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Quarterly report filed by small businesses

10QSB



                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-QSB


[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934.

                  For the quarterly period ended June 30, 2000


[ ]       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 000-24223


                      FRONTLINE COMMUNICATIONS CORPORATION
        (Exact name of Small Business issuer as specified in its Charter)


         Delaware                                        13-3950283
(State or other jurisdiction                           (I.R.S Employer
Of incorporation or organization)                   Identification number)


One Blue Hill Plaza, P.O. Box 1548, Pearl River, New York          10965
   (Address of principal executive offices)                     (Zip Code)

                                 (914) 623-8553
                (Issuer's Telephone Number, including Area Code)

Indicate by a check mark whether the issuer: (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 twelve 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 last 90 days.

Yes _X_   No ___


As of July 31, 2000 there were outstanding 6,011,502 shares of the issuer's
Common Stock, $ .01 par value.




                                      INDEX

                                                                            Page



Part I    Financial Information


Item 1    Financial Statements (Unaudited)

          Condensed Consolidated Balance Sheets                              1

          Condensed Consolidated Statements of Operations                    2

          Condensed Consolidated Statements of Cash Flows                    3

          Notes to Condensed Consolidated Financial Statements               4


Item 2    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                               8


Part II   Other information                                                 11

          Signatures                                                        12




Frontline Communications Corporation
Condensed Consolidated Balance Sheets




                                                                                       June 30,          December 31,
                                                                                         2000              1999 (1)
                                                                                    ------------        ------------
                                                                                     (Unaudited)
                                                                                                           
ASSETS
Current:
   Cash and cash equivalents                                                        $  7,488,352        $    615,190
   Accounts receivable, net of allowance for doubtful accounts                           373,155             288,337
   Prepaid expenses and other                                                            236,283             122,308
                                                                                    ------------        ------------
                              Total current assets                                     8,097,790           1,025,835

Property and equipment, net                                                            3,248,835           2,944,948
Intangibles, net                                                                       8,880,145           4,146,107
Other                                                                                    361,853             297,742
                                                                                    ------------        ------------
                                                                                    $ 20,588,623        $  8,414,632
                                                                                    ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                                            $  2,509,518        $  1,548,043
   Deferred revenue                                                                    1,325,319             684,219
   Current portion of capitalized lease obligation                                       627,740             433,917
                                                                                    ------------        ------------
                            Total current liabilities                                  4,462,577           2,666,179

Capitalized lease obligations and notes payable- net of current portion                1,902,792           1,458,583
                                                                                    ------------        ------------
                                Total liabilities                                      6,365,369           4,124,762
                                                                                    ------------        ------------

Stockholders' equity:
   Preferred stock, $.01 par value, 2,000,000 authorized, issued 
      and outstanding 668,000 and none, respectively 
      Aggregate liquidation preference $10,020,000                                         6,680
   Common Stock, $.01 par value, 25,000,000 authorized, 6,437,748 and
      4,484,060 issued, respectively, 6,034,702 and 4,252,540 outstanding,
      respectively                                                                        64,377              44,841
   Additional paid-in capital                                                         35,769,188          15,147,547
   Accumulated deficit                                                               (20,933,493)        (10,600,905)
   Note receivable                                                                       (37,500)            (37,500)
   Treasury stock, at cost, 403,046 and 231,520 shares, respectively                    (645,998)           (264,113)
                                                                                    ------------        ------------
                           Total stockholders' equity                                 14,223,254           4,289,870
                                                                                    ------------        ------------
                                                                                    $ 20,588,623        $  8,414,632
                                                                                    ============        ============



(1)  The balance sheet at December 31, 1999 is derived from audited financial
     statements at that date. See notes to condensed consolidated financial
     statements.


                                      -1-



FRONTLINE COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)




                                                              For the three months ended               For the six months ended
                                                              June 30,           June 30,            June 30,            June 30,
                                                                2000               1999                2000                1999
                                                           ------------        ------------        ------------        ------------
                                                                                                                    
Revenues                                                   $  1,033,542        $    758,561        $  1,968,196        $  1,415,418

Costs and expenses:
      Cost of revenues                                          660,745             478,436           1,253,272             877,170
      Selling, general and administrative                     2,275,025           1,088,730           3,828,943           2,029,086
      Depreciation and amortization                             721,621             380,919           1,383,084             720,355
      Non-cash compensation charge                                                  712,220                                 712,220
                                                           ------------        ------------        ------------        ------------
                                                              3,657,391           2,660,305           6,465,299           4,338,831
                                                           ------------        ------------        ------------        ------------
Loss from operations                                         (2,623,849)         (1,901,744)         (4,497,103)         (2,923,413)

Other income (expense):
   Interest income                                              162,089              35,817             255,388              55,595
   Interest expense                                             (42,120)             (6,061)            (80,736)            (16,065)
                                                           ------------        ------------        ------------        ------------
Net loss                                                     (2,503,880)         (1,871,988)         (4,322,451)         (2,883,883)
                                                           ------------        ------------        ------------        ------------

Dividends related to beneficial conversion
  feature of preferred stock                                                                          5,856,497

Preferred dividends                                              90,893                                 153,640
                                                           ------------        ------------        ------------        ------------
Net loss applicable to common shares                       ($ 2,594,773)       ($ 1,871,988)       ($10,332,588)       ($ 2,883,883)
                                                           ============        ============        ============        ============

Loss per common share-basic and diluted                    ($      0.46)       ($      0.54)       ($      2.05)       ($      0.87)
                                                           ============        ============        ============        ============

Weighted average number of  common shares
   outstanding- basic and diluted                             5,633,698           3,437,861           5,048,303           3,330,357
                                                           ============        ============        ============        ============



See notes to condensed consolidated financial statements.


                                       -2-



FRONTLINE COMMUNICATIONS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)




                                                                                       For the six months ended
                                                                                    June 30,              June 30,
                                                                                      2000                  1999
                                                                                  ------------          ------------
                                                                                                            
Cash flow from operating activities:
   Net loss                                                                       ($ 4,322,451)         ($ 2,883,883)
   Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                                                  1,383,084               720,355
      Noncash compensation charge                                                       21,845               712,220
      Changes in assets and liabilities net of effect of 
       acquisition of businesses                                                        87,903               (32,782)
         Prepaid expenses and other                                                   (113,975)              (20,294)
         Other assets                                                                 (258,114)             (146,727)
         Accounts payable and accrued expenses                                         114,542                97,102
         Deferred revenue                                                                4,502               (30,246)
                                                                                  ------------          ------------
                             Net cash (used) by operating activities                (3,082,664)           (1,584,255)
                                                                                  ------------          ------------


Cash flows from investing activities:
   Acquisition of property and equipment                                              (167,070)             (262,857)
   Acquisition of businesses- net of cash acquired                                  (3,244,740)             (451,661)
                                                                                  ------------          ------------
                               Net cash used in investing activities                (3,411,810)             (714,518)
                                                                                  ------------          ------------


Cash flows from financing activities:
   Proceeds from sale of common stock, net                                                                 1,770,000
   Proceeds from exercise of stock options                                                                   215,000
   Principal payments on capitalized lease obligations and debt                       (529,067)              (31,120)
   Proceeds from sale of preferred stock, net                                       14,597,587
   Payments to acquire treasury stock                                                 (381,885)
   Payment for Repricing Rights                                                       (165,359)
   Dividends paid                                                                     (153,640)
                                                                                  ------------          ------------
                           Net cash provided by financing activities                13,367,636             1,953,880
                                                                                  ------------          ------------

Net increase  in cash and cash equivalents                                           6,873,162              (344,893)

Cash and cash equivalents, beginning of period                                         615,190             1,994,711

Cash and cash equivalents, end of period                                          $  7,488,352          $  1,649,818
                                                                                  ============          ============

Supplemental information:
Approximate interest paid during the period                                       $     28,000          $     16,000
                                                                                  ============          ============



The Company entered into capital lease obligations in the aggregate amount of
  approximately $180,000 during the six months ended June 30, 1999.
The Company issued 286,277 shares of common stock valued at $531,000 and
  promissory notes in the aggregate amount of $794,000 for acquisitions during
  six months ended June 30, 2000.

See notes to condensed consolidated financial statements.


                                       -3-



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2000

NOTE A- BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 (b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The results for the interim periods are not
necessarily indicative of the results that may be attained for an entire year or
any future periods. For further information, refer to the Financial Statements
and footnotes thereto in the Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 1999.

     The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.


NOTE B- LOSS PER SHARE

     The Company follows SFAS No. 128, "Earning per Share", which provides for
calculation of "basic" and "diluted" earning per share. Basic earnings per share
includes no dilution and is computed by weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect, in periods in
which they have dilutive effect, the effect of common shares issuable upon
exercise of stock options and warrants. Diluted earnings per share amounts have
not been reported because the Company has a net loss and the impact of the
assumed conversion of preferred stock and exercise of stock options and warrants
would be anti-dilutive.


NOTE C- NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

     In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No.44, "Accounting for Certain Transactions Involving Stock
Compensation- an Interpretation of APB No. 25 (" FIN No.44"). FIN No.44
clarifies the application of Opinion No.25 for certain issues including: (a) the
definition of employee for purposes of applying Opinion No.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. In general, FIN No.44 is
effective July 1, 2000. The Company does not expect the adoption of FIN No.44 to
have a material impact on its financial position or results of operations.


                                      -4-



FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2000


     In June 1998, the FASB issued SFAS No. 133" Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 requires companies to
recognize all derivative contracts at their fair values, as either assets or
liabilities on the balance sheet. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
recognition of (1) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk, or (2) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years after
June 15,2000.

     Historically, the Company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standard to affect its financial statments.


NOTE D-CAPITAL STOCK

     In January 2000, the Company's shareholders approved an amendment to the
Certificate of Incorporation of the Company increasing the number of authorized
shares of preferred stock to 2,000,000.

     In February and March 2000, the Company sold in a public offering 1,137,300
shares of Series B Convertible Redeemable preferred stock at $15 per share and
realized net proceeds of approximately $14,404,000. Approximately $194,000 of
the offering costs were incurred in 1999. The preferred stock can be converted
into common stock at the rate of 3.4 shares of common stock for each share of
preferred stock. Preferred stockholders are entitled to receive cumulative
annual dividends of $.60 per share payable semi-annually either in cash or
shares of the Company's common stock at the sole discretion of the Company.
Further, preferred stockholders are entitled to receive a liquidation preference
of $15 per share, plus accrued dividends. The Company has the option to redeem
the preferred stock under certain circumstances.

     In connection with the offering, the Company sold to the underwriter, for
nominal consideration, warrants to purchase an aggregate of 100,000 shares of
Series B Convertible Redeemable preferred stock. The warrants will be
exercisable for a four-year period commencing one year after the date of the
consummation of the offering at an exercise price of $24.75 per share.

     During the six months ended June 30, 2000, additional dividends (noncash)
related to beneficial conversion feature of the preferred stock of approximately
$5,856,000 were recorded as a result of the conversion price of the preferred
stock being less than the market price of the common stock at the time of the
offering.


                                      -5-



FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2000


     During the six months ended June 30, 2000 the Company issued: (i) 1,595,620
shares of common upon conversion of 469,300 shares of Series B Convertible
Redeemable preferred stock, (ii) 5,830 shares of common stock for services
rendered and upon exercise of stock options (iii) 65,961 shares of common stock
pursuant to repricing rights and (iv) 286,277 shares of common stock for
acquisition of businesses. See Note F.

     In 1999, the Company sold through private placements 499,889 shares of its
common to two investors for an aggregate price of $4,250,000. The Company had
granted the investors repricing and redemption rights based on the future market
price of its common shares. The Company may have to issue up to 141,110
additional shares of its common stock pursuant to the repricing rights. If the
Company were required to satisfy the redemption rights, the range of estimated
liability to satisfy the redemption rights is between $341,000 (based on the
Company's common stock price on August 9, 2000 and $1,284,000. In May 2000, the
Company acquired 16,312 shares of common stock for $34,663 from the private
investors. In addition the Company paid $165,359 for repricing rights which has
been charged to additional paid in capital.

     In April 2000, the Company's board of directors authorized the Company to
purchase upto $1,000,000 worth of its common stock from time to time, as the
Company deems appropriate, through open market purchases or in privately
negotiated transactionsAs of June 30, 2000 the Company had acquired 171,526
shares of common stock including 16,312 shares from the private placement
investors for an aggregate consideration of $ 382,000.

NOTE E- NON-CASH COMPENSATION CHARGE

     In 1998 and 1999, the Company granted to certain employees options to
purchase an aggregate amount of 245,768 shares of its common stock which
required shareholder approval prior to its issuance. The shareholders approved
the issuance in June 1999, and accordingly the approval date is deemed to be the
grant date. Since the fair market value of the shares at the grant date exceeded
the exercise price, compensation costs have been recognized during the six
months ended June 30, 1999.

NOTE F- ACQUISITIONS OF BUSINESSES

     During the three months ended June 30, 2000 the Company acquired
substantially all of the assets of The PressRoom Online Services, Application
Resources Information Services, Inc d/b/a Way Communications, The First Street
Corporation and Wizardnet,Inc. The aggregate consideration for these
acquisitions consisted of $1,171,000 cash (including transaction-related costs)
86,277 shares of common stock (approximately $210,000) and $65,000 in non
interest-bearing promissory notes.


                                      -6-



FRONTLINE COMMUNICATIONS CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2000

     On June 20, 2000, the Company acquired substantially all of the assets of
Delanet, Inc. ("Delanet") in consideration of $2,100,000 cash (including
transaction-related costs) assumption of $1,354,000 of liabilities 200,000
shares of the Company's common stock (approximately $321,000) and a promissory
note in the principal amount of $729,000. The promissory note bears interest at
4% and is payable in June of 2003. The Company has the option to convert the
principal amount due under the promissory note to shares of its common stock at
a conversion price of $8 per share under certain circumstances as defined in the
acquisition agreement.

     All of the acquisitions were accounted for using the purchase method of
accounting with the results of operations of each acquisition included in the
consolidated financial statements from the respective acquisition date. The
acquisitions resulted in the recording of intangible assets of approximately
$5,758,000, which are being amortized over their expected benefit period of 3
years.

     The accompanying pro forma operating statements are presented as if the
Delanet acquisition occurred on January 1, 1999. The pro forma information is
unaudited and is not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Delanet acquisition had
been completed as of January 1, 1999 and neither is it necessarily indicative of
the results of operations for future periods.

         Six months ended June 30                      2000              1999
         ------------------------                      ----              ----

         Revenues                                  $ 2,970,093      $ 1,974,312
         Net loss                                  (11,113,656)      (4,000,408)
         Net loss per share- basic and diluted.         ($2.10)          ($1.00)

     The above pro forma financial information has been adjusted to reflect
amortization of intangibles generated by the acquisition over a three-year
period. 


                                      -7-



M
ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:

     The statements contained herein which are not historical facts are "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1934. These
"forward looking statements" are subject to risks and uncertainties, including
but not limited to, risks associated with the Company's future growth and
operating results, the ability of the Company to successfully integrate newly
acquired subscribers, business entities and personnel into its operations,
changes in consumer preference and demographics, technological change,
competitive factors, unfavorable general economic conditions, and other factors
described herein. The Company assumes no obligation to update the
forward-looking information. Actual results may vary significantly from the
results expressed or implied by such forward-looking statements.

Overview

     During 1999 and 2000 a significant part of the Company's revenues were
derived from providing Internet access services to individuals and businesses.
These revenues are comprised principally of recurring revenues from the
Company's customer base, leased line connections and from various ancillary
services. The Company charges subscription fees, which are billed monthly or
quarterly, in advance, typically pursuant to pre-authorized credit card
accounts. The balance of the Company's revenues were derived from Web
development and hosting services. The Company's business strategy is to increase
the percentage of revenues it derives from Web development and hosting services.

     Monthly subscription service revenue for Internet access is recognized over
the period in which services are provided. Fee revenue for website development
and Internet website presence services are recognized as services are performed.
Deferred revenue represents prepaid access fees by customers.

Acquisitions

     Acquisitions have historically been and will continue to be an important
aspect of the Company's growth strategy. In 1999, the Company completed the
following acquisitions; Webprime, Inc. a website design, web development and
software development firm; Channel iShop.com (now iShopNetworks.com) a company
with a marketing concept targeting retail businesses; assets relating to the
dial-up internet access customer base and web design and hosting capabilities of
United Computer Specialist, Inc; a customer base of DSL customers of Lingua
Systems, Inc. d/b/a Fullwave Networks; a customer base of additional dial-up
customers of Skyhigh Information Technologies and Fronthost LLC, a company in
the business of providing web hosting and design services.

     In 2000, the Company acquired substantially all of the assets of The
PressRoom Online Services, Application Resources Information Services, Inc d/b/a
Way Communications, The First Street Corporation, Wizardnet, Inc. and Delanet,
Inc, internet access service providers. All of the acquisitions were accounted
for using the purchase method of accounting with the results of each acquisition
included in the consolidated financial statements from the respective
acquisition date.


                                      -8-



RESULTS OF OPERATIONS
Comparison of the three and six months ended June 30, 2000 and 1999

Revenues: Revenues increased for the three months and six months ended June 30,
2000 by $274,981 or 36.3% and by $552,778 or 39.1, respectively, over the same
periods of the prior year. The increase was attributable to an expanded customer
base and increased activities in Web development and hosting services. The
increase in customer base was in part due to acquisitions, and, in part due to
the Company's marketing and sales efforts.

Cost of Revenues: For the three months ended June 30, 2000 cost of revenues
increased by $182,309 to $660,745. For the six months ended June 30, 2000 cost
of revenues increased by $376,102 to $1,253,272. Cost of revenues as a
percentage of revenues for the three months and six months ended June 30, 2000
were 63.9% and 63.1%, respectively, compared to 63.7% and 62.0%, respectively,
in 1999. The increase in cost of revenues was primarily due to increased
communication and technical personnel expenses incurred to support the increased
customer base and in anticipation of future growth. The Company expects these
costs to increase in absolute dollars as additional customers and services are
added.

Selling, General and Administrative: For the three months ended June 30, 2000,
selling, general and administrative expenses increased by $1,186,295. As a
percentage of revenues, selling, general and administrative expenses increased
from 143.5% in 1999 to 220.1% in 2000. For the six months ended June 30, 2000,
selling and administrative, general and administrative expenses increased by
$1,799,857. For the six-month period, selling, general and administrative
expenses as a percentage of revenues, increased from 143.4% in 1999 to 194.5% in
2000. The increase in selling, general and administrative expenses was primarily
attributable to higher costs incurred for advertising, promotion and sales
personnel. The Company incurred approximately $500,000 more for marketing
activities during the three and six months ended June 30, 2000 compared to prior
year.

Depreciation and Amortization: For the three months ended June 30, 2000,
depreciation and amortization increased by $340,702 to $721,621. For the six
months ended June 30, 2000, depreciation and amortization increased by $662,729
to $1,383,084. The increase was due to amortization arising from 1999
acquisitions and depreciation arising from additional equipment acquired in the
later part of 1999.

Interest Income: Interest income net of interest expense increased by $90,213
and $135,122 for the three and six month periods; respectively. The increase in
interest income was due to investment of unutilized proceeds of the Company's
public offering of Series B Convertible Redeemable preferred stock.

Net Loss and net loss applicable to common shares: The Company has incurred
significant losses and anticipates that it will continue to incur losses until
sufficient revenues are generated to offset the substantial up-front
expenditures and operating costs associated with attracting and retaining
additional customers. For the three months ended June 30, 2000 and 1999, the
Company incurred net losses of $2,503,880 and $1,871,988, respectively. For the
six months ended June 30, 2000 and 1999, the Company incurred net losses of
$4,322,451 and $2,883,883, respectively. There can be no assurance that the
Company will be able to attract and retain a sufficient number of customers to
significantly increase its revenues or ever achieve profitable operations.


                                      -9-



     During the six months ended June 30, 2000, additional dividends (noncash)
related to beneficial conversion feature of the preferred stock of approximately
$5,856,000 were recorded as a result of the conversion price of the preferred
stock being less than the market price of the common stock at the time of the
offering. For the six months ended June 30,2000 net loss after adjusting the
additional dividends and normal dividends for preferred stock resulted in a loss
of $10,332,588 applicable to common shares.

Liquidity and Capital Resources

     The Company's working capital at June 30, 2000 was $3,635,213 compared to a
deficiency of $1,640,344 at December 31, 1999. The increase in working capital
was due to receipt of the proceeds from the public sale of the Company's Series
B Convertible Redeemable preferred stock in February and March 2000.

     In February and March 2000, the Company sold in a public offering 1,137,300
shares of Series B Convertible Redeemable preferred stock at $15 per share and
realized net proceeds of approximately $14,404,000. The preferred stock can be
converted into common stock at the rate of 3.4 shares of common stock for each
share of preferred stock. Preferred stockholders are entitled to receive
cumulative annual dividends of $.60 per share payable semi-annually either in
cash or shares of the Company's common stock at the sole discretion of the
Company. Further, preferred stockholders are entitled to receive a liquidation
preference of $15 per share, plus accrued dividends. The Company has the option
to redeem the preferred stock under certain circumstances.

     Out of the proceeds of the public offering of Series B Convertible
Redeemable preferred stock, $382,000 was used to repurchase 171,526 shares of
the Company's common stock and $3,271,000 was used for acquisitions of
businesses and $425,000 was used to repay debt. The remaining proceeds, after
meeting the Company's working capital and capital expenditure requirements, are
currently held in interest-bearing bank accounts.

     The Company's primary capital requirements are to fund acquisition of
customer bases and related Internet businesses, install network equipment, and
working capital. To date, the Company has financed its capital requirements
primarily through issuance of debt and equity securities. The Company currently
does not have any lines of credit. The availability of capital resources is
dependent upon prevailing market conditions, interest rates, and financial
condition of the Company.

     The Company's capital expenditures for 2000 are expected to range between
$340,000 to $500,000. Based on the Company's current plans and assumptions
relating to its strategy, the management anticipates that the cash on hand, and
expected revenues will satisfy the company's capital requirements through at
least the end of 2000.


                                      -10-



 
                                    PART II
                                OTHER INFORMATION



Item 2.   Changes in Securities and Use of Proceeds

          Recent Sales of Unregistered Securities

          During the six months ended June 30, 2000, the Company issued 286,277
          shares of its common stock for acquisitions of businesses. The
          foregoing securities were issued in private offerings pursuant to an
          exemption from registration offered by Section 4(2) of the Securities
          Act of 1933.



Item 4.   Submission of Matters to Vote of Security holders.

          The Company held an annual meeting of stockholders on June 22,2000 at
          which the following matters were voted upon:

          1.   Election of four directors.

          2.   Approval of the amendment to the Company's 1997 Stock Option Plan
               to increase the number of shares reserved for issuance thereunder
               from 1,400,000 to 2,000,000.

          The results were as follows:
                                                               Broker
          DIRECTORS                  FOR          WITHHELD     NON-VOTES

          Stephen J. Cole-Hatchard   4,620,685    49,541           0
          Nicko Feinberg             4,623,786    46,440           0
          Ronald C. Signore          4,623,786    46,440           0
          William A. Barron          4,623,786    46,440           0


                                                                       Broker
                                FOR           AGAINST      ABSTAIN     NON-VOTES
          Proposal 2            1,368,906     132,386



Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits-- Exhibit 27 Financial Data Schedule

          (b)  Reports on Form 8-K

               Form 8-K dated June 20, 2000 relating to the acquisition of
               Delanet, Inc.


                                      -11-




                                   SIGNATURES

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


August 14, 2000


                         By: /s/ Stephen J. Cole-Hatchard
                                 ----------------------------------------------
                                 Stephen J. Cole-Hatchard
                                 Chief Executive Officer and President



                         By: /s/ Vasan Thatham
                                 ----------------------------------------------
                                 Vasan Thatham
                                 Principal Financial Officer and Vice President


                                      -12-





  


5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-2000 JUN-30-2000 7,448,352 0 410,155 37,000 0 8,097,790 4,135,884 887,050 20,588,623 4,462,575 1,902,792 0 6,680 64,377 14,152,197 20,588,623 0 1,968,196 1,253,272 5,212,027 0 0 (80,736) (4,322,451) 0 (4,322,451) 0 0 0 (10,332,588) (2.05) (2.05)