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 December 31, 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
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Page 1 of 18 Pages
Exhibit Index appears on Page 18
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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 December 31, 1999.............................3
Consolidated Statements of Operations
Three Months and Nine Months ended December 31, 1998 and 1999....4
Consolidated Statement of Cash Flows
Nine ended Months December 31, 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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<TABLE>
<CAPTION>
topjobs.net plc and subsidiaries
Consolidated Balance Sheets
(in Pounds Sterling)
--------------- --------------
March 31, December 31,
1999 1999
--------------- --------------
(pound) (pound)
<S> <C> <C>
ASSETS
Current assets:
Cash ......................................................................... 122,974 9,855,709
Accounts receivable .......................................................... 511,392 845,801
Retained interest in factored receivables .................................... 154,888 352,178
Prepaid expenses and other receivables ....................................... 1,146,258 309,134
---------- ----------
Total current assets ........................................................... 1,935,512 11,362,822
Property, plant and equipment, net ............................................. 617,102 1,041,042
Investment in equity affiliate ................................................. (200,035) 24,898
Goodwill ....................................................................... 849,584 5,141,656
---------- ----------
Total assets ................................................................... 3,202,163 17,570,418
========== ===========
LIABILITIES
Current liabilities:
Bank overdraft payable ....................................................... 1,758,587 46,470
Payable to related parties ................................................... 5,046,981 500,132
Deferred revenue ............................................................. 1,264,265 1,908,420
Trade accounts payable ....................................................... 1,053,319 1,496,963
Accrued and other liabilities ................................................ 803,994 583,633
VAT and payroll tax payable .................................................. 244,020 235,939
Current portion of capital lease obligation .................................. 123,505 97,149
---------- ----------
Total current liabilities ...................................................... 10,294,671 4,868,706
Capital lease obligation, less current portion ................................. 99,757 71,142
---------- ----------
Total liabilities .............................................................. 10,394,428 4,939,848
========== ===========
Minority Interests.............................................................. (248,010) -
Commitments
STOCKHOLDERS' (DEFICIT)/EQUITY
Ordinary Shares, 0.02 pence par value;
20,000,000 authorized; 5,230,000 and 10,026,976 shares outstanding ........... 1,006 1,927
Preference Shares(pound)1 par value, 5,000,000 authorized,
49,000 and nil shares outstanding............................................ 49,000 -
Additional paid in capital ..................................................... 176,467 30,305,607
Accumulated deficit ............................................................ (7,164,602) (17,697,435)
Cumulative translation adjustment .............................................. (6,126) 20,471
---------- -----------
Total stockholders' (deficit)/equity............................................ (6,944,255) 12,630,570
---------- -----------
Total liabilities and stockholders' equity 3,202,163 17,570,418
========== ===========
The accompanying notes are an integral part of these financial statements
3
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<TABLE>
<CAPTION>
topjobs.net plc and subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN POUNDS STERLING, EXCEPT SHARES USED TO CALCULATE LOSS PER SHARE)
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------
1998 1999 1998 1999
(POUND) (POUND)
<S> <C> <C> <C> <C>
Revenues 445,123 1,472,172 1,022,989 3,164,880
--------- --------- --------- ----------
Operating Expenses:
Selling, general and administration 1,154,740 3,026,256 2,530,464 7,830,928
Stock based compensation -- 64,818 -- 172,848
Advertising 182,858 2,070,634 640,007 3,580,509
Commission 14,686 77,862 144,927 221,170
Amortization 155,445 1,033,893 466,334 1,575,622
Depreciation 27,302 86,043 73,494 195,022
--------- --------- --------- ----------
Total operating expenses 1,535,031 6,359,506 3,855,226 13,576,099
Loss from operations (1,089,908) (4,887,334) (2,832,237) (10,411,219)
Interest expense (77,504) (3,425) (183,167) (53,307)
Interest income -- 137,066 -- 468,685
Share of losses from equity affiliate (75,914) (74,632) (188,785) (336,692)
Minority Interests 28,734 (235,219) 28,734 (120,440)
Other expense (12,291) 417,260 (27,307) (79,860)
--------- --------- --------- ----------
Net Loss (1,226,883) (4,646,284) (3,202,762) (10,532,833)
========= ========== ========= ==========
Basic net loss per share 0.24 0.46 0.62 1.15
========= ========== ========= ==========
Shares used in basic net loss per share calculation 5,200,000 10,020,664 5,200,000 9,146,097
========= ========== ========= ==========
Diluted net loss per share 0.24 0.46 0.62 1.15
========= ========== ========= ==========
Shares used in diluted net loss per share calculation 5,200,000 10,020,664 5,200,000 9,146,097
========= ========== ========= ==========
The accompanying notes are an integral part of these financial statements
4
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<TABLE>
<CAPTION>
topjobs.net plc and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN POUNDS STERLING)
NINE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
----------- ------------
(POUND) (POUND)
<S> <C> <C>
Net loss (3,202,762) (10,532,833)
Stock based compensation - 172,848
Depreciation and amortization 539,828 1,770,644
Foreign currency exchange gain (2,294) (14,244)
Share of result from equity affiliate 188,785 336,692
Minority interests (28,734) 120,440
Changes in operating assets and liabilities:
Accounts receivable (177,748) (277,262)
Prepaid expenses and other receivables (450,840) 258,930
Retained interest in factored receivables (16,759) (197,320)
Trade accounts payable 375,150 327,268
VAT and payroll tax payable 28,575 (6,656)
Accrued liabilities (846) (293,068)
Deferred revenue 474,280 693,408
--------- ----------
Net cash used in operating activities (2,273,365) (7,641,153)
--------- ----------
Investing activities
Purchase of property, plant and equipment (155,975) (530,594)
Proceeds of sale & leaseback 134,754 -
Investment in affiliate (67,409) (2,394,485)
Cash received through acquisition of affiliates 7,728 77,190
--------- ----------
Net cash used in investing activities (80,902) (2,847,889)
--------- ----------
Financing activities
Repayment of bank overdraft 25,144 (1,712,117)
Proceeds from long term debt 2,479,242 -
Proceeds from related parties - 161,427
Payments on capital leases (82,511) (54,970)
Issue of ordinary shares - 24,749,201
IPO fees - (2,915,436)
--------- ----------
Net Cash provided by financing activities 2,421,875 20,228,105
--------- ----------
Exchange movements on cash balances 653 (6,328)
--------- ----------
Increase in cash...................................... 68,261 9,732,735
Cash at beginning of period 3,085 122,974
--------- ----------
Cash at end of period................................. 71,346 9,855,709
========= ============
The accompanying notes are an integral part of these financial statements
5
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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
On November 1, 1999 by way of a Deed of Assignment, topjobs.net plc (the
"Company") purchased AUS $332,880 worth of loan owed by Australian Business
Internet Services PTY Limited ( "ABIS"), our Australian joint venture, to
Australian Business On Line PTY Limited ("ABOL"), our partner in ABIS, in
consideration for the issuance of 17,662 ordinary shares in the capital of the
Company to ABOL.
Contemporaneously with the completion of the Deed of Assignment, the
Company entered into an Option Agreement entitling the Company to acquire some
or all of the shares held by ABOL in ABIS again in consideration for the
issuance of such number of ordinary shares in the capital of the Company as
shall be calculated by dividing the number of ABIS shares the subject of the
option by the higher of (i) US$15 or (ii) the market value on the NASDAQ
National Market of the Company's American Depositary Shares on the date of
exercise of the option. It was also agreed that on each exercise of the option
to acquire the ABIS shares from ABOL, the Company would redeem the same
proportion of the remaining loan of AUS $840,000 owed by ABIS to ABOL.
On November 15, 1999 the Company exercised its option to acquire 2% of ABOL's
shareholding in ABIS, giving the Company a controlling 51% equity interest in
ABIS in consideration for the issuance of 13 ordinary shares to ABOL. The
Company also undertook to redeem 2% of the loan amounting to AUS $16,800 in
consideration for the issuance of 724 ordinary shares to ABOL.
In August 1999, the Company acquired a 75% equity interest in Jobbdirekt.se
Sverige AB. The transaction included a marketing agreement whereby topjobs.net
plc will receive advertising and IT support for fixed periods. Management is
currently assessing 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.
3. Closure of US subsidiary
In the US, topjobs.net Inc. was established in February 1999 as a subsidiary
through an agreement between the Company and Dynamic Information System and
eXchange, generally known as DiSX Inc., to operate Top Jobs on the Net in
selected US markets on a test marketing basis. The Company's objective was to
assess the broader potential of the US market through its subsidiary, relative
to the Company's overall business objectives and growth strategy. The US
subsidiary was granted an exclusive licence in the State of Utah and in the
cities of Houston, Los Angeles and San Francisco.
Management completed its review of the US test marketing initiative during this
quarter, and concluded that the US market was extremely competitive and
fragmented, and required too much working capital to establish a competitive
position. It therefore decided to close the US operation under its existing
arrangement, effective December 15, 1999, and instead focus entirely on Europe.
6
<PAGE>
4. Extraordinary Item
At December 31, 1999 topjobs.net Inc, owed (pound)251,625 to DiSX. As part
of the agreement to terminate the Stockholders Agreement between the Company and
DiSX, the obligation by topjobs.net Inc. to repay the loan was waived by DiSX.
Accordingly, other "expenses" in the Consolidated Statements of Operations
includes a credit of (pound)251,625.
5. Asset Impairments
A write down adjustment of (pound)417,725 being the total carrying value of
goodwill which arose on the acquisition of our United States subsidiary has been
included in Amortization expenses during the quarter.
6. 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 December 31, 1999 since
the inclusion of such shares is anti-dilutive due to losses for these periods.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator
Net loss (pound)(1,226,883) (pound)(4,646,284) (pound)(3,202,762) (pound)(10,532,833)
Denominator
Weighted average shares outstanding 5,200,000 10,020,664 5,200,000 9,146,097
Basic loss per ordinary share (pound)(0.24) (pound)(0.46) (pound)(0.62) (pound)(1.15)
Weighted average shares outstanding 5,200,000 10,020,664 5,200,000 9,146,097
Dilutive effect of outstanding options - - - -
Diluted loss per ordinary share (pound)(0.24) (pound)(0.46) (pound)(0.62) (pound)(1.15)
</TABLE>
7. 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>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net loss (pound)(1,226,883) (pound)(4,646,284) (pound)(3,202,762) (pound)(10,532,833)
Foreign currency translation adjustments - (44,435) (11,547) 26,597
---------- ---------- ---------- -----------
Total comprehensive loss (pound)(1,226,883) (pound)(4,690,719) (pound)(3,214,219) (pound)(10,506,236)
========== ========== ========== ===========
</TABLE>
7
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8. Related Party Transactions
The Company rents its Warrington premises under a sublease from ML Laboratories
plc ("ML"), of which Mr Kevin Leech is a director and shareholder. The sublease
is an operating lease and total rent expense for the quarter was (pound)12,483.
During this quarter our Sweedish subsidiary received free advertising as
part of the marketing agreement with Aftonbladet Hierta AB, our majority
shareholder in Sweeden.
9. Geographic Information
In 1999, the Company adopted Statement of Financial Accounting Standards (FAS)
131 Disclosures about Segments of 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 organisation 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, The Netherlands, Norway and 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>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
(POUND) (POUND) (POUND) (POUND)
<S> <C> <C> <C> <C>
Revenues by origin
- ------------------
United Kingdom (pound)384,008 (pound)764,912 (pound)961,874 (pound)1,976,051
Switzerland 61,115 274,455 61,115 547,888
Sweden - 366,585 - 418,565
US - 32,139 - 188,295
Netherlands - 25,994 - 25,994
Australia - 8,087 - 8,087
------- ------- ------- ---------
(pound)445,123 (pound)1,472,172 (pound)1,022,989 (pound)3,164,880
======= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
At September At December
30, 1999 31, 1999
------------ -----------
(POUND) (POUND)
<S> <C> <C>
Long-lived assets
- -----------------
United Kingdom (pound)5,815,672 (pound)5,823,805
Switzerland 43,216 68,674
US 55,340 50,626
Australia 3,937 59,241
Sweden - 66,876
Netherlands - 96,995
Norway - 41,379
--------- ---------
(pound)5,918,165 (pound)6,207,596
========= =========
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 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.
There has been continued growth in the subsidiary companies operating in
the United Kingdom, Ireland and Switzerland. The quarter ended December 31, 1999
also includes a full quarter's results for the Swedish and Norwegian
subsidiaries which were acquired in August and September respectively. The
quarter ended December 31, 1999 also includes two month's results for our
subsidiary in the Netherlands which was established in October and the results
of our Australian subsidiary from November 15, 1999, the date the company gained
a controlling 51% equity interest.
THREE MONTHS ENDED DECEMBER 31, 1999 AND THREE MONTHS ENDED DECEMBER 31, 1998
Revenues
Revenues for the three months ended December 31, 1999 rose to (pound)1,472,172
compared with (pound)445,123 for the same period in the previous year,
representing a 231 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)274,455
to this period a 349 percent increase on the same period in the previous year.
Our Swedish, Dutch, US and Australian subsidiaries contributed (pound)366,585,
(pound)25,994, (pound)32,139 and (pound)8,087 respectively to this period.
Revenue from the United Kingdom and Ireland businesses rose by 99 percent to
(pound)764,912 compared to the same period in the previous year
Operating expenses
Operating expenses for the three months ended December 31, 1999 were
(pound)6,359,506 compared with (pound)1,535,031 for the comparable prior year
period. Costs have increased in all areas as the United Kingdom, Ireland and
Swiss businesses have expanded and the Swedish, Norwegian, Dutch and Australian
operations have been added. The latter four operations added more than
(pound)1.2 million to total operating
9
<PAGE>
expenses. In addition, the operating expenses of the U.S. operation added
approximately (pound)1 million. 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)2,070,634 compared with
(pound)182,858 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. The
US operation added (pound)476,126 to total advertising expense.
Selling, general and administrative expenses for the quarter were
(pound)3,026,256 compared with (pound)1,154,740 in the third quarter of fiscal
1999. More than half of the increase was due to the inclusion in the quarter of
the operations in the United States, Sweden, Norway, Netherlands and Australia.
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 for the three months was (pound)77,862 compared with
(pound)14,686 for the same period in the previous year in line with increased
revenues.
Amortization expense has increased to (pound)1,033,893 for the quarter from
(pound)155,445 for the same period last year. This includes a write down of
(pound)417,725 being the total carrying value of goodwill which arose on the
acquisition of our United States subsidiary. This also includes the additional
cost of amortizing the goodwill arising on the acquisition of the remaining 49%
of our Swiss subsidiary and our subsidiaries in Sweden, Norway and Australia,
goodwill being amortized over a three year period.
Depreciation expense has increased to (pound)86,043 for the three months ended
December 31, 1999 from (pound)27,302 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
At December 31, 1999 topjobs.net Inc., owed (pound)251,625 to its minority
shareholder DiSX. As part of the agreement to terminate the Stockholders
Agreement between the Company and DiSX the obligation by topjobs.net Inc. to
repay the loan was waived by DiSX. Other expense includes the write back of this
loan.
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 gains of (pound)209,718 for the three
months ended December 31, 1999. Since the initial public offering, the Company
has held significant balances in United States Dollars and during this period
made significant gains 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 December
31,1999 from the three months ended December 31,1998 the substantial increase in
our operating expenses caused us to incur a net loss of (pound)4,646,284 for the
three months ended December 31, 1999 compared with a net loss of
(pound)1,226,883 in the same period last year. On a per share basis the loss
increased from (pound)0.24 to (pound)0.46.
10
<PAGE>
NINE MONTHS ENDED DECEMBER 31, 1999 AND NINE MONTHS ENDED DECEMBER 31, 1998
Revenues
Revenues for the nine months ended December 31, 1999 rose to (pound)3,164,880
compared with (pound)1,022,989 for the same period in the previous year,
representing a 209 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, Swedish, Dutch, US and Australian subsidiaries contributed
(pound)547,888, (pound)418,565, (pound)25,994, (pound)188,295 and (pound)8,087
respectively to this period. Revenue from the United Kingdom and Ireland
businesses rose by 158 percent to (pound)1,976,051 compared to the same period
in the previous year.
Operating expenses
Operating expenses for the nine months ended December 31, 1999 were
(pound)13,576,099 compared with (pound)3,855,226 for the comparable prior year
period. Costs have increased in all areas as the United Kingdom, Ireland and
Swiss businesses have expanded and the Swedish, Norwegian, Dutch and Australian
operations have been added. The latter four operations added more than
(pound)1.6 million to total operating expenses. In addition the operating
expenses of the U.S operations added approximately (pound)2.8 million. 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 nine months was (pound)3,580,509 compared with
(pound)640,007 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. The
US operation added (pound)1,412,005 to total advertising expense.
Selling, general and administrative expenses for the nine months were
(pound)7,830,928 compared with (pound)2,530,464 in the comparable period of
fiscal 1999. Approximately half of the increase was due to the inclusion in the
quarter of the operations in the United States, Sweden, Norway, Netherlands and
Australia. 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)172,848 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 52% to (pound)221,170 for the nine months ended
December 31, 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)1,575,622 for the nine months from
(pound)466,334 for the same period last year. This includes a write down of
(pound)417,725 being the total carrying value of goodwill which arose on the
acquisition of our United States subsidiary. This also includes the additional
cost of amortizing the goodwill arising on (i) the acquisition of the remaining
49% of our Swiss subsidiary and (ii) our subsidiaries in Sweden, Norway and
Australia which are being amortized over a three year period.
Depreciation expense has increased to (pound)195,022 for the nine months ended
December 31, 1999 from (pound)73,494 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.
11
<PAGE>
Other income and expense
At December 31, 1999, topjobs.net Inc., owed (pound)251,625 to its minority
shareholder DiSX. As part of the agreement to terminate the Stockholders
Agreement between the company and DiSX the obligation by topjobs.net Inc. to
repay the loan was waived by DiSX. Other expense includes the write back of this
loan.
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)270,642 for the nine
months ended December 31, 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 nine months ended December
31,1999 from the nine months ended December 31,1998 the substantial increase in
our operating expenses caused us to incur a net loss of (pound)10,532,833 for
the nine months ended December 31, 1999 compared with a net loss of
(pound)3,202,762 in the same period last year. On a per share basis the loss
increased from (pound)0.62 to (pound)1.15.
Liquidity and capital resources
Net cash used in operating activities was (pound)7,641,153 for the nine months
ended December 31, 1999. At December 31, 1999 the Company had cash balances of
approximately (pound)10 million and minimal borrowings, thereby providing
substantial resources to fund overseas expansion and existing operations.
Year 2000 Problems
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
the compliance and remediation work accomplished during the years leading up to
2000 was effective to prevent any problems. The Company has not experienced any
such computer difficulty, however, computer experts have warned that there may
still be residual consequences of the change in centuries and any such
difficulties may, depending upon their pervasiveness and severity, have a
material adverse effect on the Company's business, financial condition and
results of operations.
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
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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.
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 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.
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.
Liquidity risk
Since the IPO the Company has maintained substantial cash balances on short term
deposit.
Foreign currency risk
The Company has five overseas subsidiaries which collectively operate in
Switzerland, Sweden, Australia, Norway and the Netherlands 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 minimise 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)
Euros - 4969
Sterling 2.5 633,770
Swedish Krona - 43,512
Swiss franc 0.5 34,559
US dollar 5.07 8,835,732
Irish Punts - 157,032
Australian dollar - 82,018
Dutch Guilders - 45,347
Norwegian Krona - 7,944
Danish Krona - 10,826
---- ---------
Total 9,855,709
=========
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 December 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 March 31, 1999. 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: February 14, 2000 topjobs.net plc
By: /s/Alan Clarke
-----------------------------------
Alan Clarke
Chief Financial Officer and Director
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EXHIBIT INDEX
Exhibit Description of Exhibit
------- ----------------------
None.
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