<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: DECEMBER 31, 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
                LEXINGTON, MA                                02421
   (Address of principal executive offices)                (zip code)

                                 (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 January 31, 1999:
10,028,450 shares.


<PAGE>


                                  RESTRAC, INC.
                                      INDEX


PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                             Page
                                                                             -----
<S>                                                                          <C>
Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets at December 31, 1998
         and September  30, 1998                                                 3

         Consolidated Statements of Operations for the three months ended
         December 31, 1998 and December 31, 1997                                 4

         Consolidated Statements of Cash Flows for the three months ended
         December 31, 1998 and December 31, 1997                                 5

         Notes to Consolidated Financial Statements                              6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                    10

Item 3.  Quantitative and Qualitative Disclosure About Market Risk              19

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                      20

Item 2.  Changes in Securities                                                  20

Item 3.  Defaults upon Senior Securities                                        20

Item 4.  Submission of  Matters to a Vote of Security Holders                   20

Item 5.  Other Information                                                      20

Item 6.  Exhibits and Reports on Form 8-K                                       20

PART III  - SIGNATURES                                                          21

Exhibit #10.27                                                                  22

Exhibit #27.1                                                                   51

</TABLE>


<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements


                                  RESTRAC, INC.

                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31, SEPTEMBER 30,
                                                                                 1998          1998
                                                                              -----------  ------------
                                                                              (UNAUDITED)
<S>                                                                            <C>         <C>
                                   ASSETS
Current Assets:
  Cash and cash equivalents ................................................   $  2,140    $  9,772
  Short-term investments....................................................      5,870       6,664
  Accounts and installments receivable, less allowance for doubtful accounts
     of $400 at December 31, 1998 and September 30, 1998 ...................      6,571       7,282
 Other current assets ......................................................      2,237       1,445
 Refundable income taxes....................................................        135         135
 Deferred income taxes .....................................................      1,083         900
                                                                               --------    --------
          Total current assets .............................................     18,036      26,198
                                                                               --------    --------
Long-term installments receivable, net .....................................        548         581
Property and equipment, net ................................................      3,357       2,967
Long-term investments ......................................................        590         893
Junglee investment, net ....................................................     14,669          --
Other assets, net ..........................................................        553         792
                                                                               --------    --------
          TOTAL ASSETS .....................................................   $ 37,753    $ 31,431
                                                                               --------    --------
                                                                               --------    --------
                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion of capital lease obligations .............................   $     93    $    131
  Accounts payable .........................................................      1,779       1,799
  Accrued expenses .........................................................      2,642       3,272
  Deferred revenue .........................................................      5,893       5,481
  Accrued income taxes .....................................................         56         211
                                                                               --------    --------
          Total current liabilities ........................................     10,463      10,894
                                                                               --------    --------
Deferred income taxes ......................................................         19          19
                                                                               --------    --------
Deferred rent ..............................................................        201         195
                                                                               --------    --------
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 -- 10,714,819 shares at December 31, 1998,
     9,022,674 shares at September 30, 1998 ................................        107          90
Additional paid-in capital .................................................     28,082      19,502
Treasury stock, at cost ....................................................       (831)       (831)
Retained (deficit) earnings ................................................       (288)      1,562
                                                                               --------    --------
          Total stockholders' equity .......................................     27,070      20,323
                                                                               --------    --------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................   $ 37,753    $ 31,431
                                                                               --------    --------
                                                                               --------    --------
</TABLE>


  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                       FINANCIAL STATEMENTS.




                                       3
<PAGE>


                                  RESTRAC, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                     THREE MONTHS ENDED
                                                                                         DECEMBER 31, 
                                                                                 -----------------------------
                                                                                    1998             1997
                                                                                 ------------     ------------
<S>                                                                              <C>              <C>
  Revenue:
    Product revenue........................................................      $      2,500     $      4,022
    Services revenue.......................................................             3,902            2,974
                                                                                 ------------     ------------
            Total revenue..................................................             6,402            6,996
                                                                                 ------------     ------------
  Cost of Revenue:
    Product revenue........................................................               227              124
    Services revenue.......................................................             2,146            2,071
                                                                                 ------------     ------------
            Total cost of revenue..........................................             2,373            2,195
                                                                                 ------------     ------------
  Gross margin.............................................................             4,029            4,801
                                                                                 ------------     ------------
  Operating Expenses:
    Research and development...............................................             1,425            1,265
    Sales and marketing....................................................             3,027            2,566
    General and administrative.............................................             1,133              942
    Amortization of Junglee investment.....................................               638               --
                                                                                 ------------     ------------
            Total operating expenses.......................................             6,223            4,773
                                                                                 ------------     ------------
  (Loss) income from operations............................................            (2,194)              28
  Other income, net........................................................               161              143
                                                                                 ------------     ------------
  (Loss) income before (benefit) provision for income taxes................            (2,033)             171
  (Benefit) provision for income taxes ....................................              (183)              68
                                                                                 -------------    ------------
  Net (loss) income .......................................................      $     (1,850)    $        103
                                                                                 -------------    ------------
                                                                                 -------------    ------------
  Basic net (loss) income per common share ................................      $       (.20)    $        .01
                                                                                 -------------    ------------
                                                                                 -------------    ------------
  Diluted net (loss) income per common share...............................      $       (.20)    $        .01
                                                                                 -------------    ------------
                                                                                 -------------    ------------
  Basic weighted average number of common shares outstanding...............         9,136,474        8,202,461
                                                                                 -------------    ------------
                                                                                 -------------    ------------
  Diluted weighted average number of common shares outstanding.............         9,136,474        8,557,667
                                                                                 -------------    ------------
                                                                                 -------------    ------------


</TABLE>


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.











                                       4
<PAGE>

                                  RESTRAC, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                   DECEMBER 31,
                                                          ----------------------------
                                                               1998           1997
                                                          -------------- -------------
<S>                                                       <C>            <C>
   Cash Flows from Operating Activities:
     Net (loss) income .................................  $    (1,850)   $      103
   Adjustments to reconcile net (loss) income to  net
     cash (used in) provided by operating activities --
        Depreciation and amortization...................        1,100           425
        Deferred income taxes,net ......................         (183)           --
        Deferred rent ..................................            6             6
        Changes in assets and liabilities
          Accounts and installments receivable, net ....          711           113
          Other current assets .........................         (792)         (129)
          Refundable income taxes ......................                         (9)
          Long-term installments receivable ............           33            --
          Accounts payable .............................          (20)         (586)
          Accrued expenses .............................         (630)          (62)
          Deferred revenue .............................          412           313
          Accrued income taxes .........................         (155)           68
                                                          -----------    ----------
             Net cash (used in) provided by
              operating activities......................       (1,368)          242
                                                          -----------    ----------
     Cash Flows from Investing Activities:
     Investment in Junglee .............................       (6,778)           --
     Purchases of property and equipment ...............         (852)         (292)
     Maturities and purchases of short-term
       investments, net ................................          794           269
     Maturities and purchases of long-term
       investments, net.................................          303        (2,010)
     Change in other assets ............................          239            (5)
                                                          -----------    ----------
             Net cash used in investing activities .....       (6,294)       (2,038)
                                                          -----------    ----------
   Cash Flows from Financing Activities:
     Payments of capital lease obligations .............          (38)          (34)
     Proceeds from exercise of common stock options ....            9            63
     Proceeds from employee stock purchase plan
       stock issuance...................................           59            75
                                                          -----------    ----------
             Net cash provided by financing activities .           30           104
                                                          -----------    ----------
   Net decrease in Cash and Cash Equivalents ...........       (7,632)       (1,692)
                                                          -----------    ----------
   Cash and Cash Equivalents, beginning of period.......        9,772         5,745
                                                          -----------    ----------
   Cash and Cash Equivalents, end of period ............  $     2,140    $    4,053
                                                          -----------    ----------
                                                          -----------    ----------
   Supplemental Disclosure of Cash Flow Information:
     Cash paid during the period for
        Interest .......................................  $         3    $        6
                                                          -----------    ----------
        Income taxes ...................................  $       155    $        9
                                                          -----------    ----------

   Supplemental Schedule of Noncash Financing Activities
        Issuance of Junglee Stock ......................  $     8,529    $       --
                                                          -------------- -------------
</TABLE>


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.

                                       5
<PAGE>


                                  RESTRAC, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(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
"Restrac" or "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, 1998, 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, 1998 ("Fiscal
1998") included in the Company's Form 10-K filed with the Securities and
Exchange Commission on December 29, 1998.

     The consolidated balance sheet as of December 31, 1998, the consolidated
statements of operations for the three month periods ended December 31, 1998 and
1997, and the consolidated statements of cash flows for the three month periods
ended December 31, 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 month period ended
December 31, 1998 are not necessarily indicative of the results to be expected
for the fiscal year ending September 30, 1999 ("Fiscal 1999").

(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 1998 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, job posting services 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.



                                       6
<PAGE>


                                  RESTRAC, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


     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 each
installment 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 generally 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, resume
scanning and job posting is recognized as the related services are performed.
Services revenue from RESTRAC WEBHIRE is recognized ratably over the service
term.

     Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.

      (b) NET (LOSS) INCOME PER SHARE

     SFAS No. 128, EARNINGS PER SHARE, establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. In accordance with SFAS No. 128, basic net
(loss) income per share for December 31, 1998 and December 31, 1997 is
calculated by dividing net (loss) income by the weighted average number of
common shares outstanding for those periods.

     Diluted earnings per share includes the effect of dilutive securities. As a
net loss is presented for the period ended December 31, 1998, the loss per share
was based only on the weighted average number of common shares outstanding.
Common equivalent shares outstanding during the 1999 period were not used as
their inclusion would have been anti-dilutive.

     The following table reconciles the weighted average common shares
outstanding to the shares used in computation of diluted weighted average common
shares outstanding:

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                December 31,
                                                                              1998         1997
                                                                           ----------   ---------
<S>                                                                        <C>          <C>
      Weighted average common shares outstanding......................     9,136,474    8,202,461
      Dilutive effect of options......................................            --      355,206
                                                                           ----------   ---------
      Diluted weighted average common shares outstanding..............      9,136,474   8,557,667

</TABLE>


     For the three month periods ended December 31, 1998 and 1997, 1,463,160 and
18,500 potential common shares, respectively, were excluded from the above
calculation as their effect would have been anti-dilutive.



                                       7
<PAGE>


                                  RESTRAC, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


     (c) 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.

     (d) SHORT- AND LONG- TERM INVESTMENTS

     Short-term investments consist of investments with original maturities
between three and twelve months. Long-term investments consist 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.

     The Company does not use derivative financial instruments in its investment
portfolio. The Company places its investments in instruments that meet high
quality standards, as specified in the Company's investment policy guidelines;
the policy also limits the amount of credit exposure to any one issue, issuer
and type of investment. The Company does not expect any material loss with
respect to its investment portofolio.

3)   JUNGLEE INVESTMENT

     On November 18, 1998, the Company acquired certain assets and assumed
certain obligations of the Junglee Employment Services business of Amazon.com.
In exchange for cash of $6 million and 1,670,273 shares of Restrac common stock
valued at $8.5 million, Restrac received exclusive rights to Junglee's online
recruitment technologies. Restrac also acquired Junglee's Internet production
sites and will manage and develop the employer and career site business
relationships established by Junglee Corp. ("Junglee"). Restrac did not retain
any Junglee personnel in connection with the transaction. The investment will be
amortized over 2 years.

4)   BUSINESS SEGMENT INFORMATION

     Effective for the year ended September 30, 1998, the Company adopted SFAS
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which
requires disclosure of financial and descriptive information about the Company's
reportable operating segments. The operating segments reported below are the
segments for which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by senior management in
deciding how to allocate resources and in assessing performance.

     The Company has two reportable segments: enterprise software solutions and
internet and transaction-based solutions, the latter of which started to emerge
in fiscal 1997 with the offering of outsourced services (e.g., resume scanning,
acknowledgement letters) and the research and development activities undertaken
for this segment. The Internet and transaction-based solutions segment provides
outsourced management of private candidate pools via RESTRAC WEBHIRE,
subscription services to public pools and job-posting sites, resume scanning,
reference checking and other fee-based staffing functions. The enterprise
software solutions segment provides perpetual licenses to the Company's software
products



                                       8
<PAGE>


                                  RESTRAC, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


and the related maintenance, training, implementation and consulting services in
support of such licenses.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Expenses related to general
corporate functions such as Information Technology, Finance and Human Resources,
and general and administrative costs such as depreciation, rent and utilities
are allocated to the reportable segments based on relative headcount as a basis
of relative usage. Income tax provision (benefit) is allocated to the reportable
segments in deriving segment profit (loss) based on each segment's pro rata
income or loss before income tax provision (benefit). The Company has no
intersegment sales and transfers, and does not allocate assets to the operating
segments.

     The Company's reportable segments are strategic business units that offer
different solutions tailored to a customer's needs. They are managed separately
because each business requires different technology and sales and marketing
strategies.

<TABLE>
<CAPTION>
                                                                                   Three Months Ended December 31, 1998:
------------------------------------------------------------------------------------------------------------------------
                                          Internet and          Enterprise
                                          Transactions           Software                Other              Consolidated
                                          ------------           --------                -----              ------------
<S>                                    <C>                  <C>                  <C>                    <C>
Total Revenue ...................      $           824      $           5,578    $           --         $          6,402
Research & Development ..........      $           480      $             945    $           --         $          1,425
Depreciation and Amortization ...      $           716      $             384    $           --         $          1,100
Other Income, Net ...............      $            --      $              --    $           161        $            161
Segment Profit (Loss) ...........      $        (1,874)     $            (122)   $           146        $         (1,850)

</TABLE>



<TABLE>
<CAPTION>
                                                                                   Three Months Ended December 31, 1997:
------------------------------------------------------------------------------------------------------------------------
                                          Internet and          Enterprise
                                          Transactions           Software                Other              Consolidated
                                          ------------           --------                -----              ------------
<S>                                       <C>                  <C>                 <C>                  <C>

Total Revenue .....................     $           271      $          6,725     $           --      $           6,996
Research & Development ............     $           224      $          1,041     $           --      $           1,265
Depreciation and Amortization .....     $            55      $            370     $           --      $             425
Other Income, Net .................     $            --      $             --     $          143      $             143
Segment Profit (Loss) .............     $          (527)     $            544     $           86      $             103

</TABLE>





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

                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
               FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998


     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, the factors described under "Factors
Affecting Future Operating Results" included at the end of this Item 2. You
should carefully review each of the factors set forth therein, and you should be
aware that there may be other factors that could cause these differences. In
addition, the Company and its customers and suppliers may experience
unanticipated delays or expenses in achieving Year 2000 compliance.

CONSOLIDATED RESULTS OF OPERATIONS
(IN THOUSANDS)

     REVENUE

     Total revenue for the three month period ended December 31, 1998 was $6,402
compared to $6,996 for the three month period ended December 31, 1997,
representing a decrease of 8%.

     PRODUCT REVENUE. Product revenue was $2,500 for the three months ended
December 31, 1998 compared to $4,022 for the three months ended December 31,
1997. Protracted sales cycles resulting from the transition to an
Internet/Intranet product line and competitive pressures were the primary
contributors to this reduction. Because the Company's product revenue consists
of a small number of large dollar transactions, wide fluctuations can be
experienced from period to period. Such fluctuations are not necessarily
indicative of future results.

     SERVICES REVENUE. Services revenue increased 31% to $3,902 for the three
months ended December 31, 1998 from $2,974 for the three months ended December
31, 1997. The increase was attributable to the greater than 200% growth in the
emerging Internet and transaction revenue segment as well as increases in
maintenance stemming from the growth in the installed customer base.

     COST OF REVENUE

     COST OF PRODUCT REVENUE. Cost of product revenue represented 9% of total
product revenue for the three months ended December 31, 1998 as compared to 3%
for the three months ended December 31,



                                       10
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


     1997. The increase as a percentage of product revenue is due primarily to
increased costs in royalties due under third party licensing arrangements for
the RESTRAC HIRE FOR INTRANET product.

     COST OF SERVICES REVENUE. For the period ended December 31, 1998, 70% of
cost of services was attributed to the enterprise software segment, with the
remainder associated with the Internet and transaction-based solutions segment.
This compares to 77% of cost of services attributed to the enterprise software
segment for the period ended December 31, 1997. Cost of services revenue
increased 4% to $2,146 for the three months ended December 31, 1998 from $2,071
for the three months ended December 31, 1997. The increase in absolute dollars
is principally attributable to costs associated with RESTRAC WEBHIRE and the
introduction of services in connection with the JUNGLEE transaction. Cost of
services revenue decreased as a percentage of services revenue to 55% for the
first quarter of Fiscal 1999 from 70% for the first quarter of Fiscal 1998.

     OPERATING EXPENSES

     RESEARCH AND DEVELOPMENT. Research and development expenses were $1,425 or
22% of total revenue for the three months ended December 31, 1998 as compared to
$1,265 or 18% of total revenue for the comparable Fiscal 1998 period. This
increase is primarily due to increases in both personnel and consulting expenses
in support of the Company's new and existing product development initiatives.
The Internet and transaction-based solutions segment accounted for 34% of total
research and development expenses in the first quarter of Fiscal 1999 and 18%
for the first quarter of Fiscal 1998. All of the Company's research and
development costs have been expensed as incurred.

     SALES AND MARKETING. Sales and marketing expenses were $3,027 or 47% of
total revenue for the three months ended December 31, 1998 as compared to $2,566
or 37% of total revenue for the comparable Fiscal 1998 period. The increase in
absolute dollars is due primarily to expansion of the RESTRAC WEBHIRE sales
force. The Internet and transaction-based solutions segment accounted for 31% of
total sales and marketing expenses in the first quarter of Fiscal 1999 and 13%
for 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 $1,133
or 18% of total revenue for the three months ended December 31, 1998 as compared
to $942 or 13% of total revenue for the comparable three month period of Fiscal
1998. The absolute dollar increase for the three month period of Fiscal 1999 as
compared to Fiscal 1998 is the result of personnel increases in support of the
Company's infrastructure.

     OTHER INCOME, NET

     Other income increased to $161 for the three month period ended December 
31, 1998 from $143 for the comparable Fiscal 1998 period. The increase is 
primarily attributable to the interest received on installment sales 
partially offset by reduced returns on investments due to lower average 
combined cash and cash equivalents and short- and long- investment balances. 
The Company expects to continue to 

                                       11
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


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 quarter of Fiscal 1999.

     (BENEFIT) PROVISION FOR INCOME TAXES

     The Company's effective tax rate for the three months ended December 31,
1998 was (9%) as compared to 40% for the three months ended December 31, 1997.
The effective tax rate represents the Company's estimate of the rate expected to
be applicable for the full fiscal year. The change in the effective tax rate
relates primarily to the Company's taking a conservative view in recognizing tax
benefits generated in Fiscal 1999 which will be realized against taxable income
earned in future years.

LIQUIDITY AND CAPITAL RESOURCES
(IN THOUSANDS)

     At December 31, 1998, the Company had cash and cash equivalents and short-
and long-term investments of $8,600, a decrease of $8,729 from $17,329 at
September 30, 1998. Working capital was $7,573 at December 31, 1998 as compared
to $15,304 at September 30, 1998, a decrease of $7,731. The reductions were due
principally to cash outlays in connection with the Junglee transaction.

     Cash used in operating activities was $1,368 during the three month period
ended December 31, 1998. Use of cash in operating activities consisted mainly of
the net loss for the three month period of $1,850, the offsetting effects of
depreciation and amortization of $1,100 and growth in deferred revenue of $412
and the timing of receipts and disbursements, resulting in prepayment of certain
expenses, decreases in accounts and installments receivable and fluctuations in
certain liabilities.

     The Company used $6,294 in investing activities during the first quarter of
Fiscal 1999, principally for the investment in Junglee of $6,778 and the
purchase of property and equipment of $852 (primarily computer equipment),
partially offset by net proceeds of $1,097 from net maturities of short- and
long-term investments. Net cash provided by financing activities for the three
month period ended December 31, 1998 was $30.

     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.



                                       12
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


     The Company believes that its current cash and cash equivalent and
short-term investment balances and any cash provided by future operations will
be sufficient to meet its working capital expenditure 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.

IMPACT OF YEAR 2000 ISSUE

     The following paragraphs in this section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act.

     The Year 2000 issue results from computer programs written with two digits
rather than four to define the applicable year. Any of the Company's computer
programs that have date-sensitive software and are not Year 2000 compliant may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.

     The Company has attempted to make an assessment with regard to whether its
own internal information systems are Year 2000 compliant. In particular, the
Company has upgraded its accounting (excluding payroll) and customer management
systems with systems that are warranted by the vendors to be Year 2000
compliant. In addition, the Company plans to seek assurances from its existing
vendors whose systems are not warranted to be Year 2000 compliant that such
systems are Year 2000 compliant. Currently, the Company does not anticipate
purchasing additional systems. The Company does not separately track the
internal costs incurred for Year 2000 projects. Although the Company does not
believe that any additional Year 2000 compliance-related costs will be
significant, there can be no such assurance. Any failure of third-party
equipment or software comprising any part of the Company's systems to operate
properly with regard to Year 2000 and thereafter could require the Company to
incur unanticipated expenses to address associated problems. The Company has
received assurances that all material embedded systems included in the Company's
products are Year 2000 compliant.

     The Company believes, based on an internal assessment, that the current
versions of its software products are Year 2000 compliant. 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.
The Company has no plan to ascertain whether the internal systems and products
of its customers are Year 2000 compliant. Although the Company has not been
involved in any litigation or proceeding to date involving its products or
services related to Year 2000 issues, there can be no assurance that the Company
will not in the future be required to defend its products or services or to
negotiate resolutions of claims based on Year 2000 issues.



                                       13
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (CONTINUED)


     The Company does not have any specific contingency plans if any Year 2000
problems develop with respect to the Company's embedded systems, systems
acquired from vendors or systems used by third parties with whom the Company has
a mutual relationship. Contingency plans will be developed if it appears the
Company or its key vendors will not be Year 2000 compliant, and such
non-compliance is expected to have a material adverse impact on the Company's
operations.

     Year 2000 issues may affect the purchasing patterns of customers and
potential customers in a variety of ways. Many companies are expending
significant resources to replace or remedy their current hardware and software
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase software products such as those offered by the Company.
The Company does not believe that there is any practical way to ascertain the
extent of, and has no plan to address problems associated with such a reduction
in purchasing resources of its customers. Any such reduction could, however,
result in a material adverse effect on the Company's business, operating results
and financial condition. The Year 2000 issue is pervasive and complex, as
virtually every computer operation will be affected in some way. Consequently,
no assurance can be given that Year 2000 compliance can be achieved without
significant additional costs.

FACTORS AFFECTING FUTURE OPERATING RESULTS

     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, 1998, 1997 and 1996
and for the quarters ended December 31, 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) and general economic conditions. Historically,
revenue in each of the first two fiscal quarters has been lower than in the
preceding fourth fiscal quarter (which typically has the highest revenue and net
income), due largely to sales incentive programs. 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, 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



                                       14
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


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. 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 continue to 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
advancement of 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. Maturation 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



                                       15
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


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.

     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.

     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, (v) providers of other client/server application
software or document management systems and (vi) Internet-based staffing
solution providers.

     The Company's primary direct competitor is Resumix, Inc. The Company also
competes directly against other providers of human resource staffing solutions,
most of which are small privately held companies providing less functional
products at lower prices. In addition, vendors of general human resource
information systems generally include applicant tracking modules in their
offerings which can compete with the Company's products. Moreover, there can be
no assurance that such vendors will not develop and market products in direct
competition with the Company. Some of the Company's current and many of its
potential competitors, are large, publicly traded organizations with access to
significantly



                                       16
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


greater financial, technical, marketing, and other resources. As a result, they
may be able to respond to market changes, emerging technologies or changes in
customer requirements more rapidly and devote more resources to the development,
marketing, and sales of their products than the Company. Competition may
increase from new market entrants or through consolidations in the software
industry and/or cooperative relationships among companies. Although the Company
believes that at the present time its products are competitively priced, an
increase in competition could result in price reductions and loss of market
share. Such competition and any resulting price reductions could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

     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 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 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.



                                       17
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


     MANAGEMENT OF CHANGE

     The evolution of the Company's business and expansion of the Company's
customer base has resulted in substantial growth in the number of its employees,
the scope of its operations 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. 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.

     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 effected. 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.

     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 effected. 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.

     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.



                                       18
<PAGE>


                                  RESTRAC, INC.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)


     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 effect the
Company's business, financial condition and results of operations.


Item 3. Quantitative and Qualitative Disclosure About Market Risk

     Information relating to quantitative and qualitative disclosure about
market risk is set forth under the caption "Short- and Long- Term Investments"
in Note 2(d) of the Notes to Consolidated Financial Statements. The company does
not have material foreign currency risks.







                                       19
<PAGE>


                                  RESTRAC, INC.


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 and Use or Proceeds

     On November 18, 1998, the Company issued 1,670,273 shares of its common
stock, par value $.01 per share, to Amazon.com (the "Sold Shares"). In
consideration for the issuance of the Sold Shares, and a cash payment of $6
million, the Company received all of the assets and business of Amazon.com, Inc.
and Junglee Corp. relating solely to the collection, organization and
presentation of employment and related data. No registration under the
Securities Act of 1933, as amended (the "Securities Act"), was required in
connection with the issuance of the Sold Shares because the issuance to
Amazon.com was a transaction not involving a public offering (Section 4(2) of
the Securities Act).

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:

<TABLE>
<CAPTION>

        Exhibit No.       Description
        ----------        -----------
        <S>               <C>
        + 10.27           Software and Trademark License Agreement dated
                          November 18, 1998 between the Company, Amazon.com,
                          Inc. and Junglee Corp.
          27.1            Financial Data Schedule Pursuant to Regulation S-X
                          Article 5
</TABLE>

    (b) On December 4, 1998 the Company filed a form 8-K under Item 2 of 
        Form 8-K in connection with the acquisition of certain rights and 
        assets and assumption of certain obligations and liabilities of the 
        Junglee Corp., a subsidiary of Amazon.com.

    +   Certain portions of this document have been omitted pursuant to a
        confidential treatment request filed with the Securities and Exchange 
        Commission (the "Commission"). The omitted portions have been filed 
        separately with the Commission.



                                       20
<PAGE>


                                  RESTRAC, INC.



PART III - SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



                                                  RESTRAC, INC.


Date:    February 12, 1999
                                                  /s/ LARS D. PERKINS
                                                  -----------------------
                                                  Lars D. Perkins
                                                  Chief Executive Officer




                                                  /s/ CYNTHIA G. EADES
                                                  -----------------------
                                                  Cynthia G. Eades
                                                  Chief Financial Officer









                                       21