SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                  FORM 10-KSB/A
                                (Amendment No. 2)

(Mark One)


/X/  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended September 30, 1997

/ /  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _________ to ___________

                         Commission file number 0-24928

                           THE SOLOMON-PAGE GROUP LTD.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


                    Delaware                               51-0353012
    ---------------------------------------    ---------------------------------
         (State or other jurisdiction of           (IRS Employer Identification
          incorporation or organization                      Number)


1140 Avenue of the Americas, New York, New York        10036
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)             (Zip Code)

       Registrant's telephone number, including area code: (212) 764-9200

          Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, par value $.001
                         Common Stock Purchase Warrants


                  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 / /
<PAGE>
                  Check  if there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of Regulation S-B contained in this form, and no disclosure
will be  contained,  to the best of the  Registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. /X/

                  State the issuer's  revenues for its most recent  fiscal year:
The  issuer's  revenues  for the  fiscal  year  ended  September  30,  1997 were
$28,996,485.

                  The  aggregate  market  value  of the  voting  stock  held  by
non-affiliates of the Registrant computed by reference to the price at which the
stock was sold on December 31, 1997 was  approximately  $11,603,400.  Solely for
the purposes of this  calculation,  shares held by directors and officers of the
Registrant  have  been  excluded.   Such  exclusion   should  not  be  deemed  a
determination  or an admission by the Registrant that such  individuals  are, in
fact, affiliates of the Registrant.

                  Indicate  the  number  of  shares  outstanding  of each of the
issuer's classes of common stock, as of the latest practicable date: At December
31, 1997,  there were outstanding  5,129,285  shares of the Registrant's  Common
Stock, $.001 par value.

                  Transitional Small Business Disclosure Format (check one):

                  Yes /  /    No  / X /

<PAGE>
                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

GENERAL

         The  Company  is  a  specialty  niche  provider  of  staffing  services
organized  into two primary  operating  divisions:  executive  search/full  time
contingency  recruitment and temporary  staffing and  consulting.  The executive
search  and full  time  contingency  recruitment  division  has  eight  lines of
business,  including four industry (capital  markets,  publishing and new media,
healthcare and fashion services),  and four functional (information  technology,
accounting,  human resources and legal).  The temporary  staffing and consulting
division  provides  services to companies  seeking  personnel in the information
technology,  accounting  and human  resources  areas.  The  accounting and human
resources  temporary  staffing and consulting  businesses  commenced  operations
during fiscal 1997.

         In the executive search and full time contingency recruitment division,
fees usually range between 20% and 33% of the placed employee's guaranteed first
year's  compensation.  In the executive  search  sector,  the Company  generally
obtains a non-refundable  retainer of  approximately  one-third of the estimated
fee at the  inception of an  engagement,  with the balance of the fee payable on
terms negotiated with the client. A substantial  portion of the deferred payment
is usually contingent on the successful completion of the placement. In the full
time  contingency   recruitment  sector,  the  entire  fee  is  contingent  upon
successful  completion of the placement,  although under certain circumstances a
non-refundable  retainer  payment of a portion of the fee may be received at the
outset.  In the  temporary  staffing  and  consulting  division,  the Company is
compensated  by its clients for services  provided by  temporary  employees on a
time and materials basis. The Company's  primary costs, in addition to its fixed
costs  such  as  rental  expense,   salaries  of  administrative  personnel  and
advertising,  are  the  variable  costs  attributable  to  payroll  relating  to
temporary staffing  requirements,  commissions of sales and recruiting personnel
and employee benefits.

         The Solomon-Page  Group Ltd. is a Delaware  corporation  formed in June
1993 that succeeded to the business of a predecessor New York  corporation  with
the same name  through a merger that was effected in May 1994.  The  predecessor
commenced operations in 1990.  References herein to the "Company" are references
to The  Solomon-Page  Group Ltd. and its  wholly-owned  subsidiary,  Information
Technology Partners, Inc. ("ITP").

INDUSTRY OVERVIEW

         According to the Staffing  Industry  Report,  revenues for the staffing
industry  were  expected  to exceed $86 billion for 1997.  Temporary  help,  the
largest  staffing  services  segment,  was  estimated  to have 1997  revenues of
approximately   $54  billion  and  has  grown  at  an  average  annual  rate  of
approximately 19% over the past five years.  Information technology services has
become one of the fastest growing segments to the staffing services industry, as
the increased use

<PAGE>
of  technology  has led to a  dramatic  rise in  demand  for  technical  project
support, software development and other computer-related services. Revenues from
the information  technology services segment were estimated at approximately $15
billion for 1997,  representing  a 27% increase  over 1996.  The  placement  and
search  sector of the staffing  industry  consists of three  segments,  retained
search, contingency recruitment and temp-to-perm. Revenues for the placement and
search sector were estimated to exceed $10 billion for 1997.

SCOPE OF STAFFING SERVICES PROVIDED

         The Company provides its services to clients  primarily in the New York
metropolitan  area, but increasingly on a nationwide and global basis to certain
of the industries and  functional  areas that it serves.  In addition to its New
York office, the Company also has offices in New Jersey, California and Georgia.
The Company's retained executive search and contingency  recruitment business is
currently divided into eight groups.

Retained Executive Search

         CAPITAL MARKETS (SALES AND  TRADING/INVESTMENT  BANKING). The Company's
capital markets group primarily services global financial services  institutions
in North  America,  Europe and Asia.  This group places  traders,  institutional
sales  people,  investment  bankers,  research  and  quantitative  analysts  and
portfolio managers, and focuses on middle and senior level positions.

         HEALTH  CARE.  The  Company's  health  care group  services  hospitals,
managed  care firms,  group  health  insurance  companies  and other health care
related companies.  The Company fills primarily middle to senior level executive
positions in various functional areas of the health care industry such as sales,
marketing, operations, financial management and medical management.

         PUBLISHING  AND NEW  MEDIA AND  TECHNOLOGY.  The  Company's  publishing
division  provides  executive search services to businesses  engaged in consumer
and business magazine publishing, educational publishing, professional reference
and trade book publishing,  and information services on a nationwide basis. This
group  handles  primarily  retained  senior  executive  level  searches  in such
functional  areas as editorial,  marketing,  sales,  circulation and product and
technology  development.  One of the fastest  growth areas within the publishing
industry is New Media and Technology. The marketplaces serviced within this area
include  educational  and  consumer  software  publishers,  internet and website
developers, on-line services, CD-ROM producers and distance learning companies.

Contingency Recruitment

         INFORMATION  TECHNOLOGY.  The Company's information technology division
conducts search  assignments  for a diverse client base,  including those in the
investment  banking,  financial  services,   communications,   retail  and  high
technology  industries.   The  division  fills  positions  at  many  levels  and
functions, such as Chief Information Officers and Directors, project managers

                                       -2-

<PAGE>
and programmers,  as well as less technical  positions such as systems liaisons,
business systems analysts and help desk personnel.

         LEGAL PROFESSIONALS.  The Company's legal professional  division serves
primarily  the New York  metropolitan  area,  providing  attorneys to law firms,
financial  institutions  and public and privately held companies.  In law firms,
the division fills positions at the associate, of counsel and partner level. For
corporations,  lawyers are  provided  for all  positions  under the  auspices of
General  Counsel.  Specialty  practice areas include  corporate,  banking,  real
estate,  ERISA and tax law, labor and employment,  environmental law, trusts and
estates, intellectual property and litigation.

         HUMAN  RESOURCES:  The Company's  human resources  division  undertakes
search  assignments  for a diverse  client base,  from Fortune 1000 companies to
mid-size companies,  in various industries such as financial services,  consumer
products, manufacturing, publishing, telecommunications and high technology. The
Company  fills  positions  for such  human  resources  areas as  management  and
organizational   planning,   compensation  and  benefits,  labor  relations  and
training. In addition,  the Company recruits  communications  professionals with
backgrounds   in   areas   including    marketing    communications,    internal
communications,  investor relations, public relations, media relations,  writing
and editing.

         ACCOUNTING  AND FINANCE.  The  Company's  accounting  and finance group
specializes  in  providing  financial  and  accounting  personnel  such as chief
financial  officers,  controllers,  treasurers,  financial  analysts,  financial
systems  managers,  bookkeepers and other related personnel to a wide variety of
corporate  employers  in  various  industries  such  as  publishing,  investment
banking,  advertising,  insurance,  healthcare,  apparel and real estate. Within
this division,  the Company has added a concentration in management  consulting.
This area  focuses on  addressing  the needs of clients in the areas of business
and strategic planning, corporate development and change management.

         FASHION  SERVICES.  The Company's fashion services group specializes in
providing  management,  design and other professionals to clients engaged in the
fashion services and retail industries,  including manufacturers,  specialty and
department  stores,  chains,  mass  merchandisers and catalogue  companies.  The
Company  fills  positions  at the  middle  to  senior  executive  levels in many
functional areas such as buyers, designers, sales and production.

Temporary Staffing and Consulting

         INFORMATION TECHNOLOGY.  The Company's information technology temporary
staffing and consulting business provides services on a time and materials basis
to clients within the financial services, consumer products, telecommunications,
consulting and insurance industries.  The Company supplies skilled professionals
in the areas of Application  Development,  Business Analysis, Help Desk Support,
Networking, Project Management and Quality Assurance.


                                       -3-

<PAGE>
         ACCOUNTING  AND  HUMAN  RESOURCES.  During  Fiscal  1997,  the  Company
expanded  its  existing  presence  within  its full  time  accounting  and human
resources  specialty  niches by  providing  temporary  staffing  and  consulting
services  to  existing  as  well  as new  clients  through  dedicated  teams  of
experienced staffing or industry personnel.

OPERATIONAL PROCEDURES

         The  Company   concentrates  on  establishing  and  maintaining  strong
relationships  with its clients in each  industry or functional  group.  In this
way, it is able to become  familiar with and sensitive to its clients'  specific
needs, thereby facilitating its ability to provide high-quality services,  which
in turn enhances client loyalty and repeat business.  In addition,  although the
Company's  divisional  structure causes its employees to concentrate on specific
areas, they are trained and compensated to recognize cross-selling opportunities
when they exist.

         The  Company  recruits  its  candidates   primarily   through  targeted
telephone  solicitation and referrals by past and current candidates and through
advertising in local and national media and on the Internet.

         Two customers of the Company  accounted for  approximately 11% and 10%,
respectively,  of the Company's  revenues during the fiscal year ended September
30, 1997.

BUSINESS EXPANSION

         During the next fiscal year, the Company  intends to continue to expand
its current retained  executive search,  full-time  contingency  recruitment and
temporary staffing and consulting  business sectors through the retention of its
existing  staff of experienced  personnel  counselors as well as the addition of
new counselors  with  placement  experience,  who will  complement the Company's
current scope of business.  Also, the Company aggressively pursues opportunities
to  attract  highly  skilled  staffing  industry  professionals  in new areas of
retained  executive search,  contingency  recruitment and temporary staffing and
consulting on an ongoing proactive basis.

         The  Company  intends  to focus on  blending  temporary  and full  time
placement  services by  continuing  to expand its existing  presence  within the
Information  Technology,  Accounting,  Legal and Human  Resources  businesses in
order to  capitalize on synergies in client  relationships  as well as extensive
knowledge of applicants and consultants in these  functional areas of expertise.
ITP, the Company's  information  technology  temporary  staffing and  consulting
business,  is  aggressively  pursuing a strategy of continued  rapid  expansion,
either  by  attracting  seasoned  sales  and  recruitment  professionals  or  by
acquisition.  According to staffing industry  analysts,  information  technology
temporary  placement is the most rapidly  growing sector of the staffing  market
with high gross margins and continued forecasts of additional  long-term revenue
growth  potential.  ITP has  recruited  experienced  marketing,  recruiting  and
administrative  professionals to service Fortune 1000 and mid-sized clients on a
local,  regional and subsequently  nationwide  basis. The staff comprises senior
level individuals with existing client and consultant  relationships so that the
business can continue to grow in an expedient manner with a high degree

                                       -4-

<PAGE>
of customer satisfaction.  The Company believes that this expansion will achieve
operating efficiencies due to its existing  infrastructure.  This expansion will
be facilitated through either internal growth or acquisition.

         This  extension  of  services  would  enable the  Company to expand its
product mix and geographic scope as well as to further the  consultative  nature
of long-term client relationships.  This expansion would also enable the Company
to market a number of  recruitment  services  to  clients by  cross-selling  the
firm's diversified capabilities.

COMPETITION

         The Company  believes  that the personnel  services  industry is highly
competitive  and that the services  provided by the Company are also provided by
many other companies  ranging from local,  small operations to large recruitment
and placement and temporary  personnel  agencies,  many of which are national in
scope. Some of the Company's  competitors,  including all of the national firms,
are substantially larger and have greater financial resources than the Company.

         The Company  believes  that many  clients  generally  use more than one
company to satisfy their personnel requirements, and the major factors affecting
competition in the industry are customer service,  the availability of qualified
personnel,  reputation  for  integrity  and, to varying  degrees,  pricing.  The
Company  believes  that  it  has  a  favorable   competitive  position  that  is
attributable  to its  firm-wide  dedication  to client  service,  integrity  and
knowledge  of the markets it serves,  which  enables it to fulfill its  clients'
needs expeditiously and effectively. In addition, the diverse number of industry
categories and functional  areas of placement  provided by the Company creates a
number of  cross-selling  opportunities  in enhancing  the potential for account
penetration and increased revenues.

EMPLOYEES

         As of  September  30, 1997,  the staff of the Company  consisted of 110
full-time  employees,  including  the  Company's  four  executive  officers,  76
recruitment  and  placement   counselors  and  30  administrative  and  clerical
employees.   None  of  the  Company's   employees  is  represented  by  a  labor
organization  and  the  Company  is not  aware  of  any  activity  seeking  such
organization.  The Company considers its relationships  with its employees to be
excellent.

REGULATION

         The Company's operations are subject to state laws and regulations that
may require  employment  agencies  and/or other  personnel  services firms to be
licensed.   The  principal   requirements  of  such  laws  and  regulations  are
satisfactory  prior  experience  and  good  moral  character.  Requirements  for
licensing vary from state to state in those states that mandate  licensing.  The
Company believes that it has obtained all licenses and registrations material to
the conduct of its business.

                                       -5-

<PAGE>
TRADEMARKS AND SERVICE MARKS

         The Company does not own any  registered  trademarks,  service marks or
trademarks, but may seek the registration of its logo, trade name or domain name
in the future.


                                     PART II

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The  following  discussion  of the  Company's  financial  condition and
results  of  operations  should  be  read in  conjunction  with  the  historical
financial statements and notes thereto appearing elsewhere in this document.

OVERVIEW

         The  Company  is  a  specialty  niche  provider  of  staffing  services
organized into two primary operating  divisions:  executive search and full time
contingency  recruitment  as well as  temporary  staffing  and  consulting.  The
executive search and full time contingency  recruitment division has eight lines
of business including four industry (capital markets,  publishing and new media,
healthcare and fashion services),  and four functional (information  technology,
accounting,  human resources and legal).  The temporary  staffing and consulting
division provides services to all companies seeking personnel in the information
technology,  accounting  and human  resources  areas.  The  accounting and human
resources  temporary  staffing and consulting  businesses  commenced  operations
during fiscal 1997.

         The following is a summary of the Company's  consolidated financial and
operating data:
<TABLE>
<CAPTION>
                                                       FISCAL YEAR ENDED SEPTEMBER 30,
                                                  ------------------------------------
STATEMENTS OF OPERATIONS DATA:                         1997                  1996
------------------------------                        ------                 -----
<S>                                                 <C>                  <C>
Revenue                                             $28,996,485          $17,165,836
Income from Operations                                1,691,499              509,313
Net Income                                            1,282,365              710,326
Primary Income Per Common Share                            $.20                 $.14
Fully Diluted Income Per Common Share                       .20                 $.13

BALANCE SHEET DATA:                              SEPTEMBER 30, 1997
Working Capital                                      $4,921,334
Total Assets                                         12,815,456
Long-term Debt, Net of Current Maturities                36,473
Stockholders' Equity                                  8,331,465
</TABLE>



                                       -6-

<PAGE>
RESULTS OF OPERATIONS

FISCAL 1997 COMPARED TO FISCAL 1996

         Revenue  increased  to  approximately  $28,996,000  for the fiscal year
ended  September  30, 1997 from  approximately  $17,166,000  for the fiscal year
ended September 30, 1996, an increase of approximately $11,830,000 or 69%. These
results were  achieved  with only a 19% increase in  recruitment  and  placement
counselors.   Revenues  from  the  Company's  executive  search  and  full  time
contingency recruitment division experienced an increase of 37% to approximately
$14,517,000   for  the  fiscal  year  ended   September  30,  1997  compared  to
approximately  $10,559,000  for the  same  period  in  1996.  Revenues  from the
Company's   temporary  staffing  and  consulting   division  were  approximately
$14,479,000   for  the  fiscal  year  ended   September  30,  1997  compared  to
approximately   $6,607,000   for  the  same  period  in  1996,  an  increase  of
approximately $7,872,000 or 119%.

         The increase in revenues for the fiscal year ended  September  30, 1997
compared to the fiscal year ended September 30, 1996 for the Company's executive
search and full time contingency  recruitment division is primarily attributable
to the  expansion  of its client  base and  strong  demand  for  personnel  from
existing clients.  Also, the addition of experienced  counselors  contributed to
the  increase in  revenues.  Revenue for the  Company's  information  technology
temporary   staffing  and  consulting   business   increased   significantly  to
approximately  $13,332,000  for fiscal year ended September 30, 1997 compared to
approximately  $6,607,000  the same period in 1996, an increase of $6,725,000 or
102%.  This increase was  attributable  to the hiring of  experienced  sales and
recruiting  personnel as well as the  establishment  and penetration of customer
relationships. In addition, during fiscal 1997 the Company expanded its existing
presence within its accounting and human resources specialty niches by providing
temporary  staffing and  consulting  services to existing as well as new clients
through  dedicated teams of experienced  staffing or industry  personnel.  These
expanded  operations also contributed to the increase in revenues for the fiscal
year ended September 30, 1997.

         Selling  expenses for the fiscal year ended  September 30, 1997 totaled
approximately   $22,413,000  (77%  of  revenues)   compared  with  approximately
$12,763,000  (74% of revenues) for the fiscal year ended September 30, 1996. The
increase in selling  expenses as a percentage of revenues is directly related to
the Company's temporary staffing and consulting business, which incurred startup
costs during fiscal 1997 associated  with the  commencement of operations in the
accounting and human resources  temporary staffing and consulting  business.  In
addition,  the  Company  has  incurred  costs due to the hiring of senior  level
counselors  within  various  segments  of the  executive  search  and full  time
contingency  recruitment  division.  Such  costs  consist  primarily  of payroll
relating to temporary staffing  requirements,  salaries and commissions of sales
and recruiting personnel, employee benefits, telephone and advertising.

         General  and   Administrative   expenses   increased  to  approximately
$4,555,000  (16% of  revenues)  for the fiscal  year ended  September  30,  1997
compared to approximately  $3,653,000 (21% of revenues),  for the same period in
1996. The improvements as a percentage of revenues

                                       -7-

<PAGE>
relates  to  operating  efficiencies  and  economies  of scale  associated  with
increased  revenues.  The  increase  in general and  administrative  expenses is
primarily  a result of planned  business  expansion  through  the  retention  of
additional administrative personnel and leasing of additional office space.

         Depreciation  and  Amortization  expense  for  the  fiscal  year  ended
September  30, 1997 totaled  approximately  $337,000  compared to  approximately
$241,000  for same  period in 1996.  The  increase is due to  increased  capital
expenditures  and  the   amortization  of  intangible   assets  related  to  the
acquisition of trade names.

         Income from operations was approximately $1,691,000 for the fiscal year
ended September 30, 1997 compared to approximately  $509,000 for the fiscal year
ended  September 30, 1996. The Company's  operating  results for the fiscal year
ended September 30, 1997 include charges of approximately  $300,000  relating to
the  startup  of its  accounting  and  human  resource  temporary  staffing  and
consulting   business  and  a  $200,000   charge   relating  to  a   potentially
uncollectible receivable.

         Income Tax  Expense for the fiscal  year ended  September  30, 1997 was
approximately  $553,000 compared with approximately  $19,000 for the fiscal year
ended  September 30, 1996. At September 30, 1997,  the Company has net operating
loss  carryforwards  of  approximately  $54,000  which can be  applied to future
taxable  income.  The  Company's  effective  tax rate for the fiscal  year ended
September 30, 1997 was  approximately 30% compared to approximately 3% in Fiscal
1996, due to the utilization of net operating loss carryforwards in Fiscal 1996.

         Due to  the  factors  mentioned  above  net  income  was  approximately
$1,282,000   for  the  fiscal  year  ended   September   30,  1997  compared  to
approximately $710,000 for the fiscal year ended September 30, 1996.

FISCAL 1996 COMPARED TO FISCAL 1995

         Revenue  increased  to  approximately  $17,166,000  for the fiscal year
ended  September 30, 1996,  from  approximately  $7,331,000  for the fiscal year
ended  September 30, 1995,  an increase of  approximately  $9,835,000,  or 134%.
Revenues  from  the  Company's   retained   executive   search  and  contingency
recruitment  business were  approximately  $10,559,000 for the fiscal year ended
September 30, 1996 compared to  approximately  $5,831,000 for the same period in
1995  and  revenues  from  the  professional   interim  staffing  business  were
approximately  $6,607,000 for the fiscal year ended  September 30, 1996 compared
to approximately $1,500,000 for the same period in 1995.

         The increase in revenues for the fiscal year ended  September  30, 1996
compared  with the  fiscal  year  ended  September  30,  1995 for the  Company's
retained  executive search and contingency  recruitment sector can be attributed
to the expansion of its client base,  strong demand for personnel  from existing
clients and hiring of additional  experienced  counselors.  In addition,  during
1995 the Company expanded into providing executive search services to clients in
the

                                       -8-

<PAGE>
publishing  industry and augmented its presence in the managed  health care area
through the  expansion  of  executive  search  services  to managed  health care
clients on the West Coast.  These expanded  operations  also  contributed to the
increase in revenues for the fiscal year ended September 30, 1996. The Company's
professional  interim staffing business,  which commenced operations in November
1994,  experienced a significant  increase in revenues for the fiscal year ended
September  30,  1996  compared  to the same  period in 1995.  The  increase  was
attributable  to the retention of experienced  sales and  recruiting  personnel,
establishment  of various  customer  relationships as well as the expansion into
new geographical markets.

         Selling  expenses for the fiscal year ended  September 30, 1996 totaled
approximately   $12,763,000  (74%  of  revenues)   compared  with  approximately
$6,255,000  (85% of revenues) for the fiscal year ended  September 30, 1995. The
improvements as a percentage of revenues  relates to operating  efficiencies and
economies of scale associated with increased  revenues.  The increase in selling
expenses is directly related to the Company's  subsidiary ITP, which contributed
approximately  $5,369,000  of the  increased  costs for the  fiscal  year  ended
September  30,  1996.  Such  costs  consist  primarily  of payroll  relating  to
temporary staffing requirements, salaries and commissions on sales and recurring
personnel, employee benefits and advertising expenses.

         General  and   Administrative   expenses   increased  to  approximately
$3,653,000  (21% of revenues) for the fiscal year ended  September 30, 1996 from
approximately  $3,021,000  (41% of revenues) for the fiscal year ended September
30,  1995.  The  improvement  as a percentage  of revenues  relates to operating
efficiencies  and economies of scale  associated  with increased  revenues.  The
increase in general  and  administrative  expenses is  primarily a result of the
Company's  planned  business  expansion  through  the  retention  of  additional
administrative personnel, leasing additional office space and professional fees.

         Depreciation  and  Amortization for the fiscal year ended September 30,
1996 totaled approximately  $241,000 compared to approximately  $148,000 for the
same period in 1995. The increase is due to  amortization  of intangible  assets
related to the  acquisition of trade names along with the acquisition of capital
assets,  such as  computer  equipment,  furniture  and  fixtures  and  leasehold
improvements.

         Income  from  operations  as a result  of the  above-mentioned  factors
increased to  approximately  $509,000 in fiscal 1996 from an  operating  loss of
approximately $2,094,000 in fiscal 1994.

         Due to  the  factors  mentioned  above  net  income  was  approximately
$710,000 for the fiscal year ended  September 30, 1996 compared to a net loss of
approximately $1,928,000 for the fiscal year ended September 30, 1995.

LIQUIDITY AND CAPITAL RESOURCES

         As of September 30, 1997, the Company's  sources of liquidity  included
approximately   $1,309,000  in  cash  and  cash   equivalents   and   short-term
investments. The Company's working

                                       -9-

<PAGE>
capital was  approximately  $4,921,000 at September  30, 1997. In addition,  the
Company has available  approximately  $1,251,000 of long term  investments  as a
source of liquidity as required.

         In February 1997, the Company entered into a one year $4,000,000 demand
line  of  credit  facility  agreement  with  The  Dime  Savings  Bank  which  is
collateralized  by all of the  Company's  assets.  The  agreement  provides  for
borrowings at the Dime  Reference  Rate + 1% (as of December 31, 1997,  the Dime
Reference Rate + 1% was 9.50%) in amounts not exceeding 80% of eligible accounts
receivable (as defined  therein) and expires on February 28, 1998, on which date
the  outstanding  principal  amount is  required  to be repaid.  The Company has
borrowed  approximately  $1,400,000  under the credit facility during the period
from  October  9,  1997 to  December  31,  1997,  most of which was used for the
repurchase of the Company's Class A redeemable  common stock purchase  warrants.
The Company is  currently in  negotiations  with The Dime Savings Bank to extend
this facility on substantially  the same terms as are currently in effect for an
additional  one year period.  If the Company is unable to extend such  facility,
the  Company   believes  that  an  alternative   facility  can  be  obtained  on
substantially similar terms, although there can be no assurance in this regard.

         Cash flows  provided by (used in) operating  activities  for the fiscal
years  ended  September  30,  1997  and 1996  were  approximately  $292,000  and
($650,000),  respectively.  The  improvement  in cash  flows for the year  ended
September  30, 1997 compared to 1996 was due  primarily to higher  earnings.  In
addition, the increase in accounts receivable for fiscal 1997 compared to fiscal
1996 is directly related to the increase in revenues of $11,830,000.  Cash flows
used in investing  activities for the fiscal years ended  September 30, 1997 and
1996 were  approximately  $1,861,000 and $1,568,000,  respectively.  Most of the
cash used in investing activities was for the purchase of short-term investments
and capital expenditures.

         Capital  expenditures  for fiscal 1998 are expected to be approximately
$500,000,  which will primarily relate to the upgrading of computers,  telephone
system and various leasehold improvements.

           On  October  31,  1997,  the  Company  announced  that  its  Board of
Directors  had  authorized  the  repurchase  of up to  1,000,000  of the Class A
Warrants.  Purchases  are being made from time to time on the  Nasdaq  Small Cap
market or otherwise  at  prevailing  market  prices and may be made in privately
negotiated  transactions.  At December 31, 1997, an aggregate of 962,562 Class A
Warrants had been  repurchased for an aggregate  purchase price of approximately
$1,018,303.  The Company also terminated its common stock  repurchase plan which
was authorized on December 31, 1996.

         The Company  believes  that its current cash  position  and  investment
balances,  together with financing  available under its working capital facility
will be sufficient to support current working capital  requirements for the next
twelve months.

                                      -10-

<PAGE>
IMPACT OF INFLATION

         Inflation has not been a major factor in the Company's  business  since
inception. There can be no assurances that this will continue.

NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

         The Financial  Accounting Standards Board ("FASB") has issued Statement
of Financial  Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation,"  in October of 1995.  SFAS No. 123 uses a fair value based method
of accounting for stock options and similar equity  instruments as contrasted to
the  intrinsic  value  based  method  of  accounting  prescribed  by  Accounting
Principles  Board  ("APB")  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees.  The  accounting  requirements  of SFAS  No.  123 are  effective  for
transactions  entered into in fiscal  years that begin after  December 15, 1995;
the  disclosure  requirements  of SFAS  No.  123  are  effective  for  financial
statements  for fiscal years  beginning  after  December  15, 1995.  The Company
anticipates  continuing  to  account  for  stock-based  compensation  using  the
intrinsic  value  method.  SFAS No. 123 will not have an impact on the Company's
results of operations or financial position.

         The FASB has also issued SFAS No. 128,  "Earnings  per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structure," in February 1997.

         SFAS No. 128  simplifies  the earnings per share  ("EPS")  calculations
required by APB Opinion No. 15, and related  interpretations,  by replacing  the
presentation  of primary  EPS with a  presentation  of basic  EPS.  SFAS No. 128
requires  dual  presentation  of basic and diluted EPS by entities  with complex
capital  structures.  Basic EPS includes no dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares  outstanding for the period.  Diluted EPS reflects the potential dilution
of  securities  that could share in the  earnings  of an entity,  similar to the
fully diluted EPS of APB Opinion No. 15. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997,  including interim
periods;  earlier application is not permitted.  When adopted, SFAS No. 128 will
require restatement of all prior-period EPS data presented.  The Company's basic
EPS as calculated under SFAS No. 128 would have been $.25 and $.14 for the years
ended  September  30, 1997 and 1996,  respectively.  The Company  diluted EPS as
calculated  under SFAS No. 128 would have been $.23 and $.14 for the years ended
September 30, 1997 and 1996, respectively.

         SFAS No. 129 does not change any previous disclosure requirements,  but
rather consolidates existing disclosure requirements for ease of retrieval.

         The FASB also issued SFAS No. 130,  "Reporting  Comprehensive  Income."
SFAS No. 130 is effective for fiscal years  beginning  after  December 15, 1997.
Earlier application is permitted.  Reclassification of financial  statements for
earlier periods provided for comparative purposes is required. The Company is in
the process of determining its preferred format. The

                                      -11-

<PAGE>
adoption  of SFAS No.  130 will  have no impact  on the  Company's  consolidated
results of operations, financial position or cash flows.

         The FASB has issued SFAS No.  131,  "Disclosures  About  Segments of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are  reported in annual  financial  statements  and  requires  the  reporting of
selected  information  about  operating  segments in interim  financial  reports
issued to  shareholders.  SFAS No. 131 is effective for periods  beginning after
December  15,  1997,  and  comparative  information  for earlier  years is to be
restated.  SFAS No. 131 need not be applied to interim  financial  statements in
the initial year of its application. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's  consolidated  results of operations,  financial  position or cash
flows.



                                      -12-

<PAGE>

THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------

INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                                                                            Page
                                                                            ----

Independent Auditor's Report ...............................................F-2

Consolidated Balance Sheet as of September 30, 1997 ........................F-3

Consolidated Statements of Operations for the years ended
September 30, 1997 and 1996.................................................F-5

Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1997 and 1996.................................................F-6

Consolidated Statements of Cash Flows for the years ended
September 30, 1997 and 1996.................................................F-7

Notes to Consolidated Financial Statements .................................F-8




                             . . . . . . . . . . . .



                                       F-1

<PAGE>
                          INDEPENDENT AUDITOR'S REPORT


To the Stockholders and Board of Directors of
   The Solomon-Page Group Ltd.



                  We have audited the accompanying consolidated balance sheet of
The Solomon-Page Group Ltd. and its subsidiary as of September 30, 1997, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the two fiscal years in the period ended  September  30, 1997.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

                  We conducted our audits in accordance with generally  accepted
auditing  standards.  Those standards require that we plan and perform the audit
to  obtain  reasonable  assurance  about  whether  the  consolidated   financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  financial  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

                  In our opinion, the consolidated financial statements referred
to above present fairly, in all material  respects,  the consolidated  financial
position of The  Solomon-Page  Group Ltd. and its subsidiary as of September 30,
1997, and the consolidated  results of their operations and their cash flows for
each of the two  fiscal  years  in the  period  ended  September  30,  1997,  in
conformity with generally accepted accounting principles.






                                         MOORE STEPHENS, P. C.
                                         Certified Public Accountants.

Cranford,  New Jersey
December 18, 1997, except as to
Note 14 for which the date is
December 31, 1997


                                       F-2

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS:
CURRENT ASSETS:
<S>                                                                    <C>
   Cash and Cash Equivalents                                           $       409,856
   Investments                                                                 899,220
   Accounts Receivable - [Net of Allowances of $125,000]                     7,378,027
   Other Current Assets                                                        297,886
                                                                       ---------------

   TOTAL CURRENT ASSETS                                                      8,984,989
                                                                       ---------------
PROPERTY AND EQUIPMENT:
   Equipment                                                                 1,155,072
   Furniture and Fixtures                                                      406,372
   Leasehold Improvements                                                      578,764
                                                                       ---------------

   Total - At Cost                                                           2,140,208
   Less: Accumulated Depreciation                                              682,826
                                                                             ---------
PROPERTY AND EQUIPMENT -NET                                                  1,457,382
                                                                             ---------
OTHER ASSETS:
   Investments                                                               1,251,207
   Intangible Assets - [Net of Accumulated Amortization of $110,569]           753,564
   Due from Related Parties                                                    177,920
   Security Deposits                                                           133,172
   Restricted Investment                                                        34,466
   Other Assets                                                                 22,756
                                                                       ---------------

   TOTAL OTHER ASSETS                                                        2,373,085
                                                                       ---------------
   TOTAL ASSETS                                                        $    12,815,456
                                                                       ===============
</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                       F-3
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
<S>                                                                    <C>            
   Accrued Payroll and Commissions                                     $     2,494,101
   Accounts Payable and Accrued Expenses                                       967,887
   Income Taxes Payable                                                        267,104
   Current Portion of Obligations Under Capital Leases                          63,325
   Other Current Liabilities                                                   271,238
                                                                       ---------------

   TOTAL CURRENT LIABILITIES                                                 4,063,655
                                                                       ---------------

LONG-TERM LIABILITIES:
   Obligations Under Capital Leases                                             36,473
   Deferred Credit                                                             383,863
                                                                       ---------------
   TOTAL LONG-TERM LIABILITIES                                                 420,336
                                                                       ---------------
COMMITMENTS AND CONTINGENCIES                                                       --
                                                                       ---------------
STOCKHOLDERS' EQUITY:
   Preferred Stock - Par Value $.001 Per Share; Authorized
     2,000,000 Shares, None Issued or Outstanding                                   --

   Common Stock - Par Value $.001 Per Share;
     Authorized 20,000,000 Shares, 5,139,285 Shares
     Issued and 5,129,285 Shares Outstanding                                     5,139

   Additional Paid-in Capital                                                8,488,247

   Treasury Stock; 10,000 Common Shares - At Cost                              (16,250)

   Accumulated Deficit                                                        (145,671)
                                                                       ---------------
   TOTAL STOCKHOLDERS' EQUITY                                                8,331,465
                                                                       ---------------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $    12,815,456
                                                                       ===============
</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                       F-4

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                   YEARS ENDED
                                                                                                   -----------
                                                                                                  SEPTEMBER 30,
                                                                                                  -------------
                                                                                          1 9 9 7             1 9 9 6
                                                                                          -------             -------

<S>                                                                                   <C>                 <C>            
REVENUE                                                                               $    28,996,485     $    17,165,836
                                                                                      ---------------     ---------------

OPERATING EXPENSES:
   Selling Expenses                                                                        22,412,747          12,762,977
   General and Administrative                                                               4,555,081           3,652,619
   Depreciation and Amortization                                                              337,158             240,927
                                                                                      ---------------     ---------------

   TOTAL OPERATING EXPENSES                                                                27,304,986          16,656,523
                                                                                      ---------------     ---------------

   INCOME FROM OPERATIONS                                                                   1,691,499             509,313
                                                                                      ---------------     ---------------

OTHER INCOME [EXPENSES]:
   Interest and Dividend Income                                                               133,077             130,937
   Interest Expense                                                                           (26,820)            (49,215)
   Net Realized and Unrealized Gain on Investments                                             37,140             137,411
   Other Income                                                                                    --               1,080
                                                                                      ---------------     ---------------

   TOTAL OTHER INCOME                                                                         143,397             220,213
                                                                                      ---------------     ---------------

   INCOME BEFORE INCOME TAX EXPENSE                                                         1,834,896             729,526

INCOME TAX EXPENSE                                                                            552,531              19,200
                                                                                      ---------------     ---------------

   NET INCOME                                                                         $     1,282,365     $       710,326
                                                                                      ===============     ===============

PRIMARY INCOME PER COMMON SHARE                                                       $           .20     $           .14
                                                                                      ===============     ===============

FULLY DILUTED INCOME PER COMMON SHARE                                                 $           .20     $           .13
                                                                                      ===============     ===============
</TABLE>



The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                                            F-5

<PAGE>

THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                         ADDITIONAL                                        TOTAL
                                                                         ----------                                        -----
                                PREFERRED STOCK       COMMON STOCK        PAID-IN        TREASURY STOCK    ACCUMULATED STOCKHOLDERS'
                                ---------------       ------------        -------        ----------------  -------------------------
                            SHARES      AMOUNT     SHARES      AMOUNT      CAPITAL     SHARES       AMOUNT     DEFICIT       EQUITY
                            ------      ------     ------      ------      -------     ------       ------     -------       ------


BALANCE - OCTOBER 1,
<S>                              <C> <C>         <C>        <C>        <C>            <C>      <C>         <C>           <C>
   1995                          --  $      --   5,139,285  $   5,139  $ 8,488,247         --  $       --  $ (2,138,362) $ 6,355,024

   Net Income                    --         --          --         --           --         --          --       710,326      710,326
                          ---------  ---------  ----------  ---------  -----------  ---------  ----------  ------------  -----------

BALANCE - SEPTEMBER 30,
   1996                          --         --   5,139,285      5,139    8,488,247         --          --    (1,428,036)  7,065,350

   Treasury Shares
     Purchased                   --         --          --         --           --     10,000     (16,250)           --     (16,250)

   Net Income                    --         --          --         --           --         --          --     1,282,365    1,282,365
                          ---------  ---------  ----------  ---------  -----------  ---------  ----------  ------------  -----------

BALANCE - SEPTEMBER 30,
   1997                          --  $      --   5,139,285  $   5,139  $ 8,488,247     10,000  $  (16,250) $   (145,671) $ 8,331,465
                          =========  =========  ==========  =========  ===========  =========  ==========  ============  ===========
</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                       F-6

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                   YEARS ENDED
                                                                                                   -----------
                                                                                                  SEPTEMBER 30,
                                                                                                  -------------
                                                                                          1 9 9 7            1 9 9 6
                                                                                          -------            -------
OPERATING ACTIVITIES:
<S>                                                                                   <C>                 <C>            
   Net Income                                                                         $     1,282,365     $       710,326
                                                                                      ---------------     ---------------
   Adjustments  to  Reconcile  Net  Income to Net Cash  Provided  by [Used  for]
     Operating Activities:
     Depreciation and Amortization                                                            337,158             240,927
     Provision for Losses on Accounts Receivable                                               35,100             235,157
     [Gain] on Disposal of Assets                                                                  --                (580)
     Deferred Credit                                                                          117,871              52,139
     Net Realized and Unrealized Gain on Investments                                          (37,140)           (137,411)

   Changes in Assets and Liabilities:
     [Increase] Decrease in:
       Accounts Receivable                                                                 (3,253,036)         (2,944,843)
       Other Current Assets                                                                   (79,613)           (120,881)
       Security Deposits                                                                      (47,894)             (7,531)

     Increase [Decrease] in:
       Accounts Payable and Accrued Expenses                                                1,491,840           1,260,388
       Income Tax Payable                                                                     290,104                  --
       Other Current Liabilities                                                              155,676              62,198
                                                                                      ---------------     ---------------

     Total Adjustments                                                                       (989,934)         (1,360,437)
                                                                                      ---------------     ---------------

   NET CASH - OPERATING ACTIVITIES                                                            292,431            (650,111)
                                                                                      ---------------     ---------------

INVESTING ACTIVITIES:
   Capital Expenditures                                                                      (791,427)           (302,189)
   Purchases of Investments                                                                (2,183,043)         (4,618,641)
   Proceeds from Sales of Investments                                                       1,380,081           3,446,508
   Acquisitions of Trade Names                                                               (264,532)           (179,601)
   Proceeds from Insurance Claim                                                                   --              23,799
   Advances to Related Parties                                                                (11,637)            (46,888)
   Cash Received from Related Parties                                                          10,000              19,000
   Transfer from Restricted Investment                                                             --              90,043
                                                                                      ---------------     ---------------

   NET CASH - INVESTING ACTIVITIES                                                         (1,860,558)         (1,567,969)
                                                                                      ---------------     ---------------

FINANCING ACTIVITIES:
   Principal Payments Under Capital Lease Obligations                                        (119,323)           (113,525)
   Purchase of Treasury Stock                                                                 (16,250)                 --
                                                                                      ---------------     ---------------

   NET CASH - FINANCING ACTIVITIES                                                           (135,573)           (113,525)
                                                                                      ---------------     ---------------

   NET [DECREASE] IN CASH AND CASH EQUIVALENTS                                             (1,703,700)         (2,331,605)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEARS                                              2,113,556           4,445,161
                                                                                      ---------------     ---------------

   CASH AND CASH EQUIVALENTS - END OF YEARS                                           $       409,856     $     2,113,556
                                                                                      ===============     ===============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the years for:
     Interest                                                                         $        26,820     $        49,215
     Income Taxes                                                                     $       422,402     $            --
</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                       F-7

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - The Solomon-Page Group Ltd. and its wholly-owned  subsidiary [the
"Company"]   provide  retained   executive  search  and  full-time   contingency
recruitment  services  in the fields of capital  markets,  accounting,  fashion,
human  resources,  legal,  health care,  publishing and information  technology.
Temporary  staffing  and  consulting  services  are  provided  in the  fields of
information technology, accounting and human resources. The Company provides its
services  principally  in the New York  metropolitan  area  through  its offices
located in New York and New  Jersey.  The  Company  also  provides  services  in
California and Georgia through its offices located in those areas.

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include the
accounts of the Company and its subsidiary.  All material  intercompany accounts
and transactions are eliminated.

REVENUE  RECOGNITION - Search  revenues are recognized in full-time  contingency
search  engagements  upon the  successful  completion  of the  assignment.  In a
retained  search  engagement,  the  non-refundable  retainer is recognized  upon
execution  of  the  agreement,  with  the  balance  recognized  upon  successful
completion of the search.  Reserves are  established  to estimate  losses due to
placed  candidates  not  remaining in  employment  for the  Company's  guarantee
period.  Temporary  staffing  and  consulting  revenue  is  recognized  when the
temporary personnel provide the service.

RECEIVABLE   ALLOWANCES  -  The  Company  records  allowances  against  accounts
receivable,  based on historical experience,  for its estimated exposure to loss
from bad debts and from search  candidates  that do not  fulfill  the  Company's
guarantee  period.  Losses  from bad debts are  charged  to  expense  and losses
related to the guarantee period are charged to revenue.

INVESTMENTS - The Company  accounts for investments in accordance with Statement
of Financial  Accounting  Standards  ["SFAS"] No. 115,  "Accounting  for Certain
Investments  in  Debt  and  Equity   Securities."   Management   determines  the
appropriate  classification  of its investments in debt and equity securities at
the time of purchase and reevaluates  such  determination  at each balance sheet
date. Equity securities, and debt securities which the Company does not have the
intent to hold to maturity,  are  classified  as trading or available  for sale.
Securities  available  for sale are carried at fair value,  with any  unrealized
holding  gains and  losses,  net of tax,  reported  in a separate  component  of
shareholders'  equity until  realized.  Trading  securities  are carried at fair
value with any unrealized gains or losses included in earnings. Held to maturity
securities are carried at amortized cost.  Marketable debt and equity securities
available for current  operations are classified in the balance sheet as current
assets while  securities held for  non-current  uses are classified as long-term
assets.  Realized  gains  and  losses  are  calculated  utilizing  the  specific
identification method [See Note 2].

PROPERTY AND EQUIPMENT - Equipment,  furniture and  leasehold  improvements  are
recorded at cost.

DEPRECIATION  AND   AMORTIZATION  -  Depreciation  is  computed   utilizing  the
straight-line method based on estimated useful lives ranging from three to seven
years.  Amortization  is computed  utilizing the  straight-line  method over the
remaining  lease term.  Depreciation  expense was  $272,863 and $203,153 for the
years ended September 30, 1997 and 1996, respectively.

DEFERRED  INCOME  TAXES - The Company  accounts  for  deferred  income  taxes in
accordance  with SFAS No. 109,  "Accounting  for Income  Taxes."  The  statement
requires that deferred income taxes reflect the tax consequences on future years
of  differences  between  the tax  bases of  assets  and  liabilities  and their
financial reporting amounts.

DEFERRED  CREDIT - The  Company's  lease on its  premises  provides for periodic
increases over the lease term. Pursuant to SFAS No. 13, "Accounting for Leases,"
the Company records rent expense on a straight-line  basis.  The effect of these
differences is recorded as a deferred credit.

CASH AND CASH  EQUIVALENTS - Cash  equivalents  are comprised of certain  highly
liquid investments with a maturity of three months or less when purchased.

START-UP COSTS - The Company expenses the startup cost of new business groups as
incurred.

                                       F-8
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
--------------------------------------------------------------------------------

[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

INCOME  PER SHARE - Income  per share of common  stock is based on the  weighted
average number of common shares  outstanding for each period  presented.  Common
stock  equivalents  are  included if  dilutive.  The number of weighted  average
common  shares  outstanding  utilized  to compute  primary  income per share was
9,091,644  and  5,139,285  and to  compute  fully  diluted  income per share was
9,091,644  and  5,452,595  for the  years  ended  September  30,  1997 and 1996,
respectively.  For the year  ended  September  30,  1997,  income  per share was
computed using the modified treasury stock method [See Note 13].

INTANGIBLES  - Intangibles  which consist of trade names and customer  lists are
amortized  utilizing the straight-line  method over periods ranging from 5 to 15
years. When changing  circumstances  warrant, the Company evaluates the carrying
value and the periods of  amortization  based on the current and expected future
non-discounted cash flows from operations to determine whether revised estimates
of carrying value or useful lives is required.  Amortization expense was $64,295
and $37,774 for the years ended September 30, 1997 and 1996,  respectively  [See
Note 7].

CONCENTRATIONS OF CREDIT RISK - Financial  instruments that potentially  subject
the Company to  concentrations of credit risk include cash, cash equivalents and
accounts  receivable  arising from its normal business  activities.  The Company
places  its  cash  and cash  equivalents  with  high  credit  quality  financial
institutions. At September 30, 1997, the Company has approximately $580,000 in a
financial  institution  that is subject to normal  credit  risk  beyond  insured
amounts.

The Company believes that credit risk related to accounts  receivable is limited
due to the large  number of Fortune  1000  companies  comprising  the  Company's
customer base and the diversified  industries in which the Company operates. The
Company has two customers whose sales comprise approximately 21 percent of total
revenue and whose receivables at September 30, 1997 comprise 14 percent of total
accounts  receivable.  The  Company  does not  require  collateral  on  accounts
receivable or other financial instruments.

USE OF ESTIMATES - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  Actual results could differ from those estimates.

ADVERTISING  -  The  Company  expenses  advertising  costs  as  incurred.  Total
advertising  costs  charged to expense  amounted to  approximately  $207,000 and
$150,000 for the years ended September 30, 1997 and 1996, respectively.

STOCK  BASED  COMPENSATION  - The  Company  accounts  for  employee  stock-based
compensation  under the intrinsic value based method as prescribed by Accounting
Principles  Board ["APB"]  Opinion No. 25. The Company applies the provisions of
SFAS No.  123,  "Accounting  for  Stock  Based  Compensation,"  to  non-employee
stock-based  compensation  and  the  pro  forma  disclosure  provisions  of that
statement to employee stock-based compensation.

                                       F-9

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #3
--------------------------------------------------------------------------------

[2] INVESTMENTS IN DEBT AND EQUITY SECURITIES

At September 30, 1997, the Company's securities were classified as available for
sale and held to maturity while at September 30, 1996, the Company's  securities
were  classified as trading and held to maturity.  At September  30, 1997,  cost
approximates fair value for the Company's available for sale securities.

At September  30, 1997,  the  Company's  available for sale and held to maturity
securities consisted of certain highly liquid debt securities.  A summary of the
Company's investments in debt securities is as follows:

                                                      SEPTEMBER 30, 1997
                                                      ------------------
FINANCIAL STATEMENT CAPTION                   CARRYING VALUE      FAIR VALUE
---------------------------                   --------------      ----------

Available for Sale:
   Cash and Cash Equivalents                  $       9,188     $       9,188
                                              =============     =============

   Investments                                $   2,150,427     $   2,150,427
                                              =============     =============

Held to Maturity:
   Restricted Investment - Noncurrent         $      34,466     $      34,466
                                              =============     =============

Gross proceeds from sale of available for sale securities was $2,041,991 and net
realized gain on sales was $28,990 for the year ended  September  30, 1997.  Net
unrealized  gains on trading  securities  was $4,332 and is included in earnings
for the year ended September 30, 1996.

Contractual  maturities of debt securities  classified as available for sale and
held to maturity are as follows:

                                          AVAILABLE FOR SALE    HELD TO MATURITY
                                          ------------------    ----------------

Within 1 year                              $     899,220         $      34,466
Between 1 and 5 years                      $   1,251,207         $          --

[3] DUE FROM RELATED PARTIES

At September  30, 1997,  the Company had a balance due from various  officers of
the Company aggregating  $177,920 including accrued interest.  The advances bear
interest at 8 percent.  Interest  income on the advances was $11,637 and $10,401
for the  years  ended  September  30,  1997  and  1996,  respectively.  Interest
receivable on the advances was $23,272 at September 30, 1997.

[4] CREDIT FACILITY

On February 24, 1997, the Company entered into a $4,000,000 line of credit which
expires on February 28, 1998. The line carries  interest at the banks  reference
rate plus one percent [9.5% at September 30, 1997]. Borrowings are limited to 80
percent  of  eligible   receivables   as  defined  in  the   agreement   and  is
collateralized  by all the assets of the Company.  There were no  borrowings  at
September 30, 1997 [See Note 14].

                                      F-10

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4
--------------------------------------------------------------------------------

[5] LEASES

CAPITAL  LEASES - The Company is the lessee of  furniture,  fixtures  and office
equipment  under capital  leases  expiring in various  years  through 1999.  The
assets and liabilities under capital leases are recorded at the present value of
the net future  minimum  lease  payments.  The assets are  amortized  over their
estimated  productive  lives.  Amortization  of assets under  capital  leases is
included in depreciation expense.

Following is a summary of property held under capital leases:

Furniture and Fixtures                         $       110,481
Office Equipment                                       360,778
                                               ---------------

Total - At Cost                                        471,259
Less: Accumulated Amortization                         315,127

   TOTAL                                       $       156,132
   -----                                       ===============

Minimum  future lease  payments  under capital  leases for each of the next five
years and in the aggregate are:

1998                                           $        75,090
1999                                                    38,497
2000                                                        --
2001                                                        --
2002                                                        --
Thereafter                                                  --
                                               ---------------

Net Minimum Lease Payments                             113,587
Less: Amount Representing Interest                     (13,789)
                                               ---------------
Present Value of Net Minimum Lease Payments             99,798
Less: Current Portion                                   63,325
                                               ---------------
   LONG-TERM PORTION                           $        36,473
   -----------------                           ===============

OPERATING  LEASES - The  Company  leases  office  space under  operating  leases
expiring through September 2006. In lieu of a cash security deposit, the Company
has  delivered to the landlord a letter of credit in the amount of $34,466 which
expires  June 15,  1998.  This  letter  of credit  is  collateralized  by a U.S.
Treasury Bill which is classified as a restricted investment in the accompanying
balance  sheet.  The Company  leases office  equipment  under  operating  leases
expiring through 1999.

Minimum  future rental  payments  under  noncancelable  operating  leases having
remaining  terms in excess of one year as of September  30, 1997 for each of the
next five years and in the aggregate are:

YEAR ENDING
-----------
SEPTEMBER 30,
-------------
   1998                                        $       771,094
   1999                                                769,519
   2000                                                846,742
   2001                                                874,331
   2002                                                905,324
Subsequent to 2002                                   3,294,700
                                               ---------------

   TOTAL MINIMUM FUTURE RENTAL PAYMENTS        $     7,461,710
   ------------------------------------        ===============

                                      F-11

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
--------------------------------------------------------------------------------

[5] LEASES [CONTINUED]

OPERATING  LEASES  [CONTINUED]  - In  addition,  the  Company  is liable for its
pro-rata share of increases in real estate taxes and  escalations as provided in
the lease agreements.

Rent expense was $616,778  and $593,322 for the years ended  September  30, 1997
and 1996, respectively.

[6] CAPITAL STOCK

On December 18, 1996, the Company's Board of Directors authorized the repurchase
of up to 500,000  shares of the Company's  common stock from time to time in the
open market or in privately  negotiated  transactions.  The Company  repurchased
10,000 shares during the year ended September 30, 1997 [See Note 14].

[7] COMMITMENTS AND CONTINGENCIES

EMPLOYMENT  ARRANGEMENTS - On June 14, 1993, the Company entered into employment
agreements  with Mr. Herbert  Solomon,  Mr. Lloyd Solomon and Mr. Scott Page. In
addition,  Mr.  Herbert  Solomon  and Mr.  Scott  Page are  entitled  to receive
commission   payments  based  on  the  revenues  generated  by  their  executive
recruitment  and  placement  activities  and Mr.  Lloyd  Solomon is  entitled to
receive  incentive  compensation  for each  fiscal  year  during the term of his
employment  equal to that percentage of consolidated  pre-tax  operating  income
that consolidated pre-tax operating income bears to total consolidated  revenue.
These  employment  agreements  are for an initial term of five years  commencing
June 14, 1993 and will be extended automatically for additional one-year periods
unless terminated by either party. These employment agreements also prohibit the
employee from competing with the Company's  business during the term thereof and
for a period of one year  thereafter.  At  September  30,  1997,  the  Company's
obligation for salaries under these  employment  agreements  amounts to $549,000
which is to be paid during the year ending September 30, 1998.

For the years ended  September  30, 1997 and 1996,  approximately  $727,345  and
$615,000,  respectively,  was charged to operations under the commission portion
and  approximately  $200,000  and  $34,000,  respectively  under  the  incentive
compensation portion of the above described executive compensation plans.

On September 18, 1996, the Company  terminated an agreement  relating to 794,136
escrow shares that had been made available for issuance to certain executives of
the  Company.  These  escrow  shares  were to have  been  released  based on the
achievement by the Company of prescribed levels of pre-tax earnings.  Concurrent
with the  termination,  the Company  retired the shares.  In  consideration  for
terminating  the escrow share  agreement,  the Company  granted stock options to
purchase  200,000  shares of common  stock at fair  market  value on the date of
grant to each of the three  executives  who would have been  eligible to receive
escrow shares.

LITIGATION - The Company is party to  litigation  arising from the normal course
of business. In managements' opinion, this litigation will not materially affect
the Company's financial position, results of operations or cash flows.

ACQUISITIONS  - In  connection  with certain  acquisitions,  the Company will be
required to pay  purchase  price  adjustments  through July 6, 2000 based on the
achievement  of various  criteria.  These  additional  payments  are  charged to
intangibles  and are amortized over the then  remaining life of the  intangible.
Purchase price adjustments  amounted to $264,532 during the year ended September
30, 1997.


                                      F-12

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6
--------------------------------------------------------------------------------

[8] OPTIONS AND WARRANTS

On April 1, 1994,  the Company issued 175,000 Class A warrants and 175,000 Class
B warrants in  connection  with  certain  bridge  financing  which was repaid on
October 20,  1994.  The Class A warrants  are  identical  to those issued in the
Company's  initial  public  offering.  The Class B warrants are identical to the
Class A warrants except that the exercise price is $6.00 per share.

On October 20, 1994, in connection  with its initial public offering the Company
issued 2,300,000 Class A redeemable common stock purchase warrants. Each Class A
warrant entitles the holder to purchase one share of common stock exercisable at
$4.50 per share  commencing  October 20, 1995 and  expiring on October 20, 1999.
The Class A warrants are redeemable at $.05 per warrant based on the achievement
of certain criteria [See Note 14].

On October 20, 1994, in connection with its initial public offering, the Company
granted to its  underwriter  an option to purchase an  aggregate  200,000  units
consisting  of one  share of  common  stock  and one  Class A  redeemable  stock
purchase warrant  exercisable at $6.60 per unit commencing  October 20, 1995 and
expiring October 20, 1999.

On August 17, 1995, the Company  adopted the 1995  Director's  Stock Option Plan
[the "Director's  Plan"].  The Director's Plan provides for the grant of options
to  purchase  up to  100,000  shares of common  stock to  Directors  who are not
employees of the Company.  Options  granted  under the  Director's  Plan will be
exercisable commencing a minimum of 6 months from the date of grant for a period
of 10 years from the date of grant at an  exercise  price which is not less than
the fair market value of the common stock on the date of the grant. Options vest
at a rate of 50% after one year and 50% after two years.

On August 6, 1993,  the Company  adopted the 1993 Long Term  Incentive Plan [the
"1993 Plan"], which was amended on June 24, 1994. The 1993 Plan provides for the
issuance of  incentive  awards in the form of but not limited to stock  options,
stock appreciation  rights,  restricted stock and performance grants to purchase
up to  1,500,000  shares  of  common  stock and  provides  that all  individuals
performing  services for the Company are eligible to receive  incentive  awards.
The  1993  Plan is  administered  by a  committee  designated  by the  Board  of
Directors. The selection of participants,  allotment of shares, determination of
price and other  conditions of purchase of any awards granted will be determined
by such  committee  at its sole  discretion.  The purpose of the 1993 Plan is to
attract and retain persons instrumental to the success of the Company. Incentive
stock options granted under the 1993 Plan will be exercisable for a period of up
to 10 years from the date of grant at an  exercise  price which is not less than
the fair market value of the common stock on the date of the grant,  except that
the  term  of an  incentive  stock  option  granted  under  the  1993  Plan to a
stockholder  owning more than 10% of the outstanding  shares of the common stock
may not exceed  five years and its  exercise  price may not be less than 110% of
the  fair  market  value  of  the  common  stock  on  the  date  of  the  grant.
Non-executive  officer  options vest at a rate of 33 1/3% after three years,  33
1/3% after four years and 33 1/3% after five years.  Options to purchase 450,000
shares of common  stock have been  granted to  executive  officers and vest at a
rate of 33 1/3% upon grant,  33 1/3% after six months and 33 1/3% after thirteen
months.

On September 17, 1996, the Company adopted the 1996 Stock Option Plan [the "1996
Plan"].  The 1996 Plan  provides  for  awards of  incentive  stock  options  and
non-qualified  options to purchase  up to  1,000,000  shares of common  stock to
employees   and   directors  of  the  Company.   The  1996  Plan  provides  that
non-qualified options must be granted at not less than 80 percent of fair market
value on the date  granted.  No options at less than fair market value have been
awarded.  Options  principally vest at a rate of 33 1/3% after one year, 33 1/3%
after two years and 33 1/3% after three years.



                                      F-13

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
--------------------------------------------------------------------------------

[8] OPTIONS AND WARRANTS [CONTINUED]

A summary of the activity in the option plans is as follows:

                                                             WEIGHTED AVERAGE
                                                             ----------------
                                                SHARES        EXERCISE PRICE
                                                ------        --------------

OUTSTANDING AT SEPTEMBER 30, 1995              1,372,000        $   1.46

   Granted                                       758,500            2.06
   Exercised                                          --
   Expired/Canceled                             (357,000)           1.49
                                               ---------

OUTSTANDING AT SEPTEMBER 30, 1996              1,773,500            1.71

   Granted                                       246,750            2.33
   Exercised                                          --
   Expired/Canceled                              (55,000)           1.43
                                               ---------

OUTSTANDING AT SEPTEMBER 30, 1997              1,965,250            1.80
                                               =========

EXERCISABLE AT SEPTEMBER 30, 1997                709,666            1.68
                                               =========

If compensation cost for the stock option plans had been determined based on the
fair value at the grant dates for awards  under the plans,  consistent  with the
alternative  method set forth under SFAS No. 123, the  Company's  net income and
net income per share would have been  reduced on a pro forma basis as  indicated
below:

                                                 1 9 9 7               1 9 9 6
                                                 -------               -------
Year ended September 30:

Net Income:
   As Reported                                   $ 1,282,365        $ 710,326
   Pro Forma                                     $   952,889        $ 307,459

Primary Income Per Share:
   As Reported                                   $       .20        $     .14
   Pro Forma                                     $       .17        $     .06

Fully Diluted Income Per Share:
   As Reported                                   $       .20        $     .13
   Pro Forma                                     $       .16        $     .06

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for the grants awarded in 1997 and 1996, respectively:

                                                     SEPTEMBER 30,
                                                     -------------
                                               1 9 9 7                 1 9 9 6
                                              ---------               --------
Dividend Yields                                   0.00%                  0.00%
Expected Volatility                             105.29%                122.66%
Risk-Free Interest Rate                           5.99%                  6.41%
Expected Lifes                                  4 Years             4.79 Years

The  weighted-average  fair value of options granted was $1.73 and $1.74 for the
years ended September 30, 1997 and 1996, respectively.

                                      F-14
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #8
--------------------------------------------------------------------------------

[8] OPTIONS AND WARRANTS [CONTINUED]

The following table summarizes  information about stock options at September 30,
1997:
<TABLE>
<CAPTION>
                                                OUTSTANDING                                    EXERCISABLE
                              ---------------------------------------------------      ----------------------------
                                                WEIGHTED             WEIGHTED                           WEIGHTED
                                                --------             --------                           --------
      RANGE OF                                  REMAINING             AVERAGE                            AVERAGE
      --------                                  ---------             -------                            -------
   EXERCISE PRICES            SHARES        CONTRACTUAL LIFE      EXERCISE PRICE       SHARES        EXERCISE PRICE
   ---------------            ------        ----------------      --------------       ------        --------------
<S>                            <C>               <C>              <C>                     <C>          <C>        
$ .01 to $2.00                 1,089,250         7.6 Years        $         1.40          473,000      $      1.40
$2.01 to $3.00                   876,000         6.6 Years        $         2.29          236,666      $      2.25
                           -------------                                            -------------
                               1,965,250         7.2 Years        $         1.80          709,666      $      1.68
                           =============                                            =============
</TABLE>

[9] INCOME TAXES EXPENSE

The provision for income tax expense consists of the following:
<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,
                                                                       -------------
                                                                  1 9 9 7          1 9 9 6
                                                                  -------          -------
Current:
<S>                                                             <C>             <C>          
   Federal                                                      $    835,681    $     379,000
   Utilization of Net Operating Loss Carryforward                   (423,131)        (379,000)
   State and City                                                    453,680          200,000
   Utilization of Net Operating Loss Carryforward                   (229,504)        (196,000)
                                                                ------------    -------------

   Total Current                                                     636,726            4,000
                                                                ------------    -------------

Deferred [Benefit]:
   Federal                                                           (60,923)          15,200
   State and City                                                    (23,272)              --
                                                                ------------    -------------
   Total Deferred                                                    (84,195)          15,200
                                                                ------------    -------------

   TOTAL INCOME TAX EXPENSE                                     $    552,531    $      19,200
   ------------------------                                     ============    =============
</TABLE>

Income tax at the federal  statutory rate reconciled to the Company's  effective
rate is as follows:

                                                             SEPTEMBER 30,
                                                             -------------
                                                         1 9 9 7        1 9 9 6
                                                         -------        -------

Federal Statutory Rate                                     34.0%         34.0%
Non Deductible Expenses                                     4.4          17.4
Benefit of Net Operating Loss Carryforward                (23.1)        (51.4)
Change in Deferred Tax Asset Valuation Allowance            7.8            --
State Income Taxes [Net of Federal Tax Benefit]             8.1            .5
Other                                                      (1.1)          2.1
                                                   ------------   -----------

   EFFECTIVE RATE                                          30.1%          2.6%
   --------------                                  ============   ===========

The Company has net operating loss carryforwards of approximately  $54,000 which
will expire in 2009.

                                      F-15
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #9
--------------------------------------------------------------------------------

[9] INCOME TAXES EXPENSE [CONTINUED]

The major  components  of  deferred  income tax assets  and  liabilities  are as
follows:

                                                         SEPTEMBER 30,
                                                         -------------
                                                            1 9 9 7
                                                            -------
Deferred Tax Liabilities:
   Cash Basis Adjustments                               $    (159,279)
   Accelerated Depreciation                                   (91,332)
                                                        -------------

   Total Deferred Tax Liabilities                            (250,611)

Deferred Tax Assets:
   Rent Deferrals                                             149,972
   Net Operating Loss                                          18,419
   Reserves                                                   156,099
   Other                                                       10,316
                                                        -------------

   Total Deferred Tax Assets                                  334,806
                                                        -------------
Net Deferred Tax Asset:
   Before Valuation Allowance:                                 84,195
   Valuation Allowance                                             --
                                                        -------------
   NET DEFERRED INCOME TAX ASSET                        $      84,195
   -----------------------------                        =============

The net  deferred  income tax asset is included in other  current  assets in the
accompanying balance sheet.

The Company  recorded a reduction of $421,917 in its  valuation  allowance  from
September  30,  1996  due to the  achievement,  and  expected  continuation,  of
profitable operations.

[10] SIGNIFICANT CUSTOMERS

For the year ended  September 30, 1997,  two  customers  accounted for 11 and 10
percent of revenue.

For the year ended September 30, 1996, one customer  accounted for 15 percent of
revenue.

[11] RETIREMENT PLAN

The Company  maintains a 401[k]  savings  plan which  covers  substantially  all
employees.  Under the plan,  employees  may elect to defer up to 15  percent  of
their salary,  subject to the Internal Revenue Code limits. The Company may make
a  discretionary  match as well as a  discretionary  contribution.  The  Company
recorded pension expense of $2,641 and $-0- during the years ended September 30,
1997 and 1996, respectively.

[12] FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective  October 1, 1995, the Company adopted SFAS No. 107,  "Disclosure about
Fair Value of Financial  Instruments,"  which requires  disclosing fair value to
the  extent  practicable  for  financial  instruments  which are  recognized  or
unrecognized in the balance sheet.  The fair value of the financial  instruments
disclosed herein is not necessarily  representative  of the amount that could be
realized  or  settled,   nor  does  the  fair  value  amount  consider  the  tax
consequences  of  realization or settlement.  Carrying value  approximates  fair
value for amounts  classified  as due from  related  parties as the  receivables
carry market rates of interest. For certain instruments, including cash and cash
equivalents,  trade  receivables and trade  payables,  it was estimated that the
carrying amount  approximates  fair value for the majority of these  instruments
because of their short maturities.

                                      F-16
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #10
--------------------------------------------------------------------------------

[13] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board  ["FASB"]  has issued  Statement of
Financial  Accounting Standards ["SFAS"] No. 128, "Earnings per Share," and SFAS
No. 129, "Disclosure of Information about Capital Structure," in February 1997.

SFAS No. 128 simplifies the earnings per share ["EPS"] calculations  required by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented.  The Company's basic EPS as calculated  under SFAS No. 128 would have
been  $.25  and  $.14  for  the  years  ended   September  30,  1997  and  1996,
respectively.  The Company  diluted EPS as  calculated  under SFAS No. 128 would
have  been  $.23 and $.14 for the  years  ended  September  30,  1997 and  1996,
respectively.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

The Financial  Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting  Standards ["SFAS"] No. 130, "Reporting  Comprehensive  Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted.  Reclassification of financial  statements for earlier
periods  provided for  comparative  purposes is required.  The Company is in the
process of determining its preferred  format.  The adoption of SFAS No. 130 will
have no impact on the Company's  consolidated  results of operations,  financial
position or cash flows.

The FASB has issued SFAS No. 131,  "Disclosures  About Segments of an Enterprise
and  Related  Information."  SFAS No. 131  changes how  operating  segments  are
reported in annual  financial  statements and requires the reporting of selected
information  about  operating  segments in interim  financial  reports issued to
shareholders. SFAS No. 131 is effective for periods beginning after December 15,
1997, and comparative  information for earlier years is to be restated. SFAS No.
131 need not be applied to interim  financial  statements in the initial year of
its  application.  The Company is in the process of  evaluating  the  disclosure
requirements. The adoption of SFAS No. 131 will have not impact on the Company's
consolidated results of operations, financial position or cash flows.

[14] SUBSEQUENT EVENT

On October 31, 1997, the Company's Board of Directors  authorized the repurchase
of up to 1,000,000 of the  Company's  Class A redeemable  common stock  purchase
warrants in open market or privately negotiated  transactions.  Through December
31, 1997, the Company has repurchased  962,562  warrants at a cost of $1,018,303
which was financed  through  borrowings  on the  Company's  line of credit.  The
Company also terminated its common stock repurchase plan which was authorized on
December 31, 1996.


                             . . . . . . . . . . . .

                                      F-17
<PAGE>
         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         THE SOLOMON-PAGE GROUP LTD.


Dated:    March 2, 1998                  By: /s/ Lloyd Solomon
                                         ----------------------------------
                                            Lloyd Solomon
                                            Vice Chairman and
                                            Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated:

         SIGNATURE                         TITLE                   DATE


/s/ Herbert Solomon            Chairman of the Board             March 2, 1998
-----------------------------   and Director
Herbert Solomon


/s/ Lloyd Solomon              Vice Chairman of the Board,       March 2, 1998
-----------------------------  Chief Executive Officer
Lloyd Solomon                  and Director (Principal
                               Executive Officer)

/s/ Scott Page
-----------------------------  President and Director            March 2, 1998
Scott Page


/s/ Eric M. Davis              Vice President - Finance,         March 2, 1998
----------------------------   Chief Financial Officer
Eric M. Davis                  and Director (Principal
                               Financial and Accounting
                               Officer)


*/s/ Edward Ehrenberg          Director                          March 2, 1998
---------------------------
Edward Ehrenberg


*/s/ Joel A. Klarreich         Director                          March 2, 1998
---------------------------
Joel A. Klarreich


       */s/ Eric M. Davis
       --------------------
        By:  Eric M. Davis
        Attorney-in-Fact