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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
(MARK ONE)
              [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                    For the fiscal year ended June 30, 1998
 
                                       OR
 
             [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
            For the transition period from           to           .
 
                        COMMISSION FILE NUMBER 000-23989
                            ------------------------
 
                                 PROVANT, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                                 <C>
                     DELAWARE                                           04-3395167
         (State or other jurisdiction of                             (I.R.S. Employer
          incorporation or organization)                          Identification Number)
                    67 BATTERYMARCH STREET, SUITE 600, BOSTON, MASSACHUSETTS 02110
                               (Address of principal executive offices)
                                            (617) 261-1600
                         (Registrant's telephone number, including area code)
</TABLE>
 
Securities registered pursuant to Section 12(b) of the Act:
 
                                      None
 
Securities registered pursuant to Section 12(g) of the Act:
 
                     COMMON STOCK, $.01 PAR VALUE PER SHARE
                             (Title of each class)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X] No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     As of September 10, 1998, 9,995,558 shares of Common Stock were
outstanding, of which 5,442,373 were beneficially owned by non-affiliates. The
aggregate market value of shares held by non-affiliates was approximately
$73,472,036, based on the last sale price of the Common Stock on such date as
reported by the Nasdaq National Market.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of PROVANT's definitive Proxy Statement for its Annual Meeting of
Stockholders, which will be filed within 120 days of the end of PROVANT's fiscal
year ended June 30, 1998, are incorporated by reference into Part III hereof as
provided therein.
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                                     PART I
 
ITEM 1.  BUSINESS
 
COMPANY OVERVIEW
 
     PROVANT, Inc. ("PROVANT" or the "Company") provides a broad range of
training and development services and products to Fortune 1000 companies, other
large and medium-sized corporations and government entities. The Company's
services and products are designed to increase the productivity of organizations
by improving employee selection, recruitment and retention; enhancing employee
work skills; developing employee management and leadership skills; and
facilitating organizational assessment, direction and change. The Company offers
both customized and off-the-shelf services and products that are designed to
provide measurable improvements in employee performance and productivity. The
Company delivers its services and products through multiple delivery methods,
including instructor-led classroom training and seminars, certification of
client employees as instructors ("train-the-trainer"), interactive multimedia
software (such as CD-ROM) and distance-based media (such as video conferencing,
intranets and the Internet). The Company resulted from the May 1998 acquisition,
in separate combination transactions (collectively, the "Combination"), of the
following seven providers of training and development services and products
(collectively, the "Founding Companies"): Behavioral Technology, Inc. ("BTI"),
Decker Communications, Inc. ("Decker"), J. Howard & Associates, Inc. ("J.
Howard"), Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning System
Sciences, Inc. ("LSS"), MOHR Retail Learning Systems, Inc. ("MOHR"), Novations
Group, Inc. ("Novations") and Star Mountain, Inc. ("Star Mountain"). Subsequent
to the Combination, the Company has acquired two businesses. In July 1998, the
Company acquired by merger KC Resources Creative Solutions, Inc. ("KC
Resources"), a provider of training and instructional design and development
services based in the Washington, DC metropolitan area. In September 1998, the
Company purchased all of the issued and outstanding capital stock of American
Media Incorporated ("AMI"), a producer and distributor of training and
development products headquartered in West Des Moines, Iowa. The seven Founding
Companies, KC Resources and AMI (collectively, the "Operating Companies" and
each an "Operating Company") are recognized leaders in their respective fields
and have developed a wide range of services and products, a substantial
knowledge base created from years of research and development, and a
well-established client base. The Company's objective is to become the leading
single source provider of high-quality training and development services and
products that are distributed through multiple delivery methods.
 
BUSINESS STRATEGY
 
     The Company's objective is to meet a significant portion of the training
and development needs of Fortune 1000 companies, other large and medium-sized
corporations and government entities. To achieve this objective, the Company is
pursuing a business strategy with the following key elements:
 
     OFFER VALUE-ADDED, HIGH-QUALITY TRAINING.  The Company is committed to
providing value-added training and development services and products that result
in measurable improvement in the workplace performance of employees. The
Company's services and products are based upon well-researched methodologies,
processes and content, and typically have been developed, refined and used
successfully over many years. Many of the Operating Companies' executives have
advanced degrees and are regarded as leaders in their respective areas. The
Company strives to offer high-quality training by continually updating its
content to reflect changing industry trends and client preferences.
 
     PROVIDE A BROAD RANGE OF SERVICES AND PRODUCTS.  The Company seeks to
provide its clients with a broad range of high-quality training and development
services and products in both customized and off-the-shelf formats. These
services and products cover: employee selection, recruitment and retention;
employee work skills enhancement; employee management and leadership skills; and
organizational assessment, direction and change. Specifically, the Company
assists organizations and their employees in, among other things, determining
and implementing hiring criteria, increasing workplace diversity awareness,
improving communication skills, increasing point-of-sale efficiencies, working
in a team environment and soliciting and analyzing employee feedback. In
addition, the Company provides strategic consulting services to its clients,
which are enhanced by the Company's ability to offer complementary training and
development services and products.
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     UTILIZE MULTIPLE DELIVERY METHODS.  The Company offers multiple delivery
methods for its services and products, including instructor-led seminars,
train-the-trainer, interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
Two of the Operating Companies, LSS and Star Mountain, have substantial
expertise in delivery technology which the Company intends to apply to many of
the services and products of the other Operating Companies. By offering multiple
delivery methods, the Company believes that it can better serve the needs,
resource constraints and cost requirements of its clients.
 
     DEVELOP LONG-TERM CLIENT RELATIONSHIPS.  The Company seeks to develop
long-term relationships with clients to whom it can provide a full complement of
services and products on a recurring basis. Many of the Company's long-term
clients purchase its services and products on an on-going basis after the
initial delivery of services and products. For example, after a
train-the-trainer seminar where the Company certifies a client's instructors,
the Company continues to receive a fee on a participant or site basis as the
certified instructors continue to train the client's employees. The Company also
offers updated, related or new services and products to its clients in order to
generate recurring revenue.
 
     EMPLOY A DECENTRALIZED MANAGEMENT STRUCTURE.  The Company believes that the
experienced management teams of the Operating Companies have a valuable
understanding of their respective training and development markets and have
established strong client relationships. The Company currently operates with a
decentralized management structure under which management at each of the
Operating Companies makes most of the day-to-day operating decisions and has
primary responsibility for the profitability and growth of its business. The
Company utilizes stock ownership as well as appropriate incentive compensation
to ensure that management's objectives at each of the Operating Companies are
aligned with those of the Company.
 
     IMPLEMENT BEST PRACTICES AND ACHIEVE OPERATING EFFICIENCIES.  The Company
is evaluating the operating policies and procedures of the Operating Companies
in order to identify and implement Company-wide best practices in areas such as
marketing, sales, product development, human resource policies and recruiting.
In addition, the Company believes that it can achieve operating efficiencies and
cost savings by more efficiently utilizing the Company's facilities and gaining
greater purchasing power in areas such as travel, employee benefits and
communications.
 
GROWTH STRATEGY
 
     The Company's objective is to become the leading single source provider of
high-quality training and development services and products to Fortune 1000
companies, other large and medium-sized corporations and government entities.
Key elements of the Company's growth strategy include:
 
     CAPITALIZE ON CROSS-SELLING OPPORTUNITIES.  The Company believes that
significant opportunities exist for each Operating Company to cross-sell its
services and products to clients of the other Operating Companies. Prior to
joining with the Company, each of the Operating Companies established strong
relationships with its clients but could offer its clients only a limited
selection of training and development services and products. The Company intends
to capitalize on the services and products of each of the Operating Companies by
emphasizing and aggressively cross-selling its broad range of training and
development services and products to its collective client base.
 
     IMPLEMENT AGGRESSIVE SALES AND MARKETING STRATEGY.  The Company is pursuing
an aggressive sales and marketing strategy designed to establish new client
relationships and expand existing relationships. Specifically, the Company is:
(i) hiring additional salespeople to supplement the existing sales efforts of
the Operating Companies; (ii) establishing a nationwide telemarketing program
focusing primarily on medium-sized corporations; and (iii) participating in a
greater number of conferences and trade shows. The Company intends to direct its
centralized marketing campaign to both new clients and additional contacts
within existing clients (e.g., targeting upper levels of management if previous
services provided by an Operating Company were marketed to middle management).
In addition, the Company intends to pursue relationships with regional colleges
and vocational/technical schools in order to market its services and products to
small and medium-sized companies and their employees. The Company also intends
to establish a national brand
 
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identification under the PROVANT name, while preserving the value of the
established names, trademarks and client relationships of the Operating
Companies.
 
     EXPAND SERVICE AND PRODUCT OFFERINGS.  The Company intends to broaden its
offerings of training and development services and products by developing or
acquiring new or complementary services and products. For example, the Company
currently is introducing a new employee recruitment product, based upon its
Behavioral Interviewing(R) process, that teaches clients how to recruit in a
tight labor market. In addition, the Company intends to capitalize on its
expertise in certain industries, such as the retail industry, by customizing
services and products for other similar industries, such as the hospitality,
transportation and healthcare industries.
 
     PURSUE STRATEGIC ACQUISITIONS.  The Company intends to pursue strategic
acquisitions in order to: (i) offer services or products complementary to those
it currently offers; (ii) gain expertise in new areas of training and
development; (iii) access new technology to expand the scope and quality of
delivery methods; and (iv) establish or enhance client relationships. The
Company seeks to acquire companies with strong management, profitable operating
results and leading positions within their respective markets. The Company
believes that acquisitions of this nature will improve its ability to be the
leading single source provider of high-quality training and development services
and products.
 
     LEVERAGE INVESTMENTS IN TECHNOLOGY AND DEPLOY LEADING TECHNOLOGIES.  A key
element of the Company's strategy is to capitalize on the technology investments
of the Operating Companies in order to deliver training and development services
and products to its clients in the most effective manner. For example, the
Company intends to apply the technical expertise of LSS and Star Mountain, which
provide training through interactive multimedia software, to convert certain
products of other Operating Companies to interactive multimedia software
formats, such as CD-ROM. The Company intends to deploy leading technologies in
the delivery of many of its services and products, including delivery through
distance-based media, such as video conferencing, intranets and the Internet,
that can provide interactive training to employees at multiple locations.
 
TRAINING AND DEVELOPMENT SERVICES AND PRODUCTS
 
     The Company's training and development services and products assist
organizations in four principal areas: (i) employee recruitment, selection and
retention; (ii) employee work skills; (iii) employee management and leadership
skills; and (iv) organizational assessment, direction and change. Through these
services and products, the Company's clients can improve the quality of
employees entering the organization, the performance of employees within the
organization, and the ability of the organization as a whole to undergo change.
The Company offers services and products which are off-the-shelf as well as
customized to meet the specialized needs of particular clients. The following
table illustrates the principal training and development areas covered by the
Company's services and products:
 
<TABLE>
<CAPTION>
 EMPLOYEE RECRUITMENT,                                      EMPLOYEE MANAGEMENT        ORGANIZATIONAL ASSESSMENT,
SELECTION AND RETENTION       EMPLOYEE WORK SKILLS         AND LEADERSHIP SKILLS          DIRECTION AND CHANGE
-----------------------      -----------------------      -----------------------      --------------------------
<S>                          <C>                          <C>                          <C>
Interviewing candidates      Customer service             Analyzing employee           Strategic consulting
Identifying specific         training                     feedback                     Understanding employee
job   competencies           Public speaking              Presentation skills          perceptions
Retaining employees          Spoken communication         training                     Assessing organizational
Addressing sexual            training                     Coaching peers and           abilities and direction
  harassment                 Buyer negotiating            colleagues                   Measuring customer
Facilitating diversity       Point-of-sale training       Managing retail stores       satisfaction
                             General retail sales         Communicating with           Designing quality control
                             training                     subordinates                 processes
                             Specialized government       Understanding diversity      Changing corporate
                             job training                 issues                       culture
                             Industrial skills
                             training
</TABLE>
 
     EMPLOYEE RECRUITMENT, SELECTION AND RETENTION.  The Company offers services
and products designed to assist clients in hiring and retaining effective
employees. In particular, the Company helps clients understand
 
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<PAGE>   5
 
the skills required of their employees, implement more effective recruitment,
selection and retention processes to maximize employee productivity, and reduce
turnover rates. Through one of the Company's products, Behavioral
Interviewing(R), managers learn how to identify specific job competencies
required for success, interview prospective candidates and evaluate their
skills. SkilMatch(R), a related product, is an interactive software program
designed to streamline the process of developing structured interviews and
ensure a consistent selection process. Complementing these products are the
Company's outplacement services, which it provides to several federal government
agencies to assist in work force restructuring, and its diversity enhancement
services, which facilitate employee retention and development.
 
     EMPLOYEE WORK SKILLS.  The Company offers services and products designed to
provide or improve the skills necessary to perform a particular task or job.
These skills include public speaking/presentation, negotiation, general retail
sales, point-of-sale device operation, direct store delivery (receiving) and
customer service. Several of the Company's products, including The POS
Simulator, Direct Store Delivery Simulator, Cashier Ready and Produce
Identification Trainer, are designed to increase employee productivity in the
retail workplace by simulating important retail situations and environments in
interactive multimedia formats. Many of these products allow clients to measure
the effectiveness of the training. Another Company product, Effective
Communicating(TM), is a two-day workshop designed to enable clients' key staff
members to become more effective in public speaking, sales and other types of
oral communication. The Company also offers specialized industrial skills
training for government and corporate clients.
 
     The Company provides customized work skills training to numerous federal
government entities and various state and local government entities. Most of the
services and products offered in this area involve the training of employees to
perform tasks that are unique to certain government jobs. For instance, the
Company has prepared courses for the Department of Defense covering topics from
technology applications for military aircrews to basic medical care and medical
management information systems for Army and Navy healthcare personnel. Courses
prepared for other federal agencies include Reengineering and Process Mapping
for the Department of Education, Principles of Purchasing for the Postal
Service, Introductory Correctional Training for the Bureau of Prisons, and
Training in the Use of Traffic Records for Problem Identification for the
National Highway Traffic Safety Administration. Typically, these training
courses and course materials are custom-designed by experts from the Company
working closely with members of the respective government entities.
 
     EMPLOYEE MANAGEMENT AND LEADERSHIP SKILLS.  The Company offers services and
products that are designed to improve employees' operational management,
supervisory and leadership skills. In particular, the Company helps managers to
create constructive feedback processes, operate retail stores, monitor, motivate
and communicate with subordinates and understand diversity issues. Managing
Individual and Team Effectiveness (MITE(R)), one of the Company's products, is
designed to provide managers in complex work environments with "360-degree"
feedback on their management skills. Another product, Retail Management Series
III (RMSIII), is a multi-component and highly adaptable program designed to
enhance managers' retail communication and coaching skills in order to improve
the productivity and profitability of their salespeople. A third product,
Managing Inclusion, is a multi-day session designed to help individual managers
and client companies enhance understanding of workplace diversity, build morale
and satisfaction in the work force, and increase productivity through more
effective team relationships.
 
     ORGANIZATIONAL ASSESSMENT, DIRECTION AND CHANGE.  The Company provides
services and products designed to help organizations assess their strategic
direction and implement and manage change. The Company provides strategic
consulting services that help improve overall workplace performance by assisting
clients in, among other things, clarifying and communicating their business
strategies and redesigning their organizations and business processes. The
Company also provides its clients with a variety of survey tools by which
feedback can be gathered and analyzed on either an organizational or individual
basis. The Company develops the survey forms and methodologies, conducts the
surveys, and collects and analyzes the data for its corporate clients.
 
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<PAGE>   6
 
DELIVERY METHODS
 
     The Company offers multiple delivery methods for its training services and
products. By doing so, the Company believes that it can better serve the
particular needs, resource constraints, cost requirements and cultures of its
clients. Most of the Company's services and products currently are delivered
through instructor-led and train-the-trainer seminars; however, the Company also
delivers certain of its products on interactive multimedia software or through
distance-based methods. The Company's primary delivery methods are described
below.
 
     INSTRUCTOR-LED TRAINING AND SEMINARS.  The Company delivers its programs to
clients' employees primarily through the use of either dedicated Company
instructors or certified contract instructors. Most of the Company's
instructor-led training is delivered at clients' facilities, although the
Company also delivers certain programs at its own training facilities. In some
cases, the Company's programs are delivered in a public seminar format to a
small group of individuals from multiple client companies. The Company provides
textual materials and, in some cases, video tapes as a part of its
instructor-led programs. In addition, the Company sells related published
materials in connection with these programs. The Company also develops custom
courseware that ultimately is delivered by instructors (often client employees)
who are not certified by or otherwise affiliated with the Company. The Company's
courses and programs generally range in length from a few hours to several days
and include from one to hundreds of participants.
 
     TRAIN-THE-TRAINER.  For several of its services and products, the Company's
instructors train and certify qualified employees of clients in an
instructor-led program. The certified client employees then are licensed to use
the Company's methodologies and materials to train other employees of the client
in instructor-led classes at client sites. The Company supplies training
materials for these classes and on-going training for the certified trainers.
The Company receives fees for the employee-led classes on either a participant
or site basis.
 
     INTERACTIVE MULTIMEDIA SOFTWARE.  The Company delivers several of its
products on interactive multimedia software, such as CD-ROMs. Because of the
demonstrated higher rates of learning and retention achieved through interactive
multimedia training, the Company plans to convert to CD-ROM and other
interactive multimedia software several of its products that to date have been
offered only in the instructor-led or train-the-trainer formats.
 
     DISTANCE-BASED MEDIA.  The Company currently delivers a limited number of
its products through distance-based media, such as satellite or other video
conferencing, intranets and the Internet. The Company intends to seek new
technologies that will allow it to deliver its product offerings to clients more
effectively. In particular, the Company believes that more of its products will
be offered through the Internet and more clients will seek Internet-delivered
training as the bandwidth of Internet access increases.
 
OTHER SERVICES AND PRODUCTS
 
     In addition to its training and development services and products, the
Company also provides certain other services and products including computer
network security research and development (primarily for federal government
entities) and computer network design, sales, installation and support
(primarily for corporations).
 
CLIENTS
 
     The Company seeks to establish long-term relationships with Fortune 1000
companies, other large and medium-sized corporations and government entities
with substantial training and development needs. The Company has developed a
broad client base of over 1,300 corporations, with no corporate client
accounting for more than 5% of the Company's pro forma combined revenue during
fiscal 1998.
 
     Star Mountain derives a substantial majority of its revenues from
customized training and development services and products delivered to entities
affiliated with the federal government. During fiscal 1998, Star Mountain's
training and development work for federal government clients generated
approximately 28% of the Company's pro forma combined revenue. Star Mountain
also provides services and products to state and local government entities.
 
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SALES AND MARKETING
 
     Historically, the Operating Companies have used a variety of sales
strategies. The majority of the Operating Companies maintain dedicated
salespersons who seek to identify leads, qualify prospects and close sales
related to their specific training services and products. In some instances, the
salespersons also serve as the instructors or consultants for such services and
products. Generally, each of the Operating Companies targets its prospects
primarily through direct sales, public seminars, client referrals and a variety
of media, including direct mailings, the Operating Companies' web sites and
trade publications. In addition, several of the Operating Companies are able to
obtain clients as a result of the visibility of their principals, who have
published articles and books, appeared on television news shows or otherwise
created a strong reputation in their various fields of training. The Company
currently markets its services and products to its clients mainly through their
human resources personnel, business unit managers or regional managers and, to a
lesser extent, through senior executives. However, the Company intends to focus
increasingly on marketing to senior executives of both existing and targeted
clients through initial contacts made by members of the Company's Board of
Directors and senior management, as well as by the principals of the Operating
Companies.
 
     The Company generates significant revenues through sales of services and
products to government entities. Typically, these sales occur through a
competitive bidding process started by a government entity's issuance of a
request for proposal ("RFP") for a contemplated project. The Company may submit
a proposal on its own behalf or as a subcontractor to another company. Many
services and products delivered to federal government agencies are provided
through orders placed under a General Services Administration ("GSA") Supply
Schedule contract and under Office of Personnel Management/Training Management
Assistance ("OPM"). The Company is one of only a few training providers
authorized under both funding mechanisms. The Company (through Star Mountain)
benefits from its status as a preferred provider under certain funding
mechanisms (including the GSA and OPM vehicles) which allow it to negotiate
contracts without an RFP.
 
     The Company expects to capitalize on cross-selling opportunities among the
clients of the Operating Companies. The Company intends to hire additional
salespeople to supplement the existing sales efforts of the Operating Companies
and establish a nationwide telemarketing program focusing on medium-sized
corporations. In addition, the Company is developing a marketing and advertising
program to establish a national brand identification under the PROVANT name,
while preserving the value of the established names, trademarks and customer
relationships of the Operating Companies.
 
COMPETITION
 
     The training and development industry is highly fragmented and competitive,
and the Company expects this competition to increase. The Company believes the
principal competitive factors in the industry are the strength of client
relationships, quality, price and breadth of service and product offerings,
quality and number of delivery methods, reputation, and the ability to provide
customized services and products. Some of the Company's competitors have
significantly greater financial, managerial, technical, marketing and other
resources than the Company. Moreover, the Company expects that it will face
additional competition from new entrants into the training and development
market due, in part, to the evolving nature of the market and the relatively low
barriers to entry.
 
     The Company competes with thousands of privately-held training companies,
most of which provide a limited range of services and products. In addition to
these small competitors, a number of larger companies are engaged in the
business of providing training and development services and products, including
Times Mirror Training Group (a subsidiary of the Times Mirror Company), The
Forum Corporation, Development Dimensions International, Wilson Learning
Corporation and several large publishers of professional reference materials who
recently have entered the industry. The Company also competes with large
professional service companies such as Andersen Consulting, Ernst & Young LLP,
Towers Perrin and others that generally offer training services in conjunction
with strategic consulting and other client assignments of larger scope. In
addition, many of the Company's clients and potential clients have internal
training departments.
 
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<PAGE>   8
 
     The Company's competitors for government contracts include service
companies such as Booz Allen, as well as contract suppliers of equipment to the
government such as Raytheon Company, McDonnell-Douglas Corporation and Lockheed
Martin Corporation.
 
INTELLECTUAL PROPERTY
 
     The Company regards many of its training and development services and
products as proprietary and relies primarily on a combination of statutory and
common law copyright, trademark, service mark and trade secret laws, customer
licensing agreements, employee and third-party nondisclosure agreements and
other methods to protect its proprietary rights. Notwithstanding this, a third
party or parties could copy or otherwise obtain and use the Company's products
in an unauthorized manner or use these products to develop training and
development processes that are substantially similar to those of the Company.
The Company's products generally do not include any mechanisms to prohibit or
prevent unauthorized use by third parties. There can be no assurance that the
Company's means of protecting its proprietary rights will be adequate or that
the Company's competitors will not independently develop similar training
products and delivery methods. Additionally, there can be no assurance that
third parties will not claim that the Company's current or future products
and/or services infringe on the proprietary rights of others.
 
EMPLOYEES
 
     As of June 30, 1998 the Company employed approximately 737 full-time and
part-time employees and believes that its relationships with its employees are
good.
 
INDEPENDENT CONTRACTORS
 
     The Company provides certain of its services and products through
independent contractors, which as of June 30, 1998, numbered approximately 140.
The Company does not pay federal employment taxes or withhold income taxes with
respect to these independent contractors or include them in the Company's
employee benefit plans.
 
ITEM 2.  PROPERTIES
 
     The Company leases its principal executive office located in Boston,
Massachusetts, and maintains 23 additional leased office locations in 12 states
and one in Canada. The remaining terms of the Company's leases are less than
eight years. The Operating Companies' principal offices are located in:
Alexandria, Virginia; Cabin John, Maryland; Lexington, Massachusetts; Memphis,
Tennessee; North Hollywood and San Francisco, California; Provo, Utah; and
Ridgewood, New Jersey. Certain of the Founding Companies also maintain branch
offices. The Company believes that its facilities are adequate to serve its
current level of operations. If additional facilities are required, the Company
believes that suitable additional or alternative space will be available as
needed on commercially reasonable terms.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition or results of operations of the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     From April 28, 1998 (the date on which the Company became subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended) through the end of the Company's fourth fiscal quarter, no matters were
submitted to a vote of security holders.
 
ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Paul M. Verrochi, age 49, has been Chairman of the Board and Chief
Executive Officer of the Company since May 1998. Prior to the Company's initial
public offering of Common Stock (the "IPO"), Mr. Verrochi was President and a
director of the Company. Mr. Verrochi also is Chairman, co-founder and a
principal of American Business Partners LLC ("ABP"). In 1992, Mr. Verrochi
co-founded American Medical Response, Inc. ("AMR"), which prior to its
acquisition by Laidlaw Inc. in January 1997 was the largest provider of
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<PAGE>   9
 
ambulance services in the United States. From August 1992 to January 1996, Mr.
Verrochi served as AMR's President and Chief Executive Officer, and until
January 1997 he also served as the Chairman of the Board of Directors. Mr.
Verrochi was selected as the 1995 National Entrepreneur of the Year for Emerging
Growth Companies by Inc. Magazine. Mr. Verrochi serves as an advisory board
member to numerous charitable foundations, including the New England Aquarium
and the Boston Symphony Orchestra. Mr. Verrochi is Chairman of BridgeStreet
Accommodations, Inc. and a director of Coach USA, Inc. Mr. Verrochi received his
Bachelor of Science degree from the United States Merchant Marine Academy at
Kings Point, New York.
 
     John H. Zenger, age 66, has been President and a director of the Company
since May 1998. Prior to the IPO, from May 1997 until May 1998, Mr. Zenger was a
consultant to the Company. From April 1992 to November 1996, Mr. Zenger was
employed in various capacities, including Vice President and Chairman, by the
Times Mirror Training Group, one of the nation's largest training companies,
consisting of Kaset, Learning International and Zenger Miller, the company that
he founded in 1977. Mr. Zenger has taught at the University of Southern
California School of Business and the Stanford Graduate School of Business. Mr.
Zenger received his Doctorate degree in Business Administration from the
University of Southern California, his Masters in Business Administration from
the University of California, Los Angeles and his Bachelor of Science degree
from Brigham Young University.
 
     Dominic J. Puopolo, age 55, has been Executive Vice President and Chief
Financial Officer of the Company since May 1998. Mr. Puopolo also has served as
a director of the Company since November 1996. Prior to the IPO, Mr. Puopolo
also was Treasurer of the Company. Mr. Puopolo is a co-founder and principal of
ABP. In 1992, Mr. Puopolo co-founded AMR. From August 1992 to January 1996, Mr.
Puopolo served as Executive Vice President, Chief Financial Officer, Treasurer
and a member of the Board of Directors of AMR. Mr. Puopolo serves as a member of
the Board of Trustees of Emerson College of Communications and is Chairman of
its Resource Development Committee. Mr. Puopolo also serves on the Executive
Committee of the Boston University School of Medicine and is a member of the
Board of Trustees of Northeastern University. Mr. Puopolo, a Certified Public
Accountant, is a member of the Massachusetts Society of Certified Public
Accountants, The American Institute of Certified Public Accountants and the
National Association of Accountants. Mr. Puopolo received his Masters in
Business Administration degree from Suffolk University and his Bachelor of
Science degree in Business Administration from Northeastern University.
 
     Rajiv Bhatt, age 40, has been Senior Vice President, Treasurer and Chief
Accounting Officer of the Company since May 1998. Prior to the IPO, from August
1997 until May 1998, Mr. Bhatt was a consultant to the Company. From September
1994 to August 1997, Mr. Bhatt was Executive Vice President, Chief Financial
Officer and Treasurer of Summit Technology, Inc., a publicly-traded manufacturer
of ophthalmic laser systems. From September 1988 to September 1994, Mr. Bhatt
was Chief Financial Officer, Secretary and a member of the Board of Directors of
Carlisle Plastics, Inc., a publicly-traded plastics manufacturer. Also from
September 1988 to September 1994, Mr. Bhatt was Chief Financial Officer of
Carlisle Capital Corporation, a privately held mergers and acquisitions company.
Mr. Bhatt serves as a director of Big Brothers Association of Boston. Mr. Bhatt,
a Certified Public Accountant, received his Masters in Business Administration
degree from the University of Michigan and his Bachelor of Commerce degree from
the University of Bombay.
 
     Philip Gardner, age 35, has been Vice President of the Company since May
1998. Prior to the IPO, from February 1997 until May 1998, Mr. Gardner was a
consultant to the Company. From August 1994 to December 1996, Mr. Gardner was a
consultant for McKinsey & Company ("McKinsey"), a management consulting firm.
Prior to joining McKinsey, from 1985 to 1992, Mr. Gardner was an officer and a
highly decorated strike fighter pilot in the United States Navy. Mr. Gardner
received his Masters in Business Administration degree from Harvard Graduate
School of Business Administration and his Bachelor of Arts degree in Government
from Harvard College.
 
                                        9
<PAGE>   10
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     PRICE RANGE OF COMMON STOCK
 
     The Company's common stock (the "Common Stock") is quoted on the Nasdaq
National Market ("Nasdaq") under the symbol "POVT." From April 29, 1998 (the
first day of trading on Nasdaq) through June 30, 1998, the high and low sale
prices for the Common Stock as reported by Nasdaq were $22.50 and $16.00,
respectively. On September 10, 1998, the last sale price of the Common Stock was
$13.50 as reported by Nasdaq and there were 113 holders of record of Common
Stock.
 
     DIVIDEND POLICY
 
     The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
Any future determination as to the payment of dividends on the Common Stock will
be at the discretion of the Board of Directors and will depend upon, among other
things, the Company's future earnings, if any, the operating and financial
condition of the Company, its capital requirements, general business conditions
and any other factors the Board of Directors of the Company may consider. In
addition, the Company's credit facility currently restricts the Company's
ability to pay dividends without the consent of the lender.
 
     RECENT SALES OF UNREGISTERED SECURITIES
 
     On July 20, 1998, in connection with the acquisition by merger of KC
Resources, the Company issued to KC Resources' sole stockholder 200,000 shares
of Common Stock. The transaction was exempt from registration by virtue of
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
and Rule 506 promulgated thereunder.
 
     USE OF PROCEEDS
 
     In its Quarterly Report on Form 10-Q for the three months ended March 31,
1998, the Company previously detailed uses of $29.2 million of the $32.7 million
in net proceeds raised from the IPO, which was made pursuant to the Company's
Registration Statement on Form S-1 (File No. 333-46157). In addition to the
previously detailed uses, the Company used $2.4 million of the net proceeds for
the acquisition of KC Resources in July 1998 and the remaining $1.1 million of
the net proceeds was used to partially fund the acquisition of AMI in September
1998.
 
                                       10
<PAGE>   11
 
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
 
     The Company acquired the Founding Companies simultaneously with the
consummation of the IPO. The following data presents selected historical
financial data for the Company (including the accounts of the Founding Companies
from their date of acquisition in the Combination), which has been derived from
the Company's audited financial statements included elsewhere herein. The
following data also presents selected unaudited pro forma combined financial
data for the Company that is adjusted for: (i) the consummation of the
Combination; (ii) certain pro forma adjustments to the historical financial
statements of the Company and the Founding Companies; and (iii) the consummation
of the IPO and the application of the net proceeds. See the Company's historical
financial statements and Unaudited Pro Forma Combined Financial Statements and
notes thereto.
 
<TABLE>
<CAPTION>
                                                           HISTORICAL                 PRO FORMA COMBINED(1)
                                               -----------------------------------   ------------------------
                                                   PERIOD FROM
                                                NOVEMBER 16, 1996
                                               (DATE OF INCEPTION)                     YEAR ENDED JUNE 30,
                                                       TO             YEAR ENDED     ------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)     JUNE 30, 1997      JUNE 30, 1998      1997         1998
---------------------------------------------  -------------------   -------------   ----------   -----------
                                                                                           (UNAUDITED)
<S>                                            <C>                   <C>             <C>          <C>
STATEMENT OF OPERATIONS DATA:
Total revenue..............................         $       --        $   14,189     $   68,846   $    78,062
Cost of revenue............................                 --             6,374         30,967        33,578
                                                    ----------        ----------     ----------   -----------
Gross profit...............................                 --             7,815         37,879        44,484
Selling, general and administrative
  expenses (2).............................                149            10,447         28,663        33,832
Goodwill amortization (3)..................                 --               245          1,335         1,335
                                                    ----------        ----------     ----------   -----------
Income (loss) from operations..............               (149)           (2,877)         7,881         9,317
Interest income (expense), net.............                 --              (220)            44             5
                                                    ----------        ----------     ----------   -----------
Income (loss) before income taxes..........               (149)           (3,097)         7,925         9,322
Provision (benefit) for income taxes (4)...                 --              (203)         3,704         4,262
                                                    ----------        ----------     ----------   -----------
Net income (loss)..........................         $     (149)       $   (2,894)    $    4,221   $     5,060
                                                    ==========        ==========     ==========   ===========
Earnings (loss) per common share: basic....             $(0.08)           $(0.67)         $0.43         $0.52
                                                    ==========        ==========     ==========   ===========
Earnings (loss) per common share: diluted...            $(0.08)           $(0.67)         $0.42         $0.50
                                                    ==========        ==========     ==========   ===========
Shares used in computing basic earnings
  (loss) per common share (5)..............          1,950,520         4,350,169      9,795,558     9,795,558
Shares used in computing diluted earnings
  (loss) per common share (5)..............          1,950,520         4,350,169     10,168,889    10,168,889
</TABLE>
 
<TABLE>
<CAPTION>
                                                        HISTORICAL
                                                     ----------------
                                                         JUNE 30,
                                                     ----------------
              (DOLLARS IN THOUSANDS)                 1997      1998
              ----------------------                 -----   --------
<S>                                                  <C>     <C>
BALANCE SHEET DATA:
Working capital (deficit)..........................  $(297)  $ 11,107
Total assets.......................................    151     86,358
Long-term debt, net of current portion.............     --        874
Stockholders' equity (deficit).....................   (147)    66,499
</TABLE>
 
---------------
 
(1) The pro forma combined statement of operations data assumes that the
    Combination and the IPO were consummated on July 1, 1996, and is not
    necessarily indicative of the results the Company would have obtained if
    these events actually then occurred or of the Company's future results. The
    pro forma combined statement of operations data is based on preliminary
    estimates, available information and assumptions that management deems
    appropriate, and should be read in conjunction with the other financial
    statements and notes thereto included elsewhere in this Report.
 
(2) Reflects in the pro forma data the elimination of (i) a non-recurring fee of
    $750,000 in the year ended June 30, 1998 for information related to the
    training industry, (ii) non-cash compensation expense totaling $686,000 for
    the year ended June 30, 1998 related to the issuance of Common Stock and
    stock options to officers of and consultants to the
 
                                       11
<PAGE>   12
 
    Company, (iii) non-recurring legal and accounting fees related to the
    Combination and the IPO totaling $588,000 for the year ended June 30, 1998
    and (iv) the compensation differential. The compensation differential
    represents pro forma adjustments to salary, bonuses and benefits paid to
    certain pre-Combination owners of the Founding Companies to certain levels
    to which they have agreed prospectively. For the years ended June 30, 1997
    and 1998, the compensation differential was approximately $5.6 million and
    $6.5 million, respectively
 
(3) Reflects in the pro forma data amortization of the goodwill being recorded
    as a result of the Combination over a 40-year period.
 
(4) Assumes in the pro forma data that all income is subject to an effective
    corporate income tax rate of 40%, and all goodwill from the Combination is
    non-deductible.
 
(5) The pro forma basic shares consist of: (i) 3,459,341 shares issued in May
    1998 to the stockholders of the Founding Companies in the Combination; (ii)
    3,346,217 shares outstanding prior to the Combination and the IPO; and (iii)
    2,990,000 shares sold in the IPO. The pro forma diluted shares include the
    basic shares and common stock equivalents calculated under the treasury
    stock method.
 
                                       12
<PAGE>   13
 
                     STAR MOUNTAIN SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     PROVANT reports operating results commencing with its inception on November
16, 1996. For the purpose of providing five full years of selected historical
financial data, as required under the Securities Act, the following historical
selected financial data for Star Mountain, a significant predecessor company, is
presented. The selected data for the years ended December 31, 1995, 1996 and
1997 and the period January 1, 1998 to May 4, 1998 is derived from, and should
be read in conjunction with, Star Mountain's audited financial statements (and
the notes thereto) appearing elsewhere in this Report on Form 10-K. The selected
data for the years ended December 31, 1993 and 1994 are derived from Star
Mountain's audited financial statements for those years. The data presented
below is neither comparable to nor indicative of Star Mountain's
post-Combination financial position or results of operations.
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,                PERIOD FROM
                                                ---------------------------------------------   JANUARY 1, 1998
                                                 1993     1994     1995      1996      1997      TO MAY 4, 1998
                                                ------   ------   -------   -------   -------   ----------------
<S>                                             <C>      <C>      <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
  Total revenue...............................  $8,293   $9,731   $14,306   $16,313   $23,775       $ 11,052
  Cost of revenue.............................   5,418    6,350     8,668     9,457    14,504          6,109
                                                ------   ------   -------   -------   -------       --------
  Gross profit................................   2,875    3,381     5,638     6,856     9,271          4,943
  Selling, general and administrative
    expenses..................................   2,619    2,973     4,411     5,476     7,591          3,650
                                                ------   ------   -------   -------   -------       --------
  Income from operations......................     256      408     1,227     1,380     1,680          1,293
  Interest and other income (expense), net        (150)    (194)     (235)     (379)     (406)          (137)
                                                ------   ------   -------   -------   -------       --------
  Income before provision for income taxes....     106      214       992     1,001     1,274          1,156
  Provision for income taxes(1)...............      --       --        --       397       546            457
                                                ------   ------   -------   -------   -------       --------
  Net income..................................  $  106   $  214   $   992   $   604   $   728       $    699
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: basic............  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.09       $   0.09
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: diluted..........  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.08       $   0.08
                                                ======   ======   =======   =======   =======       ========
  Shares used in computing basic earnings per
    common share..............................   8,443    8,821     8,825     8,422     8,078          8,074
  Shares used in computing diluted earnings
    per common share..........................   9,271    9,058     8,963     8,565     8,823          8,871
BALANCE SHEET DATA:
  Working capital.............................  $  583   $  847   $   942   $   871   $    64
  Total assets................................   3,231    3,507     4,775     5,983    10,677
  Long term debt, net of current portion......      --       --        --        --       304
  Stockholders' equity........................   1,021    1,274     1,859     2,010     2,778
</TABLE>
 
---------------
(1) Through December 31, 1995, Star Mountain had elected to be treated as an S
    corporation and, accordingly, there was no provision for income taxes for
    periods ending on or prior to that date.
 
                                       13
<PAGE>   14
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     This Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements as a result of any number of factors, including the
risk factors set forth in the Company's Registration Statement on Form S-4 (File
No. 333-57733).
 
INTRODUCTION
 
     The Company provides a broad range of training and development services and
products to Fortune 1000 companies, other large and medium-sized corporations
and government entities. The Company's services and products are designed to
increase the productivity of organizations by improving employee selection,
recruitment and retention; enhancing employee work skills; developing employee
management and leadership skills; and facilitating organizational assessment,
direction and change. The Company offers both customized and off-the-shelf
services and products that are designed to provide measurable improvements in
employee performance and productivity. The Company delivers its services and
products through multiple delivery methods, including instructor-led and
train-the-trainer seminars, interactive multimedia software (such as CD-ROM) and
distance-based media (such as video conferencing, intranets and the Internet).
 
     The Company resulted from the May 1998 acquisition, in separate combination
transactions (collectively, the "Combination"), of seven providers of training
and development services and products (collectively, the "Founding Companies").
The seven Founding Companies are recognized leaders in their respective fields
and have developed a wide range of services and products, a substantial
knowledge base created from years of research and development, and a
well-established client base. In July 1998, the Company acquired KC Resources, a
training and instructional design and development company. In September 1998,
the Company acquired AMI, a producer and distributor of training and development
products.
 
     The Company receives revenue from five main areas: (i) instructor-led and
train-the-trainer seminars; (ii) license fees; (iii) custom services and
products; (iv) consulting services; and (v) off-the-shelf products. The Company
recognizes revenue from instructor-led training and train-the-trainer seminars,
usually on a participant basis, when the training is delivered. From its
train-the-trainer arrangements, the Company also recognizes license fees on a
per-participant basis when a certified client trainer delivers the Company's
courses and materials to other employees of the client. The Company recognizes
revenue from a site license at the time the license is granted. The Company
generally recognizes revenue from its custom services and products based on the
percentage-of-completion method. The Company recognizes revenue from fees for
its consulting services, for which it charges an hourly or per diem rate, when
the consulting is provided. The Company also recognizes revenue for its
off-the-shelf products, such as books or videotapes, when the products are
delivered.
 
     Cost of revenue primarily consists of: (i) salaries and benefits for the
Company's instructors, consultants and course designers and costs of independent
contractors; and (ii) the cost of developing, designing and producing training
courses and materials, including materials costs. As a result, the Company's
gross margins are affected by the number of instructors, consultants and course
designers and the utilization of such employees during any given period.
Selling, general and administrative expenses consist primarily of salaries,
benefits and bonuses for the Company's corporate, sales, marketing and
administrative personnel, and marketing and advertising expenses for the
Company's services and products. Selling, general and administrative expenses
also include incentive and discretionary bonuses paid to executives and other
key employees. Other selling, general and administrative expenses include non
reimbursable travel expenses, rent, depreciation, telecommunication costs,
postage and other operating costs.
 
     Prior to the Combination, the Founding Companies operated as independent,
privately-owned entities, and their results of operations reflect varying tax
structures (S corporations or C corporations) which influenced the historical
level of owners' compensation. The owners and key employees of the Founding
Companies agreed in the Combination to certain adjustments in their annual
historical salaries, bonuses and benefits. The difference (positive or negative)
between the base salary of the owners and key employees of the Founding
Companies immediately after the Combination and their salaries, bonuses and
benefits during any comparable period is referred to herein as the "Compensation
Differential." The aggregate Compensation Differentials for the years ended June
30, 1997 and 1998 were $5.6 million and $6.5 million, respectively, and have
been reflected as a pro forma adjustment in the Unaudited Pro Forma Combined
Statements of
 
                                       14
<PAGE>   15
 
Operations. The Unaudited Pro Forma Combined Statements of Operations include a
provision for income tax as if the Company was taxed as a C corporation.
 
     As a result of the Combination, the Company expects to realize certain
savings over time from: (i) consolidation of certain expenses, such as travel
and lodging, advertising, employee benefits, communications, insurance and other
general and administrative expenses; and (ii) the Company's ability to borrow at
lower interest rates than most of the Founding Companies. At this time, the
Company cannot quantify these savings, and it is anticipated that these savings
will be offset partially by the costs of being a publicly held company and the
incremental increase in costs related to the Company's new management. Neither
the anticipated savings nor the anticipated costs have been included in the pro
forma financial information of the Company.
 
     In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 ("SAB 97"), relating to business combinations
immediately prior to an initial public offering, which required that business
combinations like the Combination be accounted for using the purchase method of
acquisition accounting. Under the purchase method, PROVANT was designated as the
accounting acquiror of the Founding Companies in the Combination. Approximately
$53.2 million, representing the excess of the fair value of the consideration
received in the Combination over the fair value of the net assets acquired, was
recorded as goodwill on the Company's balance sheet in the Combination. Goodwill
is being amortized as a non-cash charge to the Company's income statement over a
40-year period. The pro forma impact of this amortization expense is
approximately $1.3 million per year. The amount amortized, however, will not be
deductible for tax purposes.
 
RECENT ACQUISITIONS
 
     On July 20, 1998, the Company completed the acquisition of KC Resources, a
training and instructional design and development consulting firm based in the
Washington, DC area. The consideration paid by the Company was $6.0 million,
consisting of $2.4 million in cash and 200,000 shares of Common Stock. This
acquisition, which was structured as a merger, will be accounted for as a
purchase transaction. The former sole stockholder of KC Resources will be
entitled to receive contingent consideration of up to $1.4 million if KC
Resources' earnings before interest and taxes for the year ending June 30, 1999
exceeds a specified base amount.
 
     On September 14, 1998, the Company completed the acquisition of AMI, a
producer and distributor of training and development products with its principal
headquarters located in West Des Moines, Iowa. The consideration paid by the
Company was $11.5 million, consisting of $8.5 million in cash and 230,767 shares
of Common Stock. The acquisition, which was structured as a stock purchase, will
be accounted for as a purchase transaction. The former owners of AMI will be
entitled to receive contingent consideration of up to $11.5 million if AMI's
earnings before interest and taxes for the three-year period ended December 31,
2001 exceed a specified base amount.
 
RESULTS OF OPERATIONS -- UNAUDITED PRO FORMA COMBINED
 
     The following table sets forth certain selected unaudited pro forma
combined financial data for the Company on a pro forma basis and as a percentage
of revenue for the periods indicated. Due to rounding of percentage amounts,
columns do not add to total. For information regarding the pro forma adjustments
made to the combined data, see the introductory paragraph and notes 1-3 to the
Company's statement of operations data contained under the caption "Selected
Consolidated Financial Data."
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED JUNE 30,
                                                           ------------------------------------
                                                                       1997                1998
                                                           ----------------    ----------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                        <C>        <C>      <C>        <C>
Total revenue............................................  $68,846    100.0%   $78,062    100.0%
Cost of revenue..........................................   30,967     45.0     33,578     43.0
                                                           -------    -----    -------    -----
Gross profit.............................................   37,879     55.0     44,484     57.0
Selling, general and administrative expenses.............   28,663     41.6     33,832     43.3
Goodwill amortization....................................    1,335      1.9      1,335      1.7
                                                           -------    -----    -------    -----
Income from operations...................................  $ 7,881     11.4%   $ 9,317     11.9%
                                                           =======    =====    =======    =====
</TABLE>
 
                                       15
<PAGE>   16
 
UNAUDITED PRO FORMA COMBINED RESULTS FOR THE YEAR ENDED JUNE 30, 1997 ("1997")
COMPARED TO THE YEAR ENDED JUNE 30, 1998 ("1998")
 
     Revenue.  Revenue increased $9.2 million, or 13.4%, from $68.9 million in
1997 to $78.1 million in 1998. The increase was primarily due to increased
demand for the Company's train-the-trainer seminars and consulting services.
 
     Cost of Revenue.  Cost of revenue as a percentage of revenue decreased from
45.0% in 1997 to 43.0% in 1998 primarily due to better utilization of certain
fixed overhead costs.
 
     Gross Profit.  Gross profit increased $6.6 million, or 17.4%, from $37.9 in
1997 to $44.5 million in 1998 primarily due to the increase in revenue. As a
percentage of revenue, gross profit increased from 55.0% in 1997 to 57.0% in
1998.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $5.2 million, or 18.0%, from $28.6 million in
1997 to $33.8 million in 1998 primarily due to the costs of establishing the
corporate office and higher selling expenses associated with increased revenue.
As a percentage of revenue, selling, general and administrative expenses
increased from 41.6% in 1997 to 43.3% in 1998 primarily due to the costs of
establishing the corporate office.
 
RESULTS OF OPERATIONS -- HISTORICAL
 
     The following historical consolidated financial information represents the
operations of the Founding Companies (from May 4, 1998, their date of
acquisition in the Combination) and PROVANT on a historical basis. Due to
rounding of percentage amounts, column does not add to total. The following
historical financial information for the year ended June 30, 1998 includes a
non-recurring fee of $750,000 for information related to the training industry,
non-cash compensation expense totaling $686,000 related to the issuance of
Common Stock and stock options to officers of and consultants to the Company,
and non-recurring Combination-related costs of $588,000, and reflects normal
recurring corporate costs of PROVANT subsequent to the IPO. This historical
consolidated information has been derived from the audited financial statements
of the Company included elsewhere herein.
 
<TABLE>
<CAPTION>
                                                             PERIOD FROM
                                                          NOVEMBER 16, 1996
                                                         (DATE OF INCEPTION)         YEAR ENDED
                                                           TO JUNE 30, 1997         JUNE 30, 1998
                                                        ----------------------    -----------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                     <C>                       <C>        <C>
Total revenue.........................................          $  --             $14,189     100.0%
Cost of revenue.......................................             --               6,374      44.9
                                                                -----             -------    ------
Gross profit..........................................             --               7,815      55.1
Selling, general and administrative expenses..........            149              10,447      73.6
Goodwill amortization.................................             --                 245       1.7
                                                                -----             -------    ------
Loss from operations..................................          $(149)            $(2,877)    (20.3)%
                                                                =====             =======    ======
</TABLE>
 
HISTORICAL RESULTS FOR THE PERIOD FROM NOVEMBER 16, 1996 (DATE OF INCEPTION) TO
JUNE 30, 1997 (THE "1997 PERIOD") COMPARED TO THE YEAR ENDED JUNE 30, 1998
("1998")
 
     Revenue.  Revenue increased from nil in the 1997 Period to $14.2 million in
1998 due to the acquisition of the Founding Companies on May 4, 1998 and the
inclusion of their operating results commencing on that date.
 
     Cost of Revenue.  Cost of revenue increased from nil in the 1997 Period to
$6.4 million in 1998 due to the acquisition of the Founding Companies on May 4,
1998 and the inclusion of their operating results commencing on that date.
 
     Gross Profit.  Gross profit increased from nil in the 1997 Period to $7.8
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased from $149,000 in the 1997 Period to $10.4
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date. Prior to
the acquisition
 
                                       16
<PAGE>   17
 
of the Founding Companies, selling, general and administrative expenses included
corporate expenses, consisting primarily of consulting fees and travel to
consummate the Combination and the IPO.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     On April 8, 1998, the Company entered into a revolving credit facility with
Fleet National Bank (as agent), the material terms of which are summarized as
follows. The facility provides the Company with a revolving line of credit of up
to $40.0 million, guaranteed by all of the Company's significant wholly-owned
subsidiaries and secured by a pledge of the capital stock of each of the
Company's wholly-owned subsidiaries. The credit facility may be used for
refinancing of existing indebtedness, acquisitions, working capital and general
corporate purposes. Loans made under the credit facility bear interest, at the
Company's option, at a rate based on either a Eurodollar rate or the bank's
prime rate. In addition, a commitment fee is payable on the unused portion of
the revolving line of credit at a rate of between 0.15% and 0.375% depending on
the ratio of the Company's consolidated total funded debt to consolidated
earnings before interest, taxes, depreciation and amortization. The credit
facility will terminate three years from the Company's initial borrowing under
the facility (which borrowing had yet to occur as of September 1, 1998), and all
amounts outstanding thereunder (if any) will be due at such time. The credit
facility (i) generally prohibits the payment of dividends and other
distributions by the Company, (ii) generally does not permit the Company to
incur or assume other indebtedness, and (iii) requires the Company to comply
with certain financial covenants. As of September 15, 1998, $6.5 million was
outstanding under the credit facility.
 
     The Company anticipates that its cash flow from operations, the net
remaining proceeds from the IPO and borrowings under the credit facility will
provide cash sufficient to satisfy the Company's working capital needs, debt
service requirements and planned capital expenditures for the next 12 months. In
July 1998, the Company used $2.4 million (funded from IPO proceeds) to acquire
KC Resources. In September 1998, the Company used $8.5 million to acquire AMI,
of which $6.5 million was borrowed under the Company's credit facility, $1.1
million was funded from the IPO proceeds and $900,000 was funded from cash flow
from operations.
 
YEAR 2000
 
     The Company uses information technology ("IT") systems in its internal
operations, including applications used in client order processing, inventory
management, financial business systems and various administrative functions
which are primarily "off-the-shelf" applications. Non-IT systems used in the
Company's internal operations consist primarily of voice and data communications
systems and elevator and climate control systems. In addition, the Company
delivers several of its products on interactive multimedia software, such as
CD-ROM. Although the Company believes that the substantial majority of its IT
and non-IT systems and products contains source code that is able to interpret
appropriately the upcoming calendar year 2000, management has not yet completed
its assessment of such systems and products. Management expects to complete its
assessment, any necessary remediation, implementation and final testing of IT
and non-IT systems and products during fiscal 1999. To the extent the source
code of IT and Non-IT internal systems and customer products may be deficient
with respect to "Year 2000" issues, the failure by the Company to make any
required modifications in order to make the systems and products "Year 2000"
compliant could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
     One of the Company's subsidiaries, Star Mountain, derives a substantial
amount of its revenues from services and products delivered to entities
affiliated with the federal government. During fiscal 1998, Star Mountain's
training and development work for federal government clients generated
approximately 28% of the Company's pro forma combined revenue. Failure by these
government entities to make their respective computer software programs and
operating systems "Year 2000" compliant could have a material adverse effect on
the Company's business, financial condition and results of operations.
 
     The Company has not yet completed the evaluation of its most reasonably
likely worst case "Year 2000" scenario, nor has the Company completed its
contingency planning with respect to the "Year 2000". The Company intends to
complete both its evaluation and contingency planning during fiscal 1999.
 
                                       17
<PAGE>   18
 
     To date, the Company has incurred limited costs to remediate "Year 2000"
issues. Management believes that any future costs to remediate "Year 2000"
issues will not be material to the financial position or results of operations
of the Company.
 
ACQUISITIONS
 
     The Company intends to pursue acquisition opportunities. The timing, size
or success of any acquisition and the associated potential capital commitments
are unpredictable. The Company expects to fund future acquisitions through the
issuance of shares of Common Stock, borrowings, including use of amounts
available under its credit facility, and cash flow from operations. To the
extent the Company funds a significant portion of the consideration for future
acquisitions with cash, it may have to increase the amount of the credit
facility or obtain other sources of financing.
 
RESULTS OF OPERATIONS -- STAR MOUNTAIN
 
     Star Mountain provides customized training and development services and
products to train individuals primarily within agencies of federal, state and
local government. Star Mountain delivers its courseware to clients in a variety
of formats (including written materials and interactive multimedia software),
but typically does not directly train its clients' employees. Star Mountain's
revenue is derived primarily from fees received from the provision of training
services as a contractor or subcontractor under government contracts.
 
     The following table sets forth certain selected financial data for Star
Mountain on a historical basis and as a percentage of revenue for the periods
indicated. Due to rounding of percentage amounts, columns may not add to total.
For all periods presented below, selling, general and administrative expenses
include amounts classified as "Other, net" in Star Mountain's historical
financial statements.
 
<TABLE>
<CAPTION>
                                                                                                           PERIOD FROM
                                                                                                         JANUARY 1, 1998
                                                             YEAR ENDED DECEMBER 31,                      TO MAY 4, 1998
                                              -----------------------------------------------------      ----------------
                                                   1995               1996               1997                  1998
                                              ---------------    ---------------    ---------------      ----------------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                           <C>       <C>      <C>       <C>      <C>       <C>        <C>        <C>
Revenue.....................................  $14,306   100.0%   $16,313   100.0%   $23,775   100.0%     $11,052    100.0%
Cost of revenue.............................    8,668    60.6      9,457    58.0     14,504    61.0        6,109     55.3%
                                              -------   -----    -------   -----    -------   -----      -------    -----
Gross profit................................    5,638    39.4      6,856    42.0      9,271    39.0        4,943     44.7
Selling, general and administrative
  expenses..................................    4,611    32.2      5,815    35.6      7,897    33.2        3,682     33.3
                                              -------   -----    -------   -----    -------   -----      -------    -----
Income from operations......................  $ 1,027     7.2%   $ 1,041     6.4%   $ 1,374     5.8%     $ 1,261     11.4%
                                              =======   =====    =======   =====    =======   =====      =======    =====
Compensation differential...................  $    64     0.4%   $   304     1.9%   $   180     0.8%     $    28      0.3%
</TABLE>
 
RESULTS FOR THE PERIOD FROM JANUARY 1, 1998 TO MAY 4, 1998 (THE "1998
PERIOD") -- STAR MOUNTAIN
 
     Total Revenue.  Revenue was $11.0 million in the 1998 Period. Revenue was
derived primarily from federal government contracts including: (i)
instructor-led and train-the-trainer seminars; (ii) license fees; (iii) custom
services and products; (iv) consulting services; and (v) off-the-shelf product.
 
     Cost of Revenue.  Cost of revenue was $6.1 million in the 1998 Period. As a
percentage of revenue, cost of revenue was 55.3%. These costs consist primarily
of: (i) salaries and benefits for the Company's instructors, consultants and
course designers and costs of independent contractors; and (ii) the cost of
developing, designing and producing training courses and materials, including
material costs.
 
     Gross Profit.  Gross profit was $4.9 million in the 1998 Period. As a
percentage of revenue, gross profit was 44.7%.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $3.7 million, in the 1998 Period. As a percentage
of revenue, selling, general and administrative expenses were 33.3%. These costs
consist primarily of salaries, benefits and bonuses for the Company's corporate,
sales, marketing and administrative personnel, and marketing and advertising
expenses for the Company's services and products.
 
                                       18
<PAGE>   19
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 ("1997") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1996 ("1996") -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $7.5 million, or 45.7%, from $16.3 million in
1996 to $23.8 million in 1997, primarily due to an increase in the number of
federal government contracts undertaken, as well as revenue of $5.6 million
contributed by businesses acquired during the third quarter of 1996 and the
first and fourth quarters of 1997. Revenue was significantly lower during the
first half of 1996 as a result of a decline in new client engagements due to
prolonged Congressional budget negotiations.
 
     Cost of Revenue.  Cost of revenue increased $5.0 million, or 53.4%, from
$9.5 million in 1996 to $14.5 million in 1997. As a percentage of revenue, cost
of revenue increased from 58.0% in 1996 to 61.0% in 1997, primarily due to the
increased use of subcontractors during 1997.
 
     Gross Profit.  Gross profit increased $2.4 million, or 35.2%, from $6.9
million in 1996 to $9.3 million in 1997. As a percentage of revenue, gross
profit decreased from 42.0% in 1996 to 39.0% in 1997, primarily due to increased
subcontracting costs.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $2.1 million, or 35.8%, from $5.8 million in
1996 to $7.9 million in 1997. Excluding the Compensation Differential of
approximately $304,000 and approximately $180,000 attributable to Star Mountain
in 1996 and 1997, respectively, selling, general and administrative expenses
would have increased $2.2 million, or 40.0%, from $5.5 million in 1996 to $7.7
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 33.8% in 1996 to 32.5%
in 1997, primarily due to the company's larger revenue base.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 ("1996") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995 ("1995") -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $2.0 million, or 14.0%, from $14.3 million in
1995 to $16.3 million in 1996, due to revenue of $3.6 million contributed by
businesses acquired by Star Mountain in the third quarters of 1995 and 1996. The
revenue from the acquired businesses was offset partially by the decline in
business generated from federal government entities as a result of the
Congressional budget negotiations described above.
 
     Cost of Revenue.  Cost of revenue increased approximately $789,000, or
9.1%, from $8.7 million in 1995 to $9.5 million in 1996. As a percentage of
revenue, cost of revenue decreased from 60.6% in 1995 to 58.0% in 1996,
primarily due to the acquisition in the third quarter of 1996 of a business with
higher gross profit margins than Star Mountain's core business.
 
     Gross Profit.  Gross profit increased $1.2 million, or 21.6%, from $5.6
million in 1995 to $6.8 million in 1996. As a percentage of revenue, gross
profit increased from 39.4% in 1995 to 42.0% in 1996, primarily due to the
acquisition in the third quarter of 1996 of a business with higher gross profit
margins than Star Mountain's core business.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.2 million, or 26.1%, from $4.6 million in
1995 to $5.8 million in 1996. Excluding the Compensation Differential
attributable to Star Mountain of approximately $64,000 and approximately
$304,000 in 1995 and 1996, respectively, selling, general and administrative
expenses would have increased approximately $964,000, or 21.2%, from $4.5
million in 1995 to $5.5 million in 1996. As a percentage of revenue, selling,
general and administrative expenses would have increased on an adjusted basis
from 31.8% in 1995 to 33.8% in 1996.
 
LIQUIDITY AND CAPITAL RESOURCES -- STAR MOUNTAIN
 
     Star Mountain generated net cash from operating activities of approximately
$1.1 million and $864,000 in the years ended December 31, 1996 and 1997,
respectively, and generated approximately $115,000 in operating activities in
the 1998 Period. Net cash used in investing activities was $565,000 and $2.3
million in the years ended December 31, 1996 and 1997, respectively, primarily
in connection with acquisitions, and approximately $264,000 in the 1998 Period
for property and equipment capital expenditures. Net cash used in financing
activities was $478,000 in the year ended December 31, 1996. Net cash provided
by financing activities was $1.8 million and approximately $129,000 in the year
ended December 31, 1997 and the 1998 Period, respectively, primarily from
borrowings on the company's line of credit.
 
                                       19
<PAGE>   20
 
ITEM 8.  FINANCIAL STATEMENTS
 
                         INDEX TO FINANCIAL STATEMENTS
 
                  UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
 
                        HISTORICAL FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PROVANT, INC. AND FOUNDING COMPANIES PRO FORMA:
  Basis of Presentation.....................................    21
  Unaudited Pro Forma Combined Statements of Operations.....    22
  Notes to Unaudited Pro Forma Combined Financial
     Statements.............................................    23
 
PROVANT, INC. AND SUBSIDIARIES:
  Independent Auditors' Report..............................    25
  Consolidated Balance Sheets...............................    26
  Consolidated Statements of Operations.....................    27
  Consolidated Statements of Stockholders' Equity
     (Deficit)..............................................    28
  Consolidated Statements of Cash Flows.....................    29
  Notes to Consolidated Financial Statements................    30
 
STAR MOUNTAIN, INC. AND SUBSIDIARIES:
  Independent Auditors' Reports.............................    43
  Consolidated Balance Sheets...............................    45
  Consolidated Statements of Operations.....................    46
  Consolidated Statements of Stockholders' Equity...........    47
  Consolidated Statements of Cash Flows.....................    48
  Notes to Consolidated Financial Statements................    50
</TABLE>
 
                                       20
<PAGE>   21
 
                      PROVANT, INC. AND FOUNDING COMPANIES
 
               UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
                             BASIS OF PRESENTATION
 
     The following unaudited pro forma combined statements of operations give
effect to (i) the Combination of PROVANT, Inc. (the "Company" or "PROVANT") and
the Founding Companies as defined below, (ii) the consummation of the IPO and
the application of the net proceeds therefrom and (iii) certain other
adjustments described below and in the notes to the unaudited pro forma combined
financial statements. The unaudited pro forma combined statements of operations
give effect to the Combination and the IPO as if they had occurred on July 1,
1996. In the Combination, subsidiaries of the Company merged with the following
Founding Companies: Behavioral Technology, Inc. ("BTI"), Decker Communications,
Inc. ("Decker"), J. Howard & Associates, Inc. ("J. Howard"), MOHR Retail
Learning Systems, Inc. ("MOHR"), Novations Group, Inc. ("Novations"), Robert
Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning Systems Sciences ("LSS")
and Star Mountain, Inc. ("Star Mountain"). The Combination occurred
simultaneously with the closing of the IPO and was accounted for using the
purchase method of accounting. PROVANT was identified as the accounting acquiror
in accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 97. These pro forma statements are based on the historical financial
statements of the Company and the Founding Companies and the estimates and
assumptions set forth below and in the notes to the unaudited pro forma combined
financial statements.
 
     The Company has preliminarily analyzed the benefits that it expects to
realize from reductions in salaries and certain benefits to the pre-Combination
owners of the Founding Companies. To the extent these owners agreed
prospectively to reductions in salary, bonuses and benefits, these reductions
have been reflected in the pro forma combined statements of operations. With
respect to other potential benefits, the Company cannot at this time quantify
these benefits, and moreover, it is anticipated that these benefits will be
offset by costs related to the Company's new corporate management and by the
costs associated with being a public company. Neither the anticipated benefits
nor the anticipated costs have been included in the pro forma financial
information of the Company.
 
     The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The unaudited pro forma combined financial data presented herein does
not purport to represent what the Company's financial position or results of
operations actually would have been had such events occurred at the beginning of
the periods presented, as assumed, or to project the Company's financial
position or results of operations for any future period or the future results of
the Founding Companies.
 
                                       21
<PAGE>   22
 
                      PROVANT, INC. AND FOUNDING COMPANIES
 
             UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
 
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                                              --------------------------
                                                                 1997           1998
                                                              -----------    -----------
<S>                                                           <C>            <C>
Total revenue...............................................  $    68,846    $    78,062
Cost of revenue.............................................       30,967         33,578
                                                              -----------    -----------
Gross profit................................................       37,879         44,484
Selling, general and administrative expenses................       28,663         33,832
Goodwill amortization.......................................        1,335          1,335
                                                              -----------    -----------
Income from operations......................................        7,881          9,317
Other income, net...........................................           44              5
                                                              -----------    -----------
Income before income taxes..................................        7,925          9,322
Provision for income taxes..................................        3,704          4,262
                                                              -----------    -----------
Net income..................................................  $     4,221    $     5,060
                                                              ===========    ===========
Earnings per common share: basic............................  $      0.43    $      0.52
                                                              ===========    ===========
Earnings per common share: diluted..........................  $      0.42    $      0.50
                                                              ===========    ===========
Shares used in computing basic earnings per common share....    9,795,558      9,795,558
Shares used in computing diluted earnings per common
  share.....................................................   10,168,889     10,168,889
</TABLE>
 
  See accompanying notes to unaudited pro forma combined financial statements
                                       22
<PAGE>   23
 
                      PROVANT, INC. AND FOUNDING COMPANIES
 
           NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
 
(1) GENERAL
 
     Concurrently with the IPO, the Company acquired the seven Founding
Companies in the Combination. The acquisitions have been accounted for using the
purchase method of accounting with the Company being treated as the accounting
acquiror.
 
(2) ACQUISITION OF FOUNDING COMPANIES
 
     The following table sets forth the consideration paid (i) in cash and (ii)
in shares of Common Stock to the former stockholders of each of the Founding
Companies. For purposes of computing the estimated purchase price for accounting
purposes, the value of the shares was determined using an estimated fair value
of $10.40 per share, representing a discount of 20% from the initial public
offering price of $13.00 due to restrictions on the sale and transferability of
the shares issued. Cash paid includes additional amounts paid or accrued for the
Founding Companies that exceeded the minimum net worth required at the
acquisition date.
 
<TABLE>
<CAPTION>
                                                                     COMMON STOCK
                                                             ----------------------------
                                                   CASH       SHARES      VALUE OF SHARES
                                                  -------    ---------    ---------------
                                                          (DOLLARS IN THOUSANDS)
<S>                                               <C>        <C>          <C>
BTI.............................................  $ 5,070      449,896        $ 4,679
Decker..........................................    1,550      348,712          3,626
J. Howard.......................................    1,830      236,308          2,457
LSS.............................................    3,930      590,568          6,142
MOHR............................................    1,511      208,435          2,168
Novations.......................................    4,988      683,619          7,110
Star Mountain...................................    5,576      941,803          9,795
                                                  -------    ---------        -------
          Total.................................  $24,455    3,459,341        $35,977
                                                  =======    =========        =======
</TABLE>
 
(3) UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
 
     The unaudited pro forma combined financial data gives effect to (i) the
Combination of PROVANT and the Founding Companies, (ii) the consummation of the
IPO and the application of the net proceeds therefrom, (iii) the elimination of
a non-recurring fee of $750,000 in the year ended June 30, 1998 for information
related to the training industry, (iv) acquisitions completed by one of the
Founding Companies, (v) the elimination of non-cash compensation expense
totaling $686,000 for the year ended June 30, 1998 related to the issuance of
Common Stock and stock options to officers of and consultants to the Company,
(vi) a provision for income tax for those Founding Companies that were taxed as
S corporations during the relevant periods, (vii) the elimination of
non-recurring legal and accounting fees related to the Combination and the IPO
totaling $588,000 for the year ended June 30, 1998 and (viii) the compensation
differential. The compensation differential represents pro forma adjustments to
salary, bonuses and benefits paid to certain pre-Combination owners of the
Founding Companies to certain levels to which they have agreed prospectively.
For the years ended June 30, 1997 and 1998, the compensation differential was
approximately $5.6 million and $6.5 million, respectively.
 
(4) NET INCOME PER SHARE
 
     The shares used in computing basic earnings per common share consist of (i)
3,346,217 shares outstanding prior to the Combination and the IPO, (ii)
3,459,341 shares issued in May 1998 to owners of the Founding Companies and
(iii) 2,990,000 shares of Common Stock sold in the IPO. The shares used in
computing diluted earnings per common share consist of those used in computing
basic earnings per share plus 373,331 Common Stock equivalents computed using
the treasury stock method.
 
                                       23
<PAGE>   24
                      PROVANT, INC. AND FOUNDING COMPANIES
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) STOCK-BASED COMPENSATION
 
     The Company has four stock-based compensation plans. The Company has
granted stock options under the Equity Incentive Plan and the Stock Plan for
Non-Employee Directors to purchase an aggregate of 883,983 shares of Common
Stock having a per-share exercise price equal to the initial offering price of
$13.00. No awards have been made to date under the Employee Stock Purchase Plan
or the 1998 Non-Qualified Stock Option Plan.
 
     The Company will apply Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation expense will be recognized for its fixed stock option plans and its
stock purchase plan, except for stock options granted to non-employees. If
compensation cost for the Company's stock-based compensation plans were based on
the fair value at the grant date for the awards under the plans consistent with
the method of Statement of Financial Accounting Standards No. 123 ("SFAS No.
123"), the Company's pro forma net income and income per share for each period
presented assuming such options were granted at the beginning of the periods
presented and that the compensation element of options with immediate vesting
was recognized during the years ended June 30, 1997 and 1998 would have been
reduced to the amounts indicated below (Dollars in thousands except per share
data):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                              --------------------
                                                                1997        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Net income:
  Pro forma.................................................   $4,221      $5,060
                                                               ======      ======
  Pro forma for SFAS No. 123................................   $2,350      $3,971
                                                               ======      ======
Basic income per common share:
  Pro forma.................................................   $ 0.43      $ 0.52
                                                               ======      ======
  Pro forma for SFAS No. 123................................   $ 0.24      $ 0.41
                                                               ======      ======
</TABLE>
 
     The fair value of the stock options used to calculate the pro forma for
SFAS No. 123 amounts was determined using the Black-Scholes option-pricing model
with the following assumptions for fiscal 1997 and 1998: volatility of 33%;
expected dividend yield of 0%; risk-free interest rate of 6.0% and an expected
life of 4 years.
 
                                       24
<PAGE>   25
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders,
PROVANT, Inc.:
 
     We have audited the accompanying consolidated balance sheets of PROVANT,
Inc. and subsidiaries, as of June 30, 1997 and 1998 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
period from November 16, 1996 (date of inception) to June 30, 1997 and for the
year ended June 30, 1998. In connection with our audits of the consolidated
financial statements, we also have audited the consolidated financial statement
schedule as listed in Item 14(a)2 of this report. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 PROVANT,
Inc. and subsidiaries as of June 30, 1997 and 1998 and the results of their
operations and their cash flows for the period from November 16, 1996 (date of
inception) to June 30, 1997 and for the year ended June 30, 1998, in conformity
with generally accepted accounting principles. Also in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                       25
<PAGE>   26
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              ----------------
                                                              1997      1998
                                                              -----    -------
<S>                                                           <C>      <C>
                                    ASSETS
Current assets:
     Cash and cash equivalents..............................  $   1    $ 6,394
     Accounts receivable, net of allowance for doubtful
       accounts of $0 and $740, respectively................     --     12,221
     Contracts receivable...................................     --      7,295
     Deferred taxes.........................................     --      2,127
     Costs in excess of billings............................     --        696
     Prepaid expenses and other current assets..............     --      1,359
                                                              -----    -------
          Total current assets..............................      1     30,092
Property and equipment, net.................................    150      2,548
Other assets................................................     --        776
Goodwill, net...............................................     --     52,942
                                                              -----    -------
          Total assets......................................  $ 151    $86,358
                                                              =====    =======
 
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable.......................................  $  --    $ 3,346
     Accrued expenses.......................................     --      7,361
     Accrued compensation...................................     --      2,928
     Billings in excess of costs............................     --      2,896
     Deferred revenue.......................................     --        669
     Income taxes payable...................................     --      1,252
     Current portion of long term debt......................     --        533
     Notes payable to stockholders..........................    298         --
                                                              -----    -------
          Total current liabilities.........................    298     18,985
Long term debt, net of current portion......................     --        874
                                                              -----    -------
          Total liabilities.................................    298     19,859
Stockholders' equity (deficit):
     Preferred stock, $.01 par value; none issued...........     --         --
     Common stock, $.01 par value; 1,950,520 and 9,795,558
      shares issued and outstanding at June 30, 1997 and
      1998, respectively....................................     20         98
     Additional paid-in capital.............................     --     69,474
     Translation adjustment.................................     --        (12)
     Accumulated deficit....................................   (167)    (3,061)
                                                              -----    -------
          Total stockholders' equity (deficit)..............   (147)    66,499
                                                              -----    -------
Total liabilities and stockholders' equity (deficit)........  $ 151    $86,358
                                                              =====    =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                       26
<PAGE>   27
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 PERIOD FROM
                                                              NOVEMBER 16, 1996
                                                                  (DATE OF
                                                                INCEPTION) TO       YEAR ENDED
                                                                JUNE 30, 1997      JUNE 30, 1998
                                                              -----------------    -------------
<S>                                                           <C>                  <C>
Total revenue...............................................     $       --         $   14,189
Cost of revenue.............................................             --              6,374
                                                                 ----------         ----------
Gross profit................................................             --              7,815
Selling, general and administrative expenses................            149             10,447
Goodwill amortization.......................................             --                245
                                                                 ----------         ----------
Loss from operations........................................           (149)            (2,877)
Interest expense, net.......................................             --               (220)
                                                                 ----------         ----------
Loss before income taxes....................................           (149)            (3,097)
Income tax benefit..........................................             --               (203)
                                                                 ----------         ----------
Net loss....................................................     $     (149)        $   (2,894)
                                                                 ==========         ==========
Loss per common share: basic and diluted....................     $    (0.08)        $    (0.67)
                                                                 ==========         ==========
Shares used in computing basic and diluted loss per common
  share.....................................................      1,950,520          4,350,169
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                       27
<PAGE>   28
 
                         PROVANT, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                          COMMON STOCK
                                       ------------------   PAID-IN    TRANSLATION   ACCUMULATED
                                        SHARES     AMOUNT   CAPITAL    ADJUSTMENT      DEFICIT      TOTAL
                                       ---------   ------   --------   -----------   -----------   -------
<S>                                    <C>         <C>      <C>        <C>           <C>           <C>
Initial capitalization...............  1,950,520    $20     $    --       $ --         $   (18)    $     2
Net loss.............................         --     --          --         --            (149)       (149)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1997.............  1,950,520     20          --         --            (167)       (147)
Issuance of management shares........  1,395,697     13         473         --              --         486
Issuance of stock options and
  warrants...........................         --     --         422         --              --         422
Acquisition of Founding Companies....  3,459,341     35      35,942         --              --      35,977
Issuance of stock sold in initial
  public offering....................  2,990,000     30      32,637         --              --      32,667
Translation adjustment...............         --     --          --        (12)             --         (12)
Net loss.............................         --     --          --         --          (2,894)     (2,894)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1998.............  9,795,558    $98     $69,474       $(12)        $(3,061)    $66,499
                                       =========    ===     =======       ====         =======     =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                       28
<PAGE>   29
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  PERIOD FROM
                                                               NOVEMBER 16, 1996
                                                                   (DATE OF
                                                                  INCEPTION)
                                                                      TO             YEAR ENDED
                                                                 JUNE 30, 1997      JUNE 30, 1998
                                                              -------------------   -------------
<S>                                                           <C>                   <C>
Cash flows from operating activities:
  Net loss..................................................         $(149)            $(2,894)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization..........................            --                 467
     Allowance for doubtful accounts........................            --                 135
     Charges related to issuance of common stock, warrants
       and stock options....................................            --                 908
     Changes in operating assets and liabilities:
       Accounts receivable..................................            --              (1,731)
       Contracts receivable.................................            --                (581)
       Deferred taxes.......................................            --              (1,191)
       Due from stockholders................................            --                 600
       Costs in excess of billings..........................            --                (244)
       Prepaid expenses and other current assets............            --                (154)
       Other assets.........................................            --                 110
       Accounts payable and accrued expenses................            --               1,636
       Accrued compensation.................................            --                 (91)
       Billings in excess of costs..........................            --               1,119
       Deferred revenue.....................................            --                 228
       Income taxes payable.................................            --                 970
                                                                     -----             -------
          Total adjustments.................................            --               2,181
                                                                     -----             -------
          Net cash used in operating activities.............          (149)               (713)
                                                                     -----             -------
Cash flows from investing activities:
     Acquisitions of businesses, net of acquired cash.......            --             (19,302)
     Additions to property and equipment....................          (150)               (177)
                                                                     -----             -------
       Net cash used in investing activities................          (150)            (19,479)
                                                                     -----             -------
Cash flows from financing activities:
     Issuance of common stock...............................             2              32,667
     Increase (decrease) in notes payable to stockholders...           298                (298)
     Repayment of long-term debt............................            --              (5,772)
                                                                     -----             -------
       Net cash provided by financing activities............           300              26,597
Effect of exchange rates on cash............................            --                 (12)
                                                                     -----             -------
Net increase in cash and cash equivalents...................             1               6,393
Cash and cash equivalents, beginning of period..............            --                   1
                                                                     -----             -------
Cash and cash equivalents, end of period....................         $   1             $ 6,394
                                                                     =====             =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                       29
<PAGE>   30
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) BUSINESS AND ORGANIZATION
 
     PROVANT, Inc., a Delaware corporation ("PROVANT" and collectively with its
subsidiaries, the "Company"), provides a broad range of training and development
services and products to Fortune 1000 companies, other large and medium-sized
corporations and government entities. Founded on November 16, 1996, the
Company's objective is to become the leading single source provider of
high-quality training and development services and products that are distributed
through multiple delivery methods.
 
     On May 4, 1998, PROVANT completed the initial public offering (the
"Offering" or "IPO") of its common stock (the "Common Stock") and simultaneously
acquired in separate merger transactions seven companies engaged in providing
training and development services and products (collectively referred to as the
"Founding Companies"). The Company provides services nationally, and has offices
in thirteen states.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Basis of Presentation
 
     For financial statement purposes, PROVANT has been identified as the
accounting acquiror. Accordingly, the consolidated financial statements include
the accounts of PROVANT since its inception, November 16, 1996, and the accounts
of the Founding Companies since their acquisition date, May 4, 1998. The
acquisitions of the Founding Companies were accounted for using the purchase
method of accounting. The allocations of the purchase prices to the assets
acquired and liabilities assumed of these companies have been recorded based on
preliminary estimates of fair value and may be changed as additional information
becomes available.
 
  Principles of Consolidation
 
     The accompanying consolidated financial statements include the accounts of
PROVANT and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
 
  Revenue Recognition
 
     The Company recognizes revenue when services are performed and products are
provided except when work is being performed under a long-term contract.
Deferred revenue is recognized for payments received prior to services being
performed.
 
     A significant portion of the Company's revenue results from services
performed under long-term U.S. Government contracts, either directly or through
subcontracts. The majority of the Company's long-term contracts are fixed-price
contracts. Revenue on fixed price contracts is recognized using the percentage
of completion method based on costs incurred in relation to total estimated
costs for each contract. Revenue on time-and-materials contracts is recognized
to the extent of fixed billable rates for hours delivered plus reimbursable
costs. Revenue on cost-plus-fee contracts is recognized based on reimbursable
costs incurred plus estimated fees earned thereon. Provisions for the total
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
 
  Cash Flow Information
 
     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
     Cash paid for interest in fiscal 1997 and 1998 was nil and $118,000,
respectively. Cash paid for taxes in fiscal 1997 and 1998 was nil and $14,000
respectively.
 
                                       30
<PAGE>   31
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company recorded the following non-cash transactions during fiscal 1998
(Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Discount on indebtedness associated with issuance of stock
  warrants..................................................  $221
Compensation expense in connection with sales of Company
  stock.....................................................  $485
Compensation expense in connection with stock options
  granted to consultants to the Company.....................  $201
</TABLE>
 
     In addition, the following is a reconciliation of net cash paid for
acquisitions during fiscal 1998 (Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Fair value of assets acquired...............................  $82,386
Liabilities assumed.........................................  (21,954)
Additional purchase price accrued but not yet paid..........     (755)
Estimated market value of stock consideration...............  (35,977)
                                                              -------
Cash paid...................................................   23,700
Less cash acquired..........................................   (4,398)
                                                              -------
     Net cash paid for acquisitions.........................  $19,302
                                                              =======
</TABLE>
 
  Fair Value of Financial Instruments
 
     The carrying amounts of the Company's financial instruments including cash
and cash equivalents, accounts receivable, contracts receivable, accounts
payable and accrued expenses approximate fair value due to the short term nature
of these instruments. The carrying value of the long term debt approximates fair
value based on current rates available to the Company for debt of similar
maturity and terms.
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation is computed using accelerated and
straight-line methods over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the expected life
of the lease or the estimated useful life of the asset. Maintenance and repairs
are expensed when incurred. Upon retirement or disposition of property and
equipment, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the statement of
operations.
 
  Goodwill
 
     Goodwill represents the excess of the aggregate purchase price paid by the
Company over the fair value of the net assets acquired. Goodwill is amortized on
a straight-line basis over 40 years.
 
     Recoverability of goodwill and intangible assets is measured by a
comparison of the carrying amount of the asset to future undiscounted net cash
flows expected to be generated by the acquired Company. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.
 
  Long-Lived Assets
 
     Long-lived assets and certain identifiable intangibles are reviewed for
impairment, based upon undiscounted future cash flows, and appropriate losses
are recognized whenever the carrying amount of an asset may not be recovered in
accordance with Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.
 
  Concentrations of Credit Risk
 
     The Company provides services to customers located in a broad range of
geographical regions. The Company's credit risk primarily consists of
receivables from a variety of customers including U.S. Govern-
 
                                       31
<PAGE>   32
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ment entities and commercial and industrial companies. The Company reviews its
accounts receivable and provides allowances as deemed necessary.
 
  Income Taxes
 
     The Company will file a consolidated return for federal income tax
purposes. 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. 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, if any, on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
  Accounting for Stock-Based Compensation
 
     The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock option plans.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Statement 123 addresses the accounting for the cost of stock-based compensation,
such as stock options, and permits either expensing the cost of stock-based
compensation over the vesting period or disclosing in the financial statement
footnotes what this expense would have been. This cost would be measured at the
grant date based upon estimated fair values, using option pricing models. The
Company has adopted the disclosure alternative of Statement 123 as of June 30,
1998.
 
  Loss Per Share
 
     In fiscal 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, for calculating
earnings per share (EPS). Statement 128 requires the disclosure of basic EPS,
which is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.
Disclosure of diluted EPS, which gives effect to all dilutive potential common
shares outstanding, is also required. For fiscal 1997 and 1998, the number of
shares used in computation of basic EPS is the same as diluted EPS since the
inclusion of any potential common shares would be anti-dilutive as a result of
the net losses in those years.
 
     The following securities that could potentially dilute basic EPS in the
future were not included in the computation of diluted EPS for 1998 because to
do so would have been antidilutive:
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Stock options...............................................   42,942
Warrants....................................................   18,400
                                                               ------
     Total..................................................   61,342
                                                               ======
</TABLE>
 
     Contingently issuable shares (Note 10) have also been excluded from the
calculation.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of revenues, expenses, assets,
liabilities and contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
 
                                       32
<PAGE>   33
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(3) BUSINESS COMBINATIONS
 
  Founding Company Acquisitions
 
     Concurrently with the completion of its IPO on May 4, 1998, PROVANT
acquired the Founding Companies (the "Combination"). The companies acquired were
Behavioral Technology, Inc., Decker Communications, Inc., J. Howard and
Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning
Systems Sciences, MOHR Retail Learning Systems, Inc., Novations Group, Inc., and
Star Mountain, Inc.
 
     The acquisition of each of the Founding Companies was accounted for using
the "purchase" method of accounting in accordance with APB Opinion No. 16,
Business Combinations. The aggregate consideration paid in these transactions
was $24.5 million in cash and 3,459,341 shares of Common Stock having a value at
the date of acquisition totaling $36.0 million.
 
     The consolidated balance sheet as of June 30, 1998 includes allocations of
the respective purchase prices to the assets acquired and liabilities assumed
based on preliminary estimates of fair value and is subject to final adjustment.
The allocations resulted in $53.2 million of goodwill, which represents the
excess of purchase price over the estimated fair value of the net assets
acquired. In conjunction with the acquisitions, goodwill was determined as
follows (Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Cash paid, net of cash acquired.............................  $ 19,302
Additional purchase price accrued but not yet paid..........       755
Estimated market value of stock consideration...............    35,977
Liabilities assumed.........................................    21,954
Less fair value of tangible assets acquired, net of cash
  acquired..................................................   (24,801)
                                                              --------
Goodwill....................................................  $ 53,187
                                                              ========
</TABLE>
 
     The unaudited pro forma combined financial data presented below consists of
the income statement data presented in these consolidated financial statements
plus income statement data for the Founding Companies as if they were acquired
effective July 1, 1996 (Dollars in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30,
                                                       --------------------
                                                         1997        1998
                                                       --------    --------
                                                           (UNAUDITED)
<S>                                                    <C>         <C>
Revenue..............................................  $68,846     $78,062
Net income...........................................    4,221       5,060
Earnings per common share, basic.....................    $0.43       $0.52
Earnings per common share, diluted...................    $0.42       $0.50
</TABLE>
 
     The unaudited pro forma combined financial data gives effect to (i) the
Combination of PROVANT and the Founding Companies, (ii) the consummation of the
IPO and the application of the net proceeds therefrom, (iii) the elimination of
a non-recurring fee of $750,000 in the year ended June 30, 1998 for information
related to the training industry, (iv) acquisitions completed by one of the
Founding Companies, (v) the elimination of non-cash compensation expense
totaling $686,000 for the year ended June 30, 1998 related to the issuance of
Common Stock and stock options to officers of and consultants to the Company,
(vi) a provision for income tax for those Founding Companies that were taxed as
S corporations during the relevant periods, (vii) the elimination of
non-recurring legal and accounting fees related to the Combination and the IPO
totaling $588,000 for the year ended June 30, 1998 and (viii) the compensation
differential. The compensation differential represents pro forma adjustments to
salary, bonuses and benefits paid to certain pre-Combination owners of the
Founding Companies to certain levels to which they have agreed prospectively.
For the years ended June 30, 1997 and 1998, the compensation differential was
approximately $5.6 million and $6.5 million, respectively.
 
                                       33
<PAGE>   34
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The unaudited pro forma combined results presented above are not
necessarily indicative of actual results which might have occurred had the
operations and management teams of PROVANT and the Founding Companies been
combined at the beginning of the periods presented.
 
  Subsequent Acquisition
 
     On July 20, 1998, the Company completed the acquisition of KC Resources
Creative Solutions, Inc. ("KC Resources"), a training and instructional design
and development consulting firm based in the Washington, DC area. The
consideration paid by the Company was $6.0 million, consisting of $2.4 million
in cash and 200,000 shares of Common Stock. This acquisition will be accounted
for as a purchase transaction. The former sole stockholder of KC Resources will
be entitled to receive contingent consideration of up to $1.4 million if KC
Resources' earnings before interest and taxes for the year ending June 30, 1999
exceeds a specified base amount.
 
     Pro forma data giving effect to the Combination and the KC Resources
acquisition for the year ended June 30, 1998 is as follows (Dollars in
thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
                                                              (UNAUDITED)
<S>                                                           <C>
Revenue.....................................................   $ 83,511
Net income..................................................      5,419
Earnings per common share, basic............................   $   0.54
Earnings per common share, diluted..........................   $   0.52
</TABLE>
 
(4) CONTRACTS RECEIVABLE
 
     Contracts receivable are summarized as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                               JUNE 30,
                                                                 1998
                                                              -----------
<S>                                                           <C>
U.S. Government customers:
Amounts due currently -- prime contractor...................    $5,353
Amounts due currently -- subcontractor......................       589
Recoverable costs and accrued profit on progress
  completed -- not billed...................................     1,317
Retainage...................................................        36
                                                                ------
Total.......................................................    $7,295
                                                                ======
</TABLE>
 
     In accordance with industry practice, amounts relating to long-term
contracts are classified as current assets although an indeterminable portion of
these amounts is not expected to be realized within one year. Receivable
balances billed but not paid by customers pursuant to retainage provisions in
contracts are due upon completion of the contracts and acceptance by the
customer. Based on the Company's experience with similar contracts in recent
years, the retention balance is billed and collected in the following fiscal
year.
 
     All unbilled contract receivables, net of retainage, are expected to be
billed and collected within one year.
 
                                       34
<PAGE>   35
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) NON-CURRENT ASSETS
 
     A summary of property and equipment follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                             JUNE 30,
                                                              USEFUL LIFE      1998
                                                              ------------   --------
<S>                                                           <C>            <C>
Equipment...................................................   5 - 7 years    $  322
Furniture and fixtures......................................   3 - 7 years     2,290
Leasehold improvements......................................   3 - 7 years       160
Less accumulated depreciation and amortization..............                    (224)
                                                                              ------
Property and equipment, net.................................                  $2,548
                                                                              ======
</TABLE>
 
     Depreciation expense was nil and $222,000 for fiscal 1997 and 1998,
respectively.
 
     Goodwill amortization expense was nil and $245,000 for fiscal 1997 and
1998, respectively.
 
(6) ACCRUED EXPENSES
 
     Accrued expenses consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Accrued lease abandonment costs.............................   $1,160
Other accrued liabilities...................................    6,201
                                                               ------
          Total.............................................   $7,361
                                                               ======
</TABLE>
 
(7) REVOLVING CREDIT AGREEMENT
 
     On April 8, 1998, the Company entered into a revolving credit facility with
Fleet National Bank (as agent), the material terms of which are summarized as
follows. The facility provides the Company with a revolving line of credit of up
to $40.0 million, guaranteed by all of the Company's significant wholly-owned
subsidiaries and secured by a pledge of the capital stock of each of the
Company's wholly-owned subsidiaries. The credit facility may be used for
refinancing of existing indebtedness, acquisitions, working capital and general
corporate purposes. Loans made under the credit facility bear interest, at the
Company's option, at a rate based on either a Eurodollar rate or the bank's
prime rate. In addition, a commitment fee is payable on the unused portion of
the revolving line of credit at a rate of between 0.15% and 0.375% depending on
the ratio of the Company's consolidated total funded debt to consolidated
earnings before interest, taxes, depreciation and amortization. The credit
facility will terminate three years from the Company's initial borrowing under
the facility (which borrowing had yet to occur as of June 30, 1998), and all
amounts outstanding thereunder (if any) will be due at such time. The credit
facility (i) generally prohibits the payment of dividends and other
distributions by the Company, (ii) generally does not permit the Company to
incur or assume other indebtedness, and (iii) requires the Company to comply
with certain financial covenants. As of June 30, 1998, there were no amounts
outstanding under the credit facility.
 
(8) LONG-TERM DEBT
 
     Long-term debt consists primarily of amounts due to former stockholders of
the Founding Companies. These notes mature through June, 2009 and bear interest
at rates ranging from 7.5% to 8.75%.
 
                                       35
<PAGE>   36
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(9) INCOME TAXES
 
     The income tax expense (benefit) consists of (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Current:
  Federal...................................................    $ 540
  State.....................................................      158
                                                                -----
          Total current.....................................      698
                                                                -----
Deferred:
  Federal...................................................     (860)
  State.....................................................      (41)
                                                                -----
          Total deferred....................................     (901)
                                                                -----
          Income tax benefit................................    $(203)
                                                                =====
</TABLE>
 
     The income tax benefit was $203,000 for the year ended June 30, 1998, and
differed from the amounts computed by applying the U.S. federal income tax rate
of 35 percent to pretax income as a result of the following (Dollars in
thousands):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Income tax benefit at the statutory rate....................   $(1,084)
Decrease in income tax benefit resulting from:
  Reduction of valuation allowance due to interaction of
     acquiror and acquired companies tax positions..........       659
  Amortization of goodwill..................................        79
  State income taxes, net of federal income tax benefit.....        75
  Other, net................................................        68
                                                               -------
Benefit at effective tax rate...............................   $  (203)
                                                               =======
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (Dollars in thousands).
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Deferred tax assets:
  Accrued liabilities.......................................   $2,794
  Allowance for doubtful accounts...........................      217
  Start-up costs capitalized for tax purposes...............      735
  Other.....................................................      139
                                                               ------
Total gross deferred tax assets.............................    3,885
  Less valuation allowance..................................     (140)
                                                               ------
  Net deferred tax assets...................................    3,745
                                                               ------
Deferred tax liabilities:
  Change from cash to accrual method for acquired
     companies..............................................    1,458
  Other.....................................................      160
                                                               ------
Total gross deferred liabilities............................    1,618
                                                               ------
Net deferred tax asset......................................   $2,127
                                                               ======
</TABLE>
 
                                       36
<PAGE>   37
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The valuation allowance for deferred tax assets was $52,000 and $140,000 as
of June 30, 1997 and 1998 respectively. The valuation allowance for deferred
income taxes increased by $88 from June 30, 1997 to June 30, 1998. Valuation
allowances at June 30, 1998 relate to potentially non-deductible expenses
recorded by certain of the Founding Companies.
 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Taxable income for the
year ended June 30, 1998 was $1,703,000. Although realization is not assured,
based upon the level of historical taxable income of the Founding Companies and
projections for PROVANT's future taxable income over the periods during which
the deferred tax assets are deductible, management believes it is more likely
than not the Company will realize the benefits of these deductible differences.
The amount of the deferred tax asset considered realizable, however, could be
reduced or increased in the near term if estimates of future taxable income
during the carryforward period are reduced or increased.
 
(10) COMMITMENTS AND CONTINGENCIES
 
  Operating Leases
 
     The Company has several leases for its office space as well as for the
Founding Companies' operating space, vehicles, and equipment under cancelable
and non-cancelable operating leases that expire on various dates through fiscal
2005. Most of these leases generally provide for rent escalation based upon
changes in real estate taxes and operating expenses.
 
     Future minimum lease payments under all non-cancelable operating leases,
including leases to related parties, are as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                    YEAR ENDING JUNE 30,
                    --------------------
<S>                                                           <C>
1999........................................................  $ 3,635
2000........................................................    3,160
2001........................................................    2,772
2002........................................................    1,857
2003........................................................      749
Thereafter..................................................    1,136
                                                              -------
Total.......................................................  $13,309
                                                              =======
</TABLE>
 
     Rent expense for the years ended June 30, 1997 and 1998 was $51,000 and
$585,000, respectively.
 
  U.S. Government Contracts
 
     Substantially all of one Founding Company's revenue and costs for all
periods presented are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     Government funding continues to be dependent on congressional approval of
program level funding and on contracting agency approval for the Company's work.
The extent to which projects will be funded in the future cannot be determined.
 
                                       37
<PAGE>   38
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Environmental Liabilities
 
     The Company has provided for the estimated costs associated with
environmental remediation activities at one of its current operating locations.
The Company provides for the estimated costs of the investigation and
remediation of these sites when such losses are probable and the amounts can be
reasonably estimated. The actual cost incurred may vary from these estimates due
to the inherent uncertainties involved. The Company believes that any additional
liability in excess of the amounts provided which may result from the resolution
of these matters will not have a material adverse impact on the financial
condition, liquidity, or cash flow of the Company.
 
  Contingent Payments to Former Stockholders
 
     The merger agreements between PROVANT and each of the Founding Companies
provide for the payment of additional, contingent consideration (the "Additional
Consideration"). With respect to six of the Founding Companies, the Additional
Consideration will be paid in shares of Common Stock, with the number of those
shares determined by a formula based on the relationship of the defined earnings
before interest and taxes ("EBIT") of that Founding Company (including its
successor following the closing of the Combination) for the fiscal year ending
June 30, 1998 (June 30, 1999 in the case of J. Howard & Associates, Inc. ("J.
Howard")) to a specified baseline EBIT target and certain other adjustments to
be calculated after the fiscal year ended June 30, 1998. In particular, each
merger agreement with a Founding Company (other than Star Mountain, Inc.)
contains a targeted pro forma EBIT amount in excess of a baseline figure which,
if achieved by the Founding Company, will result in the payment by the Company
to the former stockholders of the Founding Company of the maximum Additional
Consideration (consisting of a multiple of the excess EBIT amount). To the
extent the Founding Company does not achieve the targeted amount, its former
stockholders will receive a lesser amount of Additional Consideration
proportionately related to the excess above the baseline figure. Shares of
Common Stock issued as Additional Consideration to the former stockholders of
all Founding Companies other than Star Mountain, Inc. ("Star Mountain") and J.
Howard will be valued at the initial public offering price of $13.00 per share.
Shares issued to J. Howard as Additional Consideration will be valued based on
the average of the last sale prices of the Common Stock on Nasdaq during the 20
business days immediately following PROVANT's first public announcement of its
financial results for fiscal 1999. Other than shares which may be issuable to
the former stockholders of Star Mountain, a maximum of 969,218 shares of Common
Stock may be issued as Additional Consideration following June 30, 1998
(assuming, in the case of J. Howard's Additional Consideration, a per share
price of $13.00).
 
     For the seventh Founding Company, Star Mountain, the stockholders will be
entitled to receive additional shares of Common Stock or cash in accordance with
a formula based on the amount by which the EBIT of Star Mountain for the fiscal
year ending June 30, 1999 exceeds a specified EBIT target. In particular, if
Star Mountain's EBIT for fiscal 1999 exceeds the specified target, then (i) Star
Mountain's former non-voting stockholders will receive cash equal to a multiple
of the excess EBIT and (ii) Star Mountain's former voting stockholders will
receive, at their election, either cash equal to a multiple of the excess EBIT
or a number of shares of Common Stock equal to a multiple of the excess EBIT
divided by 80% of the average of the last sale prices of the Common Stock on
NASDAQ during the month of July 1999.
 
  Other Matters
 
     The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition or results of operations of the Company.
 
                                       38
<PAGE>   39
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(11) STOCKHOLDERS' EQUITY
 
  Common and Preferred Stock
 
     In connection with its organization and initial capitalization, the Company
issued 1,950,520 shares of its Common Stock, $.01 par value per share. In 1998,
the Company issued 1,395,697 additional shares to management. These share
amounts have been adjusted to reflect the stock split described below.
 
     The Company, in connection with the IPO, increased the authorized shares of
stock to 45 million, consisting of 40 million shares of Common Stock and 5
million shares of Preferred Stock, and declared a stock split of 979.0292-for-1
in the form of a stock dividend that resulted in a total amount of outstanding
shares of Common Stock prior to the IPO (but giving effect to the Combination)
of 6,805,558. Holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, and do not
have cumulative voting rights. All share and per share amounts have been
adjusted to reflect the stock split.
 
     On May 4, 1998, the Company completed its IPO, issuing to the public
2,600,000 shares of its Common Stock at a price of $13.00 per share and on May
7, 1998, the Company sold 390,000 shares of Common Stock at a price of $13.00
per share pursuant to the over-allotment option granted to the underwriters. The
Company realized net proceeds from these sales of $32.7 million, net of the
underwriting commissions and discounts and other expenses of the offering.
 
     As of June 30, 1998, the Company had 9,795,558 shares of Common Stock
issued and outstanding.
 
     The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. As of June 30, 1998, the Company had not issued any
shares of Preferred Stock.
 
(12) STOCK OPTION PLANS
 
  Equity Incentive Plan
 
     The Company adopted the 1998 Equity Incentive Plan which provides for the
award of up to 1,100,000 shares of Common Stock in the form of incentive stock
options, non-qualified stock options, stock appreciation rights, performance
shares, restricted stock or stock units. All directors and employees of, and all
consultants and advisors to, the Company are eligible to participate.
 
     In connection with the Offering, options to purchase 246,596 shares of
Common Stock at $13.00 per share were issued to certain executives of the
Company, of which options to purchase 86,596 shares vested upon the closing of
the IPO. Options to purchase the remaining shares vest equally over a three-year
period. All of these options expire seven years from the date of grant.
 
     Options to purchase an additional 622,387 shares of Common Stock at $13.00
per share were awarded to employees of and consultants to the Founding Companies
and PROVANT. These options vest equally over a three year period and expire
seven years from the date of grant, with the exception of options to purchase
80,000 shares, which became exercisable upon the closing of the Offering.
 
  Stock Plan for Non-employee Directors
 
     The Company adopted the Stock Plan for Non-Employee Directors whereby
100,000 shares of Common Stock have been reserved for issuance. Each
non-employee director of the Company who was not a stockholder prior to the
Offering received an option to purchase 7,500 shares of Common Stock at $13.00
per share. Any non-employee director of the Company elected after the IPO
generally will receive an option to purchase 7,500 shares of Common Stock at the
fair market value of the Common Stock at the date of grant. Each option expires
after 10 years and is exercisable six months following the date of grant. As of
June 30, 1998, options to purchase 15,000 shares of Common Stock were granted
under this plan.
 
                                       39
<PAGE>   40
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Stock Purchase Plan
 
     The Company's 1998 Employee Stock Purchase Plan allows all employees who
work more than 20 hours per week, other than employees owning more than 5% or
more of the combined voting power of all classes of stock of the Company, to
purchase shares of Common Stock at a discount on a periodic basis.
 
     Purchases can occur at the end of option periods, each of six months'
duration. The first such period began on June 1, 1998. The purchase price of
Common Stock under the Employee Stock Purchase Plan will be 85% of the lesser of
the last sale price of the Common Stock on the day prior to the beginning of an
option period and the last sale price of the Common Stock on the day prior to
the end of the option period. Participants may elect under the Plan to have from
up to 2% to 10% of their pay applied to the purchase of shares at the end of the
option period.
 
     A total of 500,000 shares are reserved for issuance under the Employee
Stock Purchase Plan. As of June 30, 1998, no shares have been issued.
 
  Stock Purchase Warrants
 
     The Company issued two warrants each to officers and directors of the
Company in exchange for these executives extending financing to the Company in
the period prior to the Offering. The first warrant entitles the holder to
purchase 176,368 shares of Common Stock at a per share exercise price equal to
$13.00. The second warrant entitles the holder to purchase 220,460 shares of
Common Stock which will become exercisable only if the market price of the
Common Stock increases to certain threshold levels (except as otherwise
described below) (the "Contingent Warrant"). Specifically, 20% of the total
number of shares issuable under the Contingent Warrant will become exercisable
on each of the three occasions that the market price of the Common Stock reaches
$26.00, $39.00 and $52.00, respectively, and the remaining 40% of the total
number of shares issuable under the Contingent Warrant will become exercisable
if the market price of the Common Stock reaches $65.00. However, under certain
circumstances involving the merger or sale of the Company, the Contingent
Warrant will become exercisable to purchase all of the warrant shares. The
exercise price of the Contingent Warrant increases on each anniversary of the
closing of the Offering. Specifically, the exercise price is equal to the
initial public offering price of $13.00 for the first 12 months following the
closing of the Offering and, for each 12 month period thereafter, is equal to
the initial public offering price plus 10% of the initial public offering price
multiplied by the number of full 12 month periods elapsed since the closing of
the Offering. However, once a portion of the Contingent Warrant becomes
exercisable, that portion's exercise price is fixed as of that date. The
warrants expire on May 4, 2005. The warrants have been accounted for in
accordance with Opinion No. 14 of the Accounting Principles Board. Accordingly,
the fair value allocated to the warrants has been accounted for as discount on
the related debt. The holders of the warrants have the right to require the
Company to register the resale of the shares that may be acquired upon exercise
of the warrants under the Securities Act of 1933, as amended.
 
     Stock option activity under all plans during the periods indicated is as
follows:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF   WEIGHTED-AVERAGE
                                                               SHARES      EXERCISE PRICE
                                                              ---------   ----------------
<S>                                                           <C>         <C>
 
Balance at June 30, 1997 and prior..........................        --
     Granted................................................   883,983         $13.00
     Exercised..............................................        --
     Forfeited..............................................     9,966          13.00
     Expired................................................        --
                                                               -------
 
Balance at June 30, 1998....................................   874,017         $13.00
                                                               =======
</TABLE>
 
                                       40
<PAGE>   41
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements, except for stock options granted to
non-employees for which compensation expense of $201,000 has been recorded in
the year ended June 30, 1998. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net loss and loss per share would have been increased to the pro
forma amounts indicated below (Dollars in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Net loss:
  As reported...............................................   $(2,894)
  Pro forma for SFAS No. 123................................   $(3,679)
Basic and diluted loss per common share:
  As reported...............................................   $ (0.67)
  Pro forma for SFAS No. 123................................   $ (0.85)
</TABLE>
 
     At June 30, 1998, there were 325,983 additional shares available for grant
under the Company's stock option plans. The per share weighted-average fair
value of stock options granted during 1998 was $4.53 on the date of grant using
the Black Scholes option-pricing model with the following weighted average
assumptions: volatility of 33%; expected dividend yield 0%, risk-free interest
rate of 6.0%, and an expected life of 4 years.
 
     The following is a summary of stock options outstanding at June 30, 1998:
 
<TABLE>
<CAPTION>
                     OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
--------------------------------------------------------------   -----------------------
                                      WEIGHTED-
                                       AVERAGE       WEIGHTED-                 WEIGHTED-
     RANGE OF                      REMAINING YEARS    AVERAGE                   AVERAGE
     EXERCISE          NUMBER      OF CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
      PRICES         OUTSTANDING        LIFE           PRICE     EXERCISABLE     PRICE
     --------        -----------   ---------------   ---------   -----------   ---------
<S>                  <C>           <C>               <C>         <C>           <C>
      $ 5.00            10,000          2.84          $ 5.00        10,000      $ 5.00
      $13.00           874,017          6.88          $13.00       168,596      $13.00
                       -------                                     -------
   $ 5.00-$13.00       884,017          6.83          $12.91       178,596      $12.55
</TABLE>
 
     In addition to the options granted under the plans noted above, the Company
issued an option to purchase 10,000 shares of Common Stock at a purchase price
of $5.00 per share.
 
  1998 Non-Qualified Stock Option Plan
 
     In July 1998, the Company adopted the 1998 Non-Qualified Stock Option Plan
which provides for the award of up to 500,000 shares of Common Stock in the form
of non-qualified stock options. All employees who are not officers or directors
of the Company are eligible to participate. As of August 10, 1998, no options
were granted under the 1998 Non-Qualified Stock Option Plan.
 
(13) EMPLOYEE BENEFIT PLANS
 
     The Founding Companies provide various retirement plans for eligible
employees. These plans consist of defined contribution plans and profit sharing
plans and cover employees at substantially all of the Company's operating
locations. The defined contribution plans provide for contributions ranging from
1.5% to 2.0% of covered employees' salaries or wages, or at the discretion of
the company. Total expense for contributions under all plans totaled $101,000
for fiscal 1998.
 
                                       41
<PAGE>   42
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(14) RELATED PARTY TRANSACTIONS
 
     Prior to the Combination, certain Founding Companies had entered into lease
arrangements with stockholders for facilities. These lease arrangements are for
periods ranging from three to five years. Related lease expense was $81,000 for
the year ended June 30, 1998. Future commitments with respect to these leases
are included in the schedule of minimum lease payments in Note 10.
 
     Expenses paid by PROVANT prior to the closing of the Offering were advanced
under a $3 million line of credit issued on October 6, 1997 by two of the
Company's stockholders. As of June 30, 1998 this loan was repaid in its entirety
and the line of credit was terminated.
 
(15) SEGMENT REPORTING
 
     The Company operates principally in one segment comprised of training and
development services and products designed to increase the productivity of
organizations. There was no single customer that accounted for 10% or more of
the Company's total revenue in fiscal 1998.
 
                                       42
<PAGE>   43
 
                          INDEPENDENT AUDITOR'S REPORT
 
Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Star Mountain, Inc. for the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
     We conducted our audit 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 audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Star
Mountain, Inc. for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
 
                                          Friedman & Fuller, P.C.
 
Rockville, Maryland
February 16, 1996
 
                                       43
<PAGE>   44
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1997 and
for the period from January 1, 1998 to May 4, 1998. 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 Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1997 and for the period from January 1, 1998
to May 4, 1998, in conformity with generally accepted accounting principles.
 
                                            KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                       44
<PAGE>   45
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                -----------------
                                                                 1996      1997
                                                                ------    -------
<S>                                                             <C>       <C>
                                     ASSETS
Current assets:
  Cash......................................................    $   39    $   358
  Accounts receivable.......................................     4,395      6,091
  Current portion of notes receivable, related parties......       181        666
  Inventory.................................................       100        129
  Other current assets......................................        71        100
  Deferred income taxes.....................................        29        117
                                                                ------    -------
          Total current assets..............................     4,815      7,461
                                                                ------    -------
Property and equipment:
  Furniture and fixtures....................................        65        531
  Office equipment..........................................       746      1,444
  Computer software.........................................        69        114
  Leasehold improvements....................................        16         87
  Automobiles...............................................        31         73
                                                                ------    -------
                                                                   927      2,249
  Less accumulated depreciation and amortization............       423      1,303
                                                                ------    -------
                                                                   504        946
                                                                ------    -------
Other assets:
  Notes receivable, related parties, net of current
     portion................................................       267         --
  Other assets..............................................       140        459
  Land held for investment..................................       110        110
  Goodwill, net of accumulated amortization of $23 and
     $88....................................................       147      1,701
                                                                ------    -------
                                                                   664      2,270
                                                                ------    -------
          Total assets......................................    $5,983    $10,677
                                                                ======    =======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable, bank........................................    $  905    $ 2,858
  Current portion of notes payable..........................        95        455
  Accounts payable..........................................     1,295      1,685
  Accrued expenses..........................................       573      1,152
  Billings in excess of costs and earnings..................     1,076      1,247
                                                                ------    -------
          Total current liabilities.........................     3,944      7,397
                                                                ------    -------
Long-term liabilities:
  Notes payable, net of current portion.....................        --        304
  Deferred income taxes.....................................        29        198
                                                                ------    -------
          Total long-term liabilities.......................        29        502
                                                                ------    -------
          Total liabilities.................................     3,973      7,899
                                                                ------    -------
Commitments and contingencies
Stockholders' equity:
  Common stock..............................................         8      2,147
  Additional paid-in capital................................     2,058         --
  Retained earnings.........................................       529      1,257
                                                                ------    -------
                                                                 2,595      3,404
  Less common stock held in treasury at cost................      (585)      (626)
                                                                ------    -------
          Total stockholders' equity........................     2,010      2,778
                                                                ------    -------
          Total liabilities and stockholders' equity........    $5,983    $10,677
                                                                ======    =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                       45
<PAGE>   46
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                   -----------------------------   JANUARY 1, 1998
                                                    1995       1996       1997     TO MAY 4, 1998
                                                   -------    -------    -------   ---------------
<S>                                                <C>        <C>        <C>       <C>
Total revenue....................................  $14,306    $16,313    $23,775       $11,052
Cost of revenue..................................    8,668      9,457     14,504         6,109
                                                   -------    -------    -------       -------
Gross profit.....................................    5,638      6,856      9,271         4,943
Operating expenses...............................    4,411      5,476      7,591         3,650
                                                   -------    -------    -------       -------
Income from operations...........................    1,227      1,380      1,680         1,293
                                                   -------    -------    -------       -------
Other income (expense):
Interest income..................................       19         25         44            15
Interest expense.................................      (54)       (65)      (144)         (120)
Other, net.......................................     (200)      (339)      (306)          (32)
                                                   -------    -------    -------       -------
Other expense, net...............................     (235)      (379)      (406)         (137)
                                                   -------    -------    -------       -------
Income before income taxes.......................      992      1,001      1,274         1,156
Income taxes.....................................       --        397        546           457
                                                   -------    -------    -------       -------
Net income.......................................  $   992    $   604    $   728       $   699
                                                   =======    =======    =======       =======
Basic income per share...........................  $  0.11    $  0.07    $  0.09       $  0.09
                                                   =======    =======    =======       =======
Diluted income per share.........................  $  0.11    $  0.07    $  0.08       $  0.08
                                                   =======    =======    =======       =======
Weighted average shares outstanding..............    8,825      8,422      8,078         8,074
                                                   =======    =======    =======       =======
Weighted average shares and potentially dilutive
  shares outstanding.............................    8,963      8,565      8,823         8,871
                                                   =======    =======    =======       =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                       46
<PAGE>   47
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                     COMMON STOCK      ADDITIONAL   RETAINED      TREASURY STOCK
                                  ------------------    PAID-IN     EARNINGS    ------------------
                                   SHARES     AMOUNT    CAPITAL     (DEFICIT)    SHARES     AMOUNT   TOTAL
                                  ---------   ------   ----------   ---------   ---------   ------   ------
<S>                               <C>         <C>      <C>          <C>         <C>         <C>      <C>
Balance, December 31, 1994......    740,852   $    8    $ 1,955      $ (688)           --   $  --    $1,275
Issuance of common stock upon
  exercise of options...........     11,827       --         36          --            --      --        36
Distributions to shareholders...         --       --         --        (379)           --      --      (379)
Purchase of treasury stock......         --       --         --          --        22,700     (65)      (65)
Net income......................         --       --         --         992            --      --       992
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1995......    752,679        8      1,991         (75)       22,700     (65)    1,859
Issuance of common stock upon
  exercise of options...........      9,414       --         67          --            --      --        67
Purchase of treasury stock......         --       --         --          --        65,671    (520)     (520)
Net income......................         --       --         --         604            --      --       604
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1996......    762,093        8      2,058         529        88,371    (585)    2,010
Issuance of common stock upon
  exercise of options...........     87,621       32         --          --            --      --        32
Purchase of treasury stock......         --       --         --          --        12,584     (41)      (41)
Stock split, conversion to no
  par stock.....................  8,383,023    2,058     (2,058)         --     1,110,505      --        --
Issuance of common stock........     50,735       49         --          --            --      --        49
Net income......................         --       --         --         728            --      --       728
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1997......  9,283,472    2,147    $    --       1,257     1,211,460    (626)   $2,778
Issuance of common stock........      1,553       12         --          --            --      --        12
Net income......................         --       --         --         699            --      --       699
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, May 4, 1998............  9,285,025   $2,159    $    --      $1,956     1,211,460   $(626)   $3,489
                                  =========   ======    =======      ======     =========   =====    ======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                       47
<PAGE>   48
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,           PERIOD FROM
                                                        --------------------------------    JANUARY 1, 1998
                                                          1995        1996        1997      TO MAY 4, 1998
                                                        --------    --------    --------    ---------------
<S>                                                     <C>         <C>         <C>         <C>
Cash flows from operating activities:
  Cash received from customers........................  $ 13,419    $ 16,428    $ 23,529        $10,152
  Cash paid to suppliers and employees................   (12,620)    (14,890)    (22,083)        (9,679)
  Interest received...................................        19          25          44             16
  Interest paid.......................................       (54)        (65)       (144)          (122)
  Income taxes paid...................................        --        (420)       (482)          (252)
                                                        --------    --------    --------        -------
          Net cash provided by operating activities...       764       1,078         864            115
                                                        --------    --------    --------        -------
Cash flows from investing activities:
  Issuance of notes receivable........................       (64)        (96)       (218)            --
  Acquisition of property and equipment...............      (159)        (61)       (358)          (264)
  Business acquisitions...............................      (100)       (300)     (1,752)            --
  Purchase of land held for investment................        --        (110)         --             --
  Other...............................................        (8)          2          --             --
                                                        --------    --------    --------        -------
          Net cash used in investing activities.......      (331)       (565)     (2,328)          (264)
                                                        --------    --------    --------        -------
Cash flows from financing activities:
  Net borrowings (payments) on line-of-credit.........       (15)        (86)      1,953            403
  Principal repayments on long-term debt..............        --          --        (210)          (286)
  Proceeds from other notes payable...................        25          95          --             --
  Payments on other notes payable.....................       (34)        (35)         --             --
  Proceeds from issuance of common stock..............        36          68          81             12
  Purchase of treasury stock..........................       (65)       (520)        (41)            --
  Distributions to shareholders.......................      (379)         --          --             --
  Decrease in deferred income taxes...................        --          --          --             --
                                                        --------    --------    --------        -------
          Net cash provided by (used in) financing
            activities................................      (432)       (478)      1,783            129
                                                        --------    --------    --------        -------
Net (decrease) increase in cash.......................         1          35         319            (20)
Cash and cash equivalents, beginning of period........         3           4          39            358
                                                        --------    --------    --------        -------
Cash and cash equivalents, end of period..............  $      4    $     39    $    358        $   338
                                                        ========    ========    ========        =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                       48
<PAGE>   49
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                            ---------------------------    JANUARY 1, 1998
                                                             1995       1996      1997     TO MAY 4, 1998
                                                            -------    ------    ------    ---------------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                                         <C>        <C>       <C>       <C>
Reconciliation of net income to net cash provided by
  operating activities:
  Net income..............................................  $   992    $  604    $  728        $  699
                                                            -------    ------    ------        ------
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation and amortization...........................       96       139       314           136
  Loss on sale of assets..................................       --         4        11            --
  Deferred income taxes...................................       --        --        (9)           (6)
  Changes in assets and liabilities:
     (Increase) decrease in:
     Accounts receivable..................................   (1,053)     (637)     (417)       (2,094)
     Inventory............................................       --        18       (29)           37
     Other current assets.................................       47       (34)       24           440
     Other assets.........................................      (25)      (69)     (237)         (183)
     Intercompany assets..................................       --        --        --           (50)
  Increase (decrease) in:
     Accounts payable.....................................      425       168        90           335
     Accrued expenses.....................................      116       133       218           271
     Billings in excess of costs and anticipated
       profits............................................      166       752       171           530
                                                            -------    ------    ------        ------
  Total adjustments.......................................     (228)      474       136          (584)
                                                            -------    ------    ------        ------
  Net cash provided by operating activities...............  $   764    $1,078    $  864        $  115
                                                            =======    ======    ======        ======
</TABLE>
 
Non-cash investing and financing activities: In February 1997, the Company
issued a note payable of $506,000 for a portion of the purchase price of ORA. In
October 1997, the Company issued a note payable of $325,000 for a portion of the
purchase price of SED.
 
          See accompanying notes to consolidated financial statements
                                       49
<PAGE>   50
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1)  NATURE OF OPERATIONS
 
     Star Mountain, Inc. (together with its direct and indirect wholly-owned
subsidiaries the "Company") was founded in 1987. The Company is primarily
engaged in contracting with the U.S. Government to provide technical and
professional services in the form of computer-based training, software
development and computer applications support. In August 1996, the Company
formed a wholly-owned subsidiary, Star Digital, Inc. to acquire the assets of
Computer Visions, Inc. Star Digital, Inc. is primarily a value added distributor
of computer equipment. In February 1997, the Company acquired the stock of
Odyssey Research Associates, Inc. ("ORA"). ORA is primarily engaged in
contracting with the U.S. Government to perform research relating to computer
access and security. ORA includes the accounts of 168004 Canada, Inc. ("ORA
Canada"), a wholly-owned subsidiary, which had performed similar contracts for
the Canadian Government, but currently has minimal activity. Effective October
1, 1997, the Company acquired the net assets of the SED Division of Essex
Corporation, which now operates as a division of the Company. This division
provides weapons handling training for the U.S. Department of Defense.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     A major portion of the Company's revenue results from services performed
under U.S. government contracts, either directly or through subcontracts. The
majority of the Company's contracts are fixed-price contracts. Revenue on fixed
price contracts is recognized using the percentage of completion method based on
costs incurred in relation to total estimated costs. Revenue on
time-and-materials contracts is recognized to the extent of fixed billable rates
for hours delivered plus reimbursable costs. Revenue on cost-plus-fee contracts
is recognized based on reimbursable costs incurred plus estimated fees earned
thereon. At the time it is recognized that it is probable that a contract will
result in a loss and the loss can be reasonably estimated, the entire estimated
loss is included in the determination of net income. In accordance with industry
practice, amounts relating to long-term contracts are classified as current
assets although an indeterminable portion of these amounts is not expected to be
realized within one year.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
  Credit Risk
 
     The Company's accounts receivable consist principally of unsecured amounts
due from the U.S. Government.
 
  Cash Equivalents
 
     Cash equivalents are defined as highly liquid short-term investments whose
maturity dates do not extend past three months from the original date of
purchase. The Company has held no such instruments.
 
                                       50
<PAGE>   51
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation and amortization are provided for in
amounts which amortize the cost of properties utilizing the straight-line method
over estimated useful lives of three to seven years. Maintenance, repairs and
minor renewals are expensed as incurred. Any gain or loss on disposition is
included in the determination of net income.
 
  Goodwill
 
     Goodwill represents the excess of the cost of business acquisitions,
accounted for by the purchase method, over the fair value of the net assets
thereof. Goodwill is being amortized on a straight-line basis principally over
14 years.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash, accounts
receivable, note payable, bank, accounts payable and accrued expenses. The
carrying value of these financial instrument approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     Through December 31, 1995, the Company had elected to be taxed as an S
Corporation and, accordingly, the financial statements for 1995 do not reflect
any provision for income taxes since elements of income and deduction passed
through directly to the shareholders. Effective January 1, 1996, the Company
terminated its election to be taxed as an S Corporation.
 
     Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities. 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 settled. Future
tax benefits recognized as deferred tax assets must be reduced by a valuation
allowance where it is more likely than not that the benefits may not be
realized.
 
(3)  ACQUISITIONS
 
     On June 19, 1995, the Company acquired all of the assets of BZ Academy,
Inc. (BZ). The acquisition has been accounted for as a purchase and has operated
as the AIT division of the Company. Tangible assets were recorded at their book
value at the date of purchase, which approximated their fair value. The
difference between the purchase price and the assets' book value was recorded as
goodwill.
 
     On August 1, 1996, the Company formed a new corporation, Star Digital,
Inc., to acquire the assets of Computer Visions, Inc. The acquisition has been
accounted for as a purchase. Computer Visions' tangible assets were recorded at
their fair value, which approximated the purchase price. No goodwill was
recorded.
 
     On February 21, 1997, the Company acquired the outstanding stock of ORA.
The acquisition has been accounted for as a purchase. The excess of the purchase
price over the book value of the net assets of ORA at the purchase date has been
recorded as goodwill.
 
     On September 30, 1997, the Company acquired certain assets of Simms
Industries. The acquisition has been accounted for as a purchase. The assets
acquired consisted primarily of accounts receivable and fixed assets.
 
     On October 1, 1997, the Company acquired the net assets of the Systems
Effectiveness Division (SED) of Essex Corporation for a total price of $1.5
million. The net assets represent substantially all of the operating
 
                                       51
<PAGE>   52
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
assets of the division. The excess of the purchase price over the book value of
the tangible assets acquired of approximately $930,000 has been recorded as
goodwill.
 
     The following table sets forth the pro forma information assuming that all
acquisitions had occurred on January 1, 1995 (the earliest date information is
available). The pro forma information takes into account amortization of
goodwill and additional interest costs, net of tax benefits (Dollars in
thousands, except per share data).
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         1995       1996       1997
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Gross revenue.........................................  $22,668    $24,818    $28,383
Operating income......................................    1,081      1,524      1,298
Net income............................................      723        529        627
Earnings per share....................................  $  0.08    $  0.06    $  0.08
</TABLE>
 
(4)  ACCOUNTS RECEIVABLE
 
     Accounts receivable consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
<S>                                                             <C>       <C>
Government contracts:
  Billed....................................................    $3,333    $4,828
  Unbilled..................................................       698       926
Other.......................................................       364       337
                                                                ------    ------
                                                                $4,395    $6,091
                                                                ======    ======
</TABLE>
 
(5)  NOTES RECEIVABLE
 
     Notes receivable consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
<S>                                                             <C>       <C>
Due from majority shareholder, unsecured, interest at
  prime.....................................................    $  131    $  349
Due from former employee, secured, interest at 10 percent...       317       317
                                                                ------    ------
                                                                   448       666
Less current portion........................................       181       666
                                                                ------    ------
                                                                $  267    $   --
                                                                ======    ======
</TABLE>
 
(6)  NOTE PAYABLE, BANK
 
     The Company maintains a bank line of credit arrangement that provides for
borrowings of 90% of billed accounts receivable less than 90 days old, not to
exceed $3.5 million in total. Advances bear interest at LIBOR plus 250 basis
points. The line is collateralized by substantially all of the Company's assets.
The agreement requires the Company to meet certain covenants including
limitations on dividends, and maintenance of adjusted tangible net worth, as
defined. The Company has been in compliance with the lender's covenants during
each of the periods presented. At December 31, 1996 and 1997, overdrafts in the
payroll and operating bank accounts amounting to $236,000 and $259,000,
respectively, have been included in the outstanding balance on the line since
such overdrafts are automatically covered by the bank as checks are presented
for payment.
 
                                       52
<PAGE>   53
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(7)  LONG-TERM DEBT (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              --------------
                                                              1996      1997
                                                              ----      ----
<S>                                                           <C>       <C>
Note payable, shareholder, representing temporary advances
  of working capital, interest at LIBOR plus 250 basis
  points, due on demand. Unsecured..........................  $95       $ --
Note payable, purchase of subsidiary, ORA, interest at 9%,
  payable in four annual installments of $127 beginning
  February 1998.............................................             406
                                                              ---       ----
Note payable, purchase of net assets of SED, interest at 9%,
  payable in monthly installments of $23 through December
  1998......................................................   --        284
Note payable, purchase of net assets of SIMMS Industries....   --         24
Capital leases, payable in monthly installments of $2
  including interest at 9% to 17.5% due July 2000...........   --         45
                                                              ---       ----
Total.......................................................   95        759
Less current portion........................................   95        455
                                                              ---       ----
Long-term portion...........................................  $--       $304
                                                              ===       ====
</TABLE>
 
(8)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee
contributions, up to a maximum of 3% of each employee's gross annual
compensation. In addition, the Company may contribute a discretionary amount
annually. Total expense under the plan for the years ended December 31, 1995,
1996 and 1997 and for the period ended May 4, 1998, was $121,000, $123,000,
$153,000 and $85,000, respectively.
 
(9)  COMMITMENTS AND CONTINGENCIES
 
     Substantially all of the Company's revenue and costs for all periods since
December 31, 1996, are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     The Company leases equipment and office space under various noncancellable
operating leases. The office leases provide for future rental increases based on
the Company's pro-rata share of increases in building operating expenses and
real estate taxes, and for inflation adjustments based on increases in the
Consumer Price Index. Rent expense, including month-to-month leases, for the
years ended December 31, 1995, 1996 and 1997 and for the period ended May 4,
1998, totalled $557,000, $595,000, $868,000 and $396,000, respectively. Future
minimum lease commitments under non-cancellable operating leases for years
ending December 31, are as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                TOTAL
                                                              ---------
<S>                                                           <C>
1999........................................................   $1,046
2000........................................................      918
2001........................................................      732
2002........................................................      553
2003........................................................       92
                                                               ------
                                                               $3,341
                                                               ======
</TABLE>
 
                                       53
<PAGE>   54
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(10)  COMMON STOCK
 
     Common stock consists of the following:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                  -------------------------------------
                                                     1995         1996          1997
                                                  ----------    ---------    ----------
<S>                                               <C>           <C>          <C>
Par value.......................................  $      .01          .01           N/A
Shares:
  Authorized....................................   1,000,000    1,000,000    15,000,000
  Issued........................................     752,679      762,093     9,283,472
</TABLE>
 
     Effective February 14, 1997, the Company's voting common stock was
increased from 800,000 shares of $.01 par value to 12,000,000 shares of no par
value, and the non-voting stock was increased from 200,000 shares of $.01 par
value to 3,000,000 shares of no par value.
 
(11)  STOCK OPTIONS
 
     The Company offers key employees the opportunity to purchase stock through
the Star Mountain Key Person Stock Option Plan (the "Plan"). Under the Plan, the
Company issues options to eligible employees who must have one year of service
with the Company. The exercise price for the options is at or above the current
market price of the Company's shares, as determined by management. Management
has applied a consistent formula which includes gross revenue and net income in
determining the Company's share price. Options are exercisable upon issuance for
periods of 3 to 5 years from the date of the grant.
 
     The activity in the Plan since 1995 is presented below. All options and
option prices have been restated to reflect the 12:1 stock split in February
1997.
 
<TABLE>
<CAPTION>
                                                        NUMBER OF OPTIONS       WEIGHTED
                                                         OUTSTANDING AND        AVERAGE
                                                           EXERCISABLE       EXERCISE PRICE
                                                        -----------------    --------------
<S>                                                     <C>                  <C>
Balance, December 31, 1994............................        912,000            $0.31
  Granted.............................................        384,000             0.47
  Forfeited...........................................       (360,000)            0.21
                                                            ---------
Balance, December 31, 1995............................        936,000             0.42
  Granted.............................................        936,000             0.49
  Forfeited...........................................       (348,000)            0.46
                                                            ---------
Balance, December 31, 1996............................      1,524,000             0.45
  Granted.............................................        331,000             1.00
  Exercised...........................................        (73,200)            0.24
  Forfeited...........................................       (120,000)            0.49
                                                            ---------
Balance, December 31, 1997............................      1,661,800             0.52
                                                            =========
</TABLE>
 
     The weighted average price for options outstanding and exercisable at
December 31, 1997 was $.52. The weighted average remaining term of the
outstanding options is 3 years.
 
     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option. Under this method, compensation cost is measured
at the grant date based on the value of the award and is recognized over the
service period. The Company has historically accounted for employee stock
options under the "intrinsic value method" as defined by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the intrinsic value method,
 
                                       54
<PAGE>   55
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
compensation cost is the excess, if any, of the quoted market price of the stock
at grant date over the amount an employee must pay to acquire the stock. The
Company's Plan, accounted for under APB Opinion No. 25, does not result in any
compensation cost.
 
     SFAS No. 123 allows an entity to continue to use the intrinsic value method
and management has elected to do so. However, entities electing to remain on the
intrinsic value method must make pro forma disclosures of net income, as if the
fair value based method of accounting had been applied. Because the method of
accounting in SFAS No. 123 has not been applied to options granted prior to
January 1, 1994, the resulting pro forma compensation costs may not be
representative of the cost to be expected in future years.
 
     Under SFAS No. 123, net income would have been as follows (Dollars in
thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                             -------------------------
                                                             1995      1996      1997
                                                             -----     -----     -----
<S>                                                          <C>       <C>       <C>
Net income, as reported....................................  $ 992     $ 604     $ 728
Pro forma net income.......................................  $ 984     $ 586     $ 675
Income per share, as reported..............................  $0.11     $0.07     $0.09
Pro forma income per share.................................  $0.11     $0.06     $0.08
</TABLE>
 
     The fair value of each option is estimated on the date of grant using the
following assumptions: no dividend yield, no volatility, risk-free interest
rates approximating 6% and expected lives of 3 to 5 years. The weighted average
grant date fair value of the options was as follows:
 
<TABLE>
<CAPTION>
                                               DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                   1995             1996             1997
                                               ------------     ------------     ------------
<S>                                            <C>              <C>              <C>
Weighted average fair value..................      $.11             $.13             $.16
</TABLE>
 
(12)  EARNINGS PER SHARE:
 
     Earnings per share is computed based on the weighted average number of
common shares outstanding in each period. The dilutive effect of outstanding
stock options is computed using the treasury stock method. Since there is no
public market for the Company's stock, current market price has been assumed to
be the exercise price of the latest stock options issued. Basic and diluted
earnings per share have been computed as follows: (Dollars in thousands, except
per share data)
 
<TABLE>
<CAPTION>
                                                             EFFECT OF DILUTIVE      DILUTED      BASIC   DILUTED
                               NET INCOME    BASIC SHARES      STOCK OPTIONS         SHARES        EPS      EPS
                               ----------    ------------    ------------------      -------      -----   -------
                              (NUMERATOR)    (DENOMINATOR)                        (DENOMINATOR)
<S>                           <C>            <C>             <C>                  <C>             <C>     <C>
Year ended:
  December 31, 1995.........      $992         8,824,986          138,404           8,963,390     $0.11    $0.11
  December 31, 1996.........       604         8,422,206          143,176           8,565,382      0.07     0.07
  December 31, 1997.........       728         8,078,338          744,751           8,823,089      0.09     0.08
Period from January 1, 1998
  to May 4, 1998............       699         8,073,565          797,664           8,871,229      0.09     0.08
</TABLE>
 
                                       55
<PAGE>   56
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(13)  INCOME TAXES
 
     Income tax expense consists of the following amounts (Dollars in
thousands):
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,              PERIOD FROM
                                              ----------------------------    JANUARY 1, 1998
                                                  1996            1997          MAY 4, 1998
                                              ------------    ------------    ----------------
<S>                                           <C>             <C>             <C>
Current:
  Federal...................................      $313            $426              $393
  State.....................................        84             123                64
Deferred:
  Federal...................................        --              (3)               --
                                                  ----            ----              ----
                                                  $397            $546              $457
                                                  ====            ====              ====
</TABLE>
 
     The differences between the effective income tax rate and the statutory
federal income tax rates are as follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,      PERIOD FROM
                                                          ------------    JANUARY 1, 1998
                                                          1996    1997      MAY 4, 1998
                                                          ----    ----    ---------------
<S>                                                       <C>     <C>     <C>
Computed "expected" tax on income.......................  34.0%   34.0%        34.0%
State taxes, net of federal benefit.....................   4.1     4.1          4.1
Other, net..............................................   1.6     4.7          1.4
                                                          ----    ----         ----
Taxes on income.........................................  39.7%   42.8%        39.5%
                                                          ====    ====         ====
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below (Dollars
in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Deferred tax assets result from
  accrued employee benefits,
  principally vacation......................................  $ 29    $ 90
  Accrued expenses..........................................    --      27
                                                              ----    ----
                                                              $ 29    $117
                                                              ====    ====
Deferred tax liabilities result from:
  Differences in depreciation methods.......................  $ 29    $135
  Change in accounting method from cash to accrual for
     ORA....................................................    --      63
                                                              ----    ----
                                                              $ 29    $198
                                                              ====    ====
</TABLE>
 
                                       56
<PAGE>   57
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information called for by this Item and not provided in Item 4A will be
contained in the Company's Proxy Statement, which the Company intends to file
within 120 days following the end of its fiscal year ended June 30, 1998, and
such information is incorporated herein by reference.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     The information called for by this Item will be contained in the Company's
Proxy Statement, which the Company intends to file within 120 days following the
end of its fiscal year ended June 30, 1998, and such information is incorporated
herein by reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information called for by this Item will be contained in the Company's
Proxy Statement, which the Company intends to file within 120 days following the
end of its fiscal year ended June 30, 1998, and such information is incorporated
herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information called for by this Item will be contained in the Company's
Proxy Statement, which the Company intends to file within 120 days following the
end of its fiscal year ended June 30, 1998, and such information is incorporated
herein by reference.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a)(1) The following financial statements are included pursuant to Item 8.
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PROVANT, INC. AND FOUNDING COMPANIES PRO FORMA:
  Basis of Presentation.....................................    21
  Unaudited Pro Forma Combined Statements of Operations.....    22
  Notes to Unaudited Pro Forma Combined Financial
     Statements.............................................    23
 
PROVANT, INC. AND SUBSIDIARIES:
  Independent Auditors' Report..............................    25
  Consolidated Balance Sheets...............................    26
  Consolidated Statements of Operations.....................    27
  Consolidated Statements of Stockholders' Equity
     (Deficit)..............................................    28
  Consolidated Statements of Cash Flows.....................    29
  Notes to Consolidated Financial Statements................    30
 
STAR MOUNTAIN, INC. AND SUBSIDIARIES:
  Independent Auditors' Reports.............................    43
  Consolidated Balance Sheets...............................    45
  Consolidated Statements of Operations.....................    46
  Consolidated Statements of Stockholders' Equity...........    47
  Consolidated Statements of Cash Flows.....................    48
  Notes to Consolidated Financial Statements................    50
</TABLE>
 
                                       57
<PAGE>   58
 
     (a)(2) The following consolidated financial statement schedule of PROVANT,
Inc. and Subsidiaries for the period from November 16, 1996 (date of inception)
to June 30, 1997 and the year ended June 30, 1998 is filed as part of this Form
10-K and should be read in conjunction with the Company's Consolidated Financial
Statements included in Item 8 of this Form 10-K.
 
<TABLE>
<CAPTION>
                                                              SEQUENTIAL
SCHEDULE                                                       PAGE NO.
--------                                                      ----------
<S>                                                           <C>
II  VALUATION AND QUALIFYING ACCOUNTS.......................  62
</TABLE>
 
     Schedules not listed above have been omitted because they are not
applicable or are not required or the information to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
 
     (a)(3) Exhibits
 
<TABLE>
<CAPTION>
                                                                       SEQUENTIAL
EXHIBIT                          DESCRIPTION                            PAGE NO.
-------                          -----------                           ----------
<C>      <S>                                                           <C>
  **3.1  Certification of Incorporation of the Company...............
  **3.2  By-laws of the Company......................................
  **4.1  Form of Specimen Stock Certificate..........................
 **10.1  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
         Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
         Green, Ph.D.................................................
 **10.2  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
         Puopolo, Decker Communications, Inc., Bert Decker and
         Kenneth Taylor..............................................
 **10.3  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
         Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
         Marc S. Wallace.............................................
 **10.4  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
         Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
         Edwin Bauch as Trustee of the Steinmetz Children's Trust
         u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
         King Children's Trust u/d/t dated December 31, 1996, John F.
         King and Robert A. Steinmetz, Ph.D..........................
 **10.5  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
         Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
         Judith Cohen and Michael Patrick............................
 **10.6  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
         Inc., Star Acquisition Corp. and Carl von Sternberg.........
 **10.7  Form of Agreement and Plan of Merger by and among PROVANT,
         Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
         J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
         Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
         Jonathan Younger............................................
 **10.8  Form of First Amendment to Agreement and Plan of Merger (J.
         Howard).....................................................
 **10.9  1998 Equity Incentive Plan..................................
**10.10  Stock Plan for Non-Employee Directors.......................
**10.11  Form of 1998 Employee Stock Purchase Plan...................
**10.12  Form of Warrants to Messrs. Verrochi and Puopolo............
**10.13  Form of Contingent Warrants to Messrs. Verrochi and
         Puopolo.....................................................
**10.14  Form of Employment Agreement between Rajiv Bhatt and
         PROVANT, Inc................................................
**10.15  Form of Employment Agreement between MOHR Acquisition Corp.,
         Herbert A. Cohen, and PROVANT, Inc..........................
**10.16  Form of Employment Agreement between Decker Acquisition
         Corp., Bert Decker, and PROVANT, Inc........................
**10.17  Form of Employment Agreement between Philip Gardner and
         PROVANT, Inc................................................
**10.18  Form of Employment Agreement between Behavioral Acquisition
         Corp., Paul C. Green, and PROVANT, Inc......................
**10.19  Form of Employment Agreement between Novations Acquisition
         Corp., Joe Hanson, and PROVANT, Inc.........................
</TABLE>
 
                                       58
<PAGE>   59
 
<TABLE>
<CAPTION>
                                                                       SEQUENTIAL
EXHIBIT                          DESCRIPTION                            PAGE NO.
-------                          -----------                           ----------
<C>      <S>                                                           <C>
**10.20  Form of Employment Agreement between LSS Acquisition Corp.,
         John F. King, and PROVANT, Inc..............................
**10.21  Form of Employment Agreement between Dominic J. Puopolo and
         PROVANT, Inc................................................
**10.22  Form of Employment Agreement between A. Carl von Sternberg,
         Star Acquisition Corp. and PROVANT, Inc.....................
**10.23  Form of Employment Agreement between Paul M. Verrochi and
         PROVANT, Inc................................................
**10.24  Form of Employment Agreement between Howard Acquisition
         Corp., Marc S. Wallace, and PROVANT, Inc....................
**10.25  Form of Employment Agreement between John H. Zenger and
         PROVANT, Inc................................................
**10.26  Form of Consulting Agreement between Michael J. Davies and
         PROVANT, Inc................................................
**10.27  Lease Agreement between Behavioral Technology, Inc. and Paul
         C. Green, Ph.D..............................................
**10.28  Lease Agreement between Novations Group, Inc. and Novations
         Partners, L.L.C.............................................
**10.29  Form of Consulting Agreement between Donald W. Glazer and
         PROVANT, Inc................................................
 *10.30  Revolving Credit Agreement dated April 8, 1998 between
         PROVANT, Inc. and Fleet National Bank.......................
 +10.31  Amendment No. 1 to Revolving Credit Agreement...............
++10.32  1998 Non-Qualified Stock Option Plan........................
    +21  Subsidiaries of the Registrant..............................
  +23.1  Consent of KPMG Peat Marwick LLP............................
  +23.2  Consent of Friedman & Fuller, P.C...........................
    +24  Power of Attorney (contained in the signature page to this
         Registration Statement).....................................
    +27  Financial Data Schedule.....................................
</TABLE>
 
---------------
 
 * Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
   the three months ended March 31, 1998.
 
** Incorporated by reference to the Company's Registration Statement on Form S-1
   (File No. 333-46157).
 
++ Incorporated by reference to the Company's Registration Statement on Form S-8
   (File 333- 62109).
 
 + Filed herewith.
 
  (b) The Company filed no reports on Form 8-K during the last quarter of its
      fiscal year ended June 30, 1998.
 
                                       59
<PAGE>   60
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          PROVANT, INC.
 
                                          By:     /s/ PAUL M. VERROCHI
                                            ------------------------------------
                                                      PAUL M. VERROCHI
                                                 CHAIRMAN OF THE BOARD AND CHIEF
                                                  EXECUTIVE OFFICER
 
                                          Date: September 16, 1998
                                             -----------------------------------
 
                               POWER OF ATTORNEY
 
     Each person whose signature appears below on this Annual Report on Form
10-K hereby constitutes and appoints Paul M. Verrochi, Dominic J. Puopolo, Rajiv
Bhatt and James E. Dawson, and each of them, with full power to act without the
other, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities (until revoked in writing), to sign any and
all amendments (including post-effective amendments and amendments thereto) to
this Annual Report on Form 10-K of the registrant, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he or she might or could do in person, thereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                     SIGNATURES                                   TITLE                     DATE
                     ----------                                   -----                     ----
<C>                                                    <S>                           <C>
 
                /s/ PAUL M. VERROCHI                   Chairman of the Board and     September 16, 1998
-----------------------------------------------------    Chief Executive Officer
                  PAUL M. VERROCHI
 
               /s/ DOMINIC J. PUOPOLO                  Chief Financial Officer and   September 16, 1998
-----------------------------------------------------    Director
                 DOMINIC J. PUOPOLO
 
                 /s/ JOHN H. ZENGER                    President and Director        September 16, 1998
-----------------------------------------------------
                   JOHN H. ZENGER
 
                   /s/ RAJIV BHATT                     Chief Accounting Officer      September 16, 1998
-----------------------------------------------------
                     RAJIV BHATT
 
                /s/ HERBERT A. COHEN                   Director                      September 16, 1998
-----------------------------------------------------
                  HERBERT A. COHEN
 
                   /s/ BERT DECKER                     Director                      September 16, 1998
-----------------------------------------------------
                     BERT DECKER
</TABLE>
 
                                       60
<PAGE>   61
 
<TABLE>
<CAPTION>
                     SIGNATURES                                   TITLE                     DATE
                     ----------                                   -----                     ----
<C>                                                    <S>                           <C>
                  /s/ PAUL C. GREEN                    Director                      September 16, 1998
-----------------------------------------------------
                    PAUL C. GREEN
 
                   /s/ JOE HANSON                      Director                      September 16, 1998
-----------------------------------------------------
                     JOE HANSON
 
                  /s/ JOHN F. KING                     Director                      September 16, 1998
-----------------------------------------------------
                    JOHN F. KING
 
              /s/ A. CARL VON STERNBERG                Director                      September 16, 1998
-----------------------------------------------------
                A. CARL VON STERNBERG
 
                 /s/ MARC S. WALLACE                   Director                      September 16, 1998
-----------------------------------------------------
                   MARC S. WALLACE
 
                /s/ MICHAEL J. DAVIES                  Director                      September 16, 1998
-----------------------------------------------------
                  MICHAEL J. DAVIES
 
                /s/ DAVID B. HAMMOND                   Director                      September 16, 1998
-----------------------------------------------------
                  DAVID B. HAMMOND
 
                 /s/ JOHN R. MURPHY                    Director                      September 16, 1998
-----------------------------------------------------
                   JOHN R. MURPHY
 
                 /s/ ESTHER T. SMITH                   Director                      September 16, 1998
-----------------------------------------------------
                   ESTHER T. SMITH
</TABLE>
 
                                       61
<PAGE>   62
 
                         PROVANT, INC. AND SUBSIDIARIES
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
 
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
<S>                                      <C>          <C>          <C>          <C>           <C>
---------------------------------------  ----------   -----------------------   -----------   -----------
               COLUMN A                   COLUMN B           COLUMN C            COLUMN D      COLUMN E
---------------------------------------  -----------  -----------------------    -----------  -----------
                                         BALANCE AT   CHARGED TO   CHARGED TO   
                                         BEGINNING    COSTS AND      OTHER                    BALANCE AT
              DESCRIPTION                 OF YEAR      EXPENSES     ACCOUNTS    DEDUCTIONS    END OF YEAR
---------------------------------------  ----------   ----------   ----------   -----------   -----------
 
Period from November 16, 1996 (date of
  inception) to June 30, 1997:
Allowance for doubtful accounts........      $--         $ --         $ --          $--          $ --
 
Year ended June 30, 1998:
Allowance for doubtful accounts........      $--         $135         $605(a)       $--          $740
</TABLE>
 
---------------
(a) Amount established as component of accounts acquired in acquisition of the
    Founding Companies.
 
                                       62