<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                             ---------------------
 
                                   FORM 10-Q
 
(MARK ONE)
 
  /X/    Quarterly Report pursuant to Section 13 or 15 (d) of the
         Securities Exchange Act of 1934
 
                 For the quarterly period ended: JUNE 30, 1998
                                       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: 0-20735
 
                            ------------------------
 
                                 RESTRAC, INC.
 
             (Exact name of Registrant as specified in its charter)
 
                  DELAWARE                             04-2935271
      (State or other jurisdiction of       (IRS Employer Identification No.)
       incorporation or organization)
 
             91 HARTWELL AVENUE                           02421
               LEXINGTON, MA                           (zip code)
  (Address of principal executive offices)
 
                                 (781) 869-5000
                        (Registrant's telephone number)
 
                         ------------------------------
 
    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 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 / /
 
    Indicate the number of shares outstanding of each of the issuer' s classes
of common stock as of the latest practicable date:
 
                              TITLE OF EACH CLASS
 
Common stock, $.01 par value, shares outstanding at July 31, 1998: 8,335,774
shares.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                 RESTRAC, INC.
 
                                     INDEX
 
PART I--FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>        <C>                                                                                               <C>
Item 1. Consolidated Financial Statements
       Consolidated Balance Sheets at June 30, 1998 and September 30, 1997.................................          2
 
       Consolidated Statements of Operations for the three and nine months ended June 30,
       1998 and June 30, 1997..............................................................................          3
 
       Consolidated Statements of Cash Flows for the nine months ended June 30, 1998 and
       June 30, 1997.......................................................................................          4
 
       Notes to Consolidated Financial Statements..........................................................          5
 
Item 2. Management's Discussion and Analysis of Financial
       Condition and Results of Operations.................................................................          7
 
PART II--OTHER INFORMATION
 
Item 1. Legal Proceedings..................................................................................         14
 
Item 2. Changes in Securities..............................................................................         14
 
Item 3. Defaults upon Senior Securities....................................................................         14
 
Item 4. Submission of Matters to a Vote of Security Holders................................................         14
 
Item 5. Other Information..................................................................................         14
 
Item 6. Exhibits and Reports on Form 8-K...................................................................         14
 
PART III--SIGNATURES.......................................................................................         15
 
Exhibit # 27...............................................................................................         16
</TABLE>
 
                                       1
<PAGE>
                                 RESTRAC, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                    SEPTEMBER 30,
                                                                                                        1997
                                                                                        JUNE 30,    -------------
                                                                                          1998
                                                                                       -----------
                                                                                       (UNAUDITED)
<S>                                                                                    <C>          <C>
                                                     ASSETS
Current Assets:
  Cash and cash equivalents..........................................................   $   6,062     $   5,745
  Short-term investments.............................................................       9,019         9,410
  Accounts and installments receivable, less allowance of $300 at June 30, 1998 and
    $320 at September 30, 1997.......................................................       6,384         5,130
  Other current assets...............................................................       1,376           780
  Refundable income taxes............................................................         948           948
  Deferred income taxes..............................................................         881           881
                                                                                       -----------  -------------
    Total Current Assets.............................................................      24,670        22,894
  Long-term license installments, net................................................         614        --
  Property and equipment, net........................................................       3,128         3,383
  Long-term investments..............................................................         584        --
  Other assets.......................................................................         781           776
                                                                                       -----------  -------------
    Total Assets.....................................................................   $  29,777     $  27,053
                                                                                       -----------  -------------
                                                                                       -----------  -------------
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion of capital lease obligations.......................................   $      38     $     144
  Accounts payable...................................................................       1,643         1,459
  Accrued expenses...................................................................       2,276         2,523
  Deferred revenue...................................................................       5,543         4,084
  Accrued income taxes...............................................................         273        --
                                                                                       -----------  -------------
    Total current liabilities........................................................       9,773         8,210
                                                                                       -----------  -------------
  Deferred rent......................................................................         189           172
                                                                                       -----------  -------------
  Capital lease obligations..........................................................         131           131
                                                                                       -----------  -------------
Stockholders' Equity:
  Preferred stock, $.01 par value. Authorized--5,000,000 shares, Issued and
    outstanding--none................................................................      --            --
  Common stock, $.01 par value. Authorized--30,000,000 shares, Issued-- 8,993,313
    shares at June 30, 1998 and 8,852,303 shares at September 30, 1997...............          90            89
  Additional paid-in capital.........................................................      19,376        19,067
  Treasury stock, at cost............................................................        (831)         (831)
  Retained earnings..................................................................       1,049           215
                                                                                       -----------  -------------
    Total stockholders' equity.......................................................      19,684        18,540
                                                                                       -----------  -------------
      Total Liabilities and Stockholders' Equity.....................................   $  29,777     $  27,053
                                                                                       -----------  -------------
                                                                                       -----------  -------------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       2
<PAGE>
                                  RESTRAC, INC
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                       JUNE 30,                JUNE 30,
                                                                ----------------------  ----------------------
<S>                                                             <C>         <C>         <C>         <C>
                                                                   1998        1997        1998        1997
                                                                ----------  ----------  ----------  ----------
Revenue:
  Product revenue.............................................  $    4,322  $    2,815  $   12,486  $    7,269
  Services revenue............................................       3,618       2,938      10,226       8,243
                                                                ----------  ----------  ----------  ----------
    Total revenue.............................................       7,940       5,753      22,712      15,512
                                                                ----------  ----------  ----------  ----------
Cost of revenue:
  Product revenue.............................................         131         105         435         492
  Services revenue............................................       2,355       1,641       6,775       4,496
                                                                ----------  ----------  ----------  ----------
    Total cost of revenue.....................................       2,486       1,746       7,210       4,988
                                                                ----------  ----------  ----------  ----------
Gross margin..................................................       5,454       4,007      15,502      10,524
                                                                ----------  ----------  ----------  ----------
Operating expenses:
  Research and development....................................       1,047       1,379       3,514       3,582
  Sales and marketing.........................................       2,891       2,228       7,926       6,283
  General and administrative..................................         824         987       3,105       2,629
                                                                ----------  ----------  ----------  ----------
    Total operating expenses..................................       4,762       4,594      14,545      12,494
                                                                ----------  ----------  ----------  ----------
Income (loss) from operations.................................         692        (587)        957      (1,970)
Other income, net.............................................         153         154         432         529
                                                                ----------  ----------  ----------  ----------
Income (loss) before provision (benefit) for income taxes.....         845        (433)      1,389      (1,441)
Provision (benefit) for income taxes..........................         338        (153)        555        (518)
                                                                ----------  ----------  ----------  ----------
Net income (loss).............................................  $      507  $     (280) $      834  $     (923)
                                                                ----------  ----------  ----------  ----------
                                                                ----------  ----------  ----------  ----------
Basic and diluted net income (loss) per common and common
  equivalent share............................................  $     0.06  $    (0.03) $     0.10  $    (0.12)
                                                                ----------  ----------  ----------  ----------
                                                                ----------  ----------  ----------  ----------
Basic weighted average number of common shares outstanding....   8,298,832   8,115,898   8,254,423   8,022,502
                                                                ----------  ----------  ----------  ----------
                                                                ----------  ----------  ----------  ----------
Diluted weighted average number of common and common
  equivalent shares outstanding...............................   8,558,121   8,115,898   8,555,022   8,022,502
                                                                ----------  ----------  ----------  ----------
                                                                ----------  ----------  ----------  ----------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       3
<PAGE>
                                 RESTRAC, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                                                                      JUNE 30,
                                                                                                --------------------
<S>                                                                                             <C>        <C>
                                                                                                  1998       1997
                                                                                                ---------  ---------
Cash Flows from Operating Activities:
  Net income (loss)...........................................................................  $     834  $    (923)
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
    activities:
    Depreciation and amortization.............................................................      1,315        885
    Compensation expense on stock options.....................................................     --            194
    Compensation expense on warrant grants....................................................     --             99
    Changes in assets and liabilities:
      Accounts and installments receivable, net...............................................     (1,868)       449
      Other current assets....................................................................       (596)    (1,214)
      Accounts payable........................................................................        184        691
      Accrued expenses........................................................................       (247)      (936)
      Deferred revenue........................................................................      1,459        874
      Deferred rent...........................................................................         17        128
      Accrued income taxes....................................................................        273       (281)
                                                                                                ---------  ---------
        Net cash provided by (used in) operating activities...................................      1,371        (34)
                                                                                                ---------  ---------
Cash Flows from Investing Activities:
  Maturities and purchases of short-term investments, net.....................................        391     (5,980)
  Purchases of long-term investments..........................................................       (584)    --
  Purchases of property and equipment.........................................................     (1,060)    (2,420)
  Increase in other assets....................................................................         (5)      (742)
                                                                                                ---------  ---------
        Net cash used in investing activities.................................................     (1,258)    (9,142)
                                                                                                ---------  ---------
Cash Flows from Financing Activities:
  Payments of capital lease obligations.......................................................       (106)        (5)
  Proceeds from exercise of common stock options..............................................        204        171
  Proceeds from employee stock purchase plan stock issuance...................................        106         79
  Payment of accumulated dividends............................................................     --           (569)
                                                                                                ---------  ---------
        Net cash provided by (used in) financing activities...................................        204       (324)
                                                                                                ---------  ---------
Net increase (decrease) in cash and cash equivalents..........................................        317     (9,500)
Cash and cash equivalents, beginning of period................................................      5,745     20,368
                                                                                                ---------  ---------
                                                                                                ---------  ---------
Cash and cash equivalents, end of period......................................................  $   6,062  $  10,868
                                                                                                ---------  ---------
                                                                                                ---------  ---------
Supplemental disclosure of cash flow information
    Cash used for interest....................................................................  $      16  $  --
                                                                                                ---------  ---------
                                                                                                ---------  ---------
    Cash used for income taxes................................................................  $     282  $     442
                                                                                                ---------  ---------
                                                                                                ---------  ---------
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       4
<PAGE>
                                 RESTRAC, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                 JUNE 30, 1998
 
(1) BASIS OF PRESENTATION
 
    The accompanying consolidated financial statements include the accounts of
Restrac, Inc. and its wholly-owned subsidiary, Restrac Securities Corporation,
collectively referred to in these Notes to Consolidated Financial Statements as
"the Company". All intercompany accounts and transactions have been eliminated
in consolidation.
 
    The consolidated financial statements of the Company presented herein,
without audit except for balance sheet information at September 30, 1997, have
been prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-Q and do not include all of the information and
footnote disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30, 1997 ("Fiscal
1997") included in the Company's Form 10-K filed with the Securities and
Exchange Commission on December 22, 1997.
 
    The consolidated balance sheet as of June 30, 1998, the consolidated
statements of operations for the three and nine month periods ended June 30,
1998 and 1997, and the consolidated statements of cash flows for the nine month
periods ended June 30, 1998 and 1997, are unaudited but, in the opinion of
management, include all adjustments (consisting solely of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods.
 
    The consolidated results of operations for the three and nine month periods
ended June 30, 1998 are not necessarily indicative of the results to be expected
for the fiscal year ending September 30, 1998 ("Fiscal 1998").
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The accompanying consolidated financial statements reflect the application
of certain significant accounting policies described below and elsewhere in the
notes to the Fiscal 1997 consolidated financial statements referenced above.
 
    (A) REVENUE RECOGNITION
 
    Product revenue includes software license fees. Services revenue includes
customer maintenance fees and fees for training, installation, consulting,
scanning and RESTRAC WEBHIRE. The Company recognizes product and services
revenue in accordance with the provisions of Statement of Position No. 97-2,
SOFTWARE REVENUE RECOGNITION.
 
    Product revenue from software license fees is recognized upon delivery
provided there are no significant Company obligations remaining and
collectibility of the revenue is probable. If an acceptance period is allowed,
revenue is recognized upon the earlier of the customer acceptance or the
expiration of the acceptance period, as defined in the applicable software
license agreement.
 
    Installments receivable represent the present value of future payments
related to the financing of noncancelable term license agreements that provide
for payment in installments over a five-year period. A portion of the revenue
from each installment agreement is recognized as interest income in the
accompanying consolidated statements of operations.
 
    Services revenue from customer maintenance fees for postcontract support is
recognized ratably over the maintenance term, which is typically 12 months. When
customer maintenance fees are included in an initial software license fee, the
Company allocates approximately 15% of the software license fee to the first
year's maintenance. The amount allocated to customer maintenance fees for the
first year is comparable to customer maintenance fees charged separately by the
Company. Services revenue from training, installation, consulting and resume
scanning is recognized as the related services are performed. Services revenue
from RESTRAC WEBHIRE is recognized ratably over the service term.
 
                                       5
<PAGE>
                                 RESTRAC, INC.
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
                                 JUNE 30, 1998
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.
 
    (B) NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
 
    The Company has implemented Statement of Financial Accounting Standards
(SFAS) No. 128, EARNINGS PER SHARE. Prior period amounts have been restated to
conform to current year presentation. One of the more significant changes is the
replacement of primary earnings per share with "basic" earnings per share. Basic
earnings per share is computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding, with no consideration given
for any potentially dilutive securities. Fully diluted earnings per share, now
called "diluted" earnings per share, includes the effect of dilutive securities.
 
    Basic and dilutive weighted average shares as required by SFAS No. 128 are
as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED    NINE MONTHS ENDED
                                                                                        JUNE 30,              JUNE 30,
                                                                                  --------------------  --------------------
<S>                                                                               <C>        <C>        <C>        <C>
                                                                                    1998       1997       1998       1997
                                                                                  ---------  ---------  ---------  ---------
Basic weighted average shares outstanding.......................................      8,299      8,116      8,254      8,023
Weighted average common equivalent shares.......................................        259     --            301     --
                                                                                  ---------  ---------  ---------  ---------
Diluted weighted average shares outstanding.....................................      8,558      8,116      8,555      8,023
</TABLE>
 
    For the three and nine month periods ended June 30, 1998, 213,500 and
210,500 anti-dilutive common stock options, respectively, have been excluded
from the number of potential common shares outstanding.
 
    (C) NEW ACCOUNTING STANDARD
 
    In March 1998, the AICPA issued Statement of Position No. 98-1, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE, which
is effective for financial statements for fiscal years beginning after December
15, 1998. Management does not anticipate that the adoption of this statement
will have a material impact on the Company or its results of operations.
 
    (D) RECLASSIFICATIONS
 
    Certain reclassifications have been made to the Fiscal 1997 consolidated
financial statements to conform to the Fiscal 1998 presentation. Such
reclassifications have no effect on previously reported income.
 
    (E) CASH AND CASH EQUIVALENTS
 
    Cash equivalents are recorded at amortized cost and consist of highly liquid
investments with original maturities of three months or less.
 
    (F) SHORT AND LONG TERM INVESTMENTS
 
    Short-term investments consist of investments with an original maturity
greater than three months that will mature within twelve months from the balance
sheet date. Long-term investments consists of investments that will mature
greater than twelve months from the balance sheet date. The Company classifies
these short- and long-term investments as held-to-maturity, and accordingly,
they are carried at amortized cost, which approximates market. These investments
consist of municipal debt securities.
 
                                       6
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
            FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998
 
CONSOLIDATED RESULTS OF OPERATIONS
  (IN THOUSANDS)
 
    REVENUE
 
    Total revenue increased 38% and 46% for the respective three and nine month
periods ended June 30, 1998 to $7,940 and $22,712 from $5,753 and $15,512 for
the three and nine month periods ended June 30, 1997, respectively.
 
    PRODUCT REVENUE.  Product revenue increased 54% to $4,322 for the three
months ended June 30, 1998 from $2,815 for the three months ended June 30, 1997.
For the nine months ended June 30, 1998, product revenue increased 72% to
$12,486 from $7,269 for the comparable 1997 period. The increase in product
revenue for both the three and nine month periods of Fiscal 1998 resulted
largely from an increase in the number of seats associated with shipments to
both new and existing customers as well as an increase in the average price per
seat.
 
    SERVICES REVENUE.  Services revenue increased 23% to $3,618 for the three
months ended June 30, 1998 from $2,938 for the three months ended June 30, 1997.
For the nine months ended June 30, 1998, services revenue increased 24% to
$10,226 from $8,243 for the comparable 1997 period. The increases for both the
three and nine month periods of Fiscal 1998 compared to the Fiscal 1997 periods
were attributable to the emerging Internet and transaction revenue as well as
increases in maintenance stemming from the growth in the installed customer
base. Internet and transaction revenue realized to date includes subscription
revenue from RESTRAC WEBHIRE and resume scanning fees.
 
    COST OF REVENUE
 
    COST OF PRODUCT REVENUE.  Cost of product revenue represented 3% of total
product revenue for both the three and nine month periods of Fiscal 1998
compared to 4% and 7% for the comparable Fiscal 1997 periods, respectively. The
decrease as a percentage of product revenue for both periods is due primarily to
favorable rate revisions in the royalties due under third party licensing
arrangements.
 
    COST OF SERVICES REVENUE.  Cost of services revenue increased 44% to $2,355
for the three months ended June 30, 1998 from $1,641 for the three months ended
June 30, 1997. For the nine months ended June 30, 1998, cost of services revenue
of $6,775 increased 51% from $4,496 for the comparable 1997 period. Cost of
services revenue increased as a percentage of services revenue to 65% and 66%
for the three and nine month periods of Fiscal 1998, respectively, from 56% and
55% for the three and nine month periods of Fiscal 1997. The increases in
absolute dollars and as a percentage of services revenue are principally
attributable to costs associated with the introduction of RESTRAC WEBHIRE, an
increase in the use of third party service providers and the increase in
technical support resources available to the expanding base of customers on
maintenance.
 
    OPERATING EXPENSES
 
    RESEARCH AND DEVELOPMENT.  Research and development expenses were $1,047 or
13% of total revenue and $3,514 or 15% of total revenue for the three and nine
month periods ended June 30, 1998, respectively, as compared to $1,379 or 24% of
total revenue and $3,582 or 23% of total revenue for the comparable Fiscal 1997
periods. The decrease for both periods is primarily a function of the stage in
product development and the requisite investment funding, which can fluctuate
from period to period. All of the Company's research and development costs have
been expensed as incurred.
 
                                       7
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
    SALES AND MARKETING.  Sales and marketing expenses were $2,891 or 36% of
total revenue and $7,926 or 35% of total revenue for the three and nine month
periods ended June 30, 1998, respectively, as compared to $2,228 or 39% of total
revenue and $6,283 or 41% of total revenue for the comparable Fiscal 1997
periods. The increases in absolute dollars are due primarily to the effect of
the increased commissions expense resulting from the increase in revenue and to
sales and marketing costs associated with Restrac WebHire, introduced in the
first quarter of Fiscal 1998. The Company expects that sales and marketing
expenses may vary from quarter to quarter as a percentage of total revenue.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenses were $824
or 10% of total revenue and $3,105 or 14% of total revenue for the three and
nine month periods ended June 30, 1998, respectively, as compared to $987 and
$2,629 or 17% of total revenue for the comparable three and nine month periods
of Fiscal 1997. The absolute dollar increase for the nine month period of Fiscal
1998 as compared to Fiscal 1997 is the result of personnel increases and
investments in internal systems as well as isolated accounts receivable
charged-off during the second fiscal quarter.
 
    OTHER INCOME, NET
 
    Other income decreased to $153 and $432 for the three and nine month periods
ended June 30, 1998 from $154 and $529 for the comparable Fiscal 1997 periods.
The decrease for the nine-month period was due to lower combined cash and cash
equivalents and short- and long-term investment balances during the first three
quarters of Fiscal 1998 as compared to the first three quarters of Fiscal 1997.
The Company expects to continue to yield investment income on its average
balance of combined cash and cash equivalents and short- and long-term
investments at an average rate consistent with that experienced for the first
three quarters of Fiscal 1998.
 
    PROVISION (BENEFIT) FOR INCOME TAXES
 
    The Company's effective tax rate for both the three and nine month periods
ended June 30, 1998 was 40% as compared to (36%) for both the three and nine
month periods of Fiscal 1997. The effective tax rate represents the Company's
estimate of the rate expected to be applicable for the full fiscal year. The
Company is providing taxes for the first three quarters of Fiscal 1998 due to
the fact that they are generating income where as they provided a benefit for
income taxes during Fiscal 1997 as a result of a loss incurred from operations.
 
LIQUIDITY AND CAPITAL RESOURCES
  (IN THOUSANDS)
 
    At June 30, 1998, the Company had cash and cash equivalents and short- and
long-term investments of $15,665, an increase of $510 from $15,155 at September
30, 1997. Working capital was $14,897 at June 30, 1998 as compared to $14,684 at
September 30, 1997, an increase of $213. Long-term investments increased to $584
at June 30, 1998 as compared to $0 at September 30, 1997.
 
    Cash provided by operating activities was $1,371 during the nine month
period ended June 30, 1998. Cash provided by operating activities consisted
mainly of the net income for the nine month period of $834, the effect of
depreciation and amortization of $1,315 and growth in deferred revenue of
$1,459, offset by an increase in accounts and installments receivable of $1,868
and the timing of receipts and disbursements, resulting in prepayment of certain
expenses and fluctuations in certain liabilities.
 
    The Company used $1,258 in investing activities during the first three
quarters of Fiscal 1998, principally for the purchase of property and equipment
of $1,060 (primarily computer equipment) and the
 
                                       8
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
net purchase of long-term investments of $584, partially offset by the
maturities of short-term investments of $391. Net cash provided by financing
activities for the nine month period ended June 30, 1998 was $204.
 
    To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, invested in
interest-bearing, investment grade securities.
 
    From time to time, the Company may evaluate potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. The Company currently does not have any understandings,
commitments or agreements with respect to any such acquisitions. Any such
transactions consummated may use a portion of the Company's working capital or
require the issuance of equity or debt.
 
    The Company believes that its current cash and cash equivalent and
investment balances and cash provided by future operations will be sufficient to
meet its working capital requirements for at least the next twelve months.
Although operating activities may provide cash in certain periods, operating and
investing activities may use cash in other periods. Consequently, any future
growth may require the Company to obtain additional equity or debt financing.
 
FACTORS AFFECTING FUTURE OPERATING RESULTS
 
    This report contains forward looking statements that involve risks and
uncertainties. The statements contained in this report that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended. Forward looking statements include, without
limitation, statements containing the words "Anticipates", "Believes",
"Expects", "Intends", "Future", and words of similar import which express
management's belief, expectations or intentions regarding the Company's future
performance. All forward looking statements included in this report are based on
information available to the Company on the date hereof, and the Company has no
obligation to update any such forward looking statements. The Company's actual
results could differ materially from its historical operating results and from
those anticipated in these forward looking statements as a result of certain
factors, including, without limitation, those set forth below.
 
    The Company operates in a dynamic and rapidly changing environment that
involves risks and uncertainties. The following section lists some, but not all,
of these risks and uncertainties which may have a material adverse effect on the
Company's business, financial condition or results of operations. This section
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto, and Management's Discussions and Analysis of Financial Condition
and Results of Operations for the years ended September 30, 1997, 1996 and 1995
and for the quarters ended June 30, 1998 and 1997.
 
    POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
 
    The Company's results of operations have been, and may in the future be,
subject to significant quarterly fluctuations, due to a variety of factors,
including the relatively lengthy sales cycle for the Company's products, the
relatively large size of a typical product sale, the timing of contracts, the
introduction of new products by the Company or its competitors, capital spending
patterns of customers, the Company's sales incentive strategy (which is based in
part on annual sales targets), the number of experienced sales personnel
employed by the Company and general economic conditions. A substantial portion
of the Company's sales often occurs during the last few weeks of each quarter;
therefore, any delays in orders or shipments are more likely to result in
revenue not being recognized until the following quarter. The Company's current
expense levels are based in part on its expectations of future revenue and,
 
                                       9
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
as a result, net income for a given period could be disproportionately affected
by any reduction in revenue. There can be no assurance that the Company will be
able to achieve significant revenue, that the level of revenue in the future
will not decrease from past levels or that in some future quarter the Company's
revenue or operating results will not be below the expectations of stock market
securities analysts and investors. In such event, the Company's profitability
and price of its Common Stock would likely be materially and adversely affected.
 
    EMERGING MARKETS
 
    The Company's future success is substantially dependent on broader
recognition of the potential benefits afforded by automated staffing software
and services and the growth in demand for such solutions. Because the market for
such software is developing, it is difficult to assess the size of the market,
the customer demands that will evolve, and the competition that may emerge.
There can be no assurance that the market for automated staffing software and
services will grow or that the introduction of new technologies or services will
not render the Company's existing software and services obsolete or
unmarketable.
 
    The market for automated staffing solutions is undergoing rapid changes
including continuing advances in technology and changes in customer requirements
and preferences. These market dynamics have been amplified by the emergence of
the Internet as a communications medium for staffing solutions. The Company's
future success will depend in significant part on its ability to continually
improve the performance, features and reliability of its software and services
in response to the evolving demands of the marketplace and competitive product
offerings, and there can be no assurance that the Company will be successful in
doing so. In addition, an element of the Company's business strategy is the
introduction of new products, functionalities and other staffing solutions that
capitalize on the increasing use of the Internet and corporate intranets. There
can be no assurance that the Company will be successful in developing and
marketing products that will keep pace with technological changes in the market
or new technologies introduced by competitors or that it will satisfy evolving
consumer preferences. Development of Internet- and intranet-based products,
functionalities and other staffing solutions will also depend on increased
acceptance of the Internet for staffing solutions and the development of the
necessary infrastructure to facilitate commercial applications on the Internet.
There can be no assurance of such acceptance or infrastructure development.
Failure to develop and introduce new products, functionalities and other
staffing solutions in a timely fashion could have a material adverse effect on
the Company's business, financial condition and results of operations.
 
    DEPENDENCE ON PRINCIPAL PRODUCT
 
    The Company currently derives most of its revenue from its Restrac Hire
(including recently introduced HIRE FOR INTRANET) product. As a result, any
factor adversely affecting sales of this product would have a material adverse
effect on the Company. The future success of the Company also depends, in part,
on achieving broader market acceptance of RESTRAC HIRE, as well as the ability
to continue to enhance RESTRAC HIRE to meet the evolving needs of its customers.
Moreover, the Company anticipates that its existing and new competitors will
introduce additional competitive products. This competition may reduce future
market acceptance of RESTRAC HIRE. The market acceptance of the Company's
software is difficult to estimate due in large measure to the effect of new
products, applications or product enhancements, technological changes in the
marketplace for staffing solutions and future competition. There can be no
assurance that the Company will maintain and expand acceptance of RESTRAC HIRE.
The failure of the Company to maintain and expand its market acceptance as a
result of competition, technological change or other factors would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
                                       10
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
    COMPETITION
 
    The marketplace for staffing solutions is intensely competitive and is
rapidly changing. The Company encounters direct competition from a number of
companies providing staffing solutions, including (i) other human resource
staffing software companies, (ii) providers of general human resource
information systems, (iii) agencies providing or sourcing full-time, contract
and temporary labor, (iv) information systems departments of potential prospects
that develop custom software, and (v) providers of other client/ server
application software or document management systems.
 
    DEPENDENCE ON KEY PERSONNEL
 
    The Company's future success depends to a significant extent on its senior
management and other key employees. The Company also believes that its future
success will depend in large part on its ability to attract and retain
additional key employees. Competition for such personnel in the computer
software industry is intense, and there can be no assurance that the Company
will be successful in attracting and training such personnel.
 
    DEPENDENCE ON THIRD PARTIES
 
    A key element of the Company's business strategy is to develop relationships
with leading industry organizations in order to increase the Company's market
presence, expand distribution channels and broaden the Company's product line.
The Company believes that its continued success depends in large part on its
ability to maintain such relationships and cultivate additional relationships.
There can be no assurance that the Company's existing strategic partners such as
PeopleSoft or future strategic partners will not develop and market products in
direct competition with the Company or otherwise discontinue their relationships
with the Company, or that the Company will be able to successfully develop
additional strategic relationships.
 
    In addition, certain technology incorporated in the Company's software is
licensed from third parties on a nonexclusive basis. The termination of any of
such licenses, or the failure of the third party licensers to adequately
maintain or update their products, could result in delay in the Company's
ability to ship certain of its products while it seeks to implement technology
offered by alternative sources. In addition, any required replacement licenses
could prove more costly than the Company's current license relationships and
might not provide technology as powerful and functional as the third-party
technology currently licensed by the Company. Also, any such delay, to the
extent it becomes extended or occurs at or near the end of a fiscal quarter,
could have a material adverse effect on the Company's results of operations for
that quarter. While it may be necessary or desirable in the future to obtain
other licenses relating to one or more of the Company's products or services or
relating to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at all.
 
    RELIANCE ON SINGLE CLIENT INTERFACE AND SINGLE SERVER PLATFORM
 
    At the present time, the Company supports client (workstation) platforms
utilizing Microsoft's Windows family of software products, including Windows
3.1, Windows NT and Windows 95. If Microsoft were to fundamentally change the
architecture of its software product such that users of the Company's software
applications experienced significant performance degradation or were rendered
incompatible with future versions of Microsoft's Windows Operating System, the
Company's business, financial condition and results of operations could be
materially adversely affected. If a new client platform or other interface were
to gain broad acceptance in the marketplace, there can be no assurance that the
Company's architecture would be compatible with such an interface.
 
                                       11
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
    Certain of the Company's products exclusively operate on Microsoft's NT
Server and Internet Information Server (IIS) platforms. If Microsoft were to
fundamentally change the architecture of its server product such that users of
the Company's software applications experienced significant performance
degradation or were rendered incompatible with future versions of Microsoft's NT
Server or IIS, the Company's business, financial condition and results of
operations could be materially adversely affected. If a new type of server were
to gain broad acceptance in the marketplace, there can be no assurance that the
Company's architecture would be compatible with such a server.
 
    RISK OF NEW PRODUCT INTRODUCTIONS; RISK OF PRODUCT DEFECTS
 
    As the marketplace for staffing solutions continues to evolve, the Company
plans to develop and introduce new products and services to enable it to
effectively address the changing needs of that market. There is no guarantee
that the Company will be able to develop new products or services or that such
solutions will achieve market acceptance or, if market acceptance is achieved,
that the Company will be able to maintain such acceptance for a significant
period of time. Any inability of the Company to quickly develop products and
services that address changes in technology or customer demands may require the
Company to substantially increase development expenditures or result in loss of
market share to a competitor.
 
    Products as complex as those offered by the Company may contain undetected
errors when first introduced or when new versions are released. The Company has
in the past discovered software errors in certain of its product offerings after
their introduction. There can be no assurance that, despite testing by the
Company, errors will not occur in new products or releases after commencement of
commercial shipments, resulting in adverse publicity, in loss of or delay in
market acceptance, or in claims by the customer against the Company, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
 
    MANAGEMENT OF CHANGE
 
    The evolution of the Company's business and expansion of the Company's
customer base has resulted in growth in the number of its employees, the scope
of its operation and financial systems and the geographic area of its
operations, resulting in increased responsibility for management personnel. The
Company's future results of operations will depend on the ability of its
officers and other key employees to continue to implement its operational,
customer support, and financial control systems and to expand, train, and manage
its employee base. Although the Company currently has no agreements,
commitments, or understandings relating to any acquisitions, the Company may
undertake acquisitions in the future. Any such transactions would place
additional strains upon the Company's management resources. There can be no
assurance that the Company will be able to manage any future expansion
successfully, and any inability to do so would have a material adverse effect on
the Company's business, financial condition and results of operations.
 
    RISK OF INTERNATIONAL EXPANSION
 
    Although international sales have not been significant to date, an element
of the Company's business strategy is the expansion of its existing
international operations and entry into additional international markets, which
will require significant management attention and financial resources. To the
extent that the Company is unable to make the investments required to expand in
a timely manner, the Company's growth, if any, in international sales will be
limited, and the Company's business, financial condition and results of
operations could be materially adversely affected. In addition, there can be no
assurance that the Company will be able to maintain or increase international
market demand for its products.
 
                                       12
<PAGE>
                                 RESTRAC, INC.
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1998 -- CONTINUED
 
    LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND DEPENDENCE ON PROPRIETARY
     RIGHTS; RISK OF LITIGATION
 
    The Company relies on a combination of copyright and trade secret laws,
employee and third party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that the measures taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or independent development by others of
similar technology. In addition, the Company may be subject to additional risk
as it enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. The Company's inability to protect
its proprietary rights would have a material adverse effect on the Company's
business, financial condition and results of operations.
 
    As the number of human resource application software products and services
in the industry increases and the functionality of these solutions further
overlaps, software developers and publishers may increasingly become subject to
infringement claims. There can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
current or future products. Although the Company is not currently the subject of
any intellectual property litigation, there has been substantial litigation
regarding copyright, patent and other intellectual property rights involving
computer software companies. Any claims or litigation, with or without merit,
could be costly and could result in a diversion of management's attention, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Adverse determinations in such claims or
litigation may require the Company to obtain a license and/or pay damages, which
could also have a material adverse effect on the Company's business, financial
condition and results of operations.
 
    PRODUCT LIABILITY
 
    Although the Company has not experienced any product liability claims to
date, the sale and support of products by the Company and the incorporation of
products from other companies may entail the risk of product liability claims.
The Company's license agreements with its customers typically contain provisions
intended to limit the Company's exposure to such claims, but such provisions may
not be effective in limiting the Company's exposure. A successful product
liability action brought against the Company could adversely affect the
Company's business, financial condition and results of operations.
 
    YEAR 2000 COMPLIANCE
 
    The Company recognizes that it must ensure that its products and operations
will not be adversely impacted by Year 2000 software failures which can arise in
time-sensitive software applications that use a two-digit field to define the
applicable year. While management does not believe this to be a significant
issue with respect to the products it markets or uses, the Company is in the
process of identifying any anticipated costs, problems and uncertainties
associated with resolving Year 2000 issues related to products of its vendors.
The Company limits its contractual warrantees on "Year 2000" compliance to
objective performance standards that the Company has tested, and the Company
makes no warrantees for nonconformance if the Company's software products are
combined with other software or data that are not conducive to accurately
calculating, comparing or sequencing date and time data between the twentieth
and twenty-first centuries. Although management does not expect Year 2000 issues
to have a material, adverse impact on the Company's business or future results
of operations, there can be no assurance that there will not be interruptions of
operations, other limitations of system or product functionality or that the
Company will not incur significant costs to avoid such interruptions or
limitations.
 
                                       13
<PAGE>
                                 RESTRAC, INC.
                                 JUNE 30, 1998
 
PART II--OTHER INFORMATION:
 
ITEM 1. LEGAL PROCEEDINGS
 
    The Company is not involved in any pending legal proceedings other than
those arising in the ordinary course of the Company's business. Management
believes that the resolution of these matters will not materially affect the
Company's business or the financial condition of the Company.
 
ITEM 2. CHANGES IN SECURITIES
 
    NONE
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
    NONE
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    NONE
 
ITEM 5. OTHER INFORMATION
 
    NONE
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
    (a) Exhibits furnished as Exhibits hereto:
 
        Exhibit 27- Financial Data Schedule Pursuant to Regulation S-X Article 5
 
    (b) No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1998.
 
                                       14
<PAGE>
                                 RESTRAC, INC.
                                   FORM 10-Q
                                 JUNE 30, 1998
 
PART III--SIGNATURES
 
    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.
 
<TABLE>
<S>                                            <C>
                                               RESTRAC, INC.
 
Date: August 14, 1998
                                               /s/ LARS D. PERKINS
                                               --------------------
                                               Lars D. Perkins
                                               Chief Executive Officer
 
                                               /s/ CYNTHIA G. EADES
                                               --------------------
                                               Cynthia G. Eades
                                               Chief Financial Officer
</TABLE>
 
                                       15