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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from .............. to ................
Commission File Number 000-26147
ZIPLINK, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3457219
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
900 Chelmsford Street,Tower 1, Fifth Floor
Lowell, Massachusetts 01851
(Address of principal executive offices)
(Zip Code)
(978) 551-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at May 8, 2000
----- --------------------------
Common Stock, par value $0.001 per share 12,939,987 shares
ZIPLINK, INC.
FORM 10-Q
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 3
(Unaudited) and December 31, 1999
Consolidated Statements of Operations for the 4
three months ended March 31, 2000 and
March 31, 1999 (Unaudited)
Consolidated Statements of Cash Flows for the three 5
months ended March 31, 2000 and 1999 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities and Use of Proceeds 13
ITEM 3. Defaults Upon Senior Securities 13
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
EXHIBIT INDEX 15
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ZIPLINK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents................................... $12,290 $17,384
Accounts receivable, net.................................... 2,267 1,491
Prepaid expenses and other current assets................... 2,638 2,256
------------- -------------
Total current assets................................... 17,195 21,131
Property and Equipment, net.................................... 21,789 15,917
Other Long term Assets......................................... 6,108 1,557
------------- -------------
Total assets........................................... $45,092 $38,605
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligation................. $4,080 $2,197
Accounts payable............................................ 5,806 3,511
Accrued expenses............................................ 1,757 1,550
Deferred revenue............................................ 101 95
Other current liabilities................................... 246 -
------------- -------------
Total current liabilities.............................. 11,990 7,353
Capital lease obligation, less current portion................. 7,792 3,943
Long term liabilities, less current portion 70 -
------------- -------------
Total liabilities...................................... 19,852 11,296
Stockholders' Equity
Common stock, $.001 par value, 50,000 shares authorized,
12,940 and 12,770 shares issued and outstanding at March
31, 2000 and December 31,1999, respectively................. 13 13
Additional paid-in capital..................................... 63,907 60,690
Accumulated deficit............................................ (38,668) (33,320)
Cumulative translation adjustment.............................. (12) -
Deferred stock-based compensation.............................. - (74)
------------- -------------
Total stockholders' equity..................................... 25,240 27,309
------------- -------------
Total liabilities and stockholders' equity............. $45,092 $38,605
------------- -------------
------------- -------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
3
ZIPLINK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---- ----
Revenues................................ $ 5,492 $ 2,745
------------ ------------
Costs and Expenses:
Cost of revenues..................... 5,321 1,758
Selling, general and administrative.. 3,612 1,385
Depreciation and amortization........ 1,952 950
------------ ------------
Total costs and expenses........ 10,885 4,093
------------ ------------
Loss from operations............ (5,393) (1,348)
------------ ------------
Other Income (expense):
Interest expense..................... (146) (356)
Interest income...................... 191 5
Other income (expense) .............. - (38)
------------ ------------
45 (389)
------------ ------------
Net loss........................ $ (5,348) $ (1,737)
------------ ------------
------------ ------------
Net Loss per Unit (Note 4):
Net Loss per unit -
Basic and diluted.............. $ - $ (0.18)
------------ ------------
------------ ------------
Weighted average units -
Basic and diluted .............. $ - 9,899
------------ ------------
------------ ------------
Net Loss per Share (Note 4):
Net Loss per share -
Basic and diluted............... $ (0.41) $ -
------------ ------------
------------ ------------
Weighted average shares -
Basic and diluted.............. 12,892 -
------------ ------------
------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
4
ZIPLINK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
---- ----
Cash Flows from Operating Activities:
Net loss............................................. $(5,348) $ (1,737)
Adjustments to reconcile net loss to net cash used
in operating activities
Noncash telecommunications expense............... 173 -
Depreciation and amortization..................... 1,952 950
Loss on disposal of property and equipment........ - 38
Compensation expense associated with the granting
of share/unit options and warrants.............. (8) 2
Translation adjustment............................ (12) -
Changes in assets and liabilities, net of
acquired amounts:
Accounts receivable, net........................ (727) (217)
Prepaid expenses and other current assets....... 58 (388)
Due from Interhop............................... (67) -
Accounts payable................................ 1,878 127
Accrued expenses................................ 76 230
Deferred revenue................................ 6 173
Other current liabilities....................... (38) -
Due to affiliates............................... - (476)
------------ -----------
Net cash used in operating activities...... (2,057) (1,299)
------------ -----------
Cash Flows from Investing Activities:
Purchases of property and equipment.................. (1,380) (199)
Cash used in acquisition............................. (1,150) -
------------ -----------
Net cash used in investing activities........ (2,530) (199)
Cash Flows from Financing Activities:
Proceeds from borrowings under notes payable......... - 1,400
Proceeds from exercise of stock options.............. 41 -
Payments of principal made on capital lease
obligation........................................ (548) (111)
------------ -----------
Net cash(used in)provided by financing
activities................................ (507) 1,289
------------ -----------
Net (Decrease) in Cash and Cash Equivalents............. (5,094) (209)
Cash and Cash Equivalents, beginning of period.......... 17,384 512
------------ -----------
Cash and Cash Equivalents, end of period............. $12,290 $ 303
------------ -----------
------------ -----------
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest............................... $ 119 $ 383
------------ -----------
------------ -----------
Supplemental Disclosure of Non-Cash Financing and
Investing Activities:
Acquisition of equipment under capital leases ...... $ 6,223 $ -
------------ -----------
------------ -----------
Investment in subsidiary $ 3,472 $ -
------------ -----------
------------ -----------
Forgiveness of accrued compensation by
Capital Member ................................... $ - $ 180
------------ -----------
------------ -----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
5
ZIPLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY AND BASIS OF PRESENTATION
THE COMPANY - ZipLink, Inc., a Delaware corporation (the "Company" or
"ZipLink"), was formed as a wholly-owned subsidiary of ZipLink, LLC on March
9, 1999. ZipLink, LLC was organized as a Connecticut limited liability
company on November 21, 1995 and reorganized as a Delaware LLC on March 9,
1999. On May 25, 1999, ZipLink, LLC was reorganized from a limited liability
company to a corporation. In connection with this reorganization, all of the
membership units in ZipLink, LLC were transferred to and merged with and into
the Company, as a result of which, all of the assets and liabilities of
ZipLink, LLC were transferred to the Company. As these entities are under
common control, the merger transaction was accounted for as a reorganization
of entities under common control similar to a pooling of interest.
BASIS OF PRESENTATION - The Company has prepared the accompanying unaudited
consolidated financial statements pursuant to the rules and regulations of
the Securities and Exchange Commission regarding interim consolidated
financial reporting. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete annual consolidated financial statements and
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1999, in the Company's Annual Report
on Form 10-K. In the opinion of the Company's management, the accompanying
unaudited consolidated financial statements contain all adjustments which are
necessary to present fairly its financial position as of March 31, 2000 and
the results of its operations and cash flows for the three months ended March
31, 2000 and 1999, and are of a normal and recurring nature. The results of
operations for interim periods are not necessarily indicative of the
operating results to be expected for the full year.
The accompanying consolidated financial statements include the accounts of
the Company and it's subsidiary, Interhop Network Services, Inc. All
intercompany balances and transactions have been eliminated in consolidation.
The accounts of the Company's foreign subsidiary are translated in accordance
with SFAS No. 52, Foreign Currency Translation. In translating the accounts
of the foreign subsidiary into U.S. dollars, assets and liabilities are
translated at the rate of exchange in effect at quarter end, while
stockholders' equity is translated at historical rates. Revenue and expense
accounts are translated using the weighted average exchange rate in effect
during the quarter. Foreign currency translation and transaction gains or
losses for the Company's subsidiary are included in the accompanying
consolidated balance sheet since the functional currency for the Company's
subsidiary is in Canadian dollars.
2. ACQUISITION OF INTERHOP NETWORK SERVICES, INC.
On January 18, 2000, the Company acquired the assets of Interhop Network
Services, Inc. of Toronto, Ontario, an Internet service provider providing
Internet connectivity services throughout Canada. The consideration paid in
the acquisition consisted of $1,150,000 in cash, 153,997 shares of common
stock valued at $2,350,000 and the assumption of liabilities of $907,000.
Goodwill and other intangibles are amortized over 15 years. For financial
statement purposes, this acquisition was accounted for as a purchase, and
accordingly, the results of operations of Interhop Network Services, Inc.
subsequent to January 18, 2000 are included in the Company's consolidated
statements of operations.
The Company has allocated the purchase price, including transaction costs of
approximately $152,000 to the fair value of the assets acquired and
liabilities assumed as follows:
Current assets......................................$ 75,000
Property and equipment.............................. 334,000
Goodwill and other intangible assets................ 4,907,000
Total liabilities assumed........................... (907,000)
------------------
$ 4,409,000
------------------
------------------
Proforma information has not been presented as the acquisition was not material.
6
3. COMPREHENSIVE LOSS
Comprehensive loss includes net loss as well as other changes in
stockholders' equity (deficit), except for stockholders' investments and
distributions. The components of comprehensive loss are as follows
(in thousands):
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Net loss .......................... $5,348 $ -
Foreign currency
translation adjustment ......... 12 -
------ ------
Comprehensive loss ................ $5,360 $ -
------ ------
------ ------
4. SIGNIFICANT CUSTOMER
WebTV Networks, Inc., a wholly-owned subsidiary of Microsoft Corporation,
represented approximately 46% and 80% of the Company's revenues during the
three months ended March 31, 2000 and 1999, respectively; and 37% and 57% of
the Company's accounts receivable at March 31, 2000 and December 31, 1999,
respectively.
5. NET LOSS PER SHARE AND NET LOSS PER UNIT
The Company has adopted SFAS No. 128, "Earnings Per Share". Basic net loss
per common share/unit is computed using the weighted average number of shares
of common stock/units outstanding during the period. Diluted net loss per
common share/unit is the same as basic net loss per common share/unit since
the effects of the Company's potential common stock/unit equivalents are
antidilutive. Antidilutive securities, which consist of options/unit options,
warrants and convertible debentures that are not included in diluted net loss
per share/unit were 834,727 shares for the three months ended March 31, 2000
and 570,299 units for the three months ended March 31, 1999.
The following tables present information necessary to calculate net loss per
share/unit (in thousands, except per share data):
Three Months Ended
March 31, 2000
---------------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
--------------- ----------------- ---------------
Basic net loss per share:
Loss available to common stockholders ... $ (5,348) 12,892 $ (0.41)
Effect of dilutive securities:
Stock options/warrants ................ - -
--------------- -----------------
Diluted net loss per share .............. $ (5,348) 12,892 $ (0.41)
--------------- ----------------- ---------------
--------------- ----------------- ---------------
7
Three Months Ended
March 31, 1999
------------------------------------------------------
Earnings Unit Per Unit
(Numerator) (Denominator ) Amount
--------------- ----------------- --------------
Basic net loss per unit:
Loss available to unit members ......... $ (1,737) 9,899 $ (0.18)
Effect of dilutive securities:
Unit options/warrants ................ - -
Convertible debentures - -
--------------- ----------------- --------------
Diluted net loss per unit .............. $ (1,737) 9,899 $ (0.18)
=============== ================= ==============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Any statements in this quarterly report concerning the Company's business
outlook or future economic performance, anticipated profitability, revenues,
expenses or other financial items, and network or service offering growth,
together with other statements that are not historical facts, are
"forward-looking statements" as that term is defined under the Federal
Securities Laws. Any forward-looking statements are estimates, reflecting the
best judgement of the party making such statements based upon currently
available information and involve a number of risks, uncertainties and other
factors which could cause actual results to differ materially from those
stated in such statements. Risks, uncertainties and factors which could
affect the accuracy of such forward-looking statements are identified in the
public filings made by the Company with the Securities and Exchange
Commission, and forward-looking statements contained in this Form 10-Q or in
other public statements of the Company should be considered in light of those
factors. The Company does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
uncertainities after the date hereof or reflect the accuracy of unanticipated
events.
OVERVIEW
ZipLink is a provider of wholesale Internet connectivity services in the United
States and Canada to Internet service providers and developers and vendors of
Internet appliances.
8
The Company provides wholesale Internet access services under the name
ZipDial to Internet service providers, or ISPs, in the United States and
Canada which, in turn, offer Internet access to their subscribers using
ZipLink's network infrastructure. These ISPs consist of traditional local,
regional, and national providers that generally collect a monthly fee from
their subscribers in addition to emerging model providers, such as free
access providers and PC manufacturers and distributors. ZipLink also offers a
range of Internet connectivity services for Internet appliances, including
Internet access and subscriber authentication.
The Company derives a significant portion of its revenues from the provision
of wholesale Internet access services for Internet appliances, including
Internet connectivity, subscriber authentication and other specially
developed services. One customer, WebTV, accounts for substantially all of
the Company's revenues from Internet appliance services. Revenues from the
provision of wholesale Internet access to WebTV are recognized monthly as
services are performed. The Company receives a fixed price per WebTV
subscriber per month if WebTV uses the Company as its first choice provider
of connectivity to WebTV. If ZipLink is not designated as the first choice
provider by WebTV, it receives an hourly rate to the extent that a WebTV
subscriber actually obtains connectivity through the Company's network.
The Company also provides wholesale national dial-up Internet access and
enhanced services, under the brand name ZipDial. These services enable ISPs
to quickly and inexpensively expand their existing geographic coverage and
offer national dial-up Internet access, without investing in costly
infrastructure. Revenues from the ZipDial program are recognized monthly as
services are provided.
The Company also provides direct Internet access under the ZipLink name to a
limited number of retail users, although we devote minimal resources to
marketing in this area. Revenues from these users are derived from service
subscriptions and are recognized monthly.
Since inception, the Company has incurred net losses and experienced negative
cash flow from operations. The Company had an accumulated deficit at March
31, 2000 of $38.7 million. The Company expects to continue to operate at a
net loss and experience negative cash flow for the foreseeable future given
the level of planned operating activities and capital expenditures. The
Company's ability to achieve profitability and positive cash flow from
operations is dependent upon its ability to substantially grow its revenue
base through expansion of its ZipDial program and an increase in sales of
access services for Internet appliances, and its ability to expand the
network and achieve operating efficiencies. The Company plans to make
significant capital expenditures to expand its network and to increase its
operating expenses based in large part on its estimate of potential future
revenues. If the Company's future revenues fall short of its estimates or if
its operating expenses exceed its expectations, then the Company may never
obtain or sustain profitability.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of revenues for the three months ended March 31, 2000 and 1999:
9
Three Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
Revenues .............. 100.0% 100.0%
Cost of revenues ...... 96.9 64.0
Selling, general and
administrative ........ 65.8 50.4
Depreciation and
amortization .......... 35.5 34.6
----------- -----------
Loss from operations (98.2) (49.1)
Interest and other
expense, net .......... 0.8 (14.2)
----------- -----------
Net loss (97.4)% (63.2)%
=========== ===========
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,1999
REVENUES. Revenues increased 104% to $5.5 million for the three months
ended March 31, 2000 from $2.7 million for the three months ended March 31,
1999. This increase was due primarily to an increase in ZipDial and other
program revenues, including revenues from free Internet access providers,
from $0.6 million to $3.0 million, and an increase in revenues from WebTV
from $2.2 million for the three months ended March 31, 1999 to $2.5 million
for the three months ended March 31, 2000.
COST OF REVENUES. Cost of revenues consists primarily of telecommunication
and collocation costs for super points of presence (SuperPops). Cost of
revenues increased to $5.3 million for the three months ended March 31, 2000
from $1.8 million for the three months ended March 31, 1999. Substantially
all of this increase was due to an increase in telecommunication and
collocation costs reflecting the expansion of the Company's network
infrastructure from approximately 10,000 ports as of March 31, 1999 to
56,000 ports as of March 31, 2000.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses consist primarily of salaries, legal and other professional
services, marketing and promotional materials to expand the Company's revenue
base and other costs related to sales, finance and administrative functions.
Selling, general and administrative expenses increased to $3.6 million for
the three months ended March 31, 2000 from $1.4 million for the three months
ended March 31, 1999. This increase was primarily due to salaries and other
related expenses from an increase in headcount totaling 105 employees as of
March 31, 2000 compared with 54 employees as of March 31, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation expense increased to $2.0 million
for the three months ended March 31, 2000 from $1.0 million for the three
months ended March 31, 1999. Substantially all of this increase resulted from
the effect of additional capital assets purchased and placed in service in
support of the network expansion during 1999 and, to a lesser extent,
additional capital assets purchased and placed in service during the three
months ended March 31, 2000.
10
INTEREST EXPENSE. Interest expense decreased to $0.1 million for the three
months ended March 31, 2000 from $0.4 million for the three months ended
March 31, 1999. Substantially all of this decrease was due to the repayment
of $20.0 million of indebtedness outstanding under the Company's line of
credit in June 1999, and reduction of interest expense due to the conversion
of convertible debentures to common stock concurrent with the closing of the
Company's IPO. The decrease is offset by an increase from the interest
expense associated with capital leases during fiscal years 2000 and 1999.
INTEREST INCOME. Interest income increased approximately $0.2 million for the
three months ended March 31, 2000 from the same period in the prior year due
to the investment of the net proceeds from the IPO in the form of commercial
paper and repurchase agreements backed by U.S. Treasury securities.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $5.2 million and $13.8 million at March 31, 2000 and
December 31, 1999, respectively. The Company had cash and cash equivalents
totaling $12.3 million at March 31, 2000. The Company currently invests in
commercial paper and repurchase agreements backed by U.S. Treasury securities
that are highly liquid, of high-quality investment grade, and have maturities
of less than three months with the intent to make such funds readily
available for operating purposes.
Net cash used in operating activities was $2.1 million and $1.3 million for
the three months ended March 31, 2000 and March 31, 1999, respectively. Net
cash used in the three months ended March 31, 2000 was primarily attributable
to the Company's net loss, increase in accounts receivable, partially offset
by an increase in depreciation and amortization, and accounts payable.
Net cash used in investing activities was $2.5 million and $0.2 million for
the three months ended March 31, 2000 and March 31, 1999, respectively.
Principal investments were capital expenditures of $1.4 million and the
acquisition of Interhop Network Services, Inc of $1.2 million. Subject to its
capital resources, the Company currently expects that its capital
expenditures will be substantially higher in future periods in connection
with the expansion of its network capacity and the increase in its area of
service coverage.
Since November 1999, the Company secured approximately $19 million of capital
lease financing from three major network equipment providers, of which $14
million was used for network equipment purchases from November 1999 through
March 31, 2000. The Company is continuing to seek one or more debt financing
aggregating between $10.0 million and $20.0 million to be used for capital
expenditures, working capital and other general corporate purposes.
Net cash (used in) or provided by financing activities was $(0.5) million and
$1.3 million for the three months ended March 31, 2000 and March 31, 1999,
respectively. Net cash used in financing activities for the three months
ended March 31, 2000 include payments on the Company's capital lease
obligations.
The Company believes that funds provided by operations and its existing cash
and cash equivalent balances should be sufficient to execute it's operating
plan through 2000. The Company is currently seeking debt or equity financing.
The proceeds from such a financing would be used to further expand our
network, for working capital and other general corporate purposes, including
investments in strategic partnerships and further acquisitions. There can be
no assurance that the Company would be able to obtain such financing on
reasonable terms, if at all.
11
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." This bulletin, as
amended, estabilished guidelines for revenue recognition and is effective for
periods beginning after March 15, 2000. We do not expect that the adoption of
the guidance required by SAB 101 will have a material impact on our financial
condition or results of operations.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation, an intrepretation of APB Opinion
No. 25." This intrepretation clarified the application of Opinion 25, among
other issued (a) the definition of employee for purposes of applying Opinion
25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. The Intrepretation is effective July 1, 2000 and the effects of
applying the Intrepretation are recoginized on a prospective basis. We do not
expect that the adoption will have a material impact on our financial
condition or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of the Company's investment activities is the
preservation of principal and liquidity while at the same time maximizing the
income it receives from investments without significantly increasing risk.
The Company currently invests in commercial paper and repurchase agreements
backed by U.S. Treasury securities that are highly liquid, of high-quality
investment grade, and have maturities of less than three months with the
intent to make such funds readily available for operating purposes. As such,
the Company considers its exposure to market risk to be minimal.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Changes in Securities
On January 18, 2000, the Company issued 153,997 unregistered shares of its
common stock in partial consideration for its acquisition of substantially
all the assets of Interhop Network Services, Inc. of Toronto, Ontario, an
Internet service provider providing Internet connectivity services throughout
Canada. The foregoing issuance was made in reliance upon the exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1+ Agreement between Registrant and SpinMedia Network,
Inc. d/b/a Spinway.com, dated as of January 12,
2000, and First Amendment dated March 31, 2000
10.2+ Equipment Lease,dated March 31, 2000 between
Registrant and NTFC Capital Corporation.
27. Financial data schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three months ended
March 31, 2000.
-----------------
+ Confidential treatment has been requested for certain portions
of this exhibit pursuant to Rule 406 promulgated under the
Securities Act of 1933, as amended.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 2000
ZIPLINK, INC.
By: /s/ Gary P. Strickland
-------------------------
Gary P. Strickland
Chief Financial Officer
(Principal Financial and Accounting
Officer and Authorized Signatory)
14
EXHIBIT INDEX
EXHIBIT
10.1+ Agreement between Registrant and SpinMedia Network, Inc.
d/b/a Spinway.com, dated as January 12, 2000 and First
Amendment dated March 31, 2000.
10.2+ Equipment Lease, dated March 31, 2000 between Registrant
and NTFC Capital Corporation.
27. Financial data schedule
+ Confidential treatment has been requested for certain portions of this
exhibit pursuant to Rule 406 promulgated under the Securities Act of
1933, as amended.
15