UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 6-K
----------------
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
TOPJOBS.NET PLC
Innovation House, Daten Park
Birchwood, Warrington WA3 6UT
United Kingdom
(011) 44-1925-844-744
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the Registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
N/A
Page 1 of 18 Pages
Exhibit Index appears on Page 18
<PAGE>
TOPJOBS.NET PLC
TABLE OF CONTENTS
PAGE
Part I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited) ...................3-8
Consolidated Balance Sheets
March 31, 1999 and September 30, 1999.............................3
Consolidated Statements of Operations
Three Months and Six Months ended September 30, 1998 and 1999.....4
Consolidated Statement of Cash Flows
Six Months ended September 30, 1998 and 1999......................5
Notes to Consolidated Financial Statements........................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................9
Part II OTHER INFORMATION
Item 1. Legal Proceedings.................................................16
Item 2. Changes in Securities and Use of Proceeds.........................16
Item 3. Defaults Upon Senior Securities...................................16
Item 4. Submission of Matters to a Vote of Security Holders...............16
Item 5. Other Information.................................................16
Item 6. Exhibits and Reports on Form 6-K..................................16
Signatures................................................................17
Exhibit Index.............................................................18
2
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TOPJOBS.NET PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN POUNDS STERLING)
<TABLE>
<CAPTION>
--------------------------
MARCH 31, SEPTEMBER 30,
1999 1999
--------------------------
(pound) (pound)
ASSETS
<S> <C> <C>
Current assets:
Cash ............................................................ 122,974 12,592,005
Accounts receivable ............................................. 511,392 729,468
Retained interest in factored receivables ....................... 154,888 450,143
Prepaid expenses and other receivables .......................... 1,146,258 667,475
-------------------------
Total current assets .............................................. 1,935,512 14,439,091
Property, plant and equipment, net ................................ 617,102 704,795
Investment in equity affiliate .................................... (200,035) (422,026)
Goodwill .......................................................... 849,584 5,615,396
-------------------------
Total assets ....................................................... 3,202,163 20,337,256
=========================
LIABILITIES
Current liabilities:
Bank overdraft payable .......................................... 1,758,587 60,373
Payable to related parties ...................................... 5,046,981 224,285
Deferred revenue ................................................ 1,264,265 1,826,802
Trade accounts payable .......................................... 1,053,319 574,828
Accrued and other liabilities ................................... 803,994 592,541
VAT and payroll tax payable ..................................... 244,020 254,365
Current portion of capital lease obligation ..................... 123,505 127,717
-------------------------
Total current liabilities ......................................... 10,294,671 3,660,911
Capital lease obligation, less current portion .................... 99,757 33,156
-------------------------
Total liabilities ................................................. 10,394,428 3,694,067
=========================
Minority Interests ................................................ (248,010) (235,219)
STOCKHOLDERS' (DEFICIT)/EQUITY
Ordinary Shares, 0.02 pence par value;
20,000,000 authorized; 5,230,000 and 9,998,577 shares outstanding 1,006 1,922
Preference Shares(pound)1 par value, 5,000,000 authorized,
49,000 and nil shares outstanding .............................. 49,000 --
Additional paid in capital ........................................ 176,467 29,862,732
Accumulated deficit ............................................... (7,164,602) (13,051,151)
Cumulative translation adjustment ................................. (6,126) 64,905
-------------------------
Total stockholders' (deficit)/equity .............................. (6,944,255) 16,878,408
-------------------------
Total liabilities and stockholders' equity ........................ 3,202,163 20,337,256
=========================
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
TOPJOBS.NET PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN POUNDS STERLING, EXCEPT SHARES USED TO CALCULATE LOSS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX SIX
ENDED ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER SEPTEMBER SEPTEMBER 30,
1998 30, 1999 30, 1998 1999
-----------------------------------------------------------
(pound) (pound)
<S> <C> <C> <C> <C>
Revenues 282,550 961,089 577,866 1,692,708
-------------------------------------------------------
Operating Expenses:
Selling, general and administration 743,512 2,622,676 1,375,724 4,804,672
Stock based compensation -- 64,818 -- 108,030
Advertising 363,668 785,830 457,149 1,509,874
Commission 80,043 107,576 130,241 143,308
Amortization 155,445 341,528 310,890 541,729
Depreciation 24,657 56,462 46,191 108,979
-------------------------------------------------------
Total operating expenses 1,367,325 3,978,890 2,320,195 7,216,592
Loss from operations (1,084,775) (3,017,801) (1,742,329) (5,523,884)
Interest expense (60,178) (9,001) (105,663) (49,882)
Interest income -- 193,472 -- 331,619
Share of losses from equity affiliate (75,750) (158,665) (112,871) (262,060)
Minority Interests -- 40,658 -- 114,779
Other expense (7,878) (704,451) (15,016) (497,119)
-------------------------------------------------------
Net Loss (1,228,581) (3,655,788) (1,975,879) (5,886,547)
=======================================================
Basic net loss per share 0.24 0.38 0.38 0.62
=======================================================
Shares used in basic net loss per share calculation 5,200,000 9,511,910 5,200,000 9,511,910
=======================================================
Diluted net loss per share 0.24 0.38 0.38 0.62
=======================================================
Shares used in diluted net loss per share calculation 5,200,000 9,511,910 5,200,000 9,511,910
=======================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
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TOPJOBS.NET PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN POUNDS STERLING)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30, 1998 30, 1999
------------------------------------
(pound) (pound)
<S> <C> <C>
Net loss ............................................. (1,975,879) (5,886,547)
Stock based compensation ........................... -- 108,030
Depreciation and amortization ...................... 357,081 650,708
Foreign currency exchange gain ..................... (5,289) (14,244)
Share of result from equity affiliate .............. (112,871) 262,060
Minority interests ................................. -- (114,779)
Changes in operating assets and liabilities:
Accounts receivable ............................... (205,612) (174,734)
Prepaid expenses and other receivables ............ (43,953) 487,247
Retained interest in factored receivables ......... (145,341) (295,254)
Trade accounts payable ............................. 142,489 (523,644)
VAT and payroll tax payable ........................ (62,628) 13,675
Accrued liabilities ................................ (9,188) (246,008)
Deferred revenue ................................... 459,647 603,820
--------------------------
Net cash used in operating activities ................ (1,375,803) (5,129,670)
--------------------------
Investing activities
Purchase of property, plant and equipment .......... (103,138) (163,863)
Proceeds of sale & leaseback ....................... 43,505 --
Investment in affiliate ............................ (63,094) (2,408,187)
Cash received through acquisition of affiliates .... -- 48,968
--------------------------
Net cash used in investing activities ................ (122,727) (2,523,082)
--------------------------
Financing activities
Repayment of bank overdraft ........................ 18,309 (1,698,214)
Proceeds from long term debt ....................... 1,615,578 --
Payments on long term debt ......................... (91,705) --
Proceeds from related parties ...................... -- 49,110
Payments on capital leases ......................... (46,737) (62,389)
Issue of ordinary shares ........................... -- 24,750,000
IPO fees ........................................... -- (2,915,436)
--------------------------
Net Cash provided by financing activities ............ 1,495,445 20,123,071
--------------------------
Exchange movements on cash balances .................. -- (1,288)
--------------------------
Increase in cash ..................................... (3,085) 12,469,031
Cash at beginning of period .......................... 3,085 122,974
==========================
Cash at end of period ................................ -- 12,592,005
==========================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
TOPJOBS.NET PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
These unaudited consolidated interim financial statements have been prepared in
accordance with the United States Generally Accepted Accounting Principles
("USGAAP").
These statements reflect all adjustments, consisting of normal recurring
accruals which, in the opinion of management, are necessary for a fair
presentation of the information contained therein.
Results of operations for interim periods are not necessarily indicative of
annual results.
2. ACQUISITIONS
In July 1999, the Company acquired the remaining 49% of the equity of TopjobsNet
AG, its Swiss subsidiary, from the minority shareholder and Managing Director,
Dr C. Nokes. The consideration included 50,000 ordinary shares in the Company
plus a cash payment of US$50,000. In addition Dr. Nokes' loans to TopjobsNet AG
were assigned to the Company and he received a repayment of (pound)85,290 equal
to the value of the loans. In August 1999, the Company acquired a 75% equity
interest in Jobbdirekt.se Sverige AB, a leading provider of Internet solutions
in Sweden. Aftonbladet Hierta AB, publishers and operators respectively of
Sweden's largest daily newspaper and Europe's most visited newspaper portal,
Aftonbladet, will continue to hold the remaining 25% interest. Aftonbladet
Hierta AB is part of Schibsted ASA (SCH.OL), a leading international media
group. The initial consideration was approximately US$6.5 million comprising
US$3.2 million in cash and 605,000 shares in the Company valued at approximately
US$3.3 million. Subsequent earn-out consideration to a maximum of US$3.3million,
approximately US$1.0 million of which can be satisfied in whole or in part by
loan notes and/or shares, will be payable if Jobbdirekt achieves certain revenue
and profitability targets over the next two years.
The transaction also includes a marketing agreement whereby topjobs.net plc will
receive advertising and IT support for fixed periods. Management is currently
working to determine the fair value of respective assets acquired. These
financial statements include a preliminary purchase price allocation whereby all
purchase consideration in excess of net assets acquired has been allocated to
goodwill. The final purchase price allocation may differ from the preliminary in
that a portion of the total consideration paid is expected to be allocated to
the marketing agreement, IT agreement and other intangible assets acquired.
In September 1999, the Company entered into a relationship with Verdens Gang AS
to establish and operate Top Jobs on the Net in Norway through VG Topjobs AS.
topjobs.net plc owns the controlling 51% equity interest in the company, with
the remaining 49% interest being held by Verdens Gang AS. topjobs.net plc will
manage the company and will underwrite the initial working capital requirements.
Verdens Gang AS will be issued 10,000 topjobs.net plc (TJOB) ordinary shares.
Verdens Gang AS is also part of the Schibsted ASA (SCH.OL) (supra) group and
publish and operate Verdens Gang, Norway's largest daily newspaper and most
visited newspaper web site.
3. COMPUTATION OF LOSS PER SHARE
Loss per ordinary share has been computed using the weighted average number
of common shares outstanding during the periods presented. The weighted average
number of shares outstanding used for the comparative period has been calculated
by retrospectively applying the stock split of 5,200 for 1, which took place in
February 1999. Diluted loss per share does not include the impact of shares
issuable under outstanding stock options and warrants at September 30, 1999
since the inclusion of such shares is anti-dilutive due to losses for these
periods.
6
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<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1998 30, 1999 30, 1998 30, 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator
Net loss (pound)(1,228,581) (pound)(3,655,788) (pound)(1,975,879) (pound)(5,886,547)
Denominator
Weighted average shares outstanding 5,200,000 9,511,910 5,200,000 9,511,910
Basic loss per ordinary share (pound)(0.24) (pound)(0.38) (pound)(0.38) (pound)(0.62)
Weighted average shares outstanding 5,200,000 9,511,910 5,200,000 9,511,910
Dilutive effect of outstanding options -- -- -- --
Diluted loss per ordinary share (pound)(0.24) (pound)(0.38) (pound)(0.38) (pound)(0.62)
</TABLE>
4. COMPREHENSIVE LOSS
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", which requires presentation
of information on comprehensive income and its components in financial
statements. Comprehensive income includes net income and foreign currency
translation adjustments.
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1998 30, 1999 30, 1998 30, 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss (pound)(1,228,581) (pound)(3,655,788) (pound)(1,975,879) (pound)(5,886,547)
Foreign currency translation adjustments -- 99,178 -- 71,031
--------------------------------------------------------------------------
Total comprehensive loss (pound)(1,228,581) (pound)(3,556,610) (pound)(1,975,879) (pound)(5,815,516)
==========================================================================
</TABLE>
5. RELATED PARTY TRANSACTIONS
Mr. K. Leech, a director of the Company, is also a director of Gala Consultancy
Limited which has lent money to the Company to fund its operations. At June 30,
1999 the loan balance due to Gala Consultancy Limited, representing accrued
interest on the original loan capital, was (pound)29,164. This balance was
repaid on September 24, 1999.
Mr K. Leech is also a director of Glen Investments Limited. At June 30, 1999 the
loan balance due to Glen Investments Limited, representing accrued interest on
the original loan capital, was (pound)835. This balance was repaid on September
24, 1999.
At September 30, 1999 our United States subsidiary, topjobs.net Incorporated,
owed (pound)242,774 to its minority shareholder, Dynamic Information System and
Exchange Incorporated. The loan shall be repaid at such time as the board of
directors of topjobs.net Inc. consider that it is cash positive and has
sufficient funding to meet its needs. No interest has been charged on the loan.
The Company rents its Warrington premises under a sublease from ML Laboratories
plc ("ML"), of which Mr K. Leech is a director and shareholder. The sublease is
an operating lease and total rent expense for the quarter was (pound)12,483.
6. GEOGRAPHIC INFORMATION
In 1999, the Company adopted Statement of Financial Accounting Standards (FAS)
131 Disclosures about Segments of
7
<PAGE>
an Enterprise and Related Information. FAS 131 supersedes FAS 14, Financial
Reporting for Segments of a Business Enterprise, replacing the "industry
segment" approach with the "management" approach. The management approach
designates that the internal organization that is used by management for making
operating decisions and assessing performance should be the source for
determining the Company's reportable segments. FAS 131 also requires disclosures
about products and services, geographic areas, and major customers. The adoption
of FAS 131 did not affect results of operations or financial position but did
affect the disclosure of segment information. The Company operates and manages
its business as a single segment. The Company's operations are principally
conducted in the United Kingdom with subsidiaries operating in Switzerland,
Sweden and the United States, and an equity affiliate in Australia. Although the
Company operates as a single segment, prior period's geographic information has
been restated in conformity with the new standard.
Foreign revenue is based on the country in which the legal subsidiary is
domiciled.
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1998 30, 1999 30, 1998 30, 1999
--------------------------------------------------------------------------
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
Revenues by origin
United Kingdom (pound)282,550 (pound)676,706 (pound)577,866 (pound)1,211,139
Switzerland -- 142,256 -- 273,433
Sweden 51,980 51,980
Other -- 90,147 -- 156,156
--------------------------------------------------------------------------
(pound)282,550 (pound)961,089 (pound)577,866 (pound)1,692,708
==========================================================================
<CAPTION>
At June 30, At September 30,
1999 1999
----------------------------------
(pound) (pound)
<S> <C> <C>
Long-lived assets
United Kingdom (pound)1,296,852 (pound)5,815,672
Switzerland 28,708 43,216
Other 56,726 59,277
--------------------------------------
(pound)1,382,286 (pound)5,918,165
--------------------------------------
</TABLE>
7. SUBSEQUENT EVENTS
The Company has taken an assignment of debt due to Australian Business On Line
PTY Limited ("ABOL"), our partner in Australian Business Internet Services PTY
Limited ("ABIS"), our Australian joint venture. The debt is in the sum of AUS
$332,880 and has been assigned from ABOL in consideration of the allotment to
ABOL of 17,662 ordinary shares in the capital of the company.
The Company has also taken an option from ABOL to acquire its 50% shareholding
in ABIS and to pay off the remaining debt due to ABOL in the sum of AUS
$840,000.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
OVERVIEW
We own and operate, through a wholly-owned subsidiary, Top Jobs on the Net
Limited (formerly, The Corporate Net Limited and originally incorporated as Top
Jobs on the Net Limited), Internet recruitment advertising Websites for
management, professional and technical positions known as Top Jobs on the Net.
We derive substantially all of our revenues from the sale of our services to
corporations and recruiting firms pursuant to fixed-fee contracts of up to one
year. We receive fees for the delivery of our services, not on a job placement
basis. We typically receive payment for our services on an up-front basis. Under
U.S. GAAP, we present as deferred revenues on our balance sheet funds received
from our customers for services that have been contracted for but not delivered
at the end of any reporting period. These deferred revenues are recognized in
net revenues as the applicable services are delivered. All the services we offer
to job-seekers are free of charge and do not contribute to our revenues.
Our most significant expenses incurred to date have been for advertising,
selling and marketing in order to build brand recognition for Top Jobs on the
Net as quickly as possible. In addition, we have incurred significant
expenditures to increase our technology and personnel infrastructure to support
our growth. As a consequence of this investment, we have incurred substantial
losses since inception
TopjobsNet AG, a wholly owned subsidiary effective July 31,1999, has only been
consolidated in the Company's financial statements since October 1, 1998 because
of the existence of minority veto rights prior to that date. As such the
comparative period results for this quarter do not include the revenues and
costs of the Swiss operation. The quarter ended September 30, 1999 also includes
one month's results for the Swedish subsidiary which was on acquired August 31,
1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND THREE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
Revenues for the three months ended September 30, 1999 rose to (pound)961,089
compared with (pound)282,550 for the same period in the previous year,
representing a 240 percent increase. The increase in revenues was due primarily
to an increase in the number of corporations and recruiting firms subscribing to
our services, as well as due to an increase in subscriptions to our more
expensive products. Our Swiss subsidiary contributed revenues of (pound)142,256
to this period. Our United States subsidiary contributed (pound)90,147 and the
Swedish subsidiary contributed (pound)51,980. Revenue from the United Kingdom
and Ireland businesses rose by 139 percent to (pound)676,706.
OPERATING EXPENSES
Operating expenses for the three months ended September 30, 1999 were
(pound)3,978,890 compared with (pound)1,367,325 for the comparable prior year
period. Costs have increased in all areas as the United Kingdom and Ireland
businesses have expanded and the Swiss, United States and Swedish operations
have been added. The latter three operations, together with the cost of
providing our Australian joint venture with head office management resources,
added more than (pound)1.6 million to total operating expenses. Operating
expenses for the remainder of the group rose in line with revenues particularly
payroll and infrastructure costs to support increased revenue.
Advertising expense for the three months was (pound)785,830 compared with
(pound)363,668 for the same period in the previous year in line with the
expansion of our promotion and marketing of the Top Jobs on the Net brand.
9
<PAGE>
Selling, general and administrative expenses for the quarter were
(pound)2,622,676 compared with (pound)743,512 in the second quarter of fiscal
1999. Approximately half of the increase was due to the inclusion in the quarter
of the operations in Switzerland, the United States and the inclusion of Sweden
for September only. Payroll and staff related costs, which account for
approximately two thirds of total selling, general and administrative expenses,
have grown as new sales and support staff have been recruited at the operational
level and management resource added centrally to support and oversee the
increased number and size of operations.
Stock based compensation expense of (pound)64,818 relates to options granted in
March 1999, at a discount to the initial public offering price, as set out in
our most recent Form 20-F.
Commission expense increased by 35% to (pound)107,576 for the three months ended
September 30, 1999 compared with the same period in 1998. This is commission
paid on invoiced sales made by our sales force. The increase is proportionately
less than the increase in Revenue because of changes to the commission scheme in
September 1998, which decreased the maximum rate of commission earned from 20
percent to 15 percent.
Amortization expense has increased to (pound)341,528 for the quarter from
(pound)155,445 for the same period last year because of the additional cost of
amortizing the goodwill arising on the acquisition of the remaining 49% of our
Swiss subsidiary and our subsidiaries in the United States and Sweden. This
goodwill is being amortized over a three year period.
Depreciation expense has increased to (pound)56,462 for the three months ended
September 30, 1999 from (pound)24,657 for the same period in the previous year.
The increase resulted from the increased capital expenditure on computer and
office equipment needed to support the growing operations.
OTHER INCOME AND EXPENSE
Since the initial public offering, when most of the Company's borrowings were
repaid, the Company has received interest income on its cash balances, which are
maintained on short-term deposit.
Other expense includes foreign exchange losses of (pound)697,142 for the three
months ended September 30, 1999. Since the initial public offering the Company
has held significant balances in United States Dollars and during this period
made significant losses primarily as a result of movements in the value of the
United States Dollar against the Pound Sterling.
NET LOSS
Although we significantly increased revenues for the three months ended
September 30, 1999 from the three months ended September 30, 1998 the
substantial increase in our operating expenses caused us to incur a net loss of
(pound)3,655,788 for the three months ended September 30, 1999 compared with a
net loss of (pound)1,228,581 in the same period last year. On a per share basis
the loss increased from (pound)0.24 to (pound)0.38.
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND SIX MONTHS ENDED SEPTEMBER 30, 1998
REVENUES
Revenues for the six months ended September 30, 1999 rose to (pound)1,692,708
compared with (pound)577,866 for the same period in the previous year,
representing a 193 percent increase. The increase in revenues was due primarily
to an increase in the number of corporations and recruiting firms subscribing to
our services, as well as due to an increase in subscriptions to our more
expensive products. Our Swiss subsidiary contributed revenues of (pound)273,433
to this period. Our United States subsidiary contributed (pound)156,156 and the
Swedish subsidiary contributed (pound)51,980. Revenue from the United Kingdom
and Ireland businesses rose by 110 percent to (pound)1,211,139.
10
<PAGE>
OPERATING EXPENSES
Operating expenses for the six months ended September 30, 1999 were
(pound)7,216,592 compared with (pound)2,320,195 for the comparable prior year
period. Costs have increased in all areas as the United Kingdom and Ireland
businesses have expanded and the Swiss, United States and Swedish operations
have been added. The latter three operations, together with the cost of
providing our Australian joint venture with head office management resources,
added more than (pound)2.6 million to total operating expenses. Operating
expenses for the remainder of the group rose in line with revenues particularly
payroll and infrastructure costs to support increased revenue.
Advertising expense for the six months was (pound)1,509,874 compared with
(pound)457,149 for the same period in the previous year in line with the
expansion of our promotion and marketing of the Top Jobs on the Net brand.
Selling, general and administrative expenses for the six months were
(pound)4,804,672 compared with (pound)1,375,724 in the comparable period of
fiscal 1999. Approximately half of the increase was due to the inclusion in the
six months of the operations in Switzerland, the United States and the inclusion
of Sweden for September only. Payroll and staff related costs, which account for
approximately 60 percent of total selling, general and administrative expenses,
have grown as new sales and support staff have been recruited at the operational
level and management resource added centrally to support and oversee the
increased number and size of operations.
Stock based compensation expense of (pound)108,030 relates to options granted in
March 1999, at a discount to the initial public offering price, as set out in
our most recent Form 20-F.
Commission expense increased by 10% to (pound)143,308 for the six months ended
September 30, 1999 compared with the same period in 1998. This is commission
paid on invoiced sales made by our sales force. The increase is proportionately
less than the increase in Revenue because of changes to the commission scheme in
September 1998, which decreased the maximum rate of commission earned from 20
percent to 15 percent.
Amortization expense has increased to (pound)541,729 for the six months from
(pound)310,890 for the same period last year because of the additional cost of
amortizing the goodwill arising on the acquisition of the remaining 49% of our
Swiss subsidiary and our subsidiaries in the United States and Sweden. This
goodwill is being amortized over a three year period.
Depreciation expense has increased to (pound)108,979 for the six months ended
September 30, 1999 from (pound)46,191 for the same period in the previous year.
The increase resulted from increased capital expenditure on computer and office
equipment needed to support the growing operations.
OTHER INCOME AND EXPENSE
Since the initial public offering, when most of the Company's borrowings were
repaid, the Company has received interest income on its cash balances which are
maintained on short-term deposit.
Other expense includes foreign exchange losses of (pound)510,954 for the six
months ended September 30, 1999. Since the initial public offering the Company
has held significant balances in United States Dollars and during this period
made significant losses primarily as a result of movements in the value of the
United States Dollar against the Pound Sterling.
NET LOSS
Although we significantly increased revenues for the six months ended September
30, 1999 from the six months ended September 30, 1998 the substantial increase
in our operating expenses caused us to incur a net loss of (pound)5,886,547 for
the six months ended September 30, 1999 compared with a net loss of
(pound)1,975,879 in the same period last year. On a per share basis the loss
increased from (pound)0.38 to (pound)0.62.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was (pound)5,129,670 for the six months
ended September 30, 1999. At September 30, 1999 the Company had cash balances in
excess of (pound)12 million and minimal borrowings, thereby providing
substantial resources to fund overseas expansion and existing operations.
FAILURE TO BE YEAR 2000 COMPLIANT COULD NEGATIVELY IMPACT OUR BUSINESS
We have taken a number of steps to address the Year 2000, or so-called Y2K,
issue. We have completed testing of our information technology hardware,
software and data sets as well as our non-information technology systems (our
mobile communications equipment, copiers and fax machines, fire alarms, air
conditioning and elevators) according to Y2K compliance standards we established
internally as the first phase of our Y2K compliance certification process. As
the next phase of our Y2K compliance certification process, we are rechecking
these systems in accordance with Y2K compliance standards officially established
by the British Standards Institute. Based on our experience to date, we have
budgeted approximately (pound)200,000 for completion of our Y2K remediation
efforts. As a parallel phase of our Y2K compliance certification process, we are
requesting and receiving certifications from the various suppliers of our
hardware, software and microprocessor-embedded equipment and other systems,
notably telecommunications and electrical utilities, that the products and
services they provide are fully Y2K compliant. We are requesting that all Y2K
certifications be provided to us in writing. Where necessary to achieve Y2K
compliance, we are obtaining upgrades from these suppliers. In the process of
testing our hardware, software, data sets and microprocessor-embedded equipment,
we have not encountered any significant problems to date and expect to be fully
Y2K compliant.
Our Y2K audit process may not discover all instances of two-digit date fields in
user data-sets, resulting in incorrect results. For example, a job advertisement
may incorrectly remain on our Website for too long or not long enough due to a
date error. Our contingency plan to handle such incidents is to identify them
through our routine quality checking processes, notify any staff, customers or
suppliers that have been affected, and correct the data-set as quickly as
possible. However, we do not anticipate any significant loss of business if this
should occur.
EFFECTS OF THE EURO CURRENCY
Under the Treaty on European Economic and Monetary Union, as of January 1, 1999,
the Euro was introduced as a common currency among the 11 members of the
European Union that are participating in this phase of European Monetary Union,
commonly referred to as EMU. Although the individual currencies of these
countries will continue to be used until 2002 their exchange rates with the Euro
are fixed. The Euro may now be used for transactions that do not involve payment
using physical notes and coins of the participating countries. These individual
currencies are to be replaced with Euro notes and coins (to be introduced on
January 1, 2002) by June 30, 2002 when all countries participating in EMU are
expected to operate with the Euro as their exclusive common currency.
The current government of the United Kingdom has stated that the United Kingdom
will not participate in EMU and adopt the Euro until after the next general
election at the earliest. We are currently working on the assumption that the
next general election will be in 2001 or 2002 and that the United Kingdom will
enter EMU shortly thereafter following confirmation of the government's decision
through a referendum. We do not currently operate in any countries that have
adopted the Euro, except for our small branch in the Republic of Ireland and we
therefore do not face a significant currency or competitive exposure to the
Euro. We are considering expanding into a number of these countries and believe
that a common currency may facilitate this process.
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In the event that the United Kingdom adopts the Euro, we would face a number of
costs in altering our accounting-related systems for the new currency, although
at present it is too early to estimate these costs. Adoption of the Euro in the
United Kingdom would also create greater transparency between prices offered to
our customers in the United Kingdom and prices offered in other countries that
participate in EMU. We do not believe that the adoption of the Euro by eleven
countries of the European Union will have an adverse impact on our liquidity or
financial condition.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's financial instruments comprise borrowings, cash and various items
such as trade debtors, trade creditors, etc. that arise directly from its
operations.
The Company does not currently purchase or sell derivative financial
instruments, as the exposure to foreign currency and interest rate risk has in
the past been minimal. Since the completion of the Company's IPO in April 1999,
the Company now has substantial cash balances denominated in US dollars. The
Company plans to invest a significant proportion of these funds in its overseas
operations which is likely to increase foreign currency risk. The directors are
currently assessing the options for minimizing such risks.
It is, and has been throughout the period under review, the Company's policy
that no trading in financial instruments shall be undertaken. The main risks
arising from the Company's financial instruments are interest rate risk,
liquidity risk and foreign currency risk. The Board reviews and agrees policies
for managing each of these risks and they are summarized below. These policies
have remained unchanged since the beginning of 1998/1999.
INTEREST RATE RISK
Until the completion of the IPO in May 1999, the Company had financed its
operations principally through a bank overdraft facility and loans from its
principal shareholder. The majority of the Company's borrowings, with the
exception of finance leases and loans attributable to minority shareholders,
were in pounds sterling and at variable rates of interest. Since the IPO the
bank overdraft facility and loans from the principal shareholder have been
repaid in full. Therefore the Company currently has minimal interest rate risk,
except on cash deposits.
LIQUIDITY RISK
Since the IPO the Company has maintained substantial cash balances on short term
deposit.
FOREIGN CURRENCY RISK
The Company has four overseas subsidiaries and a joint venture which
collectively operate in the United States, Switzerland, Sweden and Australia and
whose revenues and expenses are denominated exclusively in the local currency of
those countries. The Company's net investment in these operations has
historically been funded by pounds sterling denominated borrowings and, since
the IPO, out of US dollar deposits. As the level of investment in overseas
operations is expected to increase substantially, the directors are currently
considering financing these investments by way of borrowings in the relevant
currencies in order to minimize the foreign currency risk.
All sales by the Company's businesses are invoiced in the local currency of the
business concerned such that the customer bears any foreign currency risk.
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FINANCIAL ASSETS
CURRENCY INTEREST RATE CASH DEPOSITS
-------- ------------- -------------
% (pound)
Sterling 2.5 375,620
Swedish Krona -- 24,755
Swiss franc 0.5 15,983
US dollar 4.94 12,033,304
Irish Punts -- 129,856
Australian dollar -- 12,487
TOTAL 12,592,005
==========
The Company has no financial assets other than cash deposits held at banks.
FINANCIAL LIABILITIES
The Company has no long term financial liabilities apart from obligations
arising due to capital leases.
CURRENCY EXPOSURES
There is negligible currency exposure on Company financial assets and
liabilities apart from cash deposits held in foreign currencies.
MATURITY PROFILE
All of the Company's financial liabilities as at March 31, 1999 are payable on
demand.
BORROWING FACILITIES
On March 25, 1999 we obtained a short term increase in our Midland Bank loan
facility to (pound)2 million, of which (pound)1.76 million had been utilized at
March 31, 1999. The overdraft facility was due for review on March 25, 2000
although it has been repaid in full since the year end. The borrowing rate was
1% over LIBOR. There were no other undrawn committed borrowing facilities at
March 31, 1999. Following the completion of the initial public offering this
facility reduced to (pound)1.0 million and ceased to be personally guaranteed by
Kevin R. Leech or secured by his personal assets.
FAIR VALUES
The directors consider that the financial assets and liabilities of the Company
are currently recorded at fair value.
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PART II Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 6-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 10, 1999 TOPJOBS.NET PLC
By: _______________________
Alan Clarke
Chief Financial Officer and Director
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EXHIBIT INDEX
Exhibit Description of Exhibit
- ------- ----------------------
None.
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