<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1999
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number: 000-26891
HOTJOBS.COM, LTD.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3931821
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
24 West 40th Street, 14th Floor
New York, New York 10018
-----------------------------------
(Address of principal executive office) (Zip code)
(212) 699-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
As of November 1, 1999, there were 27,248,419 shares of the registrant's common
stock outstanding.
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HOTJOBS.COM, LTD.
Table of Contents
Part I. Financial Information Page Number
-----------
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999
(Unaudited) and December 31, 1998 ........................ 1
Consolidated Statements of Operations (Unaudited) for the
Three Month and Nine Month Periods Ended
September 30, 1999 and 1998 .............................. 2
Consolidated Statements of Cash Flows (Unaudited) for the
Nine Month Periods Ended September 30, 1999
and 1998 ................................................. 3
Notes to Consolidated Financial Statements (Unaudited) ... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............ 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 27
Part II. Other Information
Item 1. Legal Proceedings .................................. 28
Item 2. Changes in Securities and Use of Proceeds .......... 28
Item 6. Exhibits and Reports on Form 8-K ................... 28
Item 7. Signature .......................................... 29
<PAGE>
Part I Financial Information
Item 1. Financial Statements
HOTJOBS.COM, LTD.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ......................................... $ 3,002,036 $ 167,004
Marketable securities ............................................. 24,600,000 --
Accounts receivable, net .......................................... 4,731,544 1,553,297
Prepaid expenses and other current assets ......................... 1,213,544 1,042,675
------------ ------------
Total current assets ....................................... 33,547,124 2,762,976
Property and equipment, net ....................................... 2,605,729 589,693
Other assets ...................................................... 460,583 301,285
------------ ------------
Total assets ............................................... $ 36,613,436 $ 3,653,954
============ ============
Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Line of credit .................................................... $ -- $ 180,000
Accounts payable and accrued expenses ............................. 6,921,339 617,879
Due to affiliate .................................................. -- 3,631,640
Deferred revenue .................................................. 3,809,823 1,954,582
Notes payable - current portion ................................... 317,254 --
Current installments of obligations under capital leases .......... 208,233 72,950
------------ ------------
Total current liabilities .................................. 11,256,649 6,457,051
Notes payable - non-current portion .................................. 112,515 --
Obligations under capital leases, excluding
current installments .......................................... 268,081 79,999
------------ ------------
Total liabilities .......................................... 11,637,245 6,537,050
Stockholders' (deficit) equity:
Preferred stock, $0.01 par value,
10,000,000 shares authorized, none issued and outstanding as
of September 30, 1999 and December 31, 1998 ................... -- --
Common stock, $0.01 par value;
100,000,000 shares authorized, 28,448,419 issued and 27,248,419
outstanding at September 30, 1999 and 20,820,000 shares issued
and outstanding at December 31, 1998, respectively ............ 284,484 208,200
Deferred compensation ................................................ (6,234,952) --
Additional paid-in capital ........................................... 47,223,292 111,304
Accumulated deficit .................................................. (16,232,723) (3,202,600)
Accumulated comprehensive income (loss) .............................. (2,910) --
Treasury stock, at cost, 1,200,000 shares at September 30, 1999
and none at December 31, 1998 ................................. (61,000) --
------------ ------------
Total stockholders' (deficit) equity ....................... 24,976,191 (2,883,096)
------------ ------------
Commitments and contingencies ........................................
Total liabilities and stockholders' (deficit) equity ....... $ 36,613,436 $ 3,653,954
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
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HOTJOBS.COM, LTD.
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues ................................. $ 5,638,084 $ 1,142,531 $ 12,071,898 $ 2,232,889
Cost of revenues ......................... 953,440 138,942 2,185,651 305,762
------------ ------------ ------------ ------------
Gross profit ................... 4,684,644 1,003,589 9,886,247 1,927,127
Operating expenses:
Product development ................... 321,282 140,170 665,033 341,764
Sales and marketing ................... 7,934,997 754,195 15,194,604 1,907,601
General and administrative ............ 3,171,800 374,946 5,666,134 929,094
Non-cash compensation ................. 1,374,728 -- 1,539,676 --
------------ ------------ ------------ ------------
Total operating expenses .......... 12,802,807 1,269,311 23,065,447 3,178,459
Loss from operations ........... (8,118,163) (265,722) (13,179,200) (1,251,332)
Net interest income (expense) ............ 204,350 (15,207) 149,077 (27,428)
------------ ------------ ------------ ------------
Net loss ....................... $ (7,913,813) $ (280,929) $(13,030,123) $ (1,278,760)
============ ============ ============ ============
Deemed dividend attributable to issuance
of convertible preferred stock ........ 15,633,871 -- 16,200,000 --
------------ ------------ ------------ ------------
Net loss attributable to common stock .... $(23,547,684) $ (280,929) $(29,230,123) $ (1,278,760)
============ ============ ============ ============
Basic and diluted net loss per
common share .......................... $ (1.00) $ (0.01) $ (1.37) $ (0.06)
============ ============ ============ ============
Weighted average shares
outstanding used in basic and
diluted net loss per common
share calculation ..................... 23,608,858 20,865,913 21,364,231 21,117,143
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
HOTJOBS.COM, LTD.
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................................... $(13,030,123) $ (1,278,760)
Adjustments to reconcile net loss to cash (used in) provided by operating
activities:
Depreciation and amortization .......................................... 461,455 58,847
Provision for doubtful accounts ........................................ 638,827 58,915
Allocation of compensation from affiliate .............................. -- 136,500
Non-cash compensation .................................................. 1,539,676 --
Changes in operating assets and liabilities:
Accounts receivable ................................................. (3,817,074) (924,652)
Due to affiliate .................................................... 167,954 618,500
Prepaid expenses and other current assets ........................... (23,933) (5,000)
Accounts payable and accrued expenses ............................... 6,141,811 1,277,700
Deferred revenue .................................................... 1,855,252 608,338
Other ............................................................... (161,843) 23,935
------------ ------------
Net cash (used in) provided by operating activities ...... (6,227,998) 574,323
------------ ------------
Cash flows from investing activities:
Purchase of marketable securities ...................................... (24,599,922) --
Capital expenditures ................................................... (2,020,346) (253,642)
------------ ------------
Net cash used in investing activities .................... (26,620,268) (253,642)
------------ ------------
Cash flows from financing activities:
Repurchase of common stock ............................................. (61,000) --
Repayment to affiliate ................................................. (3,784,900) --
Net proceeds from issuance of redeemable convertible preferred stock ... 16,114,887 --
Net proceeds from initial public offering of common stock .............. 23,281,452 --
Proceeds from note payable ............................................. 480,998 --
Repayment of note payable .............................................. (51,229) --
Repayment of credit line ............................................... (180,000) --
Proceeds from exercise of options ...................................... 17,305 --
Principal payments under capital lease obligations ..................... (133,761) (31,322)
------------ ------------
Net cash (used in) provided by financing activities ...... 35,683,752 (31,322)
------------ ------------
Effect of foreign exchange rates on cash ............................... (454) --
------------ ------------
Net increase in cash and cash equivalents .............................. 2,835,032 289,359
Cash and cash equivalents at beginning of period ....................... 167,004 --
------------ ------------
Cash and cash equivalents at end of period ............................. $ 3,002,036 $ 289,359
============ ============
Supplemental disclosures of cash flow information:
Interest paid .......................................................... $ 142,282 $ 27,428
Non-cash transactions:
Equipment acquired under capital leases ................................ $ 457,126 $ 168,120
Barter transaction ..................................................... $ 252,500 $ --
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HOTJOBS.COM, LTD.
Notes to Consolidated Financial Statements (Unaudited)
1) DESCRIPTION OF BUSINESSS
HotJobs.com, Ltd. (the "Company") is a leading Internet-based recruiting
solutions company. The Company's suite of services leverages the Internet
to provide a direct exchange of information between job seekers and
employers. The Company's employment exchange, www.hotjobs.com, allows
member employers access to a database of job seekers and provides the
tools to post, track and manage job openings on a real-time basis
while allowing job seekers to identify, research, apply to and evaluate
job opportunities. The service also enables job seekers to prevent
unwanted access by selected member companies to their resumes. In
addition, headhunters are prohibited from using the Company's employment
exchange, thus ensuring direct contact between job seekers and member
employers.
HotJobs.com, Ltd. was incorporated in the State of Delaware on February
20, 1997 (inception) as HotJobs, Inc. On September 23, 1998, HotJobs, Inc.
changed its name to HotJobs.com, Ltd. On June 18, 1999, the Company
established an international presence with the incorporation of
HotJobs.com Australia Pty, Ltd. in Australia.
The majority of the Company's revenues are derived from corporate
recruiter monthly subscriptions to www.hotjobs.com and thus are of a
recurring nature. The Company's suite of services also includes its
proprietary Softshoe recruiting software, WorkWorld job fairs and online
advertising and consulting services.
2) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required under generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the results of the interim
periods presented in this filing have been made. Operating results for the
three and nine month periods ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
3) STOCK SPLITS
On May 10, 1999, the Company effected a 2,000-for-one stock split of the
outstanding shares of its common stock. In August 1999, the Company
effected a 24-for-one stock split of the outstanding shares of its common
stock prior to the completion of the initial public offering of the
Company's common stock (the "IPO"). The accompanying consolidated
financial statements have been retroactively restated to reflect the
effect of these stock splits.
4) LINE OF CREDIT
On July 20, 1999, the Company repaid $180,000 in principal, along with
interest due under a $500,000 line of credit with the Dime Savings Bank of
New York. On September 16, 1999, the Company terminated this $500,000 line
of credit.
4
<PAGE>
HOTJOBS.COM, LTD.
Notes to Consolidated Financial Statements (Unaudited)
5) LOAN AND SECURITY AGREEMENT
On September 16, 1999, the Company entered into a Loan and Security
Agreement with Silicon Valley Bank. The agreement consists of a
$4,000,000 revolving line of credit and a $1,000,000 equipment
line of credit. The revolving line of credit has a term of one
year and bears interest at an annual rate of the bank's prime
rate plus 75 basis points. Interest on the revolving line of
credit is payable monthly and any principal outstanding is payable at
the end of the term. The equipment line of credit has a term of
42 months and bears interest at an annual rate of the bank's
prime rate plus 100 basis points. The Company may borrow under
this equipment line of credit during the first six months of the
term. Interest on the equipment line of credit is payable monthly
and the principal is payable over 36 months commencing on April
1, 2000. As of September 30, 1999, no amounts have been drawn
down under either the revolving or equipment lines of credit.
6) STOCKHOLDERS' EQUITY
COMMON STOCK
On April 2, 1999, the Company redeemed 1.2 million shares of its common
stock from three employees for an aggregate price of $61,000. These shares
have been classified as treasury stock.
In August and September 1999, the Company completed an initial public
offering (the "IPO") of 3,350,000 shares (including the partial exercise
by the underwriters of their overallotment option) of the Company's
common stock. Proceeds to the Company from the IPO totaled approximately
$23.3 million, net of underwriting discounts and commissions and related
expenses.
CONVERTIBLE PREFERRED STOCK
In May 1999, the Company sold 1,620,000 shares of Series A Preferred Stock
for net proceeds of approximately $16,100,000. The investors in the
Series A Preferred Stock included directors and an executive officer of
the Company. At the completion of the IPO, the Series A Preferred Stock
automatically converted into 3,934,019 shares of common stock at a
conversion price of approximately $4.12 per share.
7) BENEFICIAL CONVERSION FEATURE
The Company recorded a beneficial conversion feature of $16,200,000 due to
the Company's sale of 1,620,000 shares of Series A Preferred Stock with a
conversion price that was below the then expected IPO price. Prior to the
completion of the IPO, the $16,200,000 beneficial conversion feature was
amortized as a non-cash preferred stock dividend, over four years, from
the date of issuance of the Series A Preferred Stock to the date on which
such stock would be first convertible into common stock, assuming no
acceleration of the date of conversion. Accordingly, for the three months
ended June 30, 1999, $566,129 of the beneficial conversion feature was
recorded as a non-cash preferred stock dividend. Upon the IPO, all of the
Series A Preferred Stock automatically converted into common stock and the
remainder of the beneficial conversion feature was immediately recognized
as a non-cash preferred stock dividend. As a result of the completion of
the IPO in the third quarter of 1999, the $15,633,871 of beneficial
conversion feature remaining was recognized in the three months ended
September 30, 1999 as a non-cash preferred stock dividend.
Amortization of the beneficial conversion feature increased the net loss
attributable to common stockholders by $0.66 and $0.76 per share on a
basic and diluted basis in the three and nine months ended September 30,
1999, respectively.
5
<PAGE>
HOTJOBS.COM, LTD.
Notes to Consolidated Financial Statements (Unaudited)
8) NON-CASH COMPENSATION
In connection with the granting of options in 1999, the Company recorded
net deferred compensation of $553,953 and $7,774,628 in the three and nine
months ended September 30, 1999, respectively. For financial reporting
purposes, the deferred compensation is being amortized as non-cash
compensation over the vesting period of the related options. Accordingly,
the Company amortized $1,374,728 and $1,539,676 of deferred compensation
as non-cash compensation in the three and nine months ended September 30,
1999, respectively. The remaining deferred compensation will be amortized
as non-cash compensation through August 2003 as the related options vest.
9) STOCK AWARD PLAN
The Company's Stock Award Plan served as the Company's equity incentive
program through June 30, 1999. The Company granted options under the Stock
Award Plan to purchase 4,314,200 shares of common stock at a weighted
average exercise price of $0.62, of which 3,492,000 of the options became
exercisable at the completion of the IPO and the remainder vest over a
period of three or four years. Since June 30, 1999, the Company no longer
grants options under the Stock Award Plan.
10) 1999 STOCK OPTION/STOCK ISSUANCE PLAN
On June 30, 1999, the Company's board of directors adopted and its
stockholders approved the 1999 Stock Option/Stock Issuance Plan. Effective
July 1, 1999, the Stock Option/Stock Issuance Plan serves as the Company's
equity incentive program. The Company is authorized to issue 4,500,000
shares of common stock under the 1999 Stock Option/Stock Issuance Plan.
The 1999 Stock Option/Stock Issuance Plan has three separate programs:
o a discretionary option grant program under which eligible
individuals in the Company's employ or service (including officers,
non-employee board members and consultants) may be granted options
to purchase shares of our common stock;
o a stock issuance program under which such individuals may be issued
shares of common stock directly, through the purchase of such shares
or as a bonus tied to the performance of services; and
o an automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members.
In the three months ended September 30, 1999, the Company granted options
under the 1999 Stock Option/Stock Issuance Plan to purchase 1,843,000
shares of common stock at a weighted average exercise price of $9.27.
11) EMPLOYEE STOCK PURCHASE PLAN
On August 10, 1999, the Employee Stock Purchase Plan became effective. The
plan is designed to allow eligible employees to purchase shares of common
stock at 85% of the lower of the fair market value of our common stock on
the employee's entry date into the offering period or the fair market
value on the semi-annual purchase date through periodic payroll
deductions. A total of 250,000 shares of common stock will be available
for issuance under the plan.
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months. The initial offering period began on August
10, 1999 and will end on the last business day in July 2001. The next
offering period will begin on the first business day in August 2001 and
subsequent offering periods will be set by our Compensation Committee.
6
<PAGE>
12) NOTES PAYABLE
On August 10, 1999, the Company entered into a financing arrangement to
finance approximately $481,000 of its Directors and Officers liability
insurance premium. The financing agreement has a term of 18 months and
bears interest at an annual rate of 6.31%.
13) SUBSEQUENT EVENTS
On October 27, 1999, the Company filed a registration statement on
Form S-1 with the Securities and Exchange Commission offering for
sale up to 3,450,000 shares of the Company's common stock (including
the underwriters' overallotment option).
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE EVENTS
AND FUTURE PERFORMANCE OF THE COMPANY WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED
BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES" OR SIMILAR
LANGUAGE. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
SUCH FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED
IN THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE
DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS. THE COMPANY CAUTIONS INVESTORS THAT ITS
BUSINESS AND FINANCIAL PERFORMANCE ARE SUBJECT TO SUBSTANTIAL RISKS AND
UNCERTAINTIES. IN EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH BELOW UNDER THE
CAPTION "RISK FACTORS" IN ADDITION TO THE OTHER INFORMATION SET FORTH
HEREIN AND ELSEWHERE IN THE COMPANY'S OTHER PUBLIC FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION. REFERENCE IN THIS REPORT TO
"HOTJOBS.COM", "WE", "OUR" AND "US" REFER TO THE COMPANY.
We are a leading provider of comprehensive recruiting solutions that
leverage the Internet to exchange information more efficiently between job
seekers and employers. The majority of our revenues are recurring and are
derived primarily from employer memberships to our www.hotjobs.com
employment exchange. We also provide additional recruiting solutions to
employers such as our proprietary Softshoe recruiting software, our
WorkWorld job fairs, online advertising and consulting services.
Founded in February 1997, we began operations with seven employees and we
had grown to 173 employees as of September 30, 1999. Our early operating
activities related primarily to the development of the necessary
technological infrastructure for the operation of www.hotjobs.com. In
February 1997, we commercially launched our www.hotjobs.com employment
exchange. In September 1997, we began selling our Softshoe software.
During 1998, we experienced significant increases in our revenue from
sales of memberships to our employment exchange and license and hosting
fees for our Softshoe software. In early 1999, we introduced our WorkWorld
job fairs and expanded our marketing programs to increase awareness of the
HotJobs.com brand. In May 1999, we raised net proceeds of approximately
$16.1 million in a private placement of our Series A Preferred Stock and
in the three months ended September 30, 1999, we raised net proceeds of
approximately $23.3 million in the IPO.
We classify our revenues as follows:
o Service fee revenue, consisting of subscription fees paid by
employers for memberships to our www.hotjobs.com employment
exchange and software hosting fees paid by customers of our
software. We sell memberships to each employer on a per
recruiter basis and bill the employer monthly, quarterly,
semi-annually or annually. Membership entitles each recruiter
to post a specific number of jobs on www.hotjobs.com
simultaneously. Software hosting fees consist of recurring
monthly fees to maintain an employer's Softshoe database as
well as the hosting of a miscellaneous proprietary software
product.
o Software license revenue, consisting of license fees paid by
our Softshoe customers as well as license fees relating to a
miscellaneous proprietary software product.
o Job fair revenue, consisting of fees from employers that rent
booths at our WorkWorld job fairs.
8
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o Other revenue, consisting of fees derived from single-ad job
postings on www.hotjobs.com, banner advertising, which we sell
on a monthly and extended-term basis, barter revenue,
co-operative advertising revenue, and other Softshoe-related
services, including system customization and resume scanning
services, which we bill on a monthly and extended-term basis.
We recognize revenue as follows:
o Service Fee Revenue. We provide subscriptions for membership
to our employment exchange for a minimum term of three months
and a maximum term of 24 months. We recognize subscription
revenue over the subscription term. We provide hosting
services to Softshoe customers on a monthly basis, and we
recognize hosting revenue in the month we provide the service.
These hosting fees are contracted separately from the software
license.
o Software License Revenue. We recognize software license
revenue ratably over the four year estimated useful life of
the software, in accordance with Statements of Position 97-2
and 98-9 issued by the American Institute of Certified Public
Accountants.
o Job Fair Revenue. We recognize job fair revenue in the month
in which the job fair takes place.
o Other Revenue. We recognize revenue related to these services
over the period of delivery of service. Other revenue also
includes barter revenue, which consists of fees generated from
exchanges of services with other vendors. We recognize barter
revenue over the period that we receive the benefit.
We classify our cost of revenue and operating expenses as follows:
o Cost of Revenue. Cost of revenue consists of compensation
associated with network operations staff, technology support
contract fees, Internet access, job fair expenses, resume
scanning services, barter expenses and depreciation expense.
o Product Development Expense. Product development expense
consists primarily of costs associated with the compensation
of product development personnel. Our product development
expenses constitute all of our research and development
expenditures.
o Sales and Marketing Expense. Sales and marketing expense
consists primarily of advertising and promotional expenses,
public relations expenses, conference expenses, printing fees,
sales and marketing compensation, including base salary and
sales commissions, and telemarketing communications expenses.
Sales commissions have remained relatively constant as a
percentage of revenues, and we expect this to continue.
However, the timing and magnitude of marketing initiatives
have caused, and will continue to cause, fluctuations in sales
and marketing expense as a percentage of revenues.
o General and Administrative Expense. General and administrative
expense consists primarily of compensation for administrative
and executive staff, fees for professional services, bad debt
expense and general office expense.
We have incurred substantial losses in every fiscal period since our
inception. For the nine months ended September 30, 1999, we incurred a net
loss of approximately $13.0 million. As of September 30, 1999, we had an
accumulated deficit of approximately $16.2 million. Our net loss and
resulting accumulated deficit are primarily due to the costs we incurred
to develop our online employment exchange and software products in advance
of substantial revenue and to expand our sales and marketing programs.
We intend to devote significant resources to advertising and
brand-marketing programs designed to attract new employers to subscribe to
www.hotjobs.com and new job seekers to use the site. We anticipate
increasing advertising spending in specific periods in the future. This
will result in sales and marketing expenses increasing as a percentage of
total revenues in these periods. As of November 4, 1999, we had
commitments of approximately $6.6 million for various advertising
campaigns through December 2000. These commitments include broadcasting,
print, online, and outdoor advertising.
9
<PAGE>
We expect growth in the number of member employers of www.hotjobs.com to
result in substantial growth in subscription fees. Our strategy
contemplates that revenue from employer memberships will likely be the
single largest source of revenue for us in the immediate future.
As a result of our expansion plans and our expectation that operating
expenses will increase significantly in the next several years, especially
in the areas of sales and marketing and brand promotion, we expect to
incur additional losses from operations for the foreseeable future. To the
extent that (1) increases in our operating expenses precede and are not
subsequently followed by commensurate increases in revenue, or (2) we are
unable to adjust operating expense levels accordingly, our operating
losses may exceed our expectations for those periods. We cannot be sure
that we will ever achieve or sustain profitability.
Deferred Compensation
We recorded deferred compensation net of options forfeited of
approximately $7.8 million in the first nine months of 1999,
representing the difference between the exercise price of stock options
granted and the fair value for accounting purposes of the underlying
common stock at the date of the grant. The deferred compensation cost
will be amortized over the vesting period of the options. We currently
expect to amortize the following amounts of deferred compensation as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING:
--------------------
<S> <C>
December 31, 1999 ..................................... $2.0 million
December 31, 2000 ..................................... $1.9 million
December 31, 2001 ..................................... $1.9 million
December 31, 2002 ..................................... $1.5 million
December 31, 2003 ..................................... $0.5 million
</TABLE>
Beneficial Conversion Feature
As of May 10, 1999, due to our sale of 1,620,000 shares of Series A
Preferred Stock with a conversion price that was below the expected
initial public offering price of our common stock, we recorded a
beneficial conversion feature of $16.2 million. Prior to the conversion
of the Series A Preferred Stock into common stock, we began to amortize
the value of the beneficial conversion feature over the four-year
period from the date of issuance of the preferred stock to the date on
which the preferred stock was first convertible into common stock,
assuming no acceleration of the date of conversion. All of the
preferred stock automatically converted into common stock upon
completion of our initial public offering and all of the unamortized
value of the beneficial conversion feature was immediately recognized
as a dividend to preferred stockholders. We amortized an aggregate of
approximately $566,000 of the beneficial conversion feature in the
three months ended June 30, 1999. We amortized the remaining
approximately $15.6 million of the beneficial conversion feature in the
three months ended September 30, 1999, which increased our net loss per
common share by $0.76 for the nine months ended September 30, 1999.
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Results of Operations
The following table sets forth for the periods indicated, our results of
operations expressed as a percentage of revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
------- -------- ------- ------
Revenues:
Service fees 72% 80% 73% 85%
Software license fees 1 5 2 7
Job fair fees 12 -- 10 --
Other 15 15 15 8
---- --- ---- ---
Total revenues 100 100 100 100
Cost of revenues 17 12 18 14
---- --- ---- ---
Gross profit 83 88 82 86
Operating expenses:
Product development 6 12 5 15
Sales and marketing 141 66 126 85
General and administrative 56 33 47 42
Non-cash compensation 24 -- 13 --
---- --- ---- ---
Total operating expenses 227 111 191 142
---- --- ---- ---
Loss from operations (144) (23) (109) (56)
Net interest income (expense) 4 (2) 1 (1)
---- --- ---- ---
Net loss (140)% (25)% (108)% (57)%
==== === ==== ===
For the Three and Nine Months Ended September 30, 1999 and 1998
Revenues
Our total revenues increased to approximately $5.6 million for the three
months ended September 30, 1999 from approximately $1.1 million for the
three months ended September 30, 1998. Our total revenues increased to
approximately $12.1 million for the nine months ended September 30, 1999,
from approximately $2.2 million for the nine months ended September 30,
1998. The increase in revenues in both the three and nine month periods
ended September 30, 1999 compared to the same periods in 1998, reflected
increased revenue in all of the Company's revenue categories.
Service Fees. Service revenue increased to approximately $4.1 million for
the three months ended September 30, 1999, from approximately $914,000 for
the three months ended September 30, 1998, and to approximately $8.9
million for the nine months ended September 30, 1999, from approximately
$1.9 million for the nine months ended September 30, 1998. These increases
resulted primarily from an increase in the number of employers subscribing
to www.hotjobs.com and, to a lesser extent, an increase in the hosting
fees generated by a larger number of licensees of our Softshoe software.
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Software License Fees. Software license revenue increased to approximately
$84,000 for the three months ended September 30, 1999 from approximately
$59,000 for the three months ended September 30, 1998, and to
approximately $245,000 for the nine months ended September 30, 1999, from
approximately $155,000 for the nine months ended September 30, 1998. These
increases resulted primarily from an increase in the number of companies
that license our proprietary Softshoe software.
Job Fair Fees. Job fair revenue was approximately $659,000 for the three
months ended September 30, 1999 and approximately $1.2 million for the
nine months ended September 30, 1999. We held our first job fair in
February 1999.
Other Fees. Other revenue increased to approximately $844,000 for the
three months ended September 30, 1999, from approximately $170,000 for the
three months ended September 30, 1998, and to approximately $1.8 million
for nine months ended September 30, 1999, from approximately $190,000 for
the nine months ended September 30, 1998. Other revenue increased mainly
as a result of the inception of single ad job postings and barter revenues
in 1999.
Cost of Revenues
Cost of revenues increased to approximately $953,000 for the three months
ended September 30, 1999, from approximately $139,000 for the three
months ended September 30, 1998. For the nine months ended September
30, 1999, cost of revenues increased to approximately $2.2 million from
approximately $306,000 for the nine months ended September 30, 1998.
Cost of revenues as a percentage of revenue for the three months ended
September 30, 1999 and 1998 were 17% and 12%, respectively. For the
nine months ended September 30, 1999 and September 30, 1998, cost of
revenues as a percentage of revenue were 18% and 14%, respectively. The
increase in cost of revenues as a percentage of revenue in both the
three and nine months ended September 30, 1999 compared to the same
periods in 1998 principally reflects the increased costs associated
with job fair revenues and barter revenues, each of which were
initiated in 1999. The Company incurs higher marginal costs associated
with both job fair and barter revenues than with the Company's other
revenue sources.
Operating Expenses
Product Development Expense. Product development expense increased to
approximately $321,000 in the three months ended September 30, 1999, from
approximately $140,000, in the three months ended September 30, 1998. For
the nine months ended September 30, 1999, product development expense
was approximately $665,000, compared to approximately $342,000 for the
nine months ended September 30, 1998. The increase in product development
expense in the three and nine months ended September 30, 1999 compared to
the same periods in 1998 reflects the Company's continuing efforts to
provide enhanced content and features in its products and services and
resulted primarily from increased salaries and related expenses associated
with hiring additional technology personnel.
Sales and Marketing Expense. Sales and marketing expense increased to
approximately $7.9 million for the three months ended September 30, 1999,
from approximately $754,000 for the three months ended September 30, 1998,
and increased as a percentage of revenue to 141% for the three months
ended September 30, 1999, from 66% for the three months ended September
30, 1998. Sales and marketing expense increased to approximately $15.2
million for the nine months ended September 30, 1999, from approximately
$1.9 million for the nine months ended September 30, 1998, and increased
as a percentage of revenue to 126% for the nine months ended September 30,
1999, from 85% for the nine months ended September 30, 1998. The increase
in sales and marketing expense results from the expansion of the Company's
HotJobs.com marketing campaign, as well as the expansion of its sales and
marketing work forces.
General and Administrative Expense. General and administrative expense
increased to approximately $3.2 million for the three months ended
September 30, 1999, from approximately $375,000 for the three months ended
September 30, 1998. For the nine months ended September 30, 1999, general
and administrative expense increased to approximately $5.7 million, from
approximately $929,000 for the nine months ended September 30, 1998. The
increases in general
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and administrative expense for both periods of 1999 compared to 1998
reflects increased salaries and related expenses associated with hiring
additional administrative personnel.
Non-Cash Compensation Expense. We recorded approximately $1.4 million and
$1.5 million of non-cash compensation for the three and nine months ended
September 30, 1999, respectively, which represents the amortization of
approximately $7.8 million of deferred compensation net of options
forfeited recorded in the nine months ended September 30, 1999 in
connection with stock options granted below the market value during
the nine months ended September 30, 1999. The remaining deferred
compensation of approximately $6.2 million will be amortized through
August 2003 as the options vest.
Net Interest Income (Expense)
For the three months ended September 30, 1999, the Company recorded net
interest income of approximately $204,000 compared to approximately
$15,000 of net interest expense for the three months ended September 30,
1998. Net interest income was approximately $149,000 for the nine months
ended September 30, 1999, as compared to approximately $28,000 of net
interest expense for the nine months ended September 30, 1998. Net
interest income in the three and nine months ended September 30, 1999
reflected the investment of the Company's excess cash, which resulted from
the sale of Series A Preferred Stock in May 1999 and the IPO in the
three months ended September 30, 1999. Prior to the sale of the Series A
Preferred Stock, the Company was a net borrower of funds and had recorded
net interest expense.
Net Loss
We recorded a net loss of approximately $7.9 million for the three months
ended September 30, 1999, compared to a net loss of approximately $281,000
for the comparable period of 1998. For the three months ended September
30, 1999 and 1998, the basic and diluted net loss per common share was
$1.00 and $0.01, respectively. For the nine months ended September 30,
1999 and 1998, the net loss was approximately $13.0 million and $1.3
million respectively, or a basic and diluted net loss per common share of
$1.37 and $0.06, respectively. The increase in the net loss for both
periods of 1999 compared to 1998 was primarily attributable to the
increased sales and marketing costs associated with building brand
awareness and increased hiring in connection with the growth of the
Company. The increase in the basic and diluted net loss per common share
also included the recognition of the beneficial conversion feature as a
non-cash preferred stock dividend for both periods of 1999.
Liquidity and Capital Resources
Since inception, we have financed our activities primarily through
funding from OTEC, Inc., a line of credit, cash from operations, the
private placement of equity securities and our IPO. Through May 1999,
OTEC provided the Company with approximately $3.8 million to fund the
Company's operations. Effective May 10, 1999, the Company raised net
proceeds of approximately $16.1 million from the sale of Series A
Preferred Stock in a private placement. On August 13, 1999, we
completed the initial public offering of 3,000,000 shares of our common
stock for gross proceeds of $24.0 million, and net proceeds of
approximately $22.3 million, before deducting expenses of the offering.
On September 2, 1999, the underwriters exercised their overallotment
option to the extent of 350,000 shares, resulting in gross proceeds to
the Company of $2.8 million, and net proceeds of approximately $2.6
million, before deducting expenses of the offering.
Management believes that cash on hand and marketable securities at
September 30, 1999 of approximately $27.6 million and the $5.0 million
available under a credit facility with Silicon Valley Bank will be
sufficient to fund the Company's sales and marketing and other growth
needs into the second quarter of 2000. On October 27, 1999, the Company
filed with the Securities and Exchange Commission a registration
statement on Form S-1, to offer for sale up to 3,450,000 shares of the
Company's common stock (including the underwriters' overallotment option).
The anticipated net proceeds from this offering should adequately meet
the Company's funding needs for at least the next twelve months.
Net cash used in operating activities was approximately $6.2 million for
the nine months ended September 30, 1999, compared to approximately
$574,000 provided by operating activities for the nine months ended
September 30, 1998.
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Net cash used in operating activities for the nine months ended September
30, 1999 was primarily due to the net loss of approximately $13.0 million
during the period, which resulted from costs incurred to support the
Company's sales and marketing efforts and the increased personnel required
to manage the Company's growing operations combined with a higher level of
accounts receivable resulting from increased billings which was partially
offset by increases in accounts payable and accrued expenses and deferred
revenue.
Net cash used in investing activities was approximately $26.6 million for
the nine months ended September 30, 1999, compared to approximately
$254,000 for the nine months ended September 30, 1998. We used net cash in
investing activities in the three and nine months ended September 30, 1999
to purchase marketable securities of approximately $24.6 million and for
capital expenditures.
Net cash provided by financing activities was approximately $35.7 million
for the nine months ended September 30, 1999, compared to cash required of
approximately $31,000 for the nine months ended September 30, 1998. Net
cash provided by financing activities consisted primarily of approximately
$16.1 million of net proceeds we raised in our May 1999 private placement
and approximately $23.3 million of net proceeds we raised in our IPO in
the three months ended September 30, 1999, which was partially offset by
the repayment of approximately $3.8 million to OTEC.
As of September 30, 1999, we had approximately $3.0 million of cash and
cash equivalents and $24.6 million of marketable securities. As of
November 4, 1999, our principal commitments consisted of approximately
$6.6 million for various advertising campaigns through December 2000.
We believe that the net proceeds from the currently contemplated offering
of up to 3,450,000 common shares (including the underwriters'
overallotment option), together with our existing cash and cash
equivalents and marketable securities, will be sufficient to meet our
anticipated cash requirements for working capital and capital
expenditures for the next 12 months. Our capital requirements will
depend on a number of factors, including market acceptance of our
products and services, the amount of our resources we devote to
wwww.hotjobs.com and expansion of our operations and the amount of our
resources we devote to promoting awareness of the HotJobs.com brand.
Consistent with our growth, we have experienced a substantial increase
in our sales and marketing expenses, capital expenditures and operating
lease arrangements since inception, and we anticipate that these
increases will continue for the foreseeable future. In addition, we
will continue to evaluate possible investments in businesses, products
and technologies, the consummation of any of which would increase our
capital expenditures.
Although we currently believe that we will have sufficient capital
resources to meet our anticipated working capital and capital expenditure
requirements beyond the next 12 months, unanticipated events and
opportunities may require us to sell additional equity or debt securities,
increase our current line of credit or establish new credit facilities to
raise capital in order to meet our capital requirements. If we sell
additional equity or convertible debt securities, the sale could dilute
the ownership of our existing stockholders. If we issue debt securities,
increase our credit facility or establish a new credit facility, our fixed
obligations could increase and result in operating covenants that would
restrict our operations. We cannot be sure that any such financing will be
available in amounts or on terms acceptable to us.
Year 2000 Compliance
Overview. Many currently installed computer systems and software products
are coded to accept or recognize only two-digit entries in the date code
field. These systems and software products will need to accept four-digit
entries to distinguish 21st century dates from 20th century dates. As a
result, computer systems and software used by many companies and
governmental agencies may need to be upgraded to comply with such year
2000 requirements or risk system failure or miscalculations which could
cause disruptions of normal business activities.
State of Readiness. We have made a preliminary assessment of the year 2000
readiness of our information technology ("IT") systems, including the
hardware and software that enable us to provide and deliver our products
and services. Our year 2000 readiness plan consists of:
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o quality assurance testing of our internally developed proprietary
software;
o contacting third-party vendors and licensors of material software
and services that are both directly and indirectly related to the
delivery of our products and services;
o assessing our repair and replacement requirements; and
o creating contingency plans in the event of year 2000 failures.
We performed a year 2000 simulation on our software during the second
quarter of 1999 to test system readiness, and found no anomalous behavior
in our systems. We have been informed by our material software component
vendors and our Internet service providers that the products we use are,
or will be, year 2000 compliant. We purchased or developed our systems
within the past two years, and we therefore believe that we do not have
legacy systems that have been historically identified to have year 2000
issues. We have applied vendor patches for relevant software to bring
them into compliance with vendor-defined year 2000 standards. We have
engaged an outside firm to audit our application code.
We are currently assessing our non-IT systems and will seek assurance of
year 2000 compliance from providers of material non-IT systems. Until
testing is complete and we contact these vendors and providers, we will
not be able to completely evaluate whether our IT systems or non-IT
systems will need to be revised or replaced.
Products. Under most of our Softshoe license agreements, we warrant
that our Softshoe software is free from programming defects arising from
year 2000 issues. Our obligation is to remedy the defect or replace the
product. We believe that our Softshoe product is free of year 2000
defects.
Costs. To date we have not incurred any material costs in
identifying or evaluating year 2000 compliance issues. Based on our
assessment to date, we do not anticipate that costs associated with
remediating our non-compliant IT systems or non-IT systems will be
material. We expect that our existing employees or consultants will
perform any significant work pertaining to year 2000 compliance.
Risks. We are not currently aware of any year 2000 compliance
problems relating to our technology or our IT or non-IT systems that would
have a material adverse effect on our business, results of operations or
financial condition. However, we may discover year 2000 compliance
problems in our technology that will require substantial revisions. In
addition, we may need to revise or replace third party software, hardware
or services incorporated into our material IT and non-IT systems, all of
which could be time consuming and expensive. If we fail to fix our
technology or to fix or replace third party software, hardware or services
on a timely basis, the result could be lost revenues, increased operating
costs, the loss of customers and other business interruptions, any of
which could have a material adverse effect on our business, results of
operations and financial condition. Moreover, the failure to adequately
address year 2000 compliance issues in our technology and our IT and
non-IT systems could result in claims of mismanagement, misrepresentation
or breach of contract and related litigation, which could be costly and
time-consuming to defend. In addition, we cannot assure you that
governmental agencies, utility companies, Internet access companies, third
party service providers and others outside our control will be year 2000
compliant. The failure by such entities to be year 2000 compliant could
result in a systemic failure beyond our control, such as a prolonged
Internet, telecommunications or electrical failure, which could also
prevent us from delivering our products and services to our customers,
decrease the use of the Internet or prevent users from accessing the
Websites of companies with whom we have entered into business alliances,
which could have a material adverse effect on our business, results of
operations and financial condition.
Contingency Plan. On September 15, 1999, the Company adopted a
contingency plan for the failure of one or more critical system components
as a result of year 2000 bugs in one or more proprietary and third party
systems. While no outage is anticipated and all tests to date have
indicated that our systems are year 2000 compliant, the plan identifies
first, second, and third-level technical alternatives which can be
implemented to minimize or eliminate down time in the event of component
or system failures.
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Worst Case Scenario. Based on our assessment completed to date, we
believe that the reasonably likely worst case scenario with respect to
year 2000 issues could be:
o portions of www.hotjobs.com may be down while programmers fix our
systems or the systems of ISPs or other third parties;
o temporary data loss could occur while back-up copies of data are
retrieved from tape;
o lengthy outages could occur while programmers work to repair or
restore corrupted or missing database files; and
o our internal corporate, billing and accounting system may be down
while programmers fix our system.
Although these events could have an adverse effect on our business in the
short term, we do not believe that year 2000 issues will materially and
adversely affect our business, results of operations or financial
condition over the long term. While we will have system engineers on-site
over the year 2000-date change, we can give no assurance that all
expectations will be realized.
RISK FACTORS
Risks Related to Our Financial Condition and Business Model
We have a limited operating history so it will be difficult for you to
evaluate an investment in the Company.
We were incorporated and began generating revenues in February 1997.
Accordingly, we have only a limited operating history for you to evaluate
an investment in the Company. As a new company, we face risks and
uncertainties relating to our ability to successfully implement our
strategy. You must consider the risks, expenses and uncertainties that an
early stage company like ours faces. If we cannot address these risks and
uncertainties or are unable to execute our strategy, we may not be
successful.
We have not been profitable, and we expect our losses to continue.
We have never been profitable. If our revenues grow at a slower rate than
we anticipate, or if our spending levels exceed our expectations or cannot
be adjusted to reflect slower revenue growth, we may not be able to
generate sufficient revenues to achieve or sustain profitability. For the
nine months ended September 30, 1999, we incurred a net loss of
approximately $13.2 million. As of September 30, 1999, we had an
accumulated deficit of approximately $16.2 million. We expect to continue
to lose money in the foreseeable future because we anticipate incurring
significant expenses in connection with building awareness of HotJobs.com
and improving our products and services. We forecast our future expense
levels based on our operating plans and our estimates of future revenues.
We may find it necessary to accelerate expenditures relating to our sales
and marketing, and product and technology efforts or to otherwise increase
our financial commitment to creating and maintaining brand awareness or
developing our product.
You should not rely on our quarterly operating results as an indication of
our future results because they are subject to significant fluctuations.
Fluctuations in our operating results or the failure of our operating
results to meet the expectations of public market analysts and investors
may negatively impact our stock price.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses
in any particular quarter. Fluctuations in our quarterly operating results
could cause our stock price to decline.
You should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. Factors that may affect
our quarterly results include:
o mismatches between resource allocation and consumer demand due to
difficulties in predicting consumer demand in a new market;
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o the demand for and acceptance of our Website, products, product
enhancements and services;
o the timing, amount and mix of subscription, license and service
payments;
o changes in general economic conditions, such as recessions, that
could affect recruiting efforts generally and online recruiting
efforts in particular;
o the magnitude and timing of marketing initiatives;
o the maintenance and development of our strategic relationships;
o the introduction, development, timing, competitive pricing and
market acceptance of our products and services and those of our
competitors;
o the attraction and retention of key personnel;
o our ability to manage our anticipated growth and expansion;
o our ability to attract qualified job seekers; and
o technical difficulties or system downtime affecting the Internet
generally or the operation of our products and services
specifically.
As a result of the factors listed above and because the online recruiting
market is new and it is difficult to predict customer demand, it is
possible that in some future periods our results of operations may be
below the expectations of public market analysts and investors. This could
cause our stock price to decline. In addition, we plan to significantly
increase our operating expenses to expand our sales and marketing,
administration, consulting and training, maintenance and technical support
and research and development groups. If revenues fall below our
expectations in any quarter and we are unable to quickly reduce our
spending in response, our operating results would be lower than expected
and our stock price may fall.
Our business model is unproven and may not be adaptable to a changing
market.
If we are not able to anticipate changes in the online recruiting market
or if our business model is not successful, we may not be able to expand
our business or to successfully compete with other companies, which could
have a material adverse effect on our business, results of operations and
financial condition. Our current business model depends on recurring
revenue from employers using our Website and hosting fees associated with
our application software. Our revenue model and profit potential are
unproven. If current employers decide to discontinue our service and we
are unable to replace them with new employers, our revenues could
decrease. It is possible that we will be required to further adapt our
business model in response to additional changes in the online recruiting
market or if our current business model is not successful.
We may not be able to obtain sufficient funds to grow our business and any
additional financing may be on terms adverse to the interests of our
stockholders.
We may need additional financing to continue to grow our business. If
additional financing is not available when required or is not available on
acceptable terms, we may be unable to fund our expansion, successfully
promote our brand name, develop or enhance our products and services, take
advantage of business opportunities or respond to competitive pressures,
any of which could have a material adverse effect on our business. If we
are able to raise additional funds and we do so by issuing equity
securities, holders of our common stock may experience significant
dilution of their ownership interest and holders of these securities may
have rights senior to those of the holders of our common stock. If we
obtain additional financing by issuing debt securities, the terms of these
securities could restrict or prevent us from paying dividends and could
limit our flexibility in making business decisions.
Because we expect to generate losses for the foreseeable future, we do not
expect that income from our operations will be sufficient to meet the
Company's needs. We expect to raise additional funds in the future in
order to fund our anticipated growth, more aggressive marketing programs
or the acquisition of complementary businesses, technologies and services.
Obtaining additional financing will be subject to a number of factors
including:
o market and economic conditions;
o our financial condition and operating performance; and
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o investor sentiment.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us.
Risks Related To Our Markets and Strategy
The Internet is not a proven recruiting medium.
If we are unable to compete with traditional recruiting and job seeking
methods, our revenues could be reduced. The future of our business is
dependent on the acceptance by job seekers and employers of the Internet
as an effective job seeking and recruiting tool. Of the 6 million
businesses in the U.S, Forrester Research, Inc. estimates that only 15,000
businesses currently recruit online. The online recruiting market is new
and rapidly evolving, and we do not yet know how effective online
recruiting is compared to traditional recruiting methods. The adoption of
online recruiting and job seeking, particularly among those that have
historically relied upon traditional recruiting methods, requires the
acceptance of a new way of conducting business, exchanging information,
advertising and applying for jobs. Many of our potential employer
customers have little or no experience using the Internet as a recruiting
tool, and only select segments of the job seeking population have
experience using the Internet to look for jobs. As a result, we cannot be
sure that we will be able to effectively compete with traditional
recruiting and job seeking methods.
We will only be able to execute our business model if use of the Internet
grows.
If Internet usage does not continue to grow, we may not be able to meet
our business objectives. Internet usage may be inhibited by any of the
following factors:
o the Internet infrastructure may not be able to support the demands
placed on it, or its performance and reliability may decline as
usage grows;
o Websites may not be able to provide adequate security and
authentication of confidential information contained in
transmissions over the Internet; and
o the Internet industry may not be able to adequately respond to
privacy concerns of potential users.
We may not be able to develop awareness of our brand name.
If we fail to successfully promote and maintain our HotJobs.com brand
name, incur significant expenses in promoting our brand and fail to
generate a corresponding increase in revenue as a result of our branding
efforts, or encounter legal obstacles which prevent our continued use of
our brand name, our revenues could be materially adversely affected. We
believe that continuing to build awareness of our brand name is critical
to achieving widespread acceptance of our business. Brand recognition is a
key differentiating factor among providers of online recruiting services,
and we believe it could become more important as competition in the online
recruiting market increases. In order to maintain and build brand
awareness, we must succeed in our marketing efforts, provide high quality
services and increase the number of high quality job seekers using
www.hotjobs.com. Failure to successfully maintain and build awareness of
our brand could reduce our revenues.
We may not be able to successfully introduce new or enhanced products and
services.
The failure of any new or enhanced products and services to achieve market
acceptance and generate revenue could result in a material adverse effect
on our revenues. We expect to introduce enhanced products and services in
order to generate additional revenues, attract and retain more employers,
attract more job seekers to our Website and respond to competition. Any
new or enhanced product or service we introduce that is not favorably
received could damage our reputation and the perception of our brand name.
We will not be able to attract job seekers or employers if we do not
continually enhance and develop the content and features of our products
and services. To remain competitive, we must continually improve the
responsiveness,
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functionality and features of our products and services and develop other
products and services that are attractive to job seekers and employers. We
may not succeed in developing or introducing features, functions, products
or services that job seekers and employers find attractive. This could
reduce the number of job seekers and employers using www.hotjobs.com and
materially adversely affect our revenues.
We may lose business if we fail to keep pace with rapidly changing
technologies and customer needs. If we are unable to timely and
successfully develop and introduce new products and enhancements to
existing products in response to our industry's changing technological
requirements, our revenues could be materially adversely affected. Our
success is dependent on our ability to develop new and enhanced software,
services and related products to meet rapidly evolving technological
requirements for online recruiting software and solutions. Our current
technology may not meet the future technical requirements of employers.
Trends that could have a critical impact on our success include:
o rapidly changing technology in online recruiting;
o evolving industry standards, including both formal and de facto
standards relating to online recruiting;
o developments and changes relating to the Internet;
o competing products and services that offer increased functionality;
and
o changes in employer and job seeker requirements.
Our business and growth will suffer if we are unable to hire and retain
highly skilled personnel.
If we are unable to hire and retain skilled personnel, our growth may be
restricted, and the quality of our products and services and our revenues
may be reduced. Our future success depends on our ability to attract,
train, motivate and retain highly skilled employees. Competition for
highly skilled employees is intense, particularly in the Internet
industry. We may be unable to retain our skilled employees or attract,
assimilate and retain other highly skilled employees in the future. We
have from time to time in the past experienced, and we may experience in
the future, difficulty in hiring and retaining highly skilled employees
with appropriate qualifications.
We may not be able to effectively manage our expanding operations.
If we are not able to expand our operations in an efficient manner, our
expenses could grow disproportionately to revenues or our revenues could
decline or grow more slowly than expected, either of which could have a
material adverse effect on our business, results of operations and
financial condition. We have recently experienced a period of rapid
growth. In order to execute our business plan, we must continue to grow
significantly. We had 50 employees as of December 31, 1998. As of
September 30, 1999, the number had increased to 173. We expect that the
number of our employees will continue to increase for the foreseeable
future. This growth has placed, and our anticipated future growth combined
with the requirements we face as a public company will continue to place,
a significant strain on our management, systems and resources. We expect
that we will need to continue to improve our financial and managerial
controls and reporting systems and procedures. We will also need to
continue to expand and maintain close coordination among our product and
technology, finance and administration, and sales and marketing
organizations. If we do not succeed in these efforts, it could reduce our
revenues.
Intense competition may render our services and products uncompetitive or
obsolete.
Due to competition, we may experience reduced margins on our products and
services, loss of market share or less use of www.hotjobs.com by job
seekers and employers. If we are not able to compete effectively with
current or future competitors as a result of these and other factors, our
revenues could be materially adversely affected.
The market for online recruiting solutions is intensely competitive and
highly fragmented. We compete with companies, including recruiting search
firms that offer a single database job board solution, such as
Monster.com, as well as newspapers, magazines and other traditional media
companies that provide online job search services, such as
19
<PAGE>
CareerPath.com. We also compete with large Internet information hubs, or
portals, such as Excite@Home. We may experience competition from potential
customers to the extent that they develop their own online recruiting
offerings internally. In addition, we compete with traditional recruiting
services, such as headhunters, for a share of employers' total recruiting
budgets. We expect to face additional competition as other established and
emerging companies, including print media companies and headhunters with
established brands, enter the online recruiting market.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and larger customer bases than we do. In addition, current and
potential competitors may make strategic acquisitions or establish
cooperative relationships to expand their businesses or to offer more
comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruiting industry. Accordingly, new competitors may emerge and rapidly
acquire significant market share. In addition, new technologies will
likely increase the competitive pressures that we face. The development of
competing technologies by market participants or the emergence of new
industry standards may adversely affect our revenues and ultimately our
competitive position.
Loss of any of our key management personnel could negatively impact our
business.
The loss or departure of any of our officers or key employees could
materially adversely affect our ability to implement our business plan and
could lower our revenues. Our future success depends to a significant
extent on the continued service and coordination of our management team,
particularly Richard S. Johnson, our President and Chief Executive
Officer. We do not maintain key person insurance for any member of our
management team. In addition, certain members of our management team have
joined us within the last year. These individuals have not previously
worked together and are becoming integrated into our management team. If
our key management personnel are not able to work together effectively or
successfully, our business could be materially adversely affected.
We may not be successful in our plan for international expansion.
We may not be able to successfully execute our business plan in foreign
markets. If revenue from international ventures is not adequate to cover
our investment in those ventures, our total revenues could be materially
adversely affected.
We believe that our member employers are increasingly attempting to fill
positions in international markets and that job seekers are increasingly
seeking positions in international markets. We believe that expansion into
international markets through a combination of internal business
expansion, strategic alliances and potential acquisitions will increase
the number of job seekers who post their resumes on www.hotjobs.com and
will increase the number and variety of jobs available to our job seekers.
Our future international operations might not succeed for a number of
reasons including:
o difficulties in staffing and managing foreign operations;
o competition from local recruiting services;
o operational issues such as longer customer payment cycles and
greater difficulties in collecting accounts receivable;
o seasonal reductions in business activity;
o language and cultural differences;
o legal uncertainties inherent in transnational operations such as
export and import regulations, tariffs and other trade barriers;
o taxation issues;
o unexpected changes in trading policies, regulatory requirements and
exchange rates;
o issues relating to uncertainties of laws and enforcement relating to
the protection of intellectual property; and
o general political and economic trends.
20
<PAGE>
We may not be able to successfully make acquisitions of or investments in
other companies.
If we make an acquisition of a company, we could have difficulty
assimilating the acquired company's operations and personnel, which could
increase our expenses. If we make other types of acquisitions, we could
have difficulty in assimilating any acquired products, services, personnel
and technologies into our operations. These difficulties could disrupt our
ongoing business, distract our management and employees, increase our
expenses and charges and materially adversely affect our revenues. Though
we have no present understanding or agreement relating to any acquisition
of or investment in another company or its business, our business strategy
includes the pursuit of acquisitions. In executing this strategy, we may
incur expenses without being able to identify suitable acquisition
candidates, which could reduce our profitability.
Risks Related to The Internet and Our Technology Infrastructure
We may experience reduced visitor traffic, reduced revenue and harm to our
reputation in the event of unexpected network interruptions caused by
system failures.
Any system failure, including network, software or hardware failure, that
causes an interruption in the delivery of our products and services or a
decrease in responsiveness of our services could result in reduced visitor
traffic, reduced revenue and could materially adversely affect our
reputation and brand. Our servers and software must be able to accommodate
a high volume of traffic. We have experienced system interruptions in the
past, and we believe that these interruptions will continue to occur from
time to time in the future. We believe that visitor traffic is also
dependent on the timing and magnitude of our advertising. We have
experienced monthly fluctuations in visitor traffic, including short-term
reductions. Any substantial increase in demands on our servers will
require us to expand and adapt our network infrastructure. If we are
unable to add additional software and hardware to accommodate increased
demand, we could experience unanticipated system disruptions and slower
response times. Any catastrophic failure at our co-location facility could
prevent us from serving our web traffic for up to several days, and any
failure of our Internet service provider may adversely affect our
network's performance. Our clients may become dissatisfied by any system
failure that interrupts our ability to provide our products and services
to them or results in slower response times. We do not maintain business
interruption insurance and our other insurance may not adequately
compensate us for any losses that may occur due to any failures in our
system or interruptions in our service.
Breaches of our network security could be costly.
Because we host HotJobs.com-related data for our customers, we may be
liable to any of those customers that experience losses due to our
security failures. As a result, we may be required to expend capital
and resources to protect against or to alleviate security breaches,
which could reduce our profitability. A significant barrier to
confidential communications over the Internet has been the need for
security. We may incur significant costs to protect against the threat
of security breaches or to alleviate problems caused by these breaches.
If unauthorized persons penetrate our network security, they could
misappropriate proprietary information or cause interruptions in our
services. Misappropriation of our proprietary information or
interruptions of our services could result in reduced visitor traffic.
Reduced visitor traffic may result in fewer job seekers posting their
resumes to our www.hotjobs.com employment exchange, which, in turn, may
discourage employers from subscribing to the employment exchange. We
generate a substantial portion of our revenue from these subscription
fees.
Computer viruses may cause our systems to incur delays or interruptions,
which could reduce demand for our service and damage our reputation.
Computer viruses may cause our systems to incur delays or other service
interruptions and could reduce our revenues. In June 1999, we detected a
virus on a file server which supports our office equipment. The
inadvertent transmission of computer viruses could expose us to a material
risk of loss or litigation and possible liability. Moreover, if a computer
virus affecting our system is highly publicized, our reputation could be
materially damaged and our visitor traffic may decrease. Any of these
events could have a material adverse effect on our revenues.
21
<PAGE>
We may not be able to access third party technology upon which we depend.
If we lose the ability to access third party technology which we use, are
unable to gain access to additional products or are unable to integrate
new technology with our existing systems, we could experience delays in
our development and introduction of new services and related products or
enhancements until equivalent or replacement technology can be accessed,
if available, or developed internally, if feasible. If we experience these
delays, our revenues could be reduced and our business could be materially
adversely affected. We license technology that is incorporated into our
services and related products from third parties, including the Oracle
Corporation for database technology and Thunderstone Software-EPI, Inc.
for full-text indexing. In light of the rapidly evolving nature of
Internet technology, we may increasingly need to rely on technology from
other vendors. Technology from current or other vendors may not continue
to be available to us on commercially reasonable terms, or at all.
We could lose substantial revenues or incur significant costs due to year
2000 issues.
Any failure of our systems to be year 2000 compliant could reduce our
revenues. Significant uncertainties exist in the software industry
concerning the potential effects associated with the failure of computer
systems and software to be year 2000 compliant. Computer systems and
software must accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, software and computer systems may
need to be upgraded in order to be year 2000 compliant or risk system
failure or miscalculations which could cause disruptions of normal
business activities.
Our products and services may not be year 2000 compliant. Year 2000
problems could materially adversely affect our current products and
services and the www.hotjobs.com Website, resulting in lower revenues. We
have completed an assessment of the year 2000 readiness of our products
and services. We believe that all of the products and services we
currently offer were year 2000 compliant at the time of installation or
launch. We have conducted tests internally to validate the compliance of
these products. We cannot be certain, however, that these tests have
detected all potential year 2000 problems. To address potential
disruptions, we maintain off-site backup data for our databases,
we have a redundant online database, and we have one outsourced data
center and are developing another outsourced data center to protect
against the failure of the www.hotjobs.com Website and its associated
hardware. However, these precautions may not be sufficient to prevent a
failure of our products and systems. Any business disruption due to a
failure of our products or systems to be year 2000 compliant could have
a material adverse effect on our revenues.
Our internal computer systems may not be year 2000 compliant. Any business
disruption caused by the failure of our internal systems to be year 2000
compliant could have a material adverse effect on our revenues. We have
reviewed year 2000 compliance statements made by the vendors of our
software systems, such as accounting and database management systems, and
we have completed an assessment of the year 2000 readiness of our internal
systems. Based on this review and assessment, we currently believe that
our internal software systems are year 2000 compliant. We cannot be
certain, however, that we are aware of all potential year 2000 problems.
The failure of our internal systems could disrupt our business. To address
these potential disruptions, we maintain off-site backup data for our
internal systems and databases. However, these precautions may not be
sufficient to prevent a failure of our internal systems.
Our employers' and job seekers' systems may not be year 2000 compliant. If
either employers or job seekers experience sustained difficulty in
accessing our products and services due to year 2000 complications, our
revenues could be materially adversely affected. It is possible that our
employers will experience problems with their Internet sites or internal
computer systems due to software that is not year 2000 compliant, which
could lead to disruptions in their ability to use the services of
www.hotjobs.com. If employers are not able to use our services for a
period of time, they may cease using our services. Also, if a substantial
number of employers are unable to use our services for a long period of
time, the quality and quantity of jobs available at www.hotjobs.com may
decrease, which could discourage qualified job seekers from using our
services. Similarly, if a substantial percentage of job seekers are unable
to access our services due to failures in their computer systems,
recruiters may find our services less valuable and reduce or discontinue
their use of our products.
Year 2000 concerns may adversely affect the purchasing patterns of
employers. If purchasing patterns of employers are adversely affected due
to year 2000 concerns, our revenues could be reduced. Due to year 2000
concerns, many
22
<PAGE>
employers that are customers or potential customers may choose to devote
resources to year 2000 compliance efforts that might otherwise be used to
begin or expand online recruiting efforts. In addition, employers may
elect to spend a greater portion of their recruiting budgets on
traditional recruiting methods rather than risk disruption in their
recruiting in the event of technical difficulties related to year 2000
problems.
Year 2000 problems could decrease use of the Internet. Increasing usage of
the Internet is necessary for us to achieve our business objectives. Any
disruptions caused by year 2000 problems could decrease Internet usage
generally, which could cause a reduction in our revenues.
We could be subject to year 2000-related litigation. If we are the subject
of any claims related to or are liable for losses resulting from year
2000-related systems failures, the value of your investment could be
materially adversely affected. The failure of our currently supported
products and services to be fully year 2000 compliant could result in
claims by or liability to employers or, possibly, job seekers. We host
HotJobs.com-related data for many of our customers. As a result, any year
2000-related failure of our systems could destroy a large amount of
proprietary data that our customers rely on for their recruiting efforts.
Risks Related to Legal Uncertainty
We may become subject to burdensome government regulations and legal
uncertainties affecting the Internet which could adversely affect our
business.
Legal uncertainties and new regulations could increase our costs of doing
business, prevent us from delivering our products and services over the
Internet or slow the growth of the Internet, any of which could increase
our expenses or reduce our revenues and materially adversely affect our
business, financial condition and results of operations. To date,
governmental regulations have not materially restricted use of the
Internet in our markets. However, the legal and regulatory environment
that pertains to the Internet is uncertain and may change. In addition to
the new laws and regulations being adopted, existing laws may be applied
to the Internet. New and existing laws may cover issues which include:
o user privacy;
o civil rights and employment claims;
o consumer protection;
o libel and defamation;
o copyright, trademark and patent infringement;
o pricing controls;
o characteristics and quality of products and services;
o sales and other taxes; and
o other claims based on the nature and content of Internet materials
In addition, any imposition of state sales and use taxes imposed on the
products and services sold over the Internet may decrease demand for
products and services that we sell over the Internet. The U.S. Congress
has passed legislation which limits for three years the ability of states
to impose any new taxes on Internet-based transactions. Failure by
Congress to renew this legislation and the subsequent imposition of state
taxes on Internet-based transactions could adversely affect our future
operating results, which could result in a decline in our stock price.
We may be unable to obtain a U.S. trademark registration for our brand or
to protect our other proprietary intellectual property rights.
Failure to obtain federal trademark registration for www.hotjobs.com could
disrupt our promotion of the HotJobs.com brand. If we are unable to secure
the rights to use the www.hotjobs.com mark and related derivative marks, a
key element of our strategy of promoting "HotJobs.com" as a global brand
could be disrupted. Our success depends to a significant degree upon the
protection of our proprietary technology, including our Softshoe software
and
23
<PAGE>
our "HotJobs.com" brand name. To date, we have not been successful in our
efforts to secure a federal registration for "www.hotjobs.com." In
addition, in May 1998, another pending trademark applicant, who has since
abandoned its application, made claims regarding prior use and ownership
of "hotjobs" as a trademark. Adverse outcomes to these or similar claims
or any related litigation, should it occur, could result in us being
limited or prohibited from further using the "www.hotjobs.com" mark and
related derivative marks in the future, which could have a material
adverse effect on our business.
Failure to protect our intellectual property rights could permit others to
appropriate our proprietary technology. The unauthorized reproduction or
other misappropriation of our proprietary technology could enable third
parties to benefit from our technology and brand name without paying us
for them. If this were to occur, our revenues could be materially
adversely affected. The steps we have taken to protect our proprietary
rights may not be adequate to deter misappropriation of proprietary
information. We may not be able to detect unauthorized use of our
proprietary information or take appropriate steps to enforce our
intellectual property rights. In addition, the validity, enforceability
and scope of protection of intellectual property in Internet-related
industries is uncertain and still evolving. The laws of other countries in
which we may market our services in the future are uncertain and may
afford little or no effective protection of our intellectual property. If
we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive. The proceedings
also could involve a high degree of risk.
Defending against intellectual property infringement claims could be time
consuming and expensive, and we may be liable for infringing on the
intellectual property rights of others. If we are not successful in
defending against these claims, we could be subject to significant damages
and the disruption of our business.
Successful intellectual property infringement claims against us could
result in monetary liability or a material disruption in the conduct of
our business. We cannot be certain that our products, content and brand
names do not or will not infringe on valid patents, copyrights or other
intellectual property rights held by third parties. We expect that
infringement claims in our markets will increase in number as more
participants enter the markets. We may be subject to legal proceedings and
claims from time to time relating to the intellectual property of others
in the ordinary course of our business. We may incur substantial expenses
in defending against these third party infringement claims, regardless of
their merit.
We may be liable as a result of information retrieved from or transmitted
over the Internet.
We may be sued for defamation, civil rights infringement, negligence,
copyright or trademark infringement, personal injury, product liability or
other legal claims relating to information that is published or made
available on www.hotjobs.com and the other sites linked to it. These types
of claims have been brought, sometimes successfully, against online
services in the past. We could also be sued for the content that is
accessible from www.hotjobs.com and through links to other Internet sites
or through content and materials that may be posted by members in chat
rooms or on bulletin boards. We also offer email services, which may
subject us to potential risks, such as liabilities or claims resulting
from unsolicited email or spamming, lost or misdirected messages, security
breaches, illegal or fraudulent use of email or interruptions or delays in
email service. Our insurance does not specifically provide for coverage of
these types of claims and therefore may not adequately protect us against
these types of claims. In addition, we could incur significant costs in
investigating and defending such claims, even if we ultimately are not
liable. If any of these events occur, our revenues could be materially
adversely affected.
Other Risks
Our stock price may experience extreme price and volume fluctuations.
The market price of our common stock has fluctuated in the past and is
likely to continue to be highly volatile and subject to wide fluctuations.
The stock market in general and the market prices of shares in technology
companies, particularly those such as ours that offer Internet-based
products and services, have been extremely volatile and have experienced
fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The market price of our common
stock has fluctuated in the past and could continue to be highly volatile
24
<PAGE>
and subject to wide fluctuations. In response to many factors, some of
which are largely beyond our control. These factors include:
o quarterly variations in our results of operations;
o adverse business developments;
o changes in financial estimates by securities analysts;
o investor perception of us and online recruiting services in general;
o announcements by our competitors of new products and services; and
o general economic conditions both in the U.S. and in foreign
countries.
Our stock price may also experience fluctuations due to approximately $6.2
million in non-cash deferred compensation which we expect to amortize over
the next four years.
Since our stock price is volatile, we may become subject to securities
litigation which is expensive and could result in a diversion of
resources.
Litigation brought against us could result in substantial costs to us in
defending against the lawsuits and a diversion of management's attention.
Securities class action litigation has often been brought against
companies that experienced volatility in the market price of their
securities. Since our stock price is volatile, we could be subject to
securities litigation and incur higher expenses than expected, which could
have a material adverse effect on our business and results of operations.
Future sales of our common stock may negatively affect our stock price.
The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market or as a result
of sales by our existing stockholders, or the perception that these sales
could occur. We will have a large number of shares of common stock
outstanding and available for resale beginning at various points in time
in the future. These sales might make it more difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. The shares of our common stock outstanding prior to our IPO
will become eligible for sale without registration pursuant to Rule 144
under the Securities Act, subject to certain conditions of Rule 144.
Certain holders of our common stock also have certain demand and piggyback
registration rights enabling them to register their shares under the
Securities Act for sale. Our senior officers, directors and certain of our
common stockholders and optionholders, who held a total of 26,204,904
shares of common stock at the time of the IPO have agreed, subject to
certain exceptions, not to sell their shares without the consent of
Deutsche Bank Securities, Inc. prior to February 6, 2000.
It may be difficult for a third party to acquire our Company which could
depress our stock price.
Delaware corporate law, our amended and restated certificate of
incorporation and bylaws and our Stock Award Plan and 1999
StockOption/Stock Issuance Plan contain provisions that could have the
effect of delaying, deferring or preventing a change in control of
HotJobs.com or our management that stockholders may consider favorable or
beneficial. These provisions could discourage proxy contests and make it
more difficult for you and other stockholders to elect directors and take
other corporate actions. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common
stock. These provisions include:
o authorization to issue "blank check" preferred stock, which is
preferred stock that can be created and issued by the board of
directors without prior stockholder approval, with rights senior to
those of common stock;
o a staggered board of directors, so that it would take three
successive annual meetings to replace all directors;
o prohibition of stockholder action by written consent;
o advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting;
25
<PAGE>
o immediate vesting of options issued under the Stock Award Plan and
the 1999 Stock Option/Stock Issuance Plan in connection with a
change of control; and
o the payment of a cash distribution for surrendered options with
limited stock appreciation rights upon the successful completion of
a hostile tender offer for more than 50% of our outstanding voting
stock.
Our executive officers, directors and existing stockholders, whose
interests may differ from other stockholders, will have the ability to
exercise significant control over us.
Our executive officers and directors and entities affiliated with them in
the aggregate beneficially own a majority of our common stock. These
stockholders will be able to exercise significant influence over all
matters requiring approval by our stockholders, including the election of
directors and the approval of significant corporate transactions,
including a change of control of HotJobs.com. The interests of these
stockholders may differ from the interests of our other stockholders.
26
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. We are exposed to changes in interest rates primarily due to
our investment in short-term marketable securities, which are comprised of Dutch
Auction Rate Securities with longer term maturities that generally reset at par
every 35 days and may include municipal obligations, money market preferred
stock and taxable debt. These investments are classified as available for sale
securities and, therefore, any changes in the market's interest rates affect the
value of the investment and such change in value is recorded as unrealized gains
and losses.
Market Risks. Our accounts receivable are subject, in normal course of business,
to collection risks. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of
collection risks. As a result, we do not anticipate any material losses in this
area.
27
<PAGE>
Part II. Other Information
Item 1. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and claims
in the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights and other intellectual property
rights. The Company is not currently aware of any legal proceedings or
claims that the Company believes will have, individually or in the
aggregate, a material adverse effect on the Company's financial position
or results of operations.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The effective date of our Registration Statement, filed on Form S-1 (No.
333-80367) under the Securities Act of 1933 the "Registration Statement"
relating to the IPO was August 10, 1999. A total of 3,350,000 shares of
our common stock (including 350,000 shares issued pursuant to the exercise
by the underwriters of a portion of their over-allotment option) were sold
at a price of $8.00 per share to an underwriting syndicate led by Deutsche
Bank Securities Inc., BancBoston Robertson Stephens, SG Cowen Securities
Corporation and E*OFFERING Corp. On August 13, 1999 and September 2, 1999,
3,000,000 and 350,000 shares of our common stock, respectively, were sold
and thereafter, the IPO was completed. The aggregated gross proceeds
raised in connection with the IPO were $26.8 million. The total expenses
incurred in connection with the IPO, including underwriting discounts and
commissions, and fees for registration, legal, accounting, transfer agent,
printing, and other miscellaneous fees, are estimated to be approximately
$3.5 million, resulting in net proceeds, to the Company of approximately
$23.3 million.
As of November 1, 1999, the net proceeds of the IPO have yet to be
utilized. The net proceeds will be used for working capital, advertising
and capital expenditures and for general corporate purposes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report
21 Subsidiaries
27 Financial Data Schedule for the Period Ended September 30, 1999
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
September 30, 1999.
28
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOTJOBS.COM, LTD.
(Registrant)
Dated: November 9, 1999
By: /s/ Stephen W. Ellis
-----------------------------
Stephen W. Ellis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
29
<PAGE>
Exhibit 21
HotJobs.com, Ltd.
Subsidiaries
------------
HotJobs.com Australia Pty, Ltd.
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,002
<SECURITIES> 24,600
<RECEIVABLES> 5,449
<ALLOWANCES> 717
<INVENTORY> 0
<CURRENT-ASSETS> 33,547
<PP&E> 3,165
<DEPRECIATION> 559
<TOTAL-ASSETS> 36,613
<CURRENT-LIABILITIES> 11,257
<BONDS> 0
0
0
<COMMON> 284
<OTHER-SE> 24,692
<TOTAL-LIABILITY-AND-EQUITY> 36,613
<SALES> 12,072
<TOTAL-REVENUES> 12,072
<CGS> 2,186
<TOTAL-COSTS> 2,186
<OTHER-EXPENSES> 23,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> (13,030)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,030)
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<CHANGES> 0
<NET-INCOME> (13,030)
<EPS-BASIC> (1.37)
<EPS-DILUTED> (1.37)
</TABLE>
