SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-KSB

(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, 1998

/ /      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              (IRS Employer Identification
                  jurisdiction of                        Number)
                  incorporation or
                    organization


             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) 403-6100

          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 per share
                        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, 1998 were $44,638,642.

      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 17, 1998 was approximately: $4,784,112. 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 17, 1998, there
were outstanding  4,652,282 shares of the Registrant's  Common Stock,  $.001 par
value.

                       DOCUMENTS INCORPORATED BY REFERENCE

            Certain portions of the  Registrant's  definitive proxy statement to
be filed  not later  than  January  28,  1999  pursuant  to  Regulation  14A are
incorporated  by  reference  in Items 9  through  12 of Part III of this  Annual
Report on Form 10-KSB.

            Transitional Small Business Disclosure Format (check one):

            Yes / /  No /X/

                                       -2-

<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:  temporary  staffing/consulting
and   executive   search/full-time   contingency   recruitment.   The  temporary
staffing/consulting division provides services to companies seeking personnel in
the information  technology,  accounting and human resources areas and generated
approximately  60% of the  Company's  revenue for the year ended  September  30,
1998. The executive search/full-time  contingency recruitment division comprises
nine lines of business, including four industry (capital markets, publishing and
new media,  healthcare and fashion services),  and five functional  (information
technology,  accounting, human resources, legal and administrative support). The
executive   search/full-time    contingency   recruitment   division   generated
approximately  40% of the  Company's  revenue for the year ended  September  30,
1998.

      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,   its  clients
compensate  the Company 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 support personnel and advertising,  are the
variable  costs of  compensation  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, the staffing industry grew from
approximately  $31  billion in revenue in 1991 to  approximately  $86 billion in
1997, a compound annual growth rate of  approximately  18%.  Temporary help, the
largest staffing  services  segment,  had estimated revenue of approximately $54
billion in 1997 and has grown at an average  annual  rate of  approximately  19%
over the past five years. The information  technology services has become one of
the fastest growing segments to the staffing services industry, as the increased
use of technology has led to a dramatic rise in demand


<PAGE>
for technical project support,  software development and other  computer-related
services.  The information technology services segment had estimated revenues of
approximately  $15 billion for 1997 and had a compounded  annual  growth rate of
approximately  27% since 1993.  The  placement and search sector of the staffing
industry consists of three segments,  retained search,  contingency  recruitment
and temp-to-  perm.  The placement  and search sector had estimated  revenues of
approximately  $10 billion in 1997 and had a  compounded  annual  growth rate of
approximately 20% since 1993.

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.  The Company's  retained
executive search and contingency  recruitment business is currently divided into
nine divisions.

Retained Executive Search

      CAPITAL  MARKETS  (SALES AND  TRADING/INVESTMENT  BANKING).  The Company's
capital  markets   division   primarily   services  global   financial   service
institutions  in North America,  Europe and Asia.  This division 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  division  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
division  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
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

                                       -2-

<PAGE>
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  division
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 business and strategic
planning, corporate development and change management.

      FASHION SERVICES.  The Company's fashion services division  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.

      ADMINISTRATIVE  SUPPORT.  The Company's  administrative  support  division
serves primarily the New York metropolitan  area,  providing services in various
industries such as financial services, consumer products, publishing, insurance,
entertainment, telecommunications and technology. The Company fills positions at
the  administrative  support  level within all  functional  areas and within the
hierarchy of a client's organization.

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.

      ACCOUNTING AND HUMAN RESOURCES. The Company expanded its existing presence
within  its full  time  accounting  and  human  resources  specialty  niches  by
providing temporary staffing and consulting

                                     -3-

<PAGE>
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.

      The Company's future success is materially  dependent on the skills of its
recruitment  and  placement  counselors  in  attracting  clients,  matching  the
clients' needs to appropriate  candidates in each recruiting  opportunity and in
establishing  successful  long term  relationships  with  clients.  The  Company
generally  does  not  have  non-competition   agreements  or  other  restrictive
covenants with its recruitment and placement counselors.

      One  customer  of  the  Company  accounted  for  approximately  14% of the
Company's  revenue during the fiscal year ended  September 30, 1998. The loss of
this customer or a substantial  reduction in its hiring  activities  through the
Company  would  have  a  material  adverse  effect  on the  Company's  financial
performance.

BUSINESS EXPANSION

      During the next  fiscal  year,  the  Company  intends to shift its primary
focus from  revenue  growth to increases in  earnings.  This  objective  will be
pursued by maintaining  current levels of general and  administrative  personnel
while  continuing to grow revenues in each business sector  (retained  executive
search,  full-time  and  part-time  recruitment,   and  temporary  staffing  and
consulting)  through  retention of existing  placement  staff. In addition,  new
sales personnel with prior staffing industry  experience who will complement the
current scope of business  will be recruited on an  opportunistic  basis.  It is
management's belief that the sales,  recruitment and operational  infrastructure
put into place during the past three years will enable the company to accomplish
its goals of sales growth and earnings increases during the next two years.

      Marketing  efforts are currently  focused on providing the Company's  full
complement of services  across a broad range of functional  specialties  in both
the  full-time,   temporary  and  consulting  areas   (information   technology,
accounting, human resources, legal and administrative support) in specific major
geographic  markets (New York,  New Jersey and  Connecticut)  as well as certain
capabilities (information technology,  accounting and healthcare) in Atlanta and
California.  By developing a "brand  identity" to provide a consistent  level of
quality services in each specialty niche it covers, the Company is positioned as
a  value-added  resource  serviced  by  experienced  personnel  in every area of
expertise.  Management has  implemented an ongoing  emphasis on cross selling of
services and  compensates  employees for their efforts in selling  customers the
firm's diversified capabilities.


                                       -4-

<PAGE>
COMPETITION

      The  Company  believes  that the  staffing  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.
In  addition,  many of such  firms  have  longer  operating  histories  than the
Company,  which may  afford  them  significant  advantages in  obtaining  future
clients, arranging financing and attracting skilled personnel.

      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  which enhance the potential for account
penetration and increased revenues.

EMPLOYEES

      As of September 30, 1998,  the Company  employed 136 full-time  employees,
including the Company's four executive  officers,  91 recruitment  and placement
counselors  and 41  administrative  and  support  staff.  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.

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.

ITEM 2.     DESCRIPTION OF PROPERTY

       The Company leases its corporate  headquarters  in New York, New York, as
well as space for its other locations.  The aggregate area of space under leases
is approximately 39,000 square feet. The remaining lease terms run from month to
month to eight years and the  aggregate  rent paid for the year ended  September
30, 1998 was approximately $1,017,000. The Company believes that its current

                                       -5-

<PAGE>
facilities  are  adequate  for its needs and does not expect to have  difficulty
leasing additional office space to satisfy anticipated future needs.

ITEM 3.     LEGAL PROCEEDINGS

      On October 13, 1998, Romac  International,  Inc.  ("Romac")  instituted an
action  against the Company and a former  employee of both Romac and the Company
in the Superior Court of New Jersey, Chancery Division,  Middlesex County. Romac
alleges that the former employee took  confidential and proprietary  information
upon leaving Romac and accepting  employment with the Company. In addition Romac
alleges breach of a  non-competition  agreement by the former  employee and that
the Company knew of the  existence of such  agreement.  Romac seeks  unspecified
monetary damages, as well as injunctive relief, against both the Company and the
former employee.  The Company believes that this action will not have a material
adverse effect on its financial condition or results of operations.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            Not Applicable.




                                       -6-

<PAGE>
                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

      The  Company's  Common  Stock is traded  on the  National  Association  of
Securities Dealers Automated Quotation (Nasdaq) SmallCap market under the symbol
SOLP. The table below sets forth the range of sale prices of the Common Stock as
reported by Nasdaq for the fiscal periods specified.



                                                                Common Stock
FISCAL 1998                                                  HIGH          LOW

First Quarter........................................     $4-11/16      $2-15/16
Second Quarter.......................................        3-3/4         2-5/8
Third Quarter........................................      4-31/32         3-1/8
Fourth Quarter ......................................        3-3/4        1-7/16

FISCAL 1997

First Quarter........................................     $ 2-5/16    $    1-3/8
Second Quarter.......................................        3-1/8       1-15/16
Third Quarter........................................      2-13/16       1-15/16
Fourth Quarter.......................................      3-11/16         2-1/2

     As of December  17,  1998,  there were 38 record  holders of the  Company's
Common Stock.  The Company believes that there are in excess of 1,300 beneficial
owners of its Common Stock additional to such record holders.

     The Company has never paid any  dividends  on its Common Stock and does not
intend to pay such dividends in the foreseeable  future.  The Company  currently
intends to retain  any future  earnings  for the  development  and growth of the
Company.

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.



                                       -7-

<PAGE>
OVERVIEW

      The Company is a specialty niche provider of staffing  services  organized
into  two  primary  operating  divisions:   temporary   staffing/consulting  and
executive    search/full-time    contingency    recruitment.    The    temporary
staffing/consulting division provides services to companies seeking personnel in
the information  technology,  accounting and human resources areas and generated
approximately  60% of the  Company's  revenue for the year ended  September  30,
1998. The executive search/full-time  contingency recruitment division comprises
nine lines of business, including four industry (capital markets, publishing and
new media,  healthcare and fashion services),  and five functional  (information
technology,  accounting, human resources, legal and administrative support). The
executive   search/full-time    contingency   recruitment   division   generated
approximately  40% of the  Company's  revenue for the year ended  September  30,
1998.

      The  following is a summary of the  Company's  consolidated  financial and
operating data:


                                                 FISCAL YEAR ENDED SEPTEMBER 30,
STATEMENT OF OPERATIONS DATA:                    1998                 1997
------------------------------                  ------               -----
Revenue                                        $44,638,642        $28,996,485
Income from Operations                           1,622,089          1,691,499
Net Income                                         822,552          1,282,365
Basic Income Per Common Share                         $.16              $ .25
Diluted Income Per Common Share                        .14                .23

                                                        SEPTEMBER 30,

BALANCE SHEET DATA:                              1998                 1997
-------------------                              ----                 ----
Working Capital                                $   3,794,445       $  4,921,334
Total Assets                                      16,735,142         12,815,456
Total Liabilities                                  8,695,588          4,483,991
Stockholders' Equity                               8,039,554          8,331,465


RESULTS OF OPERATIONS

FISCAL 1998 COMPARED TO FISCAL 1997

      Revenue  increased to approximately  $44,639,000 for the fiscal year ended
September  30,  1998 from  approximately  $28,996,000  for the fiscal year ended
September 30, 1997, an increase of  approximately  $15,643,000 or 54%.  Revenues
from the Company's  temporary  staffing/consulting  division were  approximately
$26,864,000   for  the  fiscal  year  ended   September  30,  1998  compared  to
approximately   $14,479,000  for  the  same  period  in  1997,  an  increase  of
approximately   $12,385,000  or  86%.  Revenues  from  the  Company's  executive
search/full-time contingency recruitment division experienced an increase of 22%
to  approximately  $17,774,000  for the fiscal  year ended  September  30,  1998
compared to approximately $14,517,000 for the same period in 1997.


                                       -8-

<PAGE>
     The  increase in  revenues  for the fiscal  year ended  September  30, 1998
compared to the fiscal year ended  September  30, 1997 was  primarily due to the
expansion of the Company's  temporary  staffing/consulting  division  within the
areas of accounting,  human resource and information  technology.  The Company's
information  technology  temporary   staffing/consulting   business  experienced
significant  increases in revenue to  approximately  $22,757,000 for fiscal year
ended September 30, 1998 compared to  approximately  $13,332,000 the same period
in 1997,  an increase of $9,425,000 or 71%. The increase in revenues can also be
attributed to the hiring of revenue  generating  personnel  within the executive
search/full-time contingency recruitment division, which increased the number of
search placements made during fiscal 1998 compared with the same period in 1997.
In addition, during fiscal 1998 the Company expanded its contingency recruitment
division by providing  administrative support services to clients within the New
York metropolitan area, which contributed to the increase in revenue.

      Selling  expenses  for the fiscal year ended  September  30, 1998  totaled
approximately   $35,015,000  (78%  of  revenues)   compared  with  approximately
$22,413,000  (77% of revenues) for the fiscal year ended September 30, 1997. The
increase in selling  expenses is primarily  related to  compensation  expense of
temporary personnel within the Company's temporary staffing/consulting division.
This  increase  can also be  attributed  to payroll,  commissions  and  benefits
associated with the hiring of revenue-generating  personnel within the executive
search/full-time  contingency  recruitment  division.  Selling  expenses consist
primarily   of   temporary   staffing/consulting   compensation,   salaries  and
commissions of revenue generating  personnel,  employee benefits,  telephone and
advertising.

      General and Administrative expenses increased to approximately  $7,486,000
(17% of  revenues)  for the fiscal year ended  September  30,  1998  compared to
approximately  $4,555,000  (16% of revenues),  for the same period in 1997.  The
increase  in  general  and  administrative  expenses  is  primarily  a result of
additional  infrastructure  costs  related  to  business  expansion,   including
additional  office space and the hiring of additional  support  personnel within
corporate accounting, information systems and administration.

      Depreciation and Amortization expense increased to approximately  $515,000
for the fiscal year ended September 30, 1998 compared to approximately  $337,000
for same  period in 1997.  The  increase  is  primarily  related  to a full year
depreciation expense on approximately  $800,000 of capital expenditures incurred
during fiscal 1997. In addition,  the Company began  depreciating  approximately
$1,100,000 of property and equipment  acquired in fiscal 1998. The  amortization
of intangible assets also contributed to this increase.

      Other Income and (Expenses) for the year ended  September 30, 1998 totaled
approximately  $90,000 of expense compared to  approximately  $143,000 of income
for the same period in 1997. The increase in other expenses was due primarily to
interest  expense of  approximately  $219,000,  charged for borrowings under the
Company's line of credit.

      Income from  operations was  approximately  $1,622,000 for the fiscal year
ended  September 30, 1998 compared to  approximately  $1,691,000  for the fiscal
year ended September 30, 1997 primarily due to the above mentioned factors.


                                       -9-

<PAGE>
      Income Tax  Expense  for the  fiscal  year ended  September  30,  1998 was
approximately  $710,000  (46%  effective tax rate)  compared with  approximately
$553,000 (30%  effective tax rate) for the same period in 1997.  The increase in
the Company's  effective tax rate was due to increased state and local taxes and
because  certain  expenses,  including  a portion  of meals,  entertainment  and
premiums on keyperson life insurance  policies are non-deductible for income tax
purposes. In addition,  the Company received a tax benefit of net operating loss
carryforwards utilized in fiscal 1997.

      Net income was approximately  $823,000 for the fiscal year ended September
30,  1998  compared  to  approximately  $1,282,000  for the  fiscal  year  ended
September 30, 1997.

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.

                                      -10-

<PAGE>
      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 relate 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 increased to  approximately  30% compared to approximately 3%
in Fiscal 1996. The increase in the Company's  effective tax rate was due to the
utilization  of net  operating  loss  carryforwards  in fiscal 1996,  changes in
deferred tax asset valuation allowance and increases in state income taxes.

      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.

LIQUIDITY AND CAPITAL RESOURCES

      As of September  30, 1998,  the  Company's  sources of liquidity  included
approximately   $1,539,000  in  cash  and  cash   equivalents   and   short-term
investments.  The  Company's  working  capital was  approximately  $3,794,000 at
September 30, 1998,  are compared to  approximately  $4,921,000 at September 30,
1997. The reduction in working capital resulted from increased  borrowings under
the  credit  facility   described   below.   Also,  the  Company  has  available
approximately  $1,112,000 of long-term  investments  as a source of liquidity if
required.

     In February 1998,  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 1% above the Dime  Reference  Rate (the  Dime  Reference  Rate at
September 30, 1998 was 8.50%) in amounts not exceeding 80% of eligible  accounts
receivable (as defined  therein) and expires on February 28, 1999, on which date
the  outstanding  principal  amount is required to be repaid.  At September  30,
1998,  the  Company  had  borrowed  approximately  $3,100,000  under the  credit
facility,  of which approximately  $1,118,000 was used for the repurchase of the
Company's  Common Stock and Class A redeemable  common stock purchase  warrants.
The Company

                                      -11-

<PAGE>

is currently in negotiations with the Dime Savings Bank to increase the facility
and modify its terms.  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 such regard.

      Cash flows used in operating  activities were  approximately  $473,000 for
the fiscal year ended  September  30, 1998.  The primary use of cash was to fund
the increase in accounts receivable related to higher revenues. Cash provided by
financing   activities  for  the  fiscal  year  ended  September  30,  1998  was
approximately  $1,974,000,  which was  primarily due to $3,100,000 of borrowings
under the line of credit offset by the $1,118,000 used for the repurchase of the
Company's Common Stock and Class A redeemable common stock purchase warrants.

      On September 11, 1998,  the Company  announced that its Board of Directors
had  authorized  the  repurchase  of up to  1,000,000  shares of  common  stock.
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  17, 1998,  an aggregate of 500,000  shares of common
stock had been  repurchased  for an aggregate  purchase  price of  approximately
$1,135,000.

     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.

YEAR 2000 COMPUTER SOFTWARE COMPLIANCE

      Many computer  systems in use today were designed and developed  using two
digits,  rather than four, to specify years, and as a result,  such systems will
recognize the year 2000 as "00". This is commonly  referred to as the "Year 2000
Issue".  This  could  cause  many  computer  applications  to fail or to  create
erroneous  results unless  corrective  measures are taken.  The Company utilizes
software or related  computer  technologies in the course of its operations that
are essential to its business. The Company has reviewed its computer systems for
compliance  with the  potential  hazards  of the Year 2000  Issue and  presently
believes  that all of its computer  system  software is Year 2000  compliant and
does not expect any material adverse impact on its financial position or results
of operations to arise from Year 2000 Issue  failures of its software.  As would
be the case with other companies in a service industry, a significant failure of
the  computer  systems of a major  client of the  Company  could have a material
adverse effect on the continuing business  relationship of the Company with such
client and the amount of revenue  generated  from such  client.  The  failure of
computer systems maintained by other third parties conducting  business with the
Company  could have a material  adverse  impact on the  Company's  business  and
results of operations.

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.


                                      -12-

<PAGE>
NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

      The Financial  Accounting Standards Board ("FASB") has 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 are 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 no impact on
the Company's  consolidated  results of operations,  financial  position or cash
flows.

      In February  1998,  the FASB issued  SFAS No. 132,  "Employers  Disclosure
about Pension and Other Post-retirement Benefits," which is effective for fiscal
years  beginning after December 15, 1997. The modified  disclosure  requirements
are  not  expected  to  have a  material  impact  on the  Company's  results  of
operations, financial position or cash flows.

      The FASB has issued SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities."  SFAS No. 133  establishes  accounting  and  reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts and for hedging  activities.  SFAS No. 133 requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the intended
use of the  derivative and how it is  designated,  for example,  gains or losses
related to changes in the fair value of a derivative not designated as a hedging
instrument  are  recognized  as earnings in the period,  while  certain types of
hedges may be initially  reported as a component of other  comprehensive  income
until the consummation of the underlying transaction.

      SFAS  No.  133 is  effective  for all  fiscal  quarters  of  fiscal  years
beginning after June 15, 1999. Initial  application of SFAS No. 133 should be as
of the beginning of a fiscal quarter;  on that date, hedging  relationships must
be designated  anew and  documented  pursuant to the provisions of SFAS No. 133.
Earlier  applications of all the provisions of SFAS No. 133 are encouraged,  but
it is permitted only as of the beginning of any fiscal quarter.  SFAS No. 133 is
not to be applied  retroactively to financial  statements of prior periods.  The
Company will evaluate the new standard to determine  whether it requires any new
disclosures or accounting.


                                      -13-

<PAGE>
ITEM 7.     FINANCIAL STATEMENTS

            See Index to Financial Statements.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE

            None.


                                      -14-

<PAGE>
                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
            PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
            ACT


            The  information  required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than January
28, 1999 pursuant to Regulation 14A of the General Rules and  Regulations  under
the Securities Exchange Act of 1934 ("Regulation 14A").

ITEM 10.    EXECUTIVE COMPENSATION

            The  information  required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than January
28, 1999 pursuant to Regulation 14A.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN
            BENEFICIAL OWNERS AND MANAGEMENT

            The  information  required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than January
28, 1999 pursuant to Regulation 14A.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The  information  required by this item is incorporated by reference
from the Company's definitive proxy statement to be filed not later than January
28, 1999 pursuant to Regulation 14A.


                                      -15-

<PAGE>
ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS


Exhibit             EXHIBITS
NUMBER

    3.1       (a)   Certificate   of   Incorporation,   as   amended,   of   The
                    Solomon-Page  Group  Ltd.   (Incorporated  by  reference  to
                    Exhibit 3.1(a) to Registration  Statement on Form SB- 2, No.
                    33-81026)
              (b)   Certificate of Amendment to Certificate of  Incorporation of
                    The  Solomon-Page  Group Ltd  (Incorporated  by reference to
                    Exhibit 3.1(b) to  Registration  Statement on Form SB-2, No.
                    33-81026)
    3.2             Amended and Restated By-Laws of the Company (Incorporated by
                    reference to Exhibit 3 to the  Company's  Current  Report on
                    Form 8-K dated June 8, 1995)
    4.1             Specimen Common Stock Certificate (Incorporated by reference
                    to Exhibit 4.1 to  Registration  Statement on Form SB-2, No.
                    33-81026)
    4.2             Specimen Warrant Certificates  (Incorporated by reference to
                    Exhibit  4.2 to  Registration  Statement  on Form SB-2,  No.
                    33-81026)
    10.1            1993 Long Term Incentive Plan  (Incorporated by reference to
                    Exhibit 10.2 to  Registration  Statement  on Form SB-2,  No.
                    33-81026)
    10.2            1995   Directors'   Stock   Option   Plan  of  the   Company
                    (Incorporated  by reference to Exhibit 99.1 to the Company's
                    Current Report on Form 8-K dated June 8, 1995)
    10.3            Employment  Agreement  dated  June  14,  1993,  as  amended,
                    between the Company and  Herbert  Solomon  (Incorporated  by
                    reference to Exhibit 10.3 to Registration
                    Statement on Form SB-2, No. 33-81026)
    10.4            Employment  Agreement  dated  June  14,  1993,  as  amended,
                    between  the  Company  and Lloyd  Solomon  (Incorporated  by
                    reference to Exhibit 10.4 to Registration  Statement on Form
                    SB-2, No. 33-81026)
    10.5            Amendment  dated  June 8,  1995 to that  certain  Employment
                    Agreement  dated as of June 14,  1993,  by and  between  the
                    Company and Lloyd  Solomon  (Incorporated  by  reference  to
                    Exhibit  99.4 to the  Company's  Current  Report on Form 8-K
                    dated June 8, 1995)
    10.6            Employment  Agreement  dated  June  14,  1993,  as  amended,
                    between  the  Company  and  Scott  Page   (Incorporated   by
                    reference to Exhibit 10.5 to Registration  Statement on Form
                    SB-2, No. 33-81026)
    10.7            Amendment  dated  June 8,  1995 to that  certain  Employment
                    Agreement  dated as of June 14,  1993,  by and  between  the
                    Company and Scott Page (Incorporated by reference to Exhibit
                    99.5 to the Company's  Current Report on Form 8-K dated June
                    8, 1995)
    10.8            1996  Stock  Option  Plan,  (Incorporated  by  reference  to
                    Exhibit  10.8 to the  Company's  Form  10-KSB for the fiscal
                    year ended September 30, 1996)


                                      -16-

<PAGE>

Exhibit             EXHIBITS
NUMBER
   10.9             Form of  Indemnification  Agreement  between the Company and
                    its officers  and  directors  (Incorporated  by reference to
                    Exhibit 10.13 to the  Company's  Form 10- KSB for the fiscal
                    year ended September 30, 1995)
   10.10            Charter of the Audit  Committee of the Board of Directors of
                    the Company  (Incorporated  by  reference to Exhibit 99.2 to
                    the Company's Current Report on Form 8-K dated June 8, 1995)
   10.11            The Company's  Policy on Transactions in Company  Securities
                    by Company Officers,  Directors and Employees  (Incorporated
                    by reference to Exhibit 99.3 to the Company's Current Report
                    on Form 8-K dated June 8, 1995)
    *23             Consent of Moore Stephens P.C. dated December 29, 1998
    *27             Financial Data Schedule

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

*     Filed herewith.

(b)   Reports on Form 8-K

      None.


                                      -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:December 23, 1998                   By:      /s/ Lloyd Solomon
                                                   ---------------------
                                                    Lloyd Solomon
                                                    Vice Chairman of the Board
                                                    and Chief Executive Officer


                               POWER OF ATTORNEY

      The Solomon-Page Group, Ltd. and each of the undersigned do hereby appoint
Lloyd Solomon, Scott Page and Eric Davis and each of them severally,  its or his
true and lawful attorney to execute on behalf of The  Solomon-Page  Group,  Ltd.
and the  undersigned any and all amendments to this Annual Report on Form 10-KSB
and to file the same with all exhibits thereto and other documents in connection
therewith,  with the Securities and Exchange Commission;  each of such attorneys
shall have the power to act hereunder with or without the other.

      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 and       December 23, 1998
Herbert Solomon             Director


/s/ Lloyd Solomon
------------------------    Vice Chairman of the Board,     December 23, 1998
Lloyd Solomon               Chief Executive Officer and
                            Director (Principal
                            Executive Officer)


/s/ Scott Page
------------------------    President and Director          December 23, 1998
Scott Page


                                      -18-

<PAGE>

         SIGNATURE                       TITLE                     DATE


/s/ Eric M. Davis
------------------------    Vice President - Finance,       December 23, 1998
Eric M. Davis               Chief Financial Officer and
                            Director (Principal Financial
                            and Accounting Officer)


/s/Edward Ehrenberg
------------------------    Director                        December 23, 1998
Edward Ehrenberg        


/s/ Joel A. Klarreich
------------------------    Director                        December 23, 1998
Joel A. Klarreich


                                      -19-


<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, 1998 .....................  F-3

Consolidated Statements of Operations for the years ended
September 30, 1998 and 1997..............................................  F-5

Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1998 and 1997..............................................  F-6

Consolidated Statements of Cash Flows for the years ended
September 30, 1998 and 1997..............................................  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  subsidiary as of September 30, 1998,
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,
1998. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

                        We conducted  our audits in  accordance  with  generally
accepted  auditing  standards.  Those standards require that we plan and perform
the  audit  to  obtain  reasonable  assurance  about  whether  the  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 subsidiary as of September
30, 1998, and the consolidated  results of their operations and their cash flows
for each of the two fiscal years in the period  ended  September  30,  1998,  in
conformity with generally accepted accounting principles.






                                                   MOORE STEPHENS, P. C.
                                                   Certified Public Accountants.

Cranford, New Jersey
December 10, 1998


                                      F-2
<PAGE>

THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998.


<TABLE>
<CAPTION>

ASSETS:
CURRENT ASSETS:
<S>                                                                          <C>           
   Cash and Cash Equivalents                                                 $      935,455
   Investments                                                                      603,250
   Accounts Receivable - [Net of Allowances of $200,000]                         10,160,955
   Other Current Assets                                                             245,662
                                                                             --------------

   TOTAL CURRENT ASSETS                                                          11,945,322
                                                                             --------------
PROPERTY AND EQUIPMENT:
   Equipment                                                                      1,725,924
   Furniture and Fixtures                                                           562,905
   Leasehold Improvements                                                           938,982
                                                                             --------------

   Total - At Cost                                                                3,227,811
   Less: Accumulated Depreciation                                                 1,113,306

PROPERTY AND EQUIPMENT -NET                                                       2,114,505

OTHER ASSETS:
   Investments                                                                    1,111,741
   Intangible Assets - [Net of Accumulated Amortization of $195,477]              1,018,986
   Deferred Tax Asset                                                               176,900
   Due from Related Parties                                                         135,725
   Security Deposits                                                                128,485
   Restricted Investment                                                             34,466
   Other Assets                                                                      69,012
                                                                             --------------

   TOTAL OTHER ASSETS                                                             2,675,315
                                                                             --------------
   TOTAL ASSETS                                                              $   16,735,142
                                                                             ==============
</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, 1998.




LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
   Accrued Payroll and Commissions                                $   3,498,371
   Accounts Payable and Accrued Expenses                                967,660
   Income Taxes Payable                                                 297,863
   Line of Credit                                                     3,100,000
   Other Current Liabilities                                            131,301
   Deferred Revenue                                                     155,682
                                                                  -------------

   TOTAL CURRENT LIABILITIES                                          8,150,877
                                                                  -------------

LONG-TERM LIABILITY:
   Deferred Credit                                                      544,711
                                                                  -------------

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, 5,162,282 Shares                      5,162
      Issued and 5,121,282 Shares Outstanding

   Additional Paid-in Capital                                         7,426,188

   Unrealized Gain on Marketable Securities - Net                        11,106

   Treasury Stock; 41,000 Common Shares - At Cost                       (79,783)

   Retained Earnings                                                    676,881
                                                                  -------------

   TOTAL STOCKHOLDERS' EQUITY                                         8,039,554
                                                                  -------------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $  16,735,142
                                                                  =============


              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


                                                 YEARS ENDED
                                                 -----------
                                                SEPTEMBER 30,
                                                -------------
                                         1 9 9 8             1 9 9 7
                                         -------             -------

REVENUE                                 44,638,642        $ 28,996,485
                                      ------------        ------------
                                                        
OPERATING EXPENSES:                                     
   Selling Expenses                     35,015,061          22,412,747
   General and Administrative            7,486,104           4,555,081
   Depreciation and Amortization           515,388             337,158
                                      ------------        ------------
                                                        
   TOTAL OPERATING EXPENSES             43,016,553          27,304,986
                                      ------------        ------------
                                                        
   INCOME FROM OPERATIONS                1,622,089           1,691,499
                                      ------------        ------------
                                                        
OTHER INCOME [EXPENSES]:                                
   Interest and Dividend Income            127,558             133,077
   Interest Expense                       (219,379)            (26,820)
   Realized Gain on Investments              2,301              37,140
                                      ------------        ------------
                                                        
   TOTAL OTHER [EXPENSES] INCOME           (89,520)            143,397
                                      ------------        ------------
                                                        
   INCOME BEFORE INCOME TAX EXPENSE      1,532,569           1,834,896
                                                        
INCOME TAX EXPENSE                         710,017             552,531
                                      ------------        ------------
                                                        
   NET INCOME                         $    822,552        $  1,282,365
                                      ============        ============
                                                        
BASIC EARNINGS PER COMMON SHARE       $        .16        $        .25
                                      ============        ============
                                                        
DILUTED EARNINGS PER COMMON SHARE     $        .14        $        .23
                                      ============        ============
                                                        
BASIC WEIGHTED AVERAGE SHARES            5,134,122           5,131,751
                                      ============        ============
                                                        
DILUTED WEIGHTED AVERAGE SHARES          5,985,319           5,633,806
                                      ============        ============
                                                      


              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>
                                                                                                              UNREALIZED
                                                                                              ADDITIONAL        GAIN ON 
                                            PREFERRED STOCK                COMMON STOCK        PAID-IN        MARKETABLE
                                        SHARES           AMOUNT       SHARES        AMOUNT     CAPITAL        SECURITIES
                                        ------           ------       ------        ------     -------        ----------
<S>                                   <C>          <C>              <C>        <C>           <C>           <C>          
BALANCE - OCTOBER 1, 1996                      --  $        --      5,139,285  $     5,139   $ 8,488,247   $      --    

   Treasury Shares
      Purchased                                --           --           --           --            --            --    

   Net Income                                  --           --           --           --            --            --    
                                      -------------  -----------  -----------  -----------   -----------   -----------  

BALANCE - SEPTEMBER 30, 1997                   --           --      5,139,285        5,139     8,488,247          --    

   Repurchase of 1,000,000
      Class A Warrants                         --           --           --           --      (1,053,998)         --    

   Costs Associated with
      Registering Class A
      Warrants                                 --           --           --           --         (37,201)         --    

   Exercise of Options                         --           --         22,997           23        29,140          --    

   Treasury Shares Purchased                   --           --           --           --            --            --    

   Unrealized Gain on Marketable
      Securities - Net                         --           --           --           --            --          11,106  

   Net Income                                               --           --           --            --            --    
                                      -------------  -----------  -----------  -----------   -----------   -----------  

BALANCE - SEPTEMBER 30, 1998                   --    $      --      5,162,282  $     5,162   $ 7,426,188   $    11,106  
                                      =============  ===========  ===========  ===========   ===========   ===========  
</TABLE>
<TABLE>
<CAPTION>
                                                                   RETAINED      TOTAL      
                                               TREASURY STOCK      EARNINGS    STOCKHOLDERS'
                                           SHARES       AMOUNT     [DEFICIT]     EQUITY     
                                           ------       ------     ---------     ------     
                                                                                            
                                                                                            
<S>                                        <C>           <C>    <C>          <C>            
BALANCE - OCTOBER 1, 1996                   --           $--    $(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             10,000       (16,250)     (145,671)    8,331,465   
                                                                                            
   Repurchase of 1,000,000                                                                  
      Class A Warrants                     --            --            --      (1,053,998)  
                                                                                            
   Costs Associated with                                                                    
      Registering Class A                                                                   
      Warrants                             --            --            --         (37,201)  
                                                                                            
   Exercise of Options                     --            --            --          29,163   
                                                                                            
   Treasury Shares Purchased             31,000       (63,533)         --         (63,533)  
                                                                                            
   Unrealized Gain on Marketable                                                            
      Securities - Net                     --            --            --          11,106   
                                                                                            
   Net Income                              --            --         822,552       822,552   
                                    -----------   -----------   -----------   -----------   
                                                                                            
BALANCE - SEPTEMBER 30, 1998             41,000   $   (79,783)  $   676,881   $ 8,039,554   
                                    ===========   ===========   ===========   ===========   
</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 8       1 9 9 7
                                                                   -------       -------
<S>                                                            <C>            <C>       
OPERATING ACTIVITIES:
   Net Income                                                  $   822,552    $1,282,365
                                                               -----------   -----------
   Adjustments to Reconcile Net Income to 
      Net Cash Provided by [Used for]
      Operating Activities:
      Depreciation and Amortization                                515,388       337,158
      Provision for Losses on Accounts Receivable                   75,000        35,100
      Deferred Credit                                              160,848       117,871
      Net Realized Gain on Investments                              (2,301)      (37,140)
      Deferred Taxes                                               (78,618)      (84,195)

   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                    (2,857,928)   (3,253,036)
         Other Current Assets                                      (53,467)       15,701

      Increase [Decrease] in:
         Accounts Payable, Accrued Expenses, Accrued Payroll
            and Commissions                                      1,004,043     1,491,840
         Income Tax Payable                                         30,759       290,104
         Other Current Liabilities                                (245,134)       36,353
         Deferred Revenue                                          155,682          --
                                                               -----------   -----------

      Total Adjustments                                         (1,295,728)   (1,050,244)
                                                               -----------   -----------

   NET CASH - OPERATING ACTIVITIES                                (473,176)      232,121
                                                               -----------   -----------

INVESTING ACTIVITIES:
   Capital Expenditures                                         (1,087,603)     (791,427)
   Purchases of Investments                                       (799,812)   (2,844,953)
   Proceeds from Sales of Investments                            1,248,655     2,041,991
   Acquisitions of and Additions to Trade Names                   (350,330)     (264,532)
   Cash Received from Related Parties                               55,000        10,000
   Increase in Cash Surrender Value of Officer Life Insurance      (46,253)      (22,756)
   Security Deposits                                                 4,687       (47,894)
                                                               -----------   -----------

   NET CASH - INVESTING ACTIVITIES                                (975,656)   (1,919,571)
                                                               -----------   -----------

FINANCING ACTIVITIES:
   Borrowings Under Line of Credit                               3,100,000          --
   Purchase of Treasury Stock and Warrants                      (1,117,531)      (16,250)
   Warrant Registration Costs                                      (37,201)         --
   Proceeds from Exercise of Stock Options                          29,163          --
                                                               -----------   -----------

   NET CASH - FINANCING ACTIVITIES                               1,974,431       (16,250)
                                                               -----------   -----------

   NET INCREASE [DECREASE] IN CASH AND CASH EQUIVALENTS            525,599    (1,703,700)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEARS                     409,856     2,113,556
                                                               -----------   -----------

   CASH AND CASH EQUIVALENTS - END OF YEARS                    $   935,455   $   409,856
                                                               ===========   ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the years for:
      Interest                                                 $   219,379   $    26,820
      Income Taxes                                             $   776,587   $   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] NATURE OF OPERATIONS

The  Solomon-Page  Group Ltd. and its  wholly-owned  subsidiary  [the "Company"]
provides staffing services  comprised of two primary  operating  divisions:  (i)
temporary  staffing  and  consulting  which  provides  approximately  60% of the
Company's revenue, and (ii) retained executive search and full-time  contingency
search which provides  approximately 40% of the Company's revenue. The temporary
staffing  and  consulting   division  provides  services  to  companies  seeking
personnel in the information  technology,  accounting and human resources areas.
The  retained  executive  search  and  full-time   contingency  search  division
comprises  nine lines of business  including  four  industry  [capital  markets,
publishing and new media, healthcare and fashion services],  and five functional
[information technology,  accounting,  human resources, legal and administrative
support].  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.

[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 executive search engagement,  the non-refundable retainer is recognized
according to the terms of the search contract, with the unearned portions of the
retainer  reflected  as  deferred  revenue.  The  balance  of  the  contract  is
recognized upon successful completion of the search.
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  to estimate  losses due to placed
candidates not fulfilling the terms of the search  agreement or not remaining in
employment for the Company's  guarantee period which generally ranges from 30 to
120 days but may  extend up to 180 days.  Losses  from bad debts are  charged to
expense and losses related to contract fulfillment 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
stockholders'  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,  and maturing within one year, are classified
in the balance sheet as current  assets while  securities  held for  non-current
uses, and maturing after one year, are classified as long-term assets.  Realized
gains and losses are  calculated  utilizing the specific  identification  method
[See Note 3].

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

DEPRECIATION  -  Depreciation  of furniture,  fixtures and equipment is computed
utilizing the straight-line  method based on estimated useful lives ranging from
three  to  nine  years.  Depreciation  of  leasehold  improvements  is  computed
utilizing  the  straight-line  method  over  the  lesser  of  the  life  of  the
improvement or the remaining lease term.  Depreciation  expense was $430,481 and
$272,863 for the years ended September 30, 1998 and 1997, respectively.


                                      F-8

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



[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

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.

EARNINGS PER COMMON SHARE - The Financial  Accounting  Standard Board has issued
SFAS No. 128, "Earnings Per Share," which is effective for financial  statements
issued for periods  ending after  December 15, 1997.  Accordingly,  earnings per
share data in the financial  statements  for the years ended  September 30, 1998
and 1997 [restated] have been calculated in accordance with SFAS No. 128.

SFAS No. 128 supersedes  Accounting  Principles  Board Opinion No. 15, "Earnings
Per Share," and replaces its primary  earnings per share with new basic earnings
per share  representing  the amount of earnings for the period available to each
share of common stock outstanding during the reporting period.  Diluted earnings
per share reflects the amount of earnings for the period available to each share
of common stock outstanding during the reporting period,  while giving effect to
all dilutive  potential common shares that were  outstanding  during the period,
such as  common  shares  that  could  result  from  the  potential  exercise  or
conversion of securities into common stock.

The  computation  of diluted  earnings  per share  does not  assume  conversion,
exercise,  or contingent  issuance of securities that would have an antidilutive
effect on earnings per share.  The dilutive  effect of  outstanding  options and
warrants and their equivalents is reflected in diluted earnings per share by the
application  of the treasury  stock method which  recognizes the use of proceeds
that could be  obtained  upon  exercise of options  and  warrants  in  computing
diluted  earning  per  share.  It  assumes  that any  proceeds  would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive  effect only when the average  market price of the
common  stock  during the period  exceeds  the  exercise  price of the option or
warrants.

Potential  future dilutive  securities  include  2,050,000 shares issuable under
outstanding warrants and 225,500 shares issuable under outstanding options.

INTANGIBLES  - Intangibles  which consist of trade names and customer  lists are
recorded  at cost and 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  $84,907  and  $64,295 for the years ended
September 30, 1998 and 1997, respectively [See Note 8].


                                      F-9

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


[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

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, 1998, the Company has approximately  $561,000 in
financial  institutions  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 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  $430,000 and
$207,000 for the years ended September 30, 1998 and 1997, 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.

RECLASSIFICATIONS - Certain prior year figures have been reclassified to conform
with the current years presentation.

[3] INVESTMENTS IN DEBT AND EQUITY SECURITIES

At September 30, 1998,  the  Company's  securities  consisted of certain  highly
liquid debt  securities  which were classified as available for sale and held to
maturity.  A summary  of the  Company's  investments  in debt  securities  is as
follows:


                                                    SEPTEMBER 30, 1998
                                                    ------------------
FINANCIAL STATEMENT CAPTION                        COST            FAIR VALUE
---------------------------                        ----            ----------

Available for Sale:
   Investments                              $   1,695,214      $   1,714,991
                                            =============      =============

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

Gross  proceeds from sale of available for sale  securities  was  $1,248,665 and
$2,041,991  and  realized  gains on sales was $2,301 and  $37,140  for the years
ended September 30, 1998 and 1997, respectively.

                                      F-10
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #4



[3] INVESTMENTS IN DEBT AND EQUITY SECURITIES [CONTINUED]

At September 30, 1998,  gross  unrealized gains on available for sale securities
was $19,777 and is included in stockholders' equity net of taxes of $8,671.

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                             $     600,000           $     36,000
Between 1 and 5 years                     $   1,100,000           $         --

[4] DUE FROM RELATED PARTIES

At September  30, 1998,  the Company had a balance due from various  officers of
the Company  aggregating  $135,725.  The advances bear interest at 8%.  Interest
income on the advances was $12,805 and $11,637 for the years ended September 30,
1998 and 1997,  respectively.  Interest  receivable  on the advances was $-0- at
September 30, 1998.

[5] LINE OF CREDIT

In February 1998, the Company entered into a one year $4,000,000  demand line of
credit facility agreement,  which is collateralized by all the Company's assets.
The agreement provides for borrowing at 1% above the bank's reference rate (8.5%
at  September  30,1998).  Borrowings  are  limited to 80% of  eligible  accounts
receivable  and  expires on February  28,  1999,  on which date the  outstanding
principal  amount is required to be repaid.  As of September 30, 1998,  the full
balance  under the line is  available  and the  Company  borrowed  approximately
$3,100,000 under the credit facility, of which approximately $1,118,000 was used
for the repurchase of the Company's common stock, and Class A redeemable  common
stock purchase  warrants with the balance used to fund current  working  capital
requirements.

The weighted  average interest rate on short-term  borrowings  outstanding as of
September 30, 1998 was 9.5%.

[6] LEASES

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 26,  1999.  This  letter  of credit  is  collateralized  by a U.S.
Treasury Bill which is classified as a noncurrent  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, 1998 for each of the
next five years and in the aggregate are:

YEAR ENDING
-----------
SEPTEMBER 30,
-------------
   1999                                        $     919,512
   2000                                              985,187
   2001                                            1,014,913
   2002                                            1,048,185
   2003                                              888,634
   Subsequent to 2003                              2,418,150
                                               -------------
                                    
   TOTAL MINIMUM FUTURE RENTAL PAYMENTS        $   7,274,581
                                               =============


                                      F-11
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5


[6] 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  approximately  $1,017,000  and  $617,000  for the years ended
September 30, 1998 and 1997, respectively.

[7] 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, at a cost of $16,250. On
October 31, 1997, the Company's  Board of Directors  terminated its common stock
repurchase plan.

On  September  11,  1998,  the  Company's  Board  of  Directors  authorized  the
repurchase of 1,000,000 shares of the Company's common stock, from time to time,
in the open  market or in  privately  negotiated  transactions.  During the year
ended September 30, 1998, 31,000 shares were repurchased at a cost of $63,533.

[8] COMMITMENTS AND CONTINGENCIES

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.

INTANGIBLES  - 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 approximately  $350,000 during the year
ended September 30, 1998.

[9] 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 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.

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

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.  On February 12,
1998,  the Company  completed  the  repurchase  of 1,000,000  Class A redeemable
common stock purchase warrants at a cost of $1,053,998.


                                      F-12
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #6


[9] OPTIONS AND WARRANTS [CONTINUED]

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% of fair market value
on the date  granted.  No  options  at less than  fair  market  value  have been
awarded.  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. Executive officers
vest at a rate of 33 1/3%  after one year,  33 1/3%  after two years and 33 1/3%
after three years.

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

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

OUTSTANDING AT OCTOBER 1, 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

   Granted                                       355,500                2.70
   Exercised                                     (22,997)               1.27
   Expired/Canceled                             (128,169)               1.85
                                            ------------

   OUTSTANDING AT SEPTEMBER 30, 1998           2,169,584                1.95
                                            ============

   EXERCISABLE AT SEPTEMBER 30, 1998           1,057,316           $    1.76
                                            ============



                                      F-13
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7


[9] OPTIONS AND WARRANTS [CONTINUED]

No  compensation  cost was charged to earnings  during the years ended September
30, 1998 and 1997.  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,  basic and  diluted  earnings  per share would have been
reduced on a pro forma basis as indicated below:

                                               1 9 9 8            1 9 9 7
                                               -------            -------
Year ended September 30:
Net Income:
   As Reported                              $    822,552       $ 1,282,365
   Pro Forma                                $    500,101       $   952,889

Basic Earnings Per Common Share:
   As Reported                              $        .16       $       .25
   Pro Forma                                $        .10       $       .19

Diluted Earnings Per Common Share:
   As Reported                              $        .14       $       .23
   Pro Forma                                $        .09       $       .17

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 1998 and 1997, respectively:

                                              SEPTEMBER 30,
                                      1 9 9 8            1 9 9 7
                                      -------            -------

Dividend Yields                         0.00%             0.00%
Expected Volatility                   131.54%           105.29%
Risk-Free Interest Rate                 4.32%             5.99%
Expected Lifes                      5.5 Years           4 Years

The  weighted-average  fair value of options granted was $2.40 and $1.73 for the
years ended September 30, 1998 and 1997, respectively.

The following table summarizes  information about stock options at September 30,
1998:

<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>     

$   0.56 - 2.00         1,095,084         4.9 Years             $    1.45        584,657        $   1.37
$   2.01 - 3.69         1,074,500         6.3 Years             $    2.46        472,659        $   2.25
                     ------------                                              ---------
                                                               
                        2,169,584         5.6 Years             $    1.95      1,057,316        $   1.76
                     ============                                              =========
</TABLE>
                                                               
                                      F-14

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



[10] INCOME TAXES EXPENSE

The provision for income tax expense consists of the following:

                                                               SEPTEMBER 30,
                                                               -------------
                                                         1 9 9 8        1 9 9 7
                                                         -------        -------

Current:
   Federal                                            $   523,835    $  835,681
   Utilization of Net Operating Loss Carryforward         (13,344)     (423,131)
   State and City                                         278,144       453,680
   Utilization of Net Operating Loss Carryforward              --      (229,504)
                                                      -----------    ----------

   Total Current                                          788,635       636,726
                                                      -----------    ----------

Deferred [Benefit]:
   Federal                                                (49,692)      (60,923)
   State and City                                         (28,926)      (23,272)
                                                      -----------    ----------

   Total Deferred                                         (78,618)      (84,195)
                                                      -----------    ----------

   TOTAL INCOME TAX EXPENSE                           $   710,017    $  552,531
   ------------------------                           ===========    ==========

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

                                                           SEPTEMBER 30,
                                                           -------------
                                                       1 9 9 8       1 9 9 7
                                                       -------       -------

Federal Statutory Rate                                     34.0%      34.0%
Non Deductible Expenses                                     1.9        4.4
Benefit of Net Operating Loss Carryforward                  (.9)     (23.1)
Change in Deferred Tax Asset Valuation Allowance             --        7.8
State Income Taxes [Net of Federal Tax Benefit]            12.0        8.1
Other                                                       (.7)      (1.1)


   EFFECTIVE RATE                                          46.3%      30.1%
   --------------                                        ======     =======

The Company has net operating loss carryforwards of approximately  $14,000 which
will expire in 2009.


                                      F-15
<PAGE>



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


[10] INCOME TAXES EXPENSE [CONTINUED]

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

                                                           SEPTEMBER 30,
                                                           -------------
                                                             1 9 9 8
                                                               -------
Deferred Tax Liabilities:
   Cash Basis Adjustments                                  $   (89,546)
   Accelerated Depreciation                                    (89,558)
   Other                                                        (8,671)
                                                           -----------

   Total Deferred Tax Liabilities                             (187,775)

Deferred Tax Assets:
   Rent Deferrals                                              239,286
   Net Operating Loss                                            5,075
   Reserves                                                     79,072
   Other                                                        27,155
                                                           -----------

   Total Deferred Tax Assets                                   350,588
                                                           -----------

NET DEFERRED TAX ASSET                                     $   162,813
----------------------                                     ===========

Net Current Deferred Tax Liability                         $   (14,087)
Net Noncurrent Deferred Tax Asset                              176,900
                                                           -----------

   NET DEFERRED TAX ASSET                                  $   162,813
   ----------------------                                  ===========

The net current deferred tax liability is included in other current  liabilities
in the accompanying balance sheet.

[11] EARNINGS PER SHARE

The  following  is a  reconciliation  of basic  earnings  per  share to  diluted
earnings per share for the years ended September 30, 1998 and 1997:

                                                         SEPTEMBER 30,
                                                         -------------
                                                     1 9 9 8       1 9 9 7
                                                     -------       -------

Basic Earnings Per Common Share                   $        .16    $       .25
                                                  ============    ===========

Weighted Average Shares Outstanding - Basic          5,134,122      5,131,751
Dilutive Options                                       851,197        502,055
                                                  ------------    -----------
Weighted Average Shares Outstanding - Diluted        5,985,319      5,633,806

   DILUTED EARNINGS PER COMMON SHARE              $        .14    $       .23
   ---------------------------------              ============    ===========

[12] SIGNIFICANT CUSTOMERS

For the year ended September 30, 1998, one customer  accounted for approximately
$6,250,000 or 14% of revenue.

For the year ended September 30, 1997, two customers accounted for approximately
$3,200,000 or 11% and $2,900,000 or 10% of revenue.


                                      F-16
<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #11



[13] 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% of their
salary,  subject to the Internal  Revenue  Code  limits.  The Company may make a
discretionary  match as well as a discretionary  contribution.  No discretionary
match or contribution was made, and no amount was charged to operations,  during
the years ended September 30, 1998 or 1997.

[14] 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 and line of credit,  it was
estimated that the carrying amount  approximates  fair value for the majority of
these instruments because of their short maturities.

[15] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

The  Financial   Accounting  Standards  Board  ["FASB"]  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 adoption of SFAS No. 130 will have no material 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.

In February 1998, the FASB issued SFAS No. 132,  "Employers'  Disclosures  about
Pension and Other Postretirement  Benefits," which is effective for fiscal years
beginning after December 15,1997.  The modified disclosure  requirements are not
expected  to have a material  impact on the  Company's  results  of  operations,
financial position or cash flows.

The FASB has issued SFAS No. 133,  "Accounting  for Derivative  Instruments  and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 133 requires that an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivative and how it its  designated.  For example,  gains or losses related to
changes  in  the  fair  value  of a  derivative,  not  designated  as a  hedging
instrument, is recognized in earnings in the period of the change, while certain
types of hedges may be initially reported as a component of other  comprehensive
income until the consummation of the underlying transaction.


                                      F-17

<PAGE>
THE SOLOMON-PAGE GROUP LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #12




[15] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS [CONTINUED]

SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15,  1999.  Initial  application  of SFAS No. 133 should be as of the
beginning  of a fiscal  quarter;  on that date,  hedging  relationships  must be
designated  anew and  documented  pursuant  to the  provisions  of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,  but
it is permitted only as of the beginning of any fiscal quarter.  SFAS No. 133 is
not to be applied  retroactively to financial  statements of prior periods.  The
Company  will   evaluate  the  new  principle  to  determine  any  required  new
disclosures or accounting.

[16] SUBSEQUENT EVENT

Through  December 10, 1998,  the Company has  repurchased  469,000 shares of its
common stock,  pursuant to its common stock  repurchase  plan [See Note 7], at a
cost of $1,071,287.







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


                                      F-18