<PAGE>   1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1999
 
                                                    REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                                 PROVANT, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
 
<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             8742                            04-3395167
   (STATE OR OTHER JURISDICTION       (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)
</TABLE>
 
                       67 BATTERYMARCH STREET, SUITE 600
                                BOSTON, MA 02110
                                 (617) 261-1600
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                                PAUL M. VERROCHI
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                  PROVANT, INC.
                       67 BATTERYMARCH STREET, SUITE 600
                                BOSTON, MA 02110
                                 (617) 261-1600
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                          COPIES OF COMMUNICATIONS TO:
 
                            JAMES E. DAWSON, ESQUIRE
                         CONSTANTINE ALEXANDER, ESQUIRE
                          NUTTER MCCLENNEN & FISH, LLP
                            ONE INTERNATIONAL PLACE
                                BOSTON, MA 02110
                           TELEPHONE: (617) 439-2000
                           FACSIMILE: (617) 973-9748
 
                          KEITH F. HIGGINS, ESQUIRE
                                  ROPES & GRAY
                            ONE INTERNATIONAL PLACE
                                BOSTON, MA 02110
                           TELEPHONE: (617) 951-7000
                           FACSIMILE: (617) 951-7050
 
                            ------------------------
 
          APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
 
    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
                                                                 PROPOSED             PROPOSED
                                              AMOUNT              MAXIMUM              MAXIMUM             AMOUNT OF
  TITLE OF EACH CLASS OF SECURITIES           TO BE           OFFERING PRICE          AGGREGATE          REGISTRATION
           TO BE REGISTERED               REGISTERED(1)        PER SHARE(2)       OFFERING PRICE(2)           FEE
-------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                 <C>                  <C>                  <C>
Common Stock, $.01 par value..........   3,967,500 shares         $20.375            $80,837,813            $22,473
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) Includes 517,500 shares that the underwriters have the option to purchase to
    cover over-allotments and           shares held by certain selling
    stockholders.
 
(2) Determined pursuant to Rule 457(c) under the Securities Act of 1933, as
    amended, based upon the average of the high and low prices per share of the
    Common Stock as reported on the Nasdaq National Market on December 29, 1998.
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
                             SUBJECT TO COMPLETION
 
                  PRELIMINARY PROSPECTUS DATED JANUARY 5, 1999
 
PROSPECTUS
 
                                3,450,000 SHARES
 
                                 [PROVANT LOGO]
 
                                  COMMON STOCK
                            ------------------------
     We are offering 2,500,000 shares of common stock and certain of our
stockholders are offering 950,000 shares of common stock. We will not receive
any proceeds from the sale of common stock by the selling stockholders.
 
     Our common stock is traded on the Nasdaq National Market under the symbol
"POVT." The last reported sale price for the common stock on January 4, 1999 was
$20.75 per share.
 
     INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7.
                            ------------------------
 
<TABLE>
<CAPTION>
                                                   PER SHARE        TOTAL
                                                   ---------        -----
<S>                                                <C>              <C>
Public offering price..........................     $               $
Underwriting discount..........................     $               $
Proceeds, before expenses, to PROVANT..........     $               $
Proceeds to the selling stockholders...........     $               $
</TABLE>
 
     The underwriters also may purchase from us up to an additional 517,500
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
 
     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
 
     We expect that the shares of common stock will be ready for delivery in New
York, New York on or about February   , 1999.
                            ------------------------
MERRILL LYNCH & CO.
              SALOMON SMITH BARNEY
 
                            PIPER JAFFRAY INC.
 
                                         BANCBOSTON ROBERTSON STEPHENS
 
                            ------------------------
                The date of this prospectus is January   , 1999
<PAGE>   3


                                    PROVANT

                         The People Performance Company

                                www.provant.com


                              Consulting Services

                                  Work Skills

                             Recruitment & Retention

                                Customer Service

                                 Communications


         Picture of Seminar                               Picture of CD-ROM


                     PROVANT'S mission is to be the premier
                           provider of comprehensive
                       training solutions that measurably
                       improve organizations' performance
                        through developing their people.


                            Supervision & Leadership

                                   Diversity

                                 Decision Making

                                  Negotiations

                          Training Management Services


         Picture of Meeting                             Picture of globe with 
                                                           finger on button
<PAGE>   4
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    4
Risk Factors................................................    7
Use of Proceeds.............................................   10
Price Range of Common Stock.................................   10
Capitalization..............................................   11
Dividend Policy.............................................   11
Selected Financial Data.....................................   12
Star Mountain Selected Financial Data.......................   13
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   14
Business....................................................   30
Management..................................................   38
Principal and Selling Stockholders..........................   46
Certain Transactions........................................   48
Description of Capital Stock................................   51
Shares Eligible for Future Sale.............................   53
Underwriting................................................   55
Legal Matters...............................................   56
Experts.....................................................   57
Available Information.......................................   57
Index to Financial Statements...............................  F-1
</TABLE>
 
                            ------------------------
 
                           FORWARD-LOOKING STATEMENTS
 
     This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things:
 
     - Our limited combined operating history and risks related to integrating
       our businesses;
 
     - Risks related to our anticipated growth and acquisition strategies;
 
     - Risks related to our ability to attract and retain key personnel;
 
     - Uncertainty about anticipated trends in our business and the performance
       improvement industry;
 
     - Risks regarding technology; and
 
     - Uncertainties regarding our ability to continue to control costs and
       maintain quality.
 
     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
                            ------------------------
 
     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
 
                                        3
<PAGE>   5
 
                               PROSPECTUS SUMMARY
 
     THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS
AND RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. THE TERMS "PROVANT,"
"WE" AND "OUR" AS USED IN THIS PROSPECTUS REFER TO "PROVANT, INC." AND ITS
SUBSIDIARIES AS A CONSOLIDATED ENTITY, EXCEPT WHERE IT IS MADE CLEAR THAT SUCH
TERM MEANS ONLY THE PARENT COMPANY. IN MAY 1998, WE COMMENCED OPERATIONS BY
ACQUIRING SEVEN COMPANIES PROVIDING PERFORMANCE IMPROVEMENT SERVICES AND
PRODUCTS IN A TRANSACTION KNOWN AS THE "COMBINATION." THESE SEVEN COMPANIES ARE
REFERRED TO AS THE "FOUNDING COMPANIES." SINCE MAY 1998, WE HAVE ACQUIRED FIVE
ADDITIONAL COMPANIES.
 
OUR COMPANY
 
     We are a leading provider of performance improvement training services and
products. Our clients are Fortune 1000 companies, other large and medium-sized
corporations and government entities. We offer both customized and standardized
services and products that are designed to provide measurable improvement in
performance and productivity for both employees and organizations. We can
deliver these performance improvement solutions using various delivery methods
to suit our clients' needs, including traditional delivery methods (such as
instructor-led classroom training and train-the-trainer programs) and
technology-based delivery methods (such as CD-ROM, intranets and the Internet).
In addition, we offer management consulting and training management services.
Our goal is to become the leading single-source provider of high-quality
performance improvement services and products. For our fiscal year ended June
30, 1998, we had pro forma revenue of $115.3 million and pro forma income from
operations of $13.4 million.
 
OUR CLIENTS
 
     The PROVANT companies are recognized leaders in their fields and have
developed well-established client bases. During fiscal 1998, we provided
performance improvement services and products to more than 1,400 companies and
135 government entities. Our clients include Bell Atlantic, Deloitte & Touche,
the Department of Energy, Ford, Hewlett-Packard, Intel, J.P. Morgan, Kellogg,
Marriott International and Mobil. During this period, we generated revenues of
more than $100,000 from approximately 145 different corporate clients and from
over 10 different federal government entities.
 
OUR INDUSTRY
 
     The performance improvement market is large and growing. We believe that
companies increasingly view employee training as a competitive necessity rather
than an optional expense in a technology-driven, knowledge-based economy.
According to TRAINING magazine, domestic corporations with over 100 employees
budgeted approximately $60.7 billion on training in 1998, compared to
approximately $48.2 billion in 1993, representing a compound annual growth rate
of approximately 4.7%. Expenditures on external providers of performance
improvement services and products by domestic corporations with over 100
employees have increased from approximately $9.4 billion in 1993 to a budgeted
$14.3 billion in 1998, representing a compound annual growth rate of 8.8%. These
expenditures have increased as a percentage of the total training budgets of
such corporations from approximately 19.5% in 1993 to a budgeted 23.6% in 1998.
We believe that no company in the industry has more than a two percent share of
the external training market. An increasing number of organizations are using
external suppliers for their training requirements so that they can focus on
their core competencies, turn fixed training costs into variable costs, and
obtain comprehensive training content and delivery capabilities that may not be
available internally.
 
                                        4
<PAGE>   6
 
OUR STRATEGY
 
     We intend to capitalize on the growth in our industry and the trend toward
using external suppliers by pursuing a multi-faceted growth strategy. Key
components of our growth strategy include:
 
     -  using our existing client relationships to cross-sell our services and
        products;
 
     -  continuing to develop industry-specific service and product offerings;
 
     -  leveraging investments in technology-based delivery methods;
 
     -  continuing to expand our sales and marketing activities;
 
     -  expanding our service and product offerings; and
 
     -  completing strategic acquisitions that will help us expand our service
        and product offerings, distribution capabilities and client base.
 
OUR ADDRESS
 
     Our principal executive offices are located at 67 Batterymarch Street,
Suite 600, Boston, Massachusetts 02110, and our telephone number at that
location is (617) 261-1600.
 
                                  THE OFFERING
 
<TABLE>
<S>                                                           <C>
Common stock offered by PROVANT.............................  2,500,000 shares
Common stock offered by the selling stockholders............  950,000 shares
  Total.....................................................  3,450,000 shares
Common stock to be outstanding after this offering(1).......  14,345,406 shares
Use of Proceeds.............................................  We estimate that PROVANT's net
                                                              proceeds from this offering will be
                                                              approximately $50.5 million. We
                                                              intend to use these net proceeds to
                                                              repay existing indebtedness, and for
                                                              general corporate purposes including
                                                              acquisitions.
Nasdaq National Market Symbol...............................  POVT
</TABLE>
 
---------------
(1) Based on 11,945,406 shares of common stock outstanding on January 5, 1999,
    assuming that the over-allotment option is not exercised. Does not include
    1,687,907 shares of common stock issuable upon the exercise of outstanding
    options and warrants, of which options and warrants to purchase 539,984
    shares currently are exercisable.
 
                                        5
<PAGE>   7
 
                             SUMMARY FINANCIAL DATA
 
     The following table presents summary historical and pro forma financial
data on the bases described below and elsewhere in this prospectus.
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED            THREE MONTHS ENDED
                                                        JUNE 30, 1998          SEPTEMBER 30, 1998
                                                        -------------     ----------------------------
                                                          PRO FORMA         ACTUAL         PRO FORMA
                                                          ---------         ------         ---------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                    <C>                <C>            <C>
STATEMENT OF OPERATIONS DATA:
  Total revenue....................................      $  115,327       $   23,710      $   31,404
  Cost of revenue..................................          48,827           10,148          13,175
                                                         ----------       ----------      ----------
  Gross profit.....................................          66,500           13,562          18,229
  Selling, general and administrative expenses.....          50,709           10,593          14,074
  Goodwill amortization............................           2,348              380             591
                                                         ----------       ----------      ----------
  Income from operations...........................          13,443            2,589           3,564
  Interest and other income (expense), net.........          (1,736)              (3)           (422)
                                                         ----------       ----------      ----------
  Income before income taxes.......................          11,707            2,586           3,142
  Provision for income taxes.......................           5,622            1,187           1,493
                                                         ----------       ----------      ----------
  Net income.......................................      $    6,085       $    1,399      $    1,649
                                                         ==========       ==========      ==========
  Earnings per common share:
    Basic..........................................      $     0.54       $     0.14      $     0.15
                                                         ==========       ==========      ==========
    Diluted........................................      $     0.52       $     0.13      $     0.13
                                                         ==========       ==========      ==========
  Weighted average common shares outstanding:
     Basic.........................................      11,311,801       10,070,808      11,311,801
    Diluted........................................      11,731,105       11,124,260      12,376,184
</TABLE>
 
<TABLE>
<CAPTION>
                                                                        SEPTEMBER 30, 1998
                                                           ---------------------------------------------
                                                                                            PRO FORMA
                                                            ACTUAL        PRO FORMA        AS ADJUSTED
                                                           ---------    --------------    --------------
                                                                        (IN THOUSANDS)
<S>                                                        <C>          <C>               <C>
BALANCE SHEET DATA:
  Working capital.................................         $ 11,916        $  8,682          $ 38,002
  Total assets....................................          101,959         132,341           161,661
  Long-term debt, net of current portion..........            8,402          22,270             1,070
  Stockholders' equity............................           72,953          84,798           135,318
</TABLE>
 
---------------
     The pro forma consolidated statement of operations data assumes that our 12
acquisitions and initial public offering were completed on July 1, 1997. This
data is not necessarily indicative of the results we would have obtained if
these events had actually then occurred or of our future results. The pro forma
balance sheet data gives effect to the three acquisitions that we completed
after September 30, 1998 as if they had occurred on that date, and the pro forma
as adjusted balance sheet data gives effect to this offering and the application
of the net proceeds as if those events also had occurred on that date. The pro
forma data is based on estimates, available information and assumptions that
management deems appropriate.
 
     The pro forma statement of operations data for the year ended June 30, 1998
reflects the elimination of non-recurring fees totalling approximately $1.3
million and non-cash compensation expense totalling $686,000. The pro forma
statement of operations data for both periods presented above reflects the
elimination of the compensation differential resulting from the pro forma
adjustments of salary, bonus and benefits paid to certain owners of the
businesses we acquired to contractually agreed-upon levels. For fiscal 1998 and
the three months ended September 30, 1998, the aggregate compensation
differential was approximately $6.7 million and $172,000, respectively. The pro
forma consolidated statement of operations data for both periods also reflects
amortization of the goodwill being recorded as a result of each of our 12
acquisitions over a 40-year period, and assumes that all income is subject to an
effective corporate income tax rate of 40%, adjusted for non-tax deductible
goodwill.
 
                                        6
<PAGE>   8
 
                                  RISK FACTORS
 
     Investing in the common stock will provide you with an equity ownership
interest in PROVANT. As a PROVANT stockholder, you will be subject to risks
inherent in our business. The value of your investment may increase or decline
and could result in a loss. You should carefully consider the following factors
as well as other information contained in this prospectus before deciding to
invest in shares of the common stock.
 
LIMITED COMBINED OPERATING HISTORY
 
     Our companies did not begin to operate on a combined basis until the
combination of the seven Founding Companies in May 1998. Since then, we have
added the operations of five acquired companies. We have a limited history of
managing the combined operations of our companies.
 
     Our companies offer different services and products, use different
technologies, target different clients and have different corporate cultures.
These differences increase the risk that our efforts to integrate these
businesses may not succeed. We manage our companies and intend to manage
subsequently-acquired businesses on a decentralized basis. This operating
strategy could result in inconsistent operating and financial practices that
could adversely impact our profitability. If we fail to integrate successfully
the operations of our companies, our business could be adversely affected.
 
RISKS RELATED TO CROSS-SELLING
 
     A key component of our internal growth strategy is to cross-sell our
services and products within our existing client base. We have limited
experience in cross-selling and cannot guarantee that significant cross-selling
will occur. Our failure to increase sales through cross-selling or otherwise
achieve internal growth could negatively affect the value of your investment.
 
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
 
     We plan to grow in part by acquiring additional performance improvement
businesses. We may have trouble integrating and managing acquired businesses
without incurring substantial costs, delays or other operational or financial
problems. We also could be adversely affected by difficulties associated with
combining diverse business systems and cultures, and failures to retain key
personnel. In addition, if increased competition for acquisition candidates
develops, it may be more difficult for us to acquire suitable companies on
favorable terms. Uncertainties regarding the size, timing and integration of
acquisitions may cause our operating results to be difficult to predict from
quarter to quarter.
 
     We often finance acquisitions by issuing shares of common stock as part of
the purchase price. However, if the common stock does not maintain a sufficient
market value, or the principals of acquired companies otherwise refuse to accept
common stock as part of the purchase price, we might not be able to use common
stock in acquisitions and instead would be required to use more cash to maintain
our acquisition program. If in this scenario we do not have sufficient cash, we
will not be able to achieve expected growth without raising additional capital
through debt or equity financings. To the extent that we rely on debt
financings, if available, we may increase our borrowing costs and decrease our
profitability.
 
     At September 30, 1998, on a pro forma basis, our total assets were
approximately $132.3 million, of which approximately $93.2 million, or 70%, was
goodwill from acquisitions. To date, we have assigned a 40-year amortization
period to the goodwill of each of our acquired businesses. If the anticipated
cash flow from an acquired business does not support the value of its remaining
goodwill, we would be required to reduce the goodwill value and record a charge
to our earnings. Our future earnings also could be reduced if there is any
change in the accounting standards for goodwill which has the effect of
shortening the permitted goodwill amortization period. Accounting standards
writing organizations are considering such changes.
 
                                        7
<PAGE>   9
 
DEPENDENCE ON KEY PERSONNEL
 
     Our success depends on the efforts, abilities and leadership of the
following senior executives: Paul M. Verrochi, our Chairman and Chief Executive
Officer; John H. Zenger, our President; Dominic J. Puopolo, our Executive Vice
President and Chief Financial Officer; and Rajiv Bhatt, our Executive Vice
President and Chief Operating Officer. While we have entered into employment
agreements with each of these executives, we cannot be assured of retaining the
services of any of them. If any of these four individuals were to leave, our
business could be adversely affected.
 
     We also must continue to attract and retain instructors and consultants who
possess the skills and experience required by our clients. In addition, to
initiate, develop and maintain client relationships, we must retain our senior
managers and salespeople. If we fail to attract and retain senior managers,
qualified instructors, consultants and salespeople, our revenues and
profitability could be negatively affected.
 
CONVERSION TO TECHNOLOGY-BASED DELIVERY METHODS
 
     Traditionally, many of our companies have used instructors, written
materials or video to deliver performance improvement services and products. We
plan to rely increasingly on technology-based delivery methods such as CD-ROM,
intranets, the Internet and other distance-based media, and to convert to these
formats certain services and products that previously have been delivered
through the more "traditional" formats. We may be unable to recoup the costs
associated with converting content to different formats or developing new
delivery formats for our services and products. We run the risk that certain
clients may resist the newer formats, especially if the newer formats do not
yield comparable performance improvement results. These formats also might be
rendered obsolete by new technologies. We cannot guarantee that we will be able
to keep up with the pace of technological change in our industry. Any of these
risks, if realized, could hurt our operating results.
 
FLUCTUATIONS IN OPERATING RESULTS
 
     Our companies experience and expect to continue to experience fluctuations
in quarterly operating results. Because of this, you should not consider our
results for any quarter to be necessarily indicative of future results. Results
may vary as a result of, among other things, the overall level of performance
improvement services and products sold, the gain or loss of material client
relationships, the timing, structure and magnitude of acquisitions, or the
utilization rates of our salaried trainers and consultants. The timing or
completion of client engagements or custom services and products also could
result in fluctuations in our quarterly results of operations.
 
RELATIONSHIP WITH FEDERAL GOVERNMENT ENTITIES
 
     We derived approximately 19% of our pro forma revenue in the year ended
June 30, 1998 from services and products provided to numerous federal government
entities. Our operations could suffer due to a general reduction in federal
government spending for external training and development, a Congressional
budget impasse, or an inability to maintain our relationship with particular
federal government entities. In addition, the government typically shares
equally in the ownership of courseware and materials that we develop with
government funds, and may share this courseware or materials with other entities
including our competitors. Contracts with the federal government entail other
unique risks including potential government audits and retroactive downward
repricing of sales.
 
RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY
 
     We use legal and contractual methods to protect proprietary information
contained in our performance improvement services and products. However, many of
our services and products do not include any mechanisms to prohibit or prevent
unauthorized use, and the means we do have for protecting our proprietary
information may not be sufficient to discourage unauthorized use.
 
                                        8
<PAGE>   10
 
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
 
     Our directors and executive officers currently beneficially own
approximately 40% of our outstanding common stock. As a result, if these
stockholders were to act together, they could, as a practical matter, determine
the outcome of corporate actions requiring stockholder approval, including the
election of directors and the approval of significant corporate transactions,
such as a sale of PROVANT. This concentration of ownership may make it more
difficult for a third party to acquire control of us.
 
POSSIBLE FUTURE SALES OF SHARES
 
     The holders of our common stock prior to the Combination and the former
stockholders of the Founding Companies, who after this offering will
collectively own approximately 6,541,761 shares of common stock, contractually
agreed not to sell these shares prior to May 4, 2000. We are waiving these
restrictions to the extent necessary to permit these stockholders to sell shares
in this offering. Sales of substantial amounts of these shares, or even the
perception that sales of that magnitude could someday occur, may depress our
stock price and could hurt our ability either to raise money by selling stock or
to use stock in acquisitions.
 
                                        9
<PAGE>   11
 
                                USE OF PROCEEDS
 
     We estimate that the net proceeds from our sale of the 2,500,000 shares of
common stock, after deducting the underwriting discount and offering expenses,
will be approximately $50.5 million (assuming an offering price of $21.75 per
share). We will not receive any of the proceeds from the sale of common stock by
the selling stockholders.
 
     We intend to use approximately $21.2 million of the net proceeds to repay
indebtedness under our revolving credit facility, which indebtedness currently
bears interest at a weighted average rate of 5.8% and matures on December 31,
2001. We incurred this indebtedness primarily to finance acquisitions completed
since the Combination.
 
     The remaining net proceeds of the offering will be used for general
corporate purposes, including acquisitions. We regularly review potential
acquisition candidates and have held preliminary discussions with a number of
such candidates. We recently entered into letters of intent for two acquisitions
that will require us to use approximately $4.5 million for the cash portion of
the purchase prices. Pending the use of the net proceeds of the offering for the
purposes described above, we intend to invest such proceeds in short-term,
investment grade securities.
 
                          PRICE RANGE OF COMMON STOCK
 
     Our common stock is quoted on the Nasdaq National Market under the symbol
"POVT." The following table sets forth the high and low sales prices for the
common stock from April 29, 1998 (the first day of trading on Nasdaq) through
January 4, 1999.
 
<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                              ----      ---
<S>                                                          <C>       <C>
FISCAL 1998
Fourth Quarter (from April 29, 1998).......................  $22.50    $16.00
FISCAL 1999
First Quarter..............................................   19.00     10.00
Second Quarter.............................................   24.25      9.50
Third Quarter (through January   , 1999)...................
</TABLE>
 
     On January 4, 1999, the last reported sale price of the common stock was
$20.75. As of such date, there were 162 holders of record of common stock.
 
                                       10
<PAGE>   12
 
                                 CAPITALIZATION
 
     The following table sets forth our short-term debt and capitalization as of
September 30, 1998 (i) on an actual basis, (ii) on a pro forma basis to give
effect to subsequent acquisitions as if they had occurred on that date, and
(iii) on a pro forma basis as adjusted to give effect to our issuance and sale
of 2,500,000 shares of common stock at an assumed offering price of $21.75 per
share and the application of the net proceeds as described under "Use of
Proceeds." This table should be read in conjunction with our historical
consolidated financial statements and unaudited pro forma consolidated financial
statements and notes included elsewhere in this prospectus.
 
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30, 1998
                                                             -----------------------------------
                                                                                      PRO FORMA
                                                             ACTUAL     PRO FORMA    AS ADJUSTED
                                                             ------     ---------    -----------
                                                                       (IN THOUSANDS)
<S>                                                          <C>        <C>          <C>
Short-term debt and current maturities of long-term debt...  $   552    $    688      $    688
                                                             =======    ========      ========
Long-term debt, net of current maturities..................  $ 8,402    $ 22,270      $  1,070
Stockholders' equity:
     Preferred Stock, $.01 par value; 5,000,000 shares
       authorized, none issued and outstanding, actual, pro
       forma and pro forma as adjusted.....................       --          --            --
     Common Stock, $.01 par value; 40,000,000 shares
       authorized; 10,226,325 shares issued and
       outstanding, actual; 11,311,801 shares issued and
       outstanding, pro forma; 13,811,801 shares issued and
       outstanding, pro forma as adjusted..................      102         113           138
     Additional paid-in capital............................   74,513      86,347       136,842
     Accumulated deficit...................................   (1,662)     (1,662)       (1,662)
                                                             -------    --------      --------
     Total stockholders' equity............................   72,953      84,798       135,318
                                                             -------    --------      --------
          Total capitalization.............................  $81,355    $107,068      $136,388
                                                             =======    ========      ========
</TABLE>
 
                                DIVIDEND POLICY
 
     We intend to retain all of our earnings, if any, to finance the expansion
of our business and for general corporate purposes, and do not anticipate paying
cash dividends on our common stock in the foreseeable future. Any future
determination as to the payment of dividends on the common stock will be at the
discretion of the Board of Directors and will depend upon, among other things,
our future earnings, if any, operating and financial condition, capital
requirements, general business conditions and any other factors the Board of
Directors may consider. In addition, our credit facility currently prohibits the
payment of dividends without the consent of the lenders.
 
                                       11
<PAGE>   13
 
                            SELECTED FINANCIAL DATA
 
     The following table presents selected historical consolidated financial
data for PROVANT (which includes the accounts of each acquired company from its
date of acquisition), which has been derived from our historical consolidated
financial statements included elsewhere in this prospectus. The following table
also presents selected consolidated financial data on a pro forma basis
reflecting adjustments described below and elsewhere in this prospectus. See our
historical consolidated financial statements and unaudited pro forma
consolidated financial statements, as well as the other financial statements and
notes included elsewhere in this prospectus.
 
<TABLE>
<CAPTION>
                                                 PERIOD FROM
                                              NOVEMBER 16, 1996
                                             (DATE OF INCEPTION)         YEAR ENDED           THREE MONTHS ENDED
                                              TO JUNE 30, 1997         JUNE 30, 1998          SEPTEMBER 30, 1998
                                             -------------------   ----------------------   -----------------------
                                                                                  PRO                       PRO
                                                                    ACTUAL       FORMA        ACTUAL       FORMA
                                                                   ---------   ----------   ----------   ----------
                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                          <C>                   <C>         <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Total revenue..............................       $      --        $  14,189   $  115,327   $   23,710   $   31,404
Cost of revenue............................              --            6,374       48,827       10,148       13,175
                                                  ---------        ---------   ----------   ----------   ----------
Gross profit...............................              --            7,815       66,500       13,562       18,229
Selling, general and administrative
  expenses.................................             149           10,447       50,709       10,593       14,074
Goodwill amortization......................              --              245        2,348          380          591
                                                  ---------        ---------   ----------   ----------   ----------
Income (loss) from operations..............            (149)          (2,877)      13,443        2,589        3,564
Interest and other income (expense), net...              --             (220)      (1,736)          (3)        (422)
                                                  ---------        ---------   ----------   ----------   ----------
Income (loss) before income taxes..........            (149)          (3,097)      11,707        2,586        3,142
Provision (benefit) for income taxes.......              --             (203)       5,622        1,187        1,493
                                                  ---------        ---------   ----------   ----------   ----------
Net income (loss)..........................       $    (149)       $  (2,894)  $    6,085   $    1,399   $    1,649
                                                  =========        =========   ==========   ==========   ==========
Earnings (loss) per common share:
  Basic....................................       $   (0.08)       $   (0.67)  $     0.54   $     0.14   $     0.15
                                                  =========        =========   ==========   ==========   ==========
  Diluted..................................       $   (0.08)       $   (0.67)  $     0.52   $     0.13   $     0.13
                                                  =========        =========   ==========   ==========   ==========
Weighted average common shares outstanding:
  Basic....................................       1,950,520        4,350,169   11,311,801   10,070,808   11,311,801
  Diluted..................................       1,950,520        4,350,169   11,731,105   11,124,260   12,376,184
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30, 1998
                                                                               ------------------------
                                                              JUNE 30, 1998     ACTUAL      PRO FORMA
                                                              -------------    --------    ------------
                                                                           (IN THOUSANDS)
<S>                                                           <C>              <C>         <C>
BALANCE SHEET DATA:
Working capital.............................................    $ 11,107       $ 11,916      $  8,682
Total assets................................................      86,358        101,959       132,341
Long-term debt, net of current portion......................         874          8,402        22,270
Stockholders' equity........................................      66,499         72,953        84,798
</TABLE>
 
---------------
     The pro forma consolidated statement of operations data assumes that our 12
acquisitions and initial public offering were completed on July 1, 1997. This
data is not necessarily indicative of the results we would have obtained if
these events had actually then occurred or of our future results. The pro forma
balance sheet data gives effect to the three acquisitions that we completed
after September 30, 1998 as if they had occurred on that date. The pro forma
data is based on estimates, available information and assumptions that
management deems appropriate.
 
     The pro forma statement of operations data for the year ended June 30, 1998
reflects the elimination of non-recurring fees totalling approximately $1.3
million and non-cash compensation expense totalling $686,000. The pro forma
statement of operations data for both periods presented above reflects the
elimination of the compensation differential resulting from the pro forma
adjustments of salary, bonus and
 
                                       12
<PAGE>   14
 
benefits paid to certain owners of the businesses we acquired to contractually
agreed-upon levels. For fiscal 1998 and the three months ended September 30,
1998, the aggregate compensation differential was approximately $6.7 million and
$172,000, respectively. The pro forma consolidated statement of operations data
for both periods also reflects amortization of the goodwill being recorded as a
result of each of our 12 acquisitions over a 40-year period, and assumes that
all income is subject to an effective corporate income tax rate of 40%, adjusted
for non-tax deductible goodwill.
 
                     STAR MOUNTAIN SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     We have reported in this prospectus PROVANT's operating results commencing
with our inception on November 16, 1996. For the purpose of providing five full
years of selected historical financial data, as required under the rules of the
SEC, we must also present the following historical selected financial data for
Star Mountain, a significant predecessor company. The selected data for the
years ended December 31, 1995, 1996 and 1997 and the period January 1, 1998 to
May 4, 1998 is derived from, and should be read in conjunction with, Star
Mountain's audited financial statements (and the notes thereto) appearing
elsewhere in this prospectus. The selected data for the years ended December 31,
1993 and 1994 are derived from Star Mountain's audited financial statements for
those years. The data presented below is neither comparable to nor indicative of
our post-Combination financial position or results of operations.
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,                PERIOD FROM
                                                ---------------------------------------------   JANUARY 1, 1998
                                                 1993     1994     1995      1996      1997      TO MAY 4, 1998
                                                ------   ------   -------   -------   -------   ----------------
<S>                                             <C>      <C>      <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
  Total revenue...............................  $8,293   $9,731   $14,306   $16,313   $23,775       $ 11,052
  Cost of revenue.............................   5,418    6,350     8,668     9,457    14,504          6,109
                                                ------   ------   -------   -------   -------       --------
  Gross profit................................   2,875    3,381     5,638     6,856     9,271          4,943
  Selling, general and administrative
    expenses..................................   2,619    2,973     4,411     5,476     7,591          3,650
                                                ------   ------   -------   -------   -------       --------
  Income from operations......................     256      408     1,227     1,380     1,680          1,293
  Interest and other income (expense), net....    (150)    (194)     (235)     (379)     (406)          (137)
                                                ------   ------   -------   -------   -------       --------
  Income before provision for income taxes....     106      214       992     1,001     1,274          1,156
  Provision for income taxes(1)...............      --       --        --       397       546            457
                                                ------   ------   -------   -------   -------       --------
  Net income..................................  $  106   $  214   $   992   $   604   $   728       $    699
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: basic............  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.09       $   0.09
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: diluted..........  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.08       $   0.08
                                                ======   ======   =======   =======   =======       ========
  Shares used in computing basic earnings per
    common share..............................   8,443    8,821     8,825     8,422     8,078          8,074
  Shares used in computing diluted earnings
    per common share..........................   9,271    9,058     8,963     8,565     8,823          8,871
BALANCE SHEET DATA:
  Working capital.............................  $  583   $  847   $   942   $   871   $    64
  Total assets................................   3,231    3,507     4,775     5,983    10,677
  Long term debt, net of current portion......      --       --        --        --       304
  Stockholders' equity........................   1,021    1,274     1,859     2,010     2,778
</TABLE>
 
---------------
(1) Through December 31, 1995, Star Mountain had elected to be treated as an S
    corporation and, accordingly, there was no provision for income taxes for
    periods ending on or prior to that date.
 
                                       13
<PAGE>   15
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     Unless otherwise indicated or the context otherwise requires in this
section, each reference to a year is to our fiscal year or a Founding Company's
fiscal year which (with the exception of J. Howard, LSS and Star Mountain) ends
on June 30 of the same calendar year (for example, "1997" means the fiscal year
ended June 30, 1997). The following discussion should be read in conjunction
with our historical consolidated financial statements and the Founding
Companies' financial statements and the related notes thereto appearing
elsewhere in this prospectus.
 
FOUNDING COMPANIES
 
     Our operations in the performance improvement industry began in May 1998
when we acquired the seven Founding Companies. The Founding Companies are:
Behavioral Technology, Inc. ("BTI"); Decker Communications, Inc. ("Decker"); J.
Howard & Associates, Inc. ("J. Howard"); Learning Systems Sciences ("LSS"); MOHR
Retail Learning Systems, Inc. ("MOHR"); Novations Group, Inc. ("Novations"); and
Star Mountain, Inc. (with its subsidiaries, "Star Mountain").
 
ACQUISITIONS SINCE THE IPO
 
     Since the Combination, we have acquired the five businesses described in
the table below.
 
<TABLE>
<CAPTION>
               COMPANY                           DATE ACQUIRED                    AREA OF EXPERTISE
--------------------------------------  -------------------------------    -------------------------------
<S>                                     <C>                                <C>
KC Resources Creative Solutions, Inc.   July 20, 1998                      Technology-based instructional
                                                                           design
American Media Incorporated             September 14, 1998                 General business management
                                                                           solutions
Strategic Interactive, Inc.             October 19, 1998                   Web-based training management
                                                                           solutions
Gulliver Ritchie Associates, Inc.       November 16, 1998                  Technology-based training
                                                                           solutions
Executive Perspectives, Inc.            November 24, 1998                  Custom training simulations
</TABLE>
 
     Each acquisition was accounted for under the purchase method of accounting.
The aggregate purchase price of these acquisitions was $51.2 million, consisting
of $30.2 million in cash and 1,516,243 shares of common stock. In addition, the
former owners of these businesses are entitled to receive contingent
consideration based upon the future earnings before interest and taxes of these
businesses. For accounting purposes, any contingent consideration paid in these
acquisitions will be treated as additional purchase price.
 
     We currently have letters of intent to acquire a technology-based
instructional design company and a custom simulations training company for an
aggregate base purchase price of approximately $11 million, plus contingent
consideration of up to $500,000.
 
REVENUES, COSTS AND EXPENSES
 
     We receive revenue from five main sources: (i) instructor-led and
train-the-trainer programs; (ii) license fees; (iii) custom services and
products; (iv) consulting and training management services; and (v) standardized
products. We recognize revenue from instructor-led training and
train-the-trainer programs, usually on a participant basis, when the training is
delivered. From our train-the-trainer arrangements, we also recognize license
fees on a per-participant basis when a certified client trainer delivers our
courses and materials to other employees of the client. We recognize revenue
from a site license at the time the license is granted. We recognize maintenance
fees on our training management services as they are performed over the life of
the contract. We generally recognize revenue from our custom services and
products based on the percentage-of-completion method. We recognize revenue from
fees for our consulting services, for which we charge an hourly or per diem
rate, when the consulting is
 
                                       14
<PAGE>   16
 
provided. We also recognize revenue for our standardized products, such as books
or videotapes, when the products are shipped.
 
     Cost of revenue primarily consists of: (i) salaries and benefits for our
instructors, consultants and course designers and costs of independent
contractors; and (ii) the cost of developing, designing and producing training
courses and materials, including materials costs. As a result, our gross margins
are affected by the number of instructors, consultants and course designers and
their utilization during any given period.
 
     Selling, general and administrative expenses consist primarily of salaries,
benefits and bonuses for our corporate, sales, marketing and administrative
personnel, and marketing and advertising expenses for our services and products.
Selling, general and administrative expenses also include incentive and
discretionary bonuses paid to executives and other key employees. Other selling,
general and administrative expenses include non-reimbursable travel expenses,
rent, depreciation, telecommunication costs, postage and other operating costs.
 
     Before we acquired them, each of the Founding Companies and the businesses
we acquired after the Combination operated as an independent entity, and their
results of operations reflect varying tax structures (S corporations or C
corporations) which have influenced the historical level of owners'
compensation. The owners and key employees of the Founding Companies and the
subsequently-acquired businesses agreed in connection with the acquisitions to
adjust their annual salaries, bonuses and benefits. The difference (positive or
negative) between the base salary of the owners and key employees of the
Founding Companies and the subsequently-acquired businesses immediately after
their dates of acquisition and their salaries, bonuses and benefits during any
comparable period is reflected in our unaudited pro forma consolidated
statements of operations as the "Compensation Differential." The aggregate
Compensation Differentials for 1998 and the three months ended September 30,
1998 were $6.7 million and $172,000, respectively. The unaudited pro forma
combined statements of operations include a provision for income tax as if we
were taxed as a C corporation during all periods presented.
 
UNAUDITED REVENUES AND GROSS PROFIT -- THREE MONTHS ENDED SEPTEMBER 30, 1997
(PRO FORMA) AND 1998 (HISTORICAL) -- PROVANT
 
     The following selected unaudited historical and pro forma financial data
represents our revenues and gross profit on an absolute basis and as a
percentage of revenue for the periods indicated. The pro forma adjustments in
the table below, which give effect only to the Combination and the historical
revenues and gross profit of companies acquired by Star Mountain in February and
October 1997, should be distinguished from the more extensive pro forma
adjustments made to our historical consolidated financial statements that are
contained elsewhere in this prospectus.
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED SEPTEMBER 30,
                                                          --------------------------------------
                                                                 1997                 1998
                                                          ------------------    ----------------
                                                          PRO FORMA COMBINED       HISTORICAL
                                                          ------------------    ----------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                       <C>         <C>       <C>        <C>
Total revenue...........................................  $17,738     100.0%    $23,710    100.0%
Cost of revenue.........................................    8,056      45.4      10,148     42.8
                                                          -------     -----     -------    -----
Gross profit............................................  $ 9,682      54.6%    $13,562     57.2%
                                                          =======     =====     =======    =====
</TABLE>
 
PRO FORMA COMBINED RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE
"1998 QUARTER") COMPARED TO THE HISTORICAL RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 (THE "1999 QUARTER")
 
     Revenue.  Revenue increased $6.0 million, or 33.7%, from $17.7 million in
the 1998 Quarter to $23.7 million in the 1999 Quarter. The increase was
primarily attributable to an increased number of government contracts,
train-the-trainer programs and contracts to develop interactive multimedia
programs, as well as revenues from businesses acquired during the 1999 Quarter.
 
                                       15
<PAGE>   17
 
     Cost of Revenue.  Cost of revenue as a percentage of revenue decreased from
45.4% in the 1998 Quarter to 42.8% in the 1999 Quarter primarily due to a
favorable revenue mix, which was composed of increased license fees and higher
sales of products through direct mail distribution.
 
     Gross Profit.  Gross profit increased $3.9 million, or 40.1%, from $9.7
million in the 1998 Quarter to $13.6 million in the 1999 Quarter primarily due
to a favorable revenue mix, which was composed of increased license fees and
higher sales of products through direct mail distribution. As a percentage of
revenue, gross profit increased from 54.6% in the 1998 Quarter to 57.2% in the
1999 Quarter.
 
RESULTS OF OPERATIONS -- PROVANT HISTORICAL
 
     The following consolidated financial information represents our operations
(including the operations of the Founding Companies from May 4, 1998, their date
of acquisition in the Combination) on a historical basis. The following
historical financial information for fiscal 1998 includes a non-recurring fee of
$750,000 for information related to the performance improvement industry,
non-cash compensation expense totaling $686,000 related to the issuance of
common stock and stock options to certain of our officers and consultants, and
non-recurring Combination-related costs of $588,000.
 
<TABLE>
<CAPTION>
                                                               PERIOD FROM
                                                            NOVEMBER 16, 1996
                                                           (DATE OF INCEPTION)       YEAR ENDED
                                                            TO JUNE 30, 1997       JUNE 30, 1998
                                                           -------------------    ----------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                        <C>                    <C>        <C>
Total revenue............................................         $  --           $14,189    100.0%
Cost of revenue..........................................            --             6,374     44.9
                                                                  -----           -------    -----
Gross profit.............................................            --             7,815     55.1
Selling, general and administrative expenses.............           149            10,447     73.7
Goodwill amortization....................................            --               245      1.7
                                                                  -----           -------    -----
Income (loss) from operations............................         $(149)          $(2,877)   (20.3)%
                                                                  =====           =======    =====
</TABLE>
 
HISTORICAL RESULTS FOR THE PERIOD FROM NOVEMBER 16, 1996 (DATE OF INCEPTION) TO
JUNE 30, 1997 (THE "1997 PERIOD") COMPARED TO 1998
 
     Revenue.  Revenue increased from nil in the 1997 Period to $14.2 million in
1998 due to the acquisition of the Founding Companies on May 4, 1998 and the
inclusion of their operating results commencing on that date.
 
     Cost of Revenue.  Cost of revenue increased from nil in the 1997 Period to
$6.4 million in 1998 due to the acquisition of the Founding Companies on May 4,
1998 and the inclusion of their operating results commencing on that date.
 
     Gross Profit.  Gross profit increased from nil in the 1997 Period to $7.8
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased from $149,000 in the 1997 Period to $10.4
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date. Prior to
the acquisition of the Founding Companies, selling, general and administrative
expenses included corporate expenses, consisting primarily of consulting fees
and travel expenses incurred to consummate the Combination and the IPO.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     We have a revolving line of credit of up to $60.0 million (increased from
$40.0 million as of December 31, 1998), guaranteed by all of our significant
wholly-owned subsidiaries and secured by a pledge of the capital stock of each
of our wholly-owned subsidiaries. We can use the credit facility to finance
acquisitions (including the refinancing of indebtedness of acquired companies),
working capital and
 
                                       16
<PAGE>   18
 
general corporate purposes. Loans made under the credit facility bear interest
at a rate, at our option, based on either a Eurodollar rate or the bank's prime
rate. The credit facility will terminate on December 31, 2001, and all
outstanding amounts will be due at such time. The credit facility (i) generally
prohibits us from paying dividends and other distributions, (ii) generally does
not permit us to incur or assume other indebtedness, and (iii) requires us to
comply with certain financial covenants. As of December 31, 1998, $20.9 million
was outstanding under the credit facility, which had a weighted average interest
rate of 5.8%.
 
     We anticipate that our cash flow from operations and borrowings under the
credit facility will provide cash sufficient to satisfy our working capital
needs, debt service requirements and planned capital expenditures for the next
12 months.
 
     We have an effective shelf registration statement on Form S-4 relating to
the issuance of up to 3,000,000 shares of common stock in connection with
acquisitions. We have issued 1,316,243 shares through December 31, 1998 and a
currently undeterminable number of shares may become issuable as contingent
consideration under the registration statement with respect to acquisitions
completed before that date.
 
THE YEAR 2000 ISSUE
 
     We use information technology ("IT") systems in our internal operations,
including applications used in client order processing, inventory management,
financial business systems and various administrative functions which are
primarily "off-the-shelf" applications. Non-IT systems used in our internal
operations consist primarily of voice and data communications systems and
elevator and climate control systems. In addition, we deliver several of our
products on technology-based platforms, such as CD-ROM, intranets and the
Internet. Management has completed the assessment of our IT and non-IT systems
and products for all of our companies except for our two most recent
acquisitions, whose assessments will be completed by the end of January 1999.
Our completed assessment has indicated the need to replace some personal
computers and upgrade two phone switches. We estimate the cost of these
remediation efforts to be approximately $55,000. Management expects to complete
any necessary remediation, implementation and final testing of IT and non-IT
systems and products by March 31, 1999. To the extent the source code of IT and
non-IT internal systems and customer products may be deficient despite our
assessment with respect to "Year 2000" issues, our failure to make any required
modifications in order to make the systems and products "Year 2000" compliant
could have a material adverse effect on our business.
 
     We derive a substantial amount of our revenues from services and products
delivered to entities affiliated with the federal government. During fiscal
1998, our work for federal government clients generated approximately 19% of our
pro forma consolidated revenue. Failure by these government entities to make
their respective computer software programs and operating systems "Year 2000"
compliant could have a material adverse effect on our business.
 
     We have not yet completed the evaluation of our most reasonably likely
worst case "Year 2000" scenario, nor have we completed our contingency planning
with respect to the "Year 2000." We also have not yet completed our evaluation
of our vendors' contingency planning with respect to their potential "Year 2000"
deficiencies. We intend to complete both these evaluations and contingency
planning during fiscal 1999.
 
     To date, we have incurred approximately $40,000 to remediate "Year 2000"
issues. Management currently believes that any future costs to remediate "Year
2000" issues will not be material to our financial position or results of
operations.
 
RESULTS OF OPERATIONS -- BTI
 
     BTI primarily provides train-the-trainer programs designed to help its
clients improve employee recruitment, selection and retention. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
 
                                       17
<PAGE>   19
 
     The following table sets forth certain selected financial data for BTI on a
historical basis and as a percentage of revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                             YEAR ENDED JUNE 30,                     FOR THE PERIOD
                                       --------------------------------    -----------------------------------
                                                                            JULY 1, 1997 TO     MAY 5, 1998 TO
                                            1996              1997            MAY 4, 1998       JUNE 30, 1998
                                       --------------    --------------    -----------------    --------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                    <C>      <C>      <C>      <C>      <C>       <C>        <C>      <C>
Revenue............................    $5,685   100.0%   $7,096   100.0%   $ 6,567     100.0%   $1,276   100.0%
Cost of revenue....................     1,495    26.3     1,488    21.0      1,243      18.9       281    22.0
                                       ------   -----    ------   -----    -------   -------    ------   -----
Gross profit.......................     4,190    73.7     5,608    79.0      5,324      81.1       995    78.0
Selling, general and administrative
  expenses.........................     4,048    71.2     5,111    72.0      6,648     101.2       841    65.9
                                       ------   -----    ------   -----    -------   -------    ------   -----
Income (loss) from operations......    $  142     2.5%   $  497     7.0%   $(1,324)    (20.1)%  $  154    12.1%
                                       ======   =====    ======   =====    =======   =======    ======   =====
Compensation differential..........    $  563     9.9%   $  942    13.3%   $ 3,355      51.1%   $   --      --%
</TABLE>
 
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- BTI
 
     Revenue.  Revenue increased approximately $747,000, or 10.5%, from $7.1
million in the 1997 Period to $7.8 million in the 1998 Period, primarily due to
increased sales of existing products as a result of the expansion of the sales
force and an increase in participant fees as a result of an increased base of
certified trainers at the company's clients.
 
     Cost of Revenue.  Cost of revenue increased approximately $36,000, or 2.4%,
from approximately $1.4 million in the 1997 Period to approximately $1.5 million
in the 1998 Period. As a percentage of revenue, cost of revenue decreased from
21.0% in the 1997 Period to 19.4% in the 1998 Period, primarily due to a
decrease in the average unit cost of participant materials.
 
     Gross Profit.  Gross profit increased approximately $711,000, or 12.7%,
from $5.6 million in the 1997 Period to $6.3 million in the 1998 Period. As a
percentage of revenue, gross profit increased from 79.0% in the 1997 Period to
80.6% in the 1998 Period, primarily due to the cost savings described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $2.4 million, or 46.5%, from $5.1 million in
the 1997 Period to $7.5 million in the 1998 Period. Excluding the Compensation
Differential attributable to BTI of approximately $942,000 and $3.4 million in
the 1997 Period and 1998 Period, respectively, selling, general and
administrative expenses would have remained relatively constant at $4.2 million
and $4.1 million in the 1997 and 1998 Periods, respectively. As a percentage of
revenue, selling, general and administrative expenses would have decreased on an
adjusted basis from 58.8% in the 1997 Period to 52.7% in the 1998 Period,
primarily due to the company's larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- BTI
 
     Revenue.  Revenue increased $1.4 million, or 24.8%, from $5.7 million in
1996 to $7.1 million in 1997, primarily due to increased sales of existing
products as a result of the expansion of the sales force and an increase in
participant fees as a result of an increased base of certified trainers at the
company's clients.
 
     Cost of Revenue.  Cost of revenue remained relatively constant at $1.5
million in 1996 and 1997. As a percentage of revenue, cost of revenue decreased
from 26.3% in 1996 to 21.0% in 1997, primarily due to a decrease in the average
unit cost of participant materials.
 
     Gross Profit.  Gross profit increased $1.4 million, or 33.8%, from $4.2
million in 1996 to $5.6 million in 1997. As a percentage of revenue, gross
profit increased from 73.7% in 1996 to 79.0% in 1997, primarily due to the
increase in revenue combined with the decrease in the average unit cost of
participant materials.
 
                                       18
<PAGE>   20
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.1 million, or 26.3%, from $4.0 million in
1996 to $5.1 million in 1997. Excluding the Compensation Differential
attributable to BTI of approximately $563,000 and approximately $942,000 in 1996
and 1997, respectively, selling, general and administrative expenses would have
increased approximately $684,000, or 19.6%, from $3.5 million in 1996 to $4.2
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 61.3% in 1996 to 58.8%
in 1997. The decrease as a percentage of revenue on an adjusted basis primarily
was due to the company's larger revenue base.
 
LIQUIDITY AND CAPITAL RESOURCES -- BTI
 
     BTI generated net cash from operating activities of approximately $641,000
in 1997. For the period from July 1, 1997 to May 4, 1998, BTI used approximately
$465,000 in operating activities, primarily for the payment of bonuses to key
employees. Net cash used in investing activities was approximately $33,000 in
1997 for purchases of property and equipment, and approximately $294,000 in the
period from July 1, 1997 to May 4, 1998 due to an increase in amounts due to
related parties. At May 4, 1998, BTI had a working capital deficit of
approximately $73,000.
 
RESULTS OF OPERATIONS -- DECKER
 
     Decker provides instructor-led training to improve employees' business
communication and presentation skills. Decker's revenue is derived primarily
from fees charged to participants in its instructor-led training programs.
 
     The following table sets forth certain selected financial data for Decker
on a historical basis and as a percentage of revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                                YEAR ENDED JUNE 30,                     FOR THE PERIOD
                                          --------------------------------    ----------------------------------
                                                                              JULY 1, 1997 TO     MAY 5, 1998 TO
                                               1996              1997           MAY 4, 1998       JUNE 30, 1998
                                          --------------    --------------    ----------------    --------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                       <C>      <C>      <C>      <C>      <C>       <C>       <C>      <C>
Revenue.................................  $8,620   100.0%   $8,410   100.0%   $8,729    100.0%    $2,016   100.0%
Cost of revenue.........................   2,655    30.8     2,275    27.1     2,275     26.1        494    24.5
                                          ------   -----    ------   -----    ------    -----     ------   -----
Gross profit............................   5,965    69.2     6,135    72.9     6,454     73.9      1,522    75.5
Selling, general and administrative
  expenses..............................   5,716    66.3     6,446    76.6     5,696     65.2      1,255    62.3
                                          ------   -----    ------   -----    ------    -----     ------   -----
Income (loss) from operations...........  $  249     2.9%   $ (311)   (3.7)%  $  758      8.7%    $  267    13.2%
                                          ======   =====    ======   =====    ======    =====     ======   =====
Compensation differential...............  $  192     2.2%   $1,165    13.9%   $  372      4.3%    $   --      --%
</TABLE>
 
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- DECKER
 
     Revenue.  Revenue increased $2.3 million, or 27.8%, from $8.4 million in
the 1997 Period to $10.7 million in the 1998 Period, primarily due to an
increase in the sales force and organizational initiatives undertaken in 1997 as
described below, which resulted in an increase in the number of seminars
delivered during the 1998 Period compared to the 1997 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $494,000, or
21.7%, from $2.3 million in the 1997 Period to $2.8 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 27.1% in the 1997
Period to 25.8% in the 1998 Period, primarily due to increased utilization of
trainers.
 
     Gross Profit.  Gross profit increased approximately $1.8 million, or 30.0%,
from $6.1 million in the 1997 Period to $8.0 million in the 1998 Period. As a
percentage of revenue, gross profit increased from 72.9% in the 1997 Period to
74.2% in the 1998 Period, primarily due to the reasons described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $505,000, or 7.8%, from $6.4
million in the 1997 Period to $7.0 million in the 1998 Period.
 
                                       19
<PAGE>   21
 
Excluding the Compensation Differential of $1.2 million and approximately
$372,000 attributable to Decker in the 1997 Period and 1998 Period,
respectively, selling, general and administrative expenses would have increased
approximately $1.3 million, or 24.6%, from $5.3 million in the 1997 Period to
$6.6 million in the 1998 Period. As a percentage of revenue, selling, general
and administrative expenses would have decreased on an adjusted basis from 62.8%
in the 1997 Period to 61.2% in the 1998 Period, primarily due to the company's
larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- DECKER
 
     Revenue.  Revenue decreased approximately $210,000, or 2.4%, from $8.6
million in 1996 to $8.4 million in 1997, primarily due to a temporary shift in
the focus of Decker's business. During the first six months of 1997, Decker
increased its focus on providing consulting services rather than its traditional
training. This shift in focus resulted in a decline in training revenue and a
high degree of sales force turnover. During the second half of 1997, the company
returned to a business model focused on instructor-led training, and launched
several organizational initiatives, including the hiring of a new president and
the implementation of a new salary structure for its sales force.
 
     Cost of Revenue.  Cost of revenue decreased approximately $380,000, or
14.3%, from $2.7 million in 1996 to $2.3 million in 1997. As a percentage of
revenue, cost of revenue decreased from 30.8% in 1996 to 27.1% in 1997,
primarily due to a reduction in the number of trainers and increased utilization
of trainers.
 
     Gross Profit.  Gross profit increased approximately $170,000, or 2.8%, from
$6.0 million in 1996 to $6.1 million in 1997. As a percentage of revenue, gross
profit increased from 69.2% in 1996 to 72.9% in 1997, primarily due to increased
utilization of trainers.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $730,000, or 12.8%, from $5.7
million in 1996 to $6.4 million in 1997. Excluding the Compensation Differential
attributable to Decker of approximately $192,000 and $1.2 million in 1996 and
1997, respectively, selling, general and administrative expenses would have
decreased approximately $243,000, or 4.4%, from $5.5 million in 1996 to $5.3
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 64.1% in 1996 to 62.8%
in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- DECKER
 
     Decker generated net cash from operating activities of approximately
$446,000 in 1997 and approximately $1.1 million in the period from July 1, 1997
to May 4, 1998. Net cash used in investing activities was approximately $11,000
in 1997 and approximately $31,000 in the period from July 1, 1997 to May 4,
1998, primarily for purchases of property and equipment. Net cash used in
financing activities was approximately $241,000 in 1997 and approximately
$590,000 in the period from July 1, 1997 to May 4, 1998, primarily for the
payment of dividends. At May 4, 1998, Decker had working capital of $1.3 million
and approximately $583,000 of long-term debt.
 
RESULTS OF OPERATIONS -- J. HOWARD
 
     J. Howard provides instructor-led training to individual managers and
client companies to identify and address potential obstacles to improving
workplace productivity, including race and gender issues and sexual harassment.
J. Howard's revenue is derived primarily from fees from instructor-led seminars
and, to a lesser extent, from the rendering of consulting services. J. Howard
also occasionally enters into license agreements and then delivers its programs
in the train-the-trainer format; in these instances, revenue from the license
agreements is recognized when the license is signed. Revenue from the trainer
certifications is recognized on a per event basis when the training is
delivered.
 
                                       20
<PAGE>   22
 
     The following table sets forth certain selected financial data for J.
Howard on a historical basis and as a percentage of revenue for the periods
indicated:
 
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,                                           FOR THE PERIOD
                          ------------------------------------------------      FOR THE       -----------------------------------
                                                                               SIX MONTHS
                                                                                 ENDED        JANUARY 1, 1998      MAY 5, 1998
                               1995             1996             1997        JUNE 30, 1997     TO MAY 4, 1998    TO JUNE 30, 1998
                          --------------   --------------   --------------   --------------   ----------------   ----------------
                                                                  (DOLLARS IN THOUSANDS)
<S>                       <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>       <C>      <C>       <C>
Revenue.................  $6,251   100.0%  $7,110   100.0%  $7,684   100.0%  $4,160   100.0%  $2,041    100.0%   $1,248    100.0%
Cost of revenue.........   1,964    31.4    2,166    30.5    2,346    30.5    1,190    28.6      670     32.8       389     31.2
                          ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    ------    -----
Gross profit............   4,287    68.6    4,944    69.5    5,338    69.5    2,970    71.4    1,371     67.2       859     68.8
Selling, general and
  administrative
  expenses..............   4,158    66.5    4,559    64.1    4,748    61.8    1,971    47.4    1,476     72.3       721     57.8
                          ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    ------    -----
Income (loss) from
  operations............  $  129     2.1%  $  385     5.4%  $  590     7.7%  $  999    24.0%  $ (105)   (5.1)%   $  138     11.0%
                          ======   =====   ======   =====   ======   =====   ======   =====   ======    =====    ======    =====
Compensation
  differential..........  $  522     8.4%  $  944    13.3%  $  603     7.8%  $  120     2.9%  $  497     24.4%   $   --       --%
</TABLE>
 
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- J. HOWARD
 
     Revenue.  Revenue decreased approximately $871,000, or 20.9%, from $4.2
million in the 1997 Period to $3.3 million in the 1998 Period, primarily due to
lower license revenue.
 
     Cost of Revenue.  Cost of revenue decreased approximately $131,000, or
11.0%, from approximately $1.2 million in the 1997 Period to approximately $1.1
million in the 1998 Period. As a percentage of revenue, cost of revenue
increased from 28.6% in the 1997 Period to 32.2% in the 1998 Period due to the
fixed nature of a portion of the company's costs.
 
     Gross Profit.  Gross profit decreased approximately $740,000, or 24.9%,
from $3.0 million in the 1997 Period to $2.2 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 71.4% in the 1997 Period to
67.8% in the 1998 Period, due to the reasons described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $226,000, or 11.5%, from $2.0
million in the 1997 Period to $2.2 million in the 1998 Period. Excluding the
Compensation Differential of approximately $120,000 and approximately $497,000
attributable to J. Howard in the 1997 Period and the 1998 Period, respectively,
selling, general and administrative expenses would have decreased approximately
$151,000, or 8.2%, from $1.9 million in the 1997 Period to $1.7 million in the
1998 Period. As a percentage of revenue, selling, general and administrative
expenses would have increased on an adjusted basis from 44.5% in the 1997 Period
to 51.7% in the 1998 Period, primarily due to compensation paid to additional
salespeople who did not generate material revenue during the 1998 Period and the
decrease in revenue.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 -- J. HOWARD
 
     Revenue.  Revenue increased approximately $574,000, or 8.1%, from $7.1
million in the year ended December 31, 1996 to $7.7 million in the year ended
December 31, 1997, primarily due to increased license revenue generated from one
of the company's clients during the year ended December 31, 1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $180,000, or
8.3%, from $2.2 million in the year ended December 31, 1996 to $2.3 million in
the year ended December 31, 1997. As a percentage of revenue, cost of revenue
remained constant at 30.5% in both periods.
 
     Gross Profit.  Gross profit increased approximately $394,000, or 8.0%, from
$4.9 million in the year ended December 31, 1996 to $5.3 million in the year
ended December 31, 1997. As a percentage of revenue, gross profit remained
constant at approximately 69.5% in both periods.
 
                                       21
<PAGE>   23
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $189,000, or 4.1%, from $4.6
million in the year ended December 31, 1996 to $4.7 million in the year ended
December 31, 1997. Excluding the Compensation Differential of approximately
$944,000 and approximately $603,000 attributable to J. Howard in the year ended
December 31, 1996 and the year ended December 31, 1997, respectively, selling,
general and administrative expenses would have increased approximately $530,000,
or 14.7%, from $3.6 million in the year ended December 31, 1996 to $4.1 million
in the year ended December 31, 1997. As a percentage of revenue, selling,
general and administrative expenses would have increased on an adjusted basis
from 50.8% in the year ended December 31, 1996 to 53.9% in the year ended
December 31, 1997, primarily due to compensation paid to additional salespeople
hired during the year ended December 31, 1997 who did not generate material
revenue during that year.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- J. HOWARD
 
     Revenue.  Revenue increased approximately $859,000, or 13.7%, from $6.3
million in the year ended December 31, 1995 to $7.1 million in the year ended
December 31, 1996, primarily due to a general increase in the number of client
engagements.
 
     Cost of Revenue.  Cost of revenue increased approximately $202,000, or
10.3%, from $2.0 million in the year ended December 31, 1995 to $2.2 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased slightly from 31.4% in the year ended December 31, 1995 to 30.5% in
the year ended December 31, 1996.
 
     Gross Profit.  Gross profit increased approximately $657,000, or 15.3%,
from $4.3 million in the year ended December 31, 1995 to $4.9 million in the
year ended December 31, 1996. As a percentage of revenue, gross profit increased
slightly, from 68.6% in the year ended December 31, 1995 to 69.5% in the year
ended December 31, 1996.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $401,000, or 9.6%, from $4.2
million in the year ended December 31, 1995 to $4.6 million in the year ended
December 31, 1996. Excluding the Compensation Differential attributable to J.
Howard of approximately $522,000 and approximately $944,000 in the year ended
December 31, 1995 and the year ended December 31, 1996, respectively, selling,
general and administrative expenses would have remained relatively constant at
$3.6 million. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 58.2% in the year ended
December 31, 1995 to 50.8% in the year ended December 31, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES -- J. HOWARD
 
     J. Howard generated net cash from operating activities of approximately
$402,000 in the year ended December 31, 1997 and used approximately $272,000 in
operating activities in the period from January 1, 1998 to May 4, 1998. Net cash
used in investing activities was approximately $287,000 in the year ended
December 31, 1997, primarily for advances made to related parties, and
approximately $75,000 was generated in the period from January 1, 1998 to May 4,
1998, primarily from advances repaid by related parties. Net cash used in
financing activities was approximately $108,000 in the year ended December 31,
1997 for distributions to stockholders. Net cash provided by financing
activities was approximately $282,000 for the period from January 1, 1998 to May
4, 1998, from borrowings to fund operating activities. At May 4, 1998, J. Howard
had working capital of $1.2 million.
 
RESULTS OF OPERATIONS -- LSS
 
     LSS creates customized technology-based training solutions that generally
are designed to facilitate faster learning of point-of-sale devices and higher
productivity of retail associates. LSS derives revenue from the design,
development and delivery of its products.
 
                                       22
<PAGE>   24
 
     The following table sets forth certain selected financial data for LSS on a
historical basis and as a percentage of revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                                                                                         FOR THE PERIOD
                                                                                                --------------------------------
                                        YEAR ENDED DECEMBER 31,                 FOR THE SIX                         MAY 5, 1998
                            ------------------------------------------------    MONTHS ENDED    JANUARY 1, 1998     TO JUNE 30,
                                 1995             1996             1997        JUNE 30, 1997     TO MAY 4, 1998        1998
                            --------------   --------------   --------------   --------------   ----------------   -------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                         <C>      <C>     <C>      <C>     <C>      <C>     <C>      <C>     <C>       <C>      <C>     <C>
Revenue...................  $3,332   100.0%  $5,123   100.0%  $5,681   100.0%  $2,910   100.0%  $2,861    100.0%   $ 936   100.0%
Cost of revenue...........   1,390    41.7    1,696    33.1    2,202    38.8    1,081    37.1      909     31.8      446    47.7
                            ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    -----   -----
Gross profit..............   1,942    58.3    3,427    66.9    3,479    61.2    1,829    62.9    1,952     68.2      490    52.4
Selling, general and
  administrative
  expenses................   1,767    53.0    3,079    60.1    2,226    39.2    1,108    38.1      633     22.1      420    44.9
                            ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    -----   -----
Income from operations....  $  175     5.3%  $  348     6.8%  $1,253    22.0%  $  721    24.8%  $1,319     46.1%   $  70     7.5%
                            ======   =====   ======   =====   ======   =====   ======   =====   ======    =====    =====   =====
Compensation
  differential............  $  415    12.5%  $1,379    26.9%  $  300     5.3%  $  210     7.2%  $ (121)   (4.2)%   $  --      --%
</TABLE>
 
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- LSS
 
     Revenue.  Revenue increased approximately $887,000, or 30.5%, from $2.9
million in the 1997 Period to $3.8 million in the 1998 Period, primarily due to
new client relationships.
 
     Cost of Revenue.  Cost of revenue increased approximately $274,000, or
25.3%, from $1.1 million in the 1997 Period to $1.4 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 37.1% in the 1997
Period to 35.7% in the 1998 Period, primarily due to reduced video production
costs associated with certain of the Company's products during the period.
 
     Gross Profit.  Gross profit increased approximately $613,000, or 33.5%,
from $1.8 million in the 1997 Period to $2.4 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 62.9% in the 1997 Period to
64.3% in the 1998 Period, primarily due to the reduced video production costs
described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $55,000, or 5.0%, from $1.1
million in the 1997 Period to $1.0 million in the 1998 Period. Excluding the
Compensation Differential of approximately $210,000 and approximately $(121,000)
attributable to LSS in the 1997 Period and the 1998 Period, respectively,
selling, general and administrative expenses would have increased approximately
$276,000, or 30.7%, from approximately $898,000 in the 1997 Period to $1.2
million in the 1998 Period. As a percentage of revenue, selling, general and
administrative expenses would have remained unchanged on an adjusted basis at
30.9% in both the 1997 Period and the 1998 Period.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996  -- LSS
 
     Revenue.  Revenue increased approximately $558,000, or 10.9%, from $5.1
million in the year ended December 31, 1996 to $5.7 million in the year ended
December 31, 1997, primarily due to the expansion of the sales force.
 
     Cost of Revenue.  Cost of revenue increased approximately $506,000, or
29.8%, from $1.7 million in the year ended December 31, 1996 to $2.2 million in
the year ended December 31, 1997. As a percentage of revenue, cost of revenue
increased from 33.1% in the year ended December 31, 1996 to 38.8% in the year
ended December 31, 1997, primarily due to increased video production costs
associated with certain of the company's products during the year ended December
31, 1997.
 
     Gross Profit.  Gross profit increased approximately $52,000, or 1.5%, from
$3.4 million in the year ended December 31, 1996 to $3.5 million in the year
ended December 31, 1997. As a percentage of revenue, gross profit decreased from
66.9% in the year ended December 31, 1996 to 61.2% in the year ended December
31, 1997, primarily due to the increased video production costs described above.
 
                                       23
<PAGE>   25
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $853,000, or 27.7%, from $3.1
million in the year ended December 31, 1996 to $2.2 million in the year ended
December 31, 1997. Excluding the Compensation Differential of $1.4 million and
approximately $300,000 attributable to LSS in the year ended December 31, 1996
and the year ended December 31, 1997, respectively, selling, general and
administrative expenses would have increased approximately $226,000, or 13.3%,
from $1.7 million in the year ended December 31, 1996 to $1.9 million in the
year ended December 31, 1997. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly on an adjusted basis from
33.2% in the year ended December 31, 1996 to 33.9% in the year ended December
31, 1997.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- LSS
 
     Revenue.  Revenue increased $1.8 million, or 53.8%, from $3.3 million in
the year ended December 31, 1995 to $5.1 million in the year ended December 31,
1996, primarily due to increased productivity from the company's expanded sales
force.
 
     Cost of Revenue.  Cost of revenue increased approximately $306,000, or
22.0%, from $1.4 million in the year ended December 31, 1995 to $1.7 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 41.7% in the year ended December 31, 1995 to 33.1% in the year
ended December 31, 1996, primarily due to several follow-on client engagements
which generally result in lower production costs.
 
     Gross Profit.  Gross profit increased $1.5 million, or 76.5%, from $1.9 in
the year ended December 31, 1995 to $3.4 million in the year ended December 31,
1996. As a percentage of revenue, gross profit increased from 58.3% in the year
ended December 31, 1995 to 66.9% in the year ended December 31, 1996, primarily
due to the lower production costs described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.3 million, or 74.3%, from $1.8 million in
the year ended December 31, 1995 to $3.1 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to LSS of
approximately $415,000 and $1.4 million in the year ended December 31, 1995 and
the year ended December 31, 1996, respectively, selling, general and
administrative expenses would have increased approximately $348,000, or 25.7%,
from $1.4 million in the year ended December 31, 1995 to $1.7 million in the
year ended December 31, 1996. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 40.6% in
the year ended December 31, 1995 to 33.2% in the year ended December 31, 1996,
primarily due to the company's larger revenue base.
 
LIQUIDITY AND CAPITAL RESOURCES -- LSS
 
     LSS generated net cash from operating activities of approximately $482,000
in the year ended December 31, 1997 and approximately $1.0 million in the period
from January 1, 1998 to May 4, 1998. Net cash used in investing activities was
approximately $86,000 in the year ended December 31, 1997 and approximately
$271,000 in the period from January 1, 1998 to May 4, 1998, for purchases of
property and equipment. Cash used in financing activities was approximately
$496,000 and approximately $629,000 during the year ended December 31, 1997 and
the period from January 1, 1998 to May 4, 1998, respectively, for dividends paid
to stockholders. At May 4, 1998, LSS had working capital of approximately $1.4
million.
 
RESULTS OF OPERATIONS -- MOHR
 
     MOHR offers train-the-trainer and instructor-led seminars to help clients
in the retail industry primarily to improve productivity by fostering a
customer-oriented focus at the sales management and sales associate levels.
MOHR's revenue is derived primarily from the licensing to clients of the right
to use its training programs on a participant or site basis.
 
                                       24
<PAGE>   26
 
     The following table sets forth certain selected financial data for MOHR on
a historical basis and as a percentage of revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                                                             FOR THE PERIOD
                                      YEAR ENDED JUNE 30,           --------------------------------
                                --------------------------------     JULY 1, 1997     MAY 5, 1998 TO
                                     1996              1997         TO MAY 4, 1998    JUNE 30, 1998
                                --------------    --------------    --------------    --------------
                                                       (DOLLARS IN THOUSANDS)
<S>                             <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Revenue.......................  $2,171   100.0%   $3,015   100.0%   $3,237   100.0%   $1,045   100.0%
Cost of revenue...............     677    31.2       825    27.4    1,009..   31.2       361    34.5
                                ------   -----    ------   -----    ------   -----    ------   -----
Gross profit..................   1,494    68.8     2,190    72.6     2,228    68.8       684    65.5
Selling, general and
  administrative expenses.....   1,151    53.0     1,745    57.9     1,510    46.6       378    36.2
                                ------   -----    ------   -----    ------   -----    ------   -----
Income from operations........  $  343    15.8%   $  445    14.7%   $  718    22.2%   $  306    29.3%
                                ======   =====    ======   =====    ======   =====    ======   =====
Compensation differential.....  $  144     6.6%   $  334    11.1%   $  205     6.3%   $   --      --%
</TABLE>
 
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- MOHR
 
     Revenue.  Revenue increased $1.3 million, or 42.0%, from $3.0 million in
the 1997 Period to $4.3 million in the 1998 Period, primarily due to an increase
in the number of salespeople and an increase in license fees received during the
1998 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $545,000, or
66.1%, from approximately $825,000 in the 1997 Period to $1.4 million in the
1998 Period. As a percentage of revenue, cost of revenue increased from 27.4% in
the 1997 Period to 32.0% in the 1998 Period, primarily due to increased new
product development costs.
 
     Gross Profit.  Gross profit increased approximately $722,000, or 33.0%,
from $2.2 million in the 1997 Period to $2.9 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 72.6% in the 1997 Period to
68.0% in the 1998 Period, primarily due to the new product development costs
described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $143,000, or 8.2%, from $1.7
million in the 1997 Period to $1.9 million in the 1998 Period. Excluding the
Compensation Differential of approximately $334,000 and approximately $205,000
attributable to MOHR in the 1997 Period and 1998 Period, respectively, selling,
general and administrative expenses would have increased approximately $272,000,
or 19.3%, from $1.4 million in the 1997 Period to $1.7 million in the 1998
Period. As a percentage of revenue, selling, general and administrative expenses
would have decreased on an adjusted basis from 46.8% in the 1997 Period to 39.3%
in the 1998 Period, primarily due to the Company's larger revenue base partially
offset by compensation paid to additional salespeople during the 1998 Period.
 
RESULTS FOR 1997 COMPARED TO 1996 -- MOHR
 
     Revenue.  Revenue increased approximately $844,000, or 38.9%, from $2.2
million in 1996 to $3.0 million in 1997, primarily due to the hiring of two
additional salespeople and the increase in license fees during 1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $148,000, or
21.9%, from approximately $677,000 in 1996 to approximately $825,000 in 1997. As
a percentage of revenue, cost of revenue decreased from 31.2% in 1996 to 27.4%
in 1997, primarily due to the increase in license fees, which result in higher
margins than train-the-trainer seminars.
 
     Gross Profit.  Gross profit increased approximately $696,000, or 46.6%,
from $1.5 million in 1996 to $2.2 million in 1997. As a percentage of revenue,
gross profit increased from 68.8% in 1996 to 72.6% in 1997, primarily due to
increased license fees.
 
                                       25
<PAGE>   27
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $594,000, or 51.6%, from $1.2
million in 1996 to $1.7 million in 1997. Excluding the Compensation Differential
attributable to MOHR of approximately $144,000 and approximately $334,000 in
1996 and 1997, respectively, selling, general and administrative expenses would
have increased approximately $404,000, or 40.1%, from $1.0 million in 1996 to
$1.4 million in 1997. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly from 46.4% in 1996 to
46.8% in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- MOHR
 
     MOHR generated net cash from operating activities of approximately $80,000
in 1997 and approximately $335,000 in the period from July 1, 1997 to May 4,
1998. Net cash used in investing activities was approximately $41,000 in 1997
and approximately $68,000 in the period from July 1, 1997 to May 4, 1998, for
purchases of property and equipment. At May 4, 1998, MOHR had working capital of
$1.2 million.
 
RESULTS OF OPERATIONS -- NOVATIONS
 
     Novations assists clients in assessing their strategic direction and
implementing and managing change. Novations also provides its clients with a
variety of organizational assessment tools that are designed to gather and
analyze feedback on either an organizational or individual basis and to initiate
change within the client's organization in response to such feedback. Novations'
revenue is derived primarily from fees from professional services and, to a
lesser extent, from the sale of services and products to support human resource
management.
 
     The following table sets forth certain selected financial data for
Novations on a historical basis and as a percentage of revenue for the periods
indicated:
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED JUNE 30,                  FOR THE PERIOD
                                             -------------------------------   ---------------------------------
                                                                               JULY 1, 1997 TO    MAY 5, 1998 TO
                                                  1996             1997          MAY 4, 1998      JUNE 30, 1998
                                             --------------   --------------   ----------------   --------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                          <C>      <C>     <C>      <C>     <C>       <C>      <C>      <C>
Revenue...................................   $9,039   100.0%  $9,018   100.0%  $9,228    100.0%   $2,426   100.0%
Cost of revenue...........................    4,733    52.4    4,839    53.7    4,356     47.2       988    40.7
                                             ------   -----   ------   -----   ------    -----    ------   -----
Gross profit..............................    4,306    47.6    4,179    46.3    4,872     52.8     1,438    59.3
Selling, general and administrative
  expenses................................    4,094    45.3    3,315    36.7    3,956     42.9       920    37.9
                                             ------   -----   ------   -----   ------    -----    ------   -----
Income from operations....................   $  212     2.3%  $  864     9.6%  $  916      9.9%   $  518    21.4%
                                             ======   =====   ======   =====   ======    =====    ======   =====
Compensation differential.................   $1,471    16.3%  $  661     7.3%  $1,512     16.4%   $   --      --%
</TABLE>
 
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- NOVATIONS
 
     Revenue.  Revenue increased $2.6 million, or 29.2%, from $9.0 million in
the 1997 Period to $11.7 million in the 1998 Period, primarily due to an
increase in organizational assessment revenues in the 1998 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $505,000, or
10.4% from $4.8 million in the 1997 Period to $5.3 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 53.7% in the 1997
Period to 45.9% in the 1998 Period, primarily due to the increased utilization
of the company's consultants.
 
     Gross Profit.  Gross profit increased $2.1 million, or 51.0%, from $4.2
million in the 1997 Period to $6.3 million in the 1998 Period. As a percentage
of revenue, gross profit increased from 46.3% in the 1997 Period to 54.1% in the
1998 Period, primarily due to the increased utilization rate described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.6 million, or 47.1%, from $3.3 million in
the 1997 Period to $4.9 million in the 1998 Period. Excluding
 
                                       26
<PAGE>   28
 
the Compensation Differential attributable to Novations of approximately
$661,000 and $1.5 million in the 1997 Period and 1998 Period, respectively,
selling, general and administrative expenses would have increased approximately
$710,000, or 26.8%, from $2.7 million in the 1997 Period to $3.4 million in the
1998 Period. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 29.4% in the 1997 Period
to 28.9% in the 1998 Period, primarily due to the company's larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- NOVATIONS
 
     Revenue.  Revenue remained relatively constant at $9.0 million in 1996 and
1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $106,000, or
2.2%, from $4.7 million in 1996 to $4.8 million in 1997. As a percentage of
revenue, cost of revenue increased from 52.4% in 1996 to 53.7% in 1997,
primarily due to an increase in the size of the consulting staff.
 
     Gross Profit.  Gross profit decreased approximately $127,000, or 2.9%, from
$4.3 million in 1996 to $4.2 million in 1997. As a percentage of revenue, gross
profit decreased from 47.6% in 1996 to 46.3% in 1997, primarily due to the staff
increase described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $779,000 or 19.0%, from $4.1
million in 1996 to $3.3 million in 1997. Excluding the Compensation Differential
attributable to Novations of $1.5 million and approximately $661,000 in 1996 and
1997, respectively, selling, general and administrative expenses would have
increased slightly from $2.6 million in 1996 to $2.7 million in 1997. As a
percentage of revenue, selling, general and administrative expenses would have
increased slightly on an adjusted basis from 29.0% in 1996 to 29.4% in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- NOVATIONS
 
     Novations generated net cash from operating activities of approximately
$153,000 in 1997. Net cash used by operating activities was approximately
$567,000 in the period from July 1, 1997 to May 4, 1998 due to an increase in
accounts receivable. Net cash used in investing activities was approximately
$137,000 in 1997, primarily for purchases of property and equipment. Net cash
used in investing activities was approximately $16,000 in the 1998 Period,
primarily due to purchases of property and equipment. Net cash provided by
financing activities was approximately $55,000 in 1997 from net proceeds of
long-term debt. Net cash used in financing activities was approximately $78,000
in the 1998 Period, for the repayment of long-term debt and distributions to
stockholders. At May 4, 1998, Novations had working capital of approximately
$1.1 million and approximately $289,000 of long term debt.
 
RESULTS OF OPERATIONS -- STAR MOUNTAIN
 
     Star Mountain provides customized work skills training, primarily to
federal, state and local government agencies. Star Mountain delivers its
courseware to clients in a variety of formats (including written materials and
interactive multimedia software), but typically does not directly train its
clients. Star Mountain's revenue is derived primarily from fees received from
the provision of training services as a contractor or subcontractor under
government contracts.
 
     The following table sets forth certain selected financial data for Star
Mountain on a historical basis and as a percentage of revenue for the periods
indicated. For all periods presented below, selling, general
 
                                       27
<PAGE>   29
 
and administrative expenses include amounts classified as "Other, net" in Star
Mountain's historical financial statements.
<TABLE>
<CAPTION>
                                                                                                   PERIOD FROM
                                                                                                 ----------------
                                     YEAR ENDED DECEMBER 31,                   SIX MONTHS
                       ---------------------------------------------------        ENDED          JANUARY 1, 1998
                            1995              1996              1997          JUNE 30, 1997       TO MAY 4, 1998
                       ---------------   ---------------   ---------------   ---------------     ----------------
                                                                               (UNAUDITED)
                                                         (DOLLARS IN THOUSANDS)
<S>                    <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>       <C>        <C>
Revenue..............  $14,306   100.0%  $16,313   100.0%  $23,775   100.0%  $11,331   100.0%    $11,052    100.0%
Cost of revenue......    8,668    60.6     9,457    58.0    14,504    61.0     7,204    63.6       6,109     55.3%
                       -------   -----   -------   -----   -------   -----   -------   -----     -------    -----
Gross profit.........    5,638    39.4     6,856    42.0     9,271    39.0     4,127    36.4       4,943     44.7
Selling, general and
 administrative
 expenses............    4,611    32.2     5,815    35.6     7,897    33.2     3,793    33.5       3,650     33.0
                       -------   -----   -------   -----   -------   -----   -------   -----     -------    -----
Income from
 operations..........  $ 1,027     7.2%  $ 1,041     6.4%  $ 1,374     5.8%  $   334     2.9%    $ 1,293     11.7%
                       =======   =====   =======   =====   =======   =====   =======   =====     =======    =====
Compensation
 differential........  $    64     0.4%  $   304     1.9%  $   180     0.8%  $    90     0.8%    $    28      0.3%
 
<CAPTION>
                        PERIOD FROM
                       --------------
                        MAY 5, 1998
                             TO
                       JUNE 30, 1998
                       --------------
 
<S>                    <C>      <C>
Revenue..............  $5,396   100.0%
Cost of revenue......   3,159    58.5
                       ------   -----
Gross profit.........   2,237    41.5
Selling, general and
 administrative
 expenses............   2,030    37.6
                       ------   -----
Income from
 operations..........  $  207     4.1%
                       ======   =====
Compensation
 differential........  $   --      --%
</TABLE>
 
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD) -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $5.1 million, or 45.2%, from $11.3 million in
the 1997 Period to $16.4 million in the 1998 Period primarily due to an increase
in the number of federal government contracts undertaken, as well as revenue
contributed by businesses acquired during the first and fourth quarters of the
year ended December 31, 1997.
 
     Cost of Revenue.  Cost of revenue increased $2.1 million, or 28.7%, from
$7.2 million in the 1997 Period to $9.3 million in the 1998 Period. As a
percentage of revenue, cost of revenue decreased from 63.6% in the 1997 Period
to 56.3% in the 1998 Period, primarily due to better utilization of the
company's fixed costs.
 
     Gross Profit.  Gross profit increased $3.1 million, or 74.0%, from $4.1
million in the 1997 Period to $7.2 million in the 1998 Period. As a percentage
of revenue, gross profit increased from 36.4% in the 1997 Period to 43.7% in the
1998 Period, primarily due to the utilization improvements described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.9 million, or 49.8%, from $3.8 million in
the 1997 Period to $5.7 million in the 1998 Period. Excluding the Compensation
Differential of approximately $90,000 and approximately $28,000 attributable to
Star Mountain in the 1997 Period and the 1998 Period, respectively, selling,
general and administrative expenses would have been $3.7 million in the 1997
Period and $5.7 million in the 1998 Period. As a percentage of revenue, selling,
general and administrative expenses would have increased on an adjusted basis
from 32.7% in the 1997 Period to 34.3% in the 1998 Period.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $7.5 million, or 45.7%, from $16.3 million in
the year ended December 31, 1996 to $23.8 million in the year ended December 31,
1997, primarily due to an increase in the number of federal government contracts
undertaken, as well as revenue of $5.6 million contributed by businesses
acquired during the third quarter of the year ended December 31, 1996 and the
first and fourth quarters of the year ended December 31, 1997. Revenue was
significantly lower during the first half of the year ended December 31, 1996 as
a result of a decline in new client engagements due to prolonged Congressional
budget negotiations.
 
     Cost of Revenue.  Cost of revenue increased $5.0 million, or 53.4%, from
$9.5 million in the year ended December 31, 1996 to $14.5 million in the year
ended December 31, 1997. As a percentage of revenue, cost of revenue increased
from 58.0% in the year ended December 31, 1996 to 61.0% in the year ended
December 31, 1997, primarily due to the increased use of subcontractors during
the year ended December 31, 1997.
 
                                       28
<PAGE>   30
 
     Gross Profit.  Gross profit increased $2.4 million, or 35.2%, from $6.9
million in the year ended December 31, 1996 to $9.3 million in the year ended
December 31, 1997. As a percentage of revenue, gross profit decreased from 42.0%
in the year ended December 31, 1996 to 39.0% in the year ended December 31,
1997, primarily due to increased subcontracting costs.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $2.1 million, or 35.8%, from $5.8 million in
the year ended December 31, 1996 to $7.9 million in the year ended December 31,
1997. Excluding the Compensation Differential of approximately $304,000 and
approximately $180,000 attributable to Star Mountain in the year ended December
31, 1996 and the year ended December 31, 1997, respectively, selling, general
and administrative expenses would have increased $2.2 million, or 40.0%, from
$5.5 million in the year ended December 31, 1996 to $7.7 million in the year
ended December 31, 1997. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 33.8% in
the year ended December 31, 1996 to 32.5% in the year ended December 31, 1997,
primarily due to the company's larger revenue base.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $2.0 million, or 14.0%, from $14.3 million in
the year ended December 31, 1995 to $16.3 million in the year ended December 31,
1996, due to revenue of $3.6 million contributed by businesses acquired by Star
Mountain in the third quarters of the years ended December 31, 1995 and 1996.
The revenue from the acquired businesses was offset partially by the decline in
business generated from federal government entities as a result of the
Congressional budget negotiations described above.
 
     Cost of Revenue.  Cost of revenue increased approximately $789,000, or
9.1%, from $8.7 million in the year ended December 31, 1995 to $9.5 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 60.6% in the year ended December 31, 1995 to 58.0% in the year
ended December 31, 1996, primarily due to the acquisition in the third quarter
of the year ended December 31, 1996 of a business with higher gross profit
margins than Star Mountain's core business.
 
     Gross Profit.  Gross profit increased $1.2 million, or 21.6%, from $5.6
million in the year ended December 31, 1995 to $6.9 million in the year ended
December 31, 1996. As a percentage of revenue, gross profit increased from 39.4%
in the year ended December 31, 1995 to 42.0% in the year ended December 31,
1996, primarily due to the acquisition in the third quarter of the year ended
December 31, 1996 of a business with higher gross profit margins than Star
Mountain's core business.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.2 million, or 26.1%, from $4.6 million in
the year ended December 31, 1995 to $5.8 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to Star Mountain of
approximately $64,000 and approximately $304,000 in the years ended December 31,
1995 and 1996, respectively, selling, general and administrative expenses would
have increased approximately $964,000, or 21.2%, from $4.5 million in the year
ended December 31, 1995 to $5.5 million in the year ended December 31, 1996. As
a percentage of revenue, selling, general and administrative expenses would have
increased on an adjusted basis from 31.8% in the year ended December 31, 1995 to
33.8% in the year ended December 31, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES -- STAR MOUNTAIN
 
     Star Mountain generated net cash from operating activities of approximately
$864,000 and approximately $115,000 in the year ended December 31, 1997 and the
period from January 1, 1998 to May 4, 1998, respectively. Net cash used in
investing activities was $2.3 million in the year ended December 31, 1997,
primarily in connection with acquisitions of businesses, and approximately
$264,000 in the period from January 1, 1998 to May 4, 1998, for acquisitions of
property and equipment. Net cash provided by financing activities was $1.8
million and approximately $129,000 in the year ended December 31, 1997 and the
period from January 1, 1998 to May 4, 1998, respectively, primarily from
borrowings on the company's line of credit.
 
                                       29
<PAGE>   31
 
                                    BUSINESS
 
COMPANY OVERVIEW
 
     We are a leading provider of performance improvement training services and
products. Our clients are Fortune 1000 companies, other large and medium-sized
corporations and government entities. We offer both customized and standardized
services and products that are designed to provide measurable improvement in
performance and productivity for both employees and organizations. We can
deliver these performance improvement solutions using various delivery methods
to satisfy our clients' needs, including traditional delivery methods such as
teaching employees in instructor-led classroom training and certifying client
employees as instructors ("train-the-trainer"), as well as technology-based
delivery methods such as CD-ROM, intranets and the Internet. In addition, we
offer management consulting and training management services. Our goal is to
become the leading single-source provider of high-quality performance
improvement services and products.
 
MARKET OVERVIEW
 
     The performance improvement market is large and growing. According to
TRAINING magazine, domestic corporations with over 100 employees budgeted
approximately $60.7 billion on training in 1998, compared to approximately $48.2
billion in 1993, representing a compound annual growth rate of approximately
4.7%. We believe that growth in the training and development market has been and
will continue to be driven by:
 
     - the evolution to a technology-driven, knowledge-based economy;
 
     - the increasing recognition that employee training is a competitive
       necessity rather than an optional expense;
 
     - a constantly changing business environment which requires continuous
       employee training; and
 
     - the increased availability of technology-based delivery methods, such as
       the Internet, that make it possible to offer training to a wider audience
       on a more cost-effective and convenient basis.
 
     The increasing need for corporate training recently was highlighted in a
1998 survey where 70% of the surveyed CEOs said they faced serious problems
finding skilled, experienced workers.
 
     Corporations and government entities increasingly are utilizing external
providers to supplement and in some cases replace internal performance
improvement efforts. Expenditures on external providers of performance
improvement services and products by domestic corporations with over 100
employees have increased from approximately $9.4 billion in 1993 to a budgeted
$14.3 billion in 1998, representing a compound annual growth rate of 8.8%. These
expenditures have increased as a percentage of the total training budgets of
such corporations from approximately 19.5% in 1993 to a budgeted 23.6% in 1998.
We believe that organizations increasingly are using external suppliers for
their training requirements so that they can focus on their core competencies,
turn fixed training costs into variable costs, and obtain comprehensive training
content and delivery capabilities that may not be available internally.
 
                                   [GRAPHIC]
          Two pie charts depicting the size of the external corporate training
market as a percentage of the total corporate training market in 1993 and 1998,
respectively.
 
                                       30
<PAGE>   32
 
     Traditionally, performance improvement services and products have been
delivered primarily through instructor-led training, books, and audio and video
tapes. However, advances in technology now permit organizations to utilize a
broad range of technology-based training formats (such as CD-ROM, intranets and
the Internet) which facilitate broader dissemination of training within
organizations and allow for more convenient and efficient learning. For example,
training is increasingly being delivered through web-based formats that allow
convenient access to training content. Technology-based training formats
overcome many of the cost, time and space constraints of traditional
instructor-led training. We believe that corporations increasingly are using
technology-based alternatives to:
 
     - accelerate learning and increase knowledge retention;
 
     - minimize the costs of employees' time spent away from the job;
 
     - allow employees to have convenient access to training "on demand";
 
     - lower overall training costs, including travel expenses of employees;
 
     - make training available to a broader range of employees;
 
     - provide consistency in training; and
 
     - better measure and track employees' progress.
 
     The performance improvement industry is highly fragmented. We believe that
no company in the industry has more than a two percent share of the external
training market. Many companies in the industry provide a narrow range of
services and products through limited delivery methods. We believe that these
companies generally have made limited investments in content development,
marketing and the technology necessary to develop or utilize technology-based
delivery alternatives. As corporations and government entities increasingly use
external training providers, we believe that they will seek providers that can
meet a significant portion of their training and development needs by providing:
 
     - a broad range of high-quality services and products in both customized
       and standardized formats;
 
     - specialized, industry-focused performance improvement expertise;
 
     - effective technology-based training capable of reaching large and
       geographically dispersed work forces; and
 
     - web-based training management services for coordinating and tracking
       performance improvement activities.
 
As a result, we believe that significant opportunities are available for
well-managed and well-capitalized companies capable of meeting these needs.
 
BUSINESS STRATEGY
 
     Our objective is to become the leading single source provider of
high-quality performance improvement services and products to Fortune 1000
companies, other large and medium-sized corporations and government entities. To
achieve this objective, we are pursuing a business strategy with the following
key elements:
 
     PROVIDE A BROAD RANGE OF SERVICES AND PRODUCTS.  We offer a broad array of
customized and standardized services and products that are designed to provide
measurable improvements in performance and productivity for both employees and
organizations. In addition, we offer management consulting services that are
designed to improve our clients' overall corporate performance, and training
management services that enable our clients to better manage their performance
improvement programs. We believe that our comprehensive service and product
offerings will allow our clients the convenience of "one-stop shopping" so that
they can reduce their reliance on multiple vendors for training content and
delivery and maximize their overall performance improvement results.
 
     UTILIZE MULTIPLE DELIVERY METHODS.  We offer multiple delivery methods
including instructor-led classroom training, train-the-trainer programs, CD-ROM,
intranets, the Internet, books, and audio and video tapes. Our varied delivery
capabilities allow us to better serve the particular needs, cost objectives and
cultures of our clients.
 
                                       31
<PAGE>   33
 
     OFFER VALUE-ADDED TRAINING.  Our goal is to provide value-added services
and products that achieve measurable results for our clients. We seek to
differentiate our services and products by helping our clients assess the
returns generated by their performance improvement investments. We can perform
return-on-investment analyses for our clients, and frequently work with them to
develop key assessment metrics by which to measure outcomes.
 
     PROVIDE SPECIALIZED INDUSTRY EXPERTISE.  We have developed and continue to
develop industry-focused service and product offerings that can better satisfy
our clients' specific performance improvement needs. By leveraging our existing
industry-specific content and delivery capabilities, we can provide clients with
customized yet cost-effective performance improvement solutions. For example, we
have developed a standard point-of-sale simulator to assist companies in the
retail industry. With minor modifications, we can rapidly customize this product
to address the specific needs of other retailers who rely on point-of-sale
devices. We believe our experience and capabilities developed by serving clients
in certain industries, including the retail, automotive and telecommunications
industries, as well as the government sector, give us an important competitive
advantage in obtaining new clients in these areas.
 
GROWTH STRATEGY
 
     Key elements of our growth strategy include:
 
     CAPITALIZE ON CROSS-SELLING OPPORTUNITIES.  We believe that significant
opportunities exist to cross-sell our services and products within our existing
client base. Most of our clients receive performance improvement services and
products from only one of the PROVANT companies. To aid in our cross-selling
efforts, we have established Greenhouse, a web-based corporate database that can
be accessed by each PROVANT company to review company-wide client relationships
and service and product capabilities. We believe that Greenhouse will allow our
salespeople to leverage these relationships and capabilities. We also have
instituted a compensation system designed to reward cross-selling. In addition,
we have assembled several cross-selling teams, comprised of individuals selected
from various PROVANT companies, to address the broad needs of major clients.
These teams recently have made proposals to clients such as Hewlett-Packard,
GMAC and K-Mart.
 
     LEVERAGE INVESTMENTS IN TECHNOLOGY AND DEPLOY LEADING TECHNOLOGIES.  A key
element of our strategy is to capitalize on the technology investments of the
PROVANT companies. Several of our companies have developed unique expertise in
content and delivery technology that can be drawn upon by other PROVANT
companies to improve their service and product capabilities. For example, we are
leveraging our investment and expertise in technology-based delivery methods to
produce CD-ROM versions of existing training content of many of the PROVANT
companies. We expect to deploy leading technologies in the delivery of many of
our services and products, including delivery through distance-based media, such
as intranets and the Internet, that can provide interactive training to
employees at multiple locations. One of our recently acquired companies is a
leading developer of web-based training. This company is helping us to deliver
web-based training systems designed to allow clients to manage training and
deliver content in a convenient, cost-effective manner.
 
     CONTINUE TO EXPAND SALES AND MARKETING EFFORTS.  We plan to establish new
client relationships and expand existing relationships. In particular, we plan
to:
 
     - expand our sales force (which has grown from 65 individuals at the time
       of the IPO to 140);
 
     - sell more services and products through nationwide telemarketing and
       e-commerce efforts;
 
     - develop a high-level consultative sales force that can market our entire
       portfolio of services and products to key accounts; and
 
     - promote national brand identification for the PROVANT name while
       preserving and enhancing the value of the established names of the
       PROVANT companies.
 
     EXPAND SERVICE AND PRODUCT OFFERINGS.  We intend to continue broadening our
offering of performance improvement services and products by developing or
acquiring new or complementary services and products. We frequently ask our
clients to evaluate our service and product offerings to insure that we can
continue to effectively service their needs. Since the IPO, we have created new
services and products, including Bottom Line Buying Plus which teaches
negotiation skills to retail buyers, and our Valuing
                                       32
<PAGE>   34
 
Inclusion seminar which helps organizations' employees adapt to gender relations
issues. In addition, one of the companies we recently acquired has developed a
new CD-ROM product for its Just-in-Time Information series, which teaches
managers solutions to common personnel management problems.
 
     PURSUE STRATEGIC ACQUISITIONS.  We intend to continue pursuing strategic
acquisitions in order to:
 
     - broaden our existing line of services and products;
 
     - access new technologies that expand the scope and quality of delivery
       methods; and
 
     - establish or enhance client relationships.
 
     We seek to acquire companies with strong management, profitable operating
results and leading positions within their respective markets. We believe that
acquisitions of this nature will further enhance our ability to become the
leading single-source provider of high-quality performance improvement services
and products. Since the IPO we have completed five acquisitions, which have
given us access to new clients, performance improvement content and delivery
capabilities. In addition, we currently have letters of intent relating to two
additional acquisitions.
 
PERFORMANCE IMPROVEMENT SERVICES AND PRODUCTS
 
     Through our services and products, our clients can provide training to
employees at virtually every level of an organization, access consulting
services that permit the organization as a whole to undergo change and utilize
web-based training management services to better manage and track their training
programs.
 
     CUSTOMIZED AND STANDARDIZED SERVICES AND PRODUCTS.  We offer customized and
standardized solutions which train employees in:
 
        - Work skills;
 
        - Recruitment, selection and retention;
 
        - Customer service;
 
        - Communications;
 
        - Supervisory and leadership skills;
 
        - Diversity;
 
        - Decision making; and
 
        - Negotiations.
 
Our customized services and products are designed to meet the specialized needs
of particular clients in a wide range of applications and can be accessed
through a wide variety of delivery methods.
 
          Work Skills.  We deliver a wide range of services and products to
     numerous corporate and government entities that are designed to provide or
     improve the skills necessary to perform a particular task or job.
     Typically, our experts work closely with our clients to custom-design work
     skills products, training courses and course materials. For example, we
     have delivered specialized work skills training on how to operate a
     manufacturing system for a paper products company, how to operate
     communication switches for a telecommunications company, how to maintain
     and repair equipment for a railroad, and how to provide and manage basic
     medical care for Army and Navy healthcare personnel.
 
          Recruitment, Selection and Retention.  We offer services and products
     designed to assist clients in hiring and retaining effective employees. In
     particular, we help clients understand the skills required of their
     employees, implement more effective recruitment, selection and retention
     processes to maximize employee productivity, and reduce turnover rates. For
     example, Behavioral Interviewing(R) teaches managers how to identify
     specific job competencies required for success, interview prospective
     candidates and evaluate their skills. Complementing this and similar
     products are our outplacement services, which we provide to several federal
     government agencies to assist in work force restructuring.
 
          Customer Service. We offer services and products designed to increase
     customer retention, customer service and sales. For example, several of our
     products, including Creating Loyal Customers,
 
                                       33
<PAGE>   35
 
     Customer Service at the Register and Professional Selling, are designed to
     improve customer service in the retail workplace by simulating important
     retail situations and environments in technology-based delivery formats.
 
          Communications.  We offer services and products designed to improve
     public speaking/presentation and spoken communication skills. For example,
     Effective Communicating is a two-day workshop designed to enable clients'
     key staff members to become more effective in public speaking, sales and
     other types of oral communication.
 
          Supervisory and Leadership Skills.  We offer services and products
     that are designed to improve employees' operational management, supervisory
     and leadership skills. For example, Managing Individual and Team
     Effectiveness is designed to provide managers in complex work environments
     with "360-degree" feedback on their management skills, and the Just-in-Time
     Information products provide solutions to common management problems on
     CD-ROM.
 
          Diversity.  We offer services and products designed to help managers
     and employees understand diversity issues, such as race and gender. For
     example, Managing Inclusion is a multi-day session designed to help
     individual managers and client companies enhance understanding of workplace
     diversity, build morale and satisfaction in the work force, and increase
     productivity through more effective team relationships.
 
          Decision Making.  We offer services and products designed to help
     improve managers' decision making skills. One way that we do this is by
     creating simulations that focus on a number of objectives, including
     strategic thinking, finance and sales. These interactive simulations enable
     managers to "play out" important business decisions and receive immediate
     feedback on their performance. For example, for a major healthcare
     manufacturing client, we created a general management simulation that
     helped managers from different functional areas think more interdependently
     about delivering customer value.
 
          Negotiations.  We offer services and products designed to help
     employees improve their negotiation skills. For example, Bottom Line Buying
     Plus trains merchandise buyers to negotiate to both improve profitability
     and strengthen vendor relationships.
 
     CONSULTING AND DIAGNOSTICS.  Our management consulting services are
designed to help improve overall corporate performance by assisting clients in,
among other things, assessing their strategic direction and implementing and
managing change. For example, we assisted a large trucking company in developing
alternative organization designs and cost reduction initiatives. By using our
recommendations, the company was able to undertake significant structural
changes and cost-cutting measures. We also provide our clients with a variety of
survey tools by which feedback can be gathered and analyzed on either an
organizational or individual basis. We develop the survey forms and
methodologies, conduct the surveys, and collect and analyze the data for our
corporate clients. For example, we assisted a large mortgage bank in identifying
critical areas for organizational change by administering an employee survey to
more than 10,000 employees.
 
     TRAINING MANAGEMENT.  We provide customized, organization-wide services
that allow clients to better manage a broad range of performance improvement
activities. Our web-based training management systems provide clients with an
automated approach to the enrollment, tracking and measurement of performance
improvement activities. We either install these systems at the client's site or
operate them from our site. For example, we developed a web-based training
management system for a manufacturing client that allows the client's 12,000
employees to access a course catalog, enroll in courses, take tests, review
transcripts and peruse company news and other information, and will eventually
deliver performance improvement content through the client's intranet.
 
DELIVERY METHODS
 
     We offer multiple delivery methods for our performance improvement services
and products to better serve the particular needs, cost objectives and cultures
of our clients. Our primary delivery methods are described below.
 
                                       34
<PAGE>   36
 
     INSTRUCTOR-LED TRAINING.  We deliver our programs to clients' employees
primarily through the use of either salaried employees or certified contract
instructors. Most of our instructor-led training is delivered at clients'
facilities, although we also deliver certain programs at our own training
facilities. In some cases, our programs are delivered in a public seminar format
to a small group of individuals from multiple client companies or through video
conferencing. We typically provide textual materials as a part of our
instructor-led programs, and in some cases sell related supplemental materials.
We also develop custom courseware that ultimately is delivered by instructors
who are not affiliated with us. Our courses and programs generally range in
length from a few hours to several days and include from one to hundreds of
participants.
 
     TRAIN-THE-TRAINER.  For several of our services and products, we train and
certify qualified employees of clients in an instructor-led program. The
certified client employees then are licensed to use our methodologies and
materials to train other employees of the client in instructor-led classes at
client sites. We supply training materials for these classes and on-going
training for the certified trainers. We receive fees for the employee-led
classes on either a per-participant or per-site basis.
 
     TECHNOLOGY-BASED FORMATS.  We increasingly deliver our products in
technology-based delivery formats, such as CD-ROM, intranets, the Internet and
other distance-based media. Because of the benefits of technology-based
training, we plan to convert some of our products to technology-based formats
that to date have been offered only in the instructor-led or train-the-trainer
formats.
 
     BOOKS AND TAPES.  We also deliver some of our training through books and
video and audio tapes. We offer approximately 400 titles of standardized books,
tapes and other written materials.
 
CLIENTS
 
     We seek to establish long-term relationships with Fortune 1000 companies,
other large and medium-sized corporations and government entities with
substantial performance improvement needs. We have developed a broad client base
of over 1,500 corporate and government clients, with no client accounting for
more than 3% of our pro forma revenue during fiscal 1998. The following table
illustrates the wide range of industries represented by our client base:
 
<TABLE>
<S>                               <C>                              <C>
BUSINESS AND FINANCIAL SERVICES   MANUFACTURING/PROCESSING         TECHNOLOGY
Allstate Insurance                3M                               Electronic Data Systems
Deloitte & Touche                 Applied Materials                Hewlett-Packard
GMAC                              Kellogg                          Intel
J.P. Morgan                       Nabisco                          Motorola
Kinko's                           Steelcase                        NETg
CHEMICALS AND PHARMACEUTICAL                                       TELECOMMUNICATIONS
Abbott Labs                                                        Bell Atlantic
Dow Chemical                                                       Bell South
Dupont                                        PROVANT              GTE
Mobil                                                              Lucent
Pfizer                                                             MCI
GOVERNMENT                        RETAIL AND HOSPITALITY           TRANSPORTATION AND AUTOMOTIVE
Department of the Army            Bloomingdale                     American Honda
Department of Energy              Burger King                      CSX Transportation
Federal Aviation Administration   Kroger                           Federal Express
IRS                               Marriott                         Ford
U.S. Postal Service               Wal-Mart                         UPS
</TABLE>
 
SALES AND MARKETING
 
     Each PROVANT company maintains its own sales force. In addition, we are
implementing a national sales force of high-level consultative sales people that
can market our entire portfolio of services and products to key accounts. Our
sales force, which numbered 65 at the time of the IPO, has grown to 140 from
both acquisitions and internal growth. Through one of our acquisitions, we have
added a nationwide telesales organization, through which we intend to offer many
of our services and products. We also
 
                                       35
<PAGE>   37
 
telemarketing through public seminars, client referrals, direct marketing, the
PROVANT companies' Web sites and trade publications.
 
     A key component of our marketing strategy is to cross-sell our various
services and products within our existing client base. To aid our cross-selling
efforts, we have instituted a compensation system designed to reward
cross-selling. We also have established Greenhouse, a web-based corporate
database that can be accessed by each PROVANT company to review company-wide
client relationships and service and product capabilities. Finally, we are
pursuing a marketing and advertising program to establish national brand
identification for the PROVANT name, while preserving and enhancing the value of
the established names of the PROVANT companies.
 
     We generate significant revenues through sales of services and products to
government entities. Typically, these sales occur through a competitive bidding
process started by a government entity's issuance of a request for proposal
("RFP") for a contemplated project. We may submit a proposal on our own behalf
or as a subcontractor to another company. Many services and products delivered
to federal government agencies are provided through orders placed under a
General Services Administration ("GSA") Supply Schedule contract and under
Office of Personnel Management/Training Management Assistance ("OPM"). We are
one of only a few training providers authorized under both funding mechanisms.
We benefit from our status as a preferred provider under certain funding
mechanisms (including the GSA and OPM vehicles) which allow us to negotiate
contracts without an RFP.
 
BOARD OF ADVISORS
 
     In December 1998 we formed a Board of Advisors to guide us in identifying
emerging trends in the marketplace and areas where we should build strategic
capability through investment or acquisition. The Board of Advisors currently
consists of the following seven leaders in the performance improvement industry
who are focused on strategic consulting, leadership, executive development and
coaching, and knowledge management:
 
- Frank Cespedes, Managing Partner, The Center for Executive Development and
  former Harvard Business School Professor;
 
- Marshall Goldsmith, Founding Director, Keilty, Goldsmith & Company;
 
- Frances Hesselbein, President and Chief Executive Officer of The Peter F.
  Drucker Foundation for Non-Profit Management;
 
- Jerry Jasinowski, President and Chief Executive Officer of the National
  Association of Manufacturers;
 
- Jon Katzenbach, Author of Teams at the Top and Founder of Katzenbach Partners,
  LLC;
 
- Edward Lawler, III, Professor and Director of the Center for Effective
  Organizations at the University of Southern California; and
 
- David Ulrich, Consultant and Professor at the University of Michigan.
 
COMPETITION
 
     The performance improvement industry is highly fragmented and competitive.
We believe the principal competitive factors in the industry are the strength of
client relationships, quality, price and breadth of service and product
offerings, quality and number of delivery methods, reputation, and the ability
to provide customized services and products. Some of our competitors have
significantly greater financial, managerial, technical, marketing and other
resources than us. Moreover, we expect to face additional competition from new
entrants into the performance improvement market due, in part, to the evolving
nature of the market.
 
     We compete with thousands of privately-held training companies, most of
which provide a limited range of services and products. In addition to these
small competitors, a number of larger companies are engaged in the business of
providing performance improvement services and products, including AchieveGlobal
(a subsidiary of the Times Mirror Company), Development Dimensions
International, EPS Solutions, The Forum Corporation, Wilson Learning
Corporation, and several large publishers of professional reference materials
who recently have entered the industry. We also occasionally compete with large
professional service companies that generally offer training services in
conjunction with strategic
                                       36
<PAGE>   38
 
consulting and other client assignments of larger scope. In addition, many of
our clients and potential clients have internal training departments.
 
     Our competitors for government contracts include service companies such as
Booz-Allen & Hamilton, as well as contract suppliers of equipment to the
government such as Raytheon Company and Lockheed Martin Corporation.
 
INTELLECTUAL PROPERTY
 
     We regard many of our performance improvement services and products as
proprietary and rely primarily on a combination of statutory and common law
copyright, trademark, service mark and trade secret laws, customer licensing
agreements, employee and third-party nondisclosure agreements and other methods
to protect our proprietary rights. There can be no assurance that third parties
will not claim that our current or future products and/or services infringe on
the proprietary rights of others.
 
EMPLOYEES
 
     As of December 31, 1998, we employed approximately 1,060 full-time and
part-time employees. We believe that our relationships with our employees are
good. In addition, we provide certain of our services and products through
independent contractors, which as of December 31, 1998 numbered approximately
150.
 
FACILITIES
 
     We lease our principal executive office located in Boston, Massachusetts,
and maintain additional leased offices in numerous locations in the United
States. We believe that our facilities are adequate to serve our current level
of operations, and that if additional facilities are required, we can find
suitable additional or alternative space on commercially reasonable terms.
 
LEGAL PROCEEDINGS
 
     We are from time to time a party to litigation arising in the ordinary
course of business. Management believes that no pending legal proceeding will
have a material adverse effect on our business, financial condition or results
of operations.
 
                                       37
<PAGE>   39
 
                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth information concerning our directors and
executive officers.
 
<TABLE>
<CAPTION>
                NAME                   AGE                           POSITION
-------------------------------------  ---   --------------------------------------------------------
<S>                                    <C>   <C>
Paul M. Verrochi.....................  49    Chairman and Chief Executive Officer
John H. Zenger.......................  67    President and Director
Dominic J. Puopolo...................  55    Executive Vice President, Chief Financial Officer and
                                             Director
Rajiv Bhatt..........................  41    Executive Vice President and Chief Operating Officer
Philip Gardner.......................  35    Vice President
Herbert A. Cohen.....................  62    Chairman - MOHR, Director
Bert Decker..........................  58    Chairman - Decker, Director
Paul C. Green, Ph.D..................  57    Chairman - BTI, Director
Joe Hanson...........................  41    Managing Director - Novations, Director
John F. King.........................  44    Chairman - LSS, Director
A. Carl von Sternberg................  70    Chairman and President - Star Mountain, Director
Marc S. Wallace......................  51    President - J. Howard, Director
Michael J. Davies....................  54    Director
David B. Hammond.....................  53    Director
John R. Murphy.......................  64    Director
Esther T. Smith......................  59    Director
</TABLE>
 
     Paul M. Verrochi has been our Chairman of the Board and Chief Executive
Officer since May 1998. Prior to the IPO, Mr. Verrochi served as our President
and a director. Mr. Verrochi also is Chairman, co-founder and a principal of
American Business Partners LLC ("ABP"). In 1992, Mr. Verrochi co-founded
American Medical Response, Inc. ("AMR"), which at the time of its acquisition by
Laidlaw Inc. in January 1997 was the largest provider of ambulance services in
the United States. From August 1992 to January 1996, Mr. Verrochi served as
AMR's President and Chief Executive Officer, and until January 1997 he also
served as the Chairman of the Board of Directors. Mr. Verrochi was selected as
the 1995 National Entrepreneur of the Year for Emerging Growth Companies by Inc.
Magazine. Mr. Verrochi serves as an advisory board member to numerous charitable
foundations, including the New England Aquarium and the Boston Symphony
Orchestra. Mr. Verrochi is Chairman of BridgeStreet Accommodations, Inc. and a
director of Coach USA, Inc. Mr. Verrochi received his Bachelor of Science degree
from the United States Merchant Marine Academy at Kings Point, New York.
 
     John H. Zenger has been our President and a director since May 1998. Prior
to the IPO, from May 1997 until May 1998, Mr. Zenger was a consultant to us.
From April 1992 to November 1996, Mr. Zenger was employed in various capacities,
including Vice President and Chairman, by the Times Mirror Training Group, one
of the nation's largest training companies, consisting of Kaset, Learning
International and Zenger Miller, the company that he co-founded in 1977. Mr.
Zenger has taught at the University of Southern California School of Business
and the Stanford Graduate School of Business. Mr. Zenger received his Doctorate
degree in Business Administration from the University of Southern California,
his Masters in Business Administration from the University of California, Los
Angeles and his Bachelor of Science degree from Brigham Young University.
 
     Dominic J. Puopolo has been our Executive Vice President, Chief Financial
Officer and a director since May 1998. Prior to the IPO, Mr. Puopolo served as
our Treasurer and a director. Mr. Puopolo is a co-founder and principal of ABP.
In 1992, Mr. Puopolo co-founded AMR. From August 1992 to January 1996, Mr.
Puopolo served as Executive Vice President, Chief Financial Officer, Treasurer
and a member of the Board of Directors of AMR. Mr. Puopolo serves as a member of
the Board of Trustees of Emerson College of Communications and is Chairman of
its Resource Development Committee. Mr. Puopolo also serves on the Executive
Committee of the Boston University School of Medicine and is a member of the
 
                                       38
<PAGE>   40
 
Board of Trustees of Northeastern University. Mr. Puopolo, a Certified Public
Accountant, is a member of the Massachusetts Society of Certified Public
Accountants, the American Institute of Certified Public Accountants and the
National Association of Accountants. Mr. Puopolo received his Masters in
Business Administration degree from Suffolk University and his Bachelor of
Science degree in Business Administration from Northeastern University.
 
     Rajiv Bhatt has been our Executive Vice President and Chief Operating
Officer since December 1998. Mr. Bhatt also has served as our Treasurer and
Chief Accounting Officer since May 1998. From May 1998 until December 1998, Mr.
Bhatt also was our Senior Vice President. Prior to the IPO, from August 1997
until May 1998, Mr. Bhatt was a consultant to us. From September 1994 to August
1997, Mr. Bhatt was Executive Vice President, Chief Financial Officer and
Treasurer of Summit Technology, Inc., a publicly-traded manufacturer of
ophthalmic laser systems. From September 1988 to September 1994, Mr. Bhatt was
Chief Financial Officer, Secretary and a member of the Board of Directors of
Carlisle Plastics, Inc., a publicly-traded plastics manufacturer. Also from
September 1988 to September 1994, Mr. Bhatt was Chief Financial Officer of
Carlisle Capital Corporation, a privately held mergers and acquisitions company.
Mr. Bhatt serves as a director of Big Brothers Association of Boston. Mr. Bhatt,
a Certified Public Accountant, received his Masters in Business Administration
degree from the University of Michigan and his Bachelor of Commerce degree from
the University of Bombay.
 
     Philip Gardner has been our Vice President since May 1998. Prior to the
IPO, from February 1997 until May 1998, Mr. Gardner was a consultant to us. From
August 1994 to December 1996, Mr. Gardner was a consultant for McKinsey &
Company ("McKinsey"), a management consulting firm. Prior to joining McKinsey,
from 1985 to 1992, Mr. Gardner was an officer and a highly decorated strike
fighter pilot in the United States Navy. Mr. Gardner received his Masters in
Business Administration degree from Harvard Graduate School of Business
Administration and his Bachelor of Arts degree in Government from Harvard
College.
 
     Herbert A. Cohen has been one of our directors, and Chairman of MOHR, since
May 1998. Previously, from February 1991 until May 1998, Mr. Cohen was Chief
Executive Officer of MOHR. From September 1978 to January 1991, Mr. Cohen was a
partner and one of the original principals of MOHR Development, Inc., a training
and consulting company. Mr. Cohen has served as President and Director of the
Instructional Systems Association, an association of over 150 training companies
dedicated to improving performance through training. Mr. Cohen received his
Bachelor of Science degree in Psychology from the University of Maine.
 
     Bert Decker has been one of our directors since May 1998. Mr. Decker also
serves as Chairman of Decker, a position he has held since October 1979. From
October 1979 until May 1998, Mr. Decker also was Chief Executive Officer of
Decker. Mr. Decker is the author of the best-selling books You've Got to be
Believed to be Heard and Creating Messages That Motivate. Mr. Decker also is the
personal communications trainer for Charles Schwab and Olympic gold medalist
Bonnie Blair. Mr. Decker has appeared on several national television programs,
including The Today Show and 20/20. Mr. Decker received his Bachelor of Arts
degree in Psychology from Yale University.
 
     Paul C. Green, Ph.D. has been one of our directors, and Chairman of BTI,
since May 1998. Previously, from May 1979 until May 1998, Dr. Green was Chief
Executive Officer of BTI. Dr. Green developed the Behavioral Interviewing(R)
seminar, which has been attended by several hundred thousand managers worldwide.
Dr. Green has also served as Assistant Professor in the Marketing Department at
Memphis State University, where he taught courses in salesmanship, sales
promotion, sales management and consumer behavior. Dr. Green received his
Doctorate degree in Industrial-Organizational Psychology from Memphis State
University, his Master of Science degree in Psychology from Memphis State
University and his Bachelor of Arts degree from Lambuth College.
 
     Joe Hanson has been one of our directors since May 1998, and has served as
a Managing Director of Novations since May 1997. Previously, from May 1989 to
April 1997, Mr. Hanson was employed by Novations in a variety of capacities
including consultant, Director and Chief Financial Officer. From September 1983
to March 1987, Mr. Hanson was a consultant for KPMG Peat Marwick LLP.
                                       39
<PAGE>   41
 
Mr. Hanson received his Masters in Business Administration degree from Brigham
Young University and his Bachelor of Science degree in Accounting from Brigham
Young University.
 
     John F. King has been one of our directors, and Chairman of LSS, since May
1998. Previously, from December 1990 until May 1998, Mr. King was Chief
Executive Officer of LSS. From October 1981 to November 1988, Mr. King was
employed by Wilson Learning where he served in various capacities including
Regional Sales Manager, Account Executive, and Performance Consultant. Mr. King
previously served as Professor of Communications Studies at McKendree College.
Mr. King received his Master of Arts degree in Communication Studies, Mass
Communications from Purdue University and his Bachelor of Arts degree from
California State University, Long Beach.
 
     A. Carl von Sternberg has been one of our directors, and Chairman of Star
Mountain, since May 1998. Mr. von Sternberg also serves as President of Star
Mountain, a position he has held since September 1987. In 1975, Mr. von
Sternberg founded Allen Corporation of America ("Allen") a firm specializing in
training, human factors, engineering and logistics services. From October 1975
to May 1986, Mr. von Sternberg was President and Chairman of Allen, and
following Allen's acquisition by The Singer Company he continued to serve as
Allen's President until September 1987. Allen was selected in 1982 by Inc.
Magazine as one of America's 500 fastest growing private companies. Prior to
founding Allen, Mr. von Sternberg served as Executive Vice President and Chief
Operating Officer of Essex Corporation, a behavioral science research company,
which he co-founded in 1969. Mr. von Sternberg received his Bachelor of Science
degree in Industrial Administration from Yale University.
 
     Marc S. Wallace has been one of our directors since May 1998, and has been
President of J. Howard since January 1991. Previously, from April 1983 until May
1998, Mr. Wallace also was Treasurer of J. Howard. Mr. Wallace serves on the
Boards of Directors of Belmont Hill School and the Berklee School of Music, on
the Board of Advisors of First Community Bank in Boston and as a member of the
Northeastern University Corporation. Mr. Wallace also is a member of the Boston
Chamber of Commerce. Mr. Wallace received his Masters in Business Administration
degree with a concentration in Finance from Central Michigan University and his
Bachelor of Arts degree from Adams State College.
 
     Michael J. Davies has been one of our directors since May 1998. Mr. Davies
also has served as a consultant to us since February 1997. From April 1994 to
June 1997, Mr. Davies was a Managing Director of Legg Mason Wood Walker,
Incorporated, specializing in media and communications. From September 1990 to
March 1993, Mr. Davies was publisher of The Baltimore Sun. Prior to joining The
Baltimore Sun, Mr. Davies was editor and publisher of The Hartford Courant. He
also was editor and president of The Kansas City Star and The Kansas City Times
and, before that, managing editor of The Courier Journal in Louisville,
Kentucky, and of The Louisville Times. Mr. Davies received his Master of Science
degree in Journalism from the Medill School of Journalism at Northwestern
University and his Bachelor of Science degree from Georgia State University.
 
     David B. Hammond has been one of our directors since May 1998. Mr. Hammond
has been Chairman of Integrated Transport Systems Limited, a European vehicle
auctioneer, since December 1995. Previously, from 1988 until April 1996, he
served as Deputy Chairman of ADT Limited, an electronic security company. Mr.
Hammond is a Fellow of the Institute of Chartered Accountants in England. Since
May 1995, he has been a commissioner at the U.K. Monopolies and Mergers
Commission. Mr. Hammond is a director of BHI Corporation and BridgeStreet
Accommodations, Inc., and served as a director and Chairman of the Audit
Committee of AMR from 1993 until 1997.
 
     John R. Murphy has been one of our directors since May 1998. Since March
1998, Mr. Murphy has served as Vice Chairman of the National Geographic Society
("National Geographic"). Mr. Murphy has served National Geographic in several
capacities, including as its President and Chief Executive Officer from May 1995
until March 1998, and as its Executive Vice President from May 1993 until May
1995. Previously, from July 1981 until January 1991, Mr. Murphy served as
President and publisher of The Baltimore Sun. Mr. Murphy is a past President of
the United States Golf Association, and currently serves as a director of
Omnicom Group and MSD&T Mutual Funds.
 
                                       40
<PAGE>   42
 
     Esther T. Smith has been one of our directors since May 1998. Since July
1998, Ms. Smith has been a principal of The Poretz Group, an investor relations
firm located in McLean, Virginia. Since October 1996, Ms. Smith has been a
management consultant in corporate positioning and internet enterprise
development. From October 1996 to December 1997, she was Editor-at-Large of
TechNews Inc. ("TechNews"). Previously, from September 1985 to September 1996
she was President and a director of TechNews. From January 1995 to September
1996, she also served as that company's Chief Executive Officer. Now
Post-Newsweek Business Information, Inc., TechNews was acquired by The
Washington Post Co. in 1996. Ms. Smith is an advisor to the Netpreneur Program
of the Morino Institute, Reston, Virginia, and is a member of the Board of
Directors of WomenCONNECT.com Corp.
 
BOARD OF DIRECTORS
 
     The Board of Directors currently consists of 14 directors. The term of
office of each director ends at our next annual meeting of stockholders. The
Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee, consisting of Messrs. Hammond and Murphy and Ms.
Smith, makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the results of the
audit, including the adequacy of internal controls and financial accounting
policies, oversees or conducts special investigations or other functions on
behalf of the Board of Directors, reviews reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), reviews our policies and procedures with regard to our
compliance with all material applicable governmental rules and regulations and
makes recommendations with regard to strategic financial planning matters. The
Compensation Committee, consisting of Messrs. Hammond and Murphy and Ms. Smith,
makes recommendations to the Board of Directors with regard to all of our
material compensation arrangements with each of our officers and directors and,
at the request of the Board of Directors, advises the Board with respect to
matters of compensation policy of broad impact. The Compensation Committee
administers our employee equity incentive plans, determines, subject to the
provisions of our incentive plans, the directors, officers, employees and
consultants eligible to participate in any of the plans, determines the extent
of such participation and terms and conditions under which benefits may be
vested, received or exercised, and makes recommendations to the Board of
Directors with regard to the adoption of new incentive plans.
 
     The Board of Directors also has established an Acquisition Committee
(consisting of Messrs. Puopolo, Verrochi, von Sternberg, Green and Davies), a
Strategic Planning Committee (consisting of Messrs. Zenger, Decker and Green),
and a Technology Development Committee (consisting of Ms. Smith and Messrs. King
and von Sternberg).
 
DIRECTOR COMPENSATION
 
     Members of the Board of Directors who also serve us as officers or
full-time consultants do not receive compensation for serving on the Board. Each
other member of the Board receives a fee of $3,000 for each Board of Directors
meeting attended and an additional fee of $500 for each committee meeting
attended. All directors receive reimbursement of reasonable expenses incurred in
attending Board and committee meetings and otherwise carrying out their duties.
 
     In connection with the IPO, each director who was neither an employee nor
one of our stockholders as of the date of the final prospectus used in
connection with the IPO (i.e., Mr. Murphy and Ms. Smith) received an option to
purchase 7,500 shares of common stock at a per share exercise price equal to the
initial public offering price of $13.00. Each option currently is exercisable
with respect to all of the shares of common stock issuable thereunder, expires
ten years after the date of grant and is non-transferable except upon death
(unless otherwise approved by the Board of Directors). If the director dies or
otherwise ceases to be a director prior to the expiration of the option, the
option (if exercisable) remains exercisable for a period of one year (following
death) or three months (following other termination of the director's status as
a director), but in no event beyond the tenth anniversary of the date of grant.
 
                                       41
<PAGE>   43
 
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
 
     Certain of our directors are compensated through the 1998 Stock Option Plan
for Outside Directors (the "Directors' Plan"). Subject to adjustment for stock
splits and similar events, a total of 100,000 shares of common stock are
reserved for issuance under the Directors' Plan.
 
     The Directors' Plan is administered by the Board of Directors, which has
the power to construe and interpret the plan's terms and provisions. The
Directors' Plan permits the Board of Directors to delegate some or all of its
powers with respect to the Directors' Plan to a committee. Only directors who do
not otherwise serve us as employees or full-time consultants ("Outside
Directors") are eligible to participate in the Directors' Plan. Messrs. Hammond
and Murphy and Ms. Smith currently are the only Board members who are entitled
to participate.
 
     On the date of each annual meeting of stockholders, each Outside Director
continuing in office will be granted an option to purchase a number of shares of
common stock to be determined by the Board of Directors on that date, and any
newly-elected Outside Director will be granted an option covering 7,500 shares
of common stock. The exercise price for each option granted under the Directors'
Plan will be the last sale price of a share of common stock as reported on
Nasdaq on the date the option is granted.
 
     All options granted under the Directors' Plan will become fully exercisable
six months after the date of grant. Upon an Outside Director's departure from
the Board of Directors by reason of death, all options that are not then
exercisable will terminate and options that are exercisable on the date of death
may be exercised by the Outside Director's executor or administrator, or by the
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution, only during the subsequent one-year period. If
an Outside Director ceases to be a director for any other reason, all options
held by the Outside Director that are not then exercisable will terminate and
options that are exercisable at that time will continue to be exercisable only
during the subsequent three-month period. In the event that a transaction occurs
that results or will result in the common stock not being registered under
Section 12 of the Exchange Act, all options held by Outside Directors will
terminate. If the transaction is intended to be treated as a
pooling-of-interests for accounting purposes, the Board of Directors will cause
the acquiring or surviving corporation or one of its affiliates to grant
replacement options to participants. Otherwise, the Board of Directors may
either accelerate the exercisability of all outstanding options or terminate all
options in exchange for a cash payment. In all other events, options granted
under the Directors' Plan will remain exercisable until the tenth anniversary of
the date of grant. Generally, no option may be transferred other than by will or
the laws of descent and distribution.
 
                             EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
     The following table contains a summary of the compensation paid or accrued
during fiscal 1998 to our Chief Executive Officer and our three other most
highly compensated executive officers (collectively, the "Named Executive
Officers," and each, a "Named Executive Officer").
 
<TABLE>
<CAPTION>
                                                                                       LONG TERM
                                                                                      COMPENSATION
                                                                                         AWARDS
                                                          ANNUAL COMPENSATION         ------------
                                                     ------------------------------    SECURITIES
                                                                       OTHER ANNUAL    UNDERLYING
            NAME AND PRINCIPAL POSITION              YEAR    SALARY    COMPENSATION     OPTIONS
            ---------------------------              ----   --------   ------------   ------------
<S>                                                  <C>    <C>        <C>            <C>
Paul M. Verrochi...................................  1998   $  8,333      $2,400(1)      43,298(2)
  Chairman and Chief Executive Officer
John H. Zenger.....................................  1998     25,000          --        100,000
  President
Dominic J. Puopolo.................................  1998      8,333       2,400(1)      43,298(2)
  Executive Vice President and Chief Financial
  Officer
Rajiv Bhatt........................................  1998    239,947(3)        --        50,000
  Executive Vice President and Chief Operating
  Officer
</TABLE>
 
                                       42
<PAGE>   44
 
---------------
(1) Consists of car allowance.
(2) Excludes 389,686 shares issuable upon the exercise of warrants described in
    "Certain Transactions."
(3) Includes $206,614 in compensation paid prior to the IPO while Mr. Bhatt was
    a full-time consultant to us.
 
OPTION GRANTS IN LAST FISCAL YEAR
 
     The following table sets forth certain information with respect to stock
options we granted during fiscal 1998 to each of the Named Executive Officers.
 
<TABLE>
<CAPTION>
                                             INDIVIDUAL GRANTS                      POTENTIAL REALIZABLE
                            ---------------------------------------------------       VALUE AT ASSUMED
                            NUMBER OF     PERCENT OF                                   ANNUAL RATES OF
                            SECURITIES   TOTAL OPTIONS                            STOCK PRICE APPRECIATION
                            UNDERLYING    GRANTED TO     EXERCISE                     FOR OPTION TERMS
                             OPTIONS     EMPLOYEES IN      PRICE     EXPIRATION   -------------------------
                            GRANTED(1)    FISCAL YEAR    ($/SHARE)      DATE          5%           10%
                            ----------   -------------   ---------   ----------   ----------   ------------
<S>                         <C>          <C>             <C>         <C>          <C>          <C>
Paul M. Verrochi..........    43,298          5.7%        $13.00      4/28/05      $229,146     $  534,008
John H. Zenger............   100,000         13.3          13.00      4/28/05       529,231      1,233,332
Dominic J. Puopolo........    43,298          5.7          13.00      4/28/05       229,146        534,008
Rajiv Bhatt...............    50,000          6.6          13.00      4/28/05       264,615        616,666
</TABLE>
 
---------------
(1) The options granted to Messrs. Zenger and Bhatt each become exercisable with
    respect to one-third of the shares issuable thereunder on each of April 28,
    1999, 2000 and 2001. Upon the occurrence of certain events constituting a
    change in control, the options will be affected as discussed in "-- Equity
    Incentive Plan."
 
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
 
     There were no options exercised by any of the Named Executive Officers
during fiscal 1998. The following table indicates the aggregate value of all
options held by each Named Executive Officer as of June 30, 1998.
 
<TABLE>
<CAPTION>
                                               NUMBER OF SECURITIES
                                              UNDERLYING UNEXERCISED           VALUE OF UNEXERCISED IN-
                                             OPTIONS AT JUNE 30, 1998            THE-MONEY OPTIONS AT
                                           ----------------------------            JUNE 30, 1998(1)
                                            NUMBER OF       NUMBER OF        ----------------------------
                                           EXERCISABLE    UNEXERCISABLE      EXERCISABLE    UNEXERCISABLE
                                             SHARES          SHARES             VALUE           VALUE
                                           -----------    -------------      -----------    -------------
<S>                                        <C>            <C>                <C>            <C>
Paul M. Verrochi.........................    43,298               --          $232,727        $     --
John H. Zenger...........................        --          100,000                --         537,500
Dominic J. Puopolo.......................    43,298               --           232,727              --
Rajiv Bhatt..............................        --           50,000                --         268,750
</TABLE>
 
---------------
(1) Value of unexercised options based upon $18.375, the closing price of the
    Common Stock on Nasdaq on June 30, 1998.
 
EMPLOYMENT AGREEMENTS
 
     We have employment agreements with each of the Named Executive Officers.
Each such agreement has a term expiring on May 4, 2001 and provides for an
initial base salary (subject to upward adjustment in the sole discretion of the
Board of Directors) and participation in our bonus and benefit plans. The base
salaries to be paid to Messrs. Verrochi, Zenger, Puopolo and Bhatt under their
employment agreements for fiscal 1999 are $50,000, $150,000 $50,000 and
$275,000, respectively. The salaries to be paid to Messrs. Verrochi and Puopolo
after the first year of the term of their employment agreements are not
specified in their respective employment agreement, but rather will be
determined by the Board of Directors in its sole discretion. Each agreement may
be terminated prior to the expiration of the term either in the event of
disability or for cause (as defined). If any of the Named Executive Officers
does not continue to be employed by us upon the expiration of his agreement, the
Named Executive Officer is entitled to receive six months' severance at his base
salary as in effect at the time of expiration. Each of
 
                                       43
<PAGE>   45
 
the Named Executive Officers has agreed not to compete with us for a period that
expires on May 4, 2003.
 
EQUITY INCENTIVE PLAN
 
     Our 1998 Equity Incentive Plan provides for the award of up to 1,100,000
shares of common stock in the form of incentive stock options ("ISOs"),
non-qualified stock options, stock appreciation rights, performance shares,
restricted stock or stock units (each, an "Award"). All of our directors and
employees, and all consultants and advisors, are eligible to participate in the
Equity Incentive Plan.
 
     The Equity Incentive Plan is administered by the Compensation Committee
(the "Committee"), which determines who shall receive Awards from those
individuals eligible to participate, the type of Award to be made, the number of
shares of common stock that may be acquired pursuant to the Award and the
specific terms and conditions of each Award, including the purchase price, term,
vesting schedule, restrictions on transfer and any other conditions and
limitations applicable to the Awards or their exercise. Options that are ISOs
may be exercisable for not more than 10 years after the date the option is
awarded. The Committee may at any time accelerate the exercisability of all or
any portion of an option.
 
     In the event a transaction occurs that results in the common stock not
being registered under Section 12 of the Exchange Act, all Awards terminate upon
the completion of the transaction. If the transaction is intended to be treated
as a pooling-of-interests for accounting purposes, then the Committee or the
Board of Directors shall cause the acquiring or surviving corporation or one of
its affiliates to grant replacement Awards to participants. Otherwise, the
Committee or the Board of Directors may either accelerate the exercisability of
all outstanding Awards (subject to completion of the transaction) or terminate
all Awards in exchange for a cash payment.
 
     The Equity Incentive Plan may be amended from time to time or terminated in
its entirety by the Board of Directors; however, no amendment may be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
 
     As of December 31, 1998, options to purchase 1,021,619 shares of common
stock were outstanding under the Equity Incentive Plan.
 
NON-QUALIFIED STOCK OPTION PLAN
 
     Our 1998 Non-Qualified Stock Option Plan provides for the award of up to
500,000 shares of common stock in the form of non-qualified stock options. All
of our employees who are neither directors nor officers are eligible to
participate in the Non-Qualified Plan.
 
     The Non-Qualified Plan is administered and interpreted by the Committee,
which selects the recipients of options, determines the terms and conditions of
the options, prescribes the form or forms of instruments evidencing options from
time to time, and decides any questions and settles all controversies and
disputes that may arise in connection with the plan. The Committee may at any
time accelerate the exercisability of all or any portion of an option.
 
     In the event a transaction occurs that results in the common stock not
being registered under Section 12 of the Exchange Act, all options granted under
the Non-Qualified Plan terminate upon the completion of the transaction. If the
transaction is intended to be treated as a pooling-of-interests for accounting
purposes, then the Committee (or the Board) shall cause the acquiring or
surviving corporation or one of its affiliates to grant replacement options to
participants. Otherwise, the Committee (or the Board) may either accelerate the
exercisability of all outstanding options (subject to completion of the
transaction) or terminate all options in exchange for cash payments.
 
     As of December 31, 1998, options to purchase 294,900 shares of common stock
were outstanding under the Non-Qualified Plan.
 
                                       44
<PAGE>   46
 
STOCK PURCHASE PLAN
 
     Our 1998 Employee Stock Purchase Plan is designed to enable eligible
employees to purchase shares of common stock at a discount on a periodic basis.
All employees working more than 20 hours per week, other than employees owning
5% or more of the combined voting power of all classes of our stock, will be
eligible to participate. Purchases occur at the end of option periods, each of
six months' duration. The first such option period began on June 1, 1998. The
purchase price of common stock under the Employee Stock Purchase Plan is 85% of
the lesser of the last sale price of the common stock on the business day
immediately preceding the beginning of an option period and the last sale price
of the common stock on the business day immediately preceding the end of the
option period. Participants may elect under the Employee Stock Purchase Plan to
have from 2% to 10% of their pay applied to the purchase of shares at the end of
the option period.
 
     Subject to adjustment for stock splits and similar events, a total of
500,000 shares of common stock are reserved for issuance under the Employee
Stock Purchase Plan. As of December 31, 1998, 17,221 shares have been issued.
 
LIMITATION OF CERTAIN LIABILITY OF OFFICERS AND DIRECTORS
 
     As permitted by the Delaware General Corporation Law (the "DGCL"), our
Certificate of Incorporation provides for the elimination, subject to certain
conditions, of the personal liability of our directors for monetary damages for
breach of their fiduciary duties. The directors, however, remain subject to
equitable remedies and to liability for breach of their duty of loyalty to us or
our stockholders. Our Certificate of Incorporation and By-laws also provide that
we will indemnify our directors and officers. In addition, we maintain an
indemnification insurance policy covering all of our directors and officers. In
general, our Certificate of Incorporation, By-laws and the indemnification
insurance policy attempt to provide the maximum protection permitted by Delaware
law with respect to indemnification and exculpation of directors and officers.
 
     Under the indemnification provisions of our Certificate of Incorporation
and By-laws and the indemnification insurance policy, we will repay certain
expenses incurred by a director or officer in connection with any civil or
criminal action or proceeding, specifically including actions by us or in our
name (derivative suits), where the individual's involvement is by reason of the
fact that he or she is or was one of our directors or officers. Such
indemnifiable expenses include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts, and
other expenses customarily incurred in connection with legal proceedings. A
director or officer will not receive indemnification if he or she is found not
to have acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, our best interests.
 
                                       45
<PAGE>   47
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth certain information as of December 31, 1998
regarding the beneficial ownership of our common stock, as of such date and as
adjusted to reflect the sale of shares of common stock in this offering by us
and the selling stockholders, by each of our directors and executive officers,
greater than 5% stockholders known to us and the selling stockholders.
 
<TABLE>
<CAPTION>
                                         SHARES BENEFICIALLY                         SHARES TO BE
                                                OWNED                             BENEFICIALLY OWNED
                                         PRIOR TO OFFERING(1)     SHARES TO       AFTER OFFERING(1)
                                         --------------------      BE SOLD       --------------------
       NAME OF BENEFICIAL OWNER           NUMBER      PERCENT    IN OFFERING      NUMBER      PERCENT
       ------------------------          ---------    -------    ------------    ---------    -------
<S>                                      <C>          <C>        <C>             <C>          <C>
Directors and Executive Officers
Paul M. Verrochi(2)(3).................  1,190,203      9.8        119,665       1,070,538      7.3
John H. Zenger(4)......................    196,197      1.6         20,000         176,197      1.2
Dominic J. Puopolo(2)(5)...............  1,112,524      9.2        122,625         989,899      6.8
Rajiv Bhatt............................     99,567        *          9,567          90,000        *
Philip Gardner.........................    339,821      2.8         40,000         299,821      2.1
Herbert A. Cohen(6)....................    183,459      1.5         20,000         163,459      1.1
Michael J. Davies(7)...................    371,632      3.1         32,060         339,572      2.4
Bert Decker............................    335,031      2.8         35,000         300,031      2.1
Paul C. Green, Ph.D(8).................    529,940      4.4         73,840         456,100      3.2
David B. Hammond(9)....................     44,643        *          5,000          39,643        *
Joe Hanson.............................     68,362        *          9,000          59,362        *
John F. King(10).......................    327,732      2.7         45,882         281,850      2.0
John R. Murphy(11).....................     11,500        *             --          11,500        *
Esther T. Smith(11)....................      9,500        *             --           9,500        *
A. Carl von Sternberg(12)..............    386,525      3.2         54,112         332,413      2.3
Marc S. Wallace........................     97,477        *         10,000          87,477        *
All executive officers and directors as
  a group (16 persons)(13).............  5,304,113     42.6        596,751       4,707,362     31.5
 
Other Named Selling Stockholders
Edwin Bauch, as Trustee................     43,950        *          5,997          37,953        *
Arthur R. Bauer(14)....................    177,591      1.5         24,863         152,728      1.1
Thomas Bohn(14)........................     94,153        *         13,181          80,972        *
Vern Della-Piana(14)...................     39,650        *          3,965          35,685        *
Harry V. Dunklin(14)(15)...............     36,727        *          3,742          32,985        *
Joseph R. Folkman(14)..................    120,317      1.0         12,031         108,286        *
Donald W. Glazer(14)...................    340,506      2.9         47,600         292,906      2.0
Jeffrey P. Howard(14)..................     97,477        *         13,646          83,831        *
Thomas McKenzie, Jr(14)................     74,902        *          7,490          67,412        *
David M. Morrison(14)..................     94,153        *         13,181          80,972        *
Mark Morrison(14)......................     94,153        *         13,181          80,972        *
Michael A. Patrick(14).................    172,870      1.4         18,000         154,870      1.1
Courtney M. Rogers(14).................     39,650        *          5,154          34,496        *
Kurt Sandholtz(14).....................     50,844        *          7,118          43,726        *
Timothy S. Schimkus(14)................     39,497        *          5,000          34,497        *
W. Norman Smallwood(14)................    120,317      1.0         16,844         103,473        *
Robert and Wendy Steinmetz(16).........    295,809      2.5         41,300         254,509      1.8
Randall G. Stott(14)...................    120,317      1.0         16,844         103,473        *
Kenneth S. Taylor(14)..................     95,093        *          9,524          85,569        *
Allena Reves von Sternberg.............     45,551        *          6,377          39,174        *
Ashley Elizabeth von Sternberg.........     28,990        *          4,058          24,932        *
Kurt T. von Sternberg..................     44,414        *          6,217          38,197        *
Leanna von Sternberg...................     44,414        *          6,217          38,197        *
Mark Allen von Sternberg...............     55,423        *          7,759          47,664        *
Mildred A. von Sternberg...............     44,414        *          6,218          38,196        *
Paul T. von Sternberg..................     32,691        *          4,576          28,115        *
Jonathan C. Younger(14)................    119,617      1.0         16,746         102,871        *
Other Selling Stockholders(17).........    102,139        *         13,145          88,994        *
</TABLE>
 
                                       46
<PAGE>   48
 
---------------
  *  Less than 1%
 
 (1) The persons named in this table have sole investment and voting power with
     respect to the shares beneficially owned by them. The selling stockholders
     either currently serve as our employees or consultants, previously held
     stock of companies that we acquired, or obtained stock as a donee of a
     person in either of these categories. Percentages in the table are based
     upon 11,945,406 shares of common stock outstanding as of January 5, 1999
     and 14,445,406 shares outstanding as of the closing of this offering,
     respectively.
 
 (2) Includes 173,194 shares issuable pursuant to a warrant that currently is
     exercisable, and 43,298 shares issuable upon the exercise of an option that
     currently is exercisable. Excludes 216,492 shares issuable upon the
     exercise of the Contingent Warrant described in "Certain Transactions."
 
 (3) Includes 60,699 shares held by Mr. Verrochi's wife (7,284 of which will be
     sold in this offering), and 140,980 shares held by a trust of which Mr.
     Verrochi is trustee (19,737 of which shares will be sold in this offering).
     Mr. Verrochi's address is c/o PROVANT, Inc., 67 Batterymarch Street, Suite
     600, Boston, MA 02110.
 
 (4) Shares are held jointly with Mr. Zenger's wife. Excludes 98,881 shares held
     by a trust for the benefit of Mr. Zenger's grandchildren, as to which Mr.
     Zenger disclaims beneficial ownership.
 
 (5) Includes 60,699 shares held by Mr. Puopolo's wife (8,498 of which shares
     will be sold in this offering), and 140,980 shares held by a trust of which
     Mr. Puopolo is trustee (16,918 of which will be sold in this offering). Mr.
     Puopolo's address is c/o PROVANT, Inc., 67 Batterymarch Street, Suite 600,
     Boston, MA 02110.
 
 (6) Includes 91,229 shares held by Mr. Cohen's wife, of which 10,000 will be
     sold in this offering.
 
 (7) Includes 50,000 shares issuable upon the exercise of an option that
     currently is exercisable.
 
 (8) Includes 900 shares held by members of Dr. Green's family, none of which
     will be sold in this offering.
 
 (9) Shares are held by a corporation of which the sole stockholders are Mr.
     Hammond and his wife.
 
(10) Shares are held jointly with Mr. King's wife.
 
(11) Includes 7,500 shares issuable upon the exercise of an option that
     currently is exercisable.
 
(12) Includes 30,848 shares held by Mr. von Sternberg's wife (4,318 of which are
     being sold in this offering) and 1,232 shares held by two trusts of which
     Mr. von Sternberg is trustee (172 of which are being sold in this
     offering).
 
(13) See notes 2 through 12 above.
 
(14) The named individual currently serves as an officer of PROVANT or one of
     the PROVANT companies.
 
(15) Includes 10,000 shares issuable upon exercise of an option that is
     currently exercisable.
 
(16) Mr. Steinmetz currently serves as an officer of one of the PROVANT
     companies.
 
(17) Consists of 11 stockholders who, in the aggregate, hold less than one
     percent of the outstanding common stock.
 
                                       47
<PAGE>   49
 
                              CERTAIN TRANSACTIONS
 
ORGANIZATION OF PROVANT
 
     The Combination was accomplished through separate mergers of the seven
Founding Companies, all providers of performance improvement services and
products, with seven of our subsidiaries. As a result, all of the assets,
liabilities and business operations formerly held by each Founding Company
currently exist in a separate subsidiary.
 
     The aggregate consideration paid by us at the closing of the Combination
was $69.4 million, consisting of $24.5 million in cash and 3,459,341 shares of
common stock. In addition, we assumed indebtedness of the Founding Companies
aggregating approximately $7 million as of March 31, 1998. Our agreements with
five of the Founding Companies provided for the payment of additional,
contingent consideration based on those companies' performance during fiscal
1998. Through December 31, 1998, we had issued as contingent consideration
615,384 shares of common stock pursuant to agreements with four of these
companies.
 
     The former stockholders of a sixth Founding Company, J. Howard, will be
eligible to receive up to an aggregate of $4.3 million of common stock (the "J.
Howard Contingent Consideration") if specified levels of EBIT are reached. J.
Howard's merger agreement contains a targeted pro forma EBIT amount for fiscal
1999 in excess of a baseline figure which, if achieved, will result in our
payment to the former stockholders of J. Howard of the maximum J. Howard
Contingent Consideration (consisting of a multiple of the excess EBIT amount).
To the extent J. Howard does not achieve the targeted amount, its former
stockholders will receive a lesser amount of J. Howard Contingent Consideration
proportionately related to the excess above the baseline figure. Shares of
common stock issued as J. Howard Contingent Consideration will be valued based
on the average of the last sale prices of the common stock on Nasdaq during the
20 business days immediately following the first public announcement of our
financial results for fiscal 1999.
 
     For the seventh Founding Company, Star Mountain, we have agreed to make a
future payment in additional shares of common stock or cash (the "Star Mountain
Contingent Consideration") in accordance with a formula based on the amount by
which the EBIT of Star Mountain for fiscal 1999 exceeds a specified EBIT target.
In particular, if Star Mountain's EBIT for fiscal 1999 exceeds the specified
target, then (i) Star Mountain's former non-voting stockholders will receive
cash equal to a multiple of the excess EBIT and (ii) Star Mountain's former
voting stockholders will receive, at their election, either cash equal to a
multiple of the excess EBIT or a number of shares of common stock equal to a
multiple of the excess EBIT divided by 80% of the average of the last sale
prices of the common stock on Nasdaq during the month of July 1999.
 
     In connection with the Combination, the following individuals who became
directors upon the closing of the IPO and who were principal stockholders and
officers of the Founding Companies received the following amounts: Mr. Cohen,
$655,520 and 189,411 shares of common stock (including cash and shares issued to
his wife); Mr. Decker, $759,623 and 334,931 shares of common stock; Dr. Green,
$4,554,713 and 528,840 shares of common stock; Mr. Hanson, $498,753 and 68,362
shares of common stock; Mr. King, $1,569,714 and 327,732 shares of common stock;
Mr. von Sternberg, $2,559,234 and 496,693 shares of common stock (including cash
and shares issued to his wife); and Mr. Wallace, $754,890 and 97,477 shares of
common stock.
 
     Pursuant to the agreements entered into in connection with the Combination,
the principal stockholders of the Founding Companies agreed not to compete with
us for a period that expires on May 4, 2003. In addition, upon the closing of
the Combination, the principal stockholders and certain other employees of each
of the Founding Companies entered into three-year employment agreements with our
subsidiaries. Each such agreement with Messrs. Cohen, Decker, Green, Hanson,
King, von Sternberg and Wallace provides for an initial base salary of $175,000
(except for Mr. Decker's agreement which provides for a base salary of
$125,000), subject to upward adjustment in the employer's sole discretion, and
in most cases participation in our bonus and benefit plans. Each agreement may
be terminated prior to the expiration of the three-year term either in the event
of disability or for cause (as defined). If the individual does not continue to
be employed by the employer upon the expiration of the agreement, the
 
                                       48
<PAGE>   50
 
individual will be entitled to receive six months' severance at his base salary
as in effect at the time of expiration.
 
     Certain indebtedness of the Founding Companies was personally guaranteed by
their respective stockholders. We repaid such indebtedness from the net proceeds
of the IPO and the guarantees were released. In particular, we repaid amounts
owed by Novations (which totalled approximately $1.7 million) and Star Mountain
(which totalled approximately $3.5 million) which were personally guaranteed by
Messrs. Hanson and von Sternberg, respectively.
 
     The former stockholders of the Founding Companies have agreed that until
May 4, 2000 they will not sell any shares of common stock received by them in
connection with the Combination other than pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act").
Our stockholders prior to the closing of the IPO and the Combination agreed to
identical restrictions on all shares of common stock held by them from time to
time. Except with respect to the shares issuable upon the exercise of the
warrants described below, we have no obligation to provide a registration
statement with respect to any of the shares held by our stockholders. However,
in the event we decide to register in an underwritten public offering any shares
received by any stockholder in the Combination, any shares of common stock
issued (or issuable pursuant to options and warrants granted by us) prior to the
date of the final prospectus used in connection with the IPO or certain shares
issued by us in post-IPO acquisitions, we must give the holders of these shares
and options the opportunity to register and sell in the offering a pro rata
amount of their shares. Certain of these stockholders are selling stockholders
in this offering.
 
OTHER TRANSACTIONS
 
  Organization of PROVANT
 
     In connection with the founding and organization of PROVANT, Messrs.
Verrochi, Zenger, Puopolo, Davies, Philip Gardner and Donald W. Glazer purchased
the following shares of common stock for an aggregate purchase price of
approximately $2,900: Mr. Verrochi, 977,461 shares; Mr. Zenger, 295,078 shares;
Mr. Puopolo, 901,782 shares; Mr. Davies, 320,632 shares; Mr. Gardner, 339,821
shares; and Mr. Glazer, 385,150 shares. Mr. Glazer currently serves us as a
consultant. For his consulting services, we pay Mr. Glazer an annual fee of
$125,000.
 
  American Business Partners LLC
 
     During 1997, certain members of the management team and certain of our
consultants were assembled by American Business Partners LLC ("ABP") to pursue
the formation of PROVANT. Mr. Verrochi, our Chairman of the Board and Chief
Executive Officer, and Mr. Puopolo, our Executive Vice President, Chief
Financial Officer and a director, are members of ABP. ABP provided us with
expertise regarding the consolidation process.
 
     Expenses that we paid prior to the closing of and in connection with the
Combination and the IPO were financed with funds advanced to us by Messrs.
Verrochi and Puopolo. Amounts advanced accrued interest at an annual rate equal
to the prime rate of interest as from time to time published in The Wall Street
Journal. We repaid the advanced amounts plus interest (which totalled $1.8
million) to Messrs. Verrochi and Puopolo out of the proceeds of the IPO.
 
     As partial consideration for their commitment to extend the financing
described above, Messrs. Verrochi and Puopolo each received two warrants. The
first warrant entitles the holder to purchase 173,194 shares of common stock at
a per share exercise price equal to the initial public offering price of $13.00.
The second warrant, entitling the holder to purchase 216,492 shares of common
stock, will become exercisable only if the market price of the common stock
increases to certain threshold levels (except as otherwise described below) (the
"Contingent Warrant"). Specifically, 20% of the total number of shares issuable
under the Contingent Warrant will become exercisable if and when the market
price of the common stock increases to $26, $39 and $52 per share, respectively,
and the remaining 40% of the total number of shares issuable under the
Contingent Warrant will become exercisable if and when the market price of the
common stock increases to $65 per share. However, under certain circumstances
involving the
 
                                       49
<PAGE>   51
 
merger or sale of PROVANT, the Contingent Warrant will become exercisable to
purchase all of the warrant shares. The exercise price of the Contingent Warrant
increases on each anniversary of May 4, 1998. Specifically, the exercise price
is equal to the initial public offering price of $13.00 for the first 12 months
following the closing of the IPO and, for each 12 month period thereafter, is
equal to $13.00 plus the product of $1.30 and the number of full 12 month
periods elapsed since May 4, 1998. However, once a portion of the Contingent
Warrant becomes exercisable, that portion's exercise price is fixed as of that
date. All four warrants expire on May 4, 2005. The holders of the warrants have
the right to require us to register the resale of the shares they may acquire
upon exercise under the Securities Act.
 
     In June 1997, Messrs. Verrochi and Puopolo sold us furniture and equipment
for our corporate executive offices for an aggregate purchase price of $150,000.
We believe that the purchase price approximated the fair market value of the
furniture and equipment.
 
OTHER TRANSACTIONS INVOLVING OFFICERS AND DIRECTORS
 
     Michael J. Davies, who became one of our directors upon the consummation of
the IPO, also became a full-time consultant at that time. For the performance of
his consulting duties, we currently pay Mr. Davies an annual fee of $125,000. In
addition, in consideration for his agreement to become a consultant, we granted
Mr. Davies an option to purchase 50,000 shares of common stock, which currently
is exercisable for all of the shares issuable thereunder at a per share exercise
price equal to the initial public offering price of $13.00.
 
     We used $750,000 of the net proceeds of the IPO to pay a fee due to Legg
Mason Wood Walker, Incorporated for information relating to the performance
improvement industry developed by Mr. Davies while he served as a Managing
Director at that company.
 
     As a result of the Combination, one of our subsidiaries became a party to a
six-year lease of administrative offices, effective January 1, 1996, from Paul
C. Green, Ph.D., who is one of our directors. For the year ended June 30, 1998,
rent expense paid to Dr. Green pursuant to the lease was approximately $83,200.
We believe that the terms of the lease are no less favorable than what we could
have obtained from non-affiliated third parties.
 
     As a result of the Combination, one of our subsidiaries became a party to a
five-year lease of office facilities renewable for an additional five years,
effective March 1997, from Novations Partners, L.L.C., a Utah limited liability
company (the "LLC"), which is controlled by the former stockholders of
Novations. Joe Hanson, one of the members of the LLC, is one of our directors.
The annual rent expense to be paid to the LLC was $300,000 for the first year of
the lease, and the lease provides for a 3% annual increase thereafter. That
subsidiary also assumed in the Combination the obligation to pay the LLC
approximately $75,000 per year through April 1, 2001 for the sublease of certain
equipment. We believe that the terms of the lease and sublease are no less
favorable than what we could have obtained from non-affiliated third parties. In
addition, Novations loaned the LLC funds during 1997, the balance of which
totalled approximately $192,000 as of March 31, 1998. All outstanding amounts
owed to Novations pursuant to these arrangements were paid by the LLC at or
before the closing of the Combination.
 
     A. Carl von Sternberg, one of our directors, was indebted to Star Mountain
during 1997 under a promissory note. Borrowings by Mr. von Sternberg under the
note totalled approximately $406,000 as of March 31, 1998. Outstanding principal
amounts owed under the note accrued interest from time to time at the prime rate
of interest as reported in The Wall Street Journal, and all principal amounts
owed under the note, together with accrued interest have been repaid by Mr. von
Sternberg.
 
     In December 1997, Marc S. Wallace, one of our directors, incurred
indebtedness to J. Howard pursuant to two promissory notes in the aggregate
principal amount of $75,000. Outstanding principal amounts owed under the notes
accrued interest from time to time at an annual rate of 7.0%, and all principal
amounts owed under the notes, together with accrued interest have been repaid by
Mr. Wallace.
 
PROVANT POLICY
 
     Our policy is that any future transactions with directors, officers,
employees or affiliates be approved in advance by a majority of the Board of
Directors, including a majority of the disinterested members of the Board, and
be on terms no less favorable than what we could obtain from non-affiliated
parties.
                                       50
<PAGE>   52
 
                          DESCRIPTION OF CAPITAL STOCK
 
GENERAL
 
     We are authorized to issue 45,000,000 shares of capital stock, par value
$.01 per share, consisting of 40,000,000 shares of common stock and 5,000,000
shares of preferred stock. As of January 4, 1999, we had outstanding 11,945,406
shares of common stock held of record by 162 stockholders, and no shares of
preferred stock.
 
COMMON STOCK
 
     Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders, and do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. See "Dividend
Policy." All outstanding shares of common stock are fully paid and
nonassessable, and the holders thereof have no preferences or rights of
conversion, exchange or pre-emption. In the event of any liquidation,
dissolution or winding-up of our affairs, holders of common stock will be
entitled to share ratably in our assets that are remaining after payment or
provision for payment of all of our debts and obligations and after liquidation
payments to holders of outstanding shares of preferred stock, if any.
 
PREFERRED STOCK
 
     The preferred stock, if issued, would have priority over the common stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. The Board of Directors has the authority, without
further stockholder authorization, to issue from time to time shares of
preferred stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although we have
no present plans to issue any shares of preferred stock, the issuance of shares
of preferred stock, or the issuance of rights to purchase such shares, could
decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers, including
voting rights, of the common stock, and could have the effect of delaying,
deterring or preventing a change in control of PROVANT or an unsolicited
acquisition proposal.
 
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
 
     Our By-laws establish an advance notice procedure with regard to the
nomination by our stockholders of candidates for election as directors (the
"Nomination Procedure") and with regard to other matters to be brought by
stockholders before a meeting of our stockholders (the "Business Procedure").
 
     The Nomination Procedure requires that a stockholder give written notice to
our Secretary, delivered to or mailed and received at our principal executive
offices neither less than 60 days nor more than 90 days prior to the meeting, in
proper form, of a planned nomination for the Board of Directors. Detailed
requirements as to the form and timing of that notice are specified in the
By-laws. If the Chairman determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director.
 
     Under the Business Procedure, a stockholder seeking to have any business
conducted at any meeting must give written notice to our Secretary, delivered to
or mailed and received at our principal executive offices neither less than 60
days nor more than 90 days prior to the meeting, in proper form, subject to the
requirements of the proxy solicitation rules under the Exchange Act. Detailed
requirements as to the form and timing of that notice are specified in the
By-laws. If the Chairman determines that the other business was not properly
brought before such meeting in accordance with the Business Procedure, such
business will not be conducted at such meeting.
 
                                       51
<PAGE>   53
 
     Although the By-laws do not give the Board of Directors any power to
approve or disapprove of stockholder nominations for the election of directors
or of any other business desired by stockholders to be conducted at an annual or
any other meeting, the By-laws (i) may have the effect of precluding nominations
for the election of directors or precluding the conduct of business at a
particular annual meeting if the proper procedures are not followed or (ii) may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
PROVANT, even if the conduct of such solicitation or such attempt might be
beneficial to us and our stockholders.
 
OTHER PROVISIONS
 
     Special Meetings of Stockholders.  Our By-laws provide that a special
meeting of our stockholders only may be called by the President, the Chairman of
the Board or by order of the Board of Directors. The By-laws do not authorize
the stockholders to call a special meeting of stockholders, potentially limiting
the stockholders' ability to offer proposals between annual meetings if no
special meetings are otherwise called by the President, Chairman or the Board.
 
     No Action by Written Consent.  Our Certificate of Incorporation does not
permit our stockholders to act by written consent. As a result, any action to be
taken by our stockholders must be taken at a duly called meeting of the
stockholders.
 
STATUTORY BUSINESS COMBINATIONS PROVISION
 
     We are subject to the provisions of Section 203 of the DGCL ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person, or an affiliate or associate of such a person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the Board of Directors of the corporation before the person becomes an
interested stockholder; (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the disinterested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and who was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the common stock is BankBoston, N.A.
 
                                       52
<PAGE>   54
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     We currently have 11,945,406 shares of common stock issued and outstanding,
and as of December 31, 1998 had 1,687,907 shares of common stock issuable upon
the exercise of outstanding options and warrants. Of these outstanding shares,
2,990,000 shares sold pursuant to the IPO are freely tradeable without
restriction under the Securities Act, except any shares purchased by one or more
of our "affiliates" (as that term is defined under the rules and regulations of
the Securities Act), which shares will be subject to the resale limitations of
Rule 144 of the Securities Act. The remaining outstanding shares may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144.
 
     In the aggregate, 1,100,000 shares are reserved for issuance under the
Equity Incentive Plan, 500,000 shares are reserved for issuance under the
Employee Stock Purchase Plan and 500,000 shares are reserved for issuance under
the Non-Qualified Plan. We have filed a registration statement under the
Securities Act to register common stock to be issued pursuant to the exercise of
options or stock granted or to be granted under the Equity Incentive Plan,
Employee Stock Purchase Plan and Non-Qualified Plan. As a result, common stock
issued upon the exercise of substantially all of such options (or the purchase
of common stock under the Employee Stock Purchase Plan) will be available for
immediate resale in the open market, subject to compliance with Rule 144 in the
case of affiliates. We intend to file promptly a registration statement under
the Securities Act to register the 100,000 shares of common stock issuable
pursuant to the exercise of options granted and to be granted under the
Directors' Plan.
 
     We also have filed a registration statement on Form S-4 to register up to 3
million shares of common stock issuable in acquisitions. Shares of common stock
issued pursuant to this registration statement are available for immediate
resale in the open market, except the resale of such shares by affiliates of
acquired companies is subject to the restrictions and limitations imposed by
Rule 145 under the Securities Act. As of December 31, 1998, 1,316,243 shares
have been issued under the registration statement, and an indeterminable number
of additional shares may be issuable in the future pursuant to contingent
consideration arrangements made in acquisitions completed prior to that date.
 
     In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
us and the date on which they were acquired from an affiliate, then the holder
of such restricted securities (including an affiliate) is entitled to sell that
number of shares within any three-month period that does not exceed the greater
of (i) one percent of the then outstanding shares of common stock or (ii) the
average weekly reported volume of trading of common stock during the four
calendar weeks preceding such sale. The shares of common stock issued as
contingent consideration in the Combination, as well as any shares of common
stock that may be issued as J. Howard Contingent Consideration and Star Mountain
Contingent Consideration, will be deemed to have been acquired at the closing of
the Combination for purposes of Rule 144. Sales under Rule 144 also are subject
to certain requirements pertaining to the manner of sales, notices of sales and
the availability of current public information concerning us. Any shares not
constituting restricted securities sold by affiliates must be sold in accordance
with the foregoing volume limitations and other requirements but without regard
to the one year holding period. Under Rule 144(k), if a period of at least two
years has elapsed from the date on which restricted securities were acquired
from us or an affiliate, a holder of such restricted securities who is not an
affiliate at the time of the sale and has not been an affiliate for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
 
     Notwithstanding any ability they may have to sell common stock under Rule
144, the stockholders of the Founding Companies, all of our stockholders prior
to the IPO and stockholders who received substantially all of the shares of
common stock issued in connection with our post-IPO acquisitions to date have
agreed to certain transfer restrictions for a two-year period on all shares of
common stock held or (in some cases) to be held by them. See "Certain
Transactions -- Organization of PROVANT." In addition, we have agreed, together
with our directors and executive officers and the selling stockholders, not to
offer,
 
                                       53
<PAGE>   55
 
sell, contract to sell, pledge, grant any option for the sale of, or otherwise
dispose or cause the disposition of any shares of common stock, or securities
convertible into or exchangeable or exercisable for such shares, for a period of
120 days after the date of this prospectus without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, except for (i) in our case,
common stock issued pursuant to any employee or director benefit plans described
herein or in connection with acquisitions and (ii) in the case of directors,
executive officers and the selling stockholders, the exercise of stock options
pursuant to benefit plans described herein and shares of common stock disposed
of as bona fide gifts, subject in each case to any remaining portion of the
120-day period applying to shares so issued or transferred. In evaluating any
request for a waiver of the 120-day lock-up period, Merrill Lynch will consider,
in accordance with their customary practice, all relevant facts and
circumstances at the time of the request, including, without limitation, the
recent trading market for the common stock, the size of the request and, with
respect to a request by us to issue additional equity securities, the purpose of
such an issuance.
 
     Sales or the availability for sale of substantial amounts of common stock
in the public market could adversely affect prevailing market prices and our
ability to raise equity capital in the future.
 
                                       54
<PAGE>   56
 
                                  UNDERWRITING
 
     Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney
Inc., Piper Jaffray Inc. and BancBoston Robertson Stephens Inc. are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in a purchase agreement (the "Purchase Agreement")
among us, the selling stockholders and the underwriters, we and the selling
stockholders have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us and the
selling stockholders, the number of shares of common stock set forth opposite
its name below.
 
<TABLE>
<CAPTION>
                                                                NUMBER OF
UNDERWRITERS                                                     SHARES
------------                                                    ---------
<S>                                                             <C>
Merrill Lynch, Pierce, Fenner & Smith
             Incorporated...................................
Salomon Smith Barney Inc....................................
Piper Jaffray Inc...........................................
BancBoston Robertson Stephens Inc...........................
 
                                                                ---------
          Total.............................................    3,450,000
                                                                =========
</TABLE>
 
     In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of
common stock being sold pursuant to such agreement if any of such shares are
purchased. Under certain circumstances, the commitments of non-defaulting
underwriters under the Purchase Agreement may be increased.
 
     The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus, and to certain dealers at such
price less a concession not in excess of $          per share. The underwriters
may allow, and such dealers may reallow, a discount not in excess of $
per share on sales to certain other dealers. After the public offering, the
public offering price, concession and discount may be changed.
 
     PROVANT has granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of 517,500
additional shares of common stock at the public offering price set forth on the
cover page of this prospectus, less the underwriting discount. The underwriters
may exercise this option solely to cover over-allotments, if any, made on the
sale of the common stock offered hereby. To the extent the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.
 
     The following table shows the per share and total underwriting discounts
and commissions to be paid by us and the selling stockholders to the
underwriters. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
 
<TABLE>
<CAPTION>
                                                                 WITHOUT
                                                    PER SHARE     OPTION     WITH OPTION
                                                    ---------    --------    -----------
<S>                                                 <C>          <C>         <C>
Public offering price.............................  $            $            $
Underwriting discount.............................  $            $            $
Proceeds, before expenses, to PROVANT.............  $            $            $
Proceeds to selling stockholders..................  $            $            $
</TABLE>
 
     The expenses of the offering are estimated at $1.0 million and are payable
entirely by us.
 
     The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the
 
                                       55
<PAGE>   57
 
underwriters and certain other conditions. The underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
 
     We, our executive officers and directors and the selling stockholders have
agreed not to offer or sell any other shares of common stock or common stock
equivalents for 120 days after the date of this prospectus. Common stock
equivalents include securities convertible into or exchangeable for common
stock. During the 120-day period, we, our executive officers and directors and
the selling stockholders have also agreed not to sell to third parties any call
option or other right to acquire common stock or common stock equivalents and
not to purchase from third parties any put option or other right to sell common
stock or common stock equivalents. In addition, we, our executive officers and
directors and the selling stockholders have agreed not to enter into any swap or
other arrangement that transfers the economic consequences of ownership of
common stock or common stock equivalents. There are some exceptions to these
restrictions, including the issuance of common stock by us in connection with
acquisitions and grants and exercises of stock options.
 
     We have agreed to indemnify the underwriters against certain liabilities,
including certain liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect thereof.
 
     Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase the common stock. As an
exception to these rules, the representatives are permitted to engage in certain
transactions that stabilize the price of the common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the common stock.
 
     If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing common stock in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
 
     The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the representatives purchase
shares of common stock in the open market to reduce the underwriters' short
position or to stabilize the price of the common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering.
 
     In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the common stock to the extent that it
discourages resales of the common stock.
 
     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, one commenced, will
not be discontinued without notice.
 
     Some of the underwriters or their affiliates have provided investment or
commercial banking services to us in the past and are likely to do so in the
future. They receive customary fees and commissions for these services.
 
                                 LEGAL MATTERS
 
     The validity of the shares of common stock offered by this prospectus will
be passed upon for PROVANT by Nutter, McClennen & Fish, LLP, Boston,
Massachusetts. Certain legal matters related to this offering will be passed
upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
 
                                       56
<PAGE>   58
 
                                    EXPERTS
 
     The financial statements of PROVANT, Inc. and Subsidiaries as of June 30,
1997 and 1998 and for the periods from November 16, 1996 (date of inception) to
June 30, 1997 and July 1, 1997 to June 30, 1998, and the financial statements of
Behavioral Technology, Inc., Decker Communications, Inc., J. Howard &
Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc. d/b/a Learning
Systems Sciences, MOHR Retail Learning Systems, Inc., Novations Group, Inc. and
Star Mountain, Inc. and subsidiaries (as of and for the years ended December 31,
1996 and 1997 and for the period from January 1, 1998 to May 4, 1998), have been
included herein and in the registration statement we have filed with the SEC in
reliance on the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, upon the authority of said firm as
experts in giving said reports.
 
     The financial statements of Star Mountain, Inc. for the year ended December
31, 1995 included in this prospectus have been audited by Friedman & Fuller,
P.C., independent public accountants, as indicated in its report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
 
     The financial statements of American Media Incorporated as of and for the
years ended June 30, 1997 and 1998 have been included in this prospectus in
reliance on the report of McGladrey & Pullen, LLP, certified public accountants,
appearing elsewhere herein, upon the authority of said firm as experts in giving
said reports.
 
     The financial statements of KC Resources Creative Solutions, Inc. as of and
for the year ended June 30, 1998 have been included in this prospectus in
reliance on the report of KPMG Peat Marwick LLP, independent certified
independent accountants, appearing elsewhere herein, upon the authority of said
firm as experts in giving said reports.
 
     The financial statements of Strategic Interactive, Inc. as of and for the
years ended June 30, 1997 and 1998 have been included in this prospectus in
reliance on the report of Plante & Moran, LLP, certified public accountants,
appearing elsewhere herein, upon the authority of said firm as experts in giving
said reports.
 
                             AVAILABLE INFORMATION
 
     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act and the rules and regulations promulgated thereunder, with
respect to the common stock offered hereby. This prospectus omits certain
information contained in the registration statement or in amendments, if any, to
the registration statement, and you should look at the registration statement
and the exhibits and schedules thereto for further information with respect to
PROVANT and the common stock offered hereby. Statements contained in this
prospectus concerning the provisions or contents of any contract, agreement or
any other document are not necessarily complete with respect to each such
contract, agreement or document filed as an exhibit to the registration
statement, and reference is made to the exhibit for a more complete description
of the matters involved. We file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
materials that we file at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. The SEC maintains an Internet site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of the SEC's Internet
site is http://www.sec.gov.
 
     The Company furnishes its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm.
 
                                       57
<PAGE>   59
 
                         INDEX TO FINANCIAL STATEMENTS
 
             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
                        HISTORICAL FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PROVANT, INC. PRO FORMA:
  Basis of Presentation.....................................  F-4
  Unaudited Pro Forma Consolidated Balance Sheet............  F-5
  Unaudited Pro Forma Consolidated Statements of
     Operations.............................................  F-6
  Notes to Unaudited Pro Forma Consolidated Financial
     Statements.............................................  F-8
 
PROVANT, INC. AND SUBSIDIARIES HISTORICAL:
Unaudited Consolidated Financial Statements
  Unaudited Consolidated Balance Sheet......................  F-12
  Unaudited Consolidated Statements of Operations...........  F-13
  Unaudited Consolidated Statements of Cash Flows...........  F-14
  Notes to Unaudited Consolidated Financial Statements......  F-15
Audited Consolidated Financial Statements
  Independent Auditors' Report..............................  F-17
  Consolidated Balance Sheets...............................  F-18
  Consolidated Statements of Operations.....................  F-19
  Consolidated Statements of Stockholders' Equity
     (Deficit)..............................................  F-20
  Consolidated Statements of Cash Flows.....................  F-21
  Notes to Consolidated Financial Statements................  F-22
 
FOUNDING COMPANIES
------------------------------------------------------------
 
BEHAVIORAL TECHNOLOGY, INC.:
  Independent Auditors' Report..............................  F-35
  Balance Sheets............................................  F-36
  Statements of Operations..................................  F-37
  Statements of Stockholders' Equity........................  F-38
  Statements of Cash Flows..................................  F-39
  Notes to Financial Statements.............................  F-40
 
DECKER COMMUNICATIONS, INC.:
  Independent Auditors' Report..............................  F-43
  Balance Sheets............................................  F-44
  Statements of Operations..................................  F-45
  Statements of Stockholders' Equity........................  F-46
  Statements of Cash Flows..................................  F-47
  Notes to Financial Statements.............................  F-48
 
J. HOWARD & ASSOCIATES, INC.:
  Independent Auditors' Report..............................  F-52
  Balance Sheets............................................  F-53
  Statements of Operations..................................  F-54
  Statements of Stockholders' Equity........................  F-55
  Statements of Cash Flows..................................  F-56
  Notes to Financial Statements.............................  F-57
</TABLE>
 
                                       F-1
<PAGE>   60
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
LEARNING SYSTEMS SCIENCES (ROBERT STEINMETZ, PH.D., AND
  ASSOCIATES, INC. ):
  Independent Auditors' Report..............................  F-60
  Balance Sheets............................................  F-61
  Statements of Operations..................................  F-62
  Statements of Stockholders' Equity........................  F-63
  Statements of Cash Flows..................................  F-64
  Notes to Financial Statements.............................  F-65
 
MOHR RETAIL LEARNING SYSTEMS, INC.:
  Independent Auditors' Report..............................  F-68
  Balance Sheets............................................  F-69
  Statements of Operations..................................  F-70
  Statements of Stockholders' Equity........................  F-71
  Statements of Cash Flows..................................  F-72
  Notes to Financial Statements.............................  F-73
 
NOVATIONS GROUP, INC.:
  Independent Auditors' Report..............................  F-76
  Balance Sheets............................................  F-77
  Statements of Operations..................................  F-78
  Statements of Stockholders' Equity........................  F-79
  Statements of Cash Flows..................................  F-80
  Notes to Financial Statements.............................  F-81
 
STAR MOUNTAIN, INC. AND SUBSIDIARIES:
  Independent Auditors' Reports.............................  F-85
  Consolidated Balance Sheets...............................  F-87
  Consolidated Statements of Operations.....................  F-88
  Consolidated Statements of Stockholders' Equity...........  F-89
  Consolidated Statements of Cash Flows.....................  F-90
  Notes to Consolidated Financial Statements................  F-92
 
COMPANIES ACQUIRED SUBSEQUENT TO MAY 4, 1998
------------------------------------------------------------
 
AMERICAN MEDIA INCORPORATED:
  Independent Auditor's Report..............................  F-99
  Balance Sheets............................................  F-100
  Statements of Income......................................  F-101
  Statements of Stockholders' Equity........................  F-102
  Statements of Cash Flows..................................  F-103
  Notes to Financial Statements.............................  F-104
 
KC RESOURCES CREATIVE SOLUTIONS, INC.:
  Independent Auditors' Report..............................  F-108
  Balance Sheet.............................................  F-109
  Statement of Operations...................................  F-110
  Statement of Stockholders' Equity.........................  F-111
  Statement of Cash Flows...................................  F-112
  Notes to Financial Statements.............................  F-113
</TABLE>
 
                                       F-2
<PAGE>   61
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
STRATEGIC INTERACTIVE, INC.:
  Independent Auditor's Report..............................  F-118
  Balance Sheets............................................  F-119
  Statements of Operations..................................  F-120
  Statements of Stockholders' Equity........................  F-121
  Statements of Cash Flows..................................  F-122
  Notes to Financial Statements.............................  F-123
</TABLE>
 
                                       F-3
<PAGE>   62
 
                         PROVANT, INC. AND SUBSIDIARIES
 
             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                             BASIS OF PRESENTATION
 
     The following unaudited pro forma consolidated statements of operations
give effect to (i) the Combination of PROVANT and the Founding Companies, (ii)
the consummation of the IPO and the application of the net proceeds, (iii)
PROVANT's acquisition subsequent to the IPO of five additional performance
improvement companies (the "Acquired Companies") and (iv) certain other
transactions described in the notes to the unaudited pro forma consolidated
financial statements, as if all of those transactions had occurred on July 1,
1997.
 
     The unaudited pro forma consolidated balance sheet gives effect to
PROVANT's acquisition of three companies during the second quarter of fiscal
1999 as if those acquisitions had occurred on September 30, 1998, and the pro
forma as adjusted balance sheet gives effect to this offering and the
application of the net proceeds as if those events also had occurred on that
date.
 
     These pro forma financial statements are based on the historical financial
statements of PROVANT, the Founding Companies and the Acquired Companies and the
estimates and assumptions set forth in the notes to the unaudited pro forma
consolidated financial statements.
 
     The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The unaudited pro forma consolidated financial statements do not
purport to represent what PROVANT's results of operations actually would have
been had such events occurred at the beginning of the periods presented, as
assumed, or to project PROVANT's financial position or results of operations for
any future period or the future results of the Founding Companies or the
Acquired Companies. The unaudited pro forma consolidated financial statements
should be read in conjunction with the historical financial statements and
related notes included elsewhere in this prospectus.
 
                                       F-4
<PAGE>   63
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 1998
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                          COMPANIES ACQUIRED
                                             SUBSEQUENT TO                 ACQUISITION    PRO FORMA      OFFERING
                               PROVANT    SEPTEMBER 30, 1998     TOTAL     ADJUSTMENTS   CONSOLIDATED   ADJUSTMENTS   AS ADJUSTED
                               --------   -------------------   --------   -----------   ------------   -----------   -----------
<S>                            <C>        <C>                   <C>        <C>           <C>            <C>           <C>
Assets
Current assets:
  Cash and cash
     equivalents.............  $ 2,811          $3,054          $  5,865     $(5,594)      $    271      $ 29,320      $ 29,591
  Accounts receivable, net...   13,728           2,344            16,072         (90)        15,982            --        15,982
  Contracts receivable.......    8,048              --             8,048          --          8,048            --         8,048
  Inventory..................    3,495              19             3,514          --          3,514            --         3,514
  Deferred income taxes......    2,146              --             2,146       1,253          3,399            --         3,399
  Costs in excess of
     billings................      867             738             1,605          --          1,605            --         1,605
  Prepaid and other current
     assets..................    1,425              98             1,523        (387)         1,136            --         1,136
                               --------         ------          --------     -------       --------      --------      --------
     Total current assets....   32,520           6,253            38,773      (4,818)        33,955        29,320        63,275
 
Property and equipment,
  net........................    3,224           1,547             4,771        (370)         4,401            --         4,401
Other assets.................      733              94               827          --            827            --           827
Goodwill, net................   65,482              --            65,482      27,676         93,158            --        93,158
                               --------         ------          --------     -------       --------      --------      --------
     Total assets............  $101,959         $7,894          $109,853     $22,488       $132,341      $ 29,320      $161,661
                               ========         ======          ========     =======       ========      ========      ========
 
Liabilities and Stockholders'
  Equity
Current liabilities:
  Accounts payable...........  $ 3,599          $  110          $  3,709     $    --       $  3,709      $     --      $  3,709
  Accrued expenses...........    7,336              99             7,435       2,109          9,544            --         9,544
  Accrued compensation.......    3,419             846             4,265          --          4,265            --         4,265
  Billings in excess of
     costs...................    3,166             201             3,367          --          3,367            --         3,367
  Deferred revenue...........      514           1,061             1,575          --          1,575            --         1,575
  Income taxes payable.......    2,018             107             2,125          --          2,125            --         2,125
  Current portion of long
     term debt...............      552             136               688          --            688            --           688
                               --------         ------          --------     -------       --------      --------      --------
     Total current
       liabilities...........   20,604           2,560            23,164       2,109         25,273            --        25,273
 
Long term debt, net of
  current portion............    8,402             168             8,570      13,700         22,270       (21,200)        1,070
                               --------         ------          --------     -------       --------      --------      --------
     Total liabilities.......   29,006           2,728            31,734      15,809         47,543       (21,200)       26,343
 
Stockholders' Equity:
  Common stock...............      102              60               162         (49)           113            25           138
  Additional paid-in
     capital.................   74,513             478            74,991      11,356         86,347        50,495       136,842
  Retained earnings
     (accumulated deficit)...   (1,662)          4,628             2,966      (4,628)        (1,662)           --        (1,662)
                               --------         ------          --------     -------       --------      --------      --------
     Total stockholders'
       equity................   72,953           5,166            78,119       6,679         84,798        50,520       135,318
                               --------         ------          --------     -------       --------      --------      --------
     Total liabilities and
       stockholders'
       equity................  $101,959         $7,894          $109,853     $22,488       $132,341      $ 29,320      $161,661
                               ========         ======          ========     =======       ========      ========      ========
</TABLE>
 
See accompanying notes to unaudited pro forma consolidated financial statements.
 
                                       F-5
<PAGE>   64
 
                         PROVANT, INC. AND SUBSIDIARIES
 
            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
 
                            YEAR ENDED JUNE 30, 1998
 
                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
                                                  FOUNDING COMPANIES -- PERIOD FROM JULY 1, 1997 TO MAY 4, 1998
                                 PROVANT      ---------------------------------------------------------------------
                               YEAR ENDED                                                                    STAR
                              JUNE 30, 1998     BTI     DECKER   J. HOWARD    LSS      MOHR    NOVATIONS   MOUNTAIN
                              -------------   -------   ------   ---------   ------   ------   ---------   --------
<S>                           <C>             <C>       <C>      <C>         <C>      <C>      <C>         <C>
Total revenue...............     $14,189      $ 6,567   $8,729    $5,565     $5,632   $3,237    $9,228     $23,496
Cost of revenue.............       6,374        1,243   2,275      1,826      2,030   1,009      4,356      13,409
                                 -------      -------   ------    ------     ------   ------    ------     -------
Gross profit................       7,815        5,324   6,454      3,739      3,602   2,228      4,872      10,087
Selling, general and
  administrative expenses...      10,447        6,648   5,696      4,253      1,751   1,510      3,956       7,754
Goodwill amortization.......         245           --      --         --         --      --         --          77
                                 -------      -------   ------    ------     ------   ------    ------     -------
Income (loss) from
  operations................      (2,877)      (1,324)    758       (514)     1,851     718        916       2,256
Other income (expense),
  net.......................          --            2       3         --         --      --         --          --
Interest income (expense),
  net.......................        (220)          29       8         11         13       5       (196)       (162)
                                 -------      -------   ------    ------     ------   ------    ------     -------
Income (loss) before income
  taxes.....................      (3,097)      (1,293)    769       (503)     1,864     723        720       2,094
Income tax expense
  (benefit).................        (203)          15      17          1         19       2        367         878
                                 -------      -------   ------    ------     ------   ------    ------     -------
Net income (loss)...........     $(2,894)     $(1,308)  $ 752     $ (504)    $1,845   $ 721     $  353     $ 1,216
                                 =======      =======   ======    ======     ======   ======    ======     =======
Earnings per common share:
Basic.......................
Diluted.....................
Weighted average common
  shares outstanding:
Basic.......................
Diluted.....................
 
<CAPTION>
 
                              COMPANIES ACQUIRED                COMBINATION
                                SUBSEQUENT TO                 AND ACQUISITION    PRO FORMA
                                 MAY 4, 1998        TOTAL       ADJUSTMENTS     CONSOLIDATED
                              ------------------   --------   ---------------   ------------
<S>                           <C>                  <C>        <C>               <C>
Total revenue...............       $37,265         $113,908       $ 1,419       $   115,327
Cost of revenue.............        15,249           47,771         1,056            48,827
                                   -------         --------       -------       -----------
Gross profit................        22,016           66,137           363            66,500
Selling, general and
  administrative expenses...        17,024           59,039        (8,330)           50,709
Goodwill amortization.......            --              322         2,026             2,348
                                   -------         --------       -------       -----------
Income (loss) from
  operations................         4,992            6,776         6,667            13,443
Other income (expense),
  net.......................           (17)             (12)           --               (12)
Interest income (expense),
  net.......................            49             (463)       (1,261)           (1,724)
                                   -------         --------       -------       -----------
Income (loss) before income
  taxes.....................         5,024            6,301         5,406            11,707
Income tax expense
  (benefit).................         1,281            2,377         3,245             5,622
                                   -------         --------       -------       -----------
Net income (loss)...........       $ 3,743         $  3,924       $ 2,161       $     6,085
                                   =======         ========       =======       ===========
Earnings per common share:
Basic.......................                                                    $      0.54
                                                                                ===========
Diluted.....................                                                    $      0.52
                                                                                ===========
Weighted average common
  shares outstanding:
Basic.......................                                                     11,311,801
                                                                                ===========
Diluted.....................                                                     11,731,105
                                                                                ===========
</TABLE>
 
See accompanying notes to unaudited pro forma consolidated financial statements.
 
                                       F-6
<PAGE>   65
 
                         PROVANT, INC. AND SUBSIDIARIES
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     THREE MONTHS ENDED SEPTEMBER 30, 1998
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                COMPANIES ACQUIRED
                                                  SUBSEQUENT TO                ACQUISITION    PRO FORMA
                                      PROVANT      MAY 4, 1998        TOTAL    ADJUSTMENTS   CONSOLIDATED
                                      -------   ------------------   -------   -----------   ------------
<S>                                   <C>       <C>                  <C>       <C>           <C>
Total revenue.......................  $23,710         $7,694         $31,404      $  --      $    31,404
Cost of revenue.....................  10,148           3,027          13,175         --           13,175
                                      -------         ------         -------      -----      -----------
     Gross profit...................  13,562           4,667          18,229         --           18,229
Selling, general, and administrative
  expenses..........................  10,593           3,653          14,246       (172)          14,074
Goodwill amortization...............     380              --             380        211              591
                                      -------         ------         -------      -----      -----------
     Income (loss) from
       operations...................   2,589           1,014           3,603        (39)           3,564
Interest expense, net...............       3               1               4        418              422
                                      -------         ------         -------      -----      -----------
 
     Income (loss) before income
       taxes........................   2,586           1,013           3,599       (457)           3,142
Income tax expense (benefit)........   1,187             (72)          1,115        378            1,493
                                      -------         ------         -------      -----      -----------
     Net income (loss)..............  $1,399          $1,085         $ 2,484      $(835)     $     1,649
                                      =======         ======         =======      =====      ===========
Earnings per common share:
Basic...............................                                                         $      0.15
                                                                                             ===========
Diluted.............................                                                         $      0.13
                                                                                             ===========
Weighted average common shares
  outstanding:
Basic...............................                                                          11,311,801
                                                                                             ===========
Diluted.............................                                                          12,376,184
                                                                                             ===========
</TABLE>
 
See accompanying notes to unaudited pro forma consolidated financial statements.
                                       F-7
<PAGE>   66
 
                         PROVANT, INC. AND SUBSIDIARIES
 
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
(1) GENERAL
 
     Concurrently with the IPO, PROVANT, Inc. (the "Company") acquired the seven
Founding Companies in the Combination. Subsequent to the IPO, the Company
acquired five additional companies during the first two fiscal quarters of 1999.
The acquisitions have been accounted for using the purchase method of accounting
with the Company being treated as the accounting acquiror.
 
(2) ACQUISITIONS
 
     The September 30, 1998 balance sheet includes the accounts of two companies
acquired during the quarter then ended. The pro forma adjustments to the
September 30, 1998 balance sheet reflect the acquisition of three companies
acquired after September 30, 1998 as if those acquisitions had occurred on such
date. The total consideration paid for the five companies consisted of cash of
$30.2 million and 1,516,243 shares of common stock valued at $17.0 million.
Shares used as consideration were valued at a discount of 20% from their
publicly-traded price due to restrictions on their transferability.
 
(3) UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated balance sheet (in thousands):
 
<TABLE>
<CAPTION>
                                        ACQUISITION ADJUSTMENTS         OFFERING ADJUSTMENTS
                                      ---------------------------   -----------------------------
                                        (a)       (b)      Total      (c)       (d)       TOTAL
                                      -------   -------   -------   -------   --------   --------
<S>                                   <C>       <C>       <C>       <C>       <C>        <C>
Assets
  Cash and cash equivalents.........  $(5,594)  $    --   $(5,594)  $50,520   $(21,200)  $ 29,320
  Accounts receivable, net..........      (90)       --       (90)       --         --         --
  Deferred income taxes.............       --     1,253     1,253        --         --         --
  Prepaid and other current
     assets.........................     (387)       --      (387)       --         --         --
Property and equipment, net.........     (370)       --      (370)       --         --         --
Goodwill............................   28,929    (1,253)   27,676        --         --         --
                                      -------   -------   -------   -------   --------   --------
     Total assets...................  $22,488   $    --   $22,488   $50,520   $(21,200)  $ 29,320
                                      =======   =======   =======   =======   ========   ========
Liabilities and Stockholders' equity
  Accrued expenses..................  $ 2,109   $    --   $ 2,109   $    --   $     --   $     --
Long term debt, net of current
  portion...........................   13,700        --    13,700        --    (21,200)   (21,200)
                                      -------   -------   -------   -------   --------   --------
     Total liabilities..............   15,809        --    15,809        --    (21,200)   (21,200)
Stockholders' Equity:
  Common stock......................      (49)       --       (49)       25         --         25
  Additional paid in capital........   11,356        --    11,356    50,495         --     50,495
  Accumulated deficit...............   (4,628)       --    (4,628)       --         --         --
                                      -------   -------   -------   -------   --------   --------
     Total stockholders' equity.....    6,679        --     6,679    50,520         --     50,520
                                      -------   -------   -------   -------   --------   --------
     Total liabilities and
       stockholders' equity.........  $22,488   $    --   $22,488   $50,520   $(21,200)  $ 29,320
                                      =======   =======   =======   =======   ========   ========
</TABLE>
 
(a) Reflects the creation of approximately $28.9 million of goodwill from the
    payment of the common stock and cash consideration for three companies
    acquired during the second quarter of fiscal 1999 totaling approximately
    $31.1 million less net assets of those companies of approximately $2.2
    million.
 
(b) Records the deferred income taxes attributable to the temporary differences
    between the financial reporting and tax basis of assets and liabilities
    acquired.
 
                                       F-8
<PAGE>   67
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(c) Records the cash proceeds of $50.5 million from the issuance of shares of
    common stock in this offering, net of the underwriting discount, and
    estimated offering costs of $1.0 million. Offering costs primarily consist
    of accounting fees, legal fees, and printing expenses.
 
(d) Records the repayment of long-term debt with a portion of the net proceeds
    of this offering.
 
(4) UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ADJUSTMENTS
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated statement of operations for the year ended June 30, 1998 (in
thousands):
 
<TABLE>
<CAPTION>
                                                        ADJUSTMENTS
                       -----------------------------------------------------------------------------
                         (a)       (b)       (c)      (d)     (e)      (f)      (g)     (h)     (i)    ADJUSTMENTS
                       -------   -------   -------   ------   ----   -------   -----   -----   -----   -----------
<S>                    <C>       <C>       <C>       <C>      <C>    <C>       <C>     <C>     <C>     <C>
Total revenue........  $    --   $    --   $    --    1,419   $ --   $    --   $  --   $  --   $  --     $ 1,419
Cost of revenue......       --        --        --    1,056     --        --      --      --      --       1,056
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Gross profit.........       --        --        --      363     --        --      --      --      --         363
Selling general and
  administrative
  expenses...........   (6,658)       --        --      352     --        --    (750)   (686)   (588)     (8,330)
Goodwill
  amortization.......       --     2,026        --       --     --        --      --      --      --       2,026
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Income (loss) from
  operations.........    6,658    (2,026)       --       11     --        --     750     686     588       6,667
Interest expense.....       --        --        --      (29)   541    (1,773)     --      --      --      (1,261)
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Income (loss) before
  income taxes.......    6,658    (2,026)       --      (18)   541    (1,773)    750     686     588       5,406
Provision (benefit)
  for income taxes...       --        --     3,745       (7)   216      (709)     --      --      --       3,245
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Net income (loss)....  $ 6,658   $(2,026)  $(3,745)  $  (11)  $325   $(1,064)  $ 750   $ 686   $ 588     $ 2,161
                       =======   =======   =======   ======   ====   =======   =====   =====   =====     =======
</TABLE>
 
(a) Reflects the reduction in salaries, bonuses and benefits of $6.7 million to
    certain of the owners and key employees of the Founding Companies and
    Subsequent Acquisitions to which they agreed prospectively. These reductions
    in salaries, bonuses and benefits are in accordance with the terms of each
    individual's employment agreement with the Company entered into in
    connection with the relevant acquisition. These employment agreements are
    primarily for three years, contain restrictions related to competition and
    provide severance under certain circumstances.
 
(b) Reflects the amortization of goodwill being recorded as a result of the
    acquisitions over a 40-year estimated life.
 
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
    Company's estimated consolidated effective tax rate subsequent to the
    Combination and subsequent acquisitions, after considering nondeductible
    goodwill amortization.
 
(d) Reflects the historical results of operations of companies acquired by Star
    Mountain in February 1997 and October 1997.
 
                                       F-9
<PAGE>   68
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(e) Reflects the reduction in interest expense, net of income tax benefit,
    related to the current portion of bank debt and notes payable to
    stockholders that were repaid with the proceeds of the IPO.
 
(f) Reflects the interest expense, net of income tax benefit, assumed to be
    incurred in connection with the cash consideration paid for the Acquired
    Companies.
 
(g) Reflects the elimination of a non-recurring fee for information related to
    the performance improvement industry.
 
(h) Reflects the elimination of non-cash compensation expense related to the
    issuance of common stock and stock options to officers of and consultants to
    the Company.
 
(i) Reflects the elimination of non-recurring legal and accounting fees related
    to the Combination and the IPO.
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated statement of operations for the three months ended September 30,
1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                     ADJUSTMENTS
                                                 ---------------------------------------------------
                                                                                            TOTAL
                                                   (a)       (b)       (c)       (d)     ADJUSTMENTS
                                                 -------   -------   -------   -------   -----------
<S>                                              <C>       <C>       <C>       <C>       <C>
Total revenue..................................  $    --   $    --   $    --               $   --
Cost of revenue................................       --        --        --                   --
                                                 -------   -------   -------   -------     ------
Gross profit...................................       --        --        --        --         --
Selling, general and administrative expenses...     (172)       --        --                 (172)
Goodwill amortization..........................       --       211        --                  211
                                                 -------   -------   -------   -------     ------
Income (loss) from operations..................      172      (211)       --        --        (39)
  Other income (expense), net..................       --        --        --                   --
Interest expense...............................       --        --        --      (418)      (418)
                                                 -------   -------   -------   -------     ------
Income (loss) before income taxes..............      172      (211)       --      (418)      (457)
Provision (benefit) for income taxes...........       --        --       545      (167)       378
                                                 -------   -------   -------   -------     ------
Net income (loss)..............................  $   172   $  (211)  $  (545)     (251)    $ (835)
                                                 =======   =======   =======   =======     ======
</TABLE>
 
(a) Reflects the reduction in salaries, bonuses and benefits of $172,000 to
    certain of the owners and key employees of the Subsequent Acquisitions to
    which they agreed prospectively. These reductions in salaries, bonuses and
    benefits are in accordance with the terms of each individual's employment
    agreement with the Company entered into in connection with the relevant
    acquisition. These employment agreements are primarily for three years,
    contain restrictions related to competition and provide severance under
    certain circumstances.
 
(b) Reflects the amortization of goodwill being recorded as a result of
    acquisitions completed subsequent to September 30, 1998 over a 40-year
    estimated life.
 
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
    Company's estimated consolidated effective tax rate subsequent to the
    acquisitions completed subsequent to September 30, 1998, after considering
    nondeductible goodwill amortization.
 
(d) Reflects the interest expense, net of income tax benefit, assumed to be
    incurred in connection with the cash consideration paid for the Acquired
    Companies.
 
                                      F-10
<PAGE>   69
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) NET INCOME PER SHARE
 
     The shares used in computing basic earnings per common share consist of (i)
3,346,217 shares outstanding prior to the Combination and the IPO, (ii)
3,459,341 shares issued in May 1998 to owners of the Founding Companies, (iii)
2,990,000 shares of Common Stock sold in the IPO and (iv) 1,516,243 shares of
Common Stock issued to owners of the Acquired Companies. The shares used in
computing diluted earnings per common share consist of those used in computing
basic earnings per common share for the year ended June 30, 1998 and the three
months ended September 30, 1998 plus 419,304 and 207,499 Common Stock
equivalents, respectively, computed using the treasury stock method. Shares used
in computing diluted earnings per common share for the three months ended
September 30, 1998 also include 856,884 shares issuable as additional
consideration to owners of the Founding Companies.
 
(6) STOCK-BASED COMPENSATION
 
     The Company currently has four stock-based compensation plans. The Company
has granted stock options under the Equity Incentive Plan, 1998 Non-Qualified
Stock Option Plan and Stock Option Plan for Outside Directors to purchase an
aggregate of 914,987 shares of Common Stock having per-share exercise prices
ranging from $11.50 to $19.375. The Company also has issued 17,221 shares under
its 1998 Employee Stock Purchase Plan. In addition, the Company also has granted
options under its Stock Plan for Non-Employee Directors to purchase an aggregate
of 15,000 shares of Common Stock at a per-share exercise price of $13.00. The
Stock Plan for Non-Employee Directors was terminated in November 1998 with
respect to the future grant of options.
 
     The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation
expense is recognized for its fixed stock option plans and its stock purchase
plan, except for stock options granted to non-employees. If compensation cost
for the Company's stock-based compensation plans were based on the fair value at
the grant date for the awards under the plans consistent with the method of
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), the
Company's pro forma net income and income per share for each period presented
assuming such options were granted at the beginning of the periods presented and
that the compensation element of options with immediate vesting was recognized
during the year ended June 30, 1998 would have been reduced to the amounts
indicated below (Dollars in thousands except per share data):
 
<TABLE>
<CAPTION>
                                                                            THREE MONTHS
                                                              YEAR ENDED        ENDED
                                                               JUNE 30,     SEPTEMBER 30,
                                                                 1998           1998
                                                              ----------    -------------
<S>                                                           <C>           <C>
Net income:
  Pro forma.................................................    $6,085         $1,649
                                                                ======         ======
  Pro forma for SFAS No. 123................................    $3,902         $1,299
                                                                ======         ======
Basic income per common share:
  Pro forma.................................................    $ 0.54         $ 0.15
                                                                ======         ======
  Pro forma for SFAS No. 123................................    $ 0.34         $ 0.11
                                                                ======         ======
</TABLE>
 
     The fair value of the stock options used to calculate the pro forma for
SFAS No. 123 amounts was determined using the Black-Scholes option-pricing model
with the following assumptions: volatility of 33%; expected dividend yield of
0%; risk-free interest rate of 6.0% and an expected life of 4 years.
 
                                      F-11
<PAGE>   70
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                      UNAUDITED CONSOLIDATED BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,
                                                                  1998
                                                              -------------
<S>                                                           <C>
                                  ASSETS
Current Assets:
     Cash and cash equivalents..............................    $  2,811
     Accounts receivable, net...............................      13,728
     Contracts receivable...................................       8,048
     Inventory..............................................       3,495
     Deferred income taxes..................................       2,146
     Costs in excess of billings............................         867
     Prepaid expenses and other current assets..............       1,425
                                                                --------
          Total current assets..............................      32,520
 
Property and equipment, net.................................       3,224
Other assets................................................         733
Goodwill, net...............................................      65,482
                                                                --------
          Total assets......................................    $101,959
                                                                ========
 
                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable.......................................    $  3,599
     Accrued expenses.......................................       7,336
     Accrued compensation...................................       3,419
     Billings in excess of costs............................       3,166
     Deferred revenue.......................................         514
     Income taxes payable...................................       2,018
     Current portion of long term debt......................         552
                                                                --------
          Total current liabilities.........................      20,604
 
Long term debt, net of current portion......................       8,402
                                                                --------
          Total liabilities.................................      29,006
 
Stockholders' Equity:
     Preferred stock, $.01 par value; none issued...........          --
     Common stock, $.01 par value; 9,795,558 and 10,226,325
      shares issued and outstanding, respectively...........         102
     Additional paid-in capital.............................      74,513
     Accumulated deficit....................................      (1,662)
                                                                --------
          Total stockholders' equity........................      72,953
                                                                --------
Total liabilities and stockholders' equity..................    $101,959
                                                                ========
</TABLE>
 
     See accompanying notes to unaudited consolidated financial statements.
                                      F-12
<PAGE>   71
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                    SEPTEMBER 30,
                                                              -------------------------
                                                                 1997          1998
                                                              ----------    -----------
<S>                                                           <C>           <C>
Total revenue...............................................  $       --    $    23,710
Cost of revenue.............................................          --         10,148
                                                              ----------    -----------
Gross profit................................................          --         13,562
Selling, general and administrative expenses................         200         10,593
Goodwill amortization.......................................          --            380
                                                              ----------    -----------
Income (loss) from operations...............................        (200)         2,589
Interest and other expense, net.............................          (8)            (3)
                                                              ----------    -----------
Income (loss) before income taxes...........................        (208)         2,586
Provision for income taxes..................................          --          1,187
                                                              ----------    -----------
Net income (loss)...........................................  $     (208)   $     1,399
                                                              ==========    ===========
 
Earnings (loss) per common share:
     Basic..................................................  $    (0.08)   $      0.14
                                                              ==========    ===========
     Diluted................................................  $    (0.08)   $      0.13
                                                              ==========    ===========
 
Weighted average common shares outstanding:
     Basic..................................................   2,577,954     10,070,808
                                                              ==========    ===========
     Diluted................................................   2,577,954     11,124,260
                                                              ==========    ===========
</TABLE>
 
     See accompanying notes to unaudited consolidated financial statements.
                                      F-13
<PAGE>   72
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                               1997       1998
                                                              ------    ---------
<S>                                                           <C>       <C>
Cash flows from operating activities:
  Net income (loss).........................................  $(208)    $  1,399
  Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
     Depreciation and amortization..........................     --          711
     Changes in operating assets and liabilities:
       Accounts receivable..................................     --          981
       Contracts receivable.................................     --         (753)
       Inventory............................................     --         (186)
       Deferred income taxes................................     --         (109)
       Costs in excess of billings..........................     --          (33)
       Prepaid expenses and other current assets............     --         (446)
       Other assets.........................................     --          207
       Accounts payable and accrued expenses................     --       (2,125)
       Accrued compensation.................................     --          491
       Billings in excess of costs..........................     --          141
       Deferred revenue.....................................     --         (155)
       Income taxes payable.................................     --         (230)
                                                              -----     --------
          Total adjustments.................................     --       (1,506)
                                                              -----     --------
          Net cash used in operating activities.............   (208)        (107)
                                                              -----     --------
Cash flows from investing activities:
  Acquisitions of businesses, net of cash acquired..........     --      (10,080)
  Additions to property and equipment.......................     --          (40)
                                                              -----     --------
       Net cash used in investing activities................     --      (10,120)
Cash flows from financing activities:
  Increase in notes payable to stockholders.................    208           --
       Net borrowings of long-term debt.....................     --        6,644
                                                              -----     --------
       Net cash provided by financing activities............    208        6,644
                                                              -----     --------
Net decrease in cash and cash equivalents...................     --       (3,583)
Cash and cash equivalents, beginning of period..............      1        6,394
                                                              -----     --------
Cash and cash equivalents, end of period....................  $   1     $  2,811
                                                              =====     ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes..................................  $  --     $  1,557
                                                              =====     ========
</TABLE>
 
     See accompanying notes to unaudited consolidated financial statements.
                                      F-14
<PAGE>   73
 
                         PROVANT, INC. AND SUBSIDIARIES
 
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1.  ORGANIZATION AND BASIS OF PRESENTATION
 
  Organization
 
     PROVANT, Inc., a Delaware corporation ("PROVANT" and collectively with its
subsidiaries, the "Company"), provides a broad range of performance improvement
training services and products primarily to Fortune 1000 companies, other large
and medium-sized corporations and government entities. The Company's objective
is to become the leading single source provider of high-quality performance
improvement services and products that are distributed through multiple delivery
methods.
 
     On May 4, 1998, PROVANT completed its initial public offering (the "IPO")
of its common stock (the "Common Stock") and simultaneously acquired in separate
merger transactions (the "Combination") seven companies engaged in providing
performance improvement services and products (collectively referred to as the
"Founding Companies"). In the quarter ended September 30, 1998, the Company
acquired in separate transactions two additional companies engaged in providing
performance improvement services and products (collectively referred to with the
Founding Companies as the "Operating Companies"). Prior to the IPO, PROVANT did
not conduct any revenue generating activities of its own. For the period from
inception through May 4, 1998, all of PROVANT's activities had been related to
the completion of the IPO and the Combination. All references to the "Company"
include PROVANT and the Operating Companies.
 
  Basis of Presentation
 
     The information contained in the following notes to the accompanying
financial statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements and
related notes thereto as of and for the year ended June 30, 1998.
 
     In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments considered necessary to present fairly the
financial position of the Company as of September 30, 1998 and the results of
operations and cash flows for the periods presented. The Company prepares its
interim financial information using the same accounting principles as it does
for its annual financial statements.
 
     For financial statement purposes, PROVANT has been identified as the
accounting acquiror. Accordingly, the consolidated financial statements include
the accounts of PROVANT since its inception, November 16, 1996, and the accounts
of the Operating Companies since their respective dates of acquisition. The
acquisitions of the Operating Companies were accounted for using the purchase
method of accounting. The allocations of the purchase prices to the assets
acquired and liabilities assumed of these companies have been recorded based on
preliminary estimates of fair value and may be changed as additional information
becomes available.
 
2.  INVENTORY
 
     Inventory consists primarily of film production and other costs associated
with a company acquired during the three months ended September 30, 1998.
 
3.  ACQUISITIONS
 
     During the quarter ended September 30, 1998, the Company acquired two
companies that provide performance improvement services and products. Initial
consideration paid by the Company was $17.5 million, consisting of $10.9 million
in cash and 430,767 shares of Common Stock. The allocation of the respective
purchase prices to assets acquired and liabilities assumed resulted in $12.9
million in goodwill
 
                                      F-15
<PAGE>   74
                         PROVANT, INC. AND SUBSIDIARIES
 
      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
for these acquisitions which were accounted for as purchase transactions.
Goodwill is amortized on a straight-line basis over 40 years. The cash portion
of the acquisitions was funded from cash provided by operations and $7.5 million
of borrowings from the Company's credit facility.
 
     In October 1998, the Company acquired an additional company that provides
performance improvement services and products. Initial consideration paid by the
Company was $12.0 million, consisting of $4.8 million in cash and 553,841 shares
of Common Stock. The cash portion of the acquisition was funded from cash
provided by operations and $2.2 million of borrowings from the Company's credit
facility. The acquisition will be accounted for as a purchase transaction.
 
4.  CONTINGENT CONSIDERATION
 
     The agreements between PROVANT and each of the Operating Companies and the
subsequently-acquired company provide for the payment of additional, contingent
consideration (the "Contingent Consideration"). With respect to five of the
Founding Companies, the former stockholders will receive Contingent
Consideration in the form of shares of Common Stock based on performance
criteria for the fiscal year ended June 30, 1998 and certain other adjustments.
The Company has estimated the number of shares to be issued to these
stockholders and has included those shares as outstanding in the calculation of
diluted weighted average common shares outstanding for the three months ended
September 30, 1998. The former stockholders of the remaining four Operating
Companies and the subsequently-acquired company are entitled to receive
Contingent Consideration of cash and/or shares of Common Stock if certain
performance criteria are met over future periods ranging from one to three
years. For the three companies with Contingent Consideration based on
performance criteria associated with the first year, the maximum Contingent
Consideration for two of the companies is $5.7 million in the form of shares of
Common Stock and the Contingent Consideration for the third Company is based
entirely on performance criteria for the year and is not currently determinable.
For the two remaining companies, the Contingent Consideration is based entirely
on performance criteria for the next three years and is not currently
determinable.
 
5.  EARNINGS PER SHARE
 
     Basic earnings per share ("EPS") is computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the period.
Diluted EPS is computed by dividing net income by the weighted average number of
shares of Common Stock and dilutive securities outstanding during the period.
 
     The following table summarizes weighted average shares outstanding for each
of the periods presented (with the pro forma combined data giving effect to the
Combination and the IPO as if they had occurred on July 1, 1997):
 
<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                                  --------------------------------------
                                                     1997          1997          1998
                                                  ----------    ----------    ----------
                                                                PRO FORMA
                                                  HISTORICAL     COMBINED     HISTORICAL
                                                  ----------    ----------    ----------
<S>                                               <C>           <C>           <C>
Basic weighted average common shares
  outstanding...................................  2,577,954      9,795,558    10,070,808
Shares to be issued as Contingent
  Consideration.................................         --             --       856,884
Weighted average shares related to stock options
  and warrants under the treasury stock
  method........................................         --        373,331       196,568
                                                  ---------     ----------    ----------
Diluted weighted average common shares
  outstanding...................................  2,577,954     10,168,889    11,124,260
                                                  =========     ==========    ==========
</TABLE>
 
                                      F-16
<PAGE>   75
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders,
PROVANT, Inc.:
 
     We have audited the accompanying consolidated balance sheets of PROVANT,
Inc. and subsidiaries as of June 30, 1997 and 1998, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
period from November 16, 1996 (date of inception) to June 30, 1997 and for the
year ended June 30, 1998. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PROVANT,
Inc. and subsidiaries as of June 30, 1997 and 1998 and the results of their
operations and their cash flows for the period from November 16, 1996 (date of
inception) to June 30, 1997 and for the year ended June 30, 1998, in conformity
with generally accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-17
<PAGE>   76
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              ----------------
                                                              1997      1998
                                                              -----    -------
<S>                                                           <C>      <C>
                                    ASSETS
Current assets:
     Cash and cash equivalents..............................  $   1    $ 6,394
     Accounts receivable, net of allowance for doubtful
       accounts of $0 and $740, respectively................     --     12,221
     Contracts receivable...................................     --      7,295
     Deferred taxes.........................................     --      2,127
     Costs in excess of billings............................     --        696
     Prepaid expenses and other current assets..............     --      1,359
                                                              -----    -------
          Total current assets..............................      1     30,092
Property and equipment, net.................................    150      2,548
Other assets................................................     --        776
Goodwill, net...............................................     --     52,942
                                                              -----    -------
          Total assets......................................  $ 151    $86,358
                                                              =====    =======
 
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable.......................................  $  --    $ 3,346
     Accrued expenses.......................................     --      7,361
     Accrued compensation...................................     --      2,928
     Billings in excess of costs............................     --      2,896
     Deferred revenue.......................................     --        669
     Income taxes payable...................................     --      1,252
     Current portion of long term debt......................     --        533
     Notes payable to stockholders..........................    298         --
                                                              -----    -------
          Total current liabilities.........................    298     18,985
Long term debt, net of current portion......................     --        874
                                                              -----    -------
          Total liabilities.................................    298     19,859
Stockholders' equity (deficit):
     Preferred stock, $.01 par value; none issued...........     --         --
     Common stock, $.01 par value; 1,950,520 and 9,795,558
      shares issued and outstanding at June 30, 1997 and
      1998, respectively....................................     20         98
     Additional paid-in capital.............................     --     69,474
     Translation adjustment.................................     --        (12)
     Accumulated deficit....................................   (167)    (3,061)
                                                              -----    -------
          Total stockholders' equity (deficit)..............   (147)    66,499
                                                              -----    -------
Total liabilities and stockholders' equity (deficit)........  $ 151    $86,358
                                                              =====    =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-18
<PAGE>   77
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 PERIOD FROM
                                                              NOVEMBER 16, 1996
                                                                  (DATE OF
                                                                INCEPTION) TO       YEAR ENDED
                                                                JUNE 30, 1997      JUNE 30, 1998
                                                              -----------------    -------------
<S>                                                           <C>                  <C>
Total revenue...............................................     $       --         $   14,189
Cost of revenue.............................................             --              6,374
                                                                 ----------         ----------
Gross profit................................................             --              7,815
Selling, general and administrative expenses................            149             10,447
Goodwill amortization.......................................             --                245
                                                                 ----------         ----------
Loss from operations........................................           (149)            (2,877)
Interest expense, net.......................................             --               (220)
                                                                 ----------         ----------
Loss before income taxes....................................           (149)            (3,097)
Income tax benefit..........................................             --               (203)
                                                                 ----------         ----------
Net loss....................................................     $     (149)        $   (2,894)
                                                                 ==========         ==========
Loss per common share: basic and diluted....................     $    (0.08)        $    (0.67)
                                                                 ==========         ==========
Shares used in computing basic and diluted loss per common
  share.....................................................      1,950,520          4,350,169
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-19
<PAGE>   78
 
                         PROVANT, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                          COMMON STOCK
                                       ------------------   PAID-IN    TRANSLATION   ACCUMULATED
                                        SHARES     AMOUNT   CAPITAL    ADJUSTMENT      DEFICIT      TOTAL
                                       ---------   ------   --------   -----------   -----------   -------
<S>                                    <C>         <C>      <C>        <C>           <C>           <C>
Initial capitalization...............  1,950,520    $20     $    --       $ --         $   (18)    $     2
Net loss.............................         --     --          --         --            (149)       (149)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1997.............  1,950,520     20          --         --            (167)       (147)
Issuance of management shares........  1,395,697     13         473         --              --         486
Issuance of stock options and
  warrants...........................         --     --         422         --              --         422
Acquisition of Founding Companies....  3,459,341     35      35,942         --              --      35,977
Issuance of stock sold in initial
  public offering....................  2,990,000     30      32,637         --              --      32,667
Translation adjustment...............         --     --          --        (12)             --         (12)
Net loss.............................         --     --          --         --          (2,894)     (2,894)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1998.............  9,795,558    $98     $69,474       $(12)        $(3,061)    $66,499
                                       =========    ===     =======       ====         =======     =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
                                      F-20
<PAGE>   79
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  PERIOD FROM
                                                               NOVEMBER 16, 1996
                                                                   (DATE OF
                                                                  INCEPTION)
                                                                      TO             YEAR ENDED
                                                                 JUNE 30, 1997      JUNE 30, 1998
                                                              -------------------   -------------
<S>                                                           <C>                   <C>
Cash flows from operating activities:
  Net loss..................................................         $(149)            $(2,894)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization..........................            --                 467
     Allowance for doubtful accounts........................            --                 135
     Charges related to issuance of common stock, warrants
       and stock options....................................            --                 908
     Changes in operating assets and liabilities:
       Accounts receivable..................................            --              (1,731)
       Contracts receivable.................................            --                (581)
       Deferred taxes.......................................            --              (1,191)
       Due from stockholders................................            --                 600
       Costs in excess of billings..........................            --                (244)
       Prepaid expenses and other current assets............            --                (154)
       Other assets.........................................            --                 110
       Accounts payable and accrued expenses................            --               1,636
       Accrued compensation.................................            --                 (91)
       Billings in excess of costs..........................            --               1,119
       Deferred revenue.....................................            --                 228
       Income taxes payable.................................            --                 970
                                                                     -----             -------
          Total adjustments.................................            --               2,181
                                                                     -----             -------
          Net cash used in operating activities.............          (149)               (713)
                                                                     -----             -------
Cash flows from investing activities:
     Acquisitions of businesses, net of acquired cash.......            --             (19,302)
     Additions to property and equipment....................          (150)               (177)
                                                                     -----             -------
       Net cash used in investing activities................          (150)            (19,479)
                                                                     -----             -------
Cash flows from financing activities:
     Issuance of common stock...............................             2              32,667
     Increase (decrease) in notes payable to stockholders...           298                (298)
     Repayment of long-term debt............................            --              (5,772)
                                                                     -----             -------
       Net cash provided by financing activities............           300              26,597
Effect of exchange rates on cash............................            --                 (12)
                                                                     -----             -------
Net increase in cash and cash equivalents...................             1               6,393
Cash and cash equivalents, beginning of period..............            --                   1
                                                                     -----             -------
Cash and cash equivalents, end of period....................         $   1             $ 6,394
                                                                     =====             =======
</TABLE>
 
            See accompanying notes to consolidated financial statements.
                                      F-21
<PAGE>   80
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) BUSINESS AND ORGANIZATION
 
     PROVANT, Inc., a Delaware corporation ("PROVANT" and collectively with its
subsidiaries, the "Company"), provides a broad range of training and development
services and products to Fortune 1000 companies, other large and medium-sized
corporations and government entities. Founded on November 16, 1996, the
Company's objective is to become the leading single source provider of
high-quality training and development services and products that are distributed
through multiple delivery methods.
 
     On May 4, 1998, PROVANT completed the initial public offering (the
"Offering" or "IPO") of its common stock (the "Common Stock") and simultaneously
acquired in separate merger transactions seven companies engaged in providing
training and development services and products (collectively referred to as the
"Founding Companies"). The Company provides services nationally, and has offices
in thirteen states.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Basis of Presentation
 
     For financial statement purposes, PROVANT has been identified as the
accounting acquiror. Accordingly, the consolidated financial statements include
the accounts of PROVANT since its inception, November 16, 1996, and the accounts
of the Founding Companies since their acquisition date, May 4, 1998. The
acquisitions of the Founding Companies were accounted for using the purchase
method of accounting. The allocations of the purchase prices to the assets
acquired and liabilities assumed of these companies have been recorded based on
preliminary estimates of fair value and may be changed as additional information
becomes available.
 
  Principles of Consolidation
 
     The accompanying consolidated financial statements include the accounts of
PROVANT and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
 
  Revenue Recognition
 
     The Company recognizes revenue when services are performed and products are
provided except when work is being performed under a long-term contract.
Deferred revenue is recognized for payments received prior to services being
performed.
 
     A significant portion of the Company's revenue results from services
performed under long-term U.S. Government contracts, either directly or through
subcontracts. The majority of the Company's long-term contracts are fixed-price
contracts. Revenue on fixed price contracts is recognized using the percentage
of completion method based on costs incurred in relation to total estimated
costs for each contract. Revenue on time-and-materials contracts is recognized
to the extent of fixed billable rates for hours delivered plus reimbursable
costs. Revenue on cost-plus-fee contracts is recognized based on reimbursable
costs incurred plus estimated fees earned thereon. Provisions for the total
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
 
  Cash Flow Information
 
     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
     Cash paid for interest in fiscal 1997 and 1998 was nil and $118,000,
respectively. Cash paid for taxes in fiscal 1997 and 1998 was nil and $14,000
respectively.
 
                                      F-22
<PAGE>   81
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company recorded the following non-cash transactions during fiscal 1998
(Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Discount on indebtedness associated with issuance of stock
  warrants..................................................  $221
Compensation expense in connection with sales of Company
  stock.....................................................  $485
Compensation expense in connection with stock options
  granted to consultants to the Company.....................  $201
</TABLE>
 
     In addition, the following is a reconciliation of net cash paid for
acquisitions during fiscal 1998 (Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Fair value of assets acquired...............................  $82,386
Liabilities assumed.........................................  (21,954)
Additional purchase price accrued but not yet paid..........     (755)
Estimated market value of stock consideration...............  (35,977)
                                                              -------
Cash paid...................................................   23,700
Less cash acquired..........................................   (4,398)
                                                              -------
     Net cash paid for acquisitions.........................  $19,302
                                                              =======
</TABLE>
 
  Fair Value of Financial Instruments
 
     The carrying amounts of the Company's financial instruments including cash
and cash equivalents, accounts receivable, contracts receivable, accounts
payable and accrued expenses approximate fair value due to the short term nature
of these instruments. The carrying value of the long term debt approximates fair
value based on current rates available to the Company for debt of similar
maturity and terms.
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation is computed using accelerated and
straight-line methods over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the expected life
of the lease or the estimated useful life of the asset. Maintenance and repairs
are expensed when incurred. Upon retirement or disposition of property and
equipment, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the statement of
operations.
 
  Goodwill
 
     Goodwill represents the excess of the aggregate purchase price paid by the
Company over the fair value of the net assets acquired. Goodwill is amortized on
a straight-line basis over 40 years.
 
     Recoverability of goodwill and intangible assets is measured by a
comparison of the carrying amount of the asset to future undiscounted net cash
flows expected to be generated by the acquired Company. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.
 
  Long-Lived Assets
 
     Long-lived assets and certain identifiable intangibles are reviewed for
impairment, based upon undiscounted future cash flows, and appropriate losses
are recognized whenever the carrying amount of an asset may not be recovered in
accordance with Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.
 
                                      F-23
<PAGE>   82
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Concentrations of Credit Risk
 
     The Company provides services to customers located in a broad range of
geographical regions. The Company's credit risk primarily consists of
receivables from a variety of customers including U.S. Government entities and
commercial and industrial companies. The Company reviews its accounts receivable
and provides allowances as deemed necessary.
 
  Income Taxes
 
     The Company will file a consolidated return for federal income tax
purposes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect, if any, on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
  Accounting for Stock-Based Compensation
 
     The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock option plans.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Statement 123 addresses the accounting for the cost of stock-based compensation,
such as stock options, and permits either expensing the cost of stock-based
compensation over the vesting period or disclosing in the financial statement
footnotes what this expense would have been. This cost would be measured at the
grant date based upon estimated fair values, using option pricing models. The
Company has adopted the disclosure alternative of Statement 123 as of June 30,
1998.
 
  Loss Per Share
 
     In fiscal 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, for calculating
earnings per share (EPS). Statement 128 requires the disclosure of basic EPS,
which is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.
Disclosure of diluted EPS, which gives effect to all dilutive potential common
shares outstanding, is also required. For fiscal 1997 and 1998, the number of
shares used in computation of basic EPS is the same as diluted EPS since the
inclusion of any potential common shares would be anti-dilutive as a result of
the net losses in those years.
 
     The following securities that could potentially dilute basic EPS in the
future were not included in the computation of diluted EPS for 1998 because to
do so would have been antidilutive:
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Stock options...............................................   42,942
Warrants....................................................   18,400
                                                               ------
     Total..................................................   61,342
                                                               ======
</TABLE>
 
     Contingently issuable shares (Note 10) have also been excluded from the
calculation.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of
 
                                      F-24
<PAGE>   83
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
revenues, expenses, assets, liabilities and contingent assets and liabilities at
the date of the financial statements. Actual results could differ from those
estimates.
 
(3) BUSINESS COMBINATIONS
 
  Founding Company Acquisitions
 
     Concurrently with the completion of its IPO on May 4, 1998, PROVANT
acquired the Founding Companies (the "Combination"). The companies acquired were
Behavioral Technology, Inc., Decker Communications, Inc., J. Howard and
Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning
Systems Sciences, MOHR Retail Learning Systems, Inc., Novations Group, Inc., and
Star Mountain, Inc.
 
     The acquisition of each of the Founding Companies was accounted for using
the "purchase" method of accounting in accordance with APB Opinion No. 16,
Business Combinations. The aggregate consideration paid in these transactions
was $24.5 million in cash and 3,459,341 shares of Common Stock having a value at
the date of acquisition totaling $36.0 million.
 
     The consolidated balance sheet as of June 30, 1998 includes allocations of
the respective purchase prices to the assets acquired and liabilities assumed
based on preliminary estimates of fair value and is subject to final adjustment.
The allocations resulted in $53.2 million of goodwill, which represents the
excess of purchase price over the estimated fair value of the net assets
acquired. In conjunction with the acquisitions, goodwill was determined as
follows (Dollars in thousands):
 
<TABLE>
<S>                                                           <C>
Cash paid, net of cash acquired.............................  $ 19,302
Additional purchase price accrued but not yet paid..........       755
Estimated market value of stock consideration...............    35,977
Liabilities assumed.........................................    21,954
Less fair value of tangible assets acquired, net of cash
  acquired..................................................   (24,801)
                                                              --------
Goodwill....................................................  $ 53,187
                                                              ========
</TABLE>
 
     The unaudited pro forma combined financial data presented below consists of
the income statement data presented in these consolidated financial statements
plus income statement data for the Founding Companies as if they were acquired
effective July 1, 1996 (Dollars in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30,
                                                       --------------------
                                                         1997        1998
                                                       --------    --------
                                                           (UNAUDITED)
<S>                                                    <C>         <C>
Revenue..............................................  $68,846     $78,062
Net income...........................................    4,221       5,060
Earnings per common share, basic.....................    $0.43       $0.52
Earnings per common share, diluted...................    $0.42       $0.50
</TABLE>
 
     The unaudited pro forma combined financial data gives effect to (i) the
Combination of PROVANT and the Founding Companies, (ii) the consummation of the
IPO and the application of the net proceeds therefrom, (iii) the elimination of
a non-recurring fee of $750,000 in the year ended June 30, 1998 for information
related to the training industry, (iv) acquisitions completed by one of the
Founding Companies, (v) the elimination of non-cash compensation expense
totaling $686,000 for the year ended June 30, 1998 related to the issuance of
Common Stock and stock options to officers of and consultants to the Company,
(vi) a provision for income tax for those Founding Companies that were taxed as
S corporations during the relevant periods, (vii) the elimination of
non-recurring legal and accounting fees related to the Combination and the IPO
totaling $588,000 for the year ended June 30, 1998 and (viii) the compensation
differential. The compensation differential represents pro forma adjustments to
salary, bonuses and benefits paid to certain pre-Combination owners of the
Founding Companies to certain levels
 
                                      F-25
<PAGE>   84
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
to which they have agreed prospectively. For the years ended June 30, 1997 and
1998, the compensation differential was approximately $5.6 million and $6.5
million, respectively.
 
     The unaudited pro forma combined results presented above are not
necessarily indicative of actual results which might have occurred had the
operations and management teams of PROVANT and the Founding Companies been
combined at the beginning of the periods presented.
 
  Subsequent Acquisition
 
     On July 20, 1998, the Company completed the acquisition of KC Resources
Creative Solutions, Inc. ("KC Resources"), a training and instructional design
and development consulting firm based in the Washington, DC area. The
consideration paid by the Company was $6.0 million, consisting of $2.4 million
in cash and 200,000 shares of Common Stock. This acquisition will be accounted
for as a purchase transaction. The former sole stockholder of KC Resources will
be entitled to receive contingent consideration of up to $1.4 million if KC
Resources' earnings before interest and taxes for the year ending June 30, 1999
exceeds a specified base amount.
 
     Pro forma data giving effect to the Combination and the KC Resources
acquisition for the year ended June 30, 1998 is as follows (Dollars in
thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
                                                              (UNAUDITED)
<S>                                                           <C>
Revenue.....................................................   $ 83,511
Net income..................................................      5,419
Earnings per common share, basic............................   $   0.54
Earnings per common share, diluted..........................   $   0.52
</TABLE>
 
(4) CONTRACTS RECEIVABLE
 
     Contracts receivable are summarized as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                               JUNE 30,
                                                                 1998
                                                              -----------
<S>                                                           <C>
U.S. Government customers:
Amounts due currently -- prime contractor...................    $5,353
Amounts due currently -- subcontractor......................       589
Recoverable costs and accrued profit on progress
  completed -- not billed...................................     1,317
Retainage...................................................        36
                                                                ------
Total.......................................................    $7,295
                                                                ======
</TABLE>
 
     In accordance with industry practice, amounts relating to long-term
contracts are classified as current assets although an indeterminable portion of
these amounts is not expected to be realized within one year. Receivable
balances billed but not paid by customers pursuant to retainage provisions in
contracts are due upon completion of the contracts and acceptance by the
customer. Based on the Company's experience with similar contracts in recent
years, the retention balance is billed and collected in the following fiscal
year.
 
     All unbilled contract receivables, net of retainage, are expected to be
billed and collected within one year.
 
                                      F-26
<PAGE>   85
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) NON-CURRENT ASSETS
 
     A summary of property and equipment follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                             JUNE 30,
                                                              USEFUL LIFE      1998
                                                              ------------   --------
<S>                                                           <C>            <C>
Equipment...................................................   5 - 7 years    $  322
Furniture and fixtures......................................   3 - 7 years     2,290
Leasehold improvements......................................   3 - 7 years       160
Less accumulated depreciation and amortization..............                    (224)
                                                                              ------
Property and equipment, net.................................                  $2,548
                                                                              ======
</TABLE>
 
     Depreciation expense was nil and $222,000 for fiscal 1997 and 1998,
respectively.
 
     Goodwill amortization expense was nil and $245,000 for fiscal 1997 and
1998, respectively.
 
(6) ACCRUED EXPENSES
 
     Accrued expenses consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Accrued lease abandonment costs.............................   $1,160
Other accrued liabilities...................................    6,201
                                                               ------
          Total.............................................   $7,361
                                                               ======
</TABLE>
 
(7) REVOLVING CREDIT AGREEMENT
 
     On April 8, 1998, the Company entered into a revolving credit facility with
Fleet National Bank (as agent), the material terms of which are summarized as
follows. The facility provides the Company with a revolving line of credit of up
to $40.0 million, guaranteed by all of the Company's significant wholly-owned
subsidiaries and secured by a pledge of the capital stock of each of the
Company's wholly-owned subsidiaries. The credit facility may be used for
refinancing of existing indebtedness, acquisitions, working capital and general
corporate purposes. Loans made under the credit facility bear interest, at the
Company's option, at a rate based on either a Eurodollar rate or the bank's
prime rate. In addition, a commitment fee is payable on the unused portion of
the revolving line of credit at a rate of between 0.15% and 0.375% depending on
the ratio of the Company's consolidated total funded debt to consolidated
earnings before interest, taxes, depreciation and amortization. The credit
facility will terminate three years from the Company's initial borrowing under
the facility (which borrowing had yet to occur as of June 30, 1998), and all
amounts outstanding thereunder (if any) will be due at such time. The credit
facility (i) generally prohibits the payment of dividends and other
distributions by the Company, (ii) generally does not permit the Company to
incur or assume other indebtedness, and (iii) requires the Company to comply
with certain financial covenants. As of June 30, 1998, there were no amounts
outstanding under the credit facility.
 
(8) LONG-TERM DEBT
 
     Long-term debt consists primarily of amounts due to former stockholders of
the Founding Companies. These notes mature through June, 2009 and bear interest
at rates ranging from 7.5% to 8.75%.
 
                                      F-27
<PAGE>   86
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(9) INCOME TAXES
 
     The income tax expense (benefit) consists of (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Current:
  Federal...................................................    $ 540
  State.....................................................      158
                                                                -----
          Total current.....................................      698
                                                                -----
Deferred:
  Federal...................................................     (860)
  State.....................................................      (41)
                                                                -----
          Total deferred....................................     (901)
                                                                -----
          Income tax benefit................................    $(203)
                                                                =====
</TABLE>
 
     The income tax benefit was $203,000 for the year ended June 30, 1998, and
differed from the amounts computed by applying the U.S. federal income tax rate
of 35 percent to pretax income as a result of the following (Dollars in
thousands):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Income tax benefit at the statutory rate....................   $(1,084)
Decrease in income tax benefit resulting from:
  Reduction of valuation allowance due to interaction of
     acquiror and acquired companies tax positions..........       659
  Amortization of goodwill..................................        79
  State income taxes, net of federal income tax benefit.....        75
  Other, net................................................        68
                                                               -------
Benefit at effective tax rate...............................   $  (203)
                                                               =======
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (Dollars in thousands).
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
Deferred tax assets:
  Accrued liabilities.......................................   $2,794
  Allowance for doubtful accounts...........................      217
  Start-up costs capitalized for tax purposes...............      735
  Other.....................................................      139
                                                               ------
Total gross deferred tax assets.............................    3,885
  Less valuation allowance..................................     (140)
                                                               ------
  Net deferred tax assets...................................    3,745
                                                               ------
Deferred tax liabilities:
  Change from cash to accrual method for acquired
     companies..............................................    1,458
  Other.....................................................      160
                                                               ------
Total gross deferred liabilities............................    1,618
                                                               ------
Net deferred tax asset......................................   $2,127
                                                               ======
</TABLE>
 
                                      F-28
<PAGE>   87
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The valuation allowance for deferred tax assets was $52,000 and $140,000 as
of June 30, 1997 and 1998 respectively. The valuation allowance for deferred
income taxes increased by $88 from June 30, 1997 to June 30, 1998. Valuation
allowances at June 30, 1998 relate to potentially non-deductible expenses
recorded by certain of the Founding Companies.
 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Taxable income for the
year ended June 30, 1998 was $1,703,000. Although realization is not assured,
based upon the level of historical taxable income of the Founding Companies and
projections for PROVANT's future taxable income over the periods during which
the deferred tax assets are deductible, management believes it is more likely
than not the Company will realize the benefits of these deductible differences.
The amount of the deferred tax asset considered realizable, however, could be
reduced or increased in the near term if estimates of future taxable income
during the carryforward period are reduced or increased.
 
(10) COMMITMENTS AND CONTINGENCIES
 
  Operating Leases
 
     The Company has several leases for its office space as well as for the
Founding Companies' operating space, vehicles, and equipment under cancelable
and non-cancelable operating leases that expire on various dates through fiscal
2005. Most of these leases generally provide for rent escalation based upon
changes in real estate taxes and operating expenses.
 
     Future minimum lease payments under all non-cancelable operating leases,
including leases to related parties, are as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                    YEAR ENDING JUNE 30,
                    --------------------
<S>                                                           <C>
1999........................................................  $ 3,635
2000........................................................    3,160
2001........................................................    2,772
2002........................................................    1,857
2003........................................................      749
Thereafter..................................................    1,136
                                                              -------
Total.......................................................  $13,309
                                                              =======
</TABLE>
 
     Rent expense for the years ended June 30, 1997 and 1998 was $51,000 and
$585,000, respectively.
 
  U.S. Government Contracts
 
     Substantially all of one Founding Company's revenue and costs for all
periods presented are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     Government funding continues to be dependent on congressional approval of
program level funding and on contracting agency approval for the Company's work.
The extent to which projects will be funded in the future cannot be determined.
 
                                      F-29
<PAGE>   88
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Environmental Liabilities
 
     The Company has provided for the estimated costs associated with
environmental remediation activities at one of its current operating locations.
The Company provides for the estimated costs of the investigation and
remediation of these sites when such losses are probable and the amounts can be
reasonably estimated. The actual cost incurred may vary from these estimates due
to the inherent uncertainties involved. The Company believes that any additional
liability in excess of the amounts provided which may result from the resolution
of these matters will not have a material adverse impact on the financial
condition, liquidity, or cash flow of the Company.
 
  Contingent Payments to Former Stockholders
 
     The merger agreements between PROVANT and each of the Founding Companies
provide for the payment of additional, contingent consideration (the "Additional
Consideration"). With respect to six of the Founding Companies, the Additional
Consideration will be paid in shares of Common Stock, with the number of those
shares determined by a formula based on the relationship of the defined earnings
before interest and taxes ("EBIT") of that Founding Company (including its
successor following the closing of the Combination) for the fiscal year ending
June 30, 1998 (June 30, 1999 in the case of J. Howard & Associates, Inc. ("J.
Howard")) to a specified baseline EBIT target and certain other adjustments to
be calculated after the fiscal year ended June 30, 1998. In particular, each
merger agreement with a Founding Company (other than Star Mountain, Inc.)
contains a targeted pro forma EBIT amount in excess of a baseline figure which,
if achieved by the Founding Company, will result in the payment by the Company
to the former stockholders of the Founding Company of the maximum Additional
Consideration (consisting of a multiple of the excess EBIT amount). To the
extent the Founding Company does not achieve the targeted amount, its former
stockholders will receive a lesser amount of Additional Consideration
proportionately related to the excess above the baseline figure. Shares of
Common Stock issued as Additional Consideration to the former stockholders of
all Founding Companies other than Star Mountain, Inc. ("Star Mountain") and J.
Howard will be valued at the initial public offering price of $13.00 per share.
Shares issued to J. Howard as Additional Consideration will be valued based on
the average of the last sale prices of the Common Stock on Nasdaq during the 20
business days immediately following PROVANT's first public announcement of its
financial results for fiscal 1999. Other than shares which may be issuable to
the former stockholders of Star Mountain, a maximum of 969,218 shares of Common
Stock may be issued as Additional Consideration following June 30, 1998
(assuming, in the case of J. Howard's Additional Consideration, a per share
price of $13.00).
 
     For the seventh Founding Company, Star Mountain, the stockholders will be
entitled to receive additional shares of Common Stock or cash in accordance with
a formula based on the amount by which the EBIT of Star Mountain for the fiscal
year ending June 30, 1999 exceeds a specified EBIT target. In particular, if
Star Mountain's EBIT for fiscal 1999 exceeds the specified target, then (i) Star
Mountain's former non-voting stockholders will receive cash equal to a multiple
of the excess EBIT and (ii) Star Mountain's former voting stockholders will
receive, at their election, either cash equal to a multiple of the excess EBIT
or a number of shares of Common Stock equal to a multiple of the excess EBIT
divided by 80% of the average of the last sale prices of the Common Stock on
NASDAQ during the month of July 1999.
 
  Other Matters
 
     The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition or results of operations of the Company.
 
                                      F-30
<PAGE>   89
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(11) STOCKHOLDERS' EQUITY
 
  Common and Preferred Stock
 
     In connection with its organization and initial capitalization, the Company
issued 1,950,520 shares of its Common Stock, $.01 par value per share. In 1998,
the Company issued 1,395,697 additional shares to management. These share
amounts have been adjusted to reflect the stock split described below.
 
     The Company, in connection with the IPO, increased the authorized shares of
stock to 45 million, consisting of 40 million shares of Common Stock and 5
million shares of Preferred Stock, and declared a stock split of 979.0292-for-1
in the form of a stock dividend that resulted in a total amount of outstanding
shares of Common Stock prior to the IPO (but giving effect to the Combination)
of 6,805,558. Holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, and do not
have cumulative voting rights. All share and per share amounts have been
adjusted to reflect the stock split.
 
     On May 4, 1998, the Company completed its IPO, issuing to the public
2,600,000 shares of its Common Stock at a price of $13.00 per share and on May
7, 1998, the Company sold 390,000 shares of Common Stock at a price of $13.00
per share pursuant to the over-allotment option granted to the underwriters. The
Company realized net proceeds from these sales of $32.7 million, net of the
underwriting commissions and discounts and other expenses of the offering.
 
     As of June 30, 1998, the Company had 9,795,558 shares of Common Stock
issued and outstanding.
 
     The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. As of June 30, 1998, the Company had not issued any
shares of Preferred Stock.
 
(12) STOCK OPTION PLANS
 
  Equity Incentive Plan
 
     The Company adopted the 1998 Equity Incentive Plan which provides for the
award of up to 1,100,000 shares of Common Stock in the form of incentive stock
options, non-qualified stock options, stock appreciation rights, performance
shares, restricted stock or stock units. All directors and employees of, and all
consultants and advisors to, the Company are eligible to participate.
 
     In connection with the Offering, options to purchase 246,596 shares of
Common Stock at $13.00 per share were issued to certain executives of the
Company, of which options to purchase 86,596 shares vested upon the closing of
the IPO. Options to purchase the remaining shares vest equally over a three-year
period. All of these options expire seven years from the date of grant.
 
     Options to purchase an additional 622,387 shares of Common Stock at $13.00
per share were awarded to employees of and consultants to the Founding Companies
and PROVANT. These options vest equally over a three year period and expire
seven years from the date of grant, with the exception of options to purchase
80,000 shares, which became exercisable upon the closing of the Offering.
 
  Stock Plan for Non-Employee Directors
 
     The Company adopted the Stock Plan for Non-Employee Directors whereby
100,000 shares of Common Stock have been reserved for issuance. Each
non-employee director of the Company who was not a stockholder prior to the
Offering received an option to purchase 7,500 shares of Common Stock at $13.00
per share. Any non-employee director of the Company elected after the IPO
generally will receive an option to purchase 7,500 shares of Common Stock at the
fair market value of the Common Stock at the date of grant. Each option expires
after 10 years and is exercisable six months following the date of grant. As of
June 30, 1998, options to purchase 15,000 shares of Common Stock were granted
under this plan.
 
                                      F-31
<PAGE>   90
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Stock Purchase Plan
 
     The Company's 1998 Employee Stock Purchase Plan allows all employees who
work more than 20 hours per week, other than employees owning more than 5% or
more of the combined voting power of all classes of stock of the Company, to
purchase shares of Common Stock at a discount on a periodic basis.
 
     Purchases can occur at the end of option periods, each of six months'
duration. The first such period began on June 1, 1998. The purchase price of
Common Stock under the Employee Stock Purchase Plan will be 85% of the lesser of
the last sale price of the Common Stock on the day prior to the beginning of an
option period and the last sale price of the Common Stock on the day prior to
the end of the option period. Participants may elect under the Plan to have from
up to 2% to 10% of their pay applied to the purchase of shares at the end of the
option period.
 
     A total of 500,000 shares are reserved for issuance under the Employee
Stock Purchase Plan. As of June 30, 1998, no shares have been issued.
 
  Stock Purchase Warrants
 
     The Company issued two warrants each to officers and directors of the
Company in exchange for these executives extending financing to the Company in
the period prior to the Offering. The first warrant entitles the holder to
purchase 173,194 shares of Common Stock at a per share exercise price equal to
$13.00. The second warrant entitles the holder to purchase 216,492 shares of
Common Stock which will become exercisable only if the market price of the
Common Stock increases to certain threshold levels (except as otherwise
described below) (the "Contingent Warrant"). Specifically, 20% of the total
number of shares issuable under the Contingent Warrant will become exercisable
on each of the three occasions that the market price of the Common Stock reaches
$26.00, $39.00 and $52.00, respectively, and the remaining 40% of the total
number of shares issuable under the Contingent Warrant will become exercisable
if the market price of the Common Stock reaches $65.00. However, under certain
circumstances involving the merger or sale of the Company, the Contingent
Warrant will become exercisable to purchase all of the warrant shares. The
exercise price of the Contingent Warrant increases on each anniversary of the
closing of the Offering. Specifically, the exercise price is equal to the
initial public offering price of $13.00 for the first 12 months following the
closing of the Offering and, for each 12 month period thereafter, is equal to
the initial public offering price plus 10% of the initial public offering price
multiplied by the number of full 12 month periods elapsed since the closing of
the Offering. However, once a portion of the Contingent Warrant becomes
exercisable, that portion's exercise price is fixed as of that date. The
warrants expire on May 4, 2005. The warrants have been accounted for in
accordance with Opinion No. 14 of the Accounting Principles Board. Accordingly,
the fair value allocated to the warrants has been accounted for as discount on
the related debt. The holders of the warrants have the right to require the
Company to register the resale of the shares that may be acquired upon exercise
of the warrants under the Securities Act of 1933, as amended.
 
     Stock option activity under all plans during the periods indicated is as
follows:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF   WEIGHTED-AVERAGE
                                                               SHARES      EXERCISE PRICE
                                                              ---------   ----------------
<S>                                                           <C>         <C>
 
Balance at June 30, 1997 and prior..........................        --
     Granted................................................   883,983         $13.00
     Exercised..............................................        --
     Forfeited..............................................     9,966          13.00
     Expired................................................        --
                                                               -------
 
Balance at June 30, 1998....................................   874,017         $13.00
                                                               =======
</TABLE>
 
                                      F-32
<PAGE>   91
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements, except for stock options granted to
non-employees for which compensation expense of $201,000 has been recorded in
the year ended June 30, 1998. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net loss and loss per share would have been increased to the pro
forma amounts indicated below (Dollars in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Net loss:
  As reported...............................................   $(2,894)
  Pro forma for SFAS No. 123................................   $(3,679)
Basic and diluted loss per common share:
  As reported...............................................   $ (0.67)
  Pro forma for SFAS No. 123................................   $ (0.85)
</TABLE>
 
     At June 30, 1998, there were 325,983 additional shares available for grant
under the Company's stock option plans. The per share weighted-average fair
value of stock options granted during 1998 was $4.53 on the date of grant using
the Black Scholes option-pricing model with the following weighted average
assumptions: volatility of 33%; expected dividend yield 0%, risk-free interest
rate of 6.0%, and an expected life of 4 years.
 
     The following is a summary of stock options outstanding at June 30, 1998:
 
<TABLE>
<CAPTION>
                     OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
--------------------------------------------------------------   -----------------------
                                      WEIGHTED-
                                       AVERAGE       WEIGHTED-                 WEIGHTED-
     RANGE OF                      REMAINING YEARS    AVERAGE                   AVERAGE
     EXERCISE          NUMBER      OF CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
      PRICES         OUTSTANDING        LIFE           PRICE     EXERCISABLE     PRICE
     --------        -----------   ---------------   ---------   -----------   ---------
<S>                  <C>           <C>               <C>         <C>           <C>
      $ 5.00            10,000          2.84          $ 5.00        10,000      $ 5.00
      $13.00           874,017          6.88          $13.00       168,596      $13.00
                       -------                                     -------
   $ 5.00-$13.00       884,017          6.83          $12.91       178,596      $12.55
</TABLE>
 
     In addition to the options granted under the plans noted above, the Company
issued an option to purchase 10,000 shares of Common Stock at a purchase price
of $5.00 per share.
 
  1998 Non-Qualified Stock Option Plan
 
     In July 1998, the Company adopted the 1998 Non-Qualified Stock Option Plan
which provides for the award of up to 500,000 shares of Common Stock in the form
of non-qualified stock options. All employees who are not officers or directors
of the Company are eligible to participate. As of August 10, 1998, no options
were granted under the 1998 Non-Qualified Stock Option Plan.
 
(13) EMPLOYEE BENEFIT PLANS
 
     The Founding Companies provide various retirement plans for eligible
employees. These plans consist of defined contribution plans and profit sharing
plans and cover employees at substantially all of the Company's operating
locations. The defined contribution plans provide for contributions ranging from
1.5% to 2.0% of covered employees' salaries or wages, or at the discretion of
the company. Total expense for contributions under all plans totaled $101,000
for fiscal 1998.
 
                                      F-33
<PAGE>   92
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(14) RELATED PARTY TRANSACTIONS
 
     Prior to the Combination, certain Founding Companies had entered into lease
arrangements with stockholders for facilities. These lease arrangements are for
periods ranging from three to five years. Related lease expense was $81,000 for
the year ended June 30, 1998. Future commitments with respect to these leases
are included in the schedule of minimum lease payments in Note 10.
 
     Expenses paid by PROVANT prior to the closing of the Offering were advanced
under a $3 million line of credit issued on October 6, 1997 by two of the
Company's stockholders. As of June 30, 1998 this loan was repaid in its entirety
and the line of credit was terminated.
 
(15) SEGMENT REPORTING
 
     The Company operates principally in one segment comprised of training and
development services and products designed to increase the productivity of
organizations. There was no single customer that accounted for 10% or more of
the Company's total revenue in fiscal 1998.
 
                                      F-34
<PAGE>   93
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Behavioral Technology, Inc.:
 
     We have audited the accompanying balance sheets of Behavioral Technology,
Inc., as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997 and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Behavioral Technology, Inc.
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997, and
for the period from July 1, 1997 to May 4, 1998, in conformity with generally
accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-35
<PAGE>   94
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
<S>                                                           <C>       <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents.................................  $  652    $1,254
  Accounts receivable, net of allowance for doubtful
     accounts of $89 at June 30, 1996 and 1997..............     940     1,055
  Prepaid expenses..........................................      67       143
                                                              ------    ------
          Total current assets..............................   1,659     2,452
                                                              ------    ------
Property and equipment, net.................................     194       135
Other assets................................................       8         7
                                                              ------    ------
          Total assets......................................  $1,861    $2,594
                                                              ======    ======
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  270    $  268
  Accrued expenses..........................................     123       148
  Accrued compensation......................................     316       433
  Deferred revenue..........................................      12        43
  Income taxes payable......................................      --        --
                                                              ------    ------
          Total current liabilities.........................     721       892
                                                              ------    ------
Commitments and contingencies
Stockholders' equity:
  Common stock, $10 par value; 1,000 shares authorized; 100
     and 99 shares issued and outstanding at June 30, 1996
     and June 30, 1997, respectively........................       1         1
  Additional paid-in capital................................      --        --
  Translation adjustment....................................      --        (6)
  Retained earnings.........................................   1,139     1,707
                                                              ------    ------
          Total stockholders' equity........................   1,140     1,702
                                                              ------    ------
          Total liabilities and stockholders' equity........  $1,861    $2,594
                                                              ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-36
<PAGE>   95
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                     PERIOD FROM
                                                          YEAR ENDED JUNE 30,        JULY 1, 1997
                                                       --------------------------         TO
                                                        1995      1996      1997     MAY 4, 1998
                                                       ------    ------    ------    ------------
<S>                                                    <C>       <C>       <C>       <C>
Revenue..............................................  $3,803    $5,685    $7,096      $  6,567
Cost of revenue......................................   1,049     1,495     1,488         1,243
                                                       ------    ------    ------      --------
          Gross profit...............................   2,754     4,190     5,608         5,324
Selling, general and administrative expenses.........   2,315     4,048     5,111         6,648
                                                       ------    ------    ------      --------
          Income (loss) from operations..............     439       142       497        (1,324)
                                                       ------    ------    ------      --------
Other income:
  Royalties..........................................      83        82        30            --
  Interest...........................................      13        27        31            29
  Other income, net..................................      43        --        10             2
                                                       ------    ------    ------      --------
          Total other income.........................     139       109        71            31
                                                       ------    ------    ------      --------
  Income (loss) before income taxes..................     578       251       568        (1,293)
  State income taxes.................................      --        --        --            15
                                                       ------    ------    ------      --------
          Net income (loss)..........................  $  578    $  251    $  568      $ (1,308)
                                                       ======    ======    ======      ========
Basic income (loss) per share........................  $5,780    $2,510    $5,680      $(13,080)
                                                       ======    ======    ======      ========
Weighted average shares outstanding..................     100       100       100           100
                                                       ======    ======    ======      ========
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-37
<PAGE>   96
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                    COMMON STOCK      ADDITIONAL
                                  ----------------     PAID-IN      TRANSLATION    RETAINED
                                  SHARES    AMOUNT     CAPITAL      ADJUSTMENT     EARNINGS     TOTAL
                                  ------    ------    ----------    -----------    --------    -------
<S>                               <C>       <C>       <C>           <C>            <C>         <C>
Balance, June 30, 1994..........   100        $1         $ --           $--        $   310     $   311
  Net income....................    --        --           --            --            578         578
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1995..........   100         1           --            --            888         889
  Net income....................    --        --           --            --            251         251
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1996..........   100         1           --            --          1,139       1,140
  Net income....................    --        --           --            --            568         568
  Translation adjustment........    --        --           --            (6)            --          (6)
  Stock surrender...............    (1)       --           --            --             --          --
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1997..........    99         1           --            (6)         1,707       1,702
  Net loss......................    --        --           --            --         (1,308)     (1,308)
  Stock grant...................     5        --          182            --             --         182
                                   ---        --         ----           ---        -------     -------
Balance, May 4, 1998............   104        $1         $182           $(6)       $   399     $   576
                                   ===       ===         ====           ===        =======     =======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-38
<PAGE>   97
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                    PERIOD FROM
                                                            YEAR ENDED JUNE 30,     JULY 1, 1997
                                                           ----------------------        TO
                                                           1995    1996     1997    MAY 4, 1998
                                                           -----   -----   ------   ------------
<S>                                                        <C>     <C>     <C>      <C>
Cash flows from operating activities:
  Net income (loss)......................................  $ 578   $ 251   $  568     $(1,308)
                                                           -----   -----   ------     -------
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization.....................     57      46       92          92
       Non-cash compensation.............................     --      --       --         946
       Changes in operating assets and liabilities:
          (Increase) in accounts receivable..............   (176)   (195)    (115)       (218)
          (Increase) decrease in prepaid expenses........     --     (67)     (76)         (3)
          (Increase) decrease in other assets............     --      --        1          (1)
          Increase (decrease) in accounts payable........     90      47       (2)        253
          Increase (decrease) in accrued expenses........     19     172      142        (199)
          Increase (decrease) in taxes payable...........     --      --       --          15
          Increase (decrease) in deferred revenue........     22     (48)      31         (42)
                                                           -----   -----   ------     -------
            Total adjustments............................     12     (45)      73         843
                                                           -----   -----   ------     -------
            Net cash provided by (used in) operating
               activities................................    590     206      641        (465)
                                                           -----   -----   ------     -------
Cash flows from investing activities:
  Purchases of property and equipment....................   (157)   (122)     (42)        (78)
  Proceeds from sale of property and equipment...........     --       5        9          --
  Net increase in amounts due from employees and related
     parties.............................................     --      --       --        (216)
  Purchase of trademark..................................     --      (7)      --          --
                                                           -----   -----   ------     -------
            Net cash used in investing activities........   (157)   (124)     (33)       (294)
                                                           -----   -----   ------     -------
Cash flows from financing activities:
  Proceeds received on line of credit....................     --      --      200          --
  Principal payments on line of credit...................     --      --     (200)         --
                                                           -----   -----   ------     -------
            Net cash used in financing activities........     --      --       --          --
                                                           -----   -----   ------     -------
Net increase (decrease) in cash and cash equivalents.....    433      82      608        (759)
Effect of exchange rate changes on cash..................     --      --       (6)         --
Cash and cash equivalents, beginning of period...........    137     570      652       1,254
                                                           -----   -----   ------     -------
Cash and cash equivalents, end of period.................  $ 570   $ 652   $1,254         495
                                                           =====   =====   ======     =======
Supplemental disclosure:
  Cash paid for interest.................................  $  --   $  --   $    2     $    --
                                                           =====   =====   ======     =======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-39
<PAGE>   98
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     Behavioral Technology, Inc. (the "Company") was founded in 1978. The
Company primarily provides train-the-trainer programs designed to help its
clients improve employee selection and to provide managers with a methodology
for assessing strengths and weaknesses of current employees. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed. The Company also licenses
to its clients the use of the Company's behavioral interviewing techniques. The
entire sale price is recognized when the noncancellable contract is signed and
the right to use the intellectual property is transferred. Deferred revenue is
recognized for payments received prior to services being performed.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Prepaid Expenses
 
     Prepaid expenses consist of costs incurred in developing videos and
publishing books. The costs of the videos are being amortized over five years
and the costs of the books are expensed as books are sold.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, short-term certificates of deposit, accounts receivable, accounts
payable and accrued expenses. The carrying value of these financial instruments
approximates their fair value due to the short maturity of these instruments.
 
  Foreign Currency Translation
 
     The Company operates a branch in Canada. Assets and liabilities for the
branch are translated into U.S. Dollars at the end of the year using year-end
exchange rates. Income and expenses are translated
 
                                      F-40
<PAGE>   99
                          BEHAVIORAL TECHNOLOGY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
using the average exchange rates for the year. Translation gains and losses are
reported as a separate component of stockholders' equity.
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company conducts its administrative operations in a facility leased
from the principal stockholder of the Company. Lease expense for the years ended
June 30, 1995, 1996 and 1997 and for the period from July 1, 1997 to May 4, 1998
was $90, $76, $85 and $88, respectively.
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
 
<TABLE>
<CAPTION>
      YEAR ENDING JUNE 30,
      --------------------
<S>                                                           <C>
      1998..................................................  $ 83
      1999..................................................    86
      2000..................................................    89
      2001..................................................    89
      2002..................................................    45
                                                              ----
                                                              $392
                                                              ====
</TABLE>
 
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                                JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Machinery and equipment.....................................  $272    $307
Furniture and fixtures......................................    97      95
Leasehold improvements......................................    18      18
                                                              ----    ----
                                                               387     420
Accumulated depreciation and amortization...................   193     285
                                                              ----    ----
          Property and equipment, net.......................  $194    $135
                                                              ====    ====
</TABLE>
 
     Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 and for the period from July 1,
1997 to May 4, 1998 was $57, $46, $92 and $92, respectively.
 
                                      F-41
<PAGE>   100
                          BEHAVIORAL TECHNOLOGY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5)  LINE OF CREDIT
 
     The Company entered into a line of credit agreement on October 15, 1996 for
borrowings up to $500. The line bears interest at prime plus 1%, is secured by
the accounts receivable of the Company, and is personally guaranteed by the
principal stockholder. The line of credit had a maturity date of October 15,
1997 and was renewed until October 15, 1998. There were no amounts outstanding
under this agreement at June 30, 1997.
 
(6)  EMPLOYEE BENEFITS
 
     The Company adopted a 401(k) profit sharing plan on January 1, 1996 that
covers all employees above the age of twenty-one who have completed one year of
service. Company contributions are made each year at the discretion of the Board
of Directors. The Company contributed $66, $101, and $101 to the plan for the
years ended June 30, 1996 and 1997 and for the period from July 1, 1997 to May
4, 1998, respectively.
 
(7)  CONCENTRATION OF CREDIT RISK
 
     The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $1,040
at June 30, 1997. The Company has not incurred losses related to these balances
to date.
 
                                      F-42
<PAGE>   101
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Decker Communications, Inc.:
 
     We have audited the accompanying balance sheets of Decker Communications,
Inc., as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997, and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Decker Communications, Inc.,
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997, and
for the period from July 1, 1997 to May 4, 1998, in conformity with generally
accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-43
<PAGE>   102
 
                          DECKER COMMUNICATIONS, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
<S>                                                           <C>       <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents.................................  $  314    $  508
  Investments...............................................     565       533
  Accounts receivable, net of allowance for doubtful
     accounts of $23 at June 30, 1996 and $31 at June 30,
     1997...................................................   1,242     1,608
  Prepaid expenses and other current assets.................     170       140
                                                              ------    ------
          Total current assets..............................   2,291     2,789
                                                              ------    ------
Property and equipment, net.................................     497       338
Other assets................................................      47        59
                                                              ------    ------
          Total assets......................................  $2,835    $3,186
                                                              ======    ======
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  251    $  111
  Accrued expenses..........................................     283       378
  Accrued compensation......................................     469       639
  Taxes payable.............................................       6        --
  Current portion of note payable...........................      --       416
  Deferred revenue..........................................      92        89
                                                              ------    ------
          Total current liabilities.........................   1,101     1,633
                                                              ------    ------
Note payable, net of current portion........................      --       623
Redeemable common stock.....................................      --       300
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 750,000 shares authorized;
     176,972 and 138,027 shares issued and outstanding at
     June 30, 1996, and June 30, 1997, respectively.........     397       269
  Unrealized gain on investments............................       5         9
  Note receivable from stock sales..........................     (92)     (127)
  Retained earnings.........................................   1,424       479
                                                              ------    ------
          Total stockholders' equity........................   1,734       630
                                                              ------    ------
          Total liabilities and stockholders' equity........  $2,835    $3,186
                                                              ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-44
<PAGE>   103
 
                          DECKER COMMUNICATIONS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                     PERIOD FROM
                                                            YEAR ENDED JUNE 30,      JULY 1, 1997
                                                          ------------------------        TO
                                                           1995     1996     1997    MAY 4, 1998
                                                          ------   ------   ------   ------------
<S>                                                       <C>      <C>      <C>      <C>
Revenue.................................................  $8,550   $8,620   $8,410      $8,729
Cost of revenue.........................................   2,419    2,655    2,275       2,275
                                                          ------   ------   ------      ------
  Gross profit..........................................   6,131    5,965    6,135       6,454
Selling, general and administrative expenses............   5,670    5,716    6,446       5,696
                                                          ------   ------   ------      ------
  Income (loss) from operations.........................     461      249     (311)        758
Other (income) expense..................................     (54)     (74)       9         (11)
                                                          ------   ------   ------      ------
  Income (loss) before income taxes.....................     515      323     (320)        769
State income taxes......................................      67       30       33          17
                                                          ------   ------   ------      ------
  Net income (loss).....................................  $  448   $  293   $ (353)     $  752
                                                          ======   ======   ======      ======
Basic income (loss) per share...........................  $ 2.53   $ 1.63   $(2.55)     $ 5.24
                                                          ======   ======   ======      ======
Weighted average shares outstanding.....................  176,750  180,150  138,352    143,417
                                                          =======  =======  =======  =========  
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-45
<PAGE>   104
 
                          DECKER COMMUNICATIONS, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                              NOTE
                                            COMMON STOCK     UNREALIZED    RECEIVABLE
                                          ----------------     GAIN ON     FROM STOCK   RETAINED
                                          SHARES    AMOUNT   INVESTMENTS     SALES      EARNINGS   TOTAL
                                          -------   ------   -----------   ----------   --------   ------
<S>                                       <C>       <C>      <C>           <C>          <C>        <C>
Balance, June 30, 1994..................  174,000   $ 314        $--         $  --       $1,257    $1,571
  Sale of stock.........................    5,500      49        --            (50)          --        (1)
  Net income............................       --      --        --             --          448       448
  Dividends.............................       --      --        --             --         (300)     (300)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1995..................  179,500     363        --            (50)       1,405     1,718
  Sale of stock.........................    4,000      42        --            (42)          --        --
  Repurchase of stock...................   (6,528)     (8)       --             --          (59)      (67)
  Unrealized gain on investments........       --      --         5             --           --         5
  Net income............................       --      --        --             --          293       293
  Dividends.............................       --      --        --             --         (215)     (215)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1996..................  176,972     397         5            (92)       1,424     1,734
  Sale of stock.........................    8,080      35        --            (35)          --        --
  Repurchase of stock...................  (37,850)   (163)       --             --         (138)     (301)
  Unrealized gain on investments........       --      --         4             --           --         4
  Redeemable common stock...............   (9,175)     --        --             --         (300)     (300)
  Net loss..............................       --      --        --             --         (353)     (353)
  Dividends.............................       --      --        --             --         (154)     (154)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1997..................  138,027     269         9           (127)         479       630
  Sale of stock.........................    5,390      44        --            (44)          --        --
  Unrealized gain on investments........       --      --        (9)            --           --        (9)
  Dividends.............................       --      --        --             --         (350)     (350)
  Net income............................       --      --        --             --          752       752
                                          -------   -----        --          -----       ------    ------
Balance, May 4, 1998....................  143,417   $ 313        $--         $(171)      $  881    $1,023
                                          =======   =====        ==          =====       ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-46
<PAGE>   105
 
                          DECKER COMMUNICATIONS, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                      PERIOD FROM
                                                               YEAR ENDED JUNE 30,    JULY 1, 1997
                                                              ---------------------        TO
                                                              1995    1996    1997    MAY 4, 1998
                                                              -----   -----   -----   ------------
<S>                                                           <C>     <C>     <C>     <C>
Cash flows from operating activities:
  Net income (loss).........................................  $ 448   $ 293   $(353)     $  752
                                                              -----   -----   -----      ------
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
       Depreciation and amortization........................    127     223     194         152
       Non-cash compensation................................     --      --     825          --
       (Gain) loss on disposal of property and equipment....     --      (3)     12          --
       Changes in operating assets and liabilities:
          (Increase) decrease in accounts receivable,
             trade..........................................   (210)     62    (366)        413
          (Increase) decrease in related party receivable...     --      --      --        (199)
          (Increase) decrease in prepaid expenses and other
             current assets.................................     12      20      30         (29)
          (Increase) decrease in other assets...............    (18)      6     (12)          7
          Increase (decrease) in accounts payable and
             accrued expenses...............................    247     (30)    119        (283)
          Increase (decrease) in deferred revenue...........    (40)    (61)     (3)         31
          Increase (decrease) in other current
             liabilities....................................     --      --      --         223
                                                              -----   -----   -----      ------
            Total adjustments...............................    118     217     799         315
                                                              -----   -----   -----      ------
            Net cash provided by operating activities.......    566     510     446       1,067
                                                              -----   -----   -----      ------
Cash flows from investing activities:
  Net change in investments.................................   (344)    131      36         133
  Purchases of property and equipment.......................   (136)   (443)    (56)       (167)
  Proceeds from sale of property and equipment..............     --       9       9           3
                                                              -----   -----   -----      ------
            Net cash (used in) provided by investing
                activities..................................   (480)   (303)    (11)        (31)
                                                              -----   -----   -----      ------
Cash flows from financing activities:
  Dividends.................................................   (300)   (215)   (154)       (544)
  Repurchase of stock.......................................     --     (67)    (35)         --
  Payments of notes payable.................................     (6)     --     (52)        (11)
  Repayments of long-term debt..............................     --      --      --         (35)
                                                              -----   -----   -----      ------
            Net cash used in financing activities...........   (306)   (282)   (241)       (590)
                                                              -----   -----   -----      ------
Net (decrease) increase in cash and cash equivalents........   (220)    (75)    194         446
Cash and cash equivalents, beginning of period..............    609     389     314         508
                                                              -----   -----   -----      ------
Cash and cash equivalents, end of period....................  $ 389   $ 314   $ 508      $  954
                                                              =====   =====   =====      ======
Supplemental disclosure:
  Cash paid for interest....................................  $  --   $  --   $  80      $   38
                                                              =====   =====   =====      ======
Supplemental disclosure of non-cash item:
  Increase (decrease) in market value of investments........  $  19   $ (11)  $   4      $   (9)
                                                              =====   =====   =====      ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-47
<PAGE>   106
 
                          DECKER COMMUNICATIONS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
(1)  NATURE OF OPERATIONS
 
     Decker Communications, Inc. (the "Company") was founded in 1979. The
Company provides instructor-led training to businesses to improve employees'
business communication skills and communication between management and
employees. Revenue is derived primarily from fees charged to participants in its
instructor-led training programs.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenues are recognized as products and services are provided.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Investments
 
     Marketable investment securities consist of U.S. treasury bills and equity
securities in various mutual funds. The investments are stated at fair market
value and are accounted for as available for sale securities under the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Unrealized gains are
included as a separate component of stockholders' equity.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the lease term.
 
  Fair Value of Financial instruments
 
     Financial instruments of the Company consist of cash and cash equivalents,
investments, accounts and notes receivable, accounts payable and accrued
liabilities. The carrying value of these financial instruments approximates
their fair value because of the short maturity of these instruments. Based upon
borrowing rates currently available to the Company for issuance of similar debt
with similar terms and remaining maturities, the estimated fair value of the
long-term debt approximates its carrying amount.
 
                                      F-48
<PAGE>   107
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Library of Copyrighted Materials
 
     The Company derives a substantial portion of its revenue from training
programs which are based on its library of copyrighted materials and other
materials developed within the Company. Costs associated with the development of
these materials have been expensed as incurred.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company has a note receivable from a stockholder and officer of the
Company for the purchase of stock. The balance of this note was $92 and $127 at
June 30, 1996 and 1997, respectively. The note bears interest at the prevailing
rate and is secured by shares of Company stock and may be repaid by cash or
redemption of the stock to the Company. The note is reflected as a reduction of
stockholders' equity in the accompanying balance sheets.
 
(4)  INVESTMENTS
 
     Investments consist of the following:
 
<TABLE>
<CAPTION>
                                                                JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
U.S. Treasury Bills.........................................  $433    $381
Mutual Funds................................................   127     143
                                                              ----    ----
          Total cost........................................  $560    $524
Unrealized gain.............................................     5       9
                                                              ----    ----
          Total fair value..................................  $565    $533
                                                              ====    ====
</TABLE>
 
                                      F-49
<PAGE>   108
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                                 JUNE 30,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
<S>                                                          <C>       <C>
Equipment..................................................  $  665       591
Furniture and fixtures.....................................     336       334
Software...................................................     129       143
Leasehold improvements.....................................      17        19
                                                             ------    ------
                                                              1,147     1,087
Accumulated depreciation and amortization..................     650       749
                                                             ------    ------
          Property and equipment, net......................  $  497       338
                                                             ======    ======
</TABLE>
 
     Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 and for the period from July 1,
1997 to May 4, 1998 was $127, $223, $194 and $152, respectively.
 
(6)  NOTE PAYABLE
 
     In July 1996, the Company entered into a stock repurchase agreement with a
stockholder of the Company to repurchase 33,350 shares of common stock. In
connection with the agreement, the Company issued a secured promissory note to
the stockholder in the amount of $1,091. Of the total purchase price, $825 has
been attributed to compensation expense. The balance has been treated as a
repurchase of common stock. The note bears interest at 7.5%, with principal and
interest due monthly through June 30, 2009. The note is secured by all tangible
and intangible assets of the Company.
 
     In connection with the stock repurchase agreement, the stockholder has the
option to accelerate the payment of a portion of the outstanding balance upon
the occurrence of certain events. One such event has occurred, as discussed in
note 1, giving the stockholder the right to accelerate approximately $416 of the
principal balance. This amount has been classified as current in the
accompanying balance sheet at June 30, 1997. The stockholder has not yet chosen
to accelerate the note.
 
     Also in connection with the stock repurchase agreement, the Company issued
a put option to the stockholder which gave him the right, upon occurrence of a
triggering event, to sell his remaining 9,175 shares of common stock to the
Company at an arbitrated value per share. Payment pursuant to this put option
would be made by amending the principal balance of the note payable by the
amount of the purchase price, effective July 1, 1999. The stockholder has not
yet chosen to exercise the put option. Common shares held under this option have
been reflected as redeemable common stock in the June 30, 1997 balance sheet.
 
     Principal payments on long-term debt are as follows:
 
<TABLE>
<CAPTION>
                YEAR ENDING JUNE 30,
                --------------------
<S>                                                   <C>
      1998..........................................  $  410
      1999..........................................      60
      2000..........................................      64
      2001..........................................      69
      2002..........................................      75
      Thereafter....................................     347
                                                      ------
          Total.....................................  $1,025
                                                      ======
</TABLE>
 
                                      F-50
<PAGE>   109
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(7)  LINE OF CREDIT
 
     The Company has a $250 line of credit agreement with a bank, with interest
payable at prime plus 1.5%. The line of credit is secured by substantially all
of the Company's assets and is guaranteed by the principal stockholder of the
Company. At June 30, 1996 and 1997, there were no amounts outstanding under the
agreement.
 
(8)  OPERATING LEASES
 
     The Company leases all of its facilities under cancelable and noncancelable
operating leases that expire on various dates through fiscal 2002. Most of these
leases generally provide for rent escalation based upon changes in real estate
taxes and operating expenses.
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
 
<TABLE>
<CAPTION>
                YEAR ENDING JUNE 30,
                --------------------
<S>                                                   <C>
      1998..........................................  $  494
      1999..........................................     502
      2000..........................................     382
      2001..........................................     374
      2002..........................................     108
                                                      ------
          Total                                       $1,860
                                                      ======
</TABLE>
 
     Rent expense for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998 was $505, $561, $510, and $427,
respectively.
 
(9)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee annual
contributions up to $1 per employee. The Company contributed $29, $20, $28, and
$36 to the plan for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998, respectively.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     The Company's three largest customers accounted for approximately 16%, 30%,
and 16% of total revenues for the years ended June 30, 1995, 1996 and 1997,
respectively. Accounts receivable from these customers represented approximately
13% and 16% of the total accounts receivable balance at June 30, 1996 and 1997,
respectively.
 
                                      F-51
<PAGE>   110
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
J. Howard & Associates, Inc.:
 
     We have audited the accompanying balance sheets of J. Howard & Associates,
Inc., as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997 and for the period from January 1,
1998 to May 4, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of J. Howard & Associates,
Inc., as of December 31, 1996 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1997 and for the period from January 1, 1997 to May 4, 1998, in conformity with
generally accepted accounting principles.
 
                                          KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-52
<PAGE>   111
 
                          J. HOWARD & ASSOCIATES, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
<S>                                                             <C>       <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $  201    $  208
  Investments...............................................        --        --
  Accounts receivable, net of allowance for doubtful
     accounts of $84 at December 31, 1996 and $74 at
     December 31, 1997......................................       724     1,166
  Due from employees and related parties....................        17       214
  Prepaid expenses..........................................        14        42
                                                                ------    ------
          Total current assets..............................       956     1,630
                                                                ------    ------
Property and equipment, net.................................       365       301
Other assets................................................        44       138
                                                                ------    ------
          Total assets......................................    $1,365    $2,069
                                                                ======    ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $   12    $   59
  Accrued expenses..........................................       106       105
  Accrued compensation......................................        32       139
  Deferred revenue..........................................       135        88
  Accrued state income taxes................................        38        41
  Distributions payable.....................................        --       103
  Current portion of long-term debt.........................        --        --
                                                                ------    ------
          Total current liabilities.........................       323       535
                                                                ------    ------
Commitments and contingencies
Stockholders' equity:
  Class A voting common stock, no par value; authorized
     100,000 shares; issued and outstanding 72,533 shares at
     December 31, 1996 and December 31, 1997................       175       175
  Class B non-voting common stock, no par value; authorized
     25,000 shares; issued and outstanding 16,267 shares at
     December 31, 1996 and December 31, 1997................        97        97
  Retained earnings.........................................       770     1,262
                                                                ------    ------
          Total stockholders' equity........................     1,042     1,534
                                                                ------    ------
          Total liabilities and stockholders' equity........    $1,365    $2,069
                                                                ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-53
<PAGE>   112
 
                          J. HOWARD & ASSOCIATES, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                       PERIOD FROM
                                                          YEAR ENDED DECEMBER 31,    JANUARY 1, 1998
                                                          ------------------------         TO
                                                           1995     1996     1997      MAY 4, 1998
                                                          ------   ------   ------   ---------------
<S>                                                       <C>      <C>      <C>      <C>
Revenue.................................................  $6,251   $7,110   $7,684       $2,041
Cost of revenue.........................................   1,964    2,166    2,346          670
                                                          ------   ------   ------       ------
  Gross profit..........................................   4,287    4,944    5,338        1,371
Selling, general, and administrative expenses...........   4,158    4,559    4,748        1,476
                                                          ------   ------   ------       ------
  Income (loss) from operations.........................     129      385      590         (105)
                                                          ------   ------   ------       ------
Other income (expense):
  Interest and dividend income..........................       6       31       15            3
  Interest expense......................................      (9)      --       --           --
  Other income (expense)................................      --        3       --           --
                                                          ------   ------   ------       ------
          Total other income (expense)..................      (3)      34       15            3
                                                          ------   ------   ------       ------
          Income (loss) before
            income taxes................................     126      419      605         (102)
State income taxes......................................      10        8        5           --
                                                          ------   ------   ------       ------
          Net income (loss).............................  $  116   $  411   $  600       $ (102)
                                                          ======   ======   ======       ======
Basic income (loss) per share...........................  $ 1.45   $ 4.81   $ 6.76       $(1.15)
                                                          ======   ======   ======       ======
Weighted average shares outstanding.....................  80,000   85,500   88,800       88,800
                                                          ======   ======   ======       ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-54
<PAGE>   113
 
                          J. HOWARD & ASSOCIATES, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                       CLASS A VOTING     CLASS B NON-VOTING
                                        COMMON STOCK         COMMON STOCK
                                      ----------------    ------------------    RETAINED
                                      SHARES    AMOUNT    SHARES     AMOUNT     EARNINGS    TOTAL
                                      ------    ------    -------    -------    --------    ------
<S>                                   <C>       <C>       <C>        <C>        <C>         <C>
Balance, December 31, 1994..........  66,667     $ 64     13,333      $ 42       $1,059     $1,165
  Net income........................      --       --         --        --          116        116
  Distributions to stockholders.....      --       --         --        --         (473)      (473)
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1995..........  66,667       64     13,333        42          702        808
  Net income........................      --       --         --        --          411        411
  Distributions to stockholders.....      --       --         --        --         (343)      (343)
  Stock grant.......................   5,866      111      2,934        55           --        166
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1996..........  72,533      175     16,267        97          770      1,042
  Net income........................      --       --         --        --          600        600
  Distributions to stockholders.....      --       --         --        --         (108)      (108)
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1997..........  72,533      175     16,267        97        1,262      1,534
  Net loss..........................      --       --         --        --         (102)      (102)
                                      ------     ----     ------      ----       ------     ------
Balance, May 4, 1998................  72,533     $175     16,267      $ 97       $1,160     $1,432
                                      ======     ====     ======      ====       ======     ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-55
<PAGE>   114
 
                          J. HOWARD & ASSOCIATES, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                           PERIOD FROM
                                                              YEAR ENDED DECEMBER 31,    JANUARY 1, 1998
                                                              ------------------------         TO
                                                               1995     1996     1997      MAY 4, 1998
                                                              ------   ------   ------   ---------------
<S>                                                           <C>      <C>      <C>      <C>
Cash flows from operating activities:
  Net income (loss).........................................  $ 116    $ 411    $ 600         $(102)
                                                              -----    -----    -----         -----
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Depreciation and amortization........................     95      104      139            45
       Non-cash compensation................................     --      166       --           152
       Loss on sale of property and equipment...............     --       --       15            --
       Changes in operating assets and liabilities:
          (Increase) decrease in accounts receivable........   (116)      37     (442)          (86)
          (Increase) decrease in prepaid expenses...........     10      (10)     (28)           (5)
          Increase in investments...........................     --       --       --           (10)
          (Increase) decrease in other assets...............     12        9      (94)          106
          Increase (decrease) in accounts payable and
            accrued expenses................................    153     (282)     256           237
          Increase in state income taxes....................      8       11        3            --
          Increase (decrease) in deferred revenue...........     91       18      (47)          (65)
                                                              -----    -----    -----         -----
            Total adjustments...............................    253       53     (198)          374
                                                              -----    -----    -----         -----
            Net cash provided by (used in) operating
                activities..................................    369      464      402           272
                                                              -----    -----    -----         -----
Cash flows from investing activities:
  Purchases of property and equipment.......................    (50)    (299)    (101)          (81)
  Proceeds from sale of property and equipment..............     --       --       11            --
  Net (increase) decrease in amounts due from employees and
     related parties........................................     (8)      51     (197)          156
                                                              -----    -----    -----         -----
            Net cash used in investing activities...........    (58)    (248)    (287)           75
                                                              -----    -----    -----         -----
Cash flows from financing activities:
  Proceeds (payments) on long-term debt.....................    (42)      --       --           385
  Distributions to stockholders.............................   (335)    (481)    (108)         (103)
                                                              -----    -----    -----         -----
            Net cash (used in) provided by financing
                activities..................................   (377)    (481)    (108)          282
                                                              -----    -----    -----         -----
Net increase (decrease) in cash and cash equivalents........    (66)    (265)       7           629
Cash and cash equivalents, beginning of period..............    532      466      201           208
                                                              -----    -----    -----         -----
Cash and cash equivalents, end of period....................  $ 466    $ 201      208         $ 837
                                                              =====    =====    =====         =====
Supplemental disclosure:
  Cash paid for interest....................................  $   9    $  --    $  --         $  --
                                                              =====    =====    =====         =====
</TABLE>
 
                   See accompanying notes to financial statements.
 
                                      F-56
<PAGE>   115
 
                          J. HOWARD & ASSOCIATES, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     J. Howard & Associates, Inc. (the "Company") was founded in 1977. The
Company provides instructor-led training to individual managers and client
companies to identify and address potential obstacles to improving workplace
productivity, including race and gender issues, sexual harassment and failure of
employees to take measured risks. Revenue is derived primarily from
instructor-led seminars and, to a lesser extent, from rendering consulting
services.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as products and services are provided.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using accelerated
and straight-line methods over periods ranging from three to seven years.
Leasehold improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
                                      F-57
<PAGE>   116
                          J. HOWARD & ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     Due from employees and related parties consists of the following at:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Due from The Efficacy Institute, Inc........................  $14     $ 39
Due from (to) stockholders..................................   (9)     173
Due from employees..........................................   12        2
                                                              ---     ----
                                                              $17     $214
                                                              ===     ====
</TABLE>
 
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
<S>                                                          <C>       <C>
Equipment..................................................  $  677    $  631
Furniture and fixtures.....................................     255       270
Leasehold improvements.....................................      49        49
Investment art.............................................      21        21
Computer software..........................................     113       207
Vehicles...................................................      38        38
                                                             ------    ------
                                                              1,153     1,216
Accumulated depreciation and amortization..................     788       915
                                                             ------    ------
          Property and equipment, net......................  $  365    $  301
                                                             ======    ======
</TABLE>
 
     Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995, 1996 and 1997 and for the period from January
1, 1998 to May 4, 1998 was $95, $104, $139 and $45, respectively.
 
(5)  LINE OF CREDIT
 
     The Company has a secured revolving line of credit agreement which permits
borrowings of up to $500 at the bank's base rate plus one percent. No amounts
were outstanding under this agreement at December 31, 1995, 1996 and 1997.
Substantially all assets of the Company are pledged as collateral under this
agreement.
 
(6)  DISTRIBUTIONS TO STOCKHOLDERS
 
     As discussed in note 2, the stockholders are taxed on their proportionate
share of the Company's taxable income. It has been the Company's policy to make
distributions to the stockholders for the purpose of funding these income tax
obligations.
 
(7)  LEASE COMMITMENTS
 
     The Company is committed under various noncancelable operating leases for
office space and equipment through June 2005. Lease expense charged to
operations was $256 in 1995, $247 in 1996 and $149 in 1997 and $55 for the
period from January 1, 1998 to May 4, 1998.
 
                                      F-58
<PAGE>   117
                          J. HOWARD & ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
 
<TABLE>
<CAPTION>
              YEAR ENDING DECEMBER 31,
              ------------------------
<S>                                                   <C>
1998................................................  $  344
1999................................................     616
2000................................................     617
2001................................................     577
2002................................................     554
Thereafter..........................................   1,372
                                                      ------
                                                      $4,080
                                                      ======
</TABLE>
 
(8)  STOCKHOLDERS' EQUITY
 
     During the year ended December 31, 1996, 5,866 shares of Class A common
stock (voting) no par value and 2,934 shares of Class B common stock
(non-voting) no par value were issued 50% each to two new shareholders in
recognition of compensation expense of $111 and $55, respectively.
 
     On June 30, 1995, the Company approved an increase in the authorized common
stock Class A (voting) from 12,500 shares to 100,000 shares and common stock
Class B (non-voting) from 1,000 shares to 25,000 shares. Additionally, the
Company approved an exchange of 40 shares of the newly authorized shares for
each share of the previously authorized shares (or a 40 for 1 stock split). All
share data has been retroactively adjusted to reflect the stock split.
 
(9)  EMPLOYEE BENEFITS
 
     The Company maintains a defined contribution retirement plan for all
eligible employees. Company contributions are at the discretion of the Board of
Directors, but cannot exceed the maximum amount deductible under applicable
provisions of the Internal Revenue Code.
 
     Contributions to the plan amounted to $34 for each of the years ended
December 31, 1995, 1996 and 1997. For the period from January 1, 1998 to May 4,
1998, contributions to the plan were $12.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     The Company's three largest customers accounted for approximately 30%, 63%
and 34% of net program revenues for the years ended December 31, 1995, 1996 and
1997, respectively. Accounts receivable from these customers approximated $514
and $280 at December 31, 1996 and 1997, respectively.
 
     The Company maintains cash deposits in two banks located in eastern
Massachusetts and in a money market mutual fund account sponsored by a
registered broker-dealer. Cash deposits in excess of FDIC insurance limits
approximated $140 and $46 at December 31, 1996 and 1997, respectively.
 
                                      F-59
<PAGE>   118
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Robert Steinmetz, Ph.D., and Associates, Inc.
d/b/a Learning Systems Sciences:
 
     We have audited the accompanying balance sheets of Robert Steinmetz, Ph.D.,
and Associates, Inc., d/b/a Learning Systems Sciences as of December 31, 1996
and 1997 and the related statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997,
and for the period from January 1, 1998 to May 4, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robert Steinmetz, Ph.D., and
Associates, Inc., d/b/a Learning Systems Sciences as of December 31, 1996 and
1997 and the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 1997, and for the period from
January 1, 1998 to May 4, 1998 in conformity with generally accepted accounting
principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-60
<PAGE>   119
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
<S>                                                           <C>       <C>
Current assets:
  Cash and cash equivalents.................................  $  274    $  174
  Accounts receivable, net of allowance for doubtful
     accounts of $88 at December 31, 1996 and 1997..........     703       984
  Costs in excess of billings...............................     267       561
  Prepaid expenses and other current assets.................      53        43
                                                              ------    ------
          Total current assets..............................   1,297     1,762
                                                              ------    ------
Property and equipment, net.................................     129       153
Other assets................................................     103       104
                                                              ------    ------
          Total assets......................................  $1,529    $2,019
                                                              ======    ======
 
Current liabilities:
  Accounts payable..........................................  $   64    $  185
  Accrued expenses..........................................     166        40
  Accrued compensation......................................     124       161
  Billings in excess of costs...............................     710       414
                                                              ------    ------
          Total current liabilities.........................   1,064       800
                                                              ------    ------
Commitments and contingencies
Stockholders' equity:
  Common stock, stated value; 14,000,000 shares authorized,
     issued and outstanding.................................       3         3
  Retained earnings.........................................     462     1,216
                                                              ------    ------
          Total stockholders' equity........................     465     1,219
                                                              ------    ------
          Total liabilities and stockholders' equity........  $1,529    $2,019
                                                              ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-61
<PAGE>   120
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,            PERIOD FROM
                                                ------------------------------------   JANUARY 1, 1998
                                                   1995         1996         1997      TO MAY 4, 1998
                                                ----------   ----------   ----------   ---------------
<S>                                             <C>          <C>          <C>          <C>
Revenue.......................................  $    3,332   $    5,123   $    5,681     $    2,861
Cost of revenue...............................       1,390        1,696        2,202            909
                                                ----------   ----------   ----------     ----------
  Gross profit................................       1,942        3,427        3,479          1,952
Selling, general and administrative
  expenses....................................       1,767        3,079        2,226            633
                                                ----------   ----------   ----------     ----------
          Income from operations..............         175          348        1,253          1,319
                                                ----------   ----------   ----------     ----------
Other income (expense):
  Other.......................................         (49)          --           --             --
  Interest income, net........................           2            9           15              5
                                                ----------   ----------   ----------     ----------
          Total other income (expense)........         (47)           9           15              5
                                                ----------   ----------   ----------     ----------
          Income before income taxes..........         128          357        1,268          1,324
Income taxes..................................          86            7           18              4
                                                ----------   ----------   ----------     ----------
          Net income..........................  $       42   $      350   $    1,250     $    1,320
                                                ==========   ==========   ==========     ==========
Basic income per share........................  $       --   $      .03   $      .09     $      .09
                                                ==========   ==========   ==========     ==========
Weighted average shares outstanding...........  14,000,000   14,000,000   14,000,000     14,000,000
                                                ==========   ==========   ==========     ==========
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-62
<PAGE>   121
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                          COMMON STOCK
                                                      --------------------    RETAINED
                                                        SHARES      AMOUNT    EARNINGS    TOTAL
                                                      ----------    ------    --------    ------
<S>                                                   <C>           <C>       <C>         <C>
Balance, December 31, 1994..........................  14,000,000      $3       $   70     $   73
  Net income........................................          --      --           42         42
                                                      ----------      --       ------     ------
Balance, December 31, 1995..........................  14,000,000       3          112        115
  Net income........................................          --      --          350        350
                                                      ----------      --       ------     ------
Balance, December 31, 1996..........................  14,000,000       3          462        465
  Dividend                                                    --      --         (496)      (496)
  Net income........................................          --      --        1,250      1,250
                                                      ----------      --       ------     ------
Balance, December 31, 1997..........................  14,000,000       3        1,216      1,219
  Dividend                                                    --      --         (279)      (279)
  Net income........................................          --      --        1,320      1,320
                                                      ----------      --       ------     ------
Balance, May 4, 1998................................  14,000,000      $3       $2,257     $2,260
                                                      ==========      ==       ======     ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-63
<PAGE>   122
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,      PERIOD FROM
                                                        -------------------------   JANUARY 1, 1998
                                                         1995     1996     1997     TO MAY 4, 1998
                                                        ------   ------   -------   ---------------
<S>                                                     <C>      <C>      <C>       <C>
Cash flows from operating activities:
  Net income..........................................  $  42    $ 350    $1,250        $1,320
                                                        -----    -----    ------        ------
  Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization..................     48       43        62            20
       Changes in operating assets and liabilities:
          Increase in accounts receivable.............   (467)    (195)     (281)         (169)
          (Increase) decrease in prepaid expenses and
            other current assets......................     12      (30)       10           (70)
          (Increase) decrease in costs in excess of
            billings..................................   (184)      14      (294)          109
          (Increase) decrease in other assets.........    (17)     (19)       (1)           14
          Increase (decrease) in accounts payable and
            accrued expenses..........................     50      115        32           111
          Increase in deferred revenue................     --       --        --            93
          Increase (decrease) in billings in excess of
            costs.....................................    560       37      (296)         (414)
                                                        -----    -----    ------        ------
            Total adjustments.........................      2      (35)     (768)         (309)
                                                        -----    -----    ------        ------
            Net cash provided by operating
               activities.............................     44      315       482         1,011
                                                        -----    -----    ------        ------
Cash flows from investing activity:
  Purchases of property and equipment.................    (84)     (85)      (86)         (271)
                                                        -----    -----    ------        ------
Cash flows from financing activity:
  Dividend............................................     --       --      (496)         (629)
                                                        -----    -----    ------        ------
            Net (decrease) increase in cash and cash
               equivalents............................    (40)     230      (100)          111
Cash and cash equivalents, beginning of period........     84       44       274           174
                                                        -----    -----    ------        ------
Cash and cash equivalents, end of period..............  $  44    $ 274    $  174        $  285
                                                        =====    =====    ======        ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-64
<PAGE>   123
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning Systems
Sciences, was founded in 1979. The Company creates customized training products
that generally are designed to facilitate faster learning of customer interface
devices and higher productivity of retail associates. Revenue is derived
primarily from the design, development and delivery of its products.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     The Company follows the percentage-of-completion method of accounting for
contracts. Accordingly, income is recognized in the ratio that costs incurred
bear to estimated total costs. Adjustments to cost estimates are made
periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. The aggregate of
costs incurred and income recognized on uncompleted contracts in excess of
related billings is shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized
is shown as a current liability.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are recorded at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     Effective August 31, 1995, the Company elected to be treated as an S
corporation. Therefore, the net income of the Company is reported by the
stockholders. Accordingly, no provision for federal income taxes
 
                                      F-65
<PAGE>   124
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
 
has been included in the financial statements for the periods subsequent to that
date. Only certain state income taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Machinery and equipment.....................................  $248    $328
Furniture and fixtures......................................    48      54
Automobiles.................................................    10      10
Leasehold improvements......................................    12      12
                                                              ----    ----
                                                               318     404
Less accumulated depreciation and amortization..............   189     251
                                                              ----    ----
          Property and equipment, net.......................  $129    $153
                                                              ====    ====
</TABLE>
 
     Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995, 1996 and 1997 and for the period from January
1 to May 4, 1998 was $48, $43, $62 and $20, respectively.
 
(4)  OPERATING LEASES
 
     Operating lease commitments consist of facility and automobile rentals.
Future minimum lease payments under all noncancelable operating leases are as
follows:
 
<TABLE>
<CAPTION>
              YEAR ENDING DECEMBER 31,
<S>                                                     <C>
1998................................................    $135
1999................................................      39
                                                        ----
                                                        $174
                                                        ====
</TABLE>
 
     Lease expense for the years ended December 31, 1995, 1996 and 1997 and for
the period from January 1 to May 4, 1998 totaled $93, $112, $136 and $50,
respectively.
 
(5)  EMPLOYEE BENEFITS
 
     The Company has established a profit sharing plan for the benefit of its
employees. Company contributions are made at the discretion of the Board of
Directors. The Company contributed $83 to the
 
                                      F-66
<PAGE>   125
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
 
plan in 1995. No contribution was made for the years ended December 31, 1996 or
1997, or for the period from January 1 to May 4, 1998.
 
(6)  CONCENTRATION OF CREDIT RISK
 
     The Company had three customers that accounted for 41% of total revenue and
two customers that accounted for 27% of total revenue for the years ended
December 31, 1996 and 1997, respectively. Accounts receivable from these
customers represented approximately 50% and 28% of the total accounts receivable
balance at December 31, 1996 and 1997, respectively.
 
(7)  STOCK SPLIT
 
     Subsequent to December 31, 1997, the Company declared a stock split of
14,000-for-1 in the form of a stock dividend. All share and per share
information has been restated to reflect the split.
 
                                      F-67
<PAGE>   126
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
MOHR Retail Learning Systems, Inc.:
 
     We have audited the accompanying balance sheets of MOHR Retail Learning
Systems, Inc., as of June 30, 1996 and 1997, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended June 30, 1997 and for the period from July 1, 1997 to May
4, 1998. These financial statements are the responsibility of MOHR Retail
Learning Systems, Inc.'s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MOHR Retail Learning
Systems, Inc. as of June 30, 1996 and 1997, and the results of its operations
and its cash flows for each of the years in the two-year period ended June 30,
1997, and for the period from July 1, 1997 to May 4, 1998, in conformity with
generally accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-68
<PAGE>   127
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $221    $260
  Accounts receivable, net of allowance for doubtful
     accounts of $46 at June 30, 1996 and 1997..............   211     548
  Inventory.................................................    99     133
  Prepaid expenses..........................................    11      14
                                                              ----    ----
          Total current assets..............................   542     955
Property and equipment, net.................................    18      44
                                                              ----    ----
          Total assets......................................  $560    $999
                                                              ====    ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $118    $ 74
  Accrued expenses..........................................   320     295
  Accrued compensation......................................    12      54
  Deferred revenue..........................................    48      73
                                                              ----    ----
          Total current liabilities.........................   498     496
                                                              ----    ----
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 2,500 shares authorized; 100
     shares issued and outstanding..........................     4       4
  Retained earnings.........................................    58     499
                                                              ----    ----
          Total stockholders' equity........................    62     503
                                                              ----    ----
          Total liabilities and stockholders' equity........  $560    $999
                                                              ====    ====
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-69
<PAGE>   128
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED       PERIOD FROM
                                                                  JUNE 30,        JULY 1, 1997
                                                              ----------------         TO
                                                               1996      1997     MAY 4, 1998
                                                              ------    ------    ------------
<S>                                                           <C>       <C>       <C>
Revenue.....................................................  $2,171    $3,015       $3,237
Cost of revenue.............................................     677       825        1,009
                                                              ------    ------       ------
  Gross profit..............................................   1,494     2,190        2,228
Selling, general and administrative expenses................   1,151     1,745        1,510
                                                              ------    ------       ------
  Income from operations....................................     343       445          718
Interest income (expense)...................................      (3)        3            5
                                                              ------    ------       ------
  Income before income taxes................................     340       448          723
State income taxes..........................................       1         7            2
                                                              ------    ------       ------
          Net income........................................  $  339    $  441       $  721
                                                              ======    ======       ======
Basic income per share......................................  $3,390    $4,410       $7,210
                                                              ======    ======       ======
Weighted average shares outstanding.........................     100       100          100
                                                              ======    ======       ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-70
<PAGE>   129
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                  COMMON STOCK
                                                ----------------      RETAINED EARNINGS
                                                SHARES    AMOUNT    (ACCUMULATED DEFICIT)     TOTAL
                                                ------    ------    ---------------------    -------
<S>                                             <C>       <C>       <C>                      <C>
Balance, June 30, 1995........................   100       $ 4             $  (281)          $  (277)
  Net income..................................    --        --                 339               339
                                                 ---       ---             -------           -------
Balance, June 30, 1996........................   100         4                  58                62
  Net income..................................    --        --                 441               441
                                                 ---       ---             -------           -------
Balance, June 30, 1997........................   100         4                 499               503
  Net income..................................    --        --                 721               721
                                                 ---       ---             -------           -------
Balance, May 4, 1998..........................   100       $ 4             $ 1,220           $ 1,224
                                                 ===       ===             =======           =======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-71
<PAGE>   130
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                                 JUNE 30,         PERIOD FROM
                                                              --------------    JULY 1, 1997 TO
                                                              1996     1997       MAY 4, 1998
                                                              -----    -----    ---------------
<S>                                                           <C>      <C>      <C>
Cash flows from operating activities:
  Net income................................................  $ 339    $ 441         $ 721
                                                              -----    -----         -----
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization........................     10       15            20
       Changes in operating assets and liabilities:
          Increase in accounts receivable...................    (99)    (337)         (304)
          (Increase) decrease in inventory..................      4      (34)           (5)
          (Increase) decrease in prepaid expenses...........      3       (3)          (31)
          Increase (decrease) in accounts payable...........     (1)     (44)           21
          Increase (decrease) in accrued expenses...........    (15)      17          (218)
          Increase (decrease) in deferred revenue...........    (29)      25           131
                                                              -----    -----         -----
            Total adjustments...............................   (127)    (361)         (386)
                                                              -----    -----         -----
            Net cash provided by operating activities.......    212       80           335
                                                              -----    -----         -----
Cash flows from investing activities:
  Purchases of property and equipment.......................     (8)     (41)          (19)
  Net increase in amounts due from employees and related
     parties................................................     --       --           (49)
                                                              -----    -----         -----
            Net cash used in investing activities...........     (8)     (41)          (68)
                                                              -----    -----         -----
Net increase (decrease) in cash and cash equivalents........    204       39           267
Cash and cash equivalents, beginning of period..............     17      221           260
                                                              -----    -----         -----
Cash and cash equivalents, end of period....................  $ 221    $ 260         $ 527
                                                              =====    =====         =====
Supplemental disclosure:
  Cash paid for interest....................................  $  --    $   3         $   7
                                                              =====    =====         =====
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-72
<PAGE>   131
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     MOHR Retail Learning Systems, Inc. (the "Company") was founded in 1991. The
Company offers train-the-trainer seminars to help clients in the retail industry
to improve productivity by fostering a customer oriented focus at the sales
management and associate levels. In some of its programs, the Company trains
employees directly through instructor-led seminars. Revenue is derived primarily
from the licensing to clients of the right to use the Company's training
programs. Revenue is received on a participant or site basis.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed. The Company contracts with
customers to provide materials and training seminars. Deferred revenue is
recognized for payments received prior to services being performed.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Inventory
 
     The Company owns training supplies and manuals which are accounted for
using the lower of cost first-in, first-out (FIFO) or market basis of
accounting.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over five years. Leasehold improvements are amortized over
the term of the lease.
 
  Fair Value of Financial Instruments
 
     The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying amount of these financial instruments approximates fair value because
of the short maturity of those instruments.
 
                                      F-73
<PAGE>   132
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
discussed.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                                JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Equipment...................................................  $34      61
Furniture...................................................    9      19
Leasehold improvements......................................   --       4
                                                              ---     ---
                                                               43      84
Accumulated depreciation and amortization...................   25      40
                                                              ---     ---
          Property and equipment, net.......................  $18      44
                                                              ===     ===
</TABLE>
 
     Depreciation and amortization expense related to property and equipment was
$10 and $15 in the years ended June 30, 1996 and 1997, respectively, and $20 for
the period from July 1, 1997 to May 4, 1998.
 
(4)  LEASE COMMITMENTS
 
     The Company is committed under various noncancelable operating leases for
office space and equipment through February 2000. Lease expense for the years
ended June 30, 1996 and 1997 was $18 and $34, respectively. For the period from
July 1, 1997 to May 4, 1998 was $31. Future minimum lease payments under all
noncancelable operating leases are as follows:
 
<TABLE>
<CAPTION>
                 YEAR ENDING JUNE 30,
<S>                                                      <C>
      1998.............................................  $41
      1999.............................................   40
      2000.............................................    1
                                                         ---
           Total.......................................  $82
                                                         ===
</TABLE>
 
(5)  EMPLOYEE BENEFITS
 
     Eligible employees of the Company participate in a profit sharing plan
sponsored by the Company. The Plan provides that the Company make discretionary
contributions to the Plan. The Company made
 
                                      F-74
<PAGE>   133
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
contributions of $145, $104 and $51 for the years ended June 30, 1996 and 1997,
and for the period from July 1, 1997 to May 4, 1998 respectively.
 
(6)  CONCENTRATION OF CREDIT RISK
 
     The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $108 at
June 30, 1997. The Company has not incurred losses related to these balances to
date.
 
     For the year ended June 30, 1996, the Company had one customer that
accounted for 11 percent of total revenue. For the year ended June 30, 1997, no
customer represented greater than 10 percent of total revenue.
 
                                      F-75
<PAGE>   134
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Novations Group, Inc.:
 
     We have audited the accompanying balance sheets of Novations Group, Inc.,
as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997 and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Novations Group, Inc., as of
June 30, 1996 and 1997, and the results of its operations and its cash flows for
each of the years in the three-year period ended June 30, 1997 and for the
period from July 1, 1997 to May 4, 1998 in conformity with generally accepted
accounting principles.
 
                                          KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-76
<PAGE>   135
 
                             NOVATIONS GROUP, INC.
 
                                 BALANCE SHEETS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
<S>                                                           <C>       <C>
Current assets:
  Cash and cash equivalents.................................  $   17    $   88
  Accounts receivable, net of allowance for doubtful
     accounts of $158.......................................   1,976     2,202
  Receivable from related parties...........................     179       414
  Prepaid expenses..........................................      63       115
                                                              ------    ------
          Total current assets..............................   2,235     2,819
Property and equipment, net.................................     552       492
                                                              ------    ------
          Total assets......................................  $2,787    $3,311
                                                              ======    ======
 
Current liabilities:
  Current portion of notes payable..........................   1,079     1,298
  Accounts payable..........................................     225       118
  Accrued compensation......................................     836       803
  Accrued expenses..........................................     275       177
  Deferred income taxes.....................................      --       415
                                                              ------    ------
          Total current liabilities.........................   2,415     2,811
                                                              ------    ------
Notes payable...............................................     459       361
Commitments and contingencies
Stockholders' equity:
  Common stock, $1.00 par value; 1,000,000 shares
     authorized; 1,000 shares issued and outstanding at June
     30, 1996 and 1997, respectively........................       1         1
  Retained earnings (deficit)...............................     (88)      138
                                                              ------    ------
          Total stockholders' equity (deficit)..............     (87)      139
                                                              ------    ------
          Total liabilities and stockholders' equity........  $2,787    $3,311
                                                              ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-77
<PAGE>   136
 
                             NOVATIONS GROUP, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30,          PERIOD FROM
                                                    --------------------------    JULY 1, 1997 TO
                                                     1995      1996      1997       MAY 4, 1998
                                                    ------    ------    ------    ---------------
<S>                                                 <C>       <C>       <C>       <C>
Revenue...........................................  $7,175    $9,039    $9,018        $9,228
Cost of revenue...................................   3,885     4,733     4,839         4,356
                                                    ------    ------    ------        ------
          Gross profit............................   3,290     4,306     4,179         4,872
Selling, general, and administrative expenses.....   3,167     4,094     3,315         3,956
                                                    ------    ------    ------        ------
          Income from operations..................     123       212       864           916
Interest expense, net.............................      98        98       137           196
                                                    ------    ------    ------        ------
          Income before income taxes..............      25       114       727           720
Income taxes......................................      22        40       435           367
                                                    ------    ------    ------        ------
          Net income..............................  $    3    $   74    $  292        $  353
                                                    ======    ======    ======        ======
Basic income per share............................  $    3    $   74    $  292        $  353
                                                    ======    ======    ======        ======
Weighted average shares outstanding...............   1,000     1,000     1,000         1,000
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-78
<PAGE>   137
 
                             NOVATIONS GROUP, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                             RETAINED
                                                         COMMON STOCK        EARNINGS
                                                       ----------------    (ACCUMULATED
                                                       SHARES    AMOUNT      DEFICIT)      TOTAL
                                                       ------    ------    ------------    -----
<S>                                                    <C>       <C>       <C>             <C>
Balance, June 30, 1994...............................   1,000     $ 1         $ (45)       $ (44)
  Net income.........................................      --      --             3            3
  Distributions to stockholders......................      --      --           (79)         (79)
                                                       ------     ---         -----        -----
Balance, June 1995...................................   1,000       1          (121)        (120)
  Net income.........................................      --      --            74           74
  Distributions to stockholders......................      --      --           (41)         (41)
                                                       ------     ---         -----        -----
Balance, June 30, 1996...............................   1,000       1           (88)         (87)
  Net income.........................................      --      --           292          292
  Distributions to stockholders......................      --      --           (66)         (66)
                                                       ------     ---         -----        -----
Balance, June 30, 1997...............................   1,000       1           138          139
  Net income.........................................      --      --           353          353
  Distributions to stockholders......................      --      --           (11)         (11)
                                                       ------     ---         -----        -----
Balance, May 4, 1998.................................   1,000     $ 1         $ 480        $ 481
                                                       ======     ===         =====        =====
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-79
<PAGE>   138
 
                             NOVATIONS GROUP, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED JUNE 30,        PERIOD FROM
                                                              -----------------------    JULY 1, 1997 TO
                                                              1995     1996     1997       MAY 4, 1998
                                                              -----    -----    -----    ---------------
<S>                                                           <C>      <C>      <C>      <C>
Cash flows from operating activities:
  Net income................................................  $   3    $  74    $ 292        $   353
                                                              -----    -----    -----        -------
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization..........................    203      167      197            160
     Deferred income taxes..................................     --       --      415            333
     Changes in operating assets and liabilities:
       Increase (decrease) in current portion LT debt.......     --       --       --            475
       (Increase) decrease in accounts receivable...........   (670)    (357)    (226)        (1,227)
       Increase in inventory................................     --       --       --            (89)
       (Increase) decrease in prepaid expenses..............   (250)      86     (287)           112
       Increase (decrease) in income taxes payable..........
       Increase (decrease) in accounts payable and accrued
          expenses..........................................    358      (88)    (238)           450
                                                              -----    -----    -----        -------
          Total adjustments.................................   (359)    (192)    (554)           214
                                                              -----    -----    -----        -------
          Net cash (used by) provided by operating
            activities......................................   (356)    (118)     153            567
                                                              -----    -----    -----        -------
Cash flows from investing activities:
  (Increase) decrease related party receivable..............     --       --       --             45
  Purchases of property and equipment.......................   (217)    (427)    (137)           (61)
                                                              -----    -----    -----        -------
  Cash used in investing activities.........................   (217)    (427)    (137)           (16)
                                                              -----    -----    -----        -------
Cash flows from financing activities:
  Net (repayments)/proceeds from long-term debt.............    340      117      121            (67)
  Distribution to stockholders..............................    (40)     (41)     (66)           (11)
                                                              -----    -----    -----        -------
          Net cash provided by (used in) financing
            activities......................................    300       76       55            (78)
                                                              -----    -----    -----        -------
Net (decrease) increase in cash and cash equivalents........   (273)    (469)      71            473
Cash and cash equivalents, beginning of period..............    759      486       17             88
                                                              -----    -----    -----        -------
Cash and cash equivalents, end of period....................  $ 486    $  17    $  88        $   561
                                                              =====    =====    =====        =======
Supplemental disclosure:
  Cash paid for interest....................................  $ 120    $ 120    $ 151        $   139
                                                              =====    =====    =====        =======
</TABLE>
 
                See accompanying notes to financial statements.
                                      F-80
<PAGE>   139
 
                             NOVATIONS GROUP, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
(1)  NATURE OF OPERATIONS
 
     Novations Group, Inc. (the "Company") was founded in 1986. The Company
assists clients in, among other things, clarifying and communicating their
business strategies and re-designing their organizations and work systems.
Revenue is derived primarily from fees for professional services and, to a
lesser extent, from the sale of services and products to support human resources
management.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed and products are provided.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using the
straight-line method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist of cash, marketable
securities, accounts receivable, accounts payable and accrued liabilities and
debt. The carrying value of these financial instruments approximates their fair
value due to the short maturity of these instruments. The carrying value of debt
approximates fair value because the interest rates on the debt approximate the
rates currently available to the Company.
 
  Income Taxes
 
     For periods prior to January 1, 1997, the Company elected to be treated as
an S corporation. Therefore, in such periods the net income of the Company was
reported by the stockholders, and no provision for federal income taxes was
included in the financial statements for such periods, and only certain state
taxes were paid by the Company. The Company terminated its S corporation status
effective January 1, 1997. Accordingly, for periods subsequent to January 1,
1997, the Company accounted for income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the
 
                                      F-81
<PAGE>   140
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company advanced cash to an entity controlled by the stockholders of
the Company. The balance due to the Company as of June 30, 1996 and 1997 was
$140 and $332, respectively. Also included in receivables from related parties
are employee advances of $39 and $82 at June 30, 1996 and 1997, respectively.
 
     The Company leases certain office facilities from a partnership controlled
by the Company's stockholders.
 
     The terms of the lease require annual payments of $300,000, increasing by
3% per year, through March 2002. The Company has an option to renew the lease
for an additional five-year term. The Company has guaranteed a $1.2 million note
payable to a financial institution by the partnership.
 
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
 
<TABLE>
<CAPTION>
                                                                 JUNE 30,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
<S>                                                          <C>       <C>
Computer equipment and software............................  $  922       945
Leasehold improvements.....................................     167       198
Office equipment...........................................     108       170
Furniture and fixtures.....................................      94       115
                                                             ------    ------
                                                              1,291     1,428
Accumulated depreciation and amortization..................     739       936
                                                             ------    ------
     Property and equipment, net...........................  $  552       492
                                                             ======    ======
</TABLE>
 
     Depreciation and amortization expense related to property and equipment for
the years ended June 1995, 1996 and 1997, and for the period from July 1, 1997
to May 4, 1998, was $203, $167, $197 and $160, respectively.
 
(5)  NOTES PAYABLE
 
     Notes payable consist of notes to former stockholders, with interest
imputed at 8.75%. Payments are due monthly or annually through March 2002.
 
                                      F-82
<PAGE>   141
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Aggregate maturities required on these notes at June 30, 1997 are as
follows:
 
<TABLE>
<S>                                                           <C>
      1998..................................................  $ 59
      1999..................................................    97
      2000..................................................    98
      2001..................................................    98
      2002..................................................    68
                                                              ----
           Total............................................  $420
                                                              ====
</TABLE>
 
(6)  OPERATING LEASES
 
     The Company leases all of its facilities and certain office equipment under
cancelable and noncancelable operating leases that expire on various dates
through 2003.
 
     Future minimum lease payments under all noncancelable operating leases,
including leases to related parties, are as follows:
 
<TABLE>
<CAPTION>
                    YEAR ENDING JUNE 30:
                    --------------------
<S>                                                           <C>
      1998..................................................  $  585
      1999..................................................     654
      2000..................................................     632
      2001..................................................     534
      2002..................................................     334
      Thereafter............................................      48
                                                              ------
           Total............................................  $2,787
                                                              ======
</TABLE>
 
     Lease expense for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998, was $71, $211, $385 and $483,
respectively.
 
(7)  LINE OF CREDIT
 
     The Company has a $1,500 line of credit agreement with a bank, with
interest payable at the bank's prime rate. The interest rate at June 30, 1996
and 1997 was 10 percent. The line of credit is secured by substantially all of
the Company's assets and is guaranteed by the principal stockholders of the
Company.
 
     The Company had $1,000 and $1,239 at June 30, 1996 and 1997, respectively,
outstanding under the agreement.
 
(8)  INCOME TAXES
 
     As discussed in note 2, the Company terminated its S corporation election
effective January 1, 1997.
 
     Income tax expense for the year ended June 30, 1997 consists of:
 
<TABLE>
<CAPTION>
                                            CURRENT    DEFERRED    TOTAL
                                            -------    --------    -----
<S>                                         <C>        <C>         <C>
Federal...................................    $--        $380      $380
State.....................................     20          35        55
                                              ---        ----      ----
                                              $20        $415      $435
                                              ===        ====      ====
</TABLE>
 
                                      F-83
<PAGE>   142
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Income tax expense for the year ended June 30, 1997 differs from the amount
computed by applying the U.S. federal tax rate of 34% to pretax income as a
result of the following:
 
<TABLE>
<S>                                                           <C>
Computed "expected" tax expense.............................  $ 247
Income (reduction) in income taxes resulting from:
  Change from S corporation status..........................    310
  Income earned during S corporation period.................   (135)
  State taxes net of federal benefit........................     36
  Other.....................................................    (23)
                                                              -----
                                                              $ 435
                                                              =====
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at June 30, 1997
are presented below.
 
<TABLE>
<S>                                                           <C>
Deferred tax assets:
  Accounts payable and accrued expenses.....................  $ 450
  Net operating loss carryforward...........................     93
                                                              -----
          Total gross deferred tax assets...................    543
 
Deferred tax liability:
  Accounts receivable and prepaid expenses..................   (958)
                                                              -----
Net deferred tax liability..................................  $(415)
                                                              =====
</TABLE>
 
     The net operating loss carryforward is subject to limitation in the event
of a greater than 50% change in ownership.
 
(9)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee
contributions up to a maximum of 4%. The Company contributed $44, $60, $75 and
$50 to the plan for the years ended June 30, 1995, 1996 and 1997, and for the
period from July 1, 1997 to May 4, 1998, respectively.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     For the year ended June 30, 1995, the Company had two customers that each
accounted for greater than 10 percent of revenue. For each of the years ended
June 30, 1996 and 1997, the Company had one customer that accounted for greater
than 10 percent of revenue.
 
                                      F-84
<PAGE>   143
 
                          INDEPENDENT AUDITOR'S REPORT
 
Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Star Mountain, Inc. for the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Star
Mountain, Inc. for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
 
                                          Friedman & Fuller, P.C.
 
Rockville, Maryland
February 16, 1996
 
                                      F-85
<PAGE>   144
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1997 and
for the period from January 1, 1998 to May 4, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1997 and for the period from January 1, 1998
to May 4, 1998, in conformity with generally accepted accounting principles.
 
                                            KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-86
<PAGE>   145
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                -----------------
                                                                 1996      1997
                                                                ------    -------
<S>                                                             <C>       <C>
ASSETS
Current assets:
  Cash......................................................    $   39    $   358
  Accounts receivable.......................................     4,395      6,091
  Current portion of notes receivable, related parties......       181        666
  Inventory.................................................       100        129
  Other current assets......................................        71        100
  Deferred income taxes.....................................        29        117
                                                                ------    -------
          Total current assets..............................     4,815      7,461
                                                                ------    -------
Property and equipment:
  Furniture and fixtures....................................        65        531
  Office equipment..........................................       746      1,444
  Computer software.........................................        69        114
  Leasehold improvements....................................        16         87
  Automobiles...............................................        31         73
                                                                ------    -------
                                                                   927      2,249
  Less accumulated depreciation and amortization............       423      1,303
                                                                ------    -------
                                                                   504        946
                                                                ------    -------
Other assets:
  Notes receivable, related parties, net of current
     portion................................................       267         --
  Other assets..............................................       140        459
  Land held for investment..................................       110        110
  Goodwill, net of accumulated amortization of $23 and
     $88....................................................       147      1,701
                                                                ------    -------
                                                                   664      2,270
                                                                ------    -------
          Total assets......................................    $5,983    $10,677
                                                                ======    =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable, bank........................................    $  905    $ 2,858
  Current portion of notes payable..........................        95        455
  Accounts payable..........................................     1,295      1,685
  Accrued expenses..........................................       573      1,152
  Accrued compensation......................................        --         --
  Billings in excess of costs and earnings..................     1,076      1,247
  Income taxes payable......................................        --         --
                                                                ------    -------
          Total current liabilities.........................     3,944      7,397
                                                                ------    -------
Long-term liabilities:
  Notes payable, net of current portion.....................        --        304
  Deferred income taxes.....................................        29        198
                                                                ------    -------
          Total long-term liabilities.......................        29        502
                                                                ------    -------
          Total liabilities.................................     3,973      7,899
                                                                ------    -------
Commitments and contingencies
Stockholders' equity:
  Common stock..............................................         8      2,147
  Additional paid-in capital................................     2,058         --
  Retained earnings.........................................       529      1,257
                                                                ------    -------
                                                                 2,595      3,404
  Less common stock held in treasury at cost................      (585)      (626)
                                                                ------    -------
          Total stockholders' equity........................     2,010      2,778
                                                                ------    -------
          Total liabilities and stockholders' equity........    $5,983    $10,677
                                                                ======    =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                      F-87
<PAGE>   146
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                     ---------------------------    JANUARY 1, 1998
                                                      1995      1996      1997      TO MAY 4, 1998
                                                     -------   -------   -------    ---------------
<S>                                                  <C>       <C>       <C>        <C>
Total revenue......................................  $14,306   $16,313   $23,775        $11,052
Cost of revenue....................................    8,668     9,457    14,504          6,109
                                                     -------   -------   -------        -------
  Gross profit.....................................    5,638     6,856     9,271          4,943
Operating expenses.................................    4,411     5,476     7,591          3,650
                                                     -------   -------   -------        -------
Income from operations.............................    1,227     1,380     1,680          1,293
                                                     -------   -------   -------        -------
Other income (expense):
  Interest income..................................       19        25        44             15
  Interest expense.................................      (54)      (65)     (144)          (120)
  Other, net.......................................     (200)     (339)     (306)           (32)
                                                     -------   -------   -------        -------
                                                        (235)     (379)     (406)          (137)
                                                     -------   -------   -------        -------
Income before income taxes.........................      992     1,001     1,274          1,156
Income taxes.......................................       --       397       546            457
                                                     -------   -------   -------        -------
Net income.........................................  $   992   $   604   $   728        $   699
                                                     =======   =======   =======        =======
Basic income per share.............................  $  0.11   $  0.07   $  0.09        $  0.09
                                                     =======   =======   =======        =======
Diluted income per share...........................  $  0.11   $  0.07   $  0.08        $  0.08
                                                     =======   =======   =======        =======
Weighted average shares outstanding................    8,825     8,422     8,078          8,074
                                                     =======   =======   =======        =======
Weighted average shares and potentially dilutive
  shares outstanding...............................    8,963     8,565     8,823          8,871
                                                     =======   =======   =======        =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                      F-88
<PAGE>   147
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                     COMMON STOCK      ADDITIONAL   RETAINED      TREASURY STOCK
                                  ------------------    PAID-IN     EARNINGS    ------------------
                                   SHARES     AMOUNT    CAPITAL     (DEFICIT)    SHARES     AMOUNT   TOTAL
                                  ---------   ------   ----------   ---------   ---------   ------   ------
<S>                               <C>         <C>      <C>          <C>         <C>         <C>      <C>
Balance, December 31, 1994......    740,852   $    8    $ 1,955      $ (688)           --   $  --    $1,275
Issuance of common stock upon
  exercise of options...........     11,827       --         36          --            --      --        36
Distributions to shareholders...         --       --         --        (379)           --      --      (379)
Purchase of treasury stock......         --       --         --          --        22,700     (65)      (65)
Net income......................         --       --         --         992            --      --       992
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1995......    752,679        8      1,991         (75)       22,700     (65)    1,859
Issuance of common stock upon
  exercise of options...........      9,414       --         67          --            --      --        67
Purchase of treasury stock......         --       --         --          --        65,671    (520)     (520)
Net income......................         --       --         --         604            --      --       604
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1996......    762,093        8      2,058         529        88,371    (585)    2,010
Issuance of common stock upon
  exercise of options...........     87,621       32         --          --            --      --        32
Purchase of treasury stock......         --       --         --          --        12,584     (41)      (41)
Stock split, conversion to no
  par stock.....................  8,383,023    2,058     (2,058)         --     1,110,505      --        --
Issuance of common stock........     50,735       49         --          --            --      --        49
Net income......................         --       --         --         728            --      --       728
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1997......  9,283,472    2,147    $    --       1,257     1,211,460    (626)   $2,778
Issuance of common stock........      1,553       12         --          --            --      --        12
Net income......................         --       --         --         699            --      --       699
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, May 4, 1998............  9,285,025   $2,159         --      $1,956     1,211,460   $(626)   $3,489
                                  =========   ======    =======      ======     =========   =====    ======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                      F-89
<PAGE>   148
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,          PRIOR FROM
                                                             ------------------------------   JANUARY 1, 1998
                                                               1995       1996       1997      TO MAY 4, 1998
                                                             --------   --------   --------   ---------------
<S>                                                          <C>        <C>        <C>        <C>
Cash flows from operating activities:
  Cash received from customers.............................  $ 13,419   $ 16,428   $ 23,529       $10,152
  Cash paid to suppliers and employees.....................   (12,620)   (14,890)   (22,083)       (9,679)
  Interest received........................................        19         25         44            16
  Interest paid............................................       (54)       (65)      (144)         (122)
  Income taxes paid........................................        --       (420)      (482)         (252)
                                                             --------   --------   --------       -------
          Net cash provided by operating activities........       764      1,078        864           115
                                                             --------   --------   --------       -------
Cash flows from investing activities:
  Issuance of notes receivable.............................       (64)       (96)      (218)           --
  Acquisition of property and equipment....................      (159)       (61)      (358)         (264)
  Business acquisitions....................................      (100)      (300)    (1,752)           --
  Purchase of land held for investment.....................        --       (110)        --            --
  Other....................................................        (8)         2         --            --
                                                             --------   --------   --------       -------
          Net cash used in investing activities............      (331)      (565)    (2,328)         (264)
                                                             --------   --------   --------       -------
Cash flows from financing activities:
  Net borrowings (payments) on line-of-credit..............       (15)       (86)     1,953           403
  Principal repayments on long-term debt...................        --         --       (210)         (286)
  Proceeds from other notes payable........................        25         95         --            --
  Payments on other notes payable..........................       (34)       (35)        --            --
  Proceeds from issuance of common stock...................        36         68         81            12
  Purchase of treasury stock...............................       (65)      (520)       (41)           --
  Distributions to shareholders............................      (379)        --         --            --
  Decrease in deferred income taxes........................        --         --         --            --
                                                             --------   --------   --------       -------
          Net cash provided by (used in) financing
            activities.....................................      (432)      (478)     1,783           129
                                                             --------   --------   --------       -------
Net (decrease) increase in cash............................         1         35        319           (20)
Cash, and cash equivalents, beginning of period............         3          4         39           358
                                                             --------   --------   --------       -------
Cash, and cash equivalents, end of period..................  $      4   $     39   $    358       $   338
                                                             ========   ========   ========       =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
                                      F-90
<PAGE>   149
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                             --------------------------    JANUARY 1, 1998
                                                              1995       1996     1997     TO MAY 4, 1998
                                                             -------    ------    -----    ---------------
<S>                                                          <C>        <C>       <C>      <C>
Reconciliation of net income to net cash provided by
  operating activities:
  Net income...............................................  $   992    $  604    $ 728        $   699
                                                             -------    ------    -----        -------
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization............................       96       139      314            136
  Loss on sale of assets...................................       --         4       11             --
  Deferred income taxes....................................       --        --       (9)            (6)
  Changes in assets and liabilities:
     (Increase) decrease in:
     Accounts receivable...................................   (1,053)     (637)    (417)        (2,094)
     Inventory.............................................       --        18      (29)            37
     Other current assets..................................       47       (34)      24            440
     Other assets..........................................      (25)      (69)    (237)          (183)
     Intercompany assets...................................       --        --       --            (50)
  Increase (decrease) in:
     Accounts payable......................................      425       168       90            335
     Accrued expenses......................................      116       133      218            271
     Billings in excess of costs and anticipated profits...      166       752      171            530
                                                             -------    ------    -----        -------
  Total adjustments........................................     (228)      474      136           (584)
                                                             -------    ------    -----        -------
  Net cash provided by (used in) operating activities......  $   764    $1,078    $ 864        $   115
                                                             =======    ======    =====        =======
</TABLE>
 
Non-cash investing and financing activities: In February 1997, the Company
issued a note payable of $506,000 for a portion of the purchase price of ORA. In
October 1997, the Company issued a note payable of $325,000 for a portion of the
purchase price of SED.
 
          See accompanying notes to consolidated financial statements
                                      F-91
<PAGE>   150
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1)  NATURE OF OPERATIONS
 
     Star Mountain, Inc. (together with its direct and indirect wholly-owned
subsidiaries the "Company") was founded in 1987. The Company is primarily
engaged in contracting with the U.S. Government to provide technical and
professional services in the form of computer-based training, software
development and computer applications support. In August 1996, the Company
formed a wholly-owned subsidiary, Star Digital, Inc. to acquire the assets of
Computer Visions, Inc. Star Digital, Inc. is primarily a value added distributor
of computer equipment. In February 1997, the Company acquired the stock of
Odyssey Research Associates, Inc. ("ORA"). ORA is primarily engaged in
contracting with the U.S. Government to perform research relating to computer
access and security. ORA includes the accounts of 168004 Canada, Inc. ("ORA
Canada"), a wholly-owned subsidiary, which had performed similar contracts for
the Canadian Government, but currently has minimal activity. Effective October
1, 1997, the Company acquired the net assets of the SED Division of Essex
Corporation, which now operates as a division of the Company. This division
provides weapons handling training for the U.S. Department of Defense.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     A major portion of the Company's revenue results from services performed
under U.S. government contracts, either directly or through subcontracts. The
majority of the Company's contracts are fixed-price contracts. Revenue on fixed
price contracts is recognized using the percentage of completion method based on
costs incurred in relation to total estimated costs. Revenue on
time-and-materials contracts is recognized to the extent of fixed billable rates
for hours delivered plus reimbursable costs. Revenue on cost-plus-fee contracts
is recognized based on reimbursable costs incurred plus estimated fees earned
thereon. At the time it is recognized that it is probable that a contract will
result in a loss and the loss can be reasonably estimated, the entire estimated
loss is included in the determination of net income. In accordance with industry
practice, amounts relating to long-term contracts are classified as current
assets although an indeterminable portion of these amounts is not expected to be
realized within one year.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
  Credit Risk
 
     The Company's accounts receivable consist principally of unsecured amounts
due from the U.S. Government.
 
  Cash Equivalents
 
     Cash equivalents are defined as highly liquid short-term investments whose
maturity dates do not extend past three months from the original date of
purchase. The Company has held no such instruments.
 
                                      F-92
<PAGE>   151
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation and amortization are provided for in
amounts which amortize the cost of properties utilizing the straight-line method
over estimated useful lives of three to seven years. Maintenance, repairs and
minor renewals are expensed as incurred. Any gain or loss on disposition is
included in the determination of net income.
 
  Goodwill
 
     Goodwill represents the excess of the cost of business acquisitions,
accounted for by the purchase method, over the fair value of the net assets
thereof. Goodwill is being amortized on a straight-line basis principally over
14 years.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash, accounts
receivable, note payable, bank, accounts payable and accrued expenses. The
carrying value of these financial instrument approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     Through December 31, 1995, the Company had elected to be taxed as an S
Corporation and, accordingly, the financial statements for 1995 do not reflect
any provision for income taxes since elements of income and deduction passed
through directly to the shareholders. Effective January 1, 1996, the Company
terminated its election to be taxed as an S Corporation.
 
     Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be settled. Future
tax benefits recognized as deferred tax assets must be reduced by a valuation
allowance where it is more likely than not that the benefits may not be
realized.
 
(3)  ACQUISITIONS
 
     On June 19, 1995, the Company acquired all of the assets of BZ Academy,
Inc. (BZ). The acquisition has been accounted for as a purchase and has operated
as the AIT division of the Company. Tangible assets were recorded at their book
value at the date of purchase, which approximated their fair value. The
difference between the purchase price and the assets' book value was recorded as
goodwill.
 
     On August 1, 1996, the Company formed a new corporation, Star Digital,
Inc., to acquire the assets of Computer Visions, Inc. The acquisition has been
accounted for as a purchase. Computer Visions' tangible assets were recorded at
their fair value, which approximated the purchase price. No goodwill was
recorded.
 
     On February 21, 1997, the Company acquired the outstanding stock of ORA.
The acquisition has been accounted for as a purchase. The excess of the purchase
price over the book value of the net assets of ORA at the purchase date has been
recorded as goodwill.
 
     On September 30, 1997, the Company acquired certain assets of Simms
Industries. The acquisition has been accounted for as a purchase. The assets
acquired consisted primarily of accounts receivable and fixed assets.
 
                                      F-93
<PAGE>   152
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On October 1, 1997, the Company acquired the net assets of the Systems
Effectiveness Division (SED) of Essex Corporation for a total price of $1.5
million. The net assets represent substantially all of the operating assets of
the division. The excess of the purchase price over the book value of the
tangible assets acquired of approximately $930,000 has been recorded as
goodwill.
 
     The following table sets forth the pro forma information assuming that all
acquisitions had occurred on January 1, 1995 (the earliest date information is
available). The pro forma information takes into account amortization of
goodwill and additional interest costs, net of tax benefits (Dollars in
thousands, except per share data).
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         1995       1996       1997
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Gross revenue.........................................  $22,668    $24,818    $28,383
Operating income......................................    1,081      1,524      1,298
Net income............................................      723        529        627
Earnings per share....................................  $  0.08    $  0.06    $  0.08
</TABLE>
 
(4)  ACCOUNTS RECEIVABLE
 
     Accounts receivable consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
<S>                                                             <C>       <C>
Government contracts:
  Billed....................................................    $3,333    $4,828
  Unbilled..................................................       698       926
Other.......................................................       364       337
                                                                ------    ------
                                                                $4,395    $6,091
                                                                ======    ======
</TABLE>
 
(5)  NOTES RECEIVABLE
 
     Notes receivable consist of the following (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
<S>                                                             <C>       <C>
Due from majority shareholder, unsecured, interest at
  prime.....................................................    $  131    $  349
Due from former employee, secured, interest at 10 percent...       317       317
                                                                ------    ------
                                                                   448       666
Less current portion........................................       181       666
                                                                ------    ------
                                                                $  267    $   --
                                                                ======    ======
</TABLE>
 
(6)  NOTE PAYABLE, BANK
 
     The Company maintains a bank line of credit arrangement that provides for
borrowings of 90% of billed accounts receivable less than 90 days old, not to
exceed $3.5 million in total. Advances bear interest at LIBOR plus 250 basis
points. The line is collateralized by substantially all of the Company's assets.
The agreement requires the Company to meet certain covenants including
limitations on dividends, and maintenance of adjusted tangible net worth, as
defined. The Company has been in compliance with the lender's covenants during
each of the periods presented. At December 31, 1996 and 1997, overdrafts in the
payroll and operating bank accounts amounting to $236,000 and $259,000,
respectively, have been included
 
                                      F-94
<PAGE>   153
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
in the outstanding balance on the line since such overdrafts are automatically
covered by the bank as checks are presented for payment.
 
(7)  LONG-TERM DEBT (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              --------------
                                                              1996      1997
                                                              ----      ----
<S>                                                           <C>       <C>
Note payable, shareholder, representing temporary advances
  of working capital, interest at LIBOR plus 250 basis
  points, due on demand. Unsecured..........................  $95       $ --
Note payable, purchase of subsidiary, ORA, interest at 9%,
  payable in four annual installments of $127 beginning
  February 1998.............................................             406
                                                              ---       ----
Note payable, purchase of net assets of SED, interest at 9%,
  payable in monthly installments of $23 through December
  1998......................................................   --        284
Note payable, purchase of net assets of SIMMS Industries....   --         24
Capital leases, payable in monthly installments of $2
  including interest at 9% to 17.5% due July 2000...........   --         45
                                                              ---       ----
Total.......................................................   95        759
Less current portion........................................   95        455
                                                              ---       ----
Long-term portion...........................................  $--       $304
                                                              ===       ====
</TABLE>
 
(8)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee
contributions, up to a maximum of 3% of each employee's gross annual
compensation. In addition, the Company may contribute a discretionary amount
annually. Total expense under the plan for the years ended December 31, 1995,
1996 and 1997 and for the period ended May 4, 1998, was $121,000, $123,000,
$153,000 and $85,000, respectively.
 
(9)  COMMITMENTS AND CONTINGENCIES
 
     Substantially all of the Company's revenue and costs for all periods since
December 31, 1996, are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     The Company leases equipment and office space under various noncancellable
operating leases. The office leases provide for future rental increases based on
the Company's pro-rata share of increases in building operating expenses and
real estate taxes, and for inflation adjustments based on increases in the
Consumer Price Index. Rent expense, including month-to-month leases, for the
years ended December 31, 1995, 1996 and 1997 and for the period ended May 4,
1998, totalled $557,000, $595,000, $868,000 and $396,000, respectively. Future
minimum lease commitments under non-cancellable operating leases for years
ending December 31, are as follows (Dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                TOTAL
                                                              ---------
<S>                                                           <C>
1999........................................................   $1,046
2000........................................................      918
2001........................................................      732
2002........................................................      553
2003........................................................       92
                                                               ------
                                                               $3,341
                                                               ======
</TABLE>
 
                                      F-95
<PAGE>   154
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(10)  COMMON STOCK
 
     Common stock consists of the following:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                  -------------------------------------
                                                     1995         1996          1997
                                                  ----------    ---------    ----------
<S>                                               <C>           <C>          <C>
Par value.......................................  $      .01          .01           N/A
Shares:
  Authorized....................................   1,000,000    1,000,000    15,000,000
  Issued........................................     752,679      762,093     9,283,472
</TABLE>
 
     Effective February 14, 1997, the Company's voting common stock was
increased from 800,000 shares of $.01 par value to 12,000,000 shares of no par
value, and the non-voting stock was increased from 200,000 shares of $.01 par
value to 3,000,000 shares of no par value.
 
(11)  STOCK OPTIONS
 
     The Company offers key employees the opportunity to purchase stock through
the Star Mountain Key Person Stock Option Plan (the "Plan"). Under the Plan, the
Company issues options to eligible employees who must have one year of service
with the Company. The exercise price for the options is at or above the current
market price of the Company's shares, as determined by management. Management
has applied a consistent formula which includes gross revenue and net income in
determining the Company's share price. Options are exercisable upon issuance for
periods of 3 to 5 years from the date of the grant.
 
     The activity in the Plan since 1995 is presented below. All options and
option prices have been restated to reflect the 12:1 stock split in February
1997.
 
<TABLE>
<CAPTION>
                                                        NUMBER OF OPTIONS       WEIGHTED
                                                         OUTSTANDING AND        AVERAGE
                                                           EXERCISABLE       EXERCISE PRICE
                                                        -----------------    --------------
<S>                                                     <C>                  <C>
Balance, December 31, 1994............................        912,000            $0.31
  Granted.............................................        384,000             0.47
  Forfeited...........................................       (360,000)            0.21
                                                            ---------
Balance, December 31, 1995............................        936,000             0.42
  Granted.............................................        936,000             0.49
  Forfeited...........................................       (348,000)            0.46
                                                            ---------
Balance, December 31, 1996............................      1,524,000             0.45
  Granted.............................................        331,000             1.00
  Exercised...........................................        (73,200)            0.24
  Forfeited...........................................       (120,000)            0.49
                                                            ---------
Balance, December 31, 1997............................      1,661,800            $0.52
                                                            =========
</TABLE>
 
     The weighted average price for options outstanding and exercisable at
December 31, 1997 was $.52. The weighted average remaining term of the
outstanding options is 3 years.
 
     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option. Under this method, compensation cost is measured
at the grant date based on the value of the award and is recognized over the
service period. The Company has historically accounted for employee stock
options under the "intrinsic value method" as defined by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under
 
                                      F-96
<PAGE>   155
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the intrinsic value method, compensation cost is the excess, if any, of the
quoted market price of the stock at grant date over the amount an employee must
pay to acquire the stock. The Company's Plan, accounted for under APB Opinion
No. 25, does not result in any compensation cost.
 
     SFAS No. 123 allows an entity to continue to use the intrinsic value method
and management has elected to do so. However, entities electing to remain on the
intrinsic value method must make pro forma disclosures of net income, as if the
fair value based method of accounting had been applied. Because the method of
accounting in SFAS No. 123 has not been applied to options granted prior to
January 1, 1994, the resulting pro forma compensation costs may not be
representative of the cost to be expected in future years.
 
     Under SFAS No. 123, net income would have been as follows (Dollars in
thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                             -------------------------
                                                             1995      1996      1997
                                                             -----     -----     -----
<S>                                                          <C>       <C>       <C>
Net income, as reported....................................  $ 992     $ 604     $ 728
Pro forma net income.......................................  $ 984     $ 586     $ 675
Income per share, as reported..............................  $0.11     $0.07     $0.09
Pro forma income per share.................................  $0.11     $0.06     $0.08
</TABLE>
 
     The fair value of each option is estimated on the date of grant using the
following assumptions: no dividend yield, no volatility, risk-free interest
rates approximating 6% and expected lives of 3 to 5 years. The weighted average
grant date fair value of the options was as follows:
 
<TABLE>
<CAPTION>
                                               DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                   1995             1996             1997
                                               ------------     ------------     ------------
<S>                                            <C>              <C>              <C>
Weighted average fair value..................      $.11             $.13             $.16
</TABLE>
 
(12)  EARNINGS PER SHARE:
 
     Earnings per share is computed based on the weighted average number of
common shares outstanding in each period. The dilutive effect of outstanding
stock options is computed using the treasury stock method. Since there is no
public market for the Company's stock, current market price has been assumed to
be the exercise price of the latest stock options issued. Basic and diluted
earnings per share have been computed as follows: (Dollars in thousands, except
per share data)
 
<TABLE>
<CAPTION>
                                                             EFFECT OF DILUTIVE      DILUTED      BASIC   DILUTED
                               NET INCOME    BASIC SHARES      STOCK OPTIONS         SHARES        EPS      EPS
                               ----------    ------------    ------------------      -------      -----   -------
                              (NUMERATOR)    (DENOMINATOR)                        (DENOMINATOR)
<S>                           <C>            <C>             <C>                  <C>             <C>     <C>
Year ended:
  December 31, 1995.........      $992         8,824,986          138,404           8,963,390     $0.11    $0.11
  December 31, 1996.........      $604         8,422,206          143,176           8,565,382     $0.07    $0.07
  December 31, 1997.........      $728         8,078,338          744,751           8,823,089     $0.09    $0.08
Period from January 1, 1998
  to May 4, 1998............      $699         8,073,565          797,664           8,871,229     $0.09    $0.08
</TABLE>
 
                                      F-97
<PAGE>   156
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(13)  INCOME TAXES
 
     Income tax expense consists of the following amounts (Dollars in
thousands):
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,              PERIOD FROM
                                              ----------------------------    JANUARY 1, 1998
                                                  1996            1997          MAY 4, 1998
                                              ------------    ------------    ----------------
<S>                                           <C>             <C>             <C>
Current:
  Federal...................................      $313            $426              $393
  State.....................................        84             123                64
Deferred:
  Federal...................................        --              (3)               --
                                                  ----            ----              ----
                                                  $397            $546              $457
                                                  ====            ====              ====
</TABLE>
 
     The differences between the effective income tax rate and the statutory
federal income tax rates are as follows:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31,      PERIOD FROM
                                                          ------------    JANUARY 1, 1998
                                                          1996    1997      MAY 4, 1998
                                                          ----    ----    ---------------
<S>                                                       <C>     <C>     <C>
Computed "expected" tax on income.......................  34.0%   34.0%        34.0%
State taxes, net of federal benefit.....................   4.1     4.1          4.1
Other, net..............................................   1.6     4.7          1.4
                                                          ----    ----         ----
Taxes on income.........................................  39.7%   42.8%        39.5%
                                                          ====    ====         ====
</TABLE>
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below (Dollars
in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
<S>                                                           <C>     <C>
Deferred tax assets result from
  accrued employee benefits,
  principally vacation......................................  $ 29    $ 90
  Accrued expenses..........................................    --      27
                                                              ----    ----
                                                              $ 29    $117
                                                              ====    ====
Deferred tax liabilities result from:
  Differences in depreciation methods.......................  $ 29    $135
  Change in accounting method from cash to accrual for
     ORA....................................................    --      63
                                                              ----    ----
                                                              $ 29    $198
                                                              ====    ====
</TABLE>
 
                                      F-98
<PAGE>   157
 
                          INDEPENDENT AUDITOR'S REPORT
 
To the Board of Directors
American Media Incorporated
West Des Moines, Iowa
 
     We have audited the accompanying balance sheets of American Media
Incorporated as of June 30, 1998 and 1997, and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Media Incorporated
as of June 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
 
                                            McGladrey & Pullen, LLP
 
Des Moines, Iowa
July 31, 1998, except for
Note 10 as to which the
date is August 10, 1998
 
                                      F-99
<PAGE>   158
 
                          AMERICAN MEDIA INCORPORATED
 
                                 BALANCE SHEETS
                             JUNE 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1998          1997
                                                              ----------    ----------
                                                                            (NOTE 11)
<S>                                                           <C>           <C>
                                   ASSETS (Note 3)
Current Assets
    Cash (Note 8)...........................................  $    5,457    $   55,942
    Receivables:
         Trade, less allowance for doubtful accounts 1998
           $110,000; 1997 $50,000...........................   2,107,936     1,786,207
         Royalties..........................................      69,950       110,000
         Other..............................................       1,955        37,559
         Income tax refund claims...........................     239,262            --
    Inventories:
         Released film cost, net of accumulated amortization
           1998 $4,017,312; 1997 $3,267,795.................   2,602,134     1,307,756
         Films in progress, at cost.........................     425,538       203,060
         Other..............................................     565,471       330,500
    Costs and estimated earnings in excess of billings on
     uncompleted film production contracts (Note 2).........      90,986        27,583
    Prepaid advertising.....................................     287,344
    Prepaid expenses........................................     126,773       115,834
    Deferred taxes (Note 5).................................          --       150,000
                                                              ----------    ----------
             Total current assets...........................   6,522,806     4,124,441
                                                              ----------    ----------
Rental Office Property, net of accumulated depreciation 1998
  $340,453; 1997 $333,481 (Note 7)..........................      60,958        67,930
                                                              ----------    ----------
Improvements and Equipment (Note 6)
    Leasehold improvements..................................     278,954       274,170
    Furniture and equipment.................................   1,883,956     1,675,171
    Automobiles.............................................      96,613       113,602
                                                              ----------    ----------
                                                               2,259,523     2,062,943
    Less accumulated depreciation...........................   1,392,585     1,287,176
                                                              ----------    ----------
                                                                 866,938       775,767
                                                              ----------    ----------
                                                              $7,450,702    $4,968,138
                                                              ==========    ==========
                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Note payable (Note 3)...................................  $1,049,000    $  100,000
    Current obligation under capital lease (Note 6).........      11,556        12,407
    Accounts payable........................................     500,351       588,938
    Accrued wages...........................................     415,727       249,051
    Accrued royalties.......................................     236,060       193,471
    Other accrued expenses..................................     425,369       204,450
    Income taxes payable....................................          --        10,000
    Billings in excess of costs and estimated earnings on
     uncompleted film production contracts (Note 2).........     112,333        55,004
    Deferred taxes (Note 5).................................     355,000            --
                                                              ----------    ----------
             Total current liabilities......................   3,105,396     1,413,321
                                                              ----------    ----------
Obligation Under Capital Lease, less current maturities
  (Note 6)..................................................      51,823         4,981
                                                              ----------    ----------
Deferred Taxes (Note 5).....................................      60,000            --
                                                              ----------    ----------
Stockholders' Equity
    Participating common stock, voting, no par value;
     authorized 2,000,000 shares; issued 1,900,000 shares...      22,000        22,000
    Nonparticipating common stock, voting, no par value;
     authorized 2,000,000 shares; issued 18,000 shares......       8,526         8,526
    Retained earnings.......................................   4,273,881     3,590,234
                                                              ----------    ----------
                                                               4,304,407     3,620,760
    Less cost of treasury stock:
         Participating common stock, 20,000 shares..........      50,000        50,000
         Nonparticipating common stock, 15,900 shares.......      20,924        20,924
                                                              ----------    ----------
                                                               4,233,483     3,549,836
                                                              ----------    ----------
                                                              $7,450,702    $4,968,138
                                                              ==========    ==========
</TABLE>
 
                       See Notes to Financial Statements.
 
                                      F-100
<PAGE>   159
 
                          AMERICAN MEDIA INCORPORATED
 
                              STATEMENTS OF INCOME
                       YEARS ENDED JUNE 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1998           1997
                                                              -----------    -----------
<S>                                                           <C>            <C>
Operating revenues:
     Film and video sales, rentals and previews.............  $14,362,513    $12,089,974
     Film production contracts..............................    1,864,615      1,213,149
     Royalties and commissions..............................      594,929        650,169
     Consulting.............................................      164,220         45,586
     Other..................................................      107,719        154,325
                                                              -----------    -----------
                                                               17,093,996     14,153,203
                                                              -----------    -----------
Operating expenses:
     Cost of films and videos sold..........................    1,876,199      1,128,472
     Cost of film production contracts......................      636,155        699,456
     Royalties and commissions..............................    2,009,278      2,043,156
     Depreciation and amortization..........................      939,096        920,214
     Selling, general and administrative (Note 8)...........   10,522,860      8,528,931
                                                              -----------    -----------
                                                               15,983,588     13,320,229
                                                              -----------    -----------
               Operating income.............................    1,110,408        832,974
                                                              -----------    -----------
Nonoperating income (expense):
     Interest income........................................        3,773         24,324
     Interest (expense).....................................      (62,221)       (44,188)
     Other income...........................................       16,812         77,671
                                                              -----------    -----------
                                                                  (41,636)        57,807
                                                              -----------    -----------
               Income before income taxes...................    1,068,772        890,781
                                                              -----------    -----------
Federal and state income taxes (credits):
     Current................................................     (179,875)       342,557
     Deferred...............................................      565,000         (8,000)
                                                              -----------    -----------
                                                                  385,125        334,557
                                                              -----------    -----------
               Net income...................................  $   683,647    $   556,224
                                                              ===========    ===========
     Basic income per share.................................  $      0.36    $      0.30
                                                              ===========    ===========
     Weighted average shares outstanding....................    1,882,100      1,881,600
                                                              ===========    ===========
</TABLE>
 
                       See Notes to Financial Statements.
                                      F-101
<PAGE>   160
 
                          AMERICAN MEDIA INCORPORATED
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       YEARS ENDED JUNE 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                  NON-                                         NON-
                              PARTICIPATING   PARTICIPATING                PARTICIPATING   PARTICIPATING
                                 COMMON          COMMON        RETAINED      TREASURY        TREASURY
                                  STOCK           STOCK        EARNINGS        STOCK           STOCK         TOTAL
                              -------------   -------------   ----------   -------------   -------------   ----------
<S>                           <C>             <C>             <C>          <C>             <C>             <C>
Balance, June 30, 1996......     $22,000         $5,346       $3,034,010     $(50,000)       $(18,774)     $2,992,582
    Net income..............          --             --          556,224           --              --         556,224
    Purchase of 1,000 shares
      of nonparticipating
      common stock for the
      treasury..............          --             --               --           --          (2,150)         (2,150)
    Issuance of 2,000 shares
      of nonparticipating
      common stock..........          --          3,180               --           --              --           3,180
                                 -------         ------       ----------     --------        --------      ----------
Balance, June 30, 1997......      22,000          8,526        3,590,234      (50,000)        (20,924)      3,549,836
    Net income..............          --             --          683,647           --              --         683,647
                                 -------         ------       ----------     --------        --------      ----------
Balance, June 30, 1998......     $22,000         $8,526       $4,273,881     $(50,000)       $(20,924)     $4,233,483
                                 =======         ======       ==========     ========        ========      ==========
</TABLE>
 
                       See Notes to Financial Statements.
                                      F-102
<PAGE>   161
 
                          AMERICAN MEDIA INCORPORATED
 
                            STATEMENTS OF CASH FLOWS
                       YEARS ENDED JUNE 30, 1998 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1998          1997
                                                              -----------    --------
<S>                                                           <C>            <C>
Cash Flows from Operating Activities
     Net income.............................................  $   683,647    $556,224
                                                              -----------    --------
     Adjustments to reconcile net income to net cash
      provided by operating activities:
          Depreciation......................................      189,579     245,950
          Amortization......................................      749,517     674,264
          Provision for doubtful accounts...................       59,647      24,179
          Deferred taxes....................................      565,000      (8,000)
          Dissolution of limited partnership................           --       6,074
          (Gain) loss on disposal of improvements and
            equipment.......................................       (8,568)     22,915
          Change in assets and liabilities:
               (Increase) in income tax refund claims
                 receivable.................................     (239,262)         --
               (Increase) in other receivables..............     (305,722)   (179,708)
               (Increase) in inventories and
                 films-in-progress..........................   (2,501,344)   (513,521)
               (Increase) decrease in costs and estimated
                 earnings in excess of billings on
                 uncompleted film production contracts......      (63,403)      1,974
               (Increase) in prepaid advertising and
                 expenses...................................     (298,283)    (81,576)
               Increase in accounts payable and accrued
                 expenses...................................      351,892     333,118
               (Decrease) in income taxes payable...........      (10,000)   (295,000)
               Increase in billings in excess of costs and
                 estimated earnings on uncompleted film
                 production contracts.......................       57,329      22,518
                                                              -----------    --------
                    Net cash provided by (used in) operating
                       activities...........................     (769,971)    809,411
                                                              -----------    --------
Cash Flows from Investing Activities
     Purchase of improvements and equipment.................     (234,314)   (238,405)
     Proceeds from sale of equipment........................       36,123      17,910
                                                              -----------    --------
                    Net cash (used in) investing
                       activities...........................     (198,191)   (220,495)
                                                              -----------    --------
Cash Flows from Financing Activities
     Borrowings on revolving line of credit.................    5,882,500     100,000
     Payments on revolving line of credit...................   (4,933,500)   (200,000)
     Principal payments on long-term borrowings, including
      capital lease obligations.............................      (21,028)   (623,176)
     Purchase of nonparticipating common stock for the
      treasury..............................................           --      (2,150)
     Proceeds from the issuance of nonparticipating common
      stock.................................................           --       3,180
     Payments for equipment purchased on account............      (10,295)    (80,069)
                                                              -----------    --------
                    Net cash provided by (used in) financing
                       activities...........................      917,677    (802,215)
                                                              -----------    --------
                    Net (decrease) in cash..................      (50,485)   (213,299)
Cash
     Beginning..............................................       55,942     269,241
                                                              -----------    --------
     Ending.................................................  $     5,457    $ 55,942
                                                              ===========    ========
Supplemental Disclosures of Cash Flow Information
     Cash payments for:
          Interest..........................................  $    62,221    $ 41,188
          Income taxes......................................       69,387     637,557
Supplemental Schedule of Noncash Investing and Financing
  Activities
     Purchase of equipment on account.......................  $        --    $ 10,295
     Capital lease obligation incurred for purchase of
      equipment.............................................       67,019          --
</TABLE>
 
                       See Notes to Financial Statements.
                                      F-103
<PAGE>   162
 
                          AMERICAN MEDIA INCORPORATED
 
                         NOTES TO FINANCIAL STATEMENTS
 
NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
     Nature of business:  The Company is engaged in the production, sale and
rental of training films and videotapes nationally and internationally.
 
     A summary of the Company's significant accounting policies follows:
 
          Accounting estimates and assumptions:  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.
 
          Inventories:  Film cost inventories are stated at the lower of cost or
     net realizable value. Amortization of film cost inventories is computed
     primarily by the individual-film-forecast method which provides for
     amortization of film costs in the ratio that current gross revenues bear to
     estimated gross revenues over the life of the film. Estimates of
     anticipated total gross revenues are reviewed periodically and revised when
     necessary to reflect more current information. Unamortized film costs are
     compared with net realizable value each reporting period on a film-by-film
     basis. If estimated future gross revenues from a film are not sufficient to
     recover the unamortized film costs, the unamortized film costs are written
     down to net realizable value. It is reasonably possible that the Company's
     estimates of anticipated future gross revenues and the recoverability of
     the remaining estimated unamortized film cost, or both, could be sensitive
     to change in the near term based upon changes in future market conditions.
 
          Other inventories are stated at the lower of cost (first-in, first-out
     method) or market.
 
          Film production contracts:  The Company reports income from film
     production contracts using percentage-of-completion accounting based
     primarily on actual costs incurred to date compared to total estimated
     costs, commencing when progress reaches a point where experience is
     sufficient to estimate final results with reasonable accuracy. Contract
     costs include all direct material and labor costs and those indirect costs
     related to contract performance. Provisions for estimated losses on
     uncompleted contracts are made in the period in which such losses are
     determined.
 
          The asset, "costs and estimated earnings in excess of billings on
     uncompleted film production contracts," represents revenues recognized in
     excess of amounts billed. The liability, "billings in excess of costs and
     estimated earnings on uncompleted film production contracts," represents
     billings in excess of revenue recognized.
 
          Advertising costs:  The Company expenses the production costs of
     advertising the first time the advertising takes place, except for
     direct-response advertising, which is capitalized and amortized over the
     expected period of future benefits.
 
          Direct-response advertising consists primarily of the costs of direct
     mail promotional pieces incurred to acquire new sales/rentals of the
     Company's video products. The capitalized costs are amortized using the
     actual sales received to date compared to total estimated sales as a result
     of the mailing. Costs and related accumulated amortization are eliminated
     as they become fully amortized.
 
          Rental office property:  Rental office property is stated at cost, net
     of accumulated depreciation computed by the straight-line method over
     estimated useful lives ranging from 15 to 31 years.
 
          Improvements and equipment:  Improvements and equipment are stated at
     cost. Depreciation is computed primarily by accelerated methods over their
     estimated useful lives. It is the Company's policy to include amortization
     of assets acquired under capital leases with depreciation expense on owned
     assets.
 
                                      F-104
<PAGE>   163
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
          Income taxes:  Deferred taxes are provided on a liability method
     whereby deferred tax assets are recognized for deductible temporary
     differences and deferred tax liabilities are recognized for taxable
     temporary differences. Temporary differences are the differences between
     the reported amounts of assets and liabilities and their tax basis.
     Deferred tax assets are reduced by a valuation allowance, when, in the
     opinion of management, it is more likely than not, that some portion or all
     of the deferred tax assets will not be realized. Deferred tax assets and
     liabilities are adjusted for the effects of changes in tax laws and rates
     on the date of enactment.
 
NOTE 2.  UNCOMPLETED FILM PRODUCTION CONTRACTS
 
     Information regarding uncompleted film production contracts follows:
 
<TABLE>
<CAPTION>
                                                            JUNE 30,
                                                      --------------------
                                                        1998        1997
                                                      --------    --------
<S>                                                   <C>         <C>
Costs incurred on uncompleted film production
  contracts.........................................  $144,918    $ 43,155
Estimated earnings..................................   228,670     136,069
                                                      --------    --------
                                                       373,588     179,224
Less billings to date...............................   394,935     206,645
                                                      --------    --------
                                                      $(21,347)   $(27,421)
                                                      ========    ========
</TABLE>
 
     Included in accompanying balance sheets under the following captions:
 
<TABLE>
<CAPTION>
                                                            JUNE 30,
                                                      --------------------
                                                        1998        1997
                                                      --------    --------
<S>                                                   <C>         <C>
Costs and estimated earnings in excess of billings
  on uncompleted film production contracts..........  $ 90,986    $ 27,583
Billings in excess of costs and estimated earnings
  on uncompleted film production contracts..........  (112,333)    (55,004)
                                                      --------    --------
                                                      $(21,347)   $(27,421)
                                                      ========    ========
</TABLE>
 
NOTE 3.  PLEDGED ASSETS AND LINE OF CREDIT AT JUNE 30, 1998
 
     The Company has a bank line of credit in the amount of $1,400,000 due
October 31, 1998. Borrowings under the line bear interest at the bank's national
rate (8.5% at June 30, 1998) and are secured by substantially all assets of the
Company not otherwise pledged and the unlimited personal guarantee of the
majority stockholder. At June 30, 1998, borrowings of $1,049,000 were
outstanding under this agreement.
 
     The line of credit agreement contains various restrictive covenants
including but not limited to debt to tangible net worth levels, borrowing base
requirements and adequate insurance coverage.
 
NOTE 4.  PROFIT-SHARING PLAN AND 401(K) PLAN
 
     The Company has a profit-sharing plan covering substantially all employees.
Contributions are made at the discretion of the Company and are allocated to
participants by a formula based on compensation. The Company's expense under
this plan was none and approximately $39,000 for the years ended June 30, 1998
and 1997, respectively.
 
     The Company also has a salary reduction "401(k)" plan covering employees
who have completed three months of service and attained the age of 21. There
were no employer contributions for the years ended June 30, 1998 and 1997.
 
                                      F-105
<PAGE>   164
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 5.  INCOME TAX MATTERS
 
     Net deferred tax assets (liabilities) consist of the following components:
 
<TABLE>
<CAPTION>
                                                           JUNE 30,
                                                     ---------------------
                                                       1998         1997
                                                     ---------    --------
<S>                                                  <C>          <C>
Deferred tax assets:
     Allowance for doubtful accounts...............  $  37,000    $ 17,000
     Inventories...................................                113,000
     Accrued expenses..............................     24,000      18,000
     Other.........................................      4,000       2,000
                                                     ---------    --------
                                                        65,000     150,000
                                                     ---------    --------
Deferred tax liabilities:
     Prepaid expenses..............................     98,000          --
     Inventories...................................    318,000          --
     Improvements and equipment....................     64,000          --
                                                     ---------    --------
                                                       480,000          --
                                                     ---------    --------
                                                     $(415,000)   $150,000
                                                     =========    ========
</TABLE>
 
     The components giving rise to the net deferred assets (liabilities) have
been included in the accompanying balance sheets as follows:
 
<TABLE>
<CAPTION>
                                                             JUNE 30,
                                                       --------------------
                                                         1998        1997
                                                       ---------   --------
<S>                                                    <C>         <C>
Current assets.......................................  $      --   $150,000
                                                       ---------   --------
Current liabilities..................................    355,000         --
Long-term liabilities................................     60,000         --
                                                       ---------   --------
                                                         415,000         --
                                                       ---------   --------
                                                       $(415,000)  $150,000
                                                       =========   ========
</TABLE>
 
NOTE 6. LEASES AND RENT EXPENSE
 
     The Company leases office equipment that is being accounted for as a
capital lease with a cost of approximately $67,000 and related accumulated
amortization of $4,500 at June 30, 1998. The lease requires monthly payments of
$1,375 through February 2003. The assets and related liabilities under the lease
have been recorded at the present value of the future minimum lease payments
using a discount rate of 8.50%.
 
     The Company leases office space under a noncancelable operating lease
agreement which requires monthly payments of approximately $43,000 and $1,700
through July 2000 and March 1999, respectively. The Company also leases two
automobiles under noncancelable operating lease agreements which require various
monthly payments expiring from January 1999 through January 2001.
 
                                      F-106
<PAGE>   165
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Approximate future minimum lease payments, by year end in the aggregate,
under the capital lease and noncancelable operating leases are as follows:
 
<TABLE>
<CAPTION>
                                                        CAPITAL   OPERATING
                                                         LEASE      LEASES
                                                        -------   ----------
<S>                                                     <C>       <C>
Year ending June 30, 1999.............................  $16,500   $  537,000
  2000................................................   16,500      521,000
  2001................................................   16,500       38,000
  2002................................................   16,500           --
  2003................................................   11,000           --
                                                        -------   ----------
          Total minimum lease payments................   77,000   $1,096,000
                                                                  ==========
Amount representing interest..........................   13,621
                                                        -------
          Present value of net minimum capital lease
            payments..................................  $63,379
                                                        =======
</TABLE>
 
     Total rent expense was approximately $536,000 and $401,000 for the years
ended June 30, 1998 and 1997, respectively.
 
NOTE 7.  RENTAL OFFICE PROPERTY
 
     The Company had a lease agreement for its rental office property requiring
monthly payments of $4,320 through June 1998. The tenant exercised the purchase
option subsequent to June 30, 1998 to purchase the property for $227,000.
 
NOTE 8.  CASH IN EXCESS OF FDIC LIMITS
 
     Throughout the years ended June 30, 1998 and 1997, the Company at times had
cash in excess of FDIC limits. The Company has not experienced any loss from
this.
 
NOTE 9.  ADVERTISING COSTS
 
     At June 30, 1998 and 1997, $287,344 and none, respectively, of direct
response advertising costs were reported as assets. Advertising expense for the
years ended June 30, 1998 and 1997, was approximately $4,033,000 and $1,836,000,
respectively.
 
NOTE 10.  SUBSEQUENT EVENT
 
     On August 10, 1998 the Company's majority stockholder signed a nonbinding
letter of intent to sell all the outstanding shares of stock of the Company.
 
NOTE 11.  RECLASSIFICATION
 
     Certain items on the balance sheet as of June 30, 1997 have been
reclassified with no effect on retained earnings to be consistent with the
classifications adopted for as of June 30, 1998.
 
                                      F-107
<PAGE>   166
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
KC Resources Creative Solutions, Inc.:
 
     We have audited the accompanying balance sheet of KC Resources Creative
Solutions, Inc. as of June 30, 1998 and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KC Resources Creative
Solutions, Inc. as of June 30, 1998 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
 
                                            KPMG Peat Marwick LLP
 
Boston, Massachusetts
July 24, 1998
 
                                      F-108
<PAGE>   167
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                                 BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              JUNE 30,
                                                                1998
                                                              --------
<S>                                                           <C>
                                ASSETS
Current assets:
  Cash and cash equivalents.................................   $1,248
  Marketable securities.....................................      353
  Accounts receivable, net of allowance for doubtful
     accounts of $25........................................    1,232
  Costs in excess of billings...............................      138
  Prepaid expenses and other current assets.................        4
                                                               ------
       Total current assets.................................    2,975
                                                               ------
Property and equipment, net.................................      422
Other assets................................................       34
                                                               ------
       Total assets.........................................   $3,431
                                                               ======
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................   $   75
  Accrued expenses..........................................      207
  Income taxes payable......................................      558
  Billings in excess of costs...............................      189
  Deferred income taxes.....................................      379
  Current portion of capital lease obligation...............        9
                                                               ------
       Total current liabilities............................    1,417
                                                               ------
Long-term capital lease obligation..........................       13
                                                               ------
Deferred income taxes.......................................       59
                                                               ------
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 5,000 shares authorized; 1,000
     shares issued and outstanding..........................        1
  Unrealized gain on marketable securities..................       24
  Retained earnings.........................................    1,917
                                                               ------
       Total stockholders' equity...........................    1,942
                                                               ------
       Total liabilities and stockholders' equity...........   $3,431
                                                               ======
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-109
<PAGE>   168
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Revenue.....................................................   $ 5,449
Cost of revenue.............................................     3,758
                                                               -------
  Gross profit..............................................     1,691
Selling, general and administrative expenses................       980
                                                               -------
       Income from operations...............................       711
                                                               -------
Other income (expense):
  Dividend income...........................................         7
  Interest income...........................................        34
  Interest expense..........................................        (3)
                                                               -------
       Total other income (expense).........................        38
                                                               -------
       Income before income taxes...........................       749
Income taxes................................................       284
                                                               -------
       Net income...........................................   $   465
                                                               =======
Basic income per share......................................   $464.76
                                                               =======
Weighted average shares outstanding.........................     1,000
                                                               =======
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-110
<PAGE>   169
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                       STATEMENT OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
                            YEAR ENDED JUNE 30, 1998
 
<TABLE>
<CAPTION>
                                                                      UNREALIZED
                                                    COMMON STOCK       GAIN ON
                                                  ----------------    MARKETABLE    RETAINED
                                                  SHARES    AMOUNT    SECURITIES    EARNINGS   TOTAL
                                                  ------    ------    ----------    --------   ------
<S>                                               <C>       <C>       <C>           <C>        <C>
Balance, June 30, 1997..........................  1,000       $1         $ 8         $1,459    $1,468
  Unrealized gain on marketable securities, net
     of tax provision of $11....................     --       --          16             --        16
  Dividends paid ($7.00 per share)..............     --       --          --             (7)       (7)
  Net income....................................     --       --          --            465       465
                                                  -----       --         ---         ------    ------
Balance, June 30, 1998..........................  1,000       $1         $24         $1,917    $1,942
                                                  =====       ==         ===         ======    ======
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-111
<PAGE>   170
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
<S>                                                           <C>
Cash flows from operating activities:
  Net income................................................    $  465
                                                                ------
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Depreciation and amortization........................       163
       Changes in operating assets and liabilities:
          Increase in accounts receivable...................      (464)
          Decrease in costs in excess of billing............       469
          Decrease in prepaid expenses and other assets.....        56
          Decrease in accounts payable......................       (67)
          Decrease in accrued expenses......................      (252)
          Increase in billings in excess of costs...........        54
          Increase in income taxes payable..................       176
          Increase in deferred income tax liabilities.......       135
                                                                ------
            Total adjustments...............................       270
                                                                ------
            Net cash provided by operating activities.......       735
                                                                ------
Cash flows from investing activities:
  Purchases of property and equipment.......................      (272)
  Purchase of investments...................................      (183)
  Sale of investments.......................................       384
                                                                ------
            Net cash used in investing activities...........       (71)
                                                                ------
Cash flows from financing activities:
  Dividends paid............................................        (7)
  Payments on capital lease obligation......................        (6)
                                                                ------
            Net cash used in financing activities...........       (13)
                                                                ------
Net increase in cash and cash equivalents...................       651
Cash and cash equivalents, beginning of year................       597
                                                                ------
Cash and cash equivalents, end of year......................    $1,248
                                                                ======
Supplemental cash flow disclosures:
  Income taxes refunded.....................................    $  (24)
                                                                ======
  Cash paid for interest....................................    $    3
                                                                ======
Non-cash investing activity:
  Increase in fair value of marketable securities...........    $   27
                                                                ======
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-112
<PAGE>   171
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
(1)  NATURE OF OPERATIONS
 
     KC Resources Creative Solutions, Inc. (the "Company") was incorporated in
December 1991. The Company is a training and instructional design consulting
firm, which analyzes clients' performance requirements and designs training
solutions using all appropriate media and technology including internet-based
training and performance support applications, multimedia computer-based
training and testing, and self-paced learning systems using various media. The
Company focused primarily on the needs of the telecommunications industry and
high-technology sector, and also has clients in the pharmaceuticals and
financial services industries.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  (a) Revenue Recognition
 
     The Company follows the percentage-of-completion method of accounting for
contracts, including those that involve delivery of customized software
products. Accordingly, income is recognized in the ratio that costs incurred
bear to estimated total costs. Adjustments to cost estimates are made
periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. The aggregate of
costs incurred and income recognized on uncompleted contracts in excess of
related billings is shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized
is shown as a current liability.
 
  (b) 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
disclosures 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.
 
  (c) Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
 
  (d) Marketable Securities
 
     All marketable securities are classified as available-for-sale and are
available to support current operations or to take advantage of other investment
opportunities. These securities are stated at estimated fair value based upon
market quotes. Unrealized gains and losses, net of tax, are computed on the
basis of specific identification and are included as a component of
stockholders' equity. Realized gains, realized losses, and declines in value,
judged to be other than temporary, are included in other income. The cost of
securities sold is based on the specific identification method and interest and
dividends earned are included in other income.
 
  (e) Accounts Receivable
 
     Accounts receivable consist of progress billings to clients under long-term
contracts.
 
                                      F-113
<PAGE>   172
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
  (f) Property and Equipment
 
     Property and equipment are recorded at cost and depreciated using an
accelerated method over the following periods:
 
<TABLE>
<S>                                                           <C>
Software....................................................  3 years
Equipment...................................................  5 years
Furniture and fixtures......................................  7 years
</TABLE>
 
  (g) Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
accrued liabilities. The carrying value of these financial instruments
approximates their fair value because of the short maturity of these
instruments.
 
  (h) Income Taxes
 
     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
 
  (i) Advertising Costs
 
     Advertising costs are expensed as incurred. Advertising costs amounted to
$54 in fiscal 1998.
 
  (j) Income per Share
 
     Effective June 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented.
 
(3) RELATED PARTY TRANSACTIONS
 
     A member of the Company's Board of Directors served as a consultant to the
Company on various aspects of the Company's business and strategic issues. Fees
paid for such services amounted to $8 in fiscal 1998.
 
     During fiscal 1998, an officer of the Company repaid an advance in the
amount of $80 which had been outstanding at June 30, 1997.
 
                                      F-114
<PAGE>   173
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
(4) MARKETABLE SECURITIES
 
     Marketable securities at June 30, 1998 consist of the following:
 
<TABLE>
<CAPTION>
                                                              GROSS
                                                            UNREALIZED
                                                             HOLDING     FAIR
                                                    COST      GAINS      VALUE
                                                    ----    ----------   -----
<S>                                                 <C>     <C>          <C>
Certificate of deposit............................  $125        --        125
Mutual funds......................................   189        39        228
                                                    ----       ---        ---
                                                    $314        39        353
                                                    ====       ===        ===
</TABLE>
 
     At June 30, 1998, the certificate of deposit has a maturity of less than
one year.
 
(5) PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at June 30, 1998:
 
<TABLE>
<S>                                                           <C>
Machinery and equipment.....................................  $653
Furniture and fixtures......................................    29
Software....................................................   144
                                                              ----
                                                               826
Less accumulated depreciation and amortization..............   404
                                                              ----
     Property and equipment, net............................  $422
                                                              ====
</TABLE>
 
     Depreciation and amortization expense on property and equipment amounted to
$163 in fiscal 1998. Amortization expense on capitalized software amounted to
$48 in fiscal 1998. Unamortized software costs at June 30, 1998 are $96.
 
(6)  ACCRUED EXPENSES
 
     Accrued expenses at June 30, 1998 consist of the following:
 
<TABLE>
<S>                                                           <C>
Accrued payroll and payroll taxes...........................  $ 95
Accrued benefit plan contribution...........................    58
Accrued vacation............................................    38
Other accrued expenses......................................    16
                                                              ----
                                                              $207
                                                              ====
</TABLE>
 
(7)  LEASES
 
     The Company leases office space and a vehicle under cancelable operating
leases. Lease expense amounted to $193 in fiscal 1998.
 
                                      F-115
<PAGE>   174
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
     The Company also leases certain office equipment under a noncancelable
capital lease. Future minimum payments under this capital lease are as follows:
 
<TABLE>
<CAPTION>
                    YEAR ENDING JUNE 30
                    -------------------
<S>                                                           <C>
     1999...................................................  $ 9
     2000...................................................    9
     2001...................................................    8
                                                              ---
          Total minimum payments............................   26
     Less amounts representing interest.....................    4
                                                              ---
          Present value of minimum lease payments...........   22
     Less current installments of capital lease payments....    9
                                                              ---
     Long-term capital lease obligation.....................  $13
                                                              ===
</TABLE>
 
     At June 30, 1998, the gross amount of equipment and related accumulated
amortization recorded under the capital lease were as follows:
 
<TABLE>
<S>                                                           <C>
     Equipment..............................................  $35
     Less accumulated amortization..........................   22
                                                              ---
                                                              $13
                                                              ===
</TABLE>
 
     Amortization of assets held under capital lease is included in depreciation
expense.
 
(8)  INCOME TAXES
 
     The provision for income taxes for fiscal 1998 consists of the following:
 
<TABLE>
<CAPTION>
                                                    CURRENT    DEFERRED   TOTAL
                                                    -------    --------   -----
<S>                                                 <C>        <C>        <C>
Federal...........................................   $124        $109     $233
State.............................................     25          26       51
                                                     ----        ----     ----
                                                     $149        $135     $284
                                                     ====        ====     ====
</TABLE>
 
     The following is a reconciliation between the statutory federal income tax
rate and the Company's effective rate for fiscal 1998:
 
<TABLE>
<S>                                                           <C>
Statutory federal income tax rate...........................  34.0%
State income taxes..........................................   4.8
Other.......................................................   1.1
                                                              ----
                                                              39.9%
                                                              ====
</TABLE>
 
                                      F-116
<PAGE>   175
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
 
<TABLE>
<S>                                                           <C>
Deferred tax liabilities:
     Accounts receivable....................................  $476
     Costs in excess of billings............................    53
     Property and equipment.................................    59
     Unrealized gains on marketable securities..............    15
                                                              ----
          Total gross deferred tax liabilities..............  $603
                                                              ----
Deferred tax assets:
     Accounts payable and accrued expenses..................  $ 86
     Billings in excess of costs............................    73
     Timing of current state tax deduction..................     6
                                                              ----
          Total gross deferred tax assets...................   165
                                                              ----
          Net deferred tax liability........................  $438
                                                              ====
</TABLE>
 
                                      F-117
<PAGE>   176
 
                          INDEPENDENT AUDITOR'S REPORT
 
To the Board of Directors
Strategic Interactive, Inc.
 
     We have audited the accompanying balance sheet of Strategic Interactive,
Inc. as of June 30, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above presents fairly,
in all material respects, the financial position of Strategic Interactive, Inc.
as of June 30, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
 
                                            PLANTE & MORAN, LLP
 
East Lansing, Michigan
October 12, 1998
 
                                      F-118
<PAGE>   177
 
                          STRATEGIC INTERACTIVE, INC.
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                 JUNE 30
                                                          ----------------------    SEPTEMBER 30,
                                                            1997         1998           1998
                                                            ----         ----       -------------
                                                                                     (UNAUDITED)
<S>                                                       <C>         <C>           <C>
                                     ASSETS
Current Assets
     Cash and cash equivalents..........................  $517,589    $  759,472     $1,165,143
     Accounts receivable:
          Trade.........................................   293,837       887,940        552,959
          Other.........................................        --        20,000             --
     Prepaid expenses...................................        --        27,629         44,616
                                                          --------    ----------     ----------
               Total current assets.....................   811,426     1,695,041      1,762,718
Property and Equipment (Note 2).........................   168,208       334,589        384,975
                                                          --------    ----------     ----------
               Total assets.............................  $979,634    $2,029,630     $2,147,693
                                                          ========    ==========     ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities
     Current portion of long-term debt (Note 4).........  $  4,940    $    5,850     $    5,553
     Accounts payable and other accrued liabilities.....    13,022       134,746        255,949
     Accrued federal income tax.........................   124,159        92,244         58,696
     Deferred revenue...................................    19,200            --          6,750
                                                          --------    ----------     ----------
               Total current liabilities................   161,321       232,840        326,948
Long-term Debt (Note 4).................................    21,699        16,444         15,047
Stockholders' Equity
     Common stock -- $1 par value:
          Class A voting:
            Authorized -- 59,000 shares
            Issued and outstanding -- 711 shares........       711           711            711
          Class B nonvoting:
            Authorized -- 1,000 shares
            Issued and outstanding -- 30 shares.........        30            30             30
     Additional paid-in capital.........................   477,225       477,225        477,225
     Retained earnings..................................   318,648     1,302,380      1,327,732
                                                          --------    ----------     ----------
               Total stockholders' equity...............   796,614     1,780,346      1,805,698
                                                          --------    ----------     ----------
               Total liabilities and stockholders'
                 equity.................................  $979,634    $2,029,630     $2,147,693
                                                          ========    ==========     ==========
</TABLE>
 
                                      F-119
<PAGE>   178
 
                          STRATEGIC INTERACTIVE, INC.
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                    THREE MONTHS
                                                           YEAR ENDED JUNE 30           ENDED
                                                        ------------------------    SEPTEMBER 30,
                                                           1997          1998           1998
                                                        ----------    ----------    -------------
                                                                                     (UNAUDITED)
<S>                                                     <C>           <C>           <C>
Sales.................................................  $1,452,190    $4,669,335     $1,013,041
Cost of Sales.........................................     304,843     1,148,382        441,024
                                                        ----------    ----------     ----------
Gross Profit..........................................   1,147,347     3,520,953        572,017
Operating Expenses
     Selling and administrative expenses..............     712,655     1,986,484        206,576
     Depreciation.....................................      24,740        65,995        334,804
                                                        ----------    ----------     ----------
          Total operating expenses....................     737,395     2,052,479        541,380
                                                        ----------    ----------     ----------
Operating Income......................................     409,952     1,468,474         30,637
Other Income (Expenses)...............................     (10,418)       (2,282)            --
     Interest income..................................       5,986        37,484          7,774
     Other............................................      78,348        20,446             --
                                                        ----------    ----------     ----------
          Total other income (expense)................      73,916        55,648          7,774
                                                        ----------    ----------     ----------
Income -- Before income taxes.........................     483,868     1,524,122         38,411
Income Taxes..........................................     124,159       540,390         13,059
                                                        ----------    ----------     ----------
Net Income............................................  $  359,709    $  983,732     $   25,352
                                                        ==========    ==========     ==========
Basic income per share................................  $      538    $    1,328     $       34
                                                        ==========    ==========     ==========
Weighted average shares outstanding...................         668           741            741
                                                        ==========    ==========     ==========
</TABLE>
 
                                      F-120
<PAGE>   179
 
                          STRATEGIC INTERACTIVE, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                           COMMON               COMMON
                                      STOCK -- CLASS A     STOCK -- CLASS B     ADDITIONAL
                                      -----------------    -----------------     PAID-IN       RETAINED
                                      SHARES    AMOUNT     SHARES    AMOUNT      CAPITAL       EARNINGS      TOTAL
                                      ------    ------     ------    ------     ----------     --------      -----
<S>                                   <C>       <C>        <C>       <C>        <C>           <C>          <C>
Balance -- July 1, 1996.............    600      $600        --        $--       $  5,586     $   11,389   $   17,575
    Sale of Class A common stock for
      cash..........................    111       111        --         --        471,639             --      471,750
    Issuance of Class B common
      stock.........................     --        --        30         30             --             --           30
    Distributions to stockholders...     --        --        --         --             --        (52,450)     (52,450)
    Net income......................     --        --        --         --             --        359,709      359,709
                                        ---      ----        --        ---       --------     ----------   ----------
 
Balance -- June 30, 1997............    711       711        30         30        477,225        318,648      796,614
    Net income......................     --        --        --         --             --        983,732      983,732
                                        ---      ----        --        ---       --------     ----------   ----------
 
Balance -- June 30, 1998............    711       711        30         30        477,225      1,302,380    1,780,346
                                        ---      ----        --        ---       --------     ----------   ----------
    Net income......................     --        --        --         --             --         25,352       25,352
                                        ---      ----        --        ---       --------     ----------   ----------
Balance -- September 30, 1998
  (unaudited).......................    711      $711        30        $30       $477,225     $1,327,732   $1,805,698
                                        ===      ====        ==        ===       ========     ==========   ==========
</TABLE>
 
                                      F-121
<PAGE>   180
 
                          STRATEGIC INTERACTIVE, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                   THREE MONTHS
                                                           YEAR ENDED JUNE 30          ENDED
                                                         ----------------------    SEPTEMBER 30,
                                                           1997         1998           1998
                                                         ---------    ---------    -------------
                                                                                    (UNAUDITED)
<S>                                                      <C>          <C>          <C>
Cash Flows from Operating Activities
     Net income........................................  $ 359,709    $ 983,732     $   25,352
                                                         ---------    ---------     ----------
     Adjustments to reconcile net income to net cash
       from operating activities:
          Depreciation.................................     24,740       65,995         22,830
          Loss on disposal of property and equipment...         --       16,470             --
          (Increase) decrease in assets:
               Accounts receivable.....................   (185,718)    (594,103)       354,981
               Prepaid expenses........................      9,732      (27,629)       (16,987)
               Other assets............................      2,924           --             --
          Increase (decrease) in liabilities:
               Current portion, long term debt.........         --           --           (297)
               Accounts payable and other accrued
                 liabilities...........................      4,263      121,724        121,203
               Accrued federal income tax..............    124,159      (31,915)       (33,548)
               Deferred revenue........................     19,200      (19,200)         6,750
                                                         ---------    ---------     ----------
                    Net cash provided by operating
                      activities.......................    359,009      515,074        480,284
 
Cash Flows from Investing Activities
     Purchase of property and equipment................   (149,071)    (268,846)       (73,216)
 
Cash Flows from Financing Activities
     Payments on bank note payable.....................   (164,398)          --             --
     Proceeds (payments) long-term debt................     28,500           --         (1,397)
     Payments on long-term debt........................     (1,861)      (4,345)            --
     Distributions to stockholders.....................    (52,450)          --             --
     Proceeds from issuance of common stock............    471,980           --             --
                                                         ---------    ---------     ----------
                    Net cash provided by (used in)
                      financing activities.............    281,771       (4,345)        (1,397)
                                                         ---------    ---------     ----------
Net Increase in Cash and Cash Equivalents..............    491,709      241,883        405,671
Cash and Cash Equivalents -- Beginning of year.........     25,880      517,589        759,472
                                                         ---------    ---------     ----------
Cash and Cash Equivalents -- End of year...............  $ 517,589    $ 759,472     $1,651,143
                                                         =========    =========     ==========
Supplemental Cash Flow Information -- Cash paid for
  interest.............................................  $  10,418    $   2,282             --
                                                         =========    =========     ==========
</TABLE>
 
                                      F-122
<PAGE>   181
 
                          STRATEGIC INTERACTIVE, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 1997 AND 1998
 
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
     The Company provides web-based training, education, and other corporate
communication solutions. Approximately 65 percent of the Company's revenue is
from domestic automobile companies. The Company is privately held, employs
approximately 50 people, and is located in Lansing, Michigan.
 
     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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
 
     Cash Equivalents -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
 
     Accounts Receivable -- Trade accounts receivable represent amounts due from
major clients such as General Motors, General Motors Acceptance Corporation,
Ford Motor Company, and others. The majority of receivables result from revenue
generated from the sale of systems.
 
     Property and Equipment -- Property and equipment are stated at cost. Assets
are depreciated over their estimated useful lives using the straight-line
method. Costs of repairs and maintenance are charged to expense as incurred.
 
     Revenue Recognition -- Revenue is recognized based on the status of the
Company's projects, primarily based on hours incurred. Deferred revenue
represents funds collected in advance of performance and completion of certain
projects.
 
     Retirement Plan -- The Company provides its employees with a qualified
retirement plan that allows employees to contribute to a personal investment
account. The Company also contributes 3 percent of participant salaries. The
Company contributed $9,142 and $34,622 for the years ended June 30, 1997 and
1998, respectively.
 
     Income Taxes -- Prior to January 1, 1997, the Company was taxed as an "S"
corporation according to the Internal Revenue Code provisions. Generally, the
income of an "S" corporation is not subject to federal income tax at the
corporation level; rather, the stockholders are required to include a pro-rata
share of the Company's taxable income in their personal income tax returns,
irrespective of whether dividends have been paid. During 1997, this election was
revoked.
 
     Effective with the change in tax status, the Company records current income
taxes based on amounts payable or refundable on tax returns for each year.
Deferred tax liabilities or assets are recognized for the estimated future tax
effects of temporary differences between financial reporting and tax accounting.
However, there are no significant temporary differences and deferred taxes have
not been recorded.
 
     The provision for income taxes for the year ended June 30, 1997 differs
from amounts computed by applying the statutory United States federal tax rate
primarily as a result of income earned during the period prior to the change in
tax status that was not taxable to the Company.
 
                                      F-123
<PAGE>   182
                          STRATEGIC INTERACTIVE, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                             JUNE 30, 1997 AND 1998
 
NOTE 2 -- PROPERTY AND EQUIPMENT
 
     Cost of property and equipment and depreciable lives are summarized as
follows:
 
<TABLE>
<CAPTION>
                                                                  DEPRECIABLE
                                            1997        1998      LIFE-YEARS
                                            ----        ----      -----------
<S>                                       <C>         <C>         <C>
Computer equipment......................  $170,288    $357,751       5
Computer software.......................     8,841      23,972       3
Telephone equipment.....................     1,741       1,741       5
Furniture...............................    40,264      63,878       7
     Total cost.........................   221,134     447,342
Accumulated depreciation................    52,926     112,753
                                          --------    --------
     Net carrying amount................  $168,208    $334,589
                                          ========    ========
</TABLE>
 
NOTE 3 -- NOTE PAYABLE -- BANK
 
     The Company has a $250,000 line of credit available with interest on
outstanding borrowings at .75 percent above of the Bank's prime rate. No amount
was outstanding as of June 30, 1997 and 1998. Accounts receivable are pledged as
collateral for borrowings.
 
NOTE 4 -- LONG-TERM DEBT
 
     The Company has a note payable to a stockholder. The note is collateralized
by furniture and equipment, bears interest at 10.00 percent, and is due in
monthly installments of $603 including interest.
 
     Minimum principal payments on the note payable to maturity as June 30,
1998, are as follows:
 
<TABLE>
<S>                                                           <C>
1999........................................................  $ 5,850
2000........................................................    5,805
2001........................................................    6,413
2002........................................................    4,226
                                                              -------
     Total..................................................  $22,294
                                                              =======
</TABLE>
 
NOTE 5 -- LEASES
 
     The Company leases office space and certain equipment under operating
leases in effect at June 30, 1998. The following is a schedule of future minimum
rental payments under these operating leases:
 
<TABLE>
<S>                                                           <C>
1999........................................................  $  167,721
2000........................................................     202,890
2001........................................................     221,900
2002........................................................     226,757
2003........................................................     231,753
2004 and after..............................................     234,905
                                                              ----------
     Total..................................................  $1,285,926
                                                              ==========
</TABLE>
 
     Lease expense charged to operations was $24,259 and $64,556 in 1997 and
1998, respectively.
 
                                      F-124
<PAGE>   183
                          STRATEGIC INTERACTIVE, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                             JUNE 30, 1997 AND 1998
 
     Subsequent to June 30, 1998, the Company entered into various leases for
office facilities, furniture and equipment. Future rental payments under the
leases entered into subsequent to June 30, 1998 are as follows:
 
<TABLE>
<S>                                                           <C>
1999........................................................  $104,616
2000........................................................   112,497
2001........................................................   112,497
2002........................................................    88,729
2003........................................................    82,392
2004 and after..............................................     5,207
                                                              --------
     Total..................................................  $505,938
                                                              ========
</TABLE>
 
                                      F-125
<PAGE>   184


                             THE PROVANT COMPANIES

AMERICAN MEDIA INCORPORATED                      LEARNING SYSTEMS SCIENCES, INC.
General business management                          Customized technology-based
videos, books, CD-ROMS                         solutions for the retail industry

BEHAVIORAL TECHNOLOGY, INC.                   MOHR RETAIL LEARNING SYSTEMS, INC.
Employee recruitment, selection              Customer-oriented training programs
and retention                                            for the retail industry

DECKER COMMUNICATIONS, INC.                                NOVATIONS GROUP, INC.
Communications and                                     Management consulting and
presentation skills                              organizational diagnostic tools

KC RESOURCES CREATIVE SOLUTIONS, INC.               J. HOWARD & ASSOCIATES, INC.
Technology-based instructional design                              Diversity and
for the telecommunications industry                             inclusion skills

EXECUTIVE PERSPECTIVES, INC.                                 STAR MOUNTAIN, INC.
Custom training simulations                      Customized work skills training
for management decision making                           for government entities

GULLIVER RITCHIE ASSOCIATES, INC.                    STRATEGIC INTERACTIVE, INC.
Technology-based training                                     Web-based training
solutions for the manufacturing industry                      management systems



                                    PROVANT

                         The People Performance Company

                                www.provant.com
<PAGE>   185
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                3,500,000 SHARES
 
                                 [PROVANT LOGO]
 
                                  COMMON STOCK
 
                            -----------------------
                                   PROSPECTUS
                            -----------------------
 
                              MERRILL LYNCH & CO.
                              SALOMON SMITH BARNEY
                               PIPER JAFFRAY INC.
                         BANCBOSTON ROBERTSON STEPHENS
 
                              JANUARY      , 1999
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   186
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq listing fee.
 
<TABLE>
<S>                                                           <C>
SEC registration fee........................................  $   22,473
NASD filing fee.............................................       8,584
Nasdaq listing fee..........................................      17,500
Printing and engraving expenses.............................     350,000
Legal fees and expenses.....................................     200,000
Accounting fees and expenses................................     250,000
Blue sky fee................................................       7,500
Transfer agent and registrar fees...........................       5,000
Miscellaneous...............................................     138,943
                                                              ----------
          TOTAL.............................................  $1,000,000
                                                              ==========
</TABLE>
 
     PROVANT will bear all of the foregoing fees and expenses.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     PROVANT is a Delaware corporation. Reference is made to Section 145 of the
DGCL, as amended, which provides that a corporation may indemnify any person who
was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
PROVANT'S Certificate of Incorporation further provides that PROVANT shall
indemnify its directors and officers to the full extent permitted by the law of
the State of Delaware.
 
                                      II-1
<PAGE>   187
 
     PROVANT's Certificate of Incorporation provides that PROVANT's directors
shall not be liable to PROVANT or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent that exculpation
from liability is not permitted under the DGCL as in effect at the time such
liability is determined.
 
     The Certificate of Incorporation and By-laws also provide that each person
who was or is made a party to, or is involved in, any action, suit, proceeding
or claim by reason of the fact that he or she is or was a director or officer of
PROVANT (or is or was serving at the request of PROVANT as a director or officer
of any other enterprise including service with respect to employee benefit
plans) shall be indemnified and held harmless by PROVANT, to the full extent
permitted by Delaware law, as in effect from time to time, against all expenses
(including attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
the investigation, preparation to defend or defense of such action, suit,
proceeding or claim. PROVANT's By-laws allow for similar rights of
indemnification to be afforded, in PROVANT's discretion, to its employees and
agents.
 
     The rights to indemnification and the payment of expenses provided by the
Certificate of Incorporation and By-laws do not apply to any action, suit,
proceeding or claim initiated by or on behalf of a person otherwise entitled to
the benefit of such provisions. Any person seeking indemnification under the
By-laws shall be deemed to have met the standard of conduct required for such
indemnification unless the contrary shall be established. Any repeal or
modification of such indemnification provisions shall not adversely affect any
right or protection of a director or officer with respect to any conduct of such
director or officer occurring prior to such repeal or modification.
 
     PROVANT maintains an indemnification insurance policy covering all
directors and officers of PROVANT and its subsidiaries.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     In December 1996, PROVANT issued (i) 298.8, 762 and 762.1 shares of common
stock, respectively, at a purchase price of $1.00 per share, to its initial
stockholders and (ii) 169.4 shares of common stock at a purchase price of $1.00
per share to a consultant. In July 1997, PROVANT issued 80.5, 260.4 and 351.6
shares of common stock, respectively, at a purchase price of $1.00 per share, to
additional consultants. In September 1997, PROVANT issued (i) 134.2 and 201.4
shares of Common Stock, respectively, at a purchase price of $1.00 per share, to
two of its initial stockholders and (ii) 67.1, 100.7 and 201.4 shares of common
stock, respectively, at a purchase price of $1.00 per share, to consultants. In
November 1997, PROVANT issued 27.3 shares and one share of common stock,
respectively, at a purchase price of $1.00 per share, to two consultants.
 
     In September 1997, PROVANT issued to a consultant an option to purchase
10,000 shares of common stock at a purchase price of $5.00 per share, which
became exercisable in full upon the closing of the IPO. The option shall
terminate on May 4, 2001.
 
     As partial consideration for an agreement to extend financing to PROVANT in
connection with the IPO and the Combination, on October 6, 1997, PROVANT issued
two warrants to each of Paul M. Verrochi and Dominic J. Puopolo. The first
warrant entitles the holder to purchase 173,194 shares of common stock at a per
share exercise price of $13.00. The second warrant entitles the holder to
purchase 216,492 shares of common stock. The second warrant will be exercisable
only if the market price of the common stock increases to certain threshold
levels, or earlier under certain circumstances involving the merger or sale of
PROVANT.
 
     PROVANT issued shares of common stock in the Combination, as described
under "Certain Transactions -- Organization of PROVANT."
 
     In July 1998, PROVANT issued 200,000 shares of common stock in connection
with its acquisition of a performance improvement company in Cabin John,
Maryland.
 
                                      II-2
<PAGE>   188
 
     All such issuances of common stock have been made in reliance upon the
exemption from registration afforded by Section 4(2) under the Securities Act.
 
     The foregoing amounts (except with respect to the stock issuances described
in the first paragraph of this Item 15 have been adjusted or otherwise reflect
the stock dividend of 979.0292-for-1 that was declared by the Board of Directors
of PROVANT on common stock outstanding as of April 28, 1998.
 
ITEM 16.  EXHIBITS
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
<C>         <S>                                                           <C>
    +1      Form of Purchase Agreement..................................
   **3.1    Certificate of Incorporation of the Company.................
   **3.2    By-laws of the Company......................................
   **4.1    Form of Specimen Stock Certificate..........................
   ++5      Opinion of Nutter, McClennen & Fish, LLP....................
  **10.1    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
            Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
            Green, Ph.D. ...............................................
  **10.2    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Decker Communications, Inc., Bert Decker and
            Kenneth Taylor..............................................
  **10.3    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
            Marc S. Wallace.............................................
  **10.4    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
            Edwin Bauch as Trustee of the Steinmetz Children's Trust
            u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
            King Children's Trust u/d/t dated December 31, 1996, John F.
            King and Robert A. Steinmetz, Ph.D. ........................
  **10.5    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
            Judith Cohen and Michael Patrick............................
  **10.6    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
            Inc., Star Acquisition Corp. and Carl von Sternberg.........
  **10.7    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
            J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
            Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
            Jonathan Younger............................................
  **10.8    Form of First Amendment to Agreement and Plan of Merger (J.
            Howard).....................................................
  **10.9    1998 Equity Incentive Plan..................................
  **10.10   Stock Plan for Non-Employee Directors.......................
  **10.11   Form of 1998 Employee Stock Purchase Plan...................
  **10.12   Form of Warrants to Messrs. Verrochi and Puopolo............
  **10.13   Form of Contingent Warrants to Messrs. Verrochi and
            Puopolo.....................................................
  **10.14   Form of Employment Agreement between Rajiv Bhatt and
            PROVANT, Inc. ..............................................
  **10.15   Form of Employment Agreement between MOHR Acquisition Corp.,
            Herbert A. Cohen, and PROVANT, Inc. ........................
  **10.16   Form of Employment Agreement between Decker Acquisition
            Corp., Bert Decker, and PROVANT, Inc. ......................
  **10.17   Form of Employment Agreement between Philip Gardner and
            PROVANT, Inc. ..............................................
  **10.18   Form of Employment Agreement between Behavioral Acquisition
            Corp., Paul C. Green, and PROVANT, Inc. ....................
</TABLE>
 
                                      II-3
<PAGE>   189
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
<C>         <S>                                                           <C>
  **10.19   Form of Employment Agreement between Novations Acquisition
            Corp., Joe Hanson, and PROVANT, Inc. .......................
  **10.20   Form of Employment Agreement between LSS Acquisition Corp.,
            John F. King, and PROVANT, Inc. ............................
  **10.21   Form of Employment Agreement between Dominic J. Puopolo and
            PROVANT, Inc. ..............................................
  **10.22   Form of Employment Agreement between A. Carl von Sternberg,
            Star Acquisition Corp. and PROVANT, Inc. ...................
  **10.23   Form of Employment Agreement between Paul M. Verrochi and
            PROVANT, Inc. ..............................................
  **10.24   Form of Employment Agreement between Howard Acquisition
            Corp., Marc S. Wallace, and PROVANT, Inc. ..................
  **10.25   Form of Employment Agreement between John H. Zenger and
            PROVANT, Inc. ..............................................
  **10.26   Form of Consulting Agreement between Michael J. Davies and
            PROVANT, Inc................................................
  **10.27   Lease Agreement between Behavioral Technology, Inc. and Paul
            C. Green, Ph.D..............................................
  **10.28   Lease Agreement between Novations Group, Inc. and Novations
            Partners, L.L.C. ...........................................
  **10.29   Form of Consulting Agreement between Donald W. Glazer and
            PROVANT, Inc................................................
   *10.30   Revolving Credit Agreement dated April 8, 1998 between
            PROVANT, Inc. and Fleet National Bank.......................
 ***10.31   Amendment No. 1 to Revolving Credit Agreement...............
  ++10.32   Amendment No. 2 to Revolving Credit Agreement...............
****10.33   1998 Stock Option Plan for Outside Directors................
  ++21      Subsidiaries of the Registrant..............................
   +23.1    Consent of KPMG Peat Marwick LLP............................
   +23.2    Consent of Friedman & Fuller, P.C...........................
   +23.3    Consent of McGladrey & Pullen, LLP..........................
   +23.4    Consent of Plante & Moran, LLP..............................
   +23.5    Consent of Nutter, McClennen & Fish, LLP (contained in
            Exhibit 5)..................................................
   +24      Power of Attorney (contained in the signature page to this
            Registration Statement).....................................
</TABLE>
 
---------------
   * Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the three months ended March 31, 1998.
  ** Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-46157).
 *** Incorporated by reference to the Company's Annual Report on Form 10-K for
     its fiscal year ended June 30, 1998.
**** Incorporated by reference to the Company's Proxy Statement relating to its
     1998 Annual Meeting of Stockholders.
   + Filed herewith.
  ++ To be filed by amendment.
 
ITEM 17.  UNDERTAKINGS
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL and the Registrant's Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent,
 
                                      II-4
<PAGE>   190
 
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
 
     The undersigned Registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under Securities Act of
     1933, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A under the Securities
     Act and contained in a form of prospectus filed by the Registrant pursuant
     to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
     to be part of this Registration Statement as of the time it was declared
     effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new Registration Statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-5
<PAGE>   191
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, the
Commonwealth of Massachusetts, on the 5th day of January 1999.
 
                                          PROVANT, INC.
 
                                          By: /s/ PAUL M. VERROCHI
                                            ------------------------------------
                                              Paul M. Verrochi
                                              Chairman of the Board and Chief
                                              Executive Officer
 
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Paul M. Verrochi, Dominic J. Puopolo, Constantine Alexander and James E. Dawson,
and each of them, with full power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments and amendments thereto) to this
Registration Statement on Form S-1 of the registrant, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he or she might or could do in person thereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
 
<TABLE>
<CAPTION>
                   SIGNATURES                                       TITLE                           DATE
                   ----------                                       -----                           ----
<C>                                               <S>                                         <C>
              /s/ PAUL M. VERROCHI                Chairman of the Board and Chief Executive    January 5, 1999
------------------------------------------------    Officer
                Paul M. Verrochi
 
             /s/ DOMINIC J. PUOPOLO               Executive Vice President, Chief Financial    January 5, 1999
------------------------------------------------    Officer and Director
               Dominic J. Puopolo
 
                                                  President and Director                       January 5, 1999
------------------------------------------------
                 John H. Zenger
 
                /s/ RAJIV BHATT                   Executive Vice President, Chief Operating    January 5, 1999
------------------------------------------------    Officer and Chief Accounting Officer
                  Rajiv Bhatt
 
              /s/ HERBERT A. COHEN                Director                                     January 5, 1999
------------------------------------------------
                Herbert A. Cohen
 
                /s/ BERT DECKER                   Director                                     January 5, 1999
------------------------------------------------
                  Bert Decker
</TABLE>
 
                                      II-6
<PAGE>   192
 
<TABLE>
<CAPTION>
                   SIGNATURES                                       TITLE                           DATE
                   ----------                                       -----                           ----
<C>                                               <S>                                         <C>
               /s/ PAUL C. GREEN                                   Director                    January 5, 1999
------------------------------------------------
                 Paul C. Green
 
                 /s/ JOE HANSON                                    Director                    January 5, 1999
------------------------------------------------
                   Joe Hanson
 
                /s/ JOHN F. KING                                   Director                    January 5, 1999
------------------------------------------------
                  John F. King
 
           /s/ A. CARL VON STERNBERG                               Director                    January 5, 1999
------------------------------------------------
             A. Carl von Sternberg
 
              /s/ MARC S. WALLACE                                  Director                    January 5, 1999
------------------------------------------------
                Marc S. Wallace
 
             /s/ MICHAEL J. DAVIES                                 Director                    January 5, 1999
------------------------------------------------
               Michael J. Davies
 
              /s/ DAVID B. HAMMOND                                 Director                    January 5, 1999
------------------------------------------------
                David B. Hammond
 
               /s/ JOHN R. MURPHY                                  Director                    January 5, 1999
------------------------------------------------
                 John R. Murphy
 
              /s/ ESTHER T. SMITH                                  Director                    January 5, 1999
------------------------------------------------
                Esther T. Smith
</TABLE>
 
                                      II-7
<PAGE>   193
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
<C>         <S>                                                           <C>
    +1      Form of Purchase Agreement..................................
   **3.1    Certificate of Incorporation of the Company.................
   **3.2    By-laws of the Company......................................
   **4.1    Form of Specimen Stock Certificate..........................
   ++5      Opinion of Nutter, McClennen & Fish, LLP....................
  **10.1    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
            Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
            Green, Ph.D. ...............................................
  **10.2    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Decker Communications, Inc., Bert Decker and
            Kenneth Taylor..............................................
  **10.3    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
            Marc S. Wallace.............................................
  **10.4    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
            Edwin Bauch as Trustee of the Steinmetz Children's Trust
            u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
            King Children's Trust u/d/t dated December 31, 1996, John F.
            King and Robert A. Steinmetz, Ph.D. ........................
  **10.5    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
            Judith Cohen and Michael Patrick............................
  **10.6    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
            Inc., Star Acquisitions Corp. and Carl von Sternberg........
  **10.7    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
            J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
            Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
            Jonathan Younger............................................
  **10.8    Form of First Amendment to Agreement and Plan of Merger (J.
            Howard).....................................................
  **10.9    1998 Equity Incentive Plan..................................
  **10.10   Stock Plan for Non-Employee Directors.......................
  **10.11   Form of 1998 Employee Stock Purchase Plan...................
  **10.12   Form of Warrants to Messrs. Verrochi and Puopolo............
  **10.13   Form of Contingent Warrants to Messrs. Verrochi and
            Puopolo.....................................................
  **10.14   Form of Employment Agreement between Rajiv Bhatt and
            PROVANT, Inc. ..............................................
  **10.15   Form of Employment Agreement between MOHR Acquisition Corp.,
            Herbert A. Cohen, and PROVANT, Inc. ........................
  **10.16   Form of Employment Agreement between Decker Acquisition
            Corp., Bert Decker, and PROVANT, Inc. ......................
  **10.17   Form of Employment Agreement between Philip Gardner and
            PROVANT, Inc. ..............................................
  **10.18   Form of Employment Agreement between Behavioral Acquisition
            Corp., Paul C. Green, and PROVANT, Inc. ....................
  **10.19   Form of Employment Agreement between Novations Acquisition
            Corp., Joe Hanson, and PROVANT, Inc. .......................
  **10.20   Form of Employment Agreement between LSS Acquisition Corp.,
            John F. King, and PROVANT, Inc. ............................
  **10.21   Form of Employment Agreement between Dominic J. Puopolo and
            PROVANT, Inc. ..............................................
</TABLE>
<PAGE>   194
 
<TABLE>
<CAPTION>
                                                                          SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
<C>         <S>                                                           <C>
  **10.22   Form of Employment Agreement between A. Carl von Sternberg,
            Star Acquisition Corp. and PROVANT, Inc. ...................
  **10.23   Form of Employment Agreement between Paul M. Verrochi and
            PROVANT, Inc. ..............................................
  **10.24   Form of Employment Agreement between Howard Acquisition
            Corp., Marc S. Wallace, and PROVANT, Inc. ..................
  **10.25   Form of Employment Agreement between John H. Zenger and
            PROVANT, Inc. ..............................................
  **10.26   Form of Consulting Agreement between Michael J. Davies and
            PROVANT, Inc................................................
  **10.27   Lease Agreement between Behavioral Technology, Inc. and Paul
            C. Green, Ph.D..............................................
  **10.28   Lease Agreement between Novations Group, Inc. and Novations
            Partners, L.L.C. ...........................................
  **10.29   Form of Consulting Agreement between Donald W. Glazer and
            PROVANT, Inc................................................
   *10.30   Revolving Credit Agreement dated April 8, 1998 between
            PROVANT, Inc. and Fleet National Bank.......................
 ***10.31   Amendment No. 1 to Revolving Credit Agreement...............
  ++10.32   Amendment No. 2 to Revolving Credit Agreement...............
****10.33   1998 Stock Option Plan for Outside Directors................
  ++21      Subsidiaries of the Registrant..............................
   +23.1    Consent of KPMG Peat Marwick LLP............................
   +23.2    Consent of Friedman & Fuller, P.C...........................
   +23.3    Consent of McGladrey & Pullen, LLP..........................
   +23.4    Consent of Plante & Moran, LLP..............................
   +23.5    Consent of Nutter, McClennen & Fish, LLP (contained in
            Exhibit 5)..................................................
   +24      Power of Attorney (contained in the signature page to this
            Registration Statement).....................................
</TABLE>
 
---------------
   * Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the three months ended March 31, 1998.
  ** Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-46157).
 *** Incorporated by reference to the Company's Annual Report on Form 10-K for
     its fiscal year ended June 30, 1998.
**** Incorporated by reference to the Company's Proxy Statement relating to its
     1998 Annual Meeting of Stockholders.
   + Filed herewith.
  ++ To be filed by amendment.
[{"type": "S-1", "sequence": "1", "description": "PROVANT, INC.", "secsgml_size_bytes": 694849}]
{"company-data": {"conformed-name": "PROVANT INC", "cik": "0001054853", "assigned-sic": "8742", "irs-number": "043395167", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-70119", "film-number": "99500649"}, "business-address": {"street1": "67 BATTERYMARCH ST SUITE 600", "city": "BOSTON", "state": "MA", "zip": "02110", "phone": "6172611600"}, "mail-address": {"street1": "67 BATTERMARCH STREET SUITE 600", "city": "BOSTON", "state": "MA", "zip": "02110"}}
1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1999
 
                                                    REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                                 PROVANT, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
DELAWARE                             8742                            04-3395167
   (STATE OR OTHER JURISDICTION       (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)
67 BATTERYMARCH STREET, SUITE 600
                                BOSTON, MA 02110
                                 (617) 261-1600
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                                PAUL M. VERROCHI
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                  PROVANT, INC.
                       67 BATTERYMARCH STREET, SUITE 600
                                BOSTON, MA 02110
                                 (617) 261-1600
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                          COPIES OF COMMUNICATIONS TO:
 
                            JAMES E. DAWSON, ESQUIRE
                         CONSTANTINE ALEXANDER, ESQUIRE
                          NUTTER MCCLENNEN & FISH, LLP
                            ONE INTERNATIONAL PLACE
                                BOSTON, MA 02110
                           TELEPHONE: (617) 439-2000
                           FACSIMILE: (617) 973-9748
 
                          KEITH F. HIGGINS, ESQUIRE
                                  ROPES & GRAY
                            ONE INTERNATIONAL PLACE
                                BOSTON, MA 02110
                           TELEPHONE: (617) 951-7000
                           FACSIMILE: (617) 951-7050
 
                            ------------------------
 
          APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
 
    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
                                                                 PROPOSED             PROPOSED
                                              AMOUNT              MAXIMUM              MAXIMUM             AMOUNT OF
  TITLE OF EACH CLASS OF SECURITIES           TO BE           OFFERING PRICE          AGGREGATE          REGISTRATION
           TO BE REGISTERED               REGISTERED(1)        PER SHARE(2)       OFFERING PRICE(2)           FEE
-------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value..........   3,967,500 shares         $20.375            $80,837,813            $22,473
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
(1) Includes 517,500 shares that the underwriters have the option to purchase to
    cover over-allotments and           shares held by certain selling
    stockholders.
 
(2) Determined pursuant to Rule 457(c) under the Securities Act of 1933, as
    amended, based upon the average of the high and low prices per share of the
    Common Stock as reported on the Nasdaq National Market on December 29, 1998.
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
 
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
                             SUBJECT TO COMPLETION
 
                  PRELIMINARY PROSPECTUS DATED JANUARY 5, 1999
 
PROSPECTUS
 
                                3,450,000 SHARES
 
                                 [PROVANT LOGO]
 
                                  COMMON STOCK
                            ------------------------
     We are offering 2,500,000 shares of common stock and certain of our
stockholders are offering 950,000 shares of common stock. We will not receive
any proceeds from the sale of common stock by the selling stockholders.
 
     Our common stock is traded on the Nasdaq National Market under the symbol
"POVT." The last reported sale price for the common stock on January 4, 1999 was
$20.75 per share.
 
     INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7.
                            ------------------------
PER SHARE        TOTAL
                                                   ---------        -----
Public offering price..........................     $               $
Underwriting discount..........................     $               $
Proceeds, before expenses, to PROVANT..........     $               $
Proceeds to the selling stockholders...........     $               $
The underwriters also may purchase from us up to an additional 517,500
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
 
     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
 
     We expect that the shares of common stock will be ready for delivery in New
York, New York on or about February   , 1999.
                            ------------------------
MERRILL LYNCH & CO.
              SALOMON SMITH BARNEY
 
                            PIPER JAFFRAY INC.
 
                                         BANCBOSTON ROBERTSON STEPHENS
 
                            ------------------------
                The date of this prospectus is January   , 1999
3

                                    PROVANT

                         The People Performance Company

                                www.provant.com

                              Consulting Services

                                  Work Skills

                             Recruitment & Retention

                                Customer Service

                                 Communications

         Picture of Seminar                               Picture of CD-ROM

                     PROVANT'S mission is to be the premier
                           provider of comprehensive
                       training solutions that measurably
                       improve organizations' performance
                        through developing their people.

                            Supervision & Leadership

                                   Diversity

                                 Decision Making

                                  Negotiations

                          Training Management Services

         Picture of Meeting                             Picture of globe with 
                                                           finger on button
4
 
                               TABLE OF CONTENTS
PAGE
                                                              ----
Prospectus Summary..........................................    4
Risk Factors................................................    7
Use of Proceeds.............................................   10
Price Range of Common Stock.................................   10
Capitalization..............................................   11
Dividend Policy.............................................   11
Selected Financial Data.....................................   12
Star Mountain Selected Financial Data.......................   13
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   14
Business....................................................   30
Management..................................................   38
Principal and Selling Stockholders..........................   46
Certain Transactions........................................   48
Description of Capital Stock................................   51
Shares Eligible for Future Sale.............................   53
Underwriting................................................   55
Legal Matters...............................................   56
Experts.....................................................   57
Available Information.......................................   57
Index to Financial Statements...............................  F-1
------------------------
 
                           FORWARD-LOOKING STATEMENTS
 
     This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things:
 
     - Our limited combined operating history and risks related to integrating
       our businesses;
 
     - Risks related to our anticipated growth and acquisition strategies;
 
     - Risks related to our ability to attract and retain key personnel;
 
     - Uncertainty about anticipated trends in our business and the performance
       improvement industry;
 
     - Risks regarding technology; and
 
     - Uncertainties regarding our ability to continue to control costs and
       maintain quality.
 
     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
                            ------------------------
 
     You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
 
                                        3
5
 
                               PROSPECTUS SUMMARY
 
     THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS
AND RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. THE TERMS "PROVANT,"
"WE" AND "OUR" AS USED IN THIS PROSPECTUS REFER TO "PROVANT, INC." AND ITS
SUBSIDIARIES AS A CONSOLIDATED ENTITY, EXCEPT WHERE IT IS MADE CLEAR THAT SUCH
TERM MEANS ONLY THE PARENT COMPANY. IN MAY 1998, WE COMMENCED OPERATIONS BY
ACQUIRING SEVEN COMPANIES PROVIDING PERFORMANCE IMPROVEMENT SERVICES AND
PRODUCTS IN A TRANSACTION KNOWN AS THE "COMBINATION." THESE SEVEN COMPANIES ARE
REFERRED TO AS THE "FOUNDING COMPANIES." SINCE MAY 1998, WE HAVE ACQUIRED FIVE
ADDITIONAL COMPANIES.
 
OUR COMPANY
 
     We are a leading provider of performance improvement training services and
products. Our clients are Fortune 1000 companies, other large and medium-sized
corporations and government entities. We offer both customized and standardized
services and products that are designed to provide measurable improvement in
performance and productivity for both employees and organizations. We can
deliver these performance improvement solutions using various delivery methods
to suit our clients' needs, including traditional delivery methods (such as
instructor-led classroom training and train-the-trainer programs) and
technology-based delivery methods (such as CD-ROM, intranets and the Internet).
In addition, we offer management consulting and training management services.
Our goal is to become the leading single-source provider of high-quality
performance improvement services and products. For our fiscal year ended June
30, 1998, we had pro forma revenue of $115.3 million and pro forma income from
operations of $13.4 million.
 
OUR CLIENTS
 
     The PROVANT companies are recognized leaders in their fields and have
developed well-established client bases. During fiscal 1998, we provided
performance improvement services and products to more than 1,400 companies and
135 government entities. Our clients include Bell Atlantic, Deloitte & Touche,
the Department of Energy, Ford, Hewlett-Packard, Intel, J.P. Morgan, Kellogg,
Marriott International and Mobil. During this period, we generated revenues of
more than $100,000 from approximately 145 different corporate clients and from
over 10 different federal government entities.
 
OUR INDUSTRY
 
     The performance improvement market is large and growing. We believe that
companies increasingly view employee training as a competitive necessity rather
than an optional expense in a technology-driven, knowledge-based economy.
According to TRAINING magazine, domestic corporations with over 100 employees
budgeted approximately $60.7 billion on training in 1998, compared to
approximately $48.2 billion in 1993, representing a compound annual growth rate
of approximately 4.7%. Expenditures on external providers of performance
improvement services and products by domestic corporations with over 100
employees have increased from approximately $9.4 billion in 1993 to a budgeted
$14.3 billion in 1998, representing a compound annual growth rate of 8.8%. These
expenditures have increased as a percentage of the total training budgets of
such corporations from approximately 19.5% in 1993 to a budgeted 23.6% in 1998.
We believe that no company in the industry has more than a two percent share of
the external training market. An increasing number of organizations are using
external suppliers for their training requirements so that they can focus on
their core competencies, turn fixed training costs into variable costs, and
obtain comprehensive training content and delivery capabilities that may not be
available internally.
 
                                        4
6
 
OUR STRATEGY
 
     We intend to capitalize on the growth in our industry and the trend toward
using external suppliers by pursuing a multi-faceted growth strategy. Key
components of our growth strategy include:
 
     -  using our existing client relationships to cross-sell our services and
        products;
 
     -  continuing to develop industry-specific service and product offerings;
 
     -  leveraging investments in technology-based delivery methods;
 
     -  continuing to expand our sales and marketing activities;
 
     -  expanding our service and product offerings; and
 
     -  completing strategic acquisitions that will help us expand our service
        and product offerings, distribution capabilities and client base.
 
OUR ADDRESS
 
     Our principal executive offices are located at 67 Batterymarch Street,
Suite 600, Boston, Massachusetts 02110, and our telephone number at that
location is (617) 261-1600.
 
                                  THE OFFERING
Common stock offered by PROVANT.............................  2,500,000 shares
Common stock offered by the selling stockholders............  950,000 shares
  Total.....................................................  3,450,000 shares
Common stock to be outstanding after this offering(1).......  14,345,406 shares
Use of Proceeds.............................................  We estimate that PROVANT's net
                                                              proceeds from this offering will be
                                                              approximately $50.5 million. We
                                                              intend to use these net proceeds to
                                                              repay existing indebtedness, and for
                                                              general corporate purposes including
                                                              acquisitions.
Nasdaq National Market Symbol...............................  POVT
---------------
(1) Based on 11,945,406 shares of common stock outstanding on January 5, 1999,
    assuming that the over-allotment option is not exercised. Does not include
    1,687,907 shares of common stock issuable upon the exercise of outstanding
    options and warrants, of which options and warrants to purchase 539,984
    shares currently are exercisable.
 
                                        5
7
 
                             SUMMARY FINANCIAL DATA
 
     The following table presents summary historical and pro forma financial
data on the bases described below and elsewhere in this prospectus.
YEAR ENDED            THREE MONTHS ENDED
                                                        JUNE 30, 1998          SEPTEMBER 30, 1998
                                                        -------------     ----------------------------
                                                          PRO FORMA         ACTUAL         PRO FORMA
                                                          ---------         ------         ---------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
  Total revenue....................................      $  115,327       $   23,710      $   31,404
  Cost of revenue..................................          48,827           10,148          13,175
                                                         ----------       ----------      ----------
  Gross profit.....................................          66,500           13,562          18,229
  Selling, general and administrative expenses.....          50,709           10,593          14,074
  Goodwill amortization............................           2,348              380             591
                                                         ----------       ----------      ----------
  Income from operations...........................          13,443            2,589           3,564
  Interest and other income (expense), net.........          (1,736)              (3)           (422)
                                                         ----------       ----------      ----------
  Income before income taxes.......................          11,707            2,586           3,142
  Provision for income taxes.......................           5,622            1,187           1,493
                                                         ----------       ----------      ----------
  Net income.......................................      $    6,085       $    1,399      $    1,649
                                                         ==========       ==========      ==========
  Earnings per common share:
    Basic..........................................      $     0.54       $     0.14      $     0.15
                                                         ==========       ==========      ==========
    Diluted........................................      $     0.52       $     0.13      $     0.13
                                                         ==========       ==========      ==========
  Weighted average common shares outstanding:
     Basic.........................................      11,311,801       10,070,808      11,311,801
    Diluted........................................      11,731,105       11,124,260      12,376,184
SEPTEMBER 30, 1998
                                                           ---------------------------------------------
                                                                                            PRO FORMA
                                                            ACTUAL        PRO FORMA        AS ADJUSTED
                                                           ---------    --------------    --------------
                                                                        (IN THOUSANDS)
BALANCE SHEET DATA:
  Working capital.................................         $ 11,916        $  8,682          $ 38,002
  Total assets....................................          101,959         132,341           161,661
  Long-term debt, net of current portion..........            8,402          22,270             1,070
  Stockholders' equity............................           72,953          84,798           135,318
---------------
     The pro forma consolidated statement of operations data assumes that our 12
acquisitions and initial public offering were completed on July 1, 1997. This
data is not necessarily indicative of the results we would have obtained if
these events had actually then occurred or of our future results. The pro forma
balance sheet data gives effect to the three acquisitions that we completed
after September 30, 1998 as if they had occurred on that date, and the pro forma
as adjusted balance sheet data gives effect to this offering and the application
of the net proceeds as if those events also had occurred on that date. The pro
forma data is based on estimates, available information and assumptions that
management deems appropriate.
 
     The pro forma statement of operations data for the year ended June 30, 1998
reflects the elimination of non-recurring fees totalling approximately $1.3
million and non-cash compensation expense totalling $686,000. The pro forma
statement of operations data for both periods presented above reflects the
elimination of the compensation differential resulting from the pro forma
adjustments of salary, bonus and benefits paid to certain owners of the
businesses we acquired to contractually agreed-upon levels. For fiscal 1998 and
the three months ended September 30, 1998, the aggregate compensation
differential was approximately $6.7 million and $172,000, respectively. The pro
forma consolidated statement of operations data for both periods also reflects
amortization of the goodwill being recorded as a result of each of our 12
acquisitions over a 40-year period, and assumes that all income is subject to an
effective corporate income tax rate of 40%, adjusted for non-tax deductible
goodwill.
 
                                        6
8
 
                                  RISK FACTORS
 
     Investing in the common stock will provide you with an equity ownership
interest in PROVANT. As a PROVANT stockholder, you will be subject to risks
inherent in our business. The value of your investment may increase or decline
and could result in a loss. You should carefully consider the following factors
as well as other information contained in this prospectus before deciding to
invest in shares of the common stock.
 
LIMITED COMBINED OPERATING HISTORY
 
     Our companies did not begin to operate on a combined basis until the
combination of the seven Founding Companies in May 1998. Since then, we have
added the operations of five acquired companies. We have a limited history of
managing the combined operations of our companies.
 
     Our companies offer different services and products, use different
technologies, target different clients and have different corporate cultures.
These differences increase the risk that our efforts to integrate these
businesses may not succeed. We manage our companies and intend to manage
subsequently-acquired businesses on a decentralized basis. This operating
strategy could result in inconsistent operating and financial practices that
could adversely impact our profitability. If we fail to integrate successfully
the operations of our companies, our business could be adversely affected.
 
RISKS RELATED TO CROSS-SELLING
 
     A key component of our internal growth strategy is to cross-sell our
services and products within our existing client base. We have limited
experience in cross-selling and cannot guarantee that significant cross-selling
will occur. Our failure to increase sales through cross-selling or otherwise
achieve internal growth could negatively affect the value of your investment.
 
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
 
     We plan to grow in part by acquiring additional performance improvement
businesses. We may have trouble integrating and managing acquired businesses
without incurring substantial costs, delays or other operational or financial
problems. We also could be adversely affected by difficulties associated with
combining diverse business systems and cultures, and failures to retain key
personnel. In addition, if increased competition for acquisition candidates
develops, it may be more difficult for us to acquire suitable companies on
favorable terms. Uncertainties regarding the size, timing and integration of
acquisitions may cause our operating results to be difficult to predict from
quarter to quarter.
 
     We often finance acquisitions by issuing shares of common stock as part of
the purchase price. However, if the common stock does not maintain a sufficient
market value, or the principals of acquired companies otherwise refuse to accept
common stock as part of the purchase price, we might not be able to use common
stock in acquisitions and instead would be required to use more cash to maintain
our acquisition program. If in this scenario we do not have sufficient cash, we
will not be able to achieve expected growth without raising additional capital
through debt or equity financings. To the extent that we rely on debt
financings, if available, we may increase our borrowing costs and decrease our
profitability.
 
     At September 30, 1998, on a pro forma basis, our total assets were
approximately $132.3 million, of which approximately $93.2 million, or 70%, was
goodwill from acquisitions. To date, we have assigned a 40-year amortization
period to the goodwill of each of our acquired businesses. If the anticipated
cash flow from an acquired business does not support the value of its remaining
goodwill, we would be required to reduce the goodwill value and record a charge
to our earnings. Our future earnings also could be reduced if there is any
change in the accounting standards for goodwill which has the effect of
shortening the permitted goodwill amortization period. Accounting standards
writing organizations are considering such changes.
 
                                        7
9
 
DEPENDENCE ON KEY PERSONNEL
 
     Our success depends on the efforts, abilities and leadership of the
following senior executives: Paul M. Verrochi, our Chairman and Chief Executive
Officer; John H. Zenger, our President; Dominic J. Puopolo, our Executive Vice
President and Chief Financial Officer; and Rajiv Bhatt, our Executive Vice
President and Chief Operating Officer. While we have entered into employment
agreements with each of these executives, we cannot be assured of retaining the
services of any of them. If any of these four individuals were to leave, our
business could be adversely affected.
 
     We also must continue to attract and retain instructors and consultants who
possess the skills and experience required by our clients. In addition, to
initiate, develop and maintain client relationships, we must retain our senior
managers and salespeople. If we fail to attract and retain senior managers,
qualified instructors, consultants and salespeople, our revenues and
profitability could be negatively affected.
 
CONVERSION TO TECHNOLOGY-BASED DELIVERY METHODS
 
     Traditionally, many of our companies have used instructors, written
materials or video to deliver performance improvement services and products. We
plan to rely increasingly on technology-based delivery methods such as CD-ROM,
intranets, the Internet and other distance-based media, and to convert to these
formats certain services and products that previously have been delivered
through the more "traditional" formats. We may be unable to recoup the costs
associated with converting content to different formats or developing new
delivery formats for our services and products. We run the risk that certain
clients may resist the newer formats, especially if the newer formats do not
yield comparable performance improvement results. These formats also might be
rendered obsolete by new technologies. We cannot guarantee that we will be able
to keep up with the pace of technological change in our industry. Any of these
risks, if realized, could hurt our operating results.
 
FLUCTUATIONS IN OPERATING RESULTS
 
     Our companies experience and expect to continue to experience fluctuations
in quarterly operating results. Because of this, you should not consider our
results for any quarter to be necessarily indicative of future results. Results
may vary as a result of, among other things, the overall level of performance
improvement services and products sold, the gain or loss of material client
relationships, the timing, structure and magnitude of acquisitions, or the
utilization rates of our salaried trainers and consultants. The timing or
completion of client engagements or custom services and products also could
result in fluctuations in our quarterly results of operations.
 
RELATIONSHIP WITH FEDERAL GOVERNMENT ENTITIES
 
     We derived approximately 19% of our pro forma revenue in the year ended
June 30, 1998 from services and products provided to numerous federal government
entities. Our operations could suffer due to a general reduction in federal
government spending for external training and development, a Congressional
budget impasse, or an inability to maintain our relationship with particular
federal government entities. In addition, the government typically shares
equally in the ownership of courseware and materials that we develop with
government funds, and may share this courseware or materials with other entities
including our competitors. Contracts with the federal government entail other
unique risks including potential government audits and retroactive downward
repricing of sales.
 
RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY
 
     We use legal and contractual methods to protect proprietary information
contained in our performance improvement services and products. However, many of
our services and products do not include any mechanisms to prohibit or prevent
unauthorized use, and the means we do have for protecting our proprietary
information may not be sufficient to discourage unauthorized use.
 
                                        8
10
 
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
 
     Our directors and executive officers currently beneficially own
approximately 40% of our outstanding common stock. As a result, if these
stockholders were to act together, they could, as a practical matter, determine
the outcome of corporate actions requiring stockholder approval, including the
election of directors and the approval of significant corporate transactions,
such as a sale of PROVANT. This concentration of ownership may make it more
difficult for a third party to acquire control of us.
 
POSSIBLE FUTURE SALES OF SHARES
 
     The holders of our common stock prior to the Combination and the former
stockholders of the Founding Companies, who after this offering will
collectively own approximately 6,541,761 shares of common stock, contractually
agreed not to sell these shares prior to May 4, 2000. We are waiving these
restrictions to the extent necessary to permit these stockholders to sell shares
in this offering. Sales of substantial amounts of these shares, or even the
perception that sales of that magnitude could someday occur, may depress our
stock price and could hurt our ability either to raise money by selling stock or
to use stock in acquisitions.
 
                                        9
11
 
                                USE OF PROCEEDS
 
     We estimate that the net proceeds from our sale of the 2,500,000 shares of
common stock, after deducting the underwriting discount and offering expenses,
will be approximately $50.5 million (assuming an offering price of $21.75 per
share). We will not receive any of the proceeds from the sale of common stock by
the selling stockholders.
 
     We intend to use approximately $21.2 million of the net proceeds to repay
indebtedness under our revolving credit facility, which indebtedness currently
bears interest at a weighted average rate of 5.8% and matures on December 31,
2001. We incurred this indebtedness primarily to finance acquisitions completed
since the Combination.
 
     The remaining net proceeds of the offering will be used for general
corporate purposes, including acquisitions. We regularly review potential
acquisition candidates and have held preliminary discussions with a number of
such candidates. We recently entered into letters of intent for two acquisitions
that will require us to use approximately $4.5 million for the cash portion of
the purchase prices. Pending the use of the net proceeds of the offering for the
purposes described above, we intend to invest such proceeds in short-term,
investment grade securities.
 
                          PRICE RANGE OF COMMON STOCK
 
     Our common stock is quoted on the Nasdaq National Market under the symbol
"POVT." The following table sets forth the high and low sales prices for the
common stock from April 29, 1998 (the first day of trading on Nasdaq) through
January 4, 1999.
HIGH      LOW
                                                              ----      ---
FISCAL 1998
Fourth Quarter (from April 29, 1998).......................  $22.50    $16.00
FISCAL 1999
First Quarter..............................................   19.00     10.00
Second Quarter.............................................   24.25      9.50
Third Quarter (through January   , 1999)...................
On January 4, 1999, the last reported sale price of the common stock was
$20.75. As of such date, there were 162 holders of record of common stock.
 
                                       10
12
 
                                 CAPITALIZATION
 
     The following table sets forth our short-term debt and capitalization as of
September 30, 1998 (i) on an actual basis, (ii) on a pro forma basis to give
effect to subsequent acquisitions as if they had occurred on that date, and
(iii) on a pro forma basis as adjusted to give effect to our issuance and sale
of 2,500,000 shares of common stock at an assumed offering price of $21.75 per
share and the application of the net proceeds as described under "Use of
Proceeds." This table should be read in conjunction with our historical
consolidated financial statements and unaudited pro forma consolidated financial
statements and notes included elsewhere in this prospectus.
SEPTEMBER 30, 1998
                                                             -----------------------------------
                                                                                      PRO FORMA
                                                             ACTUAL     PRO FORMA    AS ADJUSTED
                                                             ------     ---------    -----------
                                                                       (IN THOUSANDS)
Short-term debt and current maturities of long-term debt...  $   552    $    688      $    688
                                                             =======    ========      ========
Long-term debt, net of current maturities..................  $ 8,402    $ 22,270      $  1,070
Stockholders' equity:
     Preferred Stock, $.01 par value; 5,000,000 shares
       authorized, none issued and outstanding, actual, pro
       forma and pro forma as adjusted.....................       --          --            --
     Common Stock, $.01 par value; 40,000,000 shares
       authorized; 10,226,325 shares issued and
       outstanding, actual; 11,311,801 shares issued and
       outstanding, pro forma; 13,811,801 shares issued and
       outstanding, pro forma as adjusted..................      102         113           138
     Additional paid-in capital............................   74,513      86,347       136,842
     Accumulated deficit...................................   (1,662)     (1,662)       (1,662)
                                                             -------    --------      --------
     Total stockholders' equity............................   72,953      84,798       135,318
                                                             -------    --------      --------
          Total capitalization.............................  $81,355    $107,068      $136,388
                                                             =======    ========      ========
DIVIDEND POLICY
 
     We intend to retain all of our earnings, if any, to finance the expansion
of our business and for general corporate purposes, and do not anticipate paying
cash dividends on our common stock in the foreseeable future. Any future
determination as to the payment of dividends on the common stock will be at the
discretion of the Board of Directors and will depend upon, among other things,
our future earnings, if any, operating and financial condition, capital
requirements, general business conditions and any other factors the Board of
Directors may consider. In addition, our credit facility currently prohibits the
payment of dividends without the consent of the lenders.
 
                                       11
13
 
                            SELECTED FINANCIAL DATA
 
     The following table presents selected historical consolidated financial
data for PROVANT (which includes the accounts of each acquired company from its
date of acquisition), which has been derived from our historical consolidated
financial statements included elsewhere in this prospectus. The following table
also presents selected consolidated financial data on a pro forma basis
reflecting adjustments described below and elsewhere in this prospectus. See our
historical consolidated financial statements and unaudited pro forma
consolidated financial statements, as well as the other financial statements and
notes included elsewhere in this prospectus.
PERIOD FROM
                                              NOVEMBER 16, 1996
                                             (DATE OF INCEPTION)         YEAR ENDED           THREE MONTHS ENDED
                                              TO JUNE 30, 1997         JUNE 30, 1998          SEPTEMBER 30, 1998
                                             -------------------   ----------------------   -----------------------
                                                                                  PRO                       PRO
                                                                    ACTUAL       FORMA        ACTUAL       FORMA
                                                                   ---------   ----------   ----------   ----------
                                                        (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Total revenue..............................       $      --        $  14,189   $  115,327   $   23,710   $   31,404
Cost of revenue............................              --            6,374       48,827       10,148       13,175
                                                  ---------        ---------   ----------   ----------   ----------
Gross profit...............................              --            7,815       66,500       13,562       18,229
Selling, general and administrative
  expenses.................................             149           10,447       50,709       10,593       14,074
Goodwill amortization......................              --              245        2,348          380          591
                                                  ---------        ---------   ----------   ----------   ----------
Income (loss) from operations..............            (149)          (2,877)      13,443        2,589        3,564
Interest and other income (expense), net...              --             (220)      (1,736)          (3)        (422)
                                                  ---------        ---------   ----------   ----------   ----------
Income (loss) before income taxes..........            (149)          (3,097)      11,707        2,586        3,142
Provision (benefit) for income taxes.......              --             (203)       5,622        1,187        1,493
                                                  ---------        ---------   ----------   ----------   ----------
Net income (loss)..........................       $    (149)       $  (2,894)  $    6,085   $    1,399   $    1,649
                                                  =========        =========   ==========   ==========   ==========
Earnings (loss) per common share:
  Basic....................................       $   (0.08)       $   (0.67)  $     0.54   $     0.14   $     0.15
                                                  =========        =========   ==========   ==========   ==========
  Diluted..................................       $   (0.08)       $   (0.67)  $     0.52   $     0.13   $     0.13
                                                  =========        =========   ==========   ==========   ==========
Weighted average common shares outstanding:
  Basic....................................       1,950,520        4,350,169   11,311,801   10,070,808   11,311,801
  Diluted..................................       1,950,520        4,350,169   11,731,105   11,124,260   12,376,184
SEPTEMBER 30, 1998
                                                                               ------------------------
                                                              JUNE 30, 1998     ACTUAL      PRO FORMA
                                                              -------------    --------    ------------
                                                                           (IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.............................................    $ 11,107       $ 11,916      $  8,682
Total assets................................................      86,358        101,959       132,341
Long-term debt, net of current portion......................         874          8,402        22,270
Stockholders' equity........................................      66,499         72,953        84,798
---------------
     The pro forma consolidated statement of operations data assumes that our 12
acquisitions and initial public offering were completed on July 1, 1997. This
data is not necessarily indicative of the results we would have obtained if
these events had actually then occurred or of our future results. The pro forma
balance sheet data gives effect to the three acquisitions that we completed
after September 30, 1998 as if they had occurred on that date. The pro forma
data is based on estimates, available information and assumptions that
management deems appropriate.
 
     The pro forma statement of operations data for the year ended June 30, 1998
reflects the elimination of non-recurring fees totalling approximately $1.3
million and non-cash compensation expense totalling $686,000. The pro forma
statement of operations data for both periods presented above reflects the
elimination of the compensation differential resulting from the pro forma
adjustments of salary, bonus and
 
                                       12
14
 
benefits paid to certain owners of the businesses we acquired to contractually
agreed-upon levels. For fiscal 1998 and the three months ended September 30,
1998, the aggregate compensation differential was approximately $6.7 million and
$172,000, respectively. The pro forma consolidated statement of operations data
for both periods also reflects amortization of the goodwill being recorded as a
result of each of our 12 acquisitions over a 40-year period, and assumes that
all income is subject to an effective corporate income tax rate of 40%, adjusted
for non-tax deductible goodwill.
 
                     STAR MOUNTAIN SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     We have reported in this prospectus PROVANT's operating results commencing
with our inception on November 16, 1996. For the purpose of providing five full
years of selected historical financial data, as required under the rules of the
SEC, we must also present the following historical selected financial data for
Star Mountain, a significant predecessor company. The selected data for the
years ended December 31, 1995, 1996 and 1997 and the period January 1, 1998 to
May 4, 1998 is derived from, and should be read in conjunction with, Star
Mountain's audited financial statements (and the notes thereto) appearing
elsewhere in this prospectus. The selected data for the years ended December 31,
1993 and 1994 are derived from Star Mountain's audited financial statements for
those years. The data presented below is neither comparable to nor indicative of
our post-Combination financial position or results of operations.
YEAR ENDED DECEMBER 31,                PERIOD FROM
                                                ---------------------------------------------   JANUARY 1, 1998
                                                 1993     1994     1995      1996      1997      TO MAY 4, 1998
                                                ------   ------   -------   -------   -------   ----------------
STATEMENT OF OPERATIONS DATA:
  Total revenue...............................  $8,293   $9,731   $14,306   $16,313   $23,775       $ 11,052
  Cost of revenue.............................   5,418    6,350     8,668     9,457    14,504          6,109
                                                ------   ------   -------   -------   -------       --------
  Gross profit................................   2,875    3,381     5,638     6,856     9,271          4,943
  Selling, general and administrative
    expenses..................................   2,619    2,973     4,411     5,476     7,591          3,650
                                                ------   ------   -------   -------   -------       --------
  Income from operations......................     256      408     1,227     1,380     1,680          1,293
  Interest and other income (expense), net....    (150)    (194)     (235)     (379)     (406)          (137)
                                                ------   ------   -------   -------   -------       --------
  Income before provision for income taxes....     106      214       992     1,001     1,274          1,156
  Provision for income taxes(1)...............      --       --        --       397       546            457
                                                ------   ------   -------   -------   -------       --------
  Net income..................................  $  106   $  214   $   992   $   604   $   728       $    699
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: basic............  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.09       $   0.09
                                                ======   ======   =======   =======   =======       ========
  Earnings per common share: diluted..........  $ 0.01   $ 0.02   $  0.11   $  0.07   $  0.08       $   0.08
                                                ======   ======   =======   =======   =======       ========
  Shares used in computing basic earnings per
    common share..............................   8,443    8,821     8,825     8,422     8,078          8,074
  Shares used in computing diluted earnings
    per common share..........................   9,271    9,058     8,963     8,565     8,823          8,871
BALANCE SHEET DATA:
  Working capital.............................  $  583   $  847   $   942   $   871   $    64
  Total assets................................   3,231    3,507     4,775     5,983    10,677
  Long term debt, net of current portion......      --       --        --        --       304
  Stockholders' equity........................   1,021    1,274     1,859     2,010     2,778
---------------
(1) Through December 31, 1995, Star Mountain had elected to be treated as an S
    corporation and, accordingly, there was no provision for income taxes for
    periods ending on or prior to that date.
 
                                       13
15
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     Unless otherwise indicated or the context otherwise requires in this
section, each reference to a year is to our fiscal year or a Founding Company's
fiscal year which (with the exception of J. Howard, LSS and Star Mountain) ends
on June 30 of the same calendar year (for example, "1997" means the fiscal year
ended June 30, 1997). The following discussion should be read in conjunction
with our historical consolidated financial statements and the Founding
Companies' financial statements and the related notes thereto appearing
elsewhere in this prospectus.
 
FOUNDING COMPANIES
 
     Our operations in the performance improvement industry began in May 1998
when we acquired the seven Founding Companies. The Founding Companies are:
Behavioral Technology, Inc. ("BTI"); Decker Communications, Inc. ("Decker"); J.
Howard & Associates, Inc. ("J. Howard"); Learning Systems Sciences ("LSS"); MOHR
Retail Learning Systems, Inc. ("MOHR"); Novations Group, Inc. ("Novations"); and
Star Mountain, Inc. (with its subsidiaries, "Star Mountain").
 
ACQUISITIONS SINCE THE IPO
 
     Since the Combination, we have acquired the five businesses described in
the table below.
COMPANY                           DATE ACQUIRED                    AREA OF EXPERTISE
--------------------------------------  -------------------------------    -------------------------------
KC Resources Creative Solutions, Inc.   July 20, 1998                      Technology-based instructional
                                                                           design
American Media Incorporated             September 14, 1998                 General business management
                                                                           solutions
Strategic Interactive, Inc.             October 19, 1998                   Web-based training management
                                                                           solutions
Gulliver Ritchie Associates, Inc.       November 16, 1998                  Technology-based training
                                                                           solutions
Executive Perspectives, Inc.            November 24, 1998                  Custom training simulations
Each acquisition was accounted for under the purchase method of accounting.
The aggregate purchase price of these acquisitions was $51.2 million, consisting
of $30.2 million in cash and 1,516,243 shares of common stock. In addition, the
former owners of these businesses are entitled to receive contingent
consideration based upon the future earnings before interest and taxes of these
businesses. For accounting purposes, any contingent consideration paid in these
acquisitions will be treated as additional purchase price.
 
     We currently have letters of intent to acquire a technology-based
instructional design company and a custom simulations training company for an
aggregate base purchase price of approximately $11 million, plus contingent
consideration of up to $500,000.
 
REVENUES, COSTS AND EXPENSES
 
     We receive revenue from five main sources: (i) instructor-led and
train-the-trainer programs; (ii) license fees; (iii) custom services and
products; (iv) consulting and training management services; and (v) standardized
products. We recognize revenue from instructor-led training and
train-the-trainer programs, usually on a participant basis, when the training is
delivered. From our train-the-trainer arrangements, we also recognize license
fees on a per-participant basis when a certified client trainer delivers our
courses and materials to other employees of the client. We recognize revenue
from a site license at the time the license is granted. We recognize maintenance
fees on our training management services as they are performed over the life of
the contract. We generally recognize revenue from our custom services and
products based on the percentage-of-completion method. We recognize revenue from
fees for our consulting services, for which we charge an hourly or per diem
rate, when the consulting is
 
                                       14
16
 
provided. We also recognize revenue for our standardized products, such as books
or videotapes, when the products are shipped.
 
     Cost of revenue primarily consists of: (i) salaries and benefits for our
instructors, consultants and course designers and costs of independent
contractors; and (ii) the cost of developing, designing and producing training
courses and materials, including materials costs. As a result, our gross margins
are affected by the number of instructors, consultants and course designers and
their utilization during any given period.
 
     Selling, general and administrative expenses consist primarily of salaries,
benefits and bonuses for our corporate, sales, marketing and administrative
personnel, and marketing and advertising expenses for our services and products.
Selling, general and administrative expenses also include incentive and
discretionary bonuses paid to executives and other key employees. Other selling,
general and administrative expenses include non-reimbursable travel expenses,
rent, depreciation, telecommunication costs, postage and other operating costs.
 
     Before we acquired them, each of the Founding Companies and the businesses
we acquired after the Combination operated as an independent entity, and their
results of operations reflect varying tax structures (S corporations or C
corporations) which have influenced the historical level of owners'
compensation. The owners and key employees of the Founding Companies and the
subsequently-acquired businesses agreed in connection with the acquisitions to
adjust their annual salaries, bonuses and benefits. The difference (positive or
negative) between the base salary of the owners and key employees of the
Founding Companies and the subsequently-acquired businesses immediately after
their dates of acquisition and their salaries, bonuses and benefits during any
comparable period is reflected in our unaudited pro forma consolidated
statements of operations as the "Compensation Differential." The aggregate
Compensation Differentials for 1998 and the three months ended September 30,
1998 were $6.7 million and $172,000, respectively. The unaudited pro forma
combined statements of operations include a provision for income tax as if we
were taxed as a C corporation during all periods presented.
 
UNAUDITED REVENUES AND GROSS PROFIT -- THREE MONTHS ENDED SEPTEMBER 30, 1997
(PRO FORMA) AND 1998 (HISTORICAL) -- PROVANT
 
     The following selected unaudited historical and pro forma financial data
represents our revenues and gross profit on an absolute basis and as a
percentage of revenue for the periods indicated. The pro forma adjustments in
the table below, which give effect only to the Combination and the historical
revenues and gross profit of companies acquired by Star Mountain in February and
October 1997, should be distinguished from the more extensive pro forma
adjustments made to our historical consolidated financial statements that are
contained elsewhere in this prospectus.
THREE MONTHS ENDED SEPTEMBER 30,
                                                          --------------------------------------
                                                                 1997                 1998
                                                          ------------------    ----------------
                                                          PRO FORMA COMBINED       HISTORICAL
                                                          ------------------    ----------------
                                                                  (DOLLARS IN THOUSANDS)
Total revenue...........................................  $17,738     100.0%    $23,710    100.0%
Cost of revenue.........................................    8,056      45.4      10,148     42.8
                                                          -------     -----     -------    -----
Gross profit............................................  $ 9,682      54.6%    $13,562     57.2%
                                                          =======     =====     =======    =====
PRO FORMA COMBINED RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (THE
"1998 QUARTER") COMPARED TO THE HISTORICAL RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 (THE "1999 QUARTER")
 
     Revenue.  Revenue increased $6.0 million, or 33.7%, from $17.7 million in
the 1998 Quarter to $23.7 million in the 1999 Quarter. The increase was
primarily attributable to an increased number of government contracts,
train-the-trainer programs and contracts to develop interactive multimedia
programs, as well as revenues from businesses acquired during the 1999 Quarter.
 
                                       15
17
 
     Cost of Revenue.  Cost of revenue as a percentage of revenue decreased from
45.4% in the 1998 Quarter to 42.8% in the 1999 Quarter primarily due to a
favorable revenue mix, which was composed of increased license fees and higher
sales of products through direct mail distribution.
 
     Gross Profit.  Gross profit increased $3.9 million, or 40.1%, from $9.7
million in the 1998 Quarter to $13.6 million in the 1999 Quarter primarily due
to a favorable revenue mix, which was composed of increased license fees and
higher sales of products through direct mail distribution. As a percentage of
revenue, gross profit increased from 54.6% in the 1998 Quarter to 57.2% in the
1999 Quarter.
 
RESULTS OF OPERATIONS -- PROVANT HISTORICAL
 
     The following consolidated financial information represents our operations
(including the operations of the Founding Companies from May 4, 1998, their date
of acquisition in the Combination) on a historical basis. The following
historical financial information for fiscal 1998 includes a non-recurring fee of
$750,000 for information related to the performance improvement industry,
non-cash compensation expense totaling $686,000 related to the issuance of
common stock and stock options to certain of our officers and consultants, and
non-recurring Combination-related costs of $588,000.
PERIOD FROM
                                                            NOVEMBER 16, 1996
                                                           (DATE OF INCEPTION)       YEAR ENDED
                                                            TO JUNE 30, 1997       JUNE 30, 1998
                                                           -------------------    ----------------
                                                                   (DOLLARS IN THOUSANDS)
Total revenue............................................         $  --           $14,189    100.0%
Cost of revenue..........................................            --             6,374     44.9
                                                                  -----           -------    -----
Gross profit.............................................            --             7,815     55.1
Selling, general and administrative expenses.............           149            10,447     73.7
Goodwill amortization....................................            --               245      1.7
                                                                  -----           -------    -----
Income (loss) from operations............................         $(149)          $(2,877)   (20.3)%
                                                                  =====           =======    =====
HISTORICAL RESULTS FOR THE PERIOD FROM NOVEMBER 16, 1996 (DATE OF INCEPTION) TO
JUNE 30, 1997 (THE "1997 PERIOD") COMPARED TO 1998
 
     Revenue.  Revenue increased from nil in the 1997 Period to $14.2 million in
1998 due to the acquisition of the Founding Companies on May 4, 1998 and the
inclusion of their operating results commencing on that date.
 
     Cost of Revenue.  Cost of revenue increased from nil in the 1997 Period to
$6.4 million in 1998 due to the acquisition of the Founding Companies on May 4,
1998 and the inclusion of their operating results commencing on that date.
 
     Gross Profit.  Gross profit increased from nil in the 1997 Period to $7.8
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased from $149,000 in the 1997 Period to $10.4
million in 1998 due to the acquisition of the Founding Companies on May 4, 1998
and the inclusion of their operating results commencing on that date. Prior to
the acquisition of the Founding Companies, selling, general and administrative
expenses included corporate expenses, consisting primarily of consulting fees
and travel expenses incurred to consummate the Combination and the IPO.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     We have a revolving line of credit of up to $60.0 million (increased from
$40.0 million as of December 31, 1998), guaranteed by all of our significant
wholly-owned subsidiaries and secured by a pledge of the capital stock of each
of our wholly-owned subsidiaries. We can use the credit facility to finance
acquisitions (including the refinancing of indebtedness of acquired companies),
working capital and
 
                                       16
18
 
general corporate purposes. Loans made under the credit facility bear interest
at a rate, at our option, based on either a Eurodollar rate or the bank's prime
rate. The credit facility will terminate on December 31, 2001, and all
outstanding amounts will be due at such time. The credit facility (i) generally
prohibits us from paying dividends and other distributions, (ii) generally does
not permit us to incur or assume other indebtedness, and (iii) requires us to
comply with certain financial covenants. As of December 31, 1998, $20.9 million
was outstanding under the credit facility, which had a weighted average interest
rate of 5.8%.
 
     We anticipate that our cash flow from operations and borrowings under the
credit facility will provide cash sufficient to satisfy our working capital
needs, debt service requirements and planned capital expenditures for the next
12 months.
 
     We have an effective shelf registration statement on Form S-4 relating to
the issuance of up to 3,000,000 shares of common stock in connection with
acquisitions. We have issued 1,316,243 shares through December 31, 1998 and a
currently undeterminable number of shares may become issuable as contingent
consideration under the registration statement with respect to acquisitions
completed before that date.
 
THE YEAR 2000 ISSUE
 
     We use information technology ("IT") systems in our internal operations,
including applications used in client order processing, inventory management,
financial business systems and various administrative functions which are
primarily "off-the-shelf" applications. Non-IT systems used in our internal
operations consist primarily of voice and data communications systems and
elevator and climate control systems. In addition, we deliver several of our
products on technology-based platforms, such as CD-ROM, intranets and the
Internet. Management has completed the assessment of our IT and non-IT systems
and products for all of our companies except for our two most recent
acquisitions, whose assessments will be completed by the end of January 1999.
Our completed assessment has indicated the need to replace some personal
computers and upgrade two phone switches. We estimate the cost of these
remediation efforts to be approximately $55,000. Management expects to complete
any necessary remediation, implementation and final testing of IT and non-IT
systems and products by March 31, 1999. To the extent the source code of IT and
non-IT internal systems and customer products may be deficient despite our
assessment with respect to "Year 2000" issues, our failure to make any required
modifications in order to make the systems and products "Year 2000" compliant
could have a material adverse effect on our business.
 
     We derive a substantial amount of our revenues from services and products
delivered to entities affiliated with the federal government. During fiscal
1998, our work for federal government clients generated approximately 19% of our
pro forma consolidated revenue. Failure by these government entities to make
their respective computer software programs and operating systems "Year 2000"
compliant could have a material adverse effect on our business.
 
     We have not yet completed the evaluation of our most reasonably likely
worst case "Year 2000" scenario, nor have we completed our contingency planning
with respect to the "Year 2000." We also have not yet completed our evaluation
of our vendors' contingency planning with respect to their potential "Year 2000"
deficiencies. We intend to complete both these evaluations and contingency
planning during fiscal 1999.
 
     To date, we have incurred approximately $40,000 to remediate "Year 2000"
issues. Management currently believes that any future costs to remediate "Year
2000" issues will not be material to our financial position or results of
operations.
 
RESULTS OF OPERATIONS -- BTI
 
     BTI primarily provides train-the-trainer programs designed to help its
clients improve employee recruitment, selection and retention. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
 
                                       17
19
 
     The following table sets forth certain selected financial data for BTI on a
historical basis and as a percentage of revenue for the periods indicated:
YEAR ENDED JUNE 30,                     FOR THE PERIOD
                                       --------------------------------    -----------------------------------
                                                                            JULY 1, 1997 TO     MAY 5, 1998 TO
                                            1996              1997            MAY 4, 1998       JUNE 30, 1998
                                       --------------    --------------    -----------------    --------------
                                                               (DOLLARS IN THOUSANDS)
Revenue............................    $5,685   100.0%   $7,096   100.0%   $ 6,567     100.0%   $1,276   100.0%
Cost of revenue....................     1,495    26.3     1,488    21.0      1,243      18.9       281    22.0
                                       ------   -----    ------   -----    -------   -------    ------   -----
Gross profit.......................     4,190    73.7     5,608    79.0      5,324      81.1       995    78.0
Selling, general and administrative
  expenses.........................     4,048    71.2     5,111    72.0      6,648     101.2       841    65.9
                                       ------   -----    ------   -----    -------   -------    ------   -----
Income (loss) from operations......    $  142     2.5%   $  497     7.0%   $(1,324)    (20.1)%  $  154    12.1%
                                       ======   =====    ======   =====    =======   =======    ======   =====
Compensation differential..........    $  563     9.9%   $  942    13.3%   $ 3,355      51.1%   $   --      --%
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- BTI
 
     Revenue.  Revenue increased approximately $747,000, or 10.5%, from $7.1
million in the 1997 Period to $7.8 million in the 1998 Period, primarily due to
increased sales of existing products as a result of the expansion of the sales
force and an increase in participant fees as a result of an increased base of
certified trainers at the company's clients.
 
     Cost of Revenue.  Cost of revenue increased approximately $36,000, or 2.4%,
from approximately $1.4 million in the 1997 Period to approximately $1.5 million
in the 1998 Period. As a percentage of revenue, cost of revenue decreased from
21.0% in the 1997 Period to 19.4% in the 1998 Period, primarily due to a
decrease in the average unit cost of participant materials.
 
     Gross Profit.  Gross profit increased approximately $711,000, or 12.7%,
from $5.6 million in the 1997 Period to $6.3 million in the 1998 Period. As a
percentage of revenue, gross profit increased from 79.0% in the 1997 Period to
80.6% in the 1998 Period, primarily due to the cost savings described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $2.4 million, or 46.5%, from $5.1 million in
the 1997 Period to $7.5 million in the 1998 Period. Excluding the Compensation
Differential attributable to BTI of approximately $942,000 and $3.4 million in
the 1997 Period and 1998 Period, respectively, selling, general and
administrative expenses would have remained relatively constant at $4.2 million
and $4.1 million in the 1997 and 1998 Periods, respectively. As a percentage of
revenue, selling, general and administrative expenses would have decreased on an
adjusted basis from 58.8% in the 1997 Period to 52.7% in the 1998 Period,
primarily due to the company's larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- BTI
 
     Revenue.  Revenue increased $1.4 million, or 24.8%, from $5.7 million in
1996 to $7.1 million in 1997, primarily due to increased sales of existing
products as a result of the expansion of the sales force and an increase in
participant fees as a result of an increased base of certified trainers at the
company's clients.
 
     Cost of Revenue.  Cost of revenue remained relatively constant at $1.5
million in 1996 and 1997. As a percentage of revenue, cost of revenue decreased
from 26.3% in 1996 to 21.0% in 1997, primarily due to a decrease in the average
unit cost of participant materials.
 
     Gross Profit.  Gross profit increased $1.4 million, or 33.8%, from $4.2
million in 1996 to $5.6 million in 1997. As a percentage of revenue, gross
profit increased from 73.7% in 1996 to 79.0% in 1997, primarily due to the
increase in revenue combined with the decrease in the average unit cost of
participant materials.
 
                                       18
20
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.1 million, or 26.3%, from $4.0 million in
1996 to $5.1 million in 1997. Excluding the Compensation Differential
attributable to BTI of approximately $563,000 and approximately $942,000 in 1996
and 1997, respectively, selling, general and administrative expenses would have
increased approximately $684,000, or 19.6%, from $3.5 million in 1996 to $4.2
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 61.3% in 1996 to 58.8%
in 1997. The decrease as a percentage of revenue on an adjusted basis primarily
was due to the company's larger revenue base.
 
LIQUIDITY AND CAPITAL RESOURCES -- BTI
 
     BTI generated net cash from operating activities of approximately $641,000
in 1997. For the period from July 1, 1997 to May 4, 1998, BTI used approximately
$465,000 in operating activities, primarily for the payment of bonuses to key
employees. Net cash used in investing activities was approximately $33,000 in
1997 for purchases of property and equipment, and approximately $294,000 in the
period from July 1, 1997 to May 4, 1998 due to an increase in amounts due to
related parties. At May 4, 1998, BTI had a working capital deficit of
approximately $73,000.
 
RESULTS OF OPERATIONS -- DECKER
 
     Decker provides instructor-led training to improve employees' business
communication and presentation skills. Decker's revenue is derived primarily
from fees charged to participants in its instructor-led training programs.
 
     The following table sets forth certain selected financial data for Decker
on a historical basis and as a percentage of revenue for the periods indicated:
YEAR ENDED JUNE 30,                     FOR THE PERIOD
                                          --------------------------------    ----------------------------------
                                                                              JULY 1, 1997 TO     MAY 5, 1998 TO
                                               1996              1997           MAY 4, 1998       JUNE 30, 1998
                                          --------------    --------------    ----------------    --------------
                                                                  (DOLLARS IN THOUSANDS)
Revenue.................................  $8,620   100.0%   $8,410   100.0%   $8,729    100.0%    $2,016   100.0%
Cost of revenue.........................   2,655    30.8     2,275    27.1     2,275     26.1        494    24.5
                                          ------   -----    ------   -----    ------    -----     ------   -----
Gross profit............................   5,965    69.2     6,135    72.9     6,454     73.9      1,522    75.5
Selling, general and administrative
  expenses..............................   5,716    66.3     6,446    76.6     5,696     65.2      1,255    62.3
                                          ------   -----    ------   -----    ------    -----     ------   -----
Income (loss) from operations...........  $  249     2.9%   $ (311)   (3.7)%  $  758      8.7%    $  267    13.2%
                                          ======   =====    ======   =====    ======    =====     ======   =====
Compensation differential...............  $  192     2.2%   $1,165    13.9%   $  372      4.3%    $   --      --%
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- DECKER
 
     Revenue.  Revenue increased $2.3 million, or 27.8%, from $8.4 million in
the 1997 Period to $10.7 million in the 1998 Period, primarily due to an
increase in the sales force and organizational initiatives undertaken in 1997 as
described below, which resulted in an increase in the number of seminars
delivered during the 1998 Period compared to the 1997 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $494,000, or
21.7%, from $2.3 million in the 1997 Period to $2.8 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 27.1% in the 1997
Period to 25.8% in the 1998 Period, primarily due to increased utilization of
trainers.
 
     Gross Profit.  Gross profit increased approximately $1.8 million, or 30.0%,
from $6.1 million in the 1997 Period to $8.0 million in the 1998 Period. As a
percentage of revenue, gross profit increased from 72.9% in the 1997 Period to
74.2% in the 1998 Period, primarily due to the reasons described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $505,000, or 7.8%, from $6.4
million in the 1997 Period to $7.0 million in the 1998 Period.
 
                                       19
21
 
Excluding the Compensation Differential of $1.2 million and approximately
$372,000 attributable to Decker in the 1997 Period and 1998 Period,
respectively, selling, general and administrative expenses would have increased
approximately $1.3 million, or 24.6%, from $5.3 million in the 1997 Period to
$6.6 million in the 1998 Period. As a percentage of revenue, selling, general
and administrative expenses would have decreased on an adjusted basis from 62.8%
in the 1997 Period to 61.2% in the 1998 Period, primarily due to the company's
larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- DECKER
 
     Revenue.  Revenue decreased approximately $210,000, or 2.4%, from $8.6
million in 1996 to $8.4 million in 1997, primarily due to a temporary shift in
the focus of Decker's business. During the first six months of 1997, Decker
increased its focus on providing consulting services rather than its traditional
training. This shift in focus resulted in a decline in training revenue and a
high degree of sales force turnover. During the second half of 1997, the company
returned to a business model focused on instructor-led training, and launched
several organizational initiatives, including the hiring of a new president and
the implementation of a new salary structure for its sales force.
 
     Cost of Revenue.  Cost of revenue decreased approximately $380,000, or
14.3%, from $2.7 million in 1996 to $2.3 million in 1997. As a percentage of
revenue, cost of revenue decreased from 30.8% in 1996 to 27.1% in 1997,
primarily due to a reduction in the number of trainers and increased utilization
of trainers.
 
     Gross Profit.  Gross profit increased approximately $170,000, or 2.8%, from
$6.0 million in 1996 to $6.1 million in 1997. As a percentage of revenue, gross
profit increased from 69.2% in 1996 to 72.9% in 1997, primarily due to increased
utilization of trainers.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $730,000, or 12.8%, from $5.7
million in 1996 to $6.4 million in 1997. Excluding the Compensation Differential
attributable to Decker of approximately $192,000 and $1.2 million in 1996 and
1997, respectively, selling, general and administrative expenses would have
decreased approximately $243,000, or 4.4%, from $5.5 million in 1996 to $5.3
million in 1997. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 64.1% in 1996 to 62.8%
in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- DECKER
 
     Decker generated net cash from operating activities of approximately
$446,000 in 1997 and approximately $1.1 million in the period from July 1, 1997
to May 4, 1998. Net cash used in investing activities was approximately $11,000
in 1997 and approximately $31,000 in the period from July 1, 1997 to May 4,
1998, primarily for purchases of property and equipment. Net cash used in
financing activities was approximately $241,000 in 1997 and approximately
$590,000 in the period from July 1, 1997 to May 4, 1998, primarily for the
payment of dividends. At May 4, 1998, Decker had working capital of $1.3 million
and approximately $583,000 of long-term debt.
 
RESULTS OF OPERATIONS -- J. HOWARD
 
     J. Howard provides instructor-led training to individual managers and
client companies to identify and address potential obstacles to improving
workplace productivity, including race and gender issues and sexual harassment.
J. Howard's revenue is derived primarily from fees from instructor-led seminars
and, to a lesser extent, from the rendering of consulting services. J. Howard
also occasionally enters into license agreements and then delivers its programs
in the train-the-trainer format; in these instances, revenue from the license
agreements is recognized when the license is signed. Revenue from the trainer
certifications is recognized on a per event basis when the training is
delivered.
 
                                       20
22
 
     The following table sets forth certain selected financial data for J.
Howard on a historical basis and as a percentage of revenue for the periods
indicated:
YEAR ENDED DECEMBER 31,                                           FOR THE PERIOD
                          ------------------------------------------------      FOR THE       -----------------------------------
                                                                               SIX MONTHS
                                                                                 ENDED        JANUARY 1, 1998      MAY 5, 1998
                               1995             1996             1997        JUNE 30, 1997     TO MAY 4, 1998    TO JUNE 30, 1998
                          --------------   --------------   --------------   --------------   ----------------   ----------------
                                                                  (DOLLARS IN THOUSANDS)
Revenue.................  $6,251   100.0%  $7,110   100.0%  $7,684   100.0%  $4,160   100.0%  $2,041    100.0%   $1,248    100.0%
Cost of revenue.........   1,964    31.4    2,166    30.5    2,346    30.5    1,190    28.6      670     32.8       389     31.2
                          ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    ------    -----
Gross profit............   4,287    68.6    4,944    69.5    5,338    69.5    2,970    71.4    1,371     67.2       859     68.8
Selling, general and
  administrative
  expenses..............   4,158    66.5    4,559    64.1    4,748    61.8    1,971    47.4    1,476     72.3       721     57.8
                          ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    ------    -----
Income (loss) from
  operations............  $  129     2.1%  $  385     5.4%  $  590     7.7%  $  999    24.0%  $ (105)   (5.1)%   $  138     11.0%
                          ======   =====   ======   =====   ======   =====   ======   =====   ======    =====    ======    =====
Compensation
  differential..........  $  522     8.4%  $  944    13.3%  $  603     7.8%  $  120     2.9%  $  497     24.4%   $   --       --%
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- J. HOWARD
 
     Revenue.  Revenue decreased approximately $871,000, or 20.9%, from $4.2
million in the 1997 Period to $3.3 million in the 1998 Period, primarily due to
lower license revenue.
 
     Cost of Revenue.  Cost of revenue decreased approximately $131,000, or
11.0%, from approximately $1.2 million in the 1997 Period to approximately $1.1
million in the 1998 Period. As a percentage of revenue, cost of revenue
increased from 28.6% in the 1997 Period to 32.2% in the 1998 Period due to the
fixed nature of a portion of the company's costs.
 
     Gross Profit.  Gross profit decreased approximately $740,000, or 24.9%,
from $3.0 million in the 1997 Period to $2.2 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 71.4% in the 1997 Period to
67.8% in the 1998 Period, due to the reasons described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $226,000, or 11.5%, from $2.0
million in the 1997 Period to $2.2 million in the 1998 Period. Excluding the
Compensation Differential of approximately $120,000 and approximately $497,000
attributable to J. Howard in the 1997 Period and the 1998 Period, respectively,
selling, general and administrative expenses would have decreased approximately
$151,000, or 8.2%, from $1.9 million in the 1997 Period to $1.7 million in the
1998 Period. As a percentage of revenue, selling, general and administrative
expenses would have increased on an adjusted basis from 44.5% in the 1997 Period
to 51.7% in the 1998 Period, primarily due to compensation paid to additional
salespeople who did not generate material revenue during the 1998 Period and the
decrease in revenue.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 -- J. HOWARD
 
     Revenue.  Revenue increased approximately $574,000, or 8.1%, from $7.1
million in the year ended December 31, 1996 to $7.7 million in the year ended
December 31, 1997, primarily due to increased license revenue generated from one
of the company's clients during the year ended December 31, 1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $180,000, or
8.3%, from $2.2 million in the year ended December 31, 1996 to $2.3 million in
the year ended December 31, 1997. As a percentage of revenue, cost of revenue
remained constant at 30.5% in both periods.
 
     Gross Profit.  Gross profit increased approximately $394,000, or 8.0%, from
$4.9 million in the year ended December 31, 1996 to $5.3 million in the year
ended December 31, 1997. As a percentage of revenue, gross profit remained
constant at approximately 69.5% in both periods.
 
                                       21
23
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $189,000, or 4.1%, from $4.6
million in the year ended December 31, 1996 to $4.7 million in the year ended
December 31, 1997. Excluding the Compensation Differential of approximately
$944,000 and approximately $603,000 attributable to J. Howard in the year ended
December 31, 1996 and the year ended December 31, 1997, respectively, selling,
general and administrative expenses would have increased approximately $530,000,
or 14.7%, from $3.6 million in the year ended December 31, 1996 to $4.1 million
in the year ended December 31, 1997. As a percentage of revenue, selling,
general and administrative expenses would have increased on an adjusted basis
from 50.8% in the year ended December 31, 1996 to 53.9% in the year ended
December 31, 1997, primarily due to compensation paid to additional salespeople
hired during the year ended December 31, 1997 who did not generate material
revenue during that year.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- J. HOWARD
 
     Revenue.  Revenue increased approximately $859,000, or 13.7%, from $6.3
million in the year ended December 31, 1995 to $7.1 million in the year ended
December 31, 1996, primarily due to a general increase in the number of client
engagements.
 
     Cost of Revenue.  Cost of revenue increased approximately $202,000, or
10.3%, from $2.0 million in the year ended December 31, 1995 to $2.2 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased slightly from 31.4% in the year ended December 31, 1995 to 30.5% in
the year ended December 31, 1996.
 
     Gross Profit.  Gross profit increased approximately $657,000, or 15.3%,
from $4.3 million in the year ended December 31, 1995 to $4.9 million in the
year ended December 31, 1996. As a percentage of revenue, gross profit increased
slightly, from 68.6% in the year ended December 31, 1995 to 69.5% in the year
ended December 31, 1996.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $401,000, or 9.6%, from $4.2
million in the year ended December 31, 1995 to $4.6 million in the year ended
December 31, 1996. Excluding the Compensation Differential attributable to J.
Howard of approximately $522,000 and approximately $944,000 in the year ended
December 31, 1995 and the year ended December 31, 1996, respectively, selling,
general and administrative expenses would have remained relatively constant at
$3.6 million. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 58.2% in the year ended
December 31, 1995 to 50.8% in the year ended December 31, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES -- J. HOWARD
 
     J. Howard generated net cash from operating activities of approximately
$402,000 in the year ended December 31, 1997 and used approximately $272,000 in
operating activities in the period from January 1, 1998 to May 4, 1998. Net cash
used in investing activities was approximately $287,000 in the year ended
December 31, 1997, primarily for advances made to related parties, and
approximately $75,000 was generated in the period from January 1, 1998 to May 4,
1998, primarily from advances repaid by related parties. Net cash used in
financing activities was approximately $108,000 in the year ended December 31,
1997 for distributions to stockholders. Net cash provided by financing
activities was approximately $282,000 for the period from January 1, 1998 to May
4, 1998, from borrowings to fund operating activities. At May 4, 1998, J. Howard
had working capital of $1.2 million.
 
RESULTS OF OPERATIONS -- LSS
 
     LSS creates customized technology-based training solutions that generally
are designed to facilitate faster learning of point-of-sale devices and higher
productivity of retail associates. LSS derives revenue from the design,
development and delivery of its products.
 
                                       22
24
 
     The following table sets forth certain selected financial data for LSS on a
historical basis and as a percentage of revenue for the periods indicated:
FOR THE PERIOD
                                                                                                --------------------------------
                                        YEAR ENDED DECEMBER 31,                 FOR THE SIX                         MAY 5, 1998
                            ------------------------------------------------    MONTHS ENDED    JANUARY 1, 1998     TO JUNE 30,
                                 1995             1996             1997        JUNE 30, 1997     TO MAY 4, 1998        1998
                            --------------   --------------   --------------   --------------   ----------------   -------------
                                                                   (DOLLARS IN THOUSANDS)
Revenue...................  $3,332   100.0%  $5,123   100.0%  $5,681   100.0%  $2,910   100.0%  $2,861    100.0%   $ 936   100.0%
Cost of revenue...........   1,390    41.7    1,696    33.1    2,202    38.8    1,081    37.1      909     31.8      446    47.7
                            ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    -----   -----
Gross profit..............   1,942    58.3    3,427    66.9    3,479    61.2    1,829    62.9    1,952     68.2      490    52.4
Selling, general and
  administrative
  expenses................   1,767    53.0    3,079    60.1    2,226    39.2    1,108    38.1      633     22.1      420    44.9
                            ------   -----   ------   -----   ------   -----   ------   -----   ------    -----    -----   -----
Income from operations....  $  175     5.3%  $  348     6.8%  $1,253    22.0%  $  721    24.8%  $1,319     46.1%   $  70     7.5%
                            ======   =====   ======   =====   ======   =====   ======   =====   ======    =====    =====   =====
Compensation
  differential............  $  415    12.5%  $1,379    26.9%  $  300     5.3%  $  210     7.2%  $ (121)   (4.2)%   $  --      --%
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- LSS
 
     Revenue.  Revenue increased approximately $887,000, or 30.5%, from $2.9
million in the 1997 Period to $3.8 million in the 1998 Period, primarily due to
new client relationships.
 
     Cost of Revenue.  Cost of revenue increased approximately $274,000, or
25.3%, from $1.1 million in the 1997 Period to $1.4 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 37.1% in the 1997
Period to 35.7% in the 1998 Period, primarily due to reduced video production
costs associated with certain of the Company's products during the period.
 
     Gross Profit.  Gross profit increased approximately $613,000, or 33.5%,
from $1.8 million in the 1997 Period to $2.4 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 62.9% in the 1997 Period to
64.3% in the 1998 Period, primarily due to the reduced video production costs
described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $55,000, or 5.0%, from $1.1
million in the 1997 Period to $1.0 million in the 1998 Period. Excluding the
Compensation Differential of approximately $210,000 and approximately $(121,000)
attributable to LSS in the 1997 Period and the 1998 Period, respectively,
selling, general and administrative expenses would have increased approximately
$276,000, or 30.7%, from approximately $898,000 in the 1997 Period to $1.2
million in the 1998 Period. As a percentage of revenue, selling, general and
administrative expenses would have remained unchanged on an adjusted basis at
30.9% in both the 1997 Period and the 1998 Period.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996  -- LSS
 
     Revenue.  Revenue increased approximately $558,000, or 10.9%, from $5.1
million in the year ended December 31, 1996 to $5.7 million in the year ended
December 31, 1997, primarily due to the expansion of the sales force.
 
     Cost of Revenue.  Cost of revenue increased approximately $506,000, or
29.8%, from $1.7 million in the year ended December 31, 1996 to $2.2 million in
the year ended December 31, 1997. As a percentage of revenue, cost of revenue
increased from 33.1% in the year ended December 31, 1996 to 38.8% in the year
ended December 31, 1997, primarily due to increased video production costs
associated with certain of the company's products during the year ended December
31, 1997.
 
     Gross Profit.  Gross profit increased approximately $52,000, or 1.5%, from
$3.4 million in the year ended December 31, 1996 to $3.5 million in the year
ended December 31, 1997. As a percentage of revenue, gross profit decreased from
66.9% in the year ended December 31, 1996 to 61.2% in the year ended December
31, 1997, primarily due to the increased video production costs described above.
 
                                       23
25
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $853,000, or 27.7%, from $3.1
million in the year ended December 31, 1996 to $2.2 million in the year ended
December 31, 1997. Excluding the Compensation Differential of $1.4 million and
approximately $300,000 attributable to LSS in the year ended December 31, 1996
and the year ended December 31, 1997, respectively, selling, general and
administrative expenses would have increased approximately $226,000, or 13.3%,
from $1.7 million in the year ended December 31, 1996 to $1.9 million in the
year ended December 31, 1997. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly on an adjusted basis from
33.2% in the year ended December 31, 1996 to 33.9% in the year ended December
31, 1997.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- LSS
 
     Revenue.  Revenue increased $1.8 million, or 53.8%, from $3.3 million in
the year ended December 31, 1995 to $5.1 million in the year ended December 31,
1996, primarily due to increased productivity from the company's expanded sales
force.
 
     Cost of Revenue.  Cost of revenue increased approximately $306,000, or
22.0%, from $1.4 million in the year ended December 31, 1995 to $1.7 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 41.7% in the year ended December 31, 1995 to 33.1% in the year
ended December 31, 1996, primarily due to several follow-on client engagements
which generally result in lower production costs.
 
     Gross Profit.  Gross profit increased $1.5 million, or 76.5%, from $1.9 in
the year ended December 31, 1995 to $3.4 million in the year ended December 31,
1996. As a percentage of revenue, gross profit increased from 58.3% in the year
ended December 31, 1995 to 66.9% in the year ended December 31, 1996, primarily
due to the lower production costs described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.3 million, or 74.3%, from $1.8 million in
the year ended December 31, 1995 to $3.1 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to LSS of
approximately $415,000 and $1.4 million in the year ended December 31, 1995 and
the year ended December 31, 1996, respectively, selling, general and
administrative expenses would have increased approximately $348,000, or 25.7%,
from $1.4 million in the year ended December 31, 1995 to $1.7 million in the
year ended December 31, 1996. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 40.6% in
the year ended December 31, 1995 to 33.2% in the year ended December 31, 1996,
primarily due to the company's larger revenue base.
 
LIQUIDITY AND CAPITAL RESOURCES -- LSS
 
     LSS generated net cash from operating activities of approximately $482,000
in the year ended December 31, 1997 and approximately $1.0 million in the period
from January 1, 1998 to May 4, 1998. Net cash used in investing activities was
approximately $86,000 in the year ended December 31, 1997 and approximately
$271,000 in the period from January 1, 1998 to May 4, 1998, for purchases of
property and equipment. Cash used in financing activities was approximately
$496,000 and approximately $629,000 during the year ended December 31, 1997 and
the period from January 1, 1998 to May 4, 1998, respectively, for dividends paid
to stockholders. At May 4, 1998, LSS had working capital of approximately $1.4
million.
 
RESULTS OF OPERATIONS -- MOHR
 
     MOHR offers train-the-trainer and instructor-led seminars to help clients
in the retail industry primarily to improve productivity by fostering a
customer-oriented focus at the sales management and sales associate levels.
MOHR's revenue is derived primarily from the licensing to clients of the right
to use its training programs on a participant or site basis.
 
                                       24
26
 
     The following table sets forth certain selected financial data for MOHR on
a historical basis and as a percentage of revenue for the periods indicated:
FOR THE PERIOD
                                      YEAR ENDED JUNE 30,           --------------------------------
                                --------------------------------     JULY 1, 1997     MAY 5, 1998 TO
                                     1996              1997         TO MAY 4, 1998    JUNE 30, 1998
                                --------------    --------------    --------------    --------------
                                                       (DOLLARS IN THOUSANDS)
Revenue.......................  $2,171   100.0%   $3,015   100.0%   $3,237   100.0%   $1,045   100.0%
Cost of revenue...............     677    31.2       825    27.4    1,009..   31.2       361    34.5
                                ------   -----    ------   -----    ------   -----    ------   -----
Gross profit..................   1,494    68.8     2,190    72.6     2,228    68.8       684    65.5
Selling, general and
  administrative expenses.....   1,151    53.0     1,745    57.9     1,510    46.6       378    36.2
                                ------   -----    ------   -----    ------   -----    ------   -----
Income from operations........  $  343    15.8%   $  445    14.7%   $  718    22.2%   $  306    29.3%
                                ======   =====    ======   =====    ======   =====    ======   =====
Compensation differential.....  $  144     6.6%   $  334    11.1%   $  205     6.3%   $   --      --%
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- MOHR
 
     Revenue.  Revenue increased $1.3 million, or 42.0%, from $3.0 million in
the 1997 Period to $4.3 million in the 1998 Period, primarily due to an increase
in the number of salespeople and an increase in license fees received during the
1998 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $545,000, or
66.1%, from approximately $825,000 in the 1997 Period to $1.4 million in the
1998 Period. As a percentage of revenue, cost of revenue increased from 27.4% in
the 1997 Period to 32.0% in the 1998 Period, primarily due to increased new
product development costs.
 
     Gross Profit.  Gross profit increased approximately $722,000, or 33.0%,
from $2.2 million in the 1997 Period to $2.9 million in the 1998 Period. As a
percentage of revenue, gross profit decreased from 72.6% in the 1997 Period to
68.0% in the 1998 Period, primarily due to the new product development costs
described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $143,000, or 8.2%, from $1.7
million in the 1997 Period to $1.9 million in the 1998 Period. Excluding the
Compensation Differential of approximately $334,000 and approximately $205,000
attributable to MOHR in the 1997 Period and 1998 Period, respectively, selling,
general and administrative expenses would have increased approximately $272,000,
or 19.3%, from $1.4 million in the 1997 Period to $1.7 million in the 1998
Period. As a percentage of revenue, selling, general and administrative expenses
would have decreased on an adjusted basis from 46.8% in the 1997 Period to 39.3%
in the 1998 Period, primarily due to the Company's larger revenue base partially
offset by compensation paid to additional salespeople during the 1998 Period.
 
RESULTS FOR 1997 COMPARED TO 1996 -- MOHR
 
     Revenue.  Revenue increased approximately $844,000, or 38.9%, from $2.2
million in 1996 to $3.0 million in 1997, primarily due to the hiring of two
additional salespeople and the increase in license fees during 1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $148,000, or
21.9%, from approximately $677,000 in 1996 to approximately $825,000 in 1997. As
a percentage of revenue, cost of revenue decreased from 31.2% in 1996 to 27.4%
in 1997, primarily due to the increase in license fees, which result in higher
margins than train-the-trainer seminars.
 
     Gross Profit.  Gross profit increased approximately $696,000, or 46.6%,
from $1.5 million in 1996 to $2.2 million in 1997. As a percentage of revenue,
gross profit increased from 68.8% in 1996 to 72.6% in 1997, primarily due to
increased license fees.
 
                                       25
27
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased approximately $594,000, or 51.6%, from $1.2
million in 1996 to $1.7 million in 1997. Excluding the Compensation Differential
attributable to MOHR of approximately $144,000 and approximately $334,000 in
1996 and 1997, respectively, selling, general and administrative expenses would
have increased approximately $404,000, or 40.1%, from $1.0 million in 1996 to
$1.4 million in 1997. As a percentage of revenue, selling, general and
administrative expenses would have increased slightly from 46.4% in 1996 to
46.8% in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- MOHR
 
     MOHR generated net cash from operating activities of approximately $80,000
in 1997 and approximately $335,000 in the period from July 1, 1997 to May 4,
1998. Net cash used in investing activities was approximately $41,000 in 1997
and approximately $68,000 in the period from July 1, 1997 to May 4, 1998, for
purchases of property and equipment. At May 4, 1998, MOHR had working capital of
$1.2 million.
 
RESULTS OF OPERATIONS -- NOVATIONS
 
     Novations assists clients in assessing their strategic direction and
implementing and managing change. Novations also provides its clients with a
variety of organizational assessment tools that are designed to gather and
analyze feedback on either an organizational or individual basis and to initiate
change within the client's organization in response to such feedback. Novations'
revenue is derived primarily from fees from professional services and, to a
lesser extent, from the sale of services and products to support human resource
management.
 
     The following table sets forth certain selected financial data for
Novations on a historical basis and as a percentage of revenue for the periods
indicated:
YEAR ENDED JUNE 30,                  FOR THE PERIOD
                                             -------------------------------   ---------------------------------
                                                                               JULY 1, 1997 TO    MAY 5, 1998 TO
                                                  1996             1997          MAY 4, 1998      JUNE 30, 1998
                                             --------------   --------------   ----------------   --------------
                                                                   (DOLLARS IN THOUSANDS)
Revenue...................................   $9,039   100.0%  $9,018   100.0%  $9,228    100.0%   $2,426   100.0%
Cost of revenue...........................    4,733    52.4    4,839    53.7    4,356     47.2       988    40.7
                                             ------   -----   ------   -----   ------    -----    ------   -----
Gross profit..............................    4,306    47.6    4,179    46.3    4,872     52.8     1,438    59.3
Selling, general and administrative
  expenses................................    4,094    45.3    3,315    36.7    3,956     42.9       920    37.9
                                             ------   -----   ------   -----   ------    -----    ------   -----
Income from operations....................   $  212     2.3%  $  864     9.6%  $  916      9.9%   $  518    21.4%
                                             ======   =====   ======   =====   ======    =====    ======   =====
Compensation differential.................   $1,471    16.3%  $  661     7.3%  $1,512     16.4%   $   --      --%
RESULTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED
TO THE TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") -- NOVATIONS
 
     Revenue.  Revenue increased $2.6 million, or 29.2%, from $9.0 million in
the 1997 Period to $11.7 million in the 1998 Period, primarily due to an
increase in organizational assessment revenues in the 1998 Period.
 
     Cost of Revenue.  Cost of revenue increased approximately $505,000, or
10.4% from $4.8 million in the 1997 Period to $5.3 million in the 1998 Period.
As a percentage of revenue, cost of revenue decreased from 53.7% in the 1997
Period to 45.9% in the 1998 Period, primarily due to the increased utilization
of the company's consultants.
 
     Gross Profit.  Gross profit increased $2.1 million, or 51.0%, from $4.2
million in the 1997 Period to $6.3 million in the 1998 Period. As a percentage
of revenue, gross profit increased from 46.3% in the 1997 Period to 54.1% in the
1998 Period, primarily due to the increased utilization rate described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.6 million, or 47.1%, from $3.3 million in
the 1997 Period to $4.9 million in the 1998 Period. Excluding
 
                                       26
28
 
the Compensation Differential attributable to Novations of approximately
$661,000 and $1.5 million in the 1997 Period and 1998 Period, respectively,
selling, general and administrative expenses would have increased approximately
$710,000, or 26.8%, from $2.7 million in the 1997 Period to $3.4 million in the
1998 Period. As a percentage of revenue, selling, general and administrative
expenses would have decreased on an adjusted basis from 29.4% in the 1997 Period
to 28.9% in the 1998 Period, primarily due to the company's larger revenue base.
 
RESULTS FOR 1997 COMPARED TO 1996 -- NOVATIONS
 
     Revenue.  Revenue remained relatively constant at $9.0 million in 1996 and
1997.
 
     Cost of Revenue.  Cost of revenue increased approximately $106,000, or
2.2%, from $4.7 million in 1996 to $4.8 million in 1997. As a percentage of
revenue, cost of revenue increased from 52.4% in 1996 to 53.7% in 1997,
primarily due to an increase in the size of the consulting staff.
 
     Gross Profit.  Gross profit decreased approximately $127,000, or 2.9%, from
$4.3 million in 1996 to $4.2 million in 1997. As a percentage of revenue, gross
profit decreased from 47.6% in 1996 to 46.3% in 1997, primarily due to the staff
increase described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased approximately $779,000 or 19.0%, from $4.1
million in 1996 to $3.3 million in 1997. Excluding the Compensation Differential
attributable to Novations of $1.5 million and approximately $661,000 in 1996 and
1997, respectively, selling, general and administrative expenses would have
increased slightly from $2.6 million in 1996 to $2.7 million in 1997. As a
percentage of revenue, selling, general and administrative expenses would have
increased slightly on an adjusted basis from 29.0% in 1996 to 29.4% in 1997.
 
LIQUIDITY AND CAPITAL RESOURCES -- NOVATIONS
 
     Novations generated net cash from operating activities of approximately
$153,000 in 1997. Net cash used by operating activities was approximately
$567,000 in the period from July 1, 1997 to May 4, 1998 due to an increase in
accounts receivable. Net cash used in investing activities was approximately
$137,000 in 1997, primarily for purchases of property and equipment. Net cash
used in investing activities was approximately $16,000 in the 1998 Period,
primarily due to purchases of property and equipment. Net cash provided by
financing activities was approximately $55,000 in 1997 from net proceeds of
long-term debt. Net cash used in financing activities was approximately $78,000
in the 1998 Period, for the repayment of long-term debt and distributions to
stockholders. At May 4, 1998, Novations had working capital of approximately
$1.1 million and approximately $289,000 of long term debt.
 
RESULTS OF OPERATIONS -- STAR MOUNTAIN
 
     Star Mountain provides customized work skills training, primarily to
federal, state and local government agencies. Star Mountain delivers its
courseware to clients in a variety of formats (including written materials and
interactive multimedia software), but typically does not directly train its
clients. Star Mountain's revenue is derived primarily from fees received from
the provision of training services as a contractor or subcontractor under
government contracts.
 
     The following table sets forth certain selected financial data for Star
Mountain on a historical basis and as a percentage of revenue for the periods
indicated. For all periods presented below, selling, general
 
                                       27
29
 
and administrative expenses include amounts classified as "Other, net" in Star
Mountain's historical financial statements.
PERIOD FROM
                                                                                                 ----------------
                                     YEAR ENDED DECEMBER 31,                   SIX MONTHS
                       ---------------------------------------------------        ENDED          JANUARY 1, 1998
                            1995              1996              1997          JUNE 30, 1997       TO MAY 4, 1998
                       ---------------   ---------------   ---------------   ---------------     ----------------
                                                                               (UNAUDITED)
                                                         (DOLLARS IN THOUSANDS)
Revenue..............  $14,306   100.0%  $16,313   100.0%  $23,775   100.0%  $11,331   100.0%    $11,052    100.0%
Cost of revenue......    8,668    60.6     9,457    58.0    14,504    61.0     7,204    63.6       6,109     55.3%
                       -------   -----   -------   -----   -------   -----   -------   -----     -------    -----
Gross profit.........    5,638    39.4     6,856    42.0     9,271    39.0     4,127    36.4       4,943     44.7
Selling, general and
 administrative
 expenses............    4,611    32.2     5,815    35.6     7,897    33.2     3,793    33.5       3,650     33.0
                       -------   -----   -------   -----   -------   -----   -------   -----     -------    -----
Income from
 operations..........  $ 1,027     7.2%  $ 1,041     6.4%  $ 1,374     5.8%  $   334     2.9%    $ 1,293     11.7%
                       =======   =====   =======   =====   =======   =====   =======   =====     =======    =====
Compensation
 differential........  $    64     0.4%  $   304     1.9%  $   180     0.8%  $    90     0.8%    $    28      0.3%
PERIOD FROM
                       --------------
                        MAY 5, 1998
                             TO
                       JUNE 30, 1998
                       --------------
Revenue..............  $5,396   100.0%
Cost of revenue......   3,159    58.5
                       ------   -----
Gross profit.........   2,237    41.5
Selling, general and
 administrative
 expenses............   2,030    37.6
                       ------   -----
Income from
 operations..........  $  207     4.1%
                       ======   =====
Compensation
 differential........  $   --      --%
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD") COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD) -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $5.1 million, or 45.2%, from $11.3 million in
the 1997 Period to $16.4 million in the 1998 Period primarily due to an increase
in the number of federal government contracts undertaken, as well as revenue
contributed by businesses acquired during the first and fourth quarters of the
year ended December 31, 1997.
 
     Cost of Revenue.  Cost of revenue increased $2.1 million, or 28.7%, from
$7.2 million in the 1997 Period to $9.3 million in the 1998 Period. As a
percentage of revenue, cost of revenue decreased from 63.6% in the 1997 Period
to 56.3% in the 1998 Period, primarily due to better utilization of the
company's fixed costs.
 
     Gross Profit.  Gross profit increased $3.1 million, or 74.0%, from $4.1
million in the 1997 Period to $7.2 million in the 1998 Period. As a percentage
of revenue, gross profit increased from 36.4% in the 1997 Period to 43.7% in the
1998 Period, primarily due to the utilization improvements described above.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.9 million, or 49.8%, from $3.8 million in
the 1997 Period to $5.7 million in the 1998 Period. Excluding the Compensation
Differential of approximately $90,000 and approximately $28,000 attributable to
Star Mountain in the 1997 Period and the 1998 Period, respectively, selling,
general and administrative expenses would have been $3.7 million in the 1997
Period and $5.7 million in the 1998 Period. As a percentage of revenue, selling,
general and administrative expenses would have increased on an adjusted basis
from 32.7% in the 1997 Period to 34.3% in the 1998 Period.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $7.5 million, or 45.7%, from $16.3 million in
the year ended December 31, 1996 to $23.8 million in the year ended December 31,
1997, primarily due to an increase in the number of federal government contracts
undertaken, as well as revenue of $5.6 million contributed by businesses
acquired during the third quarter of the year ended December 31, 1996 and the
first and fourth quarters of the year ended December 31, 1997. Revenue was
significantly lower during the first half of the year ended December 31, 1996 as
a result of a decline in new client engagements due to prolonged Congressional
budget negotiations.
 
     Cost of Revenue.  Cost of revenue increased $5.0 million, or 53.4%, from
$9.5 million in the year ended December 31, 1996 to $14.5 million in the year
ended December 31, 1997. As a percentage of revenue, cost of revenue increased
from 58.0% in the year ended December 31, 1996 to 61.0% in the year ended
December 31, 1997, primarily due to the increased use of subcontractors during
the year ended December 31, 1997.
 
                                       28
30
 
     Gross Profit.  Gross profit increased $2.4 million, or 35.2%, from $6.9
million in the year ended December 31, 1996 to $9.3 million in the year ended
December 31, 1997. As a percentage of revenue, gross profit decreased from 42.0%
in the year ended December 31, 1996 to 39.0% in the year ended December 31,
1997, primarily due to increased subcontracting costs.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $2.1 million, or 35.8%, from $5.8 million in
the year ended December 31, 1996 to $7.9 million in the year ended December 31,
1997. Excluding the Compensation Differential of approximately $304,000 and
approximately $180,000 attributable to Star Mountain in the year ended December
31, 1996 and the year ended December 31, 1997, respectively, selling, general
and administrative expenses would have increased $2.2 million, or 40.0%, from
$5.5 million in the year ended December 31, 1996 to $7.7 million in the year
ended December 31, 1997. As a percentage of revenue, selling, general and
administrative expenses would have decreased on an adjusted basis from 33.8% in
the year ended December 31, 1996 to 32.5% in the year ended December 31, 1997,
primarily due to the company's larger revenue base.
 
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 -- STAR MOUNTAIN
 
     Revenue.  Revenue increased $2.0 million, or 14.0%, from $14.3 million in
the year ended December 31, 1995 to $16.3 million in the year ended December 31,
1996, due to revenue of $3.6 million contributed by businesses acquired by Star
Mountain in the third quarters of the years ended December 31, 1995 and 1996.
The revenue from the acquired businesses was offset partially by the decline in
business generated from federal government entities as a result of the
Congressional budget negotiations described above.
 
     Cost of Revenue.  Cost of revenue increased approximately $789,000, or
9.1%, from $8.7 million in the year ended December 31, 1995 to $9.5 million in
the year ended December 31, 1996. As a percentage of revenue, cost of revenue
decreased from 60.6% in the year ended December 31, 1995 to 58.0% in the year
ended December 31, 1996, primarily due to the acquisition in the third quarter
of the year ended December 31, 1996 of a business with higher gross profit
margins than Star Mountain's core business.
 
     Gross Profit.  Gross profit increased $1.2 million, or 21.6%, from $5.6
million in the year ended December 31, 1995 to $6.9 million in the year ended
December 31, 1996. As a percentage of revenue, gross profit increased from 39.4%
in the year ended December 31, 1995 to 42.0% in the year ended December 31,
1996, primarily due to the acquisition in the third quarter of the year ended
December 31, 1996 of a business with higher gross profit margins than Star
Mountain's core business.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased $1.2 million, or 26.1%, from $4.6 million in
the year ended December 31, 1995 to $5.8 million in the year ended December 31,
1996. Excluding the Compensation Differential attributable to Star Mountain of
approximately $64,000 and approximately $304,000 in the years ended December 31,
1995 and 1996, respectively, selling, general and administrative expenses would
have increased approximately $964,000, or 21.2%, from $4.5 million in the year
ended December 31, 1995 to $5.5 million in the year ended December 31, 1996. As
a percentage of revenue, selling, general and administrative expenses would have
increased on an adjusted basis from 31.8% in the year ended December 31, 1995 to
33.8% in the year ended December 31, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES -- STAR MOUNTAIN
 
     Star Mountain generated net cash from operating activities of approximately
$864,000 and approximately $115,000 in the year ended December 31, 1997 and the
period from January 1, 1998 to May 4, 1998, respectively. Net cash used in
investing activities was $2.3 million in the year ended December 31, 1997,
primarily in connection with acquisitions of businesses, and approximately
$264,000 in the period from January 1, 1998 to May 4, 1998, for acquisitions of
property and equipment. Net cash provided by financing activities was $1.8
million and approximately $129,000 in the year ended December 31, 1997 and the
period from January 1, 1998 to May 4, 1998, respectively, primarily from
borrowings on the company's line of credit.
 
                                       29
31
 
                                    BUSINESS
 
COMPANY OVERVIEW
 
     We are a leading provider of performance improvement training services and
products. Our clients are Fortune 1000 companies, other large and medium-sized
corporations and government entities. We offer both customized and standardized
services and products that are designed to provide measurable improvement in
performance and productivity for both employees and organizations. We can
deliver these performance improvement solutions using various delivery methods
to satisfy our clients' needs, including traditional delivery methods such as
teaching employees in instructor-led classroom training and certifying client
employees as instructors ("train-the-trainer"), as well as technology-based
delivery methods such as CD-ROM, intranets and the Internet. In addition, we
offer management consulting and training management services. Our goal is to
become the leading single-source provider of high-quality performance
improvement services and products.
 
MARKET OVERVIEW
 
     The performance improvement market is large and growing. According to
TRAINING magazine, domestic corporations with over 100 employees budgeted
approximately $60.7 billion on training in 1998, compared to approximately $48.2
billion in 1993, representing a compound annual growth rate of approximately
4.7%. We believe that growth in the training and development market has been and
will continue to be driven by:
 
     - the evolution to a technology-driven, knowledge-based economy;
 
     - the increasing recognition that employee training is a competitive
       necessity rather than an optional expense;
 
     - a constantly changing business environment which requires continuous
       employee training; and
 
     - the increased availability of technology-based delivery methods, such as
       the Internet, that make it possible to offer training to a wider audience
       on a more cost-effective and convenient basis.
 
     The increasing need for corporate training recently was highlighted in a
1998 survey where 70% of the surveyed CEOs said they faced serious problems
finding skilled, experienced workers.
 
     Corporations and government entities increasingly are utilizing external
providers to supplement and in some cases replace internal performance
improvement efforts. Expenditures on external providers of performance
improvement services and products by domestic corporations with over 100
employees have increased from approximately $9.4 billion in 1993 to a budgeted
$14.3 billion in 1998, representing a compound annual growth rate of 8.8%. These
expenditures have increased as a percentage of the total training budgets of
such corporations from approximately 19.5% in 1993 to a budgeted 23.6% in 1998.
We believe that organizations increasingly are using external suppliers for
their training requirements so that they can focus on their core competencies,
turn fixed training costs into variable costs, and obtain comprehensive training
content and delivery capabilities that may not be available internally.
 
                                   [GRAPHIC]
          Two pie charts depicting the size of the external corporate training
market as a percentage of the total corporate training market in 1993 and 1998,
respectively.
 
                                       30
32
 
     Traditionally, performance improvement services and products have been
delivered primarily through instructor-led training, books, and audio and video
tapes. However, advances in technology now permit organizations to utilize a
broad range of technology-based training formats (such as CD-ROM, intranets and
the Internet) which facilitate broader dissemination of training within
organizations and allow for more convenient and efficient learning. For example,
training is increasingly being delivered through web-based formats that allow
convenient access to training content. Technology-based training formats
overcome many of the cost, time and space constraints of traditional
instructor-led training. We believe that corporations increasingly are using
technology-based alternatives to:
 
     - accelerate learning and increase knowledge retention;
 
     - minimize the costs of employees' time spent away from the job;
 
     - allow employees to have convenient access to training "on demand";
 
     - lower overall training costs, including travel expenses of employees;
 
     - make training available to a broader range of employees;
 
     - provide consistency in training; and
 
     - better measure and track employees' progress.
 
     The performance improvement industry is highly fragmented. We believe that
no company in the industry has more than a two percent share of the external
training market. Many companies in the industry provide a narrow range of
services and products through limited delivery methods. We believe that these
companies generally have made limited investments in content development,
marketing and the technology necessary to develop or utilize technology-based
delivery alternatives. As corporations and government entities increasingly use
external training providers, we believe that they will seek providers that can
meet a significant portion of their training and development needs by providing:
 
     - a broad range of high-quality services and products in both customized
       and standardized formats;
 
     - specialized, industry-focused performance improvement expertise;
 
     - effective technology-based training capable of reaching large and
       geographically dispersed work forces; and
 
     - web-based training management services for coordinating and tracking
       performance improvement activities.
 
As a result, we believe that significant opportunities are available for
well-managed and well-capitalized companies capable of meeting these needs.
 
BUSINESS STRATEGY
 
     Our objective is to become the leading single source provider of
high-quality performance improvement services and products to Fortune 1000
companies, other large and medium-sized corporations and government entities. To
achieve this objective, we are pursuing a business strategy with the following
key elements:
 
     PROVIDE A BROAD RANGE OF SERVICES AND PRODUCTS.  We offer a broad array of
customized and standardized services and products that are designed to provide
measurable improvements in performance and productivity for both employees and
organizations. In addition, we offer management consulting services that are
designed to improve our clients' overall corporate performance, and training
management services that enable our clients to better manage their performance
improvement programs. We believe that our comprehensive service and product
offerings will allow our clients the convenience of "one-stop shopping" so that
they can reduce their reliance on multiple vendors for training content and
delivery and maximize their overall performance improvement results.
 
     UTILIZE MULTIPLE DELIVERY METHODS.  We offer multiple delivery methods
including instructor-led classroom training, train-the-trainer programs, CD-ROM,
intranets, the Internet, books, and audio and video tapes. Our varied delivery
capabilities allow us to better serve the particular needs, cost objectives and
cultures of our clients.
 
                                       31
33
 
     OFFER VALUE-ADDED TRAINING.  Our goal is to provide value-added services
and products that achieve measurable results for our clients. We seek to
differentiate our services and products by helping our clients assess the
returns generated by their performance improvement investments. We can perform
return-on-investment analyses for our clients, and frequently work with them to
develop key assessment metrics by which to measure outcomes.
 
     PROVIDE SPECIALIZED INDUSTRY EXPERTISE.  We have developed and continue to
develop industry-focused service and product offerings that can better satisfy
our clients' specific performance improvement needs. By leveraging our existing
industry-specific content and delivery capabilities, we can provide clients with
customized yet cost-effective performance improvement solutions. For example, we
have developed a standard point-of-sale simulator to assist companies in the
retail industry. With minor modifications, we can rapidly customize this product
to address the specific needs of other retailers who rely on point-of-sale
devices. We believe our experience and capabilities developed by serving clients
in certain industries, including the retail, automotive and telecommunications
industries, as well as the government sector, give us an important competitive
advantage in obtaining new clients in these areas.
 
GROWTH STRATEGY
 
     Key elements of our growth strategy include:
 
     CAPITALIZE ON CROSS-SELLING OPPORTUNITIES.  We believe that significant
opportunities exist to cross-sell our services and products within our existing
client base. Most of our clients receive performance improvement services and
products from only one of the PROVANT companies. To aid in our cross-selling
efforts, we have established Greenhouse, a web-based corporate database that can
be accessed by each PROVANT company to review company-wide client relationships
and service and product capabilities. We believe that Greenhouse will allow our
salespeople to leverage these relationships and capabilities. We also have
instituted a compensation system designed to reward cross-selling. In addition,
we have assembled several cross-selling teams, comprised of individuals selected
from various PROVANT companies, to address the broad needs of major clients.
These teams recently have made proposals to clients such as Hewlett-Packard,
GMAC and K-Mart.
 
     LEVERAGE INVESTMENTS IN TECHNOLOGY AND DEPLOY LEADING TECHNOLOGIES.  A key
element of our strategy is to capitalize on the technology investments of the
PROVANT companies. Several of our companies have developed unique expertise in
content and delivery technology that can be drawn upon by other PROVANT
companies to improve their service and product capabilities. For example, we are
leveraging our investment and expertise in technology-based delivery methods to
produce CD-ROM versions of existing training content of many of the PROVANT
companies. We expect to deploy leading technologies in the delivery of many of
our services and products, including delivery through distance-based media, such
as intranets and the Internet, that can provide interactive training to
employees at multiple locations. One of our recently acquired companies is a
leading developer of web-based training. This company is helping us to deliver
web-based training systems designed to allow clients to manage training and
deliver content in a convenient, cost-effective manner.
 
     CONTINUE TO EXPAND SALES AND MARKETING EFFORTS.  We plan to establish new
client relationships and expand existing relationships. In particular, we plan
to:
 
     - expand our sales force (which has grown from 65 individuals at the time
       of the IPO to 140);
 
     - sell more services and products through nationwide telemarketing and
       e-commerce efforts;
 
     - develop a high-level consultative sales force that can market our entire
       portfolio of services and products to key accounts; and
 
     - promote national brand identification for the PROVANT name while
       preserving and enhancing the value of the established names of the
       PROVANT companies.
 
     EXPAND SERVICE AND PRODUCT OFFERINGS.  We intend to continue broadening our
offering of performance improvement services and products by developing or
acquiring new or complementary services and products. We frequently ask our
clients to evaluate our service and product offerings to insure that we can
continue to effectively service their needs. Since the IPO, we have created new
services and products, including Bottom Line Buying Plus which teaches
negotiation skills to retail buyers, and our Valuing
                                       32
34
 
Inclusion seminar which helps organizations' employees adapt to gender relations
issues. In addition, one of the companies we recently acquired has developed a
new CD-ROM product for its Just-in-Time Information series, which teaches
managers solutions to common personnel management problems.
 
     PURSUE STRATEGIC ACQUISITIONS.  We intend to continue pursuing strategic
acquisitions in order to:
 
     - broaden our existing line of services and products;
 
     - access new technologies that expand the scope and quality of delivery
       methods; and
 
     - establish or enhance client relationships.
 
     We seek to acquire companies with strong management, profitable operating
results and leading positions within their respective markets. We believe that
acquisitions of this nature will further enhance our ability to become the
leading single-source provider of high-quality performance improvement services
and products. Since the IPO we have completed five acquisitions, which have
given us access to new clients, performance improvement content and delivery
capabilities. In addition, we currently have letters of intent relating to two
additional acquisitions.
 
PERFORMANCE IMPROVEMENT SERVICES AND PRODUCTS
 
     Through our services and products, our clients can provide training to
employees at virtually every level of an organization, access consulting
services that permit the organization as a whole to undergo change and utilize
web-based training management services to better manage and track their training
programs.
 
     CUSTOMIZED AND STANDARDIZED SERVICES AND PRODUCTS.  We offer customized and
standardized solutions which train employees in:
 
        - Work skills;
 
        - Recruitment, selection and retention;
 
        - Customer service;
 
        - Communications;
 
        - Supervisory and leadership skills;
 
        - Diversity;
 
        - Decision making; and
 
        - Negotiations.
 
Our customized services and products are designed to meet the specialized needs
of particular clients in a wide range of applications and can be accessed
through a wide variety of delivery methods.
 
          Work Skills.  We deliver a wide range of services and products to
     numerous corporate and government entities that are designed to provide or
     improve the skills necessary to perform a particular task or job.
     Typically, our experts work closely with our clients to custom-design work
     skills products, training courses and course materials. For example, we
     have delivered specialized work skills training on how to operate a
     manufacturing system for a paper products company, how to operate
     communication switches for a telecommunications company, how to maintain
     and repair equipment for a railroad, and how to provide and manage basic
     medical care for Army and Navy healthcare personnel.
 
          Recruitment, Selection and Retention.  We offer services and products
     designed to assist clients in hiring and retaining effective employees. In
     particular, we help clients understand the skills required of their
     employees, implement more effective recruitment, selection and retention
     processes to maximize employee productivity, and reduce turnover rates. For
     example, Behavioral Interviewing(R) teaches managers how to identify
     specific job competencies required for success, interview prospective
     candidates and evaluate their skills. Complementing this and similar
     products are our outplacement services, which we provide to several federal
     government agencies to assist in work force restructuring.
 
          Customer Service. We offer services and products designed to increase
     customer retention, customer service and sales. For example, several of our
     products, including Creating Loyal Customers,
 
                                       33
35
 
     Customer Service at the Register and Professional Selling, are designed to
     improve customer service in the retail workplace by simulating important
     retail situations and environments in technology-based delivery formats.
 
          Communications.  We offer services and products designed to improve
     public speaking/presentation and spoken communication skills. For example,
     Effective Communicating is a two-day workshop designed to enable clients'
     key staff members to become more effective in public speaking, sales and
     other types of oral communication.
 
          Supervisory and Leadership Skills.  We offer services and products
     that are designed to improve employees' operational management, supervisory
     and leadership skills. For example, Managing Individual and Team
     Effectiveness is designed to provide managers in complex work environments
     with "360-degree" feedback on their management skills, and the Just-in-Time
     Information products provide solutions to common management problems on
     CD-ROM.
 
          Diversity.  We offer services and products designed to help managers
     and employees understand diversity issues, such as race and gender. For
     example, Managing Inclusion is a multi-day session designed to help
     individual managers and client companies enhance understanding of workplace
     diversity, build morale and satisfaction in the work force, and increase
     productivity through more effective team relationships.
 
          Decision Making.  We offer services and products designed to help
     improve managers' decision making skills. One way that we do this is by
     creating simulations that focus on a number of objectives, including
     strategic thinking, finance and sales. These interactive simulations enable
     managers to "play out" important business decisions and receive immediate
     feedback on their performance. For example, for a major healthcare
     manufacturing client, we created a general management simulation that
     helped managers from different functional areas think more interdependently
     about delivering customer value.
 
          Negotiations.  We offer services and products designed to help
     employees improve their negotiation skills. For example, Bottom Line Buying
     Plus trains merchandise buyers to negotiate to both improve profitability
     and strengthen vendor relationships.
 
     CONSULTING AND DIAGNOSTICS.  Our management consulting services are
designed to help improve overall corporate performance by assisting clients in,
among other things, assessing their strategic direction and implementing and
managing change. For example, we assisted a large trucking company in developing
alternative organization designs and cost reduction initiatives. By using our
recommendations, the company was able to undertake significant structural
changes and cost-cutting measures. We also provide our clients with a variety of
survey tools by which feedback can be gathered and analyzed on either an
organizational or individual basis. We develop the survey forms and
methodologies, conduct the surveys, and collect and analyze the data for our
corporate clients. For example, we assisted a large mortgage bank in identifying
critical areas for organizational change by administering an employee survey to
more than 10,000 employees.
 
     TRAINING MANAGEMENT.  We provide customized, organization-wide services
that allow clients to better manage a broad range of performance improvement
activities. Our web-based training management systems provide clients with an
automated approach to the enrollment, tracking and measurement of performance
improvement activities. We either install these systems at the client's site or
operate them from our site. For example, we developed a web-based training
management system for a manufacturing client that allows the client's 12,000
employees to access a course catalog, enroll in courses, take tests, review
transcripts and peruse company news and other information, and will eventually
deliver performance improvement content through the client's intranet.
 
DELIVERY METHODS
 
     We offer multiple delivery methods for our performance improvement services
and products to better serve the particular needs, cost objectives and cultures
of our clients. Our primary delivery methods are described below.
 
                                       34
36
 
     INSTRUCTOR-LED TRAINING.  We deliver our programs to clients' employees
primarily through the use of either salaried employees or certified contract
instructors. Most of our instructor-led training is delivered at clients'
facilities, although we also deliver certain programs at our own training
facilities. In some cases, our programs are delivered in a public seminar format
to a small group of individuals from multiple client companies or through video
conferencing. We typically provide textual materials as a part of our
instructor-led programs, and in some cases sell related supplemental materials.
We also develop custom courseware that ultimately is delivered by instructors
who are not affiliated with us. Our courses and programs generally range in
length from a few hours to several days and include from one to hundreds of
participants.
 
     TRAIN-THE-TRAINER.  For several of our services and products, we train and
certify qualified employees of clients in an instructor-led program. The
certified client employees then are licensed to use our methodologies and
materials to train other employees of the client in instructor-led classes at
client sites. We supply training materials for these classes and on-going
training for the certified trainers. We receive fees for the employee-led
classes on either a per-participant or per-site basis.
 
     TECHNOLOGY-BASED FORMATS.  We increasingly deliver our products in
technology-based delivery formats, such as CD-ROM, intranets, the Internet and
other distance-based media. Because of the benefits of technology-based
training, we plan to convert some of our products to technology-based formats
that to date have been offered only in the instructor-led or train-the-trainer
formats.
 
     BOOKS AND TAPES.  We also deliver some of our training through books and
video and audio tapes. We offer approximately 400 titles of standardized books,
tapes and other written materials.
 
CLIENTS
 
     We seek to establish long-term relationships with Fortune 1000 companies,
other large and medium-sized corporations and government entities with
substantial performance improvement needs. We have developed a broad client base
of over 1,500 corporate and government clients, with no client accounting for
more than 3% of our pro forma revenue during fiscal 1998. The following table
illustrates the wide range of industries represented by our client base:
BUSINESS AND FINANCIAL SERVICES   MANUFACTURING/PROCESSING         TECHNOLOGY
Allstate Insurance                3M                               Electronic Data Systems
Deloitte & Touche                 Applied Materials                Hewlett-Packard
GMAC                              Kellogg                          Intel
J.P. Morgan                       Nabisco                          Motorola
Kinko's                           Steelcase                        NETg
CHEMICALS AND PHARMACEUTICAL                                       TELECOMMUNICATIONS
Abbott Labs                                                        Bell Atlantic
Dow Chemical                                                       Bell South
Dupont                                        PROVANT              GTE
Mobil                                                              Lucent
Pfizer                                                             MCI
GOVERNMENT                        RETAIL AND HOSPITALITY           TRANSPORTATION AND AUTOMOTIVE
Department of the Army            Bloomingdale                     American Honda
Department of Energy              Burger King                      CSX Transportation
Federal Aviation Administration   Kroger                           Federal Express
IRS                               Marriott                         Ford
U.S. Postal Service               Wal-Mart                         UPS
SALES AND MARKETING
 
     Each PROVANT company maintains its own sales force. In addition, we are
implementing a national sales force of high-level consultative sales people that
can market our entire portfolio of services and products to key accounts. Our
sales force, which numbered 65 at the time of the IPO, has grown to 140 from
both acquisitions and internal growth. Through one of our acquisitions, we have
added a nationwide telesales organization, through which we intend to offer many
of our services and products. We also
 
                                       35
37
 
telemarketing through public seminars, client referrals, direct marketing, the
PROVANT companies' Web sites and trade publications.
 
     A key component of our marketing strategy is to cross-sell our various
services and products within our existing client base. To aid our cross-selling
efforts, we have instituted a compensation system designed to reward
cross-selling. We also have established Greenhouse, a web-based corporate
database that can be accessed by each PROVANT company to review company-wide
client relationships and service and product capabilities. Finally, we are
pursuing a marketing and advertising program to establish national brand
identification for the PROVANT name, while preserving and enhancing the value of
the established names of the PROVANT companies.
 
     We generate significant revenues through sales of services and products to
government entities. Typically, these sales occur through a competitive bidding
process started by a government entity's issuance of a request for proposal
("RFP") for a contemplated project. We may submit a proposal on our own behalf
or as a subcontractor to another company. Many services and products delivered
to federal government agencies are provided through orders placed under a
General Services Administration ("GSA") Supply Schedule contract and under
Office of Personnel Management/Training Management Assistance ("OPM"). We are
one of only a few training providers authorized under both funding mechanisms.
We benefit from our status as a preferred provider under certain funding
mechanisms (including the GSA and OPM vehicles) which allow us to negotiate
contracts without an RFP.
 
BOARD OF ADVISORS
 
     In December 1998 we formed a Board of Advisors to guide us in identifying
emerging trends in the marketplace and areas where we should build strategic
capability through investment or acquisition. The Board of Advisors currently
consists of the following seven leaders in the performance improvement industry
who are focused on strategic consulting, leadership, executive development and
coaching, and knowledge management:
 
- Frank Cespedes, Managing Partner, The Center for Executive Development and
  former Harvard Business School Professor;
 
- Marshall Goldsmith, Founding Director, Keilty, Goldsmith & Company;
 
- Frances Hesselbein, President and Chief Executive Officer of The Peter F.
  Drucker Foundation for Non-Profit Management;
 
- Jerry Jasinowski, President and Chief Executive Officer of the National
  Association of Manufacturers;
 
- Jon Katzenbach, Author of Teams at the Top and Founder of Katzenbach Partners,
  LLC;
 
- Edward Lawler, III, Professor and Director of the Center for Effective
  Organizations at the University of Southern California; and
 
- David Ulrich, Consultant and Professor at the University of Michigan.
 
COMPETITION
 
     The performance improvement industry is highly fragmented and competitive.
We believe the principal competitive factors in the industry are the strength of
client relationships, quality, price and breadth of service and product
offerings, quality and number of delivery methods, reputation, and the ability
to provide customized services and products. Some of our competitors have
significantly greater financial, managerial, technical, marketing and other
resources than us. Moreover, we expect to face additional competition from new
entrants into the performance improvement market due, in part, to the evolving
nature of the market.
 
     We compete with thousands of privately-held training companies, most of
which provide a limited range of services and products. In addition to these
small competitors, a number of larger companies are engaged in the business of
providing performance improvement services and products, including AchieveGlobal
(a subsidiary of the Times Mirror Company), Development Dimensions
International, EPS Solutions, The Forum Corporation, Wilson Learning
Corporation, and several large publishers of professional reference materials
who recently have entered the industry. We also occasionally compete with large
professional service companies that generally offer training services in
conjunction with strategic
                                       36
38
 
consulting and other client assignments of larger scope. In addition, many of
our clients and potential clients have internal training departments.
 
     Our competitors for government contracts include service companies such as
Booz-Allen & Hamilton, as well as contract suppliers of equipment to the
government such as Raytheon Company and Lockheed Martin Corporation.
 
INTELLECTUAL PROPERTY
 
     We regard many of our performance improvement services and products as
proprietary and rely primarily on a combination of statutory and common law
copyright, trademark, service mark and trade secret laws, customer licensing
agreements, employee and third-party nondisclosure agreements and other methods
to protect our proprietary rights. There can be no assurance that third parties
will not claim that our current or future products and/or services infringe on
the proprietary rights of others.
 
EMPLOYEES
 
     As of December 31, 1998, we employed approximately 1,060 full-time and
part-time employees. We believe that our relationships with our employees are
good. In addition, we provide certain of our services and products through
independent contractors, which as of December 31, 1998 numbered approximately
150.
 
FACILITIES
 
     We lease our principal executive office located in Boston, Massachusetts,
and maintain additional leased offices in numerous locations in the United
States. We believe that our facilities are adequate to serve our current level
of operations, and that if additional facilities are required, we can find
suitable additional or alternative space on commercially reasonable terms.
 
LEGAL PROCEEDINGS
 
     We are from time to time a party to litigation arising in the ordinary
course of business. Management believes that no pending legal proceeding will
have a material adverse effect on our business, financial condition or results
of operations.
 
                                       37
39
 
                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth information concerning our directors and
executive officers.
NAME                   AGE                           POSITION
-------------------------------------  ---   --------------------------------------------------------
Paul M. Verrochi.....................  49    Chairman and Chief Executive Officer
John H. Zenger.......................  67    President and Director
Dominic J. Puopolo...................  55    Executive Vice President, Chief Financial Officer and
                                             Director
Rajiv Bhatt..........................  41    Executive Vice President and Chief Operating Officer
Philip Gardner.......................  35    Vice President
Herbert A. Cohen.....................  62    Chairman - MOHR, Director
Bert Decker..........................  58    Chairman - Decker, Director
Paul C. Green, Ph.D..................  57    Chairman - BTI, Director
Joe Hanson...........................  41    Managing Director - Novations, Director
John F. King.........................  44    Chairman - LSS, Director
A. Carl von Sternberg................  70    Chairman and President - Star Mountain, Director
Marc S. Wallace......................  51    President - J. Howard, Director
Michael J. Davies....................  54    Director
David B. Hammond.....................  53    Director
John R. Murphy.......................  64    Director
Esther T. Smith......................  59    Director
Paul M. Verrochi has been our Chairman of the Board and Chief Executive
Officer since May 1998. Prior to the IPO, Mr. Verrochi served as our President
and a director. Mr. Verrochi also is Chairman, co-founder and a principal of
American Business Partners LLC ("ABP"). In 1992, Mr. Verrochi co-founded
American Medical Response, Inc. ("AMR"), which at the time of its acquisition by
Laidlaw Inc. in January 1997 was the largest provider of ambulance services in
the United States. From August 1992 to January 1996, Mr. Verrochi served as
AMR's President and Chief Executive Officer, and until January 1997 he also
served as the Chairman of the Board of Directors. Mr. Verrochi was selected as
the 1995 National Entrepreneur of the Year for Emerging Growth Companies by Inc.
Magazine. Mr. Verrochi serves as an advisory board member to numerous charitable
foundations, including the New England Aquarium and the Boston Symphony
Orchestra. Mr. Verrochi is Chairman of BridgeStreet Accommodations, Inc. and a
director of Coach USA, Inc. Mr. Verrochi received his Bachelor of Science degree
from the United States Merchant Marine Academy at Kings Point, New York.
 
     John H. Zenger has been our President and a director since May 1998. Prior
to the IPO, from May 1997 until May 1998, Mr. Zenger was a consultant to us.
From April 1992 to November 1996, Mr. Zenger was employed in various capacities,
including Vice President and Chairman, by the Times Mirror Training Group, one
of the nation's largest training companies, consisting of Kaset, Learning
International and Zenger Miller, the company that he co-founded in 1977. Mr.
Zenger has taught at the University of Southern California School of Business
and the Stanford Graduate School of Business. Mr. Zenger received his Doctorate
degree in Business Administration from the University of Southern California,
his Masters in Business Administration from the University of California, Los
Angeles and his Bachelor of Science degree from Brigham Young University.
 
     Dominic J. Puopolo has been our Executive Vice President, Chief Financial
Officer and a director since May 1998. Prior to the IPO, Mr. Puopolo served as
our Treasurer and a director. Mr. Puopolo is a co-founder and principal of ABP.
In 1992, Mr. Puopolo co-founded AMR. From August 1992 to January 1996, Mr.
Puopolo served as Executive Vice President, Chief Financial Officer, Treasurer
and a member of the Board of Directors of AMR. Mr. Puopolo serves as a member of
the Board of Trustees of Emerson College of Communications and is Chairman of
its Resource Development Committee. Mr. Puopolo also serves on the Executive
Committee of the Boston University School of Medicine and is a member of the
 
                                       38
40
 
Board of Trustees of Northeastern University. Mr. Puopolo, a Certified Public
Accountant, is a member of the Massachusetts Society of Certified Public
Accountants, the American Institute of Certified Public Accountants and the
National Association of Accountants. Mr. Puopolo received his Masters in
Business Administration degree from Suffolk University and his Bachelor of
Science degree in Business Administration from Northeastern University.
 
     Rajiv Bhatt has been our Executive Vice President and Chief Operating
Officer since December 1998. Mr. Bhatt also has served as our Treasurer and
Chief Accounting Officer since May 1998. From May 1998 until December 1998, Mr.
Bhatt also was our Senior Vice President. Prior to the IPO, from August 1997
until May 1998, Mr. Bhatt was a consultant to us. From September 1994 to August
1997, Mr. Bhatt was Executive Vice President, Chief Financial Officer and
Treasurer of Summit Technology, Inc., a publicly-traded manufacturer of
ophthalmic laser systems. From September 1988 to September 1994, Mr. Bhatt was
Chief Financial Officer, Secretary and a member of the Board of Directors of
Carlisle Plastics, Inc., a publicly-traded plastics manufacturer. Also from
September 1988 to September 1994, Mr. Bhatt was Chief Financial Officer of
Carlisle Capital Corporation, a privately held mergers and acquisitions company.
Mr. Bhatt serves as a director of Big Brothers Association of Boston. Mr. Bhatt,
a Certified Public Accountant, received his Masters in Business Administration
degree from the University of Michigan and his Bachelor of Commerce degree from
the University of Bombay.
 
     Philip Gardner has been our Vice President since May 1998. Prior to the
IPO, from February 1997 until May 1998, Mr. Gardner was a consultant to us. From
August 1994 to December 1996, Mr. Gardner was a consultant for McKinsey &
Company ("McKinsey"), a management consulting firm. Prior to joining McKinsey,
from 1985 to 1992, Mr. Gardner was an officer and a highly decorated strike
fighter pilot in the United States Navy. Mr. Gardner received his Masters in
Business Administration degree from Harvard Graduate School of Business
Administration and his Bachelor of Arts degree in Government from Harvard
College.
 
     Herbert A. Cohen has been one of our directors, and Chairman of MOHR, since
May 1998. Previously, from February 1991 until May 1998, Mr. Cohen was Chief
Executive Officer of MOHR. From September 1978 to January 1991, Mr. Cohen was a
partner and one of the original principals of MOHR Development, Inc., a training
and consulting company. Mr. Cohen has served as President and Director of the
Instructional Systems Association, an association of over 150 training companies
dedicated to improving performance through training. Mr. Cohen received his
Bachelor of Science degree in Psychology from the University of Maine.
 
     Bert Decker has been one of our directors since May 1998. Mr. Decker also
serves as Chairman of Decker, a position he has held since October 1979. From
October 1979 until May 1998, Mr. Decker also was Chief Executive Officer of
Decker. Mr. Decker is the author of the best-selling books You've Got to be
Believed to be Heard and Creating Messages That Motivate. Mr. Decker also is the
personal communications trainer for Charles Schwab and Olympic gold medalist
Bonnie Blair. Mr. Decker has appeared on several national television programs,
including The Today Show and 20/20. Mr. Decker received his Bachelor of Arts
degree in Psychology from Yale University.
 
     Paul C. Green, Ph.D. has been one of our directors, and Chairman of BTI,
since May 1998. Previously, from May 1979 until May 1998, Dr. Green was Chief
Executive Officer of BTI. Dr. Green developed the Behavioral Interviewing(R)
seminar, which has been attended by several hundred thousand managers worldwide.
Dr. Green has also served as Assistant Professor in the Marketing Department at
Memphis State University, where he taught courses in salesmanship, sales
promotion, sales management and consumer behavior. Dr. Green received his
Doctorate degree in Industrial-Organizational Psychology from Memphis State
University, his Master of Science degree in Psychology from Memphis State
University and his Bachelor of Arts degree from Lambuth College.
 
     Joe Hanson has been one of our directors since May 1998, and has served as
a Managing Director of Novations since May 1997. Previously, from May 1989 to
April 1997, Mr. Hanson was employed by Novations in a variety of capacities
including consultant, Director and Chief Financial Officer. From September 1983
to March 1987, Mr. Hanson was a consultant for KPMG Peat Marwick LLP.
                                       39
41
 
Mr. Hanson received his Masters in Business Administration degree from Brigham
Young University and his Bachelor of Science degree in Accounting from Brigham
Young University.
 
     John F. King has been one of our directors, and Chairman of LSS, since May
1998. Previously, from December 1990 until May 1998, Mr. King was Chief
Executive Officer of LSS. From October 1981 to November 1988, Mr. King was
employed by Wilson Learning where he served in various capacities including
Regional Sales Manager, Account Executive, and Performance Consultant. Mr. King
previously served as Professor of Communications Studies at McKendree College.
Mr. King received his Master of Arts degree in Communication Studies, Mass
Communications from Purdue University and his Bachelor of Arts degree from
California State University, Long Beach.
 
     A. Carl von Sternberg has been one of our directors, and Chairman of Star
Mountain, since May 1998. Mr. von Sternberg also serves as President of Star
Mountain, a position he has held since September 1987. In 1975, Mr. von
Sternberg founded Allen Corporation of America ("Allen") a firm specializing in
training, human factors, engineering and logistics services. From October 1975
to May 1986, Mr. von Sternberg was President and Chairman of Allen, and
following Allen's acquisition by The Singer Company he continued to serve as
Allen's President until September 1987. Allen was selected in 1982 by Inc.
Magazine as one of America's 500 fastest growing private companies. Prior to
founding Allen, Mr. von Sternberg served as Executive Vice President and Chief
Operating Officer of Essex Corporation, a behavioral science research company,
which he co-founded in 1969. Mr. von Sternberg received his Bachelor of Science
degree in Industrial Administration from Yale University.
 
     Marc S. Wallace has been one of our directors since May 1998, and has been
President of J. Howard since January 1991. Previously, from April 1983 until May
1998, Mr. Wallace also was Treasurer of J. Howard. Mr. Wallace serves on the
Boards of Directors of Belmont Hill School and the Berklee School of Music, on
the Board of Advisors of First Community Bank in Boston and as a member of the
Northeastern University Corporation. Mr. Wallace also is a member of the Boston
Chamber of Commerce. Mr. Wallace received his Masters in Business Administration
degree with a concentration in Finance from Central Michigan University and his
Bachelor of Arts degree from Adams State College.
 
     Michael J. Davies has been one of our directors since May 1998. Mr. Davies
also has served as a consultant to us since February 1997. From April 1994 to
June 1997, Mr. Davies was a Managing Director of Legg Mason Wood Walker,
Incorporated, specializing in media and communications. From September 1990 to
March 1993, Mr. Davies was publisher of The Baltimore Sun. Prior to joining The
Baltimore Sun, Mr. Davies was editor and publisher of The Hartford Courant. He
also was editor and president of The Kansas City Star and The Kansas City Times
and, before that, managing editor of The Courier Journal in Louisville,
Kentucky, and of The Louisville Times. Mr. Davies received his Master of Science
degree in Journalism from the Medill School of Journalism at Northwestern
University and his Bachelor of Science degree from Georgia State University.
 
     David B. Hammond has been one of our directors since May 1998. Mr. Hammond
has been Chairman of Integrated Transport Systems Limited, a European vehicle
auctioneer, since December 1995. Previously, from 1988 until April 1996, he
served as Deputy Chairman of ADT Limited, an electronic security company. Mr.
Hammond is a Fellow of the Institute of Chartered Accountants in England. Since
May 1995, he has been a commissioner at the U.K. Monopolies and Mergers
Commission. Mr. Hammond is a director of BHI Corporation and BridgeStreet
Accommodations, Inc., and served as a director and Chairman of the Audit
Committee of AMR from 1993 until 1997.
 
     John R. Murphy has been one of our directors since May 1998. Since March
1998, Mr. Murphy has served as Vice Chairman of the National Geographic Society
("National Geographic"). Mr. Murphy has served National Geographic in several
capacities, including as its President and Chief Executive Officer from May 1995
until March 1998, and as its Executive Vice President from May 1993 until May
1995. Previously, from July 1981 until January 1991, Mr. Murphy served as
President and publisher of The Baltimore Sun. Mr. Murphy is a past President of
the United States Golf Association, and currently serves as a director of
Omnicom Group and MSD&T Mutual Funds.
 
                                       40
42
 
     Esther T. Smith has been one of our directors since May 1998. Since July
1998, Ms. Smith has been a principal of The Poretz Group, an investor relations
firm located in McLean, Virginia. Since October 1996, Ms. Smith has been a
management consultant in corporate positioning and internet enterprise
development. From October 1996 to December 1997, she was Editor-at-Large of
TechNews Inc. ("TechNews"). Previously, from September 1985 to September 1996
she was President and a director of TechNews. From January 1995 to September
1996, she also served as that company's Chief Executive Officer. Now
Post-Newsweek Business Information, Inc., TechNews was acquired by The
Washington Post Co. in 1996. Ms. Smith is an advisor to the Netpreneur Program
of the Morino Institute, Reston, Virginia, and is a member of the Board of
Directors of WomenCONNECT.com Corp.
 
BOARD OF DIRECTORS
 
     The Board of Directors currently consists of 14 directors. The term of
office of each director ends at our next annual meeting of stockholders. The
Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee, consisting of Messrs. Hammond and Murphy and Ms.
Smith, makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the results of the
audit, including the adequacy of internal controls and financial accounting
policies, oversees or conducts special investigations or other functions on
behalf of the Board of Directors, reviews reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), reviews our policies and procedures with regard to our
compliance with all material applicable governmental rules and regulations and
makes recommendations with regard to strategic financial planning matters. The
Compensation Committee, consisting of Messrs. Hammond and Murphy and Ms. Smith,
makes recommendations to the Board of Directors with regard to all of our
material compensation arrangements with each of our officers and directors and,
at the request of the Board of Directors, advises the Board with respect to
matters of compensation policy of broad impact. The Compensation Committee
administers our employee equity incentive plans, determines, subject to the
provisions of our incentive plans, the directors, officers, employees and
consultants eligible to participate in any of the plans, determines the extent
of such participation and terms and conditions under which benefits may be
vested, received or exercised, and makes recommendations to the Board of
Directors with regard to the adoption of new incentive plans.
 
     The Board of Directors also has established an Acquisition Committee
(consisting of Messrs. Puopolo, Verrochi, von Sternberg, Green and Davies), a
Strategic Planning Committee (consisting of Messrs. Zenger, Decker and Green),
and a Technology Development Committee (consisting of Ms. Smith and Messrs. King
and von Sternberg).
 
DIRECTOR COMPENSATION
 
     Members of the Board of Directors who also serve us as officers or
full-time consultants do not receive compensation for serving on the Board. Each
other member of the Board receives a fee of $3,000 for each Board of Directors
meeting attended and an additional fee of $500 for each committee meeting
attended. All directors receive reimbursement of reasonable expenses incurred in
attending Board and committee meetings and otherwise carrying out their duties.
 
     In connection with the IPO, each director who was neither an employee nor
one of our stockholders as of the date of the final prospectus used in
connection with the IPO (i.e., Mr. Murphy and Ms. Smith) received an option to
purchase 7,500 shares of common stock at a per share exercise price equal to the
initial public offering price of $13.00. Each option currently is exercisable
with respect to all of the shares of common stock issuable thereunder, expires
ten years after the date of grant and is non-transferable except upon death
(unless otherwise approved by the Board of Directors). If the director dies or
otherwise ceases to be a director prior to the expiration of the option, the
option (if exercisable) remains exercisable for a period of one year (following
death) or three months (following other termination of the director's status as
a director), but in no event beyond the tenth anniversary of the date of grant.
 
                                       41
43
 
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
 
     Certain of our directors are compensated through the 1998 Stock Option Plan
for Outside Directors (the "Directors' Plan"). Subject to adjustment for stock
splits and similar events, a total of 100,000 shares of common stock are
reserved for issuance under the Directors' Plan.
 
     The Directors' Plan is administered by the Board of Directors, which has
the power to construe and interpret the plan's terms and provisions. The
Directors' Plan permits the Board of Directors to delegate some or all of its
powers with respect to the Directors' Plan to a committee. Only directors who do
not otherwise serve us as employees or full-time consultants ("Outside
Directors") are eligible to participate in the Directors' Plan. Messrs. Hammond
and Murphy and Ms. Smith currently are the only Board members who are entitled
to participate.
 
     On the date of each annual meeting of stockholders, each Outside Director
continuing in office will be granted an option to purchase a number of shares of
common stock to be determined by the Board of Directors on that date, and any
newly-elected Outside Director will be granted an option covering 7,500 shares
of common stock. The exercise price for each option granted under the Directors'
Plan will be the last sale price of a share of common stock as reported on
Nasdaq on the date the option is granted.
 
     All options granted under the Directors' Plan will become fully exercisable
six months after the date of grant. Upon an Outside Director's departure from
the Board of Directors by reason of death, all options that are not then
exercisable will terminate and options that are exercisable on the date of death
may be exercised by the Outside Director's executor or administrator, or by the
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution, only during the subsequent one-year period. If
an Outside Director ceases to be a director for any other reason, all options
held by the Outside Director that are not then exercisable will terminate and
options that are exercisable at that time will continue to be exercisable only
during the subsequent three-month period. In the event that a transaction occurs
that results or will result in the common stock not being registered under
Section 12 of the Exchange Act, all options held by Outside Directors will
terminate. If the transaction is intended to be treated as a
pooling-of-interests for accounting purposes, the Board of Directors will cause
the acquiring or surviving corporation or one of its affiliates to grant
replacement options to participants. Otherwise, the Board of Directors may
either accelerate the exercisability of all outstanding options or terminate all
options in exchange for a cash payment. In all other events, options granted
under the Directors' Plan will remain exercisable until the tenth anniversary of
the date of grant. Generally, no option may be transferred other than by will or
the laws of descent and distribution.
 
                             EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
     The following table contains a summary of the compensation paid or accrued
during fiscal 1998 to our Chief Executive Officer and our three other most
highly compensated executive officers (collectively, the "Named Executive
Officers," and each, a "Named Executive Officer").
LONG TERM
                                                                                      COMPENSATION
                                                                                         AWARDS
                                                          ANNUAL COMPENSATION         ------------
                                                     ------------------------------    SECURITIES
                                                                       OTHER ANNUAL    UNDERLYING
            NAME AND PRINCIPAL POSITION              YEAR    SALARY    COMPENSATION     OPTIONS
            ---------------------------              ----   --------   ------------   ------------
Paul M. Verrochi...................................  1998   $  8,333      $2,400(1)      43,298(2)
  Chairman and Chief Executive Officer
John H. Zenger.....................................  1998     25,000          --        100,000
  President
Dominic J. Puopolo.................................  1998      8,333       2,400(1)      43,298(2)
  Executive Vice President and Chief Financial
  Officer
Rajiv Bhatt........................................  1998    239,947(3)        --        50,000
  Executive Vice President and Chief Operating
  Officer
42
44
 
---------------
(1) Consists of car allowance.
(2) Excludes 389,686 shares issuable upon the exercise of warrants described in
    "Certain Transactions."
(3) Includes $206,614 in compensation paid prior to the IPO while Mr. Bhatt was
    a full-time consultant to us.
 
OPTION GRANTS IN LAST FISCAL YEAR
 
     The following table sets forth certain information with respect to stock
options we granted during fiscal 1998 to each of the Named Executive Officers.
INDIVIDUAL GRANTS                      POTENTIAL REALIZABLE
                            ---------------------------------------------------       VALUE AT ASSUMED
                            NUMBER OF     PERCENT OF                                   ANNUAL RATES OF
                            SECURITIES   TOTAL OPTIONS                            STOCK PRICE APPRECIATION
                            UNDERLYING    GRANTED TO     EXERCISE                     FOR OPTION TERMS
                             OPTIONS     EMPLOYEES IN      PRICE     EXPIRATION   -------------------------
                            GRANTED(1)    FISCAL YEAR    ($/SHARE)      DATE          5%           10%
                            ----------   -------------   ---------   ----------   ----------   ------------
Paul M. Verrochi..........    43,298          5.7%        $13.00      4/28/05      $229,146     $  534,008
John H. Zenger............   100,000         13.3          13.00      4/28/05       529,231      1,233,332
Dominic J. Puopolo........    43,298          5.7          13.00      4/28/05       229,146        534,008
Rajiv Bhatt...............    50,000          6.6          13.00      4/28/05       264,615        616,666
---------------
(1) The options granted to Messrs. Zenger and Bhatt each become exercisable with
    respect to one-third of the shares issuable thereunder on each of April 28,
    1999, 2000 and 2001. Upon the occurrence of certain events constituting a
    change in control, the options will be affected as discussed in "-- Equity
    Incentive Plan."
 
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
 
     There were no options exercised by any of the Named Executive Officers
during fiscal 1998. The following table indicates the aggregate value of all
options held by each Named Executive Officer as of June 30, 1998.
NUMBER OF SECURITIES
                                              UNDERLYING UNEXERCISED           VALUE OF UNEXERCISED IN-
                                             OPTIONS AT JUNE 30, 1998            THE-MONEY OPTIONS AT
                                           ----------------------------            JUNE 30, 1998(1)
                                            NUMBER OF       NUMBER OF        ----------------------------
                                           EXERCISABLE    UNEXERCISABLE      EXERCISABLE    UNEXERCISABLE
                                             SHARES          SHARES             VALUE           VALUE
                                           -----------    -------------      -----------    -------------
Paul M. Verrochi.........................    43,298               --          $232,727        $     --
John H. Zenger...........................        --          100,000                --         537,500
Dominic J. Puopolo.......................    43,298               --           232,727              --
Rajiv Bhatt..............................        --           50,000                --         268,750
---------------
(1) Value of unexercised options based upon $18.375, the closing price of the
    Common Stock on Nasdaq on June 30, 1998.
 
EMPLOYMENT AGREEMENTS
 
     We have employment agreements with each of the Named Executive Officers.
Each such agreement has a term expiring on May 4, 2001 and provides for an
initial base salary (subject to upward adjustment in the sole discretion of the
Board of Directors) and participation in our bonus and benefit plans. The base
salaries to be paid to Messrs. Verrochi, Zenger, Puopolo and Bhatt under their
employment agreements for fiscal 1999 are $50,000, $150,000 $50,000 and
$275,000, respectively. The salaries to be paid to Messrs. Verrochi and Puopolo
after the first year of the term of their employment agreements are not
specified in their respective employment agreement, but rather will be
determined by the Board of Directors in its sole discretion. Each agreement may
be terminated prior to the expiration of the term either in the event of
disability or for cause (as defined). If any of the Named Executive Officers
does not continue to be employed by us upon the expiration of his agreement, the
Named Executive Officer is entitled to receive six months' severance at his base
salary as in effect at the time of expiration. Each of
 
                                       43
45
 
the Named Executive Officers has agreed not to compete with us for a period that
expires on May 4, 2003.
 
EQUITY INCENTIVE PLAN
 
     Our 1998 Equity Incentive Plan provides for the award of up to 1,100,000
shares of common stock in the form of incentive stock options ("ISOs"),
non-qualified stock options, stock appreciation rights, performance shares,
restricted stock or stock units (each, an "Award"). All of our directors and
employees, and all consultants and advisors, are eligible to participate in the
Equity Incentive Plan.
 
     The Equity Incentive Plan is administered by the Compensation Committee
(the "Committee"), which determines who shall receive Awards from those
individuals eligible to participate, the type of Award to be made, the number of
shares of common stock that may be acquired pursuant to the Award and the
specific terms and conditions of each Award, including the purchase price, term,
vesting schedule, restrictions on transfer and any other conditions and
limitations applicable to the Awards or their exercise. Options that are ISOs
may be exercisable for not more than 10 years after the date the option is
awarded. The Committee may at any time accelerate the exercisability of all or
any portion of an option.
 
     In the event a transaction occurs that results in the common stock not
being registered under Section 12 of the Exchange Act, all Awards terminate upon
the completion of the transaction. If the transaction is intended to be treated
as a pooling-of-interests for accounting purposes, then the Committee or the
Board of Directors shall cause the acquiring or surviving corporation or one of
its affiliates to grant replacement Awards to participants. Otherwise, the
Committee or the Board of Directors may either accelerate the exercisability of
all outstanding Awards (subject to completion of the transaction) or terminate
all Awards in exchange for a cash payment.
 
     The Equity Incentive Plan may be amended from time to time or terminated in
its entirety by the Board of Directors; however, no amendment may be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
 
     As of December 31, 1998, options to purchase 1,021,619 shares of common
stock were outstanding under the Equity Incentive Plan.
 
NON-QUALIFIED STOCK OPTION PLAN
 
     Our 1998 Non-Qualified Stock Option Plan provides for the award of up to
500,000 shares of common stock in the form of non-qualified stock options. All
of our employees who are neither directors nor officers are eligible to
participate in the Non-Qualified Plan.
 
     The Non-Qualified Plan is administered and interpreted by the Committee,
which selects the recipients of options, determines the terms and conditions of
the options, prescribes the form or forms of instruments evidencing options from
time to time, and decides any questions and settles all controversies and
disputes that may arise in connection with the plan. The Committee may at any
time accelerate the exercisability of all or any portion of an option.
 
     In the event a transaction occurs that results in the common stock not
being registered under Section 12 of the Exchange Act, all options granted under
the Non-Qualified Plan terminate upon the completion of the transaction. If the
transaction is intended to be treated as a pooling-of-interests for accounting
purposes, then the Committee (or the Board) shall cause the acquiring or
surviving corporation or one of its affiliates to grant replacement options to
participants. Otherwise, the Committee (or the Board) may either accelerate the
exercisability of all outstanding options (subject to completion of the
transaction) or terminate all options in exchange for cash payments.
 
     As of December 31, 1998, options to purchase 294,900 shares of common stock
were outstanding under the Non-Qualified Plan.
 
                                       44
46
 
STOCK PURCHASE PLAN
 
     Our 1998 Employee Stock Purchase Plan is designed to enable eligible
employees to purchase shares of common stock at a discount on a periodic basis.
All employees working more than 20 hours per week, other than employees owning
5% or more of the combined voting power of all classes of our stock, will be
eligible to participate. Purchases occur at the end of option periods, each of
six months' duration. The first such option period began on June 1, 1998. The
purchase price of common stock under the Employee Stock Purchase Plan is 85% of
the lesser of the last sale price of the common stock on the business day
immediately preceding the beginning of an option period and the last sale price
of the common stock on the business day immediately preceding the end of the
option period. Participants may elect under the Employee Stock Purchase Plan to
have from 2% to 10% of their pay applied to the purchase of shares at the end of
the option period.
 
     Subject to adjustment for stock splits and similar events, a total of
500,000 shares of common stock are reserved for issuance under the Employee
Stock Purchase Plan. As of December 31, 1998, 17,221 shares have been issued.
 
LIMITATION OF CERTAIN LIABILITY OF OFFICERS AND DIRECTORS
 
     As permitted by the Delaware General Corporation Law (the "DGCL"), our
Certificate of Incorporation provides for the elimination, subject to certain
conditions, of the personal liability of our directors for monetary damages for
breach of their fiduciary duties. The directors, however, remain subject to
equitable remedies and to liability for breach of their duty of loyalty to us or
our stockholders. Our Certificate of Incorporation and By-laws also provide that
we will indemnify our directors and officers. In addition, we maintain an
indemnification insurance policy covering all of our directors and officers. In
general, our Certificate of Incorporation, By-laws and the indemnification
insurance policy attempt to provide the maximum protection permitted by Delaware
law with respect to indemnification and exculpation of directors and officers.
 
     Under the indemnification provisions of our Certificate of Incorporation
and By-laws and the indemnification insurance policy, we will repay certain
expenses incurred by a director or officer in connection with any civil or
criminal action or proceeding, specifically including actions by us or in our
name (derivative suits), where the individual's involvement is by reason of the
fact that he or she is or was one of our directors or officers. Such
indemnifiable expenses include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts, and
other expenses customarily incurred in connection with legal proceedings. A
director or officer will not receive indemnification if he or she is found not
to have acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, our best interests.
 
                                       45
47
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth certain information as of December 31, 1998
regarding the beneficial ownership of our common stock, as of such date and as
adjusted to reflect the sale of shares of common stock in this offering by us
and the selling stockholders, by each of our directors and executive officers,
greater than 5% stockholders known to us and the selling stockholders.
SHARES BENEFICIALLY                         SHARES TO BE
                                                OWNED                             BENEFICIALLY OWNED
                                         PRIOR TO OFFERING(1)     SHARES TO       AFTER OFFERING(1)
                                         --------------------      BE SOLD       --------------------
       NAME OF BENEFICIAL OWNER           NUMBER      PERCENT    IN OFFERING      NUMBER      PERCENT
       ------------------------          ---------    -------    ------------    ---------    -------
Directors and Executive Officers
Paul M. Verrochi(2)(3).................  1,190,203      9.8        119,665       1,070,538      7.3
John H. Zenger(4)......................    196,197      1.6         20,000         176,197      1.2
Dominic J. Puopolo(2)(5)...............  1,112,524      9.2        122,625         989,899      6.8
Rajiv Bhatt............................     99,567        *          9,567          90,000        *
Philip Gardner.........................    339,821      2.8         40,000         299,821      2.1
Herbert A. Cohen(6)....................    183,459      1.5         20,000         163,459      1.1
Michael J. Davies(7)...................    371,632      3.1         32,060         339,572      2.4
Bert Decker............................    335,031      2.8         35,000         300,031      2.1
Paul C. Green, Ph.D(8).................    529,940      4.4         73,840         456,100      3.2
David B. Hammond(9)....................     44,643        *          5,000          39,643        *
Joe Hanson.............................     68,362        *          9,000          59,362        *
John F. King(10).......................    327,732      2.7         45,882         281,850      2.0
John R. Murphy(11).....................     11,500        *             --          11,500        *
Esther T. Smith(11)....................      9,500        *             --           9,500        *
A. Carl von Sternberg(12)..............    386,525      3.2         54,112         332,413      2.3
Marc S. Wallace........................     97,477        *         10,000          87,477        *
All executive officers and directors as
  a group (16 persons)(13).............  5,304,113     42.6        596,751       4,707,362     31.5
 
Other Named Selling Stockholders
Edwin Bauch, as Trustee................     43,950        *          5,997          37,953        *
Arthur R. Bauer(14)....................    177,591      1.5         24,863         152,728      1.1
Thomas Bohn(14)........................     94,153        *         13,181          80,972        *
Vern Della-Piana(14)...................     39,650        *          3,965          35,685        *
Harry V. Dunklin(14)(15)...............     36,727        *          3,742          32,985        *
Joseph R. Folkman(14)..................    120,317      1.0         12,031         108,286        *
Donald W. Glazer(14)...................    340,506      2.9         47,600         292,906      2.0
Jeffrey P. Howard(14)..................     97,477        *         13,646          83,831        *
Thomas McKenzie, Jr(14)................     74,902        *          7,490          67,412        *
David M. Morrison(14)..................     94,153        *         13,181          80,972        *
Mark Morrison(14)......................     94,153        *         13,181          80,972        *
Michael A. Patrick(14).................    172,870      1.4         18,000         154,870      1.1
Courtney M. Rogers(14).................     39,650        *          5,154          34,496        *
Kurt Sandholtz(14).....................     50,844        *          7,118          43,726        *
Timothy S. Schimkus(14)................     39,497        *          5,000          34,497        *
W. Norman Smallwood(14)................    120,317      1.0         16,844         103,473        *
Robert and Wendy Steinmetz(16).........    295,809      2.5         41,300         254,509      1.8
Randall G. Stott(14)...................    120,317      1.0         16,844         103,473        *
Kenneth S. Taylor(14)..................     95,093        *          9,524          85,569        *
Allena Reves von Sternberg.............     45,551        *          6,377          39,174        *
Ashley Elizabeth von Sternberg.........     28,990        *          4,058          24,932        *
Kurt T. von Sternberg..................     44,414        *          6,217          38,197        *
Leanna von Sternberg...................     44,414        *          6,217          38,197        *
Mark Allen von Sternberg...............     55,423        *          7,759          47,664        *
Mildred A. von Sternberg...............     44,414        *          6,218          38,196        *
Paul T. von Sternberg..................     32,691        *          4,576          28,115        *
Jonathan C. Younger(14)................    119,617      1.0         16,746         102,871        *
Other Selling Stockholders(17).........    102,139        *         13,145          88,994        *
46
48
 
---------------
  *  Less than 1%
 
 (1) The persons named in this table have sole investment and voting power with
     respect to the shares beneficially owned by them. The selling stockholders
     either currently serve as our employees or consultants, previously held
     stock of companies that we acquired, or obtained stock as a donee of a
     person in either of these categories. Percentages in the table are based
     upon 11,945,406 shares of common stock outstanding as of January 5, 1999
     and 14,445,406 shares outstanding as of the closing of this offering,
     respectively.
 
 (2) Includes 173,194 shares issuable pursuant to a warrant that currently is
     exercisable, and 43,298 shares issuable upon the exercise of an option that
     currently is exercisable. Excludes 216,492 shares issuable upon the
     exercise of the Contingent Warrant described in "Certain Transactions."
 
 (3) Includes 60,699 shares held by Mr. Verrochi's wife (7,284 of which will be
     sold in this offering), and 140,980 shares held by a trust of which Mr.
     Verrochi is trustee (19,737 of which shares will be sold in this offering).
     Mr. Verrochi's address is c/o PROVANT, Inc., 67 Batterymarch Street, Suite
     600, Boston, MA 02110.
 
 (4) Shares are held jointly with Mr. Zenger's wife. Excludes 98,881 shares held
     by a trust for the benefit of Mr. Zenger's grandchildren, as to which Mr.
     Zenger disclaims beneficial ownership.
 
 (5) Includes 60,699 shares held by Mr. Puopolo's wife (8,498 of which shares
     will be sold in this offering), and 140,980 shares held by a trust of which
     Mr. Puopolo is trustee (16,918 of which will be sold in this offering). Mr.
     Puopolo's address is c/o PROVANT, Inc., 67 Batterymarch Street, Suite 600,
     Boston, MA 02110.
 
 (6) Includes 91,229 shares held by Mr. Cohen's wife, of which 10,000 will be
     sold in this offering.
 
 (7) Includes 50,000 shares issuable upon the exercise of an option that
     currently is exercisable.
 
 (8) Includes 900 shares held by members of Dr. Green's family, none of which
     will be sold in this offering.
 
 (9) Shares are held by a corporation of which the sole stockholders are Mr.
     Hammond and his wife.
 
(10) Shares are held jointly with Mr. King's wife.
 
(11) Includes 7,500 shares issuable upon the exercise of an option that
     currently is exercisable.
 
(12) Includes 30,848 shares held by Mr. von Sternberg's wife (4,318 of which are
     being sold in this offering) and 1,232 shares held by two trusts of which
     Mr. von Sternberg is trustee (172 of which are being sold in this
     offering).
 
(13) See notes 2 through 12 above.
 
(14) The named individual currently serves as an officer of PROVANT or one of
     the PROVANT companies.
 
(15) Includes 10,000 shares issuable upon exercise of an option that is
     currently exercisable.
 
(16) Mr. Steinmetz currently serves as an officer of one of the PROVANT
     companies.
 
(17) Consists of 11 stockholders who, in the aggregate, hold less than one
     percent of the outstanding common stock.
 
                                       47
49
 
                              CERTAIN TRANSACTIONS
 
ORGANIZATION OF PROVANT
 
     The Combination was accomplished through separate mergers of the seven
Founding Companies, all providers of performance improvement services and
products, with seven of our subsidiaries. As a result, all of the assets,
liabilities and business operations formerly held by each Founding Company
currently exist in a separate subsidiary.
 
     The aggregate consideration paid by us at the closing of the Combination
was $69.4 million, consisting of $24.5 million in cash and 3,459,341 shares of
common stock. In addition, we assumed indebtedness of the Founding Companies
aggregating approximately $7 million as of March 31, 1998. Our agreements with
five of the Founding Companies provided for the payment of additional,
contingent consideration based on those companies' performance during fiscal
1998. Through December 31, 1998, we had issued as contingent consideration
615,384 shares of common stock pursuant to agreements with four of these
companies.
 
     The former stockholders of a sixth Founding Company, J. Howard, will be
eligible to receive up to an aggregate of $4.3 million of common stock (the "J.
Howard Contingent Consideration") if specified levels of EBIT are reached. J.
Howard's merger agreement contains a targeted pro forma EBIT amount for fiscal
1999 in excess of a baseline figure which, if achieved, will result in our
payment to the former stockholders of J. Howard of the maximum J. Howard
Contingent Consideration (consisting of a multiple of the excess EBIT amount).
To the extent J. Howard does not achieve the targeted amount, its former
stockholders will receive a lesser amount of J. Howard Contingent Consideration
proportionately related to the excess above the baseline figure. Shares of
common stock issued as J. Howard Contingent Consideration will be valued based
on the average of the last sale prices of the common stock on Nasdaq during the
20 business days immediately following the first public announcement of our
financial results for fiscal 1999.
 
     For the seventh Founding Company, Star Mountain, we have agreed to make a
future payment in additional shares of common stock or cash (the "Star Mountain
Contingent Consideration") in accordance with a formula based on the amount by
which the EBIT of Star Mountain for fiscal 1999 exceeds a specified EBIT target.
In particular, if Star Mountain's EBIT for fiscal 1999 exceeds the specified
target, then (i) Star Mountain's former non-voting stockholders will receive
cash equal to a multiple of the excess EBIT and (ii) Star Mountain's former
voting stockholders will receive, at their election, either cash equal to a
multiple of the excess EBIT or a number of shares of common stock equal to a
multiple of the excess EBIT divided by 80% of the average of the last sale
prices of the common stock on Nasdaq during the month of July 1999.
 
     In connection with the Combination, the following individuals who became
directors upon the closing of the IPO and who were principal stockholders and
officers of the Founding Companies received the following amounts: Mr. Cohen,
$655,520 and 189,411 shares of common stock (including cash and shares issued to
his wife); Mr. Decker, $759,623 and 334,931 shares of common stock; Dr. Green,
$4,554,713 and 528,840 shares of common stock; Mr. Hanson, $498,753 and 68,362
shares of common stock; Mr. King, $1,569,714 and 327,732 shares of common stock;
Mr. von Sternberg, $2,559,234 and 496,693 shares of common stock (including cash
and shares issued to his wife); and Mr. Wallace, $754,890 and 97,477 shares of
common stock.
 
     Pursuant to the agreements entered into in connection with the Combination,
the principal stockholders of the Founding Companies agreed not to compete with
us for a period that expires on May 4, 2003. In addition, upon the closing of
the Combination, the principal stockholders and certain other employees of each
of the Founding Companies entered into three-year employment agreements with our
subsidiaries. Each such agreement with Messrs. Cohen, Decker, Green, Hanson,
King, von Sternberg and Wallace provides for an initial base salary of $175,000
(except for Mr. Decker's agreement which provides for a base salary of
$125,000), subject to upward adjustment in the employer's sole discretion, and
in most cases participation in our bonus and benefit plans. Each agreement may
be terminated prior to the expiration of the three-year term either in the event
of disability or for cause (as defined). If the individual does not continue to
be employed by the employer upon the expiration of the agreement, the
 
                                       48
50
 
individual will be entitled to receive six months' severance at his base salary
as in effect at the time of expiration.
 
     Certain indebtedness of the Founding Companies was personally guaranteed by
their respective stockholders. We repaid such indebtedness from the net proceeds
of the IPO and the guarantees were released. In particular, we repaid amounts
owed by Novations (which totalled approximately $1.7 million) and Star Mountain
(which totalled approximately $3.5 million) which were personally guaranteed by
Messrs. Hanson and von Sternberg, respectively.
 
     The former stockholders of the Founding Companies have agreed that until
May 4, 2000 they will not sell any shares of common stock received by them in
connection with the Combination other than pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act").
Our stockholders prior to the closing of the IPO and the Combination agreed to
identical restrictions on all shares of common stock held by them from time to
time. Except with respect to the shares issuable upon the exercise of the
warrants described below, we have no obligation to provide a registration
statement with respect to any of the shares held by our stockholders. However,
in the event we decide to register in an underwritten public offering any shares
received by any stockholder in the Combination, any shares of common stock
issued (or issuable pursuant to options and warrants granted by us) prior to the
date of the final prospectus used in connection with the IPO or certain shares
issued by us in post-IPO acquisitions, we must give the holders of these shares
and options the opportunity to register and sell in the offering a pro rata
amount of their shares. Certain of these stockholders are selling stockholders
in this offering.
 
OTHER TRANSACTIONS
 
  Organization of PROVANT
 
     In connection with the founding and organization of PROVANT, Messrs.
Verrochi, Zenger, Puopolo, Davies, Philip Gardner and Donald W. Glazer purchased
the following shares of common stock for an aggregate purchase price of
approximately $2,900: Mr. Verrochi, 977,461 shares; Mr. Zenger, 295,078 shares;
Mr. Puopolo, 901,782 shares; Mr. Davies, 320,632 shares; Mr. Gardner, 339,821
shares; and Mr. Glazer, 385,150 shares. Mr. Glazer currently serves us as a
consultant. For his consulting services, we pay Mr. Glazer an annual fee of
$125,000.
 
  American Business Partners LLC
 
     During 1997, certain members of the management team and certain of our
consultants were assembled by American Business Partners LLC ("ABP") to pursue
the formation of PROVANT. Mr. Verrochi, our Chairman of the Board and Chief
Executive Officer, and Mr. Puopolo, our Executive Vice President, Chief
Financial Officer and a director, are members of ABP. ABP provided us with
expertise regarding the consolidation process.
 
     Expenses that we paid prior to the closing of and in connection with the
Combination and the IPO were financed with funds advanced to us by Messrs.
Verrochi and Puopolo. Amounts advanced accrued interest at an annual rate equal
to the prime rate of interest as from time to time published in The Wall Street
Journal. We repaid the advanced amounts plus interest (which totalled $1.8
million) to Messrs. Verrochi and Puopolo out of the proceeds of the IPO.
 
     As partial consideration for their commitment to extend the financing
described above, Messrs. Verrochi and Puopolo each received two warrants. The
first warrant entitles the holder to purchase 173,194 shares of common stock at
a per share exercise price equal to the initial public offering price of $13.00.
The second warrant, entitling the holder to purchase 216,492 shares of common
stock, will become exercisable only if the market price of the common stock
increases to certain threshold levels (except as otherwise described below) (the
"Contingent Warrant"). Specifically, 20% of the total number of shares issuable
under the Contingent Warrant will become exercisable if and when the market
price of the common stock increases to $26, $39 and $52 per share, respectively,
and the remaining 40% of the total number of shares issuable under the
Contingent Warrant will become exercisable if and when the market price of the
common stock increases to $65 per share. However, under certain circumstances
involving the
 
                                       49
51
 
merger or sale of PROVANT, the Contingent Warrant will become exercisable to
purchase all of the warrant shares. The exercise price of the Contingent Warrant
increases on each anniversary of May 4, 1998. Specifically, the exercise price
is equal to the initial public offering price of $13.00 for the first 12 months
following the closing of the IPO and, for each 12 month period thereafter, is
equal to $13.00 plus the product of $1.30 and the number of full 12 month
periods elapsed since May 4, 1998. However, once a portion of the Contingent
Warrant becomes exercisable, that portion's exercise price is fixed as of that
date. All four warrants expire on May 4, 2005. The holders of the warrants have
the right to require us to register the resale of the shares they may acquire
upon exercise under the Securities Act.
 
     In June 1997, Messrs. Verrochi and Puopolo sold us furniture and equipment
for our corporate executive offices for an aggregate purchase price of $150,000.
We believe that the purchase price approximated the fair market value of the
furniture and equipment.
 
OTHER TRANSACTIONS INVOLVING OFFICERS AND DIRECTORS
 
     Michael J. Davies, who became one of our directors upon the consummation of
the IPO, also became a full-time consultant at that time. For the performance of
his consulting duties, we currently pay Mr. Davies an annual fee of $125,000. In
addition, in consideration for his agreement to become a consultant, we granted
Mr. Davies an option to purchase 50,000 shares of common stock, which currently
is exercisable for all of the shares issuable thereunder at a per share exercise
price equal to the initial public offering price of $13.00.
 
     We used $750,000 of the net proceeds of the IPO to pay a fee due to Legg
Mason Wood Walker, Incorporated for information relating to the performance
improvement industry developed by Mr. Davies while he served as a Managing
Director at that company.
 
     As a result of the Combination, one of our subsidiaries became a party to a
six-year lease of administrative offices, effective January 1, 1996, from Paul
C. Green, Ph.D., who is one of our directors. For the year ended June 30, 1998,
rent expense paid to Dr. Green pursuant to the lease was approximately $83,200.
We believe that the terms of the lease are no less favorable than what we could
have obtained from non-affiliated third parties.
 
     As a result of the Combination, one of our subsidiaries became a party to a
five-year lease of office facilities renewable for an additional five years,
effective March 1997, from Novations Partners, L.L.C., a Utah limited liability
company (the "LLC"), which is controlled by the former stockholders of
Novations. Joe Hanson, one of the members of the LLC, is one of our directors.
The annual rent expense to be paid to the LLC was $300,000 for the first year of
the lease, and the lease provides for a 3% annual increase thereafter. That
subsidiary also assumed in the Combination the obligation to pay the LLC
approximately $75,000 per year through April 1, 2001 for the sublease of certain
equipment. We believe that the terms of the lease and sublease are no less
favorable than what we could have obtained from non-affiliated third parties. In
addition, Novations loaned the LLC funds during 1997, the balance of which
totalled approximately $192,000 as of March 31, 1998. All outstanding amounts
owed to Novations pursuant to these arrangements were paid by the LLC at or
before the closing of the Combination.
 
     A. Carl von Sternberg, one of our directors, was indebted to Star Mountain
during 1997 under a promissory note. Borrowings by Mr. von Sternberg under the
note totalled approximately $406,000 as of March 31, 1998. Outstanding principal
amounts owed under the note accrued interest from time to time at the prime rate
of interest as reported in The Wall Street Journal, and all principal amounts
owed under the note, together with accrued interest have been repaid by Mr. von
Sternberg.
 
     In December 1997, Marc S. Wallace, one of our directors, incurred
indebtedness to J. Howard pursuant to two promissory notes in the aggregate
principal amount of $75,000. Outstanding principal amounts owed under the notes
accrued interest from time to time at an annual rate of 7.0%, and all principal
amounts owed under the notes, together with accrued interest have been repaid by
Mr. Wallace.
 
PROVANT POLICY
 
     Our policy is that any future transactions with directors, officers,
employees or affiliates be approved in advance by a majority of the Board of
Directors, including a majority of the disinterested members of the Board, and
be on terms no less favorable than what we could obtain from non-affiliated
parties.
                                       50
52
 
                          DESCRIPTION OF CAPITAL STOCK
 
GENERAL
 
     We are authorized to issue 45,000,000 shares of capital stock, par value
$.01 per share, consisting of 40,000,000 shares of common stock and 5,000,000
shares of preferred stock. As of January 4, 1999, we had outstanding 11,945,406
shares of common stock held of record by 162 stockholders, and no shares of
preferred stock.
 
COMMON STOCK
 
     Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders, and do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. See "Dividend
Policy." All outstanding shares of common stock are fully paid and
nonassessable, and the holders thereof have no preferences or rights of
conversion, exchange or pre-emption. In the event of any liquidation,
dissolution or winding-up of our affairs, holders of common stock will be
entitled to share ratably in our assets that are remaining after payment or
provision for payment of all of our debts and obligations and after liquidation
payments to holders of outstanding shares of preferred stock, if any.
 
PREFERRED STOCK
 
     The preferred stock, if issued, would have priority over the common stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. The Board of Directors has the authority, without
further stockholder authorization, to issue from time to time shares of
preferred stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although we have
no present plans to issue any shares of preferred stock, the issuance of shares
of preferred stock, or the issuance of rights to purchase such shares, could
decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers, including
voting rights, of the common stock, and could have the effect of delaying,
deterring or preventing a change in control of PROVANT or an unsolicited
acquisition proposal.
 
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS
 
     Our By-laws establish an advance notice procedure with regard to the
nomination by our stockholders of candidates for election as directors (the
"Nomination Procedure") and with regard to other matters to be brought by
stockholders before a meeting of our stockholders (the "Business Procedure").
 
     The Nomination Procedure requires that a stockholder give written notice to
our Secretary, delivered to or mailed and received at our principal executive
offices neither less than 60 days nor more than 90 days prior to the meeting, in
proper form, of a planned nomination for the Board of Directors. Detailed
requirements as to the form and timing of that notice are specified in the
By-laws. If the Chairman determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director.
 
     Under the Business Procedure, a stockholder seeking to have any business
conducted at any meeting must give written notice to our Secretary, delivered to
or mailed and received at our principal executive offices neither less than 60
days nor more than 90 days prior to the meeting, in proper form, subject to the
requirements of the proxy solicitation rules under the Exchange Act. Detailed
requirements as to the form and timing of that notice are specified in the
By-laws. If the Chairman determines that the other business was not properly
brought before such meeting in accordance with the Business Procedure, such
business will not be conducted at such meeting.
 
                                       51
53
 
     Although the By-laws do not give the Board of Directors any power to
approve or disapprove of stockholder nominations for the election of directors
or of any other business desired by stockholders to be conducted at an annual or
any other meeting, the By-laws (i) may have the effect of precluding nominations
for the election of directors or precluding the conduct of business at a
particular annual meeting if the proper procedures are not followed or (ii) may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
PROVANT, even if the conduct of such solicitation or such attempt might be
beneficial to us and our stockholders.
 
OTHER PROVISIONS
 
     Special Meetings of Stockholders.  Our By-laws provide that a special
meeting of our stockholders only may be called by the President, the Chairman of
the Board or by order of the Board of Directors. The By-laws do not authorize
the stockholders to call a special meeting of stockholders, potentially limiting
the stockholders' ability to offer proposals between annual meetings if no
special meetings are otherwise called by the President, Chairman or the Board.
 
     No Action by Written Consent.  Our Certificate of Incorporation does not
permit our stockholders to act by written consent. As a result, any action to be
taken by our stockholders must be taken at a duly called meeting of the
stockholders.
 
STATUTORY BUSINESS COMBINATIONS PROVISION
 
     We are subject to the provisions of Section 203 of the DGCL ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person, or an affiliate or associate of such a person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the Board of Directors of the corporation before the person becomes an
interested stockholder; (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the disinterested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and who was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the common stock is BankBoston, N.A.
 
                                       52
54
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     We currently have 11,945,406 shares of common stock issued and outstanding,
and as of December 31, 1998 had 1,687,907 shares of common stock issuable upon
the exercise of outstanding options and warrants. Of these outstanding shares,
2,990,000 shares sold pursuant to the IPO are freely tradeable without
restriction under the Securities Act, except any shares purchased by one or more
of our "affiliates" (as that term is defined under the rules and regulations of
the Securities Act), which shares will be subject to the resale limitations of
Rule 144 of the Securities Act. The remaining outstanding shares may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144.
 
     In the aggregate, 1,100,000 shares are reserved for issuance under the
Equity Incentive Plan, 500,000 shares are reserved for issuance under the
Employee Stock Purchase Plan and 500,000 shares are reserved for issuance under
the Non-Qualified Plan. We have filed a registration statement under the
Securities Act to register common stock to be issued pursuant to the exercise of
options or stock granted or to be granted under the Equity Incentive Plan,
Employee Stock Purchase Plan and Non-Qualified Plan. As a result, common stock
issued upon the exercise of substantially all of such options (or the purchase
of common stock under the Employee Stock Purchase Plan) will be available for
immediate resale in the open market, subject to compliance with Rule 144 in the
case of affiliates. We intend to file promptly a registration statement under
the Securities Act to register the 100,000 shares of common stock issuable
pursuant to the exercise of options granted and to be granted under the
Directors' Plan.
 
     We also have filed a registration statement on Form S-4 to register up to 3
million shares of common stock issuable in acquisitions. Shares of common stock
issued pursuant to this registration statement are available for immediate
resale in the open market, except the resale of such shares by affiliates of
acquired companies is subject to the restrictions and limitations imposed by
Rule 145 under the Securities Act. As of December 31, 1998, 1,316,243 shares
have been issued under the registration statement, and an indeterminable number
of additional shares may be issuable in the future pursuant to contingent
consideration arrangements made in acquisitions completed prior to that date.
 
     In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
us and the date on which they were acquired from an affiliate, then the holder
of such restricted securities (including an affiliate) is entitled to sell that
number of shares within any three-month period that does not exceed the greater
of (i) one percent of the then outstanding shares of common stock or (ii) the
average weekly reported volume of trading of common stock during the four
calendar weeks preceding such sale. The shares of common stock issued as
contingent consideration in the Combination, as well as any shares of common
stock that may be issued as J. Howard Contingent Consideration and Star Mountain
Contingent Consideration, will be deemed to have been acquired at the closing of
the Combination for purposes of Rule 144. Sales under Rule 144 also are subject
to certain requirements pertaining to the manner of sales, notices of sales and
the availability of current public information concerning us. Any shares not
constituting restricted securities sold by affiliates must be sold in accordance
with the foregoing volume limitations and other requirements but without regard
to the one year holding period. Under Rule 144(k), if a period of at least two
years has elapsed from the date on which restricted securities were acquired
from us or an affiliate, a holder of such restricted securities who is not an
affiliate at the time of the sale and has not been an affiliate for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
 
     Notwithstanding any ability they may have to sell common stock under Rule
144, the stockholders of the Founding Companies, all of our stockholders prior
to the IPO and stockholders who received substantially all of the shares of
common stock issued in connection with our post-IPO acquisitions to date have
agreed to certain transfer restrictions for a two-year period on all shares of
common stock held or (in some cases) to be held by them. See "Certain
Transactions -- Organization of PROVANT." In addition, we have agreed, together
with our directors and executive officers and the selling stockholders, not to
offer,
 
                                       53
55
 
sell, contract to sell, pledge, grant any option for the sale of, or otherwise
dispose or cause the disposition of any shares of common stock, or securities
convertible into or exchangeable or exercisable for such shares, for a period of
120 days after the date of this prospectus without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, except for (i) in our case,
common stock issued pursuant to any employee or director benefit plans described
herein or in connection with acquisitions and (ii) in the case of directors,
executive officers and the selling stockholders, the exercise of stock options
pursuant to benefit plans described herein and shares of common stock disposed
of as bona fide gifts, subject in each case to any remaining portion of the
120-day period applying to shares so issued or transferred. In evaluating any
request for a waiver of the 120-day lock-up period, Merrill Lynch will consider,
in accordance with their customary practice, all relevant facts and
circumstances at the time of the request, including, without limitation, the
recent trading market for the common stock, the size of the request and, with
respect to a request by us to issue additional equity securities, the purpose of
such an issuance.
 
     Sales or the availability for sale of substantial amounts of common stock
in the public market could adversely affect prevailing market prices and our
ability to raise equity capital in the future.
 
                                       54
56
 
                                  UNDERWRITING
 
     Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney
Inc., Piper Jaffray Inc. and BancBoston Robertson Stephens Inc. are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in a purchase agreement (the "Purchase Agreement")
among us, the selling stockholders and the underwriters, we and the selling
stockholders have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us and the
selling stockholders, the number of shares of common stock set forth opposite
its name below.
NUMBER OF
UNDERWRITERS                                                     SHARES
------------                                                    ---------
Merrill Lynch, Pierce, Fenner & Smith
             Incorporated...................................
Salomon Smith Barney Inc....................................
Piper Jaffray Inc...........................................
BancBoston Robertson Stephens Inc...........................
 
                                                                ---------
          Total.............................................    3,450,000
                                                                =========
In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of
common stock being sold pursuant to such agreement if any of such shares are
purchased. Under certain circumstances, the commitments of non-defaulting
underwriters under the Purchase Agreement may be increased.
 
     The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus, and to certain dealers at such
price less a concession not in excess of $          per share. The underwriters
may allow, and such dealers may reallow, a discount not in excess of $
per share on sales to certain other dealers. After the public offering, the
public offering price, concession and discount may be changed.
 
     PROVANT has granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of 517,500
additional shares of common stock at the public offering price set forth on the
cover page of this prospectus, less the underwriting discount. The underwriters
may exercise this option solely to cover over-allotments, if any, made on the
sale of the common stock offered hereby. To the extent the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.
 
     The following table shows the per share and total underwriting discounts
and commissions to be paid by us and the selling stockholders to the
underwriters. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
WITHOUT
                                                    PER SHARE     OPTION     WITH OPTION
                                                    ---------    --------    -----------
Public offering price.............................  $            $            $
Underwriting discount.............................  $            $            $
Proceeds, before expenses, to PROVANT.............  $            $            $
Proceeds to selling stockholders..................  $            $            $
The expenses of the offering are estimated at $1.0 million and are payable
entirely by us.
 
     The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the
 
                                       55
57
 
underwriters and certain other conditions. The underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
 
     We, our executive officers and directors and the selling stockholders have
agreed not to offer or sell any other shares of common stock or common stock
equivalents for 120 days after the date of this prospectus. Common stock
equivalents include securities convertible into or exchangeable for common
stock. During the 120-day period, we, our executive officers and directors and
the selling stockholders have also agreed not to sell to third parties any call
option or other right to acquire common stock or common stock equivalents and
not to purchase from third parties any put option or other right to sell common
stock or common stock equivalents. In addition, we, our executive officers and
directors and the selling stockholders have agreed not to enter into any swap or
other arrangement that transfers the economic consequences of ownership of
common stock or common stock equivalents. There are some exceptions to these
restrictions, including the issuance of common stock by us in connection with
acquisitions and grants and exercises of stock options.
 
     We have agreed to indemnify the underwriters against certain liabilities,
including certain liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect thereof.
 
     Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase the common stock. As an
exception to these rules, the representatives are permitted to engage in certain
transactions that stabilize the price of the common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the common stock.
 
     If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing common stock in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
 
     The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the representatives purchase
shares of common stock in the open market to reduce the underwriters' short
position or to stabilize the price of the common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering.
 
     In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the common stock to the extent that it
discourages resales of the common stock.
 
     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, one commenced, will
not be discontinued without notice.
 
     Some of the underwriters or their affiliates have provided investment or
commercial banking services to us in the past and are likely to do so in the
future. They receive customary fees and commissions for these services.
 
                                 LEGAL MATTERS
 
     The validity of the shares of common stock offered by this prospectus will
be passed upon for PROVANT by Nutter, McClennen & Fish, LLP, Boston,
Massachusetts. Certain legal matters related to this offering will be passed
upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
 
                                       56
58
 
                                    EXPERTS
 
     The financial statements of PROVANT, Inc. and Subsidiaries as of June 30,
1997 and 1998 and for the periods from November 16, 1996 (date of inception) to
June 30, 1997 and July 1, 1997 to June 30, 1998, and the financial statements of
Behavioral Technology, Inc., Decker Communications, Inc., J. Howard &
Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc. d/b/a Learning
Systems Sciences, MOHR Retail Learning Systems, Inc., Novations Group, Inc. and
Star Mountain, Inc. and subsidiaries (as of and for the years ended December 31,
1996 and 1997 and for the period from January 1, 1998 to May 4, 1998), have been
included herein and in the registration statement we have filed with the SEC in
reliance on the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, upon the authority of said firm as
experts in giving said reports.
 
     The financial statements of Star Mountain, Inc. for the year ended December
31, 1995 included in this prospectus have been audited by Friedman & Fuller,
P.C., independent public accountants, as indicated in its report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
 
     The financial statements of American Media Incorporated as of and for the
years ended June 30, 1997 and 1998 have been included in this prospectus in
reliance on the report of McGladrey & Pullen, LLP, certified public accountants,
appearing elsewhere herein, upon the authority of said firm as experts in giving
said reports.
 
     The financial statements of KC Resources Creative Solutions, Inc. as of and
for the year ended June 30, 1998 have been included in this prospectus in
reliance on the report of KPMG Peat Marwick LLP, independent certified
independent accountants, appearing elsewhere herein, upon the authority of said
firm as experts in giving said reports.
 
     The financial statements of Strategic Interactive, Inc. as of and for the
years ended June 30, 1997 and 1998 have been included in this prospectus in
reliance on the report of Plante & Moran, LLP, certified public accountants,
appearing elsewhere herein, upon the authority of said firm as experts in giving
said reports.
 
                             AVAILABLE INFORMATION
 
     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act and the rules and regulations promulgated thereunder, with
respect to the common stock offered hereby. This prospectus omits certain
information contained in the registration statement or in amendments, if any, to
the registration statement, and you should look at the registration statement
and the exhibits and schedules thereto for further information with respect to
PROVANT and the common stock offered hereby. Statements contained in this
prospectus concerning the provisions or contents of any contract, agreement or
any other document are not necessarily complete with respect to each such
contract, agreement or document filed as an exhibit to the registration
statement, and reference is made to the exhibit for a more complete description
of the matters involved. We file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
materials that we file at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. The SEC maintains an Internet site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of the SEC's Internet
site is http://www.sec.gov.
 
     The Company furnishes its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm.
 
                                       57
59
 
                         INDEX TO FINANCIAL STATEMENTS
 
             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
                        HISTORICAL FINANCIAL STATEMENTS
PAGE
                                                              ----
PROVANT, INC. PRO FORMA:
  Basis of Presentation.....................................  F-4
  Unaudited Pro Forma Consolidated Balance Sheet............  F-5
  Unaudited Pro Forma Consolidated Statements of
     Operations.............................................  F-6
  Notes to Unaudited Pro Forma Consolidated Financial
     Statements.............................................  F-8
 
PROVANT, INC. AND SUBSIDIARIES HISTORICAL:
Unaudited Consolidated Financial Statements
  Unaudited Consolidated Balance Sheet......................  F-12
  Unaudited Consolidated Statements of Operations...........  F-13
  Unaudited Consolidated Statements of Cash Flows...........  F-14
  Notes to Unaudited Consolidated Financial Statements......  F-15
Audited Consolidated Financial Statements
  Independent Auditors' Report..............................  F-17
  Consolidated Balance Sheets...............................  F-18
  Consolidated Statements of Operations.....................  F-19
  Consolidated Statements of Stockholders' Equity
     (Deficit)..............................................  F-20
  Consolidated Statements of Cash Flows.....................  F-21
  Notes to Consolidated Financial Statements................  F-22
 
FOUNDING COMPANIES
------------------------------------------------------------
 
BEHAVIORAL TECHNOLOGY, INC.:
  Independent Auditors' Report..............................  F-35
  Balance Sheets............................................  F-36
  Statements of Operations..................................  F-37
  Statements of Stockholders' Equity........................  F-38
  Statements of Cash Flows..................................  F-39
  Notes to Financial Statements.............................  F-40
 
DECKER COMMUNICATIONS, INC.:
  Independent Auditors' Report..............................  F-43
  Balance Sheets............................................  F-44
  Statements of Operations..................................  F-45
  Statements of Stockholders' Equity........................  F-46
  Statements of Cash Flows..................................  F-47
  Notes to Financial Statements.............................  F-48
 
J. HOWARD & ASSOCIATES, INC.:
  Independent Auditors' Report..............................  F-52
  Balance Sheets............................................  F-53
  Statements of Operations..................................  F-54
  Statements of Stockholders' Equity........................  F-55
  Statements of Cash Flows..................................  F-56
  Notes to Financial Statements.............................  F-57
F-1
60
PAGE
                                                              ----
LEARNING SYSTEMS SCIENCES (ROBERT STEINMETZ, PH.D., AND
  ASSOCIATES, INC. ):
  Independent Auditors' Report..............................  F-60
  Balance Sheets............................................  F-61
  Statements of Operations..................................  F-62
  Statements of Stockholders' Equity........................  F-63
  Statements of Cash Flows..................................  F-64
  Notes to Financial Statements.............................  F-65
 
MOHR RETAIL LEARNING SYSTEMS, INC.:
  Independent Auditors' Report..............................  F-68
  Balance Sheets............................................  F-69
  Statements of Operations..................................  F-70
  Statements of Stockholders' Equity........................  F-71
  Statements of Cash Flows..................................  F-72
  Notes to Financial Statements.............................  F-73
 
NOVATIONS GROUP, INC.:
  Independent Auditors' Report..............................  F-76
  Balance Sheets............................................  F-77
  Statements of Operations..................................  F-78
  Statements of Stockholders' Equity........................  F-79
  Statements of Cash Flows..................................  F-80
  Notes to Financial Statements.............................  F-81
 
STAR MOUNTAIN, INC. AND SUBSIDIARIES:
  Independent Auditors' Reports.............................  F-85
  Consolidated Balance Sheets...............................  F-87
  Consolidated Statements of Operations.....................  F-88
  Consolidated Statements of Stockholders' Equity...........  F-89
  Consolidated Statements of Cash Flows.....................  F-90
  Notes to Consolidated Financial Statements................  F-92
 
COMPANIES ACQUIRED SUBSEQUENT TO MAY 4, 1998
------------------------------------------------------------
 
AMERICAN MEDIA INCORPORATED:
  Independent Auditor's Report..............................  F-99
  Balance Sheets............................................  F-100
  Statements of Income......................................  F-101
  Statements of Stockholders' Equity........................  F-102
  Statements of Cash Flows..................................  F-103
  Notes to Financial Statements.............................  F-104
 
KC RESOURCES CREATIVE SOLUTIONS, INC.:
  Independent Auditors' Report..............................  F-108
  Balance Sheet.............................................  F-109
  Statement of Operations...................................  F-110
  Statement of Stockholders' Equity.........................  F-111
  Statement of Cash Flows...................................  F-112
  Notes to Financial Statements.............................  F-113
F-2
61
PAGE
                                                              ----
STRATEGIC INTERACTIVE, INC.:
  Independent Auditor's Report..............................  F-118
  Balance Sheets............................................  F-119
  Statements of Operations..................................  F-120
  Statements of Stockholders' Equity........................  F-121
  Statements of Cash Flows..................................  F-122
  Notes to Financial Statements.............................  F-123
F-3
62
 
                         PROVANT, INC. AND SUBSIDIARIES
 
             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                             BASIS OF PRESENTATION
 
     The following unaudited pro forma consolidated statements of operations
give effect to (i) the Combination of PROVANT and the Founding Companies, (ii)
the consummation of the IPO and the application of the net proceeds, (iii)
PROVANT's acquisition subsequent to the IPO of five additional performance
improvement companies (the "Acquired Companies") and (iv) certain other
transactions described in the notes to the unaudited pro forma consolidated
financial statements, as if all of those transactions had occurred on July 1,
1997.
 
     The unaudited pro forma consolidated balance sheet gives effect to
PROVANT's acquisition of three companies during the second quarter of fiscal
1999 as if those acquisitions had occurred on September 30, 1998, and the pro
forma as adjusted balance sheet gives effect to this offering and the
application of the net proceeds as if those events also had occurred on that
date.
 
     These pro forma financial statements are based on the historical financial
statements of PROVANT, the Founding Companies and the Acquired Companies and the
estimates and assumptions set forth in the notes to the unaudited pro forma
consolidated financial statements.
 
     The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The unaudited pro forma consolidated financial statements do not
purport to represent what PROVANT's results of operations actually would have
been had such events occurred at the beginning of the periods presented, as
assumed, or to project PROVANT's financial position or results of operations for
any future period or the future results of the Founding Companies or the
Acquired Companies. The unaudited pro forma consolidated financial statements
should be read in conjunction with the historical financial statements and
related notes included elsewhere in this prospectus.
 
                                       F-4
63
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 1998
                                 (IN THOUSANDS)
COMPANIES ACQUIRED
                                             SUBSEQUENT TO                 ACQUISITION    PRO FORMA      OFFERING
                               PROVANT    SEPTEMBER 30, 1998     TOTAL     ADJUSTMENTS   CONSOLIDATED   ADJUSTMENTS   AS ADJUSTED
                               --------   -------------------   --------   -----------   ------------   -----------   -----------
Assets
Current assets:
  Cash and cash
     equivalents.............  $ 2,811          $3,054          $  5,865     $(5,594)      $    271      $ 29,320      $ 29,591
  Accounts receivable, net...   13,728           2,344            16,072         (90)        15,982            --        15,982
  Contracts receivable.......    8,048              --             8,048          --          8,048            --         8,048
  Inventory..................    3,495              19             3,514          --          3,514            --         3,514
  Deferred income taxes......    2,146              --             2,146       1,253          3,399            --         3,399
  Costs in excess of
     billings................      867             738             1,605          --          1,605            --         1,605
  Prepaid and other current
     assets..................    1,425              98             1,523        (387)         1,136            --         1,136
                               --------         ------          --------     -------       --------      --------      --------
     Total current assets....   32,520           6,253            38,773      (4,818)        33,955        29,320        63,275
 
Property and equipment,
  net........................    3,224           1,547             4,771        (370)         4,401            --         4,401
Other assets.................      733              94               827          --            827            --           827
Goodwill, net................   65,482              --            65,482      27,676         93,158            --        93,158
                               --------         ------          --------     -------       --------      --------      --------
     Total assets............  $101,959         $7,894          $109,853     $22,488       $132,341      $ 29,320      $161,661
                               ========         ======          ========     =======       ========      ========      ========
 
Liabilities and Stockholders'
  Equity
Current liabilities:
  Accounts payable...........  $ 3,599          $  110          $  3,709     $    --       $  3,709      $     --      $  3,709
  Accrued expenses...........    7,336              99             7,435       2,109          9,544            --         9,544
  Accrued compensation.......    3,419             846             4,265          --          4,265            --         4,265
  Billings in excess of
     costs...................    3,166             201             3,367          --          3,367            --         3,367
  Deferred revenue...........      514           1,061             1,575          --          1,575            --         1,575
  Income taxes payable.......    2,018             107             2,125          --          2,125            --         2,125
  Current portion of long
     term debt...............      552             136               688          --            688            --           688
                               --------         ------          --------     -------       --------      --------      --------
     Total current
       liabilities...........   20,604           2,560            23,164       2,109         25,273            --        25,273
 
Long term debt, net of
  current portion............    8,402             168             8,570      13,700         22,270       (21,200)        1,070
                               --------         ------          --------     -------       --------      --------      --------
     Total liabilities.......   29,006           2,728            31,734      15,809         47,543       (21,200)       26,343
 
Stockholders' Equity:
  Common stock...............      102              60               162         (49)           113            25           138
  Additional paid-in
     capital.................   74,513             478            74,991      11,356         86,347        50,495       136,842
  Retained earnings
     (accumulated deficit)...   (1,662)          4,628             2,966      (4,628)        (1,662)           --        (1,662)
                               --------         ------          --------     -------       --------      --------      --------
     Total stockholders'
       equity................   72,953           5,166            78,119       6,679         84,798        50,520       135,318
                               --------         ------          --------     -------       --------      --------      --------
     Total liabilities and
       stockholders'
       equity................  $101,959         $7,894          $109,853     $22,488       $132,341      $ 29,320      $161,661
                               ========         ======          ========     =======       ========      ========      ========
See accompanying notes to unaudited pro forma consolidated financial statements.
 
                                       F-5
64
 
                         PROVANT, INC. AND SUBSIDIARIES
 
            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
 
                            YEAR ENDED JUNE 30, 1998
 
                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
FOUNDING COMPANIES -- PERIOD FROM JULY 1, 1997 TO MAY 4, 1998
                                 PROVANT      ---------------------------------------------------------------------
                               YEAR ENDED                                                                    STAR
                              JUNE 30, 1998     BTI     DECKER   J. HOWARD    LSS      MOHR    NOVATIONS   MOUNTAIN
                              -------------   -------   ------   ---------   ------   ------   ---------   --------
Total revenue...............     $14,189      $ 6,567   $8,729    $5,565     $5,632   $3,237    $9,228     $23,496
Cost of revenue.............       6,374        1,243   2,275      1,826      2,030   1,009      4,356      13,409
                                 -------      -------   ------    ------     ------   ------    ------     -------
Gross profit................       7,815        5,324   6,454      3,739      3,602   2,228      4,872      10,087
Selling, general and
  administrative expenses...      10,447        6,648   5,696      4,253      1,751   1,510      3,956       7,754
Goodwill amortization.......         245           --      --         --         --      --         --          77
                                 -------      -------   ------    ------     ------   ------    ------     -------
Income (loss) from
  operations................      (2,877)      (1,324)    758       (514)     1,851     718        916       2,256
Other income (expense),
  net.......................          --            2       3         --         --      --         --          --
Interest income (expense),
  net.......................        (220)          29       8         11         13       5       (196)       (162)
                                 -------      -------   ------    ------     ------   ------    ------     -------
Income (loss) before income
  taxes.....................      (3,097)      (1,293)    769       (503)     1,864     723        720       2,094
Income tax expense
  (benefit).................        (203)          15      17          1         19       2        367         878
                                 -------      -------   ------    ------     ------   ------    ------     -------
Net income (loss)...........     $(2,894)     $(1,308)  $ 752     $ (504)    $1,845   $ 721     $  353     $ 1,216
                                 =======      =======   ======    ======     ======   ======    ======     =======
Earnings per common share:
Basic.......................
Diluted.....................
Weighted average common
  shares outstanding:
Basic.......................
Diluted.....................
COMPANIES ACQUIRED                COMBINATION
                                SUBSEQUENT TO                 AND ACQUISITION    PRO FORMA
                                 MAY 4, 1998        TOTAL       ADJUSTMENTS     CONSOLIDATED
                              ------------------   --------   ---------------   ------------
Total revenue...............       $37,265         $113,908       $ 1,419       $   115,327
Cost of revenue.............        15,249           47,771         1,056            48,827
                                   -------         --------       -------       -----------
Gross profit................        22,016           66,137           363            66,500
Selling, general and
  administrative expenses...        17,024           59,039        (8,330)           50,709
Goodwill amortization.......            --              322         2,026             2,348
                                   -------         --------       -------       -----------
Income (loss) from
  operations................         4,992            6,776         6,667            13,443
Other income (expense),
  net.......................           (17)             (12)           --               (12)
Interest income (expense),
  net.......................            49             (463)       (1,261)           (1,724)
                                   -------         --------       -------       -----------
Income (loss) before income
  taxes.....................         5,024            6,301         5,406            11,707
Income tax expense
  (benefit).................         1,281            2,377         3,245             5,622
                                   -------         --------       -------       -----------
Net income (loss)...........       $ 3,743         $  3,924       $ 2,161       $     6,085
                                   =======         ========       =======       ===========
Earnings per common share:
Basic.......................                                                    $      0.54
                                                                                ===========
Diluted.....................                                                    $      0.52
                                                                                ===========
Weighted average common
  shares outstanding:
Basic.......................                                                     11,311,801
                                                                                ===========
Diluted.....................                                                     11,731,105
                                                                                ===========
See accompanying notes to unaudited pro forma consolidated financial statements.
 
                                       F-6
65
 
                         PROVANT, INC. AND SUBSIDIARIES
 
           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
                     THREE MONTHS ENDED SEPTEMBER 30, 1998
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPANIES ACQUIRED
                                                  SUBSEQUENT TO                ACQUISITION    PRO FORMA
                                      PROVANT      MAY 4, 1998        TOTAL    ADJUSTMENTS   CONSOLIDATED
                                      -------   ------------------   -------   -----------   ------------
Total revenue.......................  $23,710         $7,694         $31,404      $  --      $    31,404
Cost of revenue.....................  10,148           3,027          13,175         --           13,175
                                      -------         ------         -------      -----      -----------
     Gross profit...................  13,562           4,667          18,229         --           18,229
Selling, general, and administrative
  expenses..........................  10,593           3,653          14,246       (172)          14,074
Goodwill amortization...............     380              --             380        211              591
                                      -------         ------         -------      -----      -----------
     Income (loss) from
       operations...................   2,589           1,014           3,603        (39)           3,564
Interest expense, net...............       3               1               4        418              422
                                      -------         ------         -------      -----      -----------
 
     Income (loss) before income
       taxes........................   2,586           1,013           3,599       (457)           3,142
Income tax expense (benefit)........   1,187             (72)          1,115        378            1,493
                                      -------         ------         -------      -----      -----------
     Net income (loss)..............  $1,399          $1,085         $ 2,484      $(835)     $     1,649
                                      =======         ======         =======      =====      ===========
Earnings per common share:
Basic...............................                                                         $      0.15
                                                                                             ===========
Diluted.............................                                                         $      0.13
                                                                                             ===========
Weighted average common shares
  outstanding:
Basic...............................                                                          11,311,801
                                                                                             ===========
Diluted.............................                                                          12,376,184
                                                                                             ===========
See accompanying notes to unaudited pro forma consolidated financial statements.
                                       F-7
66
 
                         PROVANT, INC. AND SUBSIDIARIES
 
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
(1) GENERAL
 
     Concurrently with the IPO, PROVANT, Inc. (the "Company") acquired the seven
Founding Companies in the Combination. Subsequent to the IPO, the Company
acquired five additional companies during the first two fiscal quarters of 1999.
The acquisitions have been accounted for using the purchase method of accounting
with the Company being treated as the accounting acquiror.
 
(2) ACQUISITIONS
 
     The September 30, 1998 balance sheet includes the accounts of two companies
acquired during the quarter then ended. The pro forma adjustments to the
September 30, 1998 balance sheet reflect the acquisition of three companies
acquired after September 30, 1998 as if those acquisitions had occurred on such
date. The total consideration paid for the five companies consisted of cash of
$30.2 million and 1,516,243 shares of common stock valued at $17.0 million.
Shares used as consideration were valued at a discount of 20% from their
publicly-traded price due to restrictions on their transferability.
 
(3) UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated balance sheet (in thousands):
ACQUISITION ADJUSTMENTS         OFFERING ADJUSTMENTS
                                      ---------------------------   -----------------------------
                                        (a)       (b)      Total      (c)       (d)       TOTAL
                                      -------   -------   -------   -------   --------   --------
Assets
  Cash and cash equivalents.........  $(5,594)  $    --   $(5,594)  $50,520   $(21,200)  $ 29,320
  Accounts receivable, net..........      (90)       --       (90)       --         --         --
  Deferred income taxes.............       --     1,253     1,253        --         --         --
  Prepaid and other current
     assets.........................     (387)       --      (387)       --         --         --
Property and equipment, net.........     (370)       --      (370)       --         --         --
Goodwill............................   28,929    (1,253)   27,676        --         --         --
                                      -------   -------   -------   -------   --------   --------
     Total assets...................  $22,488   $    --   $22,488   $50,520   $(21,200)  $ 29,320
                                      =======   =======   =======   =======   ========   ========
Liabilities and Stockholders' equity
  Accrued expenses..................  $ 2,109   $    --   $ 2,109   $    --   $     --   $     --
Long term debt, net of current
  portion...........................   13,700        --    13,700        --    (21,200)   (21,200)
                                      -------   -------   -------   -------   --------   --------
     Total liabilities..............   15,809        --    15,809        --    (21,200)   (21,200)
Stockholders' Equity:
  Common stock......................      (49)       --       (49)       25         --         25
  Additional paid in capital........   11,356        --    11,356    50,495         --     50,495
  Accumulated deficit...............   (4,628)       --    (4,628)       --         --         --
                                      -------   -------   -------   -------   --------   --------
     Total stockholders' equity.....    6,679        --     6,679    50,520         --     50,520
                                      -------   -------   -------   -------   --------   --------
     Total liabilities and
       stockholders' equity.........  $22,488   $    --   $22,488   $50,520   $(21,200)  $ 29,320
                                      =======   =======   =======   =======   ========   ========
(a) Reflects the creation of approximately $28.9 million of goodwill from the
    payment of the common stock and cash consideration for three companies
    acquired during the second quarter of fiscal 1999 totaling approximately
    $31.1 million less net assets of those companies of approximately $2.2
    million.
 
(b) Records the deferred income taxes attributable to the temporary differences
    between the financial reporting and tax basis of assets and liabilities
    acquired.
 
                                       F-8
67
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(c) Records the cash proceeds of $50.5 million from the issuance of shares of
    common stock in this offering, net of the underwriting discount, and
    estimated offering costs of $1.0 million. Offering costs primarily consist
    of accounting fees, legal fees, and printing expenses.
 
(d) Records the repayment of long-term debt with a portion of the net proceeds
    of this offering.
 
(4) UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ADJUSTMENTS
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated statement of operations for the year ended June 30, 1998 (in
thousands):
ADJUSTMENTS
                       -----------------------------------------------------------------------------
                         (a)       (b)       (c)      (d)     (e)      (f)      (g)     (h)     (i)    ADJUSTMENTS
                       -------   -------   -------   ------   ----   -------   -----   -----   -----   -----------
Total revenue........  $    --   $    --   $    --    1,419   $ --   $    --   $  --   $  --   $  --     $ 1,419
Cost of revenue......       --        --        --    1,056     --        --      --      --      --       1,056
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Gross profit.........       --        --        --      363     --        --      --      --      --         363
Selling general and
  administrative
  expenses...........   (6,658)       --        --      352     --        --    (750)   (686)   (588)     (8,330)
Goodwill
  amortization.......       --     2,026        --       --     --        --      --      --      --       2,026
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Income (loss) from
  operations.........    6,658    (2,026)       --       11     --        --     750     686     588       6,667
Interest expense.....       --        --        --      (29)   541    (1,773)     --      --      --      (1,261)
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Income (loss) before
  income taxes.......    6,658    (2,026)       --      (18)   541    (1,773)    750     686     588       5,406
Provision (benefit)
  for income taxes...       --        --     3,745       (7)   216      (709)     --      --      --       3,245
                       -------   -------   -------   ------   ----   -------   -----   -----   -----     -------
Net income (loss)....  $ 6,658   $(2,026)  $(3,745)  $  (11)  $325   $(1,064)  $ 750   $ 686   $ 588     $ 2,161
                       =======   =======   =======   ======   ====   =======   =====   =====   =====     =======
(a) Reflects the reduction in salaries, bonuses and benefits of $6.7 million to
    certain of the owners and key employees of the Founding Companies and
    Subsequent Acquisitions to which they agreed prospectively. These reductions
    in salaries, bonuses and benefits are in accordance with the terms of each
    individual's employment agreement with the Company entered into in
    connection with the relevant acquisition. These employment agreements are
    primarily for three years, contain restrictions related to competition and
    provide severance under certain circumstances.
 
(b) Reflects the amortization of goodwill being recorded as a result of the
    acquisitions over a 40-year estimated life.
 
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
    Company's estimated consolidated effective tax rate subsequent to the
    Combination and subsequent acquisitions, after considering nondeductible
    goodwill amortization.
 
(d) Reflects the historical results of operations of companies acquired by Star
    Mountain in February 1997 and October 1997.
 
                                       F-9
68
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(e) Reflects the reduction in interest expense, net of income tax benefit,
    related to the current portion of bank debt and notes payable to
    stockholders that were repaid with the proceeds of the IPO.
 
(f) Reflects the interest expense, net of income tax benefit, assumed to be
    incurred in connection with the cash consideration paid for the Acquired
    Companies.
 
(g) Reflects the elimination of a non-recurring fee for information related to
    the performance improvement industry.
 
(h) Reflects the elimination of non-cash compensation expense related to the
    issuance of common stock and stock options to officers of and consultants to
    the Company.
 
(i) Reflects the elimination of non-recurring legal and accounting fees related
    to the Combination and the IPO.
 
     The following table summarizes the adjustments to the unaudited pro forma
consolidated statement of operations for the three months ended September 30,
1998 (in thousands):
ADJUSTMENTS
                                                 ---------------------------------------------------
                                                                                            TOTAL
                                                   (a)       (b)       (c)       (d)     ADJUSTMENTS
                                                 -------   -------   -------   -------   -----------
Total revenue..................................  $    --   $    --   $    --               $   --
Cost of revenue................................       --        --        --                   --
                                                 -------   -------   -------   -------     ------
Gross profit...................................       --        --        --        --         --
Selling, general and administrative expenses...     (172)       --        --                 (172)
Goodwill amortization..........................       --       211        --                  211
                                                 -------   -------   -------   -------     ------
Income (loss) from operations..................      172      (211)       --        --        (39)
  Other income (expense), net..................       --        --        --                   --
Interest expense...............................       --        --        --      (418)      (418)
                                                 -------   -------   -------   -------     ------
Income (loss) before income taxes..............      172      (211)       --      (418)      (457)
Provision (benefit) for income taxes...........       --        --       545      (167)       378
                                                 -------   -------   -------   -------     ------
Net income (loss)..............................  $   172   $  (211)  $  (545)     (251)    $ (835)
                                                 =======   =======   =======   =======     ======
(a) Reflects the reduction in salaries, bonuses and benefits of $172,000 to
    certain of the owners and key employees of the Subsequent Acquisitions to
    which they agreed prospectively. These reductions in salaries, bonuses and
    benefits are in accordance with the terms of each individual's employment
    agreement with the Company entered into in connection with the relevant
    acquisition. These employment agreements are primarily for three years,
    contain restrictions related to competition and provide severance under
    certain circumstances.
 
(b) Reflects the amortization of goodwill being recorded as a result of
    acquisitions completed subsequent to September 30, 1998 over a 40-year
    estimated life.
 
(c) Reflects a pro forma provision for income taxes adjusted to reflect the
    Company's estimated consolidated effective tax rate subsequent to the
    acquisitions completed subsequent to September 30, 1998, after considering
    nondeductible goodwill amortization.
 
(d) Reflects the interest expense, net of income tax benefit, assumed to be
    incurred in connection with the cash consideration paid for the Acquired
    Companies.
 
                                      F-10
69
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
                      FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) NET INCOME PER SHARE
 
     The shares used in computing basic earnings per common share consist of (i)
3,346,217 shares outstanding prior to the Combination and the IPO, (ii)
3,459,341 shares issued in May 1998 to owners of the Founding Companies, (iii)
2,990,000 shares of Common Stock sold in the IPO and (iv) 1,516,243 shares of
Common Stock issued to owners of the Acquired Companies. The shares used in
computing diluted earnings per common share consist of those used in computing
basic earnings per common share for the year ended June 30, 1998 and the three
months ended September 30, 1998 plus 419,304 and 207,499 Common Stock
equivalents, respectively, computed using the treasury stock method. Shares used
in computing diluted earnings per common share for the three months ended
September 30, 1998 also include 856,884 shares issuable as additional
consideration to owners of the Founding Companies.
 
(6) STOCK-BASED COMPENSATION
 
     The Company currently has four stock-based compensation plans. The Company
has granted stock options under the Equity Incentive Plan, 1998 Non-Qualified
Stock Option Plan and Stock Option Plan for Outside Directors to purchase an
aggregate of 914,987 shares of Common Stock having per-share exercise prices
ranging from $11.50 to $19.375. The Company also has issued 17,221 shares under
its 1998 Employee Stock Purchase Plan. In addition, the Company also has granted
options under its Stock Plan for Non-Employee Directors to purchase an aggregate
of 15,000 shares of Common Stock at a per-share exercise price of $13.00. The
Stock Plan for Non-Employee Directors was terminated in November 1998 with
respect to the future grant of options.
 
     The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation
expense is recognized for its fixed stock option plans and its stock purchase
plan, except for stock options granted to non-employees. If compensation cost
for the Company's stock-based compensation plans were based on the fair value at
the grant date for the awards under the plans consistent with the method of
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), the
Company's pro forma net income and income per share for each period presented
assuming such options were granted at the beginning of the periods presented and
that the compensation element of options with immediate vesting was recognized
during the year ended June 30, 1998 would have been reduced to the amounts
indicated below (Dollars in thousands except per share data):
THREE MONTHS
                                                              YEAR ENDED        ENDED
                                                               JUNE 30,     SEPTEMBER 30,
                                                                 1998           1998
                                                              ----------    -------------
Net income:
  Pro forma.................................................    $6,085         $1,649
                                                                ======         ======
  Pro forma for SFAS No. 123................................    $3,902         $1,299
                                                                ======         ======
Basic income per common share:
  Pro forma.................................................    $ 0.54         $ 0.15
                                                                ======         ======
  Pro forma for SFAS No. 123................................    $ 0.34         $ 0.11
                                                                ======         ======
The fair value of the stock options used to calculate the pro forma for
SFAS No. 123 amounts was determined using the Black-Scholes option-pricing model
with the following assumptions: volatility of 33%; expected dividend yield of
0%; risk-free interest rate of 6.0% and an expected life of 4 years.
 
                                      F-11
70
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                      UNAUDITED CONSOLIDATED BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30,
                                                                  1998
                                                              -------------
ASSETS
Current Assets:
     Cash and cash equivalents..............................    $  2,811
     Accounts receivable, net...............................      13,728
     Contracts receivable...................................       8,048
     Inventory..............................................       3,495
     Deferred income taxes..................................       2,146
     Costs in excess of billings............................         867
     Prepaid expenses and other current assets..............       1,425
                                                                --------
          Total current assets..............................      32,520
 
Property and equipment, net.................................       3,224
Other assets................................................         733
Goodwill, net...............................................      65,482
                                                                --------
          Total assets......................................    $101,959
                                                                ========
 
                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable.......................................    $  3,599
     Accrued expenses.......................................       7,336
     Accrued compensation...................................       3,419
     Billings in excess of costs............................       3,166
     Deferred revenue.......................................         514
     Income taxes payable...................................       2,018
     Current portion of long term debt......................         552
                                                                --------
          Total current liabilities.........................      20,604
 
Long term debt, net of current portion......................       8,402
                                                                --------
          Total liabilities.................................      29,006
 
Stockholders' Equity:
     Preferred stock, $.01 par value; none issued...........          --
     Common stock, $.01 par value; 9,795,558 and 10,226,325
      shares issued and outstanding, respectively...........         102
     Additional paid-in capital.............................      74,513
     Accumulated deficit....................................      (1,662)
                                                                --------
          Total stockholders' equity........................      72,953
                                                                --------
Total liabilities and stockholders' equity..................    $101,959
                                                                ========
See accompanying notes to unaudited consolidated financial statements.
                                      F-12
71
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED
                                                                    SEPTEMBER 30,
                                                              -------------------------
                                                                 1997          1998
                                                              ----------    -----------
Total revenue...............................................  $       --    $    23,710
Cost of revenue.............................................          --         10,148
                                                              ----------    -----------
Gross profit................................................          --         13,562
Selling, general and administrative expenses................         200         10,593
Goodwill amortization.......................................          --            380
                                                              ----------    -----------
Income (loss) from operations...............................        (200)         2,589
Interest and other expense, net.............................          (8)            (3)
                                                              ----------    -----------
Income (loss) before income taxes...........................        (208)         2,586
Provision for income taxes..................................          --          1,187
                                                              ----------    -----------
Net income (loss)...........................................  $     (208)   $     1,399
                                                              ==========    ===========
 
Earnings (loss) per common share:
     Basic..................................................  $    (0.08)   $      0.14
                                                              ==========    ===========
     Diluted................................................  $    (0.08)   $      0.13
                                                              ==========    ===========
 
Weighted average common shares outstanding:
     Basic..................................................   2,577,954     10,070,808
                                                              ==========    ===========
     Diluted................................................   2,577,954     11,124,260
                                                              ==========    ===========
See accompanying notes to unaudited consolidated financial statements.
                                      F-13
72
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
THREE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                               1997       1998
                                                              ------    ---------
Cash flows from operating activities:
  Net income (loss).........................................  $(208)    $  1,399
  Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
     Depreciation and amortization..........................     --          711
     Changes in operating assets and liabilities:
       Accounts receivable..................................     --          981
       Contracts receivable.................................     --         (753)
       Inventory............................................     --         (186)
       Deferred income taxes................................     --         (109)
       Costs in excess of billings..........................     --          (33)
       Prepaid expenses and other current assets............     --         (446)
       Other assets.........................................     --          207
       Accounts payable and accrued expenses................     --       (2,125)
       Accrued compensation.................................     --          491
       Billings in excess of costs..........................     --          141
       Deferred revenue.....................................     --         (155)
       Income taxes payable.................................     --         (230)
                                                              -----     --------
          Total adjustments.................................     --       (1,506)
                                                              -----     --------
          Net cash used in operating activities.............   (208)        (107)
                                                              -----     --------
Cash flows from investing activities:
  Acquisitions of businesses, net of cash acquired..........     --      (10,080)
  Additions to property and equipment.......................     --          (40)
                                                              -----     --------
       Net cash used in investing activities................     --      (10,120)
Cash flows from financing activities:
  Increase in notes payable to stockholders.................    208           --
       Net borrowings of long-term debt.....................     --        6,644
                                                              -----     --------
       Net cash provided by financing activities............    208        6,644
                                                              -----     --------
Net decrease in cash and cash equivalents...................     --       (3,583)
Cash and cash equivalents, beginning of period..............      1        6,394
                                                              -----     --------
Cash and cash equivalents, end of period....................  $   1     $  2,811
                                                              =====     ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes..................................  $  --     $  1,557
                                                              =====     ========
See accompanying notes to unaudited consolidated financial statements.
                                      F-14
73
 
                         PROVANT, INC. AND SUBSIDIARIES
 
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
1.  ORGANIZATION AND BASIS OF PRESENTATION
 
  Organization
 
     PROVANT, Inc., a Delaware corporation ("PROVANT" and collectively with its
subsidiaries, the "Company"), provides a broad range of performance improvement
training services and products primarily to Fortune 1000 companies, other large
and medium-sized corporations and government entities. The Company's objective
is to become the leading single source provider of high-quality performance
improvement services and products that are distributed through multiple delivery
methods.
 
     On May 4, 1998, PROVANT completed its initial public offering (the "IPO")
of its common stock (the "Common Stock") and simultaneously acquired in separate
merger transactions (the "Combination") seven companies engaged in providing
performance improvement services and products (collectively referred to as the
"Founding Companies"). In the quarter ended September 30, 1998, the Company
acquired in separate transactions two additional companies engaged in providing
performance improvement services and products (collectively referred to with the
Founding Companies as the "Operating Companies"). Prior to the IPO, PROVANT did
not conduct any revenue generating activities of its own. For the period from
inception through May 4, 1998, all of PROVANT's activities had been related to
the completion of the IPO and the Combination. All references to the "Company"
include PROVANT and the Operating Companies.
 
  Basis of Presentation
 
     The information contained in the following notes to the accompanying
financial statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements and
related notes thereto as of and for the year ended June 30, 1998.
 
     In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments considered necessary to present fairly the
financial position of the Company as of September 30, 1998 and the results of
operations and cash flows for the periods presented. The Company prepares its
interim financial information using the same accounting principles as it does
for its annual financial statements.
 
     For financial statement purposes, PROVANT has been identified as the
accounting acquiror. Accordingly, the consolidated financial statements include
the accounts of PROVANT since its inception, November 16, 1996, and the accounts
of the Operating Companies since their respective dates of acquisition. The
acquisitions of the Operating Companies were accounted for using the purchase
method of accounting. The allocations of the purchase prices to the assets
acquired and liabilities assumed of these companies have been recorded based on
preliminary estimates of fair value and may be changed as additional information
becomes available.
 
2.  INVENTORY
 
     Inventory consists primarily of film production and other costs associated
with a company acquired during the three months ended September 30, 1998.
 
3.  ACQUISITIONS
 
     During the quarter ended September 30, 1998, the Company acquired two
companies that provide performance improvement services and products. Initial
consideration paid by the Company was $17.5 million, consisting of $10.9 million
in cash and 430,767 shares of Common Stock. The allocation of the respective
purchase prices to assets acquired and liabilities assumed resulted in $12.9
million in goodwill
 
                                      F-15
74
                         PROVANT, INC. AND SUBSIDIARIES
 
      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
for these acquisitions which were accounted for as purchase transactions.
Goodwill is amortized on a straight-line basis over 40 years. The cash portion
of the acquisitions was funded from cash provided by operations and $7.5 million
of borrowings from the Company's credit facility.
 
     In October 1998, the Company acquired an additional company that provides
performance improvement services and products. Initial consideration paid by the
Company was $12.0 million, consisting of $4.8 million in cash and 553,841 shares
of Common Stock. The cash portion of the acquisition was funded from cash
provided by operations and $2.2 million of borrowings from the Company's credit
facility. The acquisition will be accounted for as a purchase transaction.
 
4.  CONTINGENT CONSIDERATION
 
     The agreements between PROVANT and each of the Operating Companies and the
subsequently-acquired company provide for the payment of additional, contingent
consideration (the "Contingent Consideration"). With respect to five of the
Founding Companies, the former stockholders will receive Contingent
Consideration in the form of shares of Common Stock based on performance
criteria for the fiscal year ended June 30, 1998 and certain other adjustments.
The Company has estimated the number of shares to be issued to these
stockholders and has included those shares as outstanding in the calculation of
diluted weighted average common shares outstanding for the three months ended
September 30, 1998. The former stockholders of the remaining four Operating
Companies and the subsequently-acquired company are entitled to receive
Contingent Consideration of cash and/or shares of Common Stock if certain
performance criteria are met over future periods ranging from one to three
years. For the three companies with Contingent Consideration based on
performance criteria associated with the first year, the maximum Contingent
Consideration for two of the companies is $5.7 million in the form of shares of
Common Stock and the Contingent Consideration for the third Company is based
entirely on performance criteria for the year and is not currently determinable.
For the two remaining companies, the Contingent Consideration is based entirely
on performance criteria for the next three years and is not currently
determinable.
 
5.  EARNINGS PER SHARE
 
     Basic earnings per share ("EPS") is computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the period.
Diluted EPS is computed by dividing net income by the weighted average number of
shares of Common Stock and dilutive securities outstanding during the period.
 
     The following table summarizes weighted average shares outstanding for each
of the periods presented (with the pro forma combined data giving effect to the
Combination and the IPO as if they had occurred on July 1, 1997):
THREE MONTHS ENDED SEPTEMBER 30,
                                                  --------------------------------------
                                                     1997          1997          1998
                                                  ----------    ----------    ----------
                                                                PRO FORMA
                                                  HISTORICAL     COMBINED     HISTORICAL
                                                  ----------    ----------    ----------
Basic weighted average common shares
  outstanding...................................  2,577,954      9,795,558    10,070,808
Shares to be issued as Contingent
  Consideration.................................         --             --       856,884
Weighted average shares related to stock options
  and warrants under the treasury stock
  method........................................         --        373,331       196,568
                                                  ---------     ----------    ----------
Diluted weighted average common shares
  outstanding...................................  2,577,954     10,168,889    11,124,260
                                                  =========     ==========    ==========
F-16
75
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders,
PROVANT, Inc.:
 
     We have audited the accompanying consolidated balance sheets of PROVANT,
Inc. and subsidiaries as of June 30, 1997 and 1998, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
period from November 16, 1996 (date of inception) to June 30, 1997 and for the
year ended June 30, 1998. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PROVANT,
Inc. and subsidiaries as of June 30, 1997 and 1998 and the results of their
operations and their cash flows for the period from November 16, 1996 (date of
inception) to June 30, 1997 and for the year ended June 30, 1998, in conformity
with generally accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-17
76
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
JUNE 30,
                                                              ----------------
                                                              1997      1998
                                                              -----    -------
ASSETS
Current assets:
     Cash and cash equivalents..............................  $   1    $ 6,394
     Accounts receivable, net of allowance for doubtful
       accounts of $0 and $740, respectively................     --     12,221
     Contracts receivable...................................     --      7,295
     Deferred taxes.........................................     --      2,127
     Costs in excess of billings............................     --        696
     Prepaid expenses and other current assets..............     --      1,359
                                                              -----    -------
          Total current assets..............................      1     30,092
Property and equipment, net.................................    150      2,548
Other assets................................................     --        776
Goodwill, net...............................................     --     52,942
                                                              -----    -------
          Total assets......................................  $ 151    $86,358
                                                              =====    =======
 
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable.......................................  $  --    $ 3,346
     Accrued expenses.......................................     --      7,361
     Accrued compensation...................................     --      2,928
     Billings in excess of costs............................     --      2,896
     Deferred revenue.......................................     --        669
     Income taxes payable...................................     --      1,252
     Current portion of long term debt......................     --        533
     Notes payable to stockholders..........................    298         --
                                                              -----    -------
          Total current liabilities.........................    298     18,985
Long term debt, net of current portion......................     --        874
                                                              -----    -------
          Total liabilities.................................    298     19,859
Stockholders' equity (deficit):
     Preferred stock, $.01 par value; none issued...........     --         --
     Common stock, $.01 par value; 1,950,520 and 9,795,558
      shares issued and outstanding at June 30, 1997 and
      1998, respectively....................................     20         98
     Additional paid-in capital.............................     --     69,474
     Translation adjustment.................................     --        (12)
     Accumulated deficit....................................   (167)    (3,061)
                                                              -----    -------
          Total stockholders' equity (deficit)..............   (147)    66,499
                                                              -----    -------
Total liabilities and stockholders' equity (deficit)........  $ 151    $86,358
                                                              =====    =======
See accompanying notes to consolidated financial statements.
                                      F-18
77
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PERIOD FROM
                                                              NOVEMBER 16, 1996
                                                                  (DATE OF
                                                                INCEPTION) TO       YEAR ENDED
                                                                JUNE 30, 1997      JUNE 30, 1998
                                                              -----------------    -------------
Total revenue...............................................     $       --         $   14,189
Cost of revenue.............................................             --              6,374
                                                                 ----------         ----------
Gross profit................................................             --              7,815
Selling, general and administrative expenses................            149             10,447
Goodwill amortization.......................................             --                245
                                                                 ----------         ----------
Loss from operations........................................           (149)            (2,877)
Interest expense, net.......................................             --               (220)
                                                                 ----------         ----------
Loss before income taxes....................................           (149)            (3,097)
Income tax benefit..........................................             --               (203)
                                                                 ----------         ----------
Net loss....................................................     $     (149)        $   (2,894)
                                                                 ==========         ==========
Loss per common share: basic and diluted....................     $    (0.08)        $    (0.67)
                                                                 ==========         ==========
Shares used in computing basic and diluted loss per common
  share.....................................................      1,950,520          4,350,169
See accompanying notes to consolidated financial statements.
                                      F-19
78
 
                         PROVANT, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)
COMMON STOCK
                                       ------------------   PAID-IN    TRANSLATION   ACCUMULATED
                                        SHARES     AMOUNT   CAPITAL    ADJUSTMENT      DEFICIT      TOTAL
                                       ---------   ------   --------   -----------   -----------   -------
Initial capitalization...............  1,950,520    $20     $    --       $ --         $   (18)    $     2
Net loss.............................         --     --          --         --            (149)       (149)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1997.............  1,950,520     20          --         --            (167)       (147)
Issuance of management shares........  1,395,697     13         473         --              --         486
Issuance of stock options and
  warrants...........................         --     --         422         --              --         422
Acquisition of Founding Companies....  3,459,341     35      35,942         --              --      35,977
Issuance of stock sold in initial
  public offering....................  2,990,000     30      32,637         --              --      32,667
Translation adjustment...............         --     --          --        (12)             --         (12)
Net loss.............................         --     --          --         --          (2,894)     (2,894)
                                       ---------    ---     -------       ----         -------     -------
Balance at June 30, 1998.............  9,795,558    $98     $69,474       $(12)        $(3,061)    $66,499
                                       =========    ===     =======       ====         =======     =======
See accompanying notes to consolidated financial statements.
                                      F-20
79
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
PERIOD FROM
                                                               NOVEMBER 16, 1996
                                                                   (DATE OF
                                                                  INCEPTION)
                                                                      TO             YEAR ENDED
                                                                 JUNE 30, 1997      JUNE 30, 1998
                                                              -------------------   -------------
Cash flows from operating activities:
  Net loss..................................................         $(149)            $(2,894)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization..........................            --                 467
     Allowance for doubtful accounts........................            --                 135
     Charges related to issuance of common stock, warrants
       and stock options....................................            --                 908
     Changes in operating assets and liabilities:
       Accounts receivable..................................            --              (1,731)
       Contracts receivable.................................            --                (581)
       Deferred taxes.......................................            --              (1,191)
       Due from stockholders................................            --                 600
       Costs in excess of billings..........................            --                (244)
       Prepaid expenses and other current assets............            --                (154)
       Other assets.........................................            --                 110
       Accounts payable and accrued expenses................            --               1,636
       Accrued compensation.................................            --                 (91)
       Billings in excess of costs..........................            --               1,119
       Deferred revenue.....................................            --                 228
       Income taxes payable.................................            --                 970
                                                                     -----             -------
          Total adjustments.................................            --               2,181
                                                                     -----             -------
          Net cash used in operating activities.............          (149)               (713)
                                                                     -----             -------
Cash flows from investing activities:
     Acquisitions of businesses, net of acquired cash.......            --             (19,302)
     Additions to property and equipment....................          (150)               (177)
                                                                     -----             -------
       Net cash used in investing activities................          (150)            (19,479)
                                                                     -----             -------
Cash flows from financing activities:
     Issuance of common stock...............................             2              32,667
     Increase (decrease) in notes payable to stockholders...           298                (298)
     Repayment of long-term debt............................            --              (5,772)
                                                                     -----             -------
       Net cash provided by financing activities............           300              26,597
Effect of exchange rates on cash............................            --                 (12)
                                                                     -----             -------
Net increase in cash and cash equivalents...................             1               6,393
Cash and cash equivalents, beginning of period..............            --                   1
                                                                     -----             -------
Cash and cash equivalents, end of period....................         $   1             $ 6,394
                                                                     =====             =======
See accompanying notes to consolidated financial statements.
                                      F-21
80
 
                         PROVANT, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) BUSINESS AND ORGANIZATION
 
     PROVANT, Inc., a Delaware corporation ("PROVANT" and collectively with its
subsidiaries, the "Company"), provides a broad range of training and development
services and products to Fortune 1000 companies, other large and medium-sized
corporations and government entities. Founded on November 16, 1996, the
Company's objective is to become the leading single source provider of
high-quality training and development services and products that are distributed
through multiple delivery methods.
 
     On May 4, 1998, PROVANT completed the initial public offering (the
"Offering" or "IPO") of its common stock (the "Common Stock") and simultaneously
acquired in separate merger transactions seven companies engaged in providing
training and development services and products (collectively referred to as the
"Founding Companies"). The Company provides services nationally, and has offices
in thirteen states.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Basis of Presentation
 
     For financial statement purposes, PROVANT has been identified as the
accounting acquiror. Accordingly, the consolidated financial statements include
the accounts of PROVANT since its inception, November 16, 1996, and the accounts
of the Founding Companies since their acquisition date, May 4, 1998. The
acquisitions of the Founding Companies were accounted for using the purchase
method of accounting. The allocations of the purchase prices to the assets
acquired and liabilities assumed of these companies have been recorded based on
preliminary estimates of fair value and may be changed as additional information
becomes available.
 
  Principles of Consolidation
 
     The accompanying consolidated financial statements include the accounts of
PROVANT and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
 
  Revenue Recognition
 
     The Company recognizes revenue when services are performed and products are
provided except when work is being performed under a long-term contract.
Deferred revenue is recognized for payments received prior to services being
performed.
 
     A significant portion of the Company's revenue results from services
performed under long-term U.S. Government contracts, either directly or through
subcontracts. The majority of the Company's long-term contracts are fixed-price
contracts. Revenue on fixed price contracts is recognized using the percentage
of completion method based on costs incurred in relation to total estimated
costs for each contract. Revenue on time-and-materials contracts is recognized
to the extent of fixed billable rates for hours delivered plus reimbursable
costs. Revenue on cost-plus-fee contracts is recognized based on reimbursable
costs incurred plus estimated fees earned thereon. Provisions for the total
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
 
  Cash Flow Information
 
     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
     Cash paid for interest in fiscal 1997 and 1998 was nil and $118,000,
respectively. Cash paid for taxes in fiscal 1997 and 1998 was nil and $14,000
respectively.
 
                                      F-22
81
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company recorded the following non-cash transactions during fiscal 1998
(Dollars in thousands):
Discount on indebtedness associated with issuance of stock
  warrants..................................................  $221
Compensation expense in connection with sales of Company
  stock.....................................................  $485
Compensation expense in connection with stock options
  granted to consultants to the Company.....................  $201
In addition, the following is a reconciliation of net cash paid for
acquisitions during fiscal 1998 (Dollars in thousands):
Fair value of assets acquired...............................  $82,386
Liabilities assumed.........................................  (21,954)
Additional purchase price accrued but not yet paid..........     (755)
Estimated market value of stock consideration...............  (35,977)
                                                              -------
Cash paid...................................................   23,700
Less cash acquired..........................................   (4,398)
                                                              -------
     Net cash paid for acquisitions.........................  $19,302
                                                              =======
Fair Value of Financial Instruments
 
     The carrying amounts of the Company's financial instruments including cash
and cash equivalents, accounts receivable, contracts receivable, accounts
payable and accrued expenses approximate fair value due to the short term nature
of these instruments. The carrying value of the long term debt approximates fair
value based on current rates available to the Company for debt of similar
maturity and terms.
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation is computed using accelerated and
straight-line methods over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the expected life
of the lease or the estimated useful life of the asset. Maintenance and repairs
are expensed when incurred. Upon retirement or disposition of property and
equipment, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the statement of
operations.
 
  Goodwill
 
     Goodwill represents the excess of the aggregate purchase price paid by the
Company over the fair value of the net assets acquired. Goodwill is amortized on
a straight-line basis over 40 years.
 
     Recoverability of goodwill and intangible assets is measured by a
comparison of the carrying amount of the asset to future undiscounted net cash
flows expected to be generated by the acquired Company. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.
 
  Long-Lived Assets
 
     Long-lived assets and certain identifiable intangibles are reviewed for
impairment, based upon undiscounted future cash flows, and appropriate losses
are recognized whenever the carrying amount of an asset may not be recovered in
accordance with Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.
 
                                      F-23
82
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Concentrations of Credit Risk
 
     The Company provides services to customers located in a broad range of
geographical regions. The Company's credit risk primarily consists of
receivables from a variety of customers including U.S. Government entities and
commercial and industrial companies. The Company reviews its accounts receivable
and provides allowances as deemed necessary.
 
  Income Taxes
 
     The Company will file a consolidated return for federal income tax
purposes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect, if any, on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
 
  Accounting for Stock-Based Compensation
 
     The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock option plans.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Statement 123 addresses the accounting for the cost of stock-based compensation,
such as stock options, and permits either expensing the cost of stock-based
compensation over the vesting period or disclosing in the financial statement
footnotes what this expense would have been. This cost would be measured at the
grant date based upon estimated fair values, using option pricing models. The
Company has adopted the disclosure alternative of Statement 123 as of June 30,
1998.
 
  Loss Per Share
 
     In fiscal 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, for calculating
earnings per share (EPS). Statement 128 requires the disclosure of basic EPS,
which is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.
Disclosure of diluted EPS, which gives effect to all dilutive potential common
shares outstanding, is also required. For fiscal 1997 and 1998, the number of
shares used in computation of basic EPS is the same as diluted EPS since the
inclusion of any potential common shares would be anti-dilutive as a result of
the net losses in those years.
 
     The following securities that could potentially dilute basic EPS in the
future were not included in the computation of diluted EPS for 1998 because to
do so would have been antidilutive:
JUNE 30,
                                                                1998
                                                              --------
Stock options...............................................   42,942
Warrants....................................................   18,400
                                                               ------
     Total..................................................   61,342
                                                               ======
Contingently issuable shares (Note 10) have also been excluded from the
calculation.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of
 
                                      F-24
83
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
revenues, expenses, assets, liabilities and contingent assets and liabilities at
the date of the financial statements. Actual results could differ from those
estimates.
 
(3) BUSINESS COMBINATIONS
 
  Founding Company Acquisitions
 
     Concurrently with the completion of its IPO on May 4, 1998, PROVANT
acquired the Founding Companies (the "Combination"). The companies acquired were
Behavioral Technology, Inc., Decker Communications, Inc., J. Howard and
Associates, Inc., Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning
Systems Sciences, MOHR Retail Learning Systems, Inc., Novations Group, Inc., and
Star Mountain, Inc.
 
     The acquisition of each of the Founding Companies was accounted for using
the "purchase" method of accounting in accordance with APB Opinion No. 16,
Business Combinations. The aggregate consideration paid in these transactions
was $24.5 million in cash and 3,459,341 shares of Common Stock having a value at
the date of acquisition totaling $36.0 million.
 
     The consolidated balance sheet as of June 30, 1998 includes allocations of
the respective purchase prices to the assets acquired and liabilities assumed
based on preliminary estimates of fair value and is subject to final adjustment.
The allocations resulted in $53.2 million of goodwill, which represents the
excess of purchase price over the estimated fair value of the net assets
acquired. In conjunction with the acquisitions, goodwill was determined as
follows (Dollars in thousands):
Cash paid, net of cash acquired.............................  $ 19,302
Additional purchase price accrued but not yet paid..........       755
Estimated market value of stock consideration...............    35,977
Liabilities assumed.........................................    21,954
Less fair value of tangible assets acquired, net of cash
  acquired..................................................   (24,801)
                                                              --------
Goodwill....................................................  $ 53,187
                                                              ========
The unaudited pro forma combined financial data presented below consists of
the income statement data presented in these consolidated financial statements
plus income statement data for the Founding Companies as if they were acquired
effective July 1, 1996 (Dollars in thousands, except per share data):
YEAR ENDED JUNE 30,
                                                       --------------------
                                                         1997        1998
                                                       --------    --------
                                                           (UNAUDITED)
Revenue..............................................  $68,846     $78,062
Net income...........................................    4,221       5,060
Earnings per common share, basic.....................    $0.43       $0.52
Earnings per common share, diluted...................    $0.42       $0.50
The unaudited pro forma combined financial data gives effect to (i) the
Combination of PROVANT and the Founding Companies, (ii) the consummation of the
IPO and the application of the net proceeds therefrom, (iii) the elimination of
a non-recurring fee of $750,000 in the year ended June 30, 1998 for information
related to the training industry, (iv) acquisitions completed by one of the
Founding Companies, (v) the elimination of non-cash compensation expense
totaling $686,000 for the year ended June 30, 1998 related to the issuance of
Common Stock and stock options to officers of and consultants to the Company,
(vi) a provision for income tax for those Founding Companies that were taxed as
S corporations during the relevant periods, (vii) the elimination of
non-recurring legal and accounting fees related to the Combination and the IPO
totaling $588,000 for the year ended June 30, 1998 and (viii) the compensation
differential. The compensation differential represents pro forma adjustments to
salary, bonuses and benefits paid to certain pre-Combination owners of the
Founding Companies to certain levels
 
                                      F-25
84
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
to which they have agreed prospectively. For the years ended June 30, 1997 and
1998, the compensation differential was approximately $5.6 million and $6.5
million, respectively.
 
     The unaudited pro forma combined results presented above are not
necessarily indicative of actual results which might have occurred had the
operations and management teams of PROVANT and the Founding Companies been
combined at the beginning of the periods presented.
 
  Subsequent Acquisition
 
     On July 20, 1998, the Company completed the acquisition of KC Resources
Creative Solutions, Inc. ("KC Resources"), a training and instructional design
and development consulting firm based in the Washington, DC area. The
consideration paid by the Company was $6.0 million, consisting of $2.4 million
in cash and 200,000 shares of Common Stock. This acquisition will be accounted
for as a purchase transaction. The former sole stockholder of KC Resources will
be entitled to receive contingent consideration of up to $1.4 million if KC
Resources' earnings before interest and taxes for the year ending June 30, 1999
exceeds a specified base amount.
 
     Pro forma data giving effect to the Combination and the KC Resources
acquisition for the year ended June 30, 1998 is as follows (Dollars in
thousands, except per share data):
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
                                                              (UNAUDITED)
Revenue.....................................................   $ 83,511
Net income..................................................      5,419
Earnings per common share, basic............................   $   0.54
Earnings per common share, diluted..........................   $   0.52
(4) CONTRACTS RECEIVABLE
 
     Contracts receivable are summarized as follows (Dollars in thousands):
JUNE 30,
                                                                 1998
                                                              -----------
U.S. Government customers:
Amounts due currently -- prime contractor...................    $5,353
Amounts due currently -- subcontractor......................       589
Recoverable costs and accrued profit on progress
  completed -- not billed...................................     1,317
Retainage...................................................        36
                                                                ------
Total.......................................................    $7,295
                                                                ======
In accordance with industry practice, amounts relating to long-term
contracts are classified as current assets although an indeterminable portion of
these amounts is not expected to be realized within one year. Receivable
balances billed but not paid by customers pursuant to retainage provisions in
contracts are due upon completion of the contracts and acceptance by the
customer. Based on the Company's experience with similar contracts in recent
years, the retention balance is billed and collected in the following fiscal
year.
 
     All unbilled contract receivables, net of retainage, are expected to be
billed and collected within one year.
 
                                      F-26
85
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) NON-CURRENT ASSETS
 
     A summary of property and equipment follows (Dollars in thousands):
JUNE 30,
                                                              USEFUL LIFE      1998
                                                              ------------   --------
Equipment...................................................   5 - 7 years    $  322
Furniture and fixtures......................................   3 - 7 years     2,290
Leasehold improvements......................................   3 - 7 years       160
Less accumulated depreciation and amortization..............                    (224)
                                                                              ------
Property and equipment, net.................................                  $2,548
                                                                              ======
Depreciation expense was nil and $222,000 for fiscal 1997 and 1998,
respectively.
 
     Goodwill amortization expense was nil and $245,000 for fiscal 1997 and
1998, respectively.
 
(6) ACCRUED EXPENSES
 
     Accrued expenses consist of the following (Dollars in thousands):
JUNE 30,
                                                                1998
                                                              --------
Accrued lease abandonment costs.............................   $1,160
Other accrued liabilities...................................    6,201
                                                               ------
          Total.............................................   $7,361
                                                               ======
(7) REVOLVING CREDIT AGREEMENT
 
     On April 8, 1998, the Company entered into a revolving credit facility with
Fleet National Bank (as agent), the material terms of which are summarized as
follows. The facility provides the Company with a revolving line of credit of up
to $40.0 million, guaranteed by all of the Company's significant wholly-owned
subsidiaries and secured by a pledge of the capital stock of each of the
Company's wholly-owned subsidiaries. The credit facility may be used for
refinancing of existing indebtedness, acquisitions, working capital and general
corporate purposes. Loans made under the credit facility bear interest, at the
Company's option, at a rate based on either a Eurodollar rate or the bank's
prime rate. In addition, a commitment fee is payable on the unused portion of
the revolving line of credit at a rate of between 0.15% and 0.375% depending on
the ratio of the Company's consolidated total funded debt to consolidated
earnings before interest, taxes, depreciation and amortization. The credit
facility will terminate three years from the Company's initial borrowing under
the facility (which borrowing had yet to occur as of June 30, 1998), and all
amounts outstanding thereunder (if any) will be due at such time. The credit
facility (i) generally prohibits the payment of dividends and other
distributions by the Company, (ii) generally does not permit the Company to
incur or assume other indebtedness, and (iii) requires the Company to comply
with certain financial covenants. As of June 30, 1998, there were no amounts
outstanding under the credit facility.
 
(8) LONG-TERM DEBT
 
     Long-term debt consists primarily of amounts due to former stockholders of
the Founding Companies. These notes mature through June, 2009 and bear interest
at rates ranging from 7.5% to 8.75%.
 
                                      F-27
86
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(9) INCOME TAXES
 
     The income tax expense (benefit) consists of (Dollars in thousands):
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
Current:
  Federal...................................................    $ 540
  State.....................................................      158
                                                                -----
          Total current.....................................      698
                                                                -----
Deferred:
  Federal...................................................     (860)
  State.....................................................      (41)
                                                                -----
          Total deferred....................................     (901)
                                                                -----
          Income tax benefit................................    $(203)
                                                                =====
The income tax benefit was $203,000 for the year ended June 30, 1998, and
differed from the amounts computed by applying the U.S. federal income tax rate
of 35 percent to pretax income as a result of the following (Dollars in
thousands):
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
Income tax benefit at the statutory rate....................   $(1,084)
Decrease in income tax benefit resulting from:
  Reduction of valuation allowance due to interaction of
     acquiror and acquired companies tax positions..........       659
  Amortization of goodwill..................................        79
  State income taxes, net of federal income tax benefit.....        75
  Other, net................................................        68
                                                               -------
Benefit at effective tax rate...............................   $  (203)
                                                               =======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (Dollars in thousands).
JUNE 30,
                                                                1998
                                                              --------
Deferred tax assets:
  Accrued liabilities.......................................   $2,794
  Allowance for doubtful accounts...........................      217
  Start-up costs capitalized for tax purposes...............      735
  Other.....................................................      139
                                                               ------
Total gross deferred tax assets.............................    3,885
  Less valuation allowance..................................     (140)
                                                               ------
  Net deferred tax assets...................................    3,745
                                                               ------
Deferred tax liabilities:
  Change from cash to accrual method for acquired
     companies..............................................    1,458
  Other.....................................................      160
                                                               ------
Total gross deferred liabilities............................    1,618
                                                               ------
Net deferred tax asset......................................   $2,127
                                                               ======
F-28
87
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The valuation allowance for deferred tax assets was $52,000 and $140,000 as
of June 30, 1997 and 1998 respectively. The valuation allowance for deferred
income taxes increased by $88 from June 30, 1997 to June 30, 1998. Valuation
allowances at June 30, 1998 relate to potentially non-deductible expenses
recorded by certain of the Founding Companies.
 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Taxable income for the
year ended June 30, 1998 was $1,703,000. Although realization is not assured,
based upon the level of historical taxable income of the Founding Companies and
projections for PROVANT's future taxable income over the periods during which
the deferred tax assets are deductible, management believes it is more likely
than not the Company will realize the benefits of these deductible differences.
The amount of the deferred tax asset considered realizable, however, could be
reduced or increased in the near term if estimates of future taxable income
during the carryforward period are reduced or increased.
 
(10) COMMITMENTS AND CONTINGENCIES
 
  Operating Leases
 
     The Company has several leases for its office space as well as for the
Founding Companies' operating space, vehicles, and equipment under cancelable
and non-cancelable operating leases that expire on various dates through fiscal
2005. Most of these leases generally provide for rent escalation based upon
changes in real estate taxes and operating expenses.
 
     Future minimum lease payments under all non-cancelable operating leases,
including leases to related parties, are as follows (Dollars in thousands):
YEAR ENDING JUNE 30,
                    --------------------
1999........................................................  $ 3,635
2000........................................................    3,160
2001........................................................    2,772
2002........................................................    1,857
2003........................................................      749
Thereafter..................................................    1,136
                                                              -------
Total.......................................................  $13,309
                                                              =======
Rent expense for the years ended June 30, 1997 and 1998 was $51,000 and
$585,000, respectively.
 
  U.S. Government Contracts
 
     Substantially all of one Founding Company's revenue and costs for all
periods presented are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     Government funding continues to be dependent on congressional approval of
program level funding and on contracting agency approval for the Company's work.
The extent to which projects will be funded in the future cannot be determined.
 
                                      F-29
88
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Environmental Liabilities
 
     The Company has provided for the estimated costs associated with
environmental remediation activities at one of its current operating locations.
The Company provides for the estimated costs of the investigation and
remediation of these sites when such losses are probable and the amounts can be
reasonably estimated. The actual cost incurred may vary from these estimates due
to the inherent uncertainties involved. The Company believes that any additional
liability in excess of the amounts provided which may result from the resolution
of these matters will not have a material adverse impact on the financial
condition, liquidity, or cash flow of the Company.
 
  Contingent Payments to Former Stockholders
 
     The merger agreements between PROVANT and each of the Founding Companies
provide for the payment of additional, contingent consideration (the "Additional
Consideration"). With respect to six of the Founding Companies, the Additional
Consideration will be paid in shares of Common Stock, with the number of those
shares determined by a formula based on the relationship of the defined earnings
before interest and taxes ("EBIT") of that Founding Company (including its
successor following the closing of the Combination) for the fiscal year ending
June 30, 1998 (June 30, 1999 in the case of J. Howard & Associates, Inc. ("J.
Howard")) to a specified baseline EBIT target and certain other adjustments to
be calculated after the fiscal year ended June 30, 1998. In particular, each
merger agreement with a Founding Company (other than Star Mountain, Inc.)
contains a targeted pro forma EBIT amount in excess of a baseline figure which,
if achieved by the Founding Company, will result in the payment by the Company
to the former stockholders of the Founding Company of the maximum Additional
Consideration (consisting of a multiple of the excess EBIT amount). To the
extent the Founding Company does not achieve the targeted amount, its former
stockholders will receive a lesser amount of Additional Consideration
proportionately related to the excess above the baseline figure. Shares of
Common Stock issued as Additional Consideration to the former stockholders of
all Founding Companies other than Star Mountain, Inc. ("Star Mountain") and J.
Howard will be valued at the initial public offering price of $13.00 per share.
Shares issued to J. Howard as Additional Consideration will be valued based on
the average of the last sale prices of the Common Stock on Nasdaq during the 20
business days immediately following PROVANT's first public announcement of its
financial results for fiscal 1999. Other than shares which may be issuable to
the former stockholders of Star Mountain, a maximum of 969,218 shares of Common
Stock may be issued as Additional Consideration following June 30, 1998
(assuming, in the case of J. Howard's Additional Consideration, a per share
price of $13.00).
 
     For the seventh Founding Company, Star Mountain, the stockholders will be
entitled to receive additional shares of Common Stock or cash in accordance with
a formula based on the amount by which the EBIT of Star Mountain for the fiscal
year ending June 30, 1999 exceeds a specified EBIT target. In particular, if
Star Mountain's EBIT for fiscal 1999 exceeds the specified target, then (i) Star
Mountain's former non-voting stockholders will receive cash equal to a multiple
of the excess EBIT and (ii) Star Mountain's former voting stockholders will
receive, at their election, either cash equal to a multiple of the excess EBIT
or a number of shares of Common Stock equal to a multiple of the excess EBIT
divided by 80% of the average of the last sale prices of the Common Stock on
NASDAQ during the month of July 1999.
 
  Other Matters
 
     The Company is from time to time a party to litigation arising in the
ordinary course of business. Management believes that no pending legal
proceeding will have a material adverse effect on the business, financial
condition or results of operations of the Company.
 
                                      F-30
89
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(11) STOCKHOLDERS' EQUITY
 
  Common and Preferred Stock
 
     In connection with its organization and initial capitalization, the Company
issued 1,950,520 shares of its Common Stock, $.01 par value per share. In 1998,
the Company issued 1,395,697 additional shares to management. These share
amounts have been adjusted to reflect the stock split described below.
 
     The Company, in connection with the IPO, increased the authorized shares of
stock to 45 million, consisting of 40 million shares of Common Stock and 5
million shares of Preferred Stock, and declared a stock split of 979.0292-for-1
in the form of a stock dividend that resulted in a total amount of outstanding
shares of Common Stock prior to the IPO (but giving effect to the Combination)
of 6,805,558. Holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, and do not
have cumulative voting rights. All share and per share amounts have been
adjusted to reflect the stock split.
 
     On May 4, 1998, the Company completed its IPO, issuing to the public
2,600,000 shares of its Common Stock at a price of $13.00 per share and on May
7, 1998, the Company sold 390,000 shares of Common Stock at a price of $13.00
per share pursuant to the over-allotment option granted to the underwriters. The
Company realized net proceeds from these sales of $32.7 million, net of the
underwriting commissions and discounts and other expenses of the offering.
 
     As of June 30, 1998, the Company had 9,795,558 shares of Common Stock
issued and outstanding.
 
     The Preferred Stock, if issued, would have priority over the Common Stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. As of June 30, 1998, the Company had not issued any
shares of Preferred Stock.
 
(12) STOCK OPTION PLANS
 
  Equity Incentive Plan
 
     The Company adopted the 1998 Equity Incentive Plan which provides for the
award of up to 1,100,000 shares of Common Stock in the form of incentive stock
options, non-qualified stock options, stock appreciation rights, performance
shares, restricted stock or stock units. All directors and employees of, and all
consultants and advisors to, the Company are eligible to participate.
 
     In connection with the Offering, options to purchase 246,596 shares of
Common Stock at $13.00 per share were issued to certain executives of the
Company, of which options to purchase 86,596 shares vested upon the closing of
the IPO. Options to purchase the remaining shares vest equally over a three-year
period. All of these options expire seven years from the date of grant.
 
     Options to purchase an additional 622,387 shares of Common Stock at $13.00
per share were awarded to employees of and consultants to the Founding Companies
and PROVANT. These options vest equally over a three year period and expire
seven years from the date of grant, with the exception of options to purchase
80,000 shares, which became exercisable upon the closing of the Offering.
 
  Stock Plan for Non-Employee Directors
 
     The Company adopted the Stock Plan for Non-Employee Directors whereby
100,000 shares of Common Stock have been reserved for issuance. Each
non-employee director of the Company who was not a stockholder prior to the
Offering received an option to purchase 7,500 shares of Common Stock at $13.00
per share. Any non-employee director of the Company elected after the IPO
generally will receive an option to purchase 7,500 shares of Common Stock at the
fair market value of the Common Stock at the date of grant. Each option expires
after 10 years and is exercisable six months following the date of grant. As of
June 30, 1998, options to purchase 15,000 shares of Common Stock were granted
under this plan.
 
                                      F-31
90
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Stock Purchase Plan
 
     The Company's 1998 Employee Stock Purchase Plan allows all employees who
work more than 20 hours per week, other than employees owning more than 5% or
more of the combined voting power of all classes of stock of the Company, to
purchase shares of Common Stock at a discount on a periodic basis.
 
     Purchases can occur at the end of option periods, each of six months'
duration. The first such period began on June 1, 1998. The purchase price of
Common Stock under the Employee Stock Purchase Plan will be 85% of the lesser of
the last sale price of the Common Stock on the day prior to the beginning of an
option period and the last sale price of the Common Stock on the day prior to
the end of the option period. Participants may elect under the Plan to have from
up to 2% to 10% of their pay applied to the purchase of shares at the end of the
option period.
 
     A total of 500,000 shares are reserved for issuance under the Employee
Stock Purchase Plan. As of June 30, 1998, no shares have been issued.
 
  Stock Purchase Warrants
 
     The Company issued two warrants each to officers and directors of the
Company in exchange for these executives extending financing to the Company in
the period prior to the Offering. The first warrant entitles the holder to
purchase 173,194 shares of Common Stock at a per share exercise price equal to
$13.00. The second warrant entitles the holder to purchase 216,492 shares of
Common Stock which will become exercisable only if the market price of the
Common Stock increases to certain threshold levels (except as otherwise
described below) (the "Contingent Warrant"). Specifically, 20% of the total
number of shares issuable under the Contingent Warrant will become exercisable
on each of the three occasions that the market price of the Common Stock reaches
$26.00, $39.00 and $52.00, respectively, and the remaining 40% of the total
number of shares issuable under the Contingent Warrant will become exercisable
if the market price of the Common Stock reaches $65.00. However, under certain
circumstances involving the merger or sale of the Company, the Contingent
Warrant will become exercisable to purchase all of the warrant shares. The
exercise price of the Contingent Warrant increases on each anniversary of the
closing of the Offering. Specifically, the exercise price is equal to the
initial public offering price of $13.00 for the first 12 months following the
closing of the Offering and, for each 12 month period thereafter, is equal to
the initial public offering price plus 10% of the initial public offering price
multiplied by the number of full 12 month periods elapsed since the closing of
the Offering. However, once a portion of the Contingent Warrant becomes
exercisable, that portion's exercise price is fixed as of that date. The
warrants expire on May 4, 2005. The warrants have been accounted for in
accordance with Opinion No. 14 of the Accounting Principles Board. Accordingly,
the fair value allocated to the warrants has been accounted for as discount on
the related debt. The holders of the warrants have the right to require the
Company to register the resale of the shares that may be acquired upon exercise
of the warrants under the Securities Act of 1933, as amended.
 
     Stock option activity under all plans during the periods indicated is as
follows:
NUMBER OF   WEIGHTED-AVERAGE
                                                               SHARES      EXERCISE PRICE
                                                              ---------   ----------------
Balance at June 30, 1997 and prior..........................        --
     Granted................................................   883,983         $13.00
     Exercised..............................................        --
     Forfeited..............................................     9,966          13.00
     Expired................................................        --
                                                               -------
 
Balance at June 30, 1998....................................   874,017         $13.00
                                                               =======
F-32
91
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements, except for stock options granted to
non-employees for which compensation expense of $201,000 has been recorded in
the year ended June 30, 1998. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net loss and loss per share would have been increased to the pro
forma amounts indicated below (Dollars in thousands, except per share data):
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
Net loss:
  As reported...............................................   $(2,894)
  Pro forma for SFAS No. 123................................   $(3,679)
Basic and diluted loss per common share:
  As reported...............................................   $ (0.67)
  Pro forma for SFAS No. 123................................   $ (0.85)
At June 30, 1998, there were 325,983 additional shares available for grant
under the Company's stock option plans. The per share weighted-average fair
value of stock options granted during 1998 was $4.53 on the date of grant using
the Black Scholes option-pricing model with the following weighted average
assumptions: volatility of 33%; expected dividend yield 0%, risk-free interest
rate of 6.0%, and an expected life of 4 years.
 
     The following is a summary of stock options outstanding at June 30, 1998:
OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
--------------------------------------------------------------   -----------------------
                                      WEIGHTED-
                                       AVERAGE       WEIGHTED-                 WEIGHTED-
     RANGE OF                      REMAINING YEARS    AVERAGE                   AVERAGE
     EXERCISE          NUMBER      OF CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
      PRICES         OUTSTANDING        LIFE           PRICE     EXERCISABLE     PRICE
     --------        -----------   ---------------   ---------   -----------   ---------
$ 5.00            10,000          2.84          $ 5.00        10,000      $ 5.00
      $13.00           874,017          6.88          $13.00       168,596      $13.00
                       -------                                     -------
   $ 5.00-$13.00       884,017          6.83          $12.91       178,596      $12.55
In addition to the options granted under the plans noted above, the Company
issued an option to purchase 10,000 shares of Common Stock at a purchase price
of $5.00 per share.
 
  1998 Non-Qualified Stock Option Plan
 
     In July 1998, the Company adopted the 1998 Non-Qualified Stock Option Plan
which provides for the award of up to 500,000 shares of Common Stock in the form
of non-qualified stock options. All employees who are not officers or directors
of the Company are eligible to participate. As of August 10, 1998, no options
were granted under the 1998 Non-Qualified Stock Option Plan.
 
(13) EMPLOYEE BENEFIT PLANS
 
     The Founding Companies provide various retirement plans for eligible
employees. These plans consist of defined contribution plans and profit sharing
plans and cover employees at substantially all of the Company's operating
locations. The defined contribution plans provide for contributions ranging from
1.5% to 2.0% of covered employees' salaries or wages, or at the discretion of
the company. Total expense for contributions under all plans totaled $101,000
for fiscal 1998.
 
                                      F-33
92
                         PROVANT, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(14) RELATED PARTY TRANSACTIONS
 
     Prior to the Combination, certain Founding Companies had entered into lease
arrangements with stockholders for facilities. These lease arrangements are for
periods ranging from three to five years. Related lease expense was $81,000 for
the year ended June 30, 1998. Future commitments with respect to these leases
are included in the schedule of minimum lease payments in Note 10.
 
     Expenses paid by PROVANT prior to the closing of the Offering were advanced
under a $3 million line of credit issued on October 6, 1997 by two of the
Company's stockholders. As of June 30, 1998 this loan was repaid in its entirety
and the line of credit was terminated.
 
(15) SEGMENT REPORTING
 
     The Company operates principally in one segment comprised of training and
development services and products designed to increase the productivity of
organizations. There was no single customer that accounted for 10% or more of
the Company's total revenue in fiscal 1998.
 
                                      F-34
93
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Behavioral Technology, Inc.:
 
     We have audited the accompanying balance sheets of Behavioral Technology,
Inc., as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997 and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Behavioral Technology, Inc.
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997, and
for the period from July 1, 1997 to May 4, 1998, in conformity with generally
accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-35
94
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  652    $1,254
  Accounts receivable, net of allowance for doubtful
     accounts of $89 at June 30, 1996 and 1997..............     940     1,055
  Prepaid expenses..........................................      67       143
                                                              ------    ------
          Total current assets..............................   1,659     2,452
                                                              ------    ------
Property and equipment, net.................................     194       135
Other assets................................................       8         7
                                                              ------    ------
          Total assets......................................  $1,861    $2,594
                                                              ======    ======
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  270    $  268
  Accrued expenses..........................................     123       148
  Accrued compensation......................................     316       433
  Deferred revenue..........................................      12        43
  Income taxes payable......................................      --        --
                                                              ------    ------
          Total current liabilities.........................     721       892
                                                              ------    ------
Commitments and contingencies
Stockholders' equity:
  Common stock, $10 par value; 1,000 shares authorized; 100
     and 99 shares issued and outstanding at June 30, 1996
     and June 30, 1997, respectively........................       1         1
  Additional paid-in capital................................      --        --
  Translation adjustment....................................      --        (6)
  Retained earnings.........................................   1,139     1,707
                                                              ------    ------
          Total stockholders' equity........................   1,140     1,702
                                                              ------    ------
          Total liabilities and stockholders' equity........  $1,861    $2,594
                                                              ======    ======
See accompanying notes to financial statements.
                                      F-36
95
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PERIOD FROM
                                                          YEAR ENDED JUNE 30,        JULY 1, 1997
                                                       --------------------------         TO
                                                        1995      1996      1997     MAY 4, 1998
                                                       ------    ------    ------    ------------
Revenue..............................................  $3,803    $5,685    $7,096      $  6,567
Cost of revenue......................................   1,049     1,495     1,488         1,243
                                                       ------    ------    ------      --------
          Gross profit...............................   2,754     4,190     5,608         5,324
Selling, general and administrative expenses.........   2,315     4,048     5,111         6,648
                                                       ------    ------    ------      --------
          Income (loss) from operations..............     439       142       497        (1,324)
                                                       ------    ------    ------      --------
Other income:
  Royalties..........................................      83        82        30            --
  Interest...........................................      13        27        31            29
  Other income, net..................................      43        --        10             2
                                                       ------    ------    ------      --------
          Total other income.........................     139       109        71            31
                                                       ------    ------    ------      --------
  Income (loss) before income taxes..................     578       251       568        (1,293)
  State income taxes.................................      --        --        --            15
                                                       ------    ------    ------      --------
          Net income (loss)..........................  $  578    $  251    $  568      $ (1,308)
                                                       ======    ======    ======      ========
Basic income (loss) per share........................  $5,780    $2,510    $5,680      $(13,080)
                                                       ======    ======    ======      ========
Weighted average shares outstanding..................     100       100       100           100
                                                       ======    ======    ======      ========
See accompanying notes to financial statements.
                                      F-37
96
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK      ADDITIONAL
                                  ----------------     PAID-IN      TRANSLATION    RETAINED
                                  SHARES    AMOUNT     CAPITAL      ADJUSTMENT     EARNINGS     TOTAL
                                  ------    ------    ----------    -----------    --------    -------
Balance, June 30, 1994..........   100        $1         $ --           $--        $   310     $   311
  Net income....................    --        --           --            --            578         578
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1995..........   100         1           --            --            888         889
  Net income....................    --        --           --            --            251         251
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1996..........   100         1           --            --          1,139       1,140
  Net income....................    --        --           --            --            568         568
  Translation adjustment........    --        --           --            (6)            --          (6)
  Stock surrender...............    (1)       --           --            --             --          --
                                   ---       ---         ----           ---        -------     -------
Balance, June 30, 1997..........    99         1           --            (6)         1,707       1,702
  Net loss......................    --        --           --            --         (1,308)     (1,308)
  Stock grant...................     5        --          182            --             --         182
                                   ---        --         ----           ---        -------     -------
Balance, May 4, 1998............   104        $1         $182           $(6)       $   399     $   576
                                   ===       ===         ====           ===        =======     =======
See accompanying notes to financial statements.
                                      F-38
97
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
PERIOD FROM
                                                            YEAR ENDED JUNE 30,     JULY 1, 1997
                                                           ----------------------        TO
                                                           1995    1996     1997    MAY 4, 1998
                                                           -----   -----   ------   ------------
Cash flows from operating activities:
  Net income (loss)......................................  $ 578   $ 251   $  568     $(1,308)
                                                           -----   -----   ------     -------
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization.....................     57      46       92          92
       Non-cash compensation.............................     --      --       --         946
       Changes in operating assets and liabilities:
          (Increase) in accounts receivable..............   (176)   (195)    (115)       (218)
          (Increase) decrease in prepaid expenses........     --     (67)     (76)         (3)
          (Increase) decrease in other assets............     --      --        1          (1)
          Increase (decrease) in accounts payable........     90      47       (2)        253
          Increase (decrease) in accrued expenses........     19     172      142        (199)
          Increase (decrease) in taxes payable...........     --      --       --          15
          Increase (decrease) in deferred revenue........     22     (48)      31         (42)
                                                           -----   -----   ------     -------
            Total adjustments............................     12     (45)      73         843
                                                           -----   -----   ------     -------
            Net cash provided by (used in) operating
               activities................................    590     206      641        (465)
                                                           -----   -----   ------     -------
Cash flows from investing activities:
  Purchases of property and equipment....................   (157)   (122)     (42)        (78)
  Proceeds from sale of property and equipment...........     --       5        9          --
  Net increase in amounts due from employees and related
     parties.............................................     --      --       --        (216)
  Purchase of trademark..................................     --      (7)      --          --
                                                           -----   -----   ------     -------
            Net cash used in investing activities........   (157)   (124)     (33)       (294)
                                                           -----   -----   ------     -------
Cash flows from financing activities:
  Proceeds received on line of credit....................     --      --      200          --
  Principal payments on line of credit...................     --      --     (200)         --
                                                           -----   -----   ------     -------
            Net cash used in financing activities........     --      --       --          --
                                                           -----   -----   ------     -------
Net increase (decrease) in cash and cash equivalents.....    433      82      608        (759)
Effect of exchange rate changes on cash..................     --      --       (6)         --
Cash and cash equivalents, beginning of period...........    137     570      652       1,254
                                                           -----   -----   ------     -------
Cash and cash equivalents, end of period.................  $ 570   $ 652   $1,254         495
                                                           =====   =====   ======     =======
Supplemental disclosure:
  Cash paid for interest.................................  $  --   $  --   $    2     $    --
                                                           =====   =====   ======     =======
See accompanying notes to financial statements.
                                      F-39
98
 
                          BEHAVIORAL TECHNOLOGY, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     Behavioral Technology, Inc. (the "Company") was founded in 1978. The
Company primarily provides train-the-trainer programs designed to help its
clients improve employee selection and to provide managers with a methodology
for assessing strengths and weaknesses of current employees. BTI's revenue is
derived primarily from the licensing to clients of the right to use its training
materials.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed. The Company also licenses
to its clients the use of the Company's behavioral interviewing techniques. The
entire sale price is recognized when the noncancellable contract is signed and
the right to use the intellectual property is transferred. Deferred revenue is
recognized for payments received prior to services being performed.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Prepaid Expenses
 
     Prepaid expenses consist of costs incurred in developing videos and
publishing books. The costs of the videos are being amortized over five years
and the costs of the books are expensed as books are sold.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, short-term certificates of deposit, accounts receivable, accounts
payable and accrued expenses. The carrying value of these financial instruments
approximates their fair value due to the short maturity of these instruments.
 
  Foreign Currency Translation
 
     The Company operates a branch in Canada. Assets and liabilities for the
branch are translated into U.S. Dollars at the end of the year using year-end
exchange rates. Income and expenses are translated
 
                                      F-40
99
                          BEHAVIORAL TECHNOLOGY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
using the average exchange rates for the year. Translation gains and losses are
reported as a separate component of stockholders' equity.
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company conducts its administrative operations in a facility leased
from the principal stockholder of the Company. Lease expense for the years ended
June 30, 1995, 1996 and 1997 and for the period from July 1, 1997 to May 4, 1998
was $90, $76, $85 and $88, respectively.
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
YEAR ENDING JUNE 30,
      --------------------
1998..................................................  $ 83
      1999..................................................    86
      2000..................................................    89
      2001..................................................    89
      2002..................................................    45
                                                              ----
                                                              $392
                                                              ====
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
Machinery and equipment.....................................  $272    $307
Furniture and fixtures......................................    97      95
Leasehold improvements......................................    18      18
                                                              ----    ----
                                                               387     420
Accumulated depreciation and amortization...................   193     285
                                                              ----    ----
          Property and equipment, net.......................  $194    $135
                                                              ====    ====
Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 and for the period from July 1,
1997 to May 4, 1998 was $57, $46, $92 and $92, respectively.
 
                                      F-41
100
                          BEHAVIORAL TECHNOLOGY, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5)  LINE OF CREDIT
 
     The Company entered into a line of credit agreement on October 15, 1996 for
borrowings up to $500. The line bears interest at prime plus 1%, is secured by
the accounts receivable of the Company, and is personally guaranteed by the
principal stockholder. The line of credit had a maturity date of October 15,
1997 and was renewed until October 15, 1998. There were no amounts outstanding
under this agreement at June 30, 1997.
 
(6)  EMPLOYEE BENEFITS
 
     The Company adopted a 401(k) profit sharing plan on January 1, 1996 that
covers all employees above the age of twenty-one who have completed one year of
service. Company contributions are made each year at the discretion of the Board
of Directors. The Company contributed $66, $101, and $101 to the plan for the
years ended June 30, 1996 and 1997 and for the period from July 1, 1997 to May
4, 1998, respectively.
 
(7)  CONCENTRATION OF CREDIT RISK
 
     The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $1,040
at June 30, 1997. The Company has not incurred losses related to these balances
to date.
 
                                      F-42
101
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Decker Communications, Inc.:
 
     We have audited the accompanying balance sheets of Decker Communications,
Inc., as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997, and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Decker Communications, Inc.,
as of June 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended June 30, 1997, and
for the period from July 1, 1997 to May 4, 1998, in conformity with generally
accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-43
102
 
                          DECKER COMMUNICATIONS, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  314    $  508
  Investments...............................................     565       533
  Accounts receivable, net of allowance for doubtful
     accounts of $23 at June 30, 1996 and $31 at June 30,
     1997...................................................   1,242     1,608
  Prepaid expenses and other current assets.................     170       140
                                                              ------    ------
          Total current assets..............................   2,291     2,789
                                                              ------    ------
Property and equipment, net.................................     497       338
Other assets................................................      47        59
                                                              ------    ------
          Total assets......................................  $2,835    $3,186
                                                              ======    ======
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  251    $  111
  Accrued expenses..........................................     283       378
  Accrued compensation......................................     469       639
  Taxes payable.............................................       6        --
  Current portion of note payable...........................      --       416
  Deferred revenue..........................................      92        89
                                                              ------    ------
          Total current liabilities.........................   1,101     1,633
                                                              ------    ------
Note payable, net of current portion........................      --       623
Redeemable common stock.....................................      --       300
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 750,000 shares authorized;
     176,972 and 138,027 shares issued and outstanding at
     June 30, 1996, and June 30, 1997, respectively.........     397       269
  Unrealized gain on investments............................       5         9
  Note receivable from stock sales..........................     (92)     (127)
  Retained earnings.........................................   1,424       479
                                                              ------    ------
          Total stockholders' equity........................   1,734       630
                                                              ------    ------
          Total liabilities and stockholders' equity........  $2,835    $3,186
                                                              ======    ======
See accompanying notes to financial statements.
                                      F-44
103
 
                          DECKER COMMUNICATIONS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PERIOD FROM
                                                            YEAR ENDED JUNE 30,      JULY 1, 1997
                                                          ------------------------        TO
                                                           1995     1996     1997    MAY 4, 1998
                                                          ------   ------   ------   ------------
Revenue.................................................  $8,550   $8,620   $8,410      $8,729
Cost of revenue.........................................   2,419    2,655    2,275       2,275
                                                          ------   ------   ------      ------
  Gross profit..........................................   6,131    5,965    6,135       6,454
Selling, general and administrative expenses............   5,670    5,716    6,446       5,696
                                                          ------   ------   ------      ------
  Income (loss) from operations.........................     461      249     (311)        758
Other (income) expense..................................     (54)     (74)       9         (11)
                                                          ------   ------   ------      ------
  Income (loss) before income taxes.....................     515      323     (320)        769
State income taxes......................................      67       30       33          17
                                                          ------   ------   ------      ------
  Net income (loss).....................................  $  448   $  293   $ (353)     $  752
                                                          ======   ======   ======      ======
Basic income (loss) per share...........................  $ 2.53   $ 1.63   $(2.55)     $ 5.24
                                                          ======   ======   ======      ======
Weighted average shares outstanding.....................  176,750  180,150  138,352    143,417
                                                          =======  =======  =======  =========
See accompanying notes to financial statements.
                                      F-45
104
 
                          DECKER COMMUNICATIONS, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
NOTE
                                            COMMON STOCK     UNREALIZED    RECEIVABLE
                                          ----------------     GAIN ON     FROM STOCK   RETAINED
                                          SHARES    AMOUNT   INVESTMENTS     SALES      EARNINGS   TOTAL
                                          -------   ------   -----------   ----------   --------   ------
Balance, June 30, 1994..................  174,000   $ 314        $--         $  --       $1,257    $1,571
  Sale of stock.........................    5,500      49        --            (50)          --        (1)
  Net income............................       --      --        --             --          448       448
  Dividends.............................       --      --        --             --         (300)     (300)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1995..................  179,500     363        --            (50)       1,405     1,718
  Sale of stock.........................    4,000      42        --            (42)          --        --
  Repurchase of stock...................   (6,528)     (8)       --             --          (59)      (67)
  Unrealized gain on investments........       --      --         5             --           --         5
  Net income............................       --      --        --             --          293       293
  Dividends.............................       --      --        --             --         (215)     (215)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1996..................  176,972     397         5            (92)       1,424     1,734
  Sale of stock.........................    8,080      35        --            (35)          --        --
  Repurchase of stock...................  (37,850)   (163)       --             --         (138)     (301)
  Unrealized gain on investments........       --      --         4             --           --         4
  Redeemable common stock...............   (9,175)     --        --             --         (300)     (300)
  Net loss..............................       --      --        --             --         (353)     (353)
  Dividends.............................       --      --        --             --         (154)     (154)
                                          -------   -----        --          -----       ------    ------
Balance, June 30, 1997..................  138,027     269         9           (127)         479       630
  Sale of stock.........................    5,390      44        --            (44)          --        --
  Unrealized gain on investments........       --      --        (9)            --           --        (9)
  Dividends.............................       --      --        --             --         (350)     (350)
  Net income............................       --      --        --             --          752       752
                                          -------   -----        --          -----       ------    ------
Balance, May 4, 1998....................  143,417   $ 313        $--         $(171)      $  881    $1,023
                                          =======   =====        ==          =====       ======    ======
See accompanying notes to financial statements.
                                      F-46
105
 
                          DECKER COMMUNICATIONS, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
PERIOD FROM
                                                               YEAR ENDED JUNE 30,    JULY 1, 1997
                                                              ---------------------        TO
                                                              1995    1996    1997    MAY 4, 1998
                                                              -----   -----   -----   ------------
Cash flows from operating activities:
  Net income (loss).........................................  $ 448   $ 293   $(353)     $  752
                                                              -----   -----   -----      ------
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
       Depreciation and amortization........................    127     223     194         152
       Non-cash compensation................................     --      --     825          --
       (Gain) loss on disposal of property and equipment....     --      (3)     12          --
       Changes in operating assets and liabilities:
          (Increase) decrease in accounts receivable,
             trade..........................................   (210)     62    (366)        413
          (Increase) decrease in related party receivable...     --      --      --        (199)
          (Increase) decrease in prepaid expenses and other
             current assets.................................     12      20      30         (29)
          (Increase) decrease in other assets...............    (18)      6     (12)          7
          Increase (decrease) in accounts payable and
             accrued expenses...............................    247     (30)    119        (283)
          Increase (decrease) in deferred revenue...........    (40)    (61)     (3)         31
          Increase (decrease) in other current
             liabilities....................................     --      --      --         223
                                                              -----   -----   -----      ------
            Total adjustments...............................    118     217     799         315
                                                              -----   -----   -----      ------
            Net cash provided by operating activities.......    566     510     446       1,067
                                                              -----   -----   -----      ------
Cash flows from investing activities:
  Net change in investments.................................   (344)    131      36         133
  Purchases of property and equipment.......................   (136)   (443)    (56)       (167)
  Proceeds from sale of property and equipment..............     --       9       9           3
                                                              -----   -----   -----      ------
            Net cash (used in) provided by investing
                activities..................................   (480)   (303)    (11)        (31)
                                                              -----   -----   -----      ------
Cash flows from financing activities:
  Dividends.................................................   (300)   (215)   (154)       (544)
  Repurchase of stock.......................................     --     (67)    (35)         --
  Payments of notes payable.................................     (6)     --     (52)        (11)
  Repayments of long-term debt..............................     --      --      --         (35)
                                                              -----   -----   -----      ------
            Net cash used in financing activities...........   (306)   (282)   (241)       (590)
                                                              -----   -----   -----      ------
Net (decrease) increase in cash and cash equivalents........   (220)    (75)    194         446
Cash and cash equivalents, beginning of period..............    609     389     314         508
                                                              -----   -----   -----      ------
Cash and cash equivalents, end of period....................  $ 389   $ 314   $ 508      $  954
                                                              =====   =====   =====      ======
Supplemental disclosure:
  Cash paid for interest....................................  $  --   $  --   $  80      $   38
                                                              =====   =====   =====      ======
Supplemental disclosure of non-cash item:
  Increase (decrease) in market value of investments........  $  19   $ (11)  $   4      $   (9)
                                                              =====   =====   =====      ======
See accompanying notes to financial statements.
                                      F-47
106
 
                          DECKER COMMUNICATIONS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
(1)  NATURE OF OPERATIONS
 
     Decker Communications, Inc. (the "Company") was founded in 1979. The
Company provides instructor-led training to businesses to improve employees'
business communication skills and communication between management and
employees. Revenue is derived primarily from fees charged to participants in its
instructor-led training programs.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenues are recognized as products and services are provided.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Investments
 
     Marketable investment securities consist of U.S. treasury bills and equity
securities in various mutual funds. The investments are stated at fair market
value and are accounted for as available for sale securities under the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Unrealized gains are
included as a separate component of stockholders' equity.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the lease term.
 
  Fair Value of Financial instruments
 
     Financial instruments of the Company consist of cash and cash equivalents,
investments, accounts and notes receivable, accounts payable and accrued
liabilities. The carrying value of these financial instruments approximates
their fair value because of the short maturity of these instruments. Based upon
borrowing rates currently available to the Company for issuance of similar debt
with similar terms and remaining maturities, the estimated fair value of the
long-term debt approximates its carrying amount.
 
                                      F-48
107
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Library of Copyrighted Materials
 
     The Company derives a substantial portion of its revenue from training
programs which are based on its library of copyrighted materials and other
materials developed within the Company. Costs associated with the development of
these materials have been expensed as incurred.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company has a note receivable from a stockholder and officer of the
Company for the purchase of stock. The balance of this note was $92 and $127 at
June 30, 1996 and 1997, respectively. The note bears interest at the prevailing
rate and is secured by shares of Company stock and may be repaid by cash or
redemption of the stock to the Company. The note is reflected as a reduction of
stockholders' equity in the accompanying balance sheets.
 
(4)  INVESTMENTS
 
     Investments consist of the following:
JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
U.S. Treasury Bills.........................................  $433    $381
Mutual Funds................................................   127     143
                                                              ----    ----
          Total cost........................................  $560    $524
Unrealized gain.............................................     5       9
                                                              ----    ----
          Total fair value..................................  $565    $533
                                                              ====    ====
F-49
108
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(5)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
JUNE 30,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
Equipment..................................................  $  665       591
Furniture and fixtures.....................................     336       334
Software...................................................     129       143
Leasehold improvements.....................................      17        19
                                                             ------    ------
                                                              1,147     1,087
Accumulated depreciation and amortization..................     650       749
                                                             ------    ------
          Property and equipment, net......................  $  497       338
                                                             ======    ======
Depreciation and amortization expense related to property and equipment for
the years ended June 30, 1995, 1996 and 1997 and for the period from July 1,
1997 to May 4, 1998 was $127, $223, $194 and $152, respectively.
 
(6)  NOTE PAYABLE
 
     In July 1996, the Company entered into a stock repurchase agreement with a
stockholder of the Company to repurchase 33,350 shares of common stock. In
connection with the agreement, the Company issued a secured promissory note to
the stockholder in the amount of $1,091. Of the total purchase price, $825 has
been attributed to compensation expense. The balance has been treated as a
repurchase of common stock. The note bears interest at 7.5%, with principal and
interest due monthly through June 30, 2009. The note is secured by all tangible
and intangible assets of the Company.
 
     In connection with the stock repurchase agreement, the stockholder has the
option to accelerate the payment of a portion of the outstanding balance upon
the occurrence of certain events. One such event has occurred, as discussed in
note 1, giving the stockholder the right to accelerate approximately $416 of the
principal balance. This amount has been classified as current in the
accompanying balance sheet at June 30, 1997. The stockholder has not yet chosen
to accelerate the note.
 
     Also in connection with the stock repurchase agreement, the Company issued
a put option to the stockholder which gave him the right, upon occurrence of a
triggering event, to sell his remaining 9,175 shares of common stock to the
Company at an arbitrated value per share. Payment pursuant to this put option
would be made by amending the principal balance of the note payable by the
amount of the purchase price, effective July 1, 1999. The stockholder has not
yet chosen to exercise the put option. Common shares held under this option have
been reflected as redeemable common stock in the June 30, 1997 balance sheet.
 
     Principal payments on long-term debt are as follows:
YEAR ENDING JUNE 30,
                --------------------
1998..........................................  $  410
      1999..........................................      60
      2000..........................................      64
      2001..........................................      69
      2002..........................................      75
      Thereafter....................................     347
                                                      ------
          Total.....................................  $1,025
                                                      ======
F-50
109
                          DECKER COMMUNICATIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
(7)  LINE OF CREDIT
 
     The Company has a $250 line of credit agreement with a bank, with interest
payable at prime plus 1.5%. The line of credit is secured by substantially all
of the Company's assets and is guaranteed by the principal stockholder of the
Company. At June 30, 1996 and 1997, there were no amounts outstanding under the
agreement.
 
(8)  OPERATING LEASES
 
     The Company leases all of its facilities under cancelable and noncancelable
operating leases that expire on various dates through fiscal 2002. Most of these
leases generally provide for rent escalation based upon changes in real estate
taxes and operating expenses.
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
YEAR ENDING JUNE 30,
                --------------------
1998..........................................  $  494
      1999..........................................     502
      2000..........................................     382
      2001..........................................     374
      2002..........................................     108
                                                      ------
          Total                                       $1,860
                                                      ======
Rent expense for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998 was $505, $561, $510, and $427,
respectively.
 
(9)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee annual
contributions up to $1 per employee. The Company contributed $29, $20, $28, and
$36 to the plan for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998, respectively.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     The Company's three largest customers accounted for approximately 16%, 30%,
and 16% of total revenues for the years ended June 30, 1995, 1996 and 1997,
respectively. Accounts receivable from these customers represented approximately
13% and 16% of the total accounts receivable balance at June 30, 1996 and 1997,
respectively.
 
                                      F-51
110
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
J. Howard & Associates, Inc.:
 
     We have audited the accompanying balance sheets of J. Howard & Associates,
Inc., as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997 and for the period from January 1,
1998 to May 4, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of J. Howard & Associates,
Inc., as of December 31, 1996 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1997 and for the period from January 1, 1997 to May 4, 1998, in conformity with
generally accepted accounting principles.
 
                                          KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-52
111
 
                          J. HOWARD & ASSOCIATES, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
ASSETS
Current assets:
  Cash and cash equivalents.................................    $  201    $  208
  Investments...............................................        --        --
  Accounts receivable, net of allowance for doubtful
     accounts of $84 at December 31, 1996 and $74 at
     December 31, 1997......................................       724     1,166
  Due from employees and related parties....................        17       214
  Prepaid expenses..........................................        14        42
                                                                ------    ------
          Total current assets..............................       956     1,630
                                                                ------    ------
Property and equipment, net.................................       365       301
Other assets................................................        44       138
                                                                ------    ------
          Total assets......................................    $1,365    $2,069
                                                                ======    ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $   12    $   59
  Accrued expenses..........................................       106       105
  Accrued compensation......................................        32       139
  Deferred revenue..........................................       135        88
  Accrued state income taxes................................        38        41
  Distributions payable.....................................        --       103
  Current portion of long-term debt.........................        --        --
                                                                ------    ------
          Total current liabilities.........................       323       535
                                                                ------    ------
Commitments and contingencies
Stockholders' equity:
  Class A voting common stock, no par value; authorized
     100,000 shares; issued and outstanding 72,533 shares at
     December 31, 1996 and December 31, 1997................       175       175
  Class B non-voting common stock, no par value; authorized
     25,000 shares; issued and outstanding 16,267 shares at
     December 31, 1996 and December 31, 1997................        97        97
  Retained earnings.........................................       770     1,262
                                                                ------    ------
          Total stockholders' equity........................     1,042     1,534
                                                                ------    ------
          Total liabilities and stockholders' equity........    $1,365    $2,069
                                                                ======    ======
See accompanying notes to financial statements.
                                      F-53
112
 
                          J. HOWARD & ASSOCIATES, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PERIOD FROM
                                                          YEAR ENDED DECEMBER 31,    JANUARY 1, 1998
                                                          ------------------------         TO
                                                           1995     1996     1997      MAY 4, 1998
                                                          ------   ------   ------   ---------------
Revenue.................................................  $6,251   $7,110   $7,684       $2,041
Cost of revenue.........................................   1,964    2,166    2,346          670
                                                          ------   ------   ------       ------
  Gross profit..........................................   4,287    4,944    5,338        1,371
Selling, general, and administrative expenses...........   4,158    4,559    4,748        1,476
                                                          ------   ------   ------       ------
  Income (loss) from operations.........................     129      385      590         (105)
                                                          ------   ------   ------       ------
Other income (expense):
  Interest and dividend income..........................       6       31       15            3
  Interest expense......................................      (9)      --       --           --
  Other income (expense)................................      --        3       --           --
                                                          ------   ------   ------       ------
          Total other income (expense)..................      (3)      34       15            3
                                                          ------   ------   ------       ------
          Income (loss) before
            income taxes................................     126      419      605         (102)
State income taxes......................................      10        8        5           --
                                                          ------   ------   ------       ------
          Net income (loss).............................  $  116   $  411   $  600       $ (102)
                                                          ======   ======   ======       ======
Basic income (loss) per share...........................  $ 1.45   $ 4.81   $ 6.76       $(1.15)
                                                          ======   ======   ======       ======
Weighted average shares outstanding.....................  80,000   85,500   88,800       88,800
                                                          ======   ======   ======       ======
See accompanying notes to financial statements.
                                      F-54
113
 
                          J. HOWARD & ASSOCIATES, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
CLASS A VOTING     CLASS B NON-VOTING
                                        COMMON STOCK         COMMON STOCK
                                      ----------------    ------------------    RETAINED
                                      SHARES    AMOUNT    SHARES     AMOUNT     EARNINGS    TOTAL
                                      ------    ------    -------    -------    --------    ------
Balance, December 31, 1994..........  66,667     $ 64     13,333      $ 42       $1,059     $1,165
  Net income........................      --       --         --        --          116        116
  Distributions to stockholders.....      --       --         --        --         (473)      (473)
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1995..........  66,667       64     13,333        42          702        808
  Net income........................      --       --         --        --          411        411
  Distributions to stockholders.....      --       --         --        --         (343)      (343)
  Stock grant.......................   5,866      111      2,934        55           --        166
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1996..........  72,533      175     16,267        97          770      1,042
  Net income........................      --       --         --        --          600        600
  Distributions to stockholders.....      --       --         --        --         (108)      (108)
                                      ------     ----     ------      ----       ------     ------
Balance, December 31, 1997..........  72,533      175     16,267        97        1,262      1,534
  Net loss..........................      --       --         --        --         (102)      (102)
                                      ------     ----     ------      ----       ------     ------
Balance, May 4, 1998................  72,533     $175     16,267      $ 97       $1,160     $1,432
                                      ======     ====     ======      ====       ======     ======
See accompanying notes to financial statements.
                                      F-55
114
 
                          J. HOWARD & ASSOCIATES, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
PERIOD FROM
                                                              YEAR ENDED DECEMBER 31,    JANUARY 1, 1998
                                                              ------------------------         TO
                                                               1995     1996     1997      MAY 4, 1998
                                                              ------   ------   ------   ---------------
Cash flows from operating activities:
  Net income (loss).........................................  $ 116    $ 411    $ 600         $(102)
                                                              -----    -----    -----         -----
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Depreciation and amortization........................     95      104      139            45
       Non-cash compensation................................     --      166       --           152
       Loss on sale of property and equipment...............     --       --       15            --
       Changes in operating assets and liabilities:
          (Increase) decrease in accounts receivable........   (116)      37     (442)          (86)
          (Increase) decrease in prepaid expenses...........     10      (10)     (28)           (5)
          Increase in investments...........................     --       --       --           (10)
          (Increase) decrease in other assets...............     12        9      (94)          106
          Increase (decrease) in accounts payable and
            accrued expenses................................    153     (282)     256           237
          Increase in state income taxes....................      8       11        3            --
          Increase (decrease) in deferred revenue...........     91       18      (47)          (65)
                                                              -----    -----    -----         -----
            Total adjustments...............................    253       53     (198)          374
                                                              -----    -----    -----         -----
            Net cash provided by (used in) operating
                activities..................................    369      464      402           272
                                                              -----    -----    -----         -----
Cash flows from investing activities:
  Purchases of property and equipment.......................    (50)    (299)    (101)          (81)
  Proceeds from sale of property and equipment..............     --       --       11            --
  Net (increase) decrease in amounts due from employees and
     related parties........................................     (8)      51     (197)          156
                                                              -----    -----    -----         -----
            Net cash used in investing activities...........    (58)    (248)    (287)           75
                                                              -----    -----    -----         -----
Cash flows from financing activities:
  Proceeds (payments) on long-term debt.....................    (42)      --       --           385
  Distributions to stockholders.............................   (335)    (481)    (108)         (103)
                                                              -----    -----    -----         -----
            Net cash (used in) provided by financing
                activities..................................   (377)    (481)    (108)          282
                                                              -----    -----    -----         -----
Net increase (decrease) in cash and cash equivalents........    (66)    (265)       7           629
Cash and cash equivalents, beginning of period..............    532      466      201           208
                                                              -----    -----    -----         -----
Cash and cash equivalents, end of period....................  $ 466    $ 201      208         $ 837
                                                              =====    =====    =====         =====
Supplemental disclosure:
  Cash paid for interest....................................  $   9    $  --    $  --         $  --
                                                              =====    =====    =====         =====
See accompanying notes to financial statements.
 
                                      F-56
115
 
                          J. HOWARD & ASSOCIATES, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     J. Howard & Associates, Inc. (the "Company") was founded in 1977. The
Company provides instructor-led training to individual managers and client
companies to identify and address potential obstacles to improving workplace
productivity, including race and gender issues, sexual harassment and failure of
employees to take measured risks. Revenue is derived primarily from
instructor-led seminars and, to a lesser extent, from rendering consulting
services.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as products and services are provided.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using accelerated
and straight-line methods over periods ranging from three to seven years.
Leasehold improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
                                      F-57
116
                          J. HOWARD & ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     Due from employees and related parties consists of the following at:
DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
Due from The Efficacy Institute, Inc........................  $14     $ 39
Due from (to) stockholders..................................   (9)     173
Due from employees..........................................   12        2
                                                              ---     ----
                                                              $17     $214
                                                              ===     ====
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
DECEMBER 31,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
Equipment..................................................  $  677    $  631
Furniture and fixtures.....................................     255       270
Leasehold improvements.....................................      49        49
Investment art.............................................      21        21
Computer software..........................................     113       207
Vehicles...................................................      38        38
                                                             ------    ------
                                                              1,153     1,216
Accumulated depreciation and amortization..................     788       915
                                                             ------    ------
          Property and equipment, net......................  $  365    $  301
                                                             ======    ======
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995, 1996 and 1997 and for the period from January
1, 1998 to May 4, 1998 was $95, $104, $139 and $45, respectively.
 
(5)  LINE OF CREDIT
 
     The Company has a secured revolving line of credit agreement which permits
borrowings of up to $500 at the bank's base rate plus one percent. No amounts
were outstanding under this agreement at December 31, 1995, 1996 and 1997.
Substantially all assets of the Company are pledged as collateral under this
agreement.
 
(6)  DISTRIBUTIONS TO STOCKHOLDERS
 
     As discussed in note 2, the stockholders are taxed on their proportionate
share of the Company's taxable income. It has been the Company's policy to make
distributions to the stockholders for the purpose of funding these income tax
obligations.
 
(7)  LEASE COMMITMENTS
 
     The Company is committed under various noncancelable operating leases for
office space and equipment through June 2005. Lease expense charged to
operations was $256 in 1995, $247 in 1996 and $149 in 1997 and $55 for the
period from January 1, 1998 to May 4, 1998.
 
                                      F-58
117
                          J. HOWARD & ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Future minimum lease payments under all noncancelable operating leases are
as follows:
YEAR ENDING DECEMBER 31,
              ------------------------
1998................................................  $  344
1999................................................     616
2000................................................     617
2001................................................     577
2002................................................     554
Thereafter..........................................   1,372
                                                      ------
                                                      $4,080
                                                      ======
(8)  STOCKHOLDERS' EQUITY
 
     During the year ended December 31, 1996, 5,866 shares of Class A common
stock (voting) no par value and 2,934 shares of Class B common stock
(non-voting) no par value were issued 50% each to two new shareholders in
recognition of compensation expense of $111 and $55, respectively.
 
     On June 30, 1995, the Company approved an increase in the authorized common
stock Class A (voting) from 12,500 shares to 100,000 shares and common stock
Class B (non-voting) from 1,000 shares to 25,000 shares. Additionally, the
Company approved an exchange of 40 shares of the newly authorized shares for
each share of the previously authorized shares (or a 40 for 1 stock split). All
share data has been retroactively adjusted to reflect the stock split.
 
(9)  EMPLOYEE BENEFITS
 
     The Company maintains a defined contribution retirement plan for all
eligible employees. Company contributions are at the discretion of the Board of
Directors, but cannot exceed the maximum amount deductible under applicable
provisions of the Internal Revenue Code.
 
     Contributions to the plan amounted to $34 for each of the years ended
December 31, 1995, 1996 and 1997. For the period from January 1, 1998 to May 4,
1998, contributions to the plan were $12.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     The Company's three largest customers accounted for approximately 30%, 63%
and 34% of net program revenues for the years ended December 31, 1995, 1996 and
1997, respectively. Accounts receivable from these customers approximated $514
and $280 at December 31, 1996 and 1997, respectively.
 
     The Company maintains cash deposits in two banks located in eastern
Massachusetts and in a money market mutual fund account sponsored by a
registered broker-dealer. Cash deposits in excess of FDIC insurance limits
approximated $140 and $46 at December 31, 1996 and 1997, respectively.
 
                                      F-59
118
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Robert Steinmetz, Ph.D., and Associates, Inc.
d/b/a Learning Systems Sciences:
 
     We have audited the accompanying balance sheets of Robert Steinmetz, Ph.D.,
and Associates, Inc., d/b/a Learning Systems Sciences as of December 31, 1996
and 1997 and the related statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997,
and for the period from January 1, 1998 to May 4, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robert Steinmetz, Ph.D., and
Associates, Inc., d/b/a Learning Systems Sciences as of December 31, 1996 and
1997 and the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 1997, and for the period from
January 1, 1998 to May 4, 1998 in conformity with generally accepted accounting
principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-60
119
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
Current assets:
  Cash and cash equivalents.................................  $  274    $  174
  Accounts receivable, net of allowance for doubtful
     accounts of $88 at December 31, 1996 and 1997..........     703       984
  Costs in excess of billings...............................     267       561
  Prepaid expenses and other current assets.................      53        43
                                                              ------    ------
          Total current assets..............................   1,297     1,762
                                                              ------    ------
Property and equipment, net.................................     129       153
Other assets................................................     103       104
                                                              ------    ------
          Total assets......................................  $1,529    $2,019
                                                              ======    ======
 
Current liabilities:
  Accounts payable..........................................  $   64    $  185
  Accrued expenses..........................................     166        40
  Accrued compensation......................................     124       161
  Billings in excess of costs...............................     710       414
                                                              ------    ------
          Total current liabilities.........................   1,064       800
                                                              ------    ------
Commitments and contingencies
Stockholders' equity:
  Common stock, stated value; 14,000,000 shares authorized,
     issued and outstanding.................................       3         3
  Retained earnings.........................................     462     1,216
                                                              ------    ------
          Total stockholders' equity........................     465     1,219
                                                              ------    ------
          Total liabilities and stockholders' equity........  $1,529    $2,019
                                                              ======    ======
See accompanying notes to financial statements.
                                      F-61
120
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31,            PERIOD FROM
                                                ------------------------------------   JANUARY 1, 1998
                                                   1995         1996         1997      TO MAY 4, 1998
                                                ----------   ----------   ----------   ---------------
Revenue.......................................  $    3,332   $    5,123   $    5,681     $    2,861
Cost of revenue...............................       1,390        1,696        2,202            909
                                                ----------   ----------   ----------     ----------
  Gross profit................................       1,942        3,427        3,479          1,952
Selling, general and administrative
  expenses....................................       1,767        3,079        2,226            633
                                                ----------   ----------   ----------     ----------
          Income from operations..............         175          348        1,253          1,319
                                                ----------   ----------   ----------     ----------
Other income (expense):
  Other.......................................         (49)          --           --             --
  Interest income, net........................           2            9           15              5
                                                ----------   ----------   ----------     ----------
          Total other income (expense)........         (47)           9           15              5
                                                ----------   ----------   ----------     ----------
          Income before income taxes..........         128          357        1,268          1,324
Income taxes..................................          86            7           18              4
                                                ----------   ----------   ----------     ----------
          Net income..........................  $       42   $      350   $    1,250     $    1,320
                                                ==========   ==========   ==========     ==========
Basic income per share........................  $       --   $      .03   $      .09     $      .09
                                                ==========   ==========   ==========     ==========
Weighted average shares outstanding...........  14,000,000   14,000,000   14,000,000     14,000,000
                                                ==========   ==========   ==========     ==========
See accompanying notes to financial statements.
                                      F-62
121
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
                                                      --------------------    RETAINED
                                                        SHARES      AMOUNT    EARNINGS    TOTAL
                                                      ----------    ------    --------    ------
Balance, December 31, 1994..........................  14,000,000      $3       $   70     $   73
  Net income........................................          --      --           42         42
                                                      ----------      --       ------     ------
Balance, December 31, 1995..........................  14,000,000       3          112        115
  Net income........................................          --      --          350        350
                                                      ----------      --       ------     ------
Balance, December 31, 1996..........................  14,000,000       3          462        465
  Dividend                                                    --      --         (496)      (496)
  Net income........................................          --      --        1,250      1,250
                                                      ----------      --       ------     ------
Balance, December 31, 1997..........................  14,000,000       3        1,216      1,219
  Dividend                                                    --      --         (279)      (279)
  Net income........................................          --      --        1,320      1,320
                                                      ----------      --       ------     ------
Balance, May 4, 1998................................  14,000,000      $3       $2,257     $2,260
                                                      ==========      ==       ======     ======
See accompanying notes to financial statements.
                                      F-63
122
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31,      PERIOD FROM
                                                        -------------------------   JANUARY 1, 1998
                                                         1995     1996     1997     TO MAY 4, 1998
                                                        ------   ------   -------   ---------------
Cash flows from operating activities:
  Net income..........................................  $  42    $ 350    $1,250        $1,320
                                                        -----    -----    ------        ------
  Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization..................     48       43        62            20
       Changes in operating assets and liabilities:
          Increase in accounts receivable.............   (467)    (195)     (281)         (169)
          (Increase) decrease in prepaid expenses and
            other current assets......................     12      (30)       10           (70)
          (Increase) decrease in costs in excess of
            billings..................................   (184)      14      (294)          109
          (Increase) decrease in other assets.........    (17)     (19)       (1)           14
          Increase (decrease) in accounts payable and
            accrued expenses..........................     50      115        32           111
          Increase in deferred revenue................     --       --        --            93
          Increase (decrease) in billings in excess of
            costs.....................................    560       37      (296)         (414)
                                                        -----    -----    ------        ------
            Total adjustments.........................      2      (35)     (768)         (309)
                                                        -----    -----    ------        ------
            Net cash provided by operating
               activities.............................     44      315       482         1,011
                                                        -----    -----    ------        ------
Cash flows from investing activity:
  Purchases of property and equipment.................    (84)     (85)      (86)         (271)
                                                        -----    -----    ------        ------
Cash flows from financing activity:
  Dividend............................................     --       --      (496)         (629)
                                                        -----    -----    ------        ------
            Net (decrease) increase in cash and cash
               equivalents............................    (40)     230      (100)          111
Cash and cash equivalents, beginning of period........     84       44       274           174
                                                        -----    -----    ------        ------
Cash and cash equivalents, end of period..............  $  44    $ 274    $  174        $  285
                                                        =====    =====    ======        ======
See accompanying notes to financial statements.
                                      F-64
123
 
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     Robert Steinmetz, Ph.D., and Associates, Inc., d/b/a Learning Systems
Sciences, was founded in 1979. The Company creates customized training products
that generally are designed to facilitate faster learning of customer interface
devices and higher productivity of retail associates. Revenue is derived
primarily from the design, development and delivery of its products.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     The Company follows the percentage-of-completion method of accounting for
contracts. Accordingly, income is recognized in the ratio that costs incurred
bear to estimated total costs. Adjustments to cost estimates are made
periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. The aggregate of
costs incurred and income recognized on uncompleted contracts in excess of
related billings is shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized
is shown as a current liability.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are recorded at cost and depreciated using an
accelerated method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities. The
carrying value of these financial instruments approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     Effective August 31, 1995, the Company elected to be treated as an S
corporation. Therefore, the net income of the Company is reported by the
stockholders. Accordingly, no provision for federal income taxes
 
                                      F-65
124
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
 
has been included in the financial statements for the periods subsequent to that
date. Only certain state income taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
described.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
Machinery and equipment.....................................  $248    $328
Furniture and fixtures......................................    48      54
Automobiles.................................................    10      10
Leasehold improvements......................................    12      12
                                                              ----    ----
                                                               318     404
Less accumulated depreciation and amortization..............   189     251
                                                              ----    ----
          Property and equipment, net.......................  $129    $153
                                                              ====    ====
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1995, 1996 and 1997 and for the period from January
1 to May 4, 1998 was $48, $43, $62 and $20, respectively.
 
(4)  OPERATING LEASES
 
     Operating lease commitments consist of facility and automobile rentals.
Future minimum lease payments under all noncancelable operating leases are as
follows:
YEAR ENDING DECEMBER 31,
1998................................................    $135
1999................................................      39
                                                        ----
                                                        $174
                                                        ====
Lease expense for the years ended December 31, 1995, 1996 and 1997 and for
the period from January 1 to May 4, 1998 totaled $93, $112, $136 and $50,
respectively.
 
(5)  EMPLOYEE BENEFITS
 
     The Company has established a profit sharing plan for the benefit of its
employees. Company contributions are made at the discretion of the Board of
Directors. The Company contributed $83 to the
 
                                      F-66
125
                 ROBERT STEINMETZ, Ph.D., AND ASSOCIATES, INC.
                        d/b/a LEARNING SYSTEMS SCIENCES
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
 
plan in 1995. No contribution was made for the years ended December 31, 1996 or
1997, or for the period from January 1 to May 4, 1998.
 
(6)  CONCENTRATION OF CREDIT RISK
 
     The Company had three customers that accounted for 41% of total revenue and
two customers that accounted for 27% of total revenue for the years ended
December 31, 1996 and 1997, respectively. Accounts receivable from these
customers represented approximately 50% and 28% of the total accounts receivable
balance at December 31, 1996 and 1997, respectively.
 
(7)  STOCK SPLIT
 
     Subsequent to December 31, 1997, the Company declared a stock split of
14,000-for-1 in the form of a stock dividend. All share and per share
information has been restated to reflect the split.
 
                                      F-67
126
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
MOHR Retail Learning Systems, Inc.:
 
     We have audited the accompanying balance sheets of MOHR Retail Learning
Systems, Inc., as of June 30, 1996 and 1997, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended June 30, 1997 and for the period from July 1, 1997 to May
4, 1998. These financial statements are the responsibility of MOHR Retail
Learning Systems, Inc.'s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MOHR Retail Learning
Systems, Inc. as of June 30, 1996 and 1997, and the results of its operations
and its cash flows for each of the years in the two-year period ended June 30,
1997, and for the period from July 1, 1997 to May 4, 1998, in conformity with
generally accepted accounting principles.
 
                                          KPMG PEAT MARWICK LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-68
127
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
ASSETS
Current assets:
  Cash and cash equivalents.................................  $221    $260
  Accounts receivable, net of allowance for doubtful
     accounts of $46 at June 30, 1996 and 1997..............   211     548
  Inventory.................................................    99     133
  Prepaid expenses..........................................    11      14
                                                              ----    ----
          Total current assets..............................   542     955
Property and equipment, net.................................    18      44
                                                              ----    ----
          Total assets......................................  $560    $999
                                                              ====    ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $118    $ 74
  Accrued expenses..........................................   320     295
  Accrued compensation......................................    12      54
  Deferred revenue..........................................    48      73
                                                              ----    ----
          Total current liabilities.........................   498     496
                                                              ----    ----
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 2,500 shares authorized; 100
     shares issued and outstanding..........................     4       4
  Retained earnings.........................................    58     499
                                                              ----    ----
          Total stockholders' equity........................    62     503
                                                              ----    ----
          Total liabilities and stockholders' equity........  $560    $999
                                                              ====    ====
See accompanying notes to financial statements.
                                      F-69
128
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED       PERIOD FROM
                                                                  JUNE 30,        JULY 1, 1997
                                                              ----------------         TO
                                                               1996      1997     MAY 4, 1998
                                                              ------    ------    ------------
Revenue.....................................................  $2,171    $3,015       $3,237
Cost of revenue.............................................     677       825        1,009
                                                              ------    ------       ------
  Gross profit..............................................   1,494     2,190        2,228
Selling, general and administrative expenses................   1,151     1,745        1,510
                                                              ------    ------       ------
  Income from operations....................................     343       445          718
Interest income (expense)...................................      (3)        3            5
                                                              ------    ------       ------
  Income before income taxes................................     340       448          723
State income taxes..........................................       1         7            2
                                                              ------    ------       ------
          Net income........................................  $  339    $  441       $  721
                                                              ======    ======       ======
Basic income per share......................................  $3,390    $4,410       $7,210
                                                              ======    ======       ======
Weighted average shares outstanding.........................     100       100          100
                                                              ======    ======       ======
See accompanying notes to financial statements.
                                      F-70
129
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
                                                ----------------      RETAINED EARNINGS
                                                SHARES    AMOUNT    (ACCUMULATED DEFICIT)     TOTAL
                                                ------    ------    ---------------------    -------
Balance, June 30, 1995........................   100       $ 4             $  (281)          $  (277)
  Net income..................................    --        --                 339               339
                                                 ---       ---             -------           -------
Balance, June 30, 1996........................   100         4                  58                62
  Net income..................................    --        --                 441               441
                                                 ---       ---             -------           -------
Balance, June 30, 1997........................   100         4                 499               503
  Net income..................................    --        --                 721               721
                                                 ---       ---             -------           -------
Balance, May 4, 1998..........................   100       $ 4             $ 1,220           $ 1,224
                                                 ===       ===             =======           =======
See accompanying notes to financial statements.
                                      F-71
130
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED
                                                                 JUNE 30,         PERIOD FROM
                                                              --------------    JULY 1, 1997 TO
                                                              1996     1997       MAY 4, 1998
                                                              -----    -----    ---------------
Cash flows from operating activities:
  Net income................................................  $ 339    $ 441         $ 721
                                                              -----    -----         -----
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Depreciation and amortization........................     10       15            20
       Changes in operating assets and liabilities:
          Increase in accounts receivable...................    (99)    (337)         (304)
          (Increase) decrease in inventory..................      4      (34)           (5)
          (Increase) decrease in prepaid expenses...........      3       (3)          (31)
          Increase (decrease) in accounts payable...........     (1)     (44)           21
          Increase (decrease) in accrued expenses...........    (15)      17          (218)
          Increase (decrease) in deferred revenue...........    (29)      25           131
                                                              -----    -----         -----
            Total adjustments...............................   (127)    (361)         (386)
                                                              -----    -----         -----
            Net cash provided by operating activities.......    212       80           335
                                                              -----    -----         -----
Cash flows from investing activities:
  Purchases of property and equipment.......................     (8)     (41)          (19)
  Net increase in amounts due from employees and related
     parties................................................     --       --           (49)
                                                              -----    -----         -----
            Net cash used in investing activities...........     (8)     (41)          (68)
                                                              -----    -----         -----
Net increase (decrease) in cash and cash equivalents........    204       39           267
Cash and cash equivalents, beginning of period..............     17      221           260
                                                              -----    -----         -----
Cash and cash equivalents, end of period....................  $ 221    $ 260         $ 527
                                                              =====    =====         =====
Supplemental disclosure:
  Cash paid for interest....................................  $  --    $   3         $   7
                                                              =====    =====         =====
See accompanying notes to financial statements.
                                      F-72
131
 
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
(1)  NATURE OF OPERATIONS
 
     MOHR Retail Learning Systems, Inc. (the "Company") was founded in 1991. The
Company offers train-the-trainer seminars to help clients in the retail industry
to improve productivity by fostering a customer oriented focus at the sales
management and associate levels. In some of its programs, the Company trains
employees directly through instructor-led seminars. Revenue is derived primarily
from the licensing to clients of the right to use the Company's training
programs. Revenue is received on a participant or site basis.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed. The Company contracts with
customers to provide materials and training seminars. Deferred revenue is
recognized for payments received prior to services being performed.
 
  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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Inventory
 
     The Company owns training supplies and manuals which are accounted for
using the lower of cost first-in, first-out (FIFO) or market basis of
accounting.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using an
accelerated method over five years. Leasehold improvements are amortized over
the term of the lease.
 
  Fair Value of Financial Instruments
 
     The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses. The
carrying amount of these financial instruments approximates fair value because
of the short maturity of those instruments.
 
                                      F-73
132
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Income Taxes
 
     The Company has elected to be treated as an S corporation. Therefore, the
net income of the Company is reported by the stockholders. Accordingly, no
provision for federal income taxes has been included in the financial
statements. Only certain state taxes are paid by the Company. The Company
terminated its S corporation status concurrently with the combination previously
discussed.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
JUNE 30,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
Equipment...................................................  $34      61
Furniture...................................................    9      19
Leasehold improvements......................................   --       4
                                                              ---     ---
                                                               43      84
Accumulated depreciation and amortization...................   25      40
                                                              ---     ---
          Property and equipment, net.......................  $18      44
                                                              ===     ===
Depreciation and amortization expense related to property and equipment was
$10 and $15 in the years ended June 30, 1996 and 1997, respectively, and $20 for
the period from July 1, 1997 to May 4, 1998.
 
(4)  LEASE COMMITMENTS
 
     The Company is committed under various noncancelable operating leases for
office space and equipment through February 2000. Lease expense for the years
ended June 30, 1996 and 1997 was $18 and $34, respectively. For the period from
July 1, 1997 to May 4, 1998 was $31. Future minimum lease payments under all
noncancelable operating leases are as follows:
YEAR ENDING JUNE 30,
1998.............................................  $41
      1999.............................................   40
      2000.............................................    1
                                                         ---
           Total.......................................  $82
                                                         ===
(5)  EMPLOYEE BENEFITS
 
     Eligible employees of the Company participate in a profit sharing plan
sponsored by the Company. The Plan provides that the Company make discretionary
contributions to the Plan. The Company made
 
                                      F-74
133
                       MOHR RETAIL LEARNING SYSTEMS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
contributions of $145, $104 and $51 for the years ended June 30, 1996 and 1997,
and for the period from July 1, 1997 to May 4, 1998 respectively.
 
(6)  CONCENTRATION OF CREDIT RISK
 
     The Company's credit risks primarily relate to cash and cash equivalents
and accounts receivable. Cash and cash equivalents are primarily held in bank
accounts. Cash deposits in excess of FDIC insurance limits approximated $108 at
June 30, 1997. The Company has not incurred losses related to these balances to
date.
 
     For the year ended June 30, 1996, the Company had one customer that
accounted for 11 percent of total revenue. For the year ended June 30, 1997, no
customer represented greater than 10 percent of total revenue.
 
                                      F-75
134
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Novations Group, Inc.:
 
     We have audited the accompanying balance sheets of Novations Group, Inc.,
as of June 30, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1997 and for the period from July 1, 1997 to May 4, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Novations Group, Inc., as of
June 30, 1996 and 1997, and the results of its operations and its cash flows for
each of the years in the three-year period ended June 30, 1997 and for the
period from July 1, 1997 to May 4, 1998 in conformity with generally accepted
accounting principles.
 
                                          KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-76
135
 
                             NOVATIONS GROUP, INC.
 
                                 BALANCE SHEETS
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
                                                              ----------------
                                                               1996      1997
                                                              ------    ------
Current assets:
  Cash and cash equivalents.................................  $   17    $   88
  Accounts receivable, net of allowance for doubtful
     accounts of $158.......................................   1,976     2,202
  Receivable from related parties...........................     179       414
  Prepaid expenses..........................................      63       115
                                                              ------    ------
          Total current assets..............................   2,235     2,819
Property and equipment, net.................................     552       492
                                                              ------    ------
          Total assets......................................  $2,787    $3,311
                                                              ======    ======
 
Current liabilities:
  Current portion of notes payable..........................   1,079     1,298
  Accounts payable..........................................     225       118
  Accrued compensation......................................     836       803
  Accrued expenses..........................................     275       177
  Deferred income taxes.....................................      --       415
                                                              ------    ------
          Total current liabilities.........................   2,415     2,811
                                                              ------    ------
Notes payable...............................................     459       361
Commitments and contingencies
Stockholders' equity:
  Common stock, $1.00 par value; 1,000,000 shares
     authorized; 1,000 shares issued and outstanding at June
     30, 1996 and 1997, respectively........................       1         1
  Retained earnings (deficit)...............................     (88)      138
                                                              ------    ------
          Total stockholders' equity (deficit)..............     (87)      139
                                                              ------    ------
          Total liabilities and stockholders' equity........  $2,787    $3,311
                                                              ======    ======
See accompanying notes to financial statements.
                                      F-77
136
 
                             NOVATIONS GROUP, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED JUNE 30,          PERIOD FROM
                                                    --------------------------    JULY 1, 1997 TO
                                                     1995      1996      1997       MAY 4, 1998
                                                    ------    ------    ------    ---------------
Revenue...........................................  $7,175    $9,039    $9,018        $9,228
Cost of revenue...................................   3,885     4,733     4,839         4,356
                                                    ------    ------    ------        ------
          Gross profit............................   3,290     4,306     4,179         4,872
Selling, general, and administrative expenses.....   3,167     4,094     3,315         3,956
                                                    ------    ------    ------        ------
          Income from operations..................     123       212       864           916
Interest expense, net.............................      98        98       137           196
                                                    ------    ------    ------        ------
          Income before income taxes..............      25       114       727           720
Income taxes......................................      22        40       435           367
                                                    ------    ------    ------        ------
          Net income..............................  $    3    $   74    $  292        $  353
                                                    ======    ======    ======        ======
Basic income per share............................  $    3    $   74    $  292        $  353
                                                    ======    ======    ======        ======
Weighted average shares outstanding...............   1,000     1,000     1,000         1,000
See accompanying notes to financial statements.
                                      F-78
137
 
                             NOVATIONS GROUP, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
RETAINED
                                                         COMMON STOCK        EARNINGS
                                                       ----------------    (ACCUMULATED
                                                       SHARES    AMOUNT      DEFICIT)      TOTAL
                                                       ------    ------    ------------    -----
Balance, June 30, 1994...............................   1,000     $ 1         $ (45)       $ (44)
  Net income.........................................      --      --             3            3
  Distributions to stockholders......................      --      --           (79)         (79)
                                                       ------     ---         -----        -----
Balance, June 1995...................................   1,000       1          (121)        (120)
  Net income.........................................      --      --            74           74
  Distributions to stockholders......................      --      --           (41)         (41)
                                                       ------     ---         -----        -----
Balance, June 30, 1996...............................   1,000       1           (88)         (87)
  Net income.........................................      --      --           292          292
  Distributions to stockholders......................      --      --           (66)         (66)
                                                       ------     ---         -----        -----
Balance, June 30, 1997...............................   1,000       1           138          139
  Net income.........................................      --      --           353          353
  Distributions to stockholders......................      --      --           (11)         (11)
                                                       ------     ---         -----        -----
Balance, May 4, 1998.................................   1,000     $ 1         $ 480        $ 481
                                                       ======     ===         =====        =====
See accompanying notes to financial statements.
                                      F-79
138
 
                             NOVATIONS GROUP, INC.
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED JUNE 30,        PERIOD FROM
                                                              -----------------------    JULY 1, 1997 TO
                                                              1995     1996     1997       MAY 4, 1998
                                                              -----    -----    -----    ---------------
Cash flows from operating activities:
  Net income................................................  $   3    $  74    $ 292        $   353
                                                              -----    -----    -----        -------
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization..........................    203      167      197            160
     Deferred income taxes..................................     --       --      415            333
     Changes in operating assets and liabilities:
       Increase (decrease) in current portion LT debt.......     --       --       --            475
       (Increase) decrease in accounts receivable...........   (670)    (357)    (226)        (1,227)
       Increase in inventory................................     --       --       --            (89)
       (Increase) decrease in prepaid expenses..............   (250)      86     (287)           112
       Increase (decrease) in income taxes payable..........
       Increase (decrease) in accounts payable and accrued
          expenses..........................................    358      (88)    (238)           450
                                                              -----    -----    -----        -------
          Total adjustments.................................   (359)    (192)    (554)           214
                                                              -----    -----    -----        -------
          Net cash (used by) provided by operating
            activities......................................   (356)    (118)     153            567
                                                              -----    -----    -----        -------
Cash flows from investing activities:
  (Increase) decrease related party receivable..............     --       --       --             45
  Purchases of property and equipment.......................   (217)    (427)    (137)           (61)
                                                              -----    -----    -----        -------
  Cash used in investing activities.........................   (217)    (427)    (137)           (16)
                                                              -----    -----    -----        -------
Cash flows from financing activities:
  Net (repayments)/proceeds from long-term debt.............    340      117      121            (67)
  Distribution to stockholders..............................    (40)     (41)     (66)           (11)
                                                              -----    -----    -----        -------
          Net cash provided by (used in) financing
            activities......................................    300       76       55            (78)
                                                              -----    -----    -----        -------
Net (decrease) increase in cash and cash equivalents........   (273)    (469)      71            473
Cash and cash equivalents, beginning of period..............    759      486       17             88
                                                              -----    -----    -----        -------
Cash and cash equivalents, end of period....................  $ 486    $  17    $  88        $   561
                                                              =====    =====    =====        =======
Supplemental disclosure:
  Cash paid for interest....................................  $ 120    $ 120    $ 151        $   139
                                                              =====    =====    =====        =======
See accompanying notes to financial statements.
                                      F-80
139
 
                             NOVATIONS GROUP, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
(1)  NATURE OF OPERATIONS
 
     Novations Group, Inc. (the "Company") was founded in 1986. The Company
assists clients in, among other things, clarifying and communicating their
business strategies and re-designing their organizations and work systems.
Revenue is derived primarily from fees for professional services and, to a
lesser extent, from the sale of services and products to support human resources
management.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     Revenue is recognized as services are performed and products are provided.
 
  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
disclosures 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.
 
  Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
 
  Property and Equipment
 
     Property and equipment are stated at cost and depreciated using the
straight-line method over periods ranging from five to seven years. Leasehold
improvements are amortized over the term of the lease.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist of cash, marketable
securities, accounts receivable, accounts payable and accrued liabilities and
debt. The carrying value of these financial instruments approximates their fair
value due to the short maturity of these instruments. The carrying value of debt
approximates fair value because the interest rates on the debt approximate the
rates currently available to the Company.
 
  Income Taxes
 
     For periods prior to January 1, 1997, the Company elected to be treated as
an S corporation. Therefore, in such periods the net income of the Company was
reported by the stockholders, and no provision for federal income taxes was
included in the financial statements for such periods, and only certain state
taxes were paid by the Company. The Company terminated its S corporation status
effective January 1, 1997. Accordingly, for periods subsequent to January 1,
1997, the Company accounted for income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the
 
                                      F-81
140
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
 
  Income per Share
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented. All periods
presented have been restated in accordance with FAS 128.
 
(3)  RELATED PARTY TRANSACTIONS
 
     The Company advanced cash to an entity controlled by the stockholders of
the Company. The balance due to the Company as of June 30, 1996 and 1997 was
$140 and $332, respectively. Also included in receivables from related parties
are employee advances of $39 and $82 at June 30, 1996 and 1997, respectively.
 
     The Company leases certain office facilities from a partnership controlled
by the Company's stockholders.
 
     The terms of the lease require annual payments of $300,000, increasing by
3% per year, through March 2002. The Company has an option to renew the lease
for an additional five-year term. The Company has guaranteed a $1.2 million note
payable to a financial institution by the partnership.
 
(4)  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at:
JUNE 30,
                                                             ----------------
                                                              1996      1997
                                                             ------    ------
Computer equipment and software............................  $  922       945
Leasehold improvements.....................................     167       198
Office equipment...........................................     108       170
Furniture and fixtures.....................................      94       115
                                                             ------    ------
                                                              1,291     1,428
Accumulated depreciation and amortization..................     739       936
                                                             ------    ------
     Property and equipment, net...........................  $  552       492
                                                             ======    ======
Depreciation and amortization expense related to property and equipment for
the years ended June 1995, 1996 and 1997, and for the period from July 1, 1997
to May 4, 1998, was $203, $167, $197 and $160, respectively.
 
(5)  NOTES PAYABLE
 
     Notes payable consist of notes to former stockholders, with interest
imputed at 8.75%. Payments are due monthly or annually through March 2002.
 
                                      F-82
141
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Aggregate maturities required on these notes at June 30, 1997 are as
follows:
1998..................................................  $ 59
      1999..................................................    97
      2000..................................................    98
      2001..................................................    98
      2002..................................................    68
                                                              ----
           Total............................................  $420
                                                              ====
(6)  OPERATING LEASES
 
     The Company leases all of its facilities and certain office equipment under
cancelable and noncancelable operating leases that expire on various dates
through 2003.
 
     Future minimum lease payments under all noncancelable operating leases,
including leases to related parties, are as follows:
YEAR ENDING JUNE 30:
                    --------------------
1998..................................................  $  585
      1999..................................................     654
      2000..................................................     632
      2001..................................................     534
      2002..................................................     334
      Thereafter............................................      48
                                                              ------
           Total............................................  $2,787
                                                              ======
Lease expense for the years ended June 30, 1995, 1996 and 1997 and for the
period from July 1, 1997 to May 4, 1998, was $71, $211, $385 and $483,
respectively.
 
(7)  LINE OF CREDIT
 
     The Company has a $1,500 line of credit agreement with a bank, with
interest payable at the bank's prime rate. The interest rate at June 30, 1996
and 1997 was 10 percent. The line of credit is secured by substantially all of
the Company's assets and is guaranteed by the principal stockholders of the
Company.
 
     The Company had $1,000 and $1,239 at June 30, 1996 and 1997, respectively,
outstanding under the agreement.
 
(8)  INCOME TAXES
 
     As discussed in note 2, the Company terminated its S corporation election
effective January 1, 1997.
 
     Income tax expense for the year ended June 30, 1997 consists of:
CURRENT    DEFERRED    TOTAL
                                            -------    --------    -----
Federal...................................    $--        $380      $380
State.....................................     20          35        55
                                              ---        ----      ----
                                              $20        $415      $435
                                              ===        ====      ====
F-83
142
                             NOVATIONS GROUP, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Income tax expense for the year ended June 30, 1997 differs from the amount
computed by applying the U.S. federal tax rate of 34% to pretax income as a
result of the following:
Computed "expected" tax expense.............................  $ 247
Income (reduction) in income taxes resulting from:
  Change from S corporation status..........................    310
  Income earned during S corporation period.................   (135)
  State taxes net of federal benefit........................     36
  Other.....................................................    (23)
                                                              -----
                                                              $ 435
                                                              =====
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at June 30, 1997
are presented below.
Deferred tax assets:
  Accounts payable and accrued expenses.....................  $ 450
  Net operating loss carryforward...........................     93
                                                              -----
          Total gross deferred tax assets...................    543
 
Deferred tax liability:
  Accounts receivable and prepaid expenses..................   (958)
                                                              -----
Net deferred tax liability..................................  $(415)
                                                              =====
The net operating loss carryforward is subject to limitation in the event
of a greater than 50% change in ownership.
 
(9)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee
contributions up to a maximum of 4%. The Company contributed $44, $60, $75 and
$50 to the plan for the years ended June 30, 1995, 1996 and 1997, and for the
period from July 1, 1997 to May 4, 1998, respectively.
 
(10)  CONCENTRATION OF CREDIT RISK
 
     For the year ended June 30, 1995, the Company had two customers that each
accounted for greater than 10 percent of revenue. For each of the years ended
June 30, 1996 and 1997, the Company had one customer that accounted for greater
than 10 percent of revenue.
 
                                      F-84
143
 
                          INDEPENDENT AUDITOR'S REPORT
 
Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Star Mountain, Inc. for the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Star
Mountain, Inc. for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
 
                                          Friedman & Fuller, P.C.
 
Rockville, Maryland
February 16, 1996
 
                                      F-85
144
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Star Mountain, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended December 31, 1997 and
for the period from January 1, 1998 to May 4, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Star
Mountain, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1997 and for the period from January 1, 1998
to May 4, 1998, in conformity with generally accepted accounting principles.
 
                                            KPMG Peat Marwick LLP
 
Boston, Massachusetts
August 10, 1998
 
                                      F-86
145
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
DECEMBER 31,
                                                                -----------------
                                                                 1996      1997
                                                                ------    -------
ASSETS
Current assets:
  Cash......................................................    $   39    $   358
  Accounts receivable.......................................     4,395      6,091
  Current portion of notes receivable, related parties......       181        666
  Inventory.................................................       100        129
  Other current assets......................................        71        100
  Deferred income taxes.....................................        29        117
                                                                ------    -------
          Total current assets..............................     4,815      7,461
                                                                ------    -------
Property and equipment:
  Furniture and fixtures....................................        65        531
  Office equipment..........................................       746      1,444
  Computer software.........................................        69        114
  Leasehold improvements....................................        16         87
  Automobiles...............................................        31         73
                                                                ------    -------
                                                                   927      2,249
  Less accumulated depreciation and amortization............       423      1,303
                                                                ------    -------
                                                                   504        946
                                                                ------    -------
Other assets:
  Notes receivable, related parties, net of current
     portion................................................       267         --
  Other assets..............................................       140        459
  Land held for investment..................................       110        110
  Goodwill, net of accumulated amortization of $23 and
     $88....................................................       147      1,701
                                                                ------    -------
                                                                   664      2,270
                                                                ------    -------
          Total assets......................................    $5,983    $10,677
                                                                ======    =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable, bank........................................    $  905    $ 2,858
  Current portion of notes payable..........................        95        455
  Accounts payable..........................................     1,295      1,685
  Accrued expenses..........................................       573      1,152
  Accrued compensation......................................        --         --
  Billings in excess of costs and earnings..................     1,076      1,247
  Income taxes payable......................................        --         --
                                                                ------    -------
          Total current liabilities.........................     3,944      7,397
                                                                ------    -------
Long-term liabilities:
  Notes payable, net of current portion.....................        --        304
  Deferred income taxes.....................................        29        198
                                                                ------    -------
          Total long-term liabilities.......................        29        502
                                                                ------    -------
          Total liabilities.................................     3,973      7,899
                                                                ------    -------
Commitments and contingencies
Stockholders' equity:
  Common stock..............................................         8      2,147
  Additional paid-in capital................................     2,058         --
  Retained earnings.........................................       529      1,257
                                                                ------    -------
                                                                 2,595      3,404
  Less common stock held in treasury at cost................      (585)      (626)
                                                                ------    -------
          Total stockholders' equity........................     2,010      2,778
                                                                ------    -------
          Total liabilities and stockholders' equity........    $5,983    $10,677
                                                                ======    =======
See accompanying notes to consolidated financial statements
                                      F-87
146
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                     ---------------------------    JANUARY 1, 1998
                                                      1995      1996      1997      TO MAY 4, 1998
                                                     -------   -------   -------    ---------------
Total revenue......................................  $14,306   $16,313   $23,775        $11,052
Cost of revenue....................................    8,668     9,457    14,504          6,109
                                                     -------   -------   -------        -------
  Gross profit.....................................    5,638     6,856     9,271          4,943
Operating expenses.................................    4,411     5,476     7,591          3,650
                                                     -------   -------   -------        -------
Income from operations.............................    1,227     1,380     1,680          1,293
                                                     -------   -------   -------        -------
Other income (expense):
  Interest income..................................       19        25        44             15
  Interest expense.................................      (54)      (65)     (144)          (120)
  Other, net.......................................     (200)     (339)     (306)           (32)
                                                     -------   -------   -------        -------
                                                        (235)     (379)     (406)          (137)
                                                     -------   -------   -------        -------
Income before income taxes.........................      992     1,001     1,274          1,156
Income taxes.......................................       --       397       546            457
                                                     -------   -------   -------        -------
Net income.........................................  $   992   $   604   $   728        $   699
                                                     =======   =======   =======        =======
Basic income per share.............................  $  0.11   $  0.07   $  0.09        $  0.09
                                                     =======   =======   =======        =======
Diluted income per share...........................  $  0.11   $  0.07   $  0.08        $  0.08
                                                     =======   =======   =======        =======
Weighted average shares outstanding................    8,825     8,422     8,078          8,074
                                                     =======   =======   =======        =======
Weighted average shares and potentially dilutive
  shares outstanding...............................    8,963     8,565     8,823          8,871
                                                     =======   =======   =======        =======
See accompanying notes to consolidated financial statements
                                      F-88
147
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK      ADDITIONAL   RETAINED      TREASURY STOCK
                                  ------------------    PAID-IN     EARNINGS    ------------------
                                   SHARES     AMOUNT    CAPITAL     (DEFICIT)    SHARES     AMOUNT   TOTAL
                                  ---------   ------   ----------   ---------   ---------   ------   ------
Balance, December 31, 1994......    740,852   $    8    $ 1,955      $ (688)           --   $  --    $1,275
Issuance of common stock upon
  exercise of options...........     11,827       --         36          --            --      --        36
Distributions to shareholders...         --       --         --        (379)           --      --      (379)
Purchase of treasury stock......         --       --         --          --        22,700     (65)      (65)
Net income......................         --       --         --         992            --      --       992
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1995......    752,679        8      1,991         (75)       22,700     (65)    1,859
Issuance of common stock upon
  exercise of options...........      9,414       --         67          --            --      --        67
Purchase of treasury stock......         --       --         --          --        65,671    (520)     (520)
Net income......................         --       --         --         604            --      --       604
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1996......    762,093        8      2,058         529        88,371    (585)    2,010
Issuance of common stock upon
  exercise of options...........     87,621       32         --          --            --      --        32
Purchase of treasury stock......         --       --         --          --        12,584     (41)      (41)
Stock split, conversion to no
  par stock.....................  8,383,023    2,058     (2,058)         --     1,110,505      --        --
Issuance of common stock........     50,735       49         --          --            --      --        49
Net income......................         --       --         --         728            --      --       728
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, December 31, 1997......  9,283,472    2,147    $    --       1,257     1,211,460    (626)   $2,778
Issuance of common stock........      1,553       12         --          --            --      --        12
Net income......................         --       --         --         699            --      --       699
                                  ---------   ------    -------      ------     ---------   -----    ------
Balance, May 4, 1998............  9,285,025   $2,159         --      $1,956     1,211,460   $(626)   $3,489
                                  =========   ======    =======      ======     =========   =====    ======
See accompanying notes to consolidated financial statements
                                      F-89
148
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31,          PRIOR FROM
                                                             ------------------------------   JANUARY 1, 1998
                                                               1995       1996       1997      TO MAY 4, 1998
                                                             --------   --------   --------   ---------------
Cash flows from operating activities:
  Cash received from customers.............................  $ 13,419   $ 16,428   $ 23,529       $10,152
  Cash paid to suppliers and employees.....................   (12,620)   (14,890)   (22,083)       (9,679)
  Interest received........................................        19         25         44            16
  Interest paid............................................       (54)       (65)      (144)         (122)
  Income taxes paid........................................        --       (420)      (482)         (252)
                                                             --------   --------   --------       -------
          Net cash provided by operating activities........       764      1,078        864           115
                                                             --------   --------   --------       -------
Cash flows from investing activities:
  Issuance of notes receivable.............................       (64)       (96)      (218)           --
  Acquisition of property and equipment....................      (159)       (61)      (358)         (264)
  Business acquisitions....................................      (100)      (300)    (1,752)           --
  Purchase of land held for investment.....................        --       (110)        --            --
  Other....................................................        (8)         2         --            --
                                                             --------   --------   --------       -------
          Net cash used in investing activities............      (331)      (565)    (2,328)         (264)
                                                             --------   --------   --------       -------
Cash flows from financing activities:
  Net borrowings (payments) on line-of-credit..............       (15)       (86)     1,953           403
  Principal repayments on long-term debt...................        --         --       (210)         (286)
  Proceeds from other notes payable........................        25         95         --            --
  Payments on other notes payable..........................       (34)       (35)        --            --
  Proceeds from issuance of common stock...................        36         68         81            12
  Purchase of treasury stock...............................       (65)      (520)       (41)           --
  Distributions to shareholders............................      (379)        --         --            --
  Decrease in deferred income taxes........................        --         --         --            --
                                                             --------   --------   --------       -------
          Net cash provided by (used in) financing
            activities.....................................      (432)      (478)     1,783           129
                                                             --------   --------   --------       -------
Net (decrease) increase in cash............................         1         35        319           (20)
Cash, and cash equivalents, beginning of period............         3          4         39           358
                                                             --------   --------   --------       -------
Cash, and cash equivalents, end of period..................  $      4   $     39   $    358       $   338
                                                             ========   ========   ========       =======
See accompanying notes to consolidated financial statements
                                      F-90
149
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31,        PERIOD FROM
                                                             --------------------------    JANUARY 1, 1998
                                                              1995       1996     1997     TO MAY 4, 1998
                                                             -------    ------    -----    ---------------
Reconciliation of net income to net cash provided by
  operating activities:
  Net income...............................................  $   992    $  604    $ 728        $   699
                                                             -------    ------    -----        -------
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization............................       96       139      314            136
  Loss on sale of assets...................................       --         4       11             --
  Deferred income taxes....................................       --        --       (9)            (6)
  Changes in assets and liabilities:
     (Increase) decrease in:
     Accounts receivable...................................   (1,053)     (637)    (417)        (2,094)
     Inventory.............................................       --        18      (29)            37
     Other current assets..................................       47       (34)      24            440
     Other assets..........................................      (25)      (69)    (237)          (183)
     Intercompany assets...................................       --        --       --            (50)
  Increase (decrease) in:
     Accounts payable......................................      425       168       90            335
     Accrued expenses......................................      116       133      218            271
     Billings in excess of costs and anticipated profits...      166       752      171            530
                                                             -------    ------    -----        -------
  Total adjustments........................................     (228)      474      136           (584)
                                                             -------    ------    -----        -------
  Net cash provided by (used in) operating activities......  $   764    $1,078    $ 864        $   115
                                                             =======    ======    =====        =======
Non-cash investing and financing activities: In February 1997, the Company
issued a note payable of $506,000 for a portion of the purchase price of ORA. In
October 1997, the Company issued a note payable of $325,000 for a portion of the
purchase price of SED.
 
          See accompanying notes to consolidated financial statements
                                      F-91
150
 
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1)  NATURE OF OPERATIONS
 
     Star Mountain, Inc. (together with its direct and indirect wholly-owned
subsidiaries the "Company") was founded in 1987. The Company is primarily
engaged in contracting with the U.S. Government to provide technical and
professional services in the form of computer-based training, software
development and computer applications support. In August 1996, the Company
formed a wholly-owned subsidiary, Star Digital, Inc. to acquire the assets of
Computer Visions, Inc. Star Digital, Inc. is primarily a value added distributor
of computer equipment. In February 1997, the Company acquired the stock of
Odyssey Research Associates, Inc. ("ORA"). ORA is primarily engaged in
contracting with the U.S. Government to perform research relating to computer
access and security. ORA includes the accounts of 168004 Canada, Inc. ("ORA
Canada"), a wholly-owned subsidiary, which had performed similar contracts for
the Canadian Government, but currently has minimal activity. Effective October
1, 1997, the Company acquired the net assets of the SED Division of Essex
Corporation, which now operates as a division of the Company. This division
provides weapons handling training for the U.S. Department of Defense.
 
     On May 4, 1998, PROVANT, Inc. ("PROVANT") acquired all of the outstanding
stock of the Company for cash and shares of PROVANT common stock, and the
Company became a wholly-owned subsidiary of PROVANT.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Revenue Recognition
 
     A major portion of the Company's revenue results from services performed
under U.S. government contracts, either directly or through subcontracts. The
majority of the Company's contracts are fixed-price contracts. Revenue on fixed
price contracts is recognized using the percentage of completion method based on
costs incurred in relation to total estimated costs. Revenue on
time-and-materials contracts is recognized to the extent of fixed billable rates
for hours delivered plus reimbursable costs. Revenue on cost-plus-fee contracts
is recognized based on reimbursable costs incurred plus estimated fees earned
thereon. At the time it is recognized that it is probable that a contract will
result in a loss and the loss can be reasonably estimated, the entire estimated
loss is included in the determination of net income. In accordance with industry
practice, amounts relating to long-term contracts are classified as current
assets although an indeterminable portion of these amounts is not expected to be
realized within one year.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
  Credit Risk
 
     The Company's accounts receivable consist principally of unsecured amounts
due from the U.S. Government.
 
  Cash Equivalents
 
     Cash equivalents are defined as highly liquid short-term investments whose
maturity dates do not extend past three months from the original date of
purchase. The Company has held no such instruments.
 
                                      F-92
151
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Property and Equipment
 
     Property and equipment are stated at cost and include additions and major
replacements or betterments. Depreciation and amortization are provided for in
amounts which amortize the cost of properties utilizing the straight-line method
over estimated useful lives of three to seven years. Maintenance, repairs and
minor renewals are expensed as incurred. Any gain or loss on disposition is
included in the determination of net income.
 
  Goodwill
 
     Goodwill represents the excess of the cost of business acquisitions,
accounted for by the purchase method, over the fair value of the net assets
thereof. Goodwill is being amortized on a straight-line basis principally over
14 years.
 
  Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash, accounts
receivable, note payable, bank, accounts payable and accrued expenses. The
carrying value of these financial instrument approximates their fair value
because of the short maturity of these instruments.
 
  Income Taxes
 
     Through December 31, 1995, the Company had elected to be taxed as an S
Corporation and, accordingly, the financial statements for 1995 do not reflect
any provision for income taxes since elements of income and deduction passed
through directly to the shareholders. Effective January 1, 1996, the Company
terminated its election to be taxed as an S Corporation.
 
     Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be settled. Future
tax benefits recognized as deferred tax assets must be reduced by a valuation
allowance where it is more likely than not that the benefits may not be
realized.
 
(3)  ACQUISITIONS
 
     On June 19, 1995, the Company acquired all of the assets of BZ Academy,
Inc. (BZ). The acquisition has been accounted for as a purchase and has operated
as the AIT division of the Company. Tangible assets were recorded at their book
value at the date of purchase, which approximated their fair value. The
difference between the purchase price and the assets' book value was recorded as
goodwill.
 
     On August 1, 1996, the Company formed a new corporation, Star Digital,
Inc., to acquire the assets of Computer Visions, Inc. The acquisition has been
accounted for as a purchase. Computer Visions' tangible assets were recorded at
their fair value, which approximated the purchase price. No goodwill was
recorded.
 
     On February 21, 1997, the Company acquired the outstanding stock of ORA.
The acquisition has been accounted for as a purchase. The excess of the purchase
price over the book value of the net assets of ORA at the purchase date has been
recorded as goodwill.
 
     On September 30, 1997, the Company acquired certain assets of Simms
Industries. The acquisition has been accounted for as a purchase. The assets
acquired consisted primarily of accounts receivable and fixed assets.
 
                                      F-93
152
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On October 1, 1997, the Company acquired the net assets of the Systems
Effectiveness Division (SED) of Essex Corporation for a total price of $1.5
million. The net assets represent substantially all of the operating assets of
the division. The excess of the purchase price over the book value of the
tangible assets acquired of approximately $930,000 has been recorded as
goodwill.
 
     The following table sets forth the pro forma information assuming that all
acquisitions had occurred on January 1, 1995 (the earliest date information is
available). The pro forma information takes into account amortization of
goodwill and additional interest costs, net of tax benefits (Dollars in
thousands, except per share data).
YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         1995       1996       1997
                                                        -------    -------    -------
Gross revenue.........................................  $22,668    $24,818    $28,383
Operating income......................................    1,081      1,524      1,298
Net income............................................      723        529        627
Earnings per share....................................  $  0.08    $  0.06    $  0.08
(4)  ACCOUNTS RECEIVABLE
 
     Accounts receivable consist of the following (Dollars in thousands):
DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
Government contracts:
  Billed....................................................    $3,333    $4,828
  Unbilled..................................................       698       926
Other.......................................................       364       337
                                                                ------    ------
                                                                $4,395    $6,091
                                                                ======    ======
(5)  NOTES RECEIVABLE
 
     Notes receivable consist of the following (Dollars in thousands):
DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
Due from majority shareholder, unsecured, interest at
  prime.....................................................    $  131    $  349
Due from former employee, secured, interest at 10 percent...       317       317
                                                                ------    ------
                                                                   448       666
Less current portion........................................       181       666
                                                                ------    ------
                                                                $  267    $   --
                                                                ======    ======
(6)  NOTE PAYABLE, BANK
 
     The Company maintains a bank line of credit arrangement that provides for
borrowings of 90% of billed accounts receivable less than 90 days old, not to
exceed $3.5 million in total. Advances bear interest at LIBOR plus 250 basis
points. The line is collateralized by substantially all of the Company's assets.
The agreement requires the Company to meet certain covenants including
limitations on dividends, and maintenance of adjusted tangible net worth, as
defined. The Company has been in compliance with the lender's covenants during
each of the periods presented. At December 31, 1996 and 1997, overdrafts in the
payroll and operating bank accounts amounting to $236,000 and $259,000,
respectively, have been included
 
                                      F-94
153
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
in the outstanding balance on the line since such overdrafts are automatically
covered by the bank as checks are presented for payment.
 
(7)  LONG-TERM DEBT (DOLLARS IN THOUSANDS)
DECEMBER 31,
                                                              --------------
                                                              1996      1997
                                                              ----      ----
Note payable, shareholder, representing temporary advances
  of working capital, interest at LIBOR plus 250 basis
  points, due on demand. Unsecured..........................  $95       $ --
Note payable, purchase of subsidiary, ORA, interest at 9%,
  payable in four annual installments of $127 beginning
  February 1998.............................................             406
                                                              ---       ----
Note payable, purchase of net assets of SED, interest at 9%,
  payable in monthly installments of $23 through December
  1998......................................................   --        284
Note payable, purchase of net assets of SIMMS Industries....   --         24
Capital leases, payable in monthly installments of $2
  including interest at 9% to 17.5% due July 2000...........   --         45
                                                              ---       ----
Total.......................................................   95        759
Less current portion........................................   95        455
                                                              ---       ----
Long-term portion...........................................  $--       $304
                                                              ===       ====
(8)  EMPLOYEE BENEFITS
 
     The Company has a 401(k) plan in which it matches 50% of employee
contributions, up to a maximum of 3% of each employee's gross annual
compensation. In addition, the Company may contribute a discretionary amount
annually. Total expense under the plan for the years ended December 31, 1995,
1996 and 1997 and for the period ended May 4, 1998, was $121,000, $123,000,
$153,000 and $85,000, respectively.
 
(9)  COMMITMENTS AND CONTINGENCIES
 
     Substantially all of the Company's revenue and costs for all periods since
December 31, 1996, are subject to audit by agencies of the U.S. Government.
Management does not expect the results of these audits to have a material impact
on the financial position or future results of operations of the Company.
 
     The Company leases equipment and office space under various noncancellable
operating leases. The office leases provide for future rental increases based on
the Company's pro-rata share of increases in building operating expenses and
real estate taxes, and for inflation adjustments based on increases in the
Consumer Price Index. Rent expense, including month-to-month leases, for the
years ended December 31, 1995, 1996 and 1997 and for the period ended May 4,
1998, totalled $557,000, $595,000, $868,000 and $396,000, respectively. Future
minimum lease commitments under non-cancellable operating leases for years
ending December 31, are as follows (Dollars in thousands):
TOTAL
                                                              ---------
1999........................................................   $1,046
2000........................................................      918
2001........................................................      732
2002........................................................      553
2003........................................................       92
                                                               ------
                                                               $3,341
                                                               ======
F-95
154
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(10)  COMMON STOCK
 
     Common stock consists of the following:
DECEMBER 31,
                                                  -------------------------------------
                                                     1995         1996          1997
                                                  ----------    ---------    ----------
Par value.......................................  $      .01          .01           N/A
Shares:
  Authorized....................................   1,000,000    1,000,000    15,000,000
  Issued........................................     752,679      762,093     9,283,472
Effective February 14, 1997, the Company's voting common stock was
increased from 800,000 shares of $.01 par value to 12,000,000 shares of no par
value, and the non-voting stock was increased from 200,000 shares of $.01 par
value to 3,000,000 shares of no par value.
 
(11)  STOCK OPTIONS
 
     The Company offers key employees the opportunity to purchase stock through
the Star Mountain Key Person Stock Option Plan (the "Plan"). Under the Plan, the
Company issues options to eligible employees who must have one year of service
with the Company. The exercise price for the options is at or above the current
market price of the Company's shares, as determined by management. Management
has applied a consistent formula which includes gross revenue and net income in
determining the Company's share price. Options are exercisable upon issuance for
periods of 3 to 5 years from the date of the grant.
 
     The activity in the Plan since 1995 is presented below. All options and
option prices have been restated to reflect the 12:1 stock split in February
1997.
NUMBER OF OPTIONS       WEIGHTED
                                                         OUTSTANDING AND        AVERAGE
                                                           EXERCISABLE       EXERCISE PRICE
                                                        -----------------    --------------
Balance, December 31, 1994............................        912,000            $0.31
  Granted.............................................        384,000             0.47
  Forfeited...........................................       (360,000)            0.21
                                                            ---------
Balance, December 31, 1995............................        936,000             0.42
  Granted.............................................        936,000             0.49
  Forfeited...........................................       (348,000)            0.46
                                                            ---------
Balance, December 31, 1996............................      1,524,000             0.45
  Granted.............................................        331,000             1.00
  Exercised...........................................        (73,200)            0.24
  Forfeited...........................................       (120,000)            0.49
                                                            ---------
Balance, December 31, 1997............................      1,661,800            $0.52
                                                            =========
The weighted average price for options outstanding and exercisable at
December 31, 1997 was $.52. The weighted average remaining term of the
outstanding options is 3 years.
 
     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a "fair value based method" of accounting
for an employee stock option. Under this method, compensation cost is measured
at the grant date based on the value of the award and is recognized over the
service period. The Company has historically accounted for employee stock
options under the "intrinsic value method" as defined by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under
 
                                      F-96
155
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the intrinsic value method, compensation cost is the excess, if any, of the
quoted market price of the stock at grant date over the amount an employee must
pay to acquire the stock. The Company's Plan, accounted for under APB Opinion
No. 25, does not result in any compensation cost.
 
     SFAS No. 123 allows an entity to continue to use the intrinsic value method
and management has elected to do so. However, entities electing to remain on the
intrinsic value method must make pro forma disclosures of net income, as if the
fair value based method of accounting had been applied. Because the method of
accounting in SFAS No. 123 has not been applied to options granted prior to
January 1, 1994, the resulting pro forma compensation costs may not be
representative of the cost to be expected in future years.
 
     Under SFAS No. 123, net income would have been as follows (Dollars in
thousands, except per share data):
DECEMBER 31,
                                                             -------------------------
                                                             1995      1996      1997
                                                             -----     -----     -----
Net income, as reported....................................  $ 992     $ 604     $ 728
Pro forma net income.......................................  $ 984     $ 586     $ 675
Income per share, as reported..............................  $0.11     $0.07     $0.09
Pro forma income per share.................................  $0.11     $0.06     $0.08
The fair value of each option is estimated on the date of grant using the
following assumptions: no dividend yield, no volatility, risk-free interest
rates approximating 6% and expected lives of 3 to 5 years. The weighted average
grant date fair value of the options was as follows:
DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                   1995             1996             1997
                                               ------------     ------------     ------------
Weighted average fair value..................      $.11             $.13             $.16
(12)  EARNINGS PER SHARE:
 
     Earnings per share is computed based on the weighted average number of
common shares outstanding in each period. The dilutive effect of outstanding
stock options is computed using the treasury stock method. Since there is no
public market for the Company's stock, current market price has been assumed to
be the exercise price of the latest stock options issued. Basic and diluted
earnings per share have been computed as follows: (Dollars in thousands, except
per share data)
EFFECT OF DILUTIVE      DILUTED      BASIC   DILUTED
                               NET INCOME    BASIC SHARES      STOCK OPTIONS         SHARES        EPS      EPS
                               ----------    ------------    ------------------      -------      -----   -------
                              (NUMERATOR)    (DENOMINATOR)                        (DENOMINATOR)
Year ended:
  December 31, 1995.........      $992         8,824,986          138,404           8,963,390     $0.11    $0.11
  December 31, 1996.........      $604         8,422,206          143,176           8,565,382     $0.07    $0.07
  December 31, 1997.........      $728         8,078,338          744,751           8,823,089     $0.09    $0.08
Period from January 1, 1998
  to May 4, 1998............      $699         8,073,565          797,664           8,871,229     $0.09    $0.08
F-97
156
                      STAR MOUNTAIN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(13)  INCOME TAXES
 
     Income tax expense consists of the following amounts (Dollars in
thousands):
DECEMBER 31,              PERIOD FROM
                                              ----------------------------    JANUARY 1, 1998
                                                  1996            1997          MAY 4, 1998
                                              ------------    ------------    ----------------
Current:
  Federal...................................      $313            $426              $393
  State.....................................        84             123                64
Deferred:
  Federal...................................        --              (3)               --
                                                  ----            ----              ----
                                                  $397            $546              $457
                                                  ====            ====              ====
The differences between the effective income tax rate and the statutory
federal income tax rates are as follows:
DECEMBER 31,      PERIOD FROM
                                                          ------------    JANUARY 1, 1998
                                                          1996    1997      MAY 4, 1998
                                                          ----    ----    ---------------
Computed "expected" tax on income.......................  34.0%   34.0%        34.0%
State taxes, net of federal benefit.....................   4.1     4.1          4.1
Other, net..............................................   1.6     4.7          1.4
                                                          ----    ----         ----
Taxes on income.........................................  39.7%   42.8%        39.5%
                                                          ====    ====         ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below (Dollars
in thousands):
DECEMBER 31,
                                                              ------------
                                                              1996    1997
                                                              ----    ----
Deferred tax assets result from
  accrued employee benefits,
  principally vacation......................................  $ 29    $ 90
  Accrued expenses..........................................    --      27
                                                              ----    ----
                                                              $ 29    $117
                                                              ====    ====
Deferred tax liabilities result from:
  Differences in depreciation methods.......................  $ 29    $135
  Change in accounting method from cash to accrual for
     ORA....................................................    --      63
                                                              ----    ----
                                                              $ 29    $198
                                                              ====    ====
F-98
157
 
                          INDEPENDENT AUDITOR'S REPORT
 
To the Board of Directors
American Media Incorporated
West Des Moines, Iowa
 
     We have audited the accompanying balance sheets of American Media
Incorporated as of June 30, 1998 and 1997, and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Media Incorporated
as of June 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
 
                                            McGladrey & Pullen, LLP
 
Des Moines, Iowa
July 31, 1998, except for
Note 10 as to which the
date is August 10, 1998
 
                                      F-99
158
 
                          AMERICAN MEDIA INCORPORATED
 
                                 BALANCE SHEETS
                             JUNE 30, 1998 AND 1997
1998          1997
                                                              ----------    ----------
                                                                            (NOTE 11)
ASSETS (Note 3)
Current Assets
    Cash (Note 8)...........................................  $    5,457    $   55,942
    Receivables:
         Trade, less allowance for doubtful accounts 1998
           $110,000; 1997 $50,000...........................   2,107,936     1,786,207
         Royalties..........................................      69,950       110,000
         Other..............................................       1,955        37,559
         Income tax refund claims...........................     239,262            --
    Inventories:
         Released film cost, net of accumulated amortization
           1998 $4,017,312; 1997 $3,267,795.................   2,602,134     1,307,756
         Films in progress, at cost.........................     425,538       203,060
         Other..............................................     565,471       330,500
    Costs and estimated earnings in excess of billings on
     uncompleted film production contracts (Note 2).........      90,986        27,583
    Prepaid advertising.....................................     287,344
    Prepaid expenses........................................     126,773       115,834
    Deferred taxes (Note 5).................................          --       150,000
                                                              ----------    ----------
             Total current assets...........................   6,522,806     4,124,441
                                                              ----------    ----------
Rental Office Property, net of accumulated depreciation 1998
  $340,453; 1997 $333,481 (Note 7)..........................      60,958        67,930
                                                              ----------    ----------
Improvements and Equipment (Note 6)
    Leasehold improvements..................................     278,954       274,170
    Furniture and equipment.................................   1,883,956     1,675,171
    Automobiles.............................................      96,613       113,602
                                                              ----------    ----------
                                                               2,259,523     2,062,943
    Less accumulated depreciation...........................   1,392,585     1,287,176
                                                              ----------    ----------
                                                                 866,938       775,767
                                                              ----------    ----------
                                                              $7,450,702    $4,968,138
                                                              ==========    ==========
                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Note payable (Note 3)...................................  $1,049,000    $  100,000
    Current obligation under capital lease (Note 6).........      11,556        12,407
    Accounts payable........................................     500,351       588,938
    Accrued wages...........................................     415,727       249,051
    Accrued royalties.......................................     236,060       193,471
    Other accrued expenses..................................     425,369       204,450
    Income taxes payable....................................          --        10,000
    Billings in excess of costs and estimated earnings on
     uncompleted film production contracts (Note 2).........     112,333        55,004
    Deferred taxes (Note 5).................................     355,000            --
                                                              ----------    ----------
             Total current liabilities......................   3,105,396     1,413,321
                                                              ----------    ----------
Obligation Under Capital Lease, less current maturities
  (Note 6)..................................................      51,823         4,981
                                                              ----------    ----------
Deferred Taxes (Note 5).....................................      60,000            --
                                                              ----------    ----------
Stockholders' Equity
    Participating common stock, voting, no par value;
     authorized 2,000,000 shares; issued 1,900,000 shares...      22,000        22,000
    Nonparticipating common stock, voting, no par value;
     authorized 2,000,000 shares; issued 18,000 shares......       8,526         8,526
    Retained earnings.......................................   4,273,881     3,590,234
                                                              ----------    ----------
                                                               4,304,407     3,620,760
    Less cost of treasury stock:
         Participating common stock, 20,000 shares..........      50,000        50,000
         Nonparticipating common stock, 15,900 shares.......      20,924        20,924
                                                              ----------    ----------
                                                               4,233,483     3,549,836
                                                              ----------    ----------
                                                              $7,450,702    $4,968,138
                                                              ==========    ==========
See Notes to Financial Statements.
 
                                      F-100
159
 
                          AMERICAN MEDIA INCORPORATED
 
                              STATEMENTS OF INCOME
                       YEARS ENDED JUNE 30, 1998 AND 1997
1998           1997
                                                              -----------    -----------
Operating revenues:
     Film and video sales, rentals and previews.............  $14,362,513    $12,089,974
     Film production contracts..............................    1,864,615      1,213,149
     Royalties and commissions..............................      594,929        650,169
     Consulting.............................................      164,220         45,586
     Other..................................................      107,719        154,325
                                                              -----------    -----------
                                                               17,093,996     14,153,203
                                                              -----------    -----------
Operating expenses:
     Cost of films and videos sold..........................    1,876,199      1,128,472
     Cost of film production contracts......................      636,155        699,456
     Royalties and commissions..............................    2,009,278      2,043,156
     Depreciation and amortization..........................      939,096        920,214
     Selling, general and administrative (Note 8)...........   10,522,860      8,528,931
                                                              -----------    -----------
                                                               15,983,588     13,320,229
                                                              -----------    -----------
               Operating income.............................    1,110,408        832,974
                                                              -----------    -----------
Nonoperating income (expense):
     Interest income........................................        3,773         24,324
     Interest (expense).....................................      (62,221)       (44,188)
     Other income...........................................       16,812         77,671
                                                              -----------    -----------
                                                                  (41,636)        57,807
                                                              -----------    -----------
               Income before income taxes...................    1,068,772        890,781
                                                              -----------    -----------
Federal and state income taxes (credits):
     Current................................................     (179,875)       342,557
     Deferred...............................................      565,000         (8,000)
                                                              -----------    -----------
                                                                  385,125        334,557
                                                              -----------    -----------
               Net income...................................  $   683,647    $   556,224
                                                              ===========    ===========
     Basic income per share.................................  $      0.36    $      0.30
                                                              ===========    ===========
     Weighted average shares outstanding....................    1,882,100      1,881,600
                                                              ===========    ===========
See Notes to Financial Statements.
                                      F-101
160
 
                          AMERICAN MEDIA INCORPORATED
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                       YEARS ENDED JUNE 30, 1998 AND 1997
NON-                                         NON-
                              PARTICIPATING   PARTICIPATING                PARTICIPATING   PARTICIPATING
                                 COMMON          COMMON        RETAINED      TREASURY        TREASURY
                                  STOCK           STOCK        EARNINGS        STOCK           STOCK         TOTAL
                              -------------   -------------   ----------   -------------   -------------   ----------
Balance, June 30, 1996......     $22,000         $5,346       $3,034,010     $(50,000)       $(18,774)     $2,992,582
    Net income..............          --             --          556,224           --              --         556,224
    Purchase of 1,000 shares
      of nonparticipating
      common stock for the
      treasury..............          --             --               --           --          (2,150)         (2,150)
    Issuance of 2,000 shares
      of nonparticipating
      common stock..........          --          3,180               --           --              --           3,180
                                 -------         ------       ----------     --------        --------      ----------
Balance, June 30, 1997......      22,000          8,526        3,590,234      (50,000)        (20,924)      3,549,836
    Net income..............          --             --          683,647           --              --         683,647
                                 -------         ------       ----------     --------        --------      ----------
Balance, June 30, 1998......     $22,000         $8,526       $4,273,881     $(50,000)       $(20,924)     $4,233,483
                                 =======         ======       ==========     ========        ========      ==========
See Notes to Financial Statements.
                                      F-102
161
 
                          AMERICAN MEDIA INCORPORATED
 
                            STATEMENTS OF CASH FLOWS
                       YEARS ENDED JUNE 30, 1998 AND 1997
1998          1997
                                                              -----------    --------
Cash Flows from Operating Activities
     Net income.............................................  $   683,647    $556,224
                                                              -----------    --------
     Adjustments to reconcile net income to net cash
      provided by operating activities:
          Depreciation......................................      189,579     245,950
          Amortization......................................      749,517     674,264
          Provision for doubtful accounts...................       59,647      24,179
          Deferred taxes....................................      565,000      (8,000)
          Dissolution of limited partnership................           --       6,074
          (Gain) loss on disposal of improvements and
            equipment.......................................       (8,568)     22,915
          Change in assets and liabilities:
               (Increase) in income tax refund claims
                 receivable.................................     (239,262)         --
               (Increase) in other receivables..............     (305,722)   (179,708)
               (Increase) in inventories and
                 films-in-progress..........................   (2,501,344)   (513,521)
               (Increase) decrease in costs and estimated
                 earnings in excess of billings on
                 uncompleted film production contracts......      (63,403)      1,974
               (Increase) in prepaid advertising and
                 expenses...................................     (298,283)    (81,576)
               Increase in accounts payable and accrued
                 expenses...................................      351,892     333,118
               (Decrease) in income taxes payable...........      (10,000)   (295,000)
               Increase in billings in excess of costs and
                 estimated earnings on uncompleted film
                 production contracts.......................       57,329      22,518
                                                              -----------    --------
                    Net cash provided by (used in) operating
                       activities...........................     (769,971)    809,411
                                                              -----------    --------
Cash Flows from Investing Activities
     Purchase of improvements and equipment.................     (234,314)   (238,405)
     Proceeds from sale of equipment........................       36,123      17,910
                                                              -----------    --------
                    Net cash (used in) investing
                       activities...........................     (198,191)   (220,495)
                                                              -----------    --------
Cash Flows from Financing Activities
     Borrowings on revolving line of credit.................    5,882,500     100,000
     Payments on revolving line of credit...................   (4,933,500)   (200,000)
     Principal payments on long-term borrowings, including
      capital lease obligations.............................      (21,028)   (623,176)
     Purchase of nonparticipating common stock for the
      treasury..............................................           --      (2,150)
     Proceeds from the issuance of nonparticipating common
      stock.................................................           --       3,180
     Payments for equipment purchased on account............      (10,295)    (80,069)
                                                              -----------    --------
                    Net cash provided by (used in) financing
                       activities...........................      917,677    (802,215)
                                                              -----------    --------
                    Net (decrease) in cash..................      (50,485)   (213,299)
Cash
     Beginning..............................................       55,942     269,241
                                                              -----------    --------
     Ending.................................................  $     5,457    $ 55,942
                                                              ===========    ========
Supplemental Disclosures of Cash Flow Information
     Cash payments for:
          Interest..........................................  $    62,221    $ 41,188
          Income taxes......................................       69,387     637,557
Supplemental Schedule of Noncash Investing and Financing
  Activities
     Purchase of equipment on account.......................  $        --    $ 10,295
     Capital lease obligation incurred for purchase of
      equipment.............................................       67,019          --
See Notes to Financial Statements.
                                      F-103
162
 
                          AMERICAN MEDIA INCORPORATED
 
                         NOTES TO FINANCIAL STATEMENTS
 
NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
     Nature of business:  The Company is engaged in the production, sale and
rental of training films and videotapes nationally and internationally.
 
     A summary of the Company's significant accounting policies follows:
 
          Accounting estimates and assumptions:  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.
 
          Inventories:  Film cost inventories are stated at the lower of cost or
     net realizable value. Amortization of film cost inventories is computed
     primarily by the individual-film-forecast method which provides for
     amortization of film costs in the ratio that current gross revenues bear to
     estimated gross revenues over the life of the film. Estimates of
     anticipated total gross revenues are reviewed periodically and revised when
     necessary to reflect more current information. Unamortized film costs are
     compared with net realizable value each reporting period on a film-by-film
     basis. If estimated future gross revenues from a film are not sufficient to
     recover the unamortized film costs, the unamortized film costs are written
     down to net realizable value. It is reasonably possible that the Company's
     estimates of anticipated future gross revenues and the recoverability of
     the remaining estimated unamortized film cost, or both, could be sensitive
     to change in the near term based upon changes in future market conditions.
 
          Other inventories are stated at the lower of cost (first-in, first-out
     method) or market.
 
          Film production contracts:  The Company reports income from film
     production contracts using percentage-of-completion accounting based
     primarily on actual costs incurred to date compared to total estimated
     costs, commencing when progress reaches a point where experience is
     sufficient to estimate final results with reasonable accuracy. Contract
     costs include all direct material and labor costs and those indirect costs
     related to contract performance. Provisions for estimated losses on
     uncompleted contracts are made in the period in which such losses are
     determined.
 
          The asset, "costs and estimated earnings in excess of billings on
     uncompleted film production contracts," represents revenues recognized in
     excess of amounts billed. The liability, "billings in excess of costs and
     estimated earnings on uncompleted film production contracts," represents
     billings in excess of revenue recognized.
 
          Advertising costs:  The Company expenses the production costs of
     advertising the first time the advertising takes place, except for
     direct-response advertising, which is capitalized and amortized over the
     expected period of future benefits.
 
          Direct-response advertising consists primarily of the costs of direct
     mail promotional pieces incurred to acquire new sales/rentals of the
     Company's video products. The capitalized costs are amortized using the
     actual sales received to date compared to total estimated sales as a result
     of the mailing. Costs and related accumulated amortization are eliminated
     as they become fully amortized.
 
          Rental office property:  Rental office property is stated at cost, net
     of accumulated depreciation computed by the straight-line method over
     estimated useful lives ranging from 15 to 31 years.
 
          Improvements and equipment:  Improvements and equipment are stated at
     cost. Depreciation is computed primarily by accelerated methods over their
     estimated useful lives. It is the Company's policy to include amortization
     of assets acquired under capital leases with depreciation expense on owned
     assets.
 
                                      F-104
163
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
          Income taxes:  Deferred taxes are provided on a liability method
     whereby deferred tax assets are recognized for deductible temporary
     differences and deferred tax liabilities are recognized for taxable
     temporary differences. Temporary differences are the differences between
     the reported amounts of assets and liabilities and their tax basis.
     Deferred tax assets are reduced by a valuation allowance, when, in the
     opinion of management, it is more likely than not, that some portion or all
     of the deferred tax assets will not be realized. Deferred tax assets and
     liabilities are adjusted for the effects of changes in tax laws and rates
     on the date of enactment.
 
NOTE 2.  UNCOMPLETED FILM PRODUCTION CONTRACTS
 
     Information regarding uncompleted film production contracts follows:
JUNE 30,
                                                      --------------------
                                                        1998        1997
                                                      --------    --------
Costs incurred on uncompleted film production
  contracts.........................................  $144,918    $ 43,155
Estimated earnings..................................   228,670     136,069
                                                      --------    --------
                                                       373,588     179,224
Less billings to date...............................   394,935     206,645
                                                      --------    --------
                                                      $(21,347)   $(27,421)
                                                      ========    ========
Included in accompanying balance sheets under the following captions:
JUNE 30,
                                                      --------------------
                                                        1998        1997
                                                      --------    --------
Costs and estimated earnings in excess of billings
  on uncompleted film production contracts..........  $ 90,986    $ 27,583
Billings in excess of costs and estimated earnings
  on uncompleted film production contracts..........  (112,333)    (55,004)
                                                      --------    --------
                                                      $(21,347)   $(27,421)
                                                      ========    ========
NOTE 3.  PLEDGED ASSETS AND LINE OF CREDIT AT JUNE 30, 1998
 
     The Company has a bank line of credit in the amount of $1,400,000 due
October 31, 1998. Borrowings under the line bear interest at the bank's national
rate (8.5% at June 30, 1998) and are secured by substantially all assets of the
Company not otherwise pledged and the unlimited personal guarantee of the
majority stockholder. At June 30, 1998, borrowings of $1,049,000 were
outstanding under this agreement.
 
     The line of credit agreement contains various restrictive covenants
including but not limited to debt to tangible net worth levels, borrowing base
requirements and adequate insurance coverage.
 
NOTE 4.  PROFIT-SHARING PLAN AND 401(K) PLAN
 
     The Company has a profit-sharing plan covering substantially all employees.
Contributions are made at the discretion of the Company and are allocated to
participants by a formula based on compensation. The Company's expense under
this plan was none and approximately $39,000 for the years ended June 30, 1998
and 1997, respectively.
 
     The Company also has a salary reduction "401(k)" plan covering employees
who have completed three months of service and attained the age of 21. There
were no employer contributions for the years ended June 30, 1998 and 1997.
 
                                      F-105
164
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 5.  INCOME TAX MATTERS
 
     Net deferred tax assets (liabilities) consist of the following components:
JUNE 30,
                                                     ---------------------
                                                       1998         1997
                                                     ---------    --------
Deferred tax assets:
     Allowance for doubtful accounts...............  $  37,000    $ 17,000
     Inventories...................................                113,000
     Accrued expenses..............................     24,000      18,000
     Other.........................................      4,000       2,000
                                                     ---------    --------
                                                        65,000     150,000
                                                     ---------    --------
Deferred tax liabilities:
     Prepaid expenses..............................     98,000          --
     Inventories...................................    318,000          --
     Improvements and equipment....................     64,000          --
                                                     ---------    --------
                                                       480,000          --
                                                     ---------    --------
                                                     $(415,000)   $150,000
                                                     =========    ========
The components giving rise to the net deferred assets (liabilities) have
been included in the accompanying balance sheets as follows:
JUNE 30,
                                                       --------------------
                                                         1998        1997
                                                       ---------   --------
Current assets.......................................  $      --   $150,000
                                                       ---------   --------
Current liabilities..................................    355,000         --
Long-term liabilities................................     60,000         --
                                                       ---------   --------
                                                         415,000         --
                                                       ---------   --------
                                                       $(415,000)  $150,000
                                                       =========   ========
NOTE 6. LEASES AND RENT EXPENSE
 
     The Company leases office equipment that is being accounted for as a
capital lease with a cost of approximately $67,000 and related accumulated
amortization of $4,500 at June 30, 1998. The lease requires monthly payments of
$1,375 through February 2003. The assets and related liabilities under the lease
have been recorded at the present value of the future minimum lease payments
using a discount rate of 8.50%.
 
     The Company leases office space under a noncancelable operating lease
agreement which requires monthly payments of approximately $43,000 and $1,700
through July 2000 and March 1999, respectively. The Company also leases two
automobiles under noncancelable operating lease agreements which require various
monthly payments expiring from January 1999 through January 2001.
 
                                      F-106
165
                          AMERICAN MEDIA INCORPORATED
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Approximate future minimum lease payments, by year end in the aggregate,
under the capital lease and noncancelable operating leases are as follows:
CAPITAL   OPERATING
                                                         LEASE      LEASES
                                                        -------   ----------
Year ending June 30, 1999.............................  $16,500   $  537,000
  2000................................................   16,500      521,000
  2001................................................   16,500       38,000
  2002................................................   16,500           --
  2003................................................   11,000           --
                                                        -------   ----------
          Total minimum lease payments................   77,000   $1,096,000
                                                                  ==========
Amount representing interest..........................   13,621
                                                        -------
          Present value of net minimum capital lease
            payments..................................  $63,379
                                                        =======
Total rent expense was approximately $536,000 and $401,000 for the years
ended June 30, 1998 and 1997, respectively.
 
NOTE 7.  RENTAL OFFICE PROPERTY
 
     The Company had a lease agreement for its rental office property requiring
monthly payments of $4,320 through June 1998. The tenant exercised the purchase
option subsequent to June 30, 1998 to purchase the property for $227,000.
 
NOTE 8.  CASH IN EXCESS OF FDIC LIMITS
 
     Throughout the years ended June 30, 1998 and 1997, the Company at times had
cash in excess of FDIC limits. The Company has not experienced any loss from
this.
 
NOTE 9.  ADVERTISING COSTS
 
     At June 30, 1998 and 1997, $287,344 and none, respectively, of direct
response advertising costs were reported as assets. Advertising expense for the
years ended June 30, 1998 and 1997, was approximately $4,033,000 and $1,836,000,
respectively.
 
NOTE 10.  SUBSEQUENT EVENT
 
     On August 10, 1998 the Company's majority stockholder signed a nonbinding
letter of intent to sell all the outstanding shares of stock of the Company.
 
NOTE 11.  RECLASSIFICATION
 
     Certain items on the balance sheet as of June 30, 1997 have been
reclassified with no effect on retained earnings to be consistent with the
classifications adopted for as of June 30, 1998.
 
                                      F-107
166
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
KC Resources Creative Solutions, Inc.:
 
     We have audited the accompanying balance sheet of KC Resources Creative
Solutions, Inc. as of June 30, 1998 and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KC Resources Creative
Solutions, Inc. as of June 30, 1998 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
 
                                            KPMG Peat Marwick LLP
 
Boston, Massachusetts
July 24, 1998
 
                                      F-108
167
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                                 BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
                                                                1998
                                                              --------
ASSETS
Current assets:
  Cash and cash equivalents.................................   $1,248
  Marketable securities.....................................      353
  Accounts receivable, net of allowance for doubtful
     accounts of $25........................................    1,232
  Costs in excess of billings...............................      138
  Prepaid expenses and other current assets.................        4
                                                               ------
       Total current assets.................................    2,975
                                                               ------
Property and equipment, net.................................      422
Other assets................................................       34
                                                               ------
       Total assets.........................................   $3,431
                                                               ======
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................   $   75
  Accrued expenses..........................................      207
  Income taxes payable......................................      558
  Billings in excess of costs...............................      189
  Deferred income taxes.....................................      379
  Current portion of capital lease obligation...............        9
                                                               ------
       Total current liabilities............................    1,417
                                                               ------
Long-term capital lease obligation..........................       13
                                                               ------
Deferred income taxes.......................................       59
                                                               ------
Commitments and contingencies
Stockholders' equity:
  Common stock, no par value; 5,000 shares authorized; 1,000
     shares issued and outstanding..........................        1
  Unrealized gain on marketable securities..................       24
  Retained earnings.........................................    1,917
                                                               ------
       Total stockholders' equity...........................    1,942
                                                               ------
       Total liabilities and stockholders' equity...........   $3,431
                                                               ======
See accompanying notes to financial statements.
 
                                      F-109
168
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
Revenue.....................................................   $ 5,449
Cost of revenue.............................................     3,758
                                                               -------
  Gross profit..............................................     1,691
Selling, general and administrative expenses................       980
                                                               -------
       Income from operations...............................       711
                                                               -------
Other income (expense):
  Dividend income...........................................         7
  Interest income...........................................        34
  Interest expense..........................................        (3)
                                                               -------
       Total other income (expense).........................        38
                                                               -------
       Income before income taxes...........................       749
Income taxes................................................       284
                                                               -------
       Net income...........................................   $   465
                                                               =======
Basic income per share......................................   $464.76
                                                               =======
Weighted average shares outstanding.........................     1,000
                                                               =======
See accompanying notes to financial statements.
 
                                      F-110
169
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                       STATEMENT OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
                            YEAR ENDED JUNE 30, 1998
UNREALIZED
                                                    COMMON STOCK       GAIN ON
                                                  ----------------    MARKETABLE    RETAINED
                                                  SHARES    AMOUNT    SECURITIES    EARNINGS   TOTAL
                                                  ------    ------    ----------    --------   ------
Balance, June 30, 1997..........................  1,000       $1         $ 8         $1,459    $1,468
  Unrealized gain on marketable securities, net
     of tax provision of $11....................     --       --          16             --        16
  Dividends paid ($7.00 per share)..............     --       --          --             (7)       (7)
  Net income....................................     --       --          --            465       465
                                                  -----       --         ---         ------    ------
Balance, June 30, 1998..........................  1,000       $1         $24         $1,917    $1,942
                                                  =====       ==         ===         ======    ======
See accompanying notes to financial statements.
 
                                      F-111
170
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED
                                                               JUNE 30,
                                                                 1998
                                                              ----------
Cash flows from operating activities:
  Net income................................................    $  465
                                                                ------
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Depreciation and amortization........................       163
       Changes in operating assets and liabilities:
          Increase in accounts receivable...................      (464)
          Decrease in costs in excess of billing............       469
          Decrease in prepaid expenses and other assets.....        56
          Decrease in accounts payable......................       (67)
          Decrease in accrued expenses......................      (252)
          Increase in billings in excess of costs...........        54
          Increase in income taxes payable..................       176
          Increase in deferred income tax liabilities.......       135
                                                                ------
            Total adjustments...............................       270
                                                                ------
            Net cash provided by operating activities.......       735
                                                                ------
Cash flows from investing activities:
  Purchases of property and equipment.......................      (272)
  Purchase of investments...................................      (183)
  Sale of investments.......................................       384
                                                                ------
            Net cash used in investing activities...........       (71)
                                                                ------
Cash flows from financing activities:
  Dividends paid............................................        (7)
  Payments on capital lease obligation......................        (6)
                                                                ------
            Net cash used in financing activities...........       (13)
                                                                ------
Net increase in cash and cash equivalents...................       651
Cash and cash equivalents, beginning of year................       597
                                                                ------
Cash and cash equivalents, end of year......................    $1,248
                                                                ======
Supplemental cash flow disclosures:
  Income taxes refunded.....................................    $  (24)
                                                                ======
  Cash paid for interest....................................    $    3
                                                                ======
Non-cash investing activity:
  Increase in fair value of marketable securities...........    $   27
                                                                ======
See accompanying notes to financial statements.
 
                                      F-112
171
 
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
(1)  NATURE OF OPERATIONS
 
     KC Resources Creative Solutions, Inc. (the "Company") was incorporated in
December 1991. The Company is a training and instructional design consulting
firm, which analyzes clients' performance requirements and designs training
solutions using all appropriate media and technology including internet-based
training and performance support applications, multimedia computer-based
training and testing, and self-paced learning systems using various media. The
Company focused primarily on the needs of the telecommunications industry and
high-technology sector, and also has clients in the pharmaceuticals and
financial services industries.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  (a) Revenue Recognition
 
     The Company follows the percentage-of-completion method of accounting for
contracts, including those that involve delivery of customized software
products. Accordingly, income is recognized in the ratio that costs incurred
bear to estimated total costs. Adjustments to cost estimates are made
periodically, and losses expected to be incurred on contracts in progress are
charged to operations in the period such losses are determined. The aggregate of
costs incurred and income recognized on uncompleted contracts in excess of
related billings is shown as a current asset, and the aggregate of billings on
uncompleted contracts in excess of related costs incurred and income recognized
is shown as a current liability.
 
  (b) 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
disclosures 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.
 
  (c) Cash Equivalents
 
     The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
 
  (d) Marketable Securities
 
     All marketable securities are classified as available-for-sale and are
available to support current operations or to take advantage of other investment
opportunities. These securities are stated at estimated fair value based upon
market quotes. Unrealized gains and losses, net of tax, are computed on the
basis of specific identification and are included as a component of
stockholders' equity. Realized gains, realized losses, and declines in value,
judged to be other than temporary, are included in other income. The cost of
securities sold is based on the specific identification method and interest and
dividends earned are included in other income.
 
  (e) Accounts Receivable
 
     Accounts receivable consist of progress billings to clients under long-term
contracts.
 
                                      F-113
172
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
  (f) Property and Equipment
 
     Property and equipment are recorded at cost and depreciated using an
accelerated method over the following periods:
Software....................................................  3 years
Equipment...................................................  5 years
Furniture and fixtures......................................  7 years
(g) Fair Value of Financial Instruments
 
     Financial instruments of the Company consist primarily of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
accrued liabilities. The carrying value of these financial instruments
approximates their fair value because of the short maturity of these
instruments.
 
  (h) Income Taxes
 
     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
 
  (i) Advertising Costs
 
     Advertising costs are expensed as incurred. Advertising costs amounted to
$54 in fiscal 1998.
 
  (j) Income per Share
 
     Effective June 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), Earnings per Share, which changed the
method of computing and presenting income per share. Basic income per share has
been computed using the weighted average number of outstanding common shares.
The Company has a simple capital structure with no potentially dilutive shares.
Accordingly, only basic income per share has been presented.
 
(3) RELATED PARTY TRANSACTIONS
 
     A member of the Company's Board of Directors served as a consultant to the
Company on various aspects of the Company's business and strategic issues. Fees
paid for such services amounted to $8 in fiscal 1998.
 
     During fiscal 1998, an officer of the Company repaid an advance in the
amount of $80 which had been outstanding at June 30, 1997.
 
                                      F-114
173
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
(4) MARKETABLE SECURITIES
 
     Marketable securities at June 30, 1998 consist of the following:
GROSS
                                                            UNREALIZED
                                                             HOLDING     FAIR
                                                    COST      GAINS      VALUE
                                                    ----    ----------   -----
Certificate of deposit............................  $125        --        125
Mutual funds......................................   189        39        228
                                                    ----       ---        ---
                                                    $314        39        353
                                                    ====       ===        ===
At June 30, 1998, the certificate of deposit has a maturity of less than
one year.
 
(5) PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at June 30, 1998:
Machinery and equipment.....................................  $653
Furniture and fixtures......................................    29
Software....................................................   144
                                                              ----
                                                               826
Less accumulated depreciation and amortization..............   404
                                                              ----
     Property and equipment, net............................  $422
                                                              ====
Depreciation and amortization expense on property and equipment amounted to
$163 in fiscal 1998. Amortization expense on capitalized software amounted to
$48 in fiscal 1998. Unamortized software costs at June 30, 1998 are $96.
 
(6)  ACCRUED EXPENSES
 
     Accrued expenses at June 30, 1998 consist of the following:
Accrued payroll and payroll taxes...........................  $ 95
Accrued benefit plan contribution...........................    58
Accrued vacation............................................    38
Other accrued expenses......................................    16
                                                              ----
                                                              $207
                                                              ====
(7)  LEASES
 
     The Company leases office space and a vehicle under cancelable operating
leases. Lease expense amounted to $193 in fiscal 1998.
 
                                      F-115
174
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
     The Company also leases certain office equipment under a noncancelable
capital lease. Future minimum payments under this capital lease are as follows:
YEAR ENDING JUNE 30
                    -------------------
1999...................................................  $ 9
     2000...................................................    9
     2001...................................................    8
                                                              ---
          Total minimum payments............................   26
     Less amounts representing interest.....................    4
                                                              ---
          Present value of minimum lease payments...........   22
     Less current installments of capital lease payments....    9
                                                              ---
     Long-term capital lease obligation.....................  $13
                                                              ===
At June 30, 1998, the gross amount of equipment and related accumulated
amortization recorded under the capital lease were as follows:
Equipment..............................................  $35
     Less accumulated amortization..........................   22
                                                              ---
                                                              $13
                                                              ===
Amortization of assets held under capital lease is included in depreciation
expense.
 
(8)  INCOME TAXES
 
     The provision for income taxes for fiscal 1998 consists of the following:
CURRENT    DEFERRED   TOTAL
                                                    -------    --------   -----
Federal...........................................   $124        $109     $233
State.............................................     25          26       51
                                                     ----        ----     ----
                                                     $149        $135     $284
                                                     ====        ====     ====
The following is a reconciliation between the statutory federal income tax
rate and the Company's effective rate for fiscal 1998:
Statutory federal income tax rate...........................  34.0%
State income taxes..........................................   4.8
Other.......................................................   1.1
                                                              ----
                                                              39.9%
                                                              ====
F-116
175
                     KC RESOURCES CREATIVE SOLUTIONS, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                                 (IN THOUSANDS)
                                 JUNE 30, 1998
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
Deferred tax liabilities:
     Accounts receivable....................................  $476
     Costs in excess of billings............................    53
     Property and equipment.................................    59
     Unrealized gains on marketable securities..............    15
                                                              ----
          Total gross deferred tax liabilities..............  $603
                                                              ----
Deferred tax assets:
     Accounts payable and accrued expenses..................  $ 86
     Billings in excess of costs............................    73
     Timing of current state tax deduction..................     6
                                                              ----
          Total gross deferred tax assets...................   165
                                                              ----
          Net deferred tax liability........................  $438
                                                              ====
F-117
176
 
                          INDEPENDENT AUDITOR'S REPORT
 
To the Board of Directors
Strategic Interactive, Inc.
 
     We have audited the accompanying balance sheet of Strategic Interactive,
Inc. as of June 30, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above presents fairly,
in all material respects, the financial position of Strategic Interactive, Inc.
as of June 30, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
 
                                            PLANTE & MORAN, LLP
 
East Lansing, Michigan
October 12, 1998
 
                                      F-118
177
 
                          STRATEGIC INTERACTIVE, INC.
 
                                 BALANCE SHEETS
JUNE 30
                                                          ----------------------    SEPTEMBER 30,
                                                            1997         1998           1998
                                                            ----         ----       -------------
                                                                                     (UNAUDITED)
ASSETS
Current Assets
     Cash and cash equivalents..........................  $517,589    $  759,472     $1,165,143
     Accounts receivable:
          Trade.........................................   293,837       887,940        552,959
          Other.........................................        --        20,000             --
     Prepaid expenses...................................        --        27,629         44,616
                                                          --------    ----------     ----------
               Total current assets.....................   811,426     1,695,041      1,762,718
Property and Equipment (Note 2).........................   168,208       334,589        384,975
                                                          --------    ----------     ----------
               Total assets.............................  $979,634    $2,029,630     $2,147,693
                                                          ========    ==========     ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities
     Current portion of long-term debt (Note 4).........  $  4,940    $    5,850     $    5,553
     Accounts payable and other accrued liabilities.....    13,022       134,746        255,949
     Accrued federal income tax.........................   124,159        92,244         58,696
     Deferred revenue...................................    19,200            --          6,750
                                                          --------    ----------     ----------
               Total current liabilities................   161,321       232,840        326,948
Long-term Debt (Note 4).................................    21,699        16,444         15,047
Stockholders' Equity
     Common stock -- $1 par value:
          Class A voting:
            Authorized -- 59,000 shares
            Issued and outstanding -- 711 shares........       711           711            711
          Class B nonvoting:
            Authorized -- 1,000 shares
            Issued and outstanding -- 30 shares.........        30            30             30
     Additional paid-in capital.........................   477,225       477,225        477,225
     Retained earnings..................................   318,648     1,302,380      1,327,732
                                                          --------    ----------     ----------
               Total stockholders' equity...............   796,614     1,780,346      1,805,698
                                                          --------    ----------     ----------
               Total liabilities and stockholders'
                 equity.................................  $979,634    $2,029,630     $2,147,693
                                                          ========    ==========     ==========
F-119
178
 
                          STRATEGIC INTERACTIVE, INC.
 
                            STATEMENTS OF OPERATIONS
THREE MONTHS
                                                           YEAR ENDED JUNE 30           ENDED
                                                        ------------------------    SEPTEMBER 30,
                                                           1997          1998           1998
                                                        ----------    ----------    -------------
                                                                                     (UNAUDITED)
Sales.................................................  $1,452,190    $4,669,335     $1,013,041
Cost of Sales.........................................     304,843     1,148,382        441,024
                                                        ----------    ----------     ----------
Gross Profit..........................................   1,147,347     3,520,953        572,017
Operating Expenses
     Selling and administrative expenses..............     712,655     1,986,484        206,576
     Depreciation.....................................      24,740        65,995        334,804
                                                        ----------    ----------     ----------
          Total operating expenses....................     737,395     2,052,479        541,380
                                                        ----------    ----------     ----------
Operating Income......................................     409,952     1,468,474         30,637
Other Income (Expenses)...............................     (10,418)       (2,282)            --
     Interest income..................................       5,986        37,484          7,774
     Other............................................      78,348        20,446             --
                                                        ----------    ----------     ----------
          Total other income (expense)................      73,916        55,648          7,774
                                                        ----------    ----------     ----------
Income -- Before income taxes.........................     483,868     1,524,122         38,411
Income Taxes..........................................     124,159       540,390         13,059
                                                        ----------    ----------     ----------
Net Income............................................  $  359,709    $  983,732     $   25,352
                                                        ==========    ==========     ==========
Basic income per share................................  $      538    $    1,328     $       34
                                                        ==========    ==========     ==========
Weighted average shares outstanding...................         668           741            741
                                                        ==========    ==========     ==========
F-120
179
 
                          STRATEGIC INTERACTIVE, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON               COMMON
                                      STOCK -- CLASS A     STOCK -- CLASS B     ADDITIONAL
                                      -----------------    -----------------     PAID-IN       RETAINED
                                      SHARES    AMOUNT     SHARES    AMOUNT      CAPITAL       EARNINGS      TOTAL
                                      ------    ------     ------    ------     ----------     --------      -----
Balance -- July 1, 1996.............    600      $600        --        $--       $  5,586     $   11,389   $   17,575
    Sale of Class A common stock for
      cash..........................    111       111        --         --        471,639             --      471,750
    Issuance of Class B common
      stock.........................     --        --        30         30             --             --           30
    Distributions to stockholders...     --        --        --         --             --        (52,450)     (52,450)
    Net income......................     --        --        --         --             --        359,709      359,709
                                        ---      ----        --        ---       --------     ----------   ----------
 
Balance -- June 30, 1997............    711       711        30         30        477,225        318,648      796,614
    Net income......................     --        --        --         --             --        983,732      983,732
                                        ---      ----        --        ---       --------     ----------   ----------
 
Balance -- June 30, 1998............    711       711        30         30        477,225      1,302,380    1,780,346
                                        ---      ----        --        ---       --------     ----------   ----------
    Net income......................     --        --        --         --             --         25,352       25,352
                                        ---      ----        --        ---       --------     ----------   ----------
Balance -- September 30, 1998
  (unaudited).......................    711      $711        30        $30       $477,225     $1,327,732   $1,805,698
                                        ===      ====        ==        ===       ========     ==========   ==========
F-121
180
 
                          STRATEGIC INTERACTIVE, INC.
 
                            STATEMENTS OF CASH FLOWS
THREE MONTHS
                                                           YEAR ENDED JUNE 30          ENDED
                                                         ----------------------    SEPTEMBER 30,
                                                           1997         1998           1998
                                                         ---------    ---------    -------------
                                                                                    (UNAUDITED)
Cash Flows from Operating Activities
     Net income........................................  $ 359,709    $ 983,732     $   25,352
                                                         ---------    ---------     ----------
     Adjustments to reconcile net income to net cash
       from operating activities:
          Depreciation.................................     24,740       65,995         22,830
          Loss on disposal of property and equipment...         --       16,470             --
          (Increase) decrease in assets:
               Accounts receivable.....................   (185,718)    (594,103)       354,981
               Prepaid expenses........................      9,732      (27,629)       (16,987)
               Other assets............................      2,924           --             --
          Increase (decrease) in liabilities:
               Current portion, long term debt.........         --           --           (297)
               Accounts payable and other accrued
                 liabilities...........................      4,263      121,724        121,203
               Accrued federal income tax..............    124,159      (31,915)       (33,548)
               Deferred revenue........................     19,200      (19,200)         6,750
                                                         ---------    ---------     ----------
                    Net cash provided by operating
                      activities.......................    359,009      515,074        480,284
 
Cash Flows from Investing Activities
     Purchase of property and equipment................   (149,071)    (268,846)       (73,216)
 
Cash Flows from Financing Activities
     Payments on bank note payable.....................   (164,398)          --             --
     Proceeds (payments) long-term debt................     28,500           --         (1,397)
     Payments on long-term debt........................     (1,861)      (4,345)            --
     Distributions to stockholders.....................    (52,450)          --             --
     Proceeds from issuance of common stock............    471,980           --             --
                                                         ---------    ---------     ----------
                    Net cash provided by (used in)
                      financing activities.............    281,771       (4,345)        (1,397)
                                                         ---------    ---------     ----------
Net Increase in Cash and Cash Equivalents..............    491,709      241,883        405,671
Cash and Cash Equivalents -- Beginning of year.........     25,880      517,589        759,472
                                                         ---------    ---------     ----------
Cash and Cash Equivalents -- End of year...............  $ 517,589    $ 759,472     $1,651,143
                                                         =========    =========     ==========
Supplemental Cash Flow Information -- Cash paid for
  interest.............................................  $  10,418    $   2,282             --
                                                         =========    =========     ==========
F-122
181
 
                          STRATEGIC INTERACTIVE, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 1997 AND 1998
 
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
     The Company provides web-based training, education, and other corporate
communication solutions. Approximately 65 percent of the Company's revenue is
from domestic automobile companies. The Company is privately held, employs
approximately 50 people, and is located in Lansing, Michigan.
 
     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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
 
     Cash Equivalents -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
 
     Accounts Receivable -- Trade accounts receivable represent amounts due from
major clients such as General Motors, General Motors Acceptance Corporation,
Ford Motor Company, and others. The majority of receivables result from revenue
generated from the sale of systems.
 
     Property and Equipment -- Property and equipment are stated at cost. Assets
are depreciated over their estimated useful lives using the straight-line
method. Costs of repairs and maintenance are charged to expense as incurred.
 
     Revenue Recognition -- Revenue is recognized based on the status of the
Company's projects, primarily based on hours incurred. Deferred revenue
represents funds collected in advance of performance and completion of certain
projects.
 
     Retirement Plan -- The Company provides its employees with a qualified
retirement plan that allows employees to contribute to a personal investment
account. The Company also contributes 3 percent of participant salaries. The
Company contributed $9,142 and $34,622 for the years ended June 30, 1997 and
1998, respectively.
 
     Income Taxes -- Prior to January 1, 1997, the Company was taxed as an "S"
corporation according to the Internal Revenue Code provisions. Generally, the
income of an "S" corporation is not subject to federal income tax at the
corporation level; rather, the stockholders are required to include a pro-rata
share of the Company's taxable income in their personal income tax returns,
irrespective of whether dividends have been paid. During 1997, this election was
revoked.
 
     Effective with the change in tax status, the Company records current income
taxes based on amounts payable or refundable on tax returns for each year.
Deferred tax liabilities or assets are recognized for the estimated future tax
effects of temporary differences between financial reporting and tax accounting.
However, there are no significant temporary differences and deferred taxes have
not been recorded.
 
     The provision for income taxes for the year ended June 30, 1997 differs
from amounts computed by applying the statutory United States federal tax rate
primarily as a result of income earned during the period prior to the change in
tax status that was not taxable to the Company.
 
                                      F-123
182
                          STRATEGIC INTERACTIVE, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                             JUNE 30, 1997 AND 1998
 
NOTE 2 -- PROPERTY AND EQUIPMENT
 
     Cost of property and equipment and depreciable lives are summarized as
follows:
DEPRECIABLE
                                            1997        1998      LIFE-YEARS
                                            ----        ----      -----------
Computer equipment......................  $170,288    $357,751       5
Computer software.......................     8,841      23,972       3
Telephone equipment.....................     1,741       1,741       5
Furniture...............................    40,264      63,878       7
     Total cost.........................   221,134     447,342
Accumulated depreciation................    52,926     112,753
                                          --------    --------
     Net carrying amount................  $168,208    $334,589
                                          ========    ========
NOTE 3 -- NOTE PAYABLE -- BANK
 
     The Company has a $250,000 line of credit available with interest on
outstanding borrowings at .75 percent above of the Bank's prime rate. No amount
was outstanding as of June 30, 1997 and 1998. Accounts receivable are pledged as
collateral for borrowings.
 
NOTE 4 -- LONG-TERM DEBT
 
     The Company has a note payable to a stockholder. The note is collateralized
by furniture and equipment, bears interest at 10.00 percent, and is due in
monthly installments of $603 including interest.
 
     Minimum principal payments on the note payable to maturity as June 30,
1998, are as follows:
1999........................................................  $ 5,850
2000........................................................    5,805
2001........................................................    6,413
2002........................................................    4,226
                                                              -------
     Total..................................................  $22,294
                                                              =======
NOTE 5 -- LEASES
 
     The Company leases office space and certain equipment under operating
leases in effect at June 30, 1998. The following is a schedule of future minimum
rental payments under these operating leases:
1999........................................................  $  167,721
2000........................................................     202,890
2001........................................................     221,900
2002........................................................     226,757
2003........................................................     231,753
2004 and after..............................................     234,905
                                                              ----------
     Total..................................................  $1,285,926
                                                              ==========
Lease expense charged to operations was $24,259 and $64,556 in 1997 and
1998, respectively.
 
                                      F-124
183
                          STRATEGIC INTERACTIVE, INC.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                             JUNE 30, 1997 AND 1998
 
     Subsequent to June 30, 1998, the Company entered into various leases for
office facilities, furniture and equipment. Future rental payments under the
leases entered into subsequent to June 30, 1998 are as follows:
1999........................................................  $104,616
2000........................................................   112,497
2001........................................................   112,497
2002........................................................    88,729
2003........................................................    82,392
2004 and after..............................................     5,207
                                                              --------
     Total..................................................  $505,938
                                                              ========
F-125
184

                             THE PROVANT COMPANIES

AMERICAN MEDIA INCORPORATED                      LEARNING SYSTEMS SCIENCES, INC.
General business management                          Customized technology-based
videos, books, CD-ROMS                         solutions for the retail industry

BEHAVIORAL TECHNOLOGY, INC.                   MOHR RETAIL LEARNING SYSTEMS, INC.
Employee recruitment, selection              Customer-oriented training programs
and retention                                            for the retail industry

DECKER COMMUNICATIONS, INC.                                NOVATIONS GROUP, INC.
Communications and                                     Management consulting and
presentation skills                              organizational diagnostic tools

KC RESOURCES CREATIVE SOLUTIONS, INC.               J. HOWARD & ASSOCIATES, INC.
Technology-based instructional design                              Diversity and
for the telecommunications industry                             inclusion skills

EXECUTIVE PERSPECTIVES, INC.                                 STAR MOUNTAIN, INC.
Custom training simulations                      Customized work skills training
for management decision making                           for government entities

GULLIVER RITCHIE ASSOCIATES, INC.                    STRATEGIC INTERACTIVE, INC.
Technology-based training                                     Web-based training
solutions for the manufacturing industry                      management systems

                                    PROVANT

                         The People Performance Company

                                www.provant.com
185
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                3,500,000 SHARES
 
                                 [PROVANT LOGO]
 
                                  COMMON STOCK
 
                            -----------------------
                                   PROSPECTUS
                            -----------------------
 
                              MERRILL LYNCH & CO.
                              SALOMON SMITH BARNEY
                               PIPER JAFFRAY INC.
                         BANCBOSTON ROBERTSON STEPHENS
 
                              JANUARY      , 1999
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
186
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq listing fee.
SEC registration fee........................................  $   22,473
NASD filing fee.............................................       8,584
Nasdaq listing fee..........................................      17,500
Printing and engraving expenses.............................     350,000
Legal fees and expenses.....................................     200,000
Accounting fees and expenses................................     250,000
Blue sky fee................................................       7,500
Transfer agent and registrar fees...........................       5,000
Miscellaneous...............................................     138,943
                                                              ----------
          TOTAL.............................................  $1,000,000
                                                              ==========
PROVANT will bear all of the foregoing fees and expenses.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     PROVANT is a Delaware corporation. Reference is made to Section 145 of the
DGCL, as amended, which provides that a corporation may indemnify any person who
was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite an adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
PROVANT'S Certificate of Incorporation further provides that PROVANT shall
indemnify its directors and officers to the full extent permitted by the law of
the State of Delaware.
 
                                      II-1
187
 
     PROVANT's Certificate of Incorporation provides that PROVANT's directors
shall not be liable to PROVANT or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent that exculpation
from liability is not permitted under the DGCL as in effect at the time such
liability is determined.
 
     The Certificate of Incorporation and By-laws also provide that each person
who was or is made a party to, or is involved in, any action, suit, proceeding
or claim by reason of the fact that he or she is or was a director or officer of
PROVANT (or is or was serving at the request of PROVANT as a director or officer
of any other enterprise including service with respect to employee benefit
plans) shall be indemnified and held harmless by PROVANT, to the full extent
permitted by Delaware law, as in effect from time to time, against all expenses
(including attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
the investigation, preparation to defend or defense of such action, suit,
proceeding or claim. PROVANT's By-laws allow for similar rights of
indemnification to be afforded, in PROVANT's discretion, to its employees and
agents.
 
     The rights to indemnification and the payment of expenses provided by the
Certificate of Incorporation and By-laws do not apply to any action, suit,
proceeding or claim initiated by or on behalf of a person otherwise entitled to
the benefit of such provisions. Any person seeking indemnification under the
By-laws shall be deemed to have met the standard of conduct required for such
indemnification unless the contrary shall be established. Any repeal or
modification of such indemnification provisions shall not adversely affect any
right or protection of a director or officer with respect to any conduct of such
director or officer occurring prior to such repeal or modification.
 
     PROVANT maintains an indemnification insurance policy covering all
directors and officers of PROVANT and its subsidiaries.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     In December 1996, PROVANT issued (i) 298.8, 762 and 762.1 shares of common
stock, respectively, at a purchase price of $1.00 per share, to its initial
stockholders and (ii) 169.4 shares of common stock at a purchase price of $1.00
per share to a consultant. In July 1997, PROVANT issued 80.5, 260.4 and 351.6
shares of common stock, respectively, at a purchase price of $1.00 per share, to
additional consultants. In September 1997, PROVANT issued (i) 134.2 and 201.4
shares of Common Stock, respectively, at a purchase price of $1.00 per share, to
two of its initial stockholders and (ii) 67.1, 100.7 and 201.4 shares of common
stock, respectively, at a purchase price of $1.00 per share, to consultants. In
November 1997, PROVANT issued 27.3 shares and one share of common stock,
respectively, at a purchase price of $1.00 per share, to two consultants.
 
     In September 1997, PROVANT issued to a consultant an option to purchase
10,000 shares of common stock at a purchase price of $5.00 per share, which
became exercisable in full upon the closing of the IPO. The option shall
terminate on May 4, 2001.
 
     As partial consideration for an agreement to extend financing to PROVANT in
connection with the IPO and the Combination, on October 6, 1997, PROVANT issued
two warrants to each of Paul M. Verrochi and Dominic J. Puopolo. The first
warrant entitles the holder to purchase 173,194 shares of common stock at a per
share exercise price of $13.00. The second warrant entitles the holder to
purchase 216,492 shares of common stock. The second warrant will be exercisable
only if the market price of the common stock increases to certain threshold
levels, or earlier under certain circumstances involving the merger or sale of
PROVANT.
 
     PROVANT issued shares of common stock in the Combination, as described
under "Certain Transactions -- Organization of PROVANT."
 
     In July 1998, PROVANT issued 200,000 shares of common stock in connection
with its acquisition of a performance improvement company in Cabin John,
Maryland.
 
                                      II-2
188
 
     All such issuances of common stock have been made in reliance upon the
exemption from registration afforded by Section 4(2) under the Securities Act.
 
     The foregoing amounts (except with respect to the stock issuances described
in the first paragraph of this Item 15 have been adjusted or otherwise reflect
the stock dividend of 979.0292-for-1 that was declared by the Board of Directors
of PROVANT on common stock outstanding as of April 28, 1998.
 
ITEM 16.  EXHIBITS
SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
+1      Form of Purchase Agreement..................................
   **3.1    Certificate of Incorporation of the Company.................
   **3.2    By-laws of the Company......................................
   **4.1    Form of Specimen Stock Certificate..........................
   ++5      Opinion of Nutter, McClennen & Fish, LLP....................
  **10.1    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
            Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
            Green, Ph.D. ...............................................
  **10.2    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Decker Communications, Inc., Bert Decker and
            Kenneth Taylor..............................................
  **10.3    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
            Marc S. Wallace.............................................
  **10.4    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
            Edwin Bauch as Trustee of the Steinmetz Children's Trust
            u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
            King Children's Trust u/d/t dated December 31, 1996, John F.
            King and Robert A. Steinmetz, Ph.D. ........................
  **10.5    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
            Judith Cohen and Michael Patrick............................
  **10.6    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
            Inc., Star Acquisition Corp. and Carl von Sternberg.........
  **10.7    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
            J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
            Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
            Jonathan Younger............................................
  **10.8    Form of First Amendment to Agreement and Plan of Merger (J.
            Howard).....................................................
  **10.9    1998 Equity Incentive Plan..................................
  **10.10   Stock Plan for Non-Employee Directors.......................
  **10.11   Form of 1998 Employee Stock Purchase Plan...................
  **10.12   Form of Warrants to Messrs. Verrochi and Puopolo............
  **10.13   Form of Contingent Warrants to Messrs. Verrochi and
            Puopolo.....................................................
  **10.14   Form of Employment Agreement between Rajiv Bhatt and
            PROVANT, Inc. ..............................................
  **10.15   Form of Employment Agreement between MOHR Acquisition Corp.,
            Herbert A. Cohen, and PROVANT, Inc. ........................
  **10.16   Form of Employment Agreement between Decker Acquisition
            Corp., Bert Decker, and PROVANT, Inc. ......................
  **10.17   Form of Employment Agreement between Philip Gardner and
            PROVANT, Inc. ..............................................
  **10.18   Form of Employment Agreement between Behavioral Acquisition
            Corp., Paul C. Green, and PROVANT, Inc. ....................
II-3
189
SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
**10.19   Form of Employment Agreement between Novations Acquisition
            Corp., Joe Hanson, and PROVANT, Inc. .......................
  **10.20   Form of Employment Agreement between LSS Acquisition Corp.,
            John F. King, and PROVANT, Inc. ............................
  **10.21   Form of Employment Agreement between Dominic J. Puopolo and
            PROVANT, Inc. ..............................................
  **10.22   Form of Employment Agreement between A. Carl von Sternberg,
            Star Acquisition Corp. and PROVANT, Inc. ...................
  **10.23   Form of Employment Agreement between Paul M. Verrochi and
            PROVANT, Inc. ..............................................
  **10.24   Form of Employment Agreement between Howard Acquisition
            Corp., Marc S. Wallace, and PROVANT, Inc. ..................
  **10.25   Form of Employment Agreement between John H. Zenger and
            PROVANT, Inc. ..............................................
  **10.26   Form of Consulting Agreement between Michael J. Davies and
            PROVANT, Inc................................................
  **10.27   Lease Agreement between Behavioral Technology, Inc. and Paul
            C. Green, Ph.D..............................................
  **10.28   Lease Agreement between Novations Group, Inc. and Novations
            Partners, L.L.C. ...........................................
  **10.29   Form of Consulting Agreement between Donald W. Glazer and
            PROVANT, Inc................................................
   *10.30   Revolving Credit Agreement dated April 8, 1998 between
            PROVANT, Inc. and Fleet National Bank.......................
 ***10.31   Amendment No. 1 to Revolving Credit Agreement...............
  ++10.32   Amendment No. 2 to Revolving Credit Agreement...............
****10.33   1998 Stock Option Plan for Outside Directors................
  ++21      Subsidiaries of the Registrant..............................
   +23.1    Consent of KPMG Peat Marwick LLP............................
   +23.2    Consent of Friedman & Fuller, P.C...........................
   +23.3    Consent of McGladrey & Pullen, LLP..........................
   +23.4    Consent of Plante & Moran, LLP..............................
   +23.5    Consent of Nutter, McClennen & Fish, LLP (contained in
            Exhibit 5)..................................................
   +24      Power of Attorney (contained in the signature page to this
            Registration Statement).....................................
---------------
   * Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the three months ended March 31, 1998.
  ** Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-46157).
 *** Incorporated by reference to the Company's Annual Report on Form 10-K for
     its fiscal year ended June 30, 1998.
**** Incorporated by reference to the Company's Proxy Statement relating to its
     1998 Annual Meeting of Stockholders.
   + Filed herewith.
  ++ To be filed by amendment.
 
ITEM 17.  UNDERTAKINGS
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL and the Registrant's Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent,
 
                                      II-4
190
 
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
 
     The undersigned Registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under Securities Act of
     1933, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A under the Securities
     Act and contained in a form of prospectus filed by the Registrant pursuant
     to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
     to be part of this Registration Statement as of the time it was declared
     effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new Registration Statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-5
191
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, the
Commonwealth of Massachusetts, on the 5th day of January 1999.
 
                                          PROVANT, INC.
 
                                          By: /s/ PAUL M. VERROCHI
                                            ------------------------------------
                                              Paul M. Verrochi
                                              Chairman of the Board and Chief
                                              Executive Officer
 
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below on this Registration Statement hereby constitutes and appoints
Paul M. Verrochi, Dominic J. Puopolo, Constantine Alexander and James E. Dawson,
and each of them, with full power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments and amendments thereto) to this
Registration Statement on Form S-1 of the registrant, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he or she might or could do in person thereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES                                       TITLE                           DATE
                   ----------                                       -----                           ----
/s/ PAUL M. VERROCHI                Chairman of the Board and Chief Executive    January 5, 1999
------------------------------------------------    Officer
                Paul M. Verrochi
 
             /s/ DOMINIC J. PUOPOLO               Executive Vice President, Chief Financial    January 5, 1999
------------------------------------------------    Officer and Director
               Dominic J. Puopolo
 
                                                  President and Director                       January 5, 1999
------------------------------------------------
                 John H. Zenger
 
                /s/ RAJIV BHATT                   Executive Vice President, Chief Operating    January 5, 1999
------------------------------------------------    Officer and Chief Accounting Officer
                  Rajiv Bhatt
 
              /s/ HERBERT A. COHEN                Director                                     January 5, 1999
------------------------------------------------
                Herbert A. Cohen
 
                /s/ BERT DECKER                   Director                                     January 5, 1999
------------------------------------------------
                  Bert Decker
II-6
192
SIGNATURES                                       TITLE                           DATE
                   ----------                                       -----                           ----
/s/ PAUL C. GREEN                                   Director                    January 5, 1999
------------------------------------------------
                 Paul C. Green
 
                 /s/ JOE HANSON                                    Director                    January 5, 1999
------------------------------------------------
                   Joe Hanson
 
                /s/ JOHN F. KING                                   Director                    January 5, 1999
------------------------------------------------
                  John F. King
 
           /s/ A. CARL VON STERNBERG                               Director                    January 5, 1999
------------------------------------------------
             A. Carl von Sternberg
 
              /s/ MARC S. WALLACE                                  Director                    January 5, 1999
------------------------------------------------
                Marc S. Wallace
 
             /s/ MICHAEL J. DAVIES                                 Director                    January 5, 1999
------------------------------------------------
               Michael J. Davies
 
              /s/ DAVID B. HAMMOND                                 Director                    January 5, 1999
------------------------------------------------
                David B. Hammond
 
               /s/ JOHN R. MURPHY                                  Director                    January 5, 1999
------------------------------------------------
                 John R. Murphy
 
              /s/ ESTHER T. SMITH                                  Director                    January 5, 1999
------------------------------------------------
                Esther T. Smith
II-7
193
 
                                 EXHIBIT INDEX
SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
+1      Form of Purchase Agreement..................................
   **3.1    Certificate of Incorporation of the Company.................
   **3.2    By-laws of the Company......................................
   **4.1    Form of Specimen Stock Certificate..........................
   ++5      Opinion of Nutter, McClennen & Fish, LLP....................
  **10.1    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Behavioral Acquisition Corp., Paul M. Verrochi,
            Dominic J. Puopolo, Behavioral Technology, Inc. and Paul C.
            Green, Ph.D. ...............................................
  **10.2    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Decker Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Decker Communications, Inc., Bert Decker and
            Kenneth Taylor..............................................
  **10.3    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Howard Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, J. Howard & Associates, Inc., Jeffrey P. Howard and
            Marc S. Wallace.............................................
  **10.4    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., LSS Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, Robert Steinmetz, Ph.D., and Associates, Inc.,
            Edwin Bauch as Trustee of the Steinmetz Children's Trust
            u/d/t dated December 31, 1996, Edwin Bauch as Trustee of the
            King Children's Trust u/d/t dated December 31, 1996, John F.
            King and Robert A. Steinmetz, Ph.D. ........................
  **10.5    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., MOHR Acquisition Corp., Paul M. Verrochi, Dominic J.
            Puopolo, MOHR Retail Learning Systems, Inc., Herbert Cohen,
            Judith Cohen and Michael Patrick............................
  **10.6    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Paul M. Verrochi, Dominic J. Puopolo, Star Mountain,
            Inc., Star Acquisitions Corp. and Carl von Sternberg........
  **10.7    Form of Agreement and Plan of Merger by and among PROVANT,
            Inc., Novations Acquisition Corp., Paul M. Verrochi, Dominic
            J. Puopolo, Novations Group, Inc., Joseph Folkman, Joseph
            Hanson, Kurt Sandholtz, Norman Smallwood, Randy Stott and
            Jonathan Younger............................................
  **10.8    Form of First Amendment to Agreement and Plan of Merger (J.
            Howard).....................................................
  **10.9    1998 Equity Incentive Plan..................................
  **10.10   Stock Plan for Non-Employee Directors.......................
  **10.11   Form of 1998 Employee Stock Purchase Plan...................
  **10.12   Form of Warrants to Messrs. Verrochi and Puopolo............
  **10.13   Form of Contingent Warrants to Messrs. Verrochi and
            Puopolo.....................................................
  **10.14   Form of Employment Agreement between Rajiv Bhatt and
            PROVANT, Inc. ..............................................
  **10.15   Form of Employment Agreement between MOHR Acquisition Corp.,
            Herbert A. Cohen, and PROVANT, Inc. ........................
  **10.16   Form of Employment Agreement between Decker Acquisition
            Corp., Bert Decker, and PROVANT, Inc. ......................
  **10.17   Form of Employment Agreement between Philip Gardner and
            PROVANT, Inc. ..............................................
  **10.18   Form of Employment Agreement between Behavioral Acquisition
            Corp., Paul C. Green, and PROVANT, Inc. ....................
  **10.19   Form of Employment Agreement between Novations Acquisition
            Corp., Joe Hanson, and PROVANT, Inc. .......................
  **10.20   Form of Employment Agreement between LSS Acquisition Corp.,
            John F. King, and PROVANT, Inc. ............................
  **10.21   Form of Employment Agreement between Dominic J. Puopolo and
            PROVANT, Inc. ..............................................
194
SEQUENTIAL
 EXHIBIT                            DESCRIPTION                            PAGE NO.
---------                           -----------                           ----------
**10.22   Form of Employment Agreement between A. Carl von Sternberg,
            Star Acquisition Corp. and PROVANT, Inc. ...................
  **10.23   Form of Employment Agreement between Paul M. Verrochi and
            PROVANT, Inc. ..............................................
  **10.24   Form of Employment Agreement between Howard Acquisition
            Corp., Marc S. Wallace, and PROVANT, Inc. ..................
  **10.25   Form of Employment Agreement between John H. Zenger and
            PROVANT, Inc. ..............................................
  **10.26   Form of Consulting Agreement between Michael J. Davies and
            PROVANT, Inc................................................
  **10.27   Lease Agreement between Behavioral Technology, Inc. and Paul
            C. Green, Ph.D..............................................
  **10.28   Lease Agreement between Novations Group, Inc. and Novations
            Partners, L.L.C. ...........................................
  **10.29   Form of Consulting Agreement between Donald W. Glazer and
            PROVANT, Inc................................................
   *10.30   Revolving Credit Agreement dated April 8, 1998 between
            PROVANT, Inc. and Fleet National Bank.......................
 ***10.31   Amendment No. 1 to Revolving Credit Agreement...............
  ++10.32   Amendment No. 2 to Revolving Credit Agreement...............
****10.33   1998 Stock Option Plan for Outside Directors................
  ++21      Subsidiaries of the Registrant..............................
   +23.1    Consent of KPMG Peat Marwick LLP............................
   +23.2    Consent of Friedman & Fuller, P.C...........................
   +23.3    Consent of McGladrey & Pullen, LLP..........................
   +23.4    Consent of Plante & Moran, LLP..............................
   +23.5    Consent of Nutter, McClennen & Fish, LLP (contained in
            Exhibit 5)..................................................
   +24      Power of Attorney (contained in the signature page to this
            Registration Statement).....................................
---------------
   * Incorporated by reference to the Company's Quarterly Report on Form 10-Q
     for the three months ended March 31, 1998.
  ** Incorporated by reference to the Company's Registration Statement on Form
     S-1 (File No. 333-46157).
 *** Incorporated by reference to the Company's Annual Report on Form 10-K for
     its fiscal year ended June 30, 1998.
**** Incorporated by reference to the Company's Proxy Statement relating to its
     1998 Annual Meeting of Stockholders.
   + Filed herewith.
  ++ To be filed by amendment.