Prepared by R.R. Donnelley Financial -- FORM 10-Q/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

This Amendment is being filed to correct typographical errors in Items 1 and 2 with respect to the depreciation and amortization, net cash used in operating activities, purchases of property and equipment, and net cash used in investing activities for the three months ended March 31, 2002, set forth in the “Consolidated Statements of Cash Flows” and the second and third paragraphs under the heading “Liquidity and Capital Resources”. As corrected, the entire Items 1 and 2 are set forth below.

	March 31, 2002			December 31, 2001
	March 31, 2002			December 31, 2001
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	32,368		$	59,030
Marketable securities		75,919			74,116
Accounts receivable, net of allowances of $628 and $807, respectively		1,782			2,736
Other current assets		4,888			4,567

Total current assets		114,957			140,449

Marketable securities		22,798			—
Property and equipment, net of accumulated depreciation of $13,795 and $11,968, respectively		11,049			11,962
Intangible assets, net of accumulated amortization of $62,136 and $61,502, respectively		2,326			2,960
Other assets		498			725


Total assets	$	151,628		$	156,096

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,030		$	1,291
Accrued expenses		3,180			4,433
Deferred revenue		1,599			1,210
Current portion of capital lease obligations		1,864			2,110

Total current liabilities		7,673			9,044

Capital lease obligations, net of current portion		296			604
Other liabilities		414			479

Total liabilities		8,383			10,127

Stockholders’ equity:
Common stock, $0.01 par value; 250,000 shares authorized; 67,029 shares issued		670			670
Additional paid-in capital		380,554			380,660
Unearned compensation		(1,796	)		(2,309	)
Accumulated other comprehensive (loss) income		(313	)		205
Accumulated deficit		(234,578	)		(231,944	)

		144,537			147,282
Treasury stock, at cost (1,214 and 1,159 shares, respectively)		(1,292	)		(1,313	)

Total stockholders’ equity		143,245			145,969

Total liabilities and stockholders’ equity	$	151,628		$	156,096

	Three Months Ended March 31,
	2002			2001
	(Unaudited)
Revenue	$	5,243		$	5,422


Operating expenses:
Network costs		986			1,421
Sales and marketing (exclusive of equity related compensation of $106 and $304, respectively)		2,315			5,264
Client services (exclusive of equity related compensation of $22 and $59, respectively)		1,298			2,059
Development and engineering (exclusive of equity related compensation of $49 and $134, respectively)		2,139			3,234
General and administrative (exclusive of equity related compensation of $250 and $276, respectively)		957			2,222
Restructuring charge		—			312
Equity related compensation		427			773
Intangible amortization and charge for impairment of assets		634			116,491

Total operating expenses		8,756			131,776

Operating loss		(3,513	)		(126,354	)
Interest income		928			2,350
Interest expense		(49	)		(123	)

Net loss	$	(2,634	)	$	(124,127	)


Basic and diluted net loss per share	$	(0.04	)	$	(1.94	)

Shares used in computing basic and diluted net loss per share		64,700			64,035

	Three Months Ended March 31,
	2002			2001
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(2,634	)	$	(124,127	)
Adjustments to reconcile net loss to net cash used in operating activities:
Charge for impairment of assets		—			102,736
Depreciation and amortization		2,163			15,656
Equity related compensation		427			773
Provisions for doubtful accounts		—			98
Changes in operating assets and liabilities:
Accounts receivable		954			503
Accounts payable		(261	)		(1,003	)
Accrued expenses		(1,253	)		(217	)
Deferred revenue		389			706
Other assets and liabilities		(160	)		308

Net cash used in operating activities		(375	)		(4,567	)


Cash flows from investing activities:
Purchases of property and equipment		(616	)		(818	)
Proceeds from the sale of marketable securities		44,065			76,221
Purchases of marketable securities		(69,184	)		(45,158	)

Net cash provided by (used in) investing activities		(25,735	)		30,245

Cash flows from financing activities:
Proceeds from issuance of Common Stock, net of offering costs		—			9
Acquisition of common stock and treasury shares		(5	)		(28	)
Proceeds from exercise of options		7			72
Proceeds from repayment of notes receivable from stockholders		—			78
Payments on long-term debt		(554	)		(698	)

Net cash used in financing activities		(552	)		(567	)
Effect of exchange rate changes on cash		—			(47	)


Net (decrease) increase in cash and cash equivalents		(26,662	)		25,064
Cash and cash equivalents at beginning of period		59,030			27,527

Cash and cash equivalents at end of period	$	32,368		$	52,591

Nature of Business—Be Free, Inc. (the “Company”) provides a marketing platform that enables its customers to attract, convert and retain online customers easily and cost effectively. Its marketing platform delivers technology and services including delivering, tracking, analyzing and personalizing online promotions, and compensating and communicating with online marketing partners. Its hosted solution is designed to increase its customers’ online sales or traffic and to decrease their cost of customer acquisition. The Company has a single operating segment without an organizational structure dictated by product lines, geography or customer type. Revenue has been primarily derived from the Company’s BFAST^® partner marketing services, which have been provided primarily to domestic companies to date.

Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Consequently, the statements do not include all disclosures normally required by generally accepted accounting principles for annual financial statements or those normally made in the Company’s Annual Report on Form 10-K. The December 31, 2001 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, including those of a normal recurring nature. These adjustments are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. The results of operations for the period presented herein are not necessarily indicative of the results of operations to be expected for the entire fiscal year, which ends on December 31, 2002, or for any other future period. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, for the year ended December 31, 2001 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2002.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

On March 10, 2002, the Company entered into a merger agreement with ValueClick, Inc., a Delaware corporation (“ValueClick”). Pursuant to the merger agreement, the Company will be merged with, and become a wholly-owned subsidiary of ValueClick. Upon consummation of the merger, each outstanding share of common stock of the Company will be converted into the right to receive 0.65882 of a share of common stock of ValueClick. In the aggregate, ValueClick will issue approximately 43.4 million shares of its common stock for conversion of all of the outstanding securities of the Company. Upon consummation of the merger, the Company’s stockholders will own approximately 45% of the combined company’s outstanding shares. The consummation of the merger is subject to customary closing conditions, including the approval of the stockholders of the Company and the stockholders of ValueClick. In connection with the execution of the merger agreement, the Company amended its stockholders’ rights agreement to provide, among other things, that ValueClick would not be considered to be an “acquiring person” thereunder by reason of any transaction contemplated by the merger agreement. For more information on the merger see the Joint Proxy Statement-Prospectus dated April 15, 2002, which document is filed with the Securities and Exchange Commission.

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations”, which is effective January 1, 2003. SFAS No. 143 addresses the financial accounting and reporting for obligations and retirement costs related to the retirement of tangible long-lived assets. The Company does not expect that the adoption of SFAS No. 143 will have a material impact on its financial statements.

In July 2001, the FASB issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the impairment of goodwill and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001. On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”). The adoption of SFAS No. 142 did not impact the Company’s financial statements for the three months ended March 31, 2002. The Company’s net loss for the three months ended March 31, 2001 would have remained unchanged as a result of the impairment analysis performed at March 31, 2001. (See Note D)

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which was effective January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions relating to the disposal of a segment of a business of Accounting Principles Board Opinion No. 30. The adoption of SFAS No. 144 did not impact the Company’s financial statements.

On February 29, 2000, the Company acquired TriVida Corporation. TriVida provides personalization services to online merchants and content sites. The allocation of the purchase price for TriVida resulted in goodwill of $110,060 and other intangibles, including patents, developed technology and workforce, of $55,000. These items have been recorded as intangible assets within the Consolidated Balance Sheet, and were being amortized on a straight-line basis over three years.

Based on management’s assessment at March 31, 2001, the Company decided that the technology obtained through the acquisition of TriVida would not be integrated with the BFAST Partner Marketing technology as originally intended due to the deterioration of the Internet retail market, customer feedback and other business factors. As a result of this decision and a review of other factors, the Company concluded that an impairment assessment was required for the long-lived assets of TriVida.

The Company grouped all long-lived assets for TriVida, including goodwill and other intangible assets, and estimated the future discounted cash flows related to these long-lived assets. The discount rate used was based on the risks involved. As a result of this analysis, the Company recorded an impairment charge in 2001 totaling $102,736 which represented the excess of the carrying amount of the TriVida assets over the discounted cash flows. Had the Company applied the provisions of SFAS No. 142 for the three months ended March 31, 2001, it would have discontinued the amortization of goodwill and assembled workforce totaling $9,233 for that period. In addition, the Company would have recorded an incremental impairment charge in an equal amount during the same period. As a result, the Company’s net loss for the three months ended March 31, 2001 would have remained unchanged.

Throughout 2001, in response to a reduction in its customer base and longer than anticipated sales cycles, the Company’s management executed plans to restructure several areas of the company. The restructuring included the termination of a total of 118 employees, representing approximately 41% of the total workforce, the consolidation of certain office space and a non-cash impairment charge associated with excess and idle equipment. As a result, the Company recorded restructuring charges totaling $5,050 during the year.

The restructuring charge comprises cash charges totaling $2,999, including severance costs for terminated employees of $1,802, a charge for future lease payments for unutilized office space of $852 and other restructuring costs of $345. At March 31, 2002, $2,197 of the cash charges had been paid. The Company expects the remaining $802, principally relating to future lease payments for unutilized office space, to be paid over the next three years. The Company also recognized a non-cash impairment charge associated with excess and idle equipment and leasehold improvements on unutilized office space of $2,051.

Restructuring costs:
Employee severance, benefits and related costs	$1,802
Excess and idle equipment	1,953
Unutilized office space	852
Leasehold improvements on unutilized office space	98
Other restructuring costs	345
Total restructuring costs	5,050
Cash payments made through December 31, 2001	(2,102	)
Non-cash impairment charges	(2,051	)
Accrued restructuring costs at December 31, 2001	897
Cash payments made during the three months ended March 31, 2002	(95	)

Accrued restucturing costs at March 31, 2002	$802

Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common shares outstanding during the period, plus the effect of any dilutive potential common shares. Dilutive potential common shares consist of stock options and unvested shares of restricted stock. Potential common shares were excluded from the calculation of net loss per share for the periods presented since their inclusion would be antidilutive.

On November 30, 2001, a class action lawsuit was filed in the Southern District of New York naming as defendants the Company, the managing underwriters of the Company’s initial public offering (the “IPO”), and the following officers and former officers of the Company: Gordon B. Hoffstein, Samuel P. Gerace, Jr., Thomas A. Gerace and Stephen M. Joseph. The complaint is captioned Saul Kassin v. Be Free, Inc., et al., 01-CV-10827. The complaint alleges, in part, that the Company’s IPO registration statement and final prospectus contained material misrepresentations and/or omissions related, in part, to excessive and undisclosed commissions allegedly received by the underwriters from investors to whom the underwriters allegedly allocated shares of the IPO. The Company has not yet formally responded to the allegations. The Company believes that the claims against the Company and the individual directors and officers named in the lawsuit are without merit and intends to defend such claims vigorously. As this case is at an early stage, it is not possible to express an opinion as to it’s final outcome or estimate the amount of a probable loss, if any, that might result.

This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth below under the caption “ Factors That May Affect Future Results.”

We provide a marketing platform that enables online businesses to attract, convert and retain customers easily and cost effectively. Our marketing platform includes technology and services to manage, track and analyze a variety of online marketing programs. It is offered on a hosted basis to enable businesses to execute marketing programs without the expense of building and maintaining their own in-house technical infrastructure and resources. We offer two types of services on this platform, partner marketing services and site personalization services.

With our BFAST^® partner marketing services, online businesses can track and manage various types of marketing programs that they have established with their online marketing partners. These partner marketing programs may include affiliate programs, member buying and shopping portal programs, content distribution programs, sponsorship programs and strategic partnerships. Using BFAST, our customers can measure the results of these marketing programs in a uniform manner, allowing program-by-program comparisons. Our customers can pay their marketing partners in a variety of ways, including performance-based compensation. Our commerce customers, those that sell goods or services online, typically pay their marketing partners based on the sales or sales leads that those marketing partners generate, as tracked by BFAST. Our content customers, those that provide information online, typically pay their marketing partners based on the traffic sent to their sites by their marketing partners, as tracked by BFAST. As a result, these services provide our customers with a cost-effective solution for establishing, managing and rewarding their marketing partners.

In addition to our partner marketing services, we offer BSELECT^SM Onsite site personalization service which allows our customers to convert more visitors to their Internet site into customers by recommending relevant products or content in real-time. We are typically paid for our BSELECT Onsite site personalization services based upon the number of personalized product and content promotions that are clicked by each Internet site visitor. Revenue from BSELECT Onsite has been less than five percent of total revenue in each period.

We have incurred significant net losses and negative cash flows from operations since the commencement of our online marketing business, and as of March 31, 2002, we had an accumulated deficit of approximately $234.6 million. This loss has been funded primarily through the issuance of preferred stock, borrowings, and public offerings of our common stock. We raised net proceeds of $70.6 million and $104.7 million during our public offerings in November 1999 and in March 2000, respectively.

On March 10, 2002, we entered into a merger agreement with ValueClick, Inc. Pursuant to the merger agreement, we will be merged with, and become a wholly-owned subsidiary of ValueClick. Upon consummation of the merger, each outstanding share of our Common Stock will be converted into the right to receive 0.65882 of a share of common stock of ValueClick. In the aggregate, ValueClick will issue approximately 43.4 million shares of its common stock in exchange for our outstanding securities. Upon consummation of the merger, our stockholders will own approximately 45% of the combined company’s outstanding shares. The consummation of the merger is subject to customary closing conditions, including the approval of our stockholders and the stockholders of ValueClick and the receipt of certain governmental approvals. For more information on the merger see the Joint Proxy Statement-Prospectus dated April 15, 2002.

Revenue decreased 3% to $5.2 million for the three months ended March 31, 2002 from $5.4 million for the three months ended March 31, 2001. This decrease is primarily attributable to an overall decline in marketing spending as a result of general economic conditions. Although our customer base decreased by 24%, to 240 customers at March 31, 2002 from 317 customers at March 31, 2001, the average revenue per customer increased 28% to $21,842 from $17,104 per customer when compared to the same period of the prior year.

Network costs decreased 31% to $1.0 million for the three months ended March 31, 2002 from $1.4 million for the three months ended March 31, 2001. The decrease of $0.4 million is primarily attributable to cost savings as a result of the consolidation of our data centers as part of our restructuring plan in 2001. We currently have data centers in only two locations, Sterling, Virginia and Pittsburgh, Pennsylvania.

Sales and marketing expenses decreased 56% to $2.3 million for the three months ended March 31, 2002 from $5.3 million for the three months ended March 31, 2001. This decrease is a result of a reduction in workforce to 43 employees at March 31, 2002 from 95 employees at March 31, 2001. This resulted in cost savings of $1.9 million in employee related costs and $0.4 million in other administrative costs. Also contributing to the decrease is a reduction of $0.7 million in marketing costs, which comprises direct marketing efforts, tradeshows and conferences, public relations and various other marketing related programs, due to our cost containment programs.

Client services expenses primarily relate to the cost of assisting our customers in managing their relationships with marketing partners, as well as providing BFAST integration and BSELECT Onsite initialization, training and technical support to our customers. These services are designed to increase the success of our customers’ performance marketing sales channels and their overall satisfaction with our services by providing best practices techniques, marketing partner sales channel analysis, training and technical assistance. We also provide similar services to our customers’ marketing partners on an optional basis for additional fees.

Client services expenses decreased 37% to $1.3 million for the three months ended March 31, 2002 from $2.1 million for the three months ended March 31, 2001. This decrease is a result of a reduction in workforce to 43 employees at March 31, 2002 from 71 employees at March 31, 2001. This resulted in cost savings of $0.5 million in employee related costs and $0.2 million in other administrative costs. Also contributing to the decrease is a reduction of $0.1 million in outsourced program management costs.

Development and engineering expenses primarily include payroll and related costs for our product development and engineering groups and depreciation related to equipment used for development purposes. The product development group designs and develops the underlying technologies for our services and the engineering group develops and manages the infrastructure necessary to support our services.

Development and engineering expenses decreased 34% to $2.1 million for the three months ended March 31, 2002 from $3.2 million for the three months ended March 31, 2001. This decrease is a result of a reduction in workforce to 51 employees at March 31, 2002 from 91 employees at March 31, 2001. This resulted in a cost savings of $1.1 million in employee related costs.

General and administrative expenses decreased 57% to $1.0 million for the three months ended March 31, 2002 from $2.2 million for the three months ended March 31, 2001. This decrease is largely a result of a reduction in workforce to 18 employees at March 31, 2002 from 44 employees at March 31, 2001. This resulted in a cost savings of $0.5 million in employee related costs. Also contributing to the decrease is a reduction of $0.4 million in professional service costs relating to merger and acquisition planning and other investment banking and legal services. Additionally, bad debt expense decreased by $0.3 million. This decrease is due to recoveries in the current year of $0.1 million and an incremental provision in the prior year of $0.2 million.

Equity related compensation expenses are non-cash charges representing the difference between the exercise price of options to purchase common stock granted to our employees or the price paid for restricted stock sold to our employees and the fair value of the options or stock on the date of the option grant or stock purchase, as determined for financial reporting purposes. These expenses are recorded over the vesting period of the applicable option or stock award. These expenses also include the fair

value of options granted to consultants, as determined for financial reporting purposes. These fair values were determined in accordance with Accounting Principles Board Opinion 25 and Statement of Financial Accounting Standards 123. Equity related compensation expenses were $0.4 million for the three months ended March 31, 2002 and $0.8 million for the three months ended March 31, 2001.

Throughout 2001, in response to a reduction in our customer base and longer than anticipated sales cycles, our management executed plans to restructure several areas of the company. The restructuring included the termination of a total of 118 employees, representing approximately 41% of the total workforce, the consolidation of certain office space and a non-cash impairment charge associated with excess and idle equipment. As a result, we recorded restructuring charges totaling $5.1 million during the year.

The restructuring charge comprises cash charges totaling $3.0 million, including severance costs for terminated employees of $1.8 million, a charge for future lease payments for unutilized office space of $0.9 million and other restructuring costs of $0.3 million. At March 31, 2002, $2.2 million of the cash charges had been paid. We expect the remaining $0.8 million, principally relating to future lease payments for unutilized office space, to be paid over the next three years. We also recognized a non-cash impairment charge associated with excess and idle equipment and leasehold improvements on unutilized office space of $2.0 million. We recorded no restructuring charges in 2002.

Amortization, merger related expenses and impairment charges decreased 99% to $0.6 million for the three months ended March 31, 2002 from $116.5 million for the three months ended March 31, 2001. During the first quarter of 2001, these expenses included amortization expense of intangible assets of $13.8 million and an impairment charge of $102.7 million. All of these charges were incurred in connection with TriVida, which we acquired in February 2000.

In accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, we review goodwill and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may exceed their fair value. We consider several factors in determining whether an impairment may have occurred, including the intended use of the underlying asset, our market capitalization compared to our book value per share, the overall business climate and current estimates for expected operating results of acquired businesses. Based on our assessment at March 31, 2001, we decided that the technology obtained through the acquisition of TriVida would no longer be integrated into the BFAST technology as originally intended due to the deterioration of the Internet retail market and customer feedback as well as other business factors considered. As a result of this decision and a review of the other factors, we concluded that an impairment assessment was required for the long-lived assets of TriVida as of March 31, 2001.

We grouped all long-lived assets for TriVida, including goodwill and other intangible assets, and estimated the future discounted cash flows related to these long-lived assets. The discount rate used was based on the risks involved. As a result of this analysis, we recorded an impairment charge in the three months ended March 31, 2001, totaling $102.7 million, which represented the excess of the carrying amount of the TriVida assets over the estimated discounted cash flows. The remaining carrying amount of the assets will be amortized over their remaining useful lives.

Had we applied the provisions of SFAS No. 142 for the three months ended March 31, 2001, we would have discontinued the amortization of goodwill and assembled workforce of $9.2 million for that period. In addition, we would have recorded an incremental impairment charge in an equal amount during the same period. As a result, the Company’s net loss for the three months ended March 31, 2001 would have remained unchanged.

Net interest income of $0.9 million for the three months ended March 31, 2002 resulted from interest income of $928,000 from the investment of a portion of the proceeds from our initial and secondary public offerings which was partially offset by interest expense on lease obligations of $49,000. Net interest income of $2.2 million for the three months ended March 31, 2001 resulted from interest income of $2.4 million from investments which was partially offset by interest expense on lease obligations of $123,000.

As of March 31, 2002, we had $131.1 million in cash, cash equivalents and marketable securities. For the three months ended March 31, 2002, cash and cash equivalents decreased by $26.7 million while marketable securities, current and noncurrent, increased by $24.6 million. This reflects our treasury strategy to invest excess cash, obtained primarily through our public offerings, in marketable securities which yield a higher rate of return than cash and cash equivalents.

Cash used in operating activities was $0.4 million for the three months ended March 31, 2002. This use of cash resulted from a net loss of $2.6 million, which included $2.2 million in non-cash depreciation and amortization expense and $0.4 million in equity related compensation. In addition, the cash use resulted from a decrease in accrued expenses of $1.3 million which is attributable to an overall decrease in spending as a result of our restructuring actions and cost containment programs. The cash use was largely offset by cash provided by a decrease in accounts receivable of $1.0 million and an increase in deferred revenue of $0.4 million. The decrease in accounts receivable is a result of our cash collection efforts resulting in an overall improvement in the aging of accounts receivable. The increase in deferred revenue is a result of annual prepayments by certain customers.

We believe that our current cash, cash equivalents and marketable securities balances will be sufficient to meet our debt service, operating and capital requirements for at least the next 12 months. While we do not anticipate that this would be necessary, if cash were insufficient to satisfy our liquidity requirements, we may seek to raise additional funds through additional borrowings, public or private equity financings or from other sources. There can be no assurance that additional financing will be available at all or, if available, will be on terms acceptable to us. The issuance of additional equity securities could result in additional dilution to our shareholders.

In July 2001, the FASB issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the impairment of goodwill and that intangible assets other than goodwill be amortized over their useful lives. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001. The On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”). In accordance with the provisions on SFAS 142, goodwill is no longer amortized. Our net loss would have remained unchanged as a result of the impairment analysis performed at March 31, 2001.

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which is effective January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions relating to the disposal of a segment of a business of Accounting Principles Board Opinion No. 30. The adoption of SFAS No. 144 did not impact our financial statements.

We have entered into a merger agreement with ValueClick, Inc. Management has spent time evaluating this business combination in the past and expects to devote considerable effort to completing the transaction. Mergers such as the one anticipated are typically accompanied by a number of risks, including difficulties integrating operations and personnel, potential disruption of ongoing business, potential distraction of management, potential revenue declines as a result of customer uncertainty, potential loss of employees in anticipation of the uncertainties of integration, expenses related to the merger and potential unknown liabilities associated with combined businesses. We may incur substantial expenses and devote significant management time and resources in seeking to complete the proposed merger that ultimately may not generate benefits for us. If we are not successful in completing the merger, we may be required to pay a termination fee and expenses in excess of $6.0 million and may be required to reevaluate our growth strategy.

We introduced our first online marketing services and recorded our first revenue from these services in the third quarter of 1997 and the market for these services is still evolving. Accordingly, you have limited information about our company with which to evaluate our business, strategies and performance and an investment in our common stock. Before buying our common stock, you should consider the risks and difficulties frequently encountered by early stage companies in new and evolving markets, particularly those companies whose business depends on the Internet.

Our accumulated deficit as of March 31, 2002 was $234.6 million. Our current business has never achieved profitability and we expect to continue to incur losses for the foreseeable future in light of the level of our amortization of intangible assets and planned operating and capital expenditures. We also expect to experience negative operating cash flow for the near future as we fund our operating losses and capital expenditures. If our revenue grows more slowly than we anticipate, or if our operating expenses exceed our expectations and cannot be adjusted in a timely manner, our business, results of operations, financial condition and prospects would be materially and adversely affected. We will need to generate significant additional revenue to achieve profitability. The near-term economic outlook is very uncertain, especially in light of recent terrorist activities and the current and expected future responses to such activities. As a result, the level of commerce, including amounts conducted over the Internet, may be materially and adversely affected which would materially and adversely affect our revenue and profitability. Continued economic slowdown could cause companies to defer or reduce expenditures on online marketing programs, which could materially and adversely affect our revenue and profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future.

We provide services to our customers pursuant to contracts, many of which are not long-term. As a result, many of our customers are not bound to use our services for an extended period of time. If customers choose not to continue to use our services, we may have difficulty replacing departing customers with new customers in a timely or effective manner. If we fail to develop and sustain long-term relationships with our customers, our business would be materially harmed.

As a result, demand for, and market acceptance of Internet advertising and marketing solutions are uncertain. Further, the Internet is still emerging as a significant channel for selling goods and services to consumers. Our business and prospects will be materially and adversely affected if the Internet does not become further accepted as an advertising and marketing medium or if consumers do not increasingly purchase goods and services online. The adoption of Internet advertising and marketing services, particularly by entities that have historically relied upon more traditional methods, requires the acceptance of a new way of advertising and marketing. These customers may find Internet advertising and marketing to be less effective for meeting their business needs than other methods of advertising and marketing.

Substantially all of our revenue is derived from a new business model. Our revenue depends on whether the online marketing that we facilitate generates sales or traffic for our customers. In contrast, others earn fees based merely on placing online advertisements for customers. Our customers’ marketing partners may not generate substantial volumes of sales or traffic for our customers. Similarly, our customers’ product and service offerings may not be sufficient to attract or retain their marketing partners. In these situations, we may lose revenue and, ultimately, customers. Our business also requires that we have access to our customers’ internal catalog, transactional and fulfillment systems to track, store and analyze sales and traffic data. If customers regard this information as too sensitive to share with us, we may lose customers or businesses might forgo our marketing services entirely. In addition, because the provision of our services requires us to provide a connection to the Internet sites of our customers and their marketing partners, we may be perceived as being associated with the content of these Internet sites and could face potential liability for defamatory or other materials displayed on such sites. As a result, we could experience a loss of customers or reputational harm. If the assumptions underlying our business model are not valid or we are unable to implement our business plan, achieve the predicted level of customers and market penetration or obtain the desired level of pricing of our services for sustained periods, our business, prospects, results of operations and financial condition will be materially and adversely affected.

The continued and uninterrupted performance of the computer systems used by us, our customers and their marketing partners is critical to our success. Customers may become dissatisfied by any system failure that interrupts our ability to provide our services to them. These failures could affect our ability to deliver and track promotions quickly and accurately to the targeted audience and deliver reports to our customers and their marketing partners. Sustained or repeated system failures would reduce the attractiveness of our services significantly. Our operations depend on our ability to protect our computer systems against damage from fire, power loss, water damage, telecommunications failures, vandalism and similar unexpected adverse events. In addition, interruptions in our services could result from the failure of telecommunications providers to provide the necessary data communications capacity in the time required. Despite our efforts to implement network security measures, our systems are also vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. We do not carry enough business interruption insurance to compensate for any significant losses that may occur as a result of any of these events. Further, because our systems interact with the systems of our customers and their marketing partners, any such interruptions to their systems would also affect our ability to provide our services to them, which could result in customer dissatisfaction or customer loss.

We have experienced systems outages and denial of service interruptions in the past, during which we were unable to route transactions to our customers from their marketing partners or provide reports. We expect to experience additional outages in the future. To date, these outages have not had a material adverse effect on us. However, in the future, a prolonged system-wide outage or frequent outages could cause harm to our reputation and could cause our customers or their marketing partners to make claims against us for damages allegedly resulting from an outage or interruption. The expansion of our existing data centers and the opening of additional data centers may not eliminate systems outages or prevent the loss of sales when system outages occur. Any damage or failure that interrupts or delays our operations could result in material harm to our business and expose us to material liabilities.

We compete in markets that are new, intensely competitive, highly fragmented and rapidly changing. We compete against larger public companies as well as against similar sized, private companies. We face competition in the online marketing services market in general, as well as in the affiliate marketing program and site personalization segments specifically. We have experienced and expect to continue to experience increased competition from current and potential competitors. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we can. In addition, our current and potential competitors may bundle their products with other marketing software or services in a manner that may discourage users from purchasing services offered by us. Also, many current and potential competitors have greater name recognition and significantly greater financial, technical, marketing and other resources than we do. Increased competition could result in price reductions, fewer customer orders, reduced gross margins and loss of market share.

Because the provision of our services requires us to provide a connection to the Internet sites of our customers and their marketing partners, we may be exposed to liability for information displayed on our customer’s Internet sites or within their marketing partners’ Internet sites. We may also become involved in litigation, administrative proceedings and governmental proceedings and could be exposed to liability for such matters or for other matters in the ordinary course of business. Litigation and involvement in

such proceedings can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. In addition, any litigation or imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could have a material adverse effect on our reputation and our business and operating results.

Third parties may attempt to breach our security. If they are successful, they could obtain our customers’ or their marketing partners’ confidential information, including marketing data, sales data, passwords, and financial account, performance and contact information. A breach of security could materially and adversely affect our reputation, business and prospects. We rely on encryption technology licensed from third parties. Our systems are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss or theft of data. We may be required to expend significant capital and other resources to license encryption technology and additional technologies to protect against security breaches or to alleviate problems caused by any breach. We may be liable for any breach in our security and any breach could harm our reputation, reduce demand for our services or cause customers to terminate their relationships with us.

Software defects or inaccurate data may cause incorrect recording, reporting or display of information to our customers, their marketing partners or both. Inaccurate information could cause our customers to over-pay or under-pay their marketing partners. As a result, we could be held liable for any damages incurred by our customers or their marketing partners. In addition, we provide an optional payment service for our customers. Software defects and inaccurate data may cause us to send payments to the wrong party, in the wrong amounts, or on an untimely basis, any of which could cause liability for us, lead to customer dissatisfaction, or both. Our services depend on complex software that we have internally developed or licensed from third parties. Software often contains defects, particularly when first introduced or when new versions are released, which can adversely affect performance or result in inaccurate data. We may not discover software defects that affect our new or current services or enhancements until after they are deployed. In addition, our services depend on our customers and their marketing partners supplying us with data regarding contacts, performance and sales. If we are provided with erroneous or incomplete data, we may produce inaccurate information. Although such inaccuracies may be neither our fault or responsibility, we may still experience customer dissatisfaction or loss as a result.

Our market is characterized by rapid technological change, frequent new service introductions, change in customer requirements and evolving industry standards. The introduction of services embodying new technologies and the emergence of new industry standards could render our existing services obsolete. Our revenue growth depends upon our ability to introduce or develop a variety of new services and service enhancements to address the increasingly sophisticated needs of our customers. We have experienced delays in releasing new services and service enhancements and may experience similar delays in the future. To date, these delays have not had a material effect on our business. If we experience material delays in introducing new services and enhancements, customers may forgo

Laws and regulations directly applicable to Internet communications, commerce, marketing and privacy are becoming more prevalent. The United States Congress has enacted Internet laws regarding children’s privacy, copyrights and taxation. The United States and the European Union recently enacted privacy regulations that may result in limits on the collection and use of some user information. The United States and other countries may adopt additional legislation or regulatory requirements covering issues such as user privacy, pricing, content, taxation and quality of products and services, among other items. The governments of states and foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities. The laws governing the Internet remain largely unsettled, even in areas where legislation has been enacted. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and taxation apply to the Internet and Internet advertising and marketing services. In addition, the growth and development of the market for Internet commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet. To date, these regulations have not materially restricted the use of our services or our business growth.

We gather and maintain anonymous data related to consumer online browsing and buying behavior. When a user first views or clicks on a customer’s promotion managed by our system, we create an anonymous profile for that user and we add and change profile attributes based upon that user’s behavior on our customer’s Internet site and its marketing partners’ Internet sites. Privacy concerns may cause visitors to avoid Internet sites that track behavioral information and even the perception of security and privacy concerns, whether or not valid, may indirectly inhibit market acceptance of our services. We host an Internet site which allows consumers to opt not to have their anonymous profile gathered and maintained by us. Also, software programs exist that limit or prevent the use of “cookies” which are required for us to gather the anonymous data. Widespread use of the opt-out capability or adoption of this software by Internet users could significantly undermine the commercial viability of our BSELECT Onsite service. This development could cause our business prospects to decline materially.

We seek to protect our proprietary rights through a combination of patent, copyright, trade secret and trademark law and assignment of invention and confidentiality agreements. The unauthorized reproduction or other misappropriation of our proprietary rights could enable third parties to benefit from our technology without paying us for it. If this occurs, our business could be materially and adversely affected. We have also filed applications to register various servicemarks. We cannot assure you that any of our servicemark registrations will be approved.

We cannot assure you that our patent or any future patents or servicemark registrations we receive will not be successfully challenged by others or invalidated. In addition, we cannot assure you that we do not infringe any intellectual property rights of third parties or that we will be able to prevent misappropriation of our technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States. There have been a number of patents granted relating to online commerce, advertising and affiliate marketing programs. Further, we believe that an increased number of such patents may be filed in the future. To date, we have not been notified that our technologies infringe the intellectual property rights of third parties, but in the future third parties may claim that we infringe on their past, current or future intellectual property rights. Any such claim brought against us or our customers, whether meritorious or not, could result in loss of revenue, be time-consuming to defend, result in costly litigation, or require us to enter into royalty or licensing agreements. If we were unable to enter into such royalty or licensing agreements, it could result in the significant modification or cessation of our business operations.

We depend on a limited number of hardware and software vendors for essential products. If we were unable to purchase or license these essential products on acceptable terms or if we had to obtain substitutes for these essential products from different vendors, we might suffer a loss of revenue due to business interruption and might incur higher operating costs.

We buy and lease hardware, including our servers and storage arrays from Sun Microsystems and EMC Corporation. We also license software, including our servers’ operating systems, Internet server technology, database technology, graphical user interface technology and encryption technology, primarily from Sun Microsystems, Microsoft Corporation, Oracle Corporation and PowerSoft. If these vendors change the terms of our license arrangements with them so that it would be uneconomical to purchase our essential products from them, or if they were unable or unwilling to supply us with a sufficient quantity of properly functioning products, our business could be materially and adversely affected due to business interruption caused by any delay in product and service development until equivalent technology can be identified and the cost of integrating new technology.

We believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful. You should not rely on the results of one quarter as an indication of our future performance. If our quarterly operating results fall below the expectations of securities analysts or stockholders, however, the price of our common stock could fall. We have experienced significant fluctuation in our quarterly operating results and may continue to experience significant fluctuation.

		BE FREE, INC. (Registrant)

Date: May 22, 2002		/s/ Gordon B. Hoffstein Gordon B. Hoffstein Chief Executive Officer, President and Chairman (Principal Executive Officer)

Date: May 22, 2002		/s/ Stephen M. Joseph Stephen M. Joseph Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

Delaware		04-3303188
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	March 31,
	2002	2001
Options to purchase shares of common stock	6,326,492	6,319,696
Unvested shares of restricted stock	1,009,109	2,577,426

	Three Months Ended March 31,
	2002			2001
Net loss	$	(2,634	)	$	(124,127	)
Other comprehensive (loss) income:
Change in unrealized gain (loss) on marketable securities during the period		(518	)		142
Foreign currency translation adjustments		—			(47	)

Comprehensive loss	$	(3,152	)	$	(124,032	)