<PAGE> 1
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 SEPTEMBER 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: 0-17995
ZIXIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2216818
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
2711 NORTH HASKELL AVENUE
SUITE 2850, LB 36
DALLAS, TEXAS 75204-2911
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214) 515-7300
(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 OCTOBER 31, 2000
-------------------------------------- -------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE 16,587,113
<PAGE> 2
INDEX
PART I-FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
<S> <C> <C>
Condensed Consolidated Balance Sheets at September 30, 2000
and December 31, 1999 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended September 30, 2000 and 1999 and for
the cumulative period from January 1, 1999 through
September 30, 2000 4
Condensed Consolidated Statement of Stockholders' Equity and
Comprehensive Net Loss for the nine months ended September 30, 2000 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999 and for the
cumulative period from January 1, 1999 through September 30, 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17
PART II-OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
</TABLE>
2
<PAGE> 3
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,282 $ 6,598
Marketable securities 30,022 33,186
Due from sale of discontinued operations -- 581
Other current assets 2,041 3,030
------------------ ------------------
Total current assets 62,345 43,395
Property and equipment, net 20,767 21,006
Goodwill, net 1,202 2,122
------------------ ------------------
$ 84,314 $ 66,523
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,032 $ 2,481
Liabilities related to discontinued operations 1,116 1,148
------------------ ------------------
Total current liabilities 4,148 3,629
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none outstanding -- --
Common stock, $.01 par value, 175,000,000 shares 189 176
authorized; 18,879,013 issued, 16,587,113
outstanding in 2000 and 17,629,929 issued,
15,338,029 outstanding in 1999
Additional capital 174,556 114,740
Unearned stock-based compensation (15,594) (10,496)
Treasury stock, at cost (11,314) (11,314)
Accumulated other comprehensive loss (911) --
Accumulated deficit (net of deficit accumulated during
the development stage of $70,900 at September 30, 2000
and $34,352 at December 31, 1999) (66,760) (30,212)
------------------ ------------------
Total stockholders' equity 80,166 62,894
------------------ ------------------
$ 84,314 $ 66,523
================== ==================
</TABLE>
See accompanying notes.
3
<PAGE> 4
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Cumulative During
Three Months Nine Months Development Stage
Ended September 30 Ended September 30 (From January 1, 1999
------------------------ ------------------------ Through
2000 1999 2000 1999 September 30, 2000)
---------- ---------- ---------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 99 $ -- $ 287 $ -- $ 386
Research and development expenses (2,346) (5,112) (6,762) (19,177) (30,310)
Operating costs and general corporate expenses (14,799) (7,310) (32,681) (10,585) (49,377)
Investment income 1,024 837 2,234 2,874 5,767
---------- ---------- ---------- ---------- -------------------
Loss from continuing operations before income taxes (16,022) (11,585) (36,922) (26,888) (73,534)
Income tax benefit -- 65 -- 185 807
---------- ---------- ---------- ---------- -------------------
Loss from continuing operations (16,022) (11,520) (36,922) (26,703) (72,727)
Discontinued operations 66 210 374 608 1,827
---------- ---------- ---------- ---------- -------------------
Net loss $ (15,956) $ (11,310) $ (36,548) $ (26,095) $ (70,900)
========== ========== ========== ========== ===================
Basic and diluted earnings (loss) per common share:
Continuing operations $ (0.97) $ (0.75) $ (2.30) $ (1.75)
Discontinued operations 0.01 0.01 0.03 0.04
---------- ---------- ---------- ----------
Net loss $ (0.96) $ (0.74) $ (2.27) $ (1.71)
========== ========== ========== ==========
Weighted average shares outstanding 16,572 15,282 16,081 15,219
========== ========== ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE NET LOSS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Unearned
stock-
based
Common Stock Additional compen-
Shares Amount capital sation
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 17,629,929 $ 176 $ 114,740 $ (10,496)
Stock issued in private
placement, net of
issuance costs 916,667 9 43,785 --
Exercise of stock options
for cash 332,417 4 2,242 --
Unearned employee
stock-based
compensation -- -- 12,323 (12,323)
Unearned stock-
based compensation
for service providers -- -- 1,470 (1,470)
Amortization of
unearned stock-
based compensation -- -- -- 8,695
Other -- -- (4) --
Comprehensive net loss:
Net loss -- -- -- --
Unrealized loss on
marketable securities -- -- -- --
Comprehensive net loss -- -- -- --
--------------- --------------- --------------- ---------------
Balance, September 30, 2000 18,879,013 $ 189 $ 174,556 $ (15,594)
=============== =============== =============== ===============
<CAPTION>
Accumulated
other Total
Treasury comprehensive Accumulated stockholders'
stock loss deficit equity
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 $ (11,314) $ -- $ (30,212) $ 62,894
Stock issued in private
placement, net of
issuance costs -- -- -- 43,794
Exercise of stock options
for cash -- -- -- 2,246
Unearned employee
stock-based
compensation -- -- -- --
Unearned stock-
based compensation
for service providers -- -- -- --
Amortization of
unearned stock-
based compensation -- -- -- 8,695
Other -- -- -- (4)
Comprehensive net loss:
Net loss -- -- (36,548) (36,548)
Unrealized loss on
marketable securities -- (911) -- (911)
---------------
Comprehensive net loss -- -- -- (37,459)
--------------- --------------- --------------- ---------------
Balance, September 30, 2000 $ (11,314) $ (911) $ (66,760) $ 80,166
=============== =============== =============== ===============
</TABLE>
See accompanying notes.
5
<PAGE> 6
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Cumulative During
Nine Months Development Stage
Ended September 30 (From January 1, 1999
------------------------ Through
2000 1999 September 30, 2000)
---------- ---------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (36,922) $ (26,703) $ (72,727)
Adjustments to reconcile loss from continuing operations
to net cash used by operating activities:
Depreciation and amortization 7,238 1,446 10,714
Stock-based compensation 8,695 10,477 21,010
Changes in assets and liabilities, excluding divestiture of
businesses:
Other current assets 78 (560) (865)
Current liabilities 291 2,324 417
---------- ---------- ---------------
Net cash used by continuing operations (20,620) (13,016) (41,451)
Net cash provided (used) by discontinued operations 342 (1,907) (1,513)
---------- ---------- ---------------
Net cash used by operating activities (20,278) (14,923) (42,964)
Cash flows from investing activities:
Purchases of property and equipment, net (5,819) (17,147) (28,984)
Purchases of marketable securities (22,000) (119,015) (141,150)
Sales and maturities of marketable securities 25,164 96,243 138,057
Purchase of Anacom Communications -- -- (2,500)
Investing activities of discontinued operations 581 5,304 5,885
---------- ---------- ---------------
Net cash used by investing activities (2,074) (34,615) (28,692)
Cash flows from financing activities:
Proceeds from private placement of common stock, net of issuance 43,794 -- 43,794
costs
Proceeds from exercise of stock options 2,246 1,264 3,867
---------- ---------- ---------------
Net cash provided by financing activities 46,040 1,264 47,661
Effect of exchange rate changes on cash and cash equivalents
(4) (11) (15)
---------- ---------- ---------------
Increase (decrease) in cash and cash equivalents 23,684 (48,285) (24,010)
Cash and cash equivalents, beginning of period 6,598 54,292 54,292
---------- ---------- ---------------
Cash and cash equivalents, end of period $ 30,282 $ 6,007 $ 30,282
========== ========== ===============
</TABLE>
See accompanying notes.
6
<PAGE> 7
ZIXIT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements, which should be read in
conjunction with the audited consolidated financial statements included in the
Company's 1999 Annual Report to Shareholders on Form 10-K, are unaudited but
have been prepared in the ordinary course of business for the purpose of
providing information with respect to the interim periods. The Condensed
Consolidated Balance Sheet at December 31, 1999 was derived from the audited
Consolidated Balance Sheet at that date which is not presented herein.
Management of the Company believes that all adjustments necessary for a fair
presentation for such periods have been included and are of a normal recurring
nature. The results of operations for the nine-month period ended September 30,
2000 are not necessarily indicative of the results to be expected for the full
year.
During 1998, the Company sold all of its operating businesses and,
accordingly, the assets and liabilities, operating results and cash flows of
these businesses have been classified as discontinued operations in the
accompanying financial statements.
Since January 1999, the Company has been developing a digital signature
and encryption technology and is developing a series of products and services
that enhance privacy, security and convenience over the Internet. To date, the
Company has not earned any revenues from these products and services.
ZixMail(TM), which was first commercially released in March 2000, is a user
friendly, secure document delivery, private email and message tracking service
that enables Internet users worldwide to easily send and receive encrypted and
digitally signed communications without changing their existing email systems or
addresses. The Company released enhanced versions of ZixMail in July and
September of 2000, which include integration with Microsoft(R) Outlook(R), spell
checking, hyperlink support and rich-text formatting features, and the ability
to send secure messages to recipients who are not ZixMail users.
Also, in July 2000, the Company opened ZixIt's new Internet
secure-messaging portal -- SecureDelivery.com(TM). The architecture of the
SecureDelivery.com portal allows for interoperability between encryption formats
and allows for the delivery of messages to recipients through secure (SSL)
browsers, secure email and other modes of communication. Currently available
services include sending secure and authenticated messages from Microsoft(R)
Outlook(R) and the SecureDelivery.com Web message form and delivering those
messages to authenticated recipients over secure browser connections. Also,
current ZixMail users can route messages to any email address through
SecureDelivery.com, even though the recipient is not a ZixMail user. In the
future, SecureDelivery.com is expected to enable users to also manage incoming
secure messages from other sources, including Lotus(R) Notes(R)and branded
Web-based email compose forms, and in other encryption formats, such as S/MIME
(X.509) and PGP(R). When completed, SecureDelivery.com will forward these
incoming messages directly to the recipient, based on recipient selected
encryption options.
To reach a larger customer base for its secure-messaging products and
services than it can reach through its direct sales and marketing efforts and to
assist the Company in promoting its secure-messaging services, the Company is
pursuing collaborative relationships with third parties that possess large
existing email user bases. To date, the Company has entered into agreements of
this type with Yahoo! Inc. and Entrust Technologies, Inc. ("Entrust"). Under the
Yahoo! agreement, signed in August 2000, the Company will provide Yahoo!(R) Mail
(http://mail.yahoo.com) users with the option to send encrypted email messages
through the Company's SecureDelivery.com messaging portal. Under a Marketing and
Distribution Agreement with Entrust, entered into in November 2000, Entrust will
modify its Entrust/Express(R) product to provide Entrust/Express users the
option of using the SecureDelivery service as a mechanism for providing secure
email when the intended message recipient does not have an Entrust certificate.
Entrust intends to market the modified product and the Company and Entrust will
share the related use fees and advertising revenues.
7
<PAGE> 8
ZixCharge(TM), which has not been commercially released, is a shopping
portal and payment authorization system designed to enable consumers to purchase
goods and services over the Internet without being required to provide personal
and charge card information to Internet merchants. See Note 4, "Litigation."
Successful development of a development stage enterprise, particularly
Internet related businesses, is costly and highly competitive. The Company's
growth depends on the timely development and market acceptance of its new
products and services. A development stage enterprise involves risks and
uncertainties, and there are no assurances that the Company will be successful
in its efforts. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Risks and Uncertainties." The accompanying
statements of operations and cash flows include cumulative totals of the
Company's results during the development stage.
The amount presented for basic and diluted loss per common share has
been computed based upon the weighted average number of common shares
outstanding for the period. The two presentations are equal in amounts because
the assumed exercise of common stock equivalents would be antidilutive, since a
net loss was reported for each period presented.
2. STOCKHOLDERS' EQUITY
Private Placement of Equity Securities
In May 2000, the Company sold, in a private placement, certain
newly issued equity securities to an investor group led by H. Wayne Huizenga and
received cash totalling $44,000,000 in three installments. In exchange, the
Company issued to the investor group 916,667 shares of its common stock valued
at $48.00 per share, ten-year warrants to purchase 916,667 shares of the
Company's common stock at $57.60 per share and four-year warrants to purchase
1,222,223 shares of the Company's common stock at $12.00 per share. The
four-year warrants were reallocated from options previously held by David P.
Cook, the Company's president and chief executive officer, and are not
exercisable until May 1, 2001. In May 2000, subsequent to the completion of the
private placement, the Company filed a registration statement on Form S-3 with
the Securities and Exchange Commission covering the public resale of the shares
of common stock and the shares underlying the warrants issued to the investor
group.
Purchase of Anacom Communications
In October 1999, the Company purchased all of the outstanding
shares of Anacom Communications, Inc., a privately-held provider of real-time
transaction processing services to Internet merchants. Consideration consisted
of a cash payment of $2,500,000, primarily recorded as goodwill, and common
stock, valued at a minimum of $7,500,000, to be delivered in two annual
installments beginning October 2000, assuming continued employment by the former
owners. The minimum value of the common stock issuable pursuant to the purchase
agreement of $7,500,000 is treated as compensation for financial accounting
purposes and is being charged to operating costs and general corporate expenses
over two years with a corresponding increase in stockholders' equity. Financial
accounting rules require the minimum number of common shares issuable be
revalued on each subsequent reporting date until performance is complete with a
cumulative catch up adjustment recognized for any changes in their intrinsic
value in excess of $7,500,000. Based on the Company's common stock price of
$39.63 per share at December 31, 1999, $46.06 per share at June 30, 2000, and
$30.50 per share at September 30, 2000, the intrinsic value of these shares on
those dates was $7,529,000, $8,750,000 and $5,793,000 (less than the minimum
$7,500,000), respectively. Accordingly, the Company's results of operations for
the three months and nine months ended September 30, 2000 include non-cash
charges of $469,000 and $2,813,000, respectively, for amortization of the market
value of the common shares issuable. Unearned stock-based compensation, not yet
charged to income, is $3,750,000 based on the minimum value of these shares at
September 30, 2000. The Company's results of operations for the remainder of
2000 and 2001 could be materially impacted as a result of any future increases
in the price of the Company's common stock; however, there would be no impact on
the Company's cash flows or total stockholders' equity. The number of shares to
be delivered, set at a minimum of 190,000 shares, may be increased should the
market value of the common stock be less than $39.48 at the time of delivery.
However, if additional consideration is required, the Company may elect to pay
cash rather than issue additional shares of common stock.
8
<PAGE> 9
In October 2000, 83,663 shares were delivered to the former owners, which
included 13,382 shares in excess of the minimum.
Third Party Stock Options
The Company has agreements with three service providers whereby
the Company granted options to purchase up to 200,000 shares of the Company's
common stock at a weighted average exercise price of $38.78 per share. These
options vest over periods of up to 42 months and have expiration dates ranging
from four to eight years. On the dates of grant, these options had an estimated
fair value aggregating $6,703,000 using the Black-Scholes option valuation
model. Financial accounting rules require these options to be revalued on each
subsequent reporting date until the options are vested or until performance is
complete with a cumulative catch up adjustment recognized for any changes in
their fair value. Based on the Company's common stock price of $39.63 per share
at December 31, 1999, $46.06 per share at June 30, 2000 and $30.50 per share at
September 30, 2000, the fair value of these options on those dates was
$4,617,000, $7,031,000 and $5,382,000, respectively. Accordingly, the Company's
results of operations for the three months and nine months ended September 30,
2000 include non-cash charges of $139,000 and $1,491,000 respectively, for
amortization of the fair value of these options over their respective service or
vesting periods. Unearned stock-based compensation, not yet charged to income,
is $3,086,000 based on the fair value of these options at September 30, 2000.
The Company's future results of operations could be materially impacted by a
change in valuation of these third party stock options as a result of future
increases or decreases in the price of the Company's common stock; however,
there would be no impact on the Company's cash flows or total stockholders'
equity.
Reallocated Options to Employees and Director
During 2000, David P. Cook reallocated options to acquire 657,127
shares of the Company's common stock, including 252,500 shares reallocated in
November 2000, to certain of the Company's employees and a director. These
reallocated options have a five year term, vest from April 2001 to April 2003
and have exercise prices ranging from $7.00 to $13.75 per share as compared to
Mr. Cook's exercise price of $7.00 per share. Non-cash compensation expense of
$16,964,000 will be recognized over the vesting periods ($1,684,000 and
$3,762,000 for the three months and nine months ended September 30, 2000,
respectively), representing the intrinsic value of the reallocated options based
upon the difference between the fair market value of the Company's common stock
on the dates the options were reallocated and the option exercise prices.
Lante Common Stock
In November 1999, the Company received a fully vested option to
acquire up to 400,000 shares of Lante Corporation's ("Lante") common stock at
$7.00 per share in accordance with a cashless exercise formula. The option was
valued at $1,872,000 on the date of grant, using the Black-Scholes option
valuation model, and was included in other current assets at December 31, 1999.
In the first quarter of 2000, the Company exercised its option to acquire shares
of Lante common stock, and Lante disputed approximately 130,000 of the
approximately 322,000 shares that the Company believed it was entitled to
receive under the cashless exercise formula. Separately, in September 2000,
Lante exercised an option to acquire approximately 140,000 shares of the
Company's common stock. The Company withheld the delivery of these shares
pending the resolution of its arbitration claims. Lante has asserted an
arbitration claim against the Company for the value of the undelivered shares.
The fair market value of the Company's undisputed shares of Lante
common stock held on September 30, 2000 is $961,000 ($5.00 per share) and is
included in other current assets. An unrealized loss on these shares of $911,000
is included in other comprehensive loss as a component of stockholders' equity.
3. COMMITMENTS
In the third quarter of 2000, the Company entered into an agreement
with Yahoo! Inc. to provide Yahoo! Mail users, beginning in the fourth quarter
of 2000, with the option to send encrypted email messages through the Company's
9
<PAGE> 10
SecureDelivery.com messaging portal. The Company has minimum future commitments
to Yahoo! under this agreement totaling $5,700,000, payable in seven quarterly
installments over the next two years. In addition, the Company will pay Yahoo!
a specified portion of revenues earned by the Company which are associated
with Yahoo! users.
4. LITIGATION
On December 30, 1999, the Company and ZixCharge.com, Inc.
("ZixCharge"), a wholly-owned subsidiary of the Company, filed a lawsuit against
Visa U.S.A., Inc. and Visa International Service Association (collectively
"Visa") in the 192nd Judicial District Court of Dallas County, Texas. The suit
alleges that Visa undertook a series of actions that interfered with the
Company's business relationships and disparaged the Company, its products, its
management and its stockholders. The suit alleges that Visa intentionally set
out to destroy the Company's ability to market its ZixCharge shopping portal and
payment authorization system, which competed against the MasterCard and
Visa-owned Secure Electronic Transaction system. The suit, which is in the
discovery phase, seeks monetary damages and such other relief as the court deems
appropriate. The resolution of the lawsuit could have a material effect on the
Company's ability to market the ZixCharge system.
The Company is involved in legal proceedings that arise in the ordinary
course of business, however in the opinion of management, the outcome of these
pending legal proceedings will not have a material adverse affect on the
Company's consolidated financial statements.
5. SUBSEQUENT EVENTS
In November 2000, the Company entered into an Enterprise and CA
Services Agreement with Entrust whereby the Company will issue to Entrust
$3,400,000 of the Company's common stock in exchange for licenses to use certain
software packages, technical support and the right to issue a specified number
of Entrust digital identification certificates to users of ZixIt's
SecureDelivery and ZixMail products. These certificates, when issued and when
coupled with S/MIME enabled software, will enable SecureDelivery users to send
and to receive S/MIME formatted messages in conjunction with their usage of the
SecureDelivery service. The certificates may also possibly be used in future
applications involving the use of digital signatures over the Internet. The
shares of common stock to be received by Entrust are accompanied by registration
rights and are subject to transfer restrictions which lapse in four equal
quarterly installments ending in December 2001. If the aggregate value of the
shares on the dates the restrictions lapse is less than $3,400,000, the Company
is obligated to fund such deficiency in December 2001 by electing to pay cash or
issue additional shares of stock valued at the then fair market value of the
Company's common stock. Additionally, in the Marketing and Distribution
Agreement with Entrust as discussed in Note 1, the Company has agreed to issue
to Entrust $400,000 of the Company's common stock for the integration of the
SecureDelivery service option into the Entrust/Express(R) product.
Separately, the Company has agreed in principle to purchase
approximately 9% of the equity ownership of Maptuit Corporation ("Maptuit") for
$3,000,000 in cash in a transaction expected to be completed by the end of
November 2000. The Company has also agreed in principle to invest $2,000,000
(payable in Company stock or cash) as part of Maptuit's next round of equity
financing, which is expected to occur in the first half of 2001. Maptuit, an
early stage company , is a privately-held Internet ASP (application service
provider) that supplies wireline and wireless Internet location-based services.
Built upon a comprehensive database of the street network of North America,
Maptuit provides address matching, route generation, step-by-step directions,
map rendering, and real-cost proximity searching services. Jeff Papows, the
Company's chairman of the board, serves as the president and chief executive
officer of Maptuit and currently holds a minority interest in Maptuit.
10
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Historically, the Company operated in one industry segment, the
provision of systems and solutions for the intelligent transportation,
electronic security and other markets through the design, manufacturing,
installation and support of hardware and software products utilizing the
Company's wireless data and security technologies. The businesses comprising
this industry segment were sold during 1998 and 1997 and have been classified as
discontinued operations in the Condensed Consolidated Financial Statements.
Since January 1999, the Company has been developing a digital signature
and encryption technology and is developing a series of products and services
that enhance privacy, security and convenience over the Internet. To date, the
Company has not earned any revenues from these products and services.
ZixMail(TM), which was first commercially released in March 2000, is a user
friendly, secure document delivery, private email and message tracking service
that enables Internet users worldwide to easily send and receive encrypted and
digitally signed communications without changing their existing email systems or
addresses. The Company released enhanced versions of ZixMail in July and
September of 2000, which include integration with Microsoft(R) Outlook(R), spell
checking, hyperlink support and rich-text formatting features, and the ability
to send secure messages to recipients who are not ZixMail users.
Also, in July 2000, the Company opened ZixIt's new Internet
secure-messaging portal -- SecureDelivery.com(TM). The architecture of the
SecureDelivery.com portal allows for interoperability between encryption formats
and allows for the delivery of messages to recipients through secure (SSL)
browsers, secure email and other modes of communication. Currently available
services include sending secure and authenticated messages from Microsoft(R)
Outlook(R) and the SecureDelivery.com Web message form and delivering those
messages to authenticated recipients over secure browser connections. Also,
current ZixMail users can route messages to any email address through
SecureDelivery.com, even though the recipient is not a ZixMail user. In the
future, SecureDelivery.com is expected to enable users to manage incoming secure
messages received from other sources as well, including Lotus(R) Notes(R) and
branded Web-based email compose forms, and in other encryption formats, such as
S/MIME (X.509) and PGP(R). When completed, SecureDelivery.com will forward these
incoming messages directly to the recipient, based on recipient selected
encryption options.
To reach a larger customer base for its secure-messaging products and
services than it can reach through its direct sales and marketing efforts and to
assist the Company in promoting its secure-messaging services, the Company is
pursuing collaborative relationships with third parties that possess large
existing email user bases. To date, the Company has entered into agreements of
this type with Yahoo! Inc. and Entrust Technologies, Inc. ("Entrust"). Under the
Yahoo! agreement, signed in August 2000, the Company will provide Yahoo!(R) Mail
(http://mail.yahoo.com) users with the option to send encrypted email messages
through the Company's SecureDelivery.com messaging portal. Under a Marketing and
Distribution Agreement with Entrust, entered into in November 2000, Entrust will
modify its Entrust/Express(R) product to provide Entrust/Express users the
option of using the SecureDelivery service as a mechanism for providing secure
email when the intended message recipient does not have an Entrust certificate.
Entrust intends to market the modified product and the Company and Entrust will
share the related use fees and advertising revenues.
The foundation of the Company's business model for ZixMail and
SecureDelivery.com centers around the financial leverage expected to be
generated by revenues that are believed to be predominantly recurring in nature
and an efficient cost structure for data center operations, the core of which is
expected to remain relatively stable, regardless of the number of users. Revenue
streams are projected to consist of recurring subscription fees, variable usage
fees for certain services provided by the Company, and income earned by the
Company from click-through promotional programs, banner advertising placed with
the Company by third-parties, and branding purchased by corporate customers for
promotional purposes. New business is expected to be generated from the
Company's own direct sales efforts, its affiliate marketing programs, and the
promotional efforts of its strategic
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<PAGE> 12
marketing partners. In January 2001 the Company plans to begin charging for its
products and services. Presently, the Company's cash burn rate from operations
averages approximately $2,500,000 per month. As a result, revenue levels
necessary to achieve a cash-flow break-even are expected to be rather modest,
even as the Company expands its sales and marketing reach and begins to incur
certain variable costs such as credit card fees and the costs associated with
the Company's affiliate marketing program and the Company's strategic marketing
partnerships. If the Company is able to maintain its targets for such costs, and
if it is successful in tapping the growing demand for security in email
communications, it is possible that the Company could anticipate the potential
for attaining positive cash flow from operations sometime in the next nine to
eighteen months. In connection with this paragraph, see the "safe harbor"
statement under "Risks and Uncertainties" below.
ZixCharge(TM), which has not been commercially released, is a shopping
portal and payment authorization system designed to enable consumers to purchase
goods and services over the Internet without being required to provide personal
and charge card information to Internet merchants. As described in Note 4 to the
Condensed Consolidated Financial Statements, the Company has initiated
litigation against Visa. The litigation alleges that Visa set out to destroy the
Company's ability to market ZixCharge.
Additionally, in October 1999, the Company purchased all of the
outstanding shares of Anacom Communications, Inc. ("Anacom"), a privately-held
provider of real-time transaction processing services to Internet merchants.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Revenues
Revenues in the third quarter and first nine months of 2000 are
attributable to Anacom. The Company is not currently charging for the use of its
ZixMail or SecureDelivery.com products or services. The Company plans to begin
charging for its ZixMail and SecureDelivery.com products and services in January
2001.
Research and development expenses
Research and development expenses decreased from $5,112,000 and
$19,177,000 for the three months and nine months ended September 30, 1999 to
$2,346,000 and $6,762,000 for the corresponding periods in 2000. Expenses in
1999 include a non-cash credit of $1,418,000 and a non-cash charge of $6,387,000
in the three month and nine month periods, respectively, for amortization of the
fair-value of stock options granted to Lante Corporation, a third party Internet
services company that assisted the Company with its development efforts. In
2000, employee compensation costs increased but were more than offset by a
reduction in third party consulting expenditures as a result of hiring
additional technical personnel to support the development of the Company's
various Internet products.
Operating costs and general corporate expenses
Operating costs and general corporate expenses increased from
$7,310,000 and $10,585,000 for the three months and nine months ended September
30, 1999 to $14,799,000 and $32,681,000 for the corresponding periods in 2000.
The increase between years is primarily due to higher expenses for marketing,
advertising, expanded lease facilities, depreciation of property and equipment
and personnel relating to establishing the Company's Internet related
businesses. The three month and nine month periods in 2000 include discretionary
advertising costs of $6,712,000 and $9,147,000, respectively, primarily for
various print media and online advertising with various sites, including Yahoo!,
Lycos and McAfee.com. In addition, expenses in 2000 include non-cash charges of
$2,697,000 and $8,693,000 in the three month and nine month periods,
respectively, for stock-based compensation resulting from the issuance of
certain equity securities. See Note 2 to the Condensed Consolidated Financial
Statements for a discussion regarding the accounting for these equity securities
and their potential impact on the Company's future operating results. The
Company recognized a non-recurring, non-cash expense of $3,335,000 in the third
quarter of 1999 relating to stock options granted in January 1999 to certain of
the Company's outside directors under a plan that was approved by the
shareholders in September 1999. In the near term, the Company plans to build out
its sales and marketing staff to support an increased marketing effort.
Additionally, new categories of costs will begin to be
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<PAGE> 13
incurred such as credit card fees and the costs associated with the Company's
affiliate marketing program and the Company's strategic marketing partnerships.
Investment income
Investment income increased from $837,000 and decreased from $2,874,000
for the three months and nine months ended September 30, 1999 to $1,024,000 and
$2,234,000 for the corresponding periods in 2000. The change in the nine month
periods is primarily due to a decrease in invested cash and marketable
securities partially offset by an increase in interest rates.
Income tax benefit
The income tax benefit on the loss from continuing operations in 2000
and 1999 is different from the U.S. statutory rate of 34%, primarily due to
unbenefitted U.S. losses. The Company fully reserves its deferred tax assets due
to the uncertainty of future taxable income from the Company's new business
initiatives.
Loss from continuing operations
As a result of the foregoing, the Company experienced losses from
continuing operations of $16,022,000 and $36,922,000 for the three months and
nine months ended September 30, 2000, respectively, as compared to losses of
$11,520,000 and $26,703,000 for the corresponding periods in 1999.
DISCONTINUED OPERATIONS
The Company recorded a gain of $66,000 and $374,000 for the three
months and nine months ended September 30, 2000, respectively, compared to a
gain of $210,000 and $608,000 for the corresponding periods in 1999, primarily
due to a reduction in estimated future costs for various indemnification issues
associated with the disposal of its operating businesses in 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's principal source of liquidity is
its net working capital position of $58,197,000, including cash and marketable
securities of $60,304,000. The Company plans to invest its excess cash primarily
in short-term, high-grade U.S. corporate debt securities or U.S. government and
agency securities. The Company's first nine months 2000 loss from continuing
operations included significant non-cash expenses for stock-based compensation
and depreciation and amortization aggregating $15,933,000. Net cash used by
continuing operations in the first nine months of 2000 was $20,620,000,
primarily representing development and start-up costs relating to the Company's
Internet related businesses, including payments for discretionary advertising
costs of $8,278,000. The Company plans to begin charging for its products and
services in January 2001. Additionally, in the first nine months of 2000, the
Company invested $5,819,000 in property and equipment, primarily for additional
computer equipment associated with its secure data center. The Company's
near-term liquidity will be negatively impacted as the Company continues its
development stage activities, particularly with regards to discretionary
marketing and advertising costs, or incurs costs associated with forming
additional strategic alliances, if any are concluded. See also Note 3 to the
Condensed Consolidated Financial Statements regarding a minimum commitment to
Yahoo! Inc. totalling $5,700,000, payable over the next two years, and Note 5
regarding the issuance of $3,800,000 of common stock to Entrust and a pending
$5,000,000 investment in Maptuit Corporation.
In May 2000, the Company sold, in a private placement, certain newly
issued equity securities to an investor group led by H. Wayne Huizenga and
received cash totalling $44,000,000 in three installments. In exchange, the
Company issued to the investor group 916,667 shares of its common stock valued
at $48.00 per share, ten-year warrants to purchase 916,667 shares of the
Company's common stock at $57.60 per share and four-year warrants to purchase
1,222,223 shares of the Company's common stock at $12.00 per share. The
four-year warrants were reallocated from options previously held by David P.
Cook, the Company's president and chief executive officer, and are not
exercisable until May 1, 2001.
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<PAGE> 14
The Company believes its existing net working capital position will be
sufficient to meet near-term anticipated needs. The Company currently has no
existing borrowings or credit facilities. Acquisitions, if any, would be
financed by the most attractive alternative available, which could be cash or
the issuance of debt or equity securities.
RISKS AND UNCERTAINTIES
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: Certain matters discussed in this Quarterly
Report on Form 10-Q contain statements that constitute forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. The words "expect," "estimate," "anticipate," "predict,"
"believe," "plan" and similar expressions and variations thereof are intended to
identify forward-looking statements. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. These risks and uncertainties include, but are not limited to, the
following:
LIMITED OPERATING HISTORY
The Company has only a limited operating history in the Internet
arena on which to base an evaluation of its business and prospects. The
Company's prospects must be considered in light of the risks and uncertainties
encountered by other Internet companies in the early stages of development.
These risks and uncertainties are often more pronounced for companies in new and
rapidly evolving markets, particularly Internet related businesses.
PRODUCT DEVELOPMENT AND MARKET ACCEPTANCE
The Company's products and services are targeted at the new and
rapidly evolving markets for secure Internet communications and e-commerce.
Although the competitive environment in these markets has yet to fully develop,
the Company anticipates that it will be intensely competitive, subject to rapid
change and significantly affected by new products and service introductions and
other market activities of industry participants. The Company's success will
depend on many factors, including, but not limited to, the following:
o The Company must be able to successfully and timely develop its
products and services. The commercial version of ZixMail was first
released in March 2000 and enhanced versions were released in July and
September of 2000. The Company's new Internet secure-messaging portal -
SecureDelivery.com -- was first opened at the end of July 2000. The
Company is not currently charging for use of its ZixMail or
SecureDelivery.com products or services. ZixCharge has not been
commercially released.
o The Company must be able to achieve broad market acceptance for its
products and services. There are currently no known Internet
secure-messaging products or services, such as ZixMail and
SecureDelivery.com, that currently operate at the scale that the
Company would require, at its current expenditure levels and proposed
pricing, to become profitable from its secure-messaging operations. To
reach a larger customer base for its secure-messaging products and
services than it can reach through its direct sales and marketing
efforts and to assist the Company in promoting its secure-messaging
services, the Company is pursuing additional collaborative
relationships with third parties that possess large existing email user
bases. There is no assurance that the Company will be successful in
entering into a sufficient number of these relationships, or that if
entered into, they will significantly assist the Company in obtaining
large numbers of ZixMail or SecureDelivery.com users. Moreover, in any
event, there is no assurance that enough paying users or enough
advertising revenue will be ultimately obtained to enable the Company
to operate profitably.
o Since the commercial version of ZixCharge has not yet been released,
there are currently no consumers or merchants using ZixCharge. The
success of ZixCharge will depend on (1) the Company's ability to
obtain, as users, large numbers of consumers who desire to shop
privately over the Internet and its ability to obtain large numbers of
merchants that will permit them to do so using ZixCharge, and (2)
whether sufficient profit can be generated from potential sources of
revenue. To obtain access to large numbers of consumers and merchants,
the Company began seeking collaborative relationships with companies
that have large existing credit card user
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<PAGE> 15
bases to assist the Company in promoting ZixCharge. In this regard,
initial efforts were focused on banking institutions. As described in
Note 4 to the Condensed Consolidated Financial Statements, the Company
has initiated litigation against Visa. The litigation alleges that Visa
set out to destroy the Company's ability to market ZixCharge. The
Company now believes it is unlikely that any Visa member banks will
enter into any ZixCharge related collaborative relationship until the
Visa litigation is resolved. Moreover, the resolution of this
litigation could have a material effect on the Company's ability to
market the ZixCharge system.
There is no assurance that the Company will be successful in entering
into collaborative relationships pertaining to ZixCharge, or that if
entered into, they will significantly assist the Company in obtaining
large numbers of ZixCharge users. Moreover, in any event, there is no
assurance that the Company will be successful in obtaining a critical
mass of consumers as ZixCharge users or obtaining a critical mass of
merchants that will allow consumers to use ZixCharge or that sufficient
profit can be generated from the ZixCharge operations. If the Company
is unable to obtain the necessary critical mass or generate sufficient
profit, the Company may decide not to commercially introduce ZixCharge
or to discontinue it, if introduced.
REVENUES
The Company currently has no significant revenues.
COMPETITION AND TECHNOLOGICAL CHANGE
The Company is a new entrant into the rapidly evolving secure
Internet communications and e-commerce markets. The Company will be competing
with larger companies that have access to greater capital, research and
development, marketing, distribution and other resources than the Company. In
addition, the Internet arena is characterized by extensive research efforts and
rapid product development and technological change that could render the
Company's products and services obsolete or noncompetitive. The Company's
failure to develop and introduce new products and services successfully on a
timely basis and to achieve market acceptance for those products and services
could have a significant adverse effect on its business, financial condition and
results of operations. The Company may decide, at any time, to delay,
discontinue or not initiate the development and release of any one or more of
its planned or contemplated products and services.
SECURITY INTERRUPTIONS AND SECURITY BREACHES
The Company's business depends on the uninterrupted operation of its
secure data center. The Company must protect this center from loss, damage or
interruption caused by fire, power loss, telecommunications failure or other
events beyond its control. Any damage or failure that causes interruptions in
the Company's secure data center operations could materially harm its business,
financial condition and results of operations.
In addition, the Company's ability to issue digitally-signed
certified time-stamps and public key encryption codes in connection with its
ZixMail service and deliver messages through its SecureDelivery.com messaging
portal depends on the efficient operation of the Internet connections between
customers and the Company's data center. The Company depends on Internet service
providers efficiently operating these connections. These providers have
experienced periodic operational problems or outages in the past. Any of these
problems or outages could adversely affect customer satisfaction.
Furthermore, it is critical that the Company's facilities and
infrastructure remain secure and the markets perceive them to be secure. Despite
the Company's security measures, its infrastructure may be vulnerable to
physical break-ins, computer viruses, attacks by hackers or similar disruptive
problems. It is possible that the Company may have to use additional resources
to address these problems. Messages sent through the Company's
SecureDelivery.com messaging portal will reside, for a user-specified period of
time, in the Company's data center facilities. Also, the Company's planned
ZixCharge business will retain certain confidential customer information at the
Company's data center facilities. Any physical or electronic break-ins or other
security breaches or compromises of this information could expose the Company to
significant liability, and customers could be reluctant to use its Internet
related products and services.
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<PAGE> 16
KEY PERSONNEL
The Company depends on the performance of its senior management team
and other key employees, particularly highly skilled technical and sales and
marketing personnel. The Company's success also depends on its ability to
attract, retain and motivate these individuals. There is intense competition for
these personnel, and the Company faces a tight employment market in general.
There are no agreements with any of the Company's personnel that prevent them
from leaving ZixIt at any time. In addition, the Company does not maintain key
person life insurance for any of its personnel. The loss of the services of any
of the Company's key employees or its failure to attract, retain and motivate
key employees could harm its business.
UNKNOWN DEFECTS OR ERRORS IN PRODUCTS OR SERVICES
Any of ZixMail, the SecureDelivery.com messaging portal or ZixCharge
could contain undetected defects or errors. Despite the Company's testing,
defects or errors may occur, which could result in loss of or delay in revenues,
failure to achieve market acceptance, diversion of development resources, injury
to the Company's reputation, litigation claims, increased insurance costs or
increased service and warranty costs. Any of these could harm the Company's
business.
CRYPTOGRAPHY TECHNOLOGY
The Company's products and services employ, and future products and
services may employ, public key cryptography technology. With public key
cryptography technology, a user has a public key and a private key, which are
used to encrypt and decrypt messages. The security afforded by this technology
depends, in large measure, on the integrity of a user's private key, which is
dependent, in part, on the application of certain mathematical principles. The
integrity of a user's private key is predicated on the assumption that it is
difficult to mathematically derive a user's private key from the user's related
public key. Should methods be developed that make it easier to derive a user's
private key, the security of encryption products using public key cryptography
technology would be reduced or eliminated and such products could become
unmarketable. This could require the Company to make significant changes to its
products, which could damage its reputation and otherwise hurt its business.
Moreover, there have been public reports of the successful decryption of certain
encrypted messages. This, or related, publicity could affect public perception
of the security afforded by public key cryptography technology, which could harm
the Company's business.
GOVERNMENT REGULATION
Exports of software products using encryption technology are
generally restricted by the U.S. government. Although the Company has obtained
U.S. government approval to export its ZixMail product to almost all countries
in the world, the list of countries to which ZixMail cannot be exported could be
revised in the future. Furthermore, some foreign countries impose restrictions
on the use of software products using encryption technology, such as the ZixMail
product. Failure to obtain the required governmental approvals would preclude
the Company from selling the ZixMail product in international markets.
LACK OF STANDARDS
There is no assurance that the Company's products and services will
become generally accepted standards or that they will be compatible with any
standards that become generally accepted.
INTELLECTUAL PROPERTY RIGHTS
The Company may have to defend its intellectual property rights or
defend against claims that the Company is infringing the rights of others.
Intellectual property litigation and controversies are disruptive and expensive.
Infringement claims could require the Company to develop non-infringing products
or enter into royalty or licensing arrangements. Royalty or licensing
arrangements, if required, may not be obtainable on terms acceptable to the
Company. The Company's business could be significantly harmed if it is not able
to develop or
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<PAGE> 17
license the necessary technology. Furthermore, it is possible that others may
independently develop substantially equivalent intellectual property, thus
enabling them to effectively compete against the Company.
SALES OF BUSINESSES
The Company disposed of its remaining operating businesses in 1998
and 1997. In selling those businesses, the Company agreed to provide customary
indemnification to the purchasers of those businesses for breaches of
representations and warranties, covenants and other specified matters. Although
the Company believes that it has adequately provided for future costs associated
with these indemnification obligations, indemnifiable claims could exceed the
Company's estimates.
STOCK PRICE
The market price of the Company's common stock has fluctuated
significantly in the past and is likely to fluctuate in the future. Also, the
market prices of securities of other Internet related companies have been highly
volatile.
OTHER UNANTICIPATED RISKS AND UNCERTAINTIES
There are no assurances that the Company will be successful or that
it will not encounter other, and even unanticipated, risks. The Company
discusses other operating, financial or legal risks or uncertainties in its
other periodic SEC filings. The Company is, of course, also subject to general
economic risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended September 30, 2000, the Company did not experience
any material changes in market risk exposures that affect the quantitative and
qualitative disclosures presented in the Company's 1999 Annual Report to
Shareholders on Form 10-K.
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<PAGE> 18
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on September 20,
2000. At this meeting, the shareholders elected as directors of the Company,
David P. Cook, H. Wayne Huizenga, Michael E. Keane, James S. Marston, Jeffrey P.
Papows, Antonio R. Sanchez, Jr. and Dr. Ben G. Streetman. The tabulation of
votes with respect to the election of directors is as follows:
<TABLE>
<CAPTION>
Nominee Shares For Shares Withheld
------- ---------- ---------------
<S> <C> <C>
David P. Cook 15,041,468 304,411
H. Wayne Huizenga 15,245,315 100,564
Michael E. Keane 15,248,526 97,353
James S. Marston 15,248,280 97,599
Jeffrey P. Papows 15,239,210 106,669
Antonio R. Sanchez, Jr. 15,251,315 94,564
Dr. Ben G. Streetman 15,249,360 96,519
</TABLE>
The shareholders voted to increase the number of shares of common stock
available for grant under the 1995 Long-Term Incentive Plan from 1,000,000 to
1,825,000 shares. The tabulation of votes with respect to the change in the
number of shares available for grant is as follows:
For 14,284,367
Against 1,021,782
Abstain 39,730
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following is a list of exhibits filed as part of this
Quarterly Report on Form 10-Q.
DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation, together with all
amendments thereto (filed as Exhibit 3.1 to
the Company's Form 10-K for the year ended
December 31, 1998, and incorporated herein
by reference). Articles of Amendment to
Articles of Incorporation, dated September
14, 1999 (filed as Exhibit 3.2 to the
Company's Form 10-Q for the quarterly period
ended September 30, 1999, and incorporated
herein by reference). Articles of Amendment
to Articles of Incorporation, dated October
12, 1999 (filed as Exhibit 3.3 to the
Company's Form 10-Q for the quarterly period
ended September 30, 1999, and incorporated
herein by reference).
3.2 Restated Bylaws of ZixIt Corporation, dated
September 14, 1999 (filed as Exhibit 3.2 to
the Company's Form 10-Q for the quarterly
period ended March 31, 2000, and
incorporated herein by reference).
*10.1 Distribution Agreement, dated August 17,
2000, between Yahoo! Inc. and the Company
(excluding the exhibits). The Company agrees
to furnish supplementally to the Securities
and Exchange Commission upon request a copy
of any of the exhibits referred to but not
included in the Distribution Agreement filed
with the SEC.
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<PAGE> 19
*10.2 Letter Agreement, dated October 18, 2000,
between the Company and Jeffrey P. Papows.
*10.3 1995 Long-Term Incentive Plan of the Company
(Amended and Restated as of September 20,
2000).
*10.4 Marketing and Distribution Agreement,
effective November 6, 2000, between the
Company and Entrust Technologies, Inc.
(excluding the schedules). The Company
agrees to furnish supplementally to the
Securities and Exchange Commission upon
request a copy of any of the schedules
referred to but not included in the
Marketing and Distribution Agreement filed
with the SEC.
*10.5 Enterprise and CA Services Agreement,
effective November 6, 2000, between the
Company and Entrust Technologies, Inc.
(excluding the schedules). The Company
agrees to furnish supplementally to the
Securities and Exchange Commission upon
request a copy of any of the schedules
referred to but not included in the
Enterprise and CA Services Agreement filed
with the SEC.
*27.1 Financial Data Schedule.
b. Reports on Form 8-K
No reports of the Registrant on Form 8-K have been filed with the
Securities and Exchange Commission during the three months ended
September 30, 2000.
* Filed herewith.
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<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
ZIXIT CORPORATION
(Registrant)
Date: November 14, 2000 By: /s/ Steve M. York
-----------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation, together with all amendments
thereto (filed as Exhibit 3.1 to the Company's Form 10-K for
the year ended December 31, 1998, and incorporated herein by
reference). Articles of Amendment to Articles of
Incorporation, dated September 14, 1999 (filed as Exhibit 3.2
to the Company's Form 10-Q for the quarterly period ended
September 30, 1999, and incorporated herein by reference).
Articles of Amendment to Articles of Incorporation, dated
October 12, 1999 (filed as Exhibit 3.3 to the Company's Form
10-Q for the quarterly period ended September 30, 1999, and
incorporated herein by reference).
3.2 Restated Bylaws of ZixIt Corporation, dated September 14, 1999
(filed as Exhibit 3.2 to the Company's Form 10-Q for the
quarterly period ended March 31, 2000, and incorporated herein
by reference).
*10.1 Distribution Agreement, dated August 17, 2000, between Yahoo!
Inc. and the Company (excluding the exhibits). The Company
agrees to furnish supplementally to the Securities and
Exchange Commission upon request a copy of any of the exhibits
referred to but not included in the Distribution Agreement
filed with the SEC.
*10.2 Letter Agreement, dated October 18, 2000, between the Company
and Jeffrey P. Papows.
*10.3 1995 Long-Term Incentive Plan of the Company (Amended and
Restated as of September 20, 2000).
*10.4 Marketing and Distribution Agreement, effective November 6,
2000, between the Company and Entrust Technologies, Inc.
(excluding the schedules). The Company agrees to furnish
supplementally to the Securities and Exchange Commission upon
request a copy of any of the schedules referred to but not
included in the Marketing and Distribution Agreement filed
with the SEC.
*10.5 Enterprise and CA Services Agreement, effective November 6,
2000, between the Company and Entrust Technologies, Inc.
(excluding the schedules). The Company agrees to furnish
supplementally to the Securities and Exchange Commission upon
request a copy of any of the schedules referred to but not
included in the Enterprise and CA Services Agreement filed
with the SEC.
*27.1 Financial Data Schedule.
</TABLE>
* Filed herewith.
