. The Company's management, including the Chief Executive Officer and Chief
Financial Officer, also concluded that Teltech's controls and procedures were
effective.

Except as mentioned above, 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.

28

PART II.
OTHER INFORMATION

ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter ended September 30, 2003, options to purchase 621,000 shares
of common stock were granted under the Company's Stock Option Plans, at a price
range of $1.15 to $1.55, to various employees and non-employee directors.

In addition, the following consists of all securities sold during the quarter
ended September 30, 2003 that were not registered under the Securities Act of
1933:

o On July 1, 2003, 32,700 shares of the Company's common stock
was issued to Sopheon Corp. as partial consideration for the
Teltech acquisition.

o On July 2, 2003 1,616,685 shares of the Company's common stock
was issued to certain investors pursuant to a private
placement at a price of $1.47 per share together with warrants
to purchase 808,293 shares of common stock at an exercise
price of $1.47.

o On July 2, 2003 warrants to purchase 70,000 shares of common
stock were issued at an exercise price of $.01 to Petra in
conjunction with the Company's acquisition and finance of the
Teltech acquisition.

See Part 1, Item 1, Footnote N to the accompanying financial statements for
further details regarding these issuances.

Each of these issuances 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.

ITEM 5.
OTHER INFORMATION

On November 12, 2003, the Company's President and Founder, Andrew Garvin,
announced he would be retiring at the end of 2003. Mr. Garvin will continue to
serve his term on the Board of Directors, and will be a consultant to the
Company in 2004. In the fourth quarter of 2003, the Company expects to take a
charge of approximately $330,000 triggered by Mr. Garvin's retirement, and
consisting of certain early-retirement benefits provided for in his employment
agreement as well as certain other negotiated benefits. See Note K to the
accompanying financial statements for more details.

ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------

31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
*Filed herewith

(b) Reports on Form 8-K.

The Company filed a Form 8-K on July 16, 2003 with respect to the
acquisition of the Teltech business unit of Sopheon Corporation.

The Company filed a Form 8-K on August 22, 2003 with respect to the
Company's press release announcing its 2003 second quarter results.

The Company filed a Form 8-K/A on September 15, 2003 which amended the
Company's Form 8-K filed on July 16, 2003 with respect to the acquisition
of the Teltech business unit of Sopheon Corporation.

29

SIGNATURES

Pursuant to the requirements 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)

Date: November 13, 2003 /s/ David Walke
- ----------------------- ---------------------------------
David Walke
Chief Executive Officer

Date: November 13, 2003 /s/ Peter M. Stone
- ----------------------- ---------------------------------
Peter M. Stone
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)

30

EXHIBIT INDEX

NUMBER EXHIBIT
------ -------
31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

31