HOTJOBS COM LTD, 10-Q, 2000-08-14

HOTJOBS COM LTD
10-Q, 2000-08-14
BUSINESS SERVICES, NEC

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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 June 30, 2000
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
incorporation or organization) Identification No.)

406 West 31st Street, 9th Floor
NEW YORK, NEW YORK 10001
------------------------
(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 July 31, 2000, there were 36,141,977 shares of the registrant's common
stock outstanding.

==============================================================================
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HOTJOBS.COM, LTD.
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION PAGE NUMBER
------- --------------------- -----------

<S> <C>
Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2000
(Unaudited) and December 31, 1999.................................. 1

Unaudited Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2000 and 1999.................. 2

Unaudited Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999............................ 3

Notes to Unaudited Condensed Consolidated Financial Statements..... 5

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 9

Item 3. Quantitative and Qualitative Disclosures About Market
Risk............................................................... 29

PART II. OTHER INFORMATION
-------- -----------------

Item 1. Legal Proceedings............................................... 29

Item 2. Changes in Securities and Use of Proceeds....................... 29

Item 3. Defaults by the Company on its Senior Securities................ 30

Item 4. Results of Votes of Security Holders............................ 30

Item 5. Other Information............................................... 30

Item 6. Exhibits and Reports on Form 8-K................................ 31

Item 7. Signature....................................................... 32
</TABLE>

i
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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HOTJOBS.COM, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31,
2000 1999
--------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 52,374,784 $ 88,372,658
Marketable securities ................................ 64,486,370 49,897,110
Accounts receivable, net ............................. 17,571,715 6,456,227
Prepaid expenses and other current assets ............ 4,189,588 2,744,041
------------- -------------
TOTAL CURRENT ASSETS .......................... 138,622,457 147,470,036
Property and equipment, net .......................... 15,068,608 4,572,496
Goodwill, net ........................................ 43,272,411 --
Other assets ......................................... 825,652 498,720
------------- -------------
TOTAL ASSETS .................................. $ 197,789,128 $ 152,541,252
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit ....................................... $ 333,333 $ 166,293
Accounts payable and accrued expenses ................ 23,225,290 9,233,739
Other current liabilities ............................ 1,524,216 992,812
Deferred revenue - current portion ................... 12,557,515 4,292,808
Notes payable - current portion ...................... 192,468 297,753
Current installments of obligations under capital
leases ............................................... 200,280 205,840
------------- -------------
TOTAL CURRENT LIABILITIES ..................... 38,033,102 15,189,245
Line of credit, excluding current portion ............... 555,556 498,879
Deferred revenue, excluding current portion ............. 1,511,104 1,080,544
Notes payable - non-current portion ..................... -- 27,930
Obligations under capital leases, excluding current
installments ......................................... 119,413 216,479
------------- -------------
TOTAL LIABILITIES ............................. 40,219,175 17,013,077

Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000
shares authorized, none issued and outstanding
as of June 30, 2000 and December 31, 1999,
respectively ...................................... -- --
Common stock, $0.01 par value; 100,000,000 shares
authorized; 35,887,756 and 31,344,419 shares
issued and outstanding at June 30, 2000 and
December 31, 1999, respectively ................... 358,878 313,444
Deferred compensation ................................... (4,566,305) (5,509,523)
Additional paid-in capital .............................. 221,818,638 177,952,759
Accumulated deficit ..................................... (60,012,499) (37,219,056)
Accumulated other comprehensive loss .................... (28,759) (9,449)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY .................... 157,569,953 135,528,175
------------- -------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .... $ 197,789,128 $ 152,541,252
============= =============

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

1
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HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------

<S> <C> <C> <C> <C>
Revenues:
e-Recruitment ...................................... $ 16,886,035 $ 2,863,672 $ 28,164,252 $ 4,747,786
Software ........................................... 3,258,022 376,863 3,830,188 700,834
Career expos ....................................... 1,369,468 313,825 2,631,862 529,552
Other .............................................. 836,514 230,345 1,603,347 455,642
------------ ------------ ------------ ------------
Total revenues ............................. 22,350,039 3,784,705 36,229,649 6,433,814

Cost of revenues ...................................... 4,429,476 565,955 6,926,336 991,117
------------ ------------ ------------ ------------

Gross profit ................................ 17,920,563 3,218,750 29,303,313 5,442,697
------------ ------------ ------------ ------------

Operating expenses:
Product development ................................ 2,212,925 239,031 3,155,334 416,647
Sales and marketing ................................ 19,897,298 4,233,599 39,579,912 7,649,139
General and administrative ......................... 5,496,307 1,494,600 10,016,554 2,273,000
Non-cash compensation charge ....................... 447,427 164,948 897,018 164,948
Amortization of goodwill ........................... 2,100,602 -- 2,100,602 --
------------ ------------ ------------ ------------
Total operating expenses .................... 30,154,559 6,132,178 55,749,420 10,503,734
------------ ------------ ------------ ------------

Net interest income (expense) ......................... 1,747,961 12,814 3,652,664 (55,273)
------------ ------------ ------------ ------------
Net loss .................................... $(10,486,035) $ (2,900,614) $(22,793,443) $ (5,116,310)
============ ============ ============ ============

Deemed dividend attributable to issuance of convertible
preferred stock ................................... -- 566,129 -- 566,129
------------ ------------ ------------ ------------
Net loss attributable to common stock ................. $(10,486,035) $ (3,466,743) $(22,793,443) $ (5,682,439)
============ ============ ============ ============

Basic and diluted net loss per
common share ....................................... $ (0.31) $ (0.18) $ (0.69) $ (0.28)
============ ============ ============ ============
Weighted average shares outstanding
used in basic and diluted net loss per
common share calculation ........................... 34,075,381 19,633,187 32,822,207 20,223,315
============ ============ ============ ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

2
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HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,
-------------------------------
2000 1999
-------------- --------------

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $ (22,793,443) $ (5,116,310)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ................................. 3,789,113 229,445
Provision for doubtful accounts ............................... 1,107,736 235,000
Non-cash compensation ......................................... 897,018 164,948
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable ........................................... (7,132,797) (1,961,750)
Prepaid expenses and other current assets ..................... (390,736) 162,877
Accounts payable and accrued expenses ........................ 9,044,090 2,857,246
Deferred revenue .............................................. 3,040,474 952,349
Other ......................................................... 124,752 215,283
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES ................. (12,313,793) (2,260,912)
------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................... (10,405,729) (997,688)
Purchase of marketable securities .............................. (167,845,000) --
Sale of marketable securities ................................ 153,845,000 --
Purchase of trademark .......................................... (34,898) --
Cash acquired on acquisition, net of cash paid ................. 663,971 --
Note receivable ................................................ (400,000) --
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ................. (24,176,656) (997,688)
------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock for the Employee Stock
Purchase Plan ......................................... 399,282 --
Payment of note payable ....................................... (133,215) --
Proceeds from line of credit .................................. 334,825 --
Repayment of line of credit ................................... (111,108) --
Proceeds from exercise of options ............................. 109,053 --
Repurchase of common stock .................................... -- (61,000)
Repayment to affiliate ........................................ -- (3,784,900)
Proceeds from issuance of redeemable convertible preferred
stock ..................................................... -- 16,200,000
Principal payments under capital lease obligations ............ (102,626) (81,213)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 496,211 12,272,887
------------- -------------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH ......................... (3,636) --
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . (35,997,874) 9,014,287
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 88,372,658 167,004
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 52,374,784 $ 9,181,291
============= =============
</TABLE>

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HOTJOBS.COM, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>

<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid ............................................. $ 64,143 $ 123,209

NON-CASH TRANSACTIONS:
Equipment acquired under capital leases ................... $ -- $ 457,126
Barter transaction ........................................ $ 25,000 $ 252,500
Stock issued for purchase of trademark ................... $ 12,562 $ --
Issuance of common stock and assumption of Resumix
outstanding options in exchange for the capital stock of
Resumix Inc., net of cash received and paid ............ $46,036,984 $ --
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

4
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HOTJOBS.COM, LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1) DESCRIPTION OF BUSINESS

HotJobs.com, Ltd. (the "Company") is a leading Internet-based recruiting
solutions company. The Company's suite of products and 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 a back-end system which
provides recruiters with the tools to post, track and manage job openings in
a real-time environment. The employment exchange also allows job seekers to
identify, research, apply and evaluate job opportunities while enabling them
to restrict access to their resumes. Headhunters are prohibited from using
the employment exchange, ensuring direct contact between job seekers and
member employers. The Company also offers its Resumix(R), Softshoe(R) and
Shoelace(TM) proprietary hiring management software and provides employers
with additional recruiting solutions such as WorkWorld(TM) career expos,
online advertising and consulting services.

The majority of the Company's revenues is recurring and is primarily derived
from employer memberships to the Company's online employment exchange,
WWW.HOTJOBS.COM. The Company operates in a highly competitive environment and
inherent in the Company's business are various risks and uncertainties,
including its limited operating history and unproven business model. The
Company's success may depend in part upon the emergence of the Internet as a
recruiting medium, prospective products and service development efforts and
the acceptance of the Company's products and services by the marketplace.

HotJobs.com, Ltd. was incorporated in the State of Delaware on February
20, 1997 (inception) as Hot Jobs, Inc. On September 23, 1998, Hot Jobs,
Inc. changed its name to HotJobs.com, Ltd. On June 18, 1999, the Company
established an international presence with the incorporation of
HotJobs.com Pty. Limited in Australia. On December 15, 1999, HotJobs
Canada Inc. was incorporated. On May 11, 2000, the Company acquired
Resumix, Inc. ("Resumix") pursuant to which Resumix became a wholly-owned
subsidiary of the Company.

2) ACQUISITION OF RESUMIX, INC.

On May 11, 2000, the Company acquired 99.1% of the outstanding capital stock
of Resumix for 3,560,019 shares of the common stock of the Company, of which
359,282 shares will be held in escrow for one year from the May 11, 2000
closing date pending satisfaction of certain conditions, and paid $392,456 to
all other Resumix stockholders who were not "accredited stockholders," in
exchange for the remaining 0.9% of the outstanding capital stock of Resumix.
In addition, the Company assumed Resumix's existing stock option plans,
resulting in the potential additional issuance of approximately 1.1 million
shares of the Company's common stock upon the exercise of these options. The
total purchase price for the acquisition, including approximately $1.7
million of acquisition expenses, was approximately $45.5 million. The excess
of the purchase price over the fair value of the assets acquired of
approximately $45.4 million has been recorded as goodwill and is being
amortized on a straight-line basis over three years.

Resumix is based in Sunnyvale, California and has developed artificial
intelligence search capabilities for its recruiting software products. The
acquisition has been accounted for by the purchase method and, accordingly,
the results of operations of Resumix have been included in the Company's
consolidated financial statements from May 11, 2000.

The following unaudited pro forma financial information presents the combined
results of operations of the Company and Resumix, as if the acquisition had
occurred as of the beginning of the respective periods, after giving effect
to certain adjustments, including the amortization of goodwill. The pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company and Resumix constituted
a single entity during such period.

5
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN MILLIONS EXCEPT PER SHARE DATA)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Revenues .................................. $ 23.6 $ 11.5 $ 43.0 $ 20.9
======== ======== ======== ========

Net loss .................................. $ (16.1) $ (8.9) $ (33.1) $ (16.9)
======== ======== ======== ========

Basic and diluted net loss per common share $ (0.45) $ (0.41) $ (0.94) $ (0.73)
========= ========= ========= =========

Weighted average shares outstanding used in
basic and diluted net loss per common share 35.6 23.2 35.4 23.8
======== ======== ======== ========

</TABLE>

3) BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of the
Company as of June 30, 2000 and for the three and six months ended June 30,
2000 and 1999, included herein have been prepared in accordance with the
instructions for Form 10-Q under the Securities Exchange Act of 1934, as
amended, and Article 10 of Regulation S-X under the Securities Act of 1933,
as amended. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations relating to interim consolidated financial statements.

In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of the Company at June 30, 2000, and the results of its operations
for the three and six months ended June 30, 2000 and 1999 and its cash
flows for the six months ended June 30, 2000 and 1999.

The results of operations for such periods are not necessarily indicative of
results expected for the full year or for any future period. These
condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements as of December 31, 1999,
and for the two years then ended and for the period from February 20, 1997
(inception) to December 31, 1999 and related notes included in the Company's
Form 10-K filed with the Securities and Exchange Commission. Certain
reclassifications have been made to the 1999 financial statements to conform
to the 2000 presentation.

4) BUSINESS SEGMENT REPORTING

The Company has determined that it does not have any separately reportable
business segments.

5) RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted SFAS No. 133 "ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES," as amended by SFAS No. 138, effective July 1,
2000, and determined that SFAS No. 133 will not have an effect on its
results of operations and financial position. This statement is not
required to be applied retroactively to financial statements of prior
periods.

FASB Interpretation No. 44, "ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING
STOCK COMPENSATION" ("FIN No. 44") provides guidance for applying APB
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." With

6
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certain exceptions, FIN No. 44 applies prospectively to new awards, exchanges
of awards in a business combination, modifications to outstanding awards and
changes in grantee status on or after July 1, 2000. The Company does not
believe that the implementation of FIN No. 44 will have a significant effect
on its results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "REVENUE
RECOGNITION IN FINANCIAL STATEMENTS" ("SAB No. 101") which summarizes certain
of the SEC staff's views in applying generally accepted accounting principles
to revenue recognition in financial statements. The Company will be required
to adopt the accounting provisions of SAB No. 101, no later than the fourth
quarter of 2000. The Company does not believe that the implementation of SAB
No. 101 will have a significant effect on its results of operations.

6) LOAN AND SECURITY AGREEMENT

On September 16, 1999, the Company entered into a Loan and Security Agreement
with Silicon Valley Bank, which was subsequently modified on November 22,
1999 and May 17, 2000. 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 was able to 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 June 30, 2000, the Company had $888,889
outstanding under the equipment line of credit and has available $2,200,000
of the $4,000,000 revolving line of credit as $1,800,000 of the revolving
line of credit has been utilized to support a letter of credit issued in
1999 in connection with entering into a lease for new premises in New York.

7) NON-CASH COMPENSATION

In connection with the granting of options in 1999, the Company recorded net
deferred compensation of approximately $7.5 million. 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 $447,427 and $897,018 of deferred compensation as non-cash
compensation for the three and six months ended June 30, 2000, respectively,
and $164,948 of deferred compensation as non-cash compensation for both the
three and six months ended June 30, 1999. The deferred compensation remaining
at June 30, 2000 of approximately $4.6 million will be amortized as non-cash
compensation over the remaining vesting period of the related options through
August 2003. The following reflects the breakdown of the non-cash
compensation charge by the other expense categories:

NON-CASH COMPENSATION EXPENSE CATEGORY BREAKDOWN

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------

Cost of revenues ......... $ 5,536 $ 1,925 $ 10,106 $ 1,925
Product development ...... 61,720 23,653 123,441 23,653
Sales and marketing ...... 48,005 18,697 99,138 18,697
General and administrative 332,166 120,673 664,333 120,673
-------- -------- -------- --------
TOTAL ............... $447,427 $164,948 $897,018 $164,948
======== ======== ======== ========

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8) EMPLOYEE STOCK PURCHASE PLAN

On August 10, 1999, the Employee Stock Purchase Plan became effective. The
plan is designed to comply with the requirements of Section 423 of the
Internal Revenue Code. The plan allows eligible employees to purchase shares
of common stock at 85% of the lower of the fair market value of the Company's
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. As of June 30, 2000, a total of 191,282 shares of common stock
were available for issuance under the plan.

The plan has 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 the Compensation Committee of the Company's Board of
Directors.

On January 31, 2000, the first purchase date under the plan, employees
purchased 58,718 shares of the Company's common stock for $399,282 or $6.80
per share. As of June 30, 2000, employees have contributed $528,360 towards
the next plan purchase date of July 31, 2000. The amount contributed to the
plan by the employees is included in other current liabilities in the
condensed consolidated balance sheet as of June 30, 2000.

9) COMMITMENTS AND CONTINGENCIES

a) In January 2000, the Company entered into a five-year lease agreement for
office space in Santa Monica, California, for total minimum lease payments
of approximately $631,000.

b) In February 2000, the Company entered into a four-year lease agreement for
office space in Austin, Texas, for total minimum lease payments of
approximately $434,000.

c) As of July 1, 2000, the Company has commitments of approximately $13.7
million for various advertising campaigns through December 2001. These
commitments include broadcasting, print, online and outdoor advertising.

10) BASIC AND DILUTED NET LOSS PER COMMON SHARE

The Company computes net loss per share in accordance with SFAS No. 128,
"COMPUTATION OF EARNINGS PER SHARE," and the SEC Staff Accounting Bulletin
No. 98 ("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net
loss per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and common equivalent shares outstanding during the period. As the Company
had a net loss in each of the periods presented, basic and diluted net loss
per share is the same. Diluted net loss per share for the three and six
months ended June 30, 2000 and 1999 does not include the effects of options
to purchase shares of common stock, as the effect of their inclusion is
anti-dilutive during each period.

8
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE INFORMATION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS ARE
BASED UPON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT
HOTJOBS.COM AND OUR INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS
AND UNCERTAINTIES. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACTS MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. FOR EXAMPLE,
WORDS SUCH AS "MAY," "WILL," "SHOULD," "ESTIMATES," "PREDICTS," "POTENTIAL,"
"CONTINUE," "STRATEGY," "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS,"
"INTENDS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. HOTJOBS.COM'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS
COULD DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE OR CONTRIBUTE TO SUCH A DISCREPANCY
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED ELSEWHERE IN THIS REPORT IN
THE SECTION ENTITLED "RISK FACTORS" AND THE RISKS DISCUSSED IN OUR OTHER
SECURITIES AND EXCHANGE COMMISSION ("SEC") FILINGS INCLUDING OUR REGISTRATION
STATEMENT ON FORM S-1 DECLARED EFFECTIVE ON NOVEMBER 10, 1999 BY THE SEC
(FILE NO. 333-89813) AND IN OUR FORM 10-K FILED MARCH 24, 2000. HOTJOBS.COM
UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS
FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS
OCCUR IN THE FUTURE.

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 is recurring and is derived primarily
from employer memberships to our WWW.HOTJOBS.COM employment exchange. We also
offer our Resumix, Softshoe and Shoelace proprietary hiring management
software and provide additional recruiting solutions to employers such as our
WorkWorld career expos, online advertising and consulting services.

Founded in February 1997, we began operations with seven employees and we had
grown to 494 employees as of June 30, 2000. 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 to license our Softshoe hiring management software. During
1998 and 1999, 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 career
expos and expanded our marketing programs to increase awareness of the
HotJobs.com brand. In May 2000, we acquired Resumix, which has developed
artificial intelligence search capabilities for its recruiting software
products. In 2000, we also launched our Shoelace turn-key hiring
management software. Hosted by HotJobs.com, Shoelace delivers the same
technology that powers the WWW.HOTJOBS.COM employment exchange on a private
label version that can be used on any corporate website. In May 1999, we
raised net proceeds of approximately $16.1 million in a private placement of
our Series A Preferred Stock. In the third quarter of 1999, we raised net
proceeds of approximately $23.2 million in our IPO and in the fourth quarter
of 1999, we raised net proceeds of approximately $114.9 million in our
follow-on public offering.

We have reclassified our revenues as follows:

o E-RECRUITMENT FEES, consisting of subscription fees paid by employers for
membership to our WWW.HOTJOBS.COM employment exchange and fees derived
from single-ad job postings on WWW.HOTJOBS.COM. We sell memberships to
each employer on a per recruiter basis and bill the employer monthly,
quarterly, semi-annually, annually or bi-annually. Membership entitles
each recruiter to post a specific number of jobs on WWW.HOTJOBS.COM
simultaneously. Single-ad job postings are billed when service is
provided.

o SOFTWARE FEES, consisting mainly of license and maintenance fees generated
from customers of Resumix, license and hosting fees generated from
Softshoe and Shoelace customers as well as license and hosting fees
relating to a miscellaneous proprietary software product.

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o CAREER EXPO FEES, consisting of fees from employers that rent booths at
our WorkWorld career expos.

o OTHER, consisting of fees primarily derived from banner ads, co-operative
advertising, consulting and barter advertising.

We recognize revenue as follows:

o E-RECRUITMENT FEES. We provide subscriptions for membership to our
employment exchange for a minimum term of three months. We recognize
subscription revenue over the subscription term. We recognize single-ad
job postings revenue over the period of delivery of service.

o SOFTWARE FEES. We recognize Resumix software license fees upon the
delivery of the software and Softshoe and Shoelace license fees 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. We provide maintenance and hosting
services to our customers on a monthly basis, and we recognize revenues in
the month we provide the service.

o CAREER EXPO FEES. We recognize career expo fees in the month in which the
career expo takes place.

o OTHER. We recognize revenues related to these services over the period of
delivery of service.

We classify our cost of revenues and operating expenses as follows:

o COST OF REVENUES. Cost of revenues primarily consists of compensation and
other costs associated with the operation of our WWW.HOTJOBS.COM
employment exchange as well as costs incurred to provide maintenance,
hosting and training services for our software products and costs
associated with operating our career expos.

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, sales and marketing
compensation, including base salary and sales commissions, public
relations expenses, conference expenses, printing fees, 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.

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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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
e-Recruitment fees .................... 75% 76% 78% 74%
Software fees ......................... 15 10 11 11
Career expo fees ...................... 6 8 7 8
Other ................................. 4 6 4 7
---- ---- ---- ----
Total revenues ...................... 100 100 100 100
Cost of revenues ...................... 20 15 19 15
---- ---- ---- ----
Gross profit ........................ 80 85 81 85

Operating Expenses:
Product development ................... 10 6 9 7
Sales and marketing ................... 89 112 109 119
General and administrative ............ 25 40 28 35
Non-cash compensation ................. 2 4 2 3
Amortization of goodwill .............. 9 -- 6 --
---- ---- ---- ----
Total operating expenses ............ 135 162 154 164
---- ---- ---- ----
Loss from operations .............. (55) (77) (73) (79)
Net interest income (expense) ........... 8 -- 10 (1)
---- ---- ---- ----
Net loss ........ (47)% (77)% (63)% (80)%
==== ==== ==== ====

We have incurred substantial losses in every fiscal period since our
inception. For the six months ended June 30, 2000, we incurred a net loss of
approximately $22.8 million. As of June 30, 2000, we had an accumulated
deficit of approximately $60 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 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 may result in sales and
marketing expenses increasing as a percentage of total revenues in these
periods. As of June 30, 2000, we had commitments of approximately $13.7
million for various advertising campaigns through December 2001. These
commitments include broadcasting, print, online and outdoor advertising.

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.

DEFERRED COMPENSATION

We recorded deferred compensation net of options forfeited of approximately
$7.5 million in the year ended December 31, 1999, and amortized approximately
$2.0 million as non-cash compensation expense in 1999 and approximately
$897,000 for the six months ended June 30, 2000. Deferred compensation for
accounting purposes represents the difference between the exercise price of
stock options granted and the fair value of the underlying common stock at
the date of the grant. The remaining deferred compensation at June 30, 2000
of approximately $4.6 million will be amortized over the remaining vesting
period of the options. We currently expect to amortize the remaining deferred
compensation as follows:

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FOR THE PERIOD:
---------------

July through December 2000.......................... $0.9 million
Full Year 2001...................................... $1.8 million
Full Year 2002...................................... $1.4 million
Full Year 2003...................................... $0.5 million

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999

REVENUES

Our total revenues increased to approximately $22.4 million for the three
months ended June 30, 2000 from approximately $3.8 million for the three
months ended June 30, 1999. Our total revenues increased to approximately
$36.2 million for the six months ended June 30, 2000, from approximately $6.4
million for the six months ended June 30, 1999. The increase in our total
revenues was due to increased revenue in all of our revenue categories.

E-RECRUITMENT FEES. e-Recruitment fees increased to approximately $16.9
million for the three months ended June 30, 2000, from approximately $2.9
million for the three months ended June 30, 1999, and to approximately $28.2
million for the six months ended June 30, 2000, from approximately $4.7
million for the six months ended June 30, 1999. The increases in both periods
resulted primarily from an increase in the number of employers subscribing to
WWW.HOTJOBS.COM and an increase in the number of single-ad postings as well
as increased prices reflecting the implementation of price increases in 2000
for both subscriptions to WWW.HOTJOBS.COM and single-ad postings.

SOFTWARE FEES. Software fees increased to approximately $3.3 million for the
three months ended June 30, 2000 from approximately $377,000 for the three
months ended June 30, 1999, and to approximately $3.8 million for the six
months ended June 30, 2000, from approximately $701,000 for the six months
ended June 30, 1999. The increase in both periods resulted primarily from the
inclusion of approximately $2.6 million of Resumix revenues since May 11,
2000, the date of the acquisition, as well as from an increase in the number
of companies that license our proprietary Softshoe software, the launch of
our Shoelace software in 2000 and the increase in the related hosting fees.

CAREER EXPO FEES. Career expo fees increased to approximately $1.4 million
for the three months ended June 30, 2000 from approximately $314,000 for the
three months ended June 30, 1999, and to approximately $2.6 million for the
six months ended June 30, 2000, from approximately $530,000 for the six
months ended June 30, 1999. The increase in both periods mainly resulted from
an increase in the number of career expos held in 2000 versus 1999.

OTHER. Other revenues increased to approximately $837,000 for the three
months ended June 30, 2000, from approximately $230,000 for the three months
ended June 30, 1999, and to approximately $1.6 million for the six months
ended June 30, 2000 from approximately $456,000 for the six months ended June
30, 1999. Other revenues increased primarily as a result of increased banner
and co-operative advertising revenues as well as increased consulting
revenues.

COST OF REVENUES

Cost of revenues increased to approximately $4.4 million for the three months
ended June 30, 2000 from approximately $566,000 for the three months ended
June 30, 1999. For the six months ended June 30, 2000, cost of revenues
increased to approximately $6.9 million from approximately $991,000 for the
six months ended June 30, 1999. Cost of revenues as a percentage of revenues
for the three months ended June 30, 2000 and 1999 were 20% and 15%,
respectively. For the six months ended June 30, 2000 and June 30, 1999, cost
of revenues as a percentage of revenue were 19% and 15%, respectively. The
increase in cost of revenues as a percentage of revenues in the three and six
month periods ended June 30, 2000 compared to the same periods in 1999
principally

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reflects the cost of revenues related to the Resumix products and increased
costs associated with the increased number of career expos. We incur higher
marginal costs on Resumix and career expo revenues than with our other
revenue categories.

OPERATING EXPENSES

PRODUCT DEVELOPMENT EXPENSE. Product development expense increased to
approximately $2.2 million for the three months ended June 30, 2000 from
approximately $239,000 in the three months ended June 30, 1999. For the six
months ended June 30, 2000, product development expense was approximately
$3.2 million, compared to approximately $417,000 for the six months ended
June 30, 1999. The increase in the three and six months ended June 30, 2000,
compared to the same periods in 1999 reflects our continuing efforts to
enhance the content and features in our products and services and resulted
primarily from increased salaries and related expenses associated with hiring
additional technology personnel as well as the inclusion of Resumix's product
development cost since May 11, 2000.

SALES AND MARKETING EXPENSE. Sales and marketing expense increased to
approximately $19.9 million for the three months ended June 30, 2000 from
approximately $4.2 million for the three months ended June 30, 1999. Sales
and marketing expense increased to approximately $39.6 million for the six
months ended June 30, 2000 from approximately $7.6 million for the six months
ended June 30, 1999. The increase in sales and marketing expense was
primarily due to our extensive advertising campaigns, which included
television, outdoor signage, radio and online advertising. In addition, sales
and marketing expense increased due to the hiring of additional sales and
marketing personnel.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased to approximately $5.5 million for the three months ended June 30,
2000, from approximately $1.5 million for the three months ended June 30,
1999. For the six months ended June 30, 2000, general and administrative
expense increased to approximately $10.0 million from approximately $2.3
million for the six months ended June 30, 1999. General and administrative
expense increased primarily due to increased administrative costs including
salaries and related expenses associated with supporting the growth of the
Company.

NON-CASH COMPENSATION EXPENSE. We recorded approximately $447,000 and
$897,000 of non-cash compensation expense for the three and six months ended
June 30, 2000, respectively, versus approximately $165,000 for the three and
six months ended June 30, 1999. This expense for accounting purposes
represents the amortization of a portion of the deferred compensation, net of
options forfeited, recorded in 1999 in connection with stock options granted
below the fair value of the underlying common stock at the date of grant.
Deferred compensation is amortized over the period during which the related
options vest. The deferred compensation of approximately $4.6 million
remaining at June 30, 2000 will be amortized over the remaining vesting
period of the related options through August 2003.

AMORTIZATION OF GOODWILL. The amortization of goodwill of approximately $2.1
million in the three and six months ended June 30, 2000 represents the
amortization of the goodwill related to the Resumix acquisition. The total
goodwill of approximately $45.4 million, which resulted from the acquisition
of Resumix, will be amortized on a straight-line basis over three years.

NET INTEREST INCOME (EXPENSE)

For the three months ended June 30, 2000, we recorded net interest income of
approximately $1.7 million compared to approximately $13,000 of net interest
income for the three months ended June 30, 1999. Net interest income was
approximately $3.7 million for the six months ended June 30, 2000, as
compared to approximately $55,000 of net interest expense for the six months
ended June 30, 1999. Net interest income in the three and six months ended
June 30, 2000 reflects the investment of our excess cash, which resulted from
our initial public offering and our follow-on offering in the second half of
1999. Net interest income for the three months ended June 30, 1999 reflects
the investment of the cash received from the sale of the Series A Preferred
Stock in May 1999. Net interest expense for the six months ended June 30,
1999 reflects the fact that prior to the sale of the Series A Preferred Stock
in May 1999, we were a net borrower of funds.

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NET LOSS

We recorded a net loss of approximately $10.5 million for the three months
ended June 30, 2000, compared to a net loss of approximately $2.9 million for
the three months ended June 30, 1999. For the three months ended June 30,
2000 and 1999, the basic and diluted net loss per common share was $0.31 and
$0.18, respectively. For the six months ended June 30, 2000 and 1999, the net
loss was approximately $22.8 million and $5.1 million respectively, or a
basic and diluted net loss per common share of $0.69 and $0.28, respectively.
The increase in the net loss for both periods of 2000 compared to 1999 was
primarily attributable to the increased sales and marketing costs associated
with building brand awareness and increased hiring to support and manage the
growth of HotJobs.com.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our activities primarily through funding
from OTEC, Inc., an affiliate, lines of credit, cash from operations, the
private placement of equity securities, our initial public offering and our
follow-on public offering. Through May 1999, OTEC provided us with
approximately $3.8 million to fund our operations. Effective May 10, 1999, we
raised net proceeds, after deducting costs of the offering, of approximately
$16.1 million from the sale of our 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, after deducting costs of the offering, of approximately $20.6
million. On September 2, 1999, the underwriters exercised their
over-allotment option to the extent of 350,000 shares, resulting in gross
proceeds to us of $2.8 million, and net proceeds after deducting costs of the
offering of approximately $2.6 million. On November 16, 1999, we completed a
follow-on offering of 3,600,000 shares of our common stock for gross proceeds
of $108.0 million, and net proceeds, after deducting costs of the offering,
of approximately $102.1 million. On December 8, 1999, the underwriters
exercised their over-allotment option of an additional 450,000 shares,
resulting in gross proceeds to us of $13.5 million, and net proceeds, after
deducting costs of the offering, of approximately $12.8 million.

Net cash used in operating activities was approximately $12.3 million for the
six months ended June 30, 2000, and approximately $2.3 million for the six
months ended June 30, 1999. Net cash used in operating activities for both
the six months ended June 30, 2000 and 1999 resulted primarily from our net
loss, which mainly resulted from costs incurred to support our sales and
marketing efforts and the increased personnel required to manage our 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 $24.2 million for the
six months ended June 30, 2000, compared to approximately $998,000 for the
six months ended June 30, 1999. Net cash used in investing activities in the
six months ended June 30, 2000 was primarily for the purchase of marketable
securities of $167.8 million and for capital expenditures of approximately
$10.4 million which were partially offset by proceeds of approximately $153.8
million from the sale of marketable securities and approximately $664,000 of
net cash acquired through the acquisition of Resumix, as the amount of cash
on hand at Resumix at the time of the acquisition exceeded the amount of cash
paid for the acquisition. For the three months ended June 30, 1999 the net
cash used in investing activities was solely for capital expenditures.

Net cash provided by financing activities was approximately $496,000 for the
six months ended June 30, 2000, and approximately $12.3 million for the six
months ended June 30, 1999. Net cash provided by financing activities for the
six months ended June 30, 2000 consisted primarily of proceeds of
approximately $335,000 relating to the utilization of the remaining equipment
line of credit, approximately $399,000 from the issuance of stock under the
Employee Stock Purchase Plan and approximately $109,000 from the exercise of
options which were partially offset by approximately $133,000 of repayment of
a note, approximately $111,000 of repayment of the line of credit and
approximately $103,000 of capital lease payments. For the six months ended
June 30, 1999, net cash provided by financing activities resulted mainly from
the $16.2 million of proceeds which were raised in the private placement of
Series A Preferred Stock which was partially offset by the repayment of
advances of approximately $3.8 million to OTEC, Inc.

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<PAGE>

As of June 30, 2000, we had approximately $52.4 million of cash and cash
equivalents and approximately $64.5 million of marketable securities. As of
June 30, 2000, we had approximately $2.2 million of availability under our
existing line of credit, and our principal commitments consisted of
approximately $13.7 million for various advertising campaigns through
December 2001 and approximately $15.1 million of office lease commitments
through December 2009. We believe that our existing cash and cash
equivalents, marketable securities and available line of credit will be
sufficient to meet our anticipated cash requirements for working capital
and capital expenditures for at least 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 that we devote to
our products and services 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 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.

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 HOTJOBS.COM.

We were incorporated and began generating revenues in February 1997.
Accordingly, we have only a limited operating history for you to evaluate our
business and prospects. 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 in
new and rapidly evolving markets like ours faces.
Some of these risks include:

o ability to sustain historical revenue growth rates;

o ability to increase awareness of our brand;

o managing our expanding operations, including the integration of
acquisitions;

o competition;

o attracting, retaining and motivating qualified personnel;

o maintaining our current, and developing new, strategic relationships;

o ability to anticipate and adapt to the changing Internet market and any
changes in government regulation; and

o attracting and retaining a large number of member companies for our
employment exchange and licenses for our hiring management software.

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We also depend on the growing use of the Internet for recruiting purposes and
on general economic conditions. If we cannot address these risks and
uncertainties or are unable to execute our strategy, we may not be
successful.

WE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT
US FROM SUCCESSFULLY INTEGRATING RESUMIX AND HOTJOBS.COM.

Our acquisition of Resumix involves risks related to the integration and
management of acquired technology, operations and personnel. The integration
of HotJobs.com and Resumix will be a complex, time-consuming and expensive
process and may disrupt our business if not completed in a timely and
efficient manner. We must operate as a combined organization utilizing common
information and communication systems, operating procedures, financial
controls and human resources practices. We are in the process of combining
our systems.

We may encounter substantial difficulties, costs and delays in integrating
the Resumix operations, including:

o Potential incompatibility of business cultures;

o Perceived adverse changes in business focus;

o Potential conflicts in distribution, marketing or other important
relationships; and

o The loss of key employees and the diversion of management's attention
from other ongoing business concerns.

In addition, although we performed a legal and financial analysis of Resumix
before we agreed to purchase Resumix, it is possible that our analysis did
not uncover every risk inherent in acquiring the business of another company.
Although the shareholders of Resumix have agreed to indemnify us for the
losses arising from some of these risks, the indemnification does not cover
all losses, and may be inadequate to cover losses that are indemnified. In
such event, it is likely we would not realize the expected benefits of the
acquisition and our stock price could decline.

WE HAVE NOT BEEN PROFITABLE, AND WE EXPECT OUR LOSSES TO CONTINUE.

We have never been profitable. For the quarter ended June 30, 2000, we
incurred a net loss of approximately $10.5 million. At June 30, 2000, we had
an accumulated deficit of approximately $60.0 million. We expect to continue
to lose money in the foreseeable future because we anticipate incurring
significant expenses in connection with building awareness of the HotJobs.com
brand, rapidly expanding our sales, technology and other personnel,
developing strategic relationships 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, products and technology and
expansion efforts or to otherwise increase our financial commitment to
creating and maintaining brand awareness or developing our products. Although
our revenues have grown in recent quarters, we cannot assure you that we will
achieve sufficient revenues for profitability. Even if we do achieve
profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. 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 generate sufficient revenues to achieve or sustain profitability.

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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;

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 the timing and integration of acquisitions;

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 consumer 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.

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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 and maintenance fees associated with
our hiring management software. In addition, our acquisition of Resumix will
increase the portion of our revenue derived from maintenance and sales of
hiring management software. Our revenue model and profit potential are
unproven. If current employers decide to discontinue any of our services
and we are unable to replace them with new employers, our revenues could
decrease or grow at a slower rate than expected. 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.

Because we expect to generate losses for the foreseeable future, we do not
expect that income from our operations will be sufficient to meet our needs.
We may have 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

o investor sentiment.

These factors may make the timing, amount, terms and conditions of additional
financing unattractive for us. 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.

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.

ECONOMIC FLUCTUATIONS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

The level of economic activity and employment in the United States and abroad
may significantly and adversely affect demand for our services. When economic
activity slows, many companies hire fewer permanent employees. A recession
could cause employers to reduce or postpone their recruiting efforts
generally, and their online recruiting efforts in particular. Therefore, a
significant economic downturn or recession, especially in regions or
industries where our operations are heavily concentrated, could have a
material adverse effect on our business, financial condition and operating
results. Further, we may face increased pricing pressures during such
periods. There can be no assurance that during these periods our results of
operations will not be adversely affected.

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RISKS RELATED TO OUR MARKETS AND STRATEGY

WE MAY NOT BE ABLE TO DEVELOP AWARENESS OF OUR BRAND NAME.

We believe that continuing to build and maintain awareness of our brand name
is critical to achieving widespread acceptance of our business and to sustain
or increase the number of employers and job seekers who use our Website.
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. If we fail to successfully protect, promote, position
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 business, results of
operations and financial condition could be materially adversely affected.

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. In connection with the Resumix acquisition, we acquired several
products that will be offered separately and that will also be integrated
into our existing products and services. We may experience difficulty in
marketing these products in conjunction with our products and services and
integrating these products with our existing product and service offerings.
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 MAY LOSE BUSINESS IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING
TECHNOLOGIES AND CUSTOMER NEEDS. To remain competitive, we must continually
improve the responsiveness, functionality and features of our products and
services and develop other products and services that are attractive to job
seekers and employers. If we are unable to timely and successfully develop
and introduce or acquire new services, products and enhancements to existing
products in response to our industry's changing technological requirements,
our revenues could be materially adversely affected. New Internet-based
services, products or enhancements that we have offered or may offer in the
future may contain design flaws or other defects that could require extensive
modifications or result in a loss of client confidence. In addition, 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 evolving government regulations;

o competing products and services that offer increased functionality; and

o changes in employer and job seeker requirements.

WE MAY LOSE JOB SEEKERS BECAUSE OUR WEBSITE CONTENT IS NOT ATTRACTIVE
TO THEM. Our future growth depends in part on our ability to attract job
seekers who are qualified for the jobs posted by our customers. This in turn
depends in part on our ability to deliver original and compelling content to
these job seekers. We cannot assure you that our content will be attractive
to Internet users. We also cannot assure you that we will be able to
anticipate, monitor and successfully respond to rapidly changing consumer
tastes and preferences to continue to attract a sufficient number of Internet
users to our Website. Internet users can freely navigate and instantly switch

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among a large number of Websites. In addition, many other Websites offer very
specific, highly targeted content. These sites could have greater appeal than
our Website to particular groups within our target audience.

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 highly skilled personnel, our growth may
be restricted, the quality of our products and services reduced and our
revenues may be reduced or grow at a slower rate than expected. Our future
success depends on our ability to attract, train, motivate and retain highly
skilled employees. In connection with the Resumix acquisition, we greatly
increased the number of our employees. We have experienced and expect that we
will continue to experience some attrition in these 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.

In order to execute our business plan, we must continue to grow
significantly. 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 at a slower rate 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 that has placed considerable demands on our managerial,
operational, financial and information system resources. We continue to
increase the scope of our operations, and we have grown our workforce
substantially. We had 107 employees as of June 30, 1999. At June 30, 2000,
the number of employees had increased to 494, including the Resumix
acquisition. We expect that the number of our employees will continue to
increase for the foreseeable future. Our growth is expected to result in
increased responsibility for both existing and new management personnel. Our
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, operations, systems and resources. We
expect that we will need to continue to improve our financial and managerial
controls and reporting systems and procedures, and will need to continue to
expand, train and manage our workforce. Our success depends to a significant
extent on the ability of our executive officers and other members of senior
management to operate effectively both independently and as a group. We will
also need to continue to expand and maintain close coordination among our
products and technology, finance and administration and sales and marketing
organizations. We cannot assure you that if we continue to grow, management
will be effective in attracting and retaining additional qualified personnel,
expanding our physical facilities, integrating acquired businesses or
otherwise managing growth. We cannot assure you that our information systems,
procedures or controls will be adequate to support our operations or that our
management will be able to successfully offer our products and services and
implement our business plan. Our future performance may also depend on our
effective integration of additional acquired businesses. Any such
integration, even if successful, may take a significant period of time and
expense, and may place a significant strain on our resources. If we are not
able to manage existing or anticipated growth, our business, results of
operations and financial condition could be materially adversely affected.

INTENSE COMPETITION MAY RENDER OUR SERVICES AND PRODUCTS UNCOMPETITIVE OR
OBSOLETE.

The market for online recruiting solutions is intensely competitive and
highly fragmented. We expect competition to continue to increase because
there are no substantial barriers to entry. We believe that our ability to
compete depends upon many factors both within and beyond our control,
including the following:

o the timing and market acceptance of new solutions and enhancements to
existing solutions developed either by us or our competitors;

o our customer service and support efforts;

o our sales and marketing efforts; and

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o the ease of use, performance, price and reliability of solutions developed
either by us or our competitors.

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 CareerPath.com. We also compete with
large Internet information hubs, or portals, such as Excite@Home, recruiting
software companies such as Webhire, Inc. and job fair companies such as
TechExpo Corporation. 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. These factors may allow them
to respond more quickly than we can to new or emerging technologies and
changes in customer requirements. It may also allow them to devote greater
resources than we can to the development, promotion and sale of their
products and services. These competitors may also engage in more extensive
research and development, undertake more far-reaching marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees and strategic partners. We cannot assure you
that our competitors will not develop products or services that are equal or
superior to our solutions or that achieve greater market acceptance than our
solutions. In addition, current and potential competitors are making and are
expected to continue to make strategic acquisitions or establish cooperative,
and, in some cases, exclusive relationships with significant companies or
competitors to expand their businesses or to offer more comprehensive
solutions.

We believe that there will be rapid business consolidation in the online
recruiting industry. In recent months, several of our competitors have either
completed or announced acquisitions. 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
or acquisition of competing technologies by market participants or the
emergence of new industry standards may adversely affect our revenues and
ultimately our competitive position.

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 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. 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 companies 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. There can be no assurance that companies will
allocate or continue to allocate portions of their budgets to Internet-based
recruiting. As a result, we cannot be sure that we will be able to
effectively compete with traditional recruiting and job seeking methods. If
Internet-based recruiting is not widely accepted, our business, results of
operations and financial condition could be materially adversely affected.

WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS MODEL IF USE OF THE INTERNET
GROWS AND ITS INFRASTRUCTURE IS ADAPTED TO THAT GROWTH.

If Internet usage does not continue to grow, we may not be able to meet our
business objectives. Increased Internet usage will depend, in large part,
upon the maintenance of the Web infrastructure, such as a reliable network

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backbone with necessary speed, data capacity and security, and timely
development of enabling products, such as high-speed modems, for providing
reliable Web access and services and improved content. 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;

o The Internet industry may not be able to adequately respond to privacy
concerns of potential users; and

o Government regulation may decrease the utility of the Internet for some
purposes.

We cannot assure you that the Web infrastructure or Internet industry will be
able to effectively respond to the demands placed on the Web by increased
numbers of users, frequency of use or increased bandwidth requirements of
users.

A FAILURE TO ESTABLISH AND MAINTAIN PARTNERSHIPS AND ALLIANCES WITH OTHER WEB
PROPERTIES COULD LIMIT THE GROWTH OF OUR BUSINESS.

We have entered into, and expect to continue to enter into, arrangements with
third parties to increase our member base, bring traffic to our Website and
enhance the HotJobs.com brand. If any of our current agreements are
terminated, we cannot assure you that we will be able to replace the
terminated agreement with an equally beneficial arrangement. We also cannot
assure you that we will be able to renew any of our current agreements when
they expire or, if we are, that we will be able to do so on acceptable or
favorable terms. We also do not know whether we will be successful in
entering into additional partnerships and alliances or that any
relationships, if entered into, will be on terms favorable to us.

In late 1999, we brought an action for enforcement of an agreement between
Digital City, Inc. and us. The action has been resolved pursuant to a
settlement agreement. The settlement is not expected to have a material
effect on our business.

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 or cause our revenues to grow at a slower rate than
expected. In addition, our ability to retain the key employees of Resumix
will be important to the successful integration of Resumix and HotJobs.com.
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, including our Chief Financial Officer, as well as the
Resumix 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. In addition, if one or more key employees join a
competitor or form a competing company, though we have non-competition
agreements with each of our key employees, we may lose existing or potential
clients, which could have a material adverse effect on our business, results
of operations and financial condition. Though we have confidentiality
agreements with each of our employees, if we were to lose a key employee, we
cannot assure you that we would be able to prevent the unauthorized
disclosure or use of our procedures, practices, new product development or
client lists.

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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 expansion into international markets
through a combination of internal business expansion, strategic alliances,
joint ventures and potential acquisitions will be important to continue to
grow our business. 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
regulation and protection of intellectual property; and

o general political and economic trends.

WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OR INVESTMENTS IN
OTHER COMPANIES.

We expect our growth to continue, in part, by acquiring additional
complementary businesses, products, services or technologies. From time to
time, we have had discussions with companies regarding our acquiring, or
investing in, their businesses, products, services or technologies. We cannot
assure you that we will be able to identify suitable acquisition or
investment candidates. Even if we do identify suitable candidates, we cannot
assure you that we will be able to make acquisitions or investments on
commercially acceptable terms. Acquiring other businesses and technologies
involves several risks, including:

o availability of financing on terms we find acceptable;

o diversion of our management's attention from other business concerns;

o retention of key personnel of the acquired company;

o entry into markets in which we have little or no direct prior experience;

o inability to identify and acquire businesses on a cost-effective basis;

o inability to manage and integrate acquired personnel, operations,
services, products and technologies into our organization effectively; and

o inability to retain and motivate key personnel and to retain the clients
or goodwill of acquired entities.

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In pursuing acquisitions, we may compete with competitors that may be larger
and have greater financial and other resources than we have. Competition for
these acquisition targets could result in increased prices. In addition, in
executing our acquisition strategy, we may incur expenses without being able
to identify suitable acquisition candidates, which could reduce our
profitability. Furthermore, we may incur debt or issue equity securities to
pay for any future acquisitions, which could have the effects described in
"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."

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 one of our
co-location facilities could prevent us from serving our Web traffic for up
to several days, and any failure of one or more of our Internet service
providers 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. Our 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 many of 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 and our customers'
proprietary information or interruptions of our services could result in
reduced visitor traffic and a loss of member employers. 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. Due to the possibility
of liability related to data we host for our customers and the possibility of
a resulting decrease in the number of job seekers and member employers, a
breach of our network security could have a material adverse effect on our
financial condition and results of operations.

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 damage our reputation and have a material adverse
effect on our business, financial condition and results of operations. In
June 1999, we detected a virus on a file server that 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.

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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 or grow slower than expected and our
business could be materially adversely affected. We license technology that
is incorporated into our services and related products from third parties
including 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 these or other vendors. Technology from our current or other vendors may
not continue to be available to us on commercially reasonable terms, or at
all.

In addition, although we believe that the costs of ensuring that our systems
and software and those of third parties with which we do business do not
experience any date-related problems will not be material, we cannot assure
you of this.

RISKS RELATED TO LEGAL UNCERTAINTY

WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET THAT COULD ADVERSELY AFFECT OUR
BUSINESS.

Legal uncertainties and new regulations could increase our costs of doing
business, require us to revise our products or services, 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, reduce our revenues
or cause our revenues to grow at a slower rate than expected and materially
adversely affect our business, financial condition and results of operations.
Laws and regulations directly applicable to Internet communications,
commerce, recruiting and advertising are becoming more prevalent, and new
laws and regulations are under consideration by the United States Congress
and state legislatures. Any legislation enacted or restrictions arising from
current or future government investigations or policy could dampen the growth
in use of the Internet generally and decrease the acceptance of the Internet
as a communications, commercial, recruiting and advertising medium. The laws
governing the Internet, however, remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy, libel and taxation apply to the Internet. In addition to new laws
and regulations being adopted, existing laws may be applied to the Internet.
Moreover, the laws and the interpretation of laws concerning the recruiting
industry are constantly changing. New and existing laws may cover issues that
include:

o user privacy;

o civil rights, affirmative action and other employment claims;

o consumer protection;

o libel and defamation;

o copyright, trademark and patent infringement;

o trade secret protection;

o rights of publicity and moral rights;

o database protection;

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o domain name registration;

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 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 passed legislation in 1998
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 brands and their value, particularly the "HotJobs.com"
brand name. We are also susceptible to others imitating our brands,
particularly HotJobs.com. Our application to obtain a federal registration
for "www.hotjobs.com." was approved by the U.S. Trademark Office and
published for possible opposition by third parties on April 18, 2000. A
domain name registrant claiming that trademark registration could cause it
damage subsequently filed an opposition. We will vigorously contest the
opposition and believe we have strong arguments to prevail. Nevertheless, we
cannot assure you of the result. 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.

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, including our hiring
management software, 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 and the value of our
brand could be diminished. 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 market or 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.

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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 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. In addition, clients use our hiring management software to evaluate
and make decisions on the resumes of applicants. In the event that one of our
clients was sued alleging employment discrimination, we could be named in
that lawsuit. 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 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 significantly in the past and could continue to be highly volatile
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 or
acquisitions; and

o general economic conditions both in the U.S. and in foreign countries.

Our stock price may also experience fluctuations due to approximately $4.6
million in non-cash deferred compensation that we expect to amortize through
August 2003.

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SINCE OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES
LITIGATION THAT 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 lawsuit and a diversion of management's attention.
Securities class action litigation has often been brought against companies
that experience 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 have and will continue to have a large number of shares of common
stock outstanding and available for resale. 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. Unregistered shares of our common stock
currently outstanding are or will become eligible for sale without
registration pursuant to Rule 144 under the Securities Act, subject to
certain conditions of Rule 144. We are obligated to file a registration
statement for the resale of 3,560,019 shares of our common stock on or before
August 31, 2000, and certain of our existing stockholders have piggyback
registration rights with respect to such registration statement. We cannot be
certain when or if those shares will be sold. Sales of substantial numbers of
these shares could depress the price of our common stock. Certain other
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.

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE HOTJOBS.COM, 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 Stock Option/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;

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.

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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
cash, US Treasury Bills, Taxable Discount Commercial Paper and 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. Our interest rate risk based on a hypothetical
increase in interest rates of 100 basis points, for the financial instruments
included in our portfolio, would be a decrease of approximately $82,000 in
the value of our portfolio.

MARKET RISKS. Our accounts receivable are subject, in the 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, HotJobs.com 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. HotJobs.com 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 its financial position or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

On May 11, 2000, we issued 3,560,019 unregistered shares of our common stock,
of which 359,282 will be held in escrow for one year from May 11, 2000
pending satisfaction of certain conditions, in connection with the
acquisition of Resumix, Inc. This issuance was exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof and Rule 506 promulgated thereunder. The Company relied on the
following criteria to make such exemption available: the number of offerees,
the size and manner of the offering, the sophistication of the offerees and
the availability of material information. We have an obligation to file a
shelf registration statement with the Commission with respect to these shares
no later than August 31, 2000.

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(d) Use of Proceeds:

On August 10, 1999, the Securities and Exchange Commission declared effective
our Registration Statement on Form S-1 (File No. 333-80367) in connection
with our IPO. 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 Inc., 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 costs incurred in connection with
the IPO, including underwriting discounts and commissions, and fees for
registration, legal, accounting, transfer agent, printing, and other
miscellaneous fees, were approximately $3.6 million, resulting in net
proceeds to us of approximately $23.2 million.

As of June 30, 2000, we had used approximately $21.2 million of the net
proceeds of the IPO. The remaining net proceeds will be used for general
corporate purposes, including increasing our sales and marketing efforts;
developing our infrastructure, products and services; obtaining additional
office space; hiring additional personnel; and possible acquisitions.

ITEM 3. DEFAULT BY THE COMPANY ON ITS SENIOR SECURITIES

Not applicable.

ITEM 4. RESULTS OF VOTE OF SECURITY HOLDERS

We held our 2000 Annual Meeting of Stockholders on May 17, 2000. At that
meeting, the stockholders approved the following proposals: (i) election of
John G. Murray and Kevin P. Ryan as Class I directors to serve on the Board
of Directors until the 2003 Annual Meeting of Stockholders, (ii) amendment of
HotJobs.com's 1999 Stock Option/Stock Issuance Plan (the "Option Plan") to
automatically increase the number of shares of common stock authorized for
issuance over the term of the Option Plan on the first trading day in January
each year, beginning in calendar year 2001, by an amount equal to 3% of the
shares of common stock outstanding on the last trading day of the immediately
preceding calendar year, subject to a maximum annual increase of 1,500,000
shares; (iii) amendment of HotJobs.com's Employee Stock Purchase Plan (the
"Purchase Plan") to automatically increase the number of shares of common
stock authorized for issuance over the term of the Purchase Plan on the first
trading day in January each year, beginning in calendar year 2001, by an
amount equal to 1% of the shares of common stock outstanding on the last
trading day of the immediately preceding calendar year, subject to a maximum
annual increase of 500,000 shares, and (iv) selection of KPMG LLP as
independent auditors of HotJobs.com for the fiscal year ending December 31,
2000.

There were 28,239,878 votes cast for and 437,836 votes withheld in connection
with the election of each of John G. Murray and Kevin P. Ryan as Class I
Directors. The term of office of each other director whose term of office
continued after the meeting is as follows: the term of office of each of
Messrs. Stephen W. Ellis and John A. Hawkins expires at the 2001 Annual
Meeting of Stockholders and the term of office of each of Messrs. Richard S.
Johnson, Dimitri J. Boylan and Philip Guarascio expires at the 2002 Annual
Meeting of Stockholders. There were 19,728,719 votes cast for, 5,501,412
votes cast against and 1,804,536 abstentions in connection with the amendment
of the Option Plan. There were 24,295,554 votes cast for, 935,016 votes cast
against and 1,804,097 abstentions in connection with the amendment of the
Purchase Plan. There were 28,674,305 votes cast for, 1,616 votes cast against
and 1,793 abstentions in connection with the selection of KPMG LLP as
independent auditors.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed as part of this report:

NUMBER DESCRIPTION
---------- -------------------------------------------------------------
3.1* Amended and Restated Certificate of Incorporation.
3.2* Amended and Restated Bylaws.
4.1* Specimen Common Stock certificate.
4.2 Please see Exhibits 3.1 and 3.2 for provisions of the
Certificate of Incorporation and Bylaws.
10.1 Employment Agreement, dated as of May 8, 2000, by and between
HotJobs.com, Ltd. and Lowell W. Robinson.
10.2 Consulting Agreement, dated as of May 8, 2000, by and between
Stephen W. Ellis and HotJobs.com, Ltd.
10.3 Promissory Note, dated May 15, 2000, made by Stephen W. Ellis
and FSA Capital, Inc. and payable to HotJobs.com, Ltd.
10.4 Pledge and Security Agreement, made and entered into as of May
15, 2000, by and between HotJobs.com, Ltd. as pledgee and
Stephen W. Ellis and FSA Capital, Inc.
10.5** Agreement and Plan of Merger, dated as of April 25, 2000, by
and among HotJobs.com, Ltd., Resumix Acquisition Corp.,
Resumix, Inc., Ceridian Corporation, General Atlantic Partners
48, L.P., GAP Coinvestment Partners, L.P., General Atlantic
Partners 60, L.P., GAP Coinvestment Partners II, L.P., Double
Diamond Associates, LLC and Stephen J. Ciesinski.
10.6** Employment Agreement by and between HotJobs.com, Ltd. and
Stephen J. Ciesinski dated as of April 25, 2000.
10.7** Form of Officer Employment Agreement entered into with certain
officers of Resumix, Inc. in connection with the acquisition
of Resumix, Inc. by HotJobs.com, Ltd.
10.8+ Registration Rights Agreement, dated as of May 11, 2000 by and
among HotJobs.com, Ltd. and the Shareholders listed on
Schedule I thereto.
10.9 Second Loan Modification Agreement, dated May 17, 2000, by and
between Silicon Valley Bank and HotJobs.com, Ltd.
27.1 Financial Data Schedule for the Period Ended June 30, 2000.

* Incorporated by reference to our Registration Statement on Form S-1
(File No. 333-80367), as amended.
** Incorporated by reference to the Form 8-K filed by us on May 1, 2000.
+ Incorporated by reference to the Form 8-K filed by us on May 24, 2000
as amended by the Form 8-K/A filed by us on July 24, 2000.

(b) Reports on Form 8-K:

We filed a Report on Form 8-K, Item 5, on May 1, 2000, announcing that we had
entered into an agreement to acquire Resumix, Inc. under the Agreement and
Plan of Merger, dated as of April 25, 2000, by and among HotJobs.com, Ltd.,
Resumix Acquisition Corp., Resumix, Inc., Ceridian Corporation, General
Atlantic Partners 48, L.P., GAP Coinvestment Partners, L.P., General Atlantic
Partners 60, L.P., GAP Coinvestment Partners II, L.P., Double Diamond
Associates, LLC and Stephen J. Ciesinski.

We filed a Report on Form 8-K, Item 2, on May 24, 2000, announcing the
consummation of our acquisition of Resumix, Inc. under the terms of the
Agreement and Plan of Merger, dated as of April 25, 2000, by and among
HotJobs.com, Ltd., Resumix Acquisition Corp., Resumix, Inc., Ceridian
Corporation, General Atlantic Partners 48, L.P., GAP Coinvestment Partners,
L.P., General Atlantic Partners 60, L.P., GAP Coinvestment Partners II, L.P.,
Double Diamond Associates, LLC and Stephen J. Ciesinski. We amended this
report with the Report on Form 8-K/A filed on July 24, 2000 to include Item
7(a) the Financial Statements of Business Acquired and Item 7(b), the Pro
Forma Financial Information.

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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: August 14, 2000 BY: /s/ Lowell W. Robinson
------------------------
Lowell W. Robinson
Chief Financial Officer
(Duly Authorized Officer and
Principal Accounting Officer)